What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-04 compared with 2021-11-04 · 113 added, 170 removed, 61 unchanged (82% of the section changed)

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There may be additional risks of which we are not presently aware or that we currently believe are immaterial which could have an adverse impact on our business.

Forward-looking statements address our expected future business, financial performance, financial condition and results of operations, and often contain words such as “intends,” “estimates,” “anticipates,” “hopes,” “projects,” “plans,” “expects,” “seek,” “believes,” “see,” “should,” “will,” “would,” “target,” and similar expressions and the negative versions thereof.

Forward-looking statements address our expected future business, financial performance, financial condition and results of operations, and often contain words such as “intends,” “estimates,” “anticipates,” “hopes,” “projects,” “plans,” “expects,” “seek,” “believes,” “see,” “should,” “will,” “would,” “could,” “can,” “may,” “future,” “predicts,” “target,” and similar expressions and the negative versions thereof.

Such statements are based only upon current expectations of AtriCure.

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Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements to differ materially from those expressed or implied.

Forward-looking statements include statements that address activities, events or developments that AtriCure expects, believes or anticipates will or may occur in the future.

Forward-looking statements include statements that address activities, events, circumstances or developments that AtriCure expects, believes or anticipates will or may occur in the future.

Forward-looking statements are based on AtriCure’s experience and perception of current conditions, trends, expected future developments and other factors it believes are appropriate under the circumstances and are subject to numerous risks and uncertainties, many of which are beyond AtriCure’s control including developments related to the COVID-19 pandemic, as discussed herein.

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We undertake no obligation to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise unless required by law.

We are a leading innovator in treatments for atrial fibrillation (Afib) and left atrial appendage (LAA) management.

We are a leading innovator in treatments for atrial fibrillation (Afib), left atrial appendage (LAA) management and post-operative pain management.

According to the American Heart Association, Afib affects 1-2% of the population in the United States.

It is the most common cardiac arrhythmia, or irregular heartbeat, encountered in clinical practice and results in high utilization of healthcare services.

Patients often progress from being in Afib intermittently (paroxysmal) to being in Afib continuously.

The continuous Afib patient population includes persistent Afib, which lasts seven days to one year, and long-standing persistent Afib, which lasts longer than one year.

Afib often occurs in conjunction with other cardiovascular diseases, including hypertension, congestive heart failure, left ventricular dysfunction, coronary artery disease and valvular disease.

Our ablation and left atrial appendage management (LAAM) products are used by physicians during both open-heart and minimally invasive procedures.

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Minimally invasive procedures are performed on a standalone basis, and often include multi-disciplinary or “hybrid” approaches, combining both surgical procedures using AtriCure ablation and LAAM products and catheter ablation.

We have several product lines for the ablation of cardiac tissue, including our Isolator ® Synergy™ Ablation System approved by the United States Food and Drug Administration (FDA) for the treatment of persistent and long-standing persistent forms of Afib concomitant to other open-heart surgical procedures.

We believe that we are currently the market leader in the surgical treatment of Afib.

Our Isolator ® Synergy™ Ablation System is approved by the United States Food and Drug Administration (FDA) for the treatment of persistent and long-standing persistent Afib concomitant to other open-heart surgical procedures.

The EPi-Sense ® System is approved by FDA to treat patients with long-standing persistent Afib.

All of our other ablation devices are approved for sale in the United States under FDA 510(k) clearances, including our other RF and cryoablation products, which are indicated for the ablation of cardiac tissue and/or treatment of cardiac arrhythmias.

In addition, certain of our cryoablation probes are cleared for managing pain by temporarily ablating peripheral nerves.

Our AtriClip ® products are 510(k)-cleared with an indication for the exclusion of the heart’s LAA, performed under direct visualization and in conjunction with other cardiac surgical procedures.

All of our other ablation devices are cleared for sale in the United States under FDA 510(k) clearances, including our other radio frequency (RF) and cryoablation products, which are indicated for the ablation of cardiac tissue and/or the treatment of cardiac arrhythmias.

In addition, certain of our cryoablation probes are cleared for managing pain by temporarily ablating peripheral nerves, or Cryo Nerve Block therapy.

Our AtriClip ® LAA Exclusion System products are 510(k)-cleared with an indication for the exclusion of the LAA, performed under direct visualization and in conjunction with other cardiac surgical procedures.

Direct visualization, in this context, requires that the surgeon is able to see the heart directly, with or without assistance from a camera, endoscope or other appropriate viewing technologies.

