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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________
FORM 10-Q
__________________________________
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2021
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number 001-39430
__________________________________
https://cdn.kscope.io/1c6a7d5cb5cc1ba9eceb1634844522dc-afib-20210630_g1.jpg
ACUTUS MEDICAL, INC.
(Exact name of registrant as specified in its charter)
__________________________________
Delaware45-1306615
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2210 Faraday Ave.,
Suite 100, Carlsbad, CA
92008
(Address of principal executive offices)(Zip Code)
(Registrant’s telephone number, including area code) (442) 232-6080
___________________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol
Name of each exchange on which registered 
Common Stock, par value $0.001 per shareAFIBThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐
Indicate by check mark whether the registrant has submitted electronically, if any, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  
Indicate by check mark whether registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  ☒
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date.
Class of Common StockOutstanding Shares as of August 9, 2021
Common Stock, $0.001 par value
34,607,593


Table of Contents
Acutus Medical, Inc.
Form 10-Q
For the Quarter Ended June 30, 2021
Table of Contents
Page



Table of Contents

Item 1. Financial Statements.
Acutus Medical, Inc.
Condensed Consolidated Balance Sheets
June 30,
2021
December 31,
2020
(in thousands, except share and per share amounts)(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$7,127 $25,234 
Marketable securities, short-term73,894 105,839 
Restricted cash150 150 
Accounts receivable3,359 2,160 
Inventory14,663 12,958 
Prepaid expenses and other current assets2,859 5,047 
Total current assets102,052 151,388 
Marketable securities, long-term 8,726 
Property and equipment, net15,335 12,356 
Right-of-use assets, net4,841 1,669 
Intangible assets, net5,333 5,653 
Goodwill12,026 12,026 
Other assets1,006 717 
Total assets$140,593 $192,535 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$5,794 $8,266 
Accrued liabilities8,908 7,308 
Contingent consideration, short-term2,700 5,400 
Operating lease liabilities, short-term454 933 
Total current liabilities17,856 21,907 
Operating lease liabilities, long-term4,798 1,134 
Long-term debt39,683 39,011 
Contingent consideration, long-term2,400 3,900 
Total liabilities64,737 65,952 
Commitments and contingencies (Note 12)
Stockholders' equity
Preferred stock, $0.001 par value; 5,000,000 shares authorized as of June 30, 2021 and December 31, 2020; no shares issued and outstanding as of June 30, 2021 and December 31, 2020
  
Common stock, $0.001 par value; 260,000,000 shares authorized as of June 30, 2021 and December 31, 2020; 28,211,626 and 27,991,425 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively
28 28 
Additional paid-in capital494,595 487,290 
Accumulated deficit(418,923)(361,015)
Accumulated other comprehensive income156 280 
Total stockholders' equity75,856 126,583 
Total liabilities and stockholders' equity$140,593 $192,535 
The accompanying notes are an integral part of these condensed consolidated financial statements.
1

Table of Contents
Acutus Medical, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(in thousands, except share and per share amounts)(unaudited)(unaudited)
Revenue$4,709 $1,134 $8,300 $2,717 
Costs and operating expenses:
Cost of products sold7,492 2,663 14,447 5,857 
Research and development9,174 8,176 18,544 16,149 
Selling, general and administrative15,601 9,125 31,853 19,360 
Change in fair value of contingent consideration(258)635 (1,411)(1,584)
Total costs and operating expenses32,009 20,599 63,433 39,782 
Loss from operations(27,300)(19,465)(55,133)(37,065)
Other income (expense):
Change in fair value of warrant liability (2,453) (1,872)
Interest income29 95 69 370 
Interest expense(1,456)(1,370)(2,844)(2,724)
Total other expense, net(1,427)(3,728)(2,775)(4,226)
Loss before income taxes(28,727)(23,193)(57,908)(41,291)
Income tax benefit    
Net loss$(28,727)$(23,193)$(57,908)$(41,291)
Other comprehensive income (loss)
Unrealized gain (loss) on marketable securities4 (14)10 (41)
Foreign currency translation adjustment92 96 (134)69 
Comprehensive loss$(28,631)$(23,111)$(58,032)$(41,263)
Net loss per common share, basic and diluted$(1.02)$(32.24)$(2.06)$(58.16)
Weighted average shares outstanding, basic and diluted28,152,305 719,421 28,092,329 709,961 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2

Table of Contents
Acutus Medical, Inc.
