Organization and Description of Business

3 Months Ended

Mar. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Description of Business

Organization and Description of Business

Acutus Medical, Inc. (the “Company”) is an arrhythmia management company focused on improving the way cardiac arrhythmias are diagnosed and treated. The Company designs, manufactures and markets a range of tools for catheter-based ablation procedures to treat various arrhythmias. The Company’s product portfolio includes novel access sheaths, transseptal crossing tools, diagnostic and mapping catheters, ablation catheters, mapping and imaging consoles and accessories, as well as supporting algorithms and software programs. The Company was incorporated in the state of Delaware on March 25, 2011, and is located in Carlsbad, California.

Liquidity, Capital Resources and Going Concern

The Company has limited revenue, has incurred significant operating losses and negative cash flows from operations since its inception, and anticipates that it will incur significant losses for at least the next several years. As of March 31, 2022 and December 31, 2021, the Company had cash, cash equivalents and marketable securities of $78.6 million and $107.9 million, respectively. For the three months ended March 31, 2022 and 2021, net losses were $40.0 million and $29.2 million, respectively, and net cash used in operating activities was $27.6 million and $26.3 million respectively. As of March 31, 2022 and December 31, 2021, the Company had an accumulated deficit of $518.7 million and $478.7 million, respectively, and working capital of $87.1 million and $107.8 million, respectively.

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

In July 2021, the Company issued 6,325,000 shares of common stock in a public offering, which included 825,000 shares of common stock issued upon the underwriter’s exercise in full of an option to purchase additional shares of common stock. The price to the public for each share was $14.00. The Company received gross proceeds of $88.6 million from the offering. Net of underwriting discounts and commission and other offering expenses, the Company received proceeds of $82.7 million from the offering.

With the closing of the Company’s IPO in August 2020, the follow on offering in July 2021 and the reduction in force ("RIF") announced in January 2022, Management believes the Company’s current cash, cash equivalents and marketable securities are sufficient to fund operations for at least the next 12 months. Under Accounting Standard Codification (“ASC”) Subtopic 205-40, Presentation of Financial Statements—Going Concern (“ASC 205-40”), the Company has the responsibility to evaluate whether conditions and/or events raise substantial doubt about its ability to meet its future financial obligations as they become due within one year after the date that the consolidated financial statements are issued. As required under ASC 205-40, management’s evaluation should initially not take into consideration the potential mitigating effects of management’s plans that have not been fully implemented as of the date the consolidated financial statements are issued. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern.

Substantial Doubt Raised

In performing the first step of the evaluation, the Company concluded that the following conditions raised substantial doubt about its ability to continue as a going concern:

•History of net losses of $40.0 million and $29.2 million for the three months ended March 31, 2022 and 2021, respectively, and $117.7 million and $102.0 million for the years ended December 31, 2021 and December 31, 2020, respectively;

•Accumulated deficit of $518.7 million and $478.7 million as of March 31, 2022 and December 31, 2021, respectively;

•Disruptions in elective procedure volumes related to unanticipated impacts from COVID-19; and

•History of negative gross margins.

Consideration of Management’s Plans

In performing the second step of this assessment, the Company is required to evaluate whether it is probable that its plans will be effectively implemented within one year after the consolidated financial statements are issued and whether it is probable those plans will alleviate the substantial doubt about its ability to continue as a going concern.

The Company has identified several potential actions to strengthen liquidity and optimize resources in the event actual results and other planned activities differ materially from projections. The Company is prepared to implement these actions as required by business and market conditions. These actions would improve the available cash balances, liquidity and cash flows generated from operations over the twelve-month period from the date the consolidated financial statements are issued, as follows:

•Reduction in force that would be intended to extend the cash runway necessary to fund operations;

•Total compensation reductions for senior executives to strengthen liquidity and to preserve key research and development, commercial and functional roles;

•Increased internal identification of efficiencies within corporate functions to reduce certain external consulting and business support spend; and

•Deferral and reprioritization of certain research and development programs that would involve reduced program and headcount spend.

Management Assessment of Ability to Continue as a Going Concern

The Company has a history of operating losses and negative cash flows from operations. However, despite these conditions, the Company believes management’s plans, as described more fully above, will provide sufficient liquidity to meet its financial obligations and maintain levels of liquidity as specifically required under the 2019 Credit Agreement, as defined below. Therefore, management concluded these plans alleviate the substantial doubt that was raised about the Company’s ability to continue as a going concern for at least twelve months from the date that the consolidated financial statements were issued.

