Note 1. Basis of Presentation

HeartSciences Inc. (“HeartSciences” or the “Company”) is a healthcare information technology company focused on advancing electrocardiography (“ECG” or “EKG”) through the integration of artificial intelligence (“AI”). The Company has developed MyoVista Insights™, a cloud-native, vendor- and device-agnostic ECG management platform designed to improve workflow efficiency, streamline data management, and support the deployment of third-party AI-ECG algorithms. MyoVista Insights is classified as a Medical Device Data System (“MDDS”) and is exempt from U.S. Food and Drug Administration (“FDA”) 510(k) requirements. HeartSciences has also developed the MyoVista® wavECG™ device, which provides conventional ECG functionality and is designed to host AI-ECG algorithms. The Company submitted the MyoVista wavECG device to the FDA for 510(k) premarket clearance in December 2025 and has licensed or developed additional AI-ECG algorithms that may be submitted for regulatory clearance in the future. The Company is a Texas corporation and is headquartered in Southlake, Texas.

On  June 23, 2026, the Company and Cordis Acquisition, LLC, a Delaware limited liability company and a direct, wholly-owned subsidiary of the Company (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Fortitude Mining Holdings, Inc., a Delaware corporation (“Seller”), Fortitude Mining HoldCo, LLC, a Delaware limited liability company and a direct wholly-owned subsidiary of Seller (“Fortitude”). The Merger Agreement provides that, subject to the satisfaction or waiver of certain closing conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), Merger Sub will merge with and into Fortitude, with Fortitude surviving the merger (the “Merger”) with the Company thereby becoming the sole managing member of the surviving company (the “Surviving Company”) following the consummation of the transactions contemplated by the Merger Agreement (such transactions, the “Transactions” and such consummation, the “Closing”). The completion of the proposed Merger and the other Transactions are subject to a number of closing conditions, including shareholder approval of the Transaction by our shareholders, which make the completion and timing of the completion of the proposed Merger and the other Transactions uncertain.

In connection with closing of the Transaction, Fortitude will receive a newly established class of common stock of HeartSciences, designated as Class V common, par value $0.0001 (“Class V Common Stock”) based on an exchange ratio tied to the Company's pre-closing shares count and stock price. Fortitude will also contribute $2.0 million in cash or Zcash cryptocurrency in exchange for shares of Class A common stock. Additionally, all outstanding shares of the Company's Series C Convertible Preferred Stock and Series D Convertible Preferred Stock that are issued and outstanding immediately prior to the effective time of the Merger, will convert into shares of Class A common stock at closing. 

Note 2. Liquidity, Going Concern and Other Uncertainties

The Company is subject to a number of risks similar to those of early-stage companies, including dependence on key individuals and products, the difficulties inherent in the development of a commercial market, the need to obtain additional capital, competition from larger companies, and other technologies.

The Company has incurred losses each year since inception and has experienced negative cash flows from operations in each year since inception. At  July 31, 2026 and April 30, 2026, the Company had an accumulated deficit of $88.4 million and $85.3 million, respectively. These factors raise substantial doubt regarding the Company's ability to continue as a going concern.

On August 12, 2026, the Company sold and issued to Seller an aggregate of 411,522 shares of its Common Stock at a purchase price of $2.43 per share in a private placement offering. The investment was made pursuant to a subscription agreement entered into between the Company and Seller, dated as of August 12, 2026. The gross proceeds of the investment were approximately $1.0 million and the net proceeds will be used for operating expenses in the period leading up to the expected Merger closing. The shares issued in the private placement offering represent ordinary shares of Common Stock without any additional rights or preferences, however, such shares are not subject to the Exchange Ratio (as defined in the Merger Agreement) contemplated by the Proposed Transaction. Failure to complete the proposed Merger and the other Transactions would likely materially adversely affect our business, financial condition, results of operations and stock price.

On January 13, 2026, the Company entered into a note purchase agreement (the “Note Purchase Agreement”) with Streeterville Capital, LLC, an accredited investor (“Streeterville”), pursuant to which the Company issued to Streeterville an unsecured promissory note in the original principal amount of $3,605,000 (the “$3.6M Streeterville Note”). The Streeterville Note carried an OID of $600,000 and $5,000 was withheld from the $3.6M Streeterville Note for reimbursement of Streeterville's transaction expenses.  As a result, the Company received aggregate net proceeds of approximately $3.0 million in connection with the issuance of the $3.6M Streeterville Note. On June 23, 2026, the Company entered into an agreement with Streeterville, pursuant to which Streeterville exchanged the remaining balance of accrued interest of approximately $164,000 owed under the $2.5M Streeterville Note for 78,103 shares of the Company's Common Stock. The $2.5M Streeterville Note and accrued interest was subsequently repaid in full (see Note 4).