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)
For the Three Months Ended June 30, 2021
(in thousands, except share amounts)Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
SharesAmount
Balance as of March 31, 2021 (unaudited)28,113,165 $28 $490,369 $(390,196)$60 $100,261 
Unrealized gain on marketable securities— — — — 4 4 
Foreign currency translation adjustment— — — — 92 92 
Stock option exercises71,460 — 450 — — 450 
Stock-based compensation43 — 3,776 — — 3,776 
Issuance of common stock for cashless warrant exercise26,958 — — — — — 
Net loss— — — (28,727)— (28,727)
Balance as of June 30, 2021 (unaudited)28,211,626 $28 $494,595 $(418,923)$156 $75,856 
For the Three Months Ended June 30, 2020
(in thousands, except share amounts)Series A
Convertible Preferred
Stock
Series B
Convertible Preferred
Stock
Series C
Convertible Preferred
Stock
Series D
Convertible Preferred
Stock
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
(Deficit)
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance as of March 31, 2020 (unaudited)391,210 $3,059 3,088,444 $40,685 4,499,921 $74,575 8,593,360 $142,236 710,841 $1 $34,993 $(277,132)$(84)$(242,222)
Unrealized loss on marketable securities— — — — — — — — — — — — (14)(14)
Foreign currency translation adjustment— — — — — — — — — — — — 96 96 
Stock-based compensation— — — — — — — —   1,157 — — 1,157 
Stock option exercises— — — — — — — — 64,562 — 205 — — 205 
Net loss— — — — — — — — — — — (23,193)— (23,193)
Balance as of June 30, 2020 (unaudited)391,210 $3,059 3,088,444 $40,685 4,499,921 $74,575 8,593,360 $142,236 775,403 $1 $36,355 $(300,325)$(2)$(263,971)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Acutus Medical, Inc.
Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)
For the Six Months Ended June 30, 2021
(in thousands, except share amounts)Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
SharesAmount
Balance as of December 31, 202027,991,425 $28 $487,290 $(361,015)$280 $126,583 
Unrealized gain on marketable securities— — — — 10 10 
Foreign currency translation adjustment— — — — (134)(134)
Stock option exercises98,969 — 619 — — 619 
Stock-based compensation94,274 — 6,686 — — 6,686 
Issuance of common stock for cashless warrant exercise26,958 — — — — — 
Net loss— — — (57,908)— (57,908)
Balance as of June 30, 2021 (unaudited)28,211,626 $28 $494,595 $(418,923)$156 $75,856 
For the Six Months Ended June 30, 2020
(in thousands, except share amounts)Series A
Convertible Preferred
Stock
Series B
Convertible Preferred
Stock
Series C
Convertible Preferred
Stock
Series D
Convertible Preferred
Stock
Common StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
(Deficit)
SharesAmountSharesAmountSharesAmountSharesAmountSharesAmount
Balance as of December 31, 2019391,210 $3,059 3,088,444 $40,685 4,499,921 $74,575 8,200,297 $135,039 695,902 $1 $33,252 $(259,034)$(30)$(225,811)
Unrealized loss on marketable securities— — — — — — — — — — — — (41)(41)
Foreign currency translation adjustment— — — — — — — — — — — — 69 69 
Issuance of Series D convertible preferred stock for the Biotronik Asset Purchase— — — — — — 273,070 5,000 — — — — — — 
Issuance of Series D convertible-preferred stock for the contingent consideration related to the Rhythm Xience Acquisition— — — — — — 119,993 2,197 — — — — — — 
Stock option exercises— — — — — — — — 64,562 — 205 — — 205 
Stock-based compensation— — — — — — — — 14,939 — 2,898 — — 2,898 
Net loss— — — — — — — — — — — (41,291)— (41,291)
Balance as of June 30, 2020 (unaudited)391,210 $3,059 3,088,444 $40,685 4,499,921 $74,575 8,593,360 $142,236 775,403 $1 $36,355 $(300,325)$(2)$(263,971)
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Acutus Medical, Inc.
