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Table of Contents
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 March 31, 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
__________________________________
gbk0ijuxhbuw000001.jpg
ACUTUS MEDICAL, INC.
(Exact name of registrant as specified in its charter)
__________________________________
Delaware45-1306615
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
2210 Faraday Ave.,
Suite 100, Carlsbad, CA
92008
(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 classTrading
Symbol
Name of each exchange on which registered 1
Common Stock, par value $0.001 per shareAFIBN/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, if any, 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 definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller 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 StockOutstanding Shares as of May 6, 2024
Common Stock, $0.001 par value29,721,542
1 On April 30, 2024, Nasdaq informed us that it was commencing delisting proceedings and our common stock stopped trading on Nasdaq and commenced trading on the OTC Pink Sheets on May 9, 2024 under the symbol “AFIB.” Nasdaq has informed us that it will file 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”). The delisting will become effective 10 days after the filing of the Form 25 and our common stock will be deregistered under Section 12(b) of the Exchange Act 90 days after the Form 25 filing.


Table of Contents
Acutus Medical, Inc.
Form 10-Q
For the Quarter Ended March 31, 2024
Table of Contents
Page
Item 5.47 



Table of Contents
Item 1. Financial Statements.
Acutus Medical, Inc.
Condensed Consolidated Balance Sheets
March 31,
2024
December 31,
2023
(in thousands, except share and per share amounts)(unaudited)
ASSETS
Current assets:
Cash and cash equivalents$18,459 $19,170 
Marketable securities, short-term1,495 3,233 
Restricted cash, short-term 7,030 
Accounts receivable7,750 11,353 
Inventory5,888 4,278 
Prepaid expenses and other current assets572 678 
Current assets of discontinued operations240 510 
Total current assets34,404 46,252 
Property and equipment, net844 825 
Right-of-use assets, net3,011 3,189 
Other assets94 94 
Noncurrent assets of discontinued operations3,3153,600
Total assets$41,668 $53,960 
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
Current liabilities:
Accounts payable3,165 2,761 
Accrued liabilities2,063 2,887 
Operating lease liabilities, short-term835 718 
Long-term debt, current portion1,819 1,864 
Warrant liability692 409 
Current liabilities of discontinued operations1,300 10,303 
Total current liabilities9,874 18,942 
Operating lease liabilities, long-term3,009 3,243 
Long-term debt32,805 32,654 
Total liabilities45,688 54,839 
Commitments and contingencies (Note 11)
Stockholders' deficit
Preferred stock, $0.001 par value; 5,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 5,000,000 shares of the preferred stock, designated as Series A Common Equivalent Preferred Stock, are issued and outstanding as of March 31, 2024 and December 31, 2023
Common stock, $0.001 par value; 260,000,000 shares authorized as of March 31, 2024 and December 31, 2023; 29,715.962 and 29,313,667 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively
3029
Additional paid-in capital598,413599,935
Accumulated deficit(601,597)(599,977)
Accumulated other comprehensive loss(866)(866)
Total stockholders' deficit(4,020)(879)
Total liabilities and stockholders' deficit$41,668 $53,960 
The accompanying notes are an integral part of these condensed consolidated financial statements.
1

Table of Contents
Acutus Medical, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
Three Months Ended March 31,
20242023
(in thousands, except share and per share amounts)(unaudited)
Revenue$3,625 $1,242 
Cost of products sold3,655 2,111 
Gross loss(30)(869)
Operating (income) expenses:
Research and development 938 
Selling, general and administrative3,337 4,472 
Change in fair value of contingent consideration 200 
Gain on sale of business(2,792)(1,207)
Total operating expenses545 4,403 
Loss from operations(575)(5,272)
Other income (expense):
Change in fair value of warrant liability(283)1,446 
Interest income281 853 
Interest expense(1,478)(1,307)
Total other (expense) income, net(1,480)992 
Loss from continuing operations before income taxes(2,055)(4,280)
Income tax expense  
Net loss from continuing operations(2,055)(4,280)
Discontinued operations:
Income (loss) from discontinued operations before taxes445 (12,035)
Income tax expense - discontinued operations(10) 
Income (loss) from discontinued operations435 (12,035)
Net loss(1,620)(16,315)
Other comprehensive income (loss)
Unrealized gain on marketable securities 12 
Foreign currency translation adjustment 59 
Comprehensive loss$(1,620)$(16,244)
Net (loss) earnings per share, basic and diluted
Net loss - continuing operations$(0.07)$(0.15)
Net income (loss)- discontinued operations$0.01 $(0.42)
Net loss per common share$(0.06)$(0.57)
Weighted average number of common shares outstanding, basic and diluted29,693,926 28,764,444 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2

Table of Contents
Acutus Medical, Inc.
Condensed Consolidated Statements of Stockholders’ (Deficit) Equity
For the Three Months Ended March 31, 2024
(in thousands, except share amounts)Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
(Deficit) Equity
SharesAmountSharesAmount
Balance as of December 31, 20236,666 $ 29,313,667 $29 $599,935 $(599,977)$(866)$(879)
Stock-based compensation— — 402,295 1 (1,522)— — (1,521)
Net loss— — — — — (1,620)— (1,620)
Balance as of March 31, 2024 (unaudited)6,666 $ 29,715,962 $30 $598,413 $(601,597)$(866)$(4,020)
For the Three Months Ended March 31, 2023
(in thousands, except share amounts)Preferred StockCommon StockAdditional
Paid-in
Capital
Accumulated
Deficit
Accumulated
Other
Comprehensive
Income (Loss)
Total
Stockholders'
(Deficit) Equity
SharesAmountSharesAmount
Balance as of December 31, 20226,666 $ 28,554,656 $29 $594,173 $(518,314)$(869)$75,019 
Unrealized loss on marketable securities— — — — — — 12 12 
Foreign currency translation adjustment— — — — — — 59 59 
Stock option exercises— — 3,218 — 4 — — 4 
Stock-based compensation— — 336,206 — 1,687 — — 1,687 
Employee stock purchase plan shares issued— — — — — — — — 
Net loss— — — — — (16,315)— (16,315)
Balance as of March 31, 2023 (unaudited)6,666 $ 28,894,080 $29 $595,864 $(534,629)$(798)$60,466 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Table of Contents
Acutus Medical, Inc.
Condensed Consolidated Statements of Cash Flows
Three Months Ended March 31,
20242023
(in thousands)(unaudited)
Cash flows from operating activities
Net loss$(1,620)$(16,315)
      Less: (Gain) Loss from discontinued operations(435)12,035
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense86 93 
Non-cash stock-based compensation expense202 586 
Accretion of discounts on marketable securities, net(23)(527)
Amortization of debt issuance costs87 104 
Amortization of operating lease right-of-use assets178 164 
Gain on sale of business, net(2,792)(1,207)
Change in fair value of warrant liability283 (1,446)
Change in fair value of contingent consideration 200 
Changes in operating assets and liabilities:
Accounts receivable(819)(429)
Inventory(1,610)(234)
Employer retention credit receivable 2,141 
Prepaid expenses and other current assets117 713 
Other assets  
Accounts payable404 161 
Accrued liabilities(891)(1,133)
Operating lease liabilities(117)(201)
Other long-term liabilities (1)
Net cash used in operating activities - continuing operations(6,950)(5,296)
Net cash used in operating activities - discontinued operations(9,979)(10,432)
Net cash used in operating activities(16,929)(15,728)
Cash flows from investing activities
Proceeds from sale of business7,300 17,000 
Purchases of available-for-sale marketable securities (28,019)
Maturities of available-for-sale marketable securities1,750 26,500 
Purchases of property and equipment(105)(25)
Net cash provided by investing activities - continuing operations8,945 15,456 
Net cash provided by (used in) investing activities - discontinued operations285 (207)
Net cash provided by investing activities9,230 15,249 
Cash flows from financing activities
Proceeds from the exercise of stock options 4 
Net cash provided by financing activities - continuing operations  4 
Net cash used in financing activities - discontinued operations(42)(217)
Net cash used in financing activities(42)(213)
Effect of exchange rate changes on cash, cash equivalents and restricted cash (779)
Net change in cash, cash equivalents and restricted cash(7,741)(1,471)
Cash, cash equivalents and restricted cash, at the beginning of the period26,200 31,348 
Cash, cash equivalents and restricted cash, at the end of the period$18,459 $29,877 
Supplemental disclosure of cash flow information:
Cash paid for interest1,2671,207
Supplemental disclosure of noncash investing and financing activities:
Accounts receivable from sale of business4,904 1,244 
Change in unrealized (gain) loss on marketable securities(70)(12)
Change in unpaid purchases of property and equipment (25)
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Table of Contents
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.