On September 18, 2023, the Company entered into an Equity Distribution Agreement (the “EDA”) with an institutional investor, pursuant to which the Company may offer and sell an aggregate of up to $3.25 million of its shares of Common Stock in At-the-Market offerings (“ATM Facility”). In November 2023, the EDA was further amended increasing the aggregate amount of Common Stock that may be sold under the ATM Facility to $15.0 million, and further amended again in August 2025, increasing the aggregate amount of Common Stock that may be sold under the ATM Facility to $25.0 million. The Company is eligible to sell up to $14.7 million worth of shares of Common Stock as the aggregate market value of the Company’s shares of Common Stock eligible for sale under the EDA is subject to limitations of General Instruction I.B.6 of Form S-3 until such time that the Company's public float equals or exceeds $75.0 million. In the event the aggregate market value of the Company’s outstanding Common Stock held by non-affiliates equals or exceeds $75.0 million, then the one-third limitation on sales set forth in General Instruction I.B.6 of Form S-3 shall not apply to additional sales made pursuant to the EDA. During the three months ended July 31, 2026, the Company issued and sold 4,920 shares under the ATM Facility for net proceeds of approximately $10 thousand. Subsequent to July 31, 2026, the Company issued and sold 397,762 shares under the ATM Facility for net proceeds of approximately $1.2 million (see Note 9). There was approximately $3.0 million available for issuance as of the date of this Quarterly Report on Form 10-Q.

Based on the Company’s forecasts and cashflow projections, management believes that current resources would be insufficient to fund operations for the next twelve months following the issuance of these financial statements. Additionally, the FDA can delay, limit or deny clearance of a medical device for many reasons outside the Company’s control which may involve substantial unforeseen costs.

Management’s plans include raising capital through the sale of additional equity securities, debt, or capital inflows from strategic partnerships. Management can provide no assurance that such financing or strategic relationships will be available on acceptable terms, or at all, which would likely have a material adverse effect on the Company and its financial statements.

The condensed unaudited financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern for a reasonable period.

Note 3. Summary of Significant Accounting Policies

Note 4. Debt

Debt consists of the following:

Loan and Security Agreement

In April 2020, the Company entered into a loan and security agreement (the “Loan and Security Agreement”) pursuant to which a secured promissory note in the original principal amount of $500,000 (the “FRV Note”) was issued to each of Front Range Ventures LLC (“FRV”) and John Q. Adams (the “JQA Note”), who were both shareholders of the Company at the time of issuance. John Q. Adams was also a director of the Company at the time of entering into the Loan and Security Agreement. Each party committed to lend a principal amount of $500,000, totaling $1,000,000, and the loan was drawn in three installments of $300,000 upon execution of the loan agreement, $350,000 on or about July 2, 2020 and $350,000 on or about September 4, 2020. The loan accrued interest at a rate of 12% per annum, compounded annually, payable at maturity. The Company is also required to pay default interest at a rate of 18% per annum, compounded annually, on any unpaid amounts after the applicable due date until the loan amounts are fully re-paid. The loan is collateralized by substantially all of the Company’s assets and intellectual property, except for the secured interest on the covered technology as discussed in Note 7.

The loan had an original maturity date of September 30, 2021, which was amended in September 2021 making the note repayable on demand. The loan was amended in November 2021, extending the maturity to September 30, 2022; further amended in May 2022 to extend the maturity to September 30, 2023; amended again in January 2023 to (i) further extend the maturity date of the FRV Note to September 30, 2024, on which date the principal amount and all accrued interest thereon would be due and payable; and (ii) amend the dates on which principal and accrued interest was due under the JQA Note, such that interest accrued would have been due and payable on September 30, 2023, and the principal amount together with all accrued interest after September 30, 2023 would be due and payable on March 31, 2024.

In October 2023, the Company issued to FRV and Mr. Adams warrants ("$1M Lender Warrants") to purchase an aggregate of 2,000 shares of Common Stock as consideration for the extension of the interest maturity date to one lender. On November 16, 2023, the Company entered into a note conversion letter agreement with John Q. Adams (the “Adams Note Conversion Letter Agreement”). Pursuant to the Adams Note Conversion Letter Agreement, in consideration for the conversion of the principal and interest in the amounts of $585,006 due under the JQA Note, on November 16, 2023, the Company: (1) issued 36,563 shares of Common Stock to Mr. Adams; and (2) entered into a Adams Warrant Amendment (as defined below) with Mr. Adams, amending the $1M Lender Warrants to reduce the exercise price of an aggregate of 1,076 $1M Lender Warrants to $16.00 per share (the “Adams Warrant Amendment”).

