this discussion and analysis contains forward-looking statements that are based upon current expectations and involve risks , assumptions and uncertainties . you should review the “ risk factors ” section of this annual report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements described in the following discussion and analysis . overview we are a medical device company that develops and commercializes innovative platforms for performing minimally invasive surgical procedures in the brain under direct , intra-procedural mri guidance . our principal product platform is our clearpoint system , which is in commercial use and is used to perform minimally invasive surgical procedures in the brain . the clearpoint system utilizes intra-procedural mri to guide the procedures and are designed to work in a hospital 's existing mri suite . we believe that this product platform delivers better patient outcomes , enhances revenue potential for both physicians and hospitals , and reduces costs to the healthcare system . in 2010 , we received regulatory clearance from the fda to market our clearpoint system in the u.s. for general neurological procedures . in 2011 , we also obtained ce marking approval for our clearpoint system , which enables us to sell our clearpoint system in the european union . substantially all our product revenues for the years ended december 31 , 2019 and 2018 relate to sales of our clearpoint system products . we have financed our operations and internal growth primarily through the sale of equity securities , the issuance of convertible and other secured notes , and license arrangements . we have incurred significant losses since our inception in 1998 as we have devoted substantial efforts to research and development . as of december 31 , 2019 , we had accumulated losses of approximately $ 113 million . we may continue to incur operating losses as we expand our clearpoint system platform and our business generally . factors which may influence future results of operations the following is a description of factors which may influence our future results of operations , and which we believe are important to an understanding of our business and results of operations . revenues in 2010 , we received 510 ( k ) clearance from the fda to market our clearpoint system in the u.s. for general neurological procedures . future revenues from sales of our clearpoint platform products and services are difficult to predict and may not be sufficient to offset our continuing research and development expenses and our increasing selling , general and administrative expenses . generating recurring revenues from the sale of functional neurosurgical products is an important part of our business model for our clearpoint system . we anticipate that , over time , recurring revenues will constitute an increasing percentage of our total revenues as we leverage installations of our clearpoint system to generate recurring sales of our functional neurosurgical products . our product revenues were approximately $ 9.5 million and $ 6.7 million for the years ended december 31 , 2019 and 2018 , respectively , and were almost entirely related to our clearpoint system . in addition , we expect that , over time , service revenues will constitute an increasing portion of our total revenues based on : ( a ) leveraging current and future installations of clearpoint systems , as discussed above , so as to result in an increase in functional neurosurgical service revenues ; and ( b ) increasing biologics and drug delivery service revenues should our customers in this space be successful in expansion of their clinical trials , and should we be successful in continuing to establish relationships with new biologic and drug delivery partners . our service revenues were approximately $ 1.7 million and $ 700,000 for the years ended december 31 , 2019 and 2018 , respectively . our revenue recognition policies are more fully described in the “ critical accounting policies and significant judgments and estimates ” section below . cost of revenues cost of revenues includes the direct costs associated with the assembly and purchase of components for functional neurosurgical products , drug delivery and biologic products , non-neurosurgical therapy products , and clearpoint capital equipment which we have sold , and for which we have recognized the revenue in accordance with our revenue recognition policy . cost of revenues also includes the allocation of manufacturing overhead costs and depreciation of loaned systems installed under our clearpoint placement program , as well as provisions for obsolete , impaired , or excess inventory . with the anticipated increases in the contribution to total revenues of sales of recurring products and services , as discussed above , we expect gross margin , as a percentage of total revenue , to increase over time . 