The LARIAT ® system is cleared for soft tissue ligation.

Several of our products are currently being studied to expand labeling claims or support indications specifically for the treatment of Afib.

Our Isolator Synergy clamps, Isolator Synergy pens, Coolrail ® linear pen, cryoablation devices, certain products of the AtriClip LAA Exclusion System, COBRA Fusion ® Ablation System, the EPi-Sense ® Guided Coagulation System with VisiTrax ® technology, and LARIAT Suture Delivery Device bear the CE mark and may be commercially distributed throughout the member states of the European Union and other countries that comply with or mirror the Medical Device Directive.

Our Isolator Synergy clamps, Isolator Synergy pens, Coolrail linear pen, cryoablation devices and certain products of the AtriClip

LAA Exclusion System are available in select Asia-Pacific countries.

The LARIAT ® system is cleared under the 510(k) process for soft tissue ligation.

Several of our products are currently being studied

to expand labeling claims or to support indications specifically for the treatment of Afib.

Our Isolator Synergy clamps, Isolator Synergy pens, Coolrail ® linear pen, cryoablation devices, cryoSPHERE ® probe, certain products of the AtriClip LAA Exclusion System, COBRA Fusion ® Ablation System, the EPi-Sense ® system and LARIAT Suture Delivery Device bear the CE mark and may be commercially distributed throughout the member states of the European Union and other countries that comply with or mirror the Medical Device Directive.

Our Isolator Synergy clamps, Isolator Synergy pens, Coolrail linear pen, cryoablation devices and certain products of the AtriClip LAA Exclusion System are available in select Asia-Pacific countries.

We anticipate that substantially all of our revenue for the foreseeable future will relate to products we currently sell or are in the process of developing.

We sell our products to medical centers through our direct sales force in the United States and in certain international markets, such as Germany, France, the United Kingdom and the Benelux region.

We also sell our products to distributors who in turn sell our products to medical centers in other international markets.

Our business is transacted in U.S.

Dollars with the exception of transactions with our European subsidiaries, which are transacted in the Euro or British Pounds.

We also sell our products through distributors who in turn sell our products to medical centers in other international markets.

Our business is primarily transacted in U.S.

Dollars, with certain exceptions.

The majority of direct sales transactions outside the United States are transacted in Euros or the British Pound.

Recent Developments

Throughout 2020 and the beginning of the first quarter of 2021, we experienced a significant decrease in demand for our products as non-emergent procedures were being indeterminately deferred in order to preserve resources for COVID-19 patients and caregivers and to protect patients from potential exposure to COVID-19.

While we have seen many regions begin to stabilize with improvements in procedure volumes, there continues to be variability throughout our markets and uncertainty as variants of the virus emerge.

We can make no assurance regarding any future level of demand for our products, and COVID-19 may adversely impact our results of operations and financial condition.

We are continuing to serve our customers while taking every precaution to provide a safe work environment for our employees and customers.

Field-based sales and clinical employees continue to support cases, using technology to engage with customers in virtual settings when physical access is prohibited.

We are maintaining manufacturing and fulfillment operations to continue providing products to our customers.

We continue to modify our remote working protocols and evaluate hybrid work models for our office-based employees, and we will take further actions in the best interests of our employees or as required by law.

Despite the challenging environment resulting from the pandemic, we continue to build on our strategic initiatives of product innovation, investing in clinical science and providing superior training and education.

We remain confident in our liquidity position, which includes cash and investments of $224,843 as of September 30, 2021, and access to additional funding through our credit facility.

During early 2022, we experienced variability and intermittent demand for our products as non-emergent procedures were deferred in order to preserve resources for COVID-19 patients and caregivers and hospital staffing was impacted by the pandemic and related factors.

We expect this variability to continue as we operate in many geographic regions with diverse restrictions that are impacted as new COVID-19 variants emerge.

However, we saw many regions stabilize at the end of the first quarter of 2022 with improvements in procedure volumes.

Despite the challenging environment resulting from the pandemic, we continue to build on our strategic initiatives of product innovation, investing in clinical science and expanding awareness and adoption by providing superior training and education.

PRODUCT INNOVATION .

In July 2021, we received 510(k) clearance for the new ENCOMPASS ® clamp, and we have initiated a limited product launch.

The ENCOMPASS clamp marks innovation in our core open ablation market, and is expected to drive deeper penetration of cardiac surgery procedures.

