KMTS 10-Q
Kestra Medical Technologies, Ltd. (KMTS)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___ to ___
Commission File Number:
(Exact Name of Registrant as Specified in its Charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
(Address of principal executive offices) |
(Zip Code) |
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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 |
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Accelerated filer |
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Emerging growth company |
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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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of September 11, 2026, the registrant had
Table of Contents
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Page |
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PART I. |
4 |
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Item 1. |
4 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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Condensed Consolidated Statements of Changes in Shareholders’ Equity (Deficit) |
6 |
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7 |
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8 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. |
31 |
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Item 4. |
31 |
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PART II. |
34 |
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Item 1. |
34 |
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Item 1A. |
34 |
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Item 2. |
34 |
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Item 3. |
34 |
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Item 4. |
34 |
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Item 5. |
34 |
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Item 6. |
35 |
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36 |
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1
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the “Quarterly Report”) contains “forward-looking” statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. The forward-looking statements are contained principally in the section captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, technology developments, financing and investment plans, dividend policy, competitive position, industry and regulatory environment, potential growth opportunities and the effects of competition. Forward looking statements include statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will” and “would,” or the negative of these terms, or other comparable terminology intended to identify statements about the future. Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
Important factors that could cause actual results, performance or achievements to differ materially from our expectations described elsewhere in this Quarterly Report, and include, but are not limited to, the following:
2
We caution you that the foregoing list does not contain all of the forward-looking statements made in this Quarterly Report. More information on factors that could cause our actual results to differ from those expressed in forward-looking statements is included from time to time in our reports filed with the Securities and Exchange Commission, (the “SEC”) including in our Annual Report on Form 10-K for the year ended April 30, 2026 (the “Annual Report”), particularly under Part I, Item 1A, "Risk Factors."
Given these uncertainties, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report and should not be relied upon as representing our expectations or beliefs as of any date subsequent to the time they are made. Except as required by law, the Company does not undertake to and specifically declines any obligation to update any forward-looking statements that may be made from time to time by or on behalf of the Company.
3
Part I – Financial Information
Item 1. Financial Statements.
KESTRA MEDICAL TECHNOLOGIES, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
(unaudited)
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July 31, |
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April 30, |
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2026 |
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2026 |
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Assets |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable, net |
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Disposable medical equipment supplies |
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Prepaid expenses and other current assets |
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Total current assets |
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Long-term investments |
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Right-of-use assets |
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Deposits |
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Restricted cash |
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Property and equipment, net |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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Liabilities and Shareholders’ Equity |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Operating lease liabilities, current portion |
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Total current liabilities |
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Operating lease liabilities, net of current portion |
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Warrant liabilities |
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— |
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Other long-term liabilities |
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Long-term debt, net |
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Total liabilities |
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Shareholders’ equity |
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Common Shares, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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Accumulated deficit |
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( |
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( |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
KESTRA MEDICAL TECHNOLOGIES, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands, except share and per share amounts)
(unaudited)
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Three Months Ended July 31, |
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2026 |
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2025 |
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Revenue |
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$ |
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$ |
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Cost of revenue |
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Gross profit |
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Operating expenses: |
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Research and development |
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Selling, general and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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Other expense (income): |
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Interest expense |
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Interest income |
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Other expense (income), net |
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( |
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Loss on extinguishment of debt |
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— |
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Net loss before provision for income taxes |
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( |
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Provision for income taxes |
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Net loss attributable to common shareholders, basic and diluted |
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$ |
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$ |
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Net loss per share attributable to common shareholders, basic and diluted |
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$ |
( |
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$ |
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Weighted-average shares of common shares outstanding, basic and diluted |
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Other comprehensive loss: |
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Net loss |
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$ |
( |
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$ |
( |
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Unrealized loss on marketable securities |
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( |
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— |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share and per share amounts)
(unaudited)
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Common Shares |
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Additional |
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Accumulated Other |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Comprehensive Loss |
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Deficit |
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Equity (Deficit) |
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Balances at April 30, 2025 |
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$ |
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$ |
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$ |
- |
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$ |
( |
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$ |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Net loss and comprehensive loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balances at July 31, 2025 |
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$ |
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$ |
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$ |
- |
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$ |
( |
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$ |
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Common Shares |
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Additional |
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Accumulated Other |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Comprehensive Loss |
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Deficit |
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Equity (Deficit) |
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Balances at April 30, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Issuance of common shares - stock option exercises |
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— |
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— |
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Issuance of common shares - employee stock purchase plan |
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— |
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— |
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Issuance of common shares - restricted stock unit vesting |
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( |
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— |
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— |
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— |
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Tax withholdings on restricted stock unit vesting |
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— |
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— |
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( |
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— |
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— |
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( |
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Other comprehensive loss |
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— |
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— |
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— |
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( |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at July 31, 2026 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
6
KESTRA MEDICAL TECHNOLOGIES, LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
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Three Months Ended July 31, |
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2026 |
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2025 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Loss on disposal of property and equipment |
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Reserve for equipment and supplies |
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(Recovery) provision for uncollectible accounts receivable |
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( |
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Amortization (accretion) of premiums (discounts) on securities, net |
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( |
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— |
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Loss on extinguishment of debt |
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— |
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Amortization of debt discounts and issuance costs |
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Share-based compensation expense |
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Non-cash lease expense |
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Change in fair value of warrant liabilities |
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( |
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Changes in operating assets and liabilities: |
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Disposable medical equipment supplies |
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( |
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( |
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Prepaid expenses and other current assets |
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Accounts receivable |
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( |
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( |
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Accounts payable |
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( |
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( |
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Accrued liabilities |
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( |
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( |
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Operating lease liabilities |
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( |
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( |
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Other long-term assets |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities |
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Purchases of property and equipment |
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( |
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( |
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Deposits for medical rental equipment |
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( |
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Refund of deposits for medical rental equipment |
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Purchase of marketable securities |
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( |
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— |
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Net cash used in investing activities |
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( |
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( |
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Cash flows from financing activities |
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Proceeds from issuance of long-term debt |
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— |
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Payment of debt issuance costs |
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( |
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— |
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Repayment of long-term debt |
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( |
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— |
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Payment of early termination fee on debt repayment |
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( |
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— |
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Payment of IPO offering costs |
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— |
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( |
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Payment of equity issuance costs |
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( |
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— |
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Deemed dividend for payments to third party on behalf of shareholder |
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( |
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— |
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Proceeds from stock option exercises |
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— |
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Proceeds from employee stock purchase plan |
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— |
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Tax withholdings on restricted stock unit vesting |
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( |
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— |
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Net cash provided by (used in) financing activities |
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( |
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Net decrease in cash, cash equivalents and restricted cash |
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( |
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( |
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Cash, cash equivalents and restricted cash |
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Beginning of period |
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End of period |
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$ |
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$ |
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Reconciliation of cash, cash equivalents and restricted cash reported in the consolidated balance sheets |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Cash, cash equivalents and restricted cash |
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$ |
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$ |
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Non-cash investing and financing activities: |
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Purchases of property and equipment in accrued liabilities and accounts payable |
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$ |
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$ |
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Debt issuance costs included in accrued liabilities and accounts payable |
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— |
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Tax withholdings on restricted stock unit vesting in accrued liabilities |
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— |
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Supplemental disclosure of cash flow information |
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Income taxes paid (refunds received) |
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$ |
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$ |
( |
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Interest paid |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
7
KESTRA MEDICAL TECHNOLOGIES, LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(in thousands, except share, per share data and percentages)
1. The Company
Kestra Medical Technologies, Ltd. is a commercial stage medical device company, which principally generates revenue through leasing the ASSURE© System, which consists of a Wearable Cardioverter Defibrillator (“WCD”), to patients.
Kestra Medical Technologies, Ltd. was formed as a limited company in Bermuda on May 20, 2021 as a wholly owned subsidiary of West Affum Holdings, L.P. (“West Affum LP”), a company in the Cayman Islands. Kestra Medical Technologies, Ltd. was formed for the purpose of completing a public offering and related transactions to carry on the business of West Affum Intermediate Holdings Corp. and its subsidiaries. Effective on December 31, 2025, West Affum LP was dissolved and all of the Common Shares (as defined below) West Affum LP had received at Kestra Medical Technologies, Ltd.'s initial public offering ("IPO") were distributed to its unit holders.
West Affum Intermediate Holdings Corp., a Cayman Islands exempted company (“Intermediate Holdings”), was incorporated on
The Company and its consolidated subsidiaries own certain intellectual property related to the development of personal WCD approved by the U.S. Food and Drug Administration (“FDA”) in July of 2021.
Initial Public Offering
On
In connection with the IPO, organizational transactions were effected whereby Kestra Medical Technologies, Ltd. delivered
Following the Organizational Transactions, pre-existing interests in Intermediate Holdings, as well as non-controlling interests of its subsidiaries, were exchanged into Common Shares. Kestra Medical Technologies, Ltd. now directly owns
The IPO, together with the Organizational Transactions, represent a business combination between entities under common control under the principles of ASC Topic 805, Business Combinations. As such, the exchange of Intermediate Holdings common stock into Common Shares of Kestra Medical Technologies, Ltd. have been reflected on a retrospective basis. Other transactions that closed contemporaneously with the Organizational Transactions, including conversions of preferred stock, non-controlling interests, and equity awards were accounted for prospectively beginning on the date such transactions occurred, and were not given retrospective effect.
Liquidity
As of July 31, 2026, the Company’s principal sources of liquidity consisted of $
8
The Company has incurred negative operating cash flows and significant losses from operations since its inception. For the three months ended July 31, 2026 and 2025, the Company incurred net losses of $
In March 2025, the Company raised $
On December 4, 2025, the Company completed a public underwritten offering and issued an aggregate of
Based on the Company’s current operating plan, the Company believes that its existing cash and cash equivalents will be sufficient to fund the Company’s planned operating expenses and capital expenditure requirements for at least the next 12 months from the date of issuance of these financial statements.
However, the Company may experience lower than expected cash generated from operating activities or greater than expected capital expenditures, cost of revenue or operating expenses and may require additional funding to execute on its growth plans, which may include funding raised through future equity and debt financings. Management cannot predict with certainty that adequate funding will be available on acceptable terms or at all. If the Company cannot obtain sufficient funds on acceptable terms when needed, the Company may experience a material and adverse effect on its business, financial condition, results of operations and prospects.
2. Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the SEC and generally accepted accounting principles in the United States of America (“US GAAP”) and include the accounts of the Company and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. The Company’s reporting currency is the U.S. dollar.
The unaudited interim condensed consolidated balance sheet as of April 30, 2026, included herein, was derived from the audited financial statements as of that date. Certain information and disclosures normally included in the financial statements prepared in accordance with US GAAP have been condensed or omitted pursuant to such regulations. Accordingly, these unaudited interim condensed consolidated financial statements and accompanying footnotes should be read in conjunction with the Company’s financial statements as of and for the years ended April 30, 2026 and 2025. The results for the interim periods are not necessarily indicative of results for the full year.
In the opinion of management, all adjustments, of a normal recurring nature, considered necessary for a fair statement have been included in the unaudited interim condensed consolidated financial statements. The Company believes that the disclosures provided herein are adequate to prevent the information presented from being misleading.
Use of Estimates
The preparation of the unaudited interim condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the unaudited interim condensed consolidated financial statements, and the reported amounts of expenses during the reporting period. Estimates are required as part of determining the collectability of lease payments for revenue recognition, estimated useful lives of property and equipment, losses for unreturned property and equipment, share-based compensation expense, fair value of warrants and valuation allowance for deferred tax assets.
The Company bases its estimates on historical experience and other market-specific or relevant assumptions that it believes to be reasonable under the circumstances. Actual results could differ from those estimates.
Accounts Receivable
Accounts receivable and net revenues are based on contractually agreed-upon rates for leases for the ASSURE© System, reduced by contractual adjustments. Inherent in these estimates is the risk that they will have to be revised or updated as additional information becomes available. The complexity of third-party billing arrangements and laws and regulations governing Medicare may result in adjustments to amounts originally recorded.
9
The Company performs a periodic analysis to review the valuation of accounts receivable and collectability of outstanding balances. These estimates are determined utilizing historical realization data under a portfolio approach which is then assessed by management to evaluate whether adjustments should be made based on accounts receivable aging trends, other operating trends, and relevant business conditions such as governmental and managed care payor claims processing procedures.
The Company records a reserve for estimated probable losses as part of net revenue adjustments in reporting revenue at an expected collectable amount based on the total portfolio of receivables for which collectability has been deemed probable. The accounts receivable is presented on the unaudited interim condensed consolidated balance sheets net of the adjustments.
Receivables are considered past due when not collected by established due dates. Specific patient balances are written off after collection efforts have been followed and the account has been determined to be uncollectible. Changes to reserve estimate impacts are recorded as an adjustment to net revenue in the period during which changes in circumstances support a change to the estimate. The estimates of the allowance for uncollectible accounts receivable were $
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents are recorded at cost, which approximates fair value. Restricted cash consists of amounts related to the Company’s office lease agreement and credit card collateralization. In lieu of a cash security deposit, the landlord required an irrevocable standby letter of credit upon execution of the lease be maintained throughout the term of the lease agreement in the amount of $
Investments
The Company considers investments with an original maturity greater than three months and remaining maturities less than 12 months to be short-term investments. The Company classifies those investments that are not required for use in current operations and that mature in more than 12 months as long-term investments.
The Company classifies its marketable securities as available for sale and reports them at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). For investments sold prior to maturity, the cost of investments sold is based on the specific identification method. Realized gains and losses on the sale of investments are recorded in other income (expense), net in the unaudited interim condensed consolidated statements of operations and comprehensive loss.
If the estimated fair value of a marketable debt security is below its amortized cost basis, the Company evaluates whether it is more likely than not that the Company will be required to sell the security before its anticipated recovery in market value and whether credit losses exist for the related securities. Credit-related losses are recognized as an allowance for credit losses on the unaudited interim condensed consolidated balance sheets with a corresponding adjustment to earnings. Unrealized gains and losses that are unrelated to credit deterioration are reported in accumulated other comprehensive income (loss).
The Company invests in equity securities that do not have readily determinable fair values. Equity investments that do not have readily determinable fair values are measured using the measurement alternative at cost minus impairment, if any. These investments are included in Other long-term assets on the unaudited interim condensed consolidated balance sheet as of July 31, 2026. The carrying amount of this investment is $
Property and Equipment
Property and equipment consist of medical rental equipment, test equipment, office equipment and furniture, leasehold improvements, and work in progress. Medical rental equipment used in the delivery of the ASSURE® WCD system consists of a therapy cable, batteries, a battery charger, assistant and WCD monitor, all of which have different useful lives. Upon completion of use by a patient, medical rental equipment is returned to the Company’s third-party manufacturing and supply partner and inspected, tested and recertified for use by another patient. When not in use by patients, medical rental equipment resides with the Company’s third-party manufacturing and supply partner, at third-party warehouses or with the Company’s territory managers. Physical counts of components are conducted at least annually at the third-party manufacturing and supply partner locations and at least quarterly at other locations.
10
Property and equipment are stated at cost less accumulated depreciation. Depreciation of medical rental equipment commences at the date when it becomes available for service, which represents the date that the asset is ready for intended use by the patients and continues through the estimated useful life of the asset. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs, including planned major maintenance activities, are expensed as incurred.
Property and equipment are depreciated using the straight-line method based on the following estimated useful lives:
|
July 31, 2026 |
|
April 30, 2026 |
Asset Classification |
Estimated Useful Lives |
|
Estimated Useful Lives |
Computer software and equipment |
|
||
Test equipment |
|
||
Leasehold improvements |
|
||
Medical rental equipment |
|
When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the unaudited interim condensed consolidated statements of operations and comprehensive loss for the period.
Revenue
The Company generates revenue from the leases of ASSURE© System, which consists of a WCD combined with a proprietary digital healthcare platform, to at-risk patients for a fixed amount on a month-to-month basis. The lease payments generally consist of the contracted amounts based on reimbursement arrangements with third-party payors including Medicare, Medicaid and private commercial payors, and/or certain patient co-payments. The patient has the right to cancel the lease at any time during the rental period.
The equipment leases are classified as operating leases at lease commencement, and the Company recognizes the revenue associated with ASSURE© System rentals in accordance with Accounting Standards Codification Topic 842, Leases (“ASC Topic 842”). The Company elected the practical expedient provided under ASC Topic 842 to combine the lease of ASSURE© System with the non-lease components, which includes the digital healthcare platform. The ASSURE© System is expected to be the predominant component and, as a result, the Company accounts for the combined revenue components under ASC Topic 842. Revenue is recognized on a straight-line basis over the contractual non-cancellable lease term, which is one month, when collectability of the lease payments is deemed to be probable. If collectability of the lease payments is not deemed to be probable, the lease income is limited to the lesser of the income that would have been recognized if collectability was probable or the lease payments collected. Collectability of all lease payments, which includes amounts reimbursed by third-party payors and/or amounts covered by the patient, is assessed for each contract upon lease commencement and is subject to subsequent reassessment throughout the lease term, as necessary.
Due to the nature of the industry and the reimbursement environment in which the Company operates, the Company periodically evaluates the need to record a general reserve under ASC 450, Contingencies, for a portfolio of operating lease receivables that are probable of collection. Inherent in the reserve estimates is the risk that they will have to be revised or updated as additional information becomes available. Specifically, the complexity of many third-party billing arrangements and the uncertainty of reimbursement amounts for certain services from certain payors may result in adjustments to amounts originally recorded. Such adjustments are expected to be identified and recorded at the point of cash application or claim denial.
Debt Issuance Costs
Debt issuance costs related to term loan debt are recognized as a reduction to the related debt balance in the accompanying condensed consolidated balance sheets and amortized to interest expense over the contractual term of the related debt using the effective interest method. Debt issuance costs associated with delayed draw term loans are capitalized within other long-term assets on the unaudited interim condensed consolidated balance sheets and are amortized to interest expense over the term of the related debt.
Debt Modifications and Extinguishments
11
The Company evaluates amendments, restatements, or other changes to its debt agreements in accordance with ASC 470-50, Debt — Modifications and Extinguishments. Under this guidance, the Company determines whether the revised terms represent a modification of the existing debt or an extinguishment of the old debt and issuance of new debt. If the changes are not deemed substantial, the transaction is accounted for as a modification and any associated fees or costs are amortized over the remaining term of the modified debt. If the changes are determined to be substantial, the original debt is considered extinguished, the new debt is recorded at fair value, and any resulting difference between the reacquisition price of the debt and its net carrying amount is recognized as a gain or loss on debt extinguishment.
