HeartBeam, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022; unaudited. HeartBeam is a development-stage medical technology company developing remote cardiac diagnostic products. It reported no revenue for the quarter.
Financial performance and position
- Operating expenses: $2.148 million, versus $163,000 in Q1 2021. General and administrative expense was $1.414 million (up $1.280 million); research and development was $734,000 (up $705,000).
- Net loss: $2.146 million, compared with $210,000 in Q1 2021. Basic and diluted loss per share was $0.27, versus $0.06.
- Cash flow: $2.339 million used in operating activities, versus $155,000 used in Q1 2021. Financing provided $348,000, compared with $215,000 in Q1 2021.
- Cash and liquidity: Cash was $11.201 million at March 31, 2022, down from $13.192 million at year-end 2021. Management said available cash was expected to fund operations for the next 12 months following issuance of the statements.
- Assets and liabilities: Total assets were $12.741 million; current liabilities and total liabilities were $514,000. The balance sheet reports no long-term debt. Accumulated deficit was $11.370 million.
- Margins: Not meaningful; the company had no reported revenue.
Changes and notable items
- Operating expenses rose substantially as the company expanded general and administrative staffing and public-company/business-development costs, and increased product development spending.
- R&D activity included work with LIVMOR and Triple Ring. The company entered agreements with approximately $3.0 million of 2022 commitments. The filing’s discussion says approximately $1.7 million had been paid; detailed notes describe $500,000 paid to LIVMOR and $400,000 to Triple Ring as of March 31.
- In February, HeartBeam raised $348,000 by issuing 58,000 shares and 58,000 warrants at a combined $6.00 per unit. Warrants carry a $6.00 exercise price, a five-year term, and a 180-day lock-up. Separately, the company issued shares and warrants to a consulting firm for IPO-related services.
- Prepaid expenses and other assets increased to $1.540 million from $806,000, including amounts paid in advance under development agreements.
Outlook, risks and controls
- Management planned FDA submissions for initial products in late 2022, with anticipated clearance of the emergency-department product in late 2022 and the telehealth product in early 2023. These are plans, not assured outcomes; products had not received FDA clearance.
- The company has incurred recurring losses and negative operating cash flows since inception and expects to need additional capital. Management cautioned that financing or strategic relationships may not be available on acceptable terms or at all.
- Development and commercialization depend on FDA clearance, execution of product-development plans, capital availability, and the ability to compete and recruit qualified personnel. The filing also notes possible continuing COVID-19-related impacts.
- Management concluded disclosure controls and procedures were not effective as of March 31, 2022, citing material weaknesses involving documentation, approval and review processes, GAAP expertise, and staffing/segregation of duties. Remediation efforts were ongoing.
- No material legal proceedings were reported. Risk Factors were listed as not applicable because HeartBeam was a smaller reporting company.
Important facts for investors to verify
- Reconcile the reported approximately $1.7 million of agreement payments with the detailed $900,000 paid to LIVMOR and Triple Ring by March 31.
- Track cash burn, the stated 12-month cash runway, and the timing and terms of any additional financing.
- Verify progress toward FDA submissions and clearances, and whether development commitments remain within the stated budgets and schedules.
- Monitor remediation of the disclosed material weaknesses in internal controls.