In March 2022, the Company entered into a professional services agreement with Triple Ring Technologies, Inc. (“TRT”), a co-development company, to assist in the design and development of the Company’s telehealth complete solution 3D vector ECG collection device for remote heart attack or MI monitoring. This agreement was followed by several amendments. The agreement with TRT includes a commitment totaling $1.7 million. For the three and nine months ended September 30, 2024, the Company has expensed approximately $0.1 million and $0.3 million, respectively. For the three and nine months ended September 30, 2023, the Company has expensed approximately $0.3 million and $0.8 million, respectively.
As of September 30, 2024, the Company has a remaining commitment of $0.1 million.
We are a medical technology company focused on transforming cardiac care through the power of personalized insights. Our aim is to deliver innovative, higher resolution ambulatory cardiac monitoring solutions that can be used by patients anywhere to enable the detection and monitoring of cardiac disease outside of a healthcare facility. Our ability to develop higher resolution Electrocardiogram (“ECG”) solutions is achieved through the development of our proprietary and patented Vector Electrocardiography (“VECG”) technology platform. Our VECG technology is capable of capturing 3D vector signals of the heart’s electrical activity and synthesizing a 12-Lead (“12L”) ECG from these signals. In early studies, our approach demonstrated equal or superior diagnostic capability than traditional hospital-based 12L ECG systems.
Our Products (“Product” or “Products”) require FDA clearance and have not been cleared for marketing.
We believe our Products and services will benefit many stakeholders, including patients, healthcare providers, and healthcare payors. We are developing our telehealth Product, (“the HeartBeam System”, previously referred to as “AIMIGo™”), to address the rapidly growing field of ambulatory cardiac health monitoring. The HeartBeam System is comprised of a credit card sized electrocardiogram device, a patient application, a physician portal, and powerful cloud-based algorithms. We believe that we are uniquely positioned to play a central role in ambulatory cardiac monitoring including high-risk Coronary Artery Disease (“CAD”) patients, because the initial studies have shown that our ischemia detection system may be more accurate than existing ambulatory monitoring solutions. CAD patients are at increased risk for a heart attack or Myocardial Infarction (“MI”).
To date, we have developed a working prototype for the HeartBeam System and have filed a 510(k) submission with the FDA. This submission is for the initial Product, a device which is a 3 lead (3L) X, Y, Z vector VECG. We are in the substantive review phase of answering questions posed by the FDA on this submission. We have clarified the information requested in meetings with FDA representatives and are finalizing our official responses. During the second half of 2024 we received additional questions from FDA, have provided answers and additional data, and are engaged in productive discussions to finalize the clearance. If cleared as anticipated, we believe this will be the first patient-held VECG device to be cleared by the FDA and this will be a major milestone for the company.
Following FDA clearance of the HeartBeam System, we plan to file a submission for the software algorithms that synthesize a 12L ECG from the HeartBeam System. We have held two pre-submission meetings with the FDA on this 12L synthesis submission. These meetings focused primarily on the performance goals of our clinical study that is designed to demonstrate the similarity between our synthesized 12L signal and the output of a standard 12L ECG for the intended use. Based on feedback from FDA and our clinical experts, we have designed a prospective multicenter pivotal study, the VALID-ECG Study for clinical validation of the HeartBeam 12 Lead ECG Synthesis Software for Arrhythmia Detection.
On June 20, 2024, we completed patient enrollment in the VALID-ECG Study. A total of 198 patients were enrolled from five clinical sites in the United States. The primary objective was to demonstrate the equivalence of ECG waveforms between the HeartBeam System Synthesized 12L ECG and Standard 12L ECG, recorded simultaneously in each subject, by assessing relevant ECG characteristics, i.e. intervals and amplitudes. Efforts were made to enroll patients with a diverse demographic profile reflective of the intended use population in the United States.
We are currently analyzing the data and working on the other components of the second 510(k) application. We anticipate submitting this 510(k) application soon after receiving the initial FDA clearance. The result of these two 510(k) submissions, if cleared by the FDA as anticipated, will be an ambulatory device, carried by patients, which can synthesize a 12L ECG for physician review.
