UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2023
or
For the transition period from ___________ to ___________
Commission File Number: 001-41060
HEARTBEAM, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware
State or Other Jurisdiction of
Incorporation or Organization
2118 Walsh Avenue, Suite 210
Santa Clara, CA
Address of Principal Executive Offices
47-4881450
I.R.S. Employer
Identification No.
95050
Zip Code
Securities registered pursuant to Section 12(b) of the Act:
(408) 899-4443
Registrant’s Telephone Number, Including Area Code
Title of each class
Common Stock
Warrants
Trading Symbol(s)
BEAT
BEATW
Name of each exchange on which registered
NASDAQ
NASDAQ
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§
232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth
company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐
Non-accelerated filer ☒
Accelerated filer ☐
Smaller reporting company ☒
Emerging growth company ☒
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial
accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
As of June 30, 2023, there were 25,990,516 shares of the registrant’s common stock, par value $0.0001 per share, issued and outstanding, of these, 21,352,087 shares were held
by non-affiliates of the registrant. The market value of securities held by non-affiliates was $51,458,385 as of June 30, 2023, based on the closing price of $2.41 for the
registrant’s common stock on June 30, 2023.
As of March 19, 2024, there was 26,329,032 shares of the registrant’s common stock issued and outstanding.
None
DOCUMENTS INCORPORATED BY REFERENCE
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HEARTBEAM, INC.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”),
and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In particular, statements contained in this Annual Report on Form 10-K, including
but not limited to, statements regarding the sufficiency of our cash, our ability to finance our operations and business initiatives and obtain funding for such activities; our future
results of operations and financial position, business strategy and plan prospects, or costs and objectives of management for future acquisitions, are forward looking statements.
These forward looking statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as “may,” “will,” “should,” “expects,”
“plans,” “anticipates,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “seeks,” “goals,” “estimates,” “predicts,” “potential” and “continue” or similar words.
Readers are cautioned that these forward-looking statements are based on our current beliefs, expectations and assumptions and are subject to risks, uncertainties, and
assumptions that are difficult to predict, including those identified below, under Part II, Item lA. “Risk Factors” and elsewhere in this. Therefore, actual results may differ
materially and adversely from those expressed, projected or implied in any forward-looking statements. We undertake no obligation to revise or update any forward looking
statements for any reason.
The Company will continue to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission (the “SEC”).
Forward-looking statements speak only as of the dates specified in such filings. Except as expressly required under federal securities laws and the rules and regulations of the
SEC, we do not undertake any obligation to update any forward-looking statements to reflect events or circumstances arising after any such date, whether as a result of new
information or future events or otherwise. You should not place undue reliance on the forward-looking statements included in this report or that may be made elsewhere from
time to time by us, or on our behalf. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
Throughout this Annual Report on Form 10-K, “HeartBeam,” the “Company,” “we,” “us” and “our” refer to HeartBeam, Inc.
NOTE REGARDING COMPANY REFERENCES
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CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Table of Contents
Part I
Item 1. Business
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 1C. Cybersecurity
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Mine Safety Disclosures
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Item 6. RESERVED
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
Item 9A. Controls and Procedures
Item 9B. Other Information
Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections.
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accounting Fees and Services
Part IV
Item 15. Exhibits, Financial Statement Schedules
Item 16. Form 10-K Summary
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Item 1. Business
Overview
Part I
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 three-dimensional (“3D”) vector images 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 (hereinafter “Product” or “Products”) require Food and Drug Administration (“FDA”) clearance and have not been cleared for marketing.
TM
We believe our Products and services will benefit many stakeholders, including patients, healthcare providers, and healthcare payors. We are developing our initial Product
(“HeartBeam AIMIGo
” or “AIMIGo™”), to address the rapidly growing ambulatory cardiac monitoring market. HeartBeam AIMIGo is comprised of a credit-card sized
electrocardiogram device, a patient application, a physician portal and powerful cloud-based algorithms. We intend to show that our easy-to-use device (without external
electrodes) provides signals equivalent to a standard 12L device, and therefore will have a number of applications for ambulatory use. We believe that we are uniquely
positioned to play a central role in ambulatory cardiac monitoring including high-risk coronary artery disease patients. Initial studies have shown that our ischemia detection
system may be more accurate than existing ambulatory monitoring solutions. Coronary artery disease (“CAD”) patients are at increased risk for a heart attack or Myocardial
Infarction (“MI”).
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HeartBeam AIMIGo device in ready position (left) and the front view(right)
To date, we have developed working prototypes for HeartBeam AIMIGo and we have submitted the Product for FDA 510(k) clearance. To date, we have developed working
prototypes for HeartBeam AIMIGo and we have submitted the Product for FDA 510(k) clearance. As more fully discussed in the Products and Technology section below, we
have received questions from the FDA and are working through the stages of the FDA clearance process.
The custom software and hardware of our Products, we believe, are classified as Class II medical devices by the FDA, running on an FDA approved Class I registered software
platform. Class II medical devices are those for which general controls alone are insufficient to provide reasonable assurance of safety and effectiveness and there is sufficient
information to establish special controls. Special controls can include performance standards, post-market surveillance, patient histories and FDA guidance documents.
Premarket review and clearance by the FDA for these devices is generally accomplished through the 510(k) or 510(k) de-novo premarket notification process.
HeartBeam has 13 issued and allowed U.S. patents (U.S. 10,433,744, U.S. 10,117,592, U.S. 11,071,490, U.S. 11,419,538, U.S. 11,445,963, U.S. 11,701,049, U.S. 11,529,085,
U.S. 10,980,433, U.S. 11,412,972, U.S. 11,234,658, U.S. 11,793,444, U.S. 11,877,853, and allowed U.S. patent application no. 18/068,481), and nine pending U.S applications.
Outside of the U.S., HeartBeam has four issued patents in Germany, France, Netherlands and United Kingdom and fourteen pending applications in Canada, China, the
European Union, Japan, South Korea and Australia. HeartBeam has two pending Patent Cooperation Treaty applications. The issued patents are predicted to expire between
April 11, 2036 and April 21, 2042.
Market Overview
Chronic diseases are the number one burden on the healthcare system, driving up costs each year, and cardiovascular illnesses are one of the top contributors. Regulators,
payors, and providers are focused on earlier diagnosis and improved management of these conditions to drive better outcomes at lower cost. One way to accomplish this is
through the use of Connected Medical Devices – solutions that use technology to provide healthcare services remotely and aim to reduce healthcare expenditures while
allowing patients to engage with clinicians and better self-manage their care. The Connected Medical Device Market size is estimated at $66 billion in 2024, and is expected to
reach $133 billion by 2029, growing at a compounded annual growth (“CAGR”) of 15% during the forecast period (2024-2029).
Cardiovascular disease is the most expensive disease to manage and is estimated to be responsible for one in every eight healthcare dollars spent in the US, projected to cost the
US healthcare system $1 trillion by 2035. As cardiovascular
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disease is the leading cause of death worldwide, early detection, diagnosis, and management of chronic cardiac conditions are necessary to relieve the increasing burden on the
healthcare system. Diagnostic tests such as ECGs are used to detect, diagnose, and track numerous cardiovascular conditions. The market for cardiac monitoring technologies,
such as Holter monitors, patch-based cardiac monitoring technologies, and any other ECG-based technology used for clinical diagnosis is projected to reach approximately $18
billion by 2030, a CAGR of approximately 8%.
With advances in mobile communications, diagnostic monitoring of cardiac conditions is increasingly occurring outside the hospital. Global sales of Patient Monitoring Devices
in 2021 were $42 billion. With a CAGR of approximately 11% from 2022 to 2032, the market is projected to reach a valuation of $125 billion by 2032. The adoption of such
technology was greatly accelerated by the COVID-19 pandemic.
We believe we will be able to show that our easy-to-use device (without external electrodes) provides signals that can provide a 12L ECG representation like the gold-standard
and therefore will have a number of applications for ambulatory use. Our initial Product, HeartBeam AIMIGo, will allow physicians to evaluate the full range of cardiac
conditions that they currently assess with a standard 12L ECG. Currently we believe there are no products on the market that are portable, easy to use, and always with the
patient to provide physicians and patients with timely and highly accurate information about all heart conditions that could be detected with a 12L ECG, including potential
ischemic events. In the US, someone has a heart attack every 40 seconds. We believe a tool that is always with the patient and decreases time to intervention would have a
significant effect on saving lives and healthcare dollars. We believe our technology will address this problem by providing a convenient, cost-effective cardiac monitoring
solution, including software and hardware for physicians and their patients.
In the US, mobile cardiac tests are primarily conducted through outsourced Independent Diagnostic Testing Facilities (“IDTFs”) or as part of an telehealth system.
Reimbursement rates vary depending on the use case and generally are based on the value a technology offers to patients and healthcare providers. Actual reimbursed pricing is
set by the Centers for Medicare & Medicaid Services (“CMS”). Reimbursement rates for private insurers typically provide for similar or higher reimbursement rates when
compared to those set by the government for Medicare and Medicaid. Direct pay is an alternative for a product such as AIMIGo while data is being gathered.
Products and Technology
The foundation of our novel technology is the concept of VECG, a technology that has long been seen as superior to ECG in detecting MIs but is no longer used clinically
because of the difficulty experienced by physicians interpreting the output. We solved the crucial problem of recording three orthogonal (x, y and z) projections of the heart
vector with a device that is sized like a credit card. The thickness of our credit card-sized ECG signal collection device is about 1/8 inch (4 mm), and it weighs about 1 ounce
(28 grams). The core technology consists of a series of patented inventions and associated algorithms. In addition to using VECG to get a more complete 3D characterization of
cardiac activity, we use the concept of a baseline. We measure the change in cardiac parameters between an asymptomatic (baseline) recording and the symptomatic recording.
It is personalized for every patient as every patient has a unique baseline. Our increase in diagnostic performance in detecting MIs, when compared to a panel of cardiologists, is
attributed to a richer cardiac information set offered by VECG and the fact that our algorithms compare the patient’s personalized baseline and symptomatic recordings in the
3D space of VECG.
This novel technology has resulted in our initial Product, AIMIGo. Our AIMIGo ECG collection device is the size of a credit card and records cardiac signals with integrated
electrodes rather than wires or self-adhesive electrodes. Unlike a standard 12L ECG machine that records signals in empirically determined locations on a human body, our
approach is focused on recording three projections of the heart vector. The successful recording of the projections of the heart vector enables the synthesis, via a patented
method, of a 12L signal set and internal algorithmic diagnostic work in the space of 3D heart vectors.
There are obvious ease-of-use advantages when comparing our credit card-sized device to the current 12L ECG machine. The small form factor of our device makes it portable
and can be used by a patient at home or elsewhere. The device can be self-applied versus requiring a trained professional to apply. In addition, there are diagnostic performance
advantages, including, based on our initial study, increased accuracy in diagnosing MIs. The collected data is sent to a physician to assess the patient’s ECG in the context of the
patient’s baseline ECG, symptoms, and history.
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Our HeartBeam AIMIGo system is initially expected to be a prescription-only cardiac monitoring system intended for individuals with known or suspected heart disease,
including various arrhythmias and CAD. It helps physicians in choosing the best course of action for their patients who experience chest pain or other cardiac symptoms outside
of a medical facility. HeartBeam AIMIGo will bring a medical grade ECG to patients and will enable them to receive a plan of action from a physician in a timely manner. At
the time of onboarding, patients record a baseline 30-second ECG using our device. When a patient experiences symptoms, such as irregular heartbeats or chest pain, the patient
simply opens the smartphone application and places the credit card sized device against the chest to collect signals. These signals are processed by cloud-based algorithms and
converted to a synthesized 12L that is sent to the on-call physician, overlayed with the patient’s synthesized baseline ECG recording. In addition, the patient provides input on
their symptoms that is sent, along with the ECG data, to the cloud for interpretation by a physician. From start to finish, the process takes just a few minutes.
The HeartBeam AIMIGo system consists of a number of capabilities that will be introduced over time. These are:
1. A credit card sized ECG collection device. The device captures cardiac signals that represent x, y and z projections of the heart vector and transmits them via Bluetooth
connection to a smartphone. It is always with the patient given its small form factor. It is easy to use as all that is required of the patient is that the device be pressed
against the chest.
2. A smartphone application that receives the ECG signals from the HeartBeam signal collection device. The application has several functions: guiding the patient through
the signal collection, asking about symptoms, displaying the status of the data collection including real time signal quality check, and notifying the patient of the plan of
action as determined by a physician. In addition, the application will contain HIPAA-compliant video conferencing or text capabilities for the healthcare provider to
communicate directly with the patient.
3. A cloud-based software system that serves four basic functions: (1) Performing a final check of the ECG signal quality, (2) Synthesizing a 12L ECG from the three
measured vector leads, (3) Creating a diagnostic suggestion based on 3D VECG interpretation, risk factors and symptoms and (4) Preparing a summary report for the
physician. These software functions will be introduced to the HeartBeam AIMIGo product in a sequential manner. To facilitate a more accurate physician interpretation
of the data, the software overlays the patient’s synthesized baseline 12L ECG waveform on the synthesized 12L ECG waveform from the current reading. To ensure high
signal quality, the system checks for noise levels in the recorded signals. Those signals that can be effectively filtered are accepted and those that have a noise level
above an empirically established threshold are rejected. If a recorded signal is rejected, the user is asked to repeat the recording.
4. A web-based physician portal capable of displaying the following relevant information for the physician to analyze: diagnostic suggestion, patient history, symptoms,
baseline and current, synthesized 12L ECG, and recorded 3 vector leads. Our physician portal assists physicians with their diagnostic interpretation by providing both the
baseline 12L synthesized ECG and the 12L synthesized ECG that is under evaluation.
5. A dedicated ECG monitoring and reading team of medical professionals to offer 24/7/365 services in order to provide a recommended course of action to patients based
on the ECG signals, symptoms, and patient history. The patient will have the option of having a consult with a medical professional. This capability will be developed
in-house or outsourced through a contracted third-party organization.
The market release of our Product will be in multiple versions.
The Initial Product will include a 3D VECG credit card-sized device that records the “X, Y, Z” cardiac activity as 3 leads and displays the signals for clinician review. The
system also includes a patient application, a physician portal, and wireless communications among the elements. We anticipate this to be the first patient-friendly, portable
VECG device to be cleared by the FDA and this will be a major milestone for the company. In addition, this clearance will provide the regulatory foundation for subsequent
products in our product portfolio. An FDA 510(k) application was submitted in the 2nd quarter of 2023. The review remains active with FDA, as we have successfully passed
the acceptance of the filing and have completed the initial, substantive review phase with questions and requests from FDA. As we continue to navigate the progress towards
clearance, we have taken advantage of all available regulatory tools and opportunities to work interactively with FDA, gaining valuable official communication and feedback on
our proposed response approach, including testing protocols. We have conducted this agreed upon testing to address FDA's open questions and are in the process of preparing
our official responses. Once submitted, FDA will complete their review. We currently anticipate clearance by the end of Q2 2024.
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Following the clearance of the Initial Product, we will be working to obtain a second 510(k) clearance. This clearance will be focused on the ability to offer to the physician a
pair of baseline and symptomatic 12L ECGs, both synthesized from 3D VECG signals (X, Y, Z) recorded by the HeartBeam AIMIGo device. This approach leverages recently
issued patents for a personalized system for synthesizing 12L ECG waveforms. The 510(k) application is planned to be submitted to FDA by Q3 2024. A key part of this
submission will be a pivotal study demonstrating the similarity between the synthesized 12L output from AIMIGo and a simultaneously recorded standard 12L ECG. We have
held two Pre-submission meetings with FDA on the 12L synthesis submission. These meetings have been focused primarily on the performance goals of our clinical study.
Based on feedback from FDA and our clinical experts, we have designed our clinical study, “Clinical Validation of AIMIGo 12 Lead ECG Synthesis Software for Arrhythmia
Detection: A Prospective Multicenter Pivotal Study,” (the “VALID-ECG Study”).
On March 13, 2024, we enrolled the first patient in the VALID-ECG study. The VALID-ECG study is a prospective single-arm multicenter trial designed with the goal to
validate the AIMIGo 12L ECG Synthesis Software by comparing its results with those of a standard FDA-cleared 12L ECG using both quantitative and qualitative assessment
methodologies. We plan to enroll a total of approximately 198 patients presenting to an outpatient cardiology clinic or arrhythmia center for symptoms suggestive of cardiac
arrhythmia or for routine checkup of previously diagnosed arrhythmia. The study is expected to include up to 5 sites. The primary objective is to demonstrate the equivalence of
ECG waveforms between AIMIGo Synthesized 12L ECG and Standard 12L ECG, recorded simultaneously in each subject, by assessing intervals and amplitudes. In addition,
we have completed an 70 patient pilot study, which mirrors the pivotal study. We anticipate to complete enrollment in the VALID-ECG study in Q2 2024 and submit the second
510(k) application by Q3 2024. We continue to anticipate that our limited launch of AIMIGo will occur by the end of 2024.
Future versions of the Product may include AI algorithms that automatically classify the 3-lead VECG signals, and identify common arrhythmias as well as normal sinus
rhythm. Other potential enhancements include our proprietary ECG interpretation MI algorithms and our overall MI diagnostic suggestion.
Market Opportunity
ECGs are key diagnostic tests utilized in the diagnosis and monitoring of cardiovascular disease, the number one cause of death worldwide. According to the American Heart
Association, there were approximately 130 million adults living with cardiovascular disease and approximately 20 million adults with diagnosed CAD in the US. The
prevalence of these cardiac conditions and thus the market size is increasing, due to an aging population and lifestyle choices.
Every 40 seconds someone in the US has a heart attack, or MI. Unfortunately, there is no way for patients at home to distinguish if the symptoms they are experiencing are due
to an MI, or some other more benign condition such as indigestion. As a result, patients often ignore symptoms and delay seeking care, which leads to worse outcomes and
increased mortality. Shortening that time from symptoms to the door of a medical facility would reduce complications and save lives. On the other hand, many patients who go
to the ED with chest pain are not experiencing an MI. Chest pain is the second most common reason for an ED visit in patients over 45, yet fewer than 20% of chest pain ED
visits result in a diagnosis of a life-threatening condition. These unnecessary ED visits lead to well over $10 billion in unnecessary healthcare expenditures.
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Most ECGs are conducted in a healthcare facility setting using a 12L ECG machine, the gold standard. ECGs taken outside of healthcare facilities are expected to grow more
quickly than in-hospital ECGs. Monitoring cardiac patients outside of a hospital is a fast-growing trend, as it is less expensive and provides a better patient experience.
However, while ambulatory cardiac monitoring devices are often much easier for patients to use, they have fewer leads than the gold standard and therefore cannot offer as
comprehensive a picture of cardiac health.
While a standard 12L ECG readout is of great medical value, it is simply impractical to have a standard 12L machine next to patients when they experience symptoms outside
the clinical setting, since recording the event requires attaching multiple electrodes to the patient’s body with professional assistance. While existing technologies use
predominantly single lead ECG devices to monitor arrhythmias, these technologies do not provide information to the physician on the presence of life-threatening conditions
such as acute coronary syndrome (ACS) including MIs, also known as heart attacks.
We believe our technology addresses these market needs and has several key attributes that make it a good fit for these patients. Our Product can be used anywhere when
symptoms occur and offers the potential for lifelong patient usage. The device is practically always near the patient and ready to be used for recording a cardiac event. It enables
real-time transmission of the 3D VECG signals and a synthesized 12L ECG. We believe physicians will typically prescribe our solution to chronic cardiovascular patients for
long term monitoring, thereby enabling prolonged data collection and delivering a more complete picture for diagnosis. This will also enable the use of artificial intelligence
(AI) on our future database that will have a unique set of longitudinal VECG signals and synthesized 12L ECGs.
As we believe our VECG platform demonstrates 12L equivalence and clinical & cost-effectiveness advantages, coupled with a patent protected technology, we believe this
might open multiple licensing and/or partnering opportunities with players in the ECG, cardiac monitoring patch and smart watch verticals.
Market Strategy
Our goal is to establish our Products as key solutions for cardiology practices. Our efforts to enter the market involve establishing clinical evidence and demonstrating the cost-
effectiveness of adopting our Products. The initial geographic market for HeartBeam AIMIGo is the US.
We believe that both HeartBeam AIMIGo Products will be subject to the US FDA’s 510(k) review process. An FDA 510(k) application for the initial Product was submitted in
Q2 2023.
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The primary customers are cardiology practices and the cardiology departments of hospitals. Healthcare insurers are another important customer, as they will potentially benefit
from the reduced costs to the healthcare system. We are working to develop new clinical studies and publish results of completed clinical studies and plan to demonstrate real
world cost-effectiveness of the use of the solution.
Our initial targets for HeartBeam AIMIGo are market segments that see value in an easy-to-use device that can generate synthesized 12L ECG recordings. These will be
segments in which payment for the device will be outside of the established reimbursement system. These target segments may include concierge practices, hospital-at-home
segment and use in clinical trials. As we establish data on the clinical efficacy and cost-effectiveness of HeartBeam AIMIGo, we will target at-risk cardiology practices,
including high-risk patients being discharged from hospitals after experiencing an MI.
Our long-term strategy is to generate sufficient evidence of clinical efficacy and cost-effectiveness to generate reimbursement coverage and payment specifically for the
HeartBeam AIMIGo solution. We expect to be able to demonstrate significant clinical benefits for patients and savings to the healthcare system, justifying appropriate
reimbursement levels.
Our primary marketing strategy will focus on the medical community with continued validation of clinical efficacy and cost-effectiveness and the establishment of reference
sites. We will also create educational materials and provide other support to help educate our customers’ patients.
We will explore other business models. For example, hospitals face CMS penalties if their 30-day readmission rates for patients who are discharged after an MI exceed certain
thresholds. These CMS penalties are levied on all hospital CMS payments, so the impact can be significant. Our Product can be a tool to help hospitals manage these patients
after discharge. We will explore models in which hospitals pay for the device and for the initial 30 days of service. In addition, we will explore models for value-based care, in
which the use of Product reduces overall costs.
We are currently speaking with hospitals in large healthcare systems to educate them about our first two Products. These are sophisticated customers, and we plan to use
technical presentations, peer-reviewed clinical data, and demonstration projects to achieve penetration of this market. We plan to continue to utilize the expertise of our medical
advisory board, conduct clinical trials with leading cardiologists to increase the body of evidence, and establish reference sites among these customers.
We expect our value proposition will be progressively increased as we gradually add additional functionality to our monitoring solutions and drive down the cost by increasing
scale and automation. We expect our HeartBeam AIMIGo device to incorporate internally developed algorithms with the capabilities of detecting heart conditions that can be
detected via a standard 12L ECG device. Additionally, as we collect rich longitudinal data sets from our patients, we expect to train AI and ML algorithms that could potentially
have predictive capabilities regarding different heart conditions. Over time and with scale we expect our costs to decrease and provide more and better services to our patients
by improving our capabilities.
We plan to establish a direct sales network with relationships and experience selling to our target markets.
Clinical Data
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.
Both 12L ECG and VECG signals were recorded in patients undergoing percutaneous coronary intervention. Readings were taken before and after a 90 second balloon inflation
that occluded the artery, a surrogate for a heart attack. Automated computer analysis of the ST segment of the 12L ECG and VECG was performed. In addition, a panel of three
cardiologists analyzed the 12L ECGs.
The study showed that the automated analysis of the VECG and 12L ECG signals had similar performance in determining whether the 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.
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Both the 12L ECGs and the VECG readings were analyzed in two ways: a “spot” reading, when only a single recording was considered, and a “comparative” reading when a
separate “normal baseline” recording was available for comparison. 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 (AUC), 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.
In addition, HeartBeam has had data on its deep learning algorithm accepted for presentation at two prestigious Electrophysiology conferences: the European Heart Rhythm
Society, to be held in Berlin, Germany in April 2024 and the Heart Rhythm Society, to be held in Boston MA in May 2024.
Competition
The cardiac monitoring and detection market is characterized by rapid technological change and strong competition. There are numerous companies developing technologies
that are competitive, in a broad sense, to our products, and many of these companies have significantly greater resources than HeartBeam.
In the category of ambulatory cardiac monitors — devices that are intended to be used outside of a health facility setting — there are two major segments: consumer devices and
devices prescribed for ACS.
Consumer Devices
The consumer device segment consists of devices that are FDA cleared but are sold directly to patients, without a prescription. Generally, these devices are single lead ECG
devices intended to recognize heart rhythm abnormalities, such as atrial fibrillation, but are not intended for ischemia detection or for life threatening conditions such as heart
attack.
•
•
Apple Inc, a public company located in Cupertino, CA, produces the Apple Watch, which includes ECG functionality. The Apple Watch is a single lead ECG with two
electrodes that contact the wrist and the finger and is intended to detect some common cardiac arrhythmias, such as Atrial Fibrillation.
AliveCor Inc, a private company located in Mountain View, CA, produces the KardiaMobile, KardiaMobile Card and KardiaMobile 6L devices. These devices are
intended to detect some common cardiac arrhythmias, such as Atrial Fibrillation.
• Google Inc, a public company located in Mountain View, CA, produces the Pixel 2 smartwatch and ECG app. The Pixel 2 watch is a single lead ECG with two
electrodes that contact the fingers and is intended to detect some common cardiac arrhythmias, such as Atrial Fibrillation.
•
Samsung Electronics Co., Ltd, based in Seoul, South Korea, is publicly traded in Korea. It produces the Galaxy Watch3 and Galaxy Watch Active2 smartwatches with
ECG functionality, intended to detect some common cardiac arrhythmias, such as Atrial Fibrillation.
Devices prescribed for ischemia detection
There are a small number of devices that have been cleared by FDA to be used outside of healthcare facilities that provide information for patients with potential ischemic
events such as MIs.
•
Angel Medical Systems, Inc. is a private company based in Eatontown, NJ. The AngelMed Guardian is an implantable cardiac monitor for patients who are deemed to
be extremely high risk for an MI. Physicians implant the AngelMed Guardian in patients. We believe that the HeartBeam AIMIGo device will be a viable alternative to
the AngelMed Guardian, as it does not require an implant and does not have a high up-front cost.
12
•
SHL Telemedicine Ltd., is based in Tel Aviv, Israel and is publicly traded. It produces Smartheart, a 12L ECG indicated for patient use at home. Smartheart Pro is larger
and more complex than our telehealth solution, requiring the placement of an electrode belt, two underarm electrodes and a waist electrode, and moistening the areas
before use. Most patients would find this technology impractical to be carried with them at all times because of the large size and complex lead attachment procedure.
Intellectual Property
We believe our intellectual property (“IP”) protects our innovations, and our goal is to become a leader in the ambulatory VECG sector. For some aspects of our proprietary
technology, we rely on trade secret protection. It is our view that the combination of these two methods of IP protection maximizes our chances for success.
HeartBeam has 13 issued and allowed U.S. patents (U.S. 10,433,744, U.S. 10,117,592, U.S. 11,071,490, U.S. 11,419,538, U.S. 11,445,963, U.S. 11,701,049, U.S. 11,529,085,
U.S. 10,980,433, U.S. 11,412,972, U.S. 11,234,658, U.S. 11,793,444, U.S. 11,877,853, and allowed U.S. patent application no. 18/068,481), and nine pending U.S applications.
Outside of the U.S., HeartBeam has four issued patents in Germany, France, Netherlands and United Kingdom and fourteen pending applications in Canada, China, the
European Union, Japan, South Korea and Australia. HeartBeam has two pending Patent Cooperation Treaty applications. The issued patents are predicted to expire between
April 11, 2036 and April 21, 2042.
Our issued and pending U.S. patent applications cover compact VECG systems for remote detection and/or diagnosis of acute myocardial infarction (“AMI”). Outside of the
U.S., the pending EU, Australian (“AU”), Japanese (“JP”) and Chinese (“CN”) patent applications correspond to the pending and issued US cases. The pending PCT
applications cover methods and apparatuses for automatic cardiac diagnosis as well as compact systems including retractable electrodes.
13
The following table sets forth a brief description of issued and pending patents, including their respective titles:
Patent Type
Utility
(US)
Application No. Pat. No.
15/096,159
US 10,433,744
Status
Issued
Predicted Expiration
Sep 15, 2036
Utility
(US)
Utility
(US)
Utility
(US)
Utility
(CN)
Utility
(DE)
Utility
(FR)
Utility
(GB)
Utility
(NL)
Utility
(EU)
Utility
(EU)
15/632,155
US 10,117,592
17/092,152
US 11,877,853
17/202,299
US 11,071,490
Issued
Apr 11, 2036
Issued
Jun 2, 2037
Issued
Apr 11, 2036
201680030550.5
Published
Apr 11, 2036
16777474.4
DE 602016073016.2
Issued
Apr 11, 2036
16777474.4
FR 3280326
16777474.4
GB 3280326
16777474.4
NL 3280326
Issued
Apr 11, 2036
Issued
Apr 11, 2036
Issued
Apr 11, 2036
22174820.5
Pending
Apr 11, 2036
198948150
Pending
Nov 18, 2039
14
Title Summary
MOBILE THREE-LEAD CARDIAC MONITORING DEVICE AND
METHOD FOR AUTOMATED DIAGNOSTICS
Methods and apparatuses for remote and detection and/or diagnosis of acute
myocardial infarction (AMI).
MOBILE THREE-LEAD CARDIAC MONITORING DEVICE AND
METHOD FOR AUTOMATED DIAGNOSTICS
Methods and apparatuses for remote and detection and/or diagnosis of acute
myocardial infarction (AMI).
MOBILE THREE-LEAD CARDIAC MONITORING DEVICE AND
METHOD FOR AUTOMATED DIAGNOSTICS
Methods and apparatuses for remote and detection and/or diagnosis of acute
myocardial infarction (AMI).
ELECTROCARDIOGRAM PATCH DEVICES AND METHODS
Methods and apparatuses for remote and detection and/or diagnosis of acute
myocardial infarction (AMI).
