Basis of presentation and summary of significant accounting policies | 2. Basis of presentation and summary of significant accounting policies Basis of Presentation and Principles of Consolidation The accompanying unaudited interim condensed consolidated financial statements are presented in U.S. dollars and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standard Updates (“ASUs”) of the FASB. The accompanying unaudited interim condensed consolidated financial statements include the accounts of Augmedix, Inc. and its wholly owned subsidiaries, Augmedix Operating Corporation, Augmedix Bangladesh Limited and Augmedix Solutions Private Limited. All intercompany accounts and transactions have been eliminated in consolidation. In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s financial position as of June -K Use of Estimates The preparation of the unaudited interim condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements, and reported amounts of revenue and expenses during the reporting period. The Company’s significant estimates and judgments involve the identification of performance obligations in revenue recognition and the valuation of the warrant liability and stock -based Segment Information Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision -making Foreign Currency Transactions, Translations and Foreign Operations The functional currency of the Bangladesh and India subsidiaries are the Bangladeshi Taka and Indian Rupee, respectively. All assets and liabilities denominated in each entity’s functional currency are translated into the U.S. dollar using the exchange rate in effect as of the balance sheet dates. Expenses are translated using the weighted average exchange rate for the reporting period. The resulting translation gains and losses are recorded within the unaudited interim condensed consolidated statements of operations and comprehensive loss and as a separate component of stockholders’ (deficit) equity. Foreign currency transaction gains and losses are recorded within other income (expense) in the accompanying unaudited interim condensed consolidated statements of operations and comprehensive loss. Transaction gains and losses were not material for the three and six months ended June Operations outside the United States are subject to risks inherent in operating under different legal systems and various political and economic environments. Among the risks are changes in existing tax laws, possible limitations on foreign investment and income repatriation, government price or foreign exchange controls, and restrictions on currency exchange. Concentrations of Credit Risk and Major Customers Financial instruments at June The Company’s cash is deposited with major financial institutions in the United States, Bangladesh and India. At times, deposits in financial institutions located in the United States may be in excess of the amount of insurance provided on such deposits by the Federal Deposit Insurance Corporation (FDIC). Cash deposits at foreign financial institutions are not insured by government agencies of Bangladesh and India. To date, the Company has not experienced any losses on its cash deposits. The Company’s accounts receivable are derived from revenue earned from customers located in the United States. Major customers are defined as those generating revenue in excess of 10% of the Company’s annual revenue. The Company had three major customers during the three and six months ended June Restricted Cash Restricted cash represents amounts held on deposit at a commercial bank used to secure the Company’s credit card facility balances and to collateralize a letter of credit in the name of the Company’s landlord pursuant to a certain operating lease. The following table provides a reconciliation of the components of cash and restricted cash reported in the Company’s condensed consolidated balance sheets to the total of the amount presented in the condensed consolidated statements of cash flows: June 30, (in thousands) 2021 2020 Cash $ 16,353 $ 3,411 Restricted cash 125 2,000 Restricted cash, non-current 207 — Total cash and restricted cash presented in the condensed consolidated statements of cash flows $ 16,685 $ 5,411 Impairment of Long-Lived Assets The Company reviews its long -lived Revenue Recognition ASC Topic 606 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. The core principle, involving a five -step The Company derives its revenue through a recurring subscription model. The Company enters into contracts or agreements with its customers with a general initial term of one year. Customers are invoiced in advance and must generally pay an upfront implementation fee. The upfront implementation fee is deferred and recognized over the initial term of the contract and customer prepayments are deferred and included in the accompanying unaudited interim condensed consolidated balance sheets in deferred revenues. Revenues are recognized when the professional services are provided to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company’s revenues are earned from customers located only in the United States. After the initial term, contracts are cancellable by the customer at their discretion with a 90 day notice. The Company determines revenue recognition through the following steps: • • • • • Except for two U.S. state sales tax jurisdictions, applicable taxes, including local, sales, value added tax, etc., are the responsibility of the customer to self -assess The Company also generates revenue from data service projects, which includes projects to complete certain tasks or provide other services to customers. These services represent separate performance obligations which are recognized as revenue as the services are performed. Contract Balances and Accounts Receivable Changes in the contract liability deferred revenue account were as follows for the six months ended June (in thousands) Six Months Ended Year Ended Balance, beginning of period $ 5,439 $ 5,510 Deferral of revenue 10,409 16,412 Recognition of unearned revenue (9,963 ) (16,483 ) Balance, end of period $ 5,885 $ 5,439 Accounts receivable, net from customers was $3.8 Deferred revenue consists of billings or payments received in advance of revenue recognized for the Company’s services, as described above, and is recognized as revenue as earned. As of June Stock-Based Compensation The Company measures and recognizes compensation expense for all stock options awarded to employees and nonemployees based on the estimated fair value of the award on the grant