We continue to anticipate that our Early Access Program for the HeartBeam System will occur in coming months. This program will provide the company with valuable feedback on the user experience and functionality of the system in a real world setting. We do not anticipate that the HeartBeam System clearance will generate significant revenue before the 12L clearance.
We also have an active AI program underway. Our AI team includes 5 PhDs. The leadership has deep AI expertise, including prior positions at Apple, Microsoft and Google. We have acquired approximately one million 12L ECGs from various sources, a key element in our fast-paced AI development efforts.
We have developed initial deep learning algorithms, focused on the ability to detect various cardiac arrhythmias. HeartBeam has had data on its deep learning algorithm presented at two prestigious Electrophysiology conferences. Data were presented at the European Heart Rhythm Association in Berlin, Germany in April 2024 and at the Heart Rhythm Society, in Boston, MA in May 2024. We believe that, when combined with our Products, HeartBeam’s AI will provide additional value to patients and physicians in several ways, including:
•Providing automated classification of cardiac conditions, including common arrhythmias,
•Potentially enhancing user experience and simplify the onboarding process, and
•In the longer run, we believe that applying deep learning algorithms on top of the rich VECG data, especially with the longitudinal dataset from patients taking repeated readings, may result in unsurpassed predictive and diagnostic capabilities.
The custom software and hardware of our Products are classified as Class II medical devices by the FDA, running on an FDA registered Class I software platform. Premarket review and clearance by the FDA for Class II devices is generally accomplished through the 510(k) premarket notification process or De Novo process. Given the proposed intended use of our device, the 510(k) submission is expected to require clinical data to support FDA clearance.
A landmark clinical study on the HeartBeam technology was published in the August 2023 issue of the journal JACC: Advances. The publication, “Coronary Artery Occlusion Detection Using 3-Lead ECG System Suitable for Credit Card-Size Personal Device Integration” demonstrated that HeartBeam’s VECG technology detects the presence of a coronary occlusion, the cause of heart attacks, with the same accuracy as a standard 12L ECG.
The study showed that the automated analysis of the VECG and 12L ECG signals had similar performance in determining whether a coronary artery was occluded. Also in the study, the human interpretation of the 12L ECGs had significant intra- and inter-observer variability, which does not occur with automated readings. The study also showed that the presence of the “normal baseline” recording, a novel feature that is integral to HeartBeam’s VECG technology, dramatically improved the accuracy of interpretation, increasing the Area Under the Curve, a standard measure of diagnostic performance, from 0.72 to 0.95. This is particularly important since physicians who are analyzing 12L ECGs often do not have access to a normal baseline, implying that the HeartBeam system could outperform this approach.
The study was a collaboration of Harvard Medical School Faculty at Beth Israel Deaconess Medical Center in Boston, MA, and Clinical Center of Serbia in Belgrade.
As of September 30, 2024, we had 20 employees. We intend to hire or engage additional full-time professionals, employees, and / or consultants to align with our growth strategy. Although the market is highly competitive for attracting and retaining highly qualified professionals in our industry, we continue our endeavor to find such candidates for our Company. Our management team and additional personnel that we may hire in the future will be primarily responsible for executing and implementing growth opportunities, making tactical decisions related to our strategy and pursuing opportunities to invest in new technologies through strategic partnerships and acquisitions.
Thus far in 2024, we have been granted two new U.S. patents:
•One patent covers apparatuses and methods that facilitate the comparison of cardiac signals over time for the automated or assisted detection of heart attacks. The other patent covers methods and apparatuses around HeartBeam’s wrist-based ECG system.
•We now have 17 issued patents worldwide, with 13 issued patents in the U.S. and four issued patents in Germany, France, Netherlands and United Kingdom. Additionally, we have ten pending U.S applications and twenty-one pending applications in Canada, China, the European Union, Japan, South Korea and Australia. We also have one pending Patent Cooperation Treaty application. The issued patents are predicted to expire between April 11, 2036 and March 4, 2044.
