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10-K

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hscs_april_2022_10-k.htm

10-K

10-K

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended April 30, 2022

OR

Commission File Number 001-41422

HEART TEST LABORATORIES, INC.

(Exact name of Registrant as specified in its Charter)

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (682)-237-7781

Securities registered pursuant to Section 12(b) of the Act:

Title of each class TradingSymbol(s) Name of each exchange on which registered

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 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 ☐ Accelerated filer ☐

Non-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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2021, the last business day of the registrant’s most recently completed second fiscal quarter, the registrant did not have a public float because the registrant’s common stock was not publicly traded. Accordingly, there was no market value for the registrant’s common stock on such date.

As of July 28, 2022 there were 8,236,291 shares of the registrant's common stock issued and outstanding.

DOCUMENTS INCORPORATED BY REFERENCE - NONE

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HEART TEST LABORATORIES, 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”). Some of the statements made under “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this Annual Report on Form 10-K constitute forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “expects,” “aims,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “intends,” or “continue,” or the negative of these terms or other comparable terminology.

These forward-looking statements may include, but are not limited to, statements relating to our objectives, plans and strategies, statements that contain projections of results of operations or of financial condition, expected capital needs and expenses, statements relating to the research, development, completion and use of our device, and all statements (other than statements of historical facts) that address activities, events or developments that we intend, expect, project, believe or anticipate will or may occur in the future.

Forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties. We have based these forward-looking statements on assumptions and assessments made by our management in light of their experience and their perception of historical trends, current conditions, expected future developments and other factors they believe to be appropriate.

Important factors that could cause actual results, developments and business decisions to differ materially from those anticipated in these forward-looking statements include, among other things:

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our expectation regarding the sufficiency of our existing cash and cash equivalents to fund our current operations;

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our ability to receive regulatory clearance for the MyoVista wavECG, or the MyoVista, from the U.S. Food and Drug Administration, or FDA, state regulators, if any, or other similar foreign regulatory agencies, including approval to conduct clinical trials, the timing and scope of those trials and the prospects for regulatory approval or clearance of, or other regulatory action with respect to the MyoVista;

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our ability to advance the development of the MyoVista, our full function conventional 12-lead electrocardiograph, or ECG, device that incorporates an additional proprietary artificial intelligence-based algorithm that has been designed with the expectation of detecting cardiac dysfunction caused by heart disease or age-related cardiac dysfunction, and future potential products;

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our ability to launch sales of the MyoVista into the U.S. and any future potential products;

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our assessment of the potential of the MyoVista and future potential products to diagnose certain indications;

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our planned level of capital expenditures and liquidity;

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our plans to continue to invest in research and development to develop technology for new products;

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the regulatory environment and changes in the health policies and regimes in the countries in which we intend to operate, including the impact of any changes in regulation and legislation that could affect the medical device industry;

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our ability to meet our expectations regarding the commercial supply of the MyoVista and any future products;

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our ability to retain key executives;

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our ability to internally develop new inventions and intellectual property;

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the overall global economic environment;

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the impact of COVID-19 and resulting government actions on us;

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the impact of competition and new technologies;

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general market, political and economic conditions in the countries in which we operate;

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our ability to internally develop new devices and intellectual property;

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our expectations regarding the use of proceeds from the initial public offering (the "IPO") of units (the "Units"), with each Unit consisting of (a) one share of our common stock, par value $0.001 per share ("Common Stock"), and (b) a warrant (the "IPO Warrants") to purchase one share of our Common Stock, and additional IPO Warrants through the exercise, in part, of the underwriter's over-allotment option, in the IPO in June 2022;

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changes in our strategy; and

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litigation.

These statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. We discuss many of these risks in greater detail under the heading “Risk Factors". You should not rely upon forward-looking statements as predictions of future events.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we are under no duty to update or revise any of the forward-looking statements, whether as a result of new information, future events or otherwise, after the date of this Annual Report on Form 10-K.

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.

NOTE REGARDING COMPANY REFERENCES

Throughout this Annual Report on Form 10-K, “HeartSciences,” the “Company,” “we,” “us” and “our” refer to Heart Test Laboratories, Inc. References to "Fiscal 2023" refer to the 12-months ending April 30, 2023, references to "Fiscal 2022" refer to the 12-months ended April 30, 2022, and references to "Fiscal 2021" refer to the 12-months ended April 30, 2021.

Unless defined elsewhere, capitalized terms used in this Annual Report on Form 10-K are defined in the "Glossary of Terms" appearing directly before Part III.

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Page

PART I

Item 1. Business 4

Item 1A. Risk Factors 32

Item 1B. Unresolved Staff Comments 33

Item 2. Properties 69

Item 3. Legal Proceedings 69

Item 4. Mine Safety Disclosures 69

PART II

Item 6. Reserved 83

Item 7A. Quantitative and Qualitative Disclosures About Market Risk 95

Item 8. Financial Statements and Supplementary Data 95

Item 9A. Controls and Procedures 95

Item 9B. Other Information 96

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 96

PART III

Item 10. Directors, Executive Officers and Corporate Governance 102

Item 11. Executive Compensation 108

Item 14. Principal Accounting Fees and Services 116

PART IV

Item 15. Exhibits, Financial Statement Schedules 118

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PART I

Item 1. Business.

Company Overview

We are a medical technology company focused on applying innovative AI-based technology to an electrocardiograph device ("ECG" or also known as an "EKG") to expand and improve an ECG’s clinical usefulness. Our objective is to make an ECG a far more valuable cardiac screening tool, particularly in frontline or point-of-care clinical settings. HeartSciences’ first product candidate for FDA clearance, the MyoVista wavECG, or the MyoVista, is a resting 12-lead ECG that is also designed to provide diagnostic information related to cardiac dysfunction which has traditionally only been available through the use of cardiac imaging. The MyoVista also provides conventional ECG information in the same test. Our business model, which involves the use of the MyoVista device and consumables for each test, is expected to be “razor-razorblade” as the electrodes used with the MyoVista are proprietary to HeartSciences, and new electrodes are required for every test performed. As of July 28, 2022, we had 12 full-time employees.

Our device is not cleared for marketing by the FDA and our future success is dependent upon receiving FDA De Novo clearance for the MyoVista. Additional funding may be required as part of achieving FDA clearance and thereafter would be required to support the sales launch of the MyoVista into the U.S., provide working capital and support further R&D. See “—Previous FDA De Novo Submission” and “—Proposed FDA De Novo Resubmission”.

We believe that there is currently no low-cost, front-line, medical device that is effective at screening for heart disease. As a result, we believe that frontline physicians face a significant challenge in determining if a patient has heart disease. Although many think of the ECG as the frontline heart disease test, in 2012, the United States Preventive Services Task Force, or USPSTF, conducted an evaluation of conventional ECG testing and stated: “There is no good evidence that an ECG helps physicians predict heart risks in people with no symptoms any better than traditional considerations such as current or former smoking, blood pressure and cholesterol levels.”

ECG devices record the electrical signals of a patient’s heart. The ECG is a ubiquitous, relatively low-cost, simple and quick test; it is portable and can be performed in a wide range of clinical settings by a non-specialist clinician or clinical aide. There are three basic categories of heart disease: electrical (such as an arrhythmia), structural (such as valvular disease) and ischemic (such as coronary artery disease, or CAD). Conventional resting ECGs have limited sensitivity in detecting structural and ischemic disease and are typically used for diagnosing cardiac rhythm abnormalities, such as atrial fibrillation, also known as Afib, or acute coronary syndrome, such as a myocardial infarction, which is also known as a heart attack. However, traditional ECGs have a limited role in identifying cardiac dysfunction associated with structural and ischemic disease.

HeartSciences has designed the MyoVista to help address these limitations and extend the clinical capability of an ECG in detecting cardiac dysfunction. We apply AI-machine learning to the signal processed electrical signal of the heart. Our first algorithm, which is not yet FDA cleared, is designed to detect cardiac dysfunction caused by heart disease and/or age-related cardiac dysfunction.

The editorial comment associated with the study titled “Prediction of Abnormal Myocardial Relaxation from Signal Processed Surface ECG” presented below discusses recent applications of machine learning to data derived from surface 12-lead ECGs in relation to cardiac dysfunction:

“These are some of the most significant advances in electrocardiography since its inception, which has historically had a limited, if any, role in the evaluation of cardiac dysfunction. In the past, our cardiovascular community was resigned to the fact that surface ECGs are poor indicators for cardiac dysfunction.”

Khurram Nasir, MD, MPH, MSC, Department of Cardiology, Houston Methodist DeBakey Heart & Vascular Center, Houston, Texas, et. al., Journal of American College of Cardiology Editorial Comment Volume 76 Number 8 2020.

Almost all forms of heart disease, including CAD and structural disease, affect heart muscle, or cardiac, function prior to symptoms. Impaired cardiac function is first observed as impaired cardiac relaxation which is an

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early indicator of diastolic dysfunction and usually continues to increase in severity as heart disease progresses. The diastolic phase of the cardiac cycle occurs when the heart muscle relaxes (following contraction). Diastolic dysfunction may also be related to age-related cardiac dysfunction.

If we receive FDA clearance for the MyoVista, our main target markets would be frontline healthcare environments in the U.S., such as primary care, to assist physician decision making in the cardiology referral process. Currently, cardiology referral decisions are often based on a patient’s risk factors and/or a conventional ECG test. Accordingly, many patients with heart disease are left undetected while no treatment or intervention is required for most patients referred for cardiac imaging. We believe that adding the capability to detect cardiac dysfunction to a standard 12-lead resting ECG could help improve cardiac referral pathways and be valuable for patients, physicians, health systems and third-party payors.

New Class II devices, such as the MyoVista, require FDA De Novo premarket review. The MyoVista along with its proprietary software and hardware is classified as a Class II medical device by the FDA. Premarket review and clearance by the FDA for these devices is generally accomplished through the 510(k) premarket notification process or De Novo classification request, or petition process. We previously submitted an FDA De Novo classification request in December 2019. Based on feedback and communications with the FDA during 2020, we have been making modifications to our device and are partially through a new, pivotal clinical validation study and the device testing and development necessary for a revised FDA De Novo submission, which we expect to take place later in the fiscal year ending April 30, 2023. For additional information regarding the FDA regulatory process, see “Business—FDA and Other Government Regulation”.

We are using the funding from the IPO to continue our work towards FDA resubmission and clearance. Although our current aim is to achieve FDA clearance, which would allow us to market the MyoVista in the U.S., with the net proceeds of the IPO, there is no assurance that this will be the case. Additional funding will be required to support the sales launch of the MyoVista into the U.S., provide working capital and support further R&D. Our independent registered public accounting firm has issued an opinion on our audited financial statements included in this Annual Report on Form 10-K that contains an explanatory paragraph regarding substantial doubt about our ability to continue as a going concern because we have experienced recurring losses, negative cash flows from operations, and have a working capital deficiency. These events and conditions indicate that a material uncertainty exists that may cast significant doubt on our ability to continue as a going concern. If we are unable to continue as a going concern, we may have to liquidate our assets, and the values we receive for our assets in liquidation or dissolution could be significantly lower than the values reflected in our financial statements.

Recent Developments

Initial Public Offering

On June 17, 2022, we completed the IPO. The IPO consisted of the sale of 1,500,000 Units, with each Unit consisting of one share of Common Stock, and one IPO Warrant to purchase one share of Common Stock at a combined public offering price of $4.25 per Unit. The Common Stock and the IPO Warrants were immediately separable following the IPO. The IPO Warrants are exercisable at any time up to expiration, which is five years from the date of issuance. We received approximately $5.2 million in net proceeds from the IPO after deducting the underwriting discount and commission and other estimated offering expenses payable by the Company of approximately $1.2 million.

We received approximately $5.2 million in net proceeds from the IPO after deducting the underwriting discount and commission and other IPO expenses payable by the Company of approximately $1.2 million. As of July 27, 2022, we have used approximately $800,000 of the net proceeds from the IPO for costs directly related to achieving FDA clearance for the MyoVista device, to pay accrued and unpaid interest under the $1M Loan and Security Agreement, and for working capital and general corporate purposes including personnel costs, capital expenditures and the costs of operating as a public company. We intend to use the remaining $4.4 million of the net proceeds from the IPO for costs directly related to achieving FDA clearance and for working capital and general corporate purposes.