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30,
20212020
(in thousands)(unaudited)
Cash flows from operating activities
Net loss$(57,908)$(41,291)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense2,747 978 
Amortization of intangible assets320 220 
Stock-based compensation expense6,686 2,898 
Amortization of premiums on marketable securities, net797 5 
Amortization of debt issuance costs672 314 
Amortization of right-of-use assets343 336 
Change in fair value of warrant liability 1,872 
Change in fair value of contingent consideration(1,411)(1,584)
Changes in operating assets and liabilities:
Accounts receivable(1,199)(597)
Inventory(1,705)(3,616)
Prepaid expenses and other current assets2,501 666 
Other assets(289)8 
Accounts payable(2,727)5,286 
Accrued liabilities1,600 155 
Operating lease liabilities(342)(411)
Net cash used in operating activities(49,915)(34,761)
Cash flows from investing activities
Purchases of available-for-sale marketable securities(9,134) 
Sales of available-for-sale marketable securities4,590 17,095 
Maturities of available-for-sale marketable securities44,407 40,000 
Purchases of property and equipment(5,841)(4,445)
Net cash provided by investing activities34,022 52,650 
Cash flows from financing activities
Payment of deferred offering costs(10)(701)
Payment of contingent consideration(2,758)(2,619)
Proceeds from stock options exercises619 205 
Net cash used in financing activities(2,149)(3,115)
Effect of exchange rate changes on cash, cash equivalents and restricted cash(65)69 
Net change in cash, cash equivalents and restricted cash(18,107)14,843 
Cash, cash equivalents and restricted cash, at the beginning of the period25,384 9,602 
Cash, cash equivalents and restricted cash, at the end of the period$7,277 $24,445 
Supplemental disclosure of cash flow information:
Cash paid for income taxes$38 $ 
Cash paid for interest$2,263 $2,376 
Supplemental disclosure of noncash investing and financing activities:
Issuance of Series D convertible preferred stock for Biotronik asset purchase$ $5,000 
Issuance of Series D convertible preferred stock for Rhythm Xience Acquisition$ $2,197 
Change in unrealized (gain) loss on marketable securities$(10)$41 
Right-of-use assets exchanged for operating lease liabilities$3,527 $ 
Unpaid purchases of property and equipment$58 $55 
Unpaid deferred offering costs$313 $1,805 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Acutus Medical, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1—Organization and Description of Business
Acutus Medical, Inc. (the “Company”) is an arrhythmia management company focused on improving the way cardiac arrhythmias are diagnosed and treated. The Company designs, manufactures and markets a range of tools for catheter-based ablation procedures to treat various arrhythmias. The Company’s product portfolio includes novel access sheaths, transseptal crossing tools, diagnostic and mapping catheters, ablation catheters, mapping and imaging consoles and accessories, as well as supporting algorithms and software programs. The Company was incorporated in the state of Delaware on March 25, 2011, and is located in Carlsbad, California.
Public Offering
In July 2021, the Company issued 6,325,000 shares of common stock in a public offering, which included 825,000 shares of common stock issued upon the underwriter's exercise in full of an option to purchase additional shares of common stock. The price to the public for each share was $14.00 for approximately $82.7 million in net proceeds to the Company.
Going Concern, Liquidity and Capital Resources
The Company has limited revenue, has incurred operating losses since inception and expects to continue to incur significant operating losses for at least the next several years and may never become profitable. As of June 30, 2021 and December 31, 2020, the Company had an accumulated deficit of $418.9 million and $361.0 million, respectively, and working capital of $84.2 million and $129.5 million, respectively. The Company has historically funded its operations primarily through the sale of debt and equity securities, as well as other indebtedness. With the closing of the Company’s initial public offering (“IPO”) in August 2020 and secondary offering in July 2021, the Company’s current cash, cash equivalents and marketable securities are sufficient to fund operations for at least the next 12 months. However, the Company may need to raise additional funds through the issuance of additional debt, equity or both. Until such time, if ever, the Company can generate revenue sufficient to achieve profitability, the Company expects to finance its operations through equity or debt financings, which may not be available to the Company on the timing needed or on terms that the Company deems to be favorable. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the ownership interest of its stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. The Company may be required to delay, limit, reduce or terminate its product discovery and development activities or future commercialization efforts. There can be no assurance that the Company will be able to obtain the needed financing on acceptable terms or at all.