Future Plans and Considerations

Although not considered for purposes of the Company’s assessment of whether substantial doubt was alleviated, the Company has retained several specialized third-party consultants and advisors to review its strategy as well as a range of options to fund the long-term growth of the Company, including non-dilutive financing, partnerships and licensing and distribution agreements.

The Company’s plans are subject to inherent risks and uncertainties, which become significantly magnified when the effects of the current pandemic and related financial crisis are included in the assessment. Accordingly, there can be no assurance that the Company’s plans can be effectively implemented and, therefore, that the conditions can be effectively mitigated.

The Company may need to raise additional funds through the issuance of debt and/or equity securities or otherwise. Until such time, if ever, that the Company can generate revenue sufficient to achieve profitability, the Company expects to finance its operations through equity or debt financings, which may not be available to the Company on the timing needed or on terms that the Company deems to be favorable. To the extent that the Company raises additional capital through the sale of equity or convertible debt securities, the ownership interest of its stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting the Company’s ability to take specific actions, such as incurring additional debt, making acquisitions or capital expenditures or declaring dividends. If the Company is unable to maintain sufficient financial resources, its business, financial condition and results of operations will be materially and adversely affected. The Company may be required to delay, limit, reduce or terminate its product discovery and development activities or future commercialization efforts.

Impact of COVID-19

Beginning in March 2020, the COVID-19 pandemic and the measures imposed to contain this pandemic disrupted and are expected to continue to impact the Company's business. For example, on March 19, 2020, the Executive Department of the State of California issued Executive Order N-33-20, ordering all individuals in the State of California to stay home or at their place of residence except as needed to maintain continuity of operations of the federal critical infrastructure sectors. The Company's primary operations are located in Carlsbad, California. As a result of such order, the majority of the Company’s employees have telecommuted, which may impact certain of its operations over the near term and long term. Moreover, beginning in March 2020 and continuing through the filing of this Form 10-Q, access to hospitals and other customer sites was

restricted to essential personnel, which negatively impacted the Company’s ability to install its AcQMap consoles and workstations in new accounts and for sales representatives and mappers to promote the use of the Company’s products with physicians. Moreover, hospitals and other therapeutic centers suspended many elective procedures, resulting in a significantly reduced volume of procedures using the Company's products. In addition, all clinical trials in Europe were suspended with follow-ups for clinical trials done via telecom, and the Company believes enrollment timing in its planned clinical trials will be slowed due to COVID-19 driven delayed access to enrollment sites. As a result of the interruptions to the business due to COVID-19, the Company enacted a cash conservation program, which included delaying certain non-critical capital expenditures and other projects and implementing a hiring freeze, headcount reductions and temporary compensation reductions (through August 2020). The effects of the pandemic began to decrease in late April 2020 as electrophysiology labs began reopening and procedure volumes began increasing as compared to COVID-19 related low points in March 2020. The Company’s IPO in August 2020 provided resources sufficient to restore compensation reductions to pre-COVID levels, as well as to restart hiring and capital expenditures in support of its growth.

Over the past 24-months, the Company has continued to observe intermittent suspension of many elective procedures associated with the resurgence of COVID-19 in geographies where it sells, markets and distributes its products. In addition, the impact of COVID-19 has varied by region and by healthcare facility, which has hampered the Company’s ability to forecast the sustained impact on its business from COVID-19. The Company continues to see intermittent suspension of many elective procedures in many hospitals, resulting in reduced volume of procedures using its products. In addition, the Company has experienced personnel and other resource shortages at hospitals at which procedures using its products otherwise could be used; disruptions or restrictions on the ability of many of its employees and of third parties on which it relies to work effectively, including because of adherence to governmental orders or recommendations or to internal policies intended to reduce the spread of COVID-19; and temporary closures of its facilities and of the facilities of its customers and suppliers. The magnitude of the impact of the COVID-19 pandemic on productivity, results of operations and financial position, and its disruption to the Company’s business and clinical programs and timelines, will depend, in part, on the length and severity of the pandemic, associated restrictions and other measures designed to prevent the spread of COVID-19 and on the Company’s ability to conduct business in the ordinary course. Quarantines, shelter-in-place, vaccine mandates and similar government orders have also impacted, and may continue to impact, the Company’s third-party manufacturers and suppliers, and could in turn adversely impact the availability or cost of materials, which could disrupt the Company’s supply chain. The markets the Company serves are likely to see continued impacts from COVID-19 for the foreseeable future, and the emergence of new variants of COVID-19 creates significant uncertainty as to how long COVID-19 will continue to impact the Company’s business.