SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2025

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying condensed unaudited financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("US GAAP") and in conformity with the instructions on Form 10-Q and Rule 8-03 of Regulation S-X and the related rules and regulations of the Securities and Exchange Commission (“SEC”) and have been prepared on a basis which assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. In the opinion of management, the unaudited interim condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results of operations for the periods presented. The interim operating results are not necessarily indicative of results that may be expected for any subsequent period. The accompanying condensed unaudited financial statements should be read in conjunction with the Company’s audited annual financial statements and notes thereto included in the Company’s Form 10-K filed with the SEC on March 13, 2025 (“2024 Annual Report”).

CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash deposits. As of September 30, 2025, the Company has $1.9 million held as cash. As of December 31, 2024, the Company had $2.4 million held as cash and cash equivalents, of which $1.1 million was held as cash equivalents. The Company maintains its cash in institutions insured by the Federal Deposit Insurance Corporation (“FDIC”) and has cash balances in accounts which exceed the federally insured limits as of September 30, 2025 and December 31, 2024. The Company has made a deposit to the bank for their credit cards in the amount of $56,000 and $56,000 and is classified as restricted cash included in other assets as of September 30, 2025, and December 31, 2024, respectively.

USE OF ESTIMATES

The preparation of financial statements in conformity with US GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Due to the inherent uncertainty involved in making estimates, actual results reported in future periods may be based on amounts that differ from those estimates.

PROPERTY AND EQUIPMENT, NET

Property and equipment are stated at cost less accumulated depreciation. Depreciation of property and equipment is calculated using the straight-line method over the estimated useful lives of the assets. The Company regularly evaluates the estimated remaining useful lives of the Company’s property and equipment, net, to determine whether events or changes in circumstances warrant a revision to the remaining period of depreciation. Maintenance and repairs are expensed as incurred.

The Company capitalizes tools that are depreciated based on useful life of 7 years. Construction-in-progress amounts are not subject to depreciation as such assets are not yet available for their intended use. During the nine months ended September 30, 2025, capitalization of tools into service was $19,500 and depreciation and amortization expense was $23,200. Property and equipment, net represents machinery and equipment of $200,200 and $204,000 as of September 30, 2025 and December 31, 2024, respectively. Construction-in-progress related to tooling and software development that has not been placed into service amounting to $493,600 and $245,700 as of September 30, 2025, and December 31, 2024, respectively.

NET LOSS PER COMMON SHARE

Basic net loss per share excludes the effect of dilution and is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding.

Diluted net loss per share is computed by giving effect to all potential shares of common stock, including stock options and warrants to the extent dilutive. Basic net loss per share was the same as diluted net loss per share for the three and nine months ended September 30, 2025 and 2024 as the inclusion of all potential common shares outstanding would have an anti-dilutive effect.

In accordance with ASC 260-10-45-13, exercisable penny options are included in the calculation of weighted average basic and diluted earnings per share. Penny options of 115,627 and 182,169 have been included in the calculation of weighted average basic and diluted earnings per share for the three and nine months ended September 30, 2025 and September 30, 2024, respectively. In accordance with ASC 260, 62,421 RSUs that were fully vested on September 30, 2025 were included in basic and dilutive earnings per share as there were no remaining contingencies for these shares to be issued as of September 30, 2025.

The following is a summary of awards outstanding as of September 30, 2025 and 2024, which are not included in the computation of basic and diluted weighted average shares:


	Three and nine months ended September 30,
	2025		2024
Stock options (excluding exercisable penny stock options)		8,912,143		7,244,175
Restricted stock units		519,947		283,411
Warrants		5,827,035		5,152,397
Total		15,259,125		12,679,983

Segment Reporting

The Company operates in one reporting segment. The Company’s Chief Operating Decision Maker (“CODM”) is the Chief Executive Officer. The CODM uses operating expenses to measure performance against progress in its clinical trials and its product development. The determination of a single business segment is consistent with the financial information regularly provided to the Company’s CODM. The Company’s CODM reviews and evaluates the total net loss for purposes of assessing performance, making operating decisions, allocating resources, and planning and forecasting for future periods. In addition to the significant expense categories included within the total net loss presented on the Company's Statements of Operations, the following table sets forth significant segment expenses:


	Three months ended September 30,				Nine months ended September 30,
(in thousands)	2025		2024		2025		2024
Employee expenses	$	2,949	$	2,469	$	8,821	$	7,351
Research and Development (excluding employee expenses):
Consulting and professional fees		546		1,106		1,220		2,525
Clinical study expenses		92		127		297		901
Product development		677		324		2,032		883
Other*		313		189		951		659
Total Research and development expense	$	1,628	$	1,746	$	4,500	$	4,968
General and administrative expense (excluding employee expenses):
General and administrative expenses		477		683		1,804		2,213
Commercialization readiness expenses		236		171		704		411
Total General and administrative expense		713		854		2,508		2,624
Total operating expenses	$	5,290	$	5,069	$	15,829	$	14,943

* Other primarily includes patent, and testing for three and nine months ended September 30, 2025 and 2024.

HeartBeam, Inc. 10-Q