MOBILE THREE-LEAD CARDIAC MONITORING DEVICE AND
METHOD FOR AUTOMATED DIAGNOSTICS
Methods and apparatuses for remote and detection and/or diagnosis of acute
myocardial infarction (AMI).
MOBILE THREE-LEAD CARDIAC MONITORING DEVICE AND
METHOD FOR AUTOMATED DIAGNOSTICS
Methods and apparatuses for remote and detection and/or diagnosis of acute
myocardial infarction (AMI).
MOBILE THREE-LEAD CARDIAC MONITORING DEVICE AND
METHOD FOR AUTOMATED DIAGNOSTICS
Methods and apparatuses for remote and detection and/or diagnosis of acute
myocardial infarction (AMI).
MOBILE THREE-LEAD CARDIAC MONITORING DEVICE AND
METHOD FOR AUTOMATED DIAGNOSTICS
Methods and apparatuses for remote and detection and/or diagnosis of acute
myocardial infarction (AMI).
MOBILE THREE-LEAD CARDIAC MONITORING DEVICE AND
METHOD FOR AUTOMATED DIAGNOSTICS
Methods and apparatuses for remote and detection and/or diagnosis of acute
myocardial infarction (AMI).
MOBILE THREE-LEAD CARDIAC MONITORING DEVICE AND
METHOD FOR AUTOMATED DIAGNOSTICS
Methods and apparatuses for remote and detection and/or diagnosis of acute
myocardial infarction (AMI).
HAND HELD DEVICE FOR AUTOMATIC CARDIAC RISK AND
DIAGNOSTIC ASSESSMENT
Method and apparatus for performing automatic cardiac diagnosis.
Utility
(US)
Utility
(US)
Utility
(US)
Utility
(US)
Utility
(US)
Utility
(US)
Utility
(AU)
Utility
(CA)
Utility
(EU)
Utility
(JP)
Utility
(EU)
Utility
(EU)
Utility
(CA)
17/296,669
US 11,701,049
Issued
Nov 18, 2039
18,324,111
Pending
Nov 18, 2039
17/443,456
US 11,793,444
17/570,368
US 11,419,538
Issued
Apr 11, 2036
Issued
Apr 11, 2036
18/363685
Issued
Apr 11, 2036
17/609,014
Pending
May 20, 2040
2020275409
Pending
May 20, 2040
3137669
Pending
May 20, 2040
208063123
Pending
May 20, 2040
2021568329
Pending
May 20, 2040
2189294203
Pending
Nov 12, 2041
18/252803
Pending
Nov 12, 2041
3204059
Pending
Jan 4, 2042
HAND HELD DEVICE FOR AUTOMATIC CARDIAC RISK AND DIAGNOSTIC
ASSESSMENT
Method and apparatus for performing automatic cardiac diagnosis.
HAND HELD DEVICE FOR AUTOMATIC CARDIAC RISK AND DIAGNOSTIC
ASSESSMENT
Method and apparatus for performing automatic cardiac diagnosis.
ELECTROCARDIOGRAM PATCH DEVICES AND METHODS
Adhesive patch methods and apparatuses for remote and detection and/or diagnosis of
acute myocardial infarction (AMI).
ELECTROCARDIOGRAM PATCH DEVICES AND METHODS
Adhesive patch methods and apparatuses for remote and detection and/or diagnosis of
acute myocardial infarction (AMI).
ELECTROCARDIOGRAM PATCH DEVICES AND METHODS
Adhesive patch methods and apparatuses for remote and detection and/or diagnosis of
acute myocardial infarction (AMI).
COMPACT MOBILE THREE-LEAD CARDIAC MONITORING DEVICE
Compact, mobile three-lead cardiac monitoring devices for remote detection and/or
diagnosis of cardiac events.
COMPACT MOBILE THREE-LEAD CARDIAC MONITORING DEVICE
Compact, mobile three-lead cardiac monitoring devices for remote detection and/or
diagnosis of cardiac events.
COMPACT MOBILE THREE-LEAD CARDIAC MONITORING DEVICE
Compact, mobile three-lead cardiac monitoring devices for remote detection and/or
diagnosis of cardiac events.
COMPACT MOBILE THREE-LEAD CARDIAC MONITORING DEVICE
Compact, mobile three-lead cardiac monitoring devices for remote detection and/or
diagnosis of cardiac events.
COMPACT MOBILE THREE-LEAD CARDIAC MONITORING DEVICE
Compact, mobile three-lead cardiac monitoring devices for remote detection and/or
diagnosis of cardiac events.
COMPACT MOBILE THREE-LEAD CARDIAC MONITORING DEVICE WITH
HYBRID ELECTRODE
Compact, mobile three-lead cardiac monitoring devices for remote detection and/or
diagnosis of cardiac events.
COMPACT MOBILE THREE-LEAD CARDIAC MONITORING DEVICE WITH
HYBRID ELECTRODE
Compact, mobile three-lead cardiac monitoring devices for remote detection and/or
diagnosis of cardiac events.
AMBULATORY ELECTROCARDIOGRAM PATCH DEVICES AND METHODS
Cardiac monitoring patch devices (e.g., an ECG patch for 12-lead detection) for
remote detection and/or diagnosis of cardiac events (e.g., acute myocardial
infarction).
15
Utility
(CN)
Utility
(EP)
Utility
(JP)
Utility
(US)
Utility
(US)
Utility
(US)
Utility
(PCT)
Utility
(US)
Utility
(US)
Utility
(PCT)
Utility
(US)
Utility
(US)
2022800141214
Pending
Jan 4, 2042
227348299
Pending
Jan 4, 2042
202340687
Pending
Jan 4, 2042
18260318
Pending
Jan 4, 2042
17/494,806
US 11,445,963
Issued
Oct 5, 2041
17/948099
Pending
Oct 5, 2041
PCTUS2022
077601
17/726,497
US 11,529,085
Pending
May 5, 2024
Issued
Apr 21, 2042
18/068481
Allowed
Apr 21, 2042
PCT/US2023
065918
16/362,527
US 10,980,433
16/368,568
US 11,412,972
Published
Oct 5, 2041
Issued
Oct 12, 2038
Issued
Apr 19, 2040
AMBULATORY ELECTROCARDIOGRAM PATCH DEVICES AND
METHODS
Cardiac monitoring patch devices (e.g., an ECG patch for 12-lead detection) for
remote detection and/or diagnosis of cardiac events (e.g., acute myocardial
infarction).
AMBULATORY ELECTROCARDIOGRAM PATCH DEVICES AND
METHODS
Cardiac monitoring patch devices (e.g., an ECG patch for 12-lead detection) for
remote detection and/or diagnosis of cardiac events (e.g., acute myocardial
infarction).
AMBULATORY ELECTROCARDIOGRAM PATCH DEVICES AND
METHODS
Cardiac monitoring patch devices (e.g., an ECG patch for 12-lead detection) for
remote detection and/or diagnosis of cardiac events (e.g., acute myocardial
infarction).
AMBULATORY ELECTROCARDIOGRAM PATCH DEVICES AND
METHODS
Cardiac monitoring patch devices (e.g., an ECG patch for 12-lead detection) for
remote detection and/or diagnosis of cardiac events (e.g., acute myocardial
infarction).
METHOD AND APPARATUS FOR RECONSTRUCTING
ELECTROCARDIOGRAM (ECG) DATA
Synthesizing (generating) 12L ECG dataset from 3-lead ECG data.
METHOD AND APPARATUS FOR RECONSTRUCTING
ELECTROCARDIOGRAM (ECG) DATA
Synthesizing (generating) 12-lead ECG dataset from 3-lead ECG data.
METHOD AND APPARATUS FOR RECONSTRUCTING
ELECTROCARDIOGRAM (ECG) DATA
Synthesizing (generating) 12-lead ECG dataset from 3-lead ECG data.
APPARATUS FOR GENERATING AN ELECTROCARDIOGRAM
Wrist-worn device can be taken off of the wrist and held against the chest to detect
three orthogonal cardiac leads, and methods of using a wrist-worn device to detect
the three orthogonal cardiac leads.
APPARATUS FOR GENERATING AN ELECTROCARDIOGRAM
Wrist-worn device can be taken off of the wrist and held against the chest to detect
three orthogonal cardiac leads, and methods of using a wrist-worn device to detect
the three orthogonal cardiac leads.
APPARATUS FOR GENERATING AN ELECTROCARDIOGRAM
Wrist-worn device can be taken off of the wrist and held against the chest to detect
three orthogonal cardiac leads, and methods of using a wrist-worn device to detect
the three orthogonal cardiac leads.
HEALTH MONITORING AND GUIDANCE
Methods, systems and software for the determination of stress states utilizing PPG
sensors.
DETECTION OF ATRIAL FIBRILLATION
Methods and software for determining atrial fibrillation utilizing PPG sensors.
16
Utility
(US)
Utility
(US)
Utility
(US)
Utility
(EP)
Utility
(KR)
Utility
(US)
16/368,571
US 11,234,658
17/887160
18/516,793
Issued
Apr 5, 2039
Published
Mar 28, 2038
Pending
Mar 28, 2039
EP 19724961.8
Published
Mar 28, 2039
KR 10-2020-7031103
Published
Mar 28, 2039
18/595,410
Pending
Mar, 4, 2044
PHOTOPLETHYSMOGRAM DATA ANALYSIS AND PRESENTATION
Methods, systems and software for the creation of ECG-type waveforms from PPG
sensor data.
DETECTION OF ATRIAL FIBRILLATION
Methods and software for determining atrial fibrillation utilizing PPG sensors.
HEARTBEAT DETECTION
Wearable devices to detect PPG data for detection of heartrate.
PHOTOPLETHYSMOGRAM DATA ANALYSIS AND PRESENTATION
Methods, systems and software for the creation of ECG-type waveforms from PPG
sensor data.
PHOTOPLETHYSMOGRAM DATA ANALYSIS AND PRESENTATION
Methods, systems and software for the creation of ECG-type waveforms from PPG
sensor data.
METHODS AND APPARATUSES FOR ELECTROMYOGRAPHY NOISE
ELIMINATION FROM ELECTROCARDIOGRAM SIGNALS BY ITERATIVE
REGENERATION
Methods and systems, including software, for reducing or eliminating noise from ECG
signals.
We have entered, and generally plan to continue to enter into, non-disclosure, confidentiality and intellectual property assignment agreements with all new employees as a
condition of employment. In addition, we intend to generally enter into confidentiality and non-disclosure agreements with consultants, manufacturers’ representatives,
distributors, suppliers, and others to attempt to limit access to, use and disclosure of our proprietary information. There can be no assurance, however, that these agreements will
provide meaningful protection or adequate remedies for our trade secrets in the event of unauthorized use or disclosure of such information.
The ownership of all filed patents is assigned to HeartBeam, Inc.
Research and Development
In our quest to redefine the landscape of digital health through our innovative, user-friendly ambulatory VECG solutions, our primary objective remains steadfast: to deliver
high medical value through products that are always with the patient, assisting physicians in monitoring and diagnosing cardiac disease in patients. We believe that our success
in developing initial products, underscored by our emphasis on user-friendly solutions, will set a solid foundation for our future endeavors.
We believe that our R&D team, primarily based in the US and Belgrade, Serbia, is a testament to our commitment to excellence and innovation and is comprised of seven
employees on December 31, 2023, plus consultants, with expertise in the following:
• Healthcare IT platform development, biomedical engineering, electrical engineering with expertise in machine learning, signal processing and ECG analysis from the
medical device industry, as well as specialties in wireless communication,
• Of note, we have seven Physicists and Electrical Engineers (all Ph.D. E.E. or Ph.D. Physics) credited with our key inventions and patents.
In 2024, we plan to expand our team with several additional product development engineers.
Looking ahead, we anticipate further enhancing our efforts in harnessing signal processing and artificial intelligence (AI) to broaden our diagnostic solutions across a spectrum
of cardiac conditions.
17
Our core technology, the heart vector VECG approach, is a platform technology that we believe is poised to revolutionize diagnostic solutions for cardiovascular patients.
Potential applications include a VECG-based, synthesized 12L capable patch ECG monitor, offering significant diagnostic advantages through its 12L capability over existing
single-lead ECG patch products. This innovation aims to provide standard of care 12L ECG capabilities in a form factor like current single-lead ECG patches, which we believe
addresses a critical gap in the market.
A further potential application is a synthesized 12L ECG smartwatch-based monitor, designed for the detection of heart attacks and complex cardiac arrhythmias. The plan for
this monitor is to eliminate the need for dedicated ECG devices, offering synthesized 12L ECG capabilities directly from a smartwatch, thereby enabling the detection of heart
attacks and complex arrhythmias with unprecedented convenience and efficiency.
Both the patch and smartwatch-based monitor technologies are covered by patents that we believe provide us a strong position to expand beyond the current AIMIGo platform.
Our newly formed AI team, comprising industry leading experts, developed a roadmap for AI-based tool development. These tools will combine state of the art AI models and
techniques applied to our unique and data rich set of VECG signals. Initial AI development results indicate potential to significantly enhance ambulatory diagnostic capabilities
over what is currently available. It is expected that AI development efforts quickly become one of the major R&D efforts.
As we continue to advance our synthesized 12L VECG technology, evidenced by our recently issued and allowed patents with potentially disruptive market impacts, our initial
telehealth product will leverage rule-based algorithms, including signal processing and ECG synthesis. Concurrently, we are developing AI-based arrhythmia and ischemia
detection algorithms to become the cornerstone of our commercialized systems.
To further amplify the impact of our R&D efforts and ensure sustained leadership in digital health innovation, we are looking at several strategic enhancements:
1. Expand Cross-Disciplinary Collaborations: Forge deeper partnerships with academia, technology leaders, and healthcare institutions to access new research, diversify
our expertise, and explore novel applications of our technology.
2. Embrace Agile Development : Integrate agile methodologies into our R&D processes, enhancing our adaptability and responsiveness to emerging technologies and
market demands.
3. Strengthen Data Analytics and AI Integration: We plan to invest in advanced data analytics and AI to refine our diagnostic algorithms and tailor our solutions to meet
specific clinical needs, driving forward personalized medicine in cardiac care.
4. Foster Talent and Innovation Culture: By continuing to attract and develop top-tier talent, nurturing a culture of innovation and continuous learning that aligns with
the latest advancements in technology and healthcare.
5. Prioritize Intellectual Property and Regulatory Strategy: We believe we are able to accelerate our efforts in expanding our intellectual property portfolio, engaging
with regulatory bodies early in the development process to ensure our solutions meet the highest standards of safety and efficacy.
By embracing these strategic enhancements, we are not only committed to advancing the full potential inherent in our VECG technology, but we believe we are also poised to
make significant strides in transforming cardiovascular diagnostics and patient care.
Government Regulation
General
Our proposed products are subject to regulation by the FDA and various other federal and state agencies, as well as by foreign governmental agencies. These agencies enforce
laws and regulations that govern the development, testing, manufacturing, labeling, advertising, marketing and distribution, and market surveillance of our products.
In addition to those indicated below, the only other regulations we encounter are regulations that are common to all businesses, such as employment legislation, implied
warranty laws, and environmental, health and safety standards, to the extent applicable. In the future we will be subject to industry-specific government regulations that govern
our products when developed for commercial use. It is possible that other regulatory approvals will be required for the design and manufacture of our products and proposed
products.
18
U.S. Regulation
The FDA governs the following activities that HeartBeam performs, and will perform, upon the clearance or approval of its Product, or that are performed on its behalf, to
ensure that medical products distributed domestically or exported internationally are safe and effective for their intended uses:
•
•
•
•
product design, and development
product safety, testing, labeling and storage
record keeping procedures; and
product marketing.
There are numerous FDA regulatory requirements governing the approval or clearance and subsequent commercial marketing of our products. These include:
•
•
•
•
the timely submission of product listing and establishment registration information, along with associated establishment user fees;
continued compliance with the Quality System Regulation, or QSR, which require specification developers and manufacturers, including third-party manufacturers, to
follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the manufacturing process;
labeling regulations and FDA prohibitions against the promotion of products for uncleared, unapproved or off-label use or indication;
clearance or approval of product modifications that could significantly affect the safety or effectiveness of the device or that would constitute a major change in intended
use;
• Medical Device Reporting regulations (“MDR”), which require that manufacturers keep detailed records of investigations or complaints against their devices and to
report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or
serious injury if it were to recur;
•
•
•
•
adequate use of the Corrective and Preventive Actions process to identify and correct or prevent significant systemic failures of products or processes or in trends which
suggest same;
post-approval restrictions or conditions, including post-approval study commitments;
post-market surveillance regulations, which apply when necessary, to protect the public health or to provide additional safety and effectiveness data for the device; and
notices of correction or removal and recall regulations.
Depending on the classification of the device, before HeartBeam can commercially distribute medical devices in the United States, it must obtain, either prior 510(k)
Notification clearance, 510(k), De-Novo granting or premarket approval (“PMA”), from the FDA unless a respective exemption applies to the device under review by the FDA
The FDA classifies medical devices into one of three classes based on the degree of risk associated with each medical device and the extent of regulatory controls needed to
ensure the device’s safety and effectiveness:
•
•
Class I medical devices, which are low risk and subject to only general controls (e.g., registration and listing, medical device labeling compliance, MDRs, Quality
System Regulations, and prohibitions against adulteration and misbranding) and, in some cases, to the 510(k) premarket clearance requirements;
Class II medical devices, which are moderate risk and generally require 510(k) Notification premarket clearance or De Novo granting before they may be commercially
marketed in the United States as well as general controls and potentially special controls like performance standards or specific labeling requirements; and
19
•
Class III medical devices, which are devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices, or devices
deemed not substantially equivalent to a predicate device. Class III medical devices generally require the submission and approval of a PMA supported by clinical trial
data.
The custom software and hardware of our products, we believe, are classified as Class II. Class II medical devices are those for which general controls alone are insufficient to
provide reasonable assurance of safety and effectiveness and there is sufficient information to establish special controls. Special controls can include performance standards,
post-market surveillance, patient histories and FDA guidance documents. Premarket review and clearance by the FDA for these devices is generally accomplished through the
510(k). As part of the 510(k), the FDA may have required the following
•
•
•
•
Development of comprehensive product description and indications for use;
Completion of extensive preclinical tests and preclinical animal studies, performed in accordance with the FDA’s Good Laboratory Practice (“GLP”) regulations;
Comprehensive review of predicate devices and development of data supporting the new product’s substantial equivalence to one or more predicate devices; and
If appropriate and required, certain types of clinical trials (IDE submission and approval may be required for conducting a clinical trial in the US).
Clinical trials involve use of the medical device on human subjects under the supervision of qualified investigators in accordance with current Good Clinical Practices (“GCPs”),
including the requirement that all research subjects provide informed consent for their participation in the clinical study. A written protocol with predefined end points, an
appropriate sample size and pre-determined patient inclusion and exclusion criteria, is required before initiating and conducting a clinical trial. All clinical investigations of
devices to determine safety and effectiveness must be conducted in accordance with the FDA’s Investigational Device Exemption, or IDE, regulations that among other things,
govern investigational device labeling, prohibit promotion of the investigational device, and specify recordkeeping, reporting and monitoring responsibilities of study sponsors
and study investigators. If the device presents a “significant risk,” as defined by the FDA, the agency requires the device sponsor to submit an IDE application, which must
become effective prior to commencing human clinical trials. The IDE will automatically become effective 30 days after receipt by the FDA, unless the FDA denies the
application or notifies the Company that the investigation is on hold and may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE that
requires modification, the FDA may permit a clinical trial to proceed under a conditional approval. In addition, the study must be approved by, and conducted under the
oversight of, an Institutional Review Board (“IRB”) for each clinical site. If the device presents a non-significant risk to the patient, a sponsor may begin the clinical trial after
obtaining approval for the trial by one or more IRBs without separate approval from the FDA, but it must still follow abbreviated IDE requirements, such as monitoring the
investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements.
Given successful completion of all required testing, a detailed 510(k) premarket notification or De Novo request will be submitted to the FDA requesting clearance, or granted,
to market the product. This notification will include all relevant data from pertinent preclinical and clinical trials, together with detailed information relating to the product’s
manufacturing controls and proposed labeling, and other relevant documentation.
A 510(k)-clearance letter from the FDA authorizes commercial marketing of the device for one or more specific indications of use.
After 510(k) clearance, HeartBeam is required to comply with several post-clearance requirements, including, but not limited to, Medical Device Reporting and complaint
handling, and, if applicable, reporting of corrective actions. Also, quality control and manufacturing procedures must continue to conform to Quality System Regulations
(“QSR”). The FDA periodically inspects manufacturing facilities to assess compliance with FDA’s QSR, which impose extensive procedural, substantive, and record keeping
requirements on medical device manufacturers. In addition, changes to the manufacturing process are strictly regulated, and, depending on the change, validation activities may
need to be performed. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality control to maintain compliance with
QSR and other types of regulatory controls.
After a device receives 510(k) clearance from the FDA, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its
intended use or technological characteristics, requires a new 510(k) clearance or could require a PMA. The FDA requires each manufacturer to make the determination of
whether a
20
modification requires a new 510(k) notification or PMA in the first instance, but the FDA can review any such decision. If the FDA disagrees with a manufacturer’s decision not
to seek a new 510(k) clearance or PMA for a particular change, the FDA may retroactively require the manufacturer to seek 510(k) clearance or PMA. The FDA can also require
the manufacturer to cease U.S. marketing and/or recall the modified device until additional 510(k) clearance or PMA approval is obtained.
The FDA and the Federal Trade Commission (“FTC”), will also regulate the advertising claims of HeartBeam’s products to ensure that the claims it makes are consistent with
its regulatory clearances, that there is scientific data to substantiate the claims and that product advertising is neither false nor misleading.
We are applying for 510(k) clearance for the AIMIGo system. To obtain 510(k) clearance, a company must submit a notification to the FDA demonstrating that its proposed
device is substantially equivalent to a predicate device (i.e., a device that was in commercial distribution before May 28, 1976, a device that has been reclassified from Class III
to Class I or Class II, or a 510(k)-cleared device). The FDA’s 510(k) clearance process generally takes from three to 12 months from the date the application is submitted but
also can take significantly longer. If the FDA determines that the device or its intended use is not substantially equivalent to a predicate device, the device is automatically
placed into Class III, requiring the submission of a PMA. Once the information is submitted, there is no guarantee that the FDA will grant a company 510(k) clearance for its
pipeline products, and failure to obtain the necessary clearances for its products would adversely affect its ability to grow its business. Delays in receipt or failure to receive the
necessary clearances, or the failure to comply with existing or future regulatory requirements, could reduce its business prospects.
Devices that cannot be cleared through the 510(k)-process due to lack of a predicate device but would be considered low or moderate risk may be eligible for the De Novo
process. In 1997, the Food and Drug Administration Modernization Act (“FDAMA”) added the de novo classification pathway now codified in section 513(f)(2) of the FD&C
Act. This law established an alternate pathway to classify new devices into Class I or II that had automatically been placed in Class III after receiving a Not Substantially
Equivalent (“NSE”), determination in response to a 510(k) submission. Through this regulatory process, a sponsor who receives an NSE determination may, within 30 days of
receipt, request FDA to make a risk-based classification of the device through what is called a “de novo request.” In 2012, section 513(f)(2) of the FD&C Act was amended by
section 607 of the Food and Drug Administration Safety and Innovation Act (“FDASIA”), to provide a second option for de novo classification. Under this second pathway, a
sponsor who determines that there is no legally marketed device upon which to base a determination of substantial equivalence can submit a de novo request to FDA without
first submitting a 510(k).
If a company receives a Not Substantially Equivalent determination in response to a 510(k) submission, the device may still be eligible for the 510(k) de novo classification
process.
Devices that cannot be cleared through the 510(k) or De Novo classification process require the submission of a PMA. The PMA process is much more time consuming and
demanding than the 510(k)-notification process. A PMA must be supported by extensive data, including but not limited to data obtained from preclinical and/or clinical studies
and data relating to manufacturing and labeling, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device. After a PMA application is submitted, the
FDA’s in-depth review of the information generally takes between one and three years and may take significantly longer.
We also need to establish a suitable and effective quality management system, which establishes controlled processes for our product design, manufacturing, and distribution.
We plan to do this in compliance with the internationally recognized standard ISO 13485:2013 Medical Devices — Quality Management Systems — Requirements for
Regulatory Purposes. Following the introduction of a product, the FDA and foreign agencies engage in periodic reviews of our quality systems, as well as product performance
and advertising and promotional materials. These regulatory controls, as well as any changes in FDA policies, can affect the time and cost associated with the development,
introduction, and continued availability of new products. Where possible, we anticipate these factors in our product development processes. These agencies possess the
authority to take various administrative and legal actions against us, such as product recalls, product seizures and other civil and criminal sanctions.
Based on all available data and opinions from our well qualified external consultants who specialize in FDA submissions, we believe that both our initial products and the
follow-on products qualify for the 510(k)-clearance path or De Novo granting paths.
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Foreign Regulation
As we plan to market our products in the EU and other foreign markets, in addition to regulations in the United States, we will be subject to a variety of foreign regulations
governing clinical trials and commercial sales and distribution of our products in foreign countries. Whether or not we obtain FDA approval for a product, we must obtain
approval of a product by the comparable regulatory authorities of foreign countries before we can commence clinical trials or marketing of the product in those countries. The
approval process varies from country to country, and the time may be longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical
trials, product licensing, pricing and reimbursement vary greatly from country to country.
Preparations for Design for Manufacturing
To date, our efforts have been primarily concentrated on the research and development of our initial HeartBeam AIMIGo device. We have successfully developed fully
functional versions of the product which have passed design control processes, including all necessary verification and validation testing, to ensure compliance with safety
standards such as IEC 60601. Documentation for these pre-production units has been submitted as part of our 510(k) regulatory filing with the FDA, seeking market clearance.
In preparation for commercial production, we have proactively designed and procured the production tooling required to facilitate the future commercialization of our product.
Our manufacturing strategy is designed to be scalable. Initially, for the HeartBeam AIMIGo devices, we are collaborating with Evolve Manufacturing Technologies, a contract
medical device manufacturing firm. Evolve offers comprehensive contract manufacturing services for the medical device and life sciences sectors. As we progress towards more
automated manufacturing operations, we intend to implement specialized tooling (e.g., high-integrity molds, automated tools, and processes) and establish a formal
manufacturing agreement with Evolve. This partnership will capitalize on Evolve's manufacturing and packaging expertise to support the commercial launch of the HeartBeam
AIMIGo device. Evolve employs Design for Excellence (DFX) methodologies, and its quality management processes are closely integrated with those of Triple Ring
Technologies, Inc. (TRT), a US-based medical device and design engineering firm with which we are currently collaborating. This collaboration between Evolve and TRT
should facilitate a seamless design transfer process and provide comprehensive turnkey contract manufacturing solutions, including first article builds, prototypes, and low-to-
medium volume commercial units.
As we advance, we will explore partnerships with other manufacturers, both domestically and internationally, to accommodate our needs for high-volume and/or sub-assembly
manufacturing.
Employees
As of December 31, 2023, we had 15 full-time employees. We have budgeted to hire additional full-time employees (including additional consultants or independent
contractors) in the near future to execute our growth plans. We consider our employee relations to be good.
Corporate Information
Our principal executive offices are located at 2118 Walsh Avenue, Suite 210, Santa Clara, CA 95050. Our telephone number is (408) 899-4443 and our web address is
www.heartbeam.com. Financial and other information can be accessed on the “Investors” section of our website. We make available through our website, free of charge, copies
of our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Exchange Act as soon as reasonably practicable after filing such material electronically or otherwise furnishing it to the Securities and Exchange Commission
(the “SEC”). Also posted on our website are certain corporate governance documents, including our Code of Business Conduct and Ethics. The reference to our website is
textual in reference only, and the information included or referred to on, or accessible through, our website does not constitute part of, and is not incorporated by reference into,
this report or any other filing.
We also file periodic reports, proxy statements and other information with the SEC. Such reports may be obtained by visiting the Public Reference Room of the SEC at 100 F
Street, NE, Washington, D.C. 20549. Information on the operation of the Public Reference Room can be obtained by calling the SEC at (800) SEC-0330. In addition, the SEC
maintains an internet site at http://www.sec.gov that contains reports, proxy and information statements and other information.
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Item 1A. Risk Factors.
You should consider carefully the risks, uncertainties and other factors described below, in addition to the other information set forth in this Form 10-K, before making an
investment decision. Any of these risks, uncertainties and other factors could materially and adversely affect our business, financial condition, results of operations, cash flows
or prospects. In that case, the market price of our common stock could decline, and you may lose all or part of your investment in our common stock. See also “Cautionary
Statement Regarding Forward-Looking Statements.”
Risks Related to Our Business
We have a limited operating history upon which investors can evaluate our future prospects.
We have a limited operating history upon which an evaluation of our business plan or performance and prospects can be made. The business and prospects of the Company
must be considered in the light of the potential problems, delays, uncertainties and complications encountered in connection with a newly established business and new industry.
The risks include, but are not limited to, the possibility that we will not be able to develop functional and scalable products and services, or that although functional and
scalable, our products and services will not be economical to market; that our competitors hold proprietary rights that preclude us from marketing such products; that our
competitors market a superior or equivalent product; that we are not able to upgrade and enhance our technologies and products to accommodate new features and expanded
service offerings; or the failure to receive necessary regulatory clearances for our products. To successfully introduce and market our products at a profit, we must establish
brand name recognition and competitive advantages for our products. There are no assurances that we can successfully address these challenges and if unsuccessful, we and our
business, financial condition and operating results could be materially and adversely affected.