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Changing circumstances may cause us to consume capital significantly faster than we currently anticipate. The amounts and timing of our actual expenditures will depend upon numerous factors, including the progress of our global marketing and sales efforts, our development efforts and the overall economic environment. Therefore, our management will retain broad discretion over the use of the remaining proceeds from the IPO. We ultimately may use the remaining proceeds for different purposes than what we currently intend. Pending any ultimate use of any portion of the proceeds from the IPO, if the anticipated proceeds will not be sufficient to fund all the proposed purposes, our management will determine the order of priority for using the remaining proceeds, as well as the amount and sources of other funds needed.

Pending our use of the net proceeds from the IPO, we may invest the net proceeds in a variety of capital preservation investments, including short-term, investment grade, interest bearing instruments and U.S. government securities.

Heart Disease Facts and Current ECG Testing Limitations

Heart disease refers to a variety of conditions that affect the heart—including heart rhythm problems, heart valve problems, genetic defects and blood-vessel diseases such as coronary artery disease. It is often referred to as the “silent killer” and, according to the American Heart Association, one in three patients are not properly diagnosed until after a heart attack occurs and 50% of men and 64% of women who died suddenly of coronary heart disease had no previous symptoms. Statistics published by the U.S. Centers for Disease Control and Prevention, or the CDC, show that in the United States heart disease is the leading cause of death for men, women, and people of most racial and ethnic groups. According to the CDC, one person dies from cardiovascular disease every 36 seconds and heart disease accounts for approximately one in four deaths. In 2018, 30.3 million U.S. adults were diagnosed with heart disease including 18.2 million adults with CAD. Approximately 605,000 patients in the U.S. have a heart attack each year with approximately 20% of deaths from CAD occurring in adults less than 65 years old. The scale of the problem is similar worldwide. In 2020, the World Health Organization confirmed that heart disease has remained the leading cause of death at the global level for the last 20 years. Ischemic heart disease now represents 16% of global deaths and an estimated 17.9 million people died from cardiovascular diseases in 2019, representing 32% of all global deaths.

As heart disease progresses to more acute stages, the cost to treat patients increases significantly. Cardiovascular disease is the leading cost to the healthcare system and is estimated to be responsible for one in every six healthcare dollars spent in the United States. Heart disease costs in the United States were approximately $363 billion in each of 2016 and 2017, including the cost of health care services, medicines, and lost productivity due to death. Governments, healthcare providers and payors are motivated to shift the diagnosis and management of these conditions to earlier stages where better patient outcomes can be delivered at lower costs.

We believe that there is currently no low-cost, front-line, medical device that is effective at screening for heart disease. As a result, frontline physicians face a significant challenge in determining if a patient has heart disease. The conventional ECG is thought of by many to be the front-line tool in cardiac testing, but it has poor sensitivity in detecting CAD or structural heart disease. According to Appropriate Use of Non-Invasive Testing for Diagnosis of Stable Coronary Artery Disease, an article published in the April 2014 issue of the Journal of European Society of Cardiology, current, conventional, resting 12-lead ECG devices have a 50% or less sensitivity in identifying CAD. In 2012, the USPSTF conducted an evaluation of conventional ECG testing and stated: “There is no good evidence that an ECG helps physicians predict heart risks in people with no symptoms any better than traditional considerations such as current or former smoking, blood pressure and cholesterol levels.” In 2018, the USPSTF reconfirmed (i) its recommendation not to screen with resting or exercise ECG testing for adults at low risk of cardiovascular disease, or CVD, events and (ii) that it had found that there is also insufficient evidence to recommend screening with resting or exercise ECG tests for adults at intermediate or even high risk of CVD.

Despite the limitations of the conventional ECG and healthcare guidance around the world that recommends against its use for heart disease screening, in the absence of a better alternative, the ECG remains a ubiquitous and widely-used test throughout healthcare including non-cardiology settings. It is estimated that 1.5 to 3 million ECGs are performed worldwide every day, making it one of the most commonly used cardiac diagnostic tests and a fundamental tool in clinical practice. It is estimated that more than 100 million ECGs are performed each year in the United States. The 2018 National Ambulatory Medical Care Survey indicated that patient care physicians, excluding

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anesthesiologists and federal facilities such as VA clinics, ordered or provided 27 million ECG tests and 4 million stress ECGs at office visits, and the 2017 National Hospital Ambulatory Medical Care Survey showed that on ambulatory care visits to hospital emergency departments, an additional 28 million ECG tests were ordered or performed by hospital emergency departments.

Overuse of Expensive Cardiology-Based Diagnostic Testing

We believe that the absence of cost-effective front-line or primary-care-based testing has resulted in the over-use of costly cardiology-based diagnostic tests. Noninvasive cardiac tests are significant contributors to healthcare costs, accounting for greater than 40% of Medicare Part B spending on medical imaging, or over $17 billion annually according to the CMS. There are a variety of effective, though expensive, diagnostic tests for patients used to detect heart disease. These are typically performed in a specialist cardiology or hospital setting and include:

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Stress ECG testing, a non-invasive diagnostic test with a cost of approximately $200 with, according to the American College of Cardiology, a sensitivity of 68% in the detection of CAD; typically performed in a cardiologist setting and requires the patient to run on a treadmill, which can be difficult for many patients. A study published in March 2018 by the American Heart Association, or AHA, demonstrated that among 553,027 patients that were younger than 65 that underwent stress testing, only 5.1% were hospitalized for a heart attack, required a stent, revascularization procedure or were referred for a coronary angiogram.

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Echocardiogram, a non-invasive diagnostic imaging test, similar to an ultrasound, that is effective in the detection of heart disease; however, the Medicare cost of an echo in a hospital is approximately $600 and can be as much as $2,000 if performed privately. The echo is frequently ordered by primary care physicians and is the most common cardiac imaging test upon referral. According to the 2018 National Ambulatory Medical Care Survey, office-based patient care physicians, excluding anesthesiologists and federal facilities such as VA clinics, ordered or provided 10 million echos. However, according to a December 2017 study in Clinical Cardiology that examined the appropriateness versus the value of echocardiograms ordered by primary care physicians, only 22% of patients had abnormalities and only 2.5% experienced a change in patient management that corresponded with the initial suspected diagnosis and echocardiographic findings.

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Cardiac imaging tests, such as nuclear stress tests and coronary CT angiograms, or CCTAs, alternatively can be conducted noninvasively, but typically cost $1,000 or more. There are more than 10 million cardiac imaging tests conducted in the United States each year. According to a study published by the AHA in September 2020 that reviewed previous CT test results of nearly 40,000 patients who underwent coronary CCTAs from January 2007 to December 2013, only 15.3% of patients had obstructive CAD. Despite the high negative outcome rates, costs and patient exposure to radiation, these tests remain commonplace.

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Coronary angiogram, an invasive test in which dye that is visible by X-ray is injected into the blood vessels of the heart. The X-ray machine rapidly takes a series of images (angiograms), offering a look at the patient’s blood vessels. Coronary angiogram is considered the “gold standard” for diagnosing coronary arterial disease and can cost in excess of $5,000. According to an article in the New England Journal of Medicine, in a large 2010 study which reviewed angiogram results of 400,000 patients, only 38% of patients (without known CAD) actually had obstructive CAD.

We believe that the referral process for cardiology testing is inefficient and costly for health systems due to the absence of a gateway test which detects early heart disease at a high rate, particularly for primary care. Not only are many patients with heart disease missed, but most cardiology testing has a negative test result that requires no further treatment or testing.

Diastolic Dysfunction, an Early Indicator of Heart Disease

The symptoms and causes of cardiac dysfunction have been researched for many years. The causes of cardiac dysfunction during the contraction (systolic) phase, also called reduced left ventricular ejection fraction, have been well understood for many years. However, according to the American Heart Association Statistics Committee report

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in 2013, approximately 50% of patients with heart failure symptoms have ejection fraction measures that are not markedly abnormal. In addition, multiple articles published by the NIH state that approximately 50% of HF cases are due to severe diastolic dysfunction, also called heart failure with preserved ejection fraction or HFpEF. As a result, understanding the causes and progression of diastolic dysfunction has become a key area of scientific and clinical interest. This research has led to the understanding that almost all patients with systolic dysfunction also have diastolic dysfunction and almost all types of heart disease including CAD, valvular disease, cardiomyopathy, hypertension, congenital heart disease, and pericardial disease induce diastolic dysfunction.

According to an article by Dr. Dalane W. Kitzman, MD and Dr. William C. Little, MD published in the February 14, 2012 issue of the Journal of the American Heart Association, diastolic performance is sensitive to nearly all of the common disease processes that affect cardiovascular function. The article indicates that LV diastolic function is impaired by all of the common disease processes that affect LV function or produce LV hypertrophy or fibrosis, including hypertension, diabetes, ischemia, myocarditis, toxins, and infiltrative cardiomyopathies. LV diastolic dysfunction, or LVDD, begins early in the heart disease process and continues to increase in severity as heart disease progresses. LVDD is now recognized as one of the earliest signs of heart disease and typical onset occurs when a patient is still asymptomatic. We believe that the early detection of diastolic dysfunction can be a valuable marker for almost all forms of heart disease and age-related cardiac abnormalities that may otherwise be missed by current conventional ECG devices.

The myocardial ischemic cascade diagram below is a standard diagram in cardiology that illustrates the sequence of events that take place as ischemia (lack of blood supply to the heart) increases in severity. As noted below, the first detectable changes during the early stages of heart disease are in the diastolic phase. Conventional ECG changes, if seen at all, occur much later in the disease process. However, diastolic dysfunction continues to act as a reliable marker as heart disease progresses since the severity of dysfunction also increases.

The proprietary MyoVista wavECG algorithm, or the MyoVista Algorithm, is designed to detect abnormally slow cardiac relaxation rates during the early diastolic phase of the cardiac cycle, an early indicator for diastolic dysfunction. The algorithm was designed based on e-prime, which is a key echocardiographic measure of left ventricular diastolic function. The echo measure e-prime, or e’, calculates the maximum left ventricle longitudinal tissue velocities during the early diastolic phase. E-prime is measured at each of the septal and lateral side of the mitral valve annulus to provide septal e’ and lateral e’. An abnormal left ventricular relaxation rate, as defined in the 2016 guidelines from the American Society of Echocardiography, is either septal e’ <7cm/sec or lateral e’ <10 cm/sec.

Product and Technology

The MyoVista device has been developed in response to the relatively recent understanding in cardiology that most forms of heart disease are associated with LV relaxation abnormalities and diastolic dysfunction. The MyoVista is a 12-lead resting ECG device that features our proprietary algorithm developed to detect cardiac

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dysfunction in the diastolic phase, specifically slower than normal left ventricular relaxation rates as defined by the American Society of Echocardiology Guidelines.

The MyoVista is also designed to include the capabilities of a full-featured conventional 12-lead resting ECG including analysis using the Glasgow Algorithm, also known as the Glasgow ECG Interpretation Algorithm. Developed by the University of Glasgow in the UK, the 12-lead ECG Analysis Algorithm has been relied upon for more than 35 years and is a widely respected resting ECG interpretive algorithms. The Glasgow Algorithm was developed and has been continuously improved over the years by a team of world-renowned ECG researchers. The Glasgow Algorithm is licensed to the Company pursuant to the Glasgow Licensing Agreement. For additional information regarding the Glasgow Algorithm and our license, see “—Intellectual Property—Glasgow Licensing Agreement.”

In the MyoVista, the conventional ECG (including the Glasgow Algorithm) and our proprietary algorithm are designed to detect diastolic abnormalities and are combined as a single test with results presented separately. The MyoVista has a high-resolution touchscreen display and incorporates many easy and intuitive to use features commonly associated with a tablet device. The MyoVista’s design focuses on ease of use and features include:

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Wall mount and cart mount capabilities as well as tabletop.

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Locking capability to a cart or table to prevent theft.

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A backup lithium-ion battery to provide power if moving from location to location within an environment or if power has been lost.

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A large 15.6” touch screen with very high resolution and contrast providing a quality color image on which to view a patient’s results, which is easily wiped clean for infection control purposes.