41 research and development costs our research and development costs consist primarily of costs associated with the conceptualization , design , testing , and prototyping of our clearpoint system products . such costs include salaries , travel , and benefits for research and development personnel , including related share-based compensation ; materials and laboratory supplies in research and development activities ; consultant costs ; and licensing costs related to technology not yet commercialized . we anticipate that , over time , our research and development costs may increase as we : ( i ) continue to develop enhancements to our clearpoint system ; and ( ii ) seek to expand the application of our technological platforms . story_separator_special_tag we have not paid , and do not anticipate paying , cash dividends on shares of our common stock ; therefore , the expected dividend yield is assumed to be zero . research and development costs . costs related to research , design and development of products are charged to research and development expense as incurred . these costs include direct salary and employee benefit-related costs for research and development personnel , costs incurred under the terms of collaborative agreements , costs for materials used in research and development activities , and costs for outside services . results of operations comparison of the year ended december 31 , 2019 to the year ended december 31 , 2018 replace_table_token_1_th 44 revenue . total revenues were approximately $ 11.2 million and $ 7.4 million for the years ended december 31 , 2019 and 2018 , respectively . functional neurosurgery revenue , which consists of disposable product commercial sales related to cases utilizing the clearpoint system and related services , increased 29 % to $ 6.9 million during the year ended december 31 , 2019 from $ 5.3 million for the same period in 2018. the increase was due primarily to 801 cases utilizing our clearpoint neuro navigation system in 2019 , as compared to 670 such cases in 2018 , an increase of 20 % . the increase in sales was also influenced by two factors : ( a ) fda actions taken in early 2018 , that adversely affected third-party providers in the laser ablation space ; and ( b ) the introduction by a third-party provider of a new deep brain stimulation system that did not have approval for use in the mri suite for most of 2018. the fda actions were resolved by the affected third-parties , but not until the fourth quarter of 2018 , and the new deep brain stimulation system received fda clearance for use in the mri suite in the third quarter of 2018. there were no increases in functional neurosurgery product prices during 2019 that would be reasonably expected to affect a typical customer order . biologics and drug delivery revenues , which include sales of services related to customer-sponsored clinical trials utilizing the clearpoint system and of related disposable products , increased 116 % to $ 2.3 million for the year ended december 31 , 2019 , from $ 1.1 million for the same period in 2018. this increase was due primarily to an increase from 2018 to 2019 of : ( a ) approximately $ 839,000 , or 305 % , in biologics and drug delivery services ; and ( b ) approximately $ 543,000 , or 59 % , in biologics and drug delivery product sales . there were no increases in biologics and drug delivery product prices during 2019 that would be reasonably expected to affect a typical customer order . capital equipment revenue , consisting of sales of clearpoint reusable hardware and software , increased 147 % to $ 1.0 million for the year ended december 31 , 2019 , from $ 420,000 for the same period in 2018. revenues from this product line historically have varied from period to period . this increase was due primarily to an increase in the number of clearpoint systems sold . there were no increases in capital equipment product prices during the year ended december 31 , 2019 that would be reasonably expected to affect a typical customer order . capital equipment-related services , consisting of fees for capital equipment rental , service , installation , training and shipping , increased 59 % to $ 625,000 for the year ended december 31 , 2019 , from $ 393,000 for the same period in 2018. the increase was due primarily to an increase in service fee revenue . cost of revenues . cost of revenues was $ 3.8 million for the year ended december 31 , 2019 , representing gross margin of 66 % , compared to $ 2.4 million for the same period in 2018 , representing gross margin of 67 % . the slight decrease in gross margin was due primarily to an increased contribution from lower margin capital equipment sales in 2019 , when compared to 2018 , and to increased direct and indirect costs in 2019 , when compared to 2018. these factors were substantially offset by an increased contribution from sales of services , which bear higher margins relative to other lines of revenue . research and development costs . research and development costs were $ 2.9 million for the year ended december 31 , 2019 , compared to $ 2.3 million for the same period in 2018 , an increase of $ 612,000 , or 26 % . the increase was due primarily to increases in : ( a ) compensation costs , due primarily to increases in incentive compensation and headcount , of $ 207,000 ; ( b ) product and software development costs of $ 222,000 ; ( c ) intellectual property costs of $ 65,000 ; and ( d ) license fees of $ 76,000. sales and marketing expenses . sales and marketing expenses were $ 4.8 million for the year ended december 31 , 2019 , compared to $ 3.5 million for the same period in 2018 , an increase of $ 1.2 million , or 35 % . this increase was primarily due to a $ 1.0 million increase in compensation costs , attributable to increase in incentive-based compensation and headcount , both of which are commensurate with the increase in revenues from 2018 to 2019. general and administrative expenses . general and administrative expenses were $ 4.3 million for each of the years ended december 31 , 2019 and 2018. most general and administrative cost categories were not materially changed between 2018 and 2019 , with decreases in professional fees offset by increases in public company costs due to the uplisting of the exchange on which our common stock is traded

