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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 September 30, 2022
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/5a68c8989d912ce123e1dbf86028afa7-afib-20220930_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 November 7, 2022
Common Stock, $0.001 par value
28,452,247


Table of Contents
Acutus Medical, Inc.
Form 10-Q
For the Quarter Ended September 30, 2022
Table of Contents
Page



Table of Contents
Item 1. Financial Statements.
Acutus Medical, Inc.
Condensed Consolidated Balance Sheets
September 30,
2022
December 31,
2021
(in thousands, except share and per share amounts)(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$28,003 $24,071 
Marketable securities, short-term38,299 76,702 
Restricted cash, short-term150 150 
Accounts receivable3,213 3,633 
Inventory14,596 16,408 
Prepaid expenses and other current assets9,633 5,326 
Total current assets93,894 126,290 
Marketable securities, long-term 7,120 
Restricted cash, long-term4,000  
Property and equipment, net10,087 13,670 
Right-of-use assets, net4,027 4,521 
Intangible assets, net1,633 5,013 
Goodwill 12,026 
Other assets986 1,152 
Total assets$114,627 $169,792 
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable$4,638 $7,519 
Accrued liabilities8,917 9,096 
Contingent consideration, short-term1,900 1,500 
Operating lease liabilities, short-term392 395 
Warrant liability2,475  
Total current liabilities18,322 18,510 
Operating lease liabilities, long-term4,204 4,591 
Long-term debt34,310 40,415 
Contingent consideration, long-term 500 
Other long-term liabilities10 50 
Total liabilities56,846 64,066 
Commitments and contingencies (Note 13)
Stockholders' equity
Preferred stock, $0.001 par value; 5,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 6,666 shares of the preferred stock, designated as Series A Common Equivalent Preferred Stock, are issued and outstanding as of September 30, 2022 and December 31, 2021
  
Common stock, $0.001 par value; 260,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 28,373,788 and 27,957,223 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
28 28 
Additional paid-in capital592,296 584,613 
Accumulated deficit(533,422)(478,698)
Accumulated other comprehensive loss(1,121)(217)
Total stockholders' equity57,781 105,726 
Total liabilities and stockholders' equity$114,627 $169,792 
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 September 30,Nine Months Ended September 30,
2022202120222021
(in thousands, except share and per share amounts)(unaudited)
Revenue$3,644 $4,601 $11,401 $12,901 
Costs and operating (income) expenses:
Cost of products sold6,951 8,539 23,589 22,986 
Research and development5,946 9,299 21,884 27,843 
Selling, general and administrative9,679 15,805 38,207 47,658 
Goodwill impairment  12,026  
Restructuring1,331  2,280  
Change in fair value of contingent consideration198 (1,953)1,153 (3,364)
Gain on sale of business  (43,575) 
Total costs and operating (income) expenses24,105 31,690 55,564 95,123 
Loss from operations(20,461)(27,089)(44,163)(82,222)
Other income (expense):
Loss on debt extinguishment  (7,947) 
Change in fair value of warrant liability904  904  
Interest income241 19 292 88 
Interest expense(1,109)(1,441)(3,810)(4,285)
Total other expense, net36 (1,422)(10,561)(4,197)
Loss before income taxes(20,425)(28,511)(54,724)(86,419)
Income tax benefit    
Net loss$(20,425)$(28,511)$(54,724)$(86,419)
Other comprehensive income (loss)
Unrealized gain (loss) on marketable securities39 (13) (3)
Foreign currency translation adjustment(351)(183)(904)(317)
Comprehensive loss$(20,737)$(28,707)$(55,628)$(86,739)
Net loss per common share, basic and diluted$(0.72)$(0.94)$(1.93)$(2.99)
Weighted average shares outstanding, basic and diluted28,359,516 30,460,466 28,273,207 28,890,382 
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
For the Three Months Ended September 30, 2022
(in thousands, except share amounts)Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
SharesAmountSharesAmount
Balance as of June 30, 2022 (unaudited)6,666 $ 28,349,200 $28 $590,429 $(512,997)$(809)$76,651 
Unrealized gain on marketable securities— — — — — — 39 39 
Foreign currency translation adjustment— — — — — — (351)(351)
Stock-based compensation— — 24,588 — 1,867 — — 1,867 
Net loss— — — — — (20,425)— (20,425)
Balance as of September 30, 2022 (unaudited)6,666 $ 28,373,788 $28 $592,296 $(533,422)$(1,121)$57,781 
For the Three Months Ended September 30, 2021
(in thousands, except share amounts)Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
SharesAmountSharesAmount
Balance as of June 30, 2021 (unaudited)— $ 28,211,626 $28 $494,595 $(418,923)$156 $75,856 
Unrealized loss on marketable securities— — — — — — (13)(13)
Foreign currency translation adjustment— — — — — — (183)(183)
Issuance of common stock for
cash, net of issuance costs of $5,885
— — 6,325,000 6 82,658 — — 82,664 
Stock option exercises— — 11,452  84 — — 84 
Stock-based compensation— — 32,775 — 3,350 — — 3,350 
Employee stock purchase plan shares issued— — 33,641 — 440 — — 440 
Exchange of common stock for Series A Common Equivalent Preferred
Stock
6,666 — (6,665,841)(6)6 — —  
Net loss— — — — — (28,511)— (28,511)
Balance as of September 30, 2021 (unaudited)6,666 $ 27,948,653 $28 $581,133 $(447,434)$(40)$133,687 
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
For the Nine Months Ended September 30, 2022
(in thousands, except share amounts)Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive Loss
Total
Stockholders'
Equity
SharesAmountSharesAmount
Balance as of December 31, 20216,666 $ 27,957,223 $28 $584,613 $(478,698)$(217)$105,726 
Foreign currency translation adjustment— — — — — — (904)(904)
Stock option exercises— — 98,772 66 — — 66 
Stock-based compensation— — 223,567 — 7,435 — — 7,435 
Employee stock purchase plan shares issued— — 94,226 — 182 — — 182 
Net loss— — — — — (54,724)— (54,724)
Balance as of September 30, 2022 (unaudited)6,666 $ 28,373,788 $28 $592,296 $(533,422)$(1,121)$57,781 

