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AUGMEDIX, INC.
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2022
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Financial statements.
Augmedix, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
| As of June 30, 2022 | As of December 31, 2021 | |||||||
| (in thousands, except share data) | ||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net of allowance for doubtful accounts of $ | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Restricted cash, non-current | ||||||||
| Operating lease right of use asset | ||||||||
| Deposits and other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Note payable, current portion | $ | $ | ||||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Deferred revenue | ||||||||
| Lease liability, current portion | ||||||||
| Customer deposits | ||||||||
| Total current liabilities | ||||||||
| Lease liability, net of current portion | ||||||||
| Loan payable | ||||||||
| Deferred rent, net of current portion | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 9) | ||||||||
| Stockholders’ equity: | ||||||||
| Preferred stock, $ | ||||||||
| Common stock, $ | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Accumulated other comprehensive loss | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
1
Augmedix, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (in thousands, except share and per share data) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| Revenues | $ | $ | $ | $ | ||||||||||||
| Cost of revenues | ||||||||||||||||
| Gross profit | ||||||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | ||||||||||||||||
| Sales and marketing | ||||||||||||||||
| Research and development | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other income (expenses): | ||||||||||||||||
| Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Interest income | ||||||||||||||||
| Loss on extinguishment | ( | ) | ( | ) | ||||||||||||
| Other income | ||||||||||||||||
| Total other expenses, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| Other comprehensive income (loss): | ||||||||||||||||
| Foreign exchange translation adjustment | ( | ) | ( | ) | ( | ) | ||||||||||
| Total comprehensive loss | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | ||||
| $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
2
Augmedix, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity
(unaudited)
| Stockholders’ (Deficit) Equity | |||||||||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ (Deficit) | ||||||||||||||||||||
| (in thousands, except share data) | Shares | Amount | Capital | Deficit | Loss | Equity | ||||||||||||||||||
| Balance at January 1, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Exercise of common stock options | ||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at March 31, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Issuance of common stock warrants | — | |||||||||||||||||||||||
| Exercise of common stock options | ||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2022 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Stockholders’ (Deficit) Equity | |||||||||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||
| (in thousands, except share data) | Shares | Amount | Capital | Deficit | Loss | Deficit | ||||||||||||||||||
| Balance at January 1, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Issuance of Series B convertible preferred stock, net of issuance costs | — | |||||||||||||||||||||||
| Exercise of common stock options | ||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||
| Foreign currency translation adjustment | — | |||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at March 31, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Issuance of common stock to service provider | ||||||||||||||||||||||||
| Exercise of common stock options | ||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2021 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
3
Augmedix, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited)
| Six Months Ended June 30, |
||||||||
| (in thousands) | 2022 | 2021 | ||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation and amortization | ||||||||
| Stock-based compensation | ||||||||
| Non-cash interest expense | ||||||||
| Non-cash advertising expense | ||||||||
| Non-cash portion of loss on debt extinguishment | ||||||||
| Amortization of operating lease right of use asset | ||||||||
| Provision for bad debt | ||||||||
| Deferred rent | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( |
) | ||||||
| Prepaid expenses, deposits and other assets | ( |
) | ||||||
| Accounts payable | ||||||||
| Accrued expenses and other liabilities | ( |
) | ( |
) | ||||
| Deferred revenue | ( |
) | ||||||
| Lease liability | ( |
) | ||||||
| Net cash used in operating activities | ( |
) | ( |
) | ||||
| Cash flows from investing activities: | ||||||||
| Purchase of property and equipment | ( |
) | ( |
) | ||||
| Net cash used in investing activities | ( |
) | ( |
) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from loan payable | ||||||||
| Repayment of loan payable | ( |
) | ( |
) | ||||
| Payment to unaccredited investors of Augmedix Operating Corporation | ( |
) | ||||||
| Payment of financing costs | ( |
) | ( |
) | ||||
| Proceeds from exercise of common stock warrants | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Net cash (used in) provided by financing activities | ( |
) | ||||||
| Effect of exchange rate changes on cash and restricted cash | ( |
) | ( |
) | ||||
| Net decrease in cash and restricted cash | ( |
) | ( |
) | ||||
| Cash and restricted cash at beginning of period | ||||||||
| Cash and restricted cash at end of period | $ | $ | ||||||
| Supplemental disclosure of cash flow information: | ||||||||
| Cash paid during the period for interest | $ | $ | ||||||
| Cash paid during the period for income taxes | $ | $ | ||||||
| Supplemental schedule of non-cash investing and financing activities: | ||||||||
| Fair value of warrants issued in connection with loan | $ | $ | ||||||
| Fair value of common stock issued to service provider | $ | $ | ||||||
| Property, plant, and equipment in accounts payable | $ | $ | ||||||
| Adoption of ASC 842 new lease standard | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
4
Augmedix, Inc.
Notes to Unaudited Interim Condensed Consolidated Financial Statements
1. Organization and Nature of Business
Augmedix, Inc. (the “Company”, “we” or “our”) was incorporated in 2013 and launched its commercial real-time, remote documentation services in 2014. Clinicians access our applications through mobile devices such as smartphones or Google Glass. Once accessed, the client application provides clinicians with a secure communication channel to the Augmedix Ambient Automation Platform (“AAP”). The AAP houses our note creation software and is overseen by our Medical Documentation Specialists (“MDSs”). Our proprietary Natural Language Processing (“NLP”) technology, with assistance from the MDS, identifies, classifies and extracts the relevant medical elements from the clinician patient interaction. These elements are used by our proprietary note creation tool “Notebuilder” to automatically generate the medical note, which, when completed, is uploaded into the patient’s chart contained within the Electronic Health Records System (“EHR system”). The EHR system is third-party software licensed by the healthcare clinic or system to manage patient charts.
Liquidity and Going Concern
In accordance with Financial Accounting Standards (“FASB”) Accounting Standards Update (“ASU”) No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the unaudited interim condensed consolidated financial statements are issued.
The
Company has incurred recurring losses since its inception, including net losses of $
Risks and Uncertainties
The Company is subject to a number of risks associated with companies at a similar stage, including dependence on key individuals, competition from similar products and larger companies, volatility of the industry, ability to obtain adequate financing to support growth, the ability to attract and retain additional qualified personnel to manage the anticipated growth of the Company, and general economic conditions, including ongoing economic impacts from the conflict in Ukraine.
In March 2020, the World Health Organization declared the outbreak of a novel coronavirus (“COVID-19”) as a pandemic which continues to spread throughout the United States and the world. The Company continues to closely monitor the impact of the COVID-pandemic on its business. We cannot predict the full impact of the COVID-19, including its duration in the United States and worldwide, the effectiveness of governmental responses designed to mitigate strain to businesses and the economy and the magnitude of the economic impact of the COVID-19 pandemic. The COVID-19 pandemic and preventative measures taken to contain or mitigate its spread have caused and are continuing to cause, business shutdowns, cancellations of events and travel, significant reductions in demand for certain goods and services, reductions in business activity and financial transactions, supply chain interruptions and overall economic and financial market instability both globally and in the United States. Such effects will likely continue for the duration of the pandemic, which is uncertain, and for some period thereafter. The Company’s business, results of operations and financial condition depend on future developments that are highly uncertain and cannot be accurately predicted.
COVID-19 Update
The Company has been carefully monitoring the COVID-19 pandemic and its impact on the business and has taken important steps to help ensure the safety of the Company’s employees and to reduce the spread of COVID-19 community-wide. The Company is ensuring that essential staffing levels at the Company’s operations remain in place, including maintaining key personnel in the Company’s facilities. The Company has implemented stringent safety measures designed to create a safe and clean environment for the Company’s employees as the Company continues to comply with applicable guidelines (foreign and U.S., as applicable) instituted in response to the COVID-19 pandemic.
5
2. Basis of presentation and summary of significant accounting policies
Basis of Presentation and Principles of Consolidation
The accompanying unaudited interim condensed consolidated financial statements are presented in U.S. dollars and have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and as amended by Accounting Standard Updates (“ASUs”) of the FASB. The accompanying unaudited interim condensed consolidated financial statements include the accounts of Augmedix, Inc. and its wholly-owned subsidiaries, Augmedix Operating Corporation, Augmedix Bangladesh Limited and Augmedix Solutions Private Limited. All intercompany accounts and transactions have been eliminated in consolidation.