Our professional education and marketing teams have adapted to the pandemic by conducting online and mobile trainings for physicians and our sales team.

These adaptations expanded our training methods and ensured invaluable access to continuing education and awareness of our products and related procedures.

The recent FDA approval of the EPi-Sense system has enabled us to educate and train physicians on the benefits of Hybrid AF™ therapy in treating long-standing persistent Afib patients.

The first of several training courses planned for 2021 was held in June.

Recently, we announced the launch of the new EnCompass Clamp ® , following the receipt of 510(k) clearance for ablation of cardiac tissue during cardiac surgery in July 2021.

The EnCompass clamp marks innovation in our core open ablation market and is designed to make concomitant surgical ablations more efficient.

It is expected to drive deeper penetration of cardiac surgery procedures.

CLINICAL SCIENCE .

We continue to invest in studies to expand labeling claims or support indications for the treatment of Afib, and we also conduct various studies to gather clinical data regarding our products.

In April 2021, we announced the PMA approval of the EPi-Sense system for treatment of symptomatic, drug-refractory, long-standing persistent atrial fibrillation, when augmented with an endocardial ablation catheter.

We believe the Convergent procedure, or Hybrid AF therapy, provides the only compelling treatment option for a large and vastly underpenetrated patient population.

The CONVERGE™ trial demonstrated superiority in the hybrid therapy arm compared to endocardial catheter ablation alone.

In patients diagnosed with long-standing persistent Afib, the hybrid therapy arm showed a 29% absolute difference in efficacy at 12 months (78% relative improvement) and an absolute difference of 35% at 18 months (110% relative improvement).

There was also a 33% absolute difference in Afib burden reduction in favor of the hybrid AF therapy at 12 months, which increased to 37% at 18 months.

Enrollment was completed in December 2019.

Patient follow-up for twelve months post pulmonary vein isolation catheter ablation is required by the study protocol and was completed in April 2021.

In January 2020, we received approval for a Continued Access Protocol (CAP) for the aMAZE study.

The aMAZE CAP provides for additional enrollment of up to 85 patients at existing aMAZE trial sites, with the opportunity to further expand to 250 patients while the PMA application is under review.

In July 2021, the Company was informed that data from the aMAZE clinical trial did not achieve statistical superiority.

Specifically, while the trial met the safety endpoint, the trial did not meet the primary efficacy endpoint.

The Company has paused enrollment in the aMAZE CAP, and is in the process of further analyzing aMAZE trial data and determining next steps for the trial, PMA application and any related future development activities.

In February 2022, FDA approved the protocol for the Hybrid Epicardial and Endocardial Sinus Node Sparing Ablation Therapy for Inappropriate Sinus Tachycardia, (HEAL-IST) clinical trial.

The HEAL-IST clinical trial is designed to study the safety and efficacy of a hybrid sinus node sparing ablation procedure using the Isolator Synergy Surgical Ablation System for the treatment of symptomatic, drug refractory or drug intolerant IST.

The trial is a prospective, multicenter, single arm trial that evaluates safety 30 days post-procedure and evaluates primary effectiveness of freedom from IST at 12 months post-procedure.

The trial provides for enrollment of up to 142 patients at up to 40 sites in the United States, United Kingdom and European Union.

The Company anticipates enrollment to begin this year.

In April 2022, FDA approved the protocol for the Left Atrial Appendage Exclusion for Prophylactic Stroke Reduction (LeAAPS) IDE clinical trial.

The trial is designed to evaluate the effectiveness of prophylactic LAA exclusion using the AtriClip LAA Exclusion System for the prevention of ischemic stroke or systemic arterial embolism in cardiac surgery patients without pre-operative AF diagnosis who are at risk for these events.

The trial is a prospective, multicenter, randomized trial that evaluates safety at 30 days post-procedure to demonstrate no increased risk with LAA exclusion during cardiac surgery.

The trial provides for enrollment of up to 6,500 subjects at up to 250 sites worldwide.

The Company anticipates enrollment to begin this year.

Our professional education and marketing teams conduct virtual, in-person and mobile training for physicians and our sales team.

These training methods ensure invaluable access to continuing education and awareness of our products and related procedures.

The 2021 FDA approval of the EPi-Sense system has enabled us to educate and train physicians on the benefits of Hybrid AF™ therapy in treating long-standing persistent Afib patients.

Our Hybrid Training Course is co-sponsored by the Hearth Rhythm Society (HRS).