Impact of COVID-19
Beginning in March 2020, the COVID-19 pandemic and the measures imposed to contain this pandemic disrupted and are expected to continue to impact the Company's business. For example, on March 19, 2020, the Executive Department of the State of California issued Executive Order N-33-20, ordering all individuals in the State of California to stay home or at their place of residence except as needed to maintain continuity of operations of the federal critical infrastructure sectors. The Company's primary operations are located in Carlsbad, California. As a result of such order, the majority of the Company’s employees have telecommuted, which may impact certain of its operations over the near term and long term. Moreover, beginning in March 2020, access to hospitals and other customer sites was restricted to essential personnel, which negatively impacted the Company’s ability to install its AcQMap consoles and workstations in new accounts and for sales representatives and mappers to promote the use of the Company’s products with physicians. Moreover, hospitals and other therapeutic centers suspended many elective procedures, resulting in a significantly reduced volume of procedures using the Company's products. In addition, all clinical trials in Europe were suspended with follow-ups for clinical trials done via telecom, and the Company believes enrollment timing in its planned clinical trials will be slowed due to COVID-19 driven delayed access to enrollment sites. As a result of the interruptions to the business due to COVID-19, the Company enacted a cash conservation program, which included delaying certain non-critical capital expenditures and other projects and implementing a hiring freeze, headcount reductions and temporary compensation reductions (through August 2020). The effects of the pandemic began to decrease in late April 2020 as electrophysiology labs began reopening and procedure volumes began increasing as compared to COVID-19 related low points in March 2020. The Company’s IPO in August 2020 provided resources sufficient to restore
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compensation reductions to pre-COVID levels, as well as to restart hiring and capital expenditures in support of its growth. Over the past 12-months, the Company has continued to observe intermittent suspension of many elective procedures associated with the resurgence of COVID-19 in geographies where it sells, markets and distributes its products. Access restrictions in certain hospitals have slowed the Company’s ability to install its AcQMap consoles and workstations in new accounts and for sales representatives and mappers to promote the use of its products with physicians. In addition, the impact of COVID-19 has varied by region and by healthcare facility, making the Company’s ability to forecast the sustained impact on its business from COVID-19. The Company continues to see intermittent suspension of many elective procedures in many hospitals, resulting in reduced volume of procedures using its products. The magnitude of the impact of the COVID-19 pandemic on productivity, results of operations and financial position, and its disruption to the Company’s business and clinical programs and timelines, will depend, in part, on the length and severity of the pandemic, associated restrictions and other measures designed to prevent the spread of COVID-19 and on the Company’s ability to conduct business in the ordinary course. Quarantines, shelter-in-place and similar government orders have also impacted, and may continue to impact, the Company’s third-party manufacturers and suppliers, and could in turn adversely impact the availability or cost of materials, which could disrupt the Company’s supply chain. The markets the Company serves are likely to see continued impacts from COVID-19 for the foreseeable future, and the emergence of new variants of COVID-19 creates significant uncertainty as to how long COVID-19 will continue to impact the Company’s business.
Note 2—Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by U.S. GAAP for complete financial statements. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. These condensed consolidated financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of Acutus Medical, Inc. and its wholly-owned subsidiary Acutus Medical NV (“Acutus NV”), which was incorporated under the laws of Belgium in August 2013. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates and Assumptions
The preparation of the condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, expenses and disclosures of contingent assets and liabilities. The most significant estimates and assumptions in the Company’s condensed consolidated financial statements include, but are not limited to, revenue recognition, useful lives of intangible assets, assessment of impairment of goodwill, measurement of operating lease liabilities, and the fair value of common stock, stock options, warrants, intangible assets, contingent consideration and goodwill. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results could differ from those estimates.
Segments
Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment.
Cash and Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. All of the Company’s cash equivalents have liquid markets and high credit ratings. The Company maintains its
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cash in bank deposits and other accounts, the balances of which, at times and as of June 30, 2021 and December 31, 2020, exceeded federally insured limits.