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 March 31, 2024 and December 31, 2023, the Company had cash, cash equivalents, restricted cash and marketable securities of $20.0 million and $29.4 million, respectively. For the three months ended March 31, 2024 and 2023, net losses from continuing operations were $2.1 million and $4.3 million, respectively. For the three months ended March 31, 2024 and 2023, discontinued operations generated net income of $0.4 million and a net loss of $12.0 million, respectively. For the three months ended March 31, 2024 and 2023, net cash used in operating activities from continuing operations was $7.0 million and $5.3 million, respectively. For the three months ended March 31, 2024 and 2023, net cash used in operating activities from discontinued operations were $10.0 million and $10.4 million, respectively. As of March 31, 2024 and December 31, 2023, the Company had an accumulated deficit of $601.6 million and $600.0 million, respectively, and working capital of $24.5 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, Inc. (“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 (i.e., the Products) 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. The OEM Earnout (as defined in Note 4 - Sale of Business, below) under the Asset Purchase Agreement with Medtronic was achieved on October 31, 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 three months ended March 31, 2024, the Company recognized $2.8 million in contingent consideration based on Medtronic's Products sales.

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Management believes the Company’s current cash, cash equivalents and marketable securities are sufficient to fund operations for at least the next 12 months from the date of this filing.


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 March 31, 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 March 31, 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 statement of operations and comprehensive loss for the three months ended March 31, 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 and reportable segment.
Cash and Cash Equivalents and Restricted Cash
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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 March 31, 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 March 31, 2024, the Company recorded no restricted cash on the condensed consolidated balance sheets.
The following table reconciles cash, cash equivalents and restricted cash in the condensed consolidated balance sheets to the total balances as of March 31, 2024 and December 31, 2023 (in thousands):
March 31,
2024
December 31,
2023
(unaudited)
Cash and cash equivalents$18,459 $19,170 
Restricted cash 7,030 
Total cash, cash equivalents and restricted cash$18,459 $26,200 
Marketable Securities
The Company’s marketable securities portfolio consists of investments in money market funds, commercial paper, U.S. treasury securities, Yankee debt securities and asset-backed 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 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 investees’ 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 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 loss for the three months ended March 31, 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 is 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 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:
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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 be manufactured and sold by the Company upon completion of the Restructuring. See Note 1 – Organization and Description of Business – Liquidity and Capital Resources, above.

For new customers, the Company historically 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. Included in the transseptal crossing line of products was primarily the AcQRef Introducer Sheath, the AcQGuide Sheaths and the AcQCross Transseptal Dilator/Needle.

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, and thus the customer obtained control and 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 March 31, 2024 and December 31, 2023 and are included in discontinued operations.

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. The Notice provided 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 focuses exclusively on the manufacturing and distribution of the Products 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 continuing revenues (primarily sales to Medtronic) for disposables and service/other for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
20242023
(unaudited)
Disposables$3,097 $960 
Service/Other528 282 
Total revenue$3,625 $1,242 
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 $0.0 and $0.3 million for the three months ended March 31, 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 record an allowance for uncollectible accounts as of March 31, 2024 or December 31, 2023.

Accounts receivable recorded on the condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 consists of the following (in thousands):

March 31,
2024
December 31,
2023
(unaudited)
Trade accounts receivable$2,846 $1,993 
Earnouts receivable from Medtronic4,904 9,360 
Total accounts receivable$7,750 $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 years 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 months ended March 31, 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 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 sheet 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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In calculating the right-of-use asset and lease liability, the Company elected to combine lease and non-lease components. The Company adopted the policy election to exclude short-term leases having initial terms of twelve months from the initial recognition provisions of ASC 842. See Note 10 - Operating Leases for additional details.
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 are 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 are 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 consist 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
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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 months ended March 31, 2024 and 2023.
As of March 31, 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 (using Level 2 assumptions) 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 March 31, 2024 and December 31, 2023 (in thousands):

Fair Value Measurements as of March 31, 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$16,433 $ $ $16,433 
Marketable securities at fair value
U.S. treasury securities    
Commercial paper 995  995 
Yankee debt securities 499  499 
Total fair value$16,433 $1,494 $ $17,927 
Liabilities included in:
Warrant liability$ $ $692 $692 
Contingent consideration    
Total fair value$ $ $692 $692 

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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$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 $409 
Contingent consideration    
Total fair value$ $ $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 three months ended March 31, 2024 (in thousands):
Warrant Liability
Balance, December 31, 2023$409 
Change in fair value283 
Balance, March 31, 2024 (unaudited)$692 

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Warrants
As of March 31, 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 $0.18 per warrant as of March 31, 2024 and the significant inputs used in the estimation of the fair value were as follows:
March 31, 2024
(unaudited)
Risk-free interest rate4.20%
Expected term in years6.25
Expected volatility200.0%

Expected volatility was set at 200% as agreed upon per the amendment (the “Warrant Amendment”) 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 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 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
14


the acquisition. Goodwill is calculated as the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired.
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.
15


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 is no longer manufacturing or distributing 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 business, which it began winding down in late 2023, and 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, 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 March 31, 2024 and December 31, 2023, assets held for sale are included as non-current assets in the Company’s consolidated balance sheet and the loss recognized on classification of assets held for sale is included in the Company’s restructure 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):




March 31, 2024December 31, 2023
Carrying amounts of major classes of assets included as part of discontinued operations(unaudited)
Accounts receivable$240 $510 
Inventory12,78212,780*
Prepaid expenses and other current assets897902*
Property and equipment, net4,5894,871*
Intangible assets, net1,4161,416*
Other assets
Less: Loss recognized on classification as held for sale(16,369)(16,369)*
Total assets of the disposal group classified as discontinued operations in the statement of financial position$3,555 $4,110 
* These comprise assets held for sale, at their carrying value of $3.6 million as of December 31, 2023. The Company recorded the loss on classification of held for sale as a valuation allowance on the group of assets held for sale, without allocation to the individual assets within the group.
Carrying amounts of major classes of liabilities included as part of discontinued operations
Accounts payable1591,892
Accrued restructure1,1415,649
Accrued liabilities02,762
Total liabilities of the disposal group classified as discontinued operations in the statement of financial position$1,300 $10,303 