For the Nine Months Ended September 30, 2021
(in thousands, except share amounts)Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
Equity
SharesAmountSharesAmount
Balance as of December 31, 2020— $ 27,991,425 $28 $487,290 $(361,015)$280 $126,583 
Unrealized loss on marketable securities— — — — — — (3)(3)
Foreign currency translation adjustment— — — — — — (317)(317)
Issuance of common stock for
cash, net of issuance costs of $5,885
— — 6,325,000 6 82,658 — — 82,664 
Stock option exercises— — 110,421 — 703 — — 703 
Stock-based compensation— — 127,049 — 10,036 — — 10,036 
Employee stock purchase plan shares issued— — 33,641 — 440 — — 440 
Issuance of common stock for cashless warrant exercise— — 26,958 — — — —  
Exchange of common stock for Series A Common Equivalent Preferred Stock6,666 — (6,665,841)(6)6 — —  
Net loss— — — — — (86,419)— (86,419)
Balance as of September 30, 2021 (unaudited)6,666  27,948,653 $28 $581,133 $(447,434)$(40)$133,687 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Acutus Medical, Inc.
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 30,
20222021
(in thousands)(unaudited)
Cash flows from operating activities
Net loss$(54,724)$(86,419)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense4,653 4,227 
AcQMap Systems converted to sales266  
Sales-type lease gain(87) 
Amortization of intangible assets370 480 
Stock-based compensation expense7,497 10,263 
Amortization of premiums and accretion of discounts on marketable securities, net237 1,011 
Amortization of debt issuance costs741 1,032 
Amortization of right-of-use assets480 496 
Goodwill impairment12,026  
Loss on debt extinguishment7,947  
Gain on sale of business(43,575) 
Direct costs paid related to sale of business(2,917) 
Change in fair value of warrant liability(904) 
Change in fair value of contingent consideration1,153 (3,364)
Changes in operating assets and liabilities:
Accounts receivable420 (2,030)
Inventory1,812 (2,004)
Prepaid expenses and other current assets(4,296)(59)
Other assets386 (369)
Accounts payable(2,929)(1,813)
Accrued liabilities(179)1,862 
Operating lease liabilities(390)(432)
Other long-term liabilities(40)18 
Net cash used in operating activities(72,053)(77,101)
Cash flows from investing activities
Proceeds from sale of business50,000  
Purchases of available-for-sale marketable securities(33,235)(70,020)
Sales of available-for-sale marketable securities18,599 8,590 
Maturities of available-for-sale marketable securities59,642 98,507 
Purchases of property and equipment(2,473)(6,587)
Net cash provided by investing activities92,533 30,490 
Cash flows from financing activities
Repayment of debt(44,550) 
Penalty fees paid for early prepayment of debt(1,063) 
Borrowing under new debt, net of fees34,825  
Payment of debt issuance costs(626) 
Payment of deferred offering costs (572)
Payment of contingent consideration(873)(3,152)
Proceeds from the issuance of common stock, net of issuance costs 82,664 
Repurchase of common shares to pay employee withholding taxes(62) 
Proceeds from stock options exercises66 703 
Proceeds from employee stock purchase plan182 440 
Net cash (used in) provided by financing activities(12,101)80,083 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(447)(214)
Net change in cash, cash equivalents and restricted cash7,932 33,258 
Cash, cash equivalents and restricted cash, at the beginning of the period24,221 25,384 
Cash, cash equivalents and restricted cash, at the end of the period$32,153 $58,642 
Supplemental disclosure of cash flow information:
Cash paid for income taxes$ $38 
Cash paid for interest$3,101 $3,109 
Supplemental disclosure of noncash investing and financing activities:
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Amount of debt proceeds allocated to warrant liability$3,379 $ 
Change in unrealized loss on marketable securities$ $3 
Change in unpaid purchases of property and equipment$48 $36 
Escrow release$380 $ 
Right-of-use assets exchanged for operating lease liabilities$ $3,527 
Net book value on AcQMap system sales-type leases$244 $ 
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.
Liquidity, Capital Resources and Going Concern
The Company has limited revenue, has incurred significant operating losses and negative cash flows from operations since its inception, and anticipates that it will incur significant losses for at least the next several years. As of September 30, 2022 and December 31, 2021, the Company had cash, cash equivalents, restricted cash and marketable securities of $70.5 million and $108.0 million, respectively. For the nine months ended September 30, 2022 and 2021, net losses were $54.7 million and $86.4 million, respectively, and net cash used in operating activities was $72.1 million and $77.1 million, respectively. As of September 30, 2022 and December 31, 2021, the Company had an accumulated deficit of $533.4 million and $478.7 million, respectively, and working capital of $75.6 million and $107.8 million, respectively.