liquidity and capital resources at december 31 , 2019 , we had cash and cash equivalent balances aggregating $ 5.7 million , resulting primarily from completion of the 2019 pipe discussed in note 8 to the consolidated financial statements included elsewhere in this annual report . net cash used in operating activities was $ 2.8 million and $ 4.6 million for the years ended december 31 , 2019 and 2018 , respectively . we have incurred net losses since its inception which has resulted in a cumulative deficit at december 31 , 2019 of approximately $ 113 million . since inception , we have financed our operations principally from the sale of equity securities , the issuance of notes payable and license arrangements . as a result , management historically has expressed substantial doubt as to the company 's ability to continue as a going concern . as discussed in note 8 to the consolidated financial statements included elsewhere in this annual report , in may 2019 , we entered into the 2019 pipe , resulting in proceeds of approximately $ 7.5 million , before deducting offering expenses aggregating approximately $ 94,000. in addition , as discussed in note 11 to the consolidated financial statements included elsewhere in this annual report , in january 2020 , we entered into a securities purchase agreement with two investors under which we issued to such investors an aggregate principal amount of $ 17.5 million of floating rate secured convertible notes ( the “ 2020 secured notes ” ) . from the proceeds received from the issuance of the 2020 secured notes , which have a five-year term , we repaid and retired the 2010 junior secured notes payable that otherwise would have matured in october and november 2020. as a result , in management 's opinion , our cash and cash equivalent balances at december 31 , 2019 , when combined with the proceeds from issuance of the 2020 secured notes ( after repayment of the 2010 secured notes ) , are sufficient to support our operations for at least the next twelve months and to alleviate doubt as to our ability to continue as a going concern .


 Write a concise suspicious activity report of the following text delimited by triple backquotes. Return your response as a formal report which covers the key points highlighting the location,dates,entity names and account holder information in chronological order of the text.
     ```liquidity and capital resources at december 31 , 2019 , we had cash and cash equivalent balances aggregating $ 5.7 million , resulting primarily from completion of the 2019 pipe discussed in note 8 to the consolidated financial statements included elsewhere in this annual report . net cash used in operating activities was $ 2.8 million and $ 4.6 million for the years ended december 31 , 2019 and 2018 , respectively . we have incurred net losses since its inception which has resulted in a cumulative deficit at december 31 , 2019 of approximately $ 113 million . since inception , we have financed our operations principally from the sale of equity securities , the issuance of notes payable and license arrangements . as a result , management historically has expressed substantial doubt as to the company 's ability to continue as a going concern . as discussed in note 8 to the consolidated financial statements included elsewhere in this annual report , in may 2019 , we entered into the 2019 pipe , resulting in proceeds of approximately $ 7.5 million , before deducting offering expenses aggregating approximately $ 94,000. in addition , as discussed in note 11 to the consolidated financial statements included elsewhere in this annual report , in january 2020 , we entered into a securities purchase agreement with two investors under which we issued to such investors an aggregate principal amount of $ 17.5 million of floating rate secured convertible notes ( the “ 2020 secured notes ” ) . from the proceeds received from the issuance of the 2020 secured notes , which have a five-year term , we repaid and retired the 2010 junior secured notes payable that otherwise would have matured in october and november 2020. as a result , in management 's opinion , our cash and cash equivalent balances at december 31 , 2019 , when combined with the proceeds from issuance of the 2020 secured notes ( after repayment of the 2010 secured notes ) , are sufficient to support our operations for at least the next twelve months and to alleviate doubt as to our ability to continue as a going concern .