date. The fair value of each option award is estimated using either a Black -Scholes -pricing -line Estimating the fair market value of options requires the input of subjective assumptions, including the estimated fair value of the Company’s common stock prior to the Merger (Note 1), the expected life of the options, stock price volatility, the risk -free -condition Advertising Costs All advertising costs are expensed as incurred and included in sales and marketing expenses. In April 2021, the Company issued 120,000 -year Net Loss Per Share Basic net loss per share of common stock is computed by dividing net loss by the weighted average number of common stock outstanding during each period. Diluted net loss per common stock includes the effect, if any, from the potential exercise or conversion of securities, such as options and warrants which would result in the issuance of incremental common stock. In computing basic and diluted net loss per share, the weighted average number of shares is the same for both calculations due to the fact that a net loss existed for the six months ended June The following potentially dilutive securities have been excluded from the computation of diluted weighted -average -dilutive June 30, June 30, Convertible preferred stock — 14,812,795 Convertible preferred stock warrants — 2,767,836 Common stock warrants 3,333,791 5,585 Stock options 6,365,965 4,465,548 9,699,756 22,051,764 Recent Accounting Pronouncements In February 2016, the FASB issued ASC Topic 842, Leases, (“Topic 842”). This standard requires all entities that lease assets with terms of more than 12 -05 In August 2020, the FASB issued ASU Update No. 2020 -06 -20 -40 In June 2016, the FASB issued ASU 2016 -13 | 2. Basis of presentation and summary of significant accounting policies Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements are presented in U.S. dollars and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by ASUs of the FASB. The accompanying consolidated financial statements include the accounts of Augmedix, Inc. and its wholly owned subsidiaries, Augmedix Operating Corporation, Augmedix Bangladesh Limited and Augmedix Solutions Private Limited. All intercompany accounts and transactions have been eliminated in consolidation. Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and reported amounts of revenue and expenses during the reporting period. The Company’s significant estimates and judgments involve the identification of performance obligations in revenue recognition and the valuation of the warrant liability and stock -based Segment Information Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision -making Reverse Stock Split In March 2019, the Board of Directors approved an amendment of the Company’s Certificate of Incorporation approving a 10:1 reverse stock split on all authorized and outstanding shares of common stock and preferred stock. All references to common stock share, preferred stock share and per share amounts in these consolidated financial statements have been retroactively adjusted to reflect, where applicable, the reverse stock split, as indicated. Foreign Currency Transactions, Translations and Foreign Operations The functional currency of the Bangladesh and India subsidiaries are the Bangladeshi Taka and Indian Rupee, respectively. All assets and liabilities denominated in each entity’s functional currency are translated into the U.S. dollar using the exchange rate in effect as of the balance sheet dates. Expenses are translated using the weighted average exchange rate for the reporting period. The resulting translation gains and losses are recorded within the consolidated statements of operations and comprehensive loss and as a separate component of stockholders’ equity (deficit). Foreign currency transaction gains and losses are recorded within other income (expense) in the accompanying consolidated statements of operations and comprehensive loss. Transaction gains and losses were not material for the years ended December Operations outside the United States are subject to risks inherent in operating under different legal systems and various political and economic environments. Among the risks are changes in existing tax laws, possible limitations on foreign investment and income repatriation, government price or foreign exchange controls, and restrictions on currency exchange. Concentrations of Credit Risk and Major Customers Financial instruments at December The Company’s cash is deposited with major financial institutions in the United States, Bangladesh and India. At times, deposits in financial institutions located in the United States may be in excess of the amount of insurance provided on such deposits by the Federal Deposit Insurance Corporation (FDIC). Cash deposits at foreign financial institutions are not insured by government agencies of Bangladesh and India. To date, the Company has not experienced any losses on its cash deposits. The Company’s accounts receivable are derived from revenue earned from customers located in the United States. Major customers are defined as those generating revenue in excess of 10% of the Company’s annual revenue. The Company had two major customers during the year ended December and 20% of revenue for the year ended December Restricted Cash Restricted cash represents amounts held on deposit at a commercial bank used to secure the Company’s Note Payable. The following table provides a reconciliation of the components of cash and restricted cash reported in the Company’s consolidated balance sheets to the total of the amount presented in the consolidated statements of cash flows: December 31, 2020 2019 Cash $ 20,762,084 $ 9,603,266 Restricted cash 2,210,902 2,000,119 Total cash and restricted cash presented in the consolidated statements of cash flows $ 22,972,986 $ 11,603,385 Accounts receivable and allowance for doubtful accounts Accounts receivable primarily relates to amounts due from customers, which are typically due within 30 to 60 days from invoice date. The Company provides credit to its customers in the normal course of business and maintains allowances for potential credit losses. The Company does not require collateral or other security for accounts receivable. To reduce credit risk with accounts receivable, the Company performs ongoing evaluations of its customers’ financial condition. Historically, such losses have been immaterial and within management’s expectations. Property and Equipment Property and equipment are stated at cost, less accumulated depreciation and