AUGMEDIX, INC. 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 endedDecember 31, 2021 , as filed with theSEC onMarch 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 beliefs 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, 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 fromwhat we expect. Overview
Augmedix, Inc. (the "Company" or "Augmedix") (formerly known asMalo Holdings Corporation ) delivers industry-leading, ambient medical documentation and data solutions to healthcare systems, physician practices, hospitals, and telemedicine practitioners.Augmedix is on a mission to help clinicians and patients form a human connection at the point of care without the intrusion of technology.Augmedix's solutions extract data from natural physician-patient conversations and convert it to medical notes in real time, which are seamlessly transferred to the EHR. To achieve this, the company's Ambient Automation Platform uses Automated Speech Recognition and Natural Language Processing, supported by medical documentation specialists.
Leveraging this platform,
Patient care in theU.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.
We have generated in excess of five million medical notes since we began offering our service and are currently delivering over 50,000 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 andSri Lanka . There are six centers inIndia and one center inSri Lanka that are owned and operated by five independent third parties (the "Vendors"), while the two centers in the US andBangladesh are wholly-owned and operated by us, additionally we have begun our own operations inIndia in 2022.
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 Nine Months Ended
September 30, September 30,
Key Metrics 2022 2021 2022 2021
(unaudited) (unaudited)
Average clinicians in service headcount 1,121 784 1,041 706
Average annual revenue per clinician $ 27,800 $ 28,300 $ 28,100 $ 29,000
Dollar -based net revenue retention 130 % 122 % 130 % 121 % 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 43% to 1,121 from 784 for the three months endedSeptember 30, 2022 and 2021, respectively, and grew 47% to 1,041 from 706 for the nine months endedSeptember 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$27,800 in the three months endedSeptember 30, 2022 , down 2% from$28,300 in the three months endedSeptember 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$28,100 in the nine months endedSeptember 30, 2022 , down 3% from$29,000 in the nine months endedSeptember 30, 2021 due to an increase in mix in Notes clinicians in this nine-month period versus a year ago.21 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 fromHealth Enterprises as of twelve months prior to such period end as compared to revenue from these sameHealth 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 newHealth 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 130% in three months endedSeptember 30, 2022 compared to 122% in the three months endedSeptember 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 130% in nine months endedSeptember 30, 2022 up from 121% in nine months endedSeptember 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. Revenue associated with implementation efforts, which is approximately 1% of total revenue in the three months endedSeptember 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 we move to our new offices inBangladesh in 2023, this may lower gross margins due to the incremental costs associated with having both the old and new offices for a period of time, and due to the higher operating costs of the new office until we have it fully utilized. 22
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 inBangladesh . 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 and overhead 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, other marketing activities, and customer onboarding costs. 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, third-party consulting fees and allocated overhead. 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 theBangladesh government for investments we make within the country. 23 The following table summarizes the results of our operations for the periods presented: Three Months Ended Nine Months Ended September 30, September 30, 2022 2021 2022 2021 (in thousands) (unaudited) (unaudited) (unaudited) (unaudited) Revenues$ 7,864 $ 5,625 $ 22,182 $ 15,588 Cost of revenues 4,274 3,092 12,277 8,518 Gross profit 3,590 2,533 9,905 7,070 Operating expenses:
General and administrative 4,136 3,238
12,355 9,987
Sales and marketing 2,304 2,035 6,944 5,245
Research and development 2,608 1,810 7,537 4,735
Total operating expenses 9,048 7,083 26,836 19,967
Loss from operations (5,458 ) (4,550 ) (16,931 ) (12,897 )
Other income (expenses):
Interest expense (316 ) (589 ) (1,302 ) (1,639 )
Interest income 59 1 68 8Loss on debt extinguishment - -
(1,097 ) (246 )
Forgiveness of PPP loan - 2,180 - 2,180
Other income 225 221 412 408
Total other expenses, net (32 ) 1,813 (1,919 ) 711
Net loss $ (5,490 ) $ (2,737 ) $ (18,850 ) $ (12,186 ) Comparison for the three months ended
Revenues
Three Months Ended
September 30,
2022 2021 $ %
(in thousands) (unaudited) (unaudited) Change Change
Revenues $ 7,864 $ 5,625 $ 2,239 40 %
Revenues increased 40%, or $2.2 million , to $7.9 million during the three months
ended September 30, 2022 . The increase was primarily attributable to a 43%
increase in the average number of clinicians in service, partially offset by a
2% decrease in average revenue per unit ("ARPU") due to a higher mix of Notes
clinicians. The decline in implementation fees in the third quarter of 2022
versus the third quarter of 2021 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
higher growth of clinicians using Augmedix Notes, and by new customers.