The current and future expense levels of our business are based largely on estimates of planned operations and future revenues rather than experience. It is difficult to accurately
forecast future revenues because our business is new and our market has not been developed. If our forecasts prove incorrect, the business, operating results and financial
condition of the Company may be materially and adversely affected. Moreover, we may be unable to adjust our spending in a timely manner to compensate for any
unanticipated reduction in revenues. As a result, any significant reduction in planned or actual revenues may immediately and adversely affect our business, financial condition
and operating results.
Our independent registered public accounting firm has expressed substantial doubt about our ability to continue as a going concern.
As described in Note 2 of our accompanying audited financial statements, our auditors have issued a going concern opinion on our December 31, 2023 financial statements,
expressing substantial doubt that we can continue as an ongoing business for the next twelve months after issuance of their report based on our current development plans and
our operating requirements and us having suffered recurring losses from operations and having a net capital deficiency. Our financial statements do not include any adjustments
that may result from the outcome of this uncertainty. If we cannot raise the necessary capital to continue as a viable entity, we could experience a material adverse effect on our
business and our stockholders may lose some or all of their investment in us.
We can provide no assurances that any additional sources of financing will be available to us on favorable terms, if at all. Our forecast of the period of time through which our
current financial resources will be adequate to support our operations and the costs to support our general and administrative, selling and marketing and research and
development activities are forward-looking statements and involve risks and uncertainties.
We have no revenues and we cannot predict when we will achieve first revenues and sustained profitability.
We have no revenues and cannot definitely predict when we will achieve revenues and profitability. We do not anticipate generating significant revenues until we successfully
develop, achieve regulatory clearance, commercialize and sell our proposed products, of which we can give no assurance. We are unable to determine when we will generate
significant revenues from the sale of any such products.
We cannot predict when we will achieve profitability, if ever. Our inability to become profitable may force us to curtail or temporarily discontinue our research and
development programs and our day-to-day operations. Furthermore, there can be no assurance that profitability, if achieved, can be sustained on an ongoing basis.
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We may never complete the development and commercialization of products that we are currently developing and future development of new generations of any of our other
proposed products.
We have no assurance of success as to the completion and of the commercial launch of our products or the completion and development of any new generations of products that
are currently under development or other proposed or contemplated products, for any of our target markets. We continue to seek to improve our technologies while we are
developing them so that they result in commercially viable products. Failure to improve on any of our technologies could delay or prevent their successful development for our
target markets. Developing any technology into a marketable product is a risky, time consuming and expensive process. You should anticipate that we will encounter setbacks,
discrepancies requiring time consuming and costly redesigns and changes, and that there is the possibility of outright failure.
We may not meet our product development and commercialization milestones.
We have established milestones, based upon our expectations regarding our technologies, which we use to assess our progress toward developing our products. These
milestones relate to technology development and design improvements as well as dates for achieving development goals. If our products exhibit technical defects or are unable
to meet cost or performance goals, our commercialization schedule could be delayed and potential purchasers of our initial commercial products may decline to purchase such
products or may opt to pursue alternative products.
We may also experience shortages of the components used in our devices. The contract manufacturing operations that we will use could be disrupted by fire, earthquake or other
natural disaster, a labor-related disruption, failure in supply or other logistical channels, electrical outages or other reasons. If there were a disruption to manufacturing facilities,
we would be unable to manufacture devices until these manufacturing capabilities are restored or alternative manufacturing facilities are engaged.
Generally, we have met our milestone schedules when making technological advances in our product. We can give no assurance that our development and commercialization
schedule will continue to be met as we further develop products currently under development or any of our other future products.
Our business is dependent upon physicians utilizing and prescribing our solution; if we fail to engage physicians to utilize our solution, our revenues may never materialize
or may not meet our projections.
The success of our cardiac diagnosis and monitoring business is dependent upon physicians prescribing and utilizing our solution. The utilization of our solution by physicians
for use in the prescription of cardiac monitoring is directly influenced by a number of factors, including:
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the ability of the physicians with whom we work to obtain sufficient reimbursement and be paid in a timely manner for the professional services they provide in
connection with the use of our monitoring solutions;
establishing ourselves as a cardiac monitoring technology company by publishing peer reviewed publications showing efficacy of our solutions,
our ability to educate physicians regarding the benefits of our cardiac monitoring solutions over alternative diagnostic monitoring solutions,
our demonstrating that our proposed products are reliable and supported by us in the field;
supplying and servicing sufficient quantities of products directly or through marketing alliances; and
pricing our devices and technology service fees in a medical device industry that is becoming increasingly price sensitive.
If we are unable to drive physician utilization, our revenues may never materialize or may not meet our projections.
We are subject to extensive governmental regulations relating to the manufacturing, labeling, and marketing of our products.
Our medical technology products and operations are subject to regulation by the FDA, and other foreign and local governmental authorities. These agencies enforce laws and
regulations that govern the development, testing, manufacturing, labeling, advertising, marketing and distribution, and post market surveillance of our medical products.
Under the United States Federal Food, Drug, and Cosmetic Act, medical devices are classified into one of three classes — Class I, Class II or Class III — depending on the
degree of risk associated with each medical device and the extent of control needed to ensure safety and effectiveness. We believe that our products currently under
development and planned products will be Class II medical devices. Class II medical devices are subject to additional controls, including full applicability of the Quality System
Regulations, and requirements for 510(k) pre-market notification.
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The FDA may disagree with the classification of a new Class II medical device and require the manufacturer of that device to apply for approval as a Class III medical device. If
the FDA determines that our Class II medical Products should be classified as Class III medical devices, we could be precluded from marketing the devices for clinical use
within the United States for a period of time, the length of which depends on the specific change in the classification. Reclassification of our Class II medical Products as Class
III medical devices could significantly increase our regulatory costs, including the timing and expense associated with required clinical trials and other costs.
In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of our
products in foreign countries. Whether or not we obtain FDA approval for a product, we must obtain approval of a product by the comparable regulatory authorities of foreign
countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to country, and the time may be
longer or shorter than that required for FDA approval. The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from
country to country.
The policies of the FDA and foreign regulatory authorities may change, and additional government regulations may be enacted which could prevent or delay regulatory
approval of our products and could also increase the cost of regulatory compliance. We cannot predict the likelihood, nature or extent of adverse governmental regulation that
might arise from future legislative or administrative action, either in the United States or abroad.
The FDA and non-U.S. regulatory authorities require that our products be manufactured according to rigorous standards. These regulatory requirements may significantly
increase our production costs and may even prevent us from making our products in quantities sufficient to meet market demand. If we change our approved manufacturing
process, the FDA may need to review the process before it may be used. Failure to comply with applicable regulatory requirements discussed could subject us to enforcement
actions, including warning letters, fines, injunctions, and civil penalties, product recall or seizure of our products, operating restrictions, partial suspension or total shutdown of
our production, and even criminal prosecution.
Federal, state, and non-U.S. regulations regarding the manufacture and sale of medical devices are subject to future changes. The complexity, timeframes and costs associated
with obtaining marketing clearances are unknown. Although we cannot predict the impact, if any, these changes might have on our business, the impact could be material.
Following the introduction of a product, these agencies will also periodically review our design and manufacturing processes and product performance. The process of
complying with the applicable good manufacturing practices, adverse event reporting, clinical trial and other requirements can be costly and time consuming, and could delay or
prevent the production, manufacturing, or sale of our products. In addition, if we fail to comply with applicable regulatory requirements, it could result in fines, delays or
suspensions of regulatory clearances, closure of manufacturing sites, seizures or recalls of products and damage to our reputation. Recent changes in enforcement practice by the
FDA and other agencies have resulted in increased enforcement activity, which increases the compliance risk for the Company and other companies in our industry. In addition,
governmental agencies may impose new requirements regarding registration, labeling or prohibited materials that may require us to modify or re-register products already on
the market or otherwise impact our ability to market our products in those countries. Once clearance or approval has been obtained for a product, there is an obligation to ensure
that all applicable FDA, and other regulatory requirements continue to be met.
Additionally, injuries caused by the malfunction or misuse of cardiac devices, even where such malfunction or misuse occurs with respect to one of our competitor’s products,
could cause regulatory agencies to implement more conservative regulations on the medical cardiac monitoring industry, which could significantly increase our operating costs.
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If we are not able to both obtain and maintain adequate levels of third-party reimbursement for our products, it would have a material adverse effect on our business.
Healthcare providers and related facilities are generally reimbursed for their services through payment systems managed by various governmental agencies worldwide, private
insurance companies, and managed care organizations. The manner and level of reimbursement in any given case may depend on the site of care, the procedure(s) performed,
the final patient diagnosis, the device(s) utilized, available budget, the efficacy, safety, performance and cost-effectiveness of our planned products and services, or a
combination of these or other factors, and coverage and payment levels are determined at each payer’s discretion. The coverage policies and reimbursement levels of these
third-party payers may impact the decisions of healthcare providers and facilities regarding which medical products they purchase and the prices they are willing to pay for
those products. Thus, changes in reimbursement levels or methods may impact sales of our products.
We have no direct control over payer decision-making with respect to coverage and payment levels for our medical device products and services. Additionally, we expect many
payers to continue to explore cost-containment strategies (e.g., comparative, and cost- effectiveness studies, so-called “pay-for-performance” programs implemented by various
public and private payers, and expansion of payment bundling schemes such as Accountable Care Organizations, and other such methods that shift medical cost risk to
providers) that may potentially impact coverage and/or payment levels for our products and services.
The ability of physicians and other providers to successfully utilize our cardiac diagnostic and monitoring solutions and successfully allow payors to reimburse for the
physicians’ technical and professional fees is critical to our business because physicians and their patients will select solutions other than ours in the event that payors refuse to
adequately reimburse our technical fees and physicians’ professional fees.
Changes in reimbursement practices of third-party payers could affect the demand for our products and services and our revenue levels.
The sales of our proposed products and services could depend, in part, on the extent to which healthcare providers and facilities or individual users are reimbursed by
government authorities, private insurers and other third-party payers for the costs of our products, or the services performed with our products. The coverage policies and
reimbursement levels of third-party payers, which can vary among public and private sources and by country, may affect which products customers purchase and the prices they
are willing to pay for those products and services in a particular jurisdiction. Reimbursement rates can also affect the acceptance rate of new technologies. Legislative or
administrative reforms to reimbursement systems in the United States or abroad, or changes in reimbursement rates by private payers, could significantly reduce reimbursement
for medical actions using the Company’s products or result in denial of reimbursement for those products, which would adversely affect customer demand, or the price
customers may be willing to pay for such products and services.
We may experience difficulty in obtaining reimbursement for our services from commercial payors that consider our technology to be experimental and investigational,
which would adversely affect our revenue and operating results.
Many commercial payors refuse to enter into contracts to reimburse the fees associated with medical devices or services that such payors determine to be “experimental and
investigational.” Commercial payors typically label medical devices or services as “experimental and investigational” until such devices or services have demonstrated product
superiority evidenced by a randomized clinical trial.
For example, clinical trials have been performed on some mobile cardiac telemetry devices, proving higher diagnostic yield than monitoring devices and services that are
already being reimbursed. Certain remaining commercial payors, however, have stated that they do not believe the data from the clinical trials justifies the removal of the
experimental designation for mobile cardiac telemetry solutions. As a result, certain commercial payors may refuse to reimburse the technical and professional fees associated
with cardiac monitoring solutions such as the one expected to be offered by the Company.
If commercial payors decide not to reimburse physicians or providers for their services during the utilization of our cardiac monitoring solutions, our revenue could fail to
materialize or meet our projections.
Reimbursement by Medicare is highly regulated and subject to change; our failure to comply with applicable regulations could decrease our expected revenue and may
subject us to penalties or have an adverse impact on our business.
The Medicare program is administered by CMS, which imposes extensive and detailed requirements on medical services providers, including, but not limited to, rules that
govern how we structure our relationships with physicians, and how and where we provide our cardiac solutions. Our failure to comply with applicable Medicare rules could
result in the inability
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of physicians to receive reimbursement as they will likely utilize our cardiac monitoring solution under the Medicare payment program.
Consolidation of commercial payors could result in payors eliminating coverage of mobile cardiac monitoring solutions or reducing reimbursement rates.
When payors combine their operations, the combined company may elect to reimburse physicians for cardiac monitoring services at the lowest rate paid by any of the
participants in the consolidation. If one of the payors participating in the consolidation does not reimburse for these services at all, the combined company may elect not to
reimburse at any rate. Reimbursement rates tend to be lower for larger payors. As a result, as payors consolidate, our expected average reimbursement rate may decline.
Product defects could adversely affect the results of our operations.
The design, manufacture and marketing of our hardware and software products involve certain inherent risks. Manufacturing or design defects, unanticipated use of our
products, or inadequate disclosure of risks relating to the use of our products can lead to injury or other adverse events. These events could lead to recalls or safety alerts relating
to our products (either voluntary or required by the FDA, or similar governmental authorities in other countries), and could result, in certain cases, in the removal of a product
from the market. A recall could result in significant costs, as well as negative publicity and damage to our reputation that could reduce demand for our products. Personal
injuries or deaths relating to the use of our products could also result in product liability claims being brought against us. In some circumstances, such adverse events could also
cause delays in new product approvals.
Interruptions or delays in telecommunications systems or in the data services provided to us by cellular communication providers or the loss of our wireless or data services
could impair the delivery of our cardiac monitoring services.
The success of our cardiac monitoring services will be dependent upon our ability to transmit, store, retrieve, process and manage data and to maintain and upgrade our data
processing and communication capabilities. Our monitoring solution relies on a third-party wireless carrier to transmit data over its data network. All data sent by our monitors
via this wireless data network is expected to be routed directly to healthcare providers and data centers or third-party ECG monitoring centers. We are therefore dependent upon
a third party wireless carrier to provide data transmission services to us.
As we expand our commercial activities, an increased burden is expected to be placed upon our data processing systems and the equipment upon which they rely. Interruptions
of our data networks, or the data networks of our wireless carrier, for any extended length of time, loss of stored data or other computer problems could have a material adverse
effect on our business and operating results. Frequent or persistent interruptions in our cardiac monitoring services could cause permanent harm to our reputation and could
cause current or potential users or prescribing physicians to believe that our systems are unreliable, leading them to switch to our competitors. Such interruptions could result in
liability, claims and litigation against us for damages or injuries resulting from the disruption in service.
Our systems are also expected to be vulnerable to damage to or interruption of telecommunication services from earthquakes, floods, fires, power loss, telecommunication
failures, terrorist attacks, computer viruses, break-ins, sabotage, and acts of vandalism. Despite any precautions that we may take, the occurrence of a natural disaster or other
unanticipated problems could result in lengthy interruptions in these services. We do not carry business interruption insurance to protect against losses that may result from
interruptions in service as a result of system failures. Moreover, the communications and information technology industries are subject to rapid and significant changes, and our
ability to operate and compete is dependent on our ability to update and enhance the communication technologies used in our systems and services.
Interruptions in computing and data management cloud systems could impair the delivery of our cardiac monitoring services.
The success of our cardiac monitoring services will be dependent upon our ability to perform computing functions associated with our cardiac signal processing algorithms and
data management. The diagnostic and monitoring functions rely on the uninterrupted availability of third-party cloud based computational and data management services.
Availability of the cloud-based infrastructure is a critical link in our ability to deliver our services and could have a material adverse effect on our business and operating results.
Furthermore, loss of data due to catastrophic events at the sites for these cloud based computer systems could cause permanent harm to our customers. These adverse events
associated with unavailability of our cloud based computational infrastructure could result in liability, claims and litigation against us for damages or injuries resulting from the
disruption in service.
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Our systems are also expected to be vulnerable to damage or interruption in cloud computational services from earthquakes, floods, fires, power loss, technical failures, terrorist
attacks, computer viruses, break-ins, sabotage, and acts of vandalism. Despite any precautions that we may take, the occurrence of a natural disaster or other unanticipated
problems could result in lengthy interruptions in these services.
We could be exposed to significant liability claims if we are unable to obtain insurance at acceptable costs and adequate levels or otherwise protect ourselves against
potential product liability claims.
The testing, manufacture, marketing and sale of medical devices entail the inherent risk of liability claims or product recalls. Product liability insurance is expensive and, if
available, may not be available on acceptable terms at all periods of time. A successful product liability claim or product recall could inhibit or prevent the successful
commercialization of our products, cause a significant financial burden on the Company, or both, which in either case could have a material adverse effect on our business and
financial condition.
We require additional capital to support our present business plan and our anticipated business growth, and such capital may not be available on acceptable terms, or at all,
which would adversely affect our ability to operate.
We will require additional funds to further develop our business plan. We may choose to raise additional capital in order to expedite and propel growth more rapidly. We can
give no assurance that we will be successful in raising any additional funds. We may need to raise additional funds, doing so through debt and equity offerings, in order to meet
our expected future liquidity and capital requirements, including capital required for the development completion and introduction of our future products and technologies. Any
such financing that we undertake will likely be dilutive to current stockholders.
We intend to continue to make investments to support our business growth, including patent or other intellectual property asset creation. In addition, we may also need additional
funds to respond to business opportunities and challenges, including our ongoing operating expenses, protecting our intellectual property, satisfying debt payment obligations,
developing new lines of business and enhancing our operating infrastructure. While we may need to seek additional funding for such purposes, we may not be able to obtain
financing on acceptable terms, or at all. In addition, the terms of our financings may be dilutive to, or otherwise adversely affect, holders of our Common Stock. We may also
seek to raise additional funds through arrangements with collaborators or other third parties. We may not be able to negotiate any such arrangements on acceptable terms, if at
all. If we are unable to obtain additional funding on a timely basis, we may be required to curtail or terminate some or all our business plans.
We cannot predict our future capital needs and we may not be able to secure additional financing.
We will need to raise additional funds in the future to fund our working capital needs and to fund further expansion of our business. We may require additional equity or debt
financings, collaborative arrangements with corporate partners or funds from other sources for these purposes. No assurance can be given that necessary funds will be available
for us to finance our development on acceptable terms, if at all. Furthermore, such additional financings may involve substantial dilution of our stockholders or may require that
we relinquish rights to certain of our technologies or products. In addition, we may experience operational difficulties and delays due to working capital restrictions. If adequate
funds are not available from operations or additional sources of financing, we may have to delay or scale back our growth plans.
The results of our research and development efforts are uncertain and there can be no assurance of the commercial success of our products.
We believe that we will need to incur additional research and development expenditures to continue development of our existing proposed products as well as research and
development expenditures to develop new products and services. The products and services we are developing and may develop in the future may not be technologically
successful. In addition, the length of our product and service development cycle may be greater than we originally expected, and we may experience delays in product
development. If our resulting products and services are not technologically successful, they may not achieve market acceptance or compete effectively with our competitors’
products and services.
If we fail to retain certain of our key personnel and attract and retain additional qualified personnel, we might not be able to pursue our growth strategy.
Our future success will depend upon the continued service of Dr. Branislav Vajdic and other members of our key management team and our technical contributors. Though no
individual is indispensable, the loss of the services of these individuals could have a material adverse effect on our business, operations, revenues or prospects. We do not
currently maintain key man life insurance on the lives of these individuals.
We will not be profitable unless we can demonstrate that our products can be manufactured at low prices.
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To date, we have focused primarily on research and development of the first versions of our software and hardware products, as well as other technologies we plan to introduce
in our eco-system, and their proposed marketing and distribution. Consequently, we have little experience in manufacturing these products on a commercial basis. We plan to
manufacture our products through third-party manufacturers. We can offer no assurance that either we or our manufacturing partners will develop efficient, automated, low-cost
manufacturing capabilities and processes to meet the quality, price, engineering, design and production standards or production volumes required to successfully mass market
our products, especially at the low-cost levels we require to absorb the cost of near free distribution of our products pursuant to our proposed business plan. Even if we or our
manufacturing partners are successful in developing such manufacturing capability and processes, we do not know whether we or they will be timely in meeting our product
commercialization schedule or the production and delivery requirements of potential customers. A failure to develop such manufacturing processes and capabilities could have a
material adverse effect on our business and financial results. If we or our suppliers fail to achieve or maintain regulatory approval of manufacturing facilities, our growth could
be limited and our business could be harmed.
In order to maintain compliance with FDA and other regulatory requirements, our development and manufacturing facilities must be periodically re-evaluated and qualified
under a quality system to ensure they meet production and quality standards. Suppliers of components and products used to manufacture our devices must also comply with
FDA regulatory requirements, which often require significant resources and subject us and our suppliers to potential regulatory inspections and stoppages. If we or our suppliers
do not maintain regulatory approval for our manufacturing operations, our business could be adversely affected.
Our dependence on a limited number of suppliers may prevent us from delivering our devices on a timely basis.
We currently rely on a limited number of suppliers of components for our prototype devices. If these suppliers became unable to provide components in the volumes needed or
at an acceptable price, we would have to identify and qualify acceptable replacements from alternative sources of supply. The process of qualifying suppliers is lengthy. Delays
or interruptions in the supply of our requirements could limit or stop our ability to provide sufficient quantities of devices on a timely basis or meet demand for our devices or
services, which could have a material adverse effect on our business, financial condition and results of operations.
We rely significantly on information technology and any failure, inadequacy, or security lapse of that technology, including any cybersecurity incidents, could harm us.
We believe that companies have been increasingly subject to a wide variety of security incidents, cyberattacks and other attempts to gain unauthorized access. These threats can
come from a variety of sources, ranging in sophistication from an individual hacker to a state-sponsored attack. Cyber threats may be generic, or they may be custom-crafted
against our information systems. Over the past few years, cyber-attacks have become more prevalent and much harder to detect and defend against. Several key areas of our
business depend on the use of information technologies, including production, manufacturing, marketing, and logistics, as well as clinical and regulatory matters. We also
utilize systems that allow for the secure storage and transmission of proprietary or confidential information regarding our customers, employees, and others, including personal
information. Despite our efforts to prevent such behavior, third parties may nonetheless attempt to hack into our systems and obtain data relating to our pre-clinical studies,
clinical trials, patients using our VCG technology and our telehealth ECG collection device or other information relating to us or our business. If we fail to maintain or protect
our information systems and data integrity effectively, we could have problems in determining product cost estimates and establishing appropriate pricing, have difficulty
preventing, detecting, and controlling fraud, have disputes with physicians, and other health care professionals, have regulatory sanctions or penalties imposed, have increases
in operating expenses, incur expenses or lose revenues as a result of a data privacy breach, or suffer other adverse consequences and reputational damages. While we have
invested in the protection of data and information technology, there can be no assurance that our efforts or those of our third-party collaborators, if any, or manufacturers, to
implement adequate security and quality measures for data processing would be sufficient to protect against data deterioration or loss in the event of a system malfunction, or to
prevent data from being stolen or corrupted in the event of a security breach. Any such loss or breach could harm our business, operating results, and financial condition. For a
discussion of our management of cybersecurity risks, see Item 1C, "Cybersecurity-Risk Management" and "-Governance."
We have identified weaknesses in our internal controls, and we cannot provide assurances that these weaknesses will be effectively remediated or that additional material
weaknesses will not occur in the future.
As a public company, we are subject to the reporting requirements of the Exchange Act, and the Sarbanes-Oxley Act. We expect that the requirements of these rules and
regulations will continue to increase our legal, accounting and financial compliance costs, make some activities more difficult, time consuming and costly, and place significant
strain on our personnel, systems and resources.
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The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures, and internal controls over financial reporting.
We do not yet have effective disclosure controls and procedures, or internal controls over all aspects of our financial reporting. We are continuing to develop and refine our
internal controls over financial reporting. Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in
Rule 13a-15(f) under the Exchange Act. We will be required to expend time and resources to further improve our internal controls over financial reporting, including by
expanding our staff. However, we cannot assure you that our internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the
future.
We have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control
over financial reporting such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.
The material weaknesses identified to date include (i) lack of formal risk assessment under COSO framework (ii) policies and procedures which are not adequately
documented, (iii) lack of proper approval processes, review processes and documentation for such reviews, (iv) insufficient GAAP experience regarding complex transactions
and reporting and (v) insufficient number of staff to maintain optimal segregation of duties and levels of oversight.
Starting in third quarter of 2023, we have undertaken specific remediation actions to address the material weaknesses in our financial reporting. 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. These remediation actions
included hiring a Controller in July 2023, who we believe has extensive experience in developing and implementing internal controls and executing plans to remediate control
deficiencies. We will be required to expend time and resources to further improve our internal controls over financial reporting. However, we cannot assure you that our internal
control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.
Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure
controls or our internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls, or any difficulties encountered in
their implementation or improvement, could harm our operating results or cause us to fail to meet our reporting obligations and may result in a restatement of our financial
statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting could also adversely affect the results of management
reports and independent registered public accounting firm audits of our internal control over financial reporting that we will eventually be required to include in our periodic
reports that will be filed with the SEC. Ineffective disclosure controls and procedures, and internal control over financial reporting could also cause investors to lose confidence
in our reported financial and other information, which would likely have a negative effect on the market price of our common stock.
Our independent registered public accounting firm is not required to audit the effectiveness of our internal control over financial reporting until after we are no longer an
"emerging growth company” as defined in the JOBS Act and meet other requirements. At such time, our independent registered public accounting firm may issue a report that
is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain
effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business and operating results, and cause a decline in
the market price of our common stock.
Risks Related to Economic Conditions
We maintain our cash at financial institutions, often in balances that exceed federally insured limits.
Our cash is held in accounts at U.S. banking institutions that we believe are of high quality. Cash held in non-interest-bearing and interest-bearing operating accounts may
exceed the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. If such banking institutions were to fail, we could lose all or a portion of those amounts held in
excess of such insurance limitations.
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Changes in tax laws or regulations may increase tax uncertainty and adversely affect results of our operations and our effective tax rate.
We are subject to taxes in the United States and in the future expect to be subject to certain foreign jurisdictions. Due to economic and political conditions, tax rates in various
jurisdictions, including the United States, may be subject to change. Our future effective tax rates could be affected by changes in the mix of earnings in countries with differing
statutory tax rates, changes in the valuation of deferred tax assets and liabilities and changes in tax laws or their interpretation. In addition, we may be subject to income tax
audits by various tax jurisdictions. Although we believe our income tax liabilities are reasonably estimated and accounted for in accordance with applicable laws and principles,
an adverse resolution by one or more taxing authorities could have a material impact on the results of our operations.
Escalating global trade tensions, the Russia and Ukraine war, the Israel-Hamas war, the adoption or expansion of tariffs and trade restrictions and economic disruption
and uncertainty resulting therefrom could negatively impact us.
The Russia and Ukraine war and Israel-Hamas war could lead to disruption, instability and volatility in global markets and industries that could negatively impact our operations
and could adversely affect our business and/or our supply chain, business partners or customers in other countries beyond Russia and Ukraine. The U.S. government and other
governments in jurisdictions in which we operate have imposed severe sanctions and export controls against Russia and Russian interests and threatened additional sanctions and
controls. It is not possible to predict the broader consequences of this conflict, which could include sanctions, embargoes, regional instability, geopolitical shifts and adverse
effects on macroeconomic conditions, currency exchange rates and financial markets. The impact of these measures, as well as potential responses to them by Russia, is
currently unknown and they could adversely affect our business, supply chain, partners or customers. More specifically, while it is difficult to anticipate the impact the
sanctions announced to date may have on our Research and Development team is largely based in Belgrade, Serbia any further sanctions imposed or actions taken by the U.S. or
other countries, and any retaliatory measures by Russia in response, such as restrictions on energy supplies from Russia to countries in the region, could increase our costs,
reduce our sales and earnings or otherwise have an adverse effect on our operations.
Natural disasters and other events beyond our control could materially adversely affect us.
Natural disasters or other catastrophic events may cause damage or disruption to our operations, international commerce and the global economy, and thus could have a strong
negative effect on us. Our business operations are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. Such events
could make it difficult or impossible for us to deliver our products and services to our customers and could decrease demand for our products and services.
Our business and operations, and the operations of our suppliers and customers, have been, and may in the future be adversely affected by epidemics, pandemics or other
public health crises such as the COVID-19 pandemic outbreak.
We may face risks related to health epidemics and pandemics or other outbreaks of communicable diseases. The COVID-19 pandemic and governments’ measures taken in
response had a significant adverse impact, both direct and indirect, on our business and on the broader economy. We may in the future experience, weakened demand from
certain customers as a result of a public health crisis, which could adversely affect our revenues. For example, healthcare providers have, at times, deferred elective medical
procedures in order to focus on combating the COVID-19 pandemic, which significantly reduced demand for certain of our medical products.
We also faced difficulty sourcing some materials and components necessary to fulfill our developmental requirements due to suppliers’ capacity constraints and shipping and
transportation disruptions during the COVID-19 pandemic. These disruptions adversely affected our ability to meet our schedules. If we are not able to mitigate similar
disruptions effectively in future epidemics, pandemics or other public health crisis, our ability to manufacture our products or meet our customers’ schedules would be
adversely affected, possibly materially, and our business could be harmed. In addition, efforts to find alternate sources of supply may increase our costs or lower the quality of
our product, which could negatively affect our profitability, financial condition and business.
Risks Related to Our Industry
The industry in which we operate is highly competitive and subject to rapid technological change. If our competitors are better able to develop and market products that are
safer, more effective, less costly, easier to use, or are otherwise more attractive, we may be unable to compete effectively with other companies.
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The medical technology industry is characterized by intense competition and rapid technological change, and we will face competition on the basis of product features, clinical
outcomes, price, services and other factors. Competitors may include large medical device and other companies, some of which have significantly greater financial and
marketing resources than we do, and firms that are more specialized than we are with respect to particular markets. Our competition may respond more quickly to new or
emerging technologies, undertake more extensive marketing campaigns, have greater financial, marketing and other resources than ours or may be more successful in attracting
potential customers, employees and strategic partners.