Prior to the Company’s initial public offering (“IPO”) in August 2020, the Company's operations were financed primarily by aggregate net proceeds from the sale of convertible preferred stock and principal of converted debt of $253.9 million, as well as other indebtedness. On August 10, 2020, the Company issued 10,147,058 shares of common stock in its IPO, which included 1,323,529 shares of common stock issued upon the exercise in full by the underwriters of an option to purchase additional shares of common stock, at the public offering price less underwriting discounts and commissions. The price to the public was $18.00 per share, for net proceeds of $166.3 million.

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. The Company received gross proceeds of $88.6 million from the offering. Net of underwriting discounts and commission and other offering expenses, the Company received proceeds of $82.7 million from the offering.

On June 30, 2022, Medtronic, Inc. (“Medtronic”) paid the Company $50.0 million at the first closing (the "First Closing") of the sale of the Company's left-heart access portfolio to Medtronic, of which $4.0 million was paid into an indemnity escrow account for a period of 18 months following the first Closing to secure the Company's indemnification obligations under the asset purchase agreement ("Asset Purchase Agreement") entered into with Medtronic on April 26, 2022. Management believes the Company’s current cash, cash equivalents and marketable securities are sufficient to fund operations for at least the next 12 months. To ensure that the Company has sufficient resources to fund operations, management continues to review cost improvement opportunities and pathways to reduce expenses and cash burn, while preserving the resources to invest in future growth.

In the future, the Company may need to raise additional funds through one or more of the following: the issuance of debt and/or equity securities or otherwise. Until such time, if ever, that 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.