Dollar-based net revenue retention of our Health Enterprises was 130% in the
three months ended September 30, 2022 .
Cost of Revenues and Gross Margin
Three Months Ended
September 30,
2022 2021 $ %
(in thousands) (unaudited) (unaudited) Change Change
Cost of revenues $ 4,274 $ 3,092 $ 1,182 38 %
Cost of revenues increased $1.2 million to $4.3 million during the three months
ended September 30, 2022 , as compared to $3.1 million during the three months
ended September 30, 2021 . The increase was attributable to a $1.1 million
increase in MDS costs, up 40% verses to the comparable period last year, as
clinicians in service grew during 2022. Cloud Hosting grew by $0.1 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 45.7% during the three months ended September 30, 2022 , as
compared to 45.0% during the three months ended September 30, 2021 . Our
investments into our technology helped drive efficiency gains, which in turn
offset the increase in clinicians serviced out of US operations.
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General and Administrative Expenses
Three Months Ended
September 30,
2022 2021 $ %
(in thousands) (unaudited) (unaudited) Change Change
General and administrative $ 4,136 $ 3,238 $ 898 28 %
General and administrative expenses increased$0.9 million to$4.1 million during the three months endedSeptember 30, 2022 , as compared to$3.2 million during the three months endedSeptember 30, 2021 . The increase was primarily attributable to a$0.4 million increase in salaries and$0.5 million increase in professional fees and other costs associated with being a public company. Sales and Marketing Expenses Three Months Ended September 30, 2022 2021 $ %
(in thousands) (unaudited) (unaudited) Change Change
Sales and marketing
13 %
Sales and marketing expenses increased$0.3 million to$2.3 million during the three months endedSeptember 30, 2022 , as compared to$2.0 million during the three months endedSeptember 30, 2021 . The expense growth was due to increased headcount in both our Customer Account Management and Sales teams which increased expense by$0.1 million , while spend on additional, internal marketing headcount drove another$0.1 million increase. There was also a$0.1 million increase attributable to 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
September 30,
2022 2021 $ %
(in thousands) (unaudited) (unaudited) Change Change
Research and development $ 2,608 $ 1,810 $ 798 44 %
Research and development expenses increased $0.8 million to $2.6 million during
the three months ended September 30, 2022 , as compared to $1.8 million during
the three months ended September 30, 2021 . The increase was attributable to $0.3
million of headcount investment into our engineering and product departments and
salary increases. The remaining $0.5 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
September 30,
2022 2021 $ %
(in thousands) (unaudited) (unaudited) Change Change
Interest expense $ (316 ) $ (589 ) $ 273 (46 )%
Interest income 59 1 58 5800 %
Forgiveness of PPP loan - 2,180 (2,180 ) (100 )%
Other income 225 221 4 2 %
$ (32 ) $ 1,813 $ (1,845 ) (102 )%
Our interest expense decreased $0.3 million to $0.3 million during the three
months ended September 30, 2022 , compared to $0.6 million during the three
months ended September 30, 2021 , due the improved interest rate terms of the new
debt facility in May 2022 . In addition, there was a $0.1 million increase in
interest income driven from the newly setup money market account. The overall
increase in other expenses was primarily attributable to the $2.2 million of
gain on extinguishment from the PPP loan in the three months ended September 30,
2021 and a loss on foreign exchange in the three months ended September 30 ,
2022.