In the opinion of management, the accompanying unaudited interim condensed consolidated financial statements include all normal and recurring adjustments (which consist primarily of accruals, estimates and assumptions that impact the financial statements) considered necessary to present fairly the Company’s consolidated financial position as of June 30, 2022 and its results of operations for the three and six months ended June 30, 2022 and 2021, cash flows for the six months ended June 30, 2022 and 2021, and stockholders’(deficit) equity for the three and six months ended June 30, 2022 and 2021. Operating results for the three and six months ended June 30, 2022 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2022. The unaudited interim condensed consolidated financial statements, presented herein, do not contain the required disclosures under GAAP for annual consolidated financial statements. The condensed consolidated balance sheet as of December 31, 2021 has been derived from the audited consolidated balance sheet as of that date. The accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and related notes as of and for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on March 30, 2022.
Use of Estimates
The preparation of the unaudited interim condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements, and reported amounts of revenue and expenses during the reporting period. The Company’s significant estimates and judgments involve the identification of performance obligations in revenue recognition and the valuation of the warrant liability and stock-based compensation, including the underlying fair value of the preferred and common stock. Actual results could differ from those estimates.
Segment Information
Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one segment.
Foreign Currency Transactions, Translations and Foreign Operations
The functional currency of the Bangladesh and India subsidiaries are the Bangladeshi Taka and Indian Rupee, respectively. All assets and liabilities denominated in each entity’s functional currency are translated into the U.S. Dollar using the exchange rate in effect as of the balance sheet dates. Expenses are translated using the weighted average exchange rate for the reporting period. The resulting translation gains and losses are recorded within the unaudited interim condensed consolidated statements of operations and comprehensive loss and as a separate component of stockholders’ (deficit) equity. Foreign currency transaction gains and losses are recorded within other income (expense) in the accompanying unaudited interim condensed consolidated statements of operations and comprehensive loss. Transaction gains and losses were not material for the three and six months ended June 30, 2022 and 2021.
6
Operations outside the United States are subject to risks inherent in operating under different legal systems and various political and economic environments. Among the risks are changes in existing tax laws, possible limitations on foreign investment and income repatriation, government price or foreign exchange controls, and restrictions on currency exchange.
Concentrations of Credit Risk and Major Customers
Financial instruments at June 30, 2022 and 2021 that potentially subject the Company to concentration of credit risk consist primarily of cash and accounts receivable.
The Company’s cash is deposited with major financial institutions in the U.S., Bangladesh and India. At times, deposits in financial institutions located in the U.S. may be in excess of the amount of insurance provided on such deposits by the Federal Deposit Insurance Corporation (FDIC). Cash deposits at foreign financial institutions are not insured by government agencies of Bangladesh and India. To date, the Company has not experienced any losses on its cash deposits.
The
Company’s accounts receivable are derived from revenue earned from customers located in the U.S. Major customers are defined as
those generating revenue in excess of
Restricted Cash
Restricted cash represents amounts held on deposit at a commercial bank used to secure the Company’s credit card facility balances, to collateralize a letter of credit in the name of the Company’s landlord pursuant to a certain operating lease and for a post-employment savings fund established for the benefit of eligible Bangladesh employees. The following table provides a reconciliation of the components of cash and restricted cash reported in the Company’s condensed consolidated balance sheets to the total of the amount presented in the condensed consolidated statements of cash flows:
| June 30, | ||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
||||||
| Cash | $ | $ | ||||||
| Restricted cash | ||||||||
| Restricted cash, non-current | ||||||||
| Total cash and restricted cash presented in the condensed consolidated statements of cash flows | $ | $ | ||||||
Impairment of Long-Lived Assets
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets, less costs to sell. The Company did not record any expense related to asset impairment in 2022 or 2021.
7
Revenue Recognition
ASC Topic 606, Revenue from Contracts with Customers, outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. The core principle, involving a five-step process, of the revenue model is that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.
The Company derives its revenue through a recurring subscription model. The Company enters into contracts or agreements with its customers with a general initial term of one year. Customers are invoiced in advance and must generally pay an upfront implementation fee. The upfront implementation fee is deferred and recognized over the initial term of the contract and customer prepayments are deferred and included in the accompanying unaudited interim condensed consolidated balance sheets in deferred revenues. Revenues are recognized when the professional services are provided to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those services. The Company’s revenues are earned from customers located only in the U.S. After the initial term, contracts are cancellable by the customer at their discretion with a 90-day notice.
The Company determines revenue recognition through the following steps:
| ● | Identification of the contract, or contracts, with a customer; |
| ● | Identification of the performance obligations in the contract; |
| ● | Determination of the transaction price; |
| ● | Allocation of the transaction price to the performance obligations in the contract; and |
| ● | Recognition of revenue when, or as, the Company satisfies a performance obligation. |
Except for two U.S. state sales tax jurisdictions, applicable taxes, including local, sales, value added tax, etc., are the responsibility of the customer to self-assess and remit to proper tax authorities. Revenue is recognized net of any sales taxes.
The Company also generates revenue from data service projects, which includes projects to complete certain tasks or provide other services to customers. These services represent separate performance obligations which are recognized as revenue as the services are performed.
Contract Balances and Accounts Receivable
Changes in the contract liability deferred revenue account were as follows for the six months ended June 30, 2022 and year ended December 31, 2021:
| (in thousands) | Six Months Ended June 30, 2022 (unaudited) |
Year Ended December 31, 2021 (unaudited) |
||||||
| Balance, beginning of period | $ | $ | ||||||
| Deferral of revenue | ||||||||
| Recognition of unearned revenue | ( |
) | ( |
) | ||||
| Balance, end of period | $ | $ | ||||||
Accounts
receivable, net from customers was $
8
Deferred
revenue consists of billings or payments received in advance of revenue recognized for the Company’s services, as described above,
and is recognized as revenue as earned. As of June 30, 2022, the Company expects to recognize $
Stock-Based Compensation
The Company measures and recognizes compensation expense for all stock options awarded to employees and nonemployees based on the estimated fair value of the award on the grant date. The fair value of each option award is estimated using either a Black-Scholes option-pricing model or a Monte Carlo simulation, to the extent market conditions exist. The Company recognizes compensation expense on a straight-line basis over the requisite service period, which is generally the vesting period of the award. The Company accounts for forfeitures of stock options as they occur.
Estimating the fair market value of options requires the input of subjective assumptions, including the estimated fair value of the Company’s common stock prior to the merger, the expected life of the options, stock price volatility, the risk-free interest rate, expected dividends, and the probability of satisfying the market condition for market-condition based awards. The assumptions used in the valuation models represent management’s best estimates and involve a number of variables, uncertainties and assumptions and the application of management’s judgment, as they are inherently subjective.
Advertising Costs
All
advertising costs are expensed as incurred and included in sales and marketing expenses. In April 2021, the Company issued
Net Loss Per Share
Basic net loss per share of common stock is computed by dividing net loss by the weighted average number of common stock outstanding during each period. Diluted net loss per common stock includes the effect, if any, from the potential exercise or conversion of securities, such as options and warrants which would result in the issuance of incremental common stock. In computing basic and diluted net loss per share, the weighted average number of shares is the same for both calculations due to the fact that a net loss existed for the six months ended June 30, 2022 and 2021.
The following potentially dilutive securities have been excluded from the computation of diluted weighted-average shares of common stock outstanding, as they would be anti-dilutive:
| June 30, 2022 (unaudited) | June 30, 2021 (unaudited) | |||||||
| Common stock warrants | ||||||||
| Stock options | ||||||||
Recent Accounting Pronouncements
In February 2016, the FASB issued ASC Topic 842, Leases, (ASC 842). This standard requires all entities that lease assets with terms of more than 12 months to capitalize the assets and related liabilities on the balance sheet. As the Company has elected to use the extended transition period for complying with new or revised accounting standards as available under the JOBS Act, the standard is effective for the Company beginning January 1, 2022. The Company adopted ASC 842, on January 1, 2022, using the modified retrospective approach and elected the package of practical expedients available for existing contracts. The Company elected a policy to not apply the recognition requirements of ASC 842 for short-term leases. See Note 9 for further information on the adoption of ASC 842.