Inventory in discontinued operations consisted of the following (in thousands):

March 31,
2024
December 31,
2023
(unaudited)
Raw materials$8,022 $8,020 
Work in process2,2112,211
Finished goods2,5492,549
Total inventory transferred to held for sale$12,782 $12,780 

There was no reserve for obsolescence as of March 31, 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):
March 31,
2024
December 31,
2023
(unaudited)
Furniture and fixtures$20 $20 
Laboratory equipment and software17,68218,295
Construction in process1,1411,141
Total property and equipment18,84319,456
Less: accumulated depreciation(14,254)(14,585)
Total property and equipment, net, related to discontinued operations$4,589 $4,871 

Fixed assets transferred to held for sale are no longer depreciated. There was no depreciation expense recorded for the three months ended March 31, 2024. Depreciation expense was $1.2 million for the three months ended March 31, 2023, which is reflected in the loss from discontinued operations in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2023. There was no impairment as of March 31, 2024. An impairment charge of $0.6 million was taken as of December 31, 2023. During the three months ended March 31, 2024, net R&D assets of $0.3 million were sold.

Intangibles, net, consists 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 amortization expense recorded for the three months ended March 31, 2024. The Company recorded amortization expense related to the above intangible assets of $0.1 million for the three months ended March 31, 2023, which is reflected in the loss from discontinued operations in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2023.

The revenues and expenses associated with discontinued operations included in the Company's condensed consolidated statements of operations and comprehensive loss were as follows (in thousands):

March 31, 2024March 31, 2023
Major line items constituting pretax loss of discontinued operations(unaudited)(unaudited)
Revenue$ $2,928 
Cost of product sold(4,679)
Research and development228(5,179)
Selling, general and administrative(37)(5,093)
Impairment of inventory
Impairment of prepaid assets and other current assets
Impairment of property and equipment
Restructuring254(12)
      Income (loss) from discontinued operations before income taxes445(12,035)
      Income tax expense(10)
      Net income (loss) from discontinued operations$435 $(12,035)



Net income for the three months ended March 31, 2024 is due to recording a credit to stock-based compensation resulting from restructure termination forfeitures and RSU accelerated vesting modification treatment. (See Footnote 14, Stock-Based Compensation, for further information.)
For the three months ended March 31, 2024, there were no revenues from discontinued operations.
The following table sets forth the breakdown of the Company’s discontinued operations revenue for disposables and service/other for the three months ended March 31, 2023 (in thousands):
Three Months Ended
March 31, 2023
Disposables$2,466 
Service/Other462 
Total revenue$2,928 
The following table provides discontinued operations revenue by geographic location for the three months ended March 31, 2023 (in thousands):
Three Months Ended
March 31, 2023
United States$1,288 
Outside the United States1,640 
Total revenue$2,928 

Prior to the Restructuring, revenue was subject to fluctuation based on the foreign currency in which our products were sold. For the three months ended March 31, 2023, approximately 56% 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 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 business. 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 following summarizes the restructuring activities and their related accruals as of March 31, 2024:






Employee
Contract
Termination Costs
Termination Costs
Other Costs
Total
Restructure Accrual Balance at 12/31/2023$3,493 $2,156 $ $5,649 
Payments
(3,194)(498) (3,692)
Accrual release (non-cash)(185)(631)(816)
Restructure Accrual Balance at 3/31/2024$114 $1,027 $ $1,141 



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 (i.e., 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 has recorded as restricted cash on its condensed consolidated balance sheets.
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.
During the three months ended March 31, 2024, $2.9 million was earned under item (iii) and recorded as a receivable on the condensed consolidated balance sheet as of March 31, 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 a net gain of $79.5 million during the year ended December 31, 2022 related to the sale of business to Medtronic, calculated as the difference between the non-contingent consideration received, less direct transaction costs and the net carrying amount of the assets sold.

The Company recorded the following amounts for the three months ended March 31, 2024, resulting in a net gain of $2.8 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):

Three Months Ended March 31, 2024
(unaudited)
Product Net Sales Earnout accrued as of March 31, 20242,878
Transaction costs(86)
          Gain on sale of business, net$2,792 




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 loss. The sale did not represent a strategic shift having a major effect on the Company's operations and financial results and, consequently, does not qualify as a discontinued operation.
Note 5—Marketable Securities
Marketable securities consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):
March 31, 2024 (unaudited)
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Available-for-sale securities - short-term:
U.S. treasury securities$ $ $ $ 
Commercial paper995   995 
Yankee debt securities500   500 
Total available-for-sale securities - short-term1,495   1,495 
     Total available-for-sale securities$1,495 $ $ $1,495 

December 31, 2023
Amortized
Cost
Gross
Unrealized
Gains
Gross
Unrealized
Losses
Fair Value
Available-for-sale securities - short-term:
U.S. treasury securities$1,978 $ $ $1,978 
Commercial paper497   497 
Yankee debt securities758   758 
Total available-for-sale securities - short-term3,233   3,233 
     Total available-for-sale securities$3,233 $ $ $3,233 
As of March 31, 2024, the Company’s available-for-sale securities classified as short-term of $1.5 million 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 March 31, 2024 and December 31, 2023 consisted of the following (in thousands):
March 31,
2024
December 31,
2023
(unaudited)
Raw materials$3,683 $3,428 
Work in process328 319 
Finished goods1,877 531 
Total inventory$5,888 $4,278 

Note 7—Property and Equipment, Net
The Company’s property and equipment, net, consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):



March 31,
2024
December 31,
2023
(unaudited) 
Furniture and fixtures$432 $432 
Office equipment1,537 1,537 
Laboratory equipment and software1,494 1,494 
Leasehold improvements1,082 979 
Construction in process6 7 
Total property and equipment4,551 4,449 
Less: accumulated depreciation(3,707)(3,624)
Property and equipment, net$844 $825 

Depreciation expense was $0.1 million and $0.1 million for the three months ended March 31, 2024 and 2023, respectively.
Note 8—Accrued Liabilities
Accrued liabilities consisted of the following as of March 31, 2024 and December 31, 2023 (in thousands):
March 31,
2024
December 31,
2023
(unaudited)
Compensation and related expenses$1,036 $2,225 
Professional fees807 378 
Other220 284 
     Total accrued liabilities$2,063 $2,887 
Note 9—Debt
Outstanding debt as of March 31, 2024 and December 31, 2023 consisted of the following (in thousands):
March 31,
2024
December 31,
2023
(unaudited)
2022 Credit Agreement(1)
$36,806 $36,792 
Total outstanding debt, gross36,806 36,792 
Less: Unamortized debt discount and fees(2,182)(2,274)
Total outstanding debt$34,624 $34,518 
(1)The 2022 Credit Agreement includes final payment fees of $1.8 million.
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 Secured Overnight Financing Rate (applying a 2.5% minimum rate). From date of closing, amortization payments are due as follows:

$2,500,000 of the principal due at the end of month 24;
$7,500,000 of the principal due at the end of month 36;
$10,000,000 of the principal due at the end of 48; and



