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, 2024
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
__________________________________
(Exact name of registrant as specified in its charter)
__________________________________
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
| (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 class | Trading Symbol | Name of each exchange on which registered 1 | ||||||||||||
| N/A | ||||||||||||||
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 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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
| ☒ | Smaller 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 Stock | Outstanding Shares as of August 6, 2024 | |||||||
| Common Stock, $0.001 par value | ||||||||
1 On May 16, 2024, Nasdaq filed a Form 25 to delist our common stock and remove such securities from registration under
Section 12(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and such delisting took effect on May 26, 2024. We
expect that our common stock will be deregistered under Section 12(b) of the Exchange Act on or about August 14, 2024,
which is the 90th day after the Form 25 filing. Our common stock currently trades on the OTC Pink Market under the symbol
“AFIB.”
Acutus Medical, Inc.
Form 10-Q
For the Quarter Ended June 30, 2024
Table of Contents
| Page | ||||||||
| Item 5. | ||||||||
Item 1. Financial Statements.
Acutus Medical, Inc.
Condensed Consolidated Balance Sheets
| June 30, 2024 | December 31, 2023 | ||||||||||
| (in thousands, except share and per share amounts) | (unaudited) | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Marketable securities, short-term | |||||||||||
| Restricted cash, short-term | |||||||||||
| Accounts receivable | |||||||||||
| Inventory | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Current assets of discontinued operations (Note 3) | |||||||||||
| Total current assets | |||||||||||
| Property and equipment, net | |||||||||||
| Right-of-use assets, net | |||||||||||
| Other assets | |||||||||||
| Non-current assets of discontinued operations (Note 3) | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | |||||||||||
| Accrued liabilities | |||||||||||
| Operating lease liabilities, short-term | |||||||||||
| Long-term debt, current portion | |||||||||||
| Warrant liability | |||||||||||
| Current liabilities of discontinued operations (Note 3) | |||||||||||
| Total current liabilities | |||||||||||
| Operating lease liabilities, long-term | |||||||||||
| Long-term debt | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies (Note 11) | |||||||||||
| Stockholders' deficit | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
| Accumulated deficit | ( | ( | |||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders' deficit | ( | ( | |||||||||
| Total liabilities and stockholders' deficit | $ | $ | |||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
1
Acutus Medical, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||||||||||||
| (in thousands, except share and per share amounts) | (unaudited) | |||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||||||||||||
| Cost of products sold | ||||||||||||||||||||||||||
| Gross profit (loss) | ( | ( | ( | ( | ||||||||||||||||||||||
| Operating expenses (income): | ||||||||||||||||||||||||||
| Research and development | ||||||||||||||||||||||||||
| Selling, general and administrative | ||||||||||||||||||||||||||
| Change in fair value of contingent consideration | ( | |||||||||||||||||||||||||
| Gain on sale of business | ( | ( | ( | ( | ||||||||||||||||||||||
| Total operating expenses (income) | ( | ( | ||||||||||||||||||||||||
| Gain (loss) from operations | ( | ( | ( | |||||||||||||||||||||||
| Other income (expense): | ||||||||||||||||||||||||||
| Change in fair value of warrant liability | ( | |||||||||||||||||||||||||
| Interest income | ||||||||||||||||||||||||||
| Interest expense | ( | ( | ( | ( | ||||||||||||||||||||||
| Other revenue | ||||||||||||||||||||||||||
| Total other expense, net | ( | ( | ( | ( | ||||||||||||||||||||||
| Loss from continuing operations before income taxes | ( | ( | ( | ( | ||||||||||||||||||||||
| Net loss from continuing operations | ( | ( | ( | ( | ||||||||||||||||||||||
| Discontinued operations: | ||||||||||||||||||||||||||
| Loss from discontinued operations before taxes | ( | ( | ( | ( | ||||||||||||||||||||||
| Income tax expense - discontinued operations | ( | |||||||||||||||||||||||||
| Net loss from discontinued operations | ( | ( | ( | ( | ||||||||||||||||||||||
| Net loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Other comprehensive loss | ||||||||||||||||||||||||||
| Unrealized loss (gain) on marketable securities | ( | |||||||||||||||||||||||||
| Foreign currency translation adjustment | ( | ( | ||||||||||||||||||||||||
| Comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Net loss per share, basic and diluted: | ||||||||||||||||||||||||||
| Loss from continuing operations | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Loss from discontinued operations | $ | ( | $ | ( | $ | $ | ( | |||||||||||||||||||
| Net loss per common share | $ | ( | $ | ( | $ | ( | $ | ( | ||||||||||||||||||
| Weighted average shares outstanding, basic and diluted | ||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Acutus Medical, Inc.
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
For the Three Months Ended June 30, 2024
| (in thousands, except share amounts) | Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders' Deficit | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2024 | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2024 (unaudited) | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||
For the Three Months Ended June 30, 2023
| (in thousands, except share amounts) | Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of March 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Unrealized gain on marketable securities | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Employee stock purchase plan shares issued | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Net income | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2023 (unaudited) | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Acutus Medical, Inc.
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
For the Six Months Ended June 30, 2024
| (in thousands, except share amounts) | Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders' Deficit | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2023 | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2024 (unaudited) | $ | $ | $ | $ | ( | $ | ( | $ | ( | ||||||||||||||||||||||||||||||||||||||
For the Six Months Ended June 30, 2023
| (in thousands, except share amounts) | Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive Loss | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance as of December 31, 2022 | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
| Unrealized loss on marketable securities | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustment | — | — | — | — | — | — | ( | ( | |||||||||||||||||||||||||||||||||||||||
| Stock option exercises | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Employee stock purchase plan shares issued | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Net loss | — | — | — | — | — | ( | — | ( | |||||||||||||||||||||||||||||||||||||||
| Balance as of June 30, 2023 (unaudited) | $ | $ | $ | $ | ( | $ | ( | $ | |||||||||||||||||||||||||||||||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Acutus Medical, Inc.