Results of Operations

Three months ended September 30, 2021 compared to three months ended September 30, 2020

Three months ended March 31, 2022 compared to three months ended March 31, 2021

The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts and as percentages of revenue:

Three Months Ended

September 30,

Revenues Amount % of

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Gross profit 55,595 74.5 % 44,540 75.1 %

Operating (benefit) expenses:

Research and development expenses 11,284 16.0 % 10,576 19.3 %

Selling, general and administrative expenses 49,873 70.8 % 33,557 61.3 %

Change in fair value of contingent consideration (189,900) (269.5) % 192 0.4 %

Intangible asset impairment 82,300 116.8 % — 0.0 %

Total operating (benefit) expenses (46,443) (65.9) % 44,325 80.9 %

Income (loss) from operations 98,669 140.0 % (3,991) (7.3) %

Other income (expense) (1,523) (2.2) % (962) (1.8) %

Income (loss) before income tax expense 97,146 137.9 % (4,953) (9.0) %

Income tax expense (benefit) 38 0.1 % (4) 0.0 %

Net income (loss) $ 97,108 137.8 % $ (4,949) (9.0) %

Revenue increased 28.7% (28.6% on a constant currency basis) reflecting an upturn in activity within each franchise and across our key markets globally from an improvement in cardiac surgery procedure volumes over 2020 as well as increasing adoption of our products.

Revenue from customers in the United States increased $12,836, or 28.7% while revenue from international customers increased $2,867 or 28.5% (27.9% on a constant currency basis).

In the United States, open ablation sales increased $3,868 (19.4%) primarily from growth in Cryo Nerve Block therapy.

Minimally invasive (MIS) ablation sales increased $3,011 (43.1%) driven by Hybrid AF therapy procedure growth from the PMA approval of the EPi-Sense system in late April 2021.

Appendage management sales rose $5,971 (34.3%) as a result of continued volume growth of the AtriClip ® Flex·V ® and AtriClip Pro·V TM devices and other appendage management product lines.

Similar to the results in the United States, international revenue increased in most major markets and across product lines.

Revenue reported on a constant currency basis is a non-GAAP measure and is calculated by applying previous period foreign currency (Euro) exchange rates, which are determined by the average daily Euro to Dollar exchange rate, to each of the comparable periods.

Revenue is analyzed on a constant currency basis to better measure the comparability of results between periods.

Because changes in foreign currency exchange rates have a non-operating impact on revenue, we believe that evaluating revenue growth on a constant currency basis provides additional and meaningful assessment of revenue to both management and our investors.

Cost of revenue and gross margin.

Cost of revenue increased $3,811 reflecting revenue growth, while gross margin improved approximately 40 basis points.

The improvement in gross margin reflects favorable product mix , largely offset by inventory management charges related to the Lariat system and unfavorable geographic mix.

Research and development expenses.

Research and development expenses increased $708 or 6.7% as a result of a $1,571 rise in personnel costs due to an increase in headcount and variable compensation.

This increase in research and development expense was offset by a $1,377 decrease in product development project costs.

Selling, general and administrative expenses.

Selling, general and administrative expenses increased $16,316 or 48.6% as a result of a $10,678 increase in personnel costs, primarily driven by increases in headcount, variable compensation and travel.

Other increases in selling, general and administrative expenses included $1,008 additional training costs and $1,127 of incremental tradeshow and marketing activities, as well as legal, professional and consulting fees of $1,645 and share-based

compensation of $772.

The remaining fluctuation in selling, general and administrative expenses relates to other corporate costs, such as IT software and payment processing fees.

Change in fair value of contingent consideration.

The credit to operating expenses during the three months ended September 30, 2021 reflects a change in the forecasted timing and probability of achievement of the regulatory and reimbursement milestones related to the aMAZE clinical trial.

See Note 2 of the condensed consolidated financial statements for further discussion.

Impairment of intangible assets.

During the three months ended September 30, 2021, the Company recorded an impairment charge for the IPR&D asset associated with the aMAZE PMA.

See Note 3 of the condensed consolidated financial statements for further discussion.

Other income (expense).

Other income and expense consists primarily of net interest expense and foreign currency transaction gains and losses.

Net interest expense increased $346 driven by lower interest income from a decline in investment yields.