```    
 Suspicious Activity Report : this discussion and analysis contains forward-looking statements that are based upon current expectations and involve risks , assumptions and uncertainties . you should review the “ risk factors ” section of this annual report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements described in the following discussion and analysis . overview we are a medical device company that develops and commercializes innovative platforms for performing minimally invasive surgical procedures in the brain under direct , intra-procedural mri guidance . our principal product platform is our clearpoint system , which is in commercial use and is used to perform minimally invasive surgical procedures in the brain . the clearpoint system utilizes intra-procedural mri to guide the procedures and are designed to work in a hospital 's existing mri suite . we believe that this product platform delivers better patient outcomes , enhances revenue potential for both physicians and hospitals , and reduces costs to the healthcare system . in 2010 , we received regulatory clearance from the fda to market our clearpoint system in the u.s. for general neurological procedures . in 2011 , we also obtained ce marking approval for our clearpoint system , which enables us to sell our clearpoint system in the european union . substantially all our product revenues for the years ended december 31 , 2019 and 2018 relate to sales of our clearpoint system products . we have financed our operations and internal growth primarily through the sale of equity securities , the issuance of convertible and other secured notes , and license arrangements . we have incurred significant losses since our inception in 1998 as we have devoted substantial efforts to research and development . as of december 31 , 2019 , we had accumulated losses of approximately $ 113 million . we may continue to incur operating losses as we expand our clearpoint system platform and our business generally . factors which may influence future results of operations the following is a description of factors which may influence our future results of operations , and which we believe are important to an understanding of our business and results of operations . revenues in 2010 , we received 510 ( k ) clearance from the fda to market our clearpoint system in the u.s. for general neurological procedures . future revenues from sales of our clearpoint platform products and services are difficult to predict and may not be sufficient to offset our continuing research and development expenses and our increasing selling , general and administrative expenses . generating recurring revenues from the sale of functional neurosurgical products is an important part of our business model for our clearpoint system . we anticipate that , over time , recurring revenues will constitute an increasing percentage of our total revenues as we leverage installations of our clearpoint system to generate recurring sales of our functional neurosurgical products . our product revenues were approximately $ 9.5 million and $ 6.7 million for the years ended december 31 , 2019 and 2018 , respectively , and were almost entirely related to our clearpoint system . in addition , we expect that , over time , service revenues will constitute an increasing portion of our total revenues based on : ( a ) leveraging current and future installations of clearpoint systems , as discussed above , so as to result in an increase in functional neurosurgical service revenues ; and ( b ) increasing biologics and drug delivery service revenues should our customers in this space be successful in expansion of their clinical trials , and should we be successful in continuing to establish relationships with new biologic and drug delivery partners . our service revenues were approximately $ 1.7 million and $ 700,000 for the years ended december 31 , 2019 and 2018 , respectively . our revenue recognition policies are more fully described in the “ critical accounting policies and significant judgments and estimates ” section below . cost of revenues cost of revenues includes the direct costs associated with the assembly and purchase of components for functional neurosurgical products , drug delivery and biologic products , non-neurosurgical therapy products , and clearpoint capital equipment which we have sold , and for which we have recognized the revenue in accordance with our revenue recognition policy . cost of revenues also includes the allocation of manufacturing overhead costs and depreciation of loaned systems installed under our clearpoint placement program , as well as provisions for obsolete , impaired , or excess inventory . with the anticipated increases in the contribution to total revenues of sales of recurring products and services , as discussed above , we expect gross margin , as a percentage of total revenue , to increase over time . 