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Impact of COVID-19
COVID-19 has restricted the Company's access to hospital and other customer sites, which has 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. Furthermore, the impact of COVID-19 has varied by region and by healthcare facility, which has hampered the Company’s ability to forecast the sustained impact on its business from COVID-19. The Company expects medical procedure rates to continue to vary by therapy and country, and such rates could be impacted by regional COVID-19 case volumes, healthcare system staffing shortages, patient's willingness to schedule deferrable procedures, travel restrictions, transportation limitations, quarantine restriction, vaccine and booster immunizations rates, and new COVID-19 variants. While COVID-19 case volumes have decreased in the United States and certain other countries as a result of higher vaccination rates, the global COVID-19 outlook remains uncertain. 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 outbreaks, 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. The markets the Company serves could 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 subsidiaries. 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. 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 as 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 cash in bank deposits and other accounts, the balances of which, at times and as of September 30, 2022 and December 31, 2021, exceeded federally insured limits.
Historically, restricted cash has served as collateral for the Company’s corporate credit card program; however, $4.0 million of the proceeds received on June 30, 2022 from the sale of the left-heart access portfolio assets to Medtronic are being held in an
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indemnity escrow account for a period of 18 months following the first closing as further discussed in Note 4 - Sale of Business, and was recorded in “Restricted cash, long-term” on the condensed consolidated balance sheet. The following table reconciles cash, cash equivalents and restricted cash in the condensed consolidated balance sheets to the total balances as of September 30, 2022 and December 31, 2021 (in thousands):
September 30,
2022
December 31,
2021
(unaudited)
Cash and cash equivalents$28,003 $24,071 
Restricted cash, short-term150 150 
Restricted cash, long-term4,000  
Total cash, cash equivalents and restricted cash shown in the statement of cash flows$32,153 $24,221 
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 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 recognizes 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 nine months ended September 30, 2022 and 2021.
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 primarily consists of investments in commercial paper, Yankee debt securities, supranational, 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”), and ASC 842, Leases ("ASC 842"). The core principle of ASC 606 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.

ASC 842 provides guidance on determining if an agreement contains a lease. ASC 842 defines a lease as a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment for a period of time in exchange for consideration.

For new customers, 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 primarily include AcQMap catheters and AcQGuide steerable sheaths. Outside of the United States, the Company also has a Qubic Force Device which generates revenue from the sale of the AcQBlate Force ablation catheters. 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 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 sells the AcQMap System to customers along with software updates on a when-and-if-available basis, as well as the Qubic Force Device and a transseptal crossing line of products which can be used in a variety of heart procedures and does not need to be accompanied with an AcQMap System or Qubic Force Device. Included in the transseptal crossing line of products are primarily the AcQRef introducer sheath, the AcQGuide sheaths and the AcQCross Transseptal Dilator/Needle.

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.

Lastly, the Company enters into short-term operating leases for the rental of the system after an evaluation. These lease agreements impose no requirement on the customer to purchase the equipment, and the equipment is not transferred to the customer at the end of the lease term. The short-term nature of the lease agreements does not result in lease payments accumulating to an amount that equals the value of the equipment nor is the lease term reflective of the economic life of the equipment.
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, and 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.

