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There were
AUGMEDIX, INC.
Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2023
TABLE OF CONTENTS
i
PART I - FINANCIAL INFORMATION
Item 1. Financial statements.
Augmedix, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited)
| June 30, | December 31, | |||||||
| (in thousands except share data) | 2023 | 2022 | ||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Accounts receivable, net of allowance for doubtful accounts of $ | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Property and equipment, net | ||||||||
| Operating lease right of use asset | ||||||||
| Restricted cash, non-current | ||||||||
| Deposits and other assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Loan payable, current portion | $ | $ | ||||||
| Accounts payable | ||||||||
| Accrued expenses and other current liabilities | ||||||||
| Deferred revenue | ||||||||
| Operating lease liability, current portion | ||||||||
| Customer deposits | ||||||||
| Total current liabilities | ||||||||
| Loan payable, net of current portion | ||||||||
| Operating lease liability, net of current portion | ||||||||
| Other liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 9) | ||||||||
| Stockholders’ equity: | ||||||||
| 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) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| 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 debt extinguishment | ( | ) | ( | ) | ||||||||||||
| Change in fair value of warrant liability | ( | ) | ( | ) | ||||||||||||
| Other income | ||||||||||||||||
| Total other expenses, net | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Net loss before income taxes | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Income tax expense | ||||||||||||||||
| 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’ Equity
(unaudited)
| Stockholders’ Equity | ||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||
| Additional | Other | Total | ||||||||||||||||||||||
| Common Stock | Paid-in | Accumulated | Comprehensive | Stockholders’ | ||||||||||||||||||||
| (in thousands except share data) | Shares | Amount | Capital | Deficit | Loss | Equity | ||||||||||||||||||
| Balance at January 1, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
| Exercise of common stock options | ||||||||||||||||||||||||
| Stock-based compensation expense | — | |||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at March 31, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||
| Issuance of common stock and warrants, net of issuance costs | ||||||||||||||||||||||||
| Exercise of common stock options | ||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Exercise of common stock warrants | ||||||||||||||||||||||||
| Foreign currency translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance at June 30, 2023 | $ | ( | ) | ( | ) | |||||||||||||||||||
| Stockholders’ Equity | ||||||||||||||||||||||||
| Common Stock | Additional Paid-in | Accumulated | Accumulated Other Comprehensive | Total Stockholders’ | ||||||||||||||||||||
| (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 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
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 Six June 30, | ||||||||
| (in thousands) | 2023 | 2022 | ||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
| Depreciation | ||||||||
| Stock-based compensation | ||||||||
| Non-cash interest expense | ||||||||
| Non-cash advertising expense | ||||||||
| Non-cash portion of loss on debt extinguishment | ||||||||
| Change in fair value of warrant liability | ||||||||
| Non-cash lease expenses | ||||||||
| Provision for bad debt | ||||||||
| Changes in operating assets and liabilities: | ||||||||
| Accounts receivable | ( | ) | ||||||
| Prepaid expenses and other current assets | ( | ) | ||||||
| Deposits and other assets | ( | ) | ( | ) | ||||
| Accounts payable | ( | ) | ||||||
| Accrued expenses and other liabilities | ( | ) | ( | ) | ||||
| Deferred revenue | ( | ) | ||||||
| Customer deposit | ( | ) | ||||||
| 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 of financing costs | ( | ) | ( | ) | ||||
| Proceeds from issuance of common stock and warrants, net of issuance costs | ||||||||
| Proceeds from exercise of stock options | ||||||||
| Net cash provided by (used in) financing activities | ( | ) | ||||||
| Effect of exchange rate changes on cash and restricted cash | ( | ) | ( | ) | ||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ) | ||||||
| Cash, cash equivalents and restricted cash at beginning of period | ||||||||
| Cash, cash equivalents 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: | ||||||||
| Property and equipment in accounts payable | $ | $ | ||||||
| Operating lease right-of-use asset exchanged for operating lease liability | $ | $ | ||||||
| Fair value of warrants issued in connection with loan | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited interim condensed consolidated financial statements.
4
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.
Augmedix delivers industry-leading, ambient medical documentation and data products 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 products digitize natural physician-patient conversations and convert it to medical notes in real time, which are seamlessly transferred to the Electronic Health Record (“EHR”) system. To achieve this, the Company’s Notebuilder Platform uses Automated Speech Recognition, Natural Language Processing, including Large Language Models, and proprietary structured data sets, supported by medical documentation specialists.
Leveraging this platform, Augmedix’s products relieve clinicians of administrative burden, in turn, reducing burnout and increasing both clinician and patient satisfaction.
Augmedix is headquartered in San Francisco, CA, with offices in three (3) countries around the world.
Liquidity
The Company has historically
funded its operations primarily by debt and equity financings prior to the merger with Malo Holdings and subsequently funded its operations
through cash proceeds obtained as part of the listing on the OTC market and the listing on Nasdaq. As of June 30, 2023, the Company’s
existing sources of liquidity included cash, cash equivalents and restricted cash of $
Risks and Uncertainties
The Company is subject to a number of risks associated with companies at a similar stage, including dependence on key personnel, competition from similar products and larger companies, ongoing changes within 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, economic volatility caused by increased interest rates, and instability within the banking system.
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 the Accounting Standards Updated (“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 financial position as of June 30, 2023 and its results of operations for the three and six months ended June 30, 2023 and 2022, cash flows for six months ended June 30, 2023 and 2022, and stockholders’ equity for the three and six months ended June 30, 2023 and 2022. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023. 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, 2022 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, 2022 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on April 17, 2023.
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 average period of benefit associated with costs capitalized to obtain a revenue contract, incremental borrowing rate, internal-use software development costs, fair value of warrants issued, and stock-based compensation, including the underlying fair value of the Company’s common stock for grants issued when the Company was a private company. 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 United States 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’
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 $
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.
All of the Company’s revenue is generated in the United States and denominated in U.S. dollars.
6
Concentrations of Credit Risk and Major Customers
Financial instruments at June 30, 2023 and 2022 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 keeps a majority of its cash in quoted and highly-liquid money market funds.
The Company’s accounts
receivable are derived from revenue from customers located in the U.S. Major customers are defined as those generating revenue in excess
of
Four customers account for
Restricted Cash
| June 30, | ||||||||
| (in thousands) | 2023 | 2022 | ||||||
| Cash and cash equivalents | $ | $ | ||||||
| Restricted cash | ||||||||
| Restricted cash – non-current | ||||||||
| Total cash, cash equivalents 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 the six months ended June 30, 2023 or 2022.
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 stand-ready 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 generally pay an upfront implementation fee. The upfront implementation fee is deferred and recognized over the period the customer benefits and customer prepayments are deferred and included in the accompanying unaudited interim condensed consolidated balance sheets in deferred revenues. Revenues are recognized over time as 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 customer receives the benefit of our stand-ready scribing services as we perform them.
As permitted under the practical expedient available under ASU 2014-09, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue for the amount at which the Company has the right to invoice for services performed.
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 typically 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.
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 an estimated period of benefit that the Company determined to be between the range of 12 to 24 months. The period of benefit was determined by taking into consideration the Company’s customer contracts, technology, customer life, and other relevant factors. The Company periodically evaluates whether there have been any changes in its business, market conditions, or other events which would indicate that its amortization period should be changed, or if there are potential indicators of impairment. 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 accompanying unaudited interim condensed consolidated balance sheets. Amortization expense is included in sales and marketing expenses on the accompanying unaudited interim condensed consolidated statements of operations and comprehensive loss.
8
Internal-use software development costs
The Company capitalizes certain qualifying costs incurred during the application development stage in connection with the development of its internal use software. Costs related to preliminary project activities and post-implementation activities are expensed in research and development (“R&D”) as incurred. R&D expenses consist primarily of employee-related costs, software-related costs, allocated overhead, and costs of outside services used to supplement our internal staff.
Internal-use software costs
of $
Capitalized internal-use software costs are included within property and equipment, net, on the condensed consolidated balance sheets, and are amortized over the estimated useful life of the software, which is typically three years. The related amortization expense is recognized in the condensed consolidated statements of operations and comprehensive loss within the function that receives the benefit of the developed software. The Company will begin to amortize the capitalized internal-use software costs once the product is ready for its intended use and goes into general commercial release.
Contract Balances
Deferred revenue represents an obligation to render services for which the Company has received consideration, or for which an amount of consideration is due from the customer and the Company has an unconditional right to payment under a non-cancellable contract.
| (in thousands) | Six Months Ended June 30, 2023 | Year Ended December 31, 2022 | ||||||
| Balance, beginning of period | $ | $ | ||||||
| Deferral of revenue | ||||||||
| Recognition of unearned revenue | ( | ) | ( | ) | ||||
| Balance, end of period | $ | $ | ||||||
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, 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. Advertising expenses incurred by the Company were $
9
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 and pre-funded warrants outstanding because all necessary conditions to convert into common shares were met when those warrants were issued. 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, 2023 and 2022.
| June 30, 2023 | June 30, 2022 | |||||||
| Common stock warrants | ||||||||
| Stock options | ||||||||
| Restricted stock units | ||||||||
Correction of Immaterial Error Related to Prior Periods
In the third quarter of 2022, the Company identified an error related to its accounting for sales commissions whereby the Company should have amortized sales commissions for new revenue contracts over the estimated period of benefit which is between the range of 12 to 24 months.
For the three and six months
ended June 30, 2022, sales and marketing expenses were overstated by $
Recently Adopted Accounting Standards
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. The Company adopted this standard on January 1, 2023, and it did not have a material impact on its consolidated financial statements upon adoption.
10
Recently Issued Accounting Pronouncements Not Yet Adopted
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.
3. Fair Value Measurements
Fair Value of Financial Instruments
The carrying amounts
of cash, cash equivalents, restricted cash, accounts receivable, prepaid expenses, accounts payable, and customer deposits approximate
fair value due to their short-term nature. Cash equivalents of $
4. Property and Equipment
| (in thousands) | June 30, 2023 | December 31, 2022 | ||||||
| Computer hardware, software and equipment | $ | $ | ||||||
| Leasehold improvements | ||||||||
| Capitalized internal-use software costs | — | |||||||
| Furniture and fixtures | ||||||||
| Construction in Progress | ||||||||
| Less: accumulated depreciation | ( | ) | ( | ) | ||||
| Property and equipment, net | $ | $ | ||||||
The Company recorded depreciation
and amortization expense of $
5. Accrued expenses and other current liabilities
| (in thousands) | June 30, 2023 |
December 31, 2022 |
||||||
| Accrued compensation | $ | $ | ||||||
| Accrued other | ||||||||
| Accrued vendor partner liabilities | ||||||||
| Accrued professional fees | ||||||||
| Accrued VAT and other taxes | ||||||||
| $ | $ | |||||||
11
6. Debt
Eastward Loan and Security Agreement
On March 25, 2021, the Company
entered into the Loan and Security Agreement (the “Eastward Loan Agreement”) with Eastward Capital Partners (“Eastward”)
to establish a loan facility that provided for borrowings in the aggregate principal amount of up to $
The
Company and Eastward also entered into a Co-Investment Agreement which grants to Eastward and its affiliates a right to purchase in the
Company’s future equity financings up to a total of $
Borrowings
under the Eastward Loan Agreement were repaid in full in May 2022 with the proceeds from the SVB Loan Agreement. The Company recorded
the final payment of $
SVB Loan Agreement and Amendment
On May 4, 2022 (the “Effective Date”), the Company and its subsidiary, Augmedix Operating Corporation (individually and collectively, “Borrower”) entered into that certain Loan and Security Agreement (the “SVB Loan Agreement”) with Silicon Valley Bank, a California corporation, as lender (“SVB”). Borrower’s obligations under the SVB Loan Agreement are secured by first-priority liens on substantially all assets of Borrower. On June 13, 2023, the Borrower entered into that certain First Amendment to Loan and Security Agreement (“Amendment”) with SVB, which amends certain provisions of the SVB Loan Agreement. Under the SVB Loan Agreement, the term loan facility’s initial stated maturity date was June 1, 2025, which was automatically extended to December 1, 2025 as the Company achieved certain performance milestones that were a condition to such extension. The Amendment provides for further automatic extensions of the term loan facility’s maturity date, with the possibility of automatic extension to June 1, 2027, if the Company achieves certain equity milestones as set forth in the Amendment and certain performance milestones (including with respect to revenue and net income (loss) as set forth in the Amendment. The Amendment also extends the stated maturity date of the revolving credit facility from May 4, 2024 to November 4, 2024.
Under the SVB Loan Agreement, repayment under the term loan facility was interest only until July 1, 2023, which interest only period was automatically extended to January 1, 2024 provided the Company achieved certain performance milestones. The Amendment provides for further automatic extensions of the amortization date, with the possibility of extension of the amortization date to July 1, 2025, if the Company achieves certain equity milestones and certain performance milestones (including with respect to revenue and net income (loss) as set forth in the Amendment.
The Amendment provides that interest on the borrowings under the term
loan facility is payable at a floating rate per annum equal to the greater of (a)
12
The Amendment provides for
a reduction in the prepayment fee payable
| 2023 (6 months remaining) | $ | |||
| 2024 | ||||
| 2025 | ||||
| $ | ||||
| End of term charge | ||||
| $ | ||||
| Less unamortized debt discount | ( | ) | ||
| Loan payable net of discount | $ | |||
| Less current portion | ||||
| Loan payable, non-current portion | $ |
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 that provides that if Borrower fails to maintain minimum cash and cash equivalents in an amount
of (a) no less than $
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
On June 13, 2023, in connection with the Amendment, the Company issued
to SVB a warrant to purchase stock, to purchase up to
The Company was in compliance with all covenants of the Lender on June 30, 2023 and December 31, 2022.
7. Common Stock, and Preferred Stock
Common Stock
The Company is authorized
to issue
13
On April 19, 2023, the Company
entered into a Securities Purchase Agreement with RedCo II Master Fund, L.P. (“Redmile”) and HINSIGHT-AUGX HOLDINGS, LLC,
a wholly owned indirect subsidiary of HCA Healthcare, Inc. (the “Purchasers”), pursuant to which the Company sold to the Purchasers
for aggregate consideration of $
Common Stock Warrants
| Expiration Date | Shares of Common Stock Issuable upon Exercise of Warrants | Exercise Price Per Warrant | ||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
| $ | ||||||||
Preferred Stock
The Company is authorized
to issue
14
8. Equity Incentive Plan
At the effective date of the Malo Holdings and Augmedix merger (the “Merger”), the Company assumed Augmedix’s 2013 Equity Incentive Plan (the “2013 Plan”). Options granted under the 2013 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 Company’s 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, stock appreciation rights or RSUs were granted under the 2013 Plan after August 31, 2020.
Pursuant to the Merger, the
Company adopted the 2020 Equity Incentive Plan (the “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
| Stock Options & SARs | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Sales and marketing | ||||||||||||||||
| Research and development | ||||||||||||||||
| Cost of revenues | ||||||||||||||||
| $ | $ | $ | $ | |||||||||||||
| RSUs | Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| $ | $ | $ | $ | |||||||||||||
No income tax benefits have been recognized in the condensed consolidated
statements of operations and comprehensive loss for stock-based compensation arrangements. Stock-based compensation costs of $
15
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, 2023 and 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 because the Company has not historically paid and does not expect for the foreseeable future to pay a dividend on its ordinary shares. |
| Six Months Ended June 30, | ||||||||
| 2023 | 2022 | |||||||
| Expected term (in years) | ||||||||
| Expected volatility | % | % | ||||||
| Risk-free rate | % | % | ||||||
| Dividend rate | ||||||||
The weighted average grant
date fair value of stock option awards granted was $
| Stock Option & SARs | Number of Shares under Equity Plan | Weighted- Average Exercise Price per Option | Weighted- Average Remaining Contractual Life (in years) | |||||||||
| Outstanding at December 31, 2022 | $ | |||||||||||
| Granted | $ | |||||||||||
| Exercised | ( | ) | $ | |||||||||
| Forfeited and expired | ( | ) | $ | |||||||||
| Outstanding at June 30, 2023 | $ | |||||||||||
| Exercisable at June 30, 2023 | $ | |||||||||||
| Vested and expected to vest at June 30, 2023 | $ | |||||||||||
The intrinsic value of the
options exercised during the six months ended June 30, 2023 was $
| RSUs | Number of Shares under Equity Plan | Weighted Average Grant Date Fair Value | ||||||
| Outstanding at December 31, 2022 | $ | |||||||
| Granted | $ | |||||||
| Exercised | $ | |||||||
| Forfeited and expired | $ | |||||||
| Outstanding at June 30, 2023 | $ | |||||||
16
The aggregate intrinsic
value of RSU outstanding as of June 30, 2023, was $
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 a minimum of 20 out of 30 trading days after the Company became listed on 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 became listed on the New York Stock Exchange or Nasdaq. Since the listing on Nasdaq, these options expire on March 22, 2031, instead of 2026. |
| ● | 363,961 options vest in full when the closing price of the Company’s common stock reaches or exceeds $13.50 per share for 20 out of 30 trading days after the Company became 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. The Company’s assumptions, for the options expiring on
9. Commitments and Contingencies
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.
The Company leases its office facilities in San Francisco, California under a non-cancelable operating lease agreement that expires February 2025. The Company entered an office lease in India commencing January 1, 2023 which expires December 2027. 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 to recognize leases less than one year under short-term lease exemption under ASC 842.
The Company subsequently decided to enter an office lease in Bangladesh commencing May 1, 2023 which expires July 2028.
17
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| (in thousands) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Operating lease cost | $ | $ | $ | $ | ||||||||||||
| Short-term lease cost | ||||||||||||||||
| Total lease cost | $ | $ | $ | $ | ||||||||||||
Other information related to the operating lease where the Company is the lessee is as follows:
| Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |||||||
| Weighted-average remaining lease term | ||||||||
| Weighted-average discount rate | % | % | ||||||
| Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | |||||||
| Cash paid for operating lease liabilities | $ | $ | ||||||
| 2023 (remaining six months) | $ | |||
| 2024 | ||||
| 2025 | ||||
| 2026 | ||||
| 2027 | ||||
| Thereafter | ||||
| 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 non-cancelable three-year contract to obtain cloud computing services. The minimum contractual spend over the three-year
term is $
18
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 financial position or results of operations or cash flows. As a result, no liability related to such claims has been recorded at June 30, 2023 or December 31, 2022.
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 Company’s 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, 2023 or December 31, 2022.
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 Company’s board of directors. During the three months ended June 30, 2023 and 2022 the Company made
contributions of $
19
Effective October 2021, the
Company established a savings fund for permanent employees of the Bangladesh subsidiary named Augmedix BD Limited Employees’ Gratuity
Fund (“Gratuity Fund”), as per local requirements. Employees will be entitled to cash benefit after completion of a minimum
of five years of service with the Company. The payment amount will be calculated on the basic pay and is payable at the rate of one month’s
basic pay for every completed year of service. The Company expensed $
Similar to the Bangladesh
subsidiary, the Company established Gratuity fund for India subsidiary as per local requirements effective April 2023. The Company
expensed $
12. Subsequent Events
On July 13, 2023, at the
2023 Annual Meeting of the Company’s Stockholders (the “Annual Meeting”), the Company’s stockholders authorized,
in accordance with Nasdaq Listing Rule 5635(d), the issuance of shares of the Company’s common stock, including shares issuable
upon the exercise of warrants, having an aggregate price of up to $
On July 13, 2023, at the Annual Meeting, the Company’s stockholders
authorized, in accordance with Nasdaq Listing Rule 5635(d), the adjustment to the exercise price of the warrant issued to SVB, which warrant
is exercisable to purchase up to
On July 13, 2023, at the Annual Meeting, the Company’s stockholders re-elected Jason Krikorian, Margie L. Traylor and Robert Faulkner to the board, each to hold office for a three-year term and until the 2026 annual meeting of the Company’s stockholders or until his or her successor is duly elected and qualified.
On July 13, 2023, each non-management
director was granted
20
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, 2022, as filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2023.
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; |
21
| ● | our reliance on Vendors (as defined below); |
| ● | our expectations regarding changes in regulatory requirements; |
| ● | our ability to protect and enforce our intellectual property protection and the scope and duration of such protection; and |
| ● | the impact of current and future laws and regulations. |
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, 2022. Moreover, we operate in a very 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, Inc. was incorporated in 2013 and launched its commercial synchronous, remote, ambient documentation services in 2014. Since then, we have supplemented those services with other, asynchronous products and data services. Our applications are accessed by clinicians through mobile devices, predominantly smart phones. Once accessed, the client application provides clinicians with a secure communication channel to our Notebuilder Platform which contains our note creation software that digitizes the natural conversation between clinician and patient and converts it into a medical note. Our note creation software includes automatic speech recognition, proprietary natural language processing (“NLP”) models, large language models (“LLMs”) and proprietary structured data sets to generate the note. The note creation process is overseen by our Medical Documentation Specialists (“MDSs”) to provide quality assurance. Completed notes are uploaded via integration or manually into the patient’s chart in the electronic health record (“EHR”) system. The EHR system (e.g. Epic, Cerner) is third-party software licensed by the healthcare clinic or system to manage patient charts.
Patient care in the United States is principally provided in ambulatory clinics, specialty care centers and hospitals. We serve several care settings, including but not limited to, ambulatory, acute care, telemedicine and veterinary. Roughly 80% of the physicians who subscribe to our service are employed directly by, or are affiliated with, a healthcare enterprise. The remaining 20% consists of group practices and individual practitioners.
22
During the second quarter of 2023, we delivered an average of more than 60,000 notes to our customers each week. We estimate that our products save 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 principal benefits to healthcare enterprises from our products are increased clinician productivity, higher clinician and patient satisfaction, and more accurate and comprehensive medical documentation with structured data.
The COVID-19 pandemic and resulting safety protocols served as a catalyst for the industry’s adoption of virtual products such as ours. The pandemic required modifications to how we deliver our service. While our general business model is for MDSs to work from centralized operating centers, local shelter-in-place orders and safety restrictions required us to temporarily shift to work-from-home for most employees and contracted employees. for a period of time. Further, we instituted additional administrative, technical, and physical controls to ensure compliance with our privacy practices. In 2022, we started to shift back to central operating centers to the extent that local conditions allowed. In the first half of 2023, we brought back to the office substantially all of our MDSs in Bangladesh and a vast majority of our MDSs at our vendors in India and Sri Lanka.
Due to the success of our Bangladesh MDS operation center and the need to support additional growth, we began the launch of our own Indian MDS operation center in the second half of 2022. In December 2022, we signed a lease for office space and started training new MDSs and supporting clinicians onsite in February 2023. The Indian MDS operation center has grown consistently in the second quarter of 2023 and services a few percentage points of our providers.
Our technology vision is to automate as much of the medical note creation process as possible by combining artificial intelligence technologies, such as automated speech recognition, natural language processing and large language models, with structured data models. While the unstructured nature of a conversation between physician and patient creates challenges to fully automating the process, we believe that increasing levels of automation generate significant benefits including improved operating efficiencies, higher-quality medical notes, a more uniform level of note quality and structured medical data.
Our automation approach is based upon our belief that harmonizing human interaction with technology generates the highest note quality. We train our MDSs to be experts at using our technology tools to ensure it consistently and efficiently delivers high-quality, structured medical notes.
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 | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Average clinicians in service headcount | 1,534 | 1,040 | 1,452 | 1,000 | ||||||||||||
| Average annual revenue per clinician | $ | 27,900 | $ | 28,000 | $ | 27,900 | $ | 28,400 | ||||||||
| Dollar-based net revenue retention | 148 | % | 131 | % | 141 | % | 132 | % | ||||||||
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 48% to 1,534 from 1,040 for the three months ended June 30, 2023 and 2022, respectively, and grew 45% to 1,452 from 1,000 for the six months ended June 30, 2023 and 2022, respectively.
23
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 $27,900 in the three months ended June 30, 2023, marginally down from $28,000 in the three months ended June 30, 2022. The average annual revenue per clinician decreased to $27,900 in the six months ended June 30, 2023, down 2% from $28,400 in the six months ended June 30, 2022 due to an increase in emergency department shift-based clinicians.
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 148% in three months ended June 30, 2023 compared to 131% in the three months ended June 30, 2022. Growth from existing clients has historically represented a majority of our total revenue growth. Our annual dollar-based net revenue retention increased to 141% in six months ended June 30, 2023 up from 132% in six months ended June 30, 2022.
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 typically subject to a 90 day cancellation notice after the initial one year term. Customer attrition, as it pertains to our Enterprise clients is infrequent. In fiscal 2022, 2021, 2019, 2018, and 2017, we did not lose any of our Health Enterprise clients. We lost one Health Enterprise, one of our smallest clients, in the first quarter of 2023. We lost three Health Enterprise clients in fiscal 2020, with the economic strain caused by the COVID-19 pandemic on those clients 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 Wi-Fi assessments of the clinician’s facilities, shipping devices and accessories to the clinician, testing, selecting, and assigning MDSs, obtaining EHR systems credentials for MDSs, and clinician orientation. Revenues associated with implementation efforts 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 MDSs, some of whom are employees of our Vendors and some of whom are our employees, their direct supervisors, clinician support, 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, product mix, and changes to our technology expenses and customer support.
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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 and the number of MDSs needed overall to deliver our services. 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.
General and Administrative Expenses
General and administrative expenses consist primarily of employee compensation costs for operations management, finance, accounting, insurance, information technology, compliance, legal and human resources personnel, board of director costs, and our business support team in Bangladesh. In addition, general and administrative expenses include non-personnel costs, such as facilities, legal, accounting, insurance premiums, 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 percentage 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, 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 onboarding costs for new clinicians and 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 and onboarding capacity.
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.
Interest Expense, net
Interest expense, net, consists primarily of the interest incurred on our debt obligations and the non-cash interest expense associated with the amortization of debt discounts. Interest expense is offset by any interest income we earn on our cash balances held in our interest-bearing savings account or money market funds.
Other Income (Expense)
Other income (expenses) consists primarily of Bangladesh government grant income and also foreign currency gains and losses due to exchange rate fluctuations on transactions denominated in a currency other than our functional currency.
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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, except share and per share data) | 2023 | 2022 | 2023 | 2022 | ||||||||||||
| Revenues | $ | 10,780 | $ | 7,333 | $ | 20,408 | $ | 14,318 | ||||||||
| Cost of revenues | 5,715 | 4,131 | 10,957 | 8,003 | ||||||||||||
| Gross profit | 5,065 | 3,202 | 9,451 | 6,315 | ||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative | 4,760 | 4,172 | 8,967 | 8,219 | ||||||||||||
| Sales and marketing | 2,649 | 2,320 | 5,212 | 4,640 | ||||||||||||
| Research and development | 2,590 | 2,649 | 5,300 | 4,929 | ||||||||||||
| Total operating expenses | 9,999 | 9,141 | 19,479 | 17,788 | ||||||||||||
| Loss from operations | (4,934 | ) | (5,939 | ) | (10,028 | ) | (11,473 | ) | ||||||||
| Other income (expenses): | ||||||||||||||||
| Interest expense | (558 | ) | (385 | ) | (966 | ) | (986 | ) | ||||||||
| Interest income | 276 | 4 | 438 | 9 | ||||||||||||
| Loss on extinguishment | — | (1,097 | ) | — | (1,097 | ) | ||||||||||
| Change in fair value of warrant liability | (69 | ) | — | (69 | ) | — | ||||||||||
| Other income | 303 | 84 | 437 | 208 | ||||||||||||
| Total other expenses, net | (48 | ) | (1,394 | ) | (160 | ) | (1,866 | ) | ||||||||
| Net loss before income tax | (4,982 | ) | (7,333 | ) | (10,188 | ) | (13,339 | ) | ||||||||
| Income tax expense | 51 | 2 | 84 | 21 | ||||||||||||
| Net loss | $ | (5,033 | ) | $ | (7,335 | ) | $ | (10,272 | ) | $ | (13,360 | ) | ||||
Comparison for the three months ended June 30, 2023 and 2022:
Revenues
| Three Months Ended June 30, | $ | % | ||||||||||||||
| (in thousands) | 2023 | 2022 | Change | Change | ||||||||||||
| Revenues | $ | 10,780 | $ | 7,333 | $ | 3,446 | 47 | % | ||||||||
Revenues increased $3.4 million to $10.8 million during the three months ended June 30, 2023, as compared to $7.3 million during the three months ended June 30, 2022. The increase was primarily attributable to a 48% increase in the average number of clinicians in service with an immaterial impact from the slight decline in ARPU. The increase in clinicians in service was driven predominately by our existing Health Enterprises adding physicians. Dollar-based net revenue retention was 148% in the three months ended June 30, 2023. Increases in revenue were also attributable to growth coming from new physician practice groups and growth of our Notes business.