9
In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. The goal of the standard is to simplify the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. More specifically, the amendments focus on the guidance for convertible instruments and derivative scope exception for contracts in an entity’s own equity. The new standard is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. The Company is currently evaluating the impact of this standard but does not expect it to have a material impact on its consolidated financial statements upon adoption.
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. The amendments in ASU 2021-04 provide guidance to clarify and reduce diversity in an entity’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The Company adopted this standard on January 1, 2022, and it did not have a material impact on its consolidated financial statements upon adoption.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses, which requires financial assets measured at amortized cost basis to be presented at the net amount expected to be collected. This standard is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. Although early adoption is permitted, the Company does not intend to early adopt this standard, and the Company is currently evaluating the impact of this standard but does not expect it to have a material impact on its consolidated financial statements upon adoption.
In November 2021, the FASB issued ASU 2021-10, Government Assistance (Topic ASC 832): Disclosures by Business Entities about Government Assistance (“Topic 832”). This standard requires disclosures about transactions with a government that have been accounted for by analogizing to a grant or contribution accounting model to increase transparency about the types of transactions, the accounting for the transactions, and the effect of the transactions on an entity’s financial statements. The new standard is effective for fiscal years beginning after December 15, 2021. The Company plans to adopt this standard for the year ended December 31, 2022 and does not expect it to have a material impact on its consolidated financial statements upon adoption.
3. Fair Value Measurements
Fair Value of Financial Instruments
The
carrying amounts of cash, restricted cash, accounts receivable, prepaid expenses, accounts payable, and customer deposits approximate
fair value due to their short-term nature. As of June 30, 2022, the fair value of the Company’s loan payable was $
4. Property and Equipment
Property and equipment, consists of the following:
| (in thousands) | June 30, 2022 (unaudited) |
December 31, 2021 (unaudited) |
||||||
| Computer hardware, software and equipment | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Furniture and fixtures | ||||||||
| Less: accumulated depreciation | ( |
) | ( |
) | ||||
| Property and equipment, net | $ | $ | ||||||
The
Company recorded depreciation and amortization expense of $
5. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consists of the following:
| (in thousands) | June 30, 2022 (unaudited) |
December 31, 2021 (unaudited) |
||||||
| Accrued compensation | $ | $ | ||||||
| Accrued other | ||||||||
| Accrued vendor partner liabilities | ||||||||
| Deferred rent | ||||||||
| Accrued professional fees | ||||||||
| Accrued VAT and other taxes | ||||||||
| $ | $ | |||||||
10
6. Debt
Subordinated Note Payable
In
May 2017, the Company entered into a loan and security agreement, as amended, (“Sub Agreement”) with a lending institution
for borrowings of up to $
Borrowings
under the Sub Agreement were repaid in full in March 2021 with the proceeds from the Loan Agreement (as defined below). As a result,
the Company recorded a loss on debt extinguishment within interest expense totaling $
Paycheck Protection Program
On
April 11, 2020, the Company entered into an original loan agreement with East West Bank as the lender for a loan in an aggregate principal
amount of $
On November 19, 2020, the Company applied for forgiveness of the full principal amount. On August 9, 2021, the Company received notification that the full amount of the PPP Loan and accrued interest was forgiven. As a result, the Company recorded a gain from the forgiveness of the PPP Loan in the condensed consolidated statements of operations and comprehensive loss during the year ended December 31, 2021.
Loan and Security Agreement
On
March 25, 2021,
11
In connection with the Loan Agreement, the Company issued the Lender warrants with a fair value of $0.4 million, which was recorded as a discount to the loan, to purchase up to 346,500 shares (increasing to 392,700 shares upon funding of the second tranche) of common stock that were immediately vested upon funding with an exercise price of $3.00 per share and a term of the earlier of i) March 24, 2031 and ii) the third anniversary of the Company’s listing on Nasdaq. The warrants also provide that any shares issued pursuant to the warrants are entitled to the registration rights afforded to holders of the Company’s stock, all as set forth in those certain outstanding Registration Rights Agreement dated as of October 5, 2020.
The Company and Lender also entered into a Co-Investment Agreement, which grants to the Lender and its affiliates a right to purchase in the Company’s future private equity financings up to a total $3.0 million (if the Company only draws the first tranche) or $3.4 million (if the Company draws the second tranche) at the same per share purchase price and terms as other investors in such private equity financings.
The Company recorded the final payment of $1.1 million as both a discount and an increase to the principal amount of the debt. The Company also capitalized certain lender and legal costs associated with the Loan Agreement totaling $0.2 million, which were recorded as a discount to the loan. The aggregate discount of $1.8 million was being amortized to interest expense over the repayment term of the Loan and Security Agreement. The Company amortized $0.1 million and $0.2 million of the discount to interest expense during the three months and six months ended June 30, 2022, respectively. The Company amortized $0.1 million and $0.2 million of the discount to interest expense during the three months and six months ended June 30, 2021, respectively.
SVB Loan Agreement
On
May 4, 2022 (the “Effective Date”),
The
Revolving Credit Facility’s stated maturity date is May 4, 2024. Interest on the borrowings under the Revolving Credit Facility
is payable in arrears monthly at a floating rate per annum equal to the greater of (a)
The
SVB Loan Agreement contains customary restrictions and covenants applicable to Borrower and its subsidiaries. In particular, the SVB
Loan Agreement contains a financial covenant which provides that if Borrower fails to maintain minimum cash and cash equivalents in an
amount of (a) no less than $
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In
connection with the SVB Loan Agreement, the Company issued to SVB a warrant to purchase stock, dated as of the Effective Date (the “Warrant”),
to purchase up to
At June 30, 2022, the future minimum payments required under the SVB Loan Agreement, including the final payment, are as follows as of (in thousands):
(in thousands) | ||||
| 2022 (six months remaining) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| End of term charge | ||||
| Less unamortized debt discount | ( | ) | ||
| SVB Loan Agreement borrowing net of discount | ||||
| Less current portion | ||||
| SVB Loan Agreement borrowings, non-current portion | $ | |||
The
Company recorded the final payment of $
7. Common Stock and Preferred Stock
Common Stock
The
Company is authorized to issue
Common Stock Warrants
At June 30, 2022, the Company had the following warrants outstanding to acquire shares of its common stock:
Expiration Date | Shares of common stock issuance upon exercise of warrant | Exercise Price Per Warrant | ||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
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Preferred Stock
The
Company is authorized to issue
8. Equity Incentive Plan
At the effective date of the Malo Holdings and Augmedix merger (the “Merger”), the Company assumed Private Augmedix’s 2013 Equity Incentive Plan (“2013 Plan”). Options granted under the Plan may be incentive stock options (“ISOs”), non-qualified stock options (“NSOs”), stock appreciation rights (“SARs”) and restricted stock awards (“RSAs”). ISOs may be granted only to Company employees and directors. NSOs, SARs and RSAs may be granted to employees, directors, advisors and consultants. The Board of Directors has the authority to determine to whom options will be granted, the number of options, the term, and the exercise price. No shares of restricted stock, no stock appreciation rights and no RSUs were granted under the 2013 Plan after August 31, 2020.
Pursuant
to the Merger, the Company adopted the 2020 Equity Incentive Plan (“2020 Plan”) which serves as successor to the 2013 Plan.
The 2020 Plan authorizes the award of stock options, restricted stock awards, stock appreciation rights, restricted stock units, performance
awards, cash awards, and stock bonus awards. Certain awards provide for accelerated vesting in the event of a change in control. Options
issued may have a contractual life of up to
The
number of shares of common stock reserved for issuance under the 2020 Plan did increase on January 1, 2021, and will increase each anniversary
thereafter through 2030 by the number of shares of common stock equal to the lesser of
The Company recorded share-based compensation expense in the following expense categories in the condensed consolidated statements of operations and comprehensive loss for the three and six months ended June 30, 2022 and 2021:
| Three Months Ended June 30, (unaudited) |
Six Months Ended June 30, (unaudited) |
|||||||||||||||
| (in thousands) | 2022 | 2021 | 2022 | 2021 | ||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Sales and marketing | ||||||||||||||||
| Research and development | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
No income tax benefits have been recognized in the condensed consolidated statements of operations for stock-based compensation arrangements and no stock-based compensation costs have been capitalized as property and equipment through June 30, 2022.