Condensed Consolidated Statements of Cash Flows
5
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| (in thousands) | (unaudited) | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net loss | $ | ( | $ | ( | |||||||
| Less: Loss from discontinued operations | |||||||||||
| Adjustments to reconcile net loss to net cash used in operating activities: | |||||||||||
| Depreciation expense | |||||||||||
| Non-cash stock-based compensation expense | |||||||||||
| Accretion of discounts on marketable securities, net | ( | ( | |||||||||
| Amortization of debt issuance costs | |||||||||||
| Amortization of operating lease right-of-use assets | |||||||||||
| Gain on sale of business, net | ( | ( | |||||||||
| Change in fair value of warrant liability | ( | ( | |||||||||
| Loss on disposal of property and equipment | |||||||||||
| Change in fair value of contingent consideration | |||||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Inventory | ( | ( | |||||||||
| Employer retention credit receivable | |||||||||||
| Prepaid expenses and other current assets | |||||||||||
| Accounts payable | ( | ( | |||||||||
| Accrued liabilities | ( | ( | |||||||||
| Operating lease liabilities | ( | ( | |||||||||
| Other long-term liabilities | |||||||||||
| Net cash used in operating activities - continuing operations | ( | ( | |||||||||
| Net cash used in operating activities - discontinued operations | ( | ( | |||||||||
| Net cash used in operating activities | ( | ( | |||||||||
| Cash flows from investing activities | |||||||||||
| Proceeds from sale of business | |||||||||||
| Purchases of available-for-sale marketable securities | ( | ||||||||||
| Sales of available-for-sale marketable securities | |||||||||||
| Maturities of available-for-sale marketable securities | |||||||||||
| Purchases of property and equipment | ( | ( | |||||||||
| Net cash provided by investing activities - continuing operations | |||||||||||
| Net cash provided by (used in) investing activities - discontinued operations | ( | ||||||||||
| Net cash provided by investing activities | |||||||||||
| Cash flows from financing activities | |||||||||||
| Repayment of debt | ( | ||||||||||
| Proceeds from the exercise of stock options | |||||||||||
| Repurchase of common shares to pay employee withholding taxes | ( | ||||||||||
| Proceeds from employee stock purchase plan | |||||||||||
| Net cash (used in) provided by financing activities - continuing operations | ( | ||||||||||
| Net cash used in financing activities - discontinued operations | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Net change in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash, at the beginning of the period | |||||||||||
| Cash, cash equivalents and restricted cash, at the end of the period | $ | $ | |||||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid for interest | |||||||||||
| Supplemental disclosure of noncash investing and financing activities: | |||||||||||
| Accounts receivable from sale of business | $ | ( | $ | ||||||||
| Change in unrealized (gain) on marketable securities | $ | $ | ( | ||||||||
| Change in unpaid purchases of property and equipment | $ | $ | ( | ||||||||
6
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
Acutus Medical, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1—Organization and Description of Business
Acutus Medical, Inc. (the “Company”) historically designed, manufactured and marketed a range of tools for catheter-based ablation procedures to treat various arrhythmias. Prior to November 2023, the Company’s product portfolio included novel access sheaths, diagnostic and mapping catheters, ablation catheters, mapping and imaging consoles and accessories, as well as supporting algorithms and software programs.
In November 2023, the Company’s board of directors approved a strategic realignment of resources and corporate restructuring (the “Restructuring”). The Company began implementation of a shift in its business model to solely support the manufacturing and distribution of Medtronic Inc.’s (“Medtronic”) left-heart access product portfolio, including to potentially earn earnout payments from Medtronic pursuant to its manufacturing and distribution arrangements with Medtronic. As part of the Restructuring, the Company wound down its mapping and ablation businesses and no longer manufactures or distributes the AcQMap Mapping System, the AcQMap 3D Mapping Catheter, the AcQBlate Force-Sensing Ablation Catheter, the AcQGuide Max 2.0 Steerable Sheath or associated accessories, and is exploring strategic alternatives for these businesses (specifically a sale of related assets). The Company substantially completed the Restructuring in the first quarter of 2024.
As previously disclosed, The Nasdaq Stock Market, LLC (“Nasdaq”) suspended trading in the Company’s common stock on
May 9, 2024, due to noncompliance with Nasdaq Listing Rule 5550(a)(2) and 5550(b). On May 15, 2024, Nasdaq announced
that it would formally delist the Company’s common stock that was previously suspended. On May 16, 2024, Nasdaq filed a
Form 25 Notification of Delisting with the Securities and Exchange Commission (the “SEC”) to complete the delisting and
remove such securities from registration under Section 12(b) of the Exchange Act, and such delisting took effect on May 26,
2024.
On May 9, 2024, the Company’s common stock began trading over the counter on the OTC Pink Market under the trading
symbol “AFIB.”
The Company was incorporated in the state of Delaware on March 25, 2011, and is located in Carlsbad, California.
Liquidity and Capital Resources
The Company has limited revenue, and has incurred significant operating losses and negative cash flows from operations since its inception, and if it is unable to realize the expected benefits of the Restructuring, anticipates that it could incur losses for at least the next several years. As of June 30, 2024 and December 31, 2023, the Company had cash, cash equivalents, restricted cash and marketable securities of $13.3 million and $29.4 million, respectively. For the six months ended June 30, 2024 and 2023, net losses from continuing operations were $2.4 million and $8.5 million, respectively. For the six months ended June 30, 2024 and 2023, discontinued operations generated net loss of $0.1 million and net loss of $26.1 million, respectively. For the six months ended June 30, 2024 and 2023, net cash used in operating activities from continuing operations was $13.2 million and $11.0 million, respectively, and net cash used in operating activities from discontinued operations was $10.8 million and $20.1 million, respectively. As of June 30, 2024 and December 31, 2023, the Company had an accumulated deficit of $602.5 million and $600.0 million, respectively, and working capital of $16.1 million and $27.3 million, respectively.
The Restructuring is intended to reduce the Company’s operating expenses and optimize its cash resources by focusing exclusively on the manufacturing and distribution of the Products (as defined in Note 4 – Sale of Business, below) to Medtronic to continue to generate revenue from such sales in addition to the associated earnout payments discussed further below. Following the Restructuring, the Company's primary uses of capital have been investments in manufacturing and distributing the Products to Medtronic and related expenses, raw materials and supplies, legal and other regulatory expenses, general administrative costs and working capital.
On June 30, 2022, 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. Following the termination of the escrow account in accordance with the Asset Purchase Agreement, the amounts in escrow were released. The OEM Earnout (as defined in Note 4 - Sale of Business, below) under the Asset Purchase Agreement with Medtronic was achieved on October 31,
8
2022, with $20.0 million paid by Medtronic to the Company in November 2022. Additionally, the Transfer Earnout (as defined in Note 4 - Sale of Business, below) under the Asset Purchase Agreement with Medtronic was achieved on December 21, 2022, with $17.0 million paid by Medtronic to the Company in January 2023. Beginning in February 2023, following Medtronic's first commercial sale of the Products after the Company's achievement of the OEM Earnout (as defined in Note 4 - Sale of Business, below), the Company became eligible to earn amounts equal to 100 %, 75 %, 50 % and 50 %, respectively, of quarterly Net Sales (as defined in the Asset Purchase Agreement) of the Products achieved by Medtronic each year over four years . During the six months ended June 30, 2024, the Company earned $5.8 million in contingent consideration based on Medtronic's Products sales.
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.
Discontinued Operations
In accordance with Accounting Standards Codification ("ASC") 205, Presentation of Financial Statements, under subtopic 205-20 Discontinued Operations, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-10. In the period in which the component meets held-for-sale or discontinued operations criteria the major current assets, non-current assets, current liabilities, and non-current liabilities are reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations, less applicable income taxes, are reported as components of net loss separate from the net loss of continuing operations.
The strategic shift approved by the Company's board of directors (discussed in Note 1 – Organization and Description of Business, above) met the definition of a discontinued operation as of June 30, 2024 and December 31, 2023. Accordingly, the major current assets, non-current assets, current liabilities, and non-current liabilities are reported as components of total assets and liabilities separate from those balances of the continuing operations as of June 30, 2024 and December 31, 2023, and the operating results of the components disposed are reported as loss from discontinued operations in the accompanying condensed consolidated statements of operations and comprehensive income (loss) for the three- and six- months ended June 30, 2024 and 2023. For additional information, see Note 3 - Discontinued Operations, Assets Held for Sale and Restructuring.