Cost of Revenues and Gross Margin
| Three Months Ended June 30, | $ | % | ||||||||||||||
| (in thousands) | 2023 | 2022 | Change | Change | ||||||||||||
| Cost of revenues | $ | 5,715 | $ | 4,131 | $ | 1,584 | 38 | % | ||||||||
Cost of revenues increased $1.6 million to $5.7 million during the three months ended June 30, 2023, as compared to $4.1 million during the three months ended June 30, 2022. The increase was primarily attributable to the $1.5 million increase in MDS costs to support the clinicians in service growth. Additionally, cloud hosting costs and depreciation and amortization from hardware spend grew $0.1 million as we have utilized more Automatic Speech Recognition (“ASR”), consumed more cloud hosting as our clinician count increased, and purchased more devices. As a result of operating efficiencies in our MDS operations, cloud hosting, and customer support, our gross margin was 47.0% during the three months ended June 30, 2023, as compared to 43.7% during the three ended June 30, 2022.
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General and Administrative Expenses
| Three Months Ended June 30, | $ | % | ||||||||||||||
| (in thousands) | 2023 | 2022 | Change | Change | ||||||||||||
| General and administrative | $ | 4,760 | $ | 4,172 | $ | 588 | 14 | % | ||||||||
General and administrative expenses increased $0.6 million to $4.8 million during the three months ended June 30, 2023, as compared to $4.2 million during the three months ended June 30, 2022. The increase was primarily attributable to a $0.2 million increase due to higher legal and professional fees associated with the debt financing and a $0.2 million increase in Board of Director fees and our HITRUST certification costs . In addition, there was a $0.1 million increase of facilities costs due to increased rent costs from the expansion into a new building in Bangladesh. Lastly there was a $0.1 million increase in software expenses driven by additional users to existing software and more applications.
Sales and Marketing Expenses
| Three Months Ended June 30, | $ | % | ||||||||||||||
| (in thousands) | 2023 | 2022 | Change | Change | ||||||||||||
| Sales and marketing | $ | 2,649 | $ | 2,320 | $ | 329 | 14 | % | ||||||||
Sales and marketing expenses increased $0.3 million to $2.6 million during the three months ended June 30, 2023, as compared to $2.3 million during the three months ended June 30, 2022. An increase of $0.1 million was attributable to added headcount of our Sales team to support new business sales, while the growth of our customer onboarding team contributed another $0.2 million increase to expenses.
Research and Development Expenses
| Three Months Ended June 30, | $ | % | ||||||||||||||
| (in thousands) | 2023 | 2022 | Change | Change | ||||||||||||
| Research and development | $ | 2,590 | $ | 2,649 | $ | (60 | ) | (2 | )% | |||||||
Research and development expenses decreased $0.1 million to $2.6 million during the three months ended June 30, 2023, as compared to $2.6 million during the three months ended June 30, 2022. Research and development expenses increased by $0.1 million mainly due to additional investments in headcount offset by a $0.2 million capitalization of software expenses.
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Other Income (Expenses)
| Three Months Ended June 30, | $ | % | ||||||||||||||
| (in thousands) | 2023 | 2022 | Change | Change | ||||||||||||
| Interest expense | $ | (558 | ) | $ | (385 | ) | $ | (173 | ) | (45 | )% | |||||
| Interest income | 276 | 4 | 272 | 6800 | % | |||||||||||
| Loss on extinguishment of debt | — | (1,097 | ) | 1,097 | (100 | )% | ||||||||||
| Change in fair value of warrant liability | (69 | ) | — | (69 | ) | 100 | % | |||||||||
| Other income | 303 | 84 | 219 | 261 | % | |||||||||||
| $ | (48 | ) | $ | (1,394 | ) | $ | 1,346 | (97 | )% | |||||||
Our interest expense increased $0.2 million to $0.6 million during the three months ended June 30, 2023, compared to $0.4 million during the three months ended June 30, 2022. The increase was attributable to a higher interest rate on our debt due to the higher Federal Funds rate combined with an increase of the total debt outstanding. Our interest income increased by $0.3 million to $0.3 million during the three months ended June 30, 2023 due to higher interest rates and the increased use of money market funds.
During the three months ended June 30, 2022, the Company refinanced its debt and recorded a loss of $1.1 million on the debt extinguishment. The Company did not have this cost in the three months ended, June 30, 2023.
Other income of $0.3 million in the three months ended June 30, 2023 consisted of a gain on foreign exchange compared to other income of $0.1 million for the three months ended June 30, 2022. Other income during the three months ended June 30, 2023 consisted mainly of a $0.1 million Bangladesh Government incentive payment received by the Company for investments made in Bangladesh.
Comparison for the six months ended June 30, 2022 and 2021:
Revenues
| Six Months Ended June 30, | $ | % | ||||||||||||||
| (in thousands) | 2023 | 2022 | Change | Change | ||||||||||||
| Revenues | $ | 20,408 | $ | 14,318 | $ | 6,089 | 43 | % | ||||||||
Revenues increased 43%, or $6.1 million, to $20.4 million during the six months ended June 30, 2023, as compared to $14.3 million during the six months ended June 30, 2022. The increase was primarily attributable to a 45% increase in the average number of clinicians in service, offset by a 2% decrease in ARPU primarily due to a larger mix of emergency department shift-based clinicians. The increase in clinicians in service was driven predominately by our existing Health Enterprises adding physicians, and also by the growth of clinicians using Augmedix Notes, and new customers. Dollar-based net revenue retention was 141% in the six months ended June 30, 2023.
Cost of Revenues and Gross Margin
| Six Months Ended June 30, | $ | % | ||||||||||||||
| (in thousands) | 2023 | 2022 | Change | Change | ||||||||||||
| Cost of revenues | $ | 10,957 | $ | 8,003 | $ | 2,956 | 37 | % | ||||||||
Cost of revenues increased $3.0 million to $11.0 million during the six months ended June 30, 2023, as compared to $8.0 million during the six months ended June 30, 2022. The increase was primarily attributable to a $2.8 million increase in MDS costs driven by additional clinicians in service. In addition, cloud hosting costs increased by $0.1 million due to the addition of new clinicians, and new technology to drive automation. Lastly, there was a $0.1 increase in Hardware depreciation due to the growth of clinicians. Gross margin for the six months ending June 30, 2023 was 46.3%, as compared to 44.1% in the six months ended June 30, 2022.
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General and Administrative Expenses
| Six Months Ended June 30, | $ | % | ||||||||||||||
| (in thousands) | 2023 | 2022 | Change | Change | ||||||||||||
| General and administrative | $ | 8,967 | $ | 8,219 | $ | 748 | 9 | % | ||||||||
General and administrative expenses increased $0.8 million to $9.0 million during the six months ended June 30, 2023, as compared to $8.2 million during the six months ended June 30, 2022. The increase was attributable to a $0.4 million increase in legal fees associated with the debt amendment. There was also a $0.3 million increase associated with higher Board of Director fees and our HITRUST certification costs, as well as $0.1 million of facilities costs associated with the new building in Bangladesh.
Sales and Marketing Expenses
| Six Months Ended June 30, | $ | % | ||||||||||||||
| (in thousands) | 2023 | 2022 | Change | Change | ||||||||||||
| Sales and marketing | $ | 5,212 | $ | 4,640 | $ | 572 | 12 | % | ||||||||
Sales and marketing expenses increased $0.6 million to $5.2 million during the six months ended June 30, 2023, as compared to $4.6 million during the six months ended June 30, 2022. The increase was primarily attributable to $0.3 million of additional costs due to a larger customer onboarding team to support the growing number of clinicians launching our services, $0.1 million of additional salaries in sales, and $0.1 million increase in combined salaries in customer success management and Analytics & Insights.
Research and Development Expenses
| Six Months Ended June 30, | $ | % | ||||||||||||||
| (in thousands) | 2022 | 2021 | Change | Change | ||||||||||||
| Research and development | $ | 5,300 | $ | 4,929 | $ | 371 | 8 | % | ||||||||
Research and development expenses increased $0.4 million to $5.3 million during the six months ended June 30, 2023, as compared to $4.9 million during the six months ended June 30, 2022. The increase was primarily attributable to a $0.3 million investment into engineering and product headcount along with higher salaries, offset by $0.2 million of capitalization of application development costs. The remaining $0.3 million was driven by higher training costs to grow our MDS capacity to meet the service needs of our larger clinician user base.
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Other Income (Expenses)
| Six Months Ended June 30, | $ | % | ||||||||||||||
| (in thousands) | 2023 | 2022 | Change | Change | ||||||||||||
| Interest expense | $ | (966 | ) | $ | (986 | ) | $ | 20 | (2 | )% | ||||||
| Interest income | 438 | 9 | 429 | 4767 | % | |||||||||||
| Loss on extinguishment | — | (1,097 | ) | 1,097 | (100 | )% | ||||||||||
| Change in fair value of warrants | (69 | ) | - | (69 | ) | 100 | % | |||||||||
| Other income | 437 | 208 | 229 | 110 | % | |||||||||||
| $ | (160 | ) | $ | (1,866 | ) | $ | 1,706 | (91 | )% | |||||||
Our interest expense remained constant at $1.0 million during the six months ended June 30, 2023, compared to $1.0 million during the six months ended June 30, 2022, due to the lower interest rate on our new debt facility staring May 2022, offset with a higher balance in 2023. There was a decrease of $1.1 million due to the loss on debt extinguishment as a result of refinancing our debt facility during the six months ended June 30, 2022. Interest income increased by $0.4 million to $0.4 million due to higher interest rates and the increased utilization of money market funds.
During the six months ended June 30, 2023 Other income increased by $0.2 million to $0.4 million due to a gain on foreign exchange.
Liquidity and Capital Resources
Our primary sources of liquidity are cash raised from sales of common stock, preferred stock previous to 2020, and cash from equity financings and borrowings under various facilities, which are further described below. As of June 30, 2023, we had cash resources of $25.3 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 an 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 approximately $205 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, 2023 of $136.1 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 cash balance will provide sufficient resources to meet working capital needs for over twelve months from the filing date of the June 30, 2023 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 that 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) | 2023 | 2022 | ||||||
| Cash (used in) provided by: | ||||||||
| Operating activities | $ | (12,175 | ) | $ | (8,856 | ) | ||
| Investing activities | (1,475 | ) | (615 | ) | ||||
| Financing activities | 16,969 | (1,248 | ) | |||||
| Effects of exchange rate changes on cash and restricted cash | (47 | ) | (90 | ) | ||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 3,272 | $ | (10,809 | ) | |||
Operating Activities
Cash used in operating activities was $12.2 million and $8.9 million for the six months ended June 30, 2023 and 2022, respectively. Cash used in operating activities during the six months ended June 30, 2023 principally resulted from our net loss of $10.3 million, which includes non-cash charges of $2.4 million, and increase in working capital of $4.3 million.
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.
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Investing Activities
Cash used in investing activities was $1.5 million and $0.6 million for the six months ended June 30, 2023 and 2022, respectively. Cash used in investing activities resulted from capital expenditures of property and equipment for both periods presented.
Financing Activities
Cash provided by financing activities during the six months ended June 30, 2023 of $17.0 million principally resulted from $11.8 million from issuance of common stock , and warrants, net of issuance costs, $5.0 million in debt proceeds and $0.2 million from the exercise of stock option, and $0.1 million of financing fees .
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.
Contractual Obligations and Commitments
The following summarizes our significant contractual obligations as of June 30, 2023:
| Payments due by period | ||||||||||||||||||||
| Less than | More than | |||||||||||||||||||
| (in thousands) | Total | 1 year | 1-3 years | 4-5 years | 5 years | |||||||||||||||
| Long-term debt obligations (excluding interest) | 21,000 | 5,000 | 16,000 | — | — | |||||||||||||||
| Operating lease obligations | 4,476 | 728 | 2,876 | 872 | — | |||||||||||||||
| Cloud computing obligation | 1,400 | 1,400 | — | — | — | |||||||||||||||
| Total | $ | 26,876 | $ | 7,128 | $ | 18,876 | $ | 872 | $ | — | ||||||||||
Off-Balance Sheet Arrangements
As of June 30, 2023, 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 for the year ended December 31, 2022, filed with the SEC on April 17, 2023, 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 consolidated financial statements. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
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 financial statements appearing elsewhere in this Quarterly Report.
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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
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in company reports filed or submitted under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
We do not expect that our disclosure controls and procedures will prevent all errors and all instances of fraud. Disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable assurance of achieving the desired control objectives. Further, the design of disclosure controls and procedures must reflect the fact that there are resource constraints, and the benefits must be considered relative to their costs. The design of disclosure controls and procedures also is based partly on 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.
As of June 30, 2023, as required by Rules 13a-15 and 15d-15 under the Exchange Act, our Chief Executive Officer and Chief Financial Officer carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon their evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) were not effective at the reasonable assurance level as of such date, due to the material weakness in our internal control over technical accounting analyses, and the regular review and application of accounting policies, as the Company grew and its operations changed. Notwithstanding the identified material weakness, management has concluded that the consolidated financial statements included in this Form 10-Q present fairly, in all material respects, the Company’s financial position, results of operations, and cash flows for the periods disclosed in accordance with GAAP.
Remediation Efforts to Address the Material Weakness
A material weakness in our internal control over the application of accounting policies was identified as of September 30, 2022. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our consolidated financial statements will not be prevented or detected on a timely basis. The material weakness identified was a lack of sufficient resources in our finance function to meet our financial reporting requirements. This material weakness resulted in insufficient management review of accounting policies as our company grew. Management continues to review and make necessary changes to the overall design of our internal control environment, including implementing additional internal controls over the annual review of all relevant accounting policies, particularly in areas where our operations have changed. We will add additional resources and expertise to our finance function to enhance the effectiveness of internal controls over financial reporting. The material weakness will not be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively. Although we plan to complete this remediation process as quickly as possible, we cannot estimate at this time how long it will take.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2023, 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.
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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, 2022, filed with the SEC on April 17, 2023. 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, 2022.
Item 2. Unregistered sales of equity securities and use of proceeds.
None.
Item 3. Defaults upon senior securities.
Not applicable.
Item 4. Mine safety disclosures.
Not applicable.
Item 5. Other information.
None.
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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.
| * | Indicates a management contract of any compensatory plan, contract or arrangement. |
| ** | Portions of this exhibit (indicated by asterisks) have been omitted in accordance with the rules of the SEC. |
| # | 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. |
| + | Filed herewith. |
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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 14, 2023 | By: | /s/ Emmanuel Krakaris |
| Name: | Emmanuel Krakaris | |
| Title: | President, Chief Executive Officer and Secretary | |
| (Principal Executive Officer) | ||
| Date: August 14, 2023 | By: | /s/ Paul Ginocchio |
| Name: | Paul Ginocchio | |
| Title: | Chief Financial Officer | |
| (Principal Accounting and Financial Officer) | ||
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Exhibit 10.1
AUGMEDIX, INC.
2020 EQUITY INCENTIVE PLAN
(as amended and restated effective July 1, 2021)
1. PURPOSE. The purpose of this Plan is to provide incentives to attract, retain, and motivate eligible persons whose present and potential contributions are important to the success of the Company, and any Parents, Subsidiaries, and Affiliates that exist now or in the future, by offering them an opportunity to participate in the Company’s future performance through the grant of Awards. Capitalized terms not defined elsewhere in the text are defined in Section 29.
2. SHARES SUBJECT TO THE PLAN.
2.1. Number of Shares Available. Subject to Section 2.6 and Section 22 and any other applicable provisions hereof, the total number of Shares reserved and available for grant and issuance pursuant to this Plan is 2,376,909 Shares (which includes the 1,733,148 Share increase made as of January 1, 2021 pursuant to Section 2.4), plus (a) any reserved Shares not issued or subject to outstanding awards granted under the Company’s 2013 Equity Incentive Plan, as amended and restated (the “Prior Plan”) on the Effective Date (as defined below), (b) Shares that are subject to awards granted under the Prior Plan that cease to be subject to such awards by forfeiture or otherwise after the Effective Date, (c) Shares issued under the Prior Plan before or after the Effective Date pursuant to the exercise of stock options that are, after the Effective Date, forfeited, (d) Shares issued under the Prior Plan that are repurchased by the Company at the original issue price, (e) Shares that are subject to stock options or other awards under the Prior Plan that are used to pay the exercise price of a stock option or withheld to satisfy the tax withholding obligations related to any award, and (f) Shares that are subject to awards granted prior to the effectiveness of the Prior Plan that are forfeited or otherwise repurchased by the Company.
2.2. Lapsed, Returned Awards. Shares subject to Awards, and Shares issued under the Plan under any Award, will again be available for grant and issuance in connection with subsequent Awards under this Plan to the extent such Shares: (a) are subject to issuance upon exercise of an Option or SAR granted under this Plan but which cease to be subject to the Option or SAR for any reason other than exercise of the Option or SAR, (b) are subject to Awards granted under this Plan that are forfeited or are repurchased by the Company at the original issue price, (c) are subject to Awards granted under this Plan that otherwise terminate without such Shares being issued or (d) are surrendered pursuant to an Exchange Program. To the extent an Award under the Plan is paid out in cash rather than Shares, such cash payment will not result in reducing the number of Shares available for issuance under the Plan. Shares used to pay the exercise price of an Award or withheld to satisfy the tax withholding obligations related to an Award will become available for grant and issuance in connection with subsequent Awards under this Plan. For the avoidance of doubt, Shares that otherwise become available for grant and issuance because of the provisions of this Section 2.2 will not include Shares subject to Awards that initially became available because of the substitution clause in Section 22.2 hereof.
2.3. Minimum Share Reserve. At all times the Company will reserve and keep available a sufficient number of Shares as will be required to satisfy the requirements of all outstanding Awards granted under this Plan.
2.4. Automatic Share Reserve Increase. The number of Shares available for grant and issuance under the Plan will be increased on January 1 of each of the first ten (10) calendar years during the term of the Plan by the lesser of (a) five percent (5%) of the number of shares of all classes of the Company’s common stock issued and outstanding on each December 31 immediately prior to the date of increase or (b) such number of Shares determined by the Board.
2.5. ISO Limitation. No more than 3,287,322 Shares will be issued pursuant to the exercise of ISOs granted under the Plan.
2.6. Adjustment of Shares. If the number of outstanding Shares is changed by a stock dividend, extraordinary dividend or distribution (whether in cash, shares, or other property, other than a regular cash dividend), recapitalization, stock split, reverse stock split, subdivision, combination, consolidation, reclassification, spin-off, or similar change in the capital structure of the Company, without consideration, then (a) the number and class of Shares reserved for issuance and future grant under the Plan set forth in Section 2.1, including Shares reserved under sub-clauses (a)-(e) of Section 2.1, (b) the Exercise Prices of and number and class of Shares subject to outstanding Options and SARs, (c) the number and class of Shares subject to other outstanding Awards and (d) the maximum number and class of Shares that may be issued as ISOs set forth in Section 2.5, will be proportionately adjusted, subject to any required action by the Board or the stockholders of the Company and in compliance with applicable securities laws, provided that fractions of a Share will not be issued.
If, by reason of an adjustment pursuant to this Section 2.6, a Participant’s Award Agreement or other agreement related to any Award, or the Shares subject to such Award, covers additional or different shares of stock or securities, then such additional or different shares, and the Award Agreement or such other agreement in respect thereof, will be subject to all of the terms, conditions, and restrictions which were applicable to the Award or the Shares subject to such Award prior to such adjustment.
3. ELIGIBILITY. ISOs may be granted only to Employees. All other Awards may be granted to Employees, Consultants, Directors, and Non-Employee Directors, provided that such Consultants, Directors, and Non-Employee Directors render bona fide services not in connection with the offer and sale of securities in a capital-raising transaction.
4. ADMINISTRATION.
4.1. Committee Composition; Authority. This Plan will be administered by the Committee or by the Board acting as the Committee. Subject to the general purposes, terms, and conditions of this Plan, and to the direction of the Board, the Committee will have full power to implement and carry out this Plan, except, however, the Board will establish the terms for the grant of an Award to Non-Employee Directors. The Committee will have the authority to:
(a) construe and interpret this Plan, any Award Agreement, and any other agreement or document executed pursuant to this Plan;
(b) prescribe, amend, and rescind rules and regulations relating to this Plan or any Award;
(c) select persons to receive Awards;
(d) determine the form and terms and conditions, not inconsistent with the terms of the Plan, of any Award granted hereunder. Such terms and conditions include, but are not limited to, the Exercise Price, the time or times when Awards may vest and be exercised (which may be based on performance criteria) or settled, any vesting acceleration or waiver of forfeiture restrictions, the method to satisfy tax withholding obligations or any other tax liability legally due, and any restriction or limitation regarding any Award or the Shares relating thereto, based in each case on such factors as the Committee will determine;
(e) determine the number of Shares or other consideration subject to Awards;
(f) determine the Fair Market Value in good faith and interpret the applicable provisions of this Plan and the definition of Fair Market Value in connection with circumstances that impact the Fair Market Value, if necessary;
(g) determine whether Awards will be granted singly, in combination with, in tandem with, in replacement of, or as alternatives to, other Awards under this Plan or any other incentive or compensation plan of the Company or any Parent, Subsidiary, or Affiliate;
(h) grant waivers of Plan or Award conditions;
(i) determine the vesting, exercisability, and payment of Awards;
(j) correct any defect, supply any omission, or reconcile any inconsistency in this Plan, any Award, or any Award Agreement;
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(k) determine whether an Award has been vested and/or earned;
(l) determine the terms and conditions of any, and to institute any Exchange Program;
(m) reduce or modify any criteria with respect to Performance Factors;
(n) adjust Performance Factors to take into account changes in law and accounting or tax rules as the Committee deems necessary or appropriate to reflect the impact of extraordinary or unusual items, events, or circumstances to avoid windfalls or hardships;
(o) adopt terms and conditions, rules, and/or procedures (including the adoption of any subplan under this Plan) relating to the operation and administration of the Plan to accommodate requirements of local law and procedures outside of the United States or to qualify Awards for special tax treatment under laws of jurisdictions other than the United States;
(p) exercise discretion with respect to Performance Awards;
(q) make all other determinations necessary or advisable for the administration of this Plan; and
(r) delegate any of the foregoing to a subcommittee or to one or more executive officers pursuant to a specific delegation as permitted by applicable law, including Section 157(c) of the Delaware General Corporation Law.
4.2. Committee Interpretation and Discretion. Any determination made by the Committee with respect to any Award will be made in its sole discretion at the time of grant of the Award or, unless in contravention of any express term of the Plan or Award, at any later time, and such determination will be final and binding on the Company and all persons having an interest in any Award under the Plan. Any dispute regarding the interpretation of the Plan or any Award Agreement will be submitted by the Participant or Company to the Committee for review. The resolution of such a dispute by the Committee will be final and binding on the Company and the Participant. The Committee may delegate to one or more executive officers the authority to review and resolve disputes with respect to Awards held by Participants who are not Insiders, and such resolution will be final and binding on the Company and the Participant.
4.3. Section 16 of the Exchange Act. Awards granted to Participants who are subject to Section 16 of the Exchange Act must be approved by two or more “non-employee directors” (as defined in the regulations promulgated under Section 16 of the Exchange Act).
4.4. Documentation. The Award Agreement for a given Award, the Plan, and any other documents may be delivered to, and accepted by, a Participant or any other person in any manner (including electronic distribution or posting) that meets applicable legal requirements.
4.5. Foreign Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws and practices in other countries in which the Company, its Subsidiaries, and Affiliates operate or have Employees or other individuals eligible for Awards, the Committee, in its sole discretion, will have the power and authority to: (a) determine which Subsidiaries and Affiliates will be covered by the Plan; (b) determine which individuals outside the United States are eligible to participate in the Plan, which may include individuals who provide services to the Company, Subsidiary or Affiliate under an agreement with a foreign nation or agency; (c) modify the terms and conditions of any Award granted to individuals outside the United States or foreign nationals to comply with applicable foreign laws, policies, customs, and practices; (d) establish subplans and modify exercise procedures, vesting conditions, and other terms and procedures to the extent the Committee determines such actions to be necessary or advisable (and such subplans and/or modifications will be attached to this Plan as appendices, if necessary); and (e) take any action, before or after an Award is made, that the Committee determines to be necessary or advisable to obtain approval or comply with any local governmental regulatory exemptions or approvals, provided, however, that no action taken under this Section 4.5 will increase the Share limitations contained in Section 2.1 hereof. Notwithstanding the foregoing, the Committee may not take any actions hereunder, and no Awards will be granted, that would violate the Exchange Act or any other applicable United States securities law, the Code, or any other applicable United States governing statute or law.
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5. OPTIONS. An Option is the right but not the obligation to purchase a Share, subject to certain conditions, if applicable. The Committee may grant Options to eligible Employees, Consultants, and Directors and will determine whether such Options will be Incentive Stock Options within the meaning of the Code (“ISOs”) or Nonqualified Stock Options (“NSOs”), the number of Shares subject to the Option, the Exercise Price of the Option, the period during which the Option may vest and be exercised, and all other terms and conditions of the Option, subject to the following terms of this section.
5.1. Option Grant. Each Option granted under this Plan will identify the Option as an ISO or an NSO. An Option may be, but need not be, awarded upon satisfaction of such Performance Factors during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the Option is being earned upon the satisfaction of Performance Factors, then the Committee will: (a) determine the nature, length, and starting date of any Performance Period for each Option; and (b) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap, and Participants may participate simultaneously with respect to Options that are subject to different performance goals and other criteria.
5.2. Date of Grant. The date of grant of an Option will be the date on which the Committee makes the determination to grant such Option, or a specified future date. The Award Agreement and a copy of this Plan will be delivered to the Participant within a reasonable time after the granting of the Option.
5.3. Exercise Period. Options may be vested and exercisable within the times or upon the conditions as set forth in the Award Agreement governing such Option, provided, however, that no Option will be exercisable after the expiration of ten (10) years from the date the Option is granted and provided further that no ISO granted to a person who, at the time the ISO is granted, directly or by attribution owns more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or of any Parent or Subsidiary (“Ten Percent Stockholder”) will be exercisable after the expiration of five (5) years from the date the ISO is granted. The Committee also may provide for Options to become exercisable at one time or from time to time, periodically or otherwise, in such number of Shares or percentage of Shares as the Committee determines.
