HeartBeam, Inc. — Q3 2022 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2022. The company is a development-stage cardiovascular technology business focused on remote cardiac diagnostics and monitoring. Its products were not cleared for marketing by the FDA at the filing date. HeartBeam AIMI was submitted for FDA review on August 15, 2022; the company was preparing a 510(k) submission for AIMIGo.
Financial results and position
| Metric | Q3 2022 | Q3 2021 | Nine months 2022 | Nine months 2021 |
|---|---|---|---|---|
| Revenue | No revenue reported | No revenue reported | No revenue reported | No revenue reported |
| General and administrative expense | $2.048 million | $0.341 million | $5.256 million | $0.785 million |
| Research and development expense | $1.562 million | $0.105 million | $4.036 million | $0.159 million |
| Total operating expenses / operating loss | $3.610 million | $0.446 million | $9.292 million | $0.944 million |
| Net loss | $3.579 million | $1.188 million | $9.250 million | $2.343 million |
| Net loss per share, basic and diluted | $0.44 | $0.32 | $1.14 | $0.63 |
Revenue and gross margin were not reported; margin analysis is therefore not meaningful. At September 30, 2022, cash and cash equivalents were $6.549 million, total assets $6.672 million, accounts payable and accrued expenses $0.932 million, and stockholders’ equity $5.740 million. No debt was reported on the balance sheet. The 2015 convertible notes had been converted into common stock in November 2021.
For the first nine months of 2022, operating cash use was $6.993 million, financing cash inflow was $0.350 million, and cash declined $6.643 million from year-end 2021. The company raised $0.348 million in a February private placement and received a de minimis amount from option exercises.
Changes from the prior comparable periods
- Q3 operating expenses rose $3.164 million, or 709%, year over year; nine-month operating expenses rose $8.348 million, or 884%.
- Management attributed higher G&A principally to increased headcount and public-company costs. Higher R&D was primarily related to work with LIVMOR and Triple Ring.
- Net loss increased by $2.391 million for Q3 and $6.907 million for the nine-month period. The comparison was partly affected by 2021 interest expense on convertible notes: $0.742 million in Q3 and $1.421 million for the nine months, with no comparable 2022 expense after conversion.
- Cash used in operations increased to $6.993 million from $0.789 million for the prior-year nine-month period.
Outlook, risks and notable items
- Going concern: The company had incurred recurring losses and negative operating cash flows. Management stated that existing cash was insufficient to fund operations for the next 12 months after issuance of the financial statements, raising substantial doubt about the company’s ability to continue as a going concern. Additional capital, strategic relationships, or future revenue may be needed; availability and terms are uncertain.
- Product and regulatory execution: The business depends on FDA clearance and commercialization. The filing described a planned Q4 2022 510(k) submission for AIMIGo 3L and a planned Q2 2023 submission for AIMIGo 12L. These were plans, not reported clearances. The company also announced smartwatch connectivity and expanded arrhythmia-monitoring ambitions in October 2022.
- Development commitments: LIVMOR-related agreements had resulted in $1.2 million of R&D expense through September 30. Triple Ring work had a 2022 commitment of approximately $2.0 million; $1.4 million had been expensed and $0.07 million accrued at quarter-end. Management said the Triple Ring project was scheduled for completion in Q4 2022.
- Controls: Management concluded disclosure controls and procedures were not effective because of material weaknesses, including insufficiently documented policies, inadequate approval and review processes, limited GAAP expertise for complex reporting, and insufficient staffing and segregation of duties. Remediation efforts included hiring and accounting-system improvements.
- The filing cited potential effects of COVID-19 disruptions on operations and liquidity. It reported no material litigation and no changes to critical accounting policies.
Investor verification points
- Confirm current cash runway, subsequent financing, and progress toward resolving the going-concern uncertainty.
- Verify FDA submission, review, and clearance status for AIMI and AIMIGo against the stated development timelines.
- Track actual spending, remaining commitments, and deliverables under the LIVMOR and Triple Ring agreements.
- Monitor operating cash burn and expense growth relative to commercialization progress.
- Review remediation of the disclosed internal-control material weaknesses and any subsequent updates.