Acutus Medical(US:AFIB)2022-08-10 16:00PART I. FINANCIAL INFORMATION Financial Statements The company's financial performance was significantly impacted by an asset sale, offsetting operating losses, alongside key balance sheet and debt restructuring changes Condensed Consolidated Balance Sheets Total assets decreased to $138.3 million due to goodwill impairment, while stockholders' equity declined reflecting the period's net loss Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Items | June 30, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $46,567 | $24,071 | | Total current assets | $116,050 | $126,290 | | Goodwill | $0 | $12,026 | | Total assets | $138,330 | $169,792 | | Liabilities & Equity | | | | Total current liabilities | $22,729 | $18,510 | | Long-term debt | $34,199 | $40,415 | | Total liabilities | $61,679 | $64,066 | | Total stockholders' equity | $76,651 | $105,726 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) Q2 2022 saw a $5.7 million net income due to a significant asset sale gain, despite decreased revenue and ongoing operating losses for the six-month period Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2022 (unaudited) | Q2 2021 (unaudited) | H1 2022 (unaudited) | H1 2021 (unaudited) | | :--- | :--- | :--- | :--- | :--- | | Revenue | $4,076 | $4,709 | $7,757 | $8,300 | | Income (Loss) from Operations | $14,928 | $(27,300) | $(23,702) | $(55,133) | | Gain on sale of business | $43,575 | $0 | $43,575 | $0 | | Goodwill impairment | $0 | $0 | $12,026 | $0 | | Net Income (Loss) | $5,718 | $(28,727) | $(34,299) | $(57,908) | | Diluted Net Income (Loss) per Share | $0.16 | $(1.02) | $(1.22) | $(2.06) | Condensed Consolidated Statements of Stockholders' Equity Stockholders' equity significantly decreased to $76.7 million due to the $34.3 million net loss, partially offset by stock-based compensation - The accumulated deficit grew from $478.7 million at the end of 2021 to $513.0 million as of June 30, 2022, reflecting the ongoing net losses28 Condensed Consolidated Statements of Cash Flows Net cash used in operating activities was $48.2 million, while investing activities provided $86.7 million, primarily from an asset sale, leading to a $26.5 million increase in cash Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 (unaudited) | Six Months Ended June 30, 2021 (unaudited) | | :--- | :--- | :--- | | Net cash used in operating activities | $(48,218) | $(49,915) | | Net cash provided by investing activities | $86,680 | $34,022 | | Net cash used in financing activities | $(11,643) | $(2,149) | | Net change in cash, cash equivalents and restricted cash | $26,496 | $(18,107) | Notes to Condensed Consolidated Financial Statements Key notes include the going concern assessment, the $50 million Medtronic asset sale, $12.0 million goodwill impairment, and a $35.0 million debt refinancing with a $7.9 million extinguishment loss - Management believes the company's current cash, cash equivalents, and marketable securities are sufficient to fund operations for at least the next 12 months, following an IPO, a follow-on offering, a reduction in force (RIF), proceeds from the sale of assets to Medtronic, and other cost reduction actions40258338 - On June 30, 2022, the company sold its left-heart access portfolio to Medtronic for $50.0 million, recognizing a net gain of $43.6 million; the deal includes potential future contingent payments113114117 - Due to a significant decline in stock price, the company fully impaired its goodwill balance of $12.0 million during the six months ended June 30, 2022134251369 - On June 30, 2022, the company amended its credit agreement, borrowing $35.0 million under a new facility to repay existing debt, resulting in a loss on debt extinguishment of $7.9 million146147223 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses strategic realignment, including an asset sale and cost reductions, to improve liquidity and address ongoing operating losses despite decreased Q2 2022 revenue Overview Acutus Medical, an arrhythmia management company, undertook strategic restructuring and an asset sale to Medtronic to reduce expenses and strengthen its financial position - The company's goal is to provide a complete solution for catheter-based treatment of cardiac arrhythmias through internal development, acquisitions, and global partnerships196 - In June 2022, the company completed the first closing of the sale of its left-heart access portfolio to Medtronic, continuing to distribute and manufacture the product line for a transitional period198 - A corporate restructuring, including a reduction in force (RIF), was announced in January 2022 to reduce operating expenses and sharpen strategic focus202 Results of Operations Q2 2022 revenue decreased 13% to $4.1 million with negative gross margins, offset by a $43.6 million asset sale gain, while H1 2022 included a $12.0 million goodwill impairment Revenue by Type (in thousands) | Revenue Type | Q2 2022 | Q2 2021 | H1 2022 | H1 2021 | | :--- | :--- | :--- | :--- | :--- | | Disposables | $3,334 | $3,509 | $6,545 | $5,852 | | Systems | $346 | $799 | $346 | $1,768 | | Service/Other | $396 | $401 | $866 | $680 | | Total Revenue | $4,076 | $4,709 | $7,757 | $8,300 | - Q2 2022 cost of products sold increased by $2.2 million (29%) year-over-year, primarily due to $0.9 million in excess and obsolete inventory and $0.7 million for idle console manufacturing capacity232 - For H1 2022, the company recorded a full goodwill impairment of $12.0 million and restructuring charges of $0.9 million related to the RIF251252 Liquidity and Capital Resources Despite historical operating losses, $93.1 million in liquidity, bolstered by an asset sale and new debt, is deemed sufficient for 12 months, though future funding is anticipated - As of June 30, 2022, the company held $93.1 million in cash, cash equivalents, restricted cash, and marketable securities, down from $108.0 million at December 31, 2021255335 - Management believes current cash is sufficient for at least the next 12 months, citing the recent asset sale to Medtronic, a January 2022 RIF, and other cost-cutting measures258338 - On June 30, 2022, the company entered into a new five-year, $35.0 million credit agreement, using proceeds to repay its previous debt facility265445 Cash Flow Summary (in thousands) | Cash Flow Activity | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(48,218) | $(49,915) | | Net cash provided by investing activities | $86,680 | $34,022 | | Net cash used in financing activities | $(11,643) | $(2,149) | Quantitative and Qualitative Disclosures about Market Risk This section is omitted as the company qualifies as a "smaller reporting company" under SEC regulations - As a "smaller reporting company," Acutus Medical is not required to provide the information for this item278 Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective with no material changes to internal control over financial reporting - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of June 30, 2022280 - There were no material changes in internal control over financial reporting during the quarter281 PART II. OTHER INFORMATION Legal Proceedings The company and certain officers are defending two consolidated securities class action lawsuits, with the outcome currently not determinable - The company is defending two consolidated securities class action lawsuits alleging violations of the Exchange Act based on statements made between May and November 2021284 - The outcome of the litigation is not presently determinable, and any potential loss is neither probable nor reasonably estimable285455 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2021 - There have been no material changes from the risk factors disclosed in the company's annual report on Form 10-K for the year ended December 31, 2021286 Recent Sales of Unregistered Securities On June 30, 2022, the company issued warrants to purchase 3,779,018 common shares at $1.1114 per share in a private placement related to a new credit agreement - On June 30, 2022, the company issued warrants to purchase 3,779,018 shares of common stock at an exercise price of $1.1114 per share287 - The warrants were issued in a private placement to lenders under the 2022 Credit Agreement, exempt from registration under Section 4(a)(2) of the Securities Act289 Exhibits This section lists all exhibits filed with the quarterly report, including key agreements and CEO/CFO certifications - Key documents filed as exhibits include the Asset Purchase Agreement with Medtronic (2.1), the Amended and Restated Credit Agreement (10.6), and the Warrant Purchase Agreement (10.7)295