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The fair value of options is estimated using the Black-Scholes option pricing model which takes into account inputs such as the exercise price, the value of the underlying ordinary shares at the grant date, expected term, expected volatility, risk free interest rate and dividend yield. The fair value of each grant of options during the six months ended June 30, 2022 was determined using the methods and assumptions discussed below.
| ● | The expected term of employee options is determined using the “simplified” method, as prescribed in SEC’s Staff Accounting Bulletin (SAB) No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option due to the Company’s lack of sufficient historical data. |
| ● | The expected volatility is based on historical volatility of the publicly traded common stock of a peer group of companies. |
| ● | The risk-free interest rate is based on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected term. |
| ● | The expected dividend yield is none because the Company has not historically paid and does not expect for the foreseeable future to pay a dividend on its ordinary shares. |
For the six months ended June 30, 2022 and 2021, the fair value of options granted was estimated using a Black-Scholes option pricing model with the following weighted average assumptions:
| Six Months Ended June 30, (unaudited) |
||||||||
| 2022 | 2021 | |||||||
| Expected term (in years) | ||||||||
| Expected Volatility | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Dividend rate | ||||||||
The
weighted average grant date fair value of stock option awards granted was $
The following table summarizes stock option activity under the Plan for the six months ended June 30, 2022:
| Number of Shares under Option Plan |
Weighted- Average Exercise Price per Option |
Weighted- Average Remaining Contractual Life (in years) |
||||||||||
| Outstanding at December 31, 2021 | $ | |||||||||||
| Granted | $ | |||||||||||
| Exercised | ( |
) | $ | |||||||||
| Forfeited and expired | ( |
) | $ | |||||||||
| Outstanding at June 30, 2022 | $ | |||||||||||
| Exercisable at June 30, 2022 | $ | |||||||||||
| Vested and expected to vest at June 30, 2022 | $ | |||||||||||
There
were
15
Performance and Market-Based Options
In
March 2021,
| ● | 317,688 options vest in full when the closing price of the Company’s common stock reaches or exceeds $9.00 per share for 20 out of 30 trading days after the Company becomes listed on the New York Stock Exchange or Nasdaq. These options expire on March 3, 2031. |
| ● | 46,273 options vest in full when the closing price of the Company’s common stock reaches or exceeds $9.00 per share for 20 out of 30 trading days after the Company becomes listed on the New York Stock Exchange or Nasdaq. Since the listing on Nasdaq, these options expire on March 22, 2031, instead of 2026. |
The
grant date fair value of the options was determined using a Monte Carlo simulation model.
9. Commitments and Contingencies
Operating Leases
Leases
Effective January 1, 2022, the Company adopted ASC Topic (ASC 842) using the modified retrospective approach by applying the new standard to all leases existing on the adoption date. The results for reporting periods beginning after January 1, 2022 are presented in accordance with ASC 842, while prior period amounts are not adjusted and continue to be reported under the accounting standards that were in effect prior to January 1, 2022.
The Company leases its office facilities in San Francisco, California under non-cancelable operating lease agreements that expire at various dates through February 2025. In addition, the Company’s subsidiary has several operating lease agreements for office space in Bangladesh, which expire at various dates through December 2028. The Bangladesh lease agreements allow for early cancellation without penalty upon providing the landlord advance notice of at least six months. The Company elected the practical expedient to recognize leases less than one year under ASC 840.
Supplemental balance sheet information related to leases as of June 30, 2022 is as follows (in thousands):
| Operating leases: | ||||
| Operating lease right-of-use assets | $ | |||
| Operating lease liability, current portion | $ | |||
| Operating lease liability, net of current portion | ||||
| Total operating lease liabilities | $ | |||
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Supplemental lease expense related to leases was as follows:
Lease Cost (in thousands) | Statements of Operations Classification | Three Months Ended June 30, 2022 (unaudited) | Six Months Ended June 30, 2022 (unaudited) | |||||||
| Operating lease cost: | ||||||||||
| Cost of revenues | $ | $ | ||||||||
| General and administrative | ||||||||||
| Sales and marketing | ||||||||||
| Research and development | ||||||||||
| Total operating lease cost | $ | $ | ||||||||
Other information related to the operating lease where the Company is the lessee is as follows:
| Six Months Ended June 30, 2022 | ||||
| Weighted-average remaining lease term | ||||
| Weighted-average discount rate | % | |||
Supplemental cash flow information related to the operating lease is as follows (in thousands):
| Six Months Ended June 30, 2022 | ||||
| Cash paid for operating lease liabilities | $ | |||
As of June 30, 2022, the maturities of the Company’s operating lease liabilities (excluding short-term leases) are as follows (in thousands):
| 2022 (remaining six months) | $ | |||
| 2023 | ||||
| 2024 | ||||
| 2025 | ||||
| Total | $ | |||
| Less: imputed interest | ( | ) | ||
| Operating lease liability | ||||
| Less: Operating lease liability, current portion | ||||
| Operating lease liability, net of current portion | $ |
Cloud Computing Services
In
June 2021, the Company entered into a noncancellable three-year contract to obtain cloud computing services. The minimum contractual
spend over the three-year term is $
Legal
In the normal course of business, the Company may receive inquiries or become involved in legal disputes regarding various litigation matters. In the opinion of management, any potential liabilities resulting from such claims would not have a material adverse effect on the Company’s condensed consolidated interim financial position or results of operations. As a result, no liability related to such claims has been recorded at June 30, 2022 or December 31, 2021, respectively.
17
Indemnification Agreements
From time to time, in the normal course of business, the Company may indemnify other parties when it enters into contractual relationships, including members of the Board of Directors, employees, customers, lessors and parties to other transactions with the Company. The Company may agree to hold other parties harmless against specific losses, such as those that could arise from a breach of representation, covenant or third-party infringement claims. It may not be possible to determine the maximum potential amount of liability under such indemnification agreements due to the unique facts and circumstances that are likely to be involved in each particular claim and indemnification provision. Management believes any liability arising from these agreements will not be material to the unaudited interim condensed consolidated financial statements. As a result, no liability for these agreements has been recorded at June 30, 2022 or 2021.
10. Related Party Transactions
Operating Leases
In 2015, the Bangladesh subsidiary
entered into agreements to rent office facilities under
11. Employee Benefit Plan
The Company has a 401(k)
plan to provide defined contribution retirement benefits for all eligible employees. Participants may contribute a portion of their compensation
to the 401(k) plan, subject to the limitations under the Internal Revenue Code. The Company’s contributions to the 401(k) plan are
at the discretion of the Board of Directors. During the three months ended June 30, 2022 and 2021 the Company made contributions of $
12. Subsequent Events
Management has evaluated subsequent events occurring after June 30, 2022 through August 10, 2022, the date the unaudited condensed consolidated interim financial statements were available to be issued.
IDS Statement of Work No. 4
On July 8, 2022, Augmedix OpCo entered into Statement of Work No. 4 (“SOW No. 4”) with IDS Infotech Ltd. (“IDS”), pursuant to the Master Services Agreement, dated October 1, 2019, by and between the Subsidiary and IDS. SOW No. 4, among other things, terminates and replaces previous Statement of Work No. 3, dated August 1, 2021, by and between the Subsidiary and IDS, provides for an initial term of twelve (12) months beginning on the effective date of SOW No. 4, provides for the provision of remote medical documentation and clinical support services by IDS in accordance with SOW No. 4, and incorporates Augmedix Notes as a permanent part of the services provided by IDS.
Infosense Statement of Work No. 3
On July 11, 2022, Augmedix OpCo entered into a Statement of Work No. 3 (“SOW No. 3”) with Infosense Technologies, Pvt. Ltd. (“Infosense”), pursuant to the Master Services Agreement, dated February 1, 2018, by and between the Subsidiary and Infosense. SOW No. 3, among other things, terminates and replaces previous Statement of Work No. 2, dated July 1, 2020, by and between the Subsidiary and Infosense, provides for an initial term of twelve (12) months beginning on the effective date of SOW No. 3, provides for the provision of remote medical documentation and clinical support services by Infosense in accordance with SOW No. 3, and incorporates Augmedix Notes as a permanent part of the services provided by Infosense.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations, as well as other sections in this Quarterly Report on Form 10-Q, should be read together with the unaudited interim condensed financial statements and related notes included elsewhere in Item 1 of Part I of this Quarterly Report on Form 10-Q and with the audited consolidated financial statements and the related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, as filed with the SEC on March 30, 2022.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Forward-looking statements relate to, among others, our plans, objectives and expectations for our business, operations and financial performance and condition, and can be identified by terminology such as “may,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “will,” “could,” “project,” “target,” “potential,” “continue” and similar expressions that do not relate solely to historical matters. Forward-looking statements are based on management’s belief and assumptions and on information currently available to management. Although we believe that the expectations reflected in forward-looking statements are reasonable, such statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by forward-looking statements.