Segment Information
The Company has a operating and reportable segment. The Company has determined that its is its chief operating decision maker.
The chief operating decision maker utilizes the Company’s financial information such as net loss and comprehensive loss derived from revenues and operating expenses included in the Company forecast, performance metrics, and budget versus actual analyses for purposes of evaluating financial performance and how to best allocate resources when developing and reviewing the annual budget to achieve the Company’s long-term objectives. Significant expenses within loss from operations include cost of revenue, research and development expenses, and selling, general and administrative expenses, which are each separately presented on the Company’s unaudited interim condensed consolidated statements of operations and comprehensive loss.
Recently Adopted Accounting Pronouncements
In July 2025, the FASB issued ASU 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets ("ASU 2025-05"), requiring election of a practical expedient when estimating expected credit losses for current accounts receivable and current contract assets. The Company adopted ASU 2025-05 prospectively during the year ended April 30, 2027. The adoption of the amendments in ASU 2025-05 did not have a material impact on the Company's unaudited interim condensed consolidated balance sheets, results of operations, cash flows or disclosures within the notes to the unaudited interim condensed consolidated financial statements.
Accounting Pronouncements Not Yet Adopted
In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40) (“ASU 2024-03”), requiring disclosure in the notes to the financial statements for specified information about certain costs and expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027; however early adoption is permitted and can be applied either prospectively or retrospectively. The Company is evaluating the impact that this ASU will have on its financial statement disclosures.
In September 2025, the FASB issued ASU 2025-06, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software (“ASU 2025-06”), modernizing the accounting framework for internal-use software by eliminating the prior stage-based model and introducing a principles-based capitalization threshold. ASU 2025-06 is effective for fiscal years beginning after December 15, 2027, and interim periods within those annual reporting periods, with early adoption permitted. The Company is evaluating the impact that this ASU will have on its financial statements and related disclosures.
The Company has reviewed other recent accounting pronouncements and concluded that they are either not applicable to the business, or that no material effect is expected on the unaudited interim condensed consolidated financial statements as a result of future adoption. No other new accounting pronouncements were adopted during the three months ended July 31, 2026.
12
3. Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following at:
|
July 31, 2026 |
|
|
April 30, 2026 |
|
||
Prepaid software fees |
$ |
|
|
$ |
|
||
Other current assets |
|
|
|
|
|
||
Total Prepaid expenses and other current assets |
$ |
|
|
$ |
|
||
4. Property and Equipment
Property and equipment consisted of the following at:
|
July 31, 2026 |
|
|
April 30, 2026 |
|
||
Medical rental equipment |
$ |
|
|
$ |
|
||
Test equipment |
|
|
|
|
|
||
Office equipment and furniture |
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
||
Work in progress |
|
|
|
|
|
||
Total property and equipment |
|
|
|
|
|
||
Less: accumulated depreciation |
|
( |
) |
|
|
( |
) |
Total Property and equipment, net |
$ |
|
|
$ |
|
||
The Company recorded $
5. Leases
The Company had two operating leases for office space that commenced on May 1, 2020 and January 1, 2021 with a 48-month term and 40-month term, respectively. The Company determined at the commencement of both leases that it is reasonably certain that the Company will not exercise the option to extend the terms of either lease. The office leases have variable lease payments to reimburse the lessor for costs, such as insurance and taxes but do not depend on an index rate and are excluded from the measurement of the lease liability and are recognized in operating expense.
The October 2023 office lease amendment provided rent abatement from November 1, 2023 through April 30, 2024. The same amendment further provided a tenant improvement allowance of $
In February 2025, the Company further amended the lease to expand the leased space, commencing on April 1, 2025.
In May 2025, the Company entered into a new lease agreement for an office in Texas, commencing on May 15, 2025. The lease is set to expire on May 31, 2027.
In December 2025, the Company amended its office leases to extend the lease term through April 2031. The extended lease term resulted in a re-measurement resulting in the increase of the lease liability and right-of-use asset by $
Operating lease expense was as follows for the periods below:
|
|
Three Months Ended July 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Operating lease expense |
|
$ |
|
|
$ |
|
||
Variable lease expense |
|
|
|
|
|
|
||
Total operating lease expense |
|
$ |
|
|
$ |
|
||
13
Operating lease expense includes amortization and interest expense associated with operating lease right-of-use assets and liabilities. Variable lease expense includes payments related to taxes, insurance and maintenance costs as required by the lease.
Cash paid for operating leases was $
The weighted average remaining lease term for the Company’s operating leases was
6. Accrued Liabilities
Accrued liabilities consisted of the following at:
|
July 31, 2026 |
|
|
April 30, 2026 |
|
||
Bonuses and commissions |
$ |
|
|
$ |
|
||
Other accrued liabilities |
|
|
|
|
|
||
Paid time off |
|
|
|
|
|
||
Professional services |
|
|
|
|
|
||
Payroll and payroll taxes |
|
|
|
|
|
||
Total Accrued liabilities |
$ |
|
|
$ |
|
||
7. Long-Term Debt
On September 29, 2023, the Company entered into a Credit Agreement with a lender that provided a Senior Secured Delayed Draw Term Loan Facility (as amended, the “Term Loan 2024”) in an aggregate principal amount of up to $
On September 29, 2023, the Company drew an initial $
As of October 31, 2024, the Company determined that the revenue milestone related to the second tranche was not met and the third tranche was not probable of being achieved. As a result, the Company expensed the asset related to debt issuance costs and facility fees in the amount of $
In conjunction with the draw of the first tranche, West Affum LP issued a warrant to the lender to purchase up to
On February 25, 2025, the Company amended the Term Loan 2024 facility to adjust the revenue milestones applicable to the debt covenants therein and amend the ability to draw additional loans under the third tranche to allow for the ability to draw an additional $
In connection with the IPO, the warrant issued to the lender on September 29, 2023 was cancelled and exchanged for a new warrant (the “2033 Warrant”) to purchase up to
14
On September 4, 2025, the lender fully exercised the 2033 Warrant to purchase Common Shares on a cashless basis, resulting in the issuance of
On July 10, 2026, the Company entered into a loan agreement (the "2026 Term Loan”) with BPCR Limited Partnership and BioPharma Credit Investments V (Master) LP (each, a “Lender”) and BioPharma Credit PLC, as collateral agent. The loan agreement provides for a
The Company’s net proceeds from the Tranche A Loan were approximately $
The Term Loans mature on
The Company’s long-term debt consisted of the following at:
|
|
July 31, 2026 |
|
|
April 30, 2026 |
|
||
Term loan |
|
$ |
|
|
$ |
|
||
Accumulated paid-in-kind interest applied to term loan balance |
|
|
|
|
|
|
||
Less: unamortized debt issuance costs and debt discount |
|
|
( |
) |
|
|
( |
) |
Total long-term debt |
|
$ |
|
|
$ |
|
||
The Company recognized interest expenses related to the Term Loan 2024 and 2026 Term Loan as follows:
|
|
Three Months Ended July 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Interest expense |
|
$ |
|
|
$ |
|
||
Amortization of the debt issue costs |
|
|
|
|
|
|
||
Amortization of the debt discount recognized in connection with the warrant |
|
|
|
|
|
|
||
Total expense recognized |
|
$ |
|
|
$ |
|
||
15
8. Fair Value Measurement
The following table presents the Company’s fair value hierarchy for its classified assets and liabilities measured at fair value on a recurring basis as of July 31, 2026 and April 30, 2026:
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||
July 31, 2026 |
|
|
|
|
|
|
|
|
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|||
Money market funds |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
U.S. treasury securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
Total assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
||
|
|
|
|
|
|
|
|
|
|
|||
April 30, 2026 |
|
|
|
|
|
|
|
|
|
|||
Assets |
|
|
|
|
|
|
|
|
|
|||
Money market funds |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
U.S. treasury securities |
|
|
— |
|
|
|
|
|
|
— |
|
|
Total assets |
|
$ |
|
|
$ |
|
|
$ |
— |
|
||
Liabilities |
|
|
|
|
|
|
|
|
|
|||
Warrant liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
Total liabilities |
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|
The Company classifies its money market funds, which are valued based on quoted market prices in active markets with no valuation adjustment, as cash and cash equivalents within the fair value hierarchy.
The fair value and amortized cost of available-for-sale marketable securities as of July 31, 2026 are presented in the following table:
|
|
|
|
|
Gross Unrealized |
|
|
|
|
|||||||
|
|
Amortized Cost Basis |
|
|
Unrealized Gains |
|
|
Unrealized Losses |
|
|
Fair Value |
|
||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
U.S. treasury securities |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total |
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
As of July 31, 2026 available-for-sale marketable securities are classified as follows in the interim unaudited condensed consolidated balance sheet:
Category: |
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
|
|
|
|
|
$ |
|
|
Short-term investments |
|
|
|
|
|
|
|
|
|
|
Long-term investments |
|
|
|
|
|
|
|
|
|
|
Total |
|
|
|
|
|
|
|
$ |
|
|
Short-term investments have a contractual maturity date that is one year or less from the respective balance sheet date. Long-term investments have a contractual maturity date that is more than one year from the respective balance sheet date. The Company recognized
As of July 31, 2026 and April 30, 2026, the fair value of the long-term debt, net of discounts, approximated $
There were
16
Warrant Liabilities
As of April 30, 2026, the Company recorded warrant liabilities from issuance of warrants to the lender of the Term Loan 2024 in connection with the amendment on February 25, 2025. The warrant liabilities are based on significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy. The Company’s valuation of the warrant liabilities utilized the Black-Scholes option-pricing model, which incorporates assumptions and estimates to value the warrants. The assumptions used in the valuation were not significantly different from those used as of April 30, 2026. In connection with the settlement of the Term Loan 2024 as part of the Company's Term Loan 2026 financing transaction, the warrants were extinguished and the related warrant liabilities were derecognized. Immediately prior to the extinguishment, the warrant liabilities were remeasured to fair value. The resulting $
As of April 30, 2026, the quantitative elements associated with the Company’s Level 3 inputs impacting the fair value measurement of the warrant liabilities included the fair value per share of the underlying Common Shares, the remaining contractual term of the warrant, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying Common Shares. The expected volatility is derived from comparable public companies as the Company did not have sufficient trading history for the Company’s Common Shares. The change in fair value of warrant liability is included in other expense (income) within the unaudited interim condensed consolidated statements of operations and comprehensive loss.
The following table presents the significant inputs and assumptions used in the Black-Scholes option pricing model to determine the fair value of the warrant liabilities as of April 30, 2026:
|
|
April 30, 2026 |
|
|
Strike price |
|
$ |
|
|
Expected term (in years) |
|
|
|
|
Expected volatility |
|
|
% |
|
Risk free rate |
|
|
% |
|
Dividend yield |
|
|
% |
|
A reconciliation of the Level 3 liabilities is as follows:
Fair value of Level 3 liabilities as of April 30, 2026 |
|
$ |
|
|
Change in fair value of warrant liabilities |
|
|
|
|
Extinguishment of warrant liabilities |
|
|
( |
) |
Fair value of Level 3 liabilities as of July 31, 2026 |
|
$ |
|
9. Common Shares
The Company had
10. Equity Incentive Plan and Stock Based Compensation
Restricted Common Units and Restricted Shares
Certain directors and advisors of the Company were granted
Certain directors and advisors of the Company were granted
Share-based compensation expense associated with restricted common units and restricted Common Shares is immaterial and recorded within selling, general and administrative expense.
17
In connection with the IPO, the Company entered into the 2025 Omnibus Incentive Plan to grant eligible individuals incentive equity awards, including stock options and restricted stock units. Stock option and restricted stock unit activity for the three months ended July 31, 2026 is as follows:
Stock Options
Stock option activity for the three months ended July 31, 2026 is as follows:
|
Number of options |
|
|
Weighted average exercise price |
|
|
Weighted average remaining contractual life (in years) |
|
|
Aggregate intrinsic value (in thousands) |
|
||||
Balance at April 30, 2026 |
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Forfeited |
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Exercised |
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Balance at July 31, 2026 |
|
|
|
|
|
|
|
|
|
|
|
||||
Vested and exercisable at July 31, 2026 |
|
|
|
|
|
|
|
|
|
|
|
||||
As of July 31, 2026, unrecognized compensation cost for outstanding stock options was $
The weighted average grant date fair value of stock options outstanding as of July 31, 2026 was $
Restricted Stock Units
The 2025 Omnibus Incentive Plan also allows for the grants of restricted shares and restricted stock units. During the three months ended July 31, 2026, the Company granted restricted stock units which vest under three methods:
Time Based Restricted Stock Units
Time based restricted stock unit activity for the three months ended July 31, 2026 is as follows:
|
Number of restricted units |
|
|
Weighted average grant date fair value |
|
||
Outstanding at April 30, 2026 |
|
|
|
$ |
|
||
Granted |
|
|
|
|
|
||
Forfeited |
|
( |
) |
|
|
|
|
Vested |
|
( |
) |
|
|
|
|
Outstanding at July 31, 2026 |
|
|
|
$ |
|
||
As of July 31, 2026, there was $
18
Performance Based Restricted Stock Units
During the three months ended July 31, 2026, the Company granted
As of July 31, 2026, there was $
Market Based Restricted Stock Units
During the three months ended July 31, 2026, the Company granted
The Company estimated the fair value of the market-based restricted stock units granted during the three months ended July 31, 2026 using a Monte Carlo simulation model with the following assumptions:
|
July 31, 2026 |
|
|
Expected volatility |
|
% |
|
Expected term |
|
||
Risk free rate |
|
% |
|
Fair value of underlying common stock |
$ |
|
|
Weighted average grant-date fair value per share |
$ |
|
|
As of July 31, 2026, there was $
Employee Stock Purchase Plan
Under the 2025 Employee Stock Purchase Plan (the "ESPP") participants are permitted to purchase shares of Common Shares, up to the IRS allowable limit of $
Share Based Compensation
The Company recorded share-based compensation in the following expense categories of its unaudited interim condensed consolidated statements of operations and comprehensive loss:
|
|
Three Months Ended July 31, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Research and development |
|
$ |
|
|
$ |
|
||
Selling, general and administrative |
|
|
|
|
|
|
||
Total share-based compensation expense |
|
$ |
|
|
$ |
|
||
11. Income Taxes
The following table presents details of the provision for income taxes and effective tax rates:
|
Three Months Ended July 31, |
|
|||||
|
2026 |
|
|
2025 |
|
||
Provision for income taxes |
|
|
|
||||
Effective tax rate |
|
% |
|
|
% |
||
19
The Company is based in Bermuda and is a resident of Ireland for tax purposes. The Company has subsidiaries in the Cayman Islands, Ireland and the U.S. Under the current laws of Bermuda and the Cayman Islands, the Company is not subject to tax on income. However, the Company and its subsidiaries are subject to taxation in Ireland, the U.S. federal government, and various states. The Company accounts for the provision for income taxes in accordance with ASC 740, Income Taxes, which requires an estimate of the annual effective tax rate for the full year to be applied to the interim period, taking into account year-to-date amounts and projected results for the full year.
The Company’s effective tax rate varies from the statutory Irish tax rate due to the impact of the valuation allowance and the effect of state income taxes and research and development credits. The Company’s effective tax rate could fluctuate from quarter to quarter based on variations in the estimated and actual level of pre-tax income or loss by jurisdiction, changes in enacted tax laws and regulations, and changes in estimates regarding the realizability of deferred tax assets. As of July 31, 2026 and April 30, 2026, the Company provided a full valuation allowance against its net deferred tax assets that we believe, based on the weight of available evidence, are not more likely than not to be realized.
12. Commitments and Contingencies
From time to time, the Company may become involved in litigation relating to claims arising from the ordinary course of business. The Company considers the likelihood of loss or impairment of an asset, or the incurrence of a liability, as well as the ability to reasonably estimate the amount of loss, in determining loss contingencies. An estimated loss contingency is accrued when information available prior to issuance of the unaudited interim condensed consolidated financial statements indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the unaudited interim condensed consolidated financial statements, and the amount or range of loss can be reasonably estimated. Legal costs are expensed as incurred.
The Company enters into indemnification agreements with its officers and directors, and the Company’s certificate of incorporation and bylaws include similar indemnification obligations to its officers and directors. To date, there have been no claims under any indemnification provisions, therefore there is
13. Defined Contribution Plan
The Company sponsors a defined contribution retirement savings plan under Section 401(k) of the Internal Revenue Code of 1986, as amended (the “401(k) Plan”), for its full-time employees, which covers all eligible employees in the United States. The 401(k) Plan provides for matching and discretionary contributions by the Company. For the three months ended July 31, 2026 and 2025, matching and discretionary contributions by the Company totaled $
14. Net Loss Per Share Attributable to Common Shareholders
The Organizational Transactions represent a business combination between entities under common control under the principles of ASC Topic 805, Business Combinations. In connection with the Organizational Transactions, West Affum LP contributed its
Basic net loss per share attributable to common shareholders is calculated by dividing net loss by the weighted average number of Common Shares outstanding during the period and excludes any dilutive effects of employee share-based awards and warrants to purchase Common Shares. Diluted net loss per share attributable to common shareholders is computed giving effect to all potentially
20
dilutive Common Shares, including Common Shares issuable upon vesting of share-based payment awards and/or upon exercise of the warrants. For the three months ended July 31, 2026 and 2025, the Company did
The following table sets forth the computation of basic and diluted net loss per share attributable to common shareholders for the three months ended July 31, 2026 and 2025:
|
Three Months Ended July 31, |
|
|||||
|
2026 |
|
|
2025 |
|
||
Numerator: |
|
|
|
|
|
||
Net loss attributable to common shareholders |
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
||
Weighted average shares of common share outstanding - basic and diluted |
|
|
|
|
|
||
Net loss per share attributable to common shareholders - basic and diluted |
$ |
( |
) |
|
$ |
( |
) |
The following potentially dilutive securities outstanding have been excluded from the computations of weighted-average shares outstanding because such securities have an antidilutive impact due to losses reported (in common share equivalent shares):
|
As of July 31, |
|
|||||
|
2026 |
|
|
2025 |
|
||
Stock options |
|
|
|
|
|
||
Time based restricted stock units |
|
|
|
|
|
||
Performance based restricted stock units |
|
|
|
|
|
||
Market based restricted stock units |
|
|
|
|
|
||
Restricted stock |
|
|
|
|
|
||
Warrants to purchase Common Shares |
|
|
|
|
|
||
Employee Stock Purchase Plan |
|
|
|
— |
|
||
Total |
|
|
|
|
|
||
21
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with our unaudited interim condensed consolidated financial statements and the related notes to those statements included in this Quarterly Report and our audited consolidated financial statements and the related notes and the discussion under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for the fiscal years ended April 30, 2026 and 2025 included in our Annual Report. In addition to historical financial information, the following discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results and timing of selected events may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those discussed under the sections entitled “Special Note Regarding Forward-Looking Statements” included in this Quarterly Report and in the sections entitled “Special Note Regarding Forward-Looking Statements” and Part I, Item 1A "Risk Factors" in our Annual Report.
Overview
We are a commercial-stage wearable medical device and digital healthcare company focused on transforming patient outcomes in cardiovascular disease through connected monitoring, therapeutic intervention, and data-driven clinical insights. We have developed and are commercializing the Cardiac Recovery System platform, an integrated cardiac recovery ecosystem designed to support patients at elevated risk of sudden cardiac arrest ("SCA") during vulnerable periods of recovery. Our Cardiac Recovery System platform is anchored by the ASSURE® WCD, which continuously monitors patient heart rhythms and automatically delivers defibrillation therapy when life-threatening ventricular arrhythmias are detected. The platform also includes digital patient engagement and clinical workflow solutions designed to improve patient adherence, support care coordination, and provide actionable clinical insights throughout the recovery process. We believe the ASSURE® WCD is differentiated by its patient-centered design, including comfort, wearability, and low false alarm rates, which are intended to improve patient compliance during extended wear periods. In addition, our integrated platform generates continuous cardiac rhythm data and clinically actionable insights that may assist healthcare providers in managing patients during vulnerable recovery periods. We believe these capabilities position Kestra to participate in the growing cardiac recovery market and support future platform expansion opportunities.
We have been issued a Medicare Provider Number by the CMS, which enables us to bill Medicare for reimbursement for our ASSURE® WCD as an accredited supplier to the extent the claim meets Medicare medical necessity and coverage requirements. We derive nearly all our revenue from the direct billing of various third-party payors, including Medicare, Medicaid, private payors and other healthcare-related organizations, for the lease of our ASSURE® WCD to patients. Any costs associated with our solution that are not covered by third-party payors, such as co-payments, are billed directly to the patient by our team. As WCD therapy has existed for over 20 years in the United States, reimbursement codes are well-established, and WCDs are covered by Medicare, Medicaid and many private payors.
We outsource the manufacturing of our ASSURE® WCD and all of its components to third-party suppliers, including contract manufacturers that manufacture garments, chargers, monitors, batteries, cables and various accessories for our ASSURE® WCD. We believe that our contract manufacturing partners are recognized in their field for their competency to manufacture the respective components of our ASSURE® WCD and have established quality systems that meet FDA requirements. We believe the manufacturers we currently utilize have sufficient capacity to meet our expansion requirements and can scale up their capacity to meet anticipated demand for our product for the foreseeable future.
Since our inception, we have devoted substantially all of our efforts to research and development, undertaking clinical trials, enabling manufacturing activities in support of our product development efforts, hiring personnel, organizing and staffing our company, performing business planning, establishing our intellectual property portfolio, building and expanding a commercial team to market our Cardiac Recovery System platform in the United States, and raising capital to support and expand such activities.
Our fiscal year ends on April 30 of each year. We incurred net losses of $44.1 million and $25.8 million for the three months ended July 31, 2026 and 2025, respectively. For the three months ended July 31, 2026, we generated revenue of $31.0 million, with a gross profit of $17.5 million, compared to revenue of $19.4 million, with a gross profit of $8.9 million, for the three months ended July 31, 2025. As of July 31, 2026, we had cash and cash equivalents and investment balances of $244.7 million, and an accumulated deficit of $695.9 million.
From our inception to the consummation of our initial public offering ("IPO"), our operations were primarily funded by proceeds from capital contributions made by West Affum Holdings, L.P., our direct parent prior to the Organizational Transactions (as defined in Note 1, “The Company,” to our unaudited interim condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report), in the form of common stock and redeemable preferred stock, and borrowings under our Term Loan 2024 (as defined below). For more information, see “—Liquidity and Capital Resources—Sources of Liquidity”.
22
In connection with the IPO, we issued and sold an aggregate of 13,664,704 Common Shares at an offering price to the public of $17.00 per share for net proceeds of $215.8 million, after deducting underwriting discounts and commissions, which includes the net proceeds from the underwriters’ exercise in full of the over-allotment option. The Organizational Transactions and IPO were completed on March 7, 2025 and the proceeds from the shares sold pursuant to the underwriters’ over-allotment option were received on March 14, 2025.
In December 2025, we completed a public underwritten offering and issued an aggregate of 6,900,000 Common Shares at a price of $23.00 per share, resulting in net proceeds of $149.3 million, after deducting underwriting discounts but before expenses.
We have invested heavily in developing and commercializing our Cardiac Recovery System platform. We have also made significant investments in clinical studies to demonstrate the safety and effectiveness of our ASSURE® WCD and to support applications for regulatory approvals. We have made and will continue to make significant investments to build our sales and marketing organization, and we intend to continue to increase the size of our commercial team to market our product in the United States. Based on our current operating plan, we believe that our existing cash, cash equivalents, investments, and cash generated from revenue transactions with customers will be sufficient to fund our operating and capital needs for at least the next 12 months. We may experience lower than expected cash generated from operating activities or greater than expected capital expenditures, cost of revenue or operating expenses and may require additional funding to execute on our growth plans, which may include future equity and debt financings. Adequate funding may not be available to us on acceptable terms or at all. Our failure to obtain sufficient funds on acceptable terms when needed could have a material and adverse effect on our business, financial condition, results of operations and prospects.
Key Factors Affecting Our Results of Operations and Performance
Factors that have impacted, and that we expect will continue to impact, our operating performance and results of operations include:
23
Key Components of Our Results of Operations
The following discussion describes certain key components of our interim unaudited condensed consolidated statements of operations and comprehensive loss.
Revenue
We generate revenue by leasing our ASSURE® WCD to patients for a fixed amount on a month-to-month basis. The lease payments generally consist of the contracted amounts based on reimbursement arrangements with third-party payors, comprising Medicare, Medicaid, private payors and other healthcare-related organizations, and patient payments. The patient has the right to cancel the lease at any time during the lease period. We recognize lease revenue over the term of the lease when collectability is probable. If collectability of the lease payments is not deemed to be probable, the lease revenue is limited to the lesser of the income that would have been recognized if collectability was probable or the lease payments collected. If the lease payments are not deemed to be probable at inception, lease revenue is recognized when cash payments are received. We expect that our revenue will continue to increase as the number of patients that use our product increases.
Cost of Revenue
Cost of revenue consist of direct material, labor and indirect costs related to the lease performance of our ASSURE® WCD such as the cost of disposable WCD device components, depreciation expense of reusable medical rental equipment components, shipping and order fulfillment costs, as well as other indirect costs incurred to support the manufacture and medical rental equipment delivery to and ongoing support for the patient incurred in connection with providing our ASSURE® WCD to patients. Overall expenditures for disposable components and reprocessing costs will increase as the number of patients receiving our ASSURE® WCD increases and to a lesser extent, depreciation expense will increase as additional reusable ASSURE® WCD components are purchased. However, depreciation expense as a percentage of cost of revenue is expected to decrease in the long run through economies of scale as we continue to grow our business. For additional information on how depreciation impacts our financial results, see Note 2, “Significant Accounting Policies” to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
Gross Profit
We calculate gross profit as revenue less cost of revenue. We expect our gross profit to increase as reimbursement realization increases due to improved market access and shifts in patient mix towards patients with longer wear duration, as well as supply chain efficiencies from higher volume purchases of components and manufacturing process improvements. In addition, as the number of patients we serve continues to increase, we expect the cost of fitting per patient to continue to decrease. However, gross profit may be negatively impacted by a number of factors, including increases in prices of materials and electronics components, labor rates, shipping rates, and inflation.
Research and Development Expenses
Research and development expenses consist of personnel expenses, including salaries, benefits and share-based compensation expense for product development personnel, prototype materials and other expenses related to the development of new products. We expense research and development expenses as they are incurred, although advanced payments that we make for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses and expensed as the related goods are delivered or the services are performed.
We expect our research and development expenses to decrease as a percentage of revenue for the foreseeable future as our revenue increases. We will continue to invest in research and development activities related to developing new products and services, further enhancing our products and services through introducing new extensions and enhancements, conducting clinical trials as necessary and preparing any new products and services for commercialization.
Selling, General and Administrative Expenses
Selling expenses consist primarily of personnel expenses, including salaries, commissions, bonuses, benefits, travel, and share-based compensation expense for sales, marketing and field clinical personnel, as well as investments in marketing initiatives to increase market awareness of our technology, including expenses related to travel, conferences, trade shows and consulting services.
24
General and administrative expenses consist primarily of personnel expenses, including salaries, benefits and share-based compensation expense for personnel in executive, finance, accounting, commercial operations, distribution costs, revenue cycle management, legal, human resources, IT and administrative functions. General and administrative expenses also include direct or allocated expenses for rent and maintenance of facilities and insurance, not otherwise included in research and development expenses, selling expenses, or cost of revenue, as well as professional fees for legal, patent and consulting services. We expect expenses related to revenue cycle management to increase at higher rates than other types of general and administrative expenses as this function will continue to grow as the volume increases.
We expect that our overall selling, general and administrative expenses will increase in the foreseeable future as we increase our headcount to support the continued growth of our business. We have incurred additional expenses associated with operating as a public company, including increased expenses related to audit, legal, regulatory, compliance, director and officer insurance, investor and public relations, and tax-related services associated with maintaining compliance with the rules and regulations of the SEC and standards applicable to companies listed on a national securities exchange. These expenses may further increase when we no longer qualify as an “emerging growth company” under the JOBS Act, which will require us to comply with certain reporting requirements from which we are currently exempt. However, we expect overall general and administrative expenses to decrease as a percentage of revenue primarily as, and to the extent, our revenue grows.
Interest and Other Expense (Income), net
Interest and other expense (income), net consists of cash and non-cash components. The cash component of interest expense (income) is attributable to borrowings under our term loans as well as interest received from various interest-bearing bank accounts and investments in marketable securities.
Loss on Debt Extinguishment
Loss on debt extinguishment consists relates to the refinancing transaction completed in connection with the 2026 Term Loan and the repayment of the Term Loan 2024. The amount recognized represents the difference between the reacquisition price of the extinguished debt and its net carrying amount.
Provision for Income Taxes
To date, we have recorded a limited amount of United States federal and state income tax expense. In assessing the realizability of deferred tax assets, we consider whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during periods in which those temporary differences become deductible. We consider the scheduled reversal of deferred tax liabilities, projected future taxable income, carryback opportunities and tax planning strategies in making the assessment. We believe it is more likely than not that we will not realize the benefits of these deductible differences and have applied a full valuation allowance against them.
25
Results of Operations for the Three Months Ended July 31, 2026 and 2025
The following tables set forth our results of operations for the three months ended July 31, 2026 and 2025. We have derived the data for the three months ended July 31, 2026 and 2025 from our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report. This information should be read in conjunction with our unaudited interim condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report. The results for historical periods are not necessarily indicative of the results of operations for any future period, and our interim results are not necessarily indicative of the results to be expected for the full year.
|
|
Three Months Ended July 31, |
|
|
|
|
|
|
|
|||||||
(in thousands) |
|
2026 |
|
|
2025 |
|
|
$ Change |
|
|
% Change |
|
||||
Revenue |
|
$ |
30,971 |
|
|
$ |
19,371 |
|
|
$ |
11,600 |
|
|
|
60 |
% |
Cost of revenue |
|
|
13,473 |
|
|
|
10,520 |
|
|
|
2,953 |
|
|
|
28 |
% |
Gross profit |
|
|
17,498 |
|
|
|
8,851 |
|
|
|
8,647 |
|
|
|
98 |
% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development |
|
|
6,796 |
|
|
|
4,001 |
|
|
|
2,795 |
|
|
|
70 |
% |
Selling, general and administrative |
|
|
48,359 |
|
|
|
33,728 |
|
|
|
14,631 |
|
|
|
43 |
% |
Total operating expenses |
|
|
55,155 |
|
|
|
37,729 |
|
|
|
17,426 |
|
|
|
46 |
% |
Loss from operations |
|
|
(37,657 |
) |
|
|
(28,878 |
) |
|
|
(8,779 |
) |
|
|
30 |
% |
Other expense (income): |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Interest expense |
|
|
1,929 |
|
|
|
1,912 |
|
|
|
17 |
|
|
|
1 |
% |
Interest income |
|
|
(2,125 |
) |
|
|
(2,167 |
) |
|
|
42 |
|
|
|
(2 |
%) |
Other expense (income), net |
|
|
272 |
|
|
|
(2,830 |
) |
|
|
3,102 |
|
|
NM |
|
|
Loss on extinguishment of debt |
|
|
6,304 |
|
|
|
— |
|
|
|
6,304 |
|
|
NM |
|
|
Net loss before provision for income taxes |
|
|
(44,037 |
) |
|
|
(25,793 |
) |
|
|
(18,244 |
) |
|
|
71 |
% |
Provision for income taxes |
|
|
50 |
|
|
|
33 |
|
|
|
17 |
|
|
|
52 |
% |
Net loss attributable to common shareholders, basic and diluted |
|
$ |
(44,087 |
) |
|
$ |
(25,826 |
) |
|
$ |
(18,261 |
) |
|
|
71 |
% |
Comparison of the Three Months Ended July 31, 2026 and 2025
Revenue
Revenue for the three months ended July 31, 2026 increased by $11.6 million, or 60%, compared to the three months ended July 31, 2025. Revenue growth was primarily driven by an increase in the number of patients using our products.
Cost of Revenue
Cost of revenue for the three months ended July 31, 2026 increased by $3.0 million, or 28%, compared to the three months ended July 31, 2025. The increase in cost of revenue was primarily driven by a $1.0 million increase in the cost of disposable medical equipment supplies and equipment reconditioning, attributable to the increase in the number of patients using our product, a $0.9 million increase in depreciation expense due to an increased number of systems and equipment in use, a $1.1 million increase in reserve for lost or damaged equipment, and a $0.3 million increase in other costs, partially offset by a $0.3 million decrease in depreciation expense from increased useful lives of our components.
Gross Profit
Gross profit for the three months ended July 31, 2026 increased by $8.6 million, or 98%, compared to the three months ended July 31, 2025. The increase in gross profit was primarily due to growth in our total revenue. The increase in gross profit was also driven by a decrease in cost of revenues per patient by 9% for the three months ended July 31, 2026 compared to the three months ended July 31, 2025, due to further improvements in the utilization of our rental pool of medical equipment and lower disposable costs driven by volume and implementation of manufacturing cost improvement programs, and longer useful lives of our medical rental equipment components.
26
Research and Development Costs
Research and development costs for the three months ended July 31, 2026 increased by $2.8 million, or 70%, compared to the three months ended July 31, 2025. The increase was primarily driven by a $0.9 million increase in personnel expenses such as salaries, benefits, and share-based compensation expense, resulting from increased headcount, and a $0.9 million increase in contractor costs, and $1.0 million of development expenses from our strategic collaboration with Biobeat Technologies.
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended July 31, 2026 increased by $14.6 million, or 43%, compared to the three months ended July 31, 2025. The increase was primarily driven by a $10.7 million increase in personnel expenses such as salaries, benefits and share-based compensation, resulting from an increase in headcount to support commercial growth, a $1.4 million increase in commercial support costs including contractors, a $0.6 million increase in travel and entertainment expenses due to an increase in headcount, a $0.6 million increase in commercial training costs, a $0.5 million increase related to shipping and logistics costs, a $0.5 million increase related to increased software licensing fees driven by increased headcount, and a $0.3 million increase in other costs.
Interest and Other Expense (Income), net
Interest income and interest expense for the three months ended July 31, 2026 were consistent with the three months ended July 31, 2025.
Other expense (income), net for the three months ended July 31, 2026 increased by $3.1 million compared to the three months ended July 31, 2025. The increase was primarily due to warrant liability remeasurement.
Loss on Extinguishment of Debt
Loss on extinguishment of debt for the three months ended July 31, 2026 increased by $6.3 million compared to the three months ended July 31, 2025. The increase was related to the early repayment of the Term Loan 2024.
Provision for Income Taxes
For each of the three months ended July 31, 2026 and 2025, the tax provision was less than $0.1 million, which was primarily related to state tax liabilities in the United States.
Liquidity and Capital Resources
Since inception, we have devoted substantially all our efforts to research and development, undertaking clinical trials, enabling manufacturing activities in support of our product development efforts, hiring personnel, organizing and staffing our company, performing business planning, establishing our intellectual property portfolio, building and expanding a commercial team to market our Cardiac Recovery System platform in the United States, and raising capital to support and expand such activities. We have incurred net losses in each year since inception and expect to continue to incur net losses in the foreseeable future. Our net loss and comprehensive loss was $44.1 million and $25.8 million for the three months ended July 31, 2026 and 2025, respectively. As of July 31, 2026, we had an accumulated deficit of $695.9 million. For the three months ended July 31, 2026 and 2025, we generated negative operating cash flows of $32.3 million and $26.3 million, respectively.
As of July 31, 2026 and April 30, 2026, respectively, our principal sources of liquidity consisted of $244.7 million and $262.2 million of cash, cash equivalents, and investments. Based on our current operating plan, we believe that our existing cash and cash equivalents, which includes the net proceeds from our IPO and follow on offering, as well as cash generated from revenue transactions with customers, will be sufficient to fund our operating and capital needs for at least the next 12 months.
Funding Requirements and Contractual Obligations
We have incurred significant operating losses and negative cash flows driven by substantial research and development expenses as well as our large investment in our fleet of ASSURE® WCDs and building our commercial organization. Our operations have focused on developing products, establishing our intellectual property portfolio, marketing our product and staffing the Company to support continued growth. Our primary use of cash has been to fund operating expenses, which comprise research and development expenses, and costs of building the commercial team and necessary infrastructure to support our growth. Cash used to fund our operating expenses is impacted by the timing of when we pay for such expenses.
27
We obtained the PMA for our ASSURE® WCD from the FDA on July 27, 2021 and fully commercially launched our ASSURE® WCD in August 2022. We will continue to scale the business and therefore expect operating losses to continue. Based on our current operating plan, we believe that our existing cash, cash equivalents, and investments, as well as cash generated from revenue transactions with customers, will be sufficient to fund our operating and capital needs for at least the next 12 months. We may experience lower than expected cash generated from operating activities or greater than expected capital expenditures, cost of revenue or operating expenses and may require additional funding to execute on our growth plans, which may include future equity and debt financings. Our assessment of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties.
Our future obligations primarily consist of our debt obligations. From our inception to the consummation of the IPO, our operations were primarily funded by proceeds from our capital contributions made by West Affum Holdings, L.P., our direct parent prior to the Organizational Transactions, borrowings under our Term Loan 2024 and our revenues. We expect the proceeds from our IPO and secondary offering, cash generation from operations, and future ability to refinance or secure additional equity or financing to be sufficient to repay our outstanding debt obligations. As of July 31, 2026, the outstanding principal amount under the 2026 Term Loan was approximately $75.0 million. For further information, see Note 7, “Long-Term Debt,” to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
Sources of Liquidity
As of July 31, 2026, we had cash, cash equivalents, and investments of $244.7 million and an accumulated deficit of $695.9 million.
On December 4, 2025, the Company completed a public underwritten offering and issued an aggregate of 6,900,000 Common Shares at a price of $23.00 per share, resulting in net proceeds to the Company of $149.3 million, after deducting underwriting discounts but before expenses paid by the Company. The Common Shares were sold pursuant to an Underwriting Agreement, dated December 2, 2025, between the Company and BofA Securities, Inc., Piper Sandler & Co., J.P. Morgan Securities LLC and Goldman Sachs & Co. LLC as representatives of the underwriters named therein.
On September 29, 2023, we entered into a Credit Agreement with Perceptive Credit Holdings IV, LP, as administrative agent, which provides for a senior secured delayed draw term loan facility in an aggregate principal amount of up to $60.0 million (“Term Loan 2024”). The Term Loan 2024 bears interest on outstanding balances of Term SOFR plus a margin of 7.25% per annum. All interest is due and payable quarterly in arrears. On September 29, 2023, we drew the initial $45.0 million under the Term Loan 2024. On February 25, 2025, we entered into the Second Amendment to Credit Agreement and Guaranty, by and among Kestra Medical Technologies, Inc., the Company, the guarantors party thereto, the lenders party thereto and Perceptive Credit Holdings IV, LP, as administrative agent (the “Second Amendment to Credit Agreement”) which amended the Term Loan 2024 to adjust the revenue milestones set forth in the Term Loan 2024 and to amend our ability to draw on additional funds.
On July 10, 2026, we entered into a loan agreement (the "2026 Term Loan”) with BPCR Limited Partnership and BioPharma Credit Investments V (Master) LP (each, a “Lender”) and BioPharma Credit PLC, as collateral agent. The loan agreement provides for a five-year senior secured term loan facility of up to $200 million, divided into four tranches: (i) a committed Tranche A Loan in an aggregate principal amount of $75 million (the “Tranche A Loan”) which was funded on July 10, 2026 (the “Tranche A Closing Date”); (ii) a committed Tranche B Loan in an aggregate principal of $25 million (the “Tranche B Loan”) which may be requested, subject to certain limited conditions, at the Company’s option through July 31, 2027; (iii) a committed Tranche C Loan in an aggregate principal amount of $50 million (the “Tranche C Loan”) which is available to us upon reaching a trailing twelve-month revenue of $150 million and which may be requested on or prior to June 30, 2028 and (iv) an uncommitted Tranche D Loan for acquisitions our option in aggregate principal amount of $50 million (the “Tranche D Loan” and collectively with the Tranche A Loan, the Tranche B Loan, and the Tranche C Loan, the “Term Loans”), subject to certain limited conditions and upon approval of the Lenders, on such date mutually agreed upon between the Lenders and us.
Our net proceeds from the Tranche A Loan were approximately $20 million, after deducting estimated debt issuance costs, fees and expenses, and repaying our obligations under Term Loan 2024 on July 10, 2026. The remaining proceeds will be used to fund the Company’s general corporate and working capital requirements.
The Term Loans mature on July 10, 2031 (the “Maturity Date”). The Term Loans bear interest at a variable rate per annum equal to a 5.50% plus three-month Secured Overnight Financing Rate (“SOFR”) with a SOFR floor of 3.25%. Interest is due and payable on the last day of each quarter, with payment beginning in the calendar quarter immediately following July 10, 2026. The Loan Agreement requires us to pay an amount equal to 1.75% of the Lenders’ total committed amount to fund the Term Loans, payable with respect to each Term Loan on the funding date of such Term Loan. The Term Loans provide for 48 months of interest-only payments and amortize in four equal quarterly installments beginning in the second fiscal quarter of 2030 and continuing through
28
the Maturity Date. The Term Loans may be voluntarily prepaid in whole (but not in part), and are subject to make-whole, prepayment premium and exit fees, and must be prepaid upon a Change in Control (as defined in the Loan Agreement). We are required to maintain a minimum liquidity of at least $20 million in cash and cash equivalents at all times. As of July 31, 2026, we were in compliance with all covenants under the 2026 Term Loan.
For further information, see Note 7, “Long-Term Debt,” to our unaudited interim condensed consolidated financial statements included elsewhere in this Quarterly Report.
Cash Flows
The following table presents a summary of our cash flows from operating activities, investing activities and financing activities for the periods indicated:
|
|
Three Months Ended July 31, |
|
|||||
(in thousands) |
|
2026 |
|
|
2025 |
|
||
Net cash used in operating activities |
|
$ |
(32,295 |
) |
|
$ |
(26,274 |
) |
Net cash used in investing activities |
|
|
(21,352 |
) |
|
|
(8,232 |
) |
Net cash provided by (used in) financing activities |
|
|
22,495 |
|
|
|
(1,875 |
) |
Net (decrease) in cash, cash equivalents and restricted cash |
|
$ |
(31,152 |
) |
|
$ |
(36,381 |
) |
Cash Flows from Operating Activities
For the three months ended July 31, 2026, cash used in operating activities was $32.3 million, which primarily consisted of a net loss of $44.1 million and a net decrease of $7.5 million in operating assets and liabilities, offset by $19.3 million in net non-cash charges. The net change in our operating assets and liabilities consisted of changes in disposable medical equipment and supplies of $0.9 million, prepaid expenses and other current assets of $0.2 million, accounts payable of $1.9 million, accrued liabilities of $4.7 million, and operating lease liabilities of $0.2 million. The non-cash charges primarily consisted of share-based compensation expense of $9.5 million, loss on debt extinguishments of $6.3 million, depreciation and amortization of $2.7 million, reserve for lost equipment and supplies of $1.5 million, (recovery) provision for uncollectible accounts receivable of $0.8 million, amortization of debt discounts and issuance costs of $0.4 million, loss on disposal of property and equipment of $0.3 million, change in fair value of warrant liability of $0.3 million, and non-cash lease expense of $0.1 million, partially offset by net accretion of discounts on marketable securities of $0.9 million.
For the three months ended July 31, 2025, cash used in operating activities was $26.3 million, which primarily consisted of a net loss of $25.8 million and a net decrease of $6.1 million in operating assets and liabilities, offset by a net increase of $5.6 million in non-cash charges. The net change in our operating assets and liabilities consisted of changes in accounts payable of $2.9 million, accounts receivables of $1.8 million, accrued liabilities of $0.8 million, disposable medical equipment supplies of $0.5 million, and operating lease liabilities of $0.1 million, partially offset by prepaid expenses and other current assets of $0.1 million. The non-cash charges primarily consisted of share-based compensation expense of $4.6 million, depreciation and amortization of $2.0 million, provision for uncollectible accounts receivable of $0.6 million, amortization of debt discounts and issuance costs of $0.5 million, reserve for lost medical supplies of $0.4 million, loss on disposal of property and equipment of $0.3 million, and non-cash lease expense of $0.1 million, partially offset by change in fair value of warrant liability of $2.9 million.
Cash Flows from Investing Activities
For the three months ended July 31, 2026, cash used in investing activities was $21.4 million, which primarily consisted of purchases of marketable securities of $13.0 million, purchases of property and equipment of $8.3 million.
For the three months ended July 31, 2025, cash used in investing activities was $8.2 million, which primarily consisted of $8.1 million of purchases of property and equipment such as medical rental equipment, computer hardware, test equipment and other research and development activities, and leasehold improvements, and $0.1 million of deposits paid for medical rental equipment.
29
Cash Flows from Financing Activities
For the three months ended July 31, 2026, cash provided by financing activities was $22.5 million, which primarily consisted of proceeds from the issuance of long-term debt of $75.0 million, proceeds from stock option exercises of $1.1 million, and proceeds from the Employee Stock Purchase Plan of $1.3 million. These proceeds were partially offset by repayment of long-term debt of $46.4 million, payment of early termination fee of $3.8 million, payment of debt issuance costs of $3.2 million, payment of taxes on restricted stock unit vesting of $1.0 million, payment of equity issuance costs of $0.4 million, and payment of deemed dividends for payments to third party of $0.2 million .
For the three months ended July 31, 2025, cash used in financing activities was $1.9 million, which primarily consisted of payments of IPO offering costs.
Off-Balance Sheet Arrangements
As of July 31, 2026, we have two irrevocable standby letters of credit issued by Silicon Valley Bank, a division of First Citizens Bank, that total $0.1 million related to our office leases and Cash Pledge Agreement of $0.2 million as collateral for the Company credit card program. We did not have any other obligations, assets or liabilities that would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any non-financial agreements involving assets.
Critical Accounting Policies and Significant Management Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our unaudited interim condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of our unaudited interim condensed consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, costs and expenses and related disclosures. We base our estimates on historical experience, known trends and events and various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ materially from these estimates under different assumptions or conditions, and such conditions could have a material impact on the Company’s business, financial condition, results of operations and prospects.
Information about our significant accounting policies and how estimates are involved in the preparation of our financial statements are described in our Annual Report filed with the SEC on July 14, 2026. See also Note 2 to our unaudited interim condensed consolidated financial statements elsewhere in this Quarterly Report. There have been no material changes in our significant accounting policies and estimates since our Annual Report.
Emerging Growth Company and Smaller Reporting Company Status
We are an “emerging growth company” as defined in Section 2(a) of the Securities Act. We will remain an emerging growth company until the earliest to occur of (i) the last day of the fiscal year that follows the fifth anniversary of the completion of our IPO; (ii) the last day of the fiscal year in which we have total annual gross revenue of at least $1.235 billion; (iii) the last day of the fiscal year in which we are deemed to be a “large accelerated filer,” as defined in Rule 12b-2 under the Exchange Act, which will occur when the market value of our Common Shares held by non-affiliates exceeds $700.0 million as of the most recently completed second quarter; and (iv) the date on which we have issued more than $1 billion in non-convertible debt over a three-year period.
Pursuant to the JOBS Act, an emerging growth company is provided the option to adopt new or revised accounting standards that may be issued by the Financial Accounting Standards Board or the SEC either (i) within the same periods as those otherwise applicable to non-emerging growth companies or (ii) within the same time periods as private companies. We have elected to take advantage of the exemption for complying with new or revised accounting standards within the same time periods as private companies. Accordingly, the information contained herein may be different than the information you receive from other public companies.
We have elected to take advantage of some of the reduced regulatory and reporting requirements of emerging growth companies pursuant to the JOBS Act so long as we qualify as an emerging growth company, including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act, and reduced disclosure obligations regarding executive compensation.
30
We are also a “smaller reporting company,” as such term is defined in Rule 12b-2 under the Exchange Act. We may continue to be a smaller reporting company for so long as either (1) the market value of our Common Shares held by non-affiliates is less than $250.0 million as of the last business day of our most recently completed second fiscal quarter or (2) our annual revenue was less than $100.0 million during the most recently completed fiscal year and the market value of our Common Shares held by non-affiliates is less than $700.0 million as of the last business day of our most recently completed second quarter. Any loss of our status as a smaller reporting company takes effect in the first quarter after the fiscal year in which we cease to qualify as a smaller reporting company. To the extent that we continue to qualify as a smaller reporting company at the time we cease to qualify as an emerging growth company, we will continue to be permitted to make certain reduced disclosures in our periodic reports and other documents that we file with the SEC. Specifically, as a smaller reporting company, we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Recently Adopted and Issued Accounting Pronouncements
Recently issued accounting pronouncements are described in Note 2 to our unaudited interim condensed consolidated financial statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes to our market risk during the three months ended July 31, 2026. For a discussion of our market risk, refer to our quantitative and qualitative disclosures about market risk set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk” in our Annual Report.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, under the supervision and with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were not effective as of July 31, 2026, because of the material weaknesses in our internal control over financial reporting described below.
Material Weaknesses in Internal Control over Financial Reporting
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim consolidated financial statements will not be prevented or detected on a timely basis.
We did not design and maintain an effective control environment commensurate with our financial reporting requirements. Specifically, we lacked a sufficient complement of resources in the accounting, finance and IT functions to appropriately analyze, record and disclose accounting matters timely and accurately. This material weakness contributed to the following additional material weaknesses.
We did not design and maintain effective controls to ensure the financial statements were properly presented and classified for certain non-routine or complex transactions. Specifically, we did not design and maintain controls to appropriately account for the classification of selling, general and administrative expenses, paid-in-kind interest, restricted cash, right of use lease assets, and the cash flow presentation of leases. This material weakness resulted in immaterial audit adjustments to the aforementioned accounts, which were recorded in the Company's consolidated financial statements for the year ended April 30, 2021.
We did not design and maintain effective controls to verify personnel would not have the ability to prepare and post manual journal entries or review account reconciliations without an independent review by someone without the ability to prepare and post manual journal entries. This material weakness did not result in adjustments to the consolidated financial statements.
Additionally, these material weaknesses could result in a misstatement of substantially all of the financial statement accounts and disclosures that would result in a material misstatement to our annual or interim consolidated financial statements that would not be prevented or detected.
31
We did not design and maintain effective controls over IT general controls for information systems that are relevant to the preparation of our consolidated financial statements. Specifically, we did not design and maintain: (i) program change management controls to ensure that IT program and data changes affecting financial IT applications and underlying accounting records are identified, tested, authorized and implemented appropriately; (ii) user access controls to ensure appropriate segregation of duties and that adequately restrict user and privileged access to financial applications, programs, and data to appropriate Company personnel; (iii) computer operations controls to ensure that data backups are authorized and monitored; and (iv) testing and approval controls for program development to ensure that new software development is aligned with business and IT requirements.
These IT deficiencies did not result in adjustments to our consolidated financial statements; however, the deficiencies, when aggregated, could impact maintaining effective segregation of duties, as well as the effectiveness of IT-dependent controls (such as automated controls that address the risk of material misstatement to one or more assertions, along with the IT controls and underlying data that support the effectiveness of system-generated data and reports) that could result in misstatements potentially impacting all financial statement accounts and disclosures that would not be prevented or detected. Accordingly, we have determined these deficiencies in the aggregate constitute a material weakness.
Remediation Efforts to Address Previously Identified Material Weaknesses
Management, with oversight from the Audit Committee, and assistance from third party experts, continues to implement measures designed to remediate the material weaknesses described above. We have taken and will continue to take action to remediate these material weaknesses, including:
We believe we are making progress toward achieving effectiveness of our internal control over financial reporting. These actions that we are taking are subject to ongoing management review and Audit Committee oversight. We will not be able to conclude whether the steps we are taking will fully remediate the material weaknesses in our internal control over financial reporting until we have completed our remediation efforts and subsequently evaluated their design and effectiveness over a sufficient period of time, and management concludes, through testing, that these are operating effectively. We may also conclude that additional measures are required to remediate the material weaknesses in our internal control over financial reporting.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rules 13a-15(d) and 15d-15(d) of the Exchange Act during the quarter ended July 31, 2026 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
32
Inherent Limitations on Effectiveness of Disclosure Controls and Procedures and Internal Control over Financial Reporting
Our management team, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives. The effectiveness of any systems of controls is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to completely eliminate all potential for misconduct. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. The design of any system of controls is based in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions or deterioration in the degree of compliance with policies or procedures. Because of the inherent limitations in any cost-effective control system, misstatements due to error or fraud may occur and not be detected.
33
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
The Company is from time to time a party to various lawsuits, claims and other legal proceedings that arise in the ordinary course of business. The Company does not expect any of its pending legal proceedings to have a material adverse effect on its results of operations, financial position or cash flows.
Item 1A. Risk Factors.
Investing in our Common Shares involves a high degree of risk. For a detailed discussion of the risks that affect our business, please refer to the section entitled “Risk Factors” in the Company’s Annual Report. There have been no material changes to our risk factors as previously disclosed in the Company’s Annual Report. Additional risk factors not presently known to us or that we currently deem immaterial may also impair our business or results of operations. We may disclose changes to such factors or disclose additional factors from time to time in our future filings with the SEC.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
During the three months ended July 31, 2026,
Name |
Date |
Action |
Expiration Date |
Total Shares Subject to Plan |
34
Item 6. Exhibits.
Exhibit Number |
|
Description |
3.1 |
|
|
3.2 |
|
|
3.3 |
|
|
3.4 |
|
|
10.1 |
|
|
31.1* |
|
|
31.2* |
|
|
32.1* |
|
|
32.2* |
|
|
101.INS |
|
Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because XBRL tags are embedded within the Inline XBRL document. |
101.SCH |
|
Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
* Filed herewith.
35
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Kestra Medical Technologies, Ltd. |
|
|
|
|
|
Date: September 14, 2026 |
|
By: |
/s/ Brian Webster |
|
|
|
Brian Webster |
|
|
|
President and Chief Executive Officer |
|
|
|
|
Date: September 14, 2026 |
|
By: |
/s/ Vaseem Mahboob |
|
|
|
Vaseem Mahboob |
|
|
|
Chief Financial Officer |
36
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Brian Webster, certify that:
Date: September 14, 2026 |
|
By: |
/s/ Brian Webster |
|
|
|
Brian Webster |
|
|
|
President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Vaseem Mahboob, certify that:
Date: September 14, 2026 |
|
By: |
/s/ Vaseem Mahboob |
|
|
|
Vaseem Mahboob |
|
|
|
Chief Financial Officer |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Kestra Medical Technologies, Ltd. (the “Company”) on Form 10-Q for the period ended July 31, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: September 14, 2026 |
|
By: |
/s/ Brian Webster |
|
|
|
Brian Webster |
|
|
|
President and Chief Executive Officer |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Kestra Medical Technologies, Ltd. (the “Company”) on Form 10-Q for the period ended July 31, 2026 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that:
Date: September 14, 2026 |
|
By: |
/s/ Vaseem Mahboob |
|
|
|
Vaseem Mahboob |
|
|
|
Chief Financial Officer |