Cardio Diagnostics (US:CDIO)2023-08-13 16:00Part I — Financial Information Financial Statements The unaudited condensed consolidated financial statements for the period ended June 30, 2023, show a significant increase in net loss, minimal revenue, and improved cash from convertible notes, with details provided across key financial statements and notes Condensed Consolidated Balance Sheets As of June 30, 2023, total assets increased to $6.76 million, total liabilities grew significantly to $3.85 million due to convertible notes and derivative liability, and total stockholders' equity decreased to $2.91 million Condensed Consolidated Balance Sheet Data (unaudited) | Account | June 30, 2023 ($) | December 31, 2022 ($) | | :--- | :--- | :--- | | Total Assets | 6,756,904 | 6,249,478 | | Cash | 5,044,328 | 4,117,521 | | Total Liabilities | 3,848,380 | 1,947,770 | | Convertible notes payable, net | 915,202 | — | | Derivative liability | 1,998,752 | — | | Total Stockholders' Equity | 2,908,524 | 4,301,708 | Condensed Consolidated Statements of Operations The company reported minimal revenue of $1,725, with net loss widening substantially to $4.02 million for the quarter and $5.06 million for the six-month period, primarily due to increased general and administrative expenses and non-cash interest expenses from convertible debt Statement of Operations Highlights (unaudited) | Metric | Three Months Ended June 30, 2023 ($) | Three Months Ended June 30, 2022 ($) | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | | :--- | :--- | :--- | :--- | :--- | | Revenue | 1,725 | — | 1,725 | — | | Total operating expenses | 2,554,866 | 786,964 | 4,257,995 | 1,019,519 | | General and administrative expenses | 2,506,148 | 751,117 | 4,068,276 | 956,144 | | Loss from operations | (2,553,141) | (786,964) | (4,256,270) | (1,019,519) | | Net loss | (4,022,905) | (841,998) | (5,055,523) | (1,132,053) | | Net loss per common share | (0.39) | (0.16) | (0.51) | (0.23) | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2023, net cash used in operating activities increased to $2.94 million, while net cash provided by financing activities was $4.01 million, resulting in a $0.93 million increase in the cash balance to $5.04 million Cash Flow Summary (unaudited) | Cash Flow Activity | Six Months Ended June 30, 2023 ($) | Six Months Ended June 30, 2022 ($) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | (2,941,899) | (580,862) | | Net Cash Used in Investing Activities | (140,273) | (38,606) | | Net Cash Provided by Financing Activities | 4,008,979 | 9,766,727 | | Net Increase (Decrease) in Cash | 926,807 | 9,147,259 | | Cash - End of Period | 5,044,328 | 9,660,026 | Notes to Condensed Consolidated Financial Statements The notes detail the company's October 2022 reverse recapitalization, significant accounting policies including fair value measurements for derivative liabilities, specifics on March 2023 convertible debenture financing, and discussions of commitments and contingencies including disputes with former placement agents - The company completed a business combination with Mana Capital Acquisition Corp. on October 25, 2022, which was accounted for as a reverse recapitalization Legacy Cardio is the accounting predecessor104950 - On March 8, 2023, the company entered into a securities purchase agreement with Yorkville to sell convertible debentures for up to $11.2 million The first tranche of $5.0 million was issued on the same day98127128 - The conversion features of the convertible notes are treated as a derivative liability, recorded at fair value The initial fair value of the derivative exceeded the note's face value, resulting in an immediate charge to interest expense of $4.69 million101130 - The company is in disputes with Boustead Securities over a terminated placement agent agreement and with The Benchmark Company over a right of first refusal for financing activities No legal proceedings have been initiated for these matters102105132 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's strategy to commercialize epigenetics-based cardiovascular tests, highlighting the minimal cash proceeds from the October 2022 business combination, the substantial increase in net loss due to higher G&A and interest expenses, and the ongoing reliance on recent convertible debt financing for liquidity and future capital needs - The company's strategy focuses on developing and commercializing epigenetics-based clinical tests for cardiovascular diseases like CHD, stroke, and heart failure139160 - The business combination resulted in over 99.5% of Mana's public shares being redeemed, providing only $4,021 in cash from the SPAC trust account, significantly impacting the company's capital and growth plans142196 - The company's principal source of liquidity has shifted from equity issuances to convertible debt, specifically a March 2023 agreement with Yorkville for up to $11.2 million153174 Results of Operations Comparison (Six Months Ended June 30) | Metric | 2023 ($) | 2022 ($) | Change ($) | | :--- | :--- | :--- | :--- | | Revenue | 1,725 | — | 1,725 | | General & administrative expenses | 4,068,276 | 956,144 | 3,112,132 | | Total operating expenses | 4,257,995 | 1,019,519 | 3,238,476 | | Net loss | (5,055,523) | (1,132,053) | (3,923,470) | Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Cardio Diagnostics Holdings, Inc. is not required to provide the information for this item - The company is a "smaller reporting company" and is therefore not required to provide quantitative and qualitative disclosures about market risk236 Controls and Procedures Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2023, though they believe the financial statements in the Form 10-Q are fairly presented after additional analyses - Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2023192 - No changes were made to the internal control over financial reporting during the six months ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, internal controls237 Part II — Other Information Legal Proceedings The company reports that it is not involved in any material legal proceedings as of June 30, 2023 - As of June 30, 2023, the company is not involved in any material legal proceedings238 Risk Factors No material changes to risk factors have occurred since the last Annual Report on Form 10-K for the fiscal year ended December 31, 2022 - No material changes to risk factors have occurred since the last Annual Report on Form 10-K239 Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities to report for the period219 Other Information The company entered into two new operating lease agreements effective August 1, 2023, for medical laboratory and office space in Iowa City for five years and four months, and for office space in Chicago for a 40-month term - On July 20, 2023, the company entered into a five-year, four-month lease for medical lab and office space in Iowa City, Iowa, with rent commencing December 1, 2023222240 - On June 15, 2023, the company entered into a 40-month lease for office space in Chicago, Illinois, with rent commencing December 1, 2023225243 Exhibits A list of all exhibits filed as part of the Quarterly Report on Form 10-Q is provided, including merger agreements, corporate governance documents, financing agreements, new lease agreements, and officer certifications - A list of all exhibits filed with or incorporated by reference into the Form 10-Q is provided229246