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Gesture feature capabilities have been added for ease of use.

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A touch screen that is designed to function even when the clinician is wearing latex gloves.

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A touchscreen keyboard as well as the ability to connect a traditional keyboard.

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An available HDMI display port to provide an oversized screen as a viewing option.

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Electronic medical records integration capabilities that is critical for large hospitals.

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Interpretive analysis software of the Glasgow Algorithm.

MyoVista device with 1 lead view of signal processed waveform

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The MyoVista is intended for use in a clinical setting, by a clinician or other trained personnel who are acting on the orders of a licensed physician. It is not intended for use as a sole means of diagnosis and the information provided is only significant when used in conjunction with a physician review and consideration of all other relevant patient data.

The MyoVista uses electrical information from the heart captured during a standard resting 12-lead ECG test as inputs to a proprietary AI-based algorithm. The device then extracts additional frequency content from the electrical signal once captured using wavelet transform based signal processing to provide additional valuable inputs to the AI-based algorithm. A wavelet is a mathematical function used to divide a continuous-time signal into its different frequency components. A wavelet transform is the representation of the converted signal by wavelets. Wavelet transform mathematics has emerged over recent years as a valuable time–frequency analysis tool. It has been particularly useful in applications related to bio-signal processing such as ECG electrical signals. Our signal processing patents relate to the extraction and use of certain frequency related data from the signal processed ECG which are used to produce more accurate and effective algorithms. For more information about our patents, please refer to “—Intellectual Property.”

We have conducted multiple comparisons related to the additional algorithm performance benefits using the frequency information gathered through signal processing by comparing the number of frequency variables used in any given algorithm as compared to conventional ECG inputs and their related statistical significance. The frequency variables generated by the MyoVista consistently rank in the top-tier of statistically significant input variables to our AI algorithm and make up a significant overall percentage of the selected input variables as compared to the conventional ECG variables. During a 20-second test, more than 1,000 pieces of extracted data points may be obtained. The software on the device preselects which of the data variables represent the most valuable inputs for the cardiac dysfunction algorithm and uses those to perform an assessment. The output results of the test are provided as indicators and associated statements.

MyoVista Proprietary Algorithm Indications and Statements

The MyoVista Algorithm is designed to detect whether a patient is negative or positive for abnormally slow left ventricular diastolic relaxation rates as defined by the American Society of Echocardiography. For patients whose results are highly positive or highly negative, the probability that the test is accurate is especially high. For patients whose results are borderline, the results mean that it is likely that the patient is close to the guideline thresholds and therefore the test produces borderline results.

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The MyoVista has multiple reporting options which can be configured in the settings menu and includes an option for a clinical interpretation report. The clinical interpretation report includes clinical performance information observed in a reference clinical study population to provide context to a patient’s wavECG test results and assists interpretation by a physician. The device also performs all conventional ECG assessments including software-based automated ECG interpretation through incorporation of the Glasgow Algorithm.

MyoVista Device screen image with descriptions

MyoVista Patented Center Post Electrode Systems

Electrodes are the sticky patches that are applied to the skin to capture the ECG signal. The MyoVista Center Post Electrodes pictured below are high-quality, single-use disposable ECG electrodes that are designed to be used exclusively with the MyoVista. A new set of electrodes is required for each test.

Unlike a conventional ECG, the MyoVista is designed to analyze frequency content from the heart’s electrical signal. The MyoVista requires high-quality, low impedance signal capture to aid in obtaining the test results that the MyoVista is designed to provide. Accordingly, we have developed a patented cable connection and high-quality electrode system that is unique to us. The design of the electrodes includes a hollow center post connector (pictured below) that aligns firmly to the complementing post design on the cable grabber, allowing for a secure connection to help overcome the challenges of stable signal capture and induced signal noise that are common in other style electrodes.

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Our proprietary electrodes are applied to the skin using high-quality electrode hydrogel. The hydrogel is designed to provide improved conductivity of electrical signals and optimize consistent high-quality signal capture. Electrical tests per the Association for the Advancement of Medical Instrumentation, or AAMI, standards were performed and demonstrated improved performance over multiple major brands of electrodes. The hydrogel adhesive, while easily repositionable, provides a comfortable and firm adhesion that provides positive contact with the skin surface and ensures optimal signal transmission and minimal signal noise. The electrodes also provide optimal skin contact while accommodating easy, painless removal after single use. The electrodes have passed the International Organization for Standardization, standard ISO 10993-1 for biocompatibility testing for skin sensitivity and irritations.

Previous FDA De Novo Submission

The results from the prior clinical validation study will not be considered by the FDA and should not be used to predict the results from our ongoing new validation study. See “Business—Proposed FDA De Novo Resubmission”.

We previously submitted an FDA De Novo classification request in December 2019 on which we interacted with FDA during 2020. As part of this submission, we provided clinical validation study data for 343 patients which was obtained as part of a larger data collection effort of over a thousand patients at multiple North American institutions and was used to build and subsequently validate our diastolic LV relaxation abnormalities algorithm. The 343 patient clinical validation dataset was created using proportional random splitting of the larger data set.

Although this data was held separate, the FDA stated that random splitting of data into the two datasets is inappropriate and ideally the algorithm development and clinical validation data should be obtained from independent sites with possibly different medical practices and locations in different geographic areas from those of the wider data collection. We also undertook software modifications to address other FDA comments which caused the FDA to raise concerns over the potential introduction of algorithm bias and the FDA ultimately determined that the 343- patient data set was insufficient to establish the probable benefit of the algorithm without a new validation dataset.

The FDA therefore stated, “please evaluate the performance of the device using a new validation dataset to validate the algorithm.”

Prior to finalizing the new validation study, the results of the 343-patient clinical validation dataset represent the Company’s data on device performance and, accordingly, we believe it is material information. However, the results from the prior clinical validation study will not be considered by the FDA and should not be used to predict the results from our ongoing new validation study, which could be materially different.

The MyoVista output indicates a patient as either “highly negative,” “negative,” “borderline,” “positive” and/or “highly positive” for left ventricular relaxation abnormalities. See “Business—Product and Technology”. In the previous De Novo submission we provided statistical results of sensitivity and specificity for two clinical endpoints depending on the interpretation by a physician of a borderline test result as either a positive or negative test result. Borderline is a standard classification used in a conventional ECG interpretive analysis and 16.9% of patients in the 343-patient clinical validation dataset were classified as borderline.

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The statistical results of sensitivity, specificity and accuracy for the 343-patient clinical validation dataset are below. However, this information will not be considered by the FDA and should not be used to predict the results from our ongoing new validation study, which could be materially different, and it should be noted that the FDA determined this data was insufficient to establish the probable benefit of the algorithm.

SENSITIVITY SPECIFICITY ACCURACY

Borderline test result classified as positive 94% 70% 84%

Borderline test result classified as negative 81% 92% 86%

For additional information regarding government regulations and the regulatory authorization process, including the FDA’s authorization or clearance, see “—FDA and Other Government Regulation.”

Proposed FDA De Novo Resubmission

Based on feedback from the previous De Novo submission and subsequent interaction with the FDA, multiple changes have been incorporated into the device and associated documentation, including software, user interface changes, documentation, and test report information, layout, style and language.

The majority of the patients have already been recruited for a new, pivotal clinical validation study for our proposed FDA De Novo resubmission. We submitted the design of the new study to the FDA for review prior to its commencement. The study is expected to be a 575-patient clinical validation study. The FDA agreed that the study design should be acceptable and would be expected to provide statistical information on which the FDA can effectively evaluate the performance results of the MyoVista. The study is at the following institutions: Rutgers University (New Jersey), which is acting as the core lab, Beth Israel Hospital (Massachusetts), Scripps Health (California), Einstein Health (Pennsylvania), Montefiore Medical Center (New York) and UT Southwestern (Texas) which are conducting patient recruitment.

Since the prior De Novo submission, we have continued to explore algorithm improvements, through extraction of additional data points from the ECG signal and implementation of the latest AI techniques, which may be incorporated into the algorithm used for final clinical validation.

Additionally, we have been updating compliance standard and verification and validation testing, including electromagnetic compatibility or EMC testing due to testing guideline changes. Such testing is required for all FDA electronic medical devices.

We currently expect to resubmit for FDA De Novo clearance in the fiscal year ending April 30, 2023, and the FDA’s De Novo classification authorization process generally takes from five to twelve months from the date the application is submitted, but can take significantly longer. For additional information regarding the FDA regulatory process, see “—FDA and Other Government Regulation”.

Market Opportunity

Diagnostic Gap

The significant diagnostic gap in heart disease is early identification. Heart disease often remains asymptomatic for many years as disease progresses until it reaches an acute stage, at which point many patients have a heart attack or die without prior diagnosis of disease. For this reason, heart disease is often referred to as the “silent killer.”

Frontline physicians face a significant challenge in identifying cardiac disease early. We believe that there is currently no low-cost, front-line, medical device that is effective at screening for heart disease. According to the 2018 National Ambulatory Medical Care Survey, 72% of office visits involved patients having one or more of the main cardiac risk factors of hypertension, hyperlipidemia, diabetes, or obesity. In the absence of a low-cost, front-line, medical device that is effective at screening for heart disease, frontline healthcare providers rely predominantly on a patient’s risk factors. Despite its poor sensitivity and limited ability to identify cardiac dysfunction associated with structural and ischemic disease, the conventional ECG test still remains widely used by frontline physicians. As

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a result of its current limitations, many patients with heart disease go undiagnosed, and many patients referred to cardiology for subsequent testing do not have heart disease.

In 2012, the USPSTF stated that there is no good evidence that an ECG helps physicians predict heart risks in people with no symptoms any better than traditional considerations such as smoking, blood pressure and cholesterol levels, acknowledging the diagnostic gap that currently exists.

In addition, according to the CDC, cardiovascular disease remains the biggest cost for the US healthcare system at approximately $216 billion per year. The cost of treating acute cardiac events and heart failure is especially high in comparison to preventative treatment. Governments, healthcare providers and third-party payors are focused on shifting the diagnosis and management of heart disease to earlier stages where better patient outcomes can be delivered at lower cost; however, to make substantial progress in improving patient outcomes at lower costs, the existing diagnostic gap needs to be closed.

Changing Demographics

Heart disease is most commonly found in individuals age 65 and older with incidences of heart disease increasing at 65 years for men and 71.8 years for women. According to the Organization for Economic Co-operation and Development, advances in the field of medicine have led to an increase in life expectancy which, as of 2019, was estimated to average 78.9 years for a person in the U.S., up from 75.4 years in 1990. As life expectancy increases, the average age of the population is expected to increase. According to the HHS, the population age 65 and older increased from 38.8 million in 2008 to 52.4 million in 2018 (a 35% increase) and is projected to reach 94.7 million in 2060. By 2030, more than 20 percent of U.S. residents are projected to be age 65 and over. Since heart disease is most common in elderly individuals, and that population pool is increasing, we believe there is a significant opportunity for a device such as the MyoVista.

Growing ECG Market

The demand for electrocardiograph devices and related supplies known as electrodes is on the rise worldwide. Despite the limitations of the conventional ECG and healthcare guidance around the world that recommends against its use for screening, in the absence of a better alternative, the ECG remains a ubiquitous and widely-used test throughout healthcare including non-cardiology settings. It is estimated that 1.5 million to 3.0 million ECGs are performed worldwide every day, making it one of the most commonly used diagnostic tests in healthcare and a fundamental tool in clinical practice. It is estimated that more than 100 million ECGs are performed each year in the United States. The 2018 National Ambulatory Medical Care Survey reflected that office-based patient care physicians, excluding anesthesiologists and federal facilities such as VA clinics, ordered or provided 27 million ECG tests and four million stress ECGs during office visits and the 2017 National Hospital Ambulatory Medical Care Survey showed that during ambulatory care visits to hospital emergency departments an additional 28 million ECG tests were ordered or performed by hospital emergency departments.

According to Markets and Markets Global Diagnostic ECG, approximately 770,000 ECG devices were estimated to have been sold worldwide in 2015. We expect changing demographics, such as the aging population and increasing rates of obesity, to contribute to even greater numbers of cardio-related testing, and therefore ECG devices and supply usage, over the coming years. According to Markets and Markets Diagnostic ECG Market (2019-2024), the global diagnostic ECG device market excluding supplies is approximately $7.5 billion per year and projected to be valued at $10.3 billion in 2024 with an expected 6.4% compounded annual growth rate, or CAGR.