Forward-looking statements include, but are not limited to, statements about:
| ● | anticipated trends, growth rates, and challenges in our business and in the markets in which we operate; |
| ● | our ability to further penetrate our existing customer base; |
| ● | our estimates regarding future revenues, capital requirements, general and administrative expenses, sales and marketing expenses, research and development expenses, and our need for or ability to obtain additional financing to fund our operations; |
| ● | our ability to interoperate with the EHR systems of our customers; |
| ● | our ability to attract and retain key personnel; |
| ● | developments and projections relating to our competitors and our industry, including competing dictation software providers, third-party, non-real time medical note generators and real time medical note documentation services; |
| ● | the competition to attract and retain MDSs; |
| ● | our reliance on Vendors (as defined below); |
| ● | our expectations regarding changes in regulatory requirements; |
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| ● | our ability to protect and enforce our intellectual property protection and the scope and duration of such protection; |
| ● | the impact of current and future laws and regulations; and |
| ● | the ongoing impact of the COVID-19 pandemic on our business, results of operations and future growth prospects. |
We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, operating results, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. Moreover, we operate in a competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. We undertake no obligation to update any of these forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q or to conform these statements to actual results or revised expectations, except as required by law.
You should read this Quarterly Report on Form 10-Q and the documents that we reference herein with the understanding that our actual future results, performance, and events and circumstances may be materially different from what we expect.
Overview
Augmedix was incorporated in 2013 and launched its commercial real-time, remote documentation services in 2014.
Augmedix, Inc. (the “Company” or “Augmedix”) (formerly known as Malo Holdings Corporation) provides virtual medical documentation services for clinicians through software compatible with off-the-shelf, mobile client devices (smartphones or Google Glass) that enables clinicians to connect to the Augmedix Service Platform (“ASP”). Through the ASP, clinicians either subscribe to the Augmedix Live service or the Notes service. Clinicians connect in real time to medical documentation specialists (“MDSs”), if subscribed to Augmedix’s Live service. If subscribed to Augmedix’s Notes service, the clinician-patient’s ambient interaction is recorded and processed using ASR (auto speech recognition) then reviewed and edited by Augmedix’s MDSs. For both services, the relevant elements of the clinician-patient interaction are extracted and compiled into a comprehensive and accurate medical note that is then uploaded into the patient’s chart contained within the electronic health record system, which is a third-party software licensed by the healthcare clinic or system to manage patient charts.
Patient care in the U.S. is provided in ambulatory or clinical environments and hospitals. We focus most of our efforts in the ambulatory/clinical segment of the patient care market, although we recently started offering services into the emergency department of hospitals. Roughly 75% of the physicians who subscribe to our service are employed directly by, or are affiliated with, a healthcare enterprise. The remaining 25% consists of small practices and individual practitioners.
We have generated in excess of four million medical notes since we began offering our service and are currently delivering approximately 40,000 notes to our customers each week. We estimate that our solution saves doctors two to three hours each day which is time that they can redeploy to see more patients or improve their work-life balance. We believe the benefits to healthcare enterprises are increased productivity and higher clinician and patient satisfaction.
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The current COVID-19 pandemic and resulting safety protocols have prompted a significant shift towards delivering health services remotely via telemedicine. Our technology platform was designed to enable real time, two-way communication between remotely-located participants. As such, we were able to continue to provide uninterrupted service to our customers. We believe telemedicine will remain an important part of health services delivery even after the end of the COVID-19 pandemic.
We provide service from ten MDS Operations Centers across four countries – the US, Bangladesh, India and Sri Lanka. There are six centers in India and one center in Sri Lanka that are owned and operated by five independent third parties (the “Vendors”), while the two centers in the US and Bangladesh are wholly-owned and operated by us, additionally we have begun our own operations in India.
The COVID-19 pandemic has also required modifications to how we deliver our service. While our general business model is to provide MDS service from central operating centers, local shelter in place orders have required us to shift to work-from-home for all employees and contracted employees. We will continue our work from home model until local conditions remove workplace restrictions and employees can safely work from our central operations centers. We instituted additional system controls to ensure compliance with our privacy practices.
Our technology vision is to automate as much of the medical note creation process as possible by applying intelligent automation. While the unstructured nature of a conversation between physician and patient places inherent limitations on how much note creation can ultimately be automated, we believe automation, even if partial, could generate significant benefits including improved operating efficiencies, higher-quality medical notes and a more uniform level of note quality.
Key metrics
We regularly review the following key metrics to measure our performance, identify trends affecting our business, formulate financial projections, make strategic business decisions and assess working capital needs.
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
| Key Metrics | 2022 | 2021 | 2022 | 2021 | |||||||||
| (unaudited) | (unaudited) | ||||||||||||
| Average clinicians in service headcount | 1,040 | 700 | 1,000 | 665 | |||||||||
| Average annual revenue per clinician | $ | 28,000 | $ | 29,100 | $ | 28,400 | $ | 29,500 | |||||
| Dollar-based net revenue retention | 131 | % | 129 | % | 132 | % | 120 | % | |||||
Average Clinicians in Service Headcount: We define a clinician in service as an individual doctor, nurse practitioner or other healthcare professional using our services. We average the month end number of clinicians in service for all months in the measurement period and the number of clinicians in service at the end of the month immediately preceding the measurement period. We believe growth in the average number of clinicians in service is a key indicator of the performance of our business as it demonstrates our ability to penetrate the market and grow our business. Most of our customer contracts contain minimum service levels that range from a low of 60 hours per month to a high of 200 hours per month. Higher hours per month equate to higher revenue per clinician. The average number of clinicians in service grew 49% to 1,040 from 700 for the three months ended June 30, 2022 and 2021, respectively, and grew 50% to 1,000 from 665 for the six months ended June 30, 2022 and 2021, respectively.
Average Annual Revenue Per Clinician: Average revenue per clinician is determined as total revenue, excluding Data Services revenue, recognized during the period presented divided by the average number of clinicians in service during that same period. Using the number of clinicians in service at the end of each month, we derive an average number of clinicians in service for the periods presented. The average annual revenue per clinician will vary based upon minimum hours of service requested by clinicians, pricing, and our product mix. The average annual revenue per clinician decreased to $28,000 in the three months ended June 30, 2022, down 4% from $29,100 in the three months ended June 30, 2021 due to an increase in the mix of Notes clinicians. Revenue from Notes clinicians is lower than revenue from Live clinicians. The average annual revenue per clinician decreased to $28,400 in the six months ended June 30, 2022, down 4% from $29,500 in the six months ended June 30, 2021 due to an increase in mix in Notes clinicians in this six month period versus a year ago.
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Dollar-Based Net Revenue Retention: We define a “Health Enterprise” as a company or network of doctors that has at least 50 clinicians currently employed or affiliated that could utilize our services. Dollar-based net revenue retention is determined as the revenue from Health Enterprises as of twelve months prior to such period end as compared to revenue from these same Health Enterprises as of the current period end, or current period revenue. Current period revenue includes any expansion or new products and is net of contraction or churn over the trailing twelve months but excludes revenue from new Health Enterprises in the current period. We believe growth in dollar-based net revenue retention is a key indicator of the performance of our business as it demonstrates our ability to increase revenue across our existing customer base through expansion of users and products, as well as our ability to retain existing customers. Our annual dollar-based net revenue retention increased to 131% in three months ended June 30, 2022 compared to 129% in the three months ended June 30, 2021. Growth from existing clients has historically represented a majority of our total revenue growth. Our annual dollar-based net revenue retention increased to 132% in six months ended June 30, 2022 up from 120% in six months ended June 30, 2021.
