Heart Test Laboratories, Inc. (d/b/a HeartSciences) — Form 10-K Summary
Reporting period: Fiscal year ended April 30, 2023, compared with fiscal 2022. Although the request metadata says “2022 Q4,” this filing is an annual report for fiscal 2023, not a standalone quarterly filing. Filed July 18, 2023.
Business context
HeartSciences is a development-stage medical technology company developing the MyoVista, a resting 12-lead ECG intended to combine conventional ECG analysis with an AI-based assessment of cardiac dysfunction. The device had not received FDA clearance at filing. The company’s planned model combines device sales with recurring sales of proprietary electrodes. Revenue to date has been minimal and primarily from limited international distributor activity.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $5,150 | $14,373 |
| Gross profit | $2,354 | $6,483 |
| Gross margin | 45.7% | 45.1% |
| Research and development expense | $2.461 million | $3.002 million |
| Selling, general and administrative expense | $3.654 million | $1.714 million |
| Operating loss | $(6.113) million | $(4.709) million |
| Net loss | $(6.354) million | $(4.828) million |
| Net cash used in operations | $(5.774) million | $(3.644) million |
| Cash and cash equivalents, year-end | $1.660 million | $0.918 million |
SG&A rose 113%, principally reflecting public-company costs and higher payroll and stock compensation. R&D declined 18%, mainly as clinical-trial enrollment was completed. Revenue fell 64% as the company reduced new international distributor engagement while preparing for FDA submission and updating its European conformity status.
At April 30, 2023, total liabilities were $3.057 million and stockholders’ equity was $231,000, compared with a $6.056 million stockholders’ deficit a year earlier. Notes payable totaled $1.0 million, excluding accrued interest; the remaining $1.0 million loan is secured by substantially all company assets and intellectual property. The filing also describes a first-priority security interest in MyoVista technology securing inventor royalty obligations.
The balance sheet reports current assets of $2.697 million and current liabilities of $1.833 million, implying working capital of approximately $864,000. However, MD&A states working capital of $230,000; the filing text does not reconcile this difference. The auditor expressed substantial doubt about the company’s ability to continue as a going concern. Management stated that available resources were insufficient for operations for the 12 months following issuance of the financial statements.
Financing, outlook and material risks
- The June 2022 IPO generated approximately $5.2 million in net proceeds. Bridge warrant exercises generated approximately $1.3 million in February 2023. Under a March 2023 equity purchase agreement with Lincoln Park, the company may sell up to $15 million of shares over 36 months; approximately $0.6 million in gross proceeds had been received by July 17, 2023.
- At filing, the company had begun a proposed best-efforts offering of up to 8.0 million shares through Maxim Group; it had not yet been declared effective. Additional financing is expected to be needed for operations, FDA clearance, commercialization and further R&D.
- Management expected to submit a revised FDA De Novo application during 2023 and anticipated an FDA determination in 2024, assuming submission in 2023. These are forward-looking expectations, not assurances. A pivotal clinical validation study was underway; FDA clearance remained uncertain.
- The company’s prior CE Mark under the EU Medical Devices Directive lapsed in February 2022; compliance under the EU Medical Device Regulation was still required for EEA sales.
- Nasdaq had determined that the company failed to meet the $2.5 million minimum stockholders’ equity requirement. Delisting action was stayed pending a hearing scheduled for August 17, 2023; continued listing and any extension were uncertain.
- Other notable risks include recurring losses and cash burn, dependence on external financing and a single product candidate, reimbursement and physician adoption uncertainty, potential inventory obsolescence, supplier dependence, and competition. Management disclosed material weaknesses in internal controls related to review and approval procedures, accounting resources and segregation of duties; remediation was ongoing.
Most important facts for investors to verify
- Subsequent FDA submission, clinical-study results and any FDA decision or clearance for MyoVista.
- Cash runway, operating cash burn and financing raised after July 18, 2023, including the status and dilution terms of the proposed offering and Lincoln Park facility.
- Nasdaq hearing outcome and continued listing compliance.
- The working-capital discrepancy: $230,000 stated in MD&A versus approximately $864,000 calculated from reported current assets and liabilities.
- Outstanding debt, accrued interest, collateral and royalty obligations, as well as any inventory write-downs or control-remediation developments.