$15,000,000 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 months ended March 31, 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 that certain 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 that certain 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 statement of operations and comprehensive 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.
The following table summarizes quantitative information about the Company’s operating leases for the three months ended March 31, 2024 and 2023 (dollars in thousands):
Three Months Ended March 31,
20242023
(unaudited)
Operating cash flows from operating leases$290 $281
Weighted average remaining lease term – operating leases (in years)3.74.7
Weighted average discount rate – operating leases7.0 %7.0 %

The following table provides the components of the Company’s operating lease expense for the three months ended March 31, 2024 and 2023 (in thousands):

Three Months Ended March 31,
20242023
(unaudited)
Operating leases
Operating lease cost$258 $251 
Variable lease cost91 81 
Total operating lease expense$349 $332 



As of March 31, 2024, future minimum payments under the non-cancelable operating leases under ASC 842 were as follows (in thousands):
Nine months ending December 31, 2024$871 
Year ending December 31, 20251,160 
Year ending December 31, 20261,151 
Year ending December 31, 20271,185 
Year ending December 31, 20281,221 
Total5,588 
Less: present value discount(1,744)
Operating lease liabilities$3,844 
Note 11—Commitments and Contingencies

Securities Litigation

The Company and certain of its current and former officers have been 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. Plaintiff has thirty days in which to file a notice of appeal. Due to the complex nature of the legal and factual issues involved in these class action matters, the outcome is not presently determinable and any loss is neither probable nor reasonably estimable.

Biotronik Arbitration

On February 16, 2024, the Biotronik Parties filed 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. 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 March 31, 2024 and December 31, 2023, the outstanding warrants to purchase the Company’s common stock consisted of the following:
Exercise PriceExpiration DateMarch 31,
2024
December 31,
2023
(unaudited)
Warrants issued in 2015$5.25 1/30/253,808 3,808 
Warrants issued with 2018 Convertible Notes$0.10 6/7/28346,689 346,689 
Warrants issued with 2018 Term Loan$16.67 7/31/2826,998 26,998 
Warrants issued with 2019 Credit Agreement$16.67 5/20/29419,992 419,992 
Warrants issued with 2022 Credit Agreement$1.11 6/30/303,779,018 3,779,018 
Total Warrants4,576,505 4,576,505 

There was no warrant activity during the three months ended March 31, 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 loss. For the three months ended March 31, 2024, the fair value of the warrant liability increased $0.3 million.

In connection with the Series A Common Equivalent Preferred Stock Exchange Agreements (as defined below), four warrant holders are limited to exercising their warrants such that following any such exercise, the number of shares of common stock beneficially owned by such holder cannot exceed 4.9% of the outstanding common stock of the Company (two of the holders may, at their option and upon sufficient prior written notice to the Company, increase such percentage to 9.9%). In the event the common share limit has been met and the holder chooses to exercise their warrants, the holder can sell any common stock they hold. Therefore, the amendment to the warrant agreements does not restrict the holder from fully exercising the warrants under the original terms of the warrant agreements.
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 Designation of Preferences, Rights and Limitations of the Series A Common Equivalent Preferred Stock of the Company with the Secretary of State of the State of Delaware. The Preferred Stock ranks senior to the common stock with respect to rights on the distribution of assets on any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company, having a liquidation preference equal to its par value of $0.001 per share. The Preferred Stock will participate equally and ratably on an as-converted basis with the holders of common stock in all cash dividends paid on the common stock. The Preferred Stock is non-voting.
Upon election, each holder may convert each share of Preferred Stock into 1,000 shares of common stock, except to the extent that following such conversion the number of shares of common stock held by such holder, its affiliates and any other persons whose beneficial ownership of common stock would be aggregated with such holder’s for purposes of Section 13(d) of the Exchange Act including shares held by any “group” (as defined in Section 13(d) of the Securities Exchange Act) and applicable regulations of the Securities and Exchange Commission ("SEC")) of which such holder is a member, but excluding shares beneficially owned by virtue of the ownership of securities or rights to acquire securities that have limitations on the right to convert, exercise or purchase similar to the limitation set forth in the Series A Certificate of Designation, exceeds 4.9% (or, at the election of the holders, OrbiMed Private Investments IV, LP or OrbiMed Royalty Opportunities II, LP, made by delivering at least 61 days advance written notice to the Company of its intention to increase the beneficial ownership cap applicable to such holder, 9.9%) of the total number of shares of common stock then issued and outstanding.
Common Stock
During the three months ended March 31, 2024 no stock options were exercised. During the three months ended March 31, 2023, stock options to acquire 3,218 shares were exercised for shares of the Company's common stock for proceeds of less than $0.1 million. As part of the Restructuring, the 2020 Employee Stock Purchase Plan (the "2020 ESPP") terminated effective November 8, 2023. No shares were issued related to the 2020 ESPP during the three months ended March 31, 2023. During the three months ended March 31, 2024 and 2023, the Company issued 402,295 shares and 336,206 shares, respectively, of common stock upon vesting of RSUs, which included RSU accelerated vesting of certain RSU awards of employees terminated due to the Restructuring and 88,750 in accelerated awards in January 2024 and 21,250 in accelerated awards in February 2024, in connection with the departure of certain executive officers due to the Restructuring.
Note 14—Stock-Based Compensation
2022 Inducement Equity Incentive Plan
The 2022 Inducement Equity Incentive Plan (the “2022 Plan”), which permits the granting of nonstatutory stock options, RSUs, RSAs, stock appreciation rights, performance share units ("PSUs"), performance shares and other equity-based awards to



employees, directors and consultants, became effective on March 30, 2022. As of March 31, 2024, 6,000,000 shares of common stock were authorized for issuance under the 2022 Plan, of which 5,933,037 remain available for issuance under the 2022 Plan.
2020 Equity Incentive Plan
The 2020 Equity Incentive Plan (the “2020 Plan”), which permits the granting of nonstatutory stock options, RSAs, RSUs, stock appreciation rights, PSUs, performance shares and other equity-based awards to employees, directors and consultants became effective on August 5, 2020. As of March 31, 2024, 5,573,491 shares of common stock were authorized for issuance under the 2020 Plan. No additional shares were authorized for addition on January 1, 2024. As of March 31, 2024, 5,052,552 shares remain available for issuance under the 2020 Plan.
2011 Equity Incentive Plan
The Company’s 2011 Equity Incentive Plan (the “2011 Plan”) permits the granting of incentive stock options, non-statutory stock options, RSAs, RSUs and other stock-based awards to employees, directors, officers and consultants. As of March 31, 2024, 173,612 shares of common stock were authorized for issuance under the 2011 Plan and no shares remain available for issuance under the 2011 Plan. No additional awards will be granted under the 2011 Plan. Shares that become available for issuance from the outstanding awards under the 2011 Plan due to forfeiture, or otherwise, will become available for issuance from future awards under the 2020 Plan.
Stock Options
Stock options granted generally vest over four years and have a ten-year contractual term. The fair value of each employee and non-employee stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company's common stock became publicly traded in August 2020 and lacks company-specific historical and implied volatility information. Therefore, the Company estimates its expected stock volatility based on the historical volatility of a set of publicly traded peer companies. Due to the lack of historical exercise history, the expected term of the Company’s stock options has been determined using the “simplified” method for awards. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is zero based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
No stock option awards were granted during the three months ended March 31, 2024. The following assumptions were used to estimate the fair value of stock option awards granted for the three months ended March 31, 2023:
Three Months Ended
March 31, 2023
(unaudited)
Risk-free interest rate4.27%
Expected dividend yield
Expected term in years5.5
Expected volatility75%
The Company's stock option activity for the three months ended March 31, 2024 was as follows:

Stock
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (in years)
Aggregate
Intrinsic
Value
(in thousands)
Outstanding as of December 31, 20231,904,723 $1.98 7.80$ 
Options granted  
Options exercised  $ 
Options forfeited(632,254)1.39 
Outstanding as of March 31, 2024 (unaudited)1,272,469 $2.27 3.5$ 
Options vested and exercisable as of March 31, 2024 (unaudited)1,272,469$2.27 3.5$ 



For options in the money, the aggregate intrinsic value for options outstanding in the above table represents the product of the number of options outstanding multiplied by the difference between the per share fair value of the Company’s common stock on the last day of the fiscal period, which was $0.19 and $0.20 as of March 31, 2024 and December 31, 2023, respectively, and the exercise price. The aggregate intrinsic value for options exercised in the above table represents the product of the number of options exercised multiplied by the difference between the per share fair value of the Company’s stock on the date of exercise and the exercise price. As of March 31, 2024, the total unrecognized compensation related to unvested stock option awards granted was $0.2 million, which the Company expects to recognize over a weighted-average period of approximately 0.5 years.
Restricted Stock Units (RSUs)
The Company’s RSU activity for the three months ended March 31, 2024 was as follows:
Number
of Shares
Weighted
Average
Grant Price
Unvested as of December 31, 20232,185,330 $2.18 
Granted  
Forfeited(1,266,626)2.53 
Vested(626,913)1.52 
Unvested as of March 31, 2024 (unaudited)291,791 $2.05 
As of March 31, 2024, there was $0.4 million of unrecognized compensation related to unvested RSUs, which the Company expects to recognize over a weighted-average period of approximately 1.4 years.
Total Stock-Based Compensation
The following table summarizes the total stock-based compensation expense for the stock options, PSUs, RSUs, RSAs and ESPP expense recorded in the condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2024 and 2023 (in thousands):
Three Months Ended March 31,
Three Months Ended March 31, 2024Three Months Ended March 31, 2023
20242023Continuing OperationsDiscontinued OperationsContinuing OperationsDiscontinued Operations
(unaudited)(unaudited)(unaudited)
Cost of products sold$(132)$74 $10 $(142)$ $74 
Research and development(559)346  (559)12 334 
Selling, general and administrative(831)1,484 192 (1,023)574 910 
Total stock-based compensation$(1,522)$1,904 $202 $(1,724)$586 $1,318 
The employee terminations related to the Restructuring, resulted in the credit to stock-based compensation during the three months ended March 31, 2024 due to forfeitures (credit of $1.0 million) and Type III equity modifications related to accelerated RSU vesting (credit of $0.5 million, which was the result of the decline in the Company's stock price).

Note 15—Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per common share includes the potential impact of the Company’s convertible preferred stock, common stock options, RSUs, RSAs, intended ESPP purchases and warrants when such shares are not anti-dilutive. In accordance with ASC 260, Earnings Per Share, if a Company had discontinued



operations, the Company uses income from continuing operations, adjusted for preferred dividends and similar adjustments, as its control number to determine whether potential common shares are dilutive.
The table below provides potentially dilutive securities not included in the calculation of the diluted net loss per common share because to do so would be anti-dilutive:
Three Months Ended March 31,
20242023
(unaudited)
Shares issuable upon:
Conversion of Series A Common Equivalent Preferred Stock6,665,841 6,665,841 
Exercise of common stock warrants4,576,506 4,576,505 
Exercise of stock options1,274,011 2,019,014 
Vesting of RSUs and RSAs291,291 2,653,629 
Issuance of shares under 2020 ESPP 51,730 
Total potentially dilutive securities12,807,649 15,966,719 



Note 16—401(k) Retirement Plan
The Company has a 401(k) retirement savings plan that provides retirement benefits to substantially all full-time U.S. employees. Eligible employees may contribute a percentage of their annual compensation, subject to Internal Revenue Service limitations. The Company provided no contributions to the 401(k) retirement savings plan for the three months ended March 31, 2024 and 2023.
Note 17—Related Party Transactions
Consulting Agreement
The Company has a consulting agreement with the former chairman of the Company’s Board of Directors. The Company recorded less than $0.1 million of expense related to the agreement in each of the three months ended March 31, 2024 and 2023.

Credit Agreements
The Company's prior credit agreement (the "2019 Credit Agreement") was between the Company and related parties OrbiMed Royalty Opportunities II, LP and Deerfield Private Design Fund II, L.P., and provided for a loan of up to $70.0 million with a maturity date of May 20, 2024. On June 30, 2022, the loan balance of $40.0 million was repaid in full out of the proceeds of the 2022 Credit Agreement. The 2022 Credit Agreement with related parties Deerfield Private Design Fund III, L.P. and Deerfield Partners, L.P. replaced the 2019 Credit Agreement and provides for an aggregate principal amount of $35.0 million and a maturity date five years from the closing of the loan. Refer to Note 9 - Debt for additional details.

The liability for the loan balance related to the 2022 Credit Agreement recorded on the Company's condensed consolidated balance sheets was $34.6 million and $34.5 million as of March 31, 2024 and 2023, respectively. The Company recorded interest expense related to the debt on the condensed consolidated statement of operations and comprehensive loss of $1.5 million and $1.3 million for the three months ended March 31, 2024 and 2023, respectively.

Warrants
In connection with the 2022 Credit Agreement, the Company entered into the 2022 Warrant Purchase Agreement with Deerfield, pursuant to which the Company issued warrants for the purchase up to an aggregate 3,779,018 shares of the Company’s common stock at an exercise price of $1.1114 per share for a period of eight years following issuance. Refer to Note 12 - Warrants for additional details.
Registration Rights Agreement



On June 30, 2022, in connection with the issuance of the 2022 Warrants, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with Deerfield, pursuant to which the Company filed a shelf registration statement on Form S-3 with the SEC to register the resale of certain securities held by Deerfield and their affiliates (the “Registrable Securities”). In addition, for a period of five years following the execution of the Registration Rights Agreement, or until all Registrable Securities are registered or no longer subject to restrictions on transfer (whichever is earlier), Deerfield will hold certain “piggy-back” registration rights with respect to registration statements filed during such period. The Company will generally pay all reasonable expenses incidental to its obligations and performance under the Registration Rights Agreement, other than underwriting discounts and commissions and such other charges.
Note 18—Subsequent Events

Delisting Notification from Nasdaq

As previously disclosed, on May 1, 2023, the Company received written notice from the Listing Qualifications Staff (the “Staff”) of The Nasdaq Stock Market, LLC (“Nasdaq”) indicating that, based upon the closing bid price of the Company’s common stock, par value $0.001 per share, for the prior 30 consecutive business days, the Company was not in compliance with the $1.00 minimum bid price requirement set forth in Listing Rule 5450(a)(1) for continued listing on The Nasdaq Global Market (the “Bid Price Requirement”). Pursuant to Listing Rule 5810(c)(3)(A), the Company was granted 180 calendar days, or until October 30, 2023, to regain compliance with the Bid Price Requirement. Subsequently, on October 31, 2023, the Company transferred to The Nasdaq Capital Market and was afforded the remainder of The Nasdaq Capital Market’s second 180 calendar day compliance period, or until April 29, 2024, to regain compliance with the Bid Price Requirement.

On April 30, 2024, the Staff notified the Company that it has not regained compliance with Listing Rule 5550(a)(2). The Staff also notified the Company, as a separate basis for delisting pursuant to Listing Rule 5810(d)(2), that the Company is not in compliance with Listing Rule 5550(b) for failure to maintain stockholders’ equity of at least $2.5 million, or either of the alternatives to compliance with this standard ((i) market value of listed securities of $35 million or (ii) net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years). Further, unless the Company requests an appeal of Nasdaq’s determination to a Hearings Panel by May 7, 2024, the Company’s securities will be scheduled for delisting from The Nasdaq Capital Market and will be suspended at the opening of business on May 9, 2024, and a Form 25-NSE will be filed with the SEC, which will remove its securities from listing and registration on The Nasdaq Stock Market.

The Company did not submit a hearing request; therefore, the Company’s common stock was suspended from trading on The Nasdaq Capital Market at the opening of business on May 9, 2024. The Company’s common stock is traded on the OTC Pink Sheets, and the Company will seek to establish relationships with market makers to provide additional trading opportunities in the Company’s shares. However, there can be no assurance that a market for the Company’s shares will develop.




Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes and other financial information included elsewhere in this Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Form 10-Q, including information with respect to our plans and strategy for our business, includes “forward-looking statements” within the meaning of Section 21E of the Exchange Act. In some cases, you can identify these statements by forward-looking words such as “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “should,” “estimate” or “continue,” and similar expressions or variations. Such forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included in this Form 10-Q and in the section titled "Risk Factors" in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2023. The forward-looking statements in this Form 10-Q represent our views as of the date of this Form 10-Q. Except as may be required by law, we assume no obligation to update these forward-looking statements or the reasons that results could differ from these forward-looking statements. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Form 10-Q.
Overview
Historically, we designed, manufactured and marketed a range of tools for catheter-based ablation procedures to treat various arrhythmias. Our product portfolio included novel access sheaths, diagnostic and mapping catheters, conventional and contact ablation catheters, mapping and imaging consoles and accessories, as well as supporting algorithms and software programs. Our foundational product was our AcQMap Imaging and Mapping System, which was designed to rapidly and accurately identify ablation targets and to confirm both ablation success and procedural completion.
In April 2022, we announced that we agreed to sell our left-heart access product portfolio to Medtronic and refinanced existing debt with a new longer-term credit facility to recapitalize our business and fund our strategic growth priorities. Pursuant to the sale transaction, Medtronic paid upfront cash consideration of $20.0 million (of which $4.0 million was paid into an indemnity escrow account for a period of 18 months), and we became eligible for contingent cash consideration of up to $37.0 million (of which we earned $20.0 million on October 31, 2022 and $17.0 million on December 31, 2022) plus a portion of Medtronic’s future net sales of the left-heart access product portfolio. In conjunction with the sale of our left-heart access product portfolio, we executed a Distribution Agreement with Medtronic, pursuant to which we agreed to manufacture and supply these left-heart access products to Medtronic as exclusive distributor of the product line for an initial term of up to four years at specified transfer prices. We will also continue to be eligible for earnout payments on Medtronic’s net sales of the left-heart access product portfolio through 2027.

In November 2023, we announced, following an extensive strategic review by our board of directors, and in light of the current financing environment and the capital investments required to achieve leadership in the electrophysiology market, that we had determined to reallocate capital from our mapping and ablation business to the manufacturing of left-heart access products for Medtronic under the Distribution Agreement, which we believe will maximize the potential for future contingent cash consideration and cash flow. As a result of this Restructuring, we rely solely on our strategic partnership with Medtronic to generate revenue through (i) the manufacture of the left-heart access product portfolio for Medtronic at transfer prices specified under our Distribution Agreement and (ii) potential earnouts from Medtronic’s sales of the left-heart access product portfolio to end-users.

We were incorporated in the state of Delaware on March 25, 2011 and are headquartered in Carlsbad, California.

Left-Heart Access Portfolio Sale and Distribution Agreement

On June 30, 2022, we completed the First Closing of the sale of our left-heart access portfolio in accordance with the Asset Purchase Agreement with Medtronic, pursuant to which we sold to Medtronic our AcQCross® line of sheath-compatible septal crossing devices, the AcQGuide® MINI integrated crossing device and sheath, the AcQGuide FLEX steerable introducer with integrated transseptal dilator and needle and the AcQGuide® VUE steerable sheaths (i.e., the Products). Pursuant to the Asset Purchase Agreement, Medtronic paid cash consideration of $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, and acquired from us, among other things, intellectual property rights to the Products and certain equipment used in the manufacturing of the Products. A second closing would occur on a date determined by Medtronic, but no later than the fourth anniversary of the First Closing, subject to the satisfaction of customary closing conditions (i.e., the Second Closing). At the Second Closing, Medtronic would acquire



certain additional assets relating to the Products, primarily supplier agreements and permits and design and specification files required for Medtronic to become the manufacturer of record of the Products, for no additional consideration.
Under the Asset Purchase Agreement, we also became eligible to receive contingent cash consideration of up to $37.0 million plus a portion of Medtronic’s future net sales from the Products, as follows:

(i) $20.0 million upon our completion, to the reasonable satisfaction of Medtronic, of certain conditions set forth in the Asset Purchase Agreement relating to our 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 (i.e., the OEM Earnout);

(ii) $17.0 million upon the earlier of (A) the Second Closing or (B) our initial submission for Conformité Européenne Mark, or CE Mark, certification of the Products under the European Union Medical Devices Regulation, or MDR, to the reasonable satisfaction of a third-party regulatory consultant, subject to certain other conditions as set forth in the Asset Purchase Agreement (i.e., 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 over 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 (i.e., the Net Sales Earnouts).

On October 31, 2022, we achieved the OEM Earnout, and payment of $20.0 million from Medtronic was received in November 2022. Further, on December 1, 2022, Medtronic qualified us as an original equipment manufacturer (“OEM”) and accordingly, we began to manufacture the Products exclusively for Medtronic under the Distribution Agreement. The Distribution Agreement has an initial term ending on the date of the Second Closing. If the Second Closing has not occurred on or prior to the fourth anniversary of the First Closing, then the Distribution Agreement will automatically renew thereafter for successive one-year periods, unless either we or Medtronic provides notice of non-renewal at least 180 days before the end of the then current term.

On December 31, 2022, we achieved the Transfer Earnout for our submission for CE Mark certification of the Products under the European Union MDR, to the reasonable satisfaction of a third-party regulatory consultant, and payment of $17.0 million was received from Medtronic on January 14, 2023.

The quarterly measurement period for the Net Sales Earnouts began on January 30, 2023, and such earnout payments began in January 2024 and will continue quarterly each quarter thereafter until 2027. In 2023, we earned $9.4million related to the Net Sales Earnouts, with $7.3 million paid in January 2024. For the three months ended March 31, 2024, we earned $2.9 million before transaction costs of $0.1 million in Net Sales Earnouts.