Our competitive position will depend on multiple, complex factors, including our ability to achieve regulatory clearance and market acceptance for our products, develop new
products, implement production and marketing plans, secure regulatory approvals for products under development and protect our intellectual property. In some instances,
competitors may also offer, or may attempt to develop, alternative systems that may be delivered without a medical device or with a medical device superior to ours. The
development of new or improved products, processes or technologies by other companies may render our products or proposed products obsolete or less competitive. The entry
into the market of manufacturers located in low-cost manufacturing locations may also create pricing pressure, particularly in developing markets. Our future success depends,
among other things, upon our ability to compete effectively against current technology, as well as to respond effectively to technological advances or changing regulatory
requirements, and upon our ability to successfully implement our marketing strategies and execute our research and development plan. Our research and development efforts are
aimed, in part, at solving increasingly complex problems, as well as creating new technologies, and we do not expect that all of our projects will be successful. If our research
and development efforts are unsuccessful, our future results of operations could be materially harmed.
We face competition from other medical device companies that focus on similar markets.
We face competition from other companies that have longer operating histories and may have greater name recognition and substantially greater financial, technical and
marketing resources than us. Many of these companies also have FDA or other applicable governmental approval to market and sell their products, and more extensive
customer bases, broader customer relationships and broader industry alliances than us, including relationships with many of our potential customers. Increased competition
from any of these sources could result in our failure to achieve and maintain an adequate level of customers and market share to support the cost of our operations.
Unsuccessful clinical trials or procedures relating to products under development could have a material adverse effect on our prospects.
The regulatory approval process for new products and new indications for existing products requires extensive clinical trials and procedures, including early clinical experiences
and regulatory studies. Unfavorable or inconsistent clinical data from current or future clinical trials or procedures conducted by us, our competitors, or third parties, or
perceptions regarding this clinical data, could adversely affect our ability to obtain necessary approvals and the market’s view of our future prospects. Such clinical trials and
procedures are inherently uncertain and there can be no assurance that these trials or procedures will be completed in a timely or cost- effective manner or result in a
commercially viable product. Failure to successfully complete these trials or procedures in a timely and cost-effective manner could have a material adverse effect on our
prospects. Clinical trials or procedures may experience significant setbacks even after earlier trials have shown promising results. Further, preliminary results from clinical trials
or procedures may be contradicted by subsequent clinical analysis. In addition, results from our already completed clinical trials or procedures may not be supported by actual
long-term studies or clinical experience. If preliminary clinical results are later contradicted, or if initial results cannot be supported by actual long-term studies or clinical
experience, our business could be adversely affected. Clinical trials or procedures may be suspended or terminated by us, the FDA or other regulatory authorities at any time if it
is believed that the trial participants face unacceptable health risks.
Intellectual property litigation and infringement claims could cause us to incur significant expenses or prevent us from selling certain of our products.
The medical device industry in which we operate is characterized by extensive intellectual property litigation and, from time to time, we might be the subject of claims by third
parties of potential infringement or misappropriation. Regardless of outcome, such claims are expensive to defend and divert the time and effort of our management and
operating personnel from other business issues. A successful claim or claims of patent or other intellectual property infringement against us could result in our payment of
significant monetary damages and/or royalty payments, or it could negatively impact our ability to sell current or future products in the affected category and could have a
material adverse effect on business, cash flows, financial condition or results of operations.
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If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to obtaining intellectual property protections we rely on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our
competitive position. We will seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them,
such as our employees, corporate collaborators, outside scientific collaborators, contract manufacturers, consultants, advisors and other third parties. We will seek to protect our
confidential proprietary information, in part, by entering into confidentiality and invention or intellectual property assignment agreements with our employees and consultants.
Moreover, to the extent we enter into such agreements, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and
we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and
time-consuming, and the outcome is unpredictable. In addition, some courts inside and outside the United States are less willing or unwilling to protect trade secrets. If any of
our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them, or those to whom they communicate it,
from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive
position would be harmed. In general, any loss of trade secret protection or other unpatented proprietary rights could harm our business, results of operations and financial
condition.
If we are unable to protect our proprietary rights, or if we infringe on the proprietary rights of others, our competitiveness and business prospects may be materially
damaged.
We have filed for and were granted a number of utility patents in the U.S as well as through PCT covering international markets. We will continue to seek patent protection for
our inventions and may seek patent protection for our proprietary designs if warranted. Seeking patent protection is a lengthy and costly process, and there can be no assurance
that patents will be issued from any pending applications, or that any claims allowed from existing or pending patents will be sufficiently broad or strong to protect our designs
or our proprietary technology. There is also no guarantee that any patents we hold will not be challenged, invalidated or circumvented, or that the patent rights granted will
provide competitive advantages to us. Our competitors have developed and may continue to develop and obtain patents for technologies that are similar or superior to our
technologies. In addition, the laws of foreign jurisdictions in which we develop, manufacture or sell our products may not protect our intellectual property rights to the same
extent, as do the laws the United States.
Adverse outcomes in legal disputes regarding patent and other intellectual property rights could result in the loss of our intellectual property rights, subject us to significant
liabilities to third parties, require us to seek licenses from third parties on terms that may not be reasonable or favorable to us, prevent us from manufacturing, importing or
selling our products, or compel us to redesign our products to avoid infringing third parties’ intellectual property. As a result, we may be required to incur substantial costs to
prosecute, enforce or defend our intellectual property rights if they are challenged. Any of these circumstances could have a material adverse effect on our business, financial
condition and resources or results of operations.
Dependence on our proprietary rights and failing to protect such rights or to be successful in litigation related to such rights may result in our payment of significant
monetary damages or impact offerings in our product portfolios.
Our long-term success largely depends on our ability to market technologically competitive products. If we fail to obtain or maintain adequate intellectual property protection,
we may not be able to prevent third parties from using our proprietary technologies or may lose access to technologies critical to our products. Also, our currently pending
industrial design patent or any future patents applications may not result in issued patents, and issued patents are subject to claims concerning priority, scope and other issues.
Furthermore, to the extent we do not file applications for patents domestically or internationally, we may not be able to prevent third parties from using our proprietary
technologies or may lose access to technologies critical to our products in other countries.
Enforcement of federal and state laws regarding privacy and security of patient information may adversely affect our business, financial condition or operations.
The use and disclosure of certain health care information by health care providers and their business associates have come under increasing public scrutiny. Recent federal
standards under the Health Insurance Portability and Accountability Act of 1996, or HIPAA, establish rules concerning how individually-identifiable health information may be
used, disclosed and protected. Historically, state law has governed confidentiality issues, and HIPAA preserves these laws to the extent they are more protective of a patient’s
privacy or provide the patient with more access to his or her health information. As a result
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of the implementation of the HIPAA regulations, many states are considering revisions to their existing laws and regulations that may or may not be more stringent or
burdensome than the federal HIPAA provisions. We must operate our business in a manner that complies with all applicable laws, both federal and state, and that does not
jeopardize the ability of our customers to comply with all applicable laws. We believe that our operations are consistent with these legal standards. Nevertheless, these laws and
regulations present risks for health care providers and their business associates that provide services to patients in multiple states. Because these laws and regulations are recent,
and few have been interpreted by government regulators or courts, our interpretations of these laws and regulations may be incorrect. If a challenge to our activities is
successful, it could have an adverse effect on our operations, may require us to forego relationships with customers in certain states and may restrict the territory available to us
to expand our business. In addition, even if our interpretations of HIPAA and other federal and state laws and regulations are correct, we could be held liable for unauthorized
uses or disclosures of patient information as a result of inadequate systems and controls to protect this information or as a result of the theft of information by unauthorized
computer programmers who penetrate our network security. Enforcement of these laws against us could have a material adverse effect on our business, financial condition and
results of operations.
We may become subject, directly or indirectly, to federal and state health care fraud and abuse laws and regulations and if we are unable to fully comply with such laws, the
Company could face substantial penalties.
Although not affected at this time, our operations may in the future become directly or indirectly affected by various broad state and federal health care fraud and abuse laws,
including the Federal Healthcare Programs’ Anti-Kickback Statute and the Stark law, which among other things, prohibits a physician from referring Medicare and Medicaid
patients to an entity with which the physician has a financial relationship, subject to certain exceptions. If our future operations are found to be in violation of these laws, we or
our officers may be subject to civil or criminal penalties, including large monetary penalties, damages, fines, imprisonment and exclusion from Medicare and Medicaid program
participation. If enforcement action were to occur, our business and results of operations could be adversely affected.
We may be subject to federal and state false claims laws which impose substantial penalties.
Many of the physicians and patients whom we expect to use our services will file claims for reimbursement with government programs such as Medicare and Medicaid. As a
result, we may be subject to the federal False Claims Act if we knowingly “cause” the filing of false claims. Violations may result in substantial civil penalties, including treble
damages. The federal False Claims Act also contains “whistleblower” or “qui tam” provisions that allow private individuals to bring actions on behalf of the government
alleging that the defendant has defrauded the government. In recent years, the number of suits brought in the medical industry by private individuals has increased dramatically.
Various states have enacted laws modeled after the federal False Claims Act, including “qui tam” provisions, and some of these laws apply to claims filed with commercial
insurers. We are unable to predict whether we could be subject to actions under the federal False Claims Act, or the impact of such actions. However, the costs of defending
claims under the False Claims Act, as well as sanctions imposed under the False Claims Act, could adversely affect our results of operations.
Risks Related To Common Stock
The price of our Common Stock and Warrants may be subject to wide fluctuations.
A consistently active trading market for our Common Stock and Warrants does not exist and may not develop or be maintained. You may not be able to sell your shares quickly
or at the current market price if trading in our stock is not active. You may lose all or a part of your investment. The market price of our Common Stock and Warrants may be
highly volatile and subject to wide fluctuations in response to a variety of factors and risks, many of which are beyond our control. In addition to the risks noted elsewhere in
this prospectus, some of the other factors affecting our stock price may include:
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variations in our operating results;
announcements by us or our competitors of significant contracts, acquisitions, strategic partnerships, joint ventures or capital commitments;
announcements by third parties of significant claims or proceedings against us;
future sales of our Common Stock or other equity securities;
any delay in our regulatory filings for our product and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s
review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information;
adverse results or delays in clinical trials;
our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;
adverse regulatory decisions, including failure to receive regulatory approval of our product;
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changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;
adverse developments concerning our manufacturers;
our inability to obtain adequate product supply for any approved product or inability to do so at acceptable prices;
our inability to establish collaborations if needed;
additions or departures of key scientific or management personnel;
introduction of new products or services offered by us or our competitors;
announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;
our ability to effectively manage our growth;
the size and growth of our initial target markets;
our ability to successfully treat additional types of indications or at different stages;
actual or anticipated variations in annual and quarterly operating results;
our cash position;
our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;
publication of research reports about us or our industry, or positive or negative recommendations or withdrawal of research coverage by securities analysts;
changes in the market valuations of similar companies;
overall performance of the equity markets;
sales of our Common Stock by our stockholders in the future;
trading volume of our Common Stock;
changes in accounting practices;
ineffectiveness of our internal controls;
disputes or other developments relating to proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our or our licensee’s
technologies;
significant lawsuits, including patent or stockholder litigation;
general political and economic conditions, including war and its unknown impact on our Serbia development team; and
other events or factors, many of which are beyond our control.
We are an “emerging growth company,” and any decision on our part to comply with certain reduced disclosure requirements
We are an “emerging growth company” as defined in the JOBS Act, and, for as long as we continue to be an emerging growth company, we may choose to take advantage of
exemptions from various reporting requirements applicable to other public companies including, but (i) not limited to, not being required to comply with the auditor attestation
requirements of Section 404 of the Sarbanes-Oxley Act, (ii) not being required to comply with any new requirements adopted by the Public Company Accounting Oversight
Board (the “PCAOB”), requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information
about the audit and the financial statements of the issuer, (iii) not being required to comply with any new audit rules adopted by the PCAOB after April 5, 2012 unless the SEC
determines otherwise, (iv) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and (v) exemptions from the
requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
We could remain an emerging growth company until the earlier of: (i) the last day of the fiscal year in which we have total annual gross revenues of $1.24 billion or more; (ii)
the last day of our fiscal year following the fifth anniversary of the date of our first sale of common equity securities pursuant to an effective registration statement; (iii) the date
on which we have issued more than $1.0 billion in nonconvertible debt during the previous three years; or (iv) the date on which we are deemed to be a large accelerated filer.
We cannot predict if investors will find our securities less attractive if we choose to rely on these exemptions. If some investors find our securities less attractive as a result of
any choices to reduce future disclosure, there may be a less active trading market for our securities and our stock price may be more volatile. Further, as a result of these scaled
regulatory requirements, our disclosure may be more limited than that of other public companies and you may not have the same protections afforded to stockholders of such
companies.
Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the
Securities Act of 1933, as amended (the “Securities Act”), for complying with
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new or revised accounting standards. We have opted for taking advantage of the extended transition period for complying with new or revised accounting standards pursuant to
Section 107(b) of the Jobs Act.
We are a smaller reporting company, and we cannot be certain if the reduced reporting requirements applicable to smaller reporting companies will make our common
stock less attractive to investors.
We are a smaller reporting company under Rule 12b-2 of the Securities Exchange Act of 1934. For as long as we continue to be a smaller reporting company, we may take
advantage of exemptions from various reporting requirements that are applicable to other public companies that are not smaller reporting companies, including reduced
disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive
because we may rely on smaller reporting company exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for
our common stock, and our stock price may be more volatile.
Future sales and issuances of our Common Stock or rights to purchase Common Stock, including pursuant to our equity incentive plans and other equity securities could
result in dilution of the percentage ownership of our stockholders and could cause our stock price to fall.
We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts,
expanded research and development activities and costs associated with operating a public company. To raise capital, we may sell Common Stock or other equity securities in
one or more transactions at prices and in a manner we determine from time to time. If we sell Common Stock or other equity securities, investors may be materially diluted by
subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to the
holders of our Common Stock. Our Certificate of Incorporation authorizes the issuance of 100,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock.
Initially, the aggregate number of shares of our Common Stock that may be issued pursuant to stock awards under our 2022 Equity Incentive Plan (“2022 Plan”) is 1,900,000
shares, increased to 5,900,000 shares at the last shareholders’ meeting. As of December 31, 2023, there are 849,171 shares available for issuance under the 2022 Plan. The
number of shares available for issuance under the 2022 Plan will be increased on the first day of each fiscal year beginning with the 2023 fiscal year by five percent (5%) of the
total number of shares of common stock outstanding on the last day of the immediately preceding fiscal year as defined in the Plan. Further increases in the number of shares
available for future grant or purchase may result in additional dilution, which could cause our stock price to decline.
Nasdaq Capital Market, may delist our Common Stock if we fail to comply with ongoing listing standards.
Nasdaq Capital Market requires us to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our Common
Stock and Warrants. If we fail to meet these continued listing requirements, our Common Stock or Warrants may be subject to delisting. If our Common Stock or Warrants are
delisted and we are not able to list such Common Stock and Warrants on another national securities exchange, we expect our securities would be quoted on an over-the-counter
market; However, if this were to occur, our stockholders could face significant material adverse consequences, including limited availability of market quotations for our
Common Stock and Warrants and reduced liquidity for the trading of our securities. In addition, in the event of such delisting, we could experience a decreased ability to issue
additional securities and obtain additional financing in the future.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and trading volume could
decline.
The trading market for our Common Stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of
the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these
analysts ceases coverage of our Company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume
to decline.
Our need for future financing may result in the issuance of additional securities which will cause investors to experience dilution.
Our cash requirements may vary from those now planned depending upon numerous factors, including the result of future research and development activities, our ability to
estimate future expenses and acceptance of our products in the market.
There are no significant commitments for future financing of the commercial phase of our telehealth Product and other future products. In the future, our securities may be
offered to other investors at a price lower than the price per share paid
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by our investors, or upon terms which may be deemed more favorable than previously offered. In addition, the issuance of securities in any future financing using our securities
may dilute an investor’s equity ownership. Moreover, we may issue other equity securities with derivative features to procure qualified personnel or for other business reasons.
The issuance of any such derivative securities, which is at the discretion of our board of directors, may further dilute the equity ownership of our stockholders, including the
investors in this offering. No assurance can be given as to our ability to procure additional financing, if required, and on terms deemed favorable to us. To the extent additional
capital is required and cannot be raised successfully, we may then have to limit our then current operations and/or may have to curtail certain, if not all, of our business
objectives and plans.
If our shares become subject to the penny stock rules, it would become more difficult to trade our shares.
The SEC has adopted regulations, which generally define “penny stock” to be an equity security that has a market price of less than $5.00 per share, subject to specific
exemptions. The market price of our Common Stock is less than $5.00 per share and therefore may be a “penny stock.” Brokers and dealers effecting transactions in “penny
stock” must disclose certain information concerning the transaction, obtain a written agreement from the purchaser and determine that the purchaser is reasonably suitable to
purchase the securities. These rules may restrict the ability of brokers or dealers to sell our Common Stock and may affect your ability to sell shares of our Common Stock in
the future.
Liability of directors for breach of duty is limited under Delaware law.
Our certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not
be personally liable for monetary damages for breach of their fiduciary duties as directors, except for liability for any:
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act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;
unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in Section 174 of the Delaware General Corporation Law; or
transaction from which the directors derived an improper personal benefit.
These limitations of liability do not apply to liabilities arising under the federal or state securities laws and do not affect the availability of equitable remedies such as injunctive
relief or rescission.
Our bylaws provide that we will indemnify for our directors and officers to the fullest extent permitted by law, and may indemnify employees and other agents. Our bylaws also
provide that we are obligated to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding.
We entered into separate indemnification agreements with our directors and officers. These agreements, among other things, require us to indemnify our directors and officers
for any and all expenses (including reasonable attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and
binding costs, telephone charges, postage, delivery service fees) judgments, fines and amounts paid in settlement actually and reasonably incurred by such directors or officers
or on his or her behalf in connection with any action or proceeding arising out of their services as one of our directors or officers, or any of our subsidiaries or any other
company or enterprise to which the person provides services at our request provided that such person follows the procedures for determining entitlement to indemnification and
advancement of expenses set forth in the indemnification agreement. We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain
qualified persons as directors and officers.
The limitation of liability and indemnification provisions in our certificate of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors
for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might
provide a benefit to us and our stockholders. Our results of operations and financial condition may be harmed to the extent we pay the costs of settlement and damage awards
against directors and officers pursuant to these indemnification provisions.
In so far as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us, we have been informed that, in the
opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
37
At present, there is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware of
any threatened litigation or proceeding that may result in a claim for indemnification.
We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future and, as such, capital appreciation, if any, of our Common Stock will be
your sole source of gain for the foreseeable future.
We do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We currently intend to retain all available funds and any future earnings to fund
the development and growth of our business. In addition, and any future loan arrangements we enter into may contain, terms prohibiting or limiting the amount of dividends that
may be declared or paid on our Common Stock. As a result, capital appreciation, if any, of our Common Stock will be your sole source of gain for the foreseeable future.
Item 1B. Unresolved Staff Comments
None
Item 1C. Cybersecurity
Cybersecurity Risk Management
In the ordinary course of our business, we use, store, and process data including data of our employees, partners, collaborators, and vendors. We also have implemented
advanced data protection measures, including encryption, data masking, and secure data storage solutions, to protect patient data and other sensitive information from
unauthorized access or disclosure. We are in the process of implementing a cybersecurity risk management program that is evolving to identify, assess, and manage
cybersecurity risks associated with our digital healthcare technologies and operations. This encompasses continuously enhancing our safeguarding measures for proprietary
ECG telemedicine technology, cloud-based software, and sensitive health data from cyber threats, ensuring compliance with relevant healthcare and data protection regulations,
and actively maintaining the integrity, availability, and confidentiality of patient and company information.
Our cybersecurity risk management program includes a number of components, such as ongoing information security program assessments and continuous monitoring of
critical risks from cybersecurity threats using automated tools. We leverage a combination of internal and external resources to continuously update our intelligence about
emerging cybersecurity threats. This includes subscribing to threat intelligence feeds, participating in industry-specific security forums, and collaborating with cybersecurity
organizations. We also employ state-of-the-art automated security systems that are regularly updated to recognize and respond to the latest cybersecurity threats. Automated
alerts notify our security team of potential threats in real-time, enabling rapid assessment and response. Additionally, we have implemented an employee education program that
is regularly updated to raise awareness of cybersecurity threats, including phishing awareness, secure password practices, and the proper handling of sensitive information. This
training is included during the employee onboarding process and is revisited periodically. As part of our cybersecurity risk management program, we maintain processes to
assess and review the cybersecurity practices of third-party vendors on an ongoing basis. Prior to engaging third-party vendors, all vendors are subjected to rigorous security
assessments before engagement and are regularly re-assessed, and, as appropriate, include cybersecurity requirements in contracts. We, like other companies in our industry,
face a number of cybersecurity risks in connection with our business. Although our business strategy, results of operations, and financial condition have not, to date, been
materially affected by risks from cybersecurity threats, including as a result of previously identified cybersecurity incidents, we have, from time to time, experienced threats to
and security incidents related to our data and systems, including phishing attacks. For more information on our cybersecurity related risks, see “Risk Factors-We rely
significantly on information technology and any failure, inadequacy, or security lapse of that technology, including any cybersecurity incidents, could harm us.”
Governance
Under the ultimate direction of our chief executive officer (CEO), our executive management team, including our President, Chief Technology Officer (CTO), Director of
Platform IT and Chief Information Security Officer (CISO), and Vice President of Regulatory Affairs, along with oversight from our Audit Committee of the Board of
Directors, is tasked
38
with the continuous assessment, operation, and management of our cybersecurity threat management program. Our CTO leads the ongoing development of the Company's
cybersecurity program, oversees the implementation of cybersecurity measures, and manages the response to cybersecurity incidents. The Director of Platform IT and CISO
meets periodically with our Vice President of Regulatory Affairs to discuss the evolving cybersecurity landscape and our cybersecurity risk management program, including
providing updates regarding the sources and nature of critical risks we face and how the IT department assesses those risks, including the likelihood of such risks, the severity of
impact, and the progress on vulnerability remediation.
Our Director of Platform IT and CISO regularly consults with other members of our information technology department, and with third parties with expertise in cybersecurity,
to develop strategies to assess, address and align our continuous cybersecurity efforts with our business objectives and operational requirements. The Director of Platform IT
and CISO role is currently held by an individual who has over 12 years of experience with information security and business systems, including digital infrastructure and
cybersecurity.
As part of our Board of Directors’, or Board’s, enterprise risk management program, our Board has responsibility for oversight of cybersecurity risk management. Our Board
has delegated to our Audit Committee oversight of our cybersecurity risk management program, including oversight of information security and cybersecurity threats and
related compliance and disclosure requirements. On a quarterly basis, our finance team provides an update to our Audit Committee regarding our cybersecurity risk
management program, including as relates to critical cybersecurity risks, ongoing cybersecurity initiatives and strategies, and applicable regulatory requirements and industry
standards. The Audit Committee periodically reports on cybersecurity risk management to the full Board of Directors.
Item 2. Properties
Our headquarters are located at 2118 Walsh Avenue, Suite 210, Santa Clara, CA 95050 which we lease pursuant to a monthly lease agreement entered into in May 2019 by our
Chief Executive Officer Branislav Vajdic. The terms of the lease are month to month and either party can terminate with one months notice. We terminated this lease effective
on January 11, 2024, and entered into a new lease in name of the Company with the same landlord. The new lease commenced on February 1, 2024, for initial period of 3 years
We believe that the facilities described above are suitable and adequate for our present purposes and needs in the near future.
Item 3. Legal Proceedings.
There are no actions, suits, proceedings, inquiries or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to
the knowledge of the executive officers of our company or any of our subsidiaries, threatened against or affecting our company, our Common Stock, any of our officers or
directors in their capacities as such, in which an adverse decision could have a material adverse effect.
Item 4. Mine Safety Disclosures
Not applicable
39
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Market Information
Part II
Our common stock and warrants are traded on the NASDAQ Capital Market under the symbols “BEAT” and “BEATW”, respectively. The closing price of our common stock
and warrants on the Nasdaq Capital Market on March 19, 2024 was $2.31 and $0.20 respectively.
Use of Proceeds
Not Applicable
Holders of Record
As of March 19, 2024, there were approximately 84 holders of record of our common stock. As our shares of common stock are held by brokers and other institutions on behalf
of stockholders, we are unable to estimate the total number of stockholders represented by these record holders.
Dividend Policy
We have not paid any cash dividends on our common stock to date. The payment of dividends in the future will be contingent upon our revenues and earnings, if any, capital
requirements and general financial condition, and will be within the discretion of our then-existing board of directors.
Transfer Agent, Warrant Agent and Registrar
Our transfer agent and registrar for our common stock and warrant agent for our warrants is VStock Transfer, LLC.
Performance Graph and Purchases of Equity Securities
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Recent Sales of Unregistered Securities
The following sets forth information regarding all unregistered securities sold by the registrant in the three years preceding the date of this Annual Report on Form 10-K;
•
•
•
•
On November 11, 2021, we issued 1,497,216 shares of Common Stock from the conversion of the 2015 Notes.
On November 15, 2021, in connection with the IPO, we issued 192,500 warrants (the “Underwriter Warrants”) to purchase Common Stock as compensation to the
Underwriter, exercisable at a per share exercise price equal to $7.50 per share. The Underwriter Warrants will expire five years from the date of issuance.
On January 14, 2022, we issued 78,025 shares of Common Stock to a consulting firm for services that were related to the IPO.
On February 28, 2023 we entered into a securities purchase agreement and a note purchase agreement, each as amended March 7, 2023 (“SPA”, “NPA” or together
“Agreements”) with Maverick Capital Partners, LLC (“Maverick” or “Investor”). Pursuant to the terms of the Agreements, as amended, we agreed to sell up to
$4,000,000 of our common stock at 75% of the average calculated Volume Weighted Average Price (“VWAP”) per share during a Drawdown Pricing Period as defined
in the Agreements. We issued a $500,000 Convertible Note to the Investor pursuant to the NPA. On March 9, 2023 the Convertible Note was settled upon the execution
of a SPA and related issuance of 0.2 million shares of common stock pursuant to the SPA drawdown notice dated
40
March 7, 2023. The 0.2 million shares of common stock were registered under our registration statement on Form S-3 dated February 10, 2023 and the related
prospectus supplement dated March 9, 2023.
On May 2, 2023, we issued 1,666,666 placement agent warrants to purchase shares of Common Stock sold in the offering, with an exercise price of $1.875 per share and
are exercisable for five years from the date of issuance.
•
These issuances were made in reliance on an exemption from registration set forth in Section 4(a)(2) of the Securities Act, as transactions by an issuer not involving a public
offering.
Purchases of Equity Securities by the Issuer and Affiliated Purchasers
There were no issuer purchases of equity securities during the year ended December 31, 2023.
Equity Compensation Plan Information
On August 12, 2015 we adopted the HeartBeam, Inc. 2015 Equity Incentive Plan ("2015 Plan"), the 2015 Plan provided for the grant of stock options and RSUs to purchase
common stock of which 1,636,362 were authorized by the board, of these 970,704 are outstanding as of December 31, 2023. At the Annual Stockholder meeting held on June
15, 2022 the 2015 Plan was terminated upon stockholder approval of the 2022 Equity Incentive Plan (“2022 Plan”) whereby no new awards can be issued under the 2015 Plan.
Initially, the aggregate number of shares of our Common Stock that may be issued pursuant to stock awards under our 2022 Plan is 1,900,000 shares and increased to 5,900,000
at the 2023 annual shareholders’ meeting. As of December 31, 2023, there are 849,171 shares available for issuance under the 2022 Plan. The number of shares available for
issuance under the 2022 Plan will be increased on the first day of each fiscal year beginning with the 2023 fiscal year by five percent (5%) of the total number of shares of
common stock outstanding on the last day of the immediately preceding fiscal year as defined in the Plan.
The principal provisions of our equity compensation plan is summarized below.
Administration
The plan generally is administered by our Board of Directors. The Board of Directors will have authority to establish rules and regulations for the proper administration of our
equity incentive plan, to select the employees, directors and consultants to whom awards are granted, and to set the date of grant, the type of award and the other terms and
conditions of the awards, consistent with the terms of the 2022 Plan.
Eligibility
Persons eligible to participate in the 2022 Plan include all of our officers, employees, directors and consultants.
Awards
The 2022 Plan provides for the grant of: (i) incentive stock options; (ii) nonstatutory stock options; (iii) stock appreciation rights; (iv) restricted stock; and (v) other stock-based
and cash-based awards to eligible individuals. The terms of the awards will be set forth in an award agreement, consistent with the terms of the 2022 Plan. No stock option will
be exercisable later than ten years after the date it is granted. The 2022 Plan permits the grant of awards intended to qualify as "performance-based compensation” under Section
162(m) of the Internal Revenue Code of 1986, as amended.
Stock Options
The Board of Directors may grant incentive stock options as defined in Section 422 of the Code, and nonstatutory stock options. Options shall be exercisable for such prices,
shall expire at such times, and shall have such other terms and conditions as the Board of Directors may determine at the time of grant and as set forth in the award agreement;
however, the exercise price must be at least equal to 100% of the fair market value at the date of grant. The option price is payable in cash or other consideration acceptable to
us.
41
Stock Appreciation Rights
The Board of Directors may grant stock appreciation rights with such terms and conditions as the Board of Directors may determine at the time of grant and as set forth in the
award agreement. The grant price of a stock appreciation right shall be determined by the Board of Directors and shall be specified in the award agreement; however, the grant
price must be at least equal to 100% of the fair market value of a share on the date of grant. Stock appreciation rights may be exercised upon such terms and conditions as are
imposed by the Compensation Committee and as set forth in the stock appreciation right award agreement.
Restricted Stock
Restricted stock may be granted in such amounts and subject to the terms and conditions as determined by the Board of Directors at the time of grant and as set forth in the
award agreement. The Board of Directors may impose performance goals for restricted stock.
Other Awards
The Board of Directors may grant other types of equity-based or equity-related awards not otherwise described by the terms of the 2022 Plan, in such amounts and subject to
such terms and conditions, as the Board of Directors shall determine. Such awards may be based upon attainment of performance goals established by the Board of Directors
and may involve the transfer of actual shares to participants, or payment in cash or otherwise of amounts based on the value of shares.
Item 6. RESERVED
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our financial statements and related notes
appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion and analysis contains forward-looking statements that involve
risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors,
including but not limited to, those set forth under “Risk Factors” and elsewhere in this Annual Report on Form 10-K. See Cautionary Statement Regarding Forward-Looking
Statements.”
Overview
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 ECG solutions is achieved through the development of our proprietary and patented VECG technology platform. Our VECG technology is
capable of capturing 3D vector images of the heart’s electrical activity and synthesizing a 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 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,
HeartBeam AIMIGo, to address the rapidly growing field of ambulatory cardiac health monitoring. HeartBeam AIMIGo 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 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 MI.
To date, we have developed a working prototype for HeartBeam AIMIGo and have filed a 510(k) submission with the FDA. This submission is for the initial Product, a device
which is a 3 lead X, Y, Z vector VECG. We expect this to be the first patient-held VECG device to be cleared by the FDA and this will be a major milestone for the company.
Following
42
the FDA clearance of the AIMIGo device, we plan to file a submission for the software algorithms that synthesize a 12L ECG from the HeartBeam AIMIGo device. The result
of these two 510(k) submissions, once cleared by the FDA, will be an ambulatory device, carried by patients, which can synthesize a 12L ECG for physician review.
We have had productive discussions with the FDA on both products. On the first submission, we are in the substantive review phase of answering questions posed by the FDA.
We have clarified the information requested in meetings with FDA representatives and are in the process of preparing our official responses. We currently anticipate clearance
by the end of Q2 2024.
In addition, we have held two Pre-submission meetings with FDA on the 12L synthesis submission. These meetings have been 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. Based on feedback from FDA and
our clinical experts, we have designed our clinical study, “Clinical Validation of AIMIGo 12 Lead ECG Synthesis Software for Arrhythmia Detection: A Prospective
Multicenter Pivotal Study,” (the “VALID-ECG Study”).
On March 13, 2024, we enrolled the first patient in the VALID-ECG study. The VALID-ECG study is a prospective single-arm multicenter trial designed with the goal to
validate the AIMIGo 12L ECG Synthesis Software by comparing its results with those of a standard FDA-cleared 12L ECG using both quantitative and qualitative assessment
methodologies. We plan to enroll a total of approximately198 patients presenting to an outpatient cardiology clinic or arrhythmia center for symptoms suggestive of cardiac
arrhythmia or for routine checkup of previously diagnosed arrhythmia. The study is expected to include up to 5 sites. The primary objective is to demonstrate the equivalence of
ECG waveforms between AIMIGo Synthesized 12L ECG and Standard 12L ECG, recorded simultaneously in each subject, by assessing intervals and amplitudes.
We expect to complete enrollment in the VALID-ECG study in Q2 2024 and submit the second 510(k) application by Q3 2024. We continue to anticipate that our limited
launch of AIMIGo will occur by the end of 2024.
In 2023, we withdrew the FDA application of our AIMI Product, which is a software-only product designed for use in hospitals. We are exclusively focusing on the large market
of ambulatory cardiac monitoring,
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
accepted for presentation at two prestigious Electrophysiology conferences: the European Heart Rhythm Association, to be held in Berlin, Germany in April 2024 and the Heart
Rhythm Society, to be held 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 a number of ways, including:
•
•
•
Providing automated classification of cardiac conditions, including common arrhythmias;
The potential to further enhance 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.
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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 (“AUC”), 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, Massachusetts, and Clinical Center of Serbia in Belgrade.
HeartBeam has 13 issued and allowed U.S. patents (U.S. 10,433,744, U.S. 10,117,592, U.S. 11,071,490, U.S. 11,419,538, U.S. 11,445,963, U.S. 11,701,049, U.S. 11,529,085,
U.S. 10,980,433, U.S. 11,412,972, U.S. 11,234,658, U.S. 11,793,444, U.S. 11,877,853, and allowed U.S. patent application no. 18/068,481), and nine pending U.S applications.
Outside of the U.S., HeartBeam has four issued patents in Germany, France, Netherlands and United Kingdom and fourteen pending applications in Canada, China, the
European Union, Japan, South Korea and Australia. HeartBeam has two pending Patent Cooperation Treaty applications. The issued patents are predicted to expire between
April 11, 2036 and April 21, 2042.
As of December 31, 2023, we had 15 employees. We intend to hire or engage additional full-time professionals, employees, and / or consultants in alignment 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.
Significant Developments during 2023 and early 2024
Appointment of President
In January 2023, our Board of Directors appointed Robert P. Eno as President of the Company effective as of January 18, 2023.
Appointment of Board of Directors
We increased the size of our Board of Directors (the “Board”) this year to eight, adding individuals that broadened the scope and experience of our then 5-person Board.
On June 5, 2023, the Board appointed Mark Strome and Ken Nelson as directors of the Company.
• Mr. Strome combines over 40 years of experience in the investment management and securities industry. Mark is the Founder, Chief Investment Officer, and Chairman
at Strome Investment Management, L.P. and Strome Group, Inc. Mark earned a Bachelor of Science in Engineering from Old Dominion University and Master of
Science in Economics from the University of California at Berkeley.
• Mr. Nelson is a 20-year digital health, medical device, and remote patient monitoring executive and innovator. Over the past 10 years, Ken has led commercial efforts for
disruptive technologies in the digital health, wearables, and cardiac remote patient monitoring industries for 3 of the top 4 market share players in cardiac digital health
and remote patient monitoring. Ken earned a Bachelor of Arts in Economics from Vanderbilt University and is a graduate of Phillips Exeter Academy.
On July 24, 2023, the Board appointed Dr. Michael R. Jaff as a director of the Company. Dr. Jaff is currently Chief Medical Officer and Vice President of Clinical Affairs,
Technology, and Innovation of the Peripheral Interventions division at Boston Scientific Corporation. Dr. Jaff received a B.S. from Dickinson College, a D.O. from Kirksville
College of
44
Osteopathic Medicine, a Business degree from Harvard Business School and an honorary Doctorate of Arts from Harvard Medical School.
Appointment of Additional Senior Management Team members
• On August 8, 2023, we announced the appointment of Deborah Castillo, PhD, as Vice President of Regulatory Affairs. Ms. Castillo is an experienced biomedical
engineer with extensive knowledge of and background at the FDA, EU, and Health Canada regulations. She has held various roles at the FDA, including overseeing
510(k) submissions encompassing a wide-range of cardiovascular devices.
• On September 26, 2023, we announced the appointment of Richa Gujarati as Senior Vice President, Product, and Pooja Chatterjee as Vice President, Clinical. Ms.
Gujarati has over 13 years of experience collecting market-level insights and translating them into business needs, driving overall product portfolio and go-to-market
strategy. Previously at Apple, as Head of Health Products, Apple Watch, she built and launched applications in the wearable sensor space. Ms. Chatterjee brings over 15
years of extensive clinical leadership experience in the medical device industry and was responsible for multiple FDA approvals in medical technologies including heart
failure and cardiac rhythm management. Additionally, while at Abbott Medical Devices her role included focus on obtaining peer reviewed publications in key journals.
Expanded the Scientific Advisory Board
On November 9, 2023, we announced the expansion of our Scientific Advisory Board (SAB) to include several leading cardiologists. The SAB is led by Peter J. Fitzgerald,
MD, PhD, the company’s Chief Medical Officer and C. Michael Gibson, MD. The newly announced members of the HeartBeam SAB are:
Charles L. Brown III, MD, CEO of the Piedmont Healthcare Physician Enterprise.
Tony Das, MD, a nationally recognized board-certified interventional cardiology specialist, leader, and educator in the field of cardiovascular diseases.
Robert Harrington, MD, Dean of Weill Cornell Medicine, and provost for medical affairs of Cornell University.
Campbell Rogers, MD, Executive Vice President and Chief Medical Officer at HeartFlow, Inc.
•
•
•
•
• Niraj Varma, MD, Ph.D., Professor of Medicine, and consultant electrophysiologist at the Cleveland Clinic.
Retirement of Chief Financial Officer
On December 29, 2023, Richard Brounstein, informed the Company of his plans to retire from his position as Chief Financial Officer effective as of February 1, 2024. Mr.
Brounstein has been an important member of the executive team at HeartBeam since 2015. Mr. Brounstein will provide CFO advisory services as a consultant to the Company
to assist with a smooth transition of his former duties.
New Patent Assignments
During 2023, we were granted three U.S. patents:
• We were granted two patents (US 11,877,853 and US 11,701,049) on mobile cardiac monitoring devices and methods for providing automated diagnosis of cardiac
issues to patients, by the United States Patent and Trademark Office. These innovations build on our growing intellectual property portfolio enabling ECG diagnostics
outside of a medical setting.
• We were also granted a patent (US 11,793,444) on electrocardiogram patch devices and methods by the United States Patent and Trademark Office. This patent further
expands our coverage of wearable and patch-based patient monitoring.
• We now have a total of eleven patents issued as of December 31, 2023.
45
•
Subsequently in 2024 we received two additional patents on our core VECG technology. 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 covers methods and apparatuses around HeartBeam’s wrist-based ECG
system.
At-the-Market Offering
On February 1, 2023, we entered into a sales agreement (the “Sales Agreement”) with AGP pursuant to which we may issue and sell, from time to time, shares of our common
stock having an aggregate offering price of up to $13.0 million in at-the-market offerings (“ATM”) sales. At the same time, we filed a prospectus supplement under a shelf
registration on Form S-3 relating to the Sales Agreement. The registration statement was declared effective on February 10, 2023. AGP will act as sales agent and will be paid a
3% commission on each sale under the Sales Agreement. Our common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices will vary.
There have been no sale of shares under the ATM since February 2023, nor under the Form S-3 since May 2023. As of December 31, 2023 there was approximately $11.0
million available for issuance under the ATM.
Note Purchase Agreement and Security Purchase Agreement
On February 28, 2023, we entered into Agreements, each as amended on March 7, 2023, with Maverick. Pursuant to the terms of the Agreements, as amended, we agreed to sell
up to $4,000,000 of our common stock at 75% of the average calculated Volume Weighted Average Price (“VWAP”) per share during a Drawdown Pricing Period as defined in
the Agreements. We issued a $500,000 Convertible Note to the Investor pursuant to the NPA. On March 9, 2023, the Convertible Note was settled upon the execution of a SPA
and related issuance of 0.2 million shares of common stock pursuant to the SPA drawdown notice dated March 7, 2023. These 0.2 million shares of common stock were
registered under our registration statement on Form S-3 dated February 10, 2023, and the related prospectus supplement dated March 9, 2023.
Public Offerings under Forms S-1 and S-3
On April 20, 2023, we entered into a Placement Agency Agreement with Public Ventures, LLC to consummate an offering of 16,666,666 shares of Common Stock at an
offering price of $1.50 per share, which closed in accordance with the subscription agreement dated May 2, 2023. The Company received $23.2 million in net proceeds from the
offering after deducting placement agent discounts and commission and other estimated offering expenses. In addition, the subscription agreement granted 1,666,666 placement
agent warrants as part of this transaction.
On May 2, 2023, we completed a Registered Direct Offering of 1,000,000 shares of our common stock at an offering price of $1.50 per share. We received net proceeds of $1.1
million after deducting financial advisory and legal fees as well as other estimated offering expenses.
46
Results of operations for the years ended December 31, 2023 and 2022
The following table summarizes our results of operations for the periods presented on our statement of operations data. The year over year comparison of results of operations is
not necessarily indicative of results of operations for future periods.
Operating expenses:
General and administrative
Research and development
Total operating expenses
Loss from operations
Interest income
Income tax provision
Net loss
2023
Years ended December 31,
2022
$ Change
% Change
(In thousands, except percentages)
$
8,516 $
6,798
15,314
7,354 $
5,677
13,031
1,162
1,121
2,283
(15,314)
(13,031)
(2,283)
675
—
69
—
606
—
$
(14,639) $
(12,962) $
(1,677)
16 %
20 %
18 %
18 %
878 %
— %
13 %
Summary of Statements of Operations for the year ended December 31, 2023 compared with the year ended December 31, 2022:
General and administrative expenses (“G&A”) are largely related to personnel and professional services. G&A expense increased $1.2 million or 16% when compared to the
same period in 2022. The $1.2 million increase is primarily related to non-cash stock-based compensation expense amounting to $1.6 million associated with additional awards
granted since December 31, 2022, primarily offset by costs associated with our commercial team during the year ended December 31, 2022, and lower investor relation costs,
marketing costs and legal costs incurred in this year compared to the prior year.
Research and development expenses (“R&D”) are primarily from software development and hardware related to our credit-card sized collection device for HeartBeam AIMIGo.
R&D expense increased $1.1 million or 20% when compared with the same period in 2022. The $1.0 million increase is primarily due to non-cash stock-based compensation
expense amounting to $0.5 million associated with additional awards granted since December 31, 2022 as well as the increase in headcount and professional services supporting
the FDA clearance process, primarily offset by completion of the initial development costs of the AIMIGo platform when compared to December 31, 2022.
Other income is primarily interest income. The increase is primarily related to our increased cash balance coupled with higher interest rates following the $26.5 million
financing in May 2023.
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 following FDA
clearance of our AIMIGo device, our commercialization go to market strategies.
As of December 31, 2023, we had approximately $16.2 million in cash and cash equivalents, an increase of $12.6 million from $3.6 million as of December 31, 2022.
During the year ended December 31, 2023, we raised $24.8 million is primarily the issuance of common stock from the secondary financing in May 2023.
47
Based on its current business plan assumptions and expected cash burn rate, the Company believes 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 the Company’s ability to continue as a going concern.
Our cash is as follows (in thousands):
Cash and cash equivalents
Cash flows for the year ended December 31, 2023 and 2022 (in thousands):
Net cash used in operating activities
Net cash used in investing activities
Net cash provided by financing activities
Operating Activities:
December 31,
2023
2022
$
16,189 $
3,594
December 31
2023
2022
$
(12,093) $
(256)
24,994
(9,948)
—
350
Net cash used in our operating activities of $12.1 million during the year ended December 31, 2023, is primarily due to our net loss of $14.6 million less $3.2 million in stock-
based compensation expense and $0.7 million of net changes from changes in operating assets and liabilities.
Net cash used in our operating activities of $9.9 million during the year ended December 31, 2022, is primarily due to our net loss of $12.9 million less $1.1 million in stock-
based compensation expense and $1.9 million from changes in operating assets and liabilities.
Investing Activities:
Net cash used in investing activities during the year ended December 31, 2023, of $0.3 million, is primarily due to the purchase of property and equipment.
Financing Activities:
During the year ended December 31, 2023, net cash provided by financing activities of $24.9 million, is primarily the issuance of common stock from the secondary financing
in May 2023.
During the year ended December 31, 2022, net cash provided by financing activities of $0.3 million, is primarily from the issuance of common stock under the February Stock
Purchase Agreement.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Critical Accounting Estimates
The financial statements have been prepared in accordance with accounting principles generally accepted in the US, (“US GAAP”.) The preparation of these financial
statements in accordance with US GAAP requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenues and expenses,
and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, assumptions and judgments. We base our estimates on historical
experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the
carrying values of assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions and the impact of such differences may be
material to our financial statements.
48
We consider an accounting estimate to be critical if: (1) the accounting estimate requires us to make assumptions about matters that were highly uncertain at the time the
accounting estimate was made, and (2) changes in the estimate that are reasonably likely to occur from period to period, or use of different estimates that we reasonably could
have used in the current period, would have a material impact on our financial condition or results of operations.
Management has discussed the development and selection of these critical accounting estimates with the Audit Committee of our Board of Directors.
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.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
Item 8. Financial Statements and Supplementary Data
The financial statements and supplementary data of the Company required by this Item are described in Item 15 of this Annual Report on Form 10-K and are presented
beginning on page F-1.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosures
None
Item 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We 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 Annual Report on Form 10-K, 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. As required under Exchange Act Rule 13a-15, our management, including the Chief Executive Officer (our principal executive and accounting
officer) after evaluating the effectiveness of disclosure controls and procedures, identified material weaknesses in our internal control over financial reporting. The material
weaknesses identified include (i) lack of formal risk assessment under COSO framework (ii) policies and procedures which are not yet adequately documented, (iii) lack of
proper approval processes and review processes and documentation for such reviews, (iv) insufficient GAAP experience regarding complex transactions and reporting, and (v)
insufficient number of staff to maintain optimal segregation of duties and levels of oversight.
During the second half of 2023, we have undertaken specific remediation actions to address the material weaknesses in our financial reporting. 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. These remediation actions
included hiring a Controller in July 2023, who has extensive experience in developing and implementing internal controls and executing
49
plans to remediate control deficiencies. We will continue to assess the weaknesses as this individual progress through our onboarding process and as we continue to implement
and refine control policies and procedures.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the
Exchange Act. Our internal control over financial reporting includes those policies and procedures that:
•
•
•
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on
the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
This Annual Report on Form 10-K does not include an audit or attestation report from our registered public accounting firm regarding our internal control over financial
reporting. Our management’s report was not subject to audit or attestation by our registered public accounting firm since we are not an accelerated filer or a large accelerated
filer as defined in Rule 12b-2 under the Securities Exchange Act of 1934.
Changes in Internal Control
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) identified in connection
with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the fourth quarter of the year ended December 31, 2023 that have
materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Item 9B. Other Information.
None
Item 9C. Disclosure Regarding Foreign Jurisdiction that Prevent Inspections.
Not applicable
50
Item 10. Directors, Executive Officers and Corporate Governance
Information About our Executive Officers and Directors
Part III
Our business and affairs are organized under the direction of our board of directors, which currently consists of five members.
The following table sets forth certain information with respect to the current directors of our Company:
NAME
Richard Ferrari
Branislav Vajdic, PhD
George A. de Urioste
Marga Ortigas-Wedekind
Willem Elfrink
Mark Strome
Kenneth Nelson
Michael Jaff
AGE
70
69
68
62
71
66
48
65
POSITION
Executive Chairman of the Board of Directors
Chief Executive Officer, Director
Director
Director
Director
Director
Director
Director
Richard Ferrari - Executive Chairman of the Board of Directors
Mr. Richard Ferrari, 70, joined our Board in 2019 and was appointed Executive Director of the Board of Directors in June 2021. Mr. Ferrari combines over 40 years of
experience in Medical Device Start-ups as CEO, and entrepreneur. Also Mr. Ferrari is co-founder of De Novo Ventures which has $650M under management and has been
Managing Director since 2000. Mr. Ferrari has also co-founded 6 more companies, two of which have been successful IPO’s and subsequent acquisitions, CTS one of the
companies he co-founded was the fastest start-up to an IPO in the last 22 years in the medical device industry. Mr. Ferrari most recently from 2018 to 2021 was Chairman and
CEO of PQ Bypass which was recently acquired by Endologix. Mr. Ferrari sits on the board of Pulmonx, a public company and is the Chairman of the Compensation
Committee. Additionally, Mr. Ferrari is Executive Chairman of Tenon Medical, Vice-Chairman of ABS Interventional, Executive Chairman of Medlumics, and holds board
positions with several other medical device start-ups. Mr. Ferrari has an undergraduate degree from Ashland University and an MBA from University of South Florida.
We believe that Mr. Ferrari is qualified to serve on our board of directors because of his experience in leadership and management roles in the field of medicine, as well as his
experience as a member in the healthcare industry.
Branislav Vajdic, PhD - Chief Executive Officer and Director
Dr. Branislav Vajdic, 69, Chief Executive Officer and Founder of HeartBeam, Inc, combines over 30 years of experience in technology development and senior management
positions. Dr. Vajdic has been deeply involved with the development of HeartBeam’s technology to fit his vision for the Company. Prior to HeartBeam from 2007 to 2010, Dr.
Vajdic was CEO and Founder of NewCardio, a publicly traded company in the cardiovascular devices space, from 1984 to 2007, Dr. Vajdic was at Intel, where he held various
senior management positions. At Intel, Dr. Vajdic was the designer of first Flash memory and two key inventions that enabled Flash as a product and led engineering groups
responsible for Pentium 1 through Pentium 4 designs. Dr. Vajdic was awarded two Intel Achievement Awards, the highest level of award for outstanding contributions to Intel.
Dr. Vajdic is author of numerous patents and publications in the fields of cardiovascular devices as well as chip design. Dr. Vajdic holds a PhD degree in Electrical Engineering
from the University of Minnesota.
We believe that Dr. Vajdic is qualified to serve on our board of directors because of his experience in leadership and management roles in the field of medicine, as well as his
experience as a member in the healthcare industry.
51
George A. de Urioste - Director
Mr. de Urioste, 68, combines over 40 years of experience in high technology industry senior management. Previously, Mr. de Urioste has been involved in over 10 companies,
holding positions including Board Director, Chief Operating Officer and Chief Financial Officer. Mr. de Urioste was Chief Financial Officer of Remedy Corporation (software)
from 1992 to 1998 and led the IPO, Chief Executive Officer of Aeroprise, Inc., from 2000 to 2003 (software), from 2004 to 2006 he was Chief Operating Officer and Chief
Financial Officer for Chordiant Software, Inc. (software), interim Chief Operating Officer and Chief Financial Officer for Marvell Technology, Inc. (semiconductors) during
2008, Chief Financial Officer for Pluribus Networks, Inc. (software) 2014 to 2018, Chief Financial Officer for 4iQ, Inc. (software) 2019 to 2020 and interim Chief Financial
Officer for Mozilla, Inc. (software). Mr. de Urioste’s Board Director experience includes Audit Committee chairman roles for the following companies: Rainmaker Systems,
Inc. (business outsourcing), from 2003 to 2005, Saba Software, Inc. (software) from 2008 to 2010, GCT, Inc. (semiconductors), from 2009 to 2011 Villa Montalvo (performing
arts center), from 2011 to 2013, Bridgelux, Inc., from 2011 to 2016 (LED lighting), and Vendavo, Inc., from 2013 to 2014 (software). Mr. de Urioste was also chairman of the
Board of Directors for Aeroprise, Inc. from 2000 to 2005 (software). Mr. de Urioste is currently a Board Director at Roambee Corporation (supply chain intelligence software)
and Silicon Valley Directors Exchange, (a not-for-profit for Board education events). Mr. de Urioste has an undergraduate degree from University of Southern California and
an MBA from University of California at Berkeley. Mr. de Urioste is also a Certified Public Accountant (inactive) in the State of California and is a member of the Latino
Corporate Directors Association.
We believe that Mr. de Urioste is qualified to serve on our board of directors because of his experience in leadership and management roles in high technology industries, as
well as his experience as a board member including Audit Committee Chairman roles.
Marga Ortigas-Wedekind - Director
Ms. Marga Ortigas-Wedekind, 62, Board member, has over 30 years of experience in health technology senior management. Ms. Ortigas-Wedekind has been Chief Commercial
Strategy Officer of Fogarty Innovation, a non-profit educational incubator for early stage medtech companies since December 2019, Executive Vice President of Marketing and
Payer Relations for iRhythm Technologies Inc., a publicly-traded digital healthcare company from July 2015 through July 2019, Executive Vice President, Global Marketing
and Product Development of Omnicell Inc., a publicly-traded developer of automated medication dispensing and analytics systems where she led the Marketing, International
and Engineering departments from 2009 to 2015, Senior Vice President, Marketing, Development, and Clinical Affairs at Xoft, Inc, a developer of disruptive technology to
deliver radiation therapy with capital equipment and high-end disposables from 2002 to December 2008. She started her medtech career at Guidant Vascular, now Abbott
Vascular. Ms. Ortigas-Wedekind was on the board of Itamar Medical (NASDAQ: ITMR), which provides digitally-enabled systems for sleep apnea management until its sale to
Zoll Medical in December 2021, Total Flow Cannula, an early stage company developing a mechanism to improve safety during on-pump open heart surgery and, the Bay Area
Cancer Coalition, a non-profit organization that supports those affected by breast or ovarian cancer. Ms. Ortigas-Wedekind is a limited partner and advisory board member for
Launchpad Digital Health, a venture fund focused on digital heath technologies and is also an angel investor with Health Tech Capital. Ms. Ortigas-Wedekind has an
undergraduate degree from Wellesley College and an MBA from the Stanford Graduate School of Business.
We believe that Ms. Ortigas-Wedekind is qualified to serve on our board of directors because of her experience in leadership and management roles in the field of medicine, as
well as her experience as a member in the healthcare industry.
Willem Elfrink - Director
Mr. Willem Elfrink, 71, was Chairman of the Board since our founding and in June 2021 stepped down from this position but remains a Board member. Mr. Elfrink has over 40
years of experience in bringing new technologies to the market. Mr. Elfrink actively contributes to portfolio companies via board participation, strategic marketing, governance
and capital structure. Mr. Elfrink is also the Founder and President of WPE Ventures Digitized Solutions, a security and digitization solutions investment firm. Mr. Elfrink
joined Cisco in 1997 and was Cisco’s Executive Vice President of Industry Solutions and Chief Globalization Officer from 2000 to 2006 and 2007 to 2015 respectively, where
Mr. Elfrink made and contributed to key strategic and operational decisions of the Company. Widely recognized as Cisco’s Corporate Entrepreneur in residence, his global
charter was to identify significant technology opportunities. Mr. Elfrink also led an industry initiative — called the Internet of Things World Forum. Before joining Cisco, Mr.
Elfrink held management and senior management positions at Olivetti, Xerox, HP, Digital Equipment Corporation and Philips. Mr. Elfrink earned a Bachelor of Engineering
degree from the Institute of Technology in Rotterdam, the Netherlands.
52
We believe that Mr. Elfrink is qualified to serve on our board of directors because of his experience in leadership and management roles in bringing new technologies to the
market, as well as his globalization experience.
Mark Strome - Director
Mr. Strome, 66, combines over 40 years of experience in the investment management and securities industry. Mr. Strome is the Founder, Chief Investment Officer, and
Chairman at Strome Investment Management, L.P. and Strome Group, Inc. Under his leadership, Mr. Strome’s investment management company has managed private
placement hedge fund investments focusing on non-traditional investments including commodities, currencies, bankruptcy reorganizations, and numerous venture capital and
private equity investments. Previously, he was a Portfolio Manager at Kayne Anderson. Mr. Strome has also been involved in the founding and incubation of numerous publicly
traded companies and several successful private companies. These include Pulse Biosciences, and iWood Studios, a company that creates original content for film and TV. Mr.
Strome has been a member of the Board of Directors of multiple companies over the last three decades. Mr. Strome has served as a Director at Endurance Ventures, National
Water and Power, Eco-Duro Corporation, NWP Services Corporation and Mobil Satellite Ventures. Mr. Strome serves as Member of Advisory Board at Global Analytics, Inc.
Mr. Strome is a Trustee for New Roads School and Big Bear Foundation and serves on the Board of Advisors of John Hopkins Medical Center. Mark earned a Bachelor of
Science in Engineering from Old Dominion University and Master of Science in Economics from the University of California at Berkeley.
We believe that Mr. Strome is qualified to serve on our board of directors because of his experience in leadership and management roles, as well as his experience as a member
in the healthcare industry.
Kenneth Nelson - Director
Mr. Nelson, 48, is a 20 year digital health, medical device, and remote patient monitoring executive and innovator. Over the past 10 years, Mr. Nelson has led commercial
efforts for disruptive technologies in the digital health, wearables, and cardiac remote patient monitoring industries for 3 of the top 4 market share players in cardiac digital
health and remote patient monitoring including BioTelemetry as VP of Sales, iRhythm as VP of Sales & Marketing, and Bardy Diagnostics as Chief Commercial Officer. Most
recently, he served as Head of Digital Health, Diagnostics, and Monitoring for Biotronik, a leading cardiac digital health and medical device company. Mr. Nelson currently
serves as partner in the Medtech Advantage Fund, which has an exclusive partnership with Medtech Innovator, the largest medtech and digital health startup accelerator
globally. In addition, he serves as Chairman of the Board for CardiaCare, and is an active board member in a handful of other disruptive cardiac digital health and medtech
startups. Mr. Nelson earned a Bachelor of Arts in Economics from Vanderbilt University and is a graduate of Phillips Exeter Academy.
We believe that Mr. Nelson is qualified to serve on our board of directors because of his experience in leadership and management roles in the field of medicine, as well as his
experience as a member in the healthcare industry.
Michael Jaff, MD - Director
Dr. Jaff, age 65, is currently Chief Medical Officer and Vice President of Clinical Affairs, Technology and Innovation of the Peripheral Interventions division at Boston
Scientific Corporation. Previously, Dr. Jaff was a professor of medicine at Harvard Medical School and served as President of Newton-Wellesley Hospital. Prior to that, Dr. Jaff
was the inaugural Paul and Phyllis Fireman Endowed Chair of Vascular Medicine and Medical Director of the Fireman Vascular Center at the Massachusetts General Hospital.
Dr. is a recognized expert in all aspects of vascular medicine and is the founder of VasCore, the Vascular Ultrasound Core Laboratory. Dr. Jaff has published over 300 peer-
reviewed publications and 10 textbooks and is the Past-President of the Society for Vascular Medicine. Dr. Jaff received a B.S. from Dickinson College, a D.O. from Kirksville
College of Osteopathic Medicine, a Business degree from Harvard Business School and an honorary Doctorate of Arts from Harvard Medical School.
We believe that Mr. Jaff is qualified to serve on our board of directors because of his experience in leadership and management roles in the field of medicine, as well as his
experience as a member in the healthcare industry.
There are no agreements or understandings for any of our executive officers or directors to resign at the request of another person and no officer or director is acting on behalf of
nor will any of them act at the direction of any other person.
Directors are elected to serve until their successors are duly qualified and elected.
53
Board Diversity
The table below provides information relating to certain voluntary self-identified characteristics of our directors. Each of the categories listed in the table below has the meaning
as set forth in NASDAQ Rule 5605(f).
Total Number of Directors
8
Board Diversity Matrix (As of December 31, 2023)
Female
Male
Non-Binary
Did Not Disclose Gender
Part I: Gender Identity
Directors
Part II: Demographic Background
African American or Black
Alaskan Native or Native American
Asian
Hispanic or Latinx
Native Hawaiian or Pacific Islander
White
Two or More Races or Ethnicities
LGBTQ
Did Not Disclose Demographic Background
Director Independence
0
0
1
1
7
1
6
The Board has affirmatively determined that seven of the directors are “independent directors” under NASDAQ Listing Rule 5605(a)(2) and the related rules of the U.S.
Securities and Exchange Commission (the “SEC”). In making this determination, our Board considered the current and prior relationships that each non-employee director has
with the Company and all other facts and circumstances our Board deemed relevant in determining their independence, including the beneficial ownership of our capital stock
by each non-employee director. The Company’s independent directors conduct executive sessions at regularly scheduled meetings as required by NASDAQ Listing Rule
5605(b)(2).
Family Relationships
There are no family relationships among any of our directors and executive officers.
Board Leadership Structure
The Board does not have an express policy regarding the separation of the roles of Chief Executive Officer (“CEO”) and Board Chairman, as the Board believes it is in the best
interests of the Company to make that determination based on the position and direction of the Company and the membership of the Board. Currently, Dr. Branislav Vajdic
serves as the Company’s CEO and Richard Ferrari serves as the Chairman of the Board. The Board believes that its current leadership structure best serves the objectives of the
Board’s oversight of management; the ability of the Board to carry out its roles and responsibilities on behalf of the stockholders; and the Company’s overall corporate
governance. The Board also believes that the current separation of the Chairman and CEO roles allows the CEO to focus his time and energy on operating and managing the
Company and leverages the experience and perspectives of the Chairman.
Board Oversight of Risk Management
The full Board has responsibility for general oversight of risks facing the Company. The Board is informed by senior management on areas of risk facing the Company and
periodically conducts discussions regarding risk assessment and risk management. The Board believes that evaluating how the executive team manages the various risks
confronting the Company is one of its most important areas of oversight. While the Board has the ultimate oversight responsibility for the risk management process, various
committees of the Board also have responsibility for risk management. For example, the
54
Audit Committee reviews and assesses the Company’s processes to manage financial reporting risk and to manage investment, tax, and other financial risks; the Compensation
Committee oversees risks relating to the compensation and incentives provided to our executive officers; and the Nominating and Governance Committee oversees risks
associated with our overall compliance and corporate governance practices, as well as the independence and composition of our Board. Finally, management periodically
reports to the Board or relevant committee, which provides guidance on risk assessment and mitigation. In December 2023 the Board also formed a Commercialization
Committee to support the strategy development and implementation of all defined areas of commercialization.
Delinquent Section 16(a) Reports
Section 16(a) of the Securities Exchange Act of 1934 (the “Exchange Act”), as amended, requires the Company’s directors and executive officers, and persons who own more
than 10% of a registered class of the Company’s equity securities, to file reports of securities ownership and changes in such ownership with the SEC.
Based solely upon a review of such forms filed electronically with the SEC or written representations that no Form 5s were required, the Company believes that all Section
16(a) filing requirements were timely met during the year ended December 31, 2023, except for Mr. George de Urioste submitted one late Form 4 filing in regards to disclosing
initial securities.
Code of Ethics
The Company has adopted a code of ethics policy during 2022 for its principal executive officer and senior financial officers and that is applicable to all directors, officers and
employees, a copy of which is available online at www.Heartbeam.com. Stockholders may also request a free copy of this document from: HeartBeam, Inc., 2118 Walsh
Avenue, Suite 210, Santa Clara, CA 95050, Attn: Corporate Secretary.
Director Meeting Attendance
During the year ended December 31, 2023, the Board held four meetings of the full Board, The Board also took action by written consent on eighteen occasions. During the
year ended December 31, 2023, each member of the Board attended at least 75% of the aggregate of all meetings of the Board and the meetings of the committees on which he
or she served (during the periods for which he or she served).
The Company does not have a written policy requiring directors to attend the annual meeting.
Board Committees
Our board of directors has established an audit committee, a compensation committee, a nominating and governance committee, and a commercialization committee. Our board
of directors may establish other committees to facilitate the management of our business. The composition and functions of each committee are described below. Members
serve on these committees until their resignation or until otherwise determined by our board of directors. The charter of each committee is available on our corporate website at
https://ir.heartbeam.com/corporate-governance/governance-documents.
Committee Composition
The following description below outlines our current membership for each committee of our board of directors:
Audit Committee
The Audit Committee, among other things, will be responsible for:
•
•
•
•
•
appointing; approving the compensation of; overseeing the work of; and assessing the independence, qualifications, and performance of the independent auditor;
reviewing the internal audit function, including its independence, plans, and budget;
approving, in advance, audit and any permissible non-audit services performed by our independent auditor;
reviewing our internal controls with the independent auditor, the internal auditor, and management;
reviewing the adequacy of our accounting and financial controls as reported by the independent auditor, the internal auditor, and management;
55
•
•
overseeing our financial compliance system; and
overseeing our major risk exposures regarding the Company’s accounting and financial reporting policies, the activities of our internal audit function, and information
technology.
The Audit Committee will consist of Mr. de Urioste, Ms. Ortigas-Wedekind and Mr. Ferrari. Mr. de Urioste will chair the Audit Committee. We believe the Audit Committee
will comply with the applicable requirements of the rules and regulations of the Nasdaq listing rules and the SEC.
Compensation Committee
The Compensation Committee will be responsible for:
•
•
•
•
reviewing and making recommendations to the Board with respect to the compensation of our officers and directors, including the CEO;
overseeing and administering the Company’s executive compensation plans, including equity-based awards;
negotiating and overseeing employment agreements with officers and directors; and
overseeing how the Company’s compensation policies and practices may affect the Company’s risk management practices and/or risk-taking incentives.
The Compensation Committee will consist of Mr. Ferrari, Mr. Elfrink, Mr. Strome and Mr. de Urioste, Mr. Ferrari will serve as chairman of the Compensation Committee. The
board of directors has affirmatively determined that each member of the Compensation Committee meets the independence criteria applicable to compensation committee
members under SEC rules and Nasdaq listing rules.
Nominating and Governance Committee
The Nominating and Corporate Governance Committee, among other things, will be responsible for:
•
reviewing and assessing the development of the executive officers and considering and making recommendations to the Board regarding promotion and succession
issues;
evaluating and reporting to the Board on the performance and effectiveness of the directors, committees and the Board as a whole;
•
• working with the Board to determine the appropriate and desirable mix of characteristics, skills, expertise and experience, including diversity considerations, for the full
•
•
•
•
•
Board and each committee;
annually presenting to the Board a list of individuals recommended to be nominated for election to the Board;
reviewing, evaluating, and recommending changes to the Company’s Corporate Governance Principles and Committee Charters;
recommending to the Board individuals to be elected to fill vacancies and newly created directorships;
overseeing the Company’s compliance program, including the Code of Conduct; and
overseeing and evaluating how the Company’s corporate governance and legal and regulatory compliance policies and practices, including leadership, structure, and
succession planning, may affect the Company’s major risk exposures.
The Nominating and Corporate Governance Committee will consist of Ms. Ortigas-Wedekind, Mr. Elfrink and Mr. Nelson. Ms. Ortigas-Wedekind will serve as chairperson.
The Company’s board of directors has determined that each member of the Nominating and Corporate Governance Committee is independent within the meaning of the
independent director guidelines of Nasdaq listing rules.
Commercialization Committee
The Commercialization Committee, among other things, will be responsible for:
•
•
•
advising on the Company’s overall business strategy of bringing products to markets and all aspects of the sales process;
advising on the Company’s product strategy and roadmap;
advising on the Company’s target markets and market segmentation;
56
•
•
advising on cross-functional elements of the Company’s go-to-market effort, including the commercial support functions;
reviewing, evaluating, and recommending changes to the Company’s Commercialization Committee Charter.
The Commercialization Committee will consist of Mr. Elfrink, Dr; Jaff, Mr. Strome and Mr. Nelson. Mr. Elfrink will serve as chairperson.
Stockholder Communications with the Board
The Company’s Stockholders who wish to communicate with the Board of Directors or with an individual director may do so by writing to the Corporate Secretary, HeartBeam,
Inc., 2118 Walsh Avenue, Suite 210, Santa Clara, CA 95050. The letter should indicate that you are a stockholder and whether you own your shares in street name. Letters
received will be reviewed by the Corporate Secretary and retained until the next Board meeting when they will be available to the addressed director. Such communications may
receive an initial evaluation to determine, based on the substance and nature of the communication, a suitable process for internal distribution, review and response or other
appropriate treatment. There is no assurance that all communications will receive a response.
Hedging, Short Sales and Related Policies
Pursuant to the Company’s insider trading policy, the Company prohibits all directors, officers and employees of the Company (collectively, “Team Members”), as well as their
spouses, minor children, other persons living in their household and entities over which they exercise control, from engaging in the following transactions involving Company’s
securities without the advance unanimous written approval from members of the compliance committee designated by the Board:
• Hedging. Team Members may not enter into hedging or monetization transactions or similar arrangements with respect to the Company’s securities.
•
Short sales. Team Members may not sell the Company’s securities short;
• Options trading. Team Members may not buy or sell puts or calls or other derivative securities on the Company’s securities; and
•
Trading on margin. Team Members may not hold the Company’s securities in a margin account or pledge the Company’s securities as collateral for a loan.
Item 11. Executive Compensation
Summary Compensation Table
The following table sets forth information concerning all cash and non-cash compensation awarded to, earned by or paid to our Named Executive Officers (“NEOs”) for
services rendered in all capacities during the noted periods. The fiscal years ended December 31, 2023 and December 31, 2022 are indicated below:
57
Name and Principal
Position
(1)
(2)
Branislav Vajdic, PhD
Chief Executive Officer
(1)
Robert Eno
President and Chief Business Officer
Kenneth Persen
Chief Technology Officer
(1)
(2)
Year
2023
2022
2023
2022
2023
2022
Salary
($)
Bonus
($)(1,2)
Stock
Awards
($)(3)
Option
Awards
($)(3)
All Other
Compensation
($)
$
$
$
$
$
$
428,000 $
428,000 $
345,000 $
— $
300,000 $
125,000 $
192,600 $
203,642 $
102,970 $
— $
78,780 $
32,413 $
— $
— $
— $
— $
— $
— $
2,630,143 $
387,720 $
2,086,639 $
— $
1,033,930 $
152,800 $
Total
($)
3,250,743
1,019,362
2,534,609
—
1,412,710
310,213
—
—
—
—
—
—
$
$
$
$
$
$
1. Cash bonuses awarded to the Chief Executive Officer, President and Chief Business Officer, Chief Financial Officer and Chief Technology Officer in 2023 were paid early
2024.
2.
In 2022 the Board of Directors ratified the Compensation Committee approval of cash bonuses to its Chief Executive Officer, Chief Financial Officer and Chief Technology
Officer based on the Company’s achievements of the performance metrics as defined in the bonus plan. The Bonuses were paid in the second quarter of 2023.
3. Represents the full grant date fair value of the stock award or option grant, as applicable, calculated in accordance with FASB ASC Topic 718. Our policy and assumptions
made in the valuation of share-based payments are contained in Note 5 to our December 31, 2023 financial statements. The value of stock awards presented in the Summary
Compensation Table reflects the grant date fair value of the awards and does not correspond to the actual value that will be recognized by the named executive officers.
Employment Agreements
We have entered into employment agreements, with Branislav Vajdic, the Company’s Chief Executive Officer, Robert Eno, the Company’s President and Kenneth Persen, the
Company’s Chief Technology Officer .
Branislav Vajdic Employment Agreement
On September 10, 2021 we entered into an employment agreement with Dr. Vajdic as its Chief Executive Officer and a member of the board of directors (“2021 Vajdic
Agreement”), Dr. Vajdic will receive an annual salary of $325,000, commencing on September 15, 2021. During 2022 the Board of Directors approved an amendment to the
2021 Vajdic Agreement, whereby effective January 1, 2022 Dr. Vajdic’s annual salary increased to $428,000 and he was awarded 359,000 stock options. The stock option will
vest as to 25% on the 1-year anniversary of the vesting commencement date, and the remainder will vest monthly thereafter on the same day of the month as the vesting
commencement date until fully vested. During 2023 Dr. Vajdic was awarded a total of 1,194,000 options, these stock options vest as follows: Sixty percent (60%) are milestone
based vesting on FDA clearance for marketing of HeartBeam’s synthesized 12L product and the remaining forty percent (40%) are time based vesting monthly over 48 months.
Pursuant to the amended 2021 Vajdic Agreement, Dr. Vajdic will be eligible to receive an annual bonus up to 60% of his annual compensation, subject to adjustment on an
annual basis, based on his performance and overall progress of the Company.
Robert Eno Employment Agreement
On January 18, 2023 we entered into an employment agreement with Mr. Eno as its President, Mr. Eno will receive an annual salary of $360,000, commencing on January 18,
2023 and was awarded 240,000 stock options. The stock option will vest as to 25% on the 1-year anniversary of the vesting commencement date, and the remainder will vest
monthly thereafter on the same day of the month as the vesting commencement date until fully vested. Additionally, during 2023 Mr. Eno was awarded a total of 536,000
options, these stock options vest as follows: Sixty percent (60%) are milestone based vesting on FDA clearance for marketing of HeartBeam’s synthesized 12L product and the
remaining forty percent (40%) are time based vesting monthly over 48 months. Mr. Eno will be eligible to receive an annual bonus up to 40% of his annual compensation,
subject to adjustment on an annual basis, based upon his performance and overall progress of the Company.
58
Kenneth Persen Employment Agreement
On August 2, 2022 we entered into an employment agreement with Mr. Persen as its Chief Technology Officer (“2022 Persen Agreement”), Mr. Persen will receive an annual
salary of $300,000, commencing on August 2, 2022 and was awarded 80,000 stock options. The stock option will vest as to 25% on the 1-year anniversary of the vesting
commencement date, and the remainder will vest monthly thereafter on the same day of the month as the vesting commencement date until fully vested. During 2023 Mr. Persen
was awarded a total of 481,000 options, of these stock options, 421,000 will vest as follows: Sixty percent (60%) are milestone based vesting on FDA clearance for marketing
of HeartBeam’s synthesized 12L product and the remaining forty percent (40%) are time based vesting monthly over 48 months, and the remaining 60,000 will vest as to 25%
on the 1-year anniversary of the vesting commencement date, and the remainder will vest monthly thereafter on the same day of the month as the vesting commencement date
until fully vested. Mr. Persen will be eligible to receive an annual bonus up to 30% of his annual compensation, subject to adjustment on an annual basis, based upon his
performance and overall progress of the Company. Pursuant to the 2022 Persen Agreement, at the Board of Directors meeting held on August 21, 2023, Mr. Persen’s annual
eligible bonus was increased to 35% effective January 1, 2023.
2023 Outstanding Equity Awards at Fiscal Year-End
The following table sets forth certain information with respect to the value of all equity awards that were outstanding at December 31, 2023:
Name
Number of Securities
Underlying
Unexercised Options
Exercisable (#)
Number of Securities
Underlying Unexercised
Options Unexercisable
(#)
Option
Exercise Price
($)
Option Expiration
Date
Equity: Unearned
Shares, Units or
Other Rights That
Have Not Vested (#)
Plan Awards: Market
or Payout Value of
Unearned Shares,
Units or Other Rights
That Have Not Vested
($)
Branislav Vajdic, PhD(1)
(2)
(3)
Robert Eno(4)
(5)
(6)
(7)
(8)
Kenneth Persen(9)
(10)
(11)
(12)
26,532
23,219
172,019
11,900
10,444
—
4,699
36,363
8,400
9,856
—
26,668
769,468 $
374,781 $
186,981 $
345,100 $
168,556 $
240,000 $
4,301 $
— $
243,600 $
159,144 $
60,000 $
53,332 $
2.90
2.08
1.30
2.90
2.08
4.47
4.25
0.28
2.90
2.08
2.50
1.91
08/02/2033
05/14/2033
06/14/2032
08/02/2033
05/14/2033
01/18/2033
11/12/2031
11/01/2030
08/02/2033
05/14/2033
03/21/2033
09/17/2032
—
—
—
—
—
—
—
—
—
—
—
—
$
$
$
$
$
$
$
$
$
$
$
$
—
—
—
—
—
—
—
—
—
—
—
—
1. Dr. Vajdic was awarded 796,000 options on August 2, 2023, these options are scheduled to vest sixty percent (60%) upon FDA Clearance for marketing of HeartBeam’s
synthesized 12L product and remainder forty percent (40%) one forty-eighth (1/48th) shall vest on each one-month anniversary of the vesting commencement date.
2. Dr. Vajdic was awarded 398,000 options on May 14, 2023, these options are scheduled to vest sixty percent (60%) upon FDA Clearance for marketing of HeartBeam’s
synthesized 12L product and remainder forty percent (40%) one forty-eighth (1/48th) shall vest on each one-month anniversary of the vesting commencement date.
3. Dr. Vajdic was awarded 359,000 options on June 15, 2022, these options are scheduled to vest over 4 years with 25% vesting on January 1, 2023 and the remainder vesting
and exercisable monthly thereafter.
4. Mr. Eno was awarded 357,000 options on August 2, 2023, these options are scheduled to vest sixty percent (60%) upon FDA Clearance for marketing of HeartBeam’s
synthesized 12L product and remainder forty percent (40%) one forty-eighth (1/48th) shall vest on each one-month anniversary of the vesting commencement date.
59
5. Mr. Eno was awarded 179,000 options on May 14, 2023, these options are scheduled to vest sixty percent (60%) upon FDA Clearance for marketing of HeartBeam’s
synthesized 12L product and remainder forty percent (40%) one forty-eighth (1/48th) shall vest on each one-month anniversary of the vesting commencement date.
6. Mr. Eno was awarded 240,000 options on January 18, 2023, these options are scheduled to vest over 4 years with 25% vesting on January 18, 2024 and the remainder vesting
and exercisable monthly thereafter
7. Mr. Eno was awarded 9,000 options on November 12, 2021, these options are scheduled to vest monthly over 4 years from the vesting commencement date.
8. Mr. Eno was awarded 36,363 options on November 1, 2020, these options are scheduled to vest monthly over 4 years from the vesting commencement date.
9. Mr. Persen was awarded 252,000 options on August 2, 2023, these options are scheduled to vest sixty percent (60%) upon FDA Clearance for marketing of HeartBeam’s
synthesized 12L product and remainder forty percent (40%) one forty-eighth (1/48th) shall vest on each one-month anniversary of the vesting commencement date.
10. Mr. Persen was awarded 169,000 options on May 14, 2023, these options are scheduled to vest sixty percent (60%) upon FDA Clearance for marketing of HeartBeam’s
synthesized 12L product and remainder forty percent (40%) one forty-eighth (1/48th) shall vest on each one-month anniversary of the vesting commencement date.
11. Mr. Persen was awarded 60,000 options on March 21, 2023, these options are scheduled to vest over 4 years with 25% vesting on January 18, 2024 and the remainder vesting
and exercisable monthly thereafter.
12. Mr. Persen was awarded 80,000 options on September 17, 2022, these options are scheduled to vest over 4 years with 25% vesting on January 18, 2024 and the remainder
vesting and exercisable monthly thereafter.
Options Exercised and Stock Vested
The following table summarizes, with respect to our named executive officers, all options that were exercised on stock that was vested during fiscal 2023:
Name
Option Awards
Number of Shares Acquired on
Vesting (#)
Value Realized on Exercise ($)
(1)
Branislav Vajdic, PhD
Robert Eno
Kenneth Persen
— $
— $
— $
—
—
—
1. Based on the closing market price of our Common Stock as reported on the NASDAQ Capital Market on December 31, 2023.
DIRECTOR COMPENSATION
Directors who are also employees of the Company do not receive any separate compensation in connection with their Board service, and we pay cash fees to our non-employee
directors. Prior to 2022, our non-employee directors received a non-qualified initial stock option award upon joining the Board, which vest monthly over a four-year period,
beginning on the date of the director’s election to the Board.
On June 15, 2022, the Board of Directors approved a plan for the annual cash compensation of directors effective January 1, 2022:
Chair
Member
Board
Audit Committee
Other Committees
$
$
120,000 $
40,000 $
25,000 $
10,000 $
15,000
10,000
60
The following table presents the total compensation for each person who served as a non-employee member of our board of directors and received compensation for such
service during the fiscal year ended December 31, 2023. Other than as set forth in the table and described more fully below:
Name
Richard Ferrari
George de Urioste
Marga Ortigas-Wedekind
Willem Elfrink
Mark Strome
Kenneth Nelson
Michael Jaff(3)
Fees Earned or
Paid in Cash ($)
(1)
Option Awards
($)
Stock
Awards($)(2)(3)
Non-Equity Incentive
Plan Compensation ($)
All Other Compensation
Total ($)
$
$
$
$
$
$
$
138,587 $
77,500 $
65,000 $
65,639 $
29,722
27,595
18,651
— $
— $
— $
— $
$
$
$
100,000 $
75,000 $
75,000 $
75,000 $
75,000 $
75,000 $
130,000 $
—
—
—
—
—
—
—
$
$
$
$
$
$
$
—
—
—
—
—
—
—
$
$
$
$
$
$
$
238,587
152,500
140,000
140,639
104,722
102,595
148,651
1. Represents director fees paid for nine months period to each of Messrs Ferrari, de Urioste, Elfrink, Strome, Nelson, Jaff and Mmes Ortigas-Wedekind. Fees for three
months ended December 31, 2023 is accrued and paid early 2024.
2. The annual RSU grants to Messrs Ferrari, de Urioste, Elfrink, Strome, Nelson and Mmes Ortigas-Wedekind occur at each Annual Stockholder Meeting, vesting in full at
the following annual meeting. The dollars convert to shares based on the FMV at the date of grant.
3. The RSU awarded to Dr. Jaff will vest in equal annual installments over three years on the day following the annual shareholders’ meeting in 2024, 2025 and 2026. The
dollars convert to shares based on the FMV at the date of grant.
Item 12. Security Ownership of Certain Beneficial Owner and Management and Related Stockholder Matters
The following table sets forth certain information regarding the Company’s Common Stock, beneficially owned as of December 31, 2023 by:
•
•
•
each person known to the Company to beneficially own more than 5% of its Common Stock,
each executive officer, director and director nominee
all officers, directors and director nominees as a group.
The Company calculated beneficial ownership according to Rule 13d-3 of the Securities Exchange Act of 1934, as amended as of that date. Shares of the Company’s Common
Stock issuable upon exercise of options or warrants or conversion of notes that are exercisable or convertible within 60 days after December 31, 2023 are included as
beneficially owned by the holder, but not deemed outstanding for computing the percentage of any other stockholder for Percentage of Common Stock Beneficially Owned. For
each individual and group included in the table below, percentage ownership is calculated by dividing the number of shares beneficially owned by such person or group by the
sum of the 26,329,032 shares of Common Stock outstanding at December 31, 2023, plus the number of shares of Common Stock that such person or group had the right to
acquire on or within 60 days after December 31, 2023. Beneficial ownership generally includes voting and dispositive power with respect to securities. Unless otherwise
indicated below, the persons and entities named in the table have sole voting and sole dispositive power with respect to all shares beneficially owned.
Name
(1)
Richard Ferrari
Branislav Vajdic. PhD
(3)
George A. de Urioste
Marga Ortigas-Wedekind
(2)
(4)
Shares Beneficially
Owned
%
291,458
1,203,019
39,671
119,496
1.10 %
4.52 %
*
*
61
(5)
(7)
(6)
Willem Pieter Elfrink
Mark Strome
Kenneth Nelson
Michael Jaff MD
Richard Brounstein
Robert Eno
Kenneth Persen
All directors and executive officers as a group (11 persons)
(10)
(11)
(9)
(8)
(12)
Public Ventures
9454 Wilshire Blvd., Suite 600
Beverly Hills, CA 90212
(13)
Andrew Schwartzberg
1135 Rivas Canyon Road
Pacific Palisades, CA 90272
____________
* Less than 1 percent ownership
457,658
3,150,000
70,001
—
207,106
137,714
55,274
5,731,397
2,624,910
1.73 %
11.96 %
*
*
*
*
*
21.05 %
9.41 %
1,899,536
7.21 %
1.
2.
3.
4.
5.
6.
7.
Includes (i) 65,653 shares acquired from the conversion of 2015 Convertible Notes. (ii) 73,529 shares acquired from the vesting of RSUs and (iii) 152,276 options
exercisable within 60 days after December 31, 2023. Does not include 56,814 unvested stock options and 39,948 unvested RSUs.
Includes (i) 794,545 shares acquired as founders equity, (ii) 115,559 shares acquired from the conversion of 2015 Convertible Notes, (iii) 256,628 options exercisable
within 60 days after December 31, 2023, (iv) 1,287 shares acquired from the exercise of warrants acquired from the short-term loan investment program and (v) 35,000
BEATW exercisable warrants. Does not include 1,296,373 unvested stock options.
Includes (i) 12,168 shares acquired from the vesting of RSUs and (ii) 27,503 options exercisable within 60 days after December 31, 2023. Does not include 16,497
unvested stock options and 23,961 unvested RSUs.
Includes (i) 9,000 shares and 9,000 BEATW warrants purchased November 11, 2021, (ii) 7,824 shares acquired from the conversion of 2015 Convertible Notes, (iii)
55,147 shares acquired from the vesting of RSUs and (iv) 38,525 options exercisable within 60 days after December 31, 2023. Does not include 5,110 unvested stock
options and 23,961 unvested RSUs.
Includes (i) 101,818 shares acquired under the 2015 Incentive Plan (ii) 207,056 shares acquired from the conversion of 2015 Convertible Notes, (iii) 55,147 shares
acquired from the vesting of RSUs (iv) 29,997 options exercisable within 60 days after December 31, 2023, (v) 60,000 BEATW exercisable warrants and (vi) 3,640
shares acquired from the exercise of warrants acquired from the short-term loan investment program. Does not include 13,639 unvested stock options and
23,961unvested RSUs.
Includes 3,150,000 shares purchased on May 2, 2023. Does not include 23,961 unvested RSUs.
Includes 70,001 shares purchased on May 2, 2023. Does not include 23,961 unvested RSUs.
8. No securities held. Does not include 41,935 unvested RSUs.
9.
Includes (i) 72,725 shares acquired under the 2015 Incentive Plan, (ii) 5,000 shares and 5,000 BEATW warrants purchased November 11, 2021, (iii) 5,000 shares and
10,000 BEATW warrants acquired on the open market, (iv) 29,197 shares acquired from the conversion of 2015 Convertible Notes, (v) 184 shares acquired from the
exercise of warrants acquired from the short-term loan investment program and (vi) 80,000 options which vest within 60 days after December 31, 2023.
10. Includes 55,274 options exercisable within 60 days after December 31, 2023. Does not include 505,726 unvested stock options.
11. Includes 137,714 options exercisable within 60 days after December 31, 2023. Does not include 683,649 unvested stock options.
62
12. Represents 1,058,633 shares issued pursuant to a subscription agreement of the Company dated May 2, 2023, 1,562,666 shares of Common Stock issuable under a
warrant issued by the Issuer and 3,911 shares of Common Stock held by Christopher A. Marlett Living Trust.
13. Represents 1,833,334 shares issued pursuant to a subscription agreement of the Company dated May 2, 2023, 46,600 shares in open market purchases on May 4, 2023,
and 19,602 shares in open market purchases on May 25, 2023.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The Company has established policies and other procedures regarding approval of transactions between the Company and any employee, officer, director, and certain of their
family members and other related persons. These policies and procedures are generally not in writing but are evidenced by long standing principles adhered to by our Board.
The disinterested members of the Board review, approve and ratify transactions that involve “related persons” and potential conflicts of interest. Related persons must disclose
to the disinterested members of the Board any potential related person transactions and must disclose all material facts with respect to such transaction. All such transactions
will be reviewed by the disinterested members of the Board and, in their discretion, approved or ratified. In determining whether to approve or ratify a related person transaction
the disinterested members of the Board will consider the relevant facts and circumstances of the transaction, which may include factors such as the relationship of the related
person with the Company, the materiality or significance of the transaction to the Company and the related person, the business purpose and reasonableness of the transaction,
whether the transaction is comparable to a transaction that could be available to the Company on an arms-length basis, and the impact of the transaction on the Company’s
business and operations.
Since the beginning of fiscal year 2023, the Company did not have any transactions to which it has been a participant that involved amounts that exceeded or will exceed the
lesser of (i) $120,000 or (ii) one percent of the average of the Company’s total assets at year-end for the last two completed fiscal years, and in which any of the Company’s
directors, executive officers or any other “related person” as defined in Item 404(a) of Regulation S-K had or will have a direct or indirect material interest.
Item 14. Principal Accounting Fees and Services
Based on the Audit Committee's evaluation and determination that Marcum LLP (“Marcum”) is independent, our Audit Committee has retained the firm of Marcum as our
independent registered public accounting firm for fiscal year 2023. In making this determination, the Company is requesting its stockholders to ratify the appointment of
Marcum at its next Annual Stockholder Meeting. In the event the stockholders fail to ratify the appointment, the Audit Committee will consider in its direction to select other
auditors for the subsequent year. Even if the selection is ratified, the Audit Committee, in its discretion, may select a new independent registered public accounting firm at any
time during the year if it feels that such a change would be in the best interest of the Company and its stockholders. Representatives of Marcum will be present at the 2024
Annual Stockholders' Meeting and will have the opportunity to make a statement and be available to answer questions.
Fees to Independent Registered Public Accounting Firm.
The merger of Marcum and Friedman LLP (“Friedman”) was effective as September 1, 2022. The following table sets forth the fees that the Company was billed by Friedman
and Marcum in 2022 and Marcum in 2023, our independent registered public accountants for fiscal years 2023 and 2022:
(1)
Audit Fees
Audit Related Fees
Tax Fees
Total
(2)
$
$
2023
2022
142,200 $
45,342
—
187,542 $
126,000
12,722
—
138,722
1. Audit fees relate to professional services rendered in connection with the audit of the Company's annual financial statements, quarterly review of financial statements and
audit services provided in connection with other statutory and regulatory filings.
63
2. Fees related to services provided for registration statements during the first half of 2023 and the fourth quarter of 2022.
Policy on Audit Committee Pre-Approval of Fees
The Audit Committee must pre-approve all services to be performed for us by our independent registered public accounting firm. Pre-approval is granted usually at regularly
scheduled meetings of the Audit Committee. If unanticipated items arise between regularly scheduled meetings of the Audit Committee, the Audit Committee has delegated
authority to the chairman of the Audit Committee to pre-approve services, in which case the chairman communicates such pre-approval to the full Audit Committee at its next
meeting. The Audit Committee also may approve the additional unanticipated services by either convening a special meeting or acting by unanimous written consent.
64
Item 15. Exhibits and Financial Statement Schedules
Part IV
Exhibit
Number
3.1
3.2
3.3
3.4
4.1
4.2
4.3
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
14.1
23.1
Exhibit Description
Articles of Incorporation filed with the State of Delaware on June 11, 2015
Bylaws
Amendment to Articles of Incorporation filed with the State of Delaware on
September 27, 2021
Second Amended and Restated Articles of Incorporation dated November 15, 2022
Form of Representative’s Warrant
Form of Warrant Agency Agreement
Form of Placement Agent’s Warrant
Employment Agreement with Branislav Vajdic †
Employment Agreement with Richard Brounstein †
Employment Agreement with Jon Hunt †
Employment Agreement with Alan Baumel †
Employment Agreement with Ken Persen †
Employment Agreement with Robert Eno †
Stock Purchase Agreement, dated February 18, 2022 by and between HeartBeam,
Inc. and the Purchaser with the Form of Warrant
Form of Professional Services Agreement between Triple Ring and HeartBeam, Inc.
dated March 7, 2022
Partnership Agreement between HeartBeam, Inc. and LIVMOR, Inc. dated January
31, 2022
Supplemental Agreement between HeartBeam, Inc. and LIVMOR, Inc. dated August
2, 2022
Sales Agreement by and between HeartBeam, Inc. and A.G.P./Alliance Global
Partners, dated February 1, 2023
Securities Purchase Agreement dated February 28, 2023 between HeartBeam Inc. and
Investors
Note Purchase Agreement dated February 28, 2023 between HeartBeam Inc. and
Investors
First Amendment to Securities Purchase Agreement dated March 7, 2023 to the
Securities Purchase Agreement dated February 28, 2023 between HeartBeam, Inc.
and Investors
First Amendment to Note Purchase Agreement dated March 7, 2023 to the Note
Purchase Agreement dated February 28, 2023 between HeartBeam, Inc. and
Investors
Form of Subscription Agreement
Form of Escrow Agreement for the Offering
Form of Securities Purchase Agreement dated as of May 2, 2023 between
HeartBeam, Inc. and Investor
2022 Equity Incentive Plan
First Amendment to the HeartBeam, Inc. 2022 Equity Incentive Plan
Code of Business and Ethics
Consent of Marcum LLP Independent Registered Public Accounting Firm
65
Incorporated by Reference
Form
Exhibit
Filing Date
Filed or Furnished
Herewith
S-1
S-1
S-1
S-1
S-1/A
S-1/A
S-1/A
S-1/A
S-1/A
S-1/A
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
8-K
3.1
3.2
3.3
3.4
4.13
4.14
4.13
10.1
10.2
10.3
10.1
10.2
10.2
10.1
10.1
10.1
10.1
10.1
10.1
10.1
10.1
09/07/2021
09/07/2021
09/07/2021
02/10/2023
11/09/2021
11/09/2021
04/17/2023
10/12/2021
10/12/2021
10/12/2021
10/12/2021
08/08/2022
01/24/2023
02/22/2022
03/10/2022
02/02/2022
08/08/2022
02/02/2023
03/03/2023
03/03/2023
03/09/2023
8-K
10.2
03/09/2023
S-1/A
S-1/A
8-K
8-K
8-K
10-K
10.16
10.17
10.1
10.1
10.1
14.1
04/10/2023
04/10/2023
05/05/2023
06/16/2022
07/11/2023
03/16/2023
X
24.1
31.1
32.1
97.1
101.INS
101.SCH
101.CAL
101.DEF
101.LAB
101.PRE
104
†
#
+
Power of Attorney *
Certification Required by Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended,
as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 #
HeartBeam, Inc. Compensation Recovery Policy
XBRL Instance Document+
XBRL Taxonomy Extension Schema Document+
XBRL Taxonomy Extension Calculation Linkbase Document+
XBRL Taxonomy Extension Definition Linkbase Document+
XBRL Taxonomy Extension Label Linkbase Document+
XBRL Taxonomy Extension Presentation Linkbase Document+
Cover Page Interactive Data File - The cover page iXBRL tags are embedded within the inline
XBRL document.
Management or compensatory plan or arrangement.
This certification is being furnished and shall not be deemed “filed” with the SEC for purposes
of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall
not be deemed to be incorporated by reference into any filing under the Securities Act or the
Exchange Act, except to the extent that the registrant specifically incorporates it by reference.
Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files in Exhibit 101 hereto are
deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or
12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of
the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability
under those sections.
X
X
X
X
X
X
X
X
X
X
X
66
Item 16. Form 10-K Summary
None
67
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly
authorized.
SIGNATURES
Dated: March 20, 2024
HEARTBEAM, Inc.
By:
Name:
Title:
/s/ Branislav Vajdic
Branislav Vajdic
Chief Executive Officer
(Principal Executive and Accounting Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Branislav Vajdic his attorney-in-fact, with
the power of substitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and
other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorney-in-fact may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated:
Name
/s/ Richard Ferrari
Richard Ferrari
/s/ George de Urioste
George de Urioste
/s/ Marga Ortigas-Wedekind
Marga Ortigas-Wedekind
/s/ Willem Elfrink
Willem Elfrink
/s/ Mark Strome
Mark Strome
/s/ Kenneth Nelson
Kenneth Nelson
/s/ Michael Jaff
Michael Jaff
/s/ Branislav Vajdic
Branislav Vajdic
Title
Executive Chairman
Director
Director
Director
Director
Director
Director
Chief Executive Officer
(Principal Executive and Accounting Officer)
Date
March 20, 2024
March 20, 2024
March 20, 2024
March 20, 2024
March 20, 2024
March 20, 2024
March 20, 2024
March 20, 2024
Contents
Report of Independent Registered Public Accounting Firms (PCAOB ID No: 688)
Balance Sheets as of December 31, 2023 and 2022
Statements of Operations for the years ended December 31, 2023 and 2022
Statements of Changes in Stockholders’ Equity for the years ended December 31, 2023 and 2022
Statements of Cash Flows for the years ended December 31, 2023 and 2022
Notes to Financial Statements
F-1
Page
F-2
F-4
F-5
F-6
F-7
F-8
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
HeartBeam Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of HeartBeam, Inc. (the “Company”) as of December 31, 2023 and 2022, the related statements of operations, stockholders’
equity and cash flows for each of the two years in the period ended December 31, 2023, and the related notes (collectively referred to as the “financial statements”). In our
opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2023 and 2022, and the results of its
operations and its cash flows for each of the two years in the period ended December 31, 2023, in conformity with accounting principles generally accepted in the United States
of America.
Explanatory Paragraph – Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As more fully described in Note 2, the Company has
a significant working capital deficiency, has incurred significant losses and needs to raise additional funds to meet its obligations and sustain its operations. These conditions
raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial
statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our
audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with
respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the
PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an
audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the
purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that
respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included
evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe
that our audits provide a reasonable basis for our opinion.
/s/ Marcum LLP
We have served as the Company’s auditor since 2020
East Hanover, New Jersey
March 20, 2024
F-2
HEARTBEAM, INC.
Balance Sheets
(In thousands, except share data)
Assets
Current Assets:
Cash and cash equivalents
Prepaid expenses and other current assets
Total Current Assets
Property and equipment, net
Other assets
Total Assets
Liabilities and Stockholders’ Equity
Current Liabilities:
Accounts payable and accrued expenses (includes related party $2 and $2, respectively)
Total Liabilities
Commitments (Note 7)
Stockholders’ Equity
Preferred Stock - $0.0001 par value; 10,000,000 shares authorized; 0 shares outstanding at December 31, 2023 and 2022
Common stock - $0.0001 par value; 100,000,000 shares authorized; 26,329,032 and 8,009,743 shares issued and
outstanding at December 31, 2023 and 2022
Additional paid in capital
Accumulated deficit
Total Stockholders’ Equity
Total Liabilities and Stockholders’ Equity
See accompanying notes to the financial statements
F-3
December 31,
2023
2022
16,189 $
636
16,825 $
256
50
17,131 $
1,194
1,194
—
3
52,759
(36,825)
15,937 $
3,594
445
4,039
—
—
4,039
1,665
1,665
—
1
24,559
(22,186)
2,374
17,131 $
4,039
$
$
$
$
$
Operating Expenses:
General and administrative
Research and development
Total operating expenses
Loss from operations
Other income
Interest income
Other income
Total other income
Loss before provision for income taxes
Income tax provision
Net Loss
Net loss per share, basic and diluted
HEARTBEAM, INC.
Statements of Operations
(In thousands, except share and per share data)
December 31,
2023
2022
8,516 $
6,798
15,314
7,354
5,677
13,031
(15,314)
(13,031)
675
—
675
66
3
69
(14,639)
(12,962)
—
—
(14,639) $
(12,962)
(0.72) $
(1.59)
$
$
$
Weighted average common shares outstanding, basic and diluted
20,333,280
8,168,516
See accompanying notes to the financial statements
F-4
HEARTBEAM, INC.
Statement of Changes in Stockholders’ Equity
(In thousands, except share data)
Balance – December 31, 2021
Stock based compensation expense
Stock issuance upon vesting and exercise of stock options
Stock issuance upon vesting of restricted stock units
Sale of Common Stock & Warrants
Net loss
Balance – December 31, 2022
Stock based compensation expense
Sale of Common Stock, net of issuance costs
Stock issuance upon exercise of stock options
Stock issuance upon vesting of restricted stock units
Stock Issuance upon exercise of warrants
Net loss
Balance – December 31, 2023
Common Stock
Shares
Amount
Additional
Paid-in
Capital
Accumulated
Deficit
Total
Stockholders'
Equity (Deficit)
7,809,912 $
38,806
25,000
136,025
—
8,009,743 $
—
17,872,955
180,072
258,970
7,292
—
26,329,032
1 $
—
—
—
—
—
1 $
—
2
—
—
—
—
3
22,633 $
1,120
2
—
804
—
24,559 $
3,208
24,762
214
—
16
—
52,759
(9,224) $
—
—
—
—
(12,962)
(22,186) $
—
—
—
—
—
(14,639)
(36,825)
13,410
1,120
2
—
804
(12,962)
2,374
3,208
24,764
214
—
16
(14,639)
15,937
See accompanying notes to the financial statements
F-5
HEARTBEAM, INC.
Statements of Cash Flows
(In thousands)
Cash Flows From Operating Activities
Net loss
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation expense
Changes in operating assets and liabilities:
Prepaid expenses and other current assets
Accounts payable, accrued expenses and other current liabilities
Net cash used in operating activities
Cash Flows From Investing Activities
Purchase of property and equipment
Net cash used in investing activities
Cash Flows From Financing Activities
Proceeds from sale of equity, net of issuance costs
Proceeds from exercise of stock options
Proceeds from exercise of warrants
Net cash provided by financing activities
Net increase (decrease) in cash and restricted cash
Cash, cash equivalents and restricted cash - beginning of the year
Cash, cash equivalents and restricted cash - at end of the year
Supplemental Disclosures of Cash Flow Information:
Taxes paid
Interest paid
Supplemental Disclosures of Non-cash Flow Information:
Issuance of common stock and warrants to settle accrued expenses
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents
Restricted cash (included in other assets)
Total cash, cash equivalents and restricted cash
See accompanying notes to the financial statements
F-6
December 31,
2023
2022
$
(14,639) $
(12,962)
3,208
(191)
(471)
(12,093)
(256)
(256)
24,764
214
16
24,994
12,645
3,594
16,239 $
— $
—
— $
16,189 $
50 $
16,239 $
$
$
$
$
$
$
1,120
361
1,533
(9,948)
—
—
348
2
—
350
(9,598)
13,192
3,594
—
—
456
3,594
—
3,594
NOTE 1 – ORGANIZATION AND OPERATIONS
HEARTBEAM, INC.
NOTES TO FINANCIAL STATEMENTS
HeartBeam, Inc. (“HeartBeam” or the “Company”) is a medical technology company primarily focusing on developing and commercializing higher resolution ambulatory
Electrocardiogram (“ECG”) solutions that enable the detection and monitoring of cardiac disease outside a healthcare facility setting. The Company’s ability to develop higher
resolution ECG solutions is achieved through the development of the Company’s proprietary and patented Vector Electrocardiography (“VECG”) technology platform.
HeartBeam’s VECG is capable of developing three-dimensional (3D) images of cardiac electrical activity by displaying the spatial locations of ECG waveforms that
demonstrated in early studies to deliver equal or superior diagnostic capability than traditional hospital-based ECG systems.
The Company has validated this novel technology and is seeking U.S. Food and Drug Administration (“FDA”) clearance of its initial telehealth products during 2024.
The Company was incorporated in 2015 as a Delaware corporation. The Company’s operations are based in Santa Clara, California and operates as one segment.
NOTE 2 – GOING CONCERN AND OTHER UNCERTAINTIES
The Company is subject to a number of risks similar to those of early stage companies, including dependence on key individuals and products, the difficulties inherent in the
development of a commercial market, the potential need to obtain additional capital, competition from larger companies, other technology companies and other technologies.
The Company has incurred losses each year since inception and has experienced negative cash flows from operations in each year since inception. As of December 31, 2023
and December 31, 2022, the Company had an accumulated deficit of approximately $36.8 million and $22.2 million, respectively. As of December 31, 2023 the Company had
approximately $16.2 million cash and cash equivalents.
In February 2023, the Company entered into a sales agreement (the “Sales Agreement”) with A.G.P./Alliance Global Partners (“AGP”) pursuant to which the Company may
issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $13.0 million in at-the-market offerings (“ATM”) sales. At the same
time, the Company filed a prospectus supplement under a shelf registration relating to the Sales Agreement. AGP will act as sales agent and will be paid a 3% commission on
each sale under the Sales Agreement. The Company’s common stock will be sold at prevailing market prices at the time of the sale, and, as a result, prices will vary. As of
December 31, 2023 there was approximately $11.0 million available for issuance under the ATM.
In February 2023, the Company entered into a securities purchase agreement and a note purchase agreement (“SPA”, NPA” or together “Agreements”) with Maverick Capital
Partners, LLC (“Maverick” or “Investor”). Pursuant to the terms of the Agreements, as amended, the Company agreed to sell up to $4,000,000 of the Company’s common stock
at 75% of the average calculated Volume Weighted Average Price (“VWAP”) per share during a Drawdown Pricing Period as defined in the Agreements.
In February 2023, the Company issued a $500,000 Convertible Note to the Investor pursuant to the NPA. On March 9, 2023 the Convertible Note was settled upon the
execution of a SPA and related issuance of 0.2 million shares of common stock pursuant to the SPA drawdown notice dated March 7, 2023. These shares of common stock were
registered under the Company’s registration statement on Form S-3 dated February 10, 2023 and the related prospectus supplement dated March 9, 2023.
Based on its current business plan assumptions and expected cash burn rate, the Company believes 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 the Company’s ability to continue as a going concern.
The Company’s continued operations will depend on its ability to raise additional capital through various potential sources, such as equity and/or debt financings, strategic
relationships and revenue. Management can provide no assurance that such
F-7
financing or strategic relationships will be available on acceptable terms, or at all, which would likely have a material adverse effect on the Company and its financial
statements.
The accompanying financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and
classification of liabilities that may result should the Company be unable to continue as a going concern.
NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying audited financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP")
and in conformity with the instructions on Form 10-K and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission
(“SEC”) and have been prepared on a basis which assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction
of liabilities and commitments in the normal course of business.
USE OF ESTIMATES
The preparation of financial statements in conformity with US GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual
results could differ from those estimates. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based on amounts that
differ from those estimates. On an ongoing basis, management evaluates its estimate related to probability and timing related to vesting of the stock-based compensation related
to probability and timing related to vesting of milestone options
CASH, CASH EQUIVALENTS AND RESTRICTED CASH
The Company considers all highly liquid investments with original maturities of three months or less to be cash equivalents. As of December 31, 2023 the Company has
$15.9 million held as cash equivalents and as of December 31, 2022 there were $2.6 million held as cash equivalents. The Company maintains cash balances in accounts which
exceed the federally insured limits during the year ended December 31, 2023 and 2022. The Company has made a deposit to the bank for their credit cards in the amount of
$50,000 and is classified as restricted cash included in other non-current assets as of December 31, 2023.
PROPERTY AND EQUIPMENT, NET
Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is calculated using the straight-line method over the estimated
useful lives of the assets. The Company regularly evaluates the estimated remaining useful lives of the Company’s property and equipment, net, to determine whether events or
changes in circumstances warrant a revision to the remaining period of depreciation. Maintenance and repairs are expensed as incurred. As of December 31, 2023, property and
equipment, net represents construction-in-progress of $256,000 related to tooling development that has not been placed into service. Construction-in-progress amounts are not
subject to depreciation as such assets are not yet available for their intended use.
RESEARCH AND DEVELOPMENT EXPENSE
The Company expenses the cost of research and development as incurred. Research and development expenses consist primarily of professional services costs associated with
the development of cardiovascular technologies and products.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company’s financial instruments consist primarily of cash, accounts payable and accrued liabilities. Fair value is defined as the exchange price that would be received for
an asset or paid to transfer a liability in the principal or most advantageous market for the asset transaction between market participants on the measurement date. Where
available, fair value is based on observable market prices or is derived from such prices. The Company uses the market approach
F-8
valuation technique to value its investments. The market approach uses prices and other pertinent information generated from market transactions involving identical or
comparable assets or liabilities. The types of factors that the Company may consider in fair value pricing the investments include available current market data, including
relevant and applicable market quotes.
Financial assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:
•
•
•
Level 1 - Observable inputs such as quoted prices in active markets.
Level 2 - Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
Level 3 - Unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the assignment of an asset or liability within the fair
value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the
fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
ACCOUNTING FOR WARRANTS
The Company classifies as equity any contracts that (i) require physical settlement or net-share settlement or (ii) gives the Company a choice of net-cash settlement or
settlement in its own shares (physical settlement or net-share settlement). The Company classifies as assets or liabilities any contracts that (i) require net-cash settlement
(including a requirement to net cash settle the contract if an event occurs and if that event is outside the control of the Company) or (ii) gives the counterparty a choice of net-
cash settlement or settlement in shares (physical settlement or net-share settlement). The Company accounts for its currently issued warrant instruments in conjunction with the
Company’s common stock in permanent equity. These warrants are indexed to the Company’s stock and meet the requirements of equity classification as prescribed under ASC
815. Warrants classified as equity are initially measured at fair value, and subsequent changes in fair value are not recognized so long as the warrants continue to be classified as
equity.
STOCK-BASED COMPENSATION
The Company periodically issues stock options and restricted stock awards (“RSUs”) to employees and non-employees for services. The Company accounts for such grants
issued and vesting to employees and non-employees based on ASC 718, whereby the value of the award is measured on the date of grant and recognized as compensation
expense over the vesting period.
The fair value of stock options on the date of grant is calculated using the Black-Scholes option pricing model, based on key assumptions such as the fair value of common
stock, expected volatility and expected term. These estimates require the input of subjective assumptions, including (i) the expected stock price volatility, (ii) the calculation of
the expected term of the award, (iii) the risk-free interest rate and (iv) expected dividends. These assumptions are primarily based on historical data, peer company data and the
judgment of management regarding future trends and other factors. The Company has estimated the expected term of its employee stock options using the “simplified” method,
whereby, the expected term equals the arithmetic average of the vesting term and the original contractual term of the option due to its lack of sufficient historical data. The risk-
free interest rates for periods within the expected term of the option are based on the US Treasury securities with a maturity date commensurate with the expected term of the
associated award. The Company has never paid and does not expect to pay dividends in the foreseeable future. The Company accounts for forfeitures when they occur. Stock-
based compensation expense recognized in the financial statements is reduced by the actual awards forfeited.
Compensation cost for RSUs issued to employees and non-employees is measured using the grant date fair value of the award, and expense is recognized over the service
period, adjusted to reflect actual forfeitures.
INCOME TAXES
The Company accounts for income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis and tax carryforwards. Deferred tax assets and
liabilities are
F-9
measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
A valuation allowance is established to reduce net deferred tax assets to the amount expected to be realized The Company recognizes the effect of income tax positions only if
those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being
recognized. Changes in recognition and measurement are reflected in the period in which the change in judgment occurs. Interest and penalties related to unrecognized tax
benefits are included in income tax expense.
NET LOSS PER COMMON SHARE
Basic net loss per share excludes the effect of dilution and is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares
of common stock outstanding.
Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options and warrants to the extent dilutive. Basic net loss per
share was the same as diluted net loss per share for the years ended December 31, 2023 and 2022 as the inclusion of all potential common shares outstanding would have an
anti-dilutive effect.
As of December 31, 2022, the penny warrants issued during 2019 have been excluded from the net loss per common share calculation following treatment of contingently
issuable shares as there are circumstances under which these shares would not be issued and therefore not exercisable. These warrants expired as unissued in February 2023.
In accordance with ASC 260-10-45-13, exercisable penny options are included in the calculation of weighted average basic and diluted earnings per share. As of December 31,
2023, and 2022, 176,674 and 175,958 penny options have been included in the calculation of weighted average basic and diluted earnings per share.
The following is a summary of awards outstanding as of December 31, 2023 and 2022, which are not included in the computation of basic and diluted weighted average shares:
Stock options (excluding exercisable penny stock options)
Restricted stock units
Warrants
Total
RECENTLY ISSUED ACCOUNTING STANDARDS
Not Yet Adopted as of December 31, 2023:
Year ended December 31,
2023
2022
5,915,851
217,881
5,152,397
11,286,129
2,020,819
253,970
3,908,276
6,183,065
In November 2023, the Financial Standards Accounting Board (FASB) issued Accounting Standards Update (ASU) 2023-07 "Segment Reporting (Topic 280): Improvements to
Reportable Segment Disclosures" which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant
segment expenses. ASU 2023-07 is effective for our annual periods beginning January 1, 2024, and for interim periods beginning January 1, 2025, with early adoption
permitted. We do not expect that the updated standard will have a rather significant impact on our financial statement disclosures
In December 2023, the FASB issued ASU 2023-09 "Income Taxes (Topics 740): Improvements to Income Tax Disclosures" to expand the disclosure requirements for income
taxes, specifically related to the rate reconciliation and income taxes paid. ASU 2023-09 is effective for our annual periods beginning January 1, 2025, with early adoption
F-10
permitted. We are currently evaluating the potential effect that the updated standard will have on our financial statement disclosures.
Adopted as of December 31, 2023:
In June 2016, the FASB issued ASU 2016-13 “Financial Instruments-Credit Losses-Measurement of Credit Losses on Financial Instruments”. This guidance replaces the
current incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and
supportable information to inform credit loss estimates. The guidance applies to loans, accounts receivable, trade receivables and other financial assets measured at amortized
cost, loan commitments, debt securities and beneficial interests in securitized financial assets, but the effect on the Company is projected to be limited to accounts receivable. In
May 2019, the FASB issued ASU 2019-05 “Financial Instruments-Credit Losses (Topic 326)” which provides transition relief for companies adopting ASU 2016-13. This
guidance amends ASU 2016-13 to allow companies to elect, upon adoption of ASU 2016-13, the fair value option on financial instruments that were previously recorded at
amortized cost under certain circumstances. Companies are required to make this election on an instrument by instrument basis. The guidance is effective for the fiscal year
beginning January 1, 2023, including interim periods within that year. The Company has adopted this guidance and it had an immaterial impact on Company’s accounting.
NOTE 4 – STOCKHOLDERS’ EQUITY
On November 14, 2022 the Company held a Special Meeting of Stockholders (“Special Meeting”), wherein the stockholders of the Company approved an amendment to the
Company’s Certificate of Incorporation (“Certificate of Incorporation”) to increase the number of authorized shares of the Company’s common stock, par value $ 0.0001 per
share (“Common Stock”) to 100,000,000, and to authorize 10,000,000 shares of the Company’s preferred stock. The amendment to the Certificate of Incorporation became
effective upon filing with, and acceptance for record by, the Secretary of State of Delaware on November 16, 2022.
COMMON STOCK
On January 14, 2022, the Company issued 78,025 shares of Common Stock to a consulting firm for services provided that were related to the IPO. The Company calculated the
value of the common stock using closing stock price on November 11, 2022, resulting in a fair value of approximately $365,000. Additionally, the Company was required to
issue 72,727 warrants based on performance metrics achieved in 2021, the warrants have an exercise price of $5.50 with an expiration of five years from the date of issuance.
The Company calculated the fair value of $1.25 each for these warrants using the Black-Scholes option pricing model on the date the consulting firm achieved the milestone,
using the following assumptions: (a) fair value of $2.28 per share, (b) expected volatility of 90.81%, (c) dividend yield of 0%, (d) risk-free interest rate of 0.87%, and (e)
expected life of 5 years, resulting in the fair value of approximately $91,000.
On February 18, 2022, the Company entered into a stock purchase agreement (“Stock Purchase Agreement”) pursuant to which the Company agreed to issue and sell (“Private
Placement”) to OpenSky Opportunities Fund Ltd. 58,000 shares of common stock par value $0.0001 and 58,000 warrants to purchase one share of common stock at a
combined price of $6.00 per share. The common stock and the warrants were immediately separable and issued separately but were purchased together in the Private Placement.
These securities issued pursuant to the Stock Purchase Agreement. The Company received $348,000 in proceeds from the Private Placement. The Warrants will expire five
years from the date of issuance. The Company paid no underwriting discounts or commissions.
On May 2, 2023, the Company entered into a Securities Purchase Agreement with an accredited investor, for the purchase and sale in a registered direct offering of 1,000,000
shares of the Company’s common stock at a price of $1.50 per share, generating net proceeds from the offering of approximately $1.1 million after deducting financial advisory
and legal fees as well as other estimated offering expenses.
On April 20, 2023, the Company entered into a Placement Agency Agreement with Public Ventures, LLC to consummate an offering of 16,666,666 shares of Common Stock at
an offering price of $1.50 per share, which closed in accordance with the subscription agreement dated May 2, 2023. The Company received $23.2 million in net proceeds from
the offering after deducting placement agent discounts and commission and other estimated offering expenses payable by the Company. In
addition, the subscription agreement grants placement agent warrants as part of this transaction. See Warrants section below.
F-11
On February 2, 2023, the Company entered into a securities purchase agreement and a note purchase agreement (“SPA”, NPA” or together “Agreements”) with Maverick
Capital Partners, LLC (“Investor”). Pursuant to the terms of the Agreements, as amended, the Company agreed to sell up to $ 4,000,000 of the Company’s common stock at 75%
of the average calculated Volume Weighted Average Price per share.
On February 28, 2023, the Company issued a $500,000 Convertible Note to the Investor pursuant to the NPA. On March 9, 2023, the Convertible Note was settled upon the
execution of the SPA and related issuance of 200,105 shares of common stock pursuant to the SPA draw down notice dated March 9, 2023. These shares of common stock were
registered under the Company’s registration statement on Form S-3 dated February 10, 2023 and the related prospectus supplement dated March 9, 2023, whereby, the
Company received total proceeds of $500,000. These were the only transactions consummated under the SPA and NPA and the respective agreements expired on May 31 2023.
On February 1, 2023, the Company entered into an At-the-Market Sales Agreement (“ATM” or “Sales Agreement”) with A.G.P./ Alliance Global Partners as placement agent,
to issue and sell shares of the Company’s common stock. The issuance and sale of shares of Common Stock to or through the placement agent are effected pursuant to the
Registration Statement dated February 2, 2023. The Company shall pay to the sales agent in cash, upon each sale of placement shares through the placement agent pursuant to
the Sales Agreement, an amount equal to 3.00% of the aggregate gross proceeds from each sale of placement shares. In connection to the Sales Agreement, on February 17,
2023 and February 22, 2023, the Company sold 6,184 shares at $3.76 per share for gross proceeds of approximately $23,000. A s of December 31, 2023 there was
approximately $11.0 million available for issuance under the ATM.
Total stock issuance costs, which consist primarily of legal, accounting and underwriting fees in connection with the above stated transactions related to the offerings and SPA
was approximately $174,000, which as of December 31 2023, was recorded in additional paid in capital.
During the years ended December 31, 2023 and 2022 the Company issued 439,042 and 63,806 shares of common stock upon exercise of vested stock options and vesting of
restricted stock units.
WARRANTS
During 2019, milestone warrants were issued to certain executives totaling 407,272 warrants (“Penny Warrants”). These warrants were valued on the date of grant at $0.0003 to
vest upon meeting certain milestones. These warrants expired unissued in February 2023.
On January 14, 2022, the Company issued 72,727 warrants based on performance metrics achieved in 2021 to purchase 72,727 shares of common stock at an exercise price of
$5.50 per share, with an expiration of five years from the date of issuance.
On February 28, 2022, the Company issued 58,000 warrants to purchase 58,000 shares of common stock at an exercise price of $6.00 per share.
On May 2, 2023 the Company issued 1,666,666 placement agent warrants to purchase shares of Common Stock sold in the offering, with an exercise price of $1.875 per share
and are exercisable for five years from the date of issuance.
During the year ended December 31, 2023, 11,638 warrants were exercised, of which 5,817 were exercised in the form of a cashless exercise utilizing 4,346 warrants which
resulted in the net issuance of 1,471 common shares. The remaining 5,821 warrants were exercised for cash for approximately $16,000.
F-12
A summary of the outstanding warrants as of December 31, 2023 and 2022 is as follows:
Number of
shares
Weighted
average exercise
price
Weighted
average
remaining life (years)
Outstanding and exercisable - December 31, 2021
Exercised
Issued
Outstanding - December 31, 2022
Issued
Exercised
Expired
Outstanding and exercisable - December 31, 2023
NOTE 5 – STOCK-BASED COMPENSATION
3,777,549 $
—
130,727 $
3,908,276 $
1,666,666
(11,638) 0
(410,907)
5,152,397 $
5.42
—
5.72
5.42
1.88
2.75
—
4.71
Aggregate intrinsic
value (in thousands)
1,259
—
—
2,020
—
—
—
792
4.45 $
—
—
3.47 $
—
—
—
3.35 $
In 2015, the Company’s Board of Directors approved the HeartBeam, Inc. 2015 Equity Incentive Plan ("2015 Plan"), to attract and retain the best available personnel for
positions of substantial responsibility, to provide additional incentive to employees, directors, and consultants, and to promote the success of the Company’s business. The 2015
Plan provides for the grant of stock options and RSU’s to purchase common stock of which 1,636,362 were authorized by the board of which 970,704 are outstanding as of
December 31, 2023. The 2015 Plan was terminated upon shareholder approval of the 2022 Equity Incentive Plan (“2022 Equity Plan”) whereby no new awards can be issued
under the 2015 Plan.
The Company’s shareholders approved the 2022 Equity Plan at the annual meeting of stockholders held on June 15, 2022, pursuant to which 1,900,000 shares of common stock
were authorized for issuance. Under the 2022 Equity Plan, the number of shares available for issuance will be increased on the first day of each fiscal year beginning with the
2023 fiscal year, in an amount equal to the lesser of 3,800,000 shares, five percent (5%) of the total number of shares of all classes of common stock of the Company
outstanding on the last day of the immediately preceding fiscal year, and a lesser number of shares determined by the administrator. On January 1, 2023 400,487 shares,
equivalent to five percent (5%) of common stock outstanding were added to the shares available for issuance under the 2022 Equity Plan. Also see Note 9- Subsequent event
section below.
At the July 7, 2023, Annual Shareholders’ Meeting, the proposal to amend the 2022 Equity Incentive Plan to increase the number of authorized shares from 1,900,000 shares to
5,900,000 shares was approved.
The 2022 Equity Plan includes a provision to add-back any cancelled options from the 2015 Plan up to 1,372,816 shares. As of December 31, 2023, there are 252,856 shares
from the 2015 Plan that are included in the 849,171 shares available for issuance under the 2022 Equity Plan.
During 2023, the Company granted 2,208,000 options to various executives and employees. Sixty percent (60%) of these options vest based on FDA Clearance for marketing of
HeartBeam’s synthesized 12L product and the remaining forty percent (40%) vest monthly over a period of 48 months. The Company calculated the fair value for each of these
grants using the Black-Scholes option pricing model and it is expensed based on management’s probability assessment of FDA clearance. The 60% milestone options are issued
and outstanding as of December 31, 2023.
The Company received proceeds of $0.2 million from the exercise of stock options during the year ended December 31, 2023 and a de minimis amount during the year ended
December 31, 2022.
F-13
STOCK OPTIONS
The following is a summary of stock option activity during the years ended December 31, 2023 and 2022:
Outstanding – December 31, 2021
Options granted
Forfeitures
Options exercised
Outstanding – December 31, 2022
Options granted
Forfeitures
Options exercised
Outstanding – December 31, 2023
Exercisable – December 31, 2023
Number of
options
outstanding
Weighted
average
exercise
price
Average
remaining
contractual life
(in years)
Aggregate
intrinsic value
(in thousands)
(*)
1,105,938 $
1,251,000
(121,334)
(38,806)
2,196,798 $
4,363,800
(288,001)
(180,072)
6,092,525
1,212,312 $
2.03
1.70
2.98
—
1.76
2.42
2.48
1.19
2.22
1.78
8.8 $
1,535
8.7 $
6,770
8.7 $
7.4 $
2,945
1,203
(*) Intrinsic value is based on the fair market value of the Company's common stock.
The Company estimates the fair values of stock options using the Black-Scholes option-pricing model on the date of grant. For the years ended December 31, 2023 and 2022,
the assumptions used in the Black-Scholes option pricing model, which was used to estimate the grant date fair value per option, were as follows:
Weighted-average Black-Scholes option pricing model assumptions:
Volatility
Expected term (in years)
Risk-free rate
Expected dividend yield
Weighted average grant date fair value per share
Year ended December 31,
2023
2022
110.23% - 117.62%
5.85 - 6.07
3.54% - 4.77%
— $
$1.75 - 3.38
107.25% - 111.06%
5.62 - 5.94
1.47% - 3.17%
—
$1.08 - 3.34
$
F-14
RESTRICTED STOCK UNITS
The following is a summary of RSUs award activity:
Non-vested at beginning of the year
Shares granted
Shares vested
Non-vested at end of year
STOCK BASED COMPENSATION
The following is a summary of stock-based compensation expense:
General and administration
Stock options
RSUs
Total general and administration
R&D
Stock options
RSUs
Total R&D
Total stock based compensation
Year ended December 31,
2023
2022
Number of Shares
Weighted Average
Grant Date Fair
Value
Number of Shares
Weighted Average
Grant Date Fair
Value
253,970 $
222,881
(258,970)
217,881 $
1.47
3.11
1.48
3.12
30,000 $
248,970
(25,000)
253,970 $
3.20
1.36
2.46
1.47
Year ended December 31,
2023
2022
$
$
2,069,556 $
488,971
2,558,527
629,092
20,457
649,549
3,208,076 $
657,368
235,035
892,403
213,813
13,601
227,414
1,119,817
As of December 31, 2023 total compensation cost not yet recognized related to unvested stock options and unvested RSUs was approximately $8.1 million and $0.4 million,
respectively, which is expected to be recognized over a weighted-average period of 2.66 years and 1.2 years, respectively.
NOTE 6 – RELATED PARTY TRANSACTIONS
During the course of business, the Company obtains accounting services from CTRLCFO, a firm in which the Company’s former Chief Financial Officer has significant
influence. The Company incurred accounting fees from these firms of approximately $20,000 and $21,000 during the years ended December 31, 2023 and 2022, respectively.
As of December 31, 2023 and 2022, the Company had balances due to these firms amounting to approximately $2,000.
NOTE 7 – COMMITMENTS
Lease Obligations
In May 2019, the Company entered into a month to month lease agreement for our headquarters. The agreement is for an undefined term and can be cancelled at any time, given
one month’s notice by either party. The Company’s monthly rent expense associated with this agreement is approximately $1,440. The Company’s month to month headquarters
lease is in the name of the Company’s Chief Executive Officer, and the cost is reimbursed monthly.
F-15
For the years ended December 31, 2023 and 2022, rent expense was approximately $17,000, for each year.
Partnership Agreement
In January 2022, the Company entered into a partnership agreement with LIVMOR Inc. (“LIVMOR”) to build a Company-branded version of the LIVMOR’s Halo+ FDA
cleared turnkey solution for RPM to connect physicians and patients. As included in the agreement, the Company and LIVMOR have the right to enter into additional
agreements as needed in order to further the Company’s development of its products. The agreement with LIVMOR included a commitment in 2022 of $1.0 million.
In August 2022, the Company entered into a supplemental agreement with LIVMOR. The supplemental agreement stated the Company would pay an additional $0.2 million for
the source code access under the partnership agreement. Payments totaling $0.2 million have been made by the Company and LIVMOR has delivered to the Company copies of
source materials and codes. All licenses granted by LIVMOR will automatically be converted into a non-exclusive and perpetual license and become licenses granted on a
royalty-free and fully paid-up basis, in which LIVMOR hereby expressly waives and relinquishes all HeartBeam payment obligations under the initial partnership agreement.
Based on management’s review of Topic ASC 805 and 730, it was determined that only the source code and perpetual license were purchased and it was determined there was
no alternative future uses, therefore management recorded the expense as research and development expense.
As of December 31, 2022, the Company expensed a total of $1.2 million associated with the LIVMOR agreements, which
has been recognized as R&D expense. In February 2023, the Company acquired LIVMOR’s Halo+™ Atrial Fibrillation Detection System, the world’s first FDA-cleared
(K201208) prescription wearable for continuous cardiac rhythm monitoring, comprising of intellectual property, including 3 issued United States patents.
Professional Services Agreement
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 Triple Ring includes a commitment totaling $1.7 million.
As of December 31, 2023 the Company has a remaining commitment of $0.4 million.
F-16
NOTE 8 - INCOME TAX
Income tax expense attributable to pretax loss from continuing operations differed from the amounts computed by applying the U.S. federal income tax rate of 21% to pretax
loss from continuing operations as a result of the following:
For the Years ended December 31,
2023
2022
Computed “expected” tax benefit
(3,074,000)
21.00 %
(2,722,000)
21.00 %
Increase (reduction) in income taxes resulting from):
State tax, net of federal benefit
Permanent items
Stock-based compensation
Research and development credits
Other
Change in valuation allowance
Total
—
(80,500)
221,200
(241,800)
130,600
3,044,500
—
— %
0.55 %
(1.51)%
1.65 %
(0.89)%
(20.80)%
— %
(1,024,900)
—
(224,100)
(2,000)
3,973,000
—
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and liabilities are presented below as of December 31:
7.95 %
— %
1.70 %
— %
(30.65)%
— %
4,115,800
377,200
349,900
1,032,700
172,100
6,047,700
2023
2022
$
5,799,000 $
619,000
647,000
2,027,200
—
9,092,200
(9,092,200)
(6,047,700)
—
—
Deferred tax assets (liabilities):
Net operating loss carryforwards
Research and development credits
Stock based compensation
Sec. 174
Other
Total deferred tax assets
Valuation Allowance
Net Deferred Tax Assets
Realization of deferred tax assets is dependent upon future earnings, if any, the timing and amount of which are uncertain. Accordingly, the net deferred tax assets have been
fully offset by a valuation allowance. The valuation allowance increased by approximately $3,044,500 for the period ended December 31, 2023.
As of December 31, 2023, the Company had federal and state net operating loss (“NOL”) carryforwards of approximately $21,496,500 and $18,394,200, respectively. The
federal NOL carryforwards consist of $2,405,400 generated prior to 2018 which will begin to expire in 2035, however, are able to offset 100% of taxable income and
$19,091,000 generated after December 31, 2017 that will carryforward indefinitely but will be subject to 80% taxable income limitation beginning tax years after December 31,
2021 as provided by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act (PL 116-136).
The Company has federal R&D credit carryforwards of approximately $617,000 which will begin to expire in 2041 and state R&D credit carryforwards of approximately
$338,400 which do not expire.
The utilization of NOLs and tax credit carryforwards to offset future taxable income may be subject to an annual limitation as a result of ownership changes that have occurred
previously or may occur in the future. Under Sections 382 and 383 of the Internal Revenue Code (“IRC”) a corporation that undergoes an ownership change may be subject to
limitations on its
F-17
ability to utilize its pre-change NOLs and other tax attributes otherwise available to offset future taxable income and/or tax liability. An ownership change is defined as a
cumulative change of 50% or more in the ownership positions of certain stockholders during a rolling three-year period. The Company has not completed a formal study to
determine if any ownership changes within the meaning of IRC Section 382 and 383 have occurred. If an ownership change has occurred, the Company’s ability to use its
NOLs or tax credit carryforwards may be restricted, which could require the Company to pay federal or state income taxes earlier than would be required if such limitations
were not in effect.
Effective for tax years beginning after December 31, 2021, taxpayers are required to capitalize any expenses incurred that are considered incidental to research and
experimentation (“R&E”) activities under IRC Section 174. While taxpayers historically had the option of deducting these expenses under IRC Section 174, the December 2017
Tax Cuts and Jobs Act mandates capitalization and amortization of R&E expenses for tax years beginning after December 31, 2021. Expenses incurred in connection with R&E
activities in the US must be amortized over a 5-year period if incurred, and R&E expenses incurred outside the US must be amortized over a 15-year period. R&E activities are
broader in scope than qualified research activities considered under IRC Section 41 (relating to the research tax credit). For the years ended December 31, 2023 and December
31, 2022, the Company performed an analysis based on available guidance and determined that it will continue to be in a loss position even after the required capitalization and
amortization of its R&E expenses. The Company will continue to monitor this issue for future developments, but it does not expect R&E capitalization and amortization to
require it to pay cash taxes now or in the near future.
The total amount of unrecognized tax benefits as of December 31, 2023 is approximately $286,600, which relates to federal and state R&D credits. If recognized none of the
unrecognized tax benefits would affect the effective tax rate.
The Company's policy is to account for interest and penalties as income tax expense. As of the December 31, 2023 the Company had no interest related to unrecognized tax
benefits. No amounts of penalties related to unrecognized tax benefits were recognized in the provision for income taxes. We do not anticipate any significant change within
twelve months of this reporting date.
The Company files income tax returns in the U.S. federal jurisdiction and various state jurisdictions, with varying statutes of limitations. The tax years from inception through
2023 remain open to examination due to the carryover of unused net operating losses that are being carried forward for tax purposes.
In August 2022, the U.S. Inflation Reduction Act of 2022 and the CHIPS and Science Act of 2022 were signed into law. These acts include, among other provisions, a corporate
alternative minimum tax of 15%, an excise tax on the repurchase of corporate stock, various climate and energy provisions, and incentives for investment in semiconductor
manufacturing. These provisions are not expected to have a material impact on the Company’s results of operations or financial position.
NOTE 9 - SUBSEQUENT EVENTS
1. Under the 2022 Equity Plan, the number of shares available for issuance are increased on the first day of each fiscal year beginning with the 2023 fiscal year, in an
amount equal to the lesser of 3,800,000 shares, five percent (5%) of the total number of shares of all classes of common stock of the Company outstanding on the last day
of the immediately preceding fiscal year, and a lesser number of shares determined by the administrator. On January 1, 2024, 1,316,452 shares, equivalent to five percent
(5%) of common stock outstanding were added to the shares available for issuance under the 2022 Equity Plan.
2. On March 8, 2024, the Company has entered into an agreement with Clinical Research Organization (CRO) to perform certain services related to project set up, clinical
trial management and monitoring during next six months. As per terms of the agreement, the Company will pay CRO approximately $0.5 million for these services.
Additionally, the Company has signed a Clinical Study Agreement with first of five planned sites to carry out the clinical study for which CRO will act as Company
sponsor in relation to payment for these services. The total cost of the clinical trial including the CRO cost is expected to approximate $0.7 million.
F-18
Exhibit 23.1
Independent Registered Public Accounting Firm’s Consent
We consent to the incorporation by reference in the Registration Statements of HeartBeam, Inc. on Form S-8 (File No.’s 333-261430, 333-266114 and 333-273230) and Form
S-3 (File No. 333-269520) of our report dated March 20, 2024, which includes an explanatory paragraph as to the Company’s ability to continue as a going concern, with
respect to our audits of the financial statements of HeartBeam, Inc. as of and for the years ended December 31, 2023 and 2022, which report is included in this Annual Report
on Form 10-K of HeartBeam, Inc. for the year ended December 31, 2023.
/s/ Marcum LLP
Marcum LLP
East Hanover, New Jersey
March 20, 2024
Exhibit 31.1
I, Branislav Vajdic, certify that:
1.
I have reviewed this Annual Report on Form 10-K of HeartBeam, Inc.;
CERTIFICATION
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of
the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results
of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e)
and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material
information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in
which this report is being prepared;
b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles;
c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the
disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the
registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal
control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and
the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely
affect the registrant’s ability to record, process, summarize and report financial information; and
b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial
reporting.
Date: March 20, 2024
By: /s/ Branislav Vajdic
Branislav Vajdic
Chief Executive Officer
(Principal Executive and Accounting Officer)
CERTIFICATION
Exhibit 32.1
Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of
the United States Code (18 U.S.C. Section 1350), Branislav Vajdic, Chief Executive Officer of HeartBeam, Inc. (the “Company”), hereby certify that, to the best of his
knowledge:
1. The Company’s Annual Report on Form 10-K for the year ended December 31, 2023, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully
complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, and
2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: March 20, 2024
By: /s/ Branislav Vajdic
Branislav Vajdic
Chief Executive Officer
(Principal Executive and Accounting Officer)
HeartBeam, Inc. Compensation Recovery Policy
Exhibit 97.1
1. Purpose. The purpose of this Compensation Recovery Policy of the Company (as amended from time to time, the “Policy”), dated as of November 30, 2023 to describe the
circumstances in which current and former Executive Officers will be required to repay or return Erroneously Awarded Compensation to members of the Company Group.
The Company has adopted this Policy to comply with Section 954 of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, as codified by Section 10D
of the Exchange Act, Exchange Act Rule 10D-1 promulgated thereunder, and the rules and requirements of Nasdaq (including Nasdaq Listing Rule 5608) (such legal
requirements, and rules and requirements of Nasdaq, collectively, the “SEC/Nasdaq Clawback Rules”). Each Executive Officer shall be required to sign and return to the
Company the form of acknowledgment to this Policy in the form attached hereto as Exhibit A pursuant to which such Executive Officer will agree to be bound by the terms
and comply with this Policy.
2. Administration. This Policy shall be administered by the Committee. The Committee is authorized to interpret and construe this Policy and to make all determinations
necessary, appropriate, or advisable for the administration of this Policy, and any such determinations made by the Committee shall be in the Committee’s sole discretion and
shall be final and binding on all affected individuals. Except as otherwise required by applicable legal requirements or the rules and requirements of Nasdaq, any
determinations of the Committee hereunder need not be uniform with respect to one or more Executive Officers (whether current and/or former).
3. Definitions. For purposes of this Policy, the following capitalized terms shall have the meanings set forth below:
(a) “Accounting Restatement” shall mean an accounting restatement due to the material noncompliance of the Company with any financial reporting requirement under the
securities laws, including any required accounting restatement (i) to correct an error in previously issued financial statements (a “Big R” restatement) that is material to the
previously issued financial statements, or (ii) that would result in a material misstatement if the error were corrected in the current period or left uncorrected in the current
period (a “little r" restatement).
(b) “Board” shall mean the Board of Directors of the Company.
(c) “Clawback Eligible Incentive Compensation” shall mean all Incentive-Based Compensation Received by any current or former Executive Officer on or after the Nasdaq
Effective Date, provided that:
(i) such Incentive-Based Compensation is Received after such individual began serving as an Executive Officer;
(ii) such individual served as an Executive Officer at any time during the performance period for such Incentive-Based Compensation;
(iii) such Incentive-Based Compensation is Received while the Company has a class of securities listed on Nasdaq; and
(iv) such Incentive-Based Compensation is Received during the applicable Clawback Period.
(d) “Clawback Period” shall mean, with respect to any Accounting Restatement, the three completed fiscal years of the Company immediately preceding the Restatement Date
and any transition period (that results from a change in the Company’s fiscal year) of less than nine months within or immediately following those three completed fiscal
years.
(e) “Committee” shall mean the Compensation Committee of the Board.
(f) “Common Stock” shall mean the common stock, par value $0.001 per share, of the Company.
(g) “Company” shall mean HeartBeam, Inc., a Delaware corporation.
(h) “Company Group” shall mean the Company, together with each of its direct and indirect subsidiaries.
(i) “Erroneously Awarded Compensation” shall mean, with respect to any current or former Executive Officer in connection with any Accounting Restatement, the amount of
Clawback Eligible Incentive Compensation Received by such current or former Executive Officer that exceeds the amount of Clawback Eligible Incentive Compensation that
otherwise would have been Received by such current or former Executive Officer had such Clawback Eligible Incentive Compensation been determined based on the restated
amounts as reflected in connection with such
1
Accounting Restatement, taking into account any discretion that the Committee had applied to determine the amount of Clawback Eligible Incentive Compensation originally
Received and computed without regard to any taxes paid.
(j) “Exchange Act” means the Securities Exchange Act of 1934, as amended.
(k) “Executive Officer” shall mean any officer as defined in Rule 10D-1(d) (or any successor provision thereof) under the Exchange Act.
(l) “Financial Reporting Measures” shall mean measures that are determined and presented in accordance with the accounting principles used in preparing the Company’s
financial statements, and any other measures that are derived wholly or in part from such measures. For purposes of this Policy, stock price and total shareholder return (and
any measures that are derived wholly or in part from stock price or total shareholder return) shall be considered Financial Reporting Measures. For the avoidance of doubt, a
Financial Reporting Measure need not be presented within the Company’s financial statements or included in a filing with the SEC.
(m) “Incentive-Based Compensation” shall mean any compensation that is granted, earned or vested based wholly or in part upon the attainment of a Financial Reporting
Measure.
(n) “Nasdaq” shall mean the Nasdaq Stock Market.
(o) “Nasdaq Effective Date” shall mean October 2, 2023 (which is the effective date of the final Nasdaq listing standards).
(p) “Received” shall mean when Incentive-Based Compensation is received, and Incentive-Based Compensation shall be deemed received in the Company’s fiscal period
during which the Financial Reporting Measure specified in the Incentive-Based Compensation award is attained, even if payment or grant of the Incentive-Based
Compensation occurs after the end of that period.
(q) “Restatement Date” shall mean the earlier to occur of (i) the date the Board, a committee of the Board or the officers of the Company authorized to take such action if
Board action is not required, concludes, or reasonably should have concluded, that the Company is required to prepare an Accounting Restatement, or (ii) the date a court,
regulator or other legally authorized body directs the Company to prepare an Accounting Restatement.
(r) “SEC” shall mean the U.S. Securities and Exchange Commission.
4.
Recovery of Erroneously Awarded Compensation.
(a) In the event that the Company is required to prepare an Accounting Restatement, (i) the Committee shall determine the amount of any Erroneously Awarded
Compensation for each applicable current or former Executive Officer (whether or not such individual is serving as an Executive Officer at such time) (the “Applicable
Executives”) in connection with such Accounting Restatement, and (ii) the Company will reasonably promptly require the recovery of such Erroneously Awarded
Compensation from any such Applicable Executive, and any such Applicable Executive shall surrender such Erroneously Awarded Compensation to the Company, at such
time(s), and via such method(s), as determined by the Committee in accordance with the terms of this Policy.
(b) For Incentive-Based Compensation based on (or derived from) stock price or total shareholder return where the amount of Erroneously Awarded Compensation is not
subject to mathematical recalculation directly from the information in the applicable Accounting Restatement, (i) such amount shall be determined by the Committee based on
a reasonable estimate of the effect of the Accounting Restatement on the stock price or total shareholder return upon which the Incentive-Based Compensation was Received,
and (ii) the Company will maintain documentation of the determination of that reasonable estimate and provide such documentation to Nasdaq.
(c) The Committee shall determine, in its sole discretion, the method(s) for recovering any Erroneously Awarded Compensation from any Applicable Executive, which may
include one or more of the following:
(i) requiring one or more cash payments to the Company Group from such Applicable Executive, including, but not limited to, the repayment of cash Incentive-Based
Compensation previously paid by the Company Group to such Applicable Executive;
(ii) seeking recovery of any gain realized on the vesting, exercise, settlement, sale, transfer or other disposition of any equity-based awards previously made by the Company
to such Applicable Executive and/or, subject to applicable legal requirements, otherwise requiring the delivery to the Company of shares of Common Stock held by such
Applicable Executive;
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(iii) withholding, reducing or eliminating future cash compensation (including cash incentive payments), future equity awards and/or other benefits or amounts otherwise to be
paid or awarded by the Company Group to such Applicable Executive;
(iv) offsetting amounts against compensation or other amounts otherwise payable by the Company Group to any Applicable Executive;
(v) cancelling, adjusting or offsetting against some or all outstanding vested or unvested equity awards of the Company held by such Applicable Executive; and/or
(vi) taking any other remedial and recovery actions with respect to such Applicable Executive permitted by applicable legal requirements and the rules and regulations of
Nasdaq, as determined by the Committee.
(d) Notwithstanding anything herein to the contrary, the Company shall not be required to recover Erroneously Awarded Compensation from any Applicable Executive
pursuant to the terms of this Policy if both (1) the Committee determines that such recovery would be impracticable, and (2) any of the following conditions is met:
(i) the direct expenses paid to a third party to assist in enforcing the Policy would exceed the amount to be recovered, provided that, before concluding that it would be
impracticable to recover any amount of Erroneously Awarded Compensation based on expense of enforcement pursuant to this clause (i), the Company has (x) made a
reasonable attempt to recover such Erroneously Awarded Compensation, (y) documented such reasonable attempt(s) to recover, and (z) provided such documentation to
Nasdaq;
(ii) recovery would violate home country law where that law was adopted prior to November 28, 2022, provided that, before determining that it would be impracticable to
recover any amount of Erroneously Awarded Compensation based on violation of home country law, the Company has obtained an opinion of home country counsel,
acceptable to Nasdaq, that recovery would result in such a violation, has provided copy of the opinion is provided to Nasdaq; or
(iii) recovery would likely cause an otherwise tax-qualified retirement plan, under which benefits are broadly available to employees of the Company Group, to fail to meet
the requirements of 26 U.S.C. 401(a)(13) or 26 U.S.C. 411(a) and regulations thereunder.
5. No Indemnification, Etc. The Company Group shall not (x) indemnify any current or former Executive Officer against (i) the loss of any Erroneously Awarded
Compensation that is repaid, returned or recovered pursuant to the terms of this Policy, or (ii) any claims relating to the Company Group’s enforcement of its rights under this
Policy, or (y) pay or reimburse any current or former Executive Officers for insurance premiums to recover losses incurred under this Policy.
6. Supersedure. This Policy will supersede any provisions in (x) any agreement, plan or other arrangement applicable to any member of the Company Group, and (y) any
organizational documents of any entity that is part of Company Group that, in any such case, (a) exempt any Incentive-Based Compensation from the application of this
Policy, (b) waive or otherwise prohibit or restricts the Company Group’s right to recover any Erroneously Awarded Compensation, including, without limitation, in
connection with exercising any right of setoff as provided herein, and/or (c) require or provide for indemnification to the extent that such indemnification is prohibited under
Section 5 above.
7. Amendment; Termination; Interpretation. The Committee may amend or terminate this Policy at any time, subject to compliance with all applicable legal requirements
and the rules and requirements of Nasdaq. It is intended that this Policy be interpreted in a manner that is consistent with the SEC/Nasdaq Clawback Rules. This Policy is
separate from, and in addition to, any other compensation recovery or recoupment policy of the Company or any applicable provisions of plans, agreements, awards or other
arrangements of the Company that provide for the recoupment or recovery of compensation from Executive Officers that is voluntarily adopted by the Company and intended
to provide for discretionary recoupment beyond the scope of this Policy and the SEC/Nasdaq Clawback Rules.
8. Other Recoupment Rights; No Additional Payments.
(a) Subject to Section 8(b) of this Policy below, any right of recoupment under this Policy is in addition to, and not in lieu of, any other remedies or rights of recoupment that
may be available to the Company Group pursuant to (i) the terms of any recoupment provisions in any employment agreement, incentive or equity compensation plan or
award or other agreement, (ii) any other legal requirements, including, but not limited to, Section 304 of Sarbanes-Oxley Act of 2002, and (iii) any other legal rights or
remedies available to the Company.
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(b) Notwithstanding anything herein to the contrary, to prevent duplicative recovery:
(i) to the extent that the amount of any Erroneously Awarded Compensation is recovered from any current or former Executive Officers under this Policy, the Company will
not be entitled to recover any such amounts under any other compensation recovery or recoupment policy of the Company or any applicable provisions of plans, agreements,
awards or other arrangements of the Company that provide for the recoupment or recovery of compensation from Executive Officers; and
(ii) to the extent that any Erroneously Awarded Compensation includes any amounts that have been actually reimbursed to the Company Group from any Applicable
Executive pursuant to Section 304 of the Sarbanes-Oxley Act (any such amounts that have been reimbursed to the Company Group, the “ Applicable SOX Recoupment
Amount”), the amount of any Erroneously Awarded Compensation to be recovered from any such Applicable Executive shall be reduced by the Applicable SOX Recoupment
Amount.
9. Successors. This Policy shall be binding and enforceable against all current and former Executive Officers and their beneficiaries, heirs, executors, administrators or other
legal representatives.
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Exhibit A
Form of Acknowledgement
By signing below, the undersigned acknowledges and confirms that the undersigned has received and reviewed a copy of the HeartBeam, Inc. Compensation Recovery
Policy (such policy, as amended from time to time, the “Policy”). Capitalized terms used but not otherwise defined in this acknowledgement shall have the meanings ascribed
to such terms in the Policy.
By signing this acknowledgement, the undersigned acknowledges and agrees that the undersigned is and will continue to be subject to the Policy and that the Policy will
apply both during and after the undersigned’s employment with the Company Group. Further, by signing below, the undersigned agrees to abide by the terms of the Policy,
including, without limitation, by returning any Erroneously Awarded Compensation to the Company group to the extent required by the Policy.
Signature
Print Name
Date
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