For direct customers, 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. For AcQMap System sales sold to Biotronik SE & Co. KG (“Biotronik”), the installation is not a performance obligation as it is performed by Biotronik, and therefore the AcQMap System is satisfied at a point in time when they have 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.
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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 September 30, 2022 and December 31, 2021.
In May 2020, the Company entered into bi-lateral distribution agreements with 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 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 nine months ended September 30, 2022 and 2021 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(unaudited)(unaudited)
Disposables$2,857 $2,837 $9,402 $8,690 
Systems476 1,529 823 3,296 
Service/Other311 235 1,176 915 
Total revenue$3,644 $4,601 $11,401 $12,901 
The following table provides revenue by geographic location for the three and nine months ended September 30, 2022 and 2021 (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(unaudited)(unaudited)
United States$1,925 $2,189 $5,985 $6,256 
Outside the United States1,719 2,412 5,416 6,645 
Total revenue$3,644 $4,601 $11,401 $12,901 
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 manufacturing scrap and 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 $0.2 million and $0.1 million for the three months ended September 30, 2022 and 2021, respectively, and $2.6 million and $1.0 million for the nine months ended September 30, 2022 and 2021, respectively.
Accounts Receivable
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 September 30, 2022 and December 31, 2021.
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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
At December 31, 2021, intangible assets consisted 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, as well as a license agreement with Biotronik. The Rhythm Xience intangible assets were included in the assets sold to Medtronic at the first closing of the transaction in June 2022, leaving only the license agreement with Biotronik in intangible assets on the condensed consolidated balance sheet as of September 30, 2022. 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.
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. During the nine months ended September 30, 2022, the Company fully impaired its goodwill balance of $12.0 million. Refer to Note 9 - Goodwill and Intangible Assets for further details.
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 nine months ended September 30, 2022 and 2021, 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 Medical N.V. and Acutus Medical UK Limited are measured using their functional currency, the Euro and British Pound Sterling, respectively, which is the currency of the primary foreign economic environment in which the subsidiaries operate. Upon consolidating these entities with the Company, their assets and liabilities are translated to U.S. dollars at currency exchange rates as of the balance sheet date and their 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 the entities’ financial statements are reported in accumulated other comprehensive 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. 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 rate implicit in the lease or the Company’s incremental borrowing rate. Lease liabilities are increased by interest and reduced by payments each
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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 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.
Restructuring
Restructuring expense consists of severance expenses and benefits related to employees affected by the organizational reduction in force ("RIF"). The RIF was made to align resources with the Company's current strategic direction.
Employee Retention Credit
The Coronavirus Aid, Relief and Economic Security (“CARES”) Act provides an employee retention credit (“CARES Employee Retention Credit”), which is a refundable tax credit against certain employment taxes of up to $5 thousand per employee for eligible employers. The tax credit is equal to 50% of qualified wages paid to employees during a quarter, capped at $10 thousand of qualified wages per employee per calendar year through December 31, 2020. Additional relief provisions were passed by the United States government, which extended and expanded the qualified wage caps on these credits through September 30, 2021. Based on these additional provisions, the tax credit is now equal to 70% of qualified wages paid to employees during a quarter beginning with the first quarter of 2021, and the limit on qualified wages per employee has been increased to $10 thousand of qualified wages per quarter instead of per calendar year.

The Company qualifies for the tax credit under the CARES Act. The Company filed 2021 Form 941-X Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund for the quarters ended March 31, 2021 and June 30, 2021 on March 24, 2022. The refunds due are an aggregate of $4.0 million for the quarters ended March 31, 2021 and June 30, 2021. The Company filed its 2020 Form 941-X Adjusted Employer’s Quarterly Federal Tax Return or Claim for Refund for the period March 12, 2020 through December 31, 2020 on March 31, 2022. The refunds due for that period are an aggregate of $0.6 million. On September 29, 2022, the Company filed 2021 Form 941-X Adjusted Employer's Quarterly Federal Tax Return
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or Claim for Refund for the quarter ended September 30, 2021. The refund due is $2.1 million for the quarter ended September 30, 2021.

As of September 30, 2022, the Company has received the refund dues of $0.1 million including the interests for the quarters ended September 30, 2020 and December 31, 2020, respectively, leaving the outstanding ERC refunds due of $6.7 million.

The Company elected to classify the ERC amounts as a reduction to payroll tax expense. During the nine months ended September 30, 2022, the Company recorded $2.3 million, $2.0 million, $2.5 million related to the CARES Employee Retention Credit within cost of products sold, research and development expense, SG&A and marketing expense, respectively, on the Company’s condensed consolidated statement of operations and comprehensive loss.
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 current market exchange. There were no transfers made among the three levels in the fair value hierarchy for the three and nine months ended September 30, 2022 and 2021.
As of September 30, 2022 and December 31, 2021, 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.
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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 September 30, 2022 and December 31, 2021 (in thousands):

Fair Value Measurements as of September 30, 2022
(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
September 30,
2022
Assets included in:
Cash and cash equivalents
Money market securities$26,706 $ $ $26,706 
Marketable securities at fair value
U.S. treasury securities 26,416  26,416 
Commercial paper 11,883  11,883 
Total fair value$26,706 $38,299 $ $65,005 
Liabilities included in:
Warrant liability$ $ $