Impetus to Identify Risks Earlier for More Effective Low-Cost Testing

A key goal of the HHS is reducing healthcare costs. This places pressure on physicians and healthcare institutions to contain healthcare costs. Additionally, one of the key objectives of HHS’s Healthy People 2030, is to increase preventive care for people of all ages. We believe that efforts towards preventive care and maintenance will lead to more testing for high-risk individuals and patients who have existing cardiac conditions. This trend, we believe, in tandem with the push to shorten hospital stays, has created an impetus to identify pre-symptomatic

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patients at risk more effectively at the front-line physician or clinic level and to treat recovering cardiac patients through outpatient care and rehabilitation.

Changing Nature of Healthcare Providers

The delivery of healthcare in the U.S. is evolving. Alternative treatment sites, such as retail clinics, concierge medicine, urgent care clinics and ambulatory surgical centers deliver care from qualified providers in settings outside of emergency departments, hospitals or traditional physician offices. We expect this trend to accelerate the drive to provide more effective preventative care and represents a significant opportunity for the introduction of the MyoVista as a new medical device that offers an enhanced ability to screen for heart disease.

Retail Clinics. Retail clinics have seen significant growth and, according to a report by The Insight Partners titled, “Retail Clinics Market to 2027,” the global retail clinics market is expected to reach $8.1 billion in 2027 and increase from $3.4 billion in 2018. In the U.S., major players operating retail clinics include The Kroger Co., CVS Health, Rite Aid Corp, Walmart Inc., and Walgreens Co. Walmart alone has announced that it intends to have 4,000 primary care “supercenters” in stores by 2029 having opened its first one in 2019. Walmart and other retail clinic providers are seeking to radically change frontline health delivery by offering access to convenient, low-cost medical testing and treatment either with or without traditional insurance.

Concierge Medicine. Concierge medicine is increasing rapidly in the U.S. According to a 2021 report by Research and Markets, the U.S. concierge medicine market is expected to reach $10.0 billion by 2028 and is expected to expand at a CAGR of 9.39% from 2021 to 2028. Increased waiting time for physician appointments, shortage of physicians and rising prevalence of chronic diseases are driving patients from conventional settings to non-traditional care settings. This, along with increased face time with physicians and a focus on preventive care, is driving the growth of the market.

Urgent Care Clinics. Urgent Care Clinics market sector has exhibited strong growth. According to IBIS World market research, shifting consumer preference to the convenience and timesaving of urgent care, coupled with rising hospital emergency care costs and a shortage of primary care physicians, has stimulated demand for industry services. In response, industry revenue is anticipated to grow at an annualized rate of 4.6% to $40.3 billion during 2022. An increase in the number of insured Americans has benefited industry operators due to the Affordable Care Act, or ACA. There are currently over 9,500 urgent care centers in the U.S.

Ambulatory Surgical Centers. According to a 2018 Research and Markets report on ambulatory surgical centers, the number of freestanding surgical centers has been expanding over the last decade, experiencing strong growth. As a result of this growth, the number of outpatient surgical procedures performed in ambulatory surgery centers increased by 32% from 2005 to 2017.

We believe that the scale of cardiac disease as well as changing demographics, growing ECG market, impetus to identify risks earlier for more effective low-cost testing, along with the increasing number and type of health care settings creates a significant opportunity for a device such as the MyoVista.

Capitation Provides an Incentive to Identify Medicare Advantage Patients

Healthcare providers are paid either through fee-for-service or capitation. Fee-for-service is a payment model where services are unbundled and paid for separately. In health care, the fee-for-service payment model incentivizes physicians to provide more treatments because payment is dependent on the quantity, rather than quality of care. Capitation is a payment arrangement that pays a physician or group of physicians a set amount for each enrolled person assigned to them, per period of time, whether or not that person seeks care. Under capitation, the amount of remuneration is based on the average expected healthcare utilization of that patient, with greater payment for patients with significant history of medical problems.

Approximately 42% (approximately 26 million people) of those covered by Medicare, according to CMS, are enrolled in a Medicare Advantage plan. With respect to these patients, CMS pays capitation to healthcare providers. CMS uses risk adjustment to adjust capitation payments to health plans, either higher or lower, to account for the

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differences in health costs of individuals such as heart failure, CAD, angina and valvular heart disease. Accordingly, under CMS guidelines, risk factor adjustments per patient will provide payment that is higher for sicker patients who have conditions where diagnosis codes are documented in the medical record as a result of a face-to-face visit. Therefore, there is a financial incentive to identify those Medicare Advantage patients that are sicker, including those that have undiagnosed ailments such as heart disease. We believe that undiagnosed heart disease represents a significant problem, and we believe insurance plans that have a high number of Medicare Advantage patients could be a target market for MyoVista testing.

Market Strategy

General

Our objective is to make the MyoVista wavECG a standard-of-care, as an affordable and valuable medical test.

Our business model, which involves the capital sale of the MyoVista device and the use of proprietary supplies (electrodes) for each test, is “razor-razorblade.” The electrode connection system is patented, and we believe the electrodes are superior quality and facilitate high quality, stable ECG signal capture. The MyoVista is also designed to analyze frequency data along with conventional ECG information. Because new electrodes are needed for each test, our proprietary electrodes, if purchased, would provide recurring per-test revenue for each MyoVista device sold.

Our go-to market strategy focuses on device adoption rather than price maximization and we aim to ensure that the purchase price of the MyoVista is affordable. A major brand full-featured, resting 12-lead ECG, such as GE and Phillips, typically costs between $5,000 to $10,000 and we anticipate pricing our device competitively by setting the price for the MyoVista at the lower end of that range. As conventional ECGs are typically used multiple times per day (in a high use environment this could be as much as thirty times per day), the annual revenue from electrodes per device-in-use could exceed that of the upfront sale of the unit.

We intend to develop a direct sales force and to target hospitals, physicians’ offices as well as large retail healthcare organizations. We also intend to use technical presentations, peer reviewed clinical data, and reference sites to achieve penetration of these markets. Finally, we expect to expand our medical advisory board, conduct clinical trials with key opinion leaders, or KOLs, to generate the necessary clinical evidence in various healthcare settings, as well as establish reference sites among these customers.

Communicating the benefits and value to the medical community, while at the same time creating brand awareness, is fundamental to our marketing strategy. We anticipate that we will participate in a number of healthcare industry tradeshow events such as the American Heart Association and regional primary care events. Participating in these events will be in addition to limited advertising in key medical publications and targeted social media campaigns to increase awareness of MyoVista and its benefits.

We will also consider offering potential purchasers different financing options or models to assist them with certain costs related to the MyoVista such as, up-front costs related to purchasing the device or a licensing model charging a monthly fee, as is fairly common practice in healthcare.

Territories

Our initial sales focus will primarily be within the U.S. We intend to market the MyoVista in the U.S. using a direct sales force following FDA clearance. Outside of the U.S., for markets such as Europe and Latin America, we intend to utilize medical device distributors that have existing healthcare provider relationships and experience selling ECG devices, which will be supported by a small number of local field personnel.

The Company previously achieved regulatory compliance in Europe under the EU Medical Devices Directive, or the MDD, in February 2017. With EU compliance, the Company is permitted to affix a certificate of conformity called a CE Mark denoting that the device is allowed to be marketed. This provided the Company with a limited number of distributor relationships in Europe including Neovitalis Aps, whose territory covers Denmark, Sweden,

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Norway and Finland, and also a relationship with Heart Medical Europe BV, whose territory covers Belgium, Netherlands and Luxembourg. These prior relationships aided the Company in development of the final version of the MyoVista device and its related proprietary software by eliciting feedback from KOLs in Europe. The MDD regulatory framework was established on June 14, 1993 but has since been replaced by the European Union Medical Device Regulation , or EU MDR, which became effective in May 2021. In order to sell medical devices in member countries of the European Economic Area, or EEA, our device must now comply with the requirements of the newer, updated regulatory framework or EU MDR. An updated CE mark certificate under EU MDR will entitle the Company to market the MyoVista in the European Economic Area following which the Company intends to pursue limited efforts in Europe though these distributor relationships as well as a limited number of additional distributor relationships outside the U.S. See “—FDA and other Government Regulation” for additional information.

Potential Markets

We believe that there is a large variety of potential markets for the MyoVista. Conventional ECGs are used throughout healthcare in almost every clinical setting including clinics, doctor’s offices, urgent care centers, and hospitals. In many of those settings, the additional information on cardiac dysfunction which the MyoVista is designed to provide, in addition to the conventional ECG information provided, could be extremely valuable. The MyoVista’s range of applications and potential uses are vast, and include providing:

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Primary care—front-line cardiac testing/referral tool, heart disease screening.

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Retail Healthcare—access to ECG testing at retail sites such as CVS, Walmart and Walgreens.

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Emergency Departments—enhanced ECG testing for emergency room patients.

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Cardiologists—prescreening cardiology patients.

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Hospitals—in-patient testing or testing prior to discharge, particularly cardiac wards.

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Surgery—pre-anesthesia testing, pre/post intervention.

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Life Insurance testing—ECGs are sometimes required in connection with the issuance of life insurance policies.

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Specialty Environments—screening for conditions such as, cardiomyopathy, cardiac oncology, drug trials, heart failure, and diabetes.

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Athlete testing—cardiac screening programs for athletes.

Early Target Markets

Initially, our focus markets will be in the U.S. and will include: (i) cardiology; (ii) primary care providers that serve upper to middle income regions including concierge medicine providers; (iii) retail clinics and cardiac screening providers; and (iv) insurers with significant numbers of Medicare Advantage patients.

Cardiology. According to the American College of Cardiology, there are approximately 23,000 cardiologists in the U.S. We do not believe that cardiology will be the principal market for MyoVista as cardiologists diagnose specific heart disease conditions rather than screen for heart disease. Nonetheless, we intend to have an early focus on leading cardiologists or KOLs. We have experience internationally with KOL engagement and believe that building advocacy through KOLs and other respected cardiologists will be important as we seek to establish our new technology.

The Company intends to hire sales representatives that have experience presenting new medical devices to cardiologists. The initial focus will be on cardiology centers of excellence and working to generate sales and daily use at these institutions. The field team will also act as a liaison with HeartSciences clinical staff as clinical study opportunities present themselves. We believe that building clinical evidence, particularly for specific clinical indications for use, such as hypertensive patients, will be a key pillar not only in our discussions with payors, but also as a driver for competitive differentiation and adoption.

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Primary Care and Concierge Medicine. According to the HHS, there are approximately 209,000 primary care physicians in the U.S., not including pediatricians. The 2018 National Ambulatory Medical Care Survey showed that there were 860 million visits to nonfederal office-based patient care physicians of which approximately 50% were to primary care physicians. According to a 2021 report by Research and Markets, the U.S. concierge medicine market size is expected to reach $10.0 billion by 2028 and is expected to expand at a CAGR of 9.39% from 2021 to 2028. In 2016, there were approximately 12,000 physicians that provide some level of concierge services with over half being either family medicine 32% or internal medicine 23%.

Informal feedback to date from concierge physicians and primary care physicians that serve upper to middle income regions indicates that a patient pay charge for utilizing the MyoVista would be generally accepted, which creates revenue potential and value for the physician. This would be in addition to reimbursement for the conventional ECG test provided by the MyoVista. The Company intends to initially hire sales representatives that will focus on these physicians in densely populated middle income to affluent regions of the U.S.

Additionally, primary care and concierge medicine clinics that are not hospital-based usually have flexible procurement processes and physicians have greater autonomy related to purchasing decisions for lower cost capital equipment. Concierge medicine is increasing rapidly in the U.S.

In order to take advantage of the market opportunity of selling to primary care physicians and concierge physicians:

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We intend to create specialized marketing, sales, education and training materials focused on the primary care market.

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The sales team will focus on demonstrating ease of use and clinical advantages as well as present the financial advantages of using the MyoVista device.