5.4. Exercise Price. The Exercise Price of an Option will be determined by the Committee when the Option is granted, provided that: (a) the Exercise Price of an Option will be not less than one hundred percent (100%) of the Fair Market Value of the Shares on the date of grant, and (b) the Exercise Price of any ISO granted to a Ten Percent Stockholder will not be less than one hundred ten percent (110%) of the Fair Market Value of the Shares on the date of grant. Payment for the Shares purchased may be made in accordance with Section 12 and the Award Agreement and in accordance with any procedures established by the Company.
5.5. Method of Exercise. Any Option granted hereunder will be vested and exercisable according to the terms of the Plan and at such times and under such conditions as determined by the Committee and set forth in the Award Agreement. An Option may not be exercised for a fraction of a Share. An Option will be deemed exercised when the Company receives: (a) notice of exercise (in such form as the Committee may specify from time to time) from the person entitled to exercise the Option (and/or via electronic execution through the authorized third-party administrator), and (b) full payment for the Shares with respect to which the Option is exercised (together with applicable withholding taxes). Full payment may consist of any consideration and method of payment authorized by the Committee and permitted by the Award Agreement and the Plan. Shares issued upon exercise of an Option will be issued in the name of the Participant. Until the Shares are issued (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares, notwithstanding the exercise of the Option. The Company will issue (or cause to be issued) such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or other right for which the record date is prior to the date the Shares are issued, except as provided in Section 2.6 of the Plan. Exercising an Option in any manner will decrease the number of Shares thereafter available, both for purposes of the Plan and for sale under the Option, by the number of Shares as to which the Option is exercised.
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5.6. Termination of Service. If the Participant’s Service terminates for any reason except for Cause or the Participant’s death or Disability, then the Participant may exercise such Participant’s Options only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates no later than three (3) months after the date Participant’s Service terminates (or such shorter time period not less than thirty (30) days or longer time period as may be determined by the Committee, with any exercise beyond three (3) months after the date Participant’s Service terminates deemed to be the exercise of an NSO), but in any event no later than the expiration date of the Options.
(a) Death. If the Participant’s Service terminates because of the Participant’s death (or the Participant dies within three (3) months after Participant’s Service terminates other than for Cause or because of the Participant’s Disability), then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be exercised by the Participant’s legal representative, or authorized assignee, no later than twelve (12) months after the date Participant’s Service terminates (or such shorter time period not less than six (6) months or longer time period as may be determined by the Committee), but in any event no later than the expiration date of the Options.
(b) Disability. If the Participant’s Service terminates because of the Participant’s Disability, then the Participant’s Options may be exercised only to the extent that such Options would have been exercisable by the Participant on the date Participant’s Service terminates and must be exercised by the Participant (or the Participant’s legal representative or authorized assignee) no later than twelve (12) months after the date Participant’s Service terminates (or such shorter time period not less than six (6) months or longer time period as may be determined by the Committee, with any exercise beyond (a) three (3) months after the date Participant’s Service terminates when the termination of Service is for a Disability that is not a “permanent and total disability” as defined in Section 22(e)(3) of the Code or (b) twelve (12) months after the date Participant’s Service terminates when the termination of Service is for a Disability that is a “permanent and total disability” as defined in Section 22(e)(3) of the Code, deemed to be exercise of an NSO), but in any event no later than the expiration date of the Options.
(c) Cause. Unless as otherwise determined by the Committee, if the Participant’s Service terminates for Cause, then Participant’s Options (whether or not vested) will expire on the date of termination of Participant’s Service if the Committee has reasonably determined in good faith that such cessation of Services has resulted in connection with an act or failure to act constituting Cause (or such Participant’s Services could have been terminated for Cause (without regard to the lapsing of any required notice or cure periods in connection therewith) at the time such Participant terminated Services), or at such later time and on such conditions as are determined by the Committee, but in any event no later than the expiration date of the Options. Unless otherwise provided in an employment agreement, Award Agreement, or other applicable agreement, Cause will have the meaning set forth in the Plan.
5.7. Limitations on Exercise. The Committee may specify a minimum number of Shares that may be purchased on any exercise of an Option, provided that such minimum number will not prevent any Participant from exercising the Option for the full number of Shares for which it is then exercisable.
5.8. Limitations on ISOs. With respect to Awards granted as ISOs, to the extent that the aggregate Fair Market Value of the Shares with respect to which such ISOs are exercisable for the first time by the Participant during any calendar year (under all plans of the Company and any Parent or Subsidiary) exceeds one hundred thousand dollars ($100,000), such Options will be treated as NSOs. For purposes of this Section 5.8, ISOs will be taken into account in the order in which they were granted. The Fair Market Value of the Shares will be determined as of the time the Option with respect to such Shares is granted. In the event that the Code or the regulations promulgated thereunder are amended after the Effective Date to provide for a different limit on the Fair Market Value of Shares permitted to be subject to ISOs, such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.
5.9. Modification, Extension or Renewal. The Committee may modify, extend, or renew outstanding Options and authorize the grant of new Options in substitution therefor, provided that any such action may not, without the written consent of a Participant, impair any of such Participant’s rights under any Option previously granted. Any outstanding ISO that is modified, extended, renewed, or otherwise altered will be treated in accordance with Section 424(h) of the Code. Subject to Section 19 of this Plan, by written notice to affected Participants, the Committee may reduce the Exercise Price of outstanding Options without the consent of such Participants, provided, however, that the Exercise Price may not be reduced below the Fair Market Value on the date the action is taken to reduce the Exercise Price.
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5.10. No Disqualification. Notwithstanding any other provision in this Plan, no term of this Plan relating to ISOs will be interpreted, amended, or altered, nor will any discretion or authority granted under this Plan be exercised, so as to disqualify this Plan under Section 422 of the Code or, without the consent of the Participant affected, to disqualify any ISO under Section 422 of the Code.
6. RESTRICTED STOCK AWARDS. A Restricted Stock Award is an offer by the Company to sell to an eligible Employee, Consultant, or Director Shares that are subject to restrictions (“Restricted Stock”). The Committee will determine to whom an offer will be made, the number of Shares the Participant may purchase, the Purchase Price, the restrictions under which the Shares will be subject, and all other terms and conditions of the Restricted Stock Award, subject to the Plan.
6.1. Restricted Stock Purchase Agreement. All purchases under a Restricted Stock Award will be evidenced by an Award Agreement. Except as may otherwise be provided in an Award Agreement, a Participant accepts a Restricted Stock Award by signing and delivering to the Company an Award Agreement with full payment of the Purchase Price, within thirty (30) days from the date the Award Agreement was delivered to the Participant. If the Participant does not accept such Award within thirty (30) days, then the offer of such Restricted Stock Award will terminate, unless the Committee determines otherwise.
6.2. Purchase Price. The Purchase Price for a Restricted Stock Award will be determined by the Committee and may be less than Fair Market Value on the date the Restricted Stock Award is granted. Payment of the Purchase Price must be made in accordance with Section 12 of the Plan, and the Award Agreement and in accordance with any procedures established by the Company.
6.3. Terms of Restricted Stock Awards. Restricted Stock Awards will be subject to such restrictions as the Committee may impose or are required by law. These restrictions may be based on completion of a specified period of Service with the Company or upon completion of Performance Factors, if any, during any Performance Period as set out in advance in the Participant’s Award Agreement. Prior to the grant of a Restricted Stock Award, the Committee will: (a) determine the nature, length, and starting date of any Performance Period for the Restricted Stock Award; (b) select from among the Performance Factors to be used to measure performance goals, if any; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap, and a Participant may participate simultaneously with respect to Restricted Stock Awards that are subject to different Performance Periods and having different performance goals and other criteria.
6.4. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
7. STOCK BONUS AWARDS. A Stock Bonus Award is an award to an eligible Employee, Consultant, or Director of Shares for Services to be rendered or for past Services already rendered to the Company or any Parent, Subsidiary, or Affiliate. All Stock Bonus Awards will be made pursuant to an Award Agreement. No payment from the Participant will be required for Shares awarded pursuant to a Stock Bonus Award.
7.1. Terms of Stock Bonus Awards. The Committee will determine the number of Shares to be awarded to the Participant under a Stock Bonus Award and any restrictions thereon. These restrictions may be based upon completion of a specified period of Service with the Company or upon satisfaction of performance goals based on Performance Factors during any Performance Period as set out in advance in the Participant’s Stock Bonus Agreement. Prior to the grant of any Stock Bonus Award the Committee will: (a) determine the nature, length, and starting date of any Performance Period for the Stock Bonus Award; (b) select from among the Performance Factors to be used to measure performance goals; and (c) determine the number of Shares that may be awarded to the Participant. Performance Periods may overlap, and a Participant may participate simultaneously with respect to Stock Bonus Awards that are subject to different Performance Periods and different performance goals and other criteria.
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7.2. Form of Payment to Participant. Payment may be made in the form of cash, whole Shares, or a combination thereof, based on the Fair Market Value of the Shares earned under a Stock Bonus Award on the date of payment, as determined in the sole discretion of the Committee.
7.3. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
8. STOCK APPRECIATION RIGHTS. A Stock Appreciation Right (“SAR”) is an award to an eligible Employee, Consultant, or Director that may be settled in cash or Shares (which may consist of Restricted Stock) having a value equal to (a) the difference between the Fair Market Value on the date of exercise over the Exercise Price multiplied by (b) the number of Shares with respect to which the SAR is being settled (subject to any maximum number of Shares that may be issuable as specified in an Award Agreement). All SARs will be made pursuant to an Award Agreement.
8.1. Terms of SARs. The Committee will determine the terms of each SAR including, without limitation: (a) the number of Shares subject to the SAR, (b) the Exercise Price and the time or times during which the SAR may be settled, (c) the consideration to be distributed on settlement of the SAR, and (d) the effect of the Participant’s termination of Service on each SAR. The Exercise Price of the SAR will be determined by the Committee when the SAR is granted and may not be less than Fair Market Value of the Shares on the date of grant. A SAR may be awarded upon satisfaction of Performance Factors, if any, during any Performance Period as are set out in advance in the Participant’s individual Award Agreement. If the SAR is being earned upon the satisfaction of Performance Factors, then the Committee will: (i) determine the nature, length, and starting date of any Performance Period for each SAR; and (ii) select from among the Performance Factors to be used to measure the performance, if any. Performance Periods may overlap, and Participants may participate simultaneously with respect to SARs that are subject to different Performance Factors and other criteria.
8.2. Exercise Period and Expiration Date. A SAR will be exercisable within the times or upon the occurrence of events determined by the Committee and set forth in the Award Agreement governing such SAR. The SAR Agreement will set forth the expiration date, provided that no SAR will be exercisable after the expiration of ten (10) years from the date the SAR is granted. The Committee may also provide for SARs to become exercisable at one time or from time to time, periodically or otherwise (including, without limitation, upon the attainment during a Performance Period of performance goals based on Performance Factors), in such number of Shares or percentage of the Shares subject to the SAR as the Committee determines. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee). Notwithstanding the foregoing, the rules of Section 5.6 also will apply to SARs.
8.3. Form of Settlement. Upon exercise of a SAR, a Participant will be entitled to receive payment from the Company in an amount determined by multiplying (a) the difference between the Fair Market Value of a Share on the date of exercise over the Exercise Price, by (b) the number of Shares with respect to which the SAR is exercised. At the discretion of the Committee, the payment from the Company for the SAR exercise may be in cash, in Shares of equivalent value, or in some combination thereof. The portion of a SAR being settled may be paid currently or on a deferred basis with such interest, if any, as the Committee determines, provided that the terms of the SAR and any deferral satisfy the requirements of Section 409A of the Code to the extent applicable.
8.4. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
9. RESTRICTED STOCK UNITS. A Restricted Stock Unit (“RSU”) is an award to an eligible Employee, Consultant, or Director covering a number of Shares that may be settled in cash, or by issuance of those Shares (which may consist of Restricted Stock). All RSUs will be made pursuant to an Award Agreement.
9.1. Terms of RSUs. The Committee will determine the terms of an RSU including, without limitation: (a) the number of Shares subject to the RSU, (b) the time or times during which the RSU may be settled, (c) the consideration to be distributed on settlement, and (d) the effect of the Participant’s termination of Service on each RSU, provided that no RSU will have a term longer than ten (10) years. An RSU may be awarded upon satisfaction of such performance goals based on Performance Factors during any Performance Period as are set out in advance in the Participant’s Award Agreement. If the RSU is being earned upon satisfaction of Performance Factors, then the Committee will: (i) determine the nature, length, and starting date of any Performance Period for the RSU; (ii) select from among the Performance Factors to be used to measure the performance, if any; and (iii) determine the number of Shares deemed subject to the RSU. Performance Periods may overlap, and Participants may participate simultaneously with respect to RSUs that are subject to different Performance Periods and different performance goals and other criteria.
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9.2. Form and Timing of Settlement. Payment of earned RSUs will be made as soon as practicable after the date(s) determined by the Committee and set forth in the Award Agreement. The Committee, in its sole discretion, may settle earned RSUs in cash, Shares, or a combination of both. The Committee may also permit a Participant to defer payment under an RSU to a date or dates after the RSU is earned, provided that the terms of the RSU and any deferral satisfy the requirements of Section 409A of the Code to the extent applicable.
9.3. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on such date Participant’s Service terminates (unless determined otherwise by the Committee).
10. PERFORMANCE AWARDS.
10.1. Types of Performance Awards. A Performance Award is an award to an eligible Employee, Consultant, or Director of the Company or any Parent, Subsidiary, or Affiliate that is based upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee, and may be settled in cash, Shares (which may consist of, without limitation, Restricted Stock), other property, or any combination thereof. Grants of Performance Awards will be made pursuant to an Award Agreement.
(a) Performance Shares. The Committee may grant Awards of Performance Shares, designate the Participants to whom Performance Shares are to be awarded, and determine the number of Performance Shares and the terms and conditions of each such Award. Performance Shares will consist of a unit valued by reference to a designated number of Shares, the value of which may be paid to the Participant by delivery of Shares or, if set forth in the instrument evidencing the Award, of such property as the Committee will determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee. The amount to be paid under an Award of Performance Shares may be adjusted on the basis of such further consideration as the Committee will determine in its sole discretion.
(b) Performance Units. The Committee may grant Awards of Performance Units, designate the Participants to whom Performance Units are to be awarded, and determine the number of Performance Units and the terms and conditions of each such Award. Performance Units will consist of a unit valued by reference to a designated amount of property other than Shares, which value may be paid to the Participant by delivery of such property as the Committee will determine, including, without limitation, cash, Shares, other property, or any combination thereof, upon the attainment of performance goals, as established by the Committee, and other terms and conditions specified by the Committee.
(c) Cash-Settled Performance Awards. The Committee may also grant cash-based Performance Awards to Participants under the terms of this Plan. Such awards will be based on the attainment of performance goals using the Performance Factors within this Plan that are established by the Committee for the relevant performance period.
10.2. Terms of Performance Awards. The Committee will determine, and each Award Agreement will set forth, the terms of each Performance Award including, without limitation: (a) the amount of any cash bonus, (b) the number of Shares deemed subject to an award of Performance Shares, (c) the Performance Factors and Performance Period that will determine the time and extent to which each award of Performance Shares will be settled, (d) the consideration to be distributed on settlement, and (e) the effect of the Participant’s termination of Service on each Performance Award. In establishing Performance Factors and the Performance Period the Committee will: (i) determine the nature, length, and starting date of any Performance Period; (ii) select from among the Performance Factors to be used; and (iii) determine the number of Shares deemed subject to the award of Performance Shares. Each Performance Share will have an initial value equal to the Fair Market Value of a Share on the date of grant. Prior to settlement the Committee will determine the extent to which Performance Awards have been earned. Performance Periods may overlap, and Participants may participate simultaneously with respect to Performance Awards that are subject to different Performance Periods and different performance goals and other criteria.
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10.3. Termination of Service. Except as may be set forth in the Participant’s Award Agreement, vesting ceases on the date Participant’s Service terminates (unless determined otherwise by the Committee).
11. CASH AWARDS. A Cash Award (“Cash Award”) is an award that is denominated in, or payable to an eligible Participant solely in, cash, as deemed by the Committee to be consistent with the purposes of the Plan. Cash Awards shall be subject to the terms, conditions, restrictions, and limitations determined by the Committee, in its sole discretion, from time to time. Awards granted pursuant to this Section 11 may be granted with value and payment contingent upon the achievement of Performance Factors.
12. PAYMENT FOR SHARE PURCHASES. Payment from a Participant for Shares purchased pursuant to this Plan may be made in cash or by check or, where expressly approved for the Participant by the Committee and where permitted by law (and to the extent not otherwise set forth in the applicable Award Agreement):
(a) by cancellation of indebtedness of the Company to the Participant;
(b) by surrender of shares of the Company held by the Participant that have a Fair Market Value on the date of surrender equal to the aggregate exercise price of the Shares as to which said Award will be exercised or settled;
(c) by waiver of compensation due or accrued to the Participant for services rendered or to be rendered to the Company or a Parent or Subsidiary;
(d) by consideration received by the Company pursuant to a broker-assisted or other form of cashless exercise program implemented by the Company in connection with the Plan;
(e) by any combination of the foregoing; or
(f) by any other method of payment as is permitted by applicable law.
The Committee may limit the availability of any method of payment, to the extent the Committee determines, in its discretion, such limitation is necessary or advisable to comply with applicable law or facilitate the administration of the Plan.
13. GRANTS TO NON-EMPLOYEE DIRECTORS.
13.1. General. Non-Employee Directors are eligible to receive any type of Award offered under this Plan except ISOs. Awards pursuant to this Section 13 may be automatically made pursuant to policy adopted by the Board or made from time to time as determined in the discretion of the Board. No Non- Employee Director may receive Awards under the Plan that, when combined with cash compensation received for service as a Non-Employee Director, exceed seven-hundred and fifty thousand dollars ($750,000) in value (as described below) in any calendar year. The value of Awards for purposes of complying with this maximum will be determined as follows: (a) for Options and SARs, grant date fair value will be calculated using the Black-Scholes valuation methodology on the date of grant of such Option or SAR, and (b) for all other Awards other than Options and SARs, grant date fair value will be determined by either (i) calculating the product of the Fair Market Value per Share on the date of grant and the aggregate number of Shares subject to the Award, or (ii) calculating the product using an average of the Fair Market Value over a number of trading days and the aggregate number of Shares subject to the Award as determined by the Committee. Awards granted to an individual while he or she was serving in the capacity as an Employee or while he or she was a Consultant but not a Non-Employee Director will not count for purposes of the limitations set forth in this Section 13.1.
13.2. Eligibility. Awards pursuant to this Section 13 will be granted only to Non-Employee Directors. A Non-Employee Director who is elected or re-elected as a member of the Board will be eligible to receive an Award under this Section 13.
13.3. Vesting, Exercisability and Settlement. Except as set forth in Section 22, Awards will vest, become exercisable, and be settled as determined by the Board. With respect to Options and SARs, the exercise price granted to Non-Employee Directors will not be less than the Fair Market Value of the Shares at the time that such Option or SAR is granted.
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13.4. Election to Receive Awards in Lieu of Cash. A Non-Employee Director may elect to receive his or her annual retainer payments and/or meeting fees from the Company in the form of cash or Awards or a combination thereof, if permitted, and as determined, by the Committee. Such Awards will be issued under the Plan. An election under this Section 13.4 will be filed with the Company on the form prescribed by the Company.
14. WITHHOLDING TAXES.
14.1. Withholding Generally. Whenever Shares are to be issued in satisfaction of Awards granted under this Plan or a tax event occurs, the Company may require the Participant to remit to the Company, or to the Parent, Subsidiary, or Affiliate, as applicable, employing the Participant an amount sufficient to satisfy applicable U.S. federal, state, local, and international tax or any other tax or social insurance liability (the “Tax-Related Items”) legally due from the Participant prior to the delivery of Shares pursuant to exercise or settlement of any Award. Whenever payments in satisfaction of Awards granted under this Plan are to be made in cash, such payment will be net of an amount sufficient to satisfy applicable withholding obligations for Tax-Related Items. Unless otherwise determined by the Committee, the Fair Market Value of the Shares will be determined as of the date that the taxes are required to be withheld and such Shares will be valued based on the value of the actual trade or, if there is none, the Fair Market Value of the Shares as of the previous trading day.
14.2. Stock Withholding. The Committee, or its delegate(s), as permitted by applicable law, in its sole discretion and pursuant to such procedures as it may specify from time to time and to limitations of local law, may require or permit a Participant to satisfy such Tax Related Items legally due from the Participant, in whole or in part by (without limitation) (a) paying cash, (b) having the Company withhold otherwise deliverable cash or Shares having a Fair Market Value equal to the Tax-Related Items to be withheld, (c) delivering to the Company already-owned shares having a Fair Market Value equal to the Tax-Related Items to be withheld, or (d) withholding from the proceeds of the sale of otherwise deliverable Shares acquired pursuant to an Award either through a voluntary sale or through a mandatory sale arranged by the Company. The Company may withhold or account for these Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum permissible statutory tax rate for the applicable tax jurisdiction, to the extent consistent with applicable laws.
15. TRANSFERABILITY.
15.1. Transfer Generally. Unless determined otherwise by the Committee, an Award may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution. If the Committee makes an Award transferable, including, without limitation, by instrument to an inter vivos or testamentary trust in which the Awards are to be passed to beneficiaries upon the death of the trustor (settlor) or by gift or by domestic relations order to a Permitted Transferee, such Award will contain such additional terms and conditions as the Committee deems appropriate. All Awards will be exercisable: (a) during the Participant’s lifetime only by the Participant or the Participant’s guardian or legal representative; (b) after the Participant’s death, by the legal representative of the Participant’s heirs or legatees; and (c) in the case of all awards except ISOs, by a Permitted Transferee.
16. PRIVILEGES OF STOCK OWNERSHIP; RESTRICTIONS ON SHARES.
16.1. Voting and Dividends. No Participant will have any of the rights of a stockholder with respect to any Shares until the Shares are issued to the Participant, except for any Dividend Equivalent Rights permitted by an applicable Award Agreement. Any Dividend Equivalent Rights will be subject to the same vesting or performance conditions as the underlying Award. In addition, the Committee may provide that any Dividend Equivalent Rights permitted by an applicable Award Agreement will be deemed to have been reinvested in additional Shares or otherwise reinvested. After Shares are issued to the Participant, the Participant will be a stockholder and have all the rights of a stockholder with respect to such Shares, including the right to vote and receive all dividends or other distributions made or paid with respect to such Shares; provided, that if such Shares are Restricted Stock, then any new, additional or different securities the Participant may become entitled to receive with respect to such Shares by virtue of a stock dividend, stock split or any other change in the corporate or capital structure of the Company will be subject to the same restrictions as the Restricted Stock; provided, further, that the Participant will have no right to such stock dividends or stock distributions with respect to Unvested Shares, and any such dividends or stock distributions will be accrued and paid only at such time, if any, as such Unvested Shares become vested Shares. The Committee, in its discretion, may provide in the Award Agreement evidencing any Award that the Participant will be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Shares underlying an Award during the period beginning on the date the Award is granted and ending, with respect to each Share subject to the Award, on the earlier of the date on which the Award is exercised or settled or the date on which it is forfeited provided, that no Dividend Equivalent Right will be paid with respect to the Unvested Shares, and such dividends or stock distributions will be accrued and paid only at such time, if any, as such Unvested Shares become vested Shares. Such Dividend Equivalent Rights, if any, will be credited to the Participant in the form of additional whole Shares as of the date of payment of such cash dividends on Shares.
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16.2. Restrictions on Shares. At the discretion of the Committee, the Company may reserve to itself and/or its assignee(s) a right to repurchase (a “Right of Repurchase”) a portion of any or all Unvested Shares held by a Participant following such Participant’s termination of Service at any time within ninety (90) days (or such longer or shorter time determined by the Committee) after the later of the date Participant’s Service terminates and the date the Participant purchases Shares under this Plan, for cash and/or cancellation of purchase money indebtedness, at the Participant’s Purchase Price or Exercise Price, as the case may be.
17. CERTIFICATES. All Shares or other securities whether or not certificated, delivered under this Plan will be subject to such stock transfer orders, legends, and other restrictions as the Committee may deem necessary or advisable, including restrictions under any applicable U.S. federal, state, or foreign securities law, or any rules, regulations, and other requirements of the SEC or any stock exchange or automated quotation system upon which the Shares may be listed or quoted, and any non-U.S. exchange controls or securities law restrictions to which the Shares are subject.
18. ESCROW; PLEDGE OF SHARES. To enforce any restrictions on a Participant’s Shares, the Committee may require the Participant to deposit all certificates representing Shares, together with stock powers or other instruments of transfer approved by the Committee, appropriately endorsed in blank, with the Company or an agent designated by the Company to hold in escrow until such restrictions have lapsed or terminated, and the Committee may cause a legend or legends referencing such restrictions to be placed on the certificates. Any Participant who is permitted to execute a promissory note as partial or full consideration for the purchase of Shares under this Plan will be required to pledge and deposit with the Company all or part of the Shares so purchased as collateral to secure the payment of the Participant’s obligation to the Company under the promissory note, provided, however, that the Committee may require or accept other or additional forms of collateral to secure the payment of such obligation and, in any event, the Company will have full recourse against the Participant under the promissory note notwithstanding any pledge of the Participant’s Shares or other collateral. In connection with any pledge of the Shares, the Participant will be required to execute and deliver a written pledge agreement in such form as the Committee will from time to time approve. The Shares purchased with the promissory note may be released from the pledge on a pro rata basis as the promissory note is paid.
19. REPRICING; EXCHANGE AND BUYOUT OF AWARDS. Without prior stockholder approval the Committee may (a) reprice Options or SARs (and where such repricing is a reduction in the Exercise Price of outstanding Options or SARs, the consent of the affected Participants is not required provided written notice is provided to them, notwithstanding any adverse tax consequences to them arising from the repricing), and (b) with the consent of the respective Participants (unless not required pursuant to Section 5.9 of the Plan), pay cash or issue new Awards in exchange for the surrender and cancellation of any, or all, outstanding Awards.
20. SECURITIES LAW AND OTHER REGULATORY COMPLIANCE. An Award will not be effective unless such Award is in compliance with all applicable U.S. and foreign federal and state securities and exchange control and other laws, rules, and regulations of any governmental body, and the requirements of any stock exchange or automated quotation system upon which the Shares may then be listed or quoted, as they are in effect on the date of grant of the Award and also on the date of exercise or other issuance. Notwithstanding any other provision in this Plan, the Company will have no obligation to issue or deliver certificates for Shares under this Plan prior to: (a) obtaining any approvals from governmental agencies that the Company determines are necessary or advisable and/or (b) completion of any registration or other qualification of such Shares under any state, federal, or foreign law or ruling of any governmental body that the Company determines to be necessary or advisable. The Company will be under no obligation to register the Shares with the SEC or to effect compliance with the registration, qualification, or listing requirements of any foreign or state securities laws, exchange control laws, stock exchange, or automated quotation system, and the Company will have no liability for any inability or failure to do so.