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Comparison for the nine months ended
Revenues
Nine Months Ended
September 30,
2022 2021 $ %
(in thousands) (unaudited) (unaudited) Change Change
Revenues $ 22,182 $ 15,588 $ 6,594 42 %
Revenues increased 42%, or $6.6 million , to $22.2 million during the nine months
ended September 30, 2022 , as compared to $15.6 million during the nine months
ended September 30, 2021 . The increase was primarily attributable to a 47%
increase in the average number of clinicians in service, offset by a 3% decrease
in ARPU due to a larger mix of clinicians using the Notes product. 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 130% in the
nine months ended September 30, 2022 .
Cost of Revenues and Gross Margin
Nine Months Ended
September 30,
2022 2021 $ %
(in thousands) (unaudited) (unaudited) Change Change
Cost of revenues
Cost of revenues increased$3.8 million to$12.3 million during the nine months endedSeptember 30, 2022 , as compared to$8.5 million during the nine months endedSeptember 30, 2021 . The increase was primarily attributable to a$3.3 million increase in MDS costs, up 44% as compared to the same period a year ago. We 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$0.4 million due to the addition of new clinicians, increased technology redundancy in our streaming platform, and new technology to drive automation. There was also a$0.1 million increase due a lease write-off provision in the nine months ended,September 2021 . Gross margin for the nine months endingSeptember 30, 2022 was 44.7%, as compared to 45.4% in the nine months endedSeptember 30, 2021 , after adding back the lease write-off provision to last year's expenses.
General and Administrative Expenses
Nine Months Ended
September 30,
2022 2021 $ %
(in thousands) (unaudited) (unaudited) Change Change
General and administrative $ 12,355 $ 9,987 $ 2,368 24 %
General and administrative expenses increased$2.4 million to$12.4 million during the nine months endedSeptember 30, 2022 , as compared to$10.0 million during the nine months endedSeptember 30, 2021 . The increase was primarily attributable to a$1.3 million increase in salaries, a$0.7 million increase in professional fees and other costs associated with being a public company, and a$0.1 million increase recruiting fees and travel. In the nine months ended,September 30, 2021 , there were$0.3 million reduction of costs associated with the write-off of a lease provision and a legal fee reversal. 26 Sales and Marketing Expenses Nine Months Ended September 30, 2022 2021 $ %
(in thousands) (unaudited) (unaudited) Change Change
Sales and marketing
Sales and marketing expenses increased$1.7 million to$6.9 million during the nine months endedSeptember 30, 2022 , as compared to$5.2 million during the nine months endedSeptember 30, 2021 . The increase was primarily attributable to$0.7 million of additional salary-related expense due to increased headcount in our Customer Account Management and Sales team, and another$0.1 million due to additional headcount on the Analytics & Insight team. The increase was also attributable to an incremental$0.3 million in advertising spend, and an additional$0.2 million on internal marketing headcount and expanded outsourced marketing services. Lastly, expenses grew$0.4 million due to a larger customer onboarding team to support the growing number of clinicians launching our services.
Research and Development Expenses
Nine Months Ended
September 30,
2022 2021 $ %
(in thousands) (unaudited) (unaudited) Change Change
Research and development $ 7,537 $ 4,735 $ 2,802 59 %
Research and development expenses increased $2.8 million to $7.5 million during
the nine months ended September 30, 2022 , as compared to $4.7 million during the
nine months ended September 30, 2021 . The increase was primarily attributable to
a $1.4 million investment into engineering and product headcount and higher
salaries. The remaining $1.4 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)
Nine Months Ended
September 30,
2022 2021 $ %
(in thousands) (unaudited) (unaudited) Change Change
Interest expense $ (1,302 ) $ (1,639 ) $ 337 (21 )%
Interest income 68 8 60 750 %Loss on debt extinguishment (1,097 ) (246 ) (851
) 346 %
Forgiveness of PPP loan - 2,180 (2,180 ) (100 )%
Other income 412 408 4 1 %
$ (1,919 ) $ 711 $ (2,630 ) (370 )%