Restricted cash serves as collateral for the Company’s corporate credit card program. The following table reconciles cash, cash equivalents and restricted cash in the condensed consolidated balance sheets to the total shown on the condensed consolidated statement of cash flows (in thousands):
June 30,
2021
December 31,
2020
(unaudited)
Cash and cash equivalents$7,127 $25,234 
Restricted cash150 150 
Total cash, cash equivalents and restricted cash$7,277 $25,384 
Marketable Securities
The Company considers its debt securities to be available-for-sale securities. Available-for-sale securities are classified as cash equivalents or short-term or long-term marketable securities based on the maturity date at time of purchase and their availability to meet current operating requirements. Marketable securities that mature in three months or less from the date of purchase are classified as cash equivalents. Marketable securities, excluding cash equivalents, that mature in one year or less are classified as short-term available-for-sale securities and are reported as a component of current assets.
Securities that are classified as available-for-sale are measured at fair value with temporary unrealized gains and losses reported in other comprehensive loss, and as a component of stockholders’ equity (deficit) until their disposition or maturity. See “Fair Value Measurements” below. The Company reviews all available-for-sale securities at each period end to determine if they remain available-for-sale based on the Company’s current intent and ability to sell the security if it is required to do so. Realized gains and losses from the sale of marketable securities, if any, are calculated using the specific-identification method.
Marketable securities are subject to a periodic impairment review. The Company may recognize an impairment charge when a decline in the fair value of investments below the cost basis is determined to be other-than-temporary. In determining whether a decline in market value is other-than-temporary, various factors are considered, including the cause, duration of time and severity of the impairment, any adverse changes in the investees’ financial condition and the Company’s intent and ability to hold the security for a period of time sufficient to allow for an anticipated recovery in market value. Declines in value judged to be other-than-temporary are included in the Company’s condensed consolidated statements of operations and comprehensive loss. The Company did not record any other-than-temporary impairments related to marketable securities in the Company’s condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2021 and 2020.
Concentrations of Credit Risk and Off-Balance Sheet Risk
Financial instruments that potentially subject the Company to credit risk consist principally of cash, cash equivalents, restricted cash, accounts receivable and marketable securities. Cash and restricted cash are maintained in accounts with financial institutions, which, at times may exceed the Federal depository insurance coverage of $0.25 million. The Company has not experienced losses on these accounts and management believes, based upon the quality of the financial institutions, that the credit risk with regard to these deposits is not significant. The Company’s marketable securities portfolio consists of investments in commercial paper, U.S. treasury securities, asset-backed securities and short-term high credit quality corporate debt securities.
Revenue from Contracts with Customers
The Company accounts for revenue earned from contracts with customers under Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (“ASC 606”). The core principle of the revenue standard is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. The following five steps are applied to achieve that core principle:
Step 1: Identify the contract with the customer.
Step 2: Identify the performance obligations in the contract.
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Step 3: Determine the transaction price.
Step 4: Allocate the transaction price to the performance obligations in the contract.
Step 5: Recognize revenue when, or as, the company satisfies a performance obligation.
The Company places its medical diagnostic equipment, AcQMap System, at customer sites under evaluation agreements and generates revenue from the sale of disposable products used with the AcQMap System. Disposable products include AcQMap Catheters and AcQGuide Steerable Sheaths. The Company provides the disposable products in exchange for consideration, which occurs when a customer submits a purchase order and the Company provides disposables at the agreed upon prices in the invoice. Generally, customers purchase disposable products using separate purchase orders after the equipment has been provided to the customer for free with no binding agreement or requirement to purchase any disposable products. The Company also sells the AcQMap System to customers along with software updates on a when-and-if-available basis and equipment service. The Company has elected the practical expedient and accounting policy election to account for the shipping and handling as activities to fulfill the promise to transfer the disposable products and not as a separate performance obligation.
The Company also enters into deferred equipment agreements that are generally structured such that the Company agrees to provide an AcQMap System at no up-front charge, with title of the device transferring to the customer at the end of the contract term, in exchange for the customer’s commitment to purchase disposables at a specified price over the term of the agreement, which generally ranges from two to four years. The Company determined that the deferred equipment agreements include embedded sales-type leases. The Company allocates contract consideration under deferred equipment agreements containing fixed annual disposable purchase commitments to the underlying lease and non-lease components at contract inception. The Company expenses the cost of the device at the inception of the agreement and records a financial lease asset equal to the gross consideration allocated to the lease. The lease asset will be reduced by payments for minimum disposable purchases that are allocated to the lease.