Components of Results of Operations
Revenues
Our revenues primarily consist of service fees we charge customers to subscribe to our remote medical documentation and clinical support solutions. We generate subscription fees pursuant to contracts that typically have initial terms of one year, automatically renew after the initial term and are subject to a 90-day cancellation notice after the initial one year term. Customer attrition, as it pertains to our Health Enterprise clients is infrequent. In fiscal 2021, 2019, 2018, and 2017, we did not lose any of our Health Enterprise clients nor have we lost any year to date in 2022. We lost three Health Enterprise clients in fiscal 2020, with the COVID-19 pandemic being the main contributing factor for these losses, but we also won three new Health Enterprise clients during the year. Subscription revenue is driven primarily by the number of clinicians using our services, the minimum number of hours contracted per month, and the contracted monthly price. We typically invoice customers one to three months in advance for subscriptions to our services. For customers who use more than the minimum number of monthly hours, we have the ability to bill for the additional hours utilized at a prescribed contractual price. We also perform upfront implementation services such as ensuring adequate Wi-Fi capability of the clinician’s facilities, shipping devices and accessories to the clinician, testing, selecting and assigning MDSs, obtaining EHR credentials for the MDSs, and clinician orientation. Revenues associated with implementation efforts, which are less than 1% of total revenue in the three months ended June 30, 2022, are deferred until we go live with our service and then recognized ratably over the initial term of the contract.
Cost of Revenues and Gross Profit
Cost of Revenues. Our cost of revenues primarily consists of the cost of the MDSs, some of whom are employees of our Vendors and some of whom are our employees, their direct supervisors, and clinician and technical support. Cost of revenues also consists of infrastructure costs to operate our SaaS-based platform such as hosting fees and fees paid to various third-party partners for access to their technology, plus hardware depreciation and cost of shipping for the devices and accessories we provide to our clinicians.
Gross Profit. Our gross profit is calculated by subtracting our cost of revenues from revenues. Gross margin is expressed as a percentage of total revenues. Our gross profit may fluctuate from period to period as revenues fluctuate, and as a result of the mix of MDS centers from which service is provided, operational efficiencies regarding the relationship between the number of MDSs and clinicians, product mix, and changes to our technology expenses and customer support.
Our gross profit varies by MDS center. We plan to focus on and grow the operations of the MDS centers with the best quality and highest gross margin. We intend to continue to invest additional resources in our platform infrastructure. We will also continue to invest in technology innovation, such as Notebuilder, to reduce the level of effort required by MDSs. We expect these optimization efforts and our investment in technology to expand the efficiency and capability of our platform, enabling us to improve our gross margin over time. The level and timing of investment in these areas, plus the mix of MDS centers, could affect our cost of revenues in the future. When the Bangladesh MDSs fully return to the office it will create some gross margin headwinds as we will incur higher transportation and food costs.
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General and Administrative Expenses
General and administrative expenses consist primarily of employee compensation costs for operations management, finance, accounting, information technology, compliance, legal, and human resources personnel, and our business support team in Bangladesh. In addition, general and administrative expenses include non-personnel costs, such as facilities, legal, accounting, insurance, and other professional fees, as well as other supporting corporate expenses not allocated to other departments. We expect our general and administrative expenses will increase in absolute dollars as our business grows, but we expect general and administrative expenses to decrease as a percent of revenues in the coming years.
Sales and Marketing Expenses
Sales and marketing expenses consist primarily of employee compensation costs related to sales and marketing, including salaries, benefits, commissions, bonuses, and stock-based compensation, costs of general marketing activities and promotional activities, travel-related expenses, and allocated overhead. Sales and marketing expenses also include costs for advertising and other marketing activities. Advertising is expensed as incurred. We expect our sales and marketing expenses will increase in absolute dollars as we expand our sales and marketing efforts.
Research and Development Expenses
Research and development expenses consist of costs for the design, development, testing, and enhancement of our products and services and are generally expensed as incurred. These costs consist primarily of personnel costs, including salaries, benefits, bonuses, and stock-based compensation for our development personnel. Research and development expenses also include direct MDS training costs, product management, third-party partner fees, and third-party consulting fees. We expect our research and development expenses will increase in absolute dollars as our business grows, but R&D expenses are expected to decrease as a percent of revenues in the coming years.
Interest Expense, net
Interest expense, net consists primarily of the interest incurred on our debt obligations and the noncash interest expense associated with the amortization of debt discounts, debt facility fees, and warrants granted concurrently with new debt facilities. Interest expense is offset by any interest income we earn on our cash balances held in our interest-bearing savings account.
Other Income (Expenses)
Included in other income (expense) are foreign currency gains and losses due to exchange rate fluctuations on transactions denominated in a currency other than our functional currency, and any incentive grants we receive from the Bangladesh government for investments we make within the country.
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The following table summarizes the results of our operations for the periods presented:
| Three Months
Ended June 30, |
Six Months
Ended June 30, |
|||||||||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
2022 (unaudited) |
2021 (unaudited) |
||||||||||||
| Revenues | $ | 7,333 | $ | 5,173 | $ | 14,318 | $ | 9,963 | ||||||||
| Cost of revenues | 4,131 | 2,761 | 8,003 | 5,426 | ||||||||||||
| Gross profit | 3,202 | 2,412 | 6,315 | 4,537 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 4,172 | 3,220 | 8,219 | 6,749 | ||||||||||||
| Sales and marketing | 2,432 | 1,728 | 4,663 | 3,302 | ||||||||||||
| Research and development | 2,649 | 1,499 | 4,929 | 2,925 | ||||||||||||
| Total operating expenses | 9,253 | 6,447 | 17,811 | 12,976 | ||||||||||||
| Loss from operations | (6,051 | ) | (4,035 | ) | (11,496 | ) | (8,439 | ) | ||||||||
| Other income (expenses): | ||||||||||||||||
| Interest expense | (385 | ) | (605 | ) | (986 | ) | (1,296 | ) | ||||||||
| Interest income | 4 | 3 | 9 | 7 | ||||||||||||
| Loss on extinguishment | (1,097 | ) | — | (1,097 | ) | — | ||||||||||
| Other income | 82 | — | 187 | 187 | ||||||||||||
| Total other expenses, net | (1,396 | ) | (602 | ) | (1,887 | ) | (1,102 | ) | ||||||||
| Net loss | $ | (7,447 | ) | $ | (4,637 | ) | $ | (13,383 | ) | $ | (9,541 | ) | ||||
Comparison for the three months ended June 30, 2021 and 2020:
Revenues
| Three Months
Ended June 30, |
||||||||||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
$
Change |
%
Change |
||||||||||||
| Revenues | $ | 7,333 | $ | 5,173 | $ | 2,160 | 42 | % | ||||||||
Revenues increased 42%, or $2.2 million, to $7.3 million during the three months ended June 30, 2022. The increase was primarily attributable to a 49% increase in the average number of clinicians in service, partially offset by a 4% decrease in average revenue per unit (“ARPU”) due to a higher mix of Notes clinicians. The slower growth of implementation fees reduced total company growth by approximately one percentage point. The increase in clinicians in service was driven predominately by our existing Health Enterprises adding physicians, by the strong growth of clinicians using Augmedix Notes, and by new customers. Dollar-based net revenue retention of our Health Enterprises was 131% in the three months ended June 30, 2022.
Cost of Revenues and Gross Margin
| Three Months
Ended June 30, |
||||||||||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
$
Change |
%
Change |
||||||||||||
| Cost of revenues | $ | 4,131 | $ | 2,761 | $ | 1,370 | 50 | % | ||||||||
Cost of revenues increased $1.4 million to $4.1 million during the three months ended June 30, 2022, as compared to $2.8 million during the three months ended June 30, 2021. The increase was attributable to a $1.2 million increase in MDS costs, up 44% verses to the comparable period last year, as clinicians in service grew during 2022. The period in 2021 was impacted by a write-off of a lease provision associated with our previous office space that lowered our cost of revenue by $0.1 million in the three months ended June 30, 2021. Cloud Hosting grew by $0.2 million as our clinicians in service grew and we added additional redundancy to our streaming platform to make it even more stable, plus added technology to further automation. As a result of increased MDS costs and cloud hosting costs, our gross margin was 43.7% during the three months ended June 30, 2022, as compared to 46.6% during the three months ended June 30, 2021. An increase in the proportion of US-serviced clinicians, as compared to clinicians serviced from outside the US, more than offset the operating efficiencies we gained between the two periods, along with the year ago period’s gross margin benefiting from the write-off of the lease provision.