Interactions with Industrial Players
We believe that our VECG technology has the potential to be the most advanced ambulatory cardiac monitoring solution and is applicable in a number of form factors. In anticipation of FDA clearance, we are refining our go-to-market strategy and are encouraged by our early discussions with industry players and their interest in our technology.
Presentations at AHA
In August 2024, we were notified of the acceptance of two of our pilot studies for presentation at American Heart Association meeting in November 2024. The studies are designed to show early evidence of (1) clinical equivalence of the HeartBeam Synthesized 12L ECG to a standard 12L ECG for diagnosis of arrhythmia and (2) the use of the technology for heart attack detection.
At-the-Market Offering
On May 2, 2024, we entered into the PV Sales Agreement with Public Ventures, pursuant to which we may offer and sell from time to time, at our option, through or to Public Ventures, up to an aggregate of approximately $17 million of shares of the Company’s common stock, $0.0001 par value per share (the “Shares”). We will pay Public Ventures a commission at a fixed rate of 3.0% of the aggregate gross proceeds from each sale of the Shares under the PV Sales Agreement. There were 50,000 Shares issued under the ATM during the three months ended June 30, 2024. As of September 30, 2024, there was approximately $16.9 million available for issuance under the ATM following the use of the shelf registration on Form S-3 for the Agreements and the ATM during the quarter.
Any Shares to be offered and sold under the PV Sales Agreement will be issued and sold pursuant to our Registration Statement on Form S-3 (File No. 333-269520), filed with the Securities and Exchange Commission on February 1, 2023 and the prospectus supplement included therein, relating to the Offering, by methods deemed to be an “at the market offering” as defined in Rule 415(a)(4) promulgated under the Securities Act of 1933, as amended, or if specified by us, by any other method permitted by law.
In order to proceed with the PV Sales Agreement, we terminated the prior Sales Agreement with A.G.P/Alliance Global Partners.
Appointment of Additional Senior Management Team members
On September 10, 2024, we announced the appointment of Timothy Cruickshank as Chief Financial Officer (CFO). Mr. Cruickshank brings more than 15 years of public company experience with a focus on growing businesses with disruptive technologies through authentic leadership, strategic focus, data-driven decisions, and strong risk management and governance. He succeeds long-time CFO Richard Brounstein, who has been serving in an advisory capacity since retiring in February 2024.
On September 24, 2024, we announced the appointment of Lance Myers, PhD, a pioneer in digital health data analytics and body-worn biosensor technologies, as Chief Artificial Intelligence (AI) Scientist. In this newly created position, Dr. Myers will play a pivotal role in guiding how AI is applied to the Company’s core technology. Most recently, Dr. Myers served as AI Advisor to HeartBeam until September 23, 2024.
On October 17, 2024, we announced the appointment of Robert Eno as Chief Executive Officer (CEO). Mr. Eno joined HeartBeam as President in January 2023 and will lead as the Company continues to work towards securing the foundational FDA 510(k) clearance for its vector-based technology and prepares for commercialization and growth. As part of a long-planned transition, Mr. Eno succeeds long-time CEO and founder, Branislav Vajdic, Ph.D. Dr. Vajdic will continue as President of HeartBeam, focused on innovating on the Company’s groundbreaking vector-based technology, driving research and development efforts, and advancing artificial intelligence (AI) applications.
Results of Operations
The following table summarizes our results of operations for the periods presented on our statement of operations data.