The Company’s contracts primarily include fixed consideration. Generally, there are no discounts, rebates, returns or other forms of variable consideration. Customers are generally required to pay within 30 to 60 days.
The delivery of disposable products are performance obligations satisfied at a point in time. The disposable products are shipped Free on Board (“FOB”) shipping point or FOB destination. For disposable products that are shipped FOB shipping point, the customer has the significant risks and rewards of ownership and legal title to the assets when the disposable products leave the Company’s shipping facilities, thus the customer obtains control and revenue is recognized at that point in time. Revenue is recognized on delivery for disposable products shipped via FOB destination.
The installation and delivery of the AcQMap System is satisfied at a point in time when the installation is complete, which is when the customer can benefit and has control of the system. The Company’s software updates and equipment service performance obligations are satisfied evenly over time as the customer simultaneously receives and consumes the benefits of the Company’s performance for these services throughout the service period.
The Company allocates the transaction price to each performance obligation identified in the contract based on the relative standalone selling price (“SSP”). The Company determines SSP for the purposes of allocating the transaction price to each performance obligation based on the adjusted market assessment approach that maximizes the use of observable inputs, which includes, but is not limited to, transactions where the specific performance obligations are sold separately, list prices, and offers to customers.
Except for the deferred equipment agreements noted above, the Company’s contracts with customers generally have an expected duration of one year or less, and therefore the Company has elected the practical expedient in ASC 606 to not disclose information about its remaining performance obligations. Any incremental costs to obtain contracts are recorded as selling, general and administrative expense as incurred due to the short duration of the Company’s contracts. The Company’s contract balances consisted solely of accounts receivable as of June 30, 2021 and December 31, 2020.
In May 2020, the Company entered into bi-lateral distribution agreements with Biotronik SE & Co. KG (“Biotronik”) (the “Bi-Lateral Distribution Agreements”). Pursuant to the Bi-Lateral Distribution Agreements, the Company obtained a non-exclusive license to distribute a range of Biotronik’s products and accessories in the United States, Canada, China, Hong Kong and multiple Western European countries under the Company’s private label. Moreover, if an investigational device exemption (“IDE”) clinical trial is required for these products to obtain regulatory approval in the United States, or a clinical trial is required for these products to obtain regulatory approval in China, the Company will obtain an exclusive distribution right in such territories for a term of up to five years commencing on the date of regulatory approval if the Company covers the cost of the IDE or other clinical trial and the Company conducts such study within a specified period. Biotronik also agreed to
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distribute the Company’s products and accessories in Germany, Japan, Mexico, Switzerland and multiple countries in Asia-Pacific, Eastern Europe, the Middle East and South America. The Company also granted Biotronik a co-exclusive right to distribute these products in Hong Kong. Each party will pay to the other party specified transfer prices on the sale of the other party’s products and, accordingly, will earn a distribution margin on the sale of the other party’s products.
The following table sets forth the Company’s revenue for disposables, systems and service/other for the three and six months ended June 30, 2021 and 2020 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(unaudited)(unaudited)
Acutus Direct
Disposables$2,816 $899 $4,599 $1,919 
Systems672  1,285 520 
Service/Other33 12 68 18 
Total Acutus direct revenue3,521 911 5,952 2,457 
Distribution agreements1,188 223 2,348 260 
Total revenue$4,709 $1,134 $8,300 $2,717 
The following table provides revenue by geographic location for the three and six months ended June 30, 2021 and 2020 (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2021202020212020
(unaudited)(unaudited)
Acutus Direct
United States$2,344 $544 $3,812 $1,313 
Europe1,177 367 2,140 1,144 
Total Acutus direct revenue3,521 911 5,952 2,457 
Distribution Agreements
United States143 15 256 15 
Europe1,045 208 2,092 245 
Total revenue through distribution agreements1,188 223 2,348 260 
Total revenue$4,709 $1,134 $8,300 $2,717 
Inventory
Inventory is comprised of raw materials, direct labor and manufacturing overhead and is stated at the lower of cost (first-in, first-out basis) or net realizable value. The Company recorded write-downs for excess and obsolete inventory based on management’s review of inventories on hand, compared to estimated future usage and sales, shelf-life and assumptions about the likelihood of obsolescence of $0.1 million for both of the three months ended June 30, 2021 and 2020, and $0.9 million and $0.1 million for the six months ended June 30, 2021 and 2020, respectively.