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General and Administrative Expenses
| Three Months
Ended June 30, |
||||||||||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
$
Change |
%
Change |
||||||||||||
| General and administrative | $ | 4,172 | $ | 3,220 | $ | 952 | 30 | % | ||||||||
General and administrative expenses increased $1.0 million to $4.2 million during the three months ended June 30, 2022, as compared to $3.2 million during the three months ended June 30, 2021. The increase was primarily attributable to a $0.7 million increase in salaries, professional fees, and incremental costs associated with being a public company. The increase was also due to a $0.3 million reversal from legal fees and a write off of a lease provision in the three months ended June 30, 2021.
Sales and Marketing Expenses
| Three Months
Ended June 30, |
||||||||||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
$
Change |
%
Change |
||||||||||||
| Sales and marketing | $ | 2,432 | $ | 1,728 | $ | 704 | 41 | % | ||||||||
Sales and marketing expenses increased $0.7 million to $2.4 million during the three months ended June 30, 2022, as compared to $1.7 million during the three months ended June 30, 2021. The largest increase was the $0.4 million in expense growth due to higher bookings performance driving higher commission accruals, in addition to increased headcount in both our Customer Account Management and Sales teams. The increase was also attributable to $0.2 million of additional advertising spend, internal marketing headcount and outsourced marketing services. The remaining $0.1 million increase was driven by additional headcount to the customer onboarding team in order to sufficiently meet the needs of the growing number of clinicians launching our services.
Research and Development Expenses
| Three Months
Ended June 30, |
||||||||||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
$ Change |
% Change |
||||||||||||
| Research and development | $ | 2,649 | $ | 1,499 | $ | 1,150 | 77 | % | ||||||||
Research and development expenses increased $1.2 million to $2.6 million during the three months ended June 30, 2022, as compared to $1.5 million during the three months ended June 30, 2021. The increase was attributable to $0.6 million of headcount investment into our engineering and product departments and salary increases. The remaining $0.6 million was driven from an increase in training costs to grow our MDS capacity to meet the service needs of new clinicians.
Other Income (Expenses)
| Three Months
Ended June 30, |
||||||||||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
$
Change |
%
Change |
||||||||||||
| Interest expense | $ | (385 | ) | $ | (605 | ) | $ | (220 | ) | (36 | )% | |||||
| Interest income | 4 | 3 | 1 | 33 | % | |||||||||||
| Loss on extinguishment of debt | (1,097 | ) | — | (1,097 | ) | (100 | )% | |||||||||
| Other income | 82 | — | 82 | 100 | % | |||||||||||
| $ | (1,396 | ) | $ | (602 | ) | $ | (794 | ) | 132 | % | ||||||
Our interest expense decreased $0.2 million to $0.4 million during the three months ended June 30, 2022, compared to $0.6 million during the three months ended June 30, 2021, due the improved interest rate terms of the new debt facility in May 2022. The overall increase in other expenses was primarily attributable to $1.1 million of expenses associated with the extinguishment of the prior debt facility, which consisted almost entirely of a $1.1 million cash exit fee paid to our previous lender. Lastly other income increased by $0.1 million driven from the collection of an incentive grant from the Bangladesh government for investments and expenditures in that country.
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Comparison for the six months ended June 30, 2022 and 2021:
Revenues
| Six Months
Ended June 30, |
||||||||||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
$ Change |
% Change |
||||||||||||
| Revenues | $ | 14,318 | $ | 9,963 | $ | 4,355 | 44 | % | ||||||||
Revenues increased 44%, or $4.3 million, to $14.3 million during the six months ended June 30, 2022, as compared to $10.0 million during the six months ended June 30, 2021. The increase was primarily attributable to a 50% increase in the average number of clinicians in service, offset by a 4% decrease in ARPU due to a larger mix of clinicians using the Notes product. The slower growth of implementation fees reduced total company growth by just over one percentage point. The increase in clinicians in service was driven predominately by our existing Health Enterprises adding physicians, by the strong growth of clinicians using Augmedix Notes, and new customers. Dollar-based net revenue retention was 132% in the six months ended June 30, 2022.
Cost of Revenues and Gross Margin
| Six Months
Ended June 30, |
||||||||||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
$ Change |
% Change |
||||||||||||
| Cost of revenues | $ | 8,003 | $ | 5,426 | $ | 2,577 | 47 | % | ||||||||
Cost of revenues increased $2.6 million to $8.0 million during the six months ended June 30, 2022, as compared to $5.4 million during the six months ended June 30, 2021. The increase was primarily attributable to a $2.2 million increase in MDS costs, up 43% as compared to the same period a year ago when normalizing for the lease write off provision, as clinicians in service grew year on year. We also had a higher number of clinicians supported by US-based MDSs, which are more expensive than MDSs outside the US. In addition, cloud hosting costs increased by $0.3 million due to the addition of new clinicians, increased technology redundancy in our streaming platform, and new technology to drive automation. Lastly, there was a $0.1 million write-off of lease provision in 2021 that lowered costs in the six months ended June 30, 2021, and thus raised gross margin in the period last year. Gross margin for the six months ending June 30, 2022 was 44.1%, as compared to 43.9% in the six months ended June 30, 2021, after adding back the lease write-provision.
General and Administrative Expenses
| Six Months
Ended June 30, |
||||||||||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
$
Change |
% Change |
||||||||||||
| General and administrative | $ | 8,219 | $ | 6,749 | $ | 1,470 | 22 | % | ||||||||
General and administrative expenses increased $1.5 million to $8.2 million during the six months ended June 30, 2022, as compared to $6.7 million during the six months ended June 30, 2021. The increase was primarily attributable to a $1.0 million increase in legal fees, salaries, professional fees, and incremental costs associated with being a public company, and a $0.2 million increase in our people team costs as our organization has grown and increased recruitment activity. In the six months ended, June 30, 2021, there were $0.3 million reduction of costs associated with the write-off of a lease provision and a legal fee reversal.
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Sales and Marketing Expenses
| Six Months
Ended June 30, |
||||||||||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
$ Change |
% Change |
||||||||||||
| Sales and marketing | $ | 4,663 | $ | 3,302 | $ | 1,361 | 41 | % | ||||||||
Sales and marketing expenses increased $1.4 million to $4.7 million during the six months ended June 30, 2022, as compared to $3.3 million during the six months ended June 30, 2021. The increase was primarily attributable to $0.7 million of additional salary related expense due to increased headcount in our Analytics and Insight, Customer Account Management and Sales teams in addition to higher commission expense due to larger bookings. The increase was also attributable to an incremental $0.5 million in advertising spend, additional internal marketing headcount, and expanded outsourced marketing services. Lastly, expenses grew $0.2 million due to a larger customer onboarding team to support the growing number of clinicians launching our services.
Research and Development Expenses
| Six Months
Ended June 30, |
||||||||||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
$
Change |
% Change |
||||||||||||
| Research and development | $ | 4,929 | $ | 2,925 | $ | 2,004 | 69 | % | ||||||||
Research and development expenses increased $2.0 million to $4.9 million during the six months ended June 30, 2022, as compared to $2.9 million during the six months ended June 30, 2021. The increase was primarily attributable to a $1.1 million investment into engineering and product headcount and higher salaries. The remaining $0.9 million was driven by higher training costs to grow our MDS capacity to meet the service needs of our larger clinician user base.
Other Income (Expenses)
| Six Months Ended June 30, | ||||||||||||||||
| (in thousands) | 2022 (unaudited) | 2021 (unaudited) | $ Change | % Change | ||||||||||||
| Interest expense | $ | (986 | ) | $ | (1,296 | ) | $ | 310 | (24 | )% | ||||||
| Interest income | 9 | 7 | 2 | 29 | % | |||||||||||
| Loss on extinguishment of debt | (1,097 | ) | — | (1,097 | ) | (100 | )% | |||||||||
| Other income | 187 | 187 | — | 0 | % | |||||||||||
| $ | (1,887 | ) | $ | (1,102 | ) | $ | (785 | ) | 71 | % | ||||||
Our interest expense decreased $0.3 million to $1.0 million during the six months ended June 30, 2022, compared to $1.3 million during the six months ended June 30, 2021, due to the lower interest rate on our new debt facility staring May 2022. There was a $1.1 million loss on debt extinguishment as a result of refinancing our debt facility, which relates to the $1.1million cash exit fee paid to our previous lender.