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, revenue, 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 revenue and expenses that are not readily apparent from other sources. Actual results could differ from those estimates.
9
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
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 June 30, 2024 and December 31, 2023, exceeded federally insured limits.
Marketable Securities
The Company’s marketable securities portfolio consists of investments in money market funds, commercial paper, U.S. treasury securities and Yankee debt 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 income (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 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 investor’s 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 income (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 income (loss) for the three and six months ended June 30, 2024 and 2023.
Concentrations of Credit Risk and Off-Balance Sheet Risk
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
10
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.
•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 whether 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.
The below description applies to products that are no longer being manufactured and sold by the Company due to the Restructuring. See Note 1 – Organization and Description of Business – Liquidity and Capital Resources, above.
Historically, for new customers, the Company had placed its medical diagnostic equipment, the AcQMap System, at customer sites under evaluation agreements and had generated revenue from the sale of disposable products used with the AcQMap System. Disposable products primarily included AcQMap catheters and AcQGuide steerable sheaths. Outside of the United States, the Company also had the Qubic Force Device which generated revenue from the sale of the AcQBlate Force Ablation Catheters. The Company had provided the disposable products in exchange for consideration, which occurred when a customer submitted a purchase order and the Company provided disposables at the agreed upon prices in the invoice. Generally, customers purchased disposable products using separate purchase orders after the equipment had been provided to the customer for free with no binding agreement or requirement to purchase any disposable products. The Company had 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.
Additionally, the Company had sold 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 could be used in a variety of heart procedures and did not need to be accompanied with an AcQMap System or Qubic Force Device.
The Company had also entered into deferred equipment agreements that were generally structured such that the Company agreed 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 ranged from two years to four years . The Company had determined that such deferred equipment agreements included an embedded sales-type lease. The Company had allocated 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 had expensed the cost of the device at the inception of the agreement and recorded a financial lease asset equal to the gross consideration allocated to the lease. The lease asset had been reduced by payments for minimum disposable purchases that were allocated to the lease.
Lastly, the Company had entered into short-term operating leases for the rental of the AcQMap System after an evaluation. These lease agreements imposed no requirement on the customer to purchase the equipment, and the equipment was not transferred to the customer at the end of the lease term. The short-term nature of the lease agreements did not result in lease payments accumulating to an amount that equaled the value of the equipment nor was the lease term reflective of the economic life of the equipment.
The Company’s contracts had primarily included fixed consideration. Generally, there were no discounts, rebates, returns or other forms of variable consideration. Customers were generally required to pay within 30 days to 60 days.
The delivery of disposable products were performance obligations satisfied at a point in time. The disposable products were shipped via Free on Board (“FOB”) shipping point or FOB destination. For disposable products that were shipped via FOB shipping point, the customer had the significant risks and rewards of ownership and legal title to the assets when the disposable products left the Company’s shipping facilities, at which point the customer obtained control and thus revenue was recognized at that point in time. Revenue had been recognized on delivery for disposable products shipped via FOB destination.
For direct customers, the installation and delivery of the AcQMap System was satisfied at a point in time when the installation was complete, which was when the customer could benefit and had control of the system. For AcQMap System sales sold to Biotronik SE & Co. KG (“Biotronik”), the installation was not a performance obligation as it was performed by Biotronik, and therefore the AcQMap System was satisfied at a point in time when they had control of the system. The Company’s software
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updates and equipment service performance obligations were satisfied evenly over time as the customer simultaneously received and consumed the benefits of the Company’s performance for these services throughout the service period.
The Company had allocated the transaction price to each performance obligation identified in the contract based on the relative standalone selling price (“SSP”). The Company had determined 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 included, but was not limited to, sales transactions where the specific performance obligations were sold separately, Company listed prices and specific offers to customers.
Except for the deferred equipment agreements noted above, the Company’s contracts with customers generally had an expected duration of one year or less, and therefore the Company had elected the practical expedient in ASC 606 to not disclose information about its remaining performance obligations. Any incremental costs to obtain contracts were recorded as selling, general and administrative ("SG&A") 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, 2024 and December 31, 2023.
In May 2020, the Company entered into bi-lateral distribution agreements (the “Bi-Lateral Distribution Agreements”) with Biotronik. 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 was required for these products to obtain regulatory approval in the United States, or a clinical trial was required for these products to obtain regulatory approval in China, the Company would 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 covered the cost of the IDE or other clinical trial and the Company conducted 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 would pay to the other party a specified transfer price on the sale of the other party’s products and, accordingly, would earn a distribution margin on the sale of the other party’s products. In February 2024, Biotronik sent a notice to the Company, stating that Biotronik rescinds and terminates the Bi-Lateral Distribution Agreements, effective immediately, based on the alleged repudiation of its contractual obligations under the Bi-Lateral Distribution Agreements.
In 2022, the Company sold its left-heart access transseptal crossing business to Medtronic. In connection with the sale, the Company entered into a distribution agreement (the "Distribution Agreement") with Medtronic, pursuant to which the Company acts as the original equipment manufacturer ("OEM") supplier of these Products. The Company will produce and sell the Products to Medtronic for a period of up to four years . Revenue is recognized when the title to the products are transferred to Medtronic, which occurs when the products are shipped from the Company's facility (or via FOB shipping point). See Note 4 – Sale of Business, below, for further details. As part of the Restructuring, the Company currently focuses exclusively on the manufacturing and distribution of the Products and associated services to Medtronic to continue to generate revenue from such sales and potentially earn the associated earnout payments.
The following table sets forth the Company’s revenue for disposables, systems and service/other for the three and six months ended June 30, 2024 and 2023 (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||||||||||
| Disposables | $ | $ | $ | $ | |||||||||||||||||||
| Service/Other | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
For the three and six months ended June 30, 2024 and 2023, revenue was all U.S.-based.
Inventory
Inventory 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 of $0.6 million and $0.3 million for the three months ended June 30, 2024 and 2023, respectively, and $0.6 million and $0.6 million for the six months ended June 30, 2024 and 2023, respectively, based on management’s review of inventories on hand, comparisons to estimated future usage and sales, observed shelf-life and assumptions about the likelihood of obsolescence.
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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
Accounts receivable recorded on the condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023 consists of the following (in thousands):
| June 30, 2024 | December 31, 2023 | ||||||||||
| (unaudited) | |||||||||||
| Trade accounts receivable | $ | $ | |||||||||
| Earnouts receivable from Medtronic | |||||||||||
| Total accounts receivable | $ | $ | |||||||||
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 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.
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, 2024 and 2023, the Company determined that there was no
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 income (loss).
Lease Property
The Company leases office space in Carlsbad, California as its corporate headquarters and for manufacturing operations. Additionally, it leases office space in Zaventem, Belgium for CE Mark compliance. The Company accounts for its lease property 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 sheets 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, which is the rate for collateralized borrowings based on the current economic environment, credit history, credit rating, value of leases, currency in which the lease obligation is satisfied, rate sensitivity, lease term and materiality. 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.
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Cost of Products Sold
Cost of products sold includes raw materials, direct labor (including stock-based compensation), manufacturing overhead, shipping and receiving costs and other less significant indirect costs related to the production of the Company’s products.
Research and Development
Prior to the Restructuring, the Company was actively engaged in new product research and development efforts. Research and development expenses consisted 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.