Accounts Receivable
Trade accounts receivable are recorded net of allowances for uncollectible accounts. The Company evaluates the collectability of its accounts receivable based on various factors including historical experience, the length of time the receivables are past due and the financial health of the customer. The Company reserves specific receivables if collectability is no longer reasonably assured. Based upon the assessment of these factors, the Company did not record an allowance for uncollectible accounts as of June 30, 2021 and December 31, 2020.
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Property and Equipment, Net
Property and equipment are recorded at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful lives of the related assets, generally three to five years, or, in the case of leasehold improvements, over the lesser of the useful life of the related asset or the lease term.
Intangible Assets
Intangible assets consist of acquired developed technology, acquired in-process technology, trademarks and trade names and a customer-related intangible which were acquired as part of the acquisition of Rhythm Xience, Inc. (“Rhythm Xience”) in June 2019. The Company determines the appropriate useful life of its finite-lived intangible assets by performing an analysis of expected cash flows of the acquired assets. Finite-lived intangible assets are amortized over their estimated useful lives using the straight-line method, which approximates the pattern in which the economic benefits are consumed. Acquired in-process technology was classified as an indefinite-lived intangible asset, until the receipt of Food and Drug Administration (the “FDA”) approval for the technology in January 2020. Once the FDA approval was received, the in-process technology was classified as a finite-lived intangible and amortization for in-process technology began. Indefinite-lived intangible assets are tested for impairment at least annually and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Indefinite-lived intangible assets are impaired if their estimated fair values are less than their carrying value.
Goodwill
Goodwill represents the excess of the purchase price of an entity over the estimated fair value of the assets acquired and liabilities assumed, and it is presented as goodwill in the accompanying condensed consolidated balance sheets. Under ASC 350, Intangibles – Goodwill and Other (“ASC 350”), goodwill is not amortized but is subject to periodic impairment testing. ASC 350 requires that an entity assign its goodwill to reporting units and test each reporting unit’s goodwill for impairment at least on an annual basis and between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. In the evaluation of goodwill for impairment, which is performed annually during the fourth quarter, the Company first assesses qualitative factors to determine whether the existence of events or circumstances led to a determination that it was more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events or circumstances, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying amount, the Company is required to perform the quantitative goodwill impairment test. The Company has one reporting unit. For the six months ended June 30, 2021, the qualitative testing did not indicate any impairment for the carrying amount of goodwill.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, including property and equipment and finite-lived intangible assets, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. An impairment loss is recognized when the asset’s carrying value exceeds the total undiscounted cash flows expected from its use and eventual disposition. The amount of the impairment loss is determined as the excess of the carrying value of the asset over its fair value. For the three and six months ended June 30, 2021 and 2020, the Company determined that there was no impairment of property and equipment or intangible assets.
Foreign Currency Translation and Transactions
The assets, liabilities and results of operations of Acutus NV are measured using their functional currency, the Euro, which is the currency of the primary foreign economic environment in which this subsidiary operates. Upon consolidating this entity with the Company, its assets and liabilities are translated to U.S. dollars at currency exchange rates as of the balance sheet date and its revenues and expenses are translated at the weighted average currency exchange rates during the applicable reporting periods. Translation adjustments resulting from the process of translating this entity’s financial statements are reported in accumulated other comprehensive income (loss) in the condensed consolidated balance sheets and foreign currency translation adjustment in the condensed consolidated statements of operations and comprehensive loss.
Lessee Leases
The Company accounts for its lessee leases under ASC 842, Leases (“ASC 842”). Under this guidance, arrangements meeting the definition of a lease are classified as operating or financing leases, and are recorded on the condensed consolidated balance sheet as both a right-of-use asset and a lease liability, calculated by discounting fixed lease payments over the lease term at the
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rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each period, and the right-of-use asset is amortized over the lease term. For operating leases, interest on the lease liability and the amortization of the right-of-use asset results in straight-line rent expense over the lease term. Variable lease expenses are recorded when incurred.