Strategic Realignment and Restructuring

In November 2023, our board of directors approved a strategic realignment of resources and corporate restructuring (i.e., the Restructuring). We began implementation of a shift in our business model to solely support the manufacturing and distribution of Medtronic’s left-heart access product portfolio under the Distribution Agreement, including to earn potential Net Sales Earnouts. As part of this restructuring, we wound down our mapping and ablation businesses and no longer manufacture or distribute our AcQMap Mapping System, AcQMap 3D Mapping Catheter, AcQBlate Force-Sensing Ablation Catheter, AcQGuide Max 2.0 Steerable Sheath, or associated accessories, though we continue to explore strategic alternatives for these businesses (including a potential sale of related assets). The Restructuring included a reduction in workforce of approximately 65% of our employees. We also entered into retention arrangements with certain employees who remained with us to assist with the Restructuring and operation of our left-heart access distribution business.

As of March 31, 2024, we have recognized $23.1 million of the estimated $21.0 million to $32.0 million of pre-tax restructuring and exit-related charges. $1.6 million of the estimated $2.0 million to $3.0 million represented cash expenditures for the payment of severance and related benefit costs and additional $2.9 million of the estimated $3.0 million to $4.0 million represented cash expenditures for the payment of retention bonuses to certain employees that are assisting with the Restructuring. In addition, $0.5 million of the estimated $2.0 million to $5.0 million represented cash expenditures for other restructuring costs, and finally, $18.8 million of the estimated $14.0 million to $20.0 million represented non-cash pre-tax impairment charges in connection with the disposition of certain assets, including inventory, fixed assets and intangibles and the release of certain restructuring accruals. A majority of the non-cash charges was incurred in the fourth quarter of 2023, while the majority of the cash expenditures charges were incurred in the first quarter of 2024, with management considering the Restructure as substantially complete.

For the three months ended March 31, 2024 and 2023, we generated revenue of $3.6 million and $1.2 million, respectively. Since our inception, we have generated significant losses. Our net losses from continuing operations were $2.1 million and $4.3 million for the three months ended March 31, 2024 and 2023, respectively. For the three months ended March 31, 2024, net income from discontinued operations was $0.4 million and for the three months ended March 31, 2023, net loss from



discontinued operations was $12.0 million. As of March 31, 2024 and December 31, 2023, we had an accumulated deficit of $601.6 million and $600.0 million, respectively, and working capital of $24.5 million and $27.3 million, respectively.

Notice of Delisting from Nasdaq

As previously disclosed, on May 1, 2023, we received written notice from the Staff of Nasdaq indicating that, based upon the closing bid price of our common stock, par value $0.001 per share, for the prior 30 consecutive business days, we were not in compliance with the Bid Price Requirement. Pursuant to Listing Rule 5810(c)(3)(A), we were granted 180 calendar days, or until October 30, 2023, to regain compliance with the Bid Price Requirement. Subsequently, on October 31, 2023, we transferred to The Nasdaq Capital Market and were afforded the remainder of The Nasdaq Capital Market’s second 180 calendar day compliance period, or until April 29, 2024, to regain compliance with the Bid Price Requirement.

On April 30, 2024, the Staff notified us that we had not regained compliance with Listing Rule 5550(a)(2). The Staff also notified us, as a separate basis for delisting pursuant to Listing Rule 5810(d)(2), that we were not in compliance with Listing Rule 5550(b) for failure to maintain stockholders’ equity of at least $2.5 million, or either of the alternatives to compliance with this standard ((i) market value of listed securities of $35 million or (ii) net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years). Further, unless we request an appeal of Nasdaq’s determination to a Hearings Panel by May 7, 2024, our securities will be scheduled for delisting from The Nasdaq Capital Market and will be suspended at the opening of business on May 9, 2024, and a Form 25-NSE will be filed with the Securities and Exchange Commission, which will remove our securities from listing and registration on The Nasdaq Stock Market.

We did not submit a hearing request; therefore, our common stock was suspended from trading on The Nasdaq Capital Market at the opening of business on May 9, 2024. Our common stock trades on the OTC Pink Sheets, and we will seek to establish relationships with market makers to provide additional trading opportunities in our shares. However, there can be no assurance that a market for our shares will develop.
Factors Affecting Our Performance
There are a number of factors that have impacted, and we believe will continue to impact, or that we expect to impact, our results of operations and growth.

Medtronic Partnerships

As part of the Asset Purchase Agreement with Medtronic, we will be their OEM supplier of the Products for up to the next four years. Following the Restructuring, we expect to rely solely on our strategic partnership with Medtronic to generate revenue through (i) sales of the Products to Medtronic at transfer prices specified under the Distribution Agreement and (ii) potential earnouts from Medtronic’s sales of the Products to end-users that we may become eligible to receive under the Asset Purchase Agreement. We expect to rely solely on Medtronic to market and sell the Products as we will have no marketing and sales capabilities on our own. This strategy leaves us largely dependent upon the success of Medtronic. If Medtronic stops buying Products from us, or stops marketing or selling the Products or is unsuccessful in its efforts to sell the Products to end users, our business, results of operations and financial condition would be materially and adversely affected.

Manufacture and Supply

Our ability to perform as a business depends on the proper functioning of our manufacturing and supplier operations. Following Medtronic’s qualification of us as their OEM supplier, we have manufactured the Products for Medtronic at our approximately 50,800 square foot facility in Carlsbad, California. This facility provides approximately 15,750 square feet of space for our production operations, including manufacturing, quality control and storage. Following the Restructuring, our business model focuses exclusively on manufacturing the Products for Medtronic. Our manufacturing operations require timely delivery of sufficient amounts of materials and components. We rely on a single or limited number of suppliers for certain materials and components, and we generally have no long-term supply arrangements with our suppliers, as we generally order on a purchase order basis. In the future, we may face unanticipated interruptions and delays in manufacturing through our supply chain. Manufacturing or supplier disruptions could result in product shortages, declining production, reputational damage or significant costs. Our ability to transition our operations to full-time manufacturing of the Products for Medtronic and produce at optimal capacity when and as planned following the Restructuring could affect our revenue and operating expenses.

Restructuring




On November 8, 2023, we announced our plans for the Restructuring, designed to simplify our operational footprint and cut costs while maximizing free cash flow. As part of the Restructuring, we began to wind down our mapping and ablation businesses. We also immediately began implementation of the corporate restructuring plan, which resulted in reducing our workforce by approximately 65% across different areas and functions. We believe the Restructuring is substantially complete, however, we may not achieve the anticipated cost savings, operating efficiencies or other benefits of such activities. We will continue to review our operations to optimize our business.

Manufacturing Costs

Our financial results, including our gross margins, may fluctuate from period to period due to a variety of factors, including: the cost of direct materials; manufacturing costs; product yields; headcount and cost-reduction strategies (including the Restructuring).

Future gross margins for the Products may fluctuate due to a variety of other factors, including the introduction by others of competing products or the attempted integration by third parties of capabilities similar to ours into their existing products, and Medtronic’s demand for the Products, including due to seasonality.

Competition

Our industry is intensely competitive, subject to rapid change and significantly affected by new product introductions and other market activities of industry participants. Our most significant competitors are large, well-capitalized companies. We must continue to successfully compete considering our competitors’ existing and future products and related pricing and their resources to successfully market to the physicians who could use the Products. Publication of clinical results by us or Medtronic, our competitors and other third parties can also have a significant influence on whether, and the degree to which, Medtronic is able to gain market share and increase utilization of the Products.