Research and development expenses relating to possible future products were expensed as incurred. The Company also accrued and expensed costs for activities associated with clinical trials performed by third parties as incurred. All other costs relative to setting up clinical trial sites were expensed as incurred. Clinical trial site costs related to patient enrollment were accrued as patients were entered into the trials.
Selling, General and Administrative
Selling, general and administrative expenses consist primarily of salaries and employee-related costs (including stock-based compensation) for personnel in 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, insurance costs, and additionally, prior to the Restructuring, salaries and employee-related costs for personnel in sales, marketing, and other administrative functions.
Restructuring Expenses
The Company undertook a strategic realignment of resources and corporate restructuring (i.e., the Restructuring), including an organizational workforce reduction and additional cost reduction measures. The Company's restructuring and exit-related charges consisted of severance expenses and related benefit costs for employees affected by the organizational workforce reduction, retention bonuses for certain employees that are assisting with the Restructuring, other restructuring costs and impairment charges in connection with the disposition of certain assets, including inventory, fixed assets and intangibles. Refer to Note 3 - Discontinued Operations, Assets Held for Sale and Restructuring for additional details.
Fair Value Measurements
Financial Instruments
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 is used in determining the inputs for 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 consist of financial instruments valued 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
14
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 six months ended June 30, 2024 and 2023.
As of June 30, 2024 and December 31, 2023, 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 each instrument. 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, 2024 and December 31, 2023 (in thousands):
| Fair Value Measurements as of June 30, 2024 | |||||||||||||||||||||||
| (unaudited) | |||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
| Assets included in: | |||||||||||||||||||||||
| Cash and cash equivalents | |||||||||||||||||||||||
| Money market securities | $ | $ | $ | $ | |||||||||||||||||||
| Marketable securities at fair value | |||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Total fair value | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities included in: | |||||||||||||||||||||||
| Warrant liability | $ | $ | $ | $ | |||||||||||||||||||
| Total fair value | $ | $ | $ | $ | |||||||||||||||||||
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| Fair Value Measurements as of December 31, 2023 | |||||||||||||||||||||||
| Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | Total | ||||||||||||||||||||
| Assets included in: | |||||||||||||||||||||||
| Cash and cash equivalents | |||||||||||||||||||||||
| Money market securities | $ | $ | $ | $ | |||||||||||||||||||
| Marketable securities at fair value | |||||||||||||||||||||||
| U.S. treasury securities | |||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Yankee debt securities | |||||||||||||||||||||||
| Total fair value | $ | $ | $ | $ | |||||||||||||||||||
| Liabilities included in: | |||||||||||||||||||||||
| Warrant liability | $ | $ | $ | $ | |||||||||||||||||||
| Total fair value | $ | $ | $ | $ | |||||||||||||||||||
The fair value of the Company’s money market securities is determined using quoted market prices in active markets for identical assets.
The fair value for the available-for-sale marketable securities is determined based on valuation models using inputs that are observable either directly or indirectly (Level 2 inputs) such as quoted prices for similar assets, yield curve, volatility factors, credit spreads, default rates, loss severity, current market and contractual prices for the underlying instruments, broker and dealer quotes, as well as other relevant economic measures.
Financial Obligations
The following table presents changes in Level 3 liabilities measured at fair value for the six months ended June 30, 2024 (in thousands):
| Warrant Liability | |||||
| Balance, December 31, 2023 | $ | ||||
| Change in fair value | ( | ||||
| Balance, June 30, 2024 (unaudited) | $ | ||||
As of June 30, 2024, the fair value of the common stock warrants was estimated using the Black-Scholes option pricing model. The fair value was estimated to be $0.0300 per warrant as of June 30, 2024 and the significant inputs used in the estimation of the fair value were as follows:
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| June 30, 2024 | |||||
| (unaudited) | |||||
| Risk-free interest rate | |||||
| Expected term in years | |||||
| Expected volatility | |||||
Expected volatility was set at 200 % as agreed upon per the Amendment (as defined below) to the 2022 Warrants and 2022 Warrant Purchase Agreement with Deerfield, entered into by the Company on March 4, 2024. See Note 12—Warrants for additional details.
Stock-Based Compensation
The Company accounts for all stock-based payments to employees and non-employees, including grants of stock options, restricted stock units ("RSUs"), and restricted stock awards ("RSAs"), to be recognized in the consolidated financial statements based on their respective grant date fair values. The Company estimates the fair value of stock option grants using the Black-Scholes option pricing model. The RSUs and RSAs, are valued based on the fair value of the Company’s common stock on the date of grant. The Company expenses stock-based compensation related to stock options, RSUs and RSAs over the requisite service period. All stock-based compensation costs are recorded in cost of products sold, research and development expense or SG&A expense in the condensed consolidated statements of operations and comprehensive income (loss) based upon the respective employee’s or non-employee’s roles within the Company. Forfeitures are recorded as they occur. See Note 14—Stock-Based Compensation for additional details.
Income Taxes
Income taxes are recorded in accordance with ASC 740, Income Taxes (“ASC 740”), which provides for deferred taxes using an asset and liability approach. The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse, and net operating loss (“NOL”) carryforwards and research and development tax credit carryforwards. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.
The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit would more likely than not be realized assuming examination by the taxing authority. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. To date, there have been no interest or penalties charged in relation to the unrecognized tax benefits.
Warrant Liability
The Company accounts for certain common stock warrants outstanding as a liability at fair value, determined using the Black-Scholes option pricing model, on the condensed consolidated balance sheets in accordance with ASC 815, Derivatives and Hedging (“ASC 815”). The liability is subject to re-measurement at each reporting period and any change in fair value is recognized in the condensed consolidated statements of operations and comprehensive income (loss). See Note 12—Warrants for additional details.
Business Combinations
The Company accounts for business acquisitions using the acquisition method of accounting based on ASC 805, Business Combinations (“ASC 805”), which requires recognition and measurement of all identifiable assets acquired and liabilities assumed at their fair value as of the date control is obtained. The Company determines the fair value of assets acquired and liabilities assumed based upon its best estimates of the acquisition-date fair value of assets acquired and liabilities assumed in
17
Recently Adopted Accounting Pronouncements
The following Accounting Standard Updates (ASUs) applicable to the Company were effective January 1, 2024:
•ASU 2023-07, Segment Reporting
•ASU 2022-03, Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions
The adoption of the above noted ASUs did not have a material effect on the Company's condensed consolidated financial statements.
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Note 3—Discontinued Operations, Assets Held for Sale and Restructuring
In November 2023, with approval of the Restructuring, the Company began implementation of its business model shift to solely support the manufacturing and distribution of Medtronic’s left-heart access product portfolio. As part of the Restructuring, the Company no longer manufactures or distributes the AcQMap Mapping System, the AcQMap 3D Mapping Catheter, the AcQBlate Force-Sensing Ablation Catheter, the AcQGuide Max 2.0 Steerable Sheath, and associated accessories. Additionally, the Company has halted any further research and development related to this suite of products.
Discontinued operations comprise those activities that were disposed of during the period, abandoned or which were classified as held for sale at the end of the period and relate to the Company's mapping and ablation businesses, which it began winding down in late 2023, and was substantially completed by the end of the first quarter of 2024.
Assets Held for Sale
The Company considers assets to be held for sale when management approves and commits to a plan to actively market the assets for sale at a reasonable price in relation to its fair value, the assets are available for immediate sale in their present condition, an active program to locate a buyer and other actions required to complete the sale have been initiated, or the sale of the assets is expected to be completed within one year and it is unlikely that significant changes will be made to the plan. Upon designation as held for sale, the Company ceases to record depreciation and amortization expenses and measures the assets at the lower of their carrying value or estimated fair value less costs to sell. At June 30, 2024 and December 31, 2023, assets held for sale are included as non-current assets in the Company’s consolidated balance sheets and the loss recognized on classification of assets held for sale is included in the Company’s restructuring expenses. The assets held for sale were determined to be non-current assets as any proceeds from disposal will be used to pay down the Company's long-term debt.
The major assets and liabilities (at carrying value) associated with discontinued operations included in the Company's consolidated balance sheets are as follows (in thousands):
| June 30, 2024 | December 31, 2023 | |||||||||||||
| Carrying amounts of major classes of assets included as part of discontinued operations | (unaudited) | |||||||||||||
| Accounts receivable | $ | $ | ||||||||||||
| Inventory | * | |||||||||||||
| Prepaid expenses and other current assets | * | |||||||||||||
| Property and equipment, net | * | |||||||||||||
| Intangible assets, net | * | |||||||||||||
| Other assets | ||||||||||||||
| Less: loss recognized on classification as held for sale | ( | ( | * | |||||||||||
| Total assets of the disposal group classified as discontinued operations in the statement of financial position | $ | $ | ||||||||||||
* These comprise assets held for sale, at their carrying value of $ | ||||||||||||||
| Carrying amounts of major classes of liabilities included as part of discontinued operations | ||||||||||||||
| Accounts payable | ||||||||||||||
| Accrued restructure | ||||||||||||||
| Accrued liabilities | ||||||||||||||
| Total liabilities of the disposal group classified as discontinued operations in the statement of financial position | $ | $ | ||||||||||||
Inventory in discontinued operations consisted of the following (in thousands):
June 30, 2024 | December 31, 2023 | ||||||||||
| (unaudited) | |||||||||||
| Raw materials | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished goods | |||||||||||
| Total inventory transferred to held for sale | $ | $ | |||||||||
There was no reserve for obsolescence as of June 30, 2024 as management determined that the inventory was unexpired, usable, sellable and above net realizable value. An impairment charge of $0.4 million was taken as of December 31, 2023.
Property and equipment, net, in discontinued operations consisted of the following (in thousands):
June 30, 2024 | December 31, 2023 | ||||||||||
| (unaudited) | |||||||||||
| Furniture and fixtures | $ | $ | |||||||||
| Laboratory equipment and software | |||||||||||
| Construction in process | |||||||||||
| Total property and equipment | |||||||||||
| Less: accumulated depreciation | ( | ( | |||||||||
| Total property and equipment, net, related to discontinued operations | $ | $ | |||||||||
Fixed assets transferred to held for sale are no longer depreciated. There was no 1.0 million and $2.2 million, respectively for the three and six months ended June 30, 2023, which is reflected in the loss from discontinued operations in the condensed consolidated statements of operations and comprehensive income (loss). There was no impairment as of June 30, 2024. An impairment charge of $0.6 million was taken as of December 31, 2023. During the three and six months ended June 30, 2024, net assets held for sale of zero and $0.3 million, respectively, were sold.
Intangibles, net, consist solely of licensed intangible assets acquired from Biotronik relating to the Force Sensing Ablation Catheter, which is part of the Company's operations that it intends to sell. Intangible assets held for sale are no longer amortized. There was no 0.1 million and $0.1 million for the three and six months ended June 30, 2023, respectively, which is reflected in the loss from discontinued operations in the condensed consolidated statements of operations and comprehensive income (loss).
The revenues and expenses associated with discontinued operations included in the Company's condensed consolidated statements of operations and comprehensive loss for the three months ended June 30, 2024 were as follows (in thousands):
| Three Months Ended | ||||||||||||||
| June 30, 2024 | June 30, 2023 | |||||||||||||
| Major line items constituting pretax loss of discontinued operations | (unaudited) | (unaudited) | ||||||||||||
| Revenue | $ | $ | ||||||||||||
| Cost of products sold | ( | |||||||||||||
| Research and development | ( | ( | ||||||||||||
| Selling, general and administrative | ( | ( | ||||||||||||
| Restructuring | ( | ( | ||||||||||||
| Loss from discontinued operations before income taxes | ( | ( | ||||||||||||
| Income tax expense | ||||||||||||||
| Net loss from discontinued operations | $ | ( | $ | ( | ||||||||||
The revenues and expenses associated with discontinued operations included in the Company's condensed consolidated statements of operations and comprehensive income (loss) for the six months ended June 30, 2024 were as follows (in thousands):
| Six Months Ended | ||||||||||||||
| June 30, 2024 | June 30, 2023 | |||||||||||||
| Major line items constituting pretax loss of discontinued operations | (unaudited) | (unaudited) | ||||||||||||
| Revenue | $ | $ | ||||||||||||
| Cost of products sold | ( | |||||||||||||
| Research and development | ( | |||||||||||||
| Selling, general and administrative | ( | ( | ||||||||||||
| Restructuring | ( | |||||||||||||
| Loss from discontinued operations before income taxes | ( | ( | ||||||||||||
| Income tax expense | ( | |||||||||||||
| Net loss from discontinued operations | $ | ( | $ | ( | ||||||||||
Net loss for the six months ended June 30, 2024 is due primarily to Selling, general and administrative expenses related to the wind down of the discontinued operations, offset by recording a credit to stock-based compensation resulting from restructuring termination forfeitures and RSU accelerated vesting modification treatment. (See Footnote 14, Stock-Based Compensation, for further information.)
For the three and six months ended June 30, 2024, there were no
The following table sets forth the breakdown of the Company’s discontinued operations revenue for disposables and service/other for the three and six months ended June 30, 2023 (in thousands):
| Three Months Ended | Six Months Ended | |||||||||||||
| June 30, 2023 | June 30, 2023 | |||||||||||||
| Disposables | $ | $ | ||||||||||||
| Service/Other | ||||||||||||||
| Total revenue | $ | $ | ||||||||||||
Prior to the Restructuring, revenue was subject to fluctuation based on the foreign currency in which our products were sold. For the three and six months ended June 30, 2023, approximately 57 % and 61 %, respectively, of sales from discontinued operations were sold outside of the United States.
Restructuring Activities
In connection with the strategic decision to wind down the ablation and mapping business, restructuring actions were taken related to this shift in business model, resulting in the realignment of resources, including an organizational workforce reduction and corporate restructure. Restructuring and exit-related charges consisting of severance expenses and related benefit costs for employees affected by the organizational workforce reduction, retention bonuses for certain employees that are assisting with the Restructuring, contract termination costs and other restructuring costs were recorded as restructuring expense, cost of product sold or selling, general and administrative expense and are included in the loss from discontinued operations.