In calculating the right-of-use asset and lease liability, the Company elects to combine lease and non-lease components. The Company excludes short-term leases having initial terms of 12 months or less from the new guidance as an accounting policy election.
Cost of Products Sold
Cost of products sold includes raw materials, direct labor, manufacturing overhead, shipping and receiving costs and other less significant indirect costs related to the production of the Company’s products.
Research and Development
The Company is actively engaged in new product research and development efforts. Research and development expenses consist primarily of salaries and employee-related costs (including stock-based compensation) for personnel directly engaged in research and development activities, clinical trial expenses, equipment costs, material costs, allocated rent and facilities costs and depreciation.
In April 2021, the Company and Biotronik entered into a Feasibility and Development Agreement to pursue the development of hardware, software and IT infrastructure to implement the Qubic Connect System ("QBS"). The QBS will allow data transfer from multiple diagnostic and therapeutic medical products during an electrophysiology procedure to be aggregated and analyzed for the purposes of designing improved treatment protocols.
Research and development expenses relating to possible future products are expensed as incurred. The Company also accrues and expenses costs for activities associated with clinical trials performed by third parties as incurred. All other costs relative to setting up clinical trial sites are expensed as incurred. Clinical trial site costs related to patient enrollment are accrued as patients are entered into the trials.
Selling, General and Administrative
Selling, general and administrative (“SG&A”) expenses consist primarily of salaries and employee-related costs (including stock-based compensation) for personnel in sales, executive, finance and other administrative functions, allocated rent and facilities costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, marketing costs and insurance costs. The Company expenses all SG&A costs as incurred.
Fair Value Measurements
Fair value measurements are based on the premise that fair value is an exit price representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the following three-tier fair value hierarchy has been used in determining the inputs used in measuring fair value:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices for similar assets or liabilities that are directly or indirectly observable in the marketplace.
Level 3—Unobservable inputs which are supported by little or no market activity and that are financial instruments whose values are determined using pricing models, discounted cash flow methodologies or similar techniques, as well as instruments for which the determination of fair value requires significant judgment or estimation.
Financial instruments measured at fair value are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Management’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The use of different assumptions and/or estimation methodologies may have a material effect on estimated fair values. Accordingly, the fair value estimates disclosed or initial amounts recorded may not be indicative of the amount that the Company or holders of the instruments could realize in a
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current market exchange. There were no transfers made among the three levels in the fair value hierarchy for the three and six months ended June 30, 2021 and 2020.
As of June 30, 2021 and December 31, 2020, the Company’s cash (excluding cash equivalents which are recorded at fair value on a recurring basis), restricted cash, accounts receivable, accounts payable and accrued expenses were carried at cost, which approximates the fair values due to the short-term nature of the instruments.
The carrying amount of the Company’s long-term debt approximates fair value due to its variable market interest rate and management’s opinion that current rates and terms that would be available to the Company with the same maturity and security structure would be essentially equivalent to that of the Company’s long-term debt.
The following tables classify the Company’s financial assets and liabilities measured at fair value on a recurring basis into the fair value hierarchy as of June 30, 2021 and December 31, 2020 (in thousands):
Fair Value Measured as of June 30, 2021
(unaudited)
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value at
June 30,
2021
Assets included in:
Cash and cash equivalents
Money market securities$4,821 $ $ $4,821 
Marketable securities at fair value
Corporate debt securities 24,854  24,854 
U.S. treasury securities 20,273  20,273 
Commercial paper 22,191  22,191 
Asset-backed securities 6,576  6,576 
Total fair value$4,821 $73,894 $ $78,715 
Liabilities included in:
Contingent consideration$ $ $5,100 $5,100 
Total fair value$ $ $5,100 $5,100 
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Fair Value Measured as of December 31, 2020
Quoted
Prices
in Active
Markets for
Identical
Assets
(Level 1)
Significant
Other
Observable
Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
Fair Value at
December 31,
2020
Assets included in:
Cash and cash equivalents
Money market securities$19,070 $ $ $19,070 
Marketable securities at fair value
Corporate debt securities 31,353  31,353 
U.S. treasury securities 20,531  20,531 
Commercial paper 53,955  53,955 
Asset-backed securities 8,726  8,726 
Total fair value$19,070 $114,565 $ $133,635