Our interest expense decreased$0.3 million to$1.3 million during the nine months endedSeptember 30, 2022 , compared to$1.6 million during the nine months endedSeptember 30, 2021 , due to the lower interest rate on our new debt facility startingMay 2022 . There was a$1.1 million loss on debt extinguishment as a result of refinancing our debt facility, which relates to the$1.1 million cash exit fee paid to our previous lender. Additionally, there was a$2.2 million gain from the forgiveness of the PPP loan in the nine months endedSeptember 30, 2021 . In the nine-month period endedSeptember 30, 2022 we earned$0.1 million on interest income due to the newly setup up money market account we are utilizing with our current cash position. During the nine months endedSeptember 30, 2022 we received$0.3 million in incentive grants from theBangladesh government for our investments and expenditures in that country. During the nine months endedSeptember 30, 2021 , we received incentive grants of$0.4 million . The remainder of our other income in the nine months endedSeptember 30, 2022 are foreign exchange gains. 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 ofSeptember 30, 2022 , we had cash resources of$27.0 million which includes$0.7 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 eligibleBangladesh employees. SinceAugmedix'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 atSeptember 30, 2022 of$120.7 million . We have relied on debt and equity financing to fund operations to date and we expect losses and negative cash flows to continue, primarily as a result of continued research, development and marketing efforts. Our recent debt refinancing and cash balance will provide sufficient resources to meet working capital needs for over twelve months from the filing date of theSeptember 30, 2022 Form 10-Q. Over the longer term, if we do not generate sufficient revenue from new and existing products, additional debt or equity financing may be required along with a reduction in expenditures. Additionally, there is no assurance if we require additional future financing that such financing will be available on terms, which are acceptable to us, or at all. The following table summarizes our sources and uses of cash for each of the periods presented: Nine Months Ended September 30, 2022 2021 (in thousands) (unaudited) (unaudited) Cash (used in) provided by: Operating activities$ (12,387 ) $ (13,310 ) Investing activities (816 ) (423 ) Financing activities (1,244 ) 1,881 Effects of exchange rate changes on cash and restricted cash (143 ) (3 )
Net decrease in cash, cash equivalents and restricted cash
Operating Activities Cash used in operating activities was$12.4 million and$13.3 million for the nine months endedSeptember 30, 2022 and 2021, respectively. Cash used in operating activities during the nine months endedSeptember 30, 2022 principally resulted from our net loss of$18.9 million , which includes non-cash charges of$4.3 million , and decreases in working capital of$2.2 million . Cash used in operating activities for the nine months endedSeptember 30, 2021 principally resulted from our net loss of$12.2 million , which includes non-cash charges of$0.2 million , and increase in working capital of$1.3 million . Investing Activities
Cash used in investing activities was$0.8 million and$0.4 million for the nine months endedSeptember 30, 2022 and 2021, respectively. Cash used in investing activities resulted from capital expenditures of property and equipment for
all
periods presented.
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Financing Activities
Cash used in financing activities during the nine months ended September 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 nine months ended September 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 $75.0
million . 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 ofSeptember 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 2,138 213 1,925 - Total$ 17,888 $ 213 $ 17,675 $ - $ -
Off-Balance Sheet Arrangements
As ofSeptember 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
There have been no changes to our critical accounting policies in the nine-month endedSeptember 30, 2022 , except for costs capitalize to obtain revenue contracts, as described below and incremental borrowing rate. These policies are discussed under Note 2 to our unaudited interim condensed consolidated financial statements, the Critical Accounting Policies and Significant Judgments and Estimates as well as in our consolidated financial statements and the footnotes thereto for the fiscal year endedDecember 31, 2021 of our Annual Report on Form 10-K as filed with theSEC onMarch 30, 2022 .
Costs capitalized to obtain revenue contracts
Sales commissions earned by the Company's sales force are considered incremental and recoverable costs of obtaining a contract with a customer. Sales commissions for new revenue contracts are capitalized and then amortized on a systematic basis over a period of benefit that the Company determined to be two years. The period of benefit was determined by taking into consideration the Company's customer contracts, technology, customer life, and other factors. The current portion of capitalized sales commissions are included in prepaid expenses and other current assets and the non-current portion is included in deposits and other assets on the condensed consolidated balance sheet. Amortization expense is included in Sales and marketing expenses on the consolidated statements
of
operations.
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.
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