The Company identified three major types of restructuring activities related to the disposal of the mapping and ablation businesses. These three types of activities are employee termination costs, contract termination costs, and other costs. Other cost activities were completed as of December 31, 2023. The restructuring activities related to employee termination and contract termination activities were substantially completed by the end of the first quarter of 2024. The Company continues to actively market the mapping and ablation businesses to explore opportunities to dispose of the business.
The following summarizes the restructuring activities and their related accruals as of June 30, 2024:
| Employee | Contract | ||||||||||||||||
| Termination Costs | Termination Costs | Other Costs | Total | ||||||||||||||
| Restructure Accrual Balance at 12/31/2023 | $ | $ | $ | $ | |||||||||||||
| Payments | ( | ( | ( | ||||||||||||||
| Accrual release (non-cash) | ( | ( | ( | ||||||||||||||
| Restructure Accrual Balance at 3/31/2024 | $ | $ | $ | $ | |||||||||||||
| Payments | ( | ( | ( | ||||||||||||||
| Accrual release (non-cash) | ( | ( | ( | ||||||||||||||
| Restructure Accrual Balance at 6/30/2024 | $ | $ | $ | $ | |||||||||||||
Note 4—Sale of Business
On June 30, 2022, the Company completed the First Closing in accordance with the Asset Purchase Agreement with Medtronic, pursuant to which the Company agreed to sell to Medtronic certain transseptal access and sheath assets which make up the Company's left-heart access portfolio (and which comprised the Rhythm Xience product line acquired as part of the Rhythm Xience acquisition). The assets transferred to Medtronic upon the First Closing (the “Assets”) include patents, trademarks, patent and trademark applications, know-how, copyrights, prototypes and other intellectual property owned or licensed by the Company, business records and documents (including regulatory and clinical materials) and manufacturing equipment related to the AcQCross® line of sheath-compatible septal crossing devices, AcQGuide® MINI integrated crossing device and sheath, AcQGuide® FLEX Steerable Introducer with integrated transseptal dilator and needle, and AcQGuide® VUE steerable sheaths (the “Products”).
Pursuant to the Asset Purchase Agreement, Medtronic paid $50.0 million at the First Closing, of which $4.0 million was paid into an indemnity escrow account for a period of 18 months following the First Closing to secure indemnification obligations of the Company under the Asset Purchase Agreement, which the Company had recorded as restricted cash on its condensed consolidated balance sheets. Following the termination of the escrow account in accordance with the Asset Purchase Agreement, the amounts in escrow were released. As of June 30, 2024, the Company recorded no restricted cash on the condensed consolidated balance sheet.
The Company is also eligible to receive the following contingent cash consideration pursuant to the Asset Purchase Agreement:
(i) $20.0 million upon the Company’s completion, to the reasonable satisfaction of Medtronic, of certain conditions set forth in the Asset Purchase Agreement relating to the Company becoming a qualified supplier of Medtronic for the Products, including demonstration of ISO 14971:2019 compliance, completion of certain test method validations and compliance with certain other reporting requirements (the “OEM Earnout”);
(ii) $17.0 million upon the earlier of (A) the Second Closing (as defined below) or (B) the Company’s initial submission for CE Mark certification of the Products under the European Union Medical Devices Regulation, to the reasonable satisfaction of a third-party regulatory consultant, subject to certain other conditions as set forth in the Asset Purchase Agreement (the “Transfer Earnout”); and
(iii) amounts equal to 100 %, 75 %, 50 % and 50 %, respectively, of quarterly Net Sales (as defined in the Asset Purchase Agreement) from sales of the Products achieved by Medtronic over each year of a four-year period beginning on the first full quarter after Medtronic’s first commercial sale of a Product and achievement of the OEM Earnout.
The $20.0 million OEM Earnout was achieved in October 2022 and payment was received in November 2022, of which $1.6 million was held in escrow and recorded as restricted cash on the condensed consolidated balance sheets. The $17.0 million Transfer Earnout was achieved in December 2022 and payment was received in January 2023, of which $1.4 million was held in escrow and recorded as restricted cash on the condensed consolidated balance sheets. Following the termination of the escrow account in accordance with the Asset Purchase Agreement, all amounts in escrow were released. As of June 30, 2024, the Company recorded no restricted cash on the condensed consolidated balance sheet. During the six months ended June 30, 2024, $5.8 million was earned (before transaction costs) under item (iii) and recorded as a receivable on the condensed consolidated balance sheet as of June 30, 2024.
With the achievement of the OEM Earnout Conditions (as defined in the Asset Purchase Agreement) and upon notice from Medtronic, Medtronic became the Company's exclusive distributor of the Products under the Distribution Agreement.
The Company recorded the following amounts for the six months ended June 30, 2024, resulting in a net gain of $5.7 million related to the sale of business to Medtronic, calculated as the difference between the non-contingent consideration earned, less direct transaction costs (in thousands):
| Six Months Ended June 30, 2024 | |||||
| (unaudited) | |||||
| Product Net Sales Earnout accrued as of June 30, 2024 | $ | ||||
| Transaction costs | ( | ||||
| Gain on sale of business, net | $ | ||||
The net gain on sale will be adjusted in future periods by the contingent consideration, based on the achievement of the predetermined milestones mentioned above. The sale was accounted for as a derecognition of a group of assets that is a
business pursuant to ASC 810 - Consolidation, with the resulting gain classified as operating income within loss from operations on the condensed consolidated statements of operations and comprehensive income (loss). The sale did not represent a strategic shift having a major effect on the Company's operations and financial results and, consequently, did not qualify as a discontinued operation.
Note 5—Marketable Securities
Marketable securities consisted of the following as of June 30, 2024 and December 31, 2023 (in thousands):
| June 30, 2024 (unaudited) | |||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
| Available-for-sale securities - short-term: | |||||||||||||||||||||||
| Commercial paper | $ | $ | $ | $ | |||||||||||||||||||
| Total available-for-sale securities - short-term | |||||||||||||||||||||||
| Total available-for-sale securities | $ | $ | $ | $ | |||||||||||||||||||
| December 31, 2023 | |||||||||||||||||||||||
| Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||||||||||
| Available-for-sale securities - short-term: | |||||||||||||||||||||||
| U.S. treasury securities | $ | $ | $ | $ | |||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||
| Yankee debt securities | |||||||||||||||||||||||
| Total available-for-sale securities - short-term | |||||||||||||||||||||||
| Total available-for-sale securities | $ | $ | $ | $ | |||||||||||||||||||
As of June 30, 2024, the Company’s available-for-sale securities classified as short-term of zero mature in 1 year or less and there were none held long-term. As of December 31, 2023, the Company’s available-for-sale securities classified as short-term of $3.2 million mature in 1 year or less and there were none held long-term.