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We will focus on practices in higher income areas initially. We believe that these practices tend to have more financial flexibility to purchase new devices. There are approximately 209,000 primary care physicians excluding pediatricians as well as 24,000 cardiologists. Sales efforts on specialized clinical areas will increase over time as the salesforce expands.

With initial reimbursement codes being the same as a conventional resting 12-lead ECG, the Company believes a MyoVista test should be profitable in cardiology and hospital environments as well as for primary care providers whose patient populations are not fundamentally reliant on Medicare. Moreover, the Company believes there is a significant opportunity in additional specialty areas but the sales process will take longer since there would need to be a body of clinical evidence that the MyoVista is effective in these additional clinical use areas, although no assurance can be given that evidence of such effectiveness will be able to be produced.

Competitive Advantages

Assuming FDA clearance of the MyoVista and that we have sufficient funds to launch sales of the MyoVista in the U.S., we believe that HeartSciences could have several competitive advantages:

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Price comparability. A major brand, full-feature, resting 12-lead ECG typically costs between $5,000 to $10,000. We anticipate pricing our device competitively by setting the price for the MyoVista at the lower end of the range for a good-quality conventional ECG from a mainstream manufacturer. We believe that competitive pricing will help us to increase adoption of the MyoVista.

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Familiarity of use and protocol. The conventional ECG is the most common cardiac test, is used in almost all areas of healthcare and is often performed by a physician assistant or a nurse, rather than a physician. The MyoVista is designed to provide both conventional ECG information and proprietary cardiac dysfunction information in a single test, using standard 12-lead ECG testing protocols with standard lead placement. We believe that this should enable the MyoVista to fit into existing testing pathways, make it easy to use, and, consequently, easy to train people to use, which can be barriers to adoption for some new healthcare technologies.

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Positioned at the forefront of electrocardiography. There have been very few significant changes in the efficacy and indications for use of an ECG for many decades. We intend to position MyoVista at the forefront of electrocardiography science, which we believe could attract healthcare providers.

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Health system savings. We believe that the MyoVista could potentially generate significant cost savings to healthcare systems by improving earlier diagnosis of heart disease before it reaches an acute stage and reducing unnecessary referrals to cardiology that lead to unnecessary testing.

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Physician Profitability. We believe that the MyoVista could offer primary care physicians a significant advance in their ability to assess patient heart health. Several primary care physicians have informed us that they would expect to be able to charge additional out-of-pocket patient fees of $25 to $100 for the additional diagnostic information provided by a MyoVista test until additional reimbursement can be obtained. Even based on low usage and competitive pricing, the payback on the capital cost of the MyoVista could potentially be realized quickly. We also expect to provide financing options (through third parties) which would avoid upfront capital costs to acquire the device. In high use environments such as a cardiac screening clinic, hospital or family practice office, we expect the financial returns to be significant especially if additional reimbursement is obtained. We intend to develop financial models demonstrating the potential profitability and to establish reference sites.

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Razor-Razorblade Business Model. In addition to the MyoVista device sales, we expect to generate recurring supplies revenue from the sale of our proprietary electrodes, which are disposable and single use for each test. Unlike a conventional ECG, the MyoVista is designed to analyze frequency content from the heart’s electrical signal and we have developed a patented cable connection and high-quality electrode system that is unique to us and must be used when performing a MyoVista test. We expect the supply revenues from each test to provide recurring revenue and believe this will assist us in avoiding the need for high device pricing, which, in turn, should lower barriers to adoption.

Reimbursement

In addition to penetrating the health care settings described above, a key element of our strategy is to qualify for third-party payor reimbursement. This strategy has two stages. During the first stage, upon FDA approval, we intend to seek the support of the American College of Cardiology, or ACC, to use existing Current Procedural Terminology, or CPT, codes for the standard ECG functionality of the MyoVista. CPT codes are numbers assigned to each task or service provided by a healthcare provider including medical, surgical and diagnostic services. Insurers use the numbers to determine the amount to pay a provider. While we cannot assure you that we will receive such approval by ACC, this would provide physicians with the ability to use existing 12-lead ECG reimbursement codes. Medicare reimbursement for existing ECG testing procedures with interpretation and report ranges from approximately $17 to $55 depending on the type of healthcare facility. These charges would go directly to the healthcare facility/physician.

The existing procedure codes are:

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CPT 93799: Unlisted cardiovascular procedure (not otherwise classified)

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CPT 93000: Electrocardiogram, routine ECG with at least 12 leads; includes running test, interpretation and report

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CPT 93005: Electrocardiogram, routine ECG with at least 12 leads; testing only, without interpretation and report

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CPT 93010: Electrocardiogram, routine ECG with at least 12 leads; interpretation and report only

After this initial stage, our longer-term strategy is to obtain additional reimbursement for the MyoVista capabilities related to detecting cardiac dysfunction. While we cannot assure you that we will be successful in obtaining additional reimbursement codes, if we are successful, this could potentially provide total reimbursement that is greater than reimbursement for conventional ECG devices, which, in turn, could place the MyoVista at a competitive advantage. Any additional CPT codes or modifiers that are issued and recognized for the MyoVista related to our longer-term reimbursement strategy could provide a revenue advantage as compared to reimbursement for conventional ECG devices.

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Category III code. New technologies must meet AMA’s Level of Evidence and the Use Requirement, so a Category III code will be issued as a precursor to a final Category I code. Category III codes are generally temporary codes requiring additional studies and individual payor efforts to obtain coverage from each payor. Individual payors do not initially provide reimbursement for Category III codes so each payor will need clinical evidence that demonstrates the benefits of the MyoVista based cardiac dysfunction testing.

Category I code. Category I codes are long term codes that are expected to be in use for many years. Generally, to obtain this code, five peer-reviewed publications from at least two different patient populations are required. All third-party payors typically pay Category I coded diagnostic testing procedures. Approval by the AMA CPT Editorial Panel of new or expanded CPT codes for the MyoVista ultimately could provide a revenue advantage as compared to reimbursement for conventional ECG devices.

New Tech Ambulatory Payment Classification (or APC) code. The new tech APC code is utilized for new and significant technologies which warrant having a unique code under the Healthcare Common Procedure Coding System, or HCPCS. An HCPCS is a payment code issued by the Centers for Medicare and Medicaid Services, or CMS, for use in ambulatory outpatient hospital environments and certain integrated practices. Once the device receives FDA clearance, the Company intends to quickly file an application for a cardiac dysfunction APC code for the MyoVista. If the application is successful, it would provide enhanced revenue over existing conventional ECG devices in a hospital integrated practice such as a cardiology practice.

Competition

The medical device industry is characterized by rapidly advancing technologies, intense competition, and a strong emphasis on proprietary products. There are many medical device companies, biotechnology companies, public and private universities and research organizations actively engaged in the research and development of products that may be similar to the MyoVista. Competitors could include traditional ECG manufacturers such as GE, Philips, and Nihon Kohden Corporation that may seek to innovate due to competition from HeartSciences, and new competitors that also see the opportunity to finally innovate in a market that, we believe, has significant need for improved products and technology change. The current ECG device manufacturers with the greatest market share are GE, Philips, and Hill-Rom Holdings, Inc., or Hill-Rom. The leading competitors in the ECG market have substantially greater name recognition and financial, technical, manufacturing, marketing, research and development resources, and experience obtaining the FDA and other regulatory clearances of those devices and marketing and selling those devices around the world.

There are additional competitors that are using AI to innovate in electrocardiography including:

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AliveCor Inc., a commercial stage developer of cardiac monitoring devices and applications for heart health monitoring. AliveCor’s ECG recorder has received FDA clearance.

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Heart Output Input, Inc., or Heartio, a development stage, digital diagnostic utilizing AI in a cloud-based software tool used in conjunction with electrocardiograms to help emergency providers more effectively stratify patient risk and make admit/discharge decisions. Heartio currently does not have any FDA clearance or authorization.

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Corvista Health Inc., a development stage ECG device company with a proprietary platform focused on diagnosing heart failure, coronary artery disease, and pulmonary hypertension. Corvista currently does not have any FDA clearance or authorization.

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Anumana Inc., a development stage company funded by the MayoClinic focused on developing AI-enabled ECG algorithms for physician use, integrating point-of-care applications into existing workflows. Anumana currently does not have any FDA clearance or authorization.

Clinical Studies

We have participated in and/or conducted multiple studies at various sites including at Mount Sinai Health System, West Virginia University, University of California, Los Angeles, and The Baker Heart and Diabetes Institute in Australia. The purpose of conducting the studies was threefold: (i) to collect patient data using the

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MyoVista to build an effective proprietary algorithm designed to provide early detection of cardiac dysfunction and heart disease, (ii) to create proof-of-concept algorithms for determination by HeartSciences of the viability of an FDA version of the algorithm, and (iii) to use the collected data to conduct research for potential development of additional future algorithms. The peer review article summaries highlighted below used the proof-of-concept algorithms developed by the institutions from the MyoVista data collected. MyoVista devices were used in each study for the collection of patient ECG information. Data was extracted from these ECG readings to develop separate AI-based proof-of-concept algorithms in each individual study.

Following are summaries of the peer- reviewed articles:

Journal of the American College of Cardiology (JACC) April 2018, Volume 71 Number 15 (2018) Partho P. Sengupta, MD DM, Hemant Kulkarni, MD, Jagat Narula, MD PHD, et al.

The study was conducted at Mount Sinai NY. The article is titled, “Prediction of Abnormal Myocardial Relaxation from Signal Processed Surface ECG” and presents the results from the investigator-initiated clinical study that focused on evaluating the feasibility of the MyoVista as a diagnostic tool for predicting the presence of abnormal cardiac muscle relaxation associated with Left Ventricular Diastolic Dysfunction, or LVDD. All patients underwent a complete 2D doppler-based echocardiogram and a MyoVista wavECG test. Monte Carlo cross validation was performed using the average of 20 iterations for determining performance.

The study results demonstrated 80% sensitivity and 84% specificity (p-value 0.05) with an area under the curve, or AUC, of 91% for the prediction of low e’, an echocardiographic parameter widely used in determination of LVDD (95% confidence interval: 86%-95%). An incremental value comparison of the low e’ prediction algorithm as compared to using three clinical features associated with high risk, age, obesity and hypertension, along with conventional ECG risk categorization information resulted in demonstrating that the low e’ prediction algorithm alone provided an increase in AUC performance of 0.19% (p-value<0.0001) over the clinical features and conventional ECG risk information.

The Area Under a Receiver Operating Characteristics, or ROC, Curve is a widely used statistical performance evaluator that provides a measure of the accuracy of a diagnostic test typically calculated using data from a specific clinical study as a measure of performance. ROC is a probability curve and AUC represents the degree or measure of separability – the higher the AUC, the better the model is at distinguishing between patients with the disease and no disease. A test with no better accuracy than chance has an AUC of 0.5, while a test with perfect accuracy has an AUC of 1.

P-value is the probability of obtaining test results at least as extreme as the result actually observed, under the assumption that the null hypothesis is correct. When a statistical test is performed, a p-value helps determine the statistical significance of the results in relation to the null hypothesis. A null hypothesis is a type of statistical hypothesis that proposes that no statistical significance exists in a set of given observations. Hypothesis testing is used to assess the credibility of a hypothesis by using sample data. A low p-value indicates that observed data does not match the null hypothesis, and when the p-value is lower than the specified significance level (usually 5% or 0.05), the null hypothesis is rejected, and the finding is considered statistically significant.

Journal of the American College of Cardiology (JACC) August 2020, Volume 76 Number 8 (2020) Nobuyuki Kagiyama, MD, PHD, Marco Piccirilli, PHD, Naveena Yanamala, PHD et al.

The participating centers were The Icahn School of Medicine, Mount Sinai Hospital, New York, The West Virginia University Heart and Vascular Institute, The Windsor Cardiac Centre, Windsor, Ontario, Canada and the David Geffen School of Medicine at UCLA.

The article titled “Machine Learning Assessment of Left Ventricular Diastolic Function Based on Electrocardiographic Features” presents the results from evaluating the feasibility of MyoVista wavECGtechnology to provide actual quantitative estimates of the echocardiographic parameter of e’ related to myocardial relaxation that can be used to identify LVDD. Diastolic dysfunction is recognized as playing a major role in the pathophysiology of heart failure. All subjects underwent a full echocardiographic examination and a MyoVista wavECG test.