For three months ended September 30
For nine months ended September 30
2024
2023
Change
% Change
2024
2023
Change
% Change
(In thousands, except percentages)
Operating expenses:
General and administrative
$
2,176
$
2,114
$
62
3
%
$
6,778
$
6,417
$
361
6
%
Research and development
2,893
1,623
1,270
78
%
8,165
4,788
3,377
71
%
Total operating expenses
5,069
3,737
1,332
36
%
14,943
11,205
3,738
33
%
Loss from operations
(5,069)
(3,737)
(1,332)
36
%
(14,943)
(11,205)
(3,738)
33
%
Interest income
96
267
(171)
(64)
%
408
445
(37)
(8)
%
Other expense
(6)
—
(6)
100%
(6)
$
—
(6)
100%
Income tax provision
—
—
—
—
%
—
—
—
—
%
Net loss
$
(4,979)
$
(3,470)
$
(1,509)
43
%
$
(14,541)
$
(10,760)
$
(3,781)
35
%
Summary of Statements of Operations for the three and nine months ended September 30, 2024 compared with the three and nine months ended September 30, 2023:
General and administrative (“G&A”) expenses increased by approximately $0.06 million or 3% during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase in G&A expense is primarily related to increase in headcount amounting to $0.02 million, higher consultants costs of $0.07 million primarily offset by lower legal costs in this quarter compared to the prior period.
General and administrative (“G&A”) expenses increased by approximately $0.4 million or 6% during the nine months ended September 30, 2024. The increase in G&A expense is primarily related to non-cash stock-based compensation expense amounting to $0.7 million associated with additional awards granted since September 30, 2023, higher consulting costs of $0.4 million related to finance consultants, primarily offset by decrease in payroll cost of $0.4 million related to lower costs associated with restructuring of G&A headcount, decrease of $0.5 million comprising of lower investor relation costs, and legal costs incurred in this period compared to the prior period.
Research and development expenses (“R&D”) expenses increased by approximately $1.3 million or 78% during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023. The increase in R&D expense is primarily related to increase in headcount of $0.3 million and non-cash stock-based compensation expense amounting to $0.1 million associated with additional awards granted since September 30, 2023, increase of clinical and AI related costs of $0.5 million, increase in consulting spend of $0.6 million offset by decrease in product development consulting cost of $0.1 million primarily driven by completion of milestone projects in prior period.
Research and development expenses (“R&D”) expenses increased by approximately $3.4 million or 71% during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023. The increase in R&D
expense is primarily related to increase in headcount of $0.9 million and non-cash stock-based compensation expense amounting to $0.5 million associated with additional awards granted since September 30, 2023, increase of clinical and AI related costs of $2.0 million, increase in consulting spend of $1.0 million offset by decrease in product development consulting cost of $0.8 million primarily driven by completion of milestone projects in prior period.
Other income during the three and nine months ended September 30, 2024 and 2024 is related to interest earned on our cash balances.
Liquidity and Capital Resources
Our cash requirements are and will continue to be, dependent upon a variety of factors. We expect to continue devoting significant capital resources to R&D and go-to-market strategies.
We have incurred losses each year since inception and has experienced negative cash flows from operations in each year since inception. As of September 30, 2024, we have cash and cash equivalents balance of approximately $5.8 million. Based on our current business plan assumptions and expected cash burn rate, we believe that the existing cash is insufficient to fund operations for the next twelve months following the issuance of these financial statements. These factors raise substantial doubt regarding our ability to continue as a going concern.
Our continued operations and our commercialization plan will depend on the ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic relationships until sufficient revenue can be generated to achieve positive cash flow from operations. We expect no material commercial revenue in 2024 nor can we provide assurance that a financing or strategic relationships will be available on acceptable terms.
As of September 30, 2024, we had approximately $5.8 million in cash, a decrease of $10.4 million from $16.2 million as of December 31, 2023.
Our cash is as follows (in thousands):
September 30, 2024
December 31, 2023
Cash and cash equivalents
$
5,768
$
16,189
Cash flows for the nine months ended September 30, 2024 and 2023 (in thousands):
Nine Months ended September 30,
2024
2023
Net cash used in operating activities
$
(10,319)
$
(9,235)
Net cash used in investing activities
(201)
(144)
Net cash provided by financing activities
105
24,994
Operating Activities:
Net cash used in our operating activities of $10.3 million during the nine months ended September 30, 2024, is primarily due to our net loss of $14.5 million less $3.3 million in non-cash expenses and $0.9 million of net changes in operating assets and liabilities.