41 research and development costs our research and development costs consist primarily of costs associated with the conceptualization , design , testing , and prototyping of our clearpoint system products . such costs include salaries , travel , and benefits for research and development personnel , including related share-based compensation ; materials and laboratory supplies in research and development activities ; consultant costs ; and licensing costs related to technology not yet commercialized . we anticipate that , over time , our research and development costs may increase as we : ( i ) continue to develop enhancements to our clearpoint system ; and ( ii ) seek to expand the application of our technological platforms . story_separator_special_tag we have not paid , and do not anticipate paying , cash dividends on shares of our common stock ; therefore , the expected dividend yield is assumed to be zero . research and development costs . costs related to research , design and development of products are charged to research and development expense as incurred . these costs include direct salary and employee benefit-related costs for research and development personnel , costs incurred under the terms of collaborative agreements , costs for materials used in research and development activities , and costs for outside services . results of operations comparison of the year ended december 31 , 2019 to the year ended december 31 , 2018 replace_table_token_1_th 44 revenue . total revenues were approximately $ 11.2 million and $ 7.4 million for the years ended december 31 , 2019 and 2018 , respectively . functional neurosurgery revenue , which consists of disposable product commercial sales related to cases utilizing the clearpoint system and related services , increased 29 % to $ 6.9 million during the year ended december 31 , 2019 from $ 5.3 million for the same period in 2018. the increase was due primarily to 801 cases utilizing our clearpoint neuro navigation system in 2019 , as compared to 670 such cases in 2018 , an increase of 20 % . the increase in sales was also influenced by two factors : ( a ) fda actions taken in early 2018 , that adversely affected third-party providers in the laser ablation space ; and ( b ) the introduction by a third-party provider of a new deep brain stimulation system that did not have approval for use in the mri suite for most of 2018. the fda actions were resolved by the affected third-parties , but not until the fourth quarter of 2018 , and the new deep brain stimulation system received fda clearance for use in the mri suite in the third quarter of 2018. there were no increases in functional neurosurgery product prices during 2019 that would be reasonably expected to affect a typical customer order . biologics and drug delivery revenues , which include sales of services related to customer-sponsored clinical trials utilizing the clearpoint system and of related disposable products , increased 116 % to $ 2.3 million for the year ended december 31 , 2019 , from $ 1.1 million for the same period in 2018. this increase was due primarily to an increase from 2018 to 2019 of : ( a ) approximately $ 839,000 , or 305 % , in biologics and drug delivery services ; and ( b ) approximately $ 543,000 , or 59 % , in biologics and drug delivery product sales . there were no increases in biologics and drug delivery product prices during 2019 that would be reasonably expected to affect a typical customer order . capital equipment revenue , consisting of sales of clearpoint reusable hardware and software , increased 147 % to $ 1.0 million for the year ended december 31 , 2019 , from $ 420,000 for the same period in 2018. revenues from this product line historically have varied from period to period . this increase was due primarily to an increase in the number of clearpoint systems sold . there were no increases in capital equipment product prices during the year ended december 31 , 2019 that would be reasonably expected to affect a typical customer order . capital equipment-related services , consisting of fees for capital equipment rental , service , installation , training and shipping , increased 59 % to $ 625,000 for the year ended december 31 , 2019 , from $ 393,000 for the same period in 2018. the increase was due primarily to an increase in service fee revenue . cost of revenues . cost of revenues was $ 3.8 million for the year ended december 31 , 2019 , representing gross margin of 66 % , compared to $ 2.4 million for the same period in 2018 , representing gross margin of 67 % . the slight decrease in gross margin was due primarily to an increased contribution from lower margin capital equipment sales in 2019 , when compared to 2018 , and to increased direct and indirect costs in 2019 , when compared to 2018. these factors were substantially offset by an increased contribution from sales of services , which bear higher margins relative to other lines of revenue . research and development costs . research and development costs were $ 2.9 million for the year ended december 31 , 2019 , compared to $ 2.3 million for the same period in 2018 , an increase of $ 612,000 , or 26 % . the increase was due primarily to increases in : ( a ) compensation costs , due primarily to increases in incentive compensation and headcount , of $ 207,000 ; ( b ) product and software development costs of $ 222,000 ; ( c ) intellectual property costs of $ 65,000 ; and ( d ) license fees of $ 76,000. sales and marketing expenses . sales and marketing expenses were $ 4.8 million for the year ended december 31 , 2019 , compared to $ 3.5 million for the same period in 2018 , an increase of $ 1.2 million , or 35 % . this increase was primarily due to a $ 1.0 million increase in compensation costs , attributable to increase in incentive-based compensation and headcount , both of which are commensurate with the increase in revenues from 2018 to 2019. general and administrative expenses . general and administrative expenses were $ 4.3 million for each of the years ended december 31 , 2019 and 2018. most general and administrative cost categories were not materially changed between 2018 and 2019 , with decreases in professional fees offset by increases in public company costs due to the uplisting of the exchange on which our common stock is traded