On August 19, 2024, the Company and FRV entered into Amendment No. 6 to the Loan and Security Agreement to further extend the maturity date of the FRV Note to September 30, 2025. As per the amendment, the Company paid approximately $305,000 in accrued interest to FRV in Fiscal 2025.

On September 26, 2025, the Company and FRV entered into Amendment No. 7 of the Loan and Security Agreement to further extend the maturity date to September 30, 2026 and pay the outstanding accrued interest as follows: (i) a payment of accrued interest on or before September 30, 2025 and (ii) thereafter all accrued interest due shall be payable at maturity. The Company may elect to repay all or any part of the FRV Note, as amended, in its sole discretion at any time prior to the extended maturity date, provided such repayment shall not be less than $50,000 and shall first be applied to accrued interest and thereafter to outstanding principal. As per the amendment, the Company paid approximately $61,000 in accrued interest to FRV.

As of July 31, 2026 and April 30, 2026, accrued interest was approximately $51,000 and $35,000, respectively, and is included in accrued interest expense in the accompanying condensed balance sheets.

$2.5M and $3.6M Streeterville Notes

In September 2024, the Company entered into a Note Purchase Agreement with Streeterville, pursuant to which the Company issued to Streeterville an unsecured promissory note in the original principal amount of $2,510,000 (the "$2.5M Streeterville Note"). The $2.5M Streeterville Note carried an Original Issue Discount (the “OID”) of $500,000 and $10,000 was withheld from the $2.5M Streeterville Note for reimbursement of Streeterville's transaction expenses. Additionally, the Company incurred debt financing costs of $159,700. As a result, the Company received aggregate net proceeds of approximately $1.9 million in connection with the issuance of the $2.5M Streeterville Note.

The $2.5M Streeterville Note bears interest at the rate of 8.5% per annum and matures in March 2026. From time to time, beginning six months after issuance, Streeterville may redeem a portion of the $2.5M Streeterville Note, not to exceed $270,000 per month. In the event the Company has not reduced the outstanding balance under the $2.5M Streeterville Note by at least $900,000 by the 12-month anniversary following the issuance date, then the outstanding balance at such time will automatically increase by 5%. Subject to terms and conditions set forth in the $2.5M Streeterville Note, the Company may prepay all or any portion of the outstanding balance of the $2.5M Streeterville Note at any time.

During the term of the note, the Company entered into multiple agreements with Streeterville, pursuant to which Streeterville exchanged $2,060,000 in aggregate principal and $45,000 in accrued interest owed under the $2.5M Streeterville Note for 597,578 shares of the Company's Common Stock and repaid $450,000 in aggregate principal. The issuance of the shares was made pursuant to the exemption from the registration requirements afforded by Section 3(a)(9) of the Securities Act.

On March 11, 2026, the Company and Streeterville amended the $2.5M Streeterville Note to extend the maturity date to June 30, 2026.

On June 23, 2026, the Company entered into an agreement with Streeterville, pursuant to which Streeterville exchanged the remaining balance of accrued interest of approximately $164,000 owed under the $2.5M Streeterville Note for 78,103 shares of the Company's Common Stock. As of July 31, 2026, the $2.5M Streeterville Note and accrued interest was repaid in full.

In January 2026, the Company entered into a second Note Purchase Agreement with Streeterville, pursuant to which the Company issued to Streeterville an unsecured promissory note in the original principal amount of $3,605,000 (the "$3.6M Streeterville Note"). The $3.6M Streeterville Note carried an OID of $600,000 and $5,000 was withheld from the $3.6M Streeterville Note for reimbursement of Streeterville's transaction expenses. As a result, the Company received aggregate net proceeds of approximately $3.0 million in connection with the issuance of the $3.6M Streeterville Note.

The $3.6M Streeterville Note bears interest at the rate of 12.0% per annum and matures in July 2027. From time to time, beginning six months after issuance, Streeterville may redeem a portion of the $3.6M Streeterville Note, not to exceed $405,000 per month. In the event the Company has not reduced the outstanding balance under the $3.6M Streeterville Note by at least $1,250,000 by the 12-month anniversary following the issuance date, then the outstanding balance at such time will automatically increase by 5%. Subject to terms and conditions set forth in the $3.6M Streeterville Note, the Company may prepay all or any portion of the outstanding balance of the $3.6M Streeterville Note at any time.

Subsequent to July 31, 2026, the Company entered into an agreement with Streeterville, pursuant to which Streeterville exchanged $200,000 in aggregate principal under the $3.6M Streeterville Note for 95,602 shares of the Company's Common Stock (see Note 9). The issuance of the shares was made pursuant to the exemption from the registration requirements afforded by Section 3(a)(9) of the Securities Act.

The $2.5M Streeterville Note and the $3.6M Streeterville Note contain customary events of default, including if the Company undertakes a fundamental transaction (including consolidations, mergers, and certain changes in control of the Company), without Streeterville’s prior written consent. Upon the occurrence of certain events of default, the outstanding balance of such notes will become automatically due and payable. Additionally, upon an event of default described in such notes (i.e., the failure to pay amounts under such notes when due or to observe any covenant under the Note Purchase Agreements), the outstanding balance of these notes automatically increase to the lesser of 18% or the maximum rate permitted by law.

As of July 31, 2026 and April 30, 2026, accrued interest was approximately $0.2 million and $0.3 million, respectively, and is included in accrued interest expense in the accompanying condensed balance sheets.

Note 5. Stockholders’ Equity

Preferred Stock

The Company is authorized to issue 20,000,000 shares of preferred stock, par value $0.001 per share (“Preferred Stock”), of which 10,000 shares have been designated as Series A Convertible Preferred Stock, 10,000 shares have been designated as Series B Convertible Preferred Stock, 600,000 shares have been designated as Series C Convertible Preferred Stock (the “Series C Preferred Stock”), and 4,285,714 shares have been designated as Series D Preferred Stock.

Series C Preferred Stock

The Series C Preferred Stock was originally issued at $25.00 per share. An amendment to, or waiver of rights in, the Series C Preferred Stock certificate of designation requires the approval of holders of a majority of the outstanding shares of Series C Preferred Stock and FRV (so long as FRV owns at least 71,000 shares of Series C Preferred Stock).

At July 31, 2026 and April 30, 2026, there were 380,440 shares of Series C Preferred Stock outstanding.

Holders of the Series C Preferred Stock are entitled to receive dividends at an annual rate of $1.50 per share of Series C Preferred Stock, shall accrue and are payable out of funds legally available, are payable only when and if declared by the board of directors, and are noncumulative. No dividends have been declared to date. The holders of the shares of Series C Preferred Stock have voting rights equal to an equivalent number of shares of Common Stock into which it is convertible and vote together as one class with Common Stock.

Each share of Series C Preferred Stock is convertible, at the option of the holder at any time, into such number of fully paid and non-assessable shares of Common Stock determined by dividing the original issue price of $25.00 by the conversion price for such series in effect at the time of conversion for the Series C Preferred Stock. The conversion price for the Series C Preferred Stock is subject to adjustment in accordance with conversion provisions contained in the Company's certificate of formation, as amended, including as a result of the Proposed Transaction and the private placement with Fortitude.

At July 31, 2026, the outstanding shares of Series C Preferred Stock were convertible into 295,141 shares of Common Stock at a conversion price of $32.22 per share.

Series D Preferred Stock

On March 10, 2025, the Company entered into a selling agency agreement (the “Placement Agent Agreement”) with Digital offering LLC (“Digital Offering”) to act as sole placement agent (the “Placement Agent”) on a “best efforts” offering of up to 4,285,714 Units, with each Unit consisting of (a) one share of the Company's Series D Preferred Stock and (b) one warrant to purchase one share of the Company's Common Stock, for a total of 4,285,714 shares of the Company's Series D Preferred Stock and warrants to purchase up to an aggregate of 4,285,714 shares of Common Stock (collectively, the “Offering”), pursuant to certain subscription agreements with certain investors, upon which each investor must complete a Subscription Agreement and submit the applicable subscription price as set forth therein. The offering price is $3.50 per Unit, for a maximum offering amount of $15.0 million worth of Units. Each warrant is exercisable at any time from the date of issuance through the third anniversary from the date of issuance, unless earlier redeemed and is exercisable to purchase one share of Common Stock at $5.00 per share, subject to customary adjustment.

Pursuant to the Placement Agent Agreement, the Placement Agent is entitled to receive from each closing of the Offering (i) a cash fee of 7% of the gross proceeds received by the Company from such closing, (ii) warrants (the “Agent Unit Warrants”) to purchase 3% of the total number of Units sold by the Company at such closing (the “Agent Units”) at an exercise price of $4.375 per Agent Unit Warrant, with each Agent Unit consisting of one share of Series D Preferred Stock (the “Agent Preferred Shares”) and one Warrant (the “Agent Warrants” and the shares of Common Stock underlying such Agent Warrants, the “Agent Warrant Shares”), and (iii) reimbursement of certain of its out-of-pocket expenses. Digital Offering is acting on a “reasonable best efforts” basis, in connection with the Offering and is under no obligation to purchase any of the Units or arrange for the sale of any specific number or dollar amount of shares of the Units.

On February 10, 2025, in connection with the Series D Preferred Stock Offering, the Company’s Board of Directors adopted a Certificate of Designations of Series D Preferred Stock, which was filed with the Secretary of State of the state of Texas (the “Texas Secretary of State”) on May 21, 2025, to create, out of the Company’s authorized but unissued preferred stock, the Series D Preferred Stock (the “Certificate of Designations of Series D Preferred Stock”). On May 28, 2025, the Company was notified by the Texas Secretary of State that the Company’s Certificate of Designations of Series D Preferred Stock was made effective as of the filing date.

The Series D Preferred Stock has an initial stated value of $3.50 per share which is equal to the price per Unit, subject to appropriate adjustment in relation to certain events, such as recapitalizations, stock dividends, stock splits, stock combinations, reclassifications or similar events. The Series D Preferred Stock ranks, as to dividend rights and rights upon the Company’s liquidation, dissolution, or winding up, senior to all classes or series of the Company’s Common Stock. The terms of the Series D Preferred Stock do not limit the Company's ability to (i) incur indebtedness or (ii) issue additional equity securities that are equal or junior in rank to the shares of the Company's Series D Preferred Stock as to distribution rights and rights upon our liquidation, dissolution or winding up.

Holders of the Series D Preferred Stock are entitled to receive dividends, when, as and if declared by the board of directors, in its sole discretion, out of funds legally available for that purpose. Any dividends that may be declared shall be non-cumulative. No dividends have been declared to date.

The liquidation preference for each share of Series D Preferred Stock is $3.50. Upon a liquidation, dissolution or winding up of the Company, holders of shares of Series D Preferred Stock will be entitled to receive the liquidation preference with respect to their shares.

Each share of Series D Preferred Stock is convertible into one share of Common Stock, at the option of the holder at any time. The conversion rate shall not be adjusted for stock splits, stock dividends, recapitalizations or similar events. At any time after issuance upon the occurrence of any of the following events, the Company shall have a right to direct the mandatory conversion of the Series D Preferred Stock: (a) a change in control, (b) if the price of the Common Stock closes at or above $5.00 per share for 10 consecutive trading days, or (c) if the Company consummates a firm commitment public offering of Common Stock for gross proceeds of at least $15 million at an offering price per share equal to or greater than $5.00.

The Company may not authorize or issue any class or series of equity securities ranking senior to the Series D Preferred Stock as to dividends or distributions upon liquidation (including securities convertible into or exchangeable for any such senior equity securities) or amend the Company's Amended and Restated Certificate of Formation, as amended (whether by merger, consolidation, or otherwise), to materially, and adversely change the terms of the Series D Preferred Stock without the affirmative vote of at least a majority of the votes entitled to be cast on such matter by holders of the Company's outstanding shares of Series D Preferred Stock, voting together as a class. Otherwise, holders of the Company's Series D Preferred Stock do not have any voting rights.

During the year ended April 30, 2026, the Company issued 1,912,383 Units consisting of Series D Preferred Stock and warrants to purchase shares of Common Stock for gross proceeds of approximately $6.7 million. There were no shares issued during the three months ended July 31, 2026. Since inception and through July 31, 2026, 1,487,119 shares of Series D Preferred Stock converted into 1,487,119 shares of the Company's Common Stock. At July 31, 2026, there were 425,264 shares of Series D Preferred Stock outstanding.

Common Stock

The Company’s Certificate of Formation, as amended, authorizes 500,000,000 shares of Common Stock. As of July 31, 2026 and April 30, 2026, the Company had 3,904,983 and 3,188,380 shares of Common Stock issued and outstanding, respectively.

During the three months ended July 31, 2026, the Company entered into an agreement with Streeterville that exchanged approximately $164,000 of accrued interest on its $2.5M Streeterville Note for 78,103 shares of the Company's Common Stock. The issuance of the shares was made pursuant to the exemption from the registration requirements afforded by Section 3(a)(9) of the Securities Act.

During the three months ended July 31, 2026, the Company issued 107,330 shares of Common Stock as a result of conversions of Series D Preferred Stock.

On September 18, 2023, the Company entered into an Equity Distribution Agreement (the “EDA”) with Maxim Group LLC as sales agent pursuant to which the Company may offer and sell up to $3.25 million shares of Common Stock under the ATM Facility. The shares may be issued and sold from time to time through or to the placement agent acting as sales agent or principal pursuant to our shelf registration statement on Form S-3 (the “Shelf S-3”), as filed with the SEC on September 18, 2023. The $3.25 million shares comprised of Common Stock that may be offered, issued and sold under the at-the-market offering prospectus is included in the $50.0 million of securities that may be offered, issued, and sold by the Company under the base prospectus of the Shelf S-3. The Shelf S-3 was declared effective by the SEC on September 28, 2023.

On November 9, 2023, the Company entered into Amendment No. 1 to the EDA with Maxim, pursuant to which the Company may sell up to $10.0 million shares of Common Stock from time to time through the sales agent.

On November 17, 2023, the Company entered into Amendment No. 2 to the EDA with Maxim, pursuant to which the Company may sell up to $15.0 million shares of Common Stock from time to time through the sales agent.

On August 3, 2025, the Company entered into Amendment No. 3 to the EDA with Maxim Group pursuant to which the Company may offer and sell, from time to time, up to $25,000,000 of shares of Common Stock and the parties further agreed that Maxim will be entitled to compensation at a commission rate equal to 4.0% of the gross sales price per share sold pursuant to the EDA up to a maximum of $11,036,310 in gross proceeds to the Company, and 3.0% of the gross sales price per share sold pursuant to the EDA from any gross proceeds to the Company in excess of such amount; provided, however, that in no event will the Company issue or sell through the Sales Agent such number of shares of Common Stock that would cause the Company or the offering of its shares of Common Stock to not satisfy the eligibility and transaction requirements for use of Form S-3 (including General Instruction I.B.6 of Form S-3). 

During the three months ended July 31, 2026, the Company issued and sold 4,920 shares of Common Stock under the ATM Facility.

During the three months ended July 31, 2026, the Company issued 425,000 shares of restricted stock to management and 101,250 RSUs vested and settled into the same number of shares of Common Stock. See further discussion in Note 6. 

The holders of Common Stock are entitled to receive dividends whenever funds and assets are legally available and when declared by the board of directors, subject to the rights of holders of Preferred Stock outstanding. No dividends were declared as of or through the three months ended July 31, 2026 and the year ended April 30, 2026.

Common Stock Warrants

The Company has issued warrants to investors in connection with funding or for services rendered and these warrants are convertible into a number of shares of the Company’s Common Stock for a period of 5 years from the date of issuance.

The following is a summary of warrant activity during the three months ended July 31, 2026:

Note 6. Stock-based Compensation

The Company grants certain employees and board members stock option awards where vesting is contingent upon a service period, as it believes that such awards better align the interests of its employees with those of its shareholders. Stock option awards are granted with an exercise price equal to or above the market price of the Company’s stock at the date of grant. Certain stock option awards provide for accelerated vesting if there is a change in control, as defined in the Nonstatutory Stock Option Agreement. Unvested stock options forfeit when an employee leaves the Company.

Time-based grants generally vest quarterly based on 3 years continuous service for executive directors and employees, or 12 months continuous service for directors and have 10-year contractual terms. The Company also grants stock option awards where vesting is contingent upon meeting various departmental and company-wide performance goals, including FDA and CE Mark regulatory approval and certain EBITDA and funding thresholds. Such performance-based stock options are expected to vest when the performance criteria and metrics have been met. These stock options have contractual lives of ten years.

2023 Equity Incentive Plan

On March 15, 2023, the Company’s Board of Directors adopted the 2023 Equity Incentive Plan (as amended, the “Equity Incentive Plan”). The Company's shareholders approved the Equity Incentive Plan at the Company's 2023 annual shareholder meeting held on January 17, 2024. The Equity Incentive Plan provides for the grant of nonstatutory stock options, incentive stock options, restricted stock, RSUs, performance units, performance shares, and other share-based awards. On November 27, 2023, the Company's Board of Directors approved and entered into Amendment No. 1 to the Equity Incentive Plan to increase the initial number of shares issuable under the Plan from 25,000 shares to 85,000 shares.

On July 9, 2025, the Company’s Board of Directors approved and entered into Amendment No. 2 to the Equity Incentive Plan, to increase the maximum aggregate number of shares of the Company’s Common Stock, $0.001 par value per share, that may be issued under the Equity Incentive Plan to 1,000,000 shares of Common Stock, plus such number of shares of Company's Common Stock, which is equal to the lesser of (i) 25% of the total number of shares of all classes of Company's Common Stock and the Company’s preferred stock, $0.001 par value per share (the “Preferred Stock”), as converted to Common Stock, outstanding on the last day of each the immediately preceding fiscal year, and (ii) a lesser number of shares of our common stock determined by the Administrator (as defined in the Equity Incentive Plan) (collectively, the “Evergreen Shares”).

On November 28, 2025, the Company’s Board of Directors approved and entered into Amendment No. 3 to the Equity Incentive Plan to increase the maximum aggregate number of shares of the Company’s Common Stock, that may be issued under the Equity Incentive Plan to 1,250,000 shares of Common Stock. The number of shares of Common Stock available for issuance under the Equity Incentive Plan will be subject to automatic increase on the first day of each fiscal year of the Company beginning with fiscal year beginning May 1, 2026, so that the number of shares of Common Stock available for issuance under the Equity Incentive Plan is equal to the lesser of: (i) 25% of the total number of shares of all classes of Common Stock and preferred stock of the Company as converted to Common Stock outstanding on the last day of the immediately preceding fiscal year, and (ii) a lesser number of shares of Common Stock determined by the Administrator (as defined in the Equity Incentive Plan). The amendment was approved at the annual shareholder meeting held on April 30, 2026.

On June 22, 2026, in connection with the execution of the Merger Agreement, the Board approved and entered into Amendment No. 4 to the Equity Incentive Plan to increase the maximum aggregate number of shares of Common Stock that  may be issued under the plan by an additional 475,000 shares and the Evergreen Shares. The amendment is subject to approval of the Company’s shareholders and shall be considered and voted upon by the Company’s shareholders as part of the stockholder proposals to be submitted to the Company’s shareholders in connection with Merger Agreement.

On June 23, 2026, the Company's Board of Directors deemed that the execution of the Merger Agreement satisfied the vesting conditions of a total of 101,250 RSUs and 260,000 options granted to Mark Hilz, a former officer and director of the Company, who ceased being the Company's director due to his passing on April 1, 2026. The RSUs were settled into 101,250 shares of the Company's Common Stock in June 2026. During the three months ended July 31, 2026, the Company recognized stock compensation of approximately $0.3 million related to the accelerated vesting of Mr. Hilz's options and approximately $0.2 million related to the accelerated vesting of Mr. Hilz's RSUs. 

The following is a summary of service-based stock option activity during the three months ended July 31, 2026:

The following is a summary of performance-based stock option activity during the three months ended July 31, 2026:

During the three months ended July 31, 2026 and 2025, the Company recognized stock-based compensation for stock options of approximately $0.5 million and $0.2 million, respectively.

As of July 31, 2026, there was approximately $0.3 million of unrecognized compensation costs related to non-vested service-based Common Stock options and approximately $0.1 million of unrecognized compensation costs related to non-vested performance-based Common Stock options.

Restricted Stock Units and Restricted Shares Issued

The following is a summary of RSUs and restricted stock award activity during the three months ended  July 31, 2026. 

In connection with the execution of the Merger Agreement and subject to closing, the Compensation Committee of the Board (the “Compensation Committee”) granted an award of 425,000 restricted shares of Common Stock (the “Shares”) to the Company's Chief Executive Officer under the Equity Incentive Plan as a retention bonus in connection with the transactions to lead the Company’s and the Merger Sub’s efforts to close the transactions and to lead the current legacy business of the Company after the closing, and to provide public-company, SEC-reporting and capital-markets guidance and transition support to the Company following the closing. The Shares will be non-voting until they vest. The Shares were issued on  June 22, 2026, before the signing of the Merger Agreement. The Shares shall vest in full subject to the satisfaction of all of the following conditions (the “Conditions”): (i) occurrence of the Closing and (ii)(x) one-fourth of the Shares shall vest on the three-month anniversary of the date of the Closing (the “Initial Vesting Date”) and (y) thereafter, one-fourth of the Shares shall vest on each subsequent three-month anniversary of the Initial Vesting Date (each an “Additional Initial Vesting Date” and together with the Initial Vesting Date, the “Vesting Dates”), such that all of the Shares shall fully vest on the one-year anniversary of the date of the Closing.

On July 7, 2026, the Compensation Committee granted an award of 25,000 RSUs to the Company's Chief Financial Officer under the Equity Incentive Plan. The RSUs vest in full subject to the satisfaction of all of the following conditions: (i) occurrence of the Closing and (ii)(x) one-fourth shall vest on the Initial Vesting Date and (y) thereafter, one-fourth shall vest on each subsequent additional initial vesting date, such that all of the RSUs shall fully vest on the one-year anniversary of the date of the Closing.

During the three months ended July 31, 2026, the Company recognized stock-based compensation for vested RSUs of approximately $0.2 million. As of July 31, 2026, total unrecognized stock-based compensation expense related to performance-based non-vested RSUs totaled approximately $0.3 million.  As of July 31, 2026, total unrecognized stock-based compensation expense related to time-based non-vested RSUs and restricted stock awards totaled approximately $1.2 million.

Note 7. Commitments and Contingencies

Operating Leases

The Company has a long-term operating lease for office, industrial, and laboratory space which was entered into in May 2017. On September 27, 2022, the Company entered into the First Amendment to Lease (the “Lease Amendment”), which amended the Lease Agreement to document the exercise of its option to extend the term of the lease for an additional 64 months, commencing February 1, 2023, and expiring on May 31, 2028 (the “Extension Term”). Pursuant to the amendment, the Company will pay initial monthly payments of $13,129, beginning February 2023, subject to 3% annual increases. Rent expense for the three months ended July 31, 2026 was approximately $35,000.

The Company records right-of-use assets and liabilities at the present value of the fixed lease payments over the term at the commencement date. The Company uses its incremental borrowing rate of 12% to determine the present value of the lease as the rate implicit in the lease is typically not readily available.

Information related to the Company’s right-of-use assets and lease liabilities consist of the following:

As of July 31, 2026, future maturities of lease liabilities due under lease agreements for the period ended are as follows:

Litigation

From time to time, the Company may be subject to legal proceedings and claims that arise in the ordinary course of business. The Company does not believe that the outcome of those matters will have a material adverse effect to the financial position, operating results or cash flows. However, there can be no assurance such legal proceedings will not have a material impact.

The Company is a party to a certain legal proceeding. The claimant is seeking damages of $180,000, plus prejudgment interest costs and attorney fees. Because a loss is not currently considered probable, no liability has been recorded in the accompanying financial statements. The assessment of the matter and the estimate of potential loss are based on information available to the Company as of the date of these financial statements and are subject to change as additional information becomes available or developments occur in the proceeding.  The matter is in its preliminary stages, and the ultimate outcome cannot presently be determined. The Company has hired counsel and intends to vigorously defend itself against the claims asserted. Actual loss  may differ from the Company's current estimate.

Royalty Agreements

In 2013, the Company entered into an agreement (the “Technology Agreement”) with its founder, conveying ownership of all intellectual property and rights to the Company. As part of that agreement, the Company will make royalty payments, based upon paid MyoVista wavECG device unit sales, as follows:

The royalty obligation has a first priority security interest and pledge on the covered technology (as defined in the Technology Agreement, which essentially is comprised of the intellectual property of the MyoVista wavECG device) in priority to the debt holders of the Loan and Security Agreement as discussed further in Note 4.

Upon (i) the aggregate payment of $3,000,000 of royalties; (ii) the Common Stock having a closing quoted share price of $6,875 per share or more; or (iii) receipt by the Company of a bona fide offer valuing the Common Stock at $6,875 or more, then the secured interest and pledge shall be released.

In the event of a bankruptcy of the Company, any balance of the $3,500,000 royalty not paid at that point would accelerate and become an immediately due debt obligation of the Company with the benefit of the secured interest and pledge (if it remained at such time).

In December 2015, the Company entered into an agreement with The University Court of The University of Glasgow (“Glasgow”) for a non-exclusive license of the Glasgow algorithm interpretive analysis for the conventional ECG trace. The agreement was amended in March 2023, and as part of the agreement, the Company is required to make royalty payments, based upon MyoVista wavECG device unit sales dependent on sale volumes per year, subject to minimum annual fees. To date, such amounts have been expensed to research and development as the Glasgow algorithm has been part of the device development and will form part of the submission for FDA clearance of the MyoVista wavECG device.

Collaboration Agreements

Mount Sinai Collaboration Agreement

On September 20, 2023, the Company entered into multiple definitive license agreements (each a “License Agreement” and collectively, the “License Agreements”) with Mount Sinai to commercialize a range of AI cardiovascular algorithms developed by Mount Sinai as well as a memorandum of understanding for ongoing cooperation encompassing de-identified data access, on-going research, and the evaluation of the MyoVista wavECG. The License Agreements, of which there are eleven in total, cover rights to thirteen AI cardiovascular algorithms, two data science methods for use with ECG waveforms and three filed patents.

Note 8. Segment Information

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the CODM in deciding how to allocate resources and in assessing performance. The Company has determined that its CODM is its Chief Executive Officer.

Management and the CODM view the Company’s operations and manage its business in one operating segment, which is the business of identifying, developing and commercializing products and AI-ECG solutions in the cardiovascular diagnostic technology field. The CODM uses operating expenses to measure performance against progress in its clinical trials and its product development. 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.

The following table summarizes the segment's financial information including the Company's significant segment expenses: