| Summary of Significant Accounting Policies | 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. 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 and reportable 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 June 30, 2024 and December 31, 2023, exceeded federally insured limits. Restricted cash consists of (i) deposited cash collateral for the Company’s corporate credit card program and (ii) cash received for the sale of business to Medtronic held in an indemnity escrow account until certain terms of sale are met. 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. 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 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 (if applicable) 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. 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. • 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. Se e 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 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 $ 4,127 $ 1,290 $ 7,224 $ 2,245 Service/Other — 225 528 512 Total revenue $ 4,127 $ 1,515 $ 7,752 $ 2,757 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. Accounts Receivable Trade accounts receivable are recorded net of allowances for uncollectible accounts. The Company evaluates the collectability of its accounts receivable based on various factors including historical experience, the length of time the receivables are past due and the financial health of the customer. The Company reserves specific receivables if collectability is no longer reasonably assured. Based upon the assessment of these factors, the Company did not record an allowance for uncollectible accounts as of June 30, 2024 or December 31, 2023. 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, December 31, (unaudited) Trade accounts receivable $ 4,315 $ 1,993 Earnouts receivable from Medtronic 4,920 9,360 Total accounts receivable $ 9,235 $ 11,353 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 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 impairment of property and equipment. 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. 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. Following the Restructuring, we have no research and development expense as we discontinued research and development to focus on solely manufacturing and distributing the Products under our Distribution Agreement with Medtronic. 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 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 Significant Significant Total Assets included in: Cash and cash equivalents Money market securities $ 12,135 $ — $ — $ 12,135 Marketable securities at fair value Commercial paper — — — — Total fair value $ 12,135 $ — $ — $ 12,135 Liabilities included in: Warrant liability $ — $ — $ 128 $ 128 Total fair value $ — $ — $ 128 $ 128 Fair Value Measurements as of December 31, 2023 Quoted Significant Significant Total Assets included in: Cash and cash equivalents Money market securities $ 16,911 $ — $ — $ 16,911 Marketable securities at fair value U.S. treasury securities — 1,978 — 1,978 Commercial paper — 497 — 497 Yankee debt securities — 758 — 758 Total fair value $ 16,911 $ 3,233 $ — $ 20,144 Liabilities included in: Warrant liability $ — $ — $ 409 $ 409 Total fair value $ — $ — $ 409 $ 409 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 $ 409 Change in fair value (281) Balance, June 30, 2024 (unaudited) $ 128 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: June 30, 2024 (unaudited) Risk-free interest rate 4.30% Expected term in years 6.0 Expected volatility 200.0% 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 develop |