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The multicenter study enrolled a total of 1,202 subjects with data from one of the institutions used as an external test set n-388 for determining algorithm performance. Results from the estimated e’ values provided by the proof-of-concept algorithm discriminated the guideline-recommended thresholds for low e’ for determining abnormal myocardial relaxation, LVDD and systolic dysfunction (LV ejection fraction) with an AUC of 0.84, 0.80, and 0.81, respectively, in the external test set. Sensitivity and specificity in the external test set for predicting low e’ using the algorithm’s estimated e’ value provided a sensitivity of 90%, specificity of 61% (p-value<0.05), negative predictive value of 81% and positive predictive value of 77%. Moreover, the estimated e-prime values allowed prediction of LV diastolic dysfunction based on multiple age and sex-adjusted reference limits with an AUC of 0.94 in the external test set with sensitivity 89% and specificity 96% (p-value<0.05).

JACC Cardiovascular Imaging Oct 2021, Volume 14 Number 10

Elizabeth L. Potter, MBBS, Thomas H. Marwick, MBBS, PHD, MPH et al.

The participating centers were Baker Heart and Diabetes Institute, Melbourne, Australia, Baker Heart and Diabetes Institute, Monash University, Melbourne, Australia, Melbourne University, Melbourne, Australian National University, Canberra, and the West Virginia University Heart and Vascular Institute.

The article titled “Machine Learning of ECG Waveforms to Improve Selection for Testing for Asymptomatic Left Ventricular Dysfunction Prompt” focused on developing a screening algorithm using the MyoVista for detection of Left Ventricular Dysfunction, or LVD. References to ewECG mean energy waveform ECG and are an alternative name for the MyoVista device and the included wavelet transform signal processing. The study that was the subject of this article consisted of 398 participants with n=287 for development of the feasibility algorithm and n=111 for use as an external test set for determining performance of the algorithm. All subjects received a full echocardiographic examination and a MyoVista wavECG test. Left Ventricular Dysfunction for this study is defined as a subject having (1) LVH or left ventricular hypertrophy, (2) abnormal global longitudinal strain or borderline GLS with left atrial enlargement or (3) abnormal LV filling pressure measures of E/e’ ratios >15 or < 10 with left atrial enlargement or low e’ with LAE.

The study results in the external test set demonstrated 85% sensitivity and 72% specificity (p-value<0.05) with an of AUC 0.83, 95% confidence interval: 0.74 to 0.92.

The study below presents the results of a proof-of-concept algorithm developed using the data gathered from previous studies in which MyoVista ECGs were collected from study subjects. This research was conducted for the purpose of potential development of additional future algorithms for detection of additional heart disease conditions.

European Heart Journal—Digital Health November 2020, Volume 1 Issue 1

Peter D. Farjo MD, Naveena Yanamala PHD et al.

The participating centers were West Virginia University Heart and Vascular Institute, Carnegie Mellon University, Juntendo University, Japan and Harbor-UCLA Medical Center. Five hundred thirty-four subjects were included in this multicenter study with n=428 for the training set and n=106 for the test set.

The study article titled “Prediction of coronary artery calcium scoring from surface electrocardiogram in atherosclerotic cardiovascular disease: a pilot study” aimed to determine whether machine learning (ML) approaches can aid cardiovascular risk stratification by predicting guideline recommended Coronary Artery Calcium, or CAC, score categories from clinical features and surface electrocardiograms using the MyoVista. CAC scoring is an established tool for cardiovascular risk stratification.

The study results included two machine learning models that were developed for prediction of CAC scores equal to 0 and CAC >_400. The performance was evaluated using an independent data set, the CAC= 0 algorithm performance provided sensitivity 92%, specificity 70%, AUC 84% (p-value<0.05) and the CAC >_400 algorithm provided sensitivity 91%, specificity 75% and AUC 87% (p-value<0.05). The CAC >_400 model was further tested to risk stratify a cohort of 87 subjects referred for invasive coronary angiography. Using an intermediate or higher pretest probability (>_15%) which

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coincides with the European Society of Cardiography pretest probability guidelines, the model predicted the presence of significant coronary artery stenosis, the need for revascularization, notably bypass surgery, and major adverse cardiovascular events during a median follow-up period of two years.

FDA and Other 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 medical device 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. We will also encounter in the future industry-specific government regulations that would govern our device, if and when developed for commercial use. It may become the case that other regulatory approvals will be required for the design and manufacture of our device. In previous communications with the FDA, the Company determined that the submission would need to use the De Novo classification process for the MyoVista device.

FDA Requirements and Other Regulatory Approval Requirements

Our device and our operations are subject to regulation by numerous worldwide regulatory bodies including the FDA and comparable international regulatory agencies. In previous communications with the FDA, the Company determined that the submission would need to use the De Novo classification process for the MyoVista device.

Our device is subject to regulation as a medical device under the Federal Food, Drug, and Cosmetic Act, or FDCA, as implemented and enforced by the FDA. The FDA regulates the development, design, non-clinical and clinical research, manufacturing, safety, efficacy, labeling, packaging, storage, installation, servicing, recordkeeping, premarket clearance or approval, import, export, adverse event reporting, advertising, promotion, marketing and distribution of medical devices to ensure that medical devices distributed domestically are safe and effective for their intended uses and otherwise meet the requirements of the FDCA.

In addition to U.S. regulations, we are subject to a variety of regulations in the European Economic Area, or the EEA, governing clinical trials and the commercial sales and distribution of our device. Whether or not we have or are required to obtain FDA clearance or approval for a product, we will be required to obtain authorization before commencing clinical trials and to obtain marketing authorization or approval of our device under the comparable regulatory authorities of countries outside of the United States before we can commence clinical trials or launch sales of our device in those countries. The approval process varies from country to country and the time may be longer or shorter than that required for FDA clearance or approval. Medical devices are generally subject to varying levels of regulatory control based on risk level of the device.

A clearance or authorization letter from the FDA authorizes commercial marketing of the device for one or more specific indications of use. After clearance or authorization, the Company will be required to comply with a number of 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 the FDA's Quality System Regulation, or the QSR. The FDA periodically inspects manufacturing facilities to assess compliance with QSRs, 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 the QSR and other types of regulatory controls.

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The FDA and the Federal Trade Commission, or FTC, will also regulate the advertising claims of the Company’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.

FDA Clearance Process and FDA Validation Clinical Study

Unless an exemption applies, each medical device commercially distributed in the United States requires FDA clearance of a 510(k) premarket notification, granting of a de novo request, or approval of an application for premarket approval, or PMA. Under the FDCA, 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 regulatory controls needed to ensure its safety and effectiveness.

Class I includes devices with the lowest risk to the patient and are those for which safety and effectiveness can be assured by adherence to the FDA’s General Controls for medical devices, which include compliance with the applicable portions of the QSR facility registration and product listing, reporting of adverse medical events, and truthful and non-misleading labeling, advertising and promotional materials.

Class II devices are subject to the FDA’s General Controls, and special controls as deemed necessary by the FDA to ensure the safety and effectiveness of the device. These special controls can include performance standards, post-market surveillance, patient registries and FDA guidance documents. While most Class I devices are exempt from the 510(k) premarket notification requirement, manufacturers of most Class II devices are required to submit to the FDA a premarket notification under Section 510(k) of the FDCA requesting permission to commercially distribute the device. The FDA’s permission to commercially distribute a device subject to class II controls is generally described as 510(k) clearance.

Devices deemed by the FDA to pose the greatest risks, such as life sustaining, life supporting or some implantable devices, or devices that have a new intended use, or use advanced technology that is not substantially equivalent to that of a legally marketed device, are placed in Class III, requiring approval of a PMA. Some pre-amendment devices are unclassified but are subject to FDA’s premarket notification and clearance process in order to be commercially distributed.

510(k) Clearance Marketing Pathway

To obtain 510(k) clearance, we must submit to the FDA a premarket notification submission demonstrating that the proposed device is “substantially equivalent” to a predicate device already on the market. A predicate device is a legally marketed device that is not subject to PMA, i.e., a device that was legally marketed prior to May 28, 1976 (pre-amendments device) and for which a PMA is not required, a device that has been reclassified from Class III to Class II or I, or a device that was found substantially equivalent through the 510(k) process. The FDA’s 510(k) clearance process usually takes from three to twelve months, but often takes longer. The FDA may require additional information, including clinical data, to make a determination regarding substantial equivalence. In addition, the FDA collects user fees for certain medical device submissions and annual fees for medical device establishments.

If the FDA agrees that the device is substantially equivalent to a predicate device currently on the market, it will grant 510(k) clearance to commercially market the device. If the FDA determines that the device is “not substantially equivalent” to a previously cleared device, the device is automatically designated as a Class III device. The device sponsor must then fulfill more rigorous PMA requirements or can request a risk-based classification determination for the device in accordance with the “De Novo” process, which is a route to market novel medical devices that are low to moderate risk and are not substantially equivalent to a predicate device.

After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change in its intended use, will require a new 510(k) or possibly a PMA. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacturer’s determination. If the FDA disagrees with our determination not to seek a new 510(k) clearance, the FDA may retroactively require us to seek 510(k) clearance or possibly a PMA. The

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FDA could also require us to cease marketing and distribution and/or recall the modified device until 510(k) clearance or a PMA is obtained. Also, in these circumstances, we may be subject to significant regulatory fines and penalties.

PMA Approval Pathway

Class III devices require approval of a PMA before they can be marketed, although some pre-amendment Class III devices for which the FDA has not yet required a PMA are cleared through the 510(k) process. The PMA process is more demanding than the 510(k) premarket notification process. In a PMA application, the manufacturer must demonstrate that the device is safe and effective, and the PMA application must be supported by extensive data, including data from preclinical studies and human clinical trials. The PMA application must also contain a full description of the device and its components, a full description of the methods, facilities, and controls used for manufacturing, and proposed labeling. Following receipt of a PMA application, the FDA determines whether the application is sufficiently complete to permit a substantive review. If the FDA accepts the application for review, it has 180 days under the FDCA to complete its review of a PMA application, although in practice, the FDA’s review often takes significantly longer, and can take up to several years. An advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. The FDA may or may not accept the panel’s recommendation. In addition, the FDA will generally conduct a pre-approval inspection of the applicant or its third-party manufacturers’ or suppliers’ manufacturing facility or facilities to ensure compliance with the QSR. PMA devices are also subject to the payment of user fees.

The FDA will approve the new device for commercial distribution if it determines that the data and information in the PMA application constitute valid scientific evidence and that there is reasonable assurance that the device is safe and effective for its intended use(s). A PMA may include post-approval conditions intended to ensure the safety and effectiveness of the device, including, among other things, restrictions on labeling, promotion, sale and distribution, and collection of long-term follow-up data from patients in the clinical study that supported the PMA or requirements to conduct additional clinical studies post-approval. The FDA may condition PMA approval on some form of post-market surveillance when deemed necessary to protect the public health or to provide additional safety and efficacy data for the device in a larger population or for a longer period of use. In such cases, the manufacturer might be required to follow certain patient groups for a number of years and to make periodic reports to the FDA on the clinical status of those patients. Failure to comply with the conditions of approval can result in material adverse enforcement action, including withdrawal of the approval.

Certain changes to an approved device, such as changes in manufacturing facilities, methods, or quality control procedures, or changes in the design performance specifications, which affect the safety or effectiveness of the device, require submission of a PMA supplement. PMA supplements often require submission of the same type of information as a PMA, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA and may not require as extensive clinical data or the convening of an advisory panel. Certain other changes to an approved device require the submission of a new PMA, such as when the design change causes a different intended use, mode of operation, and technical basis of operation, or when the design change is so significant that a new generation of the device will be developed, and the data that were submitted with the original PMA are not applicable for the change in demonstrating a reasonable assurance of safety and effectiveness. None of our currently developed products require a PMA to be marketed.

De Novo Classification

Medical device types that the FDA has not previously classified as Class I, II or III are automatically classified into Class III regardless of the level of risk they pose. The Food and Drug Administration Modernization Act of 1997 established a new route to market for low to moderate risk medical devices that are automatically placed into Class III due to the absence of a predicate device, called the “Request for Evaluation of Automatic Class III Designation,” or the De Novo classification procedure.