During the six months ended June 30, 2022 we received a $0.2 million in incentive grants from the Bangladesh government for our investments and expenditures in that country. During the six months ended June 30, 2021, we received incentive grants of $0.2 million. Grants should grow as our expense base grows in Bangladesh, but the quarterly timing of our cash receipt of these grants is hard to estimate.
27
Liquidity and Capital Resources
Our primary sources of liquidity are cash raised from sales of common stock, preferred stock prior to 2020, and cash from borrowings under various facilities, which are further described below. As of June 30, 2022, we had cash resources of $30.8 million which includes $0.8 million of restricted cash to secure our credit card facility balances, to collateralize a letter of credit in the name of our landlord pursuant to a certain operating lease and for a post-employment savings fund established for the benefit of eligible Bangladesh employees. Since Augmedix’s inception in 2013 until today, we have financed our operations primarily through the private and public sale of over $185.0 million of preferred and common stock and from various debt arrangements. As described in Note 1 of our unaudited interim condensed consolidated financial statements, we have incurred recurring losses and negative cash flows from operations since inception and have an accumulated deficit at June 30, 2022 of $115.1 million. We have relied on debt and equity financing to fund operations to date and we expect losses and negative cash flows to continue, primarily as a result of continued research, development and marketing efforts. Our recent debt refinancing and cash balance will provide sufficient resources to meet working capital needs for over twelve months from the filing date of the June 30, 2022 Form 10-Q. Over the longer term, if we do not generate sufficient revenue from new and existing products, additional debt or equity financing may be required along with a reduction in expenditures. Additionally, there is no assurance if we require additional future financing that such financing will be available on terms, which are acceptable to us, or at all.
The following table summarizes our sources and uses of cash for each of the periods presented:
| Six Months
Ended June 30, |
||||||||
| (in thousands) | 2022 (unaudited) |
2021 (unaudited) |
||||||
| Cash (used in) provided by: | ||||||||
| Operating activities | $ | (8,856 | ) | $ | (7,853 | ) | ||
| Investing activities | (615 | ) | (318 | ) | ||||
| Financing activities | (1,248 | ) | 1,884 | |||||
| Effects of exchange rate changes on cash and restricted cash | (90 | ) | (1 | ) | ||||
| Net decrease in cash and restricted cash | $ | (10,809 | ) | $ | (6,288 | ) | ||
Operating Activities
Cash used in operating activities was $8.9 million and $7.9 million for the six months ended June 30, 2022 and 2021, respectively. Cash used in operating activities during the six months ended June 30, 2022 principally resulted from our net loss of $13.4 million, which includes non-cash charges of $3.2 million, and decreases in working capital of $1.3 million. Cash used in operating activities for the six months ended June 30, 2021 principally resulted from our net loss of $9.5 million, which includes non-cash charges of $1.6 million, and decreases in working capital of $0.1 million.
Investing Activities
Cash used in investing activities was $0.6 million and $0.3 million for the six months ended June 30, 2022 and 2021, respectively. Cash used in investing activities resulted from capital expenditures of property and equipment for all periods presented.
28
Financing Activities
Cash used in financing activities during the six months ended June 30, 2022 of $1.2 million principally resulted from $15.0 million of debt proceeds which was offset by $16.1 million in repayment of existing debt agreement, and exit fees and $0.1 million in payments for financing costs related to the new debt arrangement.
Cash provided by financing activities during the six months ended June 30, 2021 of $1.9 million principally resulted from $15.0 million in debt proceeds and $0.1 million of proceeds from exercise of stock options which was offset by $13.0 million in repayment of the existing debt agreements and $0.2 million in payments for financing costs related to the new debt arrangement.
Sources of Liquidity
ATM Program
On May 24, 2022, the Company entered into an Open Market Sales Agreement (the “Sales Agreement”) with Jefferies LLC (the “Agent”) with respect to an at-the-market equity offering program (“ATM Program”), under which the Agent will act as the Company’s agent and may issue and sell from time to time, during the term of the Sales Agreement, shares of our common stock, par value $0.0001 per share, having an aggregate offering price of up to $25.0 million (the “Shares”). The issuance and sale of the Shares by the Company under the Sales Agreement will be made pursuant to the Company’s effective shelf registration statement on Form S-3. Pursuant to General Instruction I.B.6 to Registration Statement on Form S-3, the Company may not sell more than the equivalent of one-third of our public float held by non-affiliates during any 12 consecutive months so long as our public float held by non-affiliates is less than $75,000. As of the date hereof, the Company has not sold any shares pursuant to the ATM Program.
Contractual Obligations and Commitments
The following summarizes our significant contractual obligations as of June 30, 2022:
| Payments due by period | ||||||||||||||||||||
| Less than | More than | |||||||||||||||||||
| (in thousands) | Total | 1 year | 1-3 years | 4-5 years | 5 years | |||||||||||||||
| Short-term debt obligations (excluding interest) | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
| Long-term debt obligations (excluding interest) | 15,750 | — | 15,750 | — | — | |||||||||||||||
| Operating lease obligations | 2,351 | 426 | 1,925 | — | ||||||||||||||||
| Total | $ | 18,101 | $ | 426 | $ | 17,675 | $ | — | $ | — | ||||||||||
Off-Balance Sheet Arrangements
As of June 30, 2022, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Critical Accounting Policies and Estimates
Other than as described under Note 2 to our unaudited interim condensed consolidated financial statements, the Critical Accounting Policies and Significant Judgments and Estimates included in our Form 10-K/A for the year ended December 31, 2021, filed with the SEC on March 30, 2022, have not materially changed.
JOBS Act Accounting Election
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. We have elected to early adopt certain new accounting standards, as described in Note 2 of our unaudited interim condensed consolidated financial statements. As a result, these interim financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
29
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 2 to our unaudited interim financial statements appearing elsewhere in this Quarterly Report.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 4. Controls and Procedures.
Management’s Evaluation of our Disclosure Controls and Procedures
Under the supervision of and with the participation of our management, including our principal executive officer and our principal financial officer, we conducted an evaluation of the effectiveness of our disclosure controls and procedures as of June 30, 2022, the end of the period covered by this Form 10-Q. The term “disclosure controls and procedures,” as set forth in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to provide reasonable assurance that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms promulgated by the SEC. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.
Based on this evaluation, our management concluded that our disclosure controls and procedures were effective as of June 30, 2022.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2022, there have been no changes in our internal control over financial reporting as such term is defined in Rule 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
30
PART II-OTHER INFORMATION
Item 1. Legal Proceedings.
We are not a party to any material pending legal proceedings. From time to time, we may become involved in lawsuits and legal proceedings that arise in the ordinary course of business.
Item 1A. Risk Factors.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, Item 1A “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 30, 2022. There have been no material changes in reported risk factors from the information reported in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Item 2. Unregistered sales of equity securities and use of proceeds.
None.
Item 3. Defaults upon senior securities.
None.
Item 4. Mine safety disclosures.
Not applicable.
Item 5. Other information.
None.
31
Item 6. Exhibits.
The following is a list of exhibits filed as part of this Quarterly Report on Form 10-Q. Where so indicated, exhibits that were previously filed are incorporated by reference. For exhibits incorporated by reference, the location of the exhibit in the previous filing is indicated.
| * | Filed herewith. |
| ** | This certification is being furnished solely to accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C Section 1350 and is not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing of the registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof, regardless of any general incorporation language in such filing. |
32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
AUGMEDIX, INC. (Registrant) | ||
| Date: August 11, 2022 | By: | /s/ Emmanuel Krakaris |
| Name: | Emmanuel Krakaris | |
| Title: | President, Chief Executive Officer and Secretary | |
| (Principal Executive Officer) | ||
| Date: August 11, 2022 | By: | /s/ Paul Ginocchio |
| Name: | Paul Ginocchio | |
| Title: | Chief Financial Officer | |
| (Principal Accounting and Financial Officer) | ||
33