Nine months ended September 30, 2021 compared to nine months ended September 30, 2020

The following table sets forth, for the periods indicated, our results of operations expressed as dollar amounts and as percentages of revenue:

Nine Months Ended

September 30,

Revenues Amount % of

Revenue $ 201,111 100.0 % $ 148,806 100.0 %

Cost of revenue 50,267 25.0 % 41,934 28.2 %

Gross profit 150,844 75.0 % 106,872 71.8 %

Operating (benefit) expenses:

Operating expenses:

Research and development expenses 13,629 18.3 % 11,217 18.9 %

Selling, general and administrative expenses 56,116 75.2 % 49,208 83.0 %

Change in fair value of contingent consideration (184,800) (91.9) % (4,854) (3.3) %

Intangible asset impairment 82,300 40.9 % — 0.0 %

Total operating (benefit) expenses 83,137 41.3 % 133,602 89.8 %

Income (loss) from operations 67,707 33.7 % (26,730) (18.0) %

Other income (expense):

Total operating expenses 69,745 93.5 % 60,425 101.9 %

Loss from operations (14,150) (19.0) % (15,885) (26.8) %

Other expense, net:

(977) (1.3) % (1,001) (1.7) %

Income (loss) before income tax expense 64,075 31.9 % (29,577) (19.9) %

Loss before income tax expense (15,127) (20.3) % (16,886) (28.5) %

Income tax expense 56 0.1 % 31 0.1 %

Net income (loss ) $ 63,940 31.8 % $ (29,593) (19.9) %

Revenue increased 35.1% (34.4% on a constant currency basis).

Revenue from customers in the United States increased $46,078, or 37.8%, while revenue from international customers increased $6,227, or 23.1% (19.0% on a constant currency basis).

Sales in the United States grew across all product lines with MIS ablation sales increasing $9,782 (53.5%), appendage management sales increasing $21,274 (44.4%), and open ablation sales increasing $15,014 (27.5%).

International sales rose across all major franchises driven primarily by Germany and Asian markets.

Net loss $ (15,183) (20.4) % $ (16,917) (28.5) %

The following table sets forth, for the periods indicated, our revenue by product type and geography expressed as dollar amounts and the corresponding change in such revenues between periods, in both dollars and percentages:

Three Months Ended

March 31, Change

2022 2021 Amount %

Open ablation $ 18,974 $ 17,439 $ 1,535 8.8 %

Minimally invasive ablation 8,615 8,385 230 2.7 %

Pain management 8,014 3,898 4,116 105.6 %

Appendage management 26,669 20,587 6,082 29.5 %

Total United States $ 62,272 $ 50,309 $ 11,963 23.8 %

Total International 12,304 8,966 3,338 37.2 %

Total revenue $ 74,576 $ 59,275 $ 15,301 25.8 %

Worldwide revenue increased 25.8% (26.7% on a constant currency basis).

In the United States, we experienced growth across key product lines and franchises.

Appendage management and pain management sales increases were driven by sales of the AtriClip® Flex⋅V ® device and cryoSPHERE ® probe.

The soft launch of the new EnCompass Clamp contributed to the open ablation sales growth, while adoption of the EPi-Sense ® System alone drove increases in minimally invasive ablation.

International sales increased 37.2% (43.1% on a constant currency basis), rising across all major franchises due primarily to the Asian markets and our direct markets in the United Kingdom and Germany.

Revenue is analyzed on a constant currency basis to better measure the comparability of results between periods.

Because changes in foreign currency exchange rates have a non-operating impact on revenue, we believe that evaluating growth in revenue on a constant currency basis provides an additional and meaningful assessment of revenue to both management and investors.

Cost of revenue and gross margin.

Cost of revenue increased $8,333, reflecting higher sales volumes, while gross margin increased more than 300 basis points.

The overall increase in gross margin was driven largely by a return to normal production activity in 2021, leverage from higher revenue, and favorable geographic and product mix.

Cost of revenue increased $4,246, reflecting higher sales volumes, while gross margin decreased approximately 60 basis points, reflecting geographic and product mix between periods and cost increases.

Research and development expenses.

Research and development expenses increased $2,412 or 21.5%.

Personnel costs grew $3,979 driven by additional variable compensation and headcount as we continue to build our product development, regulatory, and clinical teams.

This increase is offset by a $1,428 decrease in product development project costs.

Personnel costs grew $995 from increased headcount as we continue to build our product development, regulatory and clinical teams and travel activity resumes.

Amortization of the technology asset related to the PMA resulting from the CONVERGE IDE clinical trial, which commenced in April 2021, drove higher depreciation and amortization expense of $730.

Finally, share-based compensation increased $193 compared with the prior period.