Note 6—Inventory
Inventory as of June 30, 2024 and December 31, 2023 consisted of the following (in thousands):
| June 30, 2024 | December 31, 2023 | ||||||||||
| (unaudited) | |||||||||||
| Raw materials | $ | $ | |||||||||
| Work in process | |||||||||||
| Finished goods | |||||||||||
| Total inventory | $ | $ | |||||||||
Note 7—Property and Equipment, Net
The Company’s property and equipment, net, consisted of the following as of June 30, 2024 and December 31, 2023 (in thousands):
| June 30, 2024 | December 31, 2023 | ||||||||||
| (unaudited) | |||||||||||
| Furniture and fixtures | |||||||||||
| Office equipment | |||||||||||
| Laboratory equipment and software | |||||||||||
| Leasehold improvements | |||||||||||
| Construction in process | |||||||||||
| Total property and equipment | |||||||||||
| Less: accumulated depreciation | ( | ( | |||||||||
| Property and equipment, net | $ | $ | |||||||||
Note 8—Accrued Liabilities
Accrued liabilities consisted of the following as of June 30, 2024 and December 31, 2023 (in thousands):
| June 30, 2024 | December 31, 2023 | ||||||||||
| (unaudited) | |||||||||||
| Compensation and related expenses | $ | $ | |||||||||
| Professional fees | |||||||||||
| Other | |||||||||||
| Total accrued liabilities | $ | $ | |||||||||
Note 9—Debt
Outstanding debt as of June 30, 2024 and December 31, 2023 consisted of the following (in thousands):
| June 30, 2024 | December 31, 2023 | ||||||||||
| (unaudited) | |||||||||||
2022 Credit Agreement(1) | $ | $ | |||||||||
| Total outstanding debt, gross | |||||||||||
| Less: unamortized debt discount and fees | ( | ( | |||||||||
| Total outstanding debt | $ | $ | |||||||||
(1)The 2022 Credit Agreement includes final payment fees of $1.8 million.
The first principal payment of $2.5 million with associated fees under the Company's 2022 Credit Agreement (as defined below) was paid in June 2024.
2022 Amended and Restated Credit Agreement
On June 30, 2022, the Company amended and restated its prior debt facility. The amended and restated credit agreement (as amended by Amendment No. 1, dated August 4, 2023, Amendment No. 2, dated November 8, 2023, and Amendment No. 3, dated March 4, 2024, and as further amended from time to time, the "2022 Credit Agreement") is with related parties Deerfield Private Design Fund III, L.P. and Deerfield Partners, L.P. (collectively referred to as “Deerfield” or “Lenders”) and is for an aggregate principal amount of $35.0 million and has a 5-year term. Proceeds from the 2022 Credit Agreement, along with cash on hand, were used to repay the prior debt facility and to pay related fees and expenses.
The 2022 Credit Agreement bears an annual interest of 9 % plus the one-month adjusted term (applying a 2.5 % minimum rate). From date of closing, amortization payments are due as follows:
•$2.5 million of the principal due at the end of month 24;
•$7.5 million of the principal due at the end of month 36;
•$10.0 million of the principal due at the end of 48; and
•$15.0 million due at the end of month 60.
The 2022 Credit Agreement is subject to prepayment penalties and provides for final payment fees of an additional $1.8 million due upon prepayment, on the maturity date or upon acceleration.
The 2022 Credit Agreement is secured by a first-priority perfected lien on and security interest in substantially all of the Company’s existing and after-acquired tangible and intangible assets, subject to certain exceptions noted therein.
The 2022 Credit Agreement is subject to certain customary affirmative covenants, representations and warranties and other terms and conditions. It also contains certain customary negative covenants, including, but not limited to, restrictions on the Company’s ability and that of its subsidiaries to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, pay dividends or make other restricted payments, sell or otherwise transfer assets or enter into transactions with affiliates. As of and for the three and six months ended June 30, 2024, the Company was in compliance with all such covenants.
In addition, the 2022 Credit Agreement includes customary events of default and other provisions that could require all amounts due thereunder to become immediately due and payable, either automatically or at the option of the Lenders, if the Company fails to comply with the terms.
On August 4, 2023, the Company and Deerfield entered into Amendment No. 1, dated August 4, 2023 (“Amendment No.1”) to the 2022 Credit Agreement. Pursuant to Amendment No. 1, the 2022 Credit Agreement was amended to decrease the amount of cash the Company is required to maintain pursuant to the minimum liquidity covenant in the 2022 Credit Agreement to $5,000,000 for a period of 18 months, at which point the amount required under the minimum liquidity covenant shall increase to $20,000,000 (or, if certain conditions are met, $10,000,000 ), in exchange for a fee paid by the Company.
On November 8, 2023, the Company and Deerfield entered into Amendment No. 2, dated November 8, 2023 (“Amendment No. 2”) to the 2022 Credit Agreement. Pursuant to Amendment No. 2, the 2022 Credit Agreement was amended to, among other things: (i) adjust and increase the amortization schedule such that payments commence on June 30, 2024 and are made 12, 24 and 36 months (i.e., the scheduled maturity date) following June 30, 2024; (ii) limit the business activities the Company may engage in; and (iii) require the Company to maintain a minimum liquidity of $10,000,000 at all times, in exchange for fees paid by the Company.
On March 4, 2024, the Company entered into Waiver and Amendment No. 3 ("Amendment No. 3") to the 2022 Credit Agreement. Previously, on February 16, 2024, Biotronik and VascoMed GmbH (the “Biotronik Parties") filed a Demand for Arbitration (the “Demand") against Acutus with the American Arbitration Association (who notified the Company of the Demand on February 29, 2024), alleging that the Company breached its contractual obligations under five agreements relating to the licensing, manufacturing, distribution and development of medical devices as a result of the wind down of its businesses. Pursuant to Amendment No. 3, Deerfield has agreed to waive any Default or Event of Default (each defined in the 2022 Credit Agreement) that has arisen or may arise in connection with the Demand. In addition, pursuant to Amendment No. 3 among other things, (i) the 2022 Credit Agreement was amended such that (x) a Change in Control (as defined in the 2022 Credit Agreement) under the 2022 Credit Agreement would not be deemed to occur in the event the Company's common stock ceases to be listed on Nasdaq (without a comparable re-listing) (a "Delisting") and (y) exposure incurred in excess of $3.0 million in respect of proceedings in relation to the Demand and/or related proceedings and/or between such parties is deemed an Event of Default (as defined in the 2022 Credit Agreement) under the 2022 Credit Agreement.
In connection with entering into the 2022 Credit Agreement, the Company entered into a warrant purchase agreement (the "2022 Warrant Purchase Agreement"), with Deerfield, pursuant to which the Company issued to Deerfield warrants to purchase up to an aggregate 3,779,018 shares of common stock at an exercise price of $1.1114 per warrant share for a period of eight years following issuance (the "2022 Warrants"). On March 4, 2024, the Company entered into an amendment (the “Amendment”) to the 2022 Warrants and 2022 Warrant Purchase Agreement with Deerfield. Pursuant to the Amendment, (i) the 2022 Warrants were amended to remove Deerfield’s option to require the Company to repurchase the 2022 Warrants from
Deerfield upon a Delisting, and modify the volatility rate that would be used to calculate the Black-Scholes value of the 2022 Warrants that would apply to certain other transactions involving the Company pursuant to the 2022 Warrants, and (ii) the Warrant Purchase Agreement was amended to remove the Company obligation to take all commercially reasonable actions necessary to cause the Company’s common stock to remain listed on Nasdaq at all times during the term of the 2022 Warrants.