Net cash used by our operating activities of $9.2 million during the nine months ended September 30, 2023, is primarily due to our net loss of $10.8 million less $2.0 million in non-cash expenses and $0.4 million of net changes in operating assets and liabilities.
Investing Activities:
Net cash used in investing activities during the nine months ended September 30, 2024 of $0.2 million, is from the purchase of property and equipment.
Net cash used in investing activities during the nine months ended September 30, 2023, of $0.1 million, is primarily due to purchase of property and equipment.
During the nine months ended September 30, 2024, net cash provided by financing activities during the nine months ended September 30, 2024, of $0.1 million is primarily from net proceeds from sale of equity, net of issuance costs.
Net cash provided by financing activities during the nine months ended September 30, 2023, of $24.9 million, is primarily from the issuance of common stock, net of issuance costs.
Critical Accounting Estimates
There have been no material changes to our critical accounting estimates from the information provided in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included in our 2023 Annual Report except as covered below:
Stock-based Compensation
The compensation cost for all stock-based awards is measured at the grant date, based on the fair value of the award, determined using a Black-Scholes option pricing model for stock options and fair value on the date of grant for non-vested restricted stock, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award). Determining the fair value of stock-based awards at the grant date requires significant estimates and judgments. Management has determined the fair value and vesting period of stock-based compensation to be a critical accounting estimate due to certain options containing performance-based vesting condition.
Research and Development: Clinical and Manufacturing Accruals
We record accruals for estimated costs of research, preclinical studies and clinical trials, and manufacturing development, which are a significant component of research and development expenses. A substantial portion of our ongoing research and development activities are conducted by one CRO. Our contract with this CRO include pass-through fees such as regulatory expenses, investigator fees, travel costs and other miscellaneous costs. We accrue the costs incurred under agreements with CRO based on estimates of actual work completed in accordance with the CRO agreement. We determine the estimated costs based on actual services performed by the CRO and clinical sites as at each period end. As actual costs become known, we adjust our accruals. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in our reporting amounts that are too high or too low in any particular period.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We do not hold any derivative instruments and do not engage in any hedging activities.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures
We have adopted and maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the SEC. Our disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. The material weaknesses previously identified but not yet remediated include (i) insufficient number of staff to maintain optimal segregation of duties and levels of oversight, and (ii) lack of formal risk assessment under COSO framework. As of September 30, 2024, based on evaluation of our disclosure controls and procedures, management concluded that our disclosure controls and procedures were not effective.
Notwithstanding the material weaknesses described above, our management team, including the CEO and CFO have concluded that the condensed unaudited financial statements, and other financial information included in this quarterly report, fairly presents in all material respects our financial condition, results of operations, and cash flows as of and for the periods presented in this quarterly report.
Since the third quarter of 2023, we have undertaken specific remediation actions to address the material weaknesses in our financial reporting specifically remediating the material weakness as identified in the 2023 Form 10-K related to documentation of policies and procedures, and insufficient GAAP experience regarding complex transactions and reporting. These remediation actions included hiring a Controller in July 2023, who has extensive experience in developing and implementing internal controls and executing plans to remediate control deficiencies, performing risk assessment under COSO framework, and hiring a Chief Financial Officer in September 2024, who has extensive experience leading public entities. We are establishing more robust processes related to the review of complex accounting transactions, the preparation of account reconciliations and the review of journal entries. We will continue to assess the remaining weaknesses as we continue to implement and refine control policies and procedures.
Changes in Internal Control
We have hired personnel with sufficient GAAP experience, completed documentation of policies and procedures, and documented proper approval processes including documentation of reviews to address the material weaknesses. There has been no change in our internal control procedures over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during our fiscal quarter ended September 30, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
There were no sales of equity securities sold during the period covered by this Quarterly Report that were not registered under the Securities Act and were not previously reported in a Current Report on Form 8-K filed by the Company.
(B) Use of Proceeds
Not applicable.
(C) Issuer Purchases of Equity Securities
Not applicable.
Item 3. Defaults Upon Senior Securities.
Not applicable
Item 4. Mine Safety Disclosures (Removed and Reserved)
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