Selling, general and administrative expenses.

Selling, general and administrative expenses increased $6,908, or 14.0%.

Additional headcount, variable compensation, and travel expenses totaling $32,646 was the largest driver of the increase in expenses.

In addition, as quarantine and travel restrictions have lifted from 2020, there has been an increase in live events.

As a result, training expenses increased $3,975, while tradeshow and marketing activities increased $1,189 as compared to the prior year.

Other changes included a $3,212 increase in share-based compensation and a $2,605 increase in legal, professional and consulting expenses.

Change in fair value of contingent consideration.

The credit to operating expenses during the nine months ended September 30, 2021 reflects a change in the forecasted timing and probability of achievement of the regulatory and reimbursement milestones related to the aMAZE clinical trial.

See Note 2 of the condensed consolidated financial statements for further discussion.

Impairment of intangible assets.

During the nine months ended September 30, 2021, the Company recorded an impairment charge for the IPR&D asset associated with the aMAZE PMA.

See Note 3 of the condensed consolidated financial statements for further discussion.

Additional headcount and travel activities of $5,301 drove the increase in expenses, primarily reflecting the expansion of our sales and training teams, while meetings, trainings and tradeshow activities contributed $2,915 of the increase as we saw further transition from virtual to in-person events.

Other operating costs, including IT, legal and administrative expenses grew $768 as compared to the prior period.

Partially offsetting these increases was a $2,500 charge for the change in fair value of the SentreHEART contingent consideration liability in 2021.

Other income (expense).

Other income and expense consists primarily of net interest expense and foreign currency transaction gains and losses.

Net interest expense increased $704 driven by lower interest income from a decline in investment yields.

Net interest expense increased $171 driven by lower interest income from a decline in investment yields partially offset by lower interest expense on the term loan, stemming from the November 2021 refinancing.

Liquidity and Capital Resources

As of September 30, 2021, the Company had cash, cash equivalents and investments of $224,843 and outstanding debt of $58,333.

As of March 31, 2022, the Company had cash, cash equivalents and investments of $181,911 and outstanding debt of $60,000.

We had unused borrowing capacity of approximately $28,750 under our revolving credit facility.

Most of our operating cash and all cash equivalents and investments are held by United States financial institutions.

We had net working capital of $141,753 and an accumulated deficit of $266,412 as of September 30, 2021.

We had net working capital of $152,232 and an accumulated deficit of $295,336 as of March 31, 2022.

Three Months Ended March 31,

2022 2021 Change

(dollars in thousands)

Net cash used in operating activities $ (24,632) $ (9,316) $ 15,316

Net cash provided by investing activities 19,722 63,587 (43,865)

Net cash used in financing activities (10,497) (10,707) (210)

Cash flows used in operating activities.

We used $14,081 of net cash in operating activities during the nine months ended September 30, 2021.

The net cash outflow from operating activities reflects our net income of $ 63,940 , offset by $70,914 of non-cash adjustments, as well as $7,107 net cash used for operating assets and liabilities.

Non-cash adjustments reflect the impact of the aMAZE trial results contributing to a $184,800 change in value of the contingent consideration liability, offset by an $ 82,300 impairment charge on the aMAZE IPR&D asset.

Other non-cash expenses included $20,539 share-based compensation, as well as $7,608 of depreciation and amortization.

Net cash used for operating assets and liabilities was driven by higher customer receivables in the first nine months of 2021 due to the increase in revenue and continued investment in inventories, offset by increases to both accounts payable and accrued liabilities balances, reflecting the increase in inventories, operating expenses and variable compensation as of September 30, 2021.

Net cash used in operating activities increased $15,316 in 2022 compared to 2021.

This change is driven by the fluctuation in working capital and other assets and liabilities of $15,815, driven by the $12,500 reduction in accrued liabilities primarily as a result of higher annual variable compensation payments due to improved operating performance and a $1,254 increase in accounts receivable as a result of sales growth.

The remaining fluctuation is a decrease in the net loss of $1,734, driven by a decrease in non-cash expenses of $1,235.

Fluctuation in non-cash expenses is largely the $2,500 non-cash impact for the fair value adjustment of the SentreHEART contingent consideration liability in 2021, offset partially by amortization of the CONVERGE technology asset.

Cash flows provided by investing activities.

We generated $22,427 of net cash from investing activities during the nine months ended September 30, 2021, reflecting $29,470 of net sales and maturities of available-for-sale securities, partially offset by $7,043 of purchases of property and equipment.