Global Supply Chain Disruption

Our costs are subject to fluctuations, particularly due to change in the price of raw and packing materials and the cost of labor, transportation and operating supplies. In addition, it is possible that we may be negatively affected from unexpected delays resulting from global supply-chain disruptions and other adverse global conditions, including supply shortages of key electronic components and other raw materials, vendor disruptions related to COVID-19, extended lead times for raw material procurement, or geopolitical factors that could restrict the manufacturing and delivery of raw materials or other components.

Variability in Operating Results

In addition, we may experience meaningful variability in our yearly revenue and gross profit/loss as a result of a number of factors, including, but not limited to: inventory write-offs and write-downs; costs, the availability and cost of components and raw materials; inflation rates and interest rates; and our ability to realize the benefits the Restructuring. We continue to take proactive steps to recover and mitigate inflationary cost pressures by managing our costs through efficiency and labor productivity. These efforts may not be successful for various reasons, including the pace of inflation.

While certain of these factors may present significant opportunities for us, they also pose significant risks and challenges that we must address. See the section titled “Risk Factors” for more information.


Components of Results of Operations
Revenue
Prior to November 8, 2023, our revenue consisted primarily of revenue from: (i) the sale of our disposable products; (ii) the sale, rental or leasing of systems; and (iii) service/other revenue. In the United States and select markets in Western Europe where we had developed a direct selling presence, we historically installed our AcQMap console and workstation with our customer accounts and then generated revenue from the sale of our disposable products to these accounts for use with our system. We also generated revenue from the direct sale of our AcQMap console into hospital accounts as well as revenue



through long-term customer commitments on disposable purchases. In other international markets, we historically leveraged our partnership with Biotronik to install our AcQMap console and workstation with customer accounts and then generated revenue from Biotronik’s sale of our disposable products to these accounts for use with our system. These sources of revenue are no longer relevant following the Restructuring. Prior to November 8, 2023, our marketed disposable products included access sheaths, diagnostic and mapping catheters, ablation catheters and accessories. Following the Restructuring, we generate revenue solely under our Distribution Agreement with Medtronic, as Medtronic’s exclusive OEM supplier of the left-heart access Products sold to Medtronic under the Asset Purchase Agreement and potential earnouts from Medtronic’s sales of the Products to end-users that we may become eligible to receive under the Asset Purchase Agreement.
For the three months ended March 31, 2024 and 2023, sales from continuing operations were primarily within the United States, with approximately 0% and 23% sold outside of the United States, respectively.
Costs and Operating Expenses
Cost of Products Sold
Cost of products sold consist primarily of raw materials, direct labor (including stock-based compensation), manufacturing overhead associated with the production and sale of our products and additionally, prior to the Restructuring, production and depreciation of our AcQMap console and workstation that we install with our customer accounts. We depreciate equipment over a three-year period. Cost of products sold also includes expenditures for warranty, field service, freight, royalties, and inventory reserve provisions. We expect cost of products sold to increase in absolute dollars in future periods as our revenue increases.
Research and Development Expenses
Historically, research and development expenses consist 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, materials costs, allocated rent and facilities costs and depreciation.
Research and development expenses related to possible future products are expensed as incurred. We also accrue and expense costs for activities associated with clinical trials performed by third parties as incurred. All other costs relative to setting up clinical trial sites are expensed as incurred. Clinical trial site costs related to patient enrollment are accrued as patients are entered into the trials.
Due to our shift in business model as part of the Restructuring, we expect our research and development expenses to significantly decrease in absolute dollars in the upcoming years.
Selling, General and Administrative Expenses
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
To align resources with our current strategic direction, we implemented an organizational workforce reduction and are implementing additional cost reduction measures. Due to the strategic realignment, which is substantially complete, we expect our SG&A expenses to decrease in absolute dollars in the upcoming years.
Restructuring Expenses

In 2023, we undertook a strategic realignment of resources and corporate restructuring (i.e., the Restructuring), including an organizational workforce reduction and additional cost reduction measures. Our restructuring and exit-related charges consist 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.

Change in Fair Value of Contingent Consideration




The change in fair value of contingent consideration relates to our June 2019 acquisition of Rhythm Xience. The acquisition included potential earn-out considerations based on the achievement of certain regulatory and revenue milestones. The value of such contingencies is estimated and recorded on the condensed consolidated balance sheets and are adjusted to fair value each period with increases and decreases of in the estimated fair value of the contingent consideration earn-out recognized in the condensed consolidated statement of operations and comprehensive loss. The earnout period under the Rhythm Xience acquisition agreement concluded on June 19, 2023. Accordingly, no contingent consideration liability was recorded at fair value on the condensed consolidated balance sheet as of March 31, 2024.
Gain on Sale of Business

Gain on sale of business consists of the value of consideration received by us in excess of the book value of assets transferred to the buyer and net of direct selling costs. In 2022, we completed the First Closing of the sale of certain assets to Medtronic whereby the value received was in excess of the book value of the assets transferred, resulting in a recognized gain of $79.5 million. Gain on sale of business also consists of consideration contingent upon the satisfaction of certain contractual conditions. Associated with the sale and included in the above recognized gain, in 2022, we achieved both an OEM Earnout entitling us to $20.0 million and a Transfer Earnout entitling us to $17.0 million in contingent consideration.

Additionally, over the next four years, we expect to receive a percentage of Medtronic's quarterly commercial sales of the Products, ranging from 100% in the first year to 50% in the fourth year. For the three months ended March 31, 2024, we recognized an estimated gain (earned sales less transactions costs) of $2.8 million related to the Net Sales Earnouts, and, for the full year 2023 we recognized an estimated gain of $9.1 million. Refer to Note 4 - Sale of Business for more information.
Other Income (Expense)
Change in Fair Value of Warrant Liability
Warrants meeting specific conditions are required to be recorded as liabilities at fair value on the consolidated balance sheets. We issued warrants associated with various recorded transactions, some of which meet these specific conditions. The change in fair value of warrant liability recorded on our condensed consolidated results of operations and comprehensive loss reflect changes in the fair value of these recorded liabilities.
Under the terms of our 2022 Credit Agreement effective June 30, 2022, we issued warrants meeting the conditions for treatment as a liability. The recorded fair value of the liability associated with such warrants is adjusted each reporting period with an entry to the condensed consolidated statements of operations and comprehensive loss. Refer to Note 12 - Warrants for more information.
Interest Income
Interest income consists primarily of interest earned on our cash, cash equivalents and marketable securities.
Interest Expense
Interest expense for the three months ended March 31, 2024 primarily relates to interest paid on our 2022 Credit Agreement. Refer to Note 9 - Debt for more information.



Results of Operations for the Three Months Ended March 31, 2024 and 2023
The results of operations presented below should be reviewed in conjunction with our condensed consolidated financial statements and related notes included elsewhere in this quarterly report on Form 10-Q. The following table sets forth our results of operations for the three months ended March 31, 2024 and 2023:
Three Months Ended March 31,Change
(dollars in thousands)20242023$%
(unaudited)
Revenue(1)
$3,625 $1,242 $2,383 192 %
Costs of products sold(2)
3,655 2,1111,54473 %
Gross loss(30)