HeartBeam, Inc. — Q3 2023 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2023. Financial statements are unaudited. HeartBeam is a pre-commercial cardiac technology company developing ambulatory ECG products based on its proprietary Vector Electrocardiography platform.
Financial results
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | No revenue reported | No revenue reported | No revenue reported | No revenue reported |
| Operating expenses | $3.737 million | $3.610 million | $11.205 million | $9.292 million |
| Operating loss | $(3.737) million | $(3.610) million | $(11.205) million | $(9.292) million |
| Net loss | $(3.470) million | $(3.579) million | $(10.760) million | $(9.250) million |
| Net loss per share | $(0.13) | $(0.44) | $(0.59) | $(1.14) |
With no reported revenue, gross profit and operating margins are not meaningful. Q3 operating expenses increased 4% year over year; nine-month expenses rose 21%, with general and administrative costs up 22% and R&D up 19%. Higher stock-based compensation, staffing and commercial-team transition costs contributed to increases. Higher interest income, reflecting increased cash and interest rates, helped reduce Q3 net loss year over year; the nine-month net loss widened.
Cash, liquidity and capitalization
- Cash and cash equivalents were $19.2 million at September 30, 2023, versus $3.6 million at December 31, 2022. An additional $25,000 was restricted cash.
- Nine-month operating cash use was $9.2 million, compared with $7.0 million in 2022; investing cash use was $0.1 million. Financing provided $25.0 million, primarily from equity issuance.
- The company raised approximately $24.8 million net from securities sales during the first nine months, including a May offering. Common shares outstanding increased from 8.0 million at year-end 2022 to 26.3 million at September 30, 2023.
- Total liabilities were $1.0 million, consisting of accounts payable and accrued expenses. The balance sheet reports no debt at September 30; a $0.5 million convertible note issued in February was settled through a share issuance in March.
- Management stated that current cash, based on its business-plan assumptions and expected burn rate, should fund operations for the 12 months following issuance of the financial statements. The company has incurred recurring losses and negative operating cash flow since inception and may need additional capital.
Developments, outlook and risks
- HeartBeam reported filing a 510(k) submission for its AIMIGo device and said it plans a separate submission for software algorithms after device clearance. The filing describes FDA clearance as required; the products are not cleared for marketing. Management was seeking initial product clearance during 2024.
- The company expected no material commercial revenue in 2023. Its outlook depends on regulatory progress, product development and access to additional capital; management cautioned financing or strategic relationships may not be available on acceptable terms or at all.
- A peer-reviewed VECG study was published in August 2023. Management described it as foundational research on detecting coronary artery occlusions; this is not evidence of regulatory clearance or commercial adoption.
- There was a $1.7 million open committed project with Triple Ring Technologies, with $0.6 million remaining at quarter-end. The headquarters lease is month-to-month.
- Management concluded disclosure controls and procedures were not effective because of material weaknesses, including insufficiently documented policies, approval and review processes, complex-GAAP expertise, and staffing for segregation of duties. A Controller was hired in July 2023 and remediation work was underway; management said no material change in internal control procedures occurred during the quarter.
- No material legal proceedings were reported. The company identified no material changes to critical accounting policies and reported no derivatives or hedging activities.
Important facts for investors to verify
- FDA review status, timing and requirements for the AIMIGo device and planned software submission.
- Actual cash burn and whether available cash remains sufficient relative to the stated 12-month runway and development commitments.
- Potential need for additional financing and resulting dilution; approximately $11.0 million remained available under the ATM at September 30, 2023.
- Progress in remediating the disclosed internal-control material weaknesses.
- Commercial evidence, including revenue prospects, product adoption and the extent to which early VECG study results translate into validated clinical performance.