Net cash provided by investing activities decreased by $43,865 in 2022 compared to 2021, due to a decrease in sales and maturities of available-for-sale securities of $41,810, offset by an increase of $2,055 for the purchase of property and equipment to support our new product introductions and construction costs to expand our manufacturing facilities.

Cash flows used in financing activities.

We used $10,149 of net cash in financing activities during the nine months ended September 30, 2021.

Activity included $17,900 for shares repurchased for payment of taxes on stock awards and $2,269 repayment of debt and lease obligations, partially offset by $10,020 of proceeds from stock option exercises and ESPP purchases.

Net cash used in financing activities decreased by $210 in 2022 due primarily to lower stock option exercise activity of $4,233 offset by a decrease of $4,462 in cash tax payments from restricted and performance share vesting.

Credit facility.

Our Loan and Security Agreement with Silicon Valley Bank (SVB), as amended, (Loan Agreement), provides for a $ 60,000 term loan and a $ 20,000 revolving line of credit.

The term loan and revolving credit facility both mature or expire, as applicable, on August 1, 2024.

The term loan accrues interest at the greater of the Prime Rate or 5.00 %, plus 0.75 % and is subject to an additional 3.00 % fee on the $ 60,000 term loan principal amount, payable at maturity or upon acceleration or prepayment of the term loan.

Our borrowing availability under the revolving credit facility is based on the lesser of $ 20,000 or a borrowing base calculation as defined by the Loan Agreement.

Borrowing availability under the revolving credit facility is further limited by a cap on total debt outstanding under the Loan Agreement, including outstanding letters of credit, of $ 70,000 .

As of September 30, 2021 we had no borrowings under the revolving credit facility, and we had borrowing availability approximately of $ 10,000 .

The Loan Agreement also provides for certain prepayment and early termination fees if the term loan is repaid before maturity and establishes a minimum liquidity ratio and dividend restrictions, along with other customary terms and conditions.

Specified assets have been pledged as collateral.

Principal payments on the term loan commenced September 1, 2021 and were made through October 2021.

Effective November 1, 2021, the Company and SVB entered into the Sixth Amendment to the Loan and Security Agreement (Amended Loan and Security Agreement).

This amendment provides for a $60,000 term loan, with an option to make available an additional $30,000 in term loan borrowings, and a $30,000 revolving line of credit.

The Amended Loan and Security Agreement has a five year term, expiring November 2026.

Our Loan and Security Agreement, as amended and modified effective November 1, 2021 (Loan Agreement) with Silicon Valley Bank (SVB) provides for a $60,000 term loan, a $30,000 revolving line of credit, and an option to make available an additional $30,000 in term loan borrowings.

The Loan Agreement has a five year term, expiring November 2026.

Principal payments are to be made ratably commencing 24 months after the inception of the loan through the loan's maturity date.

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The term loan accrues interest at the Prime Rate plus 1.25% and is subject to an additional 3.00% fee on the term loan principal amount at maturity.

The revolving line of credit is subject to an annual facility fee of 0.20% of the revolving line of credit fully earned at close, and any borrowings bear interest at the floating Prime Rate.

The Amended Loan and Security Agreement also provides for certain prepayment and early termination fees, as well as establishes a liquidity covenant, along with other customary terms and conditions similar to those in the Company's current agreement with SVB.

This refinancing has been treated as a debt modification, with the $1,667 principal repayment made in October 2021 classified as current, while the remaining borrowings of $56,666 have been classified as long-term in the Condensed Consolidated Balance Sheet as of September 30, 2021.

Our corporate headquarters lease agreement requires a $1,250 letter of credit which renews annually and remains outstanding as of September 30, 2021.

As of March 31, 2022, our outstanding debt was $60,000 and is classified as

We had unused borrowing capacity of approximately $28,750 under our revolving credit facility.

For additional information on the terms and conditions, as well as applicable interest and fee payments, see Note 6 — Indebtedness.

Our corporate headquarters lease agreement requires a $1,250 letter of credit which renews annually and remains outstanding as of March 31, 2022.

Uses of liquidity and capital resources.

Our future capital requirements depend on a number of factors, including market acceptance of our current and future products;

the resources we devote to developing and supporting our products, including professional training costs;

future expenses to support and expand our sales and marketing efforts;

costs relating to changes in regulatory policies or laws that affect our operations and cost of filings;

costs associated with clinical trials and securing regulatory approval for new products;

costs associated with acquiring and integrating businesses;

costs associated with prosecuting, defending and enforcing our intellectual property rights;

and possible acquisitions and joint ventures.