The 2022 Warrants represent a freestanding financial instrument and are conditionally puttable at the holder’s option upon an event that is outside of the Company’s control. Therefore, the 2022 Warrants are classified as liability pursuant to ASC 480, Distinguishing Liabilities from Equity, initially and subsequently recognized at fair value, with changes in fair value recognized in the condensed consolidated statements of operations and comprehensive income (loss). Refer to Fair Value Measurements in Note 2 - Summary of Significant Accounting Policies and Note 12 - Warrants for more information.
Note 10—Operating Leases
The Company leases approximately 50,800 square feet of office space for its corporate headquarters and manufacturing facility in Carlsbad, California under a non-cancelable operating lease that expires on December 31, 2027. The lease is subject to variable charges for common area maintenance and other costs that are determined annually based on actual costs. The base rent is subject to an annual increase each year. The Company has a renewal option for an additional five-year term upon the expiration date of the lease, which has been excluded from the calculation of the right-of-use asset as it is not reasonably certain to be exercised.
Additionally, the Company leases approximately 3,900 square feet of office space in Zaventem, Belgium under a non-cancelable operating lease that expires on December 31, 2024. The lease is subject to variable charges that are determined annually for common area maintenance and other costs based on actual costs, and base rent is subject to an annual increase each year based on an index rate.
The Carlsbad and Belgium leases were not impacted by the Restructuring. The Carlsbad office will continue as the corporate headquarters and the facility to manufacture the Products. The Belgium office will continue to facilitate the upkeep of the Company's CE Mark.
During the second quarter of 2024, the Company entered into two subleases with unrelated third parties at the Carlsbad property. The Company was not relieved of its primary obligations under the Carlsbad lease ("head lease") and, therefore, became the intermediate lessor of the subleases. Pursuant to ASC 842, the subleases are operating leases related to property, plant and equipment. The Company determined that the sublease income was more than the remaining lease cost on the head lease, and as such, there was no impairment of the head lease's right-to-use assets. The Company also determined that the head lease did not need to be remeasured as the lease term of the subleases was not longer than the remaining term of the head lease. Additionally, there are no residual value guarantees on the subleases. The Company recorded the sublease income as other revenue in the other income (expense) section of the condensed consolidated statements of operations and comprehensive income (loss). For the three and six months ended June 30, 2024, sublease income was less than$0.1
The following table summarizes quantitative information about the Company’s operating leases for the six months ended June 30, 2024 and 2023 (dollars in thousands):
| Six Months Ended June 30, | |||||||||||
| 2024 | 2023 | ||||||||||
| (unaudited) | |||||||||||
| Operating cash flows from operating leases | $ | $ | |||||||||
| Weighted average remaining lease term – operating leases (in years) | |||||||||||
| Weighted average discount rate – operating leases | |||||||||||
The following table provides the components of the Company’s operating lease expense for the three and six months ended June 30, 2024 and 2023 (in thousands):
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2024 | 2023 | 2024 | 2023 | ||||||||||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||||||||||
| Operating leases | |||||||||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | |||||||||||||||||||
| Variable lease cost | |||||||||||||||||||||||
| Total operating lease expense | $ | $ | $ | $ | |||||||||||||||||||
As of June 30, 2024, future minimum payments under the non-cancelable operating leases under ASC 842 were as follows (in thousands):
| Six months ending December 31, 2024 | |||||
| Year ending December 31, 2025 | |||||
| Year ending December 31, 2026 | |||||
| Year ending December 31, 2027 | |||||
| Total | |||||
| Less: present value discount | ( | ||||
| Operating lease liabilities | $ | ||||
Note 11—Commitments and Contingencies
Securities Litigation
The Company and certain of its current and former officers were named as defendants in two putative securities class action lawsuits filed in the United States District Court for the Southern District of California on February 14, 2022 and March 23, 2022. On July 19, 2022, the court consolidated the two actions, appointed a lead plaintiff and appointed lead counsel for the proposed class. On September 16, 2022, the lead plaintiff filed a consolidated amended complaint. The defendants thereafter filed a motion to dismiss. On September 27, 2023, the court granted the defendant’s motion to dismiss in its entirety, but gave plaintiffs leave to file an amended complaint. On October 27, 2023, the plaintiffs filed a second amended complaint asserting similar claims. The defendants thereafter filed a motion to dismiss. On March 26, 2024, the court granted the defendant’s motion and, on April 29, 2024, dismissed the case and entered judgment. On May 29, 2024, plaintiff filed a notice of appeal. On June 28, 2024, plaintiff voluntarily dismissed the appeal with prejudice, and the Company considers this matter closed.
Biotronik Arbitration
On February 16, 2024, the Biotronik Parties filed the Demand against the Company with the American Arbitration Association (who notified the Company of the Demand on February 29, 2024), alleging that the Company breached its contractual obligations under five agreements relating to the licensing, manufacturing, distribution and development of medical devices as a result of the wind down of its businesses. As the arbitration process has effectively begun; and, as the parties appointed an arbitral tribunal, and set a procedural timetable, the Company has determined the Demand loss contingency to be "reasonably possible" as it is less than “probable”, but, more than “remote”. The Company has also determined that it cannot reasonably estimate the possible loss related to this contingency as the outcome is both unknown and not reasonably estimable.
Note 12—Warrants
As of June 30, 2024 and December 31, 2023, the outstanding warrants to purchase the Company’s common stock consisted of the following:
| Exercise Price | Expiration Date | June 30, 2024 | December 31, 2023 | |||||||||||||||||||||||
| (unaudited) | ||||||||||||||||||||||||||
| Warrants issued in 2015 | $ | 1/30/25 | ||||||||||||||||||||||||
| Warrants issued with 2018 Convertible Notes | $ | 6/7/28 | ||||||||||||||||||||||||
| Warrants issued with 2018 Term Loan | $ | 7/31/28 | ||||||||||||||||||||||||
| Warrants issued with 2019 Credit Agreement | $ | 5/20/29 | ||||||||||||||||||||||||
| Warrants issued with 2022 Credit Agreement | $ | 6/30/30 | ||||||||||||||||||||||||
| Total Warrants | ||||||||||||||||||||||||||
There was no warrant activity during the six months ended June 30, 2024.
The Company’s warrants provide the holder the option to purchase a specified number of shares for a specified price within a specified duration or upon the occurrence of a specific event. The holder may exercise the warrant either by cash payment or by exercise pursuant to a cashless exercise whereby a calculated number of shares are withheld upon exercise to satisfy the exercise price. The warrants do not provide the holder any voting rights until the warrants are exercised.
In accordance with ASC 480, the 2022 Warrants are recorded at fair value on the condensed consolidated balance sheets as a warrant liability. Changes in fair value are recognized as a change in fair value of warrant liability in the condensed consolidated statements of operations and comprehensive income (loss). For the six months ended June 30, 2024, the fair value of the warrant liability decreased $0.3 million.
Note 13—Stockholders’ Equity
Series A Common Equivalent Preferred Stock
In August 2021, the Company entered into exchange agreements (the “Exchange Agreements”) with four investors pursuant to which the investors exchanged 6,665,841 shares of the Company’s common stock for 6,666 shares of a new series of non-voting convertible preferred stock of the Company designated as “Series A Common Equivalent Preferred Stock,” par value $0.001 per share (the "Preferred Stock"). In connection with the issuance of the Preferred Stock pursuant to the Exchange Agreements, on August 23, 2021, the Company filed a Certificate of