amortization. The Company depreciates computer hardware, software and equipment using the straight -line -line Impairment of Long-Lived Assets The Company reviews its long -lived Fair Value of Financial Instruments Certain assets and liabilities of the Company are carried at fair value under GAAP. The Company uses a three -level -based -specific at the measurement date. The inputs or methodology used for valuing financial instruments are not necessarily an indication of the risk associated with those financial instruments. The three -level Level 1: Level 2: Level 3: An asset or liability’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Convertible Preferred Stock Warrants Accounting standards require that freestanding warrants and similar instruments, due to settlement features of the financial instruments, should be accounted for as a preferred stock warrant liability even though the underlying shares of capital stock may be classified as equity. Such warrants are measured and recognized at fair value, and subject to re -measurement Revenue Recognition ASC Topic 606 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. The core principle, involving a five -step The Company derives its revenue through a recurring subscription model. The Company enters into contracts or agreements with its customers with a general initial term of one year. Customers are invoiced in advance and must generally pay an upfront implementation fee. The upfront implementation fee is deferred and recognized over the initial term of the contract and customer prepayments are deferred and included in the accompanying consolidated balance sheets in deferred revenues. Revenues are recognized when the professional services are provided to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company’s revenues are earned from customers primarily located in the United States. After the initial term, contracts are cancellable by the customer at their discretion with a 90 day notice. The Company determines revenue recognition through the following steps: • • • • • Except for two U.S. state sales tax jurisdictions, applicable taxes, including local, sales, value added tax, etc., are the responsibility of the customer to self -assess The Company also generates revenue from data service projects, which includes discrete projects to complete certain tasks or provide other services to customers. These services represent separate performance obligations which are recognized as revenue as the services are performed. Contract Balances and Accounts Receivable Changes in the contract liability deferred revenue account were as follows for the years ended December Years Ended 2020 2019 Balance, beginning of year $ 5,510,460 $ 4,865,499 Deferral of revenue 16,411,279 14,752,642 Recognition of unearned revenue (16,483,184 ) (14,107,681 ) Balance, end of year $ 5,438,555 $ 5,510,460 Accounts receivable, net from customers was $2,692,540 and $2,290,803 as of December Deferred revenue consists of billings or payments received in advance of revenue recognized for the Company’s services, as described above, and is recognized as revenue as earned. As of December Customer Deposits Customer deposits consists of deposits received by the Company, as required on certain contracts and agreements, which are refundable at the termination of the contract. Cost of Revenue The Company’s cost of revenue consists primarily of salaries and related expenses, overhead, contract labor and third party services from MDS Vendors, depreciation expense related to the glass equipment and information technology costs incurred directly in the Company’s revenue -generating Stock-Based Compensation The Company measures and recognizes compensation expense for all stock options awarded to employees and nonemployees based on the estimated fair market value of the award on the grant date. The Company uses the Black -Scholes -line -based On January -7 Compensation — Stock Compensation (ASC Topic 718): Improvements to Nonemployee Share -Based Payment Accounting -based -based -7 Estimating the fair market value of options requires the input of subjective assumptions, including the estimated fair value of the Company’s common stock, the expected life of the options, stock price volatility, the risk -free -Scholes -pricing Research and Development Costs Research and development costs are expensed as incurred and consist primarily of personnel -related Advertising Costs All advertising costs are expensed as incurred and included in sales and marketing expenses. Advertising expenses incurred by the Company were $155,835 and $51,919 for the years ended December Comprehensive Loss The Company reports comprehensive loss, which includes the Company’s net loss as well as changes in equity from non -stockholder Income Taxes Income taxes are accounted for under the asset and liability method as required by FASB ASC Topic 740, Income Taxes FASB ASC Subtopic 740 -10 Accounting for Uncertainty of Income Taxes -10 -10 Net Loss Per Share Basic net loss per share of common stock is computed by dividing net loss by the weighted average number of common stock outstanding during each period. Diluted net loss per common stock includes the effect, if any, from the potential exercise or conversion of securities, such as options and warrants which would result in the issuance of incremental common stock. In computing basic and diluted net loss per share, the weighted average number of shares is the same for both calculations due to the fact that a net loss existed for the years ended December The following potentially dilutive securities have been excluded from the computation of diluted weighted -average -dilutive December 31, 2020 2019 Convertible preferred stock — 14,639,043 Convertible preferred stock warrants — 2,710,498 Common stock warrants 2,991,499 5,585 Stock options 4,211,857 2,749,298 7,203,356 20,104,424 Recent Accounting Pronouncements In February 2016, the FASB issued ASC Topic 842, Leases, -05 In August 2016, the FASB issued ASU No. 2016 -15 Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments -15 In August 2018, the FASB issued ASU 2018 -13 Disclosure Framework — Changes to the Disclosure Requirements for Fair Value Measurements In August 2020, the FASB issued ASC Update No. 2020 -06 Debt — Debt with Conversion and Other Options (Subtopic 470 -20 ) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815 -40 ): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity In June 2016, the FASB issued ASU 2016 -13 Financial Instruments — Credit Losses, |