We continue to evaluate additional measures to maintain financial flexibility, and we will continue to closely monitor our liquidity and capital resources through recovery from, and any further disruptions caused by, COVID-19.

We have on file with the SEC a shelf registration statement which allows us to sell any combination of senior or subordinated debt securities, common stock, preferred stock, warrants, depository shares and units in one or more offerings should we choose to do so in the future.

We expect to maintain the effectiveness of this shelf registration statement for the foreseeable future.

We believe that our current cash, cash equivalents and investments, along with the cash we expect to generate or use for operations or access via our credit facility agreement with SVB, will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next twelve months.

The SentreHEART acquisition provides for contingent consideration to be paid upon PMA approval before December 2023 and CPT reimbursement before December 2026.

Subject to the terms and conditions of the SentreHEART merger agreement, such contingent consideration must be paid primarily in AtriCure common stock, up to a specified maximum number of shares.

We do not expect our cash requirements to include significant cash payments for contingent consideration based on likelihood and progress towards achievement of the related success-based milestones and terms of the acquisition agreement over the next twelve months.

If our sources of cash are insufficient to satisfy our liquidity requirements, we may seek to sell additional equity or debt securities or obtain a revised or additional credit facility.

The sale of additional equity or convertible debt securities could result in dilution to our stockholders.

If additional funds are raised through the issuance of debt securities, these securities could have rights senior to those associated with our common stock and could contain covenants that would restrict our operations.

Finally, our term loan agreement and revolving line of credit require compliance with certain financial and other covenants.

If we are unable to maintain these financing arrangements, we may be required to reduce the scope of our planned research and development, clinical activities and selling, training, education and marketing efforts.

Our executive officers and Board of Directors review our funding sources and future capital requirements in connection with our annual operating plan and periodic updates to the plan.

Our future capital requirements depend on a number of factors, including, without limitation:

market acceptance of our current and future products;

costs to develop and support our products, including professional training;

future expenses to expand and support our sales and marketing efforts;

operating and filing costs relating to changes in regulatory policies or laws;

costs for clinical trials and to secure regulatory approval for new products;

costs to prosecute, defend and enforce our intellectual property rights;

maintenance and enhancements to our information systems and security;

and possible acquisitions and joint ventures, including potential business integration costs.

We continue to evaluate additional measures to maintain financial flexibility, and we will continue to closely monitor our liquidity and capital resources through the recovery from, and any further disruptions caused by, COVID-19.

Our principal cash requirements include costs of operations, capital expenditures, debt service costs and other contractual obligations.

Critical Accounting Policies and Estimates

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The preparation of financial statements requires management to make estimates and judgments that affect the reported amounts of assets and liabilities, revenue and expenses and disclosures of contingent assets and liabilities at the date of the financial statements.

On a periodic basis, we evaluate our estimates, including those related to sales returns and allowances, accounts receivable, inventories, intangible assets including goodwill, contingent liabilities and share-based compensation.

On a periodic basis, we evaluate our estimates, including those related to sales returns and allowances, inventories, share-based compensation and income taxes.

We use authoritative pronouncements, historical experience and other assumptions as the basis for making estimates.

Actual results could differ from those estimates under different assumptions or conditions.

Our Annual Report on Form 10-K for the fiscal

year ended December 31, 2020 includes additional information about the Company, our operations, our financial position and our critical accounting policies and estimates and should be read in conjunction with this Quarterly Report on Form 10-Q.

Our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 includes additional information about the Company, our operations, our financial position and our critical accounting policies and estimates and should be read in conjunction with this Quarterly Report on Form 10-Q.

Recent Accounting Pronouncements

As of September 30, 2021, there were no material changes to the information provided in Note 2, “Recent Accounting Pronouncements” in the Company’s Form 10-K for the fiscal year ended December 31, 2020.

As of March 31, 2022, there were no material changes to the information provided in Note 2, “Recent Accounting Pronouncements” in the Company’s Form 10-K for the fiscal year ended December 31, 2021.

Quantitative and Qualitative Disclosures About Market Risk

As of September 30, 2021 there were no material changes to the information provided under Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Form 10-K for the year ended December 31, 2020.

As of March 31, 2022, there were no material changes to the information provided under Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in the Company’s Form 10-K for the year ended December 31, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis