HeartBeam, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023. HeartBeam is an early-stage cardiac technology company developing ambulatory ECG products based on its VECG platform. Its products require FDA clearance and were not cleared for marketing as of the filing.
Financial results and liquidity
| Metric | Q1 2023 | Q1 2022 / comparison |
|---|---|---|
| Revenue | No revenue reported | No revenue reported |
| General and administrative expense | $2.475 million | $1.414 million; up 75% |
| Research and development expense | $1.681 million | $0.734 million; up 129% |
| Total operating expenses | $4.156 million | $2.148 million; up 93% |
| Net loss | $4.136 million | $2.146 million |
| Basic and diluted loss per share | $0.50 | $0.27 |
| Net cash used in operations | $3.114 million | $2.339 million |
| Cash and cash equivalents | $0.990 million at March 31 | $3.594 million at December 31, 2022 |
Operating cash use was higher than net loss was partly offset by $0.393 million in noncash stock compensation and changes in operating assets and liabilities. Financing provided $0.510 million, including $0.494 million from equity sales and $0.016 million from warrant exercises. No debt balance is reported on the March 31 balance sheet; accounts payable and accrued expenses were $2.320 million. Total assets were $1.461 million, liabilities were $2.320 million, and stockholders’ equity was a deficit of $0.859 million. The filing does not present a meaningful operating margin because the company reported no revenue.
Changes and financing
- Compared with Q1 2022, operating expenses increased $2.008 million and net loss increased $1.990 million. Management attributed higher G&A mainly to increased headcount and public-company/business-development costs; higher R&D mainly to product development, including work with Triple Ring Technologies.
- In February, HeartBeam established an ATM program of up to $13 million; approximately $12.5 million remained available at March 31. It also received $0.5 million through a Maverick financing arrangement, which it said it did not plan to use further.
- After quarter-end, the company completed a $25 million public offering and a $1.5 million registered direct offering, reporting combined net proceeds of approximately $24.6 million. The public offering included 16,666,666 common shares and 1,666,666 placement-agent warrants; the direct offering issued 1,000,000 shares. These transactions materially increased liquidity but also create substantial shareholder dilution.
Outlook, risks, and unusual items
- Following the May offerings, management said cash was sufficient to fund operations for the 12 months after issuance of the financial statements, alleviating substantial doubt about going concern. Before those offerings, cash was approximately $1.0 million and the company had recurring losses and negative operating cash flows.
- Management expected no material commercial revenue in 2023 and said continued operations depend on capital, strategic relationships, or revenue; it gave no assurance that additional financing would be available on acceptable terms.
- HeartBeam AIMI had been submitted for FDA 510(k) clearance. The company reported receiving FDA questions and continuing discussions with the review team. The filing describes FDA clearance as necessary for commercialization; timing and outcome remain uncertain.
- Management identified material weaknesses in internal control over financial reporting, including inadequate documentation and review processes, insufficient GAAP expertise for complex reporting, and limited staffing and segregation of duties. Disclosure controls were assessed as ineffective as of March 31. Remediation efforts include hiring and accounting-system improvements.
- Stock-based compensation was $0.393 million, versus $0.159 million a year earlier. The company also disclosed a roughly $3.0 million development-services commitment with Triple Ring; by March 31 it had expensed $2.8 million and recorded related payable, prepaid, and accrued amounts.
Key facts for investors to verify
- Whether FDA review progresses and the timing and requirements for clearance of AIMI and AIMIGo.
- Post-offering cash, quarterly cash burn, and whether liquidity supports the planned development and commercialization timeline.
- Actual dilution from the May share offerings, placement-agent warrants, ATM usage, and outstanding options and warrants.
- Progress in remediating the disclosed material weaknesses and whether controls are reassessed as effective.
- Development spending, remaining commitments to service providers, and any change to management’s expectation of no material 2023 commercial revenue.