This procedure allows a manufacturer whose novel device is automatically classified into Class III to request down-classification of its medical device into Class I or Class II on the basis that the device presents low or moderate risk, rather than requiring the submission and approval of a PMA application. Prior to the enactment of the

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Food and Drug Administration Safety and Innovation Act of 2012, or FDASIA, a medical device could only be eligible for De Novo classification if the manufacturer first submitted a 510(k) pre-market notification and received a determination from the FDA that the device was not substantially equivalent. FDASIA streamlined the De Novo classification pathway by permitting manufacturers to request De Novo classification directly without first submitting a 510(k) pre-market notification to the FDA and receiving a not substantially equivalent determination. Under FDASIA, the FDA is required to classify the device within 120 days following receipt of the De Novo application. If the manufacturer seeks reclassification into Class II, the manufacturer must include a draft proposal for special controls that are necessary to provide a reasonable assurance of the safety and effectiveness of the medical device. In addition, the FDA may reject the reclassification petition if it identifies a legally marketed predicate device that would be appropriate for a 510(k) or determines that the device is not low to moderate risk or that general controls would be inadequate to control the risks and special controls cannot be developed.

Devices such as ECG devices are generally considered to have moderate risk and are generally classified as Class II devices. Applicants must submit a notification to the FDA demonstrating that its proposed device is either substantially equivalent to a predicate (existing) device that is a Class II, or for devices with no existing predicate they will seek to be designated with a De Novo classification. Through previous interactions and correspondence with the FDA, the Company determined there was not an existing predicate to the MyoVista AI algorithm and therefore was not eligible to submit an application via the more common 510(k) clearance process. The Company also previously received formal notification from the FDA that the regulatory pathway for MyoVista was determined to be with a De Novo classification.

After initial authorization, any modification that could significantly affect its safety or effectiveness, or that would constitute a major change or modification in its intended use, will require a new 510(k) clearance or, depending on the modification, another De Novo classification request, or PMA approval. The FDA requires each manufacturer to determine whether the proposed change requires submission of a 510(k) or a PMA in the first instance, but the FDA can review any such decision and disagree with a manufacturer’s determination. If the FDA disagrees with a manufacturer’s determination, the FDA can require the manufacturer to cease marketing and/or request the recall of the modified device until 510(k) marketing clearance or PMA approval is obtained. Also, in these circumstances, the manufacturer may be subject to significant regulatory fines or penalties. We have previously submitted and intend to seek authorization to market the device through submission of a new De Novo request for the MyoVista device. Delays in receipt or failure to receive the necessary clearances, or the failure to comply with existing or future regulatory requirements, could reduce the Company’s business prospects.

Clinical Trials

Clinical trials are almost always required to support a De Novo request and are sometimes required to support a 510(k) submission. All clinical investigations of investigational devices to determine safety and effectiveness must be conducted in accordance with the FDA’s investigational device exemption, or IDE, regulations which govern investigational device labeling, prohibit promotion of the investigational device, and specify an array of recordkeeping, reporting and monitoring responsibilities of study sponsors and study investigators. If the device presents a “significant risk” to human health, as defined by the FDA, the FDA requires the device sponsor to submit an IDE application to the FDA, which must become effective prior to commencing human clinical trials. A significant risk device is one that presents a potential for serious risk to the health, safety or welfare of a patient and either is implanted, used in supporting or sustaining human life, substantially important in diagnosing, curing, mitigating or treating disease or otherwise preventing impairment of human health, or otherwise presents a potential for serious risk to a subject. An IDE application must be supported by appropriate data, such as animal and laboratory test results, showing that it is safe to test the device in humans and that the testing protocol is scientifically sound. The IDE will automatically become effective 30 days after receipt by the FDA unless the FDA notifies the Company that the investigation may not begin. If the FDA determines that there are deficiencies or other concerns with an IDE for which it 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, or IRB, for each clinical site. The IRB is responsible for the initial and continuing review of the IDE, and may pose additional requirements for the conduct of the study. If an IDE application is approved by the FDA and one or more IRBs, human clinical trials may begin at a specific number of investigational sites with a specific

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number of patients, as approved by the FDA. 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 must still follow abbreviated IDE requirements, such as monitoring the investigation, ensuring that the investigators obtain informed consent, and labeling and record-keeping requirements. Acceptance of an IDE application for review does not guarantee that the FDA will allow the IDE to become effective and, if it does become effective, the FDA may or may not determine that the data derived from the trials support the safety and effectiveness of the device or warrant the continuation of clinical trials. An IDE supplement must be submitted to, and approved by, the FDA before a sponsor or investigator may make a change to the investigational plan that may affect its scientific soundness, study plan or the rights, safety or welfare of human subjects.

During a study, the sponsor is required to comply with the applicable FDA requirements, including, for example, trial monitoring, selecting clinical investigators and providing them with the investigational plan, ensuring IRB review, adverse event reporting, record keeping and prohibitions on the promotion of investigational devices or on making safety or effectiveness claims for them. The clinical investigators in the clinical study are also subject to FDA regulations and must obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of the investigational device, and comply with all reporting and recordkeeping requirements. Additionally, after a trial begins, we, the FDA or the IRB could suspend or terminate a clinical trial at any time for various reasons, including a belief that the risks to study subjects outweigh the anticipated benefits.

Post-market Regulation

After a device is cleared or approved for marketing, numerous and pervasive regulatory requirements continue to apply. These include:

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establishment registration and device listing with the FDA;

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QSR requirements, which require manufacturers, including third-party manufacturers, to follow stringent design, testing, control, documentation and other quality assurance procedures during all aspects of the design and manufacturing process;

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labeling and marketing regulations, which require that promotion is truthful, not misleading, fairly balanced and provide adequate directions for use and that all claims are substantiated, and also prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; FDA guidance on off-label dissemination of information and responding to unsolicited requests for information;

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clearance or approval of product modifications to 510(k)-cleared devices, or those re-classified to 510(k) cleared devices, that could significantly affect safety or effectiveness or that would constitute a major change in intended use of one of our cleared devices, or approval of a supplement for certain modifications to PMA devices;

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medical device reporting regulations, which require that a manufacturer report to the FDA if a device it markets may have caused or contributed to a death or serious injury, or has malfunctioned and the device or a similar device that it markets would be likely to cause or contribute to a death or serious injury, if the malfunction were to recur;

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correction, removal and recall reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health;

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complying with the new federal law and regulations requiring Unique Device Identifiers (UDI) on devices and also requiring the submission of certain information about each device to the FDA’s Global Unique Device Identification Database (GUDID);

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the FDA’s recall authority, whereby the agency can order device manufacturers to recall from the market a product that is in violation of governing laws and regulations; and

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post-market surveillance activities and regulations, which apply when deemed by the FDA to be necessary to protect the public health or to provide additional safety and effectiveness data for the device.

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The manufacturing processes for medical devices are required to comply with the applicable portions of the QSR, which cover the methods and the facilities and controls for the design, manufacture, testing, production, processes, controls, quality assurance, labeling, packaging, distribution, installation and servicing of finished devices intended for human use. The QSR also requires, among other things, maintenance of a device master file, device history file, and complaint files. These requirements impose certain procedural and documentation requirements upon us and our third-party manufacturers related to the methods used in and the facilities and controls used for designing, manufacturing, packaging, labeling, storing, medical devices. As a manufacturer, we will be subject to periodic scheduled or unscheduled inspections by the FDA. Following these inspections, the FDA may assert noncompliance with QSR requirements on a Form 483, which is a report of observations from an inspection, or by way of “untitled letters” or “warning letters” that could cause us or any third-party manufacturers to modify certain activities. A Form 483 notice, if issued at the conclusion of an FDA inspection, can list conditions the FDA investigators believe may have violated QSR or other FDA requirements. We cannot be certain that we or our present or any future third-party manufacturers or suppliers will be able to comply with QSR or other FDA regulatory requirements to the agency’s satisfaction. Failure to comply with these obligations may lead to possible legal or regulatory enforcement action by the FDA.

The FDA has broad regulatory compliance and enforcement powers. If the FDA determines that we failed to comply with applicable regulatory requirements, it can take a variety of compliance or enforcement actions, which may result in any of the following sanctions:

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warning letters, untitled letters, fines, injunctions, consent decrees and civil penalties;

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recalls, withdrawals, or administrative detention or seizure of our device;

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operating restrictions or partial suspension or total shutdown of production;

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refusing or delaying requests for 510(k) marketing clearance or PMA approvals of new products or modified products;

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withdrawing 510(k) clearances or PMA approvals that have already been granted;

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refusal to grant export or import approvals for our device; or

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criminal prosecution.

Advertising and Promotion

The FDA and other regulatory agencies closely regulate the post-approval marketing and promotion of medical devices, including standards and regulations for direct-to-consumer advertising, communications about unapproved uses, industry-sponsored scientific and educational activities and promotional activities involving the internet. Devices may be marketed only for the approved or cleared indications and in accordance with the provisions of the approved or cleared label.

Foreign Regulation

As we plan to market our device 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 device 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 also vary greatly from country to country and such regulatory requirements have been changing and increasing in some countries. We may be unable to maintain regulatory qualifications, clearances, approvals or CE Certificates of Conformity in these countries or to obtain clearances or approvals in other countries. We may incur significant costs in attempting to obtain, renew, or modify foreign regulatory clearances or approvals, qualifications or CE Certificates of Conformity. If we experience difficulties in receiving, maintaining, renewing or modifying necessary qualifications, clearances, approvals or CE Certificates of Conformity to market our products outside the United States, or if we fail to receive, renew, modify or maintain those qualifications, clearances, approvals or CE Certificates of Conformity, we may be unable to

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market our products or enhancements in certain international markets effectively, or at all. We previously received CE clearance for marketing the MyoVista in Europe and will continue efforts to maintain regulatory approval in Europe.

On April 5, 2017, a new regulation on medical devices was adopted to establish a modernized and more robust European Union legislative framework, with the aim of ensuring better protection of public health and patient safety: Regulation (EU) 2017/745 of the European Parliament and of the Council of 5 April 2017 on medical devices, amending Directive 2001/83/EC, Regulation (EC) No 178/2002 and Regulation (EC) No 1223/2009 and repealing Council Directives 90/385/EEC and 93/42/EEC, which became applicable from May 26, 2021, or the EU MDR. The EU MDR repeals and replaces the EU Medical Devices Directive and unlike directives, which must be given effect through transposition into the national domestic laws of the member states of the EEA, or the Relevant States, regulations are directly applicable (i.e., without the need for transposition into national laws implementing them) in all Relevant States. The EU MDR is also applicable in the EEA. Regulations (as EU law instruments) must be applied in their entirety across the EU so that legal acts are automatically and uniformly applied to all EU countries as soon as they enter into force to minimize variations that may arise in transposition of EU law into national law. These modifications may have an effect on the way we design and manufacture products and conduct our business in the EU and EEA. For example, as a result of the transition towards the new regime, organizations accredited by a Relevant State to conduct conformity assessments, or Notified Bodies, have lengthened their review times, and product introductions or modifications could be delayed or cancelled or otherwise rejected, which could adversely affect our ability to grow our business.

The Company previously achieved a CE Mark under the EU Medical Devices Directive, or the MDD, in February 2017. The MDD was established on June 14, 1993, but the MDD regulatory framework has since been replaced by the EU MDR. In order to sell in member countries of the European Economic Area, or EEA, our device must now comply with the essential requirements of the newer, updated regulatory framework or EU MDR. An updated CE mark certificate under EU MDR will entitle the Company to market the MyoVista in the European Economic Area as well as other countries for which CE Mark represents an appropriate regulatory standard.

Intellectual Property

Our technology is protected by a patent portfolio as well as trade secrets, which together comprise an important part of technology protection especially when developing proprietary algorithms. We believe that the combination of patents and trade secrets create valuable competitive barriers for HeartSciences.

The USPTO has issued five utility patents and one design patent to us, and has allowed one further utility patent application. These patents expire from March 5, 2029 to August 27, 2040. We also have seven utility patents (which expire from September 20, 2036 to March 9, 2037) and fourteen design registrations granted by international jurisdictions such as China, Japan, South Korea, the United Kingdom, France, Germany and Australia, and have received allowances of further applications by the European Patent Office and in Israel. We also have several pending patent applications in several international jurisdictions including Brazil, Canada, India, South Korea, Mexico and the United Arab Emirates.

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The following chart includes a list of the five utility patents that have been granted to us by the USPTO:

Patent No. Patent Title Description of General Subject Matter Expiration Date

The following chart includes a list of the trademarks that we have registered with the USPTO:

Application No. Trademark Type of Trademark

87/073,995 HEART TEST LABORATORIES Design

MyoVista Technology Agreement

In 2014, the Company entered into a technology agreement, which we refer to as the MyoVista Technology Agreement, with the inventor of certain specified MyoVista technology and proprietary and intellectual property rights thereto (including patents, copyright, trademarks, trade secrets and know-how). In the MyoVista Technology Agreement, the inventor conveyed ownership of all his rights in the MyoVista to us. In exchange, we (a) issued promissory notes in the amounts of $448,000, $700,000 and $300,000, payable to the inventor, all of which have been paid, and (b) entered into a security agreement with the inventor that requires us to pay the inventor royalties on any sales of the MyoVista. Royalty payments are $500 per device for the first 2,400 devices sold and then $200 per device thereafter until the aggregate amount of royalties paid to the inventor equals $3.5 million which, in any event, is the maximum amount we are required to pay in royalties under the MyoVista Technology Agreement.

Glasgow Licensing Agreement

In December 2015, we entered into a licensing agreement, which we refer to as the Glasgow Licensing Agreement, with The University Court of the University of Glasgow, under which we obtained a non-exclusive,

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worldwide license, automatically renewing every five years, to software modules for an Android platform for analysis of resting 12-lead electrocardiograms and all intellectual property rights (including patents, copyright, trademarks, trade secrets and know-how) relating to the software modules, which are collectively referred to in only this section as the Glasgow Technology, to be used in the MyoVista. The Glasgow Licensing Agreement also granted the Company the right to sub-license all of the Company’s rights under the Glasgow Licensing Agreement to any third party to, among other things, manufacture, assemble, market, distribute and sell the MyoVista product containing the Glasgow Technology. Under the Glasgow Licensing Agreement, we are currently obliged to pay, per 12-month period, the greater of (i) $42,236, subject to a 3% increase each year, or (ii) the aggregate amount of royalties owed per MyoVista sold, which is $53.04 per unit for the first 2,000 sold, $42.44 per unit for the next 3,000 sold and $37.13 per unit thereafter, subject to a 3% increase each year.

Preparations for Manufacturing

At this time, we have fully functional hardware versions of the MyoVista, which have also been used in most of our medical clinical studies. We have a scalable manufacturing strategy and have engaged Benchmark Electronics, a firm with deep experience in manufacturing medical devices.

Benchmark Electronics is an NYSE listed US-based medical device manufacturing organization that is FDA Registered and ISO 13485 Certified and has over 30 years of product manufacturing experience.

Research and Development

The Company’s R&D staff designs the hardware, software and AI-based algorithms. Hardware development assistance is provided by outside consulting firms. The Company internally develops the signal processing software elements along with outside assistance. The user interface elements of the software are designed by the Company along with the assistance of outside consultants. The data science work necessary to build the AI-based algorithms is performed both internally and externally using outside consultants. Incorporation of all software elements into the MyoVista hardware is performed internally. We currently employ five full-time R&D staff.

We believe our research demonstrates the potential to develop further algorithms for a range of additional or alternative clinical indications. Studies involving use of the MyoVista have already been published as an example of alternative clinical indications. We believe that, in the future, the ECG will have significantly greater clinical value and will facilitate far more effective heart disease screening and referral.

Future Products

Our future plans include the development of additional algorithms for different clinical indications, additional hardware platforms and cloud-based services that allow other ECG devices to send standard ECG recordings and have them evaluated using our algorithms. Additional development opportunities could include development of a version of the algorithm to run on smartphones or tablets or a lower cost version of the MyoVista.

The Company has already cooperated with cardiology researchers to assist them in the development of three proof-of-concept algorithms in key specific areas of heart disease beyond cardiac dysfunction. For example, a proof-of-concept algorithm was developed to detect abnormally high coronary artery calcium scores; the results were published in the European Heart Journal in November 2020. Two additional proof-of-concept algorithms were developed by researchers and results presented as abstracts. A proof-of-concept algorithm was developed to predict which heart disease patients were at a higher risk for having a major adverse cardiac event, or MACE, within three years, and results were presented at the annual ACC conference in April 2021. In addition, a proof-of-concept algorithm has also been developed to detect patients that have valvular heart disease; results will be presented at the ACC conference in March 2022. Some additional opportunities for new algorithms include reduced ejection fraction and CAD.

Available Information

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Our principal executive offices are located at 550 Reserve Street, Suite 360, Southlake, Texas 76092. Our telephone number is (682)-237-7781 and our web address is www.heartsciences.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 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.

Item 1A. Risk Factors

Our business is subject to numerous risks, as more fully described below in this "Risk Factors" section. The following is a summary of the most significant risks and uncertainties that we believe could adversely affect our business, financial condition, and results of operations. In addition to the following summary, you should read the other information set forth below in this “Risk Factors” section before you invest in our securities. In particular, our risks include, but are not limited to, the following:

Risks Related to Our Financial Condition and Capital Requirements:

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We have a limited operating history and we have incurred significant operating losses since our inception, and anticipate that we will incur continued losses for the foreseeable future;

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Our future operating results are dependent on regulatory approval for the MyoVista, which we have not received as of the date of filing of this Annual Report on Form 10-K;

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We will need to raise substantial additional funding, which may not be available on acceptable terms, or at all. Failure to obtain funding on acceptable terms and on a timely basis may require us to curtail, delay or discontinue our development efforts and other operations;

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All of our assets are subject to security interests; and

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There is substantial doubt about our ability to continue as a going concern, which could prevent us from obtaining new financing either on reasonable terms or at all.

Risks Related to Our Business and Industry:

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Our future success depends on our ability to develop, receive regulatory clearance or approval for, and introduce the MyoVista to the market in a timely manner. If we do not obtain and maintain the regulatory registrations and clearances for our device, we will be unable to market and sell the MyoVista in the United States, Europe or other regions;

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Our success will be dependent upon physician acceptance; and

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If third-party payors do not provide adequate coverage and reimbursement for the use of the MyoVista, our revenue will be negatively impacted.

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Risks Related to Product Development and Regulatory Approval:

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Our device and operations are subject to extensive government regulation and oversight both in the U.S. and abroad, and our failure to comply with applicable requirements could harm our business;

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If and when our products are ready for sales launch into the U.S., modifications to our marketed products may require new 510(k) clearances, or may require us to cease marketing or recall the modified products until clearances or approvals are obtained;

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Clinical studies may be necessary to support future product submissions to the FDA. The clinical trial process is lengthy and expensive with uncertain outcomes, and often requires the enrollment of large numbers of patients, and suitable patients may be difficult to identify and recruit. Delays or failures in our clinical studies will prevent us from launching sales of modified or new products into the U.S. and will adversely affect our business, operating results and prospects; and

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Medical device development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies may not be predictive of future study results.

Risks Related to Our Intellectual Property:

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If we are unable to obtain and maintain effective patent rights for our device, we may not be able to compete effectively in our markets. If we are unable to protect the confidentiality of our trade secrets or know-how, such proprietary information may be used by others to compete against us;

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Intellectual property rights of third parties could adversely affect our ability to market our device, and we might be required to litigate or obtain licenses from third parties in order to develop or market our device. Such litigation or licenses could be costly or not available on commercially reasonable terms; and

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We may be subject to claims challenging the inventorship of our intellectual property.

Risks Related to the Ownership of our Securities:

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Although our Common Stock and IPO Warrants began trading on The Nasdaq Stock Market LLC on June 15, 2022, we do not know whether an active, liquid trading market for our Common Stock or IPO Warrants will develop or, if developed, be sustained, or what the trading price of our Common Stock or IPO Warrants will be in the future. Our Common Stock and IPO Warrants may trade at a price below the price you paid and it may be difficult for you to sell the Common Stock or IPO Warrants you purchase;

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The market price of our Common Stock and IPO Warrants may be highly volatile, and you could lose all or part of your investment;

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Future sales of a substantial number of shares of our Common Stock by our existing shareholders could cause our stock price to decline; and

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If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they publish negative reports regarding our business or our securities, our share price and trading volume could decline.

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RISK FACTORS

Investing in our securities involves a high degree of risk. You should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K, including the financial statements and related notes, before deciding whether to purchase our securities. If any of the following risks are realized, our business, operating results, financial condition and prospects could be materially and adversely affected. In that event, the price of our Common Stock or IPO Warrants could decline, and you could lose part or all of your investment.

Risks Related to Our Financial Condition and Capital Requirements

We have a limited operating history and we have incurred significant operating losses since our inception, and anticipate that we will incur continued losses for the foreseeable future.

We are a development-stage medical device company with a limited operating history. In addition, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the medical device industry. To date, we have generated limited revenue from the sale of the MyoVista during its development stage. We have incurred losses in each year since our inception, including net losses of approximately $4.8 million and $2.4 million for Fiscal 2022 and Fiscal 2021, respectively. As of April 30, 2022, we had an accumulated deficit of approximately $54.4 million and stockholder’s deficit of approximately $6.1 million. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” for additional information.

Even if we obtain regulatory approval for sales launch of the MyoVista into the U.S., our future revenue will depend upon the size of the market in which the device or any future product receives approval as well as our ability to achieve sufficient market acceptance, pricing, and reimbursement from third-party payors, which we may never achieve.

We also anticipate that our expenses will increase substantially if and as we:

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continue research and development;

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are granted regulatory and marketing approvals;

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establish a sales, marketing, and distribution infrastructure;

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seek to identify, assess, acquire, license, and/or develop subsequent generations of the MyoVista and any new products;

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seek to maintain, protect, and expand our intellectual property portfolio;

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seek to attract and retain skilled personnel;

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create additional infrastructure to support our operations as a public company as well as our device development and planned future marketing efforts; and

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experience any delays or encounter issues with respect to any of the above, including, but not limited to, failed studies, complex results, safety issues or other regulatory challenges that require longer follow-up of existing studies or additional supportive studies in order to pursue marketing approval.

We expect to continue to incur significant operating losses for the foreseeable future. As a result of the numerous risks and uncertainties associated with developing a medical device, we are unable to predict the extent of any future losses or whether we will ever achieve and maintain profitability. Further, the operating losses that we incur may fluctuate significantly from quarter to quarter and year to year, such that a period-to-period comparison of our results of operations may not be a good indication of our future performance. Other unanticipated costs may also arise.

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Our future operating results are dependent on regulatory approval for the MyoVista, which we have not received as of the date of filing of this Annual Report on Form 10-K.

The MyoVista is our only current product candidate. As a result, the success of our business plan is entirely dependent on our ability to obtain regulatory approval and to subsequently develop, manufacture and launch sales of the MyoVista into the U.S. Our failure to do so would likely cause our business to fail. Successful marketing of medical devices is a complex, lengthy, costly and uncertain process, dependent on the efforts of management, manufacturers, local operators, integrators, medical professionals, third-party payors, as well as general economic conditions, among other factors. For more information, see “—Risks Related to Our Business and Industry—Our future success depends on our ability to develop, receive regulatory clearance or approval for, and introduce the MyoVista to the market in a timely manner. If we do not obtain and maintain the regulatory registrations and clearances for our device, we will be unable to market and sell the MyoVista in the United States, Europe or other regions.” Any factor that adversely impacts the approval, development and sales launch of the MyoVista into the U.S. will have a negative impact on our business, financial condition and results of operations. We may face several challenges with respect to launching sales of the MyoVisto into the U.S. including, among others, that:

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we may fail to obtain regulatory clearance or approvals or, even if regulatory approval is obtained, we may face adverse regulatory and/or legal actions;

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we may not have adequate financial or other resources to properly market the MyoVista or sell it in economically viable quantities;

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we may not be able to manufacture in commercial quantities, at an adequate quality or at an acceptable cost;

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we may not be able to establish adequate sales, marketing and distribution channels;

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healthcare professionals and patients may not accept the MyoVista;

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