10-K: HeartSciences Faces Going Concern Doubts Amidst Increased Losses and Nasdaq Compliance Challenges

HeartSciences Inc. reported a significant increase in net losses for fiscal year 2025, raising substantial doubt about its ability to continue as a going concern, while actively pursuing FDA clearances for its AI-ECG devices and addressing Nasdaq listing requirements.

Summary

• HeartSciences Inc. is a medical technology company focused on applying AI-based technology to ECGs to expand their clinical usefulness for detecting heart disease.
• The company's primary products, the MyoVista wav ECG device and MyoVista Insights Cloud Platform, are not yet cleared for marketing by the FDA.
• Net loss for fiscal year 2025 increased by 33% to $8.765 million, up from $6.605 million in fiscal year 2024.
• Revenue significantly decreased to $4,000 in fiscal year 2025 from $19,000 in fiscal year 2024, primarily from international distributor relationships during product development.
• Research and Development (R&D) expenses rose by 52% to $4.386 million in fiscal year 2025, driven by $1.2 million in consulting costs for the MyoVista Insights Cloud Platform and increased personnel for FDA submission.
• Selling, General, and Administrative (SG&A) expenses increased by 15% to $3.969 million in fiscal year 2025, largely due to $611,000 in legal and accounting fees related to the withdrawal of an S-1/A registration statement.
• Cash and cash equivalents decreased significantly to $1.1 million as of April 30, 2025, from $5.8 million as of April 30, 2024.
• The company had an accumulated deficit of $76.1 million and a working capital deficit of $1.5 million as of April 30, 2025.
• An independent registered public accounting firm issued an opinion with an explanatory paragraph regarding substantial doubt about the company's ability to continue as a going concern.
• The company regained compliance with Nasdaq's minimum bid price requirement after a 1-for-100 reverse stock split in May 2024, but received a non-compliance notice for minimum stockholders' equity ($1.787 million vs. $2.5 million required) in March 2025, with an extension to September 15, 2025.
• HeartSciences holds 8 utility patents, 1 design patent, 1 patent allowance, 14 international design registrations, and 18 international utility patents, with expiration dates ranging from March 2031 to August 2040.
• The company entered into license agreements with Icahn School of Medicine at Mount Sinai in September 2023 to commercialize 13 AI cardiovascular algorithms, 2 data science methods, and 3 filed patents.
• Breakthrough Device designation was received from the FDA in June 2025 for the aortic stenosis algorithm licensed from Mount Sinai.

Sentiment

Score: 3

Explanation: The company faces significant financial distress, evidenced by increased net losses, declining revenue, and a substantial decrease in cash, leading to a 'going concern' opinion from auditors. While there are positive developments in product designation and intellectual property, and ongoing capital raising efforts, the immediate financial challenges and regulatory hurdles for commercialization present a high level of risk and uncertainty.

Positives

• Received Breakthrough Device designation from the FDA in June 2025 for the aortic stenosis algorithm licensed from Mount Sinai, which could accelerate regulatory review.
• Successfully regained compliance with Nasdaq's minimum bid price requirement through a 1-for-100 reverse stock split in May 2024.
• Secured multiple intellectual property grants, including a patent from the Indian Patent Office for MyoVista wavelet technology (May 2024), a USPTO patent allowance for deep learning in LV/RV dysfunction (July 2024), and a foundational USPTO patent for echocardiography parameter estimation using ECG (June 2025).
• Entered into definitive license agreements with Icahn School of Medicine at Mount Sinai in September 2023 for 13 AI cardiovascular algorithms, expanding the product pipeline.
• Signed two initial customers as early adopters for the MyoVista Insights Cloud Platform, enabling integration and testing in clinical workflow environments.
• The MyoVista Insights Cloud Platform is designed to be ECG device agnostic, potentially allowing broader adoption without requiring replacement of existing ECG devices.

Negatives

• Experienced a significant increase in net loss to $8.765 million in fiscal year 2025 from $6.605 million in fiscal year 2024, indicating worsening financial performance.
• Revenue declined substantially to $4,000 in fiscal year 2025 from $19,000 in fiscal year 2024, reflecting minimal sales.
• Cash and cash equivalents decreased by $4.7 million to $1.1 million as of April 30, 2025, from $5.8 million as of April 30, 2024, highlighting a deteriorating liquidity position.
• The company has an accumulated deficit of $76.1 million and a working capital deficit of $1.5 million as of April 30, 2025.
• The independent auditor issued an explanatory paragraph regarding substantial doubt about the company's ability to continue as a going concern.
• Received a Nasdaq non-compliance notice in March 2025 for failing to meet the minimum stockholders' equity requirement ($1.787 million vs. $2.5 million required).
• The MyoVista wav ECG, MyoVista Insights Cloud Platform, and AI-ECG algorithms are not yet cleared for marketing by the FDA, delaying commercialization and revenue generation.
• Evaluation of alignment with newly updated LVDD guidelines by the American Society of Echocardiography may delay the planned 510(k) FDA submission for the MyoVista wav ECG in calendar 2025.
• Increased R&D expenses by 52% and SG&A expenses by 15% in fiscal year 2025, contributing to higher operating losses.

Risks

• Substantial doubt about the ability to continue as a going concern due to recurring losses, negative cash flows from operations, and limited capital resources.
• Inability to maintain compliance with Nasdaq listing requirements, potentially leading to delisting of common stock and warrants.
• Future operating results are entirely dependent on receiving FDA clearance for the MyoVista wav ECG hardware, MyoVista Insights Cloud Platform, and AI-ECG algorithms.
• Need to raise substantial additional funding, which may not be available on acceptable terms or at all, potentially leading to curtailment or discontinuation of development and operations.
• All company assets are subject to security interests, and failure to service indebtedness could result in foreclosure.
• Identified material weaknesses in internal controls, including lack of proper approval/review processes, insufficient U.S. GAAP and SEC accounting resources, and inadequate segregation of duties.
• Success is dependent upon physician acceptance of new AI-ECG algorithms and devices, which may be slow due to existing relationships, lack of clinical evidence, or required skill development.
• Inadequate coverage and reimbursement from third-party payors for AI-ECG algorithms could negatively impact revenue.
• Dependence on third-party manufacturers and suppliers makes the company vulnerable to supply shortages, increased costs, and quality/compliance issues.
• Interruptions in computing and data management cloud systems could impair the delivery of cardiac monitoring services and lead to liability.
• Proprietary data analytics engine may not operate properly, damaging reputation, leading to claims, or diverting resources.
• Medical device development is costly and subject to rapid technological change, potentially rendering products obsolete.
• Intense competition from established medical device companies with greater resources and brand recognition.
• Inability to attract and retain highly skilled managerial, scientific, technical, and marketing personnel.
• Exposure to additional business, regulatory, political, operational, financial, and economic risks from conducting business outside the U.S.
• Potential product liability, warranty, or similar claims and product recalls, which could be expensive and harm business reputation.
• Risk of computer system failures, cyber-attacks, or cybersecurity deficiencies leading to data loss, legal claims, and reputational damage.
• Impact of changes in general economic conditions, including inflation, interest rates, and geopolitical events, on funding and customer spending.
• Adverse effects from health epidemics, pandemics, or other public health crises on business, clinical trials, and global economy.
• Modifications to marketed products may require new FDA clearances, potentially leading to marketing cessation or recalls.
• Clinical studies are lengthy, expensive, and have uncertain outcomes, with potential for delays or failures in demonstrating specificity and sensitivity.
• Reliance on third parties for clinical studies and pre-clinical development poses risks if they do not perform as required.
• Failure to comply with post-marketing regulatory requirements could lead to enforcement actions, penalties, or product recalls.
• Misuse or off-label use of products could harm reputation, cause patient harm, and result in costly investigations or sanctions.
• Inability to obtain and maintain effective patent rights or protect trade secrets could hinder competition.
• Intellectual property rights of third parties could lead to litigation or costly licensing requirements.
• Claims challenging the inventorship of intellectual property could result in loss of rights or substantial costs.
• High dependence on Mount Sinai Licenses, with termination potentially preventing commercialization and imposing significant obligations.
• Future financial performance depends on successful integration, improvement, and software updates from Mount Sinai algorithms.
• Market price volatility of common stock due to various factors, including operational results, economic conditions, and analyst reports.
• Future sales and issuances of common stock or rights could dilute existing shareholders and cause stock price decline.
• Anti-takeover provisions in corporate documents and Texas law could make third-party acquisition difficult.
• FINRA sales practice requirements may limit stockholders' ability to buy and sell shares.
• If shares become subject to penny stock rules, it would become more difficult to trade them.

Future Outlook

The company's future success is dependent upon receiving FDA clearances for its products and securing additional funding for sales launch, working capital, and further R&D. It aims for an FDA submission of the MyoVista Insights Cloud Platform and low ejection fraction algorithm during the first half of calendar year 2026. The company is evaluating alignment with newly updated LVDD guidelines for its MyoVista wav ECG submission, which may impact its planned calendar 2025 submission. Management plans to raise capital through additional equity securities, debt, or strategic partnerships to fund future operations and address the going concern issue.

Management Comments

• Management believes that there is currently no low-cost, front-line, medical device effective at screening broadly for many types of heart disease, presenting a significant challenge for frontline physicians.
• Management believes that adding the capability to detect a broader range of cardiac conditions to the standard 12-lead resting ECG could help improve cardiac referral pathways and be valuable for patients, physicians, health systems, and third-party payors.
• Management believes that the combination of a device agnostic Cloud Platform and MyoVista wav ECG device would allow the company to offer AI-ECG solutions across a wide range of healthcare settings.
• Management believes the company's hardware platform is in final form, but acknowledges further hardware changes could be necessary prior to FDA clearance and market acceptance.
• Management believes the foregoing actions will effectively remediate the material weaknesses in internal controls, but notes that remediation will not be considered complete until controls are in place for a period, tested, and concluded to be properly designed and operating effectively.

Industry Context

The company operates in the medical technology industry, specifically focusing on cardiovascular diagnostics. It aims to address a significant diagnostic gap in early heart disease identification, as conventional ECGs have limited sensitivity for structural and ischemic disease. The industry is characterized by rapidly advancing technologies, intense competition from established players like GE Healthcare and Philips, and a strong emphasis on proprietary products. There's a growing global ECG market, projected to reach $30.87 billion by 2034, driven by changing demographics (aging population), and an impetus for earlier, low-cost testing to reduce healthcare costs. The shift towards alternative treatment sites (retail clinics, urgent care) also presents an opportunity for enhanced front-line screening tools. The company's strategy aligns with the broader trend of integrating AI into healthcare for improved diagnostics and efficiency.

Comparison to Industry Standards

• The company's MyoVista wav ECG aims to extend the clinical capability of a standard 12-lead resting ECG, which the 2012 U.S. Preventive Services Task Force stated has no good evidence to predict heart risks better than traditional considerations in asymptomatic people.
• The company's AI-ECG algorithms are intended to provide diagnostic information traditionally requiring cardiac imaging, which can cost from approximately $200 for a stress ECG to over $5,000 for a coronary angiogram, positioning the company's solution as a potentially lower-cost alternative.
• The company's low ejection fraction algorithm, licensed from Mount Sinai, was developed using over 100,000 patient records and demonstrated strong performance comparable to predicate devices, aligning with industry efforts to leverage large datasets for AI development.
• The FDA's industry-first De Novo clearance in August 2023 for cardiovascular machine learning-based notification software (for hypertrophic cardiomyopathy) and subsequent 510(k) clearance for a low ejection fraction algorithm (less than 40%) in September 2023 set a new precedent that the company is leveraging for its own 510(k) pathway submissions, indicating alignment with evolving regulatory standards for AI in medical devices.

Management Changes

Corporate Governance

Legal Proceedings

• No actions, suits, proceedings, inquiries or investigations before or by any court, public board, government agency, self-regulatory organization or body pending or threatened against or affecting the Company, its common stock, or any officers or directors, in which an adverse decision could have a material adverse effect.

Related Party Transactions

• The company has a Loan and Security Agreement with Front Range Ventures LLC (FRV) for a $500,000 note (FRV Note), which was extended to September 30, 2025. The company paid approximately $305,000 in accrued interest to FRV during fiscal year 2025.
• A similar note with John Q. Adams (JQA Note) for $500,000 principal and $85,006 accrued interest was converted into 36,563 shares of common stock and amended warrants on November 16, 2023.
• The company issued warrants to FRV and John Q. Adams in October 2023 as consideration for extending the interest maturity date of the $1M Notes.
• The company entered into multiple definitive license agreements and a securities purchase agreement with Icahn School of Medicine at Mount Sinai on September 20, 2023, issuing 48,549 shares of common stock, pre-funded warrants for 7,107 shares, and common stock warrants for 9,142 shares as consideration.

Stakeholder Impact

• Shareholders face significant dilution risk from ongoing equity financings (Equity Line, ATM Facility, Series D Preferred Stock Offering) and potential future capital raises.
• Shareholders are exposed to high volatility in stock price and the risk of delisting from Nasdaq due to non-compliance with listing requirements.
• Employees and executive officers are incentivized through stock-based compensation, with vesting tied to key regulatory milestones, aligning their interests with company success.
• Customers and patients could benefit from new, low-cost, front-line cardiac screening tools if the MyoVista wav ECG and MyoVista Insights Cloud Platform receive FDA clearance.
• Suppliers and creditors face risks related to the company's going concern doubts and reliance on future financing to meet obligations.
• Regulatory bodies are actively involved in the company's product development and marketing, with strict compliance requirements and potential enforcement actions for non-compliance.

Next Steps

• Evaluate alignment with newly published American Society of Echocardiography guidelines for LVDD prior to submitting the MyoVista wav ECG device for FDA clearance.
• Prepare for a 510(k) FDA submission for the MyoVista wav ECG device in calendar 2025.
• Aim for an FDA submission of the MyoVista Insights Cloud Platform and low ejection fraction algorithm during the first half of calendar year 2026.
• Begin discussions with the FDA regarding the MyoVista Insights Cloud Platform and Mount Sinai licensed AI-ECG algorithms in the current calendar year.
• Focus on signing agreements with multiple early adopter customers for the MyoVista Insights Cloud Platform.
• Expand user functionality and connectivity, and integrate with multiple electronic medical record systems, ECG management systems, and direct-to-ECG device integration for the MyoVista Insights Cloud Platform after the early adopter phase.
• Bring forward a pipeline of other AI-ECG algorithms following regulatory clearance of the first AI-ECG on the platform.
• Continue to implement remedial steps to improve internal controls over financial reporting and monitor their effectiveness.
• Take all reasonable measures to regain compliance with Nasdaq Listing Rules, specifically the Minimum Stockholders Equity Requirement, by September 15, 2025.
• Seek additional financing through the sale of additional equity securities, debt, or strategic partnerships to fund future operations and address the going concern issue.
• Consider and vote upon the Plan Shares Increase Amendment to the 2023 Equity Incentive Plan at the next annual meeting of shareholders.

Key Dates

Recommendation

The company's financial position is highly precarious, marked by a substantial increase in net losses, near-zero revenue, and rapidly dwindling cash reserves, leading to an explicit 'going concern' warning from its auditors. While the company has secured some capital and made progress on intellectual property and regulatory designations (Breakthrough Device), the core products are still awaiting critical FDA clearance, which is subject to further delays due to evolving guidelines. The ongoing Nasdaq non-compliance for stockholders' equity adds another layer of risk, threatening liquidity and investor confidence. The heavy reliance on continuous capital raises, which are dilutive and uncertain, coupled with significant operating losses and a large accumulated deficit, indicates a high probability of further value erosion for shareholders. The fundamental business model has yet to prove commercial viability, and the path to profitability remains distant and fraught with significant execution and regulatory risks.

Keywords

AI-ECG, Electrocardiogram, Cardiac Dysfunction, Medical Device, FDA Clearance, MyoVista, Heart Disease Screening, Cardiology, Healthcare Technology, Nasdaq Listing, Going Concern, Capital Raise, Intellectual Property, Mount Sinai, Clinical Trials, Regulatory Approval, Diastolic Dysfunction, Systolic Dysfunction, Aortic Stenosis