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21. NO OBLIGATION TO EMPLOY. Nothing in this Plan or any Award granted under this Plan will confer or be deemed to confer on any Participant any right to continue in the employ of, or to continue any other relationship with, the Company or any Parent, Subsidiary, or Affiliate or limit in any way the right of the Company or any Parent, Subsidiary, or Affiliate to terminate Participant’s employment or other relationship at any time.
22. CORPORATE TRANSACTIONS.
22.1. Assumption or Replacement of Awards by Successor. In the event of a Corporate Transaction any or all outstanding Awards may be (a) continued by the Company, if the Company is the successor entity; or (b) assumed or substituted by the successor corporation, or a parent or subsidiary of the successor corporation, for substantially equivalent Awards (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction), in each case after taking into account appropriate adjustments for the number and kind of shares and exercise prices. The successor corporation may also issue, as replacement of outstanding Shares of the Company held by the Participant, substantially similar shares or other property subject to repurchase restrictions no less favorable to the Participant. In the event such successor corporation refuses to assume, substitute or replace any Award in accordance with this Section 22, then notwithstanding any other provision in this Plan to the contrary, each such Award shall become fully vested and, as applicable, exercisable and any rights of repurchase or forfeiture restrictions thereon shall lapse, immediately prior to the consummation of the Corporation Transaction. Performance Awards not assumed pursuant to the foregoing shall be deemed earned and vested based on the greater of actual performance (if determinable) or 100% of target level, unless otherwise indicated pursuant to the terms and conditions of the applicable Award Agreement. The Board shall have full power and authority to assign the Company’s right to repurchase or re-acquire or forfeiture rights to such successor or acquiring corporation. Awards need not be treated similarly in a Corporate Transaction.
22.2. Assumption of Awards by the Company. The Company, from time to time, also may substitute or assume outstanding awards granted by another company, whether in connection with an acquisition of such other company or otherwise, by either: (a) granting an Award under this Plan in substitution of such other company’s award, or (b) assuming such award as if it had been granted under this Plan if the terms of such assumed award could be applied to an Award granted under this Plan. Such substitution or assumption will be permissible if the holder of the substituted or assumed award would have been eligible to be granted an Award under this Plan if the other company had applied the rules of this Plan to such grant. In the event the Company assumes an award granted by another company, the terms and conditions of such award will remain unchanged (except that the Purchase Price or the Exercise Price, as the case may be, and the number and nature of Shares issuable upon exercise or settlement of any such Award will be adjusted appropriately pursuant to Section 424(a) of the Code). In the event the Company elects to grant a new Option in substitution rather than assuming an existing option, such new Option may be granted with a similarly adjusted Exercise Price. Substitute Awards will not reduce the number of Shares authorized for grant under the Plan or authorized for grant to a Participant in a calendar year.
22.3. Non-Employee Directors’ Awards. Notwithstanding any provision to the contrary herein, in the event of a Corporate Transaction, the vesting of all Awards granted to Non-Employee Directors will accelerate and such Awards will become exercisable (as applicable) in full prior to the consummation of such event at such times and on such conditions as the Committee determines.
23. ADOPTION AND STOCKHOLDER APPROVAL. This Plan will be submitted for the approval of the Company’s stockholders, consistent with applicable laws, within twelve (12) months before or after the date this Plan is adopted by the Board.
24. TERM OF PLAN/GOVERNING LAW. Unless earlier terminated as provided herein, this Plan will become effective on the Effective Date and will terminate ten (10) years from the date this Plan is adopted by the Board. This Plan and all Awards granted hereunder will be governed by and construed in accordance with the laws of the State of Delaware (excluding its conflict of laws rules).
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25. AMENDMENT OR TERMINATION OF PLAN. The Board may at any time terminate or amend this Plan in any respect, including, without limitation, amendment of any form of Award Agreement or instrument to be executed pursuant to this Plan, provided, however, that the Board will not, without the approval of the stockholders of the Company, amend this Plan in any manner that requires such stockholder approval. No termination or amendment of the Plan will affect any then-outstanding Award unless expressly provided by the Committee. In any event, no termination or amendment of the Plan or any outstanding Award may adversely affect any then outstanding Award without the consent of the Participant, unless such termination or amendment is necessary to comply with applicable law, regulation, or rule.
26. NONEXCLUSIVITY OF THE PLAN. Neither the adoption of this Plan by the Board, the submission of this Plan to the stockholders of the Company for approval, nor any provision of this Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of stock awards and bonuses otherwise than under this Plan, and such arrangements may be either generally applicable or applicable only in specific cases.
27. INSIDER TRADING POLICY. Each Participant who receives an Award will comply with any policy adopted by the Company from time to time covering transactions in the Company’s securities by Employees, officers, and/or Directors of the Company, as well as with any applicable insider trading or market abuse laws to which the Participant may be subject.
28. ALL AWARDS SUBJECT TO COMPANY CLAWBACK OR RECOUPMENT POLICY. All Awards, subject to applicable law, will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participant’s employment or other service with the Company that is applicable to officers, Employees, Directors or other service providers of the Company, and in addition to any other remedies available under such policy and applicable law, may require the cancellation of outstanding Awards and the recoupment of any gains realized with respect to Awards.
29. DEFINITIONS. As used in this Plan, and except as elsewhere defined herein, the following terms will have the following meanings:
29.1. “Affiliate” means (a) any entity that, directly or indirectly, is controlled by, controls, or is under common control with, the Company, and (b) any entity in which the Company has a significant equity interest, in either case as determined by the Committee, whether now or hereafter existing.
29.2. “Award” means any award under the Plan, including any Option, Performance Award, Cash Award, Restricted Stock, Stock Bonus, Stock Appreciation Right, or Restricted Stock Unit.
29.3. “Award Agreement” means, with respect to each Award, the written or electronic agreement between the Company and the Participant setting forth the terms and conditions of the Award, and country-specific appendix thereto for grants to non-U.S. Participants, which will be in substantially a form (which need not be the same for each Participant) that the Committee (or in the case of Award agreements that are not used for Insiders, the Committee’s delegate(s)) has from time to time approved, and will comply with and be subject to the terms and conditions of this Plan.
29.4. “Board” means the Board of Directors of the Company.
29.5. “Cash Award” means an award as defined in Section 11 and granted under the Plan.
29.6. “Cause” means a determination by the Company (and in the case of Participant who is subject to Section 16 of the Exchange Act, the Committee) that the Participant has committed an act or acts constituting any of the following: (i) dishonesty, fraud, misconduct or negligence in connection with Participant’s duties to the Company, (ii) unauthorized disclosure or use of the Company’s confidential or proprietary information, (iii) misappropriation of a business opportunity of the Company, (iv) materially aiding Company competitor, (v) a felony conviction, (vi) failure or refusal to attend to the duties or obligations of the Participant’s position (vii) violation or breach of, or failure to comply with, the Company’s code of ethics or conduct, any of the Company’s rules, policies or procedures applicable to the Participant or any agreement in effect between the Company and the Participant or (viii) other conduct by such Participant that could be expected to be harmful to the business, interests or reputation of the Company. The determination as to whether Cause for a Participant’s termination exists will be made in good faith by the Company or Committee, as applicable, and will be final and binding on the Participant. This definition does not in any way limit the Company’s or any Parent’s or Subsidiary’s ability to terminate a Participant’s employment or services at any time as provided in Section 21 above. Notwithstanding the foregoing, the foregoing definition of “Cause” may, in part or in whole, be modified or replaced if a definition of Cause is set forth in such individual’s employment agreement, Award Agreement, or other applicable agreement with any Participant that pertains to Awards under the Plan.
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29.7. “Code” means the United States Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.
29.8. “Committee” means the Compensation Committee of the Board or those persons to whom administration of the Plan, or part of the Plan, has been delegated as permitted by law.
29.9. “Common Stock” means the common stock of the Company.
29.10. “Company” means Augmedix, Inc., a Delaware corporation, or any successor corporation.
29.11. “Consultant” means any natural person, including an advisor or independent contractor, engaged by the Company or a Parent, Subsidiary, or Affiliate to render services to such entity.
29.12. “Corporate Transaction” means the occurrence of any of the following events: (a) any “Person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 of the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total voting power represented by the Company’s then- outstanding voting securities, provided, however, that for purposes of this subclause (a) the acquisition of additional securities by any one Person who is considered to own more than fifty percent (50%) of the total voting power of the securities of the Company will not be considered a Corporate Transaction; (b) the consummation of the sale or disposition by the Company of all or substantially all of the Company’s assets; (c) the consummation of a merger or consolidation of the Company with any other corporation, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity or its parent) at least fifty percent (50%) of the total voting power represented by the voting securities of the Company or such surviving entity or its parent outstanding immediately after such merger or consolidation; (d) any other transaction which qualifies as a “corporate transaction” under Section 424(a) of the Code wherein the stockholders of the Company give up all of their equity interest in the Company (except for the acquisition, sale or transfer of all or substantially all of the outstanding shares of capital stock of the Company), or (e) a change in the effective control of the Company that occurs on the date that a majority of members of the Board is replaced during any twelve (12) month period by members of the Board whose appointment or election is not endorsed by a majority of the members of the Board prior to the date of the appointment or election. For purpose of this subclause (e), if any Person is considered to be in effective control of the Company, the acquisition of additional control of the Company by the same Person will not be considered a Corporate Transaction. For purposes of this definition, Persons will be considered to be acting as a group if they are owners of a corporation that enters into a merger, consolidation, purchase, or acquisition of stock, or similar business transaction with the Company. Notwithstanding the foregoing, to the extent that any amount constituting deferred compensation (as defined in Section 409A of the Code) would become payable under this Plan by reason of a Corporate Transaction, such amount will become payable only if the event constituting a Corporate Transaction would also qualify as a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company, each as defined within the meaning of Code Section 409A, as it has been and may be amended from time to time, and any proposed or final Treasury Regulations and IRS guidance that has been promulgated or may be promulgated thereunder from time to time.
29.13. “Director” means a member of the Board.
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29.14. “Disability” means in the case of incentive stock options, total and permanent disability as defined in Section 22(e)(3) of the Code and in the case of other Awards, that the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months.
29.15. “Dividend Equivalent Right” means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash, stock, or other property dividends in amounts equal equivalent to cash, stock, or other property dividends for each Share represented by an Award held by such Participant.
29.16. “Effective Date” means the day immediately prior to the Company’s IPO Registration Date, subject to approval of the Plan by the Company’s stockholders.
29.17. “Employee” means any person, including officers and Directors, providing services as an employee to the Company or any Parent, Subsidiary, or Affiliate. Neither service as a Director nor payment of a director’s fee by the Company will be sufficient to constitute “employment” by the Company.
29.18. “Exchange Act” means the United States Securities Exchange Act of 1934, as amended.
29.19. “Exchange Program” means a program pursuant to which (a) outstanding Awards are surrendered, cancelled, or exchanged for cash, the same type of Award, or a different Award (or combination thereof); or (b) the exercise price of an outstanding Award is increased or reduced.
29.20. “Exercise Price” means, with respect to an Option, the price at which a holder may purchase the Shares issuable upon exercise of an Option and with respect to a SAR, the price at which the SAR is granted to the holder thereof.
29.21. “Fair Market Value” means, as of any date, the value of a Share, determined as follows:
(a) if such Common Stock is publicly traded and is then listed on a national securities exchange, its closing price on the date of determination on the principal national securities exchange on which the Common Stock is listed or admitted to trading as reported in The Wall Street Journal or such other source as the Committee deems reliable;
(b) if such Common Stock is publicly traded but is neither listed nor admitted to trading on a national securities exchange, the average of the closing bid and asked prices on the date of determination as reported in The Wall Street Journal or such other source as the Committee deems reliable;
(c) in the case of an Option or SAR grant made on the IPO Registration Date, the price per share at which Shares are initially offered for sale to the public by the Company’s underwriters in the initial public offering of Shares as set forth in the Company’s final prospectus included within the registration statement on Form S-1 filed with the SEC under the Securities Act; or
(d) by the Board or the Committee in good faith.
29.22. “Insider” means an officer or Director of the Company or any other person whose transactions in the Company’s Common Stock are subject to Section 16 of the Exchange Act.
29.23. “IPO Registration Date” means the date on which the Company’s registration statement on Form S-1 in connection with its initial public offering of common stock is declared effective by the SEC under the Securities Act.
29.24. “IRS” means the United States Internal Revenue Service.
29.25. “Non-Employee Director” means a Director who is not an Employee of the Company or any Parent, Subsidiary, or Affiliate.
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29.26. “Option” means an award of an option to purchase Shares pursuant to Section 5.
29.27. “Parent” means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if each of such corporations other than the Company owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
29.28. “Participant” means a person who holds an Award under this Plan.
29.29. “Performance Award” means an Award as defined in Section 10 and granted under the Plan, the payment of which is contingent upon achieving certain performance goals established by the Committee.
29.30. “Performance Factors” means any of the factors selected by the Committee and specified in an Award Agreement, from among the following measures, either individually, alternatively or in any combination, applied to the Company as a whole or any business unit or Subsidiary, either individually, alternatively, or in any combination, on a GAAP or non-GAAP basis, and measured, to the extent applicable on an absolute basis or relative to a pre-established target, to determine whether the performance goals established by the Committee with respect to applicable Awards have been satisfied:
(a) profit before tax;
(b) billings;
(c) revenue;
(d) net revenue;
(e) earnings (which may include earnings before interest and taxes, earnings before taxes, net earnings, stock-based compensation expenses, depreciation, and amortization);
(f) operating income;
(g) operating margin;
(h) operating profit;
(i) controllable operating profit or net operating profit;
(j) net profit;
(k) gross margin;
(l) operating expenses or operating expenses as a percentage of revenue;
(m) net income;
(n) earnings per share;
(o) total stockholder return;
(p) market share;
(q) return on assets or net assets;
(r) the Company’s stock price;
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(s) growth in stockholder value relative to a pre-determined index;
(t) return on equity;
(u) return on invested capital;
(v) cash flow (including free cash flow or operating cash flows);
(w) cash conversion cycle;
(x) economic value added;
(y) individual confidential business objectives;
(z) contract awards or backlog;
(aa) overhead or other expense reduction;
(bb) credit rating;
(cc) strategic plan development and implementation;
(dd) succession plan development and implementation;
(ee) improvement in workforce diversity;
(ff) customer indicators and/or satisfaction;
(gg) new product invention or innovation;
(hh) attainment of research and development milestones;
(ii) improvements in productivity;
(jj) bookings;
(kk) attainment of objective operating goals and employee metrics;
(ll) sales;
(mm) expenses;
(nn) balance of cash, cash equivalents, and marketable securities;
(oo) completion of an identified special project;
(pp) completion of a joint venture or other corporate transaction;
(qq) employee satisfaction and/or retention;
(rr) research and development expenses;
(ss) working capital targets and changes in working capital; and
(tt) any other metric that is capable of measurement as determined by the Committee.
The Committee may provide for one or more equitable adjustments to the Performance Factors to preserve the Committee’s original intent regarding the Performance Factors at the time of the initial award grant, such as but not limited to, adjustments in recognition of unusual or non-recurring items such as acquisition related activities or changes in applicable accounting rules. It is within the sole discretion of the Committee to make or not make any such equitable adjustments.
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29.31. “Performance Period” means one or more periods of time, which may be of varying and overlapping durations, as the Committee may select, over which the attainment of one or more Performance Factors will be measured for the purpose of determining a Participant’s right to, and the payment of, a Performance Award.
29.32. “Performance Share” means an Award as defined in Section 10 and granted under the Plan, the payment of which is contingent upon achieving certain performance goals established by the Committee.
29.33. “Performance Unit” means an Award as defined in Section 10 and granted under the Plan, the payment of which is contingent upon achieving certain performance goals established by the Committee.
29.34. “Permitted Transferee” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (including adoptive relationships) of the Employee, any person sharing the Employee’s household (other than a tenant or employee), a trust in which these persons (or the Employee) have more than 50% of the beneficial interest, a foundation in which these persons (or the Employee) control the management of assets, and any other entity in which these persons (or the Employee) own more than 50% of the voting interests.
29.35. “Plan” means this Augmedix, Inc., 2020 Equity Incentive Plan, as may be amended from time to time.
29.36. “Purchase Price” means the price to be paid for Shares acquired under the Plan, other than Shares acquired upon exercise of an Option or SAR.
29.37. “Restricted Stock Award” means an Award as defined in Section 6 and granted under the Plan or issued pursuant to the early exercise of an Option.
29.38. “Restricted Stock Unit” means an Award as defined in Section 9 and granted under the Plan.
29.39. “SEC” means the United States Securities and Exchange Commission.
29.40. “Securities Act” means the United States Securities Act of 1933, as amended.
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29.41. “Service” will mean service as an Employee, Consultant, Director, or Non-Employee Director, to the Company or a Parent, Subsidiary, or Affiliate, subject to such further limitations as may be set forth in the Plan or the applicable Award Agreement. An Employee will not be deemed to have ceased to provide Service in the case of (a) sick leave, (b) military leave, or (c) any other leave of absence approved by the Company, provided that such leave is for a period of not more than ninety (90) days unless reemployment upon the expiration of such leave is guaranteed by contract or statute. Notwithstanding anything to the contrary, an Employee will not be deemed to have ceased to provide Service if a formal policy adopted from time to time by the Company and issued and promulgated to employees in writing provides otherwise. In the case of any Employee on an approved leave of absence or a reduction in hours worked (for illustrative purposes only, a change in schedule from that of full-time to part-time), the Committee may make such provisions respecting suspension or modification of vesting of the Award while on leave from the employ of the Company or a Parent, Subsidiary, or Affiliate or during such change in working hours as it may deem appropriate, except that in no event may an Award be exercised after the expiration of the term set forth in the applicable Award Agreement. In the event of military or other protected leave, if required by applicable laws, vesting will continue for the longest period that vesting continues under any other statutory or Company approved leave of absence and, upon a Participant’s returning from military leave, he or she will be given vesting credit with respect to Awards to the same extent as would have applied had the Participant continued to provide Service to the Company throughout the leave on the same terms as he or she was providing Service immediately prior to such leave. An employee will have terminated employment as of the date he or she ceases to provide Service (regardless of whether the termination is in breach of local employment laws or is later found to be invalid) and employment will not be extended by any notice period or garden leave mandated by local law, provided, however, that a change in status from an Employee to a Consultant or Non-Employee Director (or vice versa) will not terminate the Participant’s Service, unless determined by the Committee, in its discretion. The Committee will have sole discretion to determine whether a Participant has ceased to provide Service and the effective date on which the Participant ceased to provide Service.
29.42. "Shares” means shares of the Common Stock and the common stock of any successor entity of the Company.
29.43. “Stock Appreciation Right” means an Award defined in Section 8 and granted under the Plan.
29.44. “Stock Bonus” means an Award defined in Section 7 and granted under the Plan.
29.45. “Subsidiary” means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if each of the corporations other than the last corporation in the unbroken chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in such chain.
29.46. “Treasury Regulations” means regulations promulgated by the United States Treasury Department.
29.47. “Unvested Shares” means Shares that have not yet vested or are subject to a right of repurchase in favor of the Company (or any successor thereto).
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AUGMEDIX, INC.
2020 EQUITY INCENTIVE PLAN
NOTICE OF STOCK OPTION GRANT
Unless otherwise defined herein, the terms defined in the Augmedix, Inc. (the “Company”) 2020 Equity Incentive Plan (the “Plan”) will have the same meanings in this Notice of Stock Option Grant and the electronic representation of this Notice of Stock Option Grant established and maintained by the Company or a third party designated by the Company (this “Notice”).
Name:
Address:
You (the “Participant”) have been granted an option to purchase shares of Common Stock of the Company (the “Option”) under the Plan subject to the terms and conditions of the Plan, this Notice, and the Stock Option Award Agreement (the “Option Agreement”), including any applicable country-specific provisions in any appendix attached hereto (the “Appendix”), which constitutes part of the Option Agreement.
| Grant Number: | |||
| Date of Grant: | |||
| Vesting Commencement Date: | |||
| Exercise Price per Share: | |||
| Total Number of Shares: | |||
| Type of Option: | Non-Qualified Stock Option | ||
| Incentive Stock Option | |||
| Expiration Date: | ________ __, 20__; the Option expires earlier if Participant’s Service terminates earlier, as described in the Option Agreement. | ||
| Vesting Schedule: | Subject to the limitations set forth in this Notice, the Plan, and the Agreement, the Option will vest in accordance with the following schedule: [insert applicable vesting schedule, which may include performance metrics] | ||
By accepting (whether in writing, electronically, or otherwise) the Option, Participant acknowledges and agrees to the following:
| 1) | Participant understands that Participant’s Service with the Company or a Parent, Subsidiary, or Affiliate is for an unspecified duration, can be terminated at any time (i.e., is “at-will”) except where otherwise prohibited by applicable law, and that nothing in this Notice, the Option Agreement, or the Plan changes the nature of that relationship. Participant acknowledges that the vesting of the Option pursuant to this Notice is subject to Participant’s continuing Service as an Employee, Director, or Consultant. Participant agrees and acknowledges that the Vesting Schedule may change prospectively in the event that Participant’s Service status changes between full-and part-time and/or in the event the Participant is on a leave of absence, in accordance with Company policies relating to work schedules and vesting of Awards or as determined by the Committee. Furthermore, the period during which Participant may exercise the Option after termination of Service, if any, will commence on the Termination Date (as defined in the Option Agreement). |
| 2) | This grant is made under and governed by the Plan, the Agreement, and this Notice, and this Notice is subject to the terms and conditions of the Agreement and the Plan, both of which are incorporated herein by reference. Participant has read the Notice, the Option Agreement and, the Plan. |
| 3) |
Participant has read the Company’s Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Participant acquires or disposes of the Company’s securities. |
| 4) | By accepting the Option, Participant consents to electronic delivery and participation as set forth in the Option Agreement. |
| PARTICIPANT | AUGMEDIX, INC. | |||
| Signature: | By: | |||
| Print Name: | Its: | |||
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AUGMEDIX, INC.
2020 EQUITY INCENTIVE PLAN
STOCK OPTION AWARD AGREEMENT
Unless otherwise defined in this Stock Option Award Agreement (this “Option Agreement”), any capitalized terms used herein will have the same meaning ascribed to them in the Augmedix, Inc. 2020 Equity Incentive Plan (the “Plan”).
Participant has been granted an option to purchase Shares (the “Option”) of Augmedix, Inc. (the “Company”), subject to the terms, restrictions, and conditions of the Plan, the Notice of Stock Option Grant (the “Notice”), and this Option Agreement, including any applicable country-specific provisions in any appendix attached hereto (the “Appendix”), which constitutes part of this Option Agreement. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of the Notice or this Option Agreement, the terms and conditions of the Plan will prevail.
1. Vesting Rights. Subject to the applicable provisions of the Plan and this Option Agreement, the Option may be exercised, in whole or in part, in accordance with the Vesting Schedule set forth in the Notice. Participant acknowledges and agrees that the Vesting Schedule may change prospectively in the event Participant’s Service status changes between full and part-time and/or in the event Participant is on a leave of absence, in accordance with Company policies relating to work schedules and vesting of Awards or as determined by the Committee. Participant acknowledges that the vesting of the Option pursuant to this Notice and Agreement is subject to Participant’s continuing Service as an Employee, Director, or Consultant.
2. Grant of Option. Participant has been granted an Option for the number of Shares set forth in the Notice at the exercise price per Share in U.S. Dollars set forth in the Notice (the “Exercise Price”). If designated in the Notice as an Incentive Stock Option (“ISO”), the Option is intended to qualify as an Incentive Stock Option under Section 422 of the Code. However, if the Option is intended to be an ISO, to the extent that it exceeds the U.S. $100,000 rule of Code Section 422(d) it will be treated as a Nonqualified Stock Option (“NSO”).
3. Termination Period.
(a) General Rule. If Participant’s Service terminates for any reason except death or Disability, and other than for Cause, then the Option will expire at the close of business at Company headquarters on the date three (3) months after Participant’s Termination Date (as defined below) (or such shorter time period not less than thirty (30) days or longer time period as may be determined by the Committee, with any exercise beyond three (3) months after the date Participant’s Service terminates deemed to be the exercise of an NSO). The Company determines when Participant’s Service terminates for all purposes under this Option Agreement.
(b) Death; Disability. If Participant dies before Participant’s Service terminates (or Participant dies within three (3) months of Participant’s termination of Service other than for Cause), then the Option will expire at the close of business at Company headquarters on the date twelve (12) months after the date of death (or such shorter time period not less than six (6) months or longer time period as may be determined by the Committee, subject to the expiration details in Section 7). If Participant’s Service terminates because of Participant’s Disability, then the Option will expire at the close of business at Company headquarters on the date twelve (12) months after Participant’s Termination Date (or such shorter time period not less than six (6) months or longer time period as may be determined by the Committee, subject to the expiration details in Section 7).
(c) Cause. Unless otherwise determined by the Committee, the Option (whether or not vested) will terminate immediately upon the Participant’s cessation of Services if the Company reasonably determines in good faith that such cessation of Services has resulted in connection with an act or failure to act constituting Cause (or the Participant’s Services could have been terminated for Cause (without regard to the lapsing of any required notice or cure periods in connection therewith) at the time the Participant terminated Services).
(d) No Notification of Exercise Periods. Participant is responsible for keeping track of these exercise periods following Participant’s termination of Service for any reason. The Company will not provide further notice of such periods. In no event will the Option be exercised later than the Expiration Date set forth in the Notice.
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(e) Termination. For purposes of this Option, Participant’s Service will be considered terminated as of the date Participant is no longer providing Services to the Company, its Parent or one of its Subsidiaries or Affiliates (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any) (the “Termination Date”). The Committee will have the exclusive discretion to determine when Participant is no longer actively providing services for purposes of Participant’s Option (including whether Participant may still be considered to be providing services while on an approved leave of absence). Unless otherwise provided in this Option Agreement or determined by the Company, Participant’s right to vest in this Option under the Plan, if any, will terminate as of the Termination Date and will not be extended by any notice period (e.g., Participant’s period of services would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any). Following the Termination Date, Participant may exercise the Option only as set forth in the Notice and this Section, provided that the period (if any) during which Participant may exercise the Option after the Termination Date, if any, will commence on the date Participant ceases to provide services and will not be extended by any notice period mandated under employment laws in the jurisdiction where Participant is employed or terms of Participant’s employment agreement, if any. If Participant does not exercise this Option within the termination period set forth in the Notice or the termination periods set forth above, the Option will terminate in its entirety. In no event, may any Option be exercised after the Expiration Date of the Option as set forth in the Notice.
4. Exercise of Option.
(a) Right to Exercise. The Option is exercisable during its term in accordance with the Vesting Schedule set forth in the Notice and the applicable provisions of the Plan and this Option Agreement. In the event of Participant’s death, Disability, termination for Cause, or other cessation of Service, the exercisability of the Option is governed by the applicable provisions of the Plan, the Notice, and this Option Agreement. The Option may not be exercised for a fraction of a Share.
(b) Method of Exercise. The Option is exercisable by delivery of an exercise notice in a form specified by the Company (the “Exercise Notice”), which will state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice will be delivered in person, by mail, via electronic mail or facsimile or by other authorized method to the Secretary of the Company or other person designated by the Company. The Exercise Notice will be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares together with any applicable Tax-Related Items (as defined in Section 8 below). The Option will be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by such aggregate Exercise Price and payment of any applicable Tax-Related Items. No Shares will be issued pursuant to the exercise of the Option unless such issuance and exercise complies with all relevant provisions of law and the requirements of any stock exchange or quotation service upon which the Shares are then listed. Assuming such compliance, for United States income tax purposes the Exercised Shares will be considered transferred to Participant on the date the Option is exercised with respect to such Exercised Shares.
(c) Exercise by Another. If another person wants to exercise the Option after it has been transferred to him or her in compliance with this Option Agreement, that person must prove to the Company’s satisfaction that he or she is entitled to exercise the Option. That person must also complete the proper Exercise Notice form (as described above) and pay the Exercise Price (as described below) and any applicable Tax-Related Items (as described below).
5. Method of Payment. Payment of the aggregate Exercise Price will be by any of the following, or a combination thereof, at the election of Participant:
(a) Participant’s personal check (or readily available funds), wire transfer, or a cashier’s check;
(b) certificates for shares of Company stock that Participant owns, along with any forms needed to effect a transfer of those shares to the Company; the value of the shares, determined as of the effective date of the Option exercise, will be applied to the Exercise Price. Instead of surrendering shares of Company stock, Participant may attest to the ownership of those shares on a form provided by the Company and have the same number of shares subtracted from the Option shares issued to Participant. However, Participant may not surrender, or attest to the ownership of, shares of Company stock in payment of the Exercise Price of Participant’s Option if Participant’s action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to this Option for financial reporting purposes;
(c) cashless exercise through irrevocable directions to a securities broker approved by the Company to sell all or part of the Shares covered by the Option and to deliver to the Company from the sale proceeds an amount sufficient to pay the Exercise Price and any applicable Tax-Related Items. The balance of the sale proceeds, if any, will be delivered to Participant. The directions must be given by signing a special notice of exercise form provided by the Company; or
(d) other method authorized by the Company;
provided, however, that the Company may restrict the available methods of payment due to facilitate compliance with applicable law or administration of the Plan. In particular, if Participant is located outside the United States, Participant should review the applicable provisions of the Appendix for any such restrictions that may currently apply.
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6. Non-Transferability of Option. The Option may not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of other than by will or by the laws of descent or distribution or court order and may be exercised during the lifetime of Participant only by Participant or unless otherwise permitted by the Committee on a case-by-case basis. The terms of the Plan and this Option Agreement will be binding upon the executors, administrators, heirs, successors, and assigns of Participant.
7. Term of Option. The Option will in any event expire on the expiration date set forth in the Notice, which date is ten (10) years after the Date of Grant (five (5) years after the Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and Section 5.3 of the Plan applies).
8. Taxes.
a) Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if different, a Parent, Subsidiary, or Affiliate employing or retaining Participant (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account, or other tax related items related to Participant’s participation in the Plan and legally applicable to Participant (“Tax-Related Items”) is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer, if any. Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of this Option, including, but not limited to, the grant, vesting, or exercise of this Option; the subsequent sale of Shares acquired pursuant to such exercise; and the receipt of any dividends; and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of this Option to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if Participant is subject to Tax-Related Items in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. PARTICIPANT SHOULD CONSULT A TAX ADVISER APPROPRIATELY QUALIFIED IN THE COUNTRY OR COUNTRIES IN WHICH PARTICIPANT RESIDES OR IS SUBJECT TO TAXATION.
(b) Withholding. Prior to any relevant taxable or tax withholding event, as applicable, Participant agrees to make arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any withholding obligations for Tax-Related Items by one or a combination of the following, all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable:
| (i) | withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Employer; or |
| (ii) | withholding from proceeds of the sale of Shares acquired at exercise of this Option either through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization and without further consent); |
| (iii) | withholding Shares to be issued upon exercise of the Option, provided the Company only withholds the number of Shares necessary to satisfy no more than the maximum applicable statutory withholding amounts; |
| (iv) | Participant’s payment of a cash amount (including by check representing readily available funds or a wire transfer); or |
| (v) | any other arrangement approved by the Committee and permitted under applicable law; |
provided, however, that if Participant is a Section 16 officer of the Company under the Exchange Act, then the Committee (as constituted in accordance with Rule 16b-3 of the Exchange Act) shall establish the method of withholding from alternatives (i) – (v) above prior to the Tax-Related Items withholding event.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum permissible statutory rate for Participant’s tax jurisdiction(s) in which case Participant will have no entitlement to the equivalent amount in Shares and will receive a refund of any over-withheld amount in cash in accordance with applicable law. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Exercised Shares; notwithstanding that a number of the Shares are held back solely for the purpose of satisfying the withholding obligation for Tax-Related Items.
Finally, Participant agrees to pay to the Company and/or the Employer any amount of Tax-Related Items that the Company and/or the Employer may be required to withhold or account for as a result of Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares, if Participant fails to comply with Participant’s obligations in connection with the Tax-Related Items.
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(c) Notice of Disqualifying Disposition of ISO Shares. If Participant is subject to Tax-Related Items in the United States and sells or otherwise disposes of any of the Shares acquired pursuant to an ISO on or before the later of (i) two (2) years after the grant date, or (ii) one (1) year after the exercise date, Participant will immediately notify the Company in writing of such disposition. Participant agrees that he or she may be subject to income tax withholding by the Company on the compensation income recognized from such early disposition of ISO Shares by payment in cash or out any wages or other cash compensation paid to Participant by the Company and/or the Employer.
9. Nature of Grant. By accepting the Option, Participant acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature, and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b) the grant of the Option is exceptional, voluntary, and occasional, and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;
(c) all decisions with respect to future options or other grants, if any, will be at the sole discretion of the Company;
(d) Participant is voluntarily participating in the Plan;
(e) the Option and Participant’s participation in the Plan will not create a right to employment or be interpreted as forming or amending an employment or service contract with the Company or the Employer, and will not interfere with the ability of the Company or the Employer, as applicable, to terminate Participant’s employment or service relationship (if any);
(f) the Option and the Shares subject to the Option, and the income and value of same, are not intended to replace any pension rights or compensation;
(g) the Option and the Shares subject to the Option, and the income and value of same, are not part of normal or expected compensation for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement, or welfare benefits or similar payments;
(h) unless otherwise agreed with the Company, the Option, and the Shares subject to the Option, and the income and value of same, are not granted as consideration for, or in connection with, the service Participant may provide as a director of a Parent, Subsidiary, or Affiliate;
(i) the future value of the Shares underlying the Option is unknown, indeterminable, and cannot be predicted with certainty; if the underlying Shares do not increase in value, the Option will have no value; if Participant exercises the Option and acquires Shares, the value of such Shares may increase or decrease, even below the Exercise Price;
(j) no claim or entitlement to compensation or damages will arise from forfeiture of the Option resulting from Participant’s termination of Service (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any), and in consideration of the grant of the Option to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against the Employer, the Company, and any Parent, Subsidiary, or Affiliate; waives his or her ability, if any, to bring any such claim; and releases the Employer, the Company, and any Parent, Subsidiary, or Affiliate from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant will be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
(k) unless otherwise provided in the Plan or by the Company in its discretion, the Option and the benefits evidenced by this Option Agreement do not create any entitlement to have the Option or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any Corporate Transaction affecting the Shares; and
(l) neither the Employer, the Company, or any Parent, Subsidiary or Affiliate will be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Participant pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise.
(m) the following provisions apply only if Participant is providing services outside the United States:
| (i) | the Option and the Shares subject to the Option are not part of normal or expected compensation or salary for any purpose; and |
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| (ii) | Participant acknowledges and agrees that neither the Company, the Employer nor any Parent or Subsidiary or Affiliate will be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Participant pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercised |
10. No Advice Regarding Grant. The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan or Participant’s acquisition or sale of the underlying Shares. Participant acknowledges, understands, and agrees that he or she should consult with his or her own personal tax, legal, and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
11. Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Option Agreement and any other Option grant materials by and among, as applicable, the Employer, the Company and any Parent, Subsidiary or Affiliate for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.
Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address, email address and telephone number, date of birth, social insurance number, passport number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.
Participant understands that Data will be transferred to the stock plan service provider as may be designated by the Company from time to time or its affiliates or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. Participant authorizes the Company, the stock plan service provider as may be designated by the Company from time to time, and its affiliates, and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands that if he or she resides outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant options or other equity awards or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.
12. Language. If Participant has received this Option Agreement, or any other document related to the Option and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
13. Appendix. Notwithstanding any provisions in this Option Agreement, the Option will be subject to any special terms and conditions set forth in any Appendix to this Option Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Option Agreement.
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14. Imposition of Other Requirements. The Company reserves the right to impose other requirements on Participant’s participation in the Plan, on the Option, and on any Shares purchased upon exercise of the Option, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
15. Acknowledgement. The Company and Participant agree that the Option is granted under and governed by the Notice, this Option Agreement and the Plan (incorporated herein by reference). Participant: (a) acknowledges receipt of a copy of the Plan and the Plan prospectus, (b) represents that Participant has carefully read and is familiar with their provisions, and (c) hereby accepts the Option subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice.
16. Entire Agreement; Enforcement of Rights. This Option Agreement, the Plan, and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments, or negotiations concerning the purchase of the Shares hereunder are superseded. No adverse modification of, or adverse amendment to, this Option Agreement, nor any waiver of any rights under this Option Agreement, will be effective unless in writing and signed by the parties to this Option Agreement (which writing and signing may be electronic). The failure by either party to enforce any rights under this Option Agreement will not be construed as a waiver of any rights of such party.
17. Compliance with Laws and Regulations. The issuance of Shares and the sale of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state, federal, local and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Shares may be listed or quoted at the time of such issuance or transfer. Participant understands that the Company is under no obligation to register or qualify the Common Stock with any state, federal, or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, Participant agrees that the Company will have unilateral authority to amend the Plan and this Option Agreement without Participant’s consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this Option Agreement will be endorsed with appropriate legends, if any, determined by the Company.
18. Severability. If one or more provisions of this Option Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision will be excluded from this Option Agreement, (b) the balance of this Option Agreement will be interpreted as if such provision were so excluded and (c) the balance of this Option Agreement will be enforceable in accordance with its terms.
19. Governing Law and Venue. This Option Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed, construed and interpreted in accordance with the laws of the State of Delaware, without giving effect to such state’s conflict of laws rules.
Any and all disputes relating to, concerning or arising from this Option Agreement, or relating to, concerning or arising from the relationship between the parties evidenced by the Plan or this Option Agreement, will be brought and heard exclusively in the United States District Court for the District of Delaware or any state court in New Castle County, Delaware. Each of the parties hereby represents and agrees that such party is subject to the personal jurisdiction of said courts; hereby irrevocably consents to the jurisdiction of such courts in any legal or equitable proceedings related to, concerning, or arising from such dispute, and waives, to the fullest extent permitted by law, any objection which such party may now or hereafter have that the laying of the venue of any legal or equitable proceedings related to, concerning, or arising from such dispute which is brought in such courts is improper or that such proceedings have been brought in an inconvenient forum.
20. No Rights as Employee, Director or Consultant. Nothing in this Option Agreement will affect in any manner whatsoever any right or power of the Employer or the Company to terminate Participant’s Service, for any reason, with or without Cause.
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21. Consent to Electronic Delivery of All Plan Documents and Disclosures. By Participant’s acceptance of the Notice (whether in writing or electronically), Participant and the Company agree that the Option is granted under and governed by the terms and conditions of the Plan, the Notice, and this Option Agreement. Participant has reviewed the Plan, the Notice, and this Option Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing the Notice and Agreement, and fully understands all provisions of the Plan, the Notice, and this Option Agreement. Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice, and this Option Agreement. Participant further agrees to notify the Company upon any change in Participant’s residence address. By acceptance of the Option, Participant agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company and consents to the electronic delivery of the Notice, this Option Agreement, the Plan, account statements, Plan prospectuses required by the U.S. Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements), or other communications or information related to the Option and current or future participation in the Plan. Electronic delivery may include the delivery of a link to the Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail, or such other delivery determined at the Company’s discretion. Participant acknowledges that Participant may receive from the Company a paper copy of any documents delivered electronically at no cost if Participant contacts the Company by telephone, through a postal service, or electronic mail to Stock Administration. Participant further acknowledges that Participant will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, Participant understands that Participant must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, Participant understands that Participant’s consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if Participant has provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service, or electronic mail to Stock Administration. Finally, Participant understands that Participant is not required to consent to electronic delivery if local laws prohibit such consent.
22. Insider Trading Restrictions/Market Abuse Laws. Participant acknowledges that, depending on Participant’s country, Participant may be subject to insider trading restrictions and/or market abuse laws, which may affect Participant’s ability to acquire or sell the Shares or rights to Shares under the Plan during such times as Participant is considered to have “inside information” regarding the Company (as defined by the laws in Participant’s country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Participant acknowledges that it is Participant’s responsibility to comply with any applicable restrictions and understands that Participant should consult his or her personal legal advisor on such matters. In addition, Participant acknowledges that he or she has read the Company’s Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Participant acquires or disposes of the Company’s securities.
23. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the Option will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participant’s employment or other Service that is applicable to Participant. In addition to any other remedies available under such policy and applicable law, the Company may require the cancellation of Participant’s Option (whether vested or unvested) and the recoupment of any gains realized with respect to Participant’s Option.
BY ACCEPTING THIS OPTION, PARTICIPANT AGREES TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
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APPENDIX
AUGMEDIX, INC.
2020 EQUITY INCENTIVE PLAN
STOCK OPTION AWARD AGREEMENT
COUNTRY SPECIFIC PROVISIONS FOR EMPLOYEES OUTSIDE THE U.S.
Terms and Conditions
This Appendix includes additional terms and conditions that govern the Option granted to Participant under the Plan if Participant resides and/or works in one of the countries below. This Appendix forms part of the Option Agreement. Any capitalized term used in this Appendix without definition will have the meaning ascribed to it in the Notice, the Option Agreement, or the Plan, as applicable.
If Participant is a citizen or resident of a country, or is considered resident of a country, other than the one in which Participant is currently working, or Participant transfers employment and/or residency between countries after the Date of Grant, the Company will, in its sole discretion, determine to what extent the additional terms and conditions included herein will apply to Participant under these circumstances.
Notifications
This Appendix also includes information relating to exchange control, securities laws, foreign asset/account reporting, and other issues of which Participant should be aware with respect to Participant’s participation in the Plan. The information is based on the securities, exchange control, foreign asset/account reporting, and other laws in effect in the respective countries as of ________. Such laws are complex and change frequently. As a result, Participant should not rely on the information herein as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date at the time that Participant exercises the Option, sells Shares acquired under the Plan, or takes any other action in connection with the Plan.
In addition, the information is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of any particular result. Accordingly, Participant should seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to Participant’s situation.
Finally, if Participant is a citizen or resident of a country, or is considered resident of a country, other than the one in which Participant is currently working and/or residing, or Participant transfers employment and/or residency after the Date of Grant, the information contained herein may not apply to Participant in the same manner.
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APPENDIX
AUGMEDIX, INC.
2020 EQUITY INCENTIVE PLAN
STOCK OPTION AWARD AGREEMENT
COUNTRY SPECIFIC PROVISIONS FOR EMPLOYEES OUTSIDE THE U.S.
None
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AUGMEDIX, INC.
2020 EQUITY INCENTIVE PLAN
NOTICE OF RESTRICTED STOCK UNIT AWARD
Unless otherwise defined herein, the terms defined in the Augmedix, Inc. (the “Company”) 2020 Equity Incentive Plan (the “Plan”) will have the same meanings in this Notice of Restricted Stock Unit Award and the electronic representation of this Notice of Restricted Stock Unit Award established and maintained by the Company or a third party designated by the Company (this “Notice”).
Name:
Address:
You (the “Participant”) have been granted an award of Restricted Stock Units (“RSUs”) under the Plan subject to the terms and conditions of the Plan, this Notice and the attached Restricted Stock Unit Award Agreement (the “Agreement”), including any applicable country-specific provisions in any appendix attached hereto (the “Appendix”), which constitutes part of the Agreement.
Grant Number:
Number of RSUs:
Date of Grant:
Vesting Commencement Date:
| Expiration Date: | The earlier to occur of: (a) the date on which settlement of all RSUs granted hereunder occurs, and (b) the tenth anniversary of the Date of Grant. This RSU expires earlier if Participant’s Service terminates earlier, as described in the Agreement. | |
| Vesting Schedule: | Subject to the limitations set forth in this Notice, the Plan, and the Agreement, the RSUs will vest in accordance with the following schedule: [insert applicable vesting schedule, which may include performance metrics] |
By accepting (whether in writing, electronically or otherwise) the RSUs, Participant acknowledges and agrees to the following:
| 1) | Participant understands that Participant’s Service with the Company or a Parent, Subsidiary, or Affiliate is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), except where otherwise prohibited by applicable law, and that nothing in this Notice, the Agreement, or the Plan changes the nature of that relationship. Participant acknowledges that the vesting of the RSUs pursuant to this Notice is subject to Participant’s continuing Service as an Employee, Director or Consultant. Participant agrees and acknowledges that the Vesting Schedule may change prospectively in the event that Participant’s Service status changes between full- and part-time and/or in the event the Participant is on a leave of absence, in accordance with Company policies relating to work schedules and vesting of Awards or as determined by the Committee. |
| 2) | This grant is made under and governed by the Plan, the Agreement, and this Notice, and this Notice is subject to the terms and conditions of the Agreement and the Plan, both of which are incorporated herein by reference. Participant has read the Notice, the Agreement, and the Plan. |
| 3) | Participant has read the Company’s Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Participant acquires or disposes of the Company’s securities. |
| 4) | By accepting the RSUs, Participant consents to electronic delivery and participation as set forth in the Agreement. |
| PARTICIPANT | AUGMEDIX, INC. | |||
| Signature: | By: | |||
| Print Name: | Its: | |||
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AUGMEDIX, INC.
2020 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
Unless otherwise defined in this Restricted Stock Unit Award Agreement (this “Agreement”), any capitalized terms used herein will have the same meaning ascribed to them in the Augmedix, Inc. 2020 Equity Incentive Plan (the “Plan”).
Participant has been granted Restricted Stock Units (“RSUs”) subject to the terms, restrictions, and conditions of the Plan, the Notice of Restricted Stock Unit Award (the “Notice”), and this Agreement, including any applicable country-specific provisions in any appendix attached hereto (the “Appendix”), which constitutes part of this Agreement. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of the Notice or this Agreement, the terms and conditions of the Plan will prevail.
1. Settlement. Settlement of RSUs will be made within thirty (30) days following the applicable date of vesting under the Vesting Schedule set forth in the Notice. Settlement of RSUs will be in Shares. No fractional RSUs or rights for fractional Shares will be created pursuant to this Agreement.
2. No Stockholder Rights. Unless and until such time as Shares are issued in settlement of vested RSUs, Participant will have no ownership of the Shares allocated to the RSUs and will have no rights to dividends or to vote such Shares.
3. Dividend Equivalents. Dividends, if any (whether in cash or Shares), will not be credited to Participant.
4. Non-Transferability of RSUs. The RSUs and any interest therein will not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of in any manner other than by will or by the laws of descent or distribution or court order or unless otherwise permitted by the Committee on a case-by-case basis.
5. Termination; Leave of Absence; Change in Status. If Participant’s Service terminates for any reason, all unvested RSUs will be forfeited to the Company immediately, and all rights of Participant to such RSUs automatically terminate without payment of any consideration to Participant. Participant’s Service will be considered terminated as of the date Participant is no longer providing services (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any) and will not, subject to the laws applicable to Participant’s Award, be extended by any notice period mandated under local laws (e.g., Service would not include a period of “garden leave” or similar period). Participant acknowledges and agrees that the Vesting Schedule may change prospectively in the event Participant’s service status changes between full- and part-time status and/or in the event Participant is on an approved leave of absence in accordance the Company’s policies relating to work schedules and vesting of awards or as determined by the Committee. Participant acknowledges that the vesting of the Shares pursuant to this Notice and Agreement is subject to Participant’s continued Service. In case of any dispute as to whether termination of Service has occurred, the Committee will have sole discretion to determine whether such termination of Service has occurred and the effective date of such termination (including whether Participant may still be considered to be providing services while on an approved leave of absence).
6. Taxes.
(a) Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if different, a Parent, Subsidiary or Affiliate employing or retaining Participant (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to Participant’s participation in the Plan and legally applicable to Participant (“Tax-Related Items”) is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer, if any. Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the RSUs, including, but not limited to, the grant, vesting or settlement of the RSUs and the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends, and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the RSUs to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if Participant is subject to Tax-Related Items in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. PARTICIPANT SHOULD CONSULT A TAX ADVISER APPROPRIATELY QUALIFIED IN THE COUNTRY OR COUNTRIES IN WHICH PARTICIPANT RESIDES OR IS SUBJECT TO TAXATION.
(b) Withholding. Prior to any relevant taxable or tax withholding event, as applicable, Participant agrees to make arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any withholding obligations for Tax-Related Items by one or a combination of the following:
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| (i) | withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Employer; or |
| (ii) | withholding from proceeds of the sale of Shares acquired upon settlement of the RSUs either through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization and without further consent); |
| (iii) | withholding Shares to be issued upon settlement of the RSUs, provided the Company only withholds the number of Shares necessary to satisfy no more than the maximum applicable statutory withholding amounts; |
| (iv) | Participant’s payment of a cash amount (including by check representing readily available funds or a wire transfer); or |
| (v) | any other arrangement approved by the Committee and permitted under applicable law; |
all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if Participant is a Section 16 officer of the Company under the Exchange Act, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) will establish the method of withholding from alternatives (i)-(v) above prior to the Tax-Related Items withholding event.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum permissible statutory rate for Participant’s tax jurisdiction(s) in which case Participant will have no entitlement to the equivalent amount in Shares and will receive a refund of any over-withheld amount in cash in accordance with applicable law. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Shares subject to the vested RSUs, notwithstanding that a number of the Shares are held back solely for the purpose of satisfying the withholding obligation for Tax-Related Items.
Finally, Participant agrees to pay to the Company and/or the Employer any amount of Tax-Related Items that the Company and/or the Employer may be required to withhold or account for as a result of Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares, if Participant fails to comply with Participant’s obligations in connection with the Tax-Related Items.
7. Nature of Grant. By accepting the RSUs, Participant acknowledges, understands and agrees that:
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b) the grant of the RSUs is exceptional, voluntary, and occasional, and does not create any contractual or other right to receive future grants of RSUs, or benefits in lieu of RSUs, even if RSUs have been granted in the past;
(c) all decisions with respect to future RSUs or other grants, if any, will be at the sole discretion of the Company;
(d) Participant is voluntarily participating in the Plan;
(e) the RSUs and Participant’s participation in the Plan will not create a right to employment or be interpreted as forming or amending an employment or service contract with the Company or the Employer and will not interfere with the ability of the Company or the Employer, as applicable, to terminate Participant’s employment or service relationship (if any);
(f) the RSUs and the Shares subject to the RSUs, and the income and value of same, are not intended to replace any pension rights or compensation;
(g) the RSUs and the Shares subject to the RSUs, and the income and value of same, are not part of normal or expected compensation for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement, or welfare benefits or similar payments;
(h) unless otherwise agreed with the Company, the RSUs, and the Shares subject to the RSUs, and the income and value of same, are not granted as consideration for, or in connection with, the service Participant may provide as a director of a Parent, Subsidiary, or Affiliate;
(i) the future value of the underlying Shares is unknown, indeterminable, and cannot be predicted with certainty;
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(j) no claim or entitlement to compensation or damages will arise from forfeiture of the RSUs resulting from Participant’s termination of Service (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any), and in consideration of the grant of the RSUs to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against the Employer, the Company, and any Parent, Subsidiary or Affiliate; waives his or her ability, if any, to bring any such claim; and releases the Employer, the Company, and any Parent, Subsidiary, or Affiliate from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant will be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
(k) unless otherwise provided in the Plan or by the Company in its discretion, the RSUs and the benefits evidenced by this Agreement do not create any entitlement to have the RSUs or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any Corporate Transaction affecting the Shares; and
(l) the following provisions apply only if Participant is providing services outside the United States:
(i) the RSUs and the Shares subject to the RSUs are not part of normal or expected compensation or salary for any purpose;
(ii) Participant acknowledges and agrees that neither the Company, the Employer nor any Parent or Subsidiary or Affiliate will be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the RSUs or of any amounts due to Participant pursuant to the settlement of the RSUs or the subsequent sale of any Shares acquired upon settlement.
8. No Advice Regarding Grant. The Company is not providing any tax, legal, or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant acknowledges, understands and agrees he or she should consult with his or her own personal tax, legal, and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
9. Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Agreement and any other RSU grant materials by and among, as applicable, the Employer, the Company and any Parent, Subsidiary or Affiliate for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.
Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address, email address and telephone number, date of birth, social insurance number, passport number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all RSUs or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.
Participant understands that Data will be transferred to the stock plan service provider as may be designated by the Company from time to time or its affiliates or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. Participant authorizes the Company, the stock plan service provider as may be designated by the Company from time to time, and its affiliates, and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands that if he or she resides outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant RSUs or other equity awards or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.
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10. Language. If Participant has received this Agreement or any other document related to the RSU and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
11. Appendix. Notwithstanding any provisions in this Agreement, the RSUs will be subject to any special terms and conditions set forth in any Appendix to this Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Agreement.
12. Imposition of Other Requirements. The Company reserves the right to impose other requirements on Participant’s participation in the Plan, on the RSUs and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
13. Acknowledgement. The Company and Participant agree that the RSUs are granted under and governed by the Notice, this Agreement, and the Plan (incorporated herein by reference). Participant: (a) acknowledges receipt of a copy of the Plan and the Plan prospectus, (b) represents that Participant has carefully read and is familiar with their provisions, and (c) hereby accepts the RSUs subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice.
14. Entire Agreement; Enforcement of Rights. This Agreement, the Plan, and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments, or negotiations concerning the purchase of the Shares hereunder are superseded. No adverse modification of or adverse amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the parties to this Agreement (which writing and signing may be electronic). The failure by either party to enforce any rights under this Agreement will not be construed as a waiver of any rights of such party.
15. Compliance with Laws and Regulations. The issuance of Shares and the sale of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state, federal, local and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Shares may be listed or quoted at the time of such issuance or transfer. Participant understands that the Company is under no obligation to register or qualify the Common Stock with any state, federal, or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, Participant agrees that the Company will have unilateral authority to amend the Plan and this RSU Agreement without Participant’s consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this RSU Agreement will be endorsed with appropriate legends, if any, determined by the Company.
16. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision will be excluded from this Agreement, (b) the balance of this Agreement will be interpreted as if such provision were so excluded and (c) the balance of this Agreement will be enforceable in accordance with its terms.
17. Governing Law and Venue. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed, construed, and interpreted in accordance with the laws of the State of Delaware, without giving effect to such state’s conflict of laws rules.
Any and all disputes relating to, concerning or arising from this Agreement, or relating to, concerning, or arising from the relationship between the parties evidenced by the Plan or this Agreement, will be brought and heard exclusively in the United States District Court for the District of Delaware or any state court in New Castle County, Delaware. Each of the parties hereby represents and agrees that such party is subject to the personal jurisdiction of said courts; hereby irrevocably consents to the jurisdiction of such courts in any legal or equitable proceedings related to, concerning, or arising from such dispute, and waives, to the fullest extent permitted by law, any objection which such party may now or hereafter have that the laying of the venue of any legal or equitable proceedings related to, concerning, or arising from such dispute which is brought in such courts is improper or that such proceedings have been brought in an inconvenient forum.
18. No Rights as Employee, Director or Consultant. Nothing in this Agreement will affect in any manner whatsoever any right or power of the Employer or the Company to terminate Participant’s Service, for any reason, with or without Cause.
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19. Consent to Electronic Delivery of All Plan Documents and Disclosures. By Participant’s acceptance of the Notice (whether in writing or electronically), Participant and the Company agree that the RSUs are granted under and governed by the terms and conditions of the Plan, the Notice, and this Agreement. Participant has reviewed the Plan, the Notice, and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice and Agreement, and fully understands all provisions of the Plan, the Notice, and this Agreement. Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice, and this Agreement. Participant further agrees to notify the Company upon any change in Participant’s residence address. By acceptance of the RSUs, Participant agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company and consents to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the U.S. Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements), or other communications or information related to the RSUs and current or future participation in the Plan. Electronic delivery may include the delivery of a link to the Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail, or such other delivery determined at the Company’s discretion. Participant acknowledges that Participant may receive from the Company a paper copy of any documents delivered electronically at no cost if Participant contacts the Company by telephone, through a postal service, or electronic mail to Stock Administration. Participant further acknowledges that Participant will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, Participant understands that Participant must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, Participant understands that Participant’s consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if Participant has provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service, or electronic mail to Stock Administration. Finally, Participant understands that Participant is not required to consent to electronic delivery if local laws prohibit such consent.
20. Insider Trading Restrictions/Market Abuse Laws. Participant acknowledges that, depending on Participant’s country, Participant may be subject to insider trading restrictions and/or market abuse laws, which may affect Participant’s ability to acquire or sell the Shares or rights to Shares under the Plan during such times as Participant is considered to have “inside information” regarding the Company (as defined by the laws in Participant’s country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Participant acknowledges that it is Participant’s responsibility to comply with any applicable restrictions and understands that Participant should consult his or her personal legal advisor on such matters. In addition, Participant acknowledges that he or she read the Company’s Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Participant acquires or disposes of the Company’s securities.
21. Code Section 409A. For purposes of this Agreement, a termination of employment will be determined consistent with the rules relating to a “separation from service” as defined in Section 409A of the Internal Revenue Code and the regulations thereunder (“Section 409A”). Notwithstanding anything else provided herein, to the extent any payments provided under this RSU Agreement in connection with Participant’s termination of employment constitute deferred compensation subject to Section 409A, and Participant is deemed at the time of such termination of employment to be a “specified employee” under Section 409A, then such payment will not be made or commence until the earlier of (a) the expiration of the six (6) month period measured from Participant’s separation from service to the Employer or the Company, or (b) the date of Participant’s death following such a separation from service; provided, however, that such deferral will only be effected to the extent required to avoid adverse tax treatment to Participant including, without limitation, the additional tax for which Participant would otherwise be liable under Section 409A(a)(1)(B) in the absence of such a deferral. To the extent any payment under this RSU Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment will be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to this section are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.
22. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the RSUs will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participant’s employment or other Service that is applicable to Participant. In addition to any other remedies available under such policy and applicable law, the Company may require the cancellation of Participant’s RSUs (whether vested or unvested) and the recoupment of any gains realized with respect to Participant’s RSUs.
BY ACCEPTING THIS AWARD OF RSUS, PARTICIPANT AGREES TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
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APPENDIX
AUGMEDIX, INC.
2020 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
COUNTRY SPECIFIC PROVISIONS FOR EMPLOYEES OUTSIDE THE U.S.
Terms and Conditions
This Appendix includes additional terms and conditions that govern the RSUs granted to Participant under the Plan if Participant resides and/or works in one of the countries below. This Appendix forms part of the Agreement. Any capitalized term used in this Appendix without definition will have the meaning ascribed to it in the Notice, the Agreement, or the Plan, as applicable.
If Participant is a citizen or resident of a country, or is considered resident of a country, other than the one in which Participant is currently working, or Participant transfers employment and/or residency between countries after the Date of Grant, the Company will, in its sole discretion, determine to what extent the additional terms and conditions included herein will apply to Participant under these circumstances.
Notifications
This Appendix also includes information relating to exchange control, securities laws, foreign asset/account reporting, and other issues of which Participant should be aware with respect to Participant’s participation in the Plan. The information is based on the securities, exchange control, foreign asset/account reporting, and other laws in effect in the respective countries as of _________. Such laws are complex and change frequently. As a result, Participant should not rely on the information herein as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date at the time that Participant vests in the RSUs, sells Shares acquired under the Plan, or takes any other action in connection with the Plan.
In addition, the information is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of any particular result. Accordingly, Participant should seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to Participant’s situation.
Finally, if Participant is a citizen or resident of a country, or is considered resident of a country, other than the one in which Participant is currently working and/or residing, or Participant transfers employment and/or residency after the Date of Grant, the information contained herein may not apply to Participant in the same manner.
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APPENDIX
AUGMEDIX, INC.
2020 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
COUNTRY SPECIFIC PROVISIONS FOR EMPLOYEES OUTSIDE THE U.S.
None
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AUGMEDIX, INC.
2020 EQUITY INCENTIVE PLAN
NOTICE OF PERFORMANCE STOCK UNIT AWARD
Unless otherwise defined herein, the terms defined in the Augmedix, Inc. (the “Company”) 2020 Equity Incentive Plan (the “Plan”) will have the same meanings in this Notice of Performance Stock Unit Award and the electronic representation of this Notice of Performance Stock Unit Award established and maintained by the Company or a third party designated by the Company (this “Notice”).
Name:
Address:
You (the “Participant”) have been granted an award of Performance Stock Units (“PSUs”) under the Plan subject to the terms and conditions of the Plan, this Notice and the attached Performance Stock Unit Award Agreement (the “Agreement”), including any applicable country-specific provisions in any appendix attached hereto (the “Appendix”), which constitutes part of the Agreement.
Grant Number:
Number of PSUs:
Date of Grant:
Vesting Commencement Date:
| Expiration Date: | The earlier to occur of: (a) the date on which settlement of all PSUs granted hereunder occurs, and (b) the tenth anniversary of the Date of Grant. This RSU expires earlier if Participant’s Service terminates earlier, as described in the Agreement. | |
| Vesting Schedule: | Subject to the limitations set forth in this Notice, the Plan, and the Agreement, the PSUs will vest in accordance with the following schedule: [insert applicable vesting schedule, which may include performance metrics] |
By accepting (whether in writing, electronically or otherwise) the PSUs, Participant acknowledges and agrees to the following:
| 1) | Participant understands that Participant’s Service with the Company or a Parent, Subsidiary, or Affiliate is for an unspecified duration, can be terminated at any time (i.e., is “at-will”), except where otherwise prohibited by applicable law, and that nothing in this Notice, the Agreement, or the Plan changes the nature of that relationship. Participant acknowledges that the vesting of the PSUs pursuant to this Notice is subject to Participant’s continuing Service as an Employee, Director or Consultant. Participant agrees and acknowledges that the Vesting Schedule may change prospectively in the event that Participant’s Service status changes between full- and part-time and/or in the event the Participant is on a leave of absence, in accordance with Company policies relating to work schedules and vesting of Awards or as determined by the Committee. |
| 2) | This grant is made under and governed by the Plan, the Agreement, and this Notice, and this Notice is subject to the terms and conditions of the Agreement and the Plan, both of which are incorporated herein by reference. Participant has read the Notice, the Agreement, and the Plan. |
| 3) | Participant has read the Company’s Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Participant acquires or disposes of the Company’s securities. |
| 4) | By accepting the PSUs, Participant consents to electronic delivery and participation as set forth in the Agreement. |
| PARTICIPANT | AUGMEDIX, INC. | |||
| Signature: | By: | |||
| Print Name: | Its: | |||
38
AUGMEDIX, INC.
2020 EQUITY INCENTIVE PLAN
PERFORMANCE STOCK UNIT AWARD AGREEMENT
Unless otherwise defined in this Performance Stock Unit Award Agreement (this “Agreement”), any capitalized terms used herein will have the same meaning ascribed to them in the Augmedix, Inc. 2020 Equity Incentive Plan (the “Plan”).
Participant has been granted Performance Stock Units (“PSUs”) subject to the terms, restrictions, and conditions of the Plan, the Notice of Performance Stock Unit Award (the “Notice”), and this Agreement, including any applicable country-specific provisions in any appendix attached hereto (the “Appendix”), which constitutes part of this Agreement. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of the Notice or this Agreement, the terms and conditions of the Plan will prevail.
1. Settlement. Settlement of PSUs will be made within thirty (30) days following the applicable date of vesting under the Vesting Schedule set forth in the Notice. Settlement of PSUs will be in Shares. No fractional PSUs or rights for fractional Shares will be created pursuant to this Agreement.
2. No Stockholder Rights. Unless and until such time as Shares are issued in settlement of vested PSUs, Participant will have no ownership of the Shares allocated to the PSUs and will have no rights to dividends or to vote such Shares.
3. Dividend Equivalents. Dividends, if any (whether in cash or Shares), will not be credited to Participant.
4. Non-Transferability of PSUs. The PSUs and any interest therein will not be sold, assigned, transferred, pledged, hypothecated, or otherwise disposed of in any manner other than by will or by the laws of descent or distribution or court order or unless otherwise permitted by the Committee on a case-by-case basis.
5. Termination; Leave of Absence; Change in Status. If Participant’s Service terminates for any reason, all unvested PSUs will be forfeited to the Company immediately, and all rights of Participant to such PSUs automatically terminate without payment of any consideration to Participant. Participant’s Service will be considered terminated as of the date Participant is no longer providing services (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any) and will not, subject to the laws applicable to Participant’s Award, be extended by any notice period mandated under local laws (e.g., Service would not include a period of “garden leave” or similar period). Participant acknowledges and agrees that the Vesting Schedule may change prospectively in the event Participant’s service status changes between full- and part-time status and/or in the event Participant is on an approved leave of absence in accordance the Company’s policies relating to work schedules and vesting of awards or as determined by the Committee. Participant acknowledges that the vesting of the Shares pursuant to this Notice and Agreement is subject to Participant’s continued Service. In case of any dispute as to whether termination of Service has occurred, the Committee will have sole discretion to determine whether such termination of Service has occurred and the effective date of such termination (including whether Participant may still be considered to be providing services while on an approved leave of absence).
6. Taxes.
(a) Responsibility for Taxes. Participant acknowledges that, regardless of any action taken by the Company or, if different, a Parent, Subsidiary or Affiliate employing or retaining Participant (the “Employer”), the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to Participant’s participation in the Plan and legally applicable to Participant (“Tax-Related Items”) is and remains Participant’s responsibility and may exceed the amount actually withheld by the Company or the Employer, if any. Participant further acknowledges that the Company and/or the Employer (i) make no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the PSUs, including, but not limited to, the grant, vesting or settlement of the PSUs and the subsequent sale of Shares acquired pursuant to such settlement and the receipt of any dividends, and (ii) do not commit to and are under no obligation to structure the terms of the grant or any aspect of the PSUs to reduce or eliminate Participant’s liability for Tax-Related Items or achieve any particular tax result. Further, if Participant is subject to Tax-Related Items in more than one jurisdiction, Participant acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction. PARTICIPANT SHOULD CONSULT A TAX ADVISER APPROPRIATELY QUALIFIED IN THE COUNTRY OR COUNTRIES IN WHICH PARTICIPANT RESIDES OR IS SUBJECT TO TAXATION.
39
(b) Withholding. Prior to any relevant taxable or tax withholding event, as applicable, Participant agrees to make arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items. In this regard, Participant authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy any withholding obligations for Tax-Related Items by one or a combination of the following:
| (i) | withholding from Participant’s wages or other cash compensation paid to Participant by the Company and/or the Employer; or |
| (ii) | withholding from proceeds of the sale of Shares acquired upon settlement of the PSUs either through a voluntary sale or through a mandatory sale arranged by the Company (on Participant’s behalf pursuant to this authorization and without further consent); |
| (iii) | withholding Shares to be issued upon settlement of the PSUs, provided the Company only withholds the number of Shares necessary to satisfy no more than the maximum applicable statutory withholding amounts; |
| (iv) | Participant’s payment of a cash amount (including by check representing readily available funds or a wire transfer); or |
| (v) | any other arrangement approved by the Committee and permitted under applicable law; |
all under such rules as may be established by the Committee and in compliance with the Company’s Insider Trading Policy and 10b5-1 Trading Plan Policy, if applicable; provided however, that if Participant is a Section 16 officer of the Company under the Exchange Act, then the Committee (as constituted in accordance with Rule 16b-3 under the Exchange Act) will establish the method of withholding from alternatives (i)-(v) above prior to the Tax-Related Items withholding event.
Depending on the withholding method, the Company may withhold or account for Tax-Related Items by considering applicable statutory withholding rates or other applicable withholding rates, including up to the maximum permissible statutory rate for Participant’s tax jurisdiction(s) in which case Participant will have no entitlement to the equivalent amount in Shares and will receive a refund of any over-withheld amount in cash in accordance with applicable law. If the obligation for Tax-Related Items is satisfied by withholding in Shares, for tax purposes, Participant is deemed to have been issued the full number of Shares subject to the vested PSUs, notwithstanding that a number of the Shares are held back solely for the purpose of satisfying the withholding obligation for Tax-Related Items.
Finally, Participant agrees to pay to the Company and/or the Employer any amount of Tax-Related Items that the Company and/or the Employer may be required to withhold or account for as a result of Participant’s participation in the Plan that cannot be satisfied by the means previously described. The Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares, if Participant fails to comply with Participant’s obligations in connection with the Tax-Related Items.
| 7. | Nature of Grant. By accepting the PSUs, Participant acknowledges, understands and agrees that: |
(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;
(b) the grant of the PSUs is exceptional, voluntary, and occasional, and does not create any contractual or other right to receive future grants of PSUs, or benefits in lieu of PSUs, even if PSUs have been granted in the past;
(c) all decisions with respect to future PSUs or other grants, if any, will be at the sole discretion of the Company;
(d) Participant is voluntarily participating in the Plan;
(e) the PSUs and Participant’s participation in the Plan will not create a right to employment or be interpreted as forming or amending an employment or service contract with the Company or the Employer and will not interfere with the ability of the Company or the Employer, as applicable, to terminate Participant’s employment or service relationship (if any);
(f) the PSUs and the Shares subject to the PSUs, and the income and value of same, are not intended to replace any pension rights or compensation;
(g) the PSUs and the Shares subject to the PSUs, and the income and value of same, are not part of normal or expected compensation for any purpose, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement, or welfare benefits or similar payments;
(h) unless otherwise agreed with the Company, the PSUs, and the Shares subject to the PSUs, and the income and value of same, are not granted as consideration for, or in connection with, the service Participant may provide as a director of a Parent, Subsidiary, or Affiliate;
(i) the future value of the underlying Shares is unknown, indeterminable, and cannot be predicted with certainty;
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(j) no claim or entitlement to compensation or damages will arise from forfeiture of the PSUs resulting from Participant’s termination of Service (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is employed or the terms of Participant’s employment agreement, if any), and in consideration of the grant of the PSUs to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against the Employer, the Company, and any Parent, Subsidiary or Affiliate; waives his or her ability, if any, to bring any such claim; and releases the Employer, the Company, and any Parent, Subsidiary, or Affiliate from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant will be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim;
(k) unless otherwise provided in the Plan or by the Company in its discretion, the PSUs and the benefits evidenced by this Agreement do not create any entitlement to have the PSUs or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any Corporate Transaction affecting the Shares; and
(l) the following provisions apply only if Participant is providing services outside the United States:
(i) the PSUs and the Shares subject to the PSUs are not part of normal or expected compensation or salary for any purpose;
(ii) Participant acknowledges and agrees that neither the Company, the Employer nor any Parent or Subsidiary or Affiliate will be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the PSUs or of any amounts due to Participant pursuant to the settlement of the PSUs or the subsequent sale of any Shares acquired upon settlement.
8. No Advice Regarding Grant. The Company is not providing any tax, legal, or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant acknowledges, understands and agrees he or she should consult with his or her own personal tax, legal, and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.
9. Data Privacy. Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Agreement and any other RSU grant materials by and among, as applicable, the Employer, the Company and any Parent, Subsidiary or Affiliate for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.
Participant understands that the Company and the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address, email address and telephone number, date of birth, social insurance number, passport number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all PSUs or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.
Participant understands that Data will be transferred to the stock plan service provider as may be designated by the Company from time to time or its affiliates or such other stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipients’ country (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. Participant authorizes the Company, the stock plan service provider as may be designated by the Company from time to time, and its affiliates, and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purpose of implementing, administering and managing his or her participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands that if he or she resides outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her employment status or service and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant PSUs or other equity awards or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.
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10. Language. If Participant has received this Agreement or any other document related to the RSU and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.
11. Appendix. Notwithstanding any provisions in this Agreement, the PSUs will be subject to any special terms and conditions set forth in any Appendix to this Agreement for Participant’s country. Moreover, if Participant relocates to one of the countries included in the Appendix, the special terms and conditions for such country will apply to Participant, to the extent the Company determines that the application of such terms and conditions is necessary or advisable for legal or administrative reasons. The Appendix constitutes part of this Agreement.
12. Imposition of Other Requirements. The Company reserves the right to impose other requirements on Participant’s participation in the Plan, on the PSUs and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable for legal or administrative reasons, and to require Participant to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.
13. Acknowledgement. The Company and Participant agree that the PSUs are granted under and governed by the Notice, this Agreement, and the Plan (incorporated herein by reference). Participant: (a) acknowledges receipt of a copy of the Plan and the Plan prospectus, (b) represents that Participant has carefully read and is familiar with their provisions, and (c) hereby accepts the PSUs subject to all of the terms and conditions set forth herein and those set forth in the Plan and the Notice.
14. Entire Agreement; Enforcement of Rights. This Agreement, the Plan, and the Notice constitute the entire agreement and understanding of the parties relating to the subject matter herein and supersede all prior discussions between them. Any prior agreements, commitments, or negotiations concerning the purchase of the Shares hereunder are superseded. No adverse modification of or adverse amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the parties to this Agreement (which writing and signing may be electronic). The failure by either party to enforce any rights under this Agreement will not be construed as a waiver of any rights of such party.
15. Compliance with Laws and Regulations. The issuance of Shares and the sale of Shares will be subject to and conditioned upon compliance by the Company and Participant with all applicable state, federal, local and foreign laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Shares may be listed or quoted at the time of such issuance or transfer. Participant understands that the Company is under no obligation to register or qualify the Common Stock with any state, federal, or foreign securities commission or to seek approval or clearance from any governmental authority for the issuance or sale of the Shares. Further, Participant agrees that the Company will have unilateral authority to amend the Plan and this RSU Agreement without Participant’s consent to the extent necessary to comply with securities or other laws applicable to issuance of Shares. Finally, the Shares issued pursuant to this RSU Agreement will be endorsed with appropriate legends, if any, determined by the Company.
16. Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good faith. In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision will be excluded from this Agreement, (b) the balance of this Agreement will be interpreted as if such provision were so excluded and (c) the balance of this Agreement will be enforceable in accordance with its terms.
17. Governing Law and Venue. This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto will be governed, construed, and interpreted in accordance with the laws of the State of Delaware, without giving effect to such state’s conflict of laws rules.
Any and all disputes relating to, concerning or arising from this Agreement, or relating to, concerning, or arising from the relationship between the parties evidenced by the Plan or this Agreement, will be brought and heard exclusively in the United States District Court for the District of Delaware or any state court in New Castle County, Delaware. Each of the parties hereby represents and agrees that such party is subject to the personal jurisdiction of said courts; hereby irrevocably consents to the jurisdiction of such courts in any legal or equitable proceedings related to, concerning, or arising from such dispute, and waives, to the fullest extent permitted by law, any objection which such party may now or hereafter have that the laying of the venue of any legal or equitable proceedings related to, concerning, or arising from such dispute which is brought in such courts is improper or that such proceedings have been brought in an inconvenient forum.
18. No Rights as Employee, Director or Consultant. Nothing in this Agreement will affect in any manner whatsoever any right or power of the Employer or the Company to terminate Participant’s Service, for any reason, with or without Cause.
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19. Consent to Electronic Delivery of All Plan Documents and Disclosures. By Participant’s acceptance of the Notice (whether in writing or electronically), Participant and the Company agree that the PSUs are granted under and governed by the terms and conditions of the Plan, the Notice, and this Agreement. Participant has reviewed the Plan, the Notice, and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Notice and Agreement, and fully understands all provisions of the Plan, the Notice, and this Agreement. Participant hereby agrees to accept as binding, conclusive, and final all decisions or interpretations of the Committee upon any questions relating to the Plan, the Notice, and this Agreement. Participant further agrees to notify the Company upon any change in Participant’s residence address. By acceptance of the PSUs, Participant agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or a third party designated by the Company and consents to the electronic delivery of the Notice, this Agreement, the Plan, account statements, Plan prospectuses required by the U.S. Securities and Exchange Commission, U.S. financial reports of the Company, and all other documents that the Company is required to deliver to its security holders (including, without limitation, annual reports and proxy statements), or other communications or information related to the PSUs and current or future participation in the Plan. Electronic delivery may include the delivery of a link to the Company intranet or the internet site of a third party involved in administering the Plan, the delivery of the document via e-mail, or such other delivery determined at the Company’s discretion. Participant acknowledges that Participant may receive from the Company a paper copy of any documents delivered electronically at no cost if Participant contacts the Company by telephone, through a postal service, or electronic mail to Stock Administration. Participant further acknowledges that Participant will be provided with a paper copy of any documents delivered electronically if electronic delivery fails; similarly, Participant understands that Participant must provide on request to the Company or any designated third party a paper copy of any documents delivered electronically if electronic delivery fails. Also, Participant understands that Participant’s consent may be revoked or changed, including any change in the electronic mail address to which documents are delivered (if Participant has provided an electronic mail address), at any time by notifying the Company of such revised or revoked consent by telephone, postal service, or electronic mail to Stock Administration. Finally, Participant understands that Participant is not required to consent to electronic delivery if local laws prohibit such consent.
20. Insider Trading Restrictions/Market Abuse Laws. Participant acknowledges that, depending on Participant’s country, Participant may be subject to insider trading restrictions and/or market abuse laws, which may affect Participant’s ability to acquire or sell the Shares or rights to Shares under the Plan during such times as Participant is considered to have “inside information” regarding the Company (as defined by the laws in Participant’s country). Any restrictions under these laws or regulations are separate from and in addition to any restrictions that may be imposed under any applicable Company insider trading policy. Participant acknowledges that it is Participant’s responsibility to comply with any applicable restrictions and understands that Participant should consult his or her personal legal advisor on such matters. In addition, Participant acknowledges that he or she read the Company’s Insider Trading Policy, and agrees to comply with such policy, as it may be amended from time to time, whenever Participant acquires or disposes of the Company’s securities.
21. Code Section 409A. For purposes of this Agreement, a termination of employment will be determined consistent with the rules relating to a “separation from service” as defined in Section 409A of the Internal Revenue Code and the regulations thereunder (“Section 409A”). Notwithstanding anything else provided herein, to the extent any payments provided under this RSU Agreement in connection with Participant’s termination of employment constitute deferred compensation subject to Section 409A, and Participant is deemed at the time of such termination of employment to be a “specified employee” under Section 409A, then such payment will not be made or commence until the earlier of (a) the expiration of the six (6) month period measured from Participant’s separation from service to the Employer or the Company, or (b) the date of Participant’s death following such a separation from service; provided, however, that such deferral will only be effected to the extent required to avoid adverse tax treatment to Participant including, without limitation, the additional tax for which Participant would otherwise be liable under Section 409A(a)(1)(B) in the absence of such a deferral. To the extent any payment under this RSU Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment will be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A. Payments pursuant to this section are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations.
22. Award Subject to Company Clawback or Recoupment. To the extent permitted by applicable law, the PSUs will be subject to clawback or recoupment pursuant to any compensation clawback or recoupment policy adopted by the Board or required by law during the term of Participant’s employment or other Service that is applicable to Participant. In addition to any other remedies available under such policy and applicable law, the Company may require the cancellation of Participant’s PSUs (whether vested or unvested) and the recoupment of any gains realized with respect to Participant’s PSUs.
BY ACCEPTING THIS AWARD OF RSUS, PARTICIPANT AGREES TO ALL OF THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE PLAN.
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APPENDIX
AUGMEDIX, INC.
2020 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
COUNTRY SPECIFIC PROVISIONS FOR EMPLOYEES OUTSIDE THE U.S.
Terms and Conditions
This Appendix includes additional terms and conditions that govern the PSUs granted to Participant under the Plan if Participant resides and/or works in one of the countries below. This Appendix forms part of the Agreement. Any capitalized term used in this Appendix without definition will have the meaning ascribed to it in the Notice, the Agreement, or the Plan, as applicable.
If Participant is a citizen or resident of a country, or is considered resident of a country, other than the one in which Participant is currently working, or Participant transfers employment and/or residency between countries after the Date of Grant, the Company will, in its sole discretion, determine to what extent the additional terms and conditions included herein will apply to Participant under these circumstances.
Notifications
This Appendix also includes information relating to exchange control, securities laws, foreign asset/account reporting, and other issues of which Participant should be aware with respect to Participant’s participation in the Plan. The information is based on the securities, exchange control, foreign asset/account reporting, and other laws in effect in the respective countries as of _________. Such laws are complex and change frequently. As a result, Participant should not rely on the information herein as the only source of information relating to the consequences of Participant’s participation in the Plan because the information may be out of date at the time that Participant vests in the PSUs, sells Shares acquired under the Plan, or takes any other action in connection with the Plan.
In addition, the information is general in nature and may not apply to Participant’s particular situation, and the Company is not in a position to assure Participant of any particular result. Accordingly, Participant should seek appropriate professional advice as to how the relevant laws in Participant’s country may apply to Participant’s situation.
Finally, if Participant is a citizen or resident of a country, or is considered resident of a country, other than the one in which Participant is currently working and/or residing, or Participant transfers employment and/or residency after the Date of Grant, the information contained herein may not apply to Participant in the same manner.
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APPENDIX
AUGMEDIX, INC.
2020 EQUITY INCENTIVE PLAN
RESTRICTED STOCK UNIT AWARD AGREEMENT
COUNTRY SPECIFIC PROVISIONS FOR EMPLOYEES OUTSIDE THE U.S.
None
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Exhibit 10.10
AUGMEDIX, INC. (the “Company”)
Non-Employee Director
Election to Receive Shares in Lieu of Cash
To be effective with respect to the payment of Board and Committee fees for the third quarter of 2023, this election must be received by Todd Holvick (todd@augmedix.com, with a copy to jrafferty@mofo.com) by no later than August 11, 2023 (the “Election Date”).
Election to Receive Shares
Pursuant to the terms of the Augmedix, Inc. 2020 Equity Incentive Plan (the “Plan”), I hereby elect to receive all or a portion of my Board and Committee fee payments (“Cash Fees”) in Shares in lieu of cash in accordance with this election. Capitalized terms used but not defined herein shall have the meanings set forth in the Plan.
Retainer Election
I hereby elect to receive _____% of my Cash Fees due to me for the third quarter of 2023 in Shares having an equivalent value.
Type of Shares Issued
Shares issued in lieu of Cash Fees shall be fully vested and unrestricted Shares issued pursuant to the Plan. Notwithstanding the foregoing, if there are not sufficient Shares available under the Plan to pay the Cash Fees in Shares, the Cash Fees will be paid in cash.
Number of Shares
The number of Shares paid shall be determined by dividing the dollar amount of the Cash Fees subject to the election by the Fair Market Value of a Share on the date the Cash Fees would otherwise be payable rounded to the nearest whole Share.
Election Irrevocable
I understand that this election will become irrevocable on the Election Date with respect to Cash Fees payable for the third quarter of 2023.
Duration of Election
Check applicable box (only one):
[__] I understand that this election will continue in effect for Cash Fees related to Board and Committee services performed by me during all future quarterly periods while I am on the Board until I notify the Company by email of the revocation of such election. Any such revocation must be emailed to todd@augmedix.com, with a copy to jrafferty@mofo.com.
OR
[__] I understand that this election will only be effective for Cash Fees related to services performed during the third quarter of 2023. If I do not submit another timely written director stock election for future quarterly periods, 100% of my Cash Fees for services performed during future quarterly periods will be paid in cash.
Withholding
I understand and agree that the Company may take such action as it deems necessary or appropriate to satisfy any obligations it may have to withhold federal, state or local income or other taxes incurred by reason of payments made pursuant to the Plan.
Acknowledgement
I acknowledge receipt of a copy of the Plan and acknowledge and agree that this election is made pursuant to the Plan and is subject to all of the terms and conditions thereof.
| Signature of Non-Employee Director: ________________________ | Date: __________________ |
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Emmanuel Krakaris, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Augmedix, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 14, 2023 | By: | /s/ Emmanuel Krakaris |
| Emmanuel Krakaris | ||
| President, Chief Executive Officer and Secretary (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul Ginocchio, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of Augmedix, Inc.; |
| 2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
| 3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
| 4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| Date: August 14, 2023 | By: | /s/ Paul Ginocchio |
| Paul Ginocchio | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Augmedix, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein. |
| Date: August 14, 2023 | By: | /s/ Emmanuel Krakaris |
| Emmanuel Krakaris | ||
| President, Chief Executive Officer and Secretary (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Augmedix, Inc. (the “Company”) on Form 10-Q for the period ended June 30, 2023 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented therein. |
| Date: August 14, 2023 | By: | /s/ Paul Ginocchio |
| Paul Ginocchio | ||
| Chief Financial Officer | ||
| (Principal Financial Officer and Principal Accounting Officer) |
Condensed Consolidated Balance Sheets (Unaudited) (Parentheticals) - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Statement of Financial Position [Abstract] | ||
| Allowance for doubtful accounts (in Dollars) | $ 128 | $ 102 |
| Common stock, par value (in Dollars per share) | $ 0.1000 | $ 0.1000 |
| Common stock, shares authorized | 500,000,000 | 500,000,000 |
| Common stock, shares issued | 40,800,078 | 37,442,663 |
| Common stock, shares outstanding | 40,800,078 | 37,442,663 |
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Income Statement [Abstract] | ||||
| Revenues | $ 10,780 | $ 7,333 | $ 20,408 | $ 14,318 |
| Cost of revenues | 5,715 | 4,131 | 10,957 | 8,003 |
| Gross profit | 5,065 | 3,202 | 9,451 | 6,315 |
| Operating expenses: | ||||
| General and administrative | 4,760 | 4,172 | 8,967 | 8,219 |
| Sales and marketing | 2,649 | 2,320 | 5,212 | 4,640 |
| Research and development | 2,590 | 2,649 | 5,300 | 4,929 |
| Total operating expenses | 9,999 | 9,141 | 19,479 | 17,788 |
| Loss from operations | (4,934) | (5,939) | (10,028) | (11,473) |
| Other income (expenses): | ||||
| Interest expense | (558) | (385) | (966) | (986) |
| Interest income | 276 | 4 | 438 | 9 |
| Loss on debt extinguishment | (1,097) | (1,097) | ||
| Change in fair value of warrant liability | (69) | (69) | ||
| Other income | 303 | 84 | 437 | 208 |
| Total other expenses, net | (48) | (1,394) | (160) | (1,866) |
| Net loss before income taxes | (4,982) | (7,333) | (10,188) | (13,339) |
| Income tax expense | 51 | 2 | 84 | 21 |
| Net loss | (5,033) | (7,335) | (10,272) | (13,360) |
| Other comprehensive income (loss): | ||||
| Foreign exchange translation adjustment | (298) | (131) | (331) | (140) |
| Total comprehensive loss | $ (5,331) | $ (7,466) | $ (10,603) | $ (13,500) |
| Net loss per share of common stock, basic (in Dollars per share) | $ (0.12) | $ (0.2) | $ (0.25) | $ (0.36) |
| Weighted average shares of common stock outstanding, basic (in Shares) | 43,607,984 | 37,416,095 | 40,566,425 | 37,406,090 |
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (Parentheticals) - $ / shares |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Income Statement [Abstract] | ||||
| Net loss per share of common stock, diluted (in Dollars per share) | $ (0.12) | $ (0.20) | $ (0.25) | $ (0.36) |
| Weighted average shares of common stock outstanding, diluted (in Shares) | 43,607,984 | 37,416,095 | 40,566,425 | 37,406,090 |
Organization and Nature of Business |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Organization and Nature of Business [Abstract] | |
| Organization and Nature of Business | 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.
Augmedix delivers industry-leading, ambient medical documentation and data products 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 products digitize natural physician-patient conversations and convert it to medical notes in real time, which are seamlessly transferred to the Electronic Health Record (“EHR”) system. To achieve this, the Company’s Notebuilder Platform uses Automated Speech Recognition, Natural Language Processing, including Large Language Models, and proprietary structured data sets, supported by medical documentation specialists.
Leveraging this platform, Augmedix’s products relieve clinicians of administrative burden, in turn, reducing burnout and increasing both clinician and patient satisfaction.
Augmedix is headquartered in San Francisco, CA, with offices in three (3) countries around the world.
Liquidity
The Company has historically funded its operations primarily by debt and equity financings prior to the merger with Malo Holdings and subsequently funded its operations through cash proceeds obtained as part of the listing on the OTC market and the listing on Nasdaq. As of June 30, 2023, the Company’s existing sources of liquidity included cash, cash equivalents and restricted cash of $25.3 million, plus up to $5.0 million in incremental capital available through the SVB Loan Agreement and an additional $5.0 million through the Equity Line of Credit with Redmile Group, LLC, which may be utilized starting in the second half of 2024. The Company has a limited history of operations and has incurred negative cash flows from operating activities and losses from operations in the past as reflected in the accumulated deficit of $136.1 million as of June 30, 2023. The Company has relied on debt and equity financing to fund operations to date and expects losses and negative cash flows to continue, primarily as a result of continued research, development, and marketing efforts. The Company’s cash balance will provide sufficient resources to meet working capital needs for over twelve months from the filing date of the June 30, 2023 Form 10-Q. Over the longer term, if the Company does 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 the Company requires additional future financing that such financing will be available on terms which are acceptable to it, or at all.
Risks and Uncertainties
The Company is subject to a number of risks associated with companies at a similar stage, including dependence on key personnel, competition from similar products and larger companies, ongoing changes within 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, economic volatility caused by increased interest rates, and instability within the banking system. |
Basis of Presentation and Summary of Significant Accounting Policies |
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| Basis of Presentation and Summary of Significant Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation and Summary of Significant Accounting Policies | 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 the Accounting Standards Updated (“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 financial position as of June 30, 2023 and its results of operations for the three and six months ended June 30, 2023 and 2022, cash flows for six months ended June 30, 2023 and 2022, and stockholders’ equity for the three and six months ended June 30, 2023 and 2022. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023. 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, 2022 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, 2022 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on April 17, 2023.
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 average period of benefit associated with costs capitalized to obtain a revenue contract, incremental borrowing rate, internal-use software development costs, fair value of warrants issued, and stock-based compensation, including the underlying fair value of the Company’s common stock for grants issued when the Company was a private company. 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 United States 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’ 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 $0.3 million gain and $0.1 million gain for the three months ended June 30, 2023 and 2022 respectively. Transaction gains and losses were $0.3 million gain and $0.1 million gains for the six months ended June 30, 2023 and 2022, respectively.
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.
All of the Company’s revenue is generated in the United States and denominated in U.S. dollars.
Concentrations of Credit Risk and Major Customers
Financial instruments at June 30, 2023 and 2022 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 keeps a majority of its cash in quoted and highly-liquid money market funds.
The Company’s accounts receivable are derived from revenue from customers located in the U.S. Major customers are defined as those generating revenue in excess of 10% of the Company’s annual revenue. The Company had three major customers during the three and six months ended June 30, 2023. Revenues from these major customers accounted for 20%, 14% and 12% of revenue for the three months ended June 30, 2023 and 19%, 14% and 12% of revenue for the six months ended June 30, 2023. The Company had three major customers during the three and six months ended June 30, 2022. Revenues from these major customers accounted for 18%, 17% and 12% of revenue for the three months ended June 30, 2022 and 19%, 17% and 12% of revenue for the six months ended June 30, 2022.
Four customers account for 10% or more of the accounts receivable, with balances of $2.5 million, $1.2 million, $1.2 million and $1.2 million at June 30, 2023. Two customers account for 10% or more of the accounts receivable, with balances of $1.4 million and $0.7 million at December 31, 2022.
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, cash equivalents 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:
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 the six months ended June 30, 2023 or 2022.
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 stand-ready 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 generally pay an upfront implementation fee. The upfront implementation fee is deferred and recognized over the period the customer benefits and customer prepayments are deferred and included in the accompanying unaudited interim condensed consolidated balance sheets in deferred revenues. Revenues are recognized over time as 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 customer receives the benefit of our stand-ready scribing services as we perform them.
As permitted under the practical expedient available under ASU 2014-09, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue for the amount at which the Company has the right to invoice for services performed.
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 typically with a 90 day notice.
The Company determines revenue recognition through the following steps:
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.
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 an estimated period of benefit that the Company determined to be between the range of 12 to 24 months. The period of benefit was determined by taking into consideration the Company’s customer contracts, technology, customer life, and other relevant factors. The Company periodically evaluates whether there have been any changes in its business, market conditions, or other events which would indicate that its amortization period should be changed, or if there are potential indicators of impairment. 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 accompanying unaudited interim condensed consolidated balance sheets. Amortization expense is included in sales and marketing expenses on the accompanying unaudited interim condensed consolidated statements of operations and comprehensive loss.
Internal-use software development costs
The Company capitalizes certain qualifying costs incurred during the application development stage in connection with the development of its internal use software. Costs related to preliminary project activities and post-implementation activities are expensed in research and development (“R&D”) as incurred. R&D expenses consist primarily of employee-related costs, software-related costs, allocated overhead, and costs of outside services used to supplement our internal staff.
Internal-use software costs of $0.2 million were capitalized in the three months ended June 30, 2023. All capitalized costs are related to costs incurred during the application development stage of software development for the Company’s platform to which subscriptions will be sold once the software is ready for its intended use.
Capitalized internal-use software costs are included within property and equipment, net, on the condensed consolidated balance sheets, and are amortized over the estimated useful life of the software, which is typically three years. The related amortization expense is recognized in the condensed consolidated statements of operations and comprehensive loss within the function that receives the benefit of the developed software. The Company will begin to amortize the capitalized internal-use software costs once the product is ready for its intended use and goes into general commercial release.
Contract Balances
Deferred revenue represents an obligation to render services for which the Company has received consideration, or for which an amount of consideration is due from the customer and the Company has an unconditional right to payment under a non-cancellable contract.
Changes in the deferred revenue account were as follows:
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, 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. Advertising expenses incurred by the Company were $0.2 million and $0.2 million for the three months ended June 30, 2023 and 2022, respectively, and $0.4 million and $0.5 million for the six months ended June 30, 2023 and 2022, respectively.
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 and pre-funded warrants outstanding because all necessary conditions to convert into common shares were met when those warrants were issued. 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, 2023 and 2022.
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:
Correction of Immaterial Error Related to Prior Periods
In the third quarter of 2022, the Company identified an error related to its accounting for sales commissions whereby the Company should have amortized sales commissions for new revenue contracts over the estimated period of benefit which is between the range of 12 to 24 months.
For the three and six months ended June 30, 2022, sales and marketing expenses were overstated by $0.1 million and overstated by a nominal amount, respectively.
Recently Adopted Accounting Standards
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. The Company adopted this standard on January 1, 2023, and it did not have a material impact on its consolidated financial statements upon adoption.
Recently Issued Accounting Pronouncements Not Yet Adopted
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. |
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Fair Value Measurements |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Fair Value Measurements [Abstract] | |
| Fair Value Measurements | 3. Fair Value Measurements
Fair Value of Financial Instruments
The carrying amounts of cash, cash equivalents, restricted cash, accounts receivable, prepaid expenses, accounts payable, and customer deposits approximate fair value due to their short-term nature. Cash equivalents of $23.3 million are currently held in money market funds which are classified as Level 1 because they are valued using quoted market prices in active markets for identical assets. As of June 30, 2023, the fair value of the Company’s loan payable was $21.3 million. As of June 30, 2023, the carrying value of the Company loan payable was $19.9 million. The estimated fair value for the Company’s loan payable was based on discounted expected future cash flows using prevailing interest rates which are Level 3 inputs under the fair value hierarchy. The fair value of the warrant liability was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy. |
Property and Equipment |
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| Property and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property and Equipment | 4. Property and Equipment
Property and equipment consist of the following:
The Company recorded depreciation and amortization expense of $0.2 million and $0.2 million during the three months ended June 30, 2023 and 2022, respectively, and $0.5 million and $0.4 million during the six months ended June 30, 2023 and 2022, respectively. |
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Accrued Expenses and Other Current Liabilities |
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| Accrued Expenses and Other Current Liabilities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued expenses and other current liabilities | 5. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consists of the following:
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Debt |
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt | 6. Debt
Eastward Loan and Security Agreement
On March 25, 2021, the Company entered into the Loan and Security Agreement (the “Eastward Loan Agreement”) with Eastward Capital Partners (“Eastward”) to establish a loan facility that provided for borrowings in the aggregate principal amount of up to $17.0 million, which were available to be drawn in two tranches. The first tranche of $15.0 million was funded on March 31, 2021. The second tranche of $2.0 million was available, at the Company’s request, between October 30, 2021, and November 30, 2021, provided the Company achieved at least $6.0 million in revenue and a maximum earnings before interest, taxes, depreciation, and amortization (“EBITDA”) loss of $4.8 million, in each case for the third fiscal quarter of 2021. There were no borrowings under the second tranche. Outstanding borrowings under the Eastward Loan Agreement were secured by a first priority lien on substantially all of the personal property assets of the Company, including the Company’s intellectual property. The Company was required to pay only interest during the first 18 months after funding of the first tranche and thereafter. The loan facility bore an annual interest rate of the prime rate as published in the Wall Street Journal, subject to a floor of 3.25% plus 8.75%. The annual interest rate was 12.0% as of December 31, 2021.
The Company and Eastward also entered into a Co-Investment Agreement which grants to Eastward and its affiliates a right to purchase in the Company’s future equity financings up to a total of $3.0 million at the same per share purchase price and terms as other investors in such equity financings. Eastward chose not to exercise its co-investment rights during the October 2021 capital raise.
Borrowings under the Eastward Loan Agreement were repaid in full in May 2022 with the proceeds from the SVB Loan Agreement. 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 Eastward Loan Agreement.
SVB Loan Agreement and Amendment
On May 4, 2022 (the “Effective Date”), the Company and its subsidiary, Augmedix Operating Corporation (individually and collectively, “Borrower”) entered into that certain Loan and Security Agreement (the “SVB Loan Agreement”) with Silicon Valley Bank, a California corporation, as lender (“SVB”). Borrower’s obligations under the SVB Loan Agreement are secured by first-priority liens on substantially all assets of Borrower. On June 13, 2023, the Borrower entered into that certain First Amendment to Loan and Security Agreement (“Amendment”) with SVB, which amends certain provisions of the SVB Loan Agreement. Under the SVB Loan Agreement, the term loan facility’s initial stated maturity date was June 1, 2025, which was automatically extended to December 1, 2025 as the Company achieved certain performance milestones that were a condition to such extension. The Amendment provides for further automatic extensions of the term loan facility’s maturity date, with the possibility of automatic extension to June 1, 2027, if the Company achieves certain equity milestones as set forth in the Amendment and certain performance milestones (including with respect to revenue and net income (loss) as set forth in the Amendment. The Amendment also extends the stated maturity date of the revolving credit facility from May 4, 2024 to November 4, 2024.
Under the SVB Loan Agreement, repayment under the term loan facility was interest only until July 1, 2023, which interest only period was automatically extended to January 1, 2024 provided the Company achieved certain performance milestones. The Amendment provides for further automatic extensions of the amortization date, with the possibility of extension of the amortization date to July 1, 2025, if the Company achieves certain equity milestones and certain performance milestones (including with respect to revenue and net income (loss) as set forth in the Amendment.
The Amendment provides that interest on the borrowings under the term loan facility is payable at a floating rate per annum equal to the greater of (a) 6.00% and (b) the prime rate plus 0.00%. Additionally, the Amendment provides that interest on the borrowings under the revolving credit facility is payable at a floating rate per annum equal to the greater of (a) 6.50% and (b) the prime rate plus 0.50%.
The Amendment provides for a reduction in the prepayment fee payable in connection with a prepayment by the Company of all borrowings under the term loan facility, with the following prepayment fee payable: (a) 2.50% of the outstanding principal amount of the borrowings under the term loan facility at the time of such prepayment if it occurs prior to the first anniversary of the Effective Date, (b) 1.50% of the outstanding principal amount of the borrowings under the term loan facility at the time of such prepayment if it occurs on or after the first anniversary of the effective date but prior to the second anniversary of the Effective Date, and (c) 0.50% of the outstanding principal amount of the borrowings under the term loan facility at the time of such prepayment if it occurs on or after the second anniversary of the Effective Date but prior to the term loan facility’s maturity date.
On June 30, 2023, the future minimum payments required under the SVB Loan Agreement, including the final payment, are as follows as of (in thousands):
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 that provides that if Borrower fails to maintain minimum cash and cash equivalents in an amount of (a) no less than $25.0 million (prior to any Tranche B advance) and (b) $30.0 million (following any Tranche B advance), Borrower is then required to maintain certain minimum revenue requirements as set forth in the SVB Loan Agreement, which will be measured on a trailing 3-month basis and tested quarterly. If Borrower has failed to maintain the minimum cash and cash equivalents set forth in the preceding sentence, in lieu of being subject to the minimum revenue requirements, Borrower has the ability to cure such failure to maintain minimum cash and cash equivalents by delivering evidence satisfactory to SVB that Borrower has raised at least $10.0 million in net cash proceeds from the sale of Borrower’s equity interests.
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 48,295 shares of the Company’s common stock, $0.0001 par value per share, exercisable at any time for a period of approximately seven years from the Effective Date, at an exercise price of $2.38 per share, payable in cash or on a cashless basis according to the formula set forth in the Warrant.
On June 13, 2023, in connection with the Amendment, the Company issued to SVB a warrant to purchase stock, to purchase up to 190,330 shares of the Company’s common stock, $0.0001 par value per share, exercisable at any time for a period of approximately seven years from the date of issuance, at an exercise price of $4.25 per share, payable in cashless basis according to the formula set forth in the warrant. The exercise price of the warrant was adjusted to $3.01 per share upon approval of the Company’s shareholders at the Company’s Annual Meeting of stockholders held on July 13, 2023.
The Company was in compliance with all covenants of the Lender on June 30, 2023 and December 31, 2022. |
Common Stock, and Preferred Stock |
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| Common Stock, and Preferred Stock [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock, and Preferred Stock | 7. Common Stock, and Preferred Stock
Common Stock
The Company is authorized to issue 500,000,000 shares of common stock with a par value of $0.0001 per share. Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders. Subject to preferences that may apply to any outstanding preferred stock, holders of common stock are entitled to receive ratably any dividends that the Company’s board of directors may declare out of funds legally available for that purpose on a non-cumulative basis. No dividends had been declared through June 30, 2023.
On April 19, 2023, the Company entered into a Securities Purchase Agreement with RedCo II Master Fund, L.P. (“Redmile”) and HINSIGHT-AUGX HOLDINGS, LLC, a wholly owned indirect subsidiary of HCA Healthcare, Inc. (the “Purchasers”), pursuant to which the Company sold to the Purchasers for aggregate consideration of $11,999,999.29 an aggregate of 3,125,000 shares of the Company’s common stock at a purchase price of $1.60 per share, pre-funded warrants to purchase up to 4,375,273 shares of common stock, at a price per pre-funded warrant equal to the purchase price per share, less $0.0001, and breakeven warrants to purchase up to 1,875,069 shares of common stock, at an exercise price of $1.75 per share, that will become exercisable on the earliest of (1) the date on which the Company closes an equity or debt financing prior to December 31, 2025, (2) December 31, 2025, if the Company cannot provide written certification that it has achieved cash flow break even from operations, excluding interest payments, for two out of three consecutive quarters between the Closing Date and December 31, 2025, on such date, (3) immediately prior to a change of control that occurs prior to December 31, 2025, and (4) the date on which a specified Regulatory Event (as defined in the break-even warrants) occurs; provided, however, that the breakeven warrants shall terminate on December 31, 2025 if none of the foregoing events have occurred on or prior to December 31, 2025. In no event shall the initial exercise date be prior to the 6-month anniversary of the date of issuance, and the breakeven warrants will expire seven years following the date of issuance. The pre-funded warrants have an exercise price of $0.0001 per pre-funded warrant share, became exercisable upon issuance and remain exercisable until exercised in full. On June 13, 2023, the Company and Redmile entered into a separate equity line of credit, which was subsequently approved by the Company’s stockholders on July 13, 2023. This equity line of credit permits the Company to sell shares of its common stock having an aggregate price of up to $5,000,000 to Redmile from time to time, at a purchase price of $1.60 per share, subject to certain conditions set forth in the securities purchase agreement by and between the Company and Redmile dated as of July 13, 2023. On May 19, 2023, the Company filed a registration statement on Form S-3 (File No. 333-272081), which was declared effective by the SEC on May 26, 2023, which registered for resale 9,375,342 shares of the Company’s common stock.
Common Stock Warrants
At June 30, 2023, the Company had the following warrants outstanding to acquire shares of its common stock:
Preferred Stock
The Company is authorized to issue 10,000,000 shares of preferred stock with a par value of $0.0001 per share. The Company’s board of directors are authorized, subject to limitations prescribed by Delaware law, to issue preferred stock in one or more series, to establish from time to time the number of shares to be included in each series, and to fix the designation, powers, preferences, and rights of the shares of each series. As of June 30, 2023, there were no shares of preferred stock issued or outstanding. |
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Equity Incentive Plan |
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| Equity Incentive Plan [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity Incentive Plan | 8. Equity Incentive Plan
At the effective date of the Malo Holdings and Augmedix merger (the “Merger”), the Company assumed Augmedix’s 2013 Equity Incentive Plan (the “2013 Plan”). Options granted under the 2013 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 Company’s 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, stock appreciation rights or RSUs were granted under the 2013 Plan after August 31, 2020.
Pursuant to the Merger, the Company adopted the 2020 Equity Incentive Plan (the “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 10 years and may be exercisable in cash or as otherwise determined by the Company’s board of directors. Vesting generally occurs over a period of not greater than four years.
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 5% of the total number of outstanding shares of common stock as of the immediately preceding January 1, or a number as may be determined by the Company’s board of directors. As of June 30, 2023, 616,743 shares of common stock remained available for grant under the 2020 Plan.
The Company recorded share-based compensation expense in the following expense categories in the condensed consolidated statements of operations and comprehensive loss for the six months ended June 30, 2023 and 2022:
No income tax benefits have been recognized in the condensed consolidated statements of operations and comprehensive loss for stock-based compensation arrangements. Stock-based compensation costs of $5,000 have been capitalized as property and equipment through the three and six month ended June 30, 2023.
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, 2023 and 2022 was determined using the methods and assumptions discussed below.
For the six months ended June 30, 2023 and 2022, the fair value of options granted was estimated using a Black-Scholes option pricing model with the following weighted average assumptions:
The weighted average grant date fair value of stock option awards granted was $1.13 and $1.26 during the six months ended June 30, 2023 and 2022, respectively.
The following table summarizes stock option activity under the 2020 Plan for the six months ended June 30, 2023:
The intrinsic value of the options exercised during the six months ended June 30, 2023 was $0.3 million. The aggregate intrinsic value of options outstanding and options exercisable as of June 30, 2023 were $27.9 million and $18.2 million, respectively. At June 30, 2023, future stock-based compensation for options granted and outstanding of $3.8 million will be recognized over a remaining weighted-average requisite service period of 2.4 years.
The aggregate intrinsic value of RSU outstanding as of June 30, 2023, was $1.3 million. At June 30, 2023, there is no future stock-based compensation for RSU pending recognition.
Performance and Market-Based Options
In March 2021, the Company granted 727,922 stock options to the Company’s Chief Executive Officer (“CEO”) under the 2020 Plan with an exercise price of $3.00 per share. The options vest based on the CEO’s continued service in addition to the following terms:
The grant date fair value of the options was determined using a Monte Carlo simulation model. The Company’s assumptions, for the options expiring on March 3, 2031, for expected volatility, closing price and risk-free rate were 50.0%, $3.00 and 0.77%, respectively. For the options expiring on March 22, 2031, the assumptions for expected volatility, closing price and risk-free rate were 50.0%, $3.00 and 0.87%, respectively. The aggregate estimated fair value of the options was $0.4 million. The Company recognized $0.1 in stock-based compensation expense for the six months ended June 30, 2023. As of June 30, 2023, there was $0.1 million of unrecognized compensation costs which the Company plans to recognize over a weighted average period of 1 year. If the market conditions are achieved, any remaining unrecognized compensation cost associated with those options will be immediately recognized. |
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Commitments and Contingencies |
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| Commitments and Contingencies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies | 9. Commitments and Contingencies
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.
The Company leases its office facilities in San Francisco, California under a non-cancelable operating lease agreement that expires February 2025. The Company entered an office lease in India commencing January 1, 2023 which expires December 2027. 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 to recognize leases less than one year under short-term lease exemption under ASC 842.
The Company subsequently decided to enter an office lease in Bangladesh commencing May 1, 2023 which expires July 2028.
Supplemental lease information related to leases for the periods of three and six months ended June 30, 2022 and 2023 is as follows (in thousands):
Other information related to the operating lease where the Company is the lessee is as follows:
Supplemental cash flow information related to the operating lease is as follows (in thousands):
As of June 30, 2023, the maturities of the Company’s operating lease liabilities (excluding short-term leases) are as follows (in thousands):
Cloud Computing Services
In June 2021, the Company entered into a non-cancelable three-year contract to obtain cloud computing services. The minimum contractual spend over the three-year term is $1.8 million. As of June 30, 2023, the Company has spent approximately $0.4 million against this contract.
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 financial position or results of operations or cash flows. As a result, no liability related to such claims has been recorded at June 30, 2023 or December 31, 2022.
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 Company’s 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, 2023 or December 31, 2022. |
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Related Party Transactions |
6 Months Ended |
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Jun. 30, 2023 | |
| Related Party Transactions [Abstract] | |
| Related Party Transactions | 10. Related Party Transactions
Operating Leases
In 2015, the Bangladesh subsidiary entered into agreements to rent office facilities under 10-year operating lease agreements (Note 9), with a company owned by relatives of the Company’s Director and Chief Strategy Officer. The Company paid $0.1 million and $0.1 million to the related party during the three months ended June 30, 2023 and 2022, respectively, and $0.1 million and $0.2 million to the related party during the six months ended June 30, 2023 and 2022, respectively, which is included as rent expense. At June 30, 2023, the amounts owed to the related party were $8,000 and included in accounts payable in the accompanying consolidated balance sheet. At December 31, 2022, the amounts owed to the related party were $4,000 and included in accounts payable in the accompanying consolidated balance sheet. |
Employee Benefit Plan |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Employee Benefit Plan [Abstract] | |
| Employee Benefit Plan | 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 Company’s board of directors. During the three months ended June 30, 2023 and 2022 the Company made contributions of $38,000 and $36,000, respectively, and $0.1 million and $0.1 million for the six months ended June 30, 2023 and 2022, respectively, to the 401(k) plan.
Effective October 2021, the Company established a savings fund for permanent employees of the Bangladesh subsidiary named Augmedix BD Limited Employees’ Gratuity Fund (“Gratuity Fund”), as per local requirements. Employees will be entitled to cash benefit after completion of a minimum of five years of service with the Company. The payment amount will be calculated on the basic pay and is payable at the rate of one month’s basic pay for every completed year of service. The Company expensed $0.1 million and $45,000 related to the Gratuity Fund during the three months ended June 30, 2023 and 2022, respectively, and the Company expensed $0.2 million and $0.5 million related to the Gratuity Fund during the six months ended June 30, 2023 and 2022, respectively. At June 30, 2023 and December 31, 2022, $0.7 million and $0.5 million, respectively, was accrued in other liabilities in the accompanying consolidated balance sheet.
Similar to the Bangladesh subsidiary, the Company established Gratuity fund for India subsidiary as per local requirements effective April 2023. The Company expensed $20,000 related to the Gratuity Fund during the three months ended June 30, 2023. At June 30, 2023, $20,000 was accrued in other liabilities in the accompanying consolidated balance sheet. |
Subsequent Events |
6 Months Ended |
|---|---|
Jun. 30, 2023 | |
| Subsequent Events [Abstract] | |
| Subsequent Events | 12. Subsequent Events
On July 13, 2023, at the 2023 Annual Meeting of the Company’s Stockholders (the “Annual Meeting”), the Company’s stockholders authorized, in accordance with Nasdaq Listing Rule 5635(d), the issuance of shares of the Company’s common stock, including shares issuable upon the exercise of warrants, having an aggregate price of up to $5,000,000 to Redmile from time to time, at a purchase price of $1.60 per share, pursuant to, and subject to the terms and condition of, the Securities Purchase Agreement by and between the Company and Redmile.
On July 13, 2023, at the Annual Meeting, the Company’s stockholders authorized, in accordance with Nasdaq Listing Rule 5635(d), the adjustment to the exercise price of the warrant issued to SVB, which warrant is exercisable to purchase up to 190,330 shares of the Company’s common stock at any time for a period of approximately seven years from June 13, 2023. The exercise price of this warrant was adjusted to $3.01 per share.
On July 13, 2023, at the Annual Meeting, the Company’s stockholders re-elected Jason Krikorian, Margie L. Traylor and Robert Faulkner to the board, each to hold office for a three-year term and until the 2026 annual meeting of the Company’s stockholders or until his or her successor is duly elected and qualified.
On July 13, 2023, each non-management director was granted 21,598 RSUs under the Company’s 2020 Equity Incentive Plan. Each RSU represents a contingent right to receive one share of the Company’s common stock and will vest in full on the one-year anniversary of July 13, 2023, so long as the grantee remains director on such date. |
Accounting Policies, by Policy (Policies) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation and Principles of Consolidation | 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 the Accounting Standards Updated (“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 financial position as of June 30, 2023 and its results of operations for the three and six months ended June 30, 2023 and 2022, cash flows for six months ended June 30, 2023 and 2022, and stockholders’ equity for the three and six months ended June 30, 2023 and 2022. Operating results for the three and six months ended June 30, 2023 are not necessarily indicative of the results that may be expected for the full year ending December 31, 2023. 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, 2022 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, 2022 included in the Company’s Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (“SEC”) on April 17, 2023. |
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| Use of Estimates | 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 average period of benefit associated with costs capitalized to obtain a revenue contract, incremental borrowing rate, internal-use software development costs, fair value of warrants issued, and stock-based compensation, including the underlying fair value of the Company’s common stock for grants issued when the Company was a private company. Actual results could differ from those estimates. |
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| Segment Information | 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. |
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| Foreign Currency Transactions, Translations and Foreign Operations | 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 United States 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’ 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 $0.3 million gain and $0.1 million gain for the three months ended June 30, 2023 and 2022 respectively. Transaction gains and losses were $0.3 million gain and $0.1 million gains for the six months ended June 30, 2023 and 2022, respectively. 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. All of the Company’s revenue is generated in the United States and denominated in U.S. dollars.
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| Concentrations of Credit Risk and Major Customers | Concentrations of Credit Risk and Major Customers Financial instruments at June 30, 2023 and 2022 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 keeps a majority of its cash in quoted and highly-liquid money market funds. The Company’s accounts receivable are derived from revenue from customers located in the U.S. Major customers are defined as those generating revenue in excess of 10% of the Company’s annual revenue. The Company had three major customers during the three and six months ended June 30, 2023. Revenues from these major customers accounted for 20%, 14% and 12% of revenue for the three months ended June 30, 2023 and 19%, 14% and 12% of revenue for the six months ended June 30, 2023. The Company had three major customers during the three and six months ended June 30, 2022. Revenues from these major customers accounted for 18%, 17% and 12% of revenue for the three months ended June 30, 2022 and 19%, 17% and 12% of revenue for the six months ended June 30, 2022. Four customers account for 10% or more of the accounts receivable, with balances of $2.5 million, $1.2 million, $1.2 million and $1.2 million at June 30, 2023. Two customers account for 10% or more of the accounts receivable, with balances of $1.4 million and $0.7 million at December 31, 2022. |
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| Restricted Cash | 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, cash equivalents 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:
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| Impairment of Long-Lived Assets | 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 the six months ended June 30, 2023 or 2022.
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| Revenue Recognition | 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 stand-ready 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 generally pay an upfront implementation fee. The upfront implementation fee is deferred and recognized over the period the customer benefits and customer prepayments are deferred and included in the accompanying unaudited interim condensed consolidated balance sheets in deferred revenues. Revenues are recognized over time as 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 customer receives the benefit of our stand-ready scribing services as we perform them. As permitted under the practical expedient available under ASU 2014-09, the Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts with variable consideration that is allocated entirely to unsatisfied performance obligations or to a wholly unsatisfied promise accounted for under the series guidance, and (iii) contracts for which the Company recognizes revenue for the amount at which the Company has the right to invoice for services performed. 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 typically with a 90 day notice. The Company determines revenue recognition through the following steps:
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. |
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| Costs Capitalized to Obtain Revenue Contracts | 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 an estimated period of benefit that the Company determined to be between the range of 12 to 24 months. The period of benefit was determined by taking into consideration the Company’s customer contracts, technology, customer life, and other relevant factors. The Company periodically evaluates whether there have been any changes in its business, market conditions, or other events which would indicate that its amortization period should be changed, or if there are potential indicators of impairment. 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 accompanying unaudited interim condensed consolidated balance sheets. Amortization expense is included in sales and marketing expenses on the accompanying unaudited interim condensed consolidated statements of operations and comprehensive loss.
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| Internal-use software development costs | Internal-use software development costs The Company capitalizes certain qualifying costs incurred during the application development stage in connection with the development of its internal use software. Costs related to preliminary project activities and post-implementation activities are expensed in research and development (“R&D”) as incurred. R&D expenses consist primarily of employee-related costs, software-related costs, allocated overhead, and costs of outside services used to supplement our internal staff. Internal-use software costs of $0.2 million were capitalized in the three months ended June 30, 2023. All capitalized costs are related to costs incurred during the application development stage of software development for the Company’s platform to which subscriptions will be sold once the software is ready for its intended use. Capitalized internal-use software costs are included within property and equipment, net, on the condensed consolidated balance sheets, and are amortized over the estimated useful life of the software, which is typically three years. The related amortization expense is recognized in the condensed consolidated statements of operations and comprehensive loss within the function that receives the benefit of the developed software. The Company will begin to amortize the capitalized internal-use software costs once the product is ready for its intended use and goes into general commercial release. |
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| Contract Balances | Contract Balances Deferred revenue represents an obligation to render services for which the Company has received consideration, or for which an amount of consideration is due from the customer and the Company has an unconditional right to payment under a non-cancellable contract. Changes in the deferred revenue account were as follows:
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| Stock-Based Compensation | 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, 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. |
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| Advertising Costs | Advertising Costs All advertising costs are expensed as incurred and included in sales and marketing expenses. Advertising expenses incurred by the Company were $0.2 million and $0.2 million for the three months ended June 30, 2023 and 2022, respectively, and $0.4 million and $0.5 million for the six months ended June 30, 2023 and 2022, respectively.
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| Net Loss Per Share | 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 and pre-funded warrants outstanding because all necessary conditions to convert into common shares were met when those warrants were issued. 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, 2023 and 2022. 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:
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| Correction of Immaterial Error Related to Prior Periods | Correction of Immaterial Error Related to Prior Periods In the third quarter of 2022, the Company identified an error related to its accounting for sales commissions whereby the Company should have amortized sales commissions for new revenue contracts over the estimated period of benefit which is between the range of 12 to 24 months. For the three and six months ended June 30, 2022, sales and marketing expenses were overstated by $0.1 million and overstated by a nominal amount, respectively. |
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| Recently Adopted Accounting Standards | Recently Adopted Accounting Standards 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. The Company adopted this standard on January 1, 2023, and it did not have a material impact on its consolidated financial statements upon adoption.
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| Recently Issued Accounting Pronouncements Not Yet Adopted | Recently Issued Accounting Pronouncements Not Yet Adopted 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. |
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Basis of Presentation and Summary of Significant Accounting Policies (Tables) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Basis of Presentation and Summary of Significant Accounting Policies (Tables) LineItems | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Reconciliation of the Components of Cash and 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, cash equivalents
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:
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| Schedule of Deferred Revenue | Changes in the deferred revenue
account were as follows:
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| Schedule of Diluted Weighted-Average Shares of Common Stock Outstanding | 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:
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Property and Equipment (Tables) |
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Property and Equipment [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Property and Equipment | Property and equipment consist
of the following:
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Accrued Expenses and Other Current Liabilities (Tables) |
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Accrued Expenses and Other Current Liabilities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Accrued Expenses and Other Current Liabilities | Accrued expenses and other
current liabilities consists of the following:
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Debt (Tables) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Future Minimum Payments Required Under the Loan Agreement | On June 30, 2023, the future
minimum payments required under the SVB Loan Agreement, including the final payment, are as follows as of (in thousands):
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Common Stock, and Preferred Stock (Tables) |
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Jun. 30, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock, and Preferred Stock [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Warrants Outstanding to Acquire Shares of its Common Stock | At June 30, 2023, the Company
had the following warrants outstanding to acquire shares of its common stock:
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Equity Incentive Plan (Tables) |
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Equity Incentive Plan [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Share-Based Compensation Expense | The Company recorded share-based
compensation expense in the following expense categories in the condensed consolidated statements of operations and comprehensive loss
for the six months ended June 30, 2023 and 2022
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| Schedule of Weighted Average Assumptions | For the six months ended
June 30, 2023 and 2022, the fair value of options granted was estimated using a Black-Scholes option pricing model with the following
weighted average assumptions
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| Schedule of Stock Option Activity | The following table summarizes
stock option activity under the 2020 Plan for the six months ended June 30, 2023
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Commitments and Contingencies (Tables) |
6 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commitments and Contingencies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Schedule of Supplemental Balance Sheet Information Related To Leases | Supplemental lease information
related to leases for the periods of three and six months ended June 30, 2022 and 2023 is as follows (in thousands):
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| Schedule of Other Information Related to the Operating Lease | Supplemental lease information
related to leases for the periods of three and six months ended June 30, 2022 and 2023 is as follows (in thousands):
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| Schedule of Cash Flow Information Related to the Operating Lease | Supplemental cash flow information
related to the operating lease is as follows (in thousands):
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| Schedule of Company’s Operating Lease Liabilities | As of June 30, 2023, the
maturities of the Company’s operating lease liabilities (excluding short-term leases) are as follows (in thousands):
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Organization and Nature of Business (Details) - USD ($) $ in Thousands |
6 Months Ended | ||
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Jun. 30, 2023 |
Dec. 31, 2022 |
Jun. 30, 2022 |
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| Organization and Nature of Business (Details) [Line Items] | |||
| Cash equivalents and restricted cash | $ 25,260 | $ 30,778 | |
| Incremental capital | 5,000 | ||
| Equity line of credit amount | 5,000 | ||
| Accumulated deficit | (136,063) | $ (125,791) | |
| Malo Holdings [Member] | |||
| Organization and Nature of Business (Details) [Line Items] | |||
| Accumulated deficit | $ 136,100 |
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of Reconciliation of the Components of Cash and Restricted Cash - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
Jun. 30, 2022 |
|---|---|---|---|
| Schedule of Reconciliation of the Components of Cash and Restricted Cash [Abstract] | |||
| Cash and cash equivalents | $ 24,551 | $ 21,251 | $ 29,988 |
| Restricted cash | 125 | 125 | |
| Restricted cash – non-current | 584 | 665 | |
| Total cash, cash equivalents and restricted cash presented in the condensed consolidated statements of cash flows | $ 25,260 | $ 30,778 |
Basis of Presentation and Summary of Significant Accounting Policies (Details) - Schedule of Deferred Revenue - USD ($) |
6 Months Ended | 12 Months Ended |
|---|---|---|
Jun. 30, 2023 |
Dec. 31, 2022 |
|
| Schedule of Liability Deferred Revenue [Abstract] | ||
| Balance, beginning of period | $ 7,254 | $ 6,238 |
| Deferral of revenue | 21,064 | 31,949 |
| Recognition of unearned revenue | (20,460) | (30,933) |
| Balance, end of period | $ 7,858 | $ 7,254 |
Fair Value Measurements (Details) $ in Millions |
Jun. 30, 2023
USD ($)
|
|---|---|
| Fair Value Measurements [Abstract] | |
| Cash equivalents | $ 23.3 |
| Loan payable | 21.3 |
| Carrying value of loans payable | $ 19.9 |
Property and Equipment (Details) - USD ($) $ in Millions |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Property, Plant and Equipment [Abstract] | ||||
| Depreciation and amortization expense | $ 0.2 | $ 0.2 | $ 0.5 | $ 0.4 |
Property and Equipment (Details) - Schedule of Property and Equipment - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment | $ 9,440 | $ 7,925 |
| Less: accumulated depreciation | (6,832) | (6,352) |
| Property and equipment, net | 2,608 | 1,573 |
| Computer hardware, software and equipment [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment | 7,781 | 7,229 |
| Leasehold improvements [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment | 480 | 460 |
| Capitalized internal-use software costs [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment | 223 | |
| Furniture and fixtures [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment | 76 | 73 |
| Construction in progress [Member] | ||
| Property, Plant and Equipment [Line Items] | ||
| Property and equipment | $ 880 | $ 163 |
Accrued Expenses and Other Current Liabilities (Details) - Schedule of Accrued Expenses and Other Current Liabilities - USD ($) $ in Thousands |
Jun. 30, 2023 |
Dec. 31, 2022 |
|---|---|---|
| Schedule of Accrued Expenses and Other Current Liabilities [Abstract] | ||
| Accrued compensation | $ 2,191 | $ 3,587 |
| Accrued other | 569 | 466 |
| Accrued vendor partner liabilities | 1,069 | 871 |
| Accrued professional fees | 680 | 118 |
| Accrued VAT and other taxes | 303 | 279 |
| Total accrued expenses and other current liabilities | $ 4,812 | $ 5,321 |
Debt (Details) - USD ($) $ / shares in Units, $ in Millions |
6 Months Ended | 9 Months Ended | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|
Jun. 13, 2023 |
Jun. 30, 2023 |
Sep. 30, 2021 |
Apr. 19, 2023 |
Dec. 31, 2022 |
Dec. 31, 2021 |
Nov. 30, 2021 |
Oct. 30, 2021 |
Mar. 31, 2021 |
Mar. 25, 2021 |
|
| Debt (Details) [Line Items] | ||||||||||
| Aggregate principal amount | $ 17.0 | |||||||||
| Funds amount | $ 6.0 | $ 2.0 | $ 15.0 | |||||||
| Depreciation and amortization | $ 4.8 | |||||||||
| Interest rate | 12.00% | |||||||||
| Purchase price | $ 3.0 | |||||||||
| Principal amount | 1.1 | |||||||||
| Loan agreement | $ 0.2 | |||||||||
| Interest rate | 0.00% | |||||||||
| SVB loan agreement, description | in connection with a prepayment by the Company of all borrowings under the term loan facility, with the following prepayment fee payable: (a) 2.50% of the outstanding principal amount of the borrowings under the term loan facility at the time of such prepayment if it occurs prior to the first anniversary of the Effective Date, (b) 1.50% of the outstanding principal amount of the borrowings under the term loan facility at the time of such prepayment if it occurs on or after the first anniversary of the effective date but prior to the second anniversary of the Effective Date, and (c) 0.50% of the outstanding principal amount of the borrowings under the term loan facility at the time of such prepayment if it occurs on or after the second anniversary of the Effective Date but prior to the term loan facility’s maturity date. | |||||||||
| Borrowings amount | $ 10.0 | |||||||||
| Common stock, par value per share (in Dollars per share) | $ 0.1000 | $ 0.1000 | ||||||||
| Exercise price (in Dollars per share) | $ 1.6 | $ 1.6 | ||||||||
| Adjusted exercise price of warrant per share (in Dollars per share) | $ 3.01 | |||||||||
| Minimum [Member] | ||||||||||
| Debt (Details) [Line Items] | ||||||||||
| Interest rate | 3.25% | |||||||||
| Maximum [Member] | ||||||||||
| Debt (Details) [Line Items] | ||||||||||
| Interest rate | 8.75% | |||||||||
| Sub Agreement [Member] | ||||||||||
| Debt (Details) [Line Items] | ||||||||||
| Amortized discount of interest expense | $ 1.8 | |||||||||
| Revolving Credit Facility [Member] | ||||||||||
| Debt (Details) [Line Items] | ||||||||||
| Interest rate | 0.50% | |||||||||
| SVB Loan Agreement [Member] | ||||||||||
| Debt (Details) [Line Items] | ||||||||||
| Interest rate | 6.00% | |||||||||
| Cash and cash equivalents | $ 25.0 | |||||||||
| Borrowings amount | $ 30.0 | |||||||||
| Common stock shares (in Shares) | 190,330 | 48,295 | ||||||||
| Common stock, par value per share (in Dollars per share) | $ 0.0001 | $ 0.0001 | ||||||||
| Effective date | 7 years | 7 years | ||||||||
| Exercise price (in Dollars per share) | $ 4.25 | $ 2.38 | ||||||||
| SVB Loan Agreement [Member] | Revolving Credit Facility [Member] | ||||||||||
| Debt (Details) [Line Items] | ||||||||||
| Interest rate | 6.50% |
Debt (Details) - Schedule of Future Minimum Payments Required Under the Loan Agreement $ in Thousands |
Jun. 30, 2023
USD ($)
|
|---|---|
| Schedule of Future Minimum Payments Under the Loan Agreement [Abstract] | |
| 2023 (6 months remaining) | |
| 2024 | 10,000 |
| 2025 | 10,000 |
| Total | 20,000 |
| End of term charge | 1,000 |
| Subordinated note payable | 21,000 |
| Less unamortized debt discount | (1,068) |
| Loan payable net of discount | 19,932 |
| Less current portion | 5,000 |
| Loan payable, non-current portion | $ 14,932 |
Equity Incentive Plan (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Mar. 31, 2021 |
Jun. 30, 2023 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Equity Incentive Plan (Details) [Line Items] | ||||
| Vesting period | 4 years | |||
| Common stock remained available for grant (in Shares) | 616,743 | 616,743 | ||
| Stock based compensation cost | $ 5,000 | $ 5,000 | ||
| Expected dividend yield | ||||
| Fair value of stock option (in Dollars per share) | $ 1.13 | $ 1.26 | ||
| Intrinsic value of options exercised | $ 300,000 | |||
| Intrinsic value options outstanding | 27,900,000 | 27,900,000 | ||
| Intrinsic value options exercisable | $ 18,200,000 | 18,200,000 | ||
| Stock-based compensation | $ 3,800,000 | |||
| Weighted average requisite service period | 2 years 4 months 24 days | |||
| Stock options, description | the Company granted 727,922 stock options to the Company’s Chief Executive Officer (“CEO”) under the 2020 Plan with an exercise price of $3.00 per share. The options vest based on the CEO’s continued service in addition to the following terms: ●317,688 options vest in full when the closing price of the Company’s common stock reaches or exceeds $9.00 per share for a minimum of 20 out of 30 trading days after the Company became listed on 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 became listed on the New York Stock Exchange or Nasdaq. Since the listing on Nasdaq, these options expire on March 22, 2031, instead of 2026. ●363,961 options vest in full when the closing price of the Company’s common stock reaches or exceeds $13.50 per share for 20 out of 30 trading days after the Company became listed on the New York Stock Exchange or Nasdaq. Since the listing on Nasdaq, these options expire on March 22, 2031, instead of 2026. | |||
| Options expiration | March 3, 2031 | |||
| Expected volatility | 50.00% | |||
| Closing price (in Dollars per share) | $ 3 | $ 3 | ||
| Risk-free rate | 0.77% | |||
| Estimated fair value of options | $ 400,000 | |||
| Unrecognized compensation costs | $ 100,000 | |||
| Weighted average period | 1 year | |||
| 2020 Equity Incentive Plan [Member] | ||||
| Equity Incentive Plan (Details) [Line Items] | ||||
| Options contractual life | 10 years | |||
| Number of shares equal percentage | 5.00% | |||
| Options [Member] | ||||
| Equity Incentive Plan (Details) [Line Items] | ||||
| Stock-based compensation | $ 0.1 | |||
| Options expiration | March 22, 2031 | |||
| Expected volatility | 50.00% | |||
| Closing price (in Dollars per share) | $ 3 | $ 3 | ||
| Risk-free rate | 0.87% | |||
| RSU [Member] | ||||
| Equity Incentive Plan (Details) [Line Items] | ||||
| Aggregate intrinsic value | $ 1,300,000 | |||
Equity Incentive Plan (Details) - Schedule of Share-Based Compensation Expense - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Stock Options & SARs [Member] | ||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
| General and administrative | $ 277 | $ 344 | $ 511 | $ 654 |
| Sales and marketing | 64 | 42 | 123 | 70 |
| Research and development | 93 | 81 | 184 | 146 |
| Cost of revenues | 27 | 24 | 53 | 45 |
| Share-based compensation expense | 461 | 491 | 871 | 915 |
| Restricted Stock Units (RSUs) [Member] | ||||
| Share-Based Compensation Arrangement by Share-Based Payment Award [Line Items] | ||||
| General and administrative | 104 | 227 | ||
| Share-based compensation expense | $ 104 | $ 227 | ||
Equity Incentive Plan (Details) - Schedule of Weighted Average Assumptions |
6 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Schedule of Fair Value of Option Grants Weighted Average Assumptions [Abstract] | ||
| Expected term (in years) | 5 years 10 months 24 days | 5 years 10 months 24 days |
| Expected volatility | 57.10% | 54.40% |
| Risk-free rate | 3.90% | 1.90% |
| Dividend rate | ||
Commitments and Contingencies (Details) - USD ($) $ in Millions |
6 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2021 |
|
| Commitments and Contingencies [Abstract] | ||
| Minimum contractual spend | $ 1.8 | |
| Expenses | $ 0.4 |
Commitments and Contingencies (Details) - Schedule of Supplemental Balance Sheet Information Related To Leases - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Schedule of Supplemental Balance Sheet Information Related to Leases [Abstract] | ||||
| Operating lease cost | $ 336 | $ 191 | $ 546 | $ 382 |
| Short-term lease cost | 91 | 90 | 175 | 175 |
| Total lease cost | $ 427 | $ 281 | $ 721 | $ 557 |
Commitments and Contingencies (Details) - Schedule of Other Information Related to the Operating Lease |
Jun. 30, 2023 |
Jun. 30, 2022 |
|---|---|---|
| Schedule of other Information Related to the Operating Lease [Abstract] | ||
| Weighted-average remaining lease term | 3 years 9 months 18 days | 2 years 8 months 12 days |
| Weighted-average discount rate | 6.80% | 4.00% |
Commitments and Contingencies (Details) - Schedule of Cash Flow Information Related to the Operating Lease - USD ($) $ in Thousands |
6 Months Ended | |
|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
|
| Schedule of Cash Flow Information Related to the Operating Lease [Abstract] | ||
| Cash paid for operating lease liabilities | $ 485 | $ 422 |
Commitments and Contingencies (Details) - Schedule of Company’s Operating Lease Liabilities $ in Thousands |
Jun. 30, 2023
USD ($)
|
|---|---|
| Schedule of Company’s Operating Lease Liabilities [Abstract] | |
| 2023 (remaining six months) | $ 728 |
| 2024 | 1,478 |
| 2025 | 768 |
| 2026 | 630 |
| 2027 | 674 |
| Thereafter | 198 |
| Total | 4,476 |
| Less: imputed interest | (568) |
| Operating lease liability | 3,908 |
| Less: Operating lease liability, current portion | (1,471) |
| Operating lease liability, net of current portion | $ 2,437 |
Related Party Transactions (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||||
|---|---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
Dec. 31, 2015 |
|
| Related Party Transactions [Abstract] | ||||||
| Operating lease term | 10 years | |||||
| Rent expenses | $ 100,000 | $ 100,000 | $ 100,000 | $ 200,000 | ||
| Account payable | $ 8,000 | $ 8,000 | $ 4,000 | |||
Employee Benefit Plan (Details) - USD ($) |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
|---|---|---|---|---|---|
Jun. 30, 2023 |
Jun. 30, 2022 |
Jun. 30, 2023 |
Jun. 30, 2022 |
Dec. 31, 2022 |
|
| Employee Benefit Plan (Details) [Line Items] | |||||
| Contributions | $ 38,000 | $ 36,000 | $ 100,000 | $ 100,000 | |
| Fund expenses | 700,000 | $ 500,000 | |||
| Accrued in other liabilities | 20,000 | 20,000 | |||
| Gratuity Fund [Member] | |||||
| Employee Benefit Plan (Details) [Line Items] | |||||
| Expenses | 100,000 | $ 45,000 | $ 200,000 | $ 500,000 | |
| Expenses relates to fund | $ 20,000 | ||||
Subsequent Events (Details) - Subsequent Event [Member] |
Jul. 13, 2023
USD ($)
$ / shares
shares
|
|---|---|
| Subsequent Events (Details) [Line Items] | |
| Aggregate price (in Dollars) | $ | $ 5,000,000 |
| Purchase price per share (in Dollars per share) | $ / shares | $ 1.6 |
| Common stock shares | 190,330 |
| Exercise price per warrant (in Dollars per share) | $ / shares | $ 3.01 |
| Director [Member] | |
| Subsequent Events (Details) [Line Items] | |
| Common stock shares | 1 |
| Restricted stock units | 21,598 |