HeartSciences Inc. (HSCS) - Q1 2026 10-Q Summary
Business Context and Reporting Period
Company: HeartSciences Inc.
Reporting Period: Three months ended July 31, 2025 (Fiscal Q1 2026).
Business Overview: A medical technology company developing AI-based electrocardiograph (ECG) solutions, specifically the MyoVista wav ECG device and the MyoVista Insights Cloud Platform. The company is pre-commercial in the U.S., awaiting FDA clearance for its AI algorithms and device.
Listing Status: Nasdaq Capital Market (HSCS, HSCSW). The company is currently under a Nasdaq compliance extension regarding minimum stockholders' equity requirements, with a deadline of September 15, 2025.
Key Financial Metrics
| Metric | Q1 2026 (Ended July 31, 2025) | Q1 2025 (Ended July 31, 2024) |
|---|---|---|
| Revenue | $1,900 | $0 |
| Net Loss | $(2,054,994) | $(2,051,689) |
| Loss Per Share (Basic & Diluted) | $(1.58) | $(2.64) |
| Cash and Cash Equivalents | $2,792,231 | $4,339,778 |
| Working Capital | $1,402,090 | $(1,531,754) |
| Total Debt (Notes Payable) | $1,541,120 | $2,551,170 |
| Stockholders' Equity | $3,141,111 | $5,933,957 |
Note: Revenue is negligible, derived from limited international distributor relationships. Gross margin is $1,140.
Material Changes vs. Prior Period
- Financing Activity: The company raised approximately $4.6 million in gross proceeds during the quarter through the issuance of 1,317,689 Units (Series D Preferred Stock and Warrants). This significantly improved liquidity compared to the prior year.
- Debt Reduction: Notes payable decreased by approximately $1.01 million. This reduction was achieved through a combination of cash repayments ($100,000) and debt-for-equity exchanges ($1.02 million principal exchanged for 274,159 shares of Common Stock).
- Operating Expenses: Total operating expenses decreased by 10% to $1.88 million. Research and Development (R&D) expenses dropped 19% to $997,000, primarily due to reduced cloud consulting costs following the completion of Phase 1 of the MyoVista Insights Cloud Platform. Selling, General, and Administrative (SG&A) expenses increased slightly by 3% to $878,000, driven by higher stock-based compensation.
- Interest Expense: Interest expense surged 715% to $184,000, attributed to the Streeterville Note and amortization of debt discounts.
Guidance, Outlook, and Risks
- Going Concern: The filing explicitly states substantial doubt regarding the company's ability to continue as a going concern. Management believes current resources are insufficient to fund operations for the next 12 months without additional capital.
- Capital Raising: The company is actively pursuing capital through:
- Series D Offering: "Best efforts" offering of up to $15.0 million in Units. Approximately $9.6 million remains available for issuance as of the filing date.
- ATM Facility: An Equity Distribution Agreement (EDA) with Maxim Group allows for the sale of up to $25.0 million of Common Stock. Approximately $4.3 million is currently available for issuance.
- Equity Line: A $15.0 million facility with Lincoln Park Capital, with approximately $12.8 million remaining.
- Regulatory Outlook: The company intends to submit separate FDA filings for the MyoVista wav ECG device and its software algorithm in calendar 2025. A low-ejection fraction algorithm submission for the Cloud Platform is targeted for the first half of calendar 2026.
- Internal Controls: Management disclosed that disclosure controls and procedures were not effective as of July 31, 2025, due to material weaknesses including lack of proper approval processes, insufficient accounting resources, and inadequate segregation of duties.
- Nasdaq Compliance: The company received a 180-day extension from Nasdaq to regain compliance with the $2.5 million minimum stockholders' equity requirement. Failure to comply by September 15, 2025, could result in delisting.
Investor Verification Checklist
- Cash Runway: Verify the sufficiency of the $2.8 million cash balance against the stated burn rate and the timeline for FDA submissions.
- Financing Progress: Monitor the status of the Series D offering and ATM facility to ensure the company can raise the necessary capital to avoid insolvency.
- Nasdaq Status: Confirm whether the company regains compliance with Nasdaq listing rules by the September 15, 2025 deadline.
- Debt Covenants: Review the terms of the Streeterville Note and FRV Note for potential default triggers or mandatory conversion events.
- Internal Controls: Assess the remediation plan for the identified material weaknesses in internal controls over financial reporting.
- Regulatory Milestones: Track the actual submission dates for the FDA 510(k) or De Novo requests for the MyoVista wav ECG and associated algorithms.