Cardio Diagnostics Holdings Inc

Previous wording

Cardio believes that it is the first company to develop and commercialize epigenetics-based clinical tests for cardiovascular disease that have clear value propositions for multiple stakeholders including (1) patients, (2) clinicians, (3) hospitals/health systems, (4) employers and (5) payors. According to the CDC, epigenetics is the study of how a person’s behaviors and environment can cause changes that affect the way a person’s genes work. Unlike genetic changes, epigenetic changes are reversible and do not change one’s DNA sequence, but they can change how a person’s body reads a DNA sequence.

Current wording

Cardio believes that it is the first company to develop and commercialize epigenetics-based clinical tests for cardiovascular disease that have clear value propositions for multiple stakeholders including (1) patients, (2) clinicians, (3) hospitals/health systems, (4) employers and (5) payors. According to the CDC, epigenetics is the study of how a person’s behaviors and environment can cause changes that affect the way a person’s genes work. Unlike geneti changes, epigenetic changes are reversible and do not change one’s DNA sequence, but they can change how a person’s body reads a DNA sequence.

Previous wording

Cardio launched its first clinical test, Epi+Gen CHD™, a three-year symptomatic CHD risk assessment clinical blood test targeting CHD events, including heart attacks, in 2021 during the Covid-19 pandemic. As a result, the initial strategy for commercialization involved launching the test via telemedicine and in smaller provider practices such as concierge medicine practices. The volume of tests through these channels were minimal, and as the circumstances around Covid-19 pandemic improved, management re-vamped the Company’s go-to-market strategy to include other healthcare verticals and stakeholders beyond patients and small providers, including larger provider organizations, group purchasing organizations, employers, payors and life insurers. This new approach allowed Cardio to expand the reach of our solutions beyond the initial focus areas. Beyond the launch of Epi+Gen CHD, in March 2023, we announced the launch of our second product, PrecisionCHD™, anintegrated epigenetic-genetic clinical blood test for the detection of coronary heart disease. The Epi+Gen CHD™ and PrecisionCHD™ tests are coupled to Actionable Clinical Intelligence (ACI), a platform that offers new epigenetic and genetic insights to clinicians prescribing the to help improve chronic care management. In May 2023, we launched CardioInnovate360 TM, a research-use-only (RUO) solution to support the discovery, development and validation of novel biopharmaceuticals for the assessment and management of cardiovascular diseases. In February 2024, we announce the launch of HeartRisk™, a cardiovascular risk intelligence platform. We believe that our Epi+Gen CHD™ and PrecisionCHD™ tests are categorized as laboratory-developed tests, or “LDTs.” The new go-to-market strategy is also being implemented for these products.

Current wording

Cardio launched its first clinical test, Epi+Gen CHD™, a three-year symptomatic CHD risk assessment clinical blood test targeting CHD events, including heart attacks, in 2021 during the Covid-19 pandemic. As a result, the initial strategy for commercialization involved launching the test via telemedicine and in smaller provider practices such as concierge medicine practices. The volume of tests through these channels were minimal, and as the circumstances around Covid-19 pandemic improved, management re-vamped the Company’s go-to-market strategy to include other healthcare verticals and stakeholders beyond patients and small providers, including larger provider organizations, group purchasing organizations, employers, payors and life insurers. This new approach allowed Cardio to expand the reach of our solutions beyond the initial focus areas. Beyond the launch of Epi+Gen CHD, in March 2023, we announced the launch of our second product, PrecisionCHD™, an integrated epigenetic-genetic clinical blood test for the detection of coronary heart disease. The Epi+Gen CHD™ and PrecisionCHD™ tests are coupled to Actionable Clinical Intelligence (ACI), a platform that offers new epigenetic and genetic insights to clinicians prescribing the to help improve chronic care management. In May 2023, we launched CardioInnovate360™, a research-use-only (RUO) solution to support the discovery, development and validation of novel biopharmaceuticals for the assessment and management of cardiovascular diseases. In February 2024, we announce the launch of HeartRisk™, a cardiovascular risk intelligence platform. We believe that our Epi+Gen CHD™ and PrecisionCHD™ tests are categorized as laboratory-developed tests, or “LDTs.” The new go-to-market strategy is also being implemented for these products.

Previous wording

Despite long partnership and sales cycles, in some instance as long as 14 months, Cardio in 2023 generated revenue from patient(s), small provider(s), larger provider(s) and employer(s) for the first time and has developed a more robust sales and partnership pipeline. In addition to increased revenue, other key developments since the 2023 Form 10-K, include:

Current wording

Despite long partnership and sales cycles, in some instance as long as 14 months, in 2023 Cardio generated revenue from patient(s), small provider(s), larger provider(s) and employer(s) for the first time and has developed a more robust sales and partnership pipeline. Key developments since the 2023 Form 10-K filing include:

Previous wording

On May 6, 2024, FDA published a final rule amending the definition of an in vitro diagnostic (IVD) device to include IVDs manufactured by a clinical laboratory. Pursuant to the rule, laboratory developed tests (LDTs), i.e., tests designed, manufactured, and used within a single CLIA-certified high complexity laboratory, are medical devices subject to FDA regulation under the Federal Food, Drug, and Cosmetic Act. The final rule also announced FDA’s intention to apply its medical device requirements to LDTs. Under the final rule, all LDTs, unless subject to a specific exemption, will be subject to premarket authorization requirements (510(k), de novo classification, or PMA) for each LDT performed by the laboratory, and to postmarket registration and listing, medical device reporting, correction, removal, and recall, complaint handling, labeling, investigational device, and quality system requirements. FDA intends to phase in these requirements beginning May 6, 2025. The final rule states that certain categories of LDTs will be subject to enforcement discretion with respect to some or all of these requirements. For example, FDA will apply enforcement discretion to currently marketed LDTs that were first offered prior to May 6, 2024, with respect to most quality system requirements and the requirement for premarket authorization if they are not modified or modified in only limited ways. Laboratories performing these tests are subject to other requirements, including the requirement to submit the labeling for the LDT to FDA for review. FDA will similarly exercise enforcement discretion with respect to premarket authorization for LDTs approved by the New York State Clinical Laboratory Evaluation Program (NYS-CLEP). Unless overturned by a court or Congress, the final rule will substantially increase costs and regulatory burdens for many clinical laboratories in ways that may adversely affect their ability to develop, perform, and offer LDTs.

Current wording

On May 6, 2024, FDA published a final rule amending the definition of an in vitro diagnostic (IVD) device to include tests manufactured by a clinical laboratory. Pursuant to the rule, laboratory developed tests (LDTs), i.e., tests designed, manufactured, and used within a single CLIA-certified high complexity laboratory, are medical devices subject to FDA regulation under the Federal Food, Drug, and Cosmetic Act. The final rule also announced FDA’s intention to apply its medical device requirements to LDTs. Under the final rule, all LDTs, unless subject to a specific exemption, will be subject to premarket authorization requirements (510(k), de novo classification, or PMA) for each LDT performed by the laboratory, and to postmarket registration and listing, medical device reporting, correction, removal, and recall, complaint handling, labeling, investigational device, and quality system requirements. FDA intends to phase in these requirements beginning May 6, 2025. The final rule states that certain categories of LDTs will be subject to enforcement discretion with respect to some or all of these requirements. For example, FDA will apply enforcement discretion to currently marketed LDTs that were first offered prior to May 6, 2024, with respect to most quality system requirements and the requirement for premarket authorization if they are not modified or modified in only limited ways. Laboratories performing these tests are subject to other requirements, including the requirement to submit the labeling for the LDT to FDA for review. FDA will similarly exercise enforcement discretion with respect to premarket authorization for LDTs approved by the New York State Clinical Laboratory Evaluation Program (NYS-CLEP).

Previous wording

Cardio’s net loss for the three months ended March 31, 2024 was $4,163,584 as compared to $1,032,618 for the three months ended March 31, 2023, an increase of $3,130,966. The increase in net loss was primarily the result of an increase in General and Administrative expenses associated with being a public company, stock compensation issued, increased personnel and increased rent.

Current wording

Cardio’s net loss for the six months ended June 30, 2024 was $5,451,579 as compared to $5,055,523 for the six months ended June 30, 2023, an increase of $396,056. The increase in net loss was primarily the result of an increase in General and Administrative expenses related to stock compensation issued in the first quarter of 2024, offset by the decrease in D&O insurance and various expenses related to the sale and issuance of convertible debentures.

Previous wording

Cardio had $15,928 and $0 in revenue for the three months ended March 31, 2024 and 2023, respectively.

Current wording

Cardio had $7,870 and $1,725 in revenue for the three months ended June 30, 2024 and 2023, respectively.

Previous wording

Expenses related to sales and marketing for the three months ended March 31, 2024 were $34,402 as compared to $49,551 for the three months ended March 31, 2023, a decrease of $15,149. The overall decrease was due to a decrease in sales and marketing efforts in the first quarter of 2024 due to fewer tradeshows in 2024.

Current wording

Expenses related to sales and marketing for the three months ended June 30, 2024 were $57,779 as compared to $31,608 for the three months ended June 30, 2023, an increase of $26,171. The overall increase was due to an increase in sales and marketing activity in the second quarter of 2024 due to tradeshow attendance.

Previous wording

Research and development expense for the three months ended March 31, 2024 was $10,840 as compared to $86,665 for the three months ended March 31, 2023, a decrease of $75,825. The decrease was attributable to the decrease in laboratory runs performed in the 2024 period on new product offerings in the pipeline as compared to laboratory runs performed in the same period in 2023.

Current wording

Research and development expense for the three months ended June 30, 2024 was $7,280 as compared to $12,317 for the three months ended June 30, 2023, a decrease of $5,037. The decrease was attributable to the decrease in laboratory runs performed in the 2024 period on new product offerings in the pipeline as compared to laboratory runs performed in the same period in 2023, without a corresponding expense in the second quarter of 2024.

Previous wording

General and administrative expenses for the three months ended March 31, 2024 were $4,123,941 as compared to $1,562,128 for the three months ended March 31, 2023, an increase of $2,561,813. The overall increase is primarily due to stock compensation expenses of $2,519,404, an increase in rent, personnel, and office and software expenses related to new offices and the new internal lab setup.

Current wording

General and administrative expenses for the three months ended June 30, 2024 were $1,220,477 as compared to $2,506,148 for the three months ended June 30, 2023, a decrease of $1,285,671. The overall decrease is primarily due to stock compensation expenses of $1,141,273 related to stock options issued and vesting of Restricted Stock Units granted in the second quarter of 2023.

Previous wording

Amortization expense for the three months ended March 31, 2024 was $4,793 as compared to $4,785 for the three months ended March 31, 2023. The total amortization expense for the three months ended March 31, 2024 is for intangible assets of $4,000 and patent costs of $793, respectively.

Current wording

Amortization expense for the three months ended June 30, 2024 was $4,794 as compared to $4,793 for the three months ended June 30, 2023. The total amortization expense for the three months ended June 30, 2024 is for intangible assets of $4,000 and patent costs of $794, respectively.

Previous wording

Total other expenses for the three months ended March 31, 2024, was $(5,536) as compared to $670,511 total other income for the three months ended March 31, 2023. The total other expenses for the three months ended March 31, 2024 consists of interest expense of $5,817 net of interest income of $281. The total other income for the three months ended March 31, 2023 consists of change in fair value of derivative liability of $5,686,901 offset by interest expense of $5,016,611 net of interest income of $221.

Current wording

Total other expenses for the three months ended June 30, 2024, was $(5,535) as compared to $(1,469,764) for the three months ended June 30, 2023. The total other expenses for the three months ended June 30, 2024 consists of interest expense of $5,817 net of interest income of $282. The total other expenses for the three months ended June 30, 2023 consists of change in fair value of derivative liability of $53,816, interest expense of $1,051,916 and loss on extinguishment of debt of $364,295 offset by interest income of $263.

Previous wording

Historically, our principal sources of liquidity have been proceeds from the issuance of equity and warrant exercises. More recently, upon signing the YA Securities Purchase Agreement on March 8, 2023 (the "Securities Purchase Agreement”), we issued and sold to YA II PN, Ltd. ("Yorkville”) a Convertible Debenture in the principal amount of $5,000,000 for a purchase price of $4,500,000 to provide additional liquidity. Yorkville fully converted the $5,000,000 Convertible Debenture into an aggregate of 10,622,119 common shares during the year ended December 31, 2023. The Securities Purchase Agreement contemplated the issuance of a second convertible debenture in the amount of $6,200,000. However, prior to the issuance of the second convertible debenture, the Company and Yorkville terminated the Securities Purchase Agreement by the mutual consent of the parties, effective as of January 4, 2024.

Current wording

Historically, our principal sources of liquidity have been proceeds from the issuance of equity. More recently, upon signing the YA Securities Purchase Agreement on March 8, 2023 (the "Securities Purchase Agreement”), we issued and sold to YA II PN, Ltd. ("Yorkville”) a Convertible Debenture in the principal amount of $5,000,000 for a purchase price of $4,500,000 to provide additional liquidity. Yorkville fully converted the $5,000,000 Convertible Debenture into an aggregate of 10,622,119 common shares during the year ended December 31, 2023. The Securities Purchase Agreement contemplated the issuance of a second convertible debenture in the amount of $6,200,000. However, prior to the issuance of the second convertible debenture, the Company and Yorkville terminated the Securities Purchase Agreement by the mutual consent of the parties, effective as of January 4, 2024.

Previous wording

As noted in Recent Developments, above, we entered into an At-the Market Sales Agreement with Craig-Hallum on January 26, 2024. As of May 15, 2024, we have received $1,773,809 in gross proceeds from the ATM sales, and we have available up to $15,226,191 in future sales of our Common Stock that we may elect to make under the Sales Agreement.

Current wording

We entered into an At-the Market Sales Agreement with Craig-Hallum Capital Group LLC (“Craig-Hallum”) on January 26, 2024 (the “Sales Agreement”) under the terms of which we are able to sell up to $17.0 million of our Common Stock (the “ATM Offering”) from time to time and at our discretion. As of August 12, 2024, we have received an aggregate of $2,504,862 in gross proceeds from the ATM sales of 2,791,114 shares of Common Stock, and we have available up to $14,495,138 in future sales of our Common Stock that we may elect to make under the Sales Agreement. We have paid Craig-Hallum $62,617 in sales commissions as of August 12, 2024.

Previous wording

We continue to explore our financing options, such as equity private placement transactions. However, given recent stock prices and the extreme volatility of our stock, it continues to be challenging to balance cash that could be raised and the dilution that might be required to close a particular transaction. We expect that for the remainder of 2024, we will rely on the ongoing ATM offering, provided that market conditions are favorable.

Current wording

We have had, and expect that we will continue to have, an ongoing need to raise additional cash from outside sources to fund our operations and grow our business. We expect that our primary cash needs in 2024 and for the foreseeable future will be for funding day-to-day operations and working capital requirements, funding our growth strategy, paying the setup expenses of our internal laboratory and paying expenses incurred in connection with our ongoing FDA submission activities. We explore our financing options on an ongoing basis. However, given recent stock prices and the extreme volatility of our stock, it continues to be challenging to balance cash that could be raised and the dilution that might be required to close a particular transaction. We expect that for the remainder of 2024, we will rely primarily on the ongoing ATM Offering, provided that market conditions are favorable.

Previous wording

We expect that working capital requirements will continue to be funded through a combination of existing funds and further issuances of securities. Working capital requirements are expected to increase in line with the growth of the business.. We have no lines of credit or other bank financing arrangements. In connection with our business plan, management anticipates additional increases in operating expenses and capital expenditures relating to: (i) developmental expenses associated with a start-up business and (ii) marketing expenses. Cardio intends to finance these expenses with further issuances of securities and debt issuances. Thereafter, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our equity holders could be significantly diluted, particularly at current stock price levels, and these newly-issued securities may have rights, preferences or privileges senior to those of existing equity holders. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operating flexibility and also require us to incur interest expense.

Current wording

Unless we are able to generate significant cash flows from operations, which we do not foresee happening in the near term, we will need to finance our operations through the issuance of additional equity and/or convertible debt securities. Looking forward, we expect we will need to raise additional capital and generate revenues to meet long-term operating requirements. If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our equity holders could be significantly diluted, particularly at current stock price levels, and these newly-issued securities may have rights, preferences or privileges senior to those of existing equity holders. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operating flexibility and also require us to incur interest expense.

Previous wording

We have had, and expect that we will continue to have, an ongoing need to raise additional cash from outside sources to fund our operations and expand our business. If we are unable to raise additional capital when desired, our business, financial condition and results of operations would be harmed. Successful transition to attaining profitable operations depends upon achieving a level of revenue adequate to support the post-merger company. There is no assurance that we will be successful in reaching and sustaining profitability.

Current wording

If we are unable to raise additional capital when desired, our business, financial condition and results of operations would be harmed. Successful transition to attaining profitable operations depends upon achieving a level of revenue adequate to support our business plan, balanced against ongoing expenses. There is no assurance that we will be successful in reaching and sustaining profitability.

Previous wording

The exercise prices of our currently outstanding warrants range from a high of $11.50 to a low of $1.78 per share of Common Stock. We believe the likelihood that warrant holders will exercise their Warrants and therefore the amount of cash proceeds that we might receive, is dependent upon the trading price of our Common Stock, the last reported sales price for which was $0.8140 on May 14, 2024. If the trading price of our Common Stock is less than the respective exercise prices of our outstanding Warrants, we believe holders of any of our Warrants will be unlikely to exercise their Warrants. There is no guarantee that the Warrants will be in the money prior to their respective expiration dates, and as such, the Warrants may expire worthless, and we may receive no proceeds from the exercise of Warrants. Given the current differential between the trading price of our Common Stock and the Warrant exercise prices and the volatility of our stock price, we are not making strategic business decisions based on an expectation that we will receive any cash from the exercise of Warrants. However, we will use any cash proceeds received from the exercise of Warrants for general corporate and working capital purposes, which would increase our liquidity. We will continue to evaluate the probability of Warrant exercises and the merit of including potential cash proceeds from the exercise of the Warrants in our future liquidity projections.

Current wording

The exercise prices of our currently outstanding warrants range from a high of $11.50 to a low of $1.78 (subject to adjustment) per share of Common Stock. We believe the likelihood that warrant holders will exercise their Warrants and therefore the amount of cash proceeds that we might receive, is dependent upon the trading price of our Common Stock, the last reported sales price for which was $0.4475 on August 8, 2024. If the trading price of our Common Stock is less than the respective exercise prices of our outstanding Warrants, which has been the case for a substantial period of time, we believe holders of any of our Warrants will be unlikely to exercise their Warrants. There is no guarantee that the Warrants will be in the money prior to their respective expiration dates, and as such, the Warrants may expire worthless, and we may receive no proceeds from the exercise of Warrants. Given the current differential between the trading price of our Common Stock and the Warrant exercise prices and the volatility of our stock price, we are not making strategic business decisions based on an expectation that we will receive any cash from the exercise of Warrants. However, we will use any cash proceeds received from the exercise of Warrants for general corporate and working capital purposes, which would increase our liquidity. We will continue to evaluate the probability of Warrant exercises and the merit of including potential cash proceeds from the exercise of the Warrants in our future liquidity projections.

Previous wording

Cash at March 31, 2024 totaled $1,563,139 as compared to $1,283,523 at December 31, 2023, an increase of $279,616. The following table shows Cardio’s cash flows from operating activities, investing activities and financing activities for the stated periods:

Current wording

Cash at June 30, 2024 totaled $1,310,119 as compared to $1,283,523 at December 31, 2023, an increase of $26,596. The following table shows Cardio’s cash flows from operating activities, investing activities and financing activities for the stated periods:

Previous wording

Cash used in operating activities for the three months ended March 31, 2024 was $1,233,050 as compared to $1,649,067 for the three months ended March 31, 2023. The cash used in operations during the three months ended March 31, 2024 is a function of net loss of $4,163,584 adjusted for the following non-cash operating items: depreciation of $3,587, amortization of $24,750, $2,519,404 in stock-based compensation, an increase of $14,028 in accounts receivable, a decrease of $470,050 in prepaid expenses and other current assets, a decrease of $18,494 in accounts payable and accrued expenses and a decrease in lease liability of $54,735.

Current wording

Cash used in operating activities for the six months ended June 30, 2024 was $2,443,450 as compared to $2,941,899 for the six months ended June 30, 2023. The cash used in operations during the six months ended June 30, 2024 is a function of net loss of $5,451,579 adjusted for the following non-cash operating items: depreciation of $39,579, amortization of $69,877, $2,546,135 in stock-based compensation, an increase of $2,560 in accounts receivable, a decrease of $656,310 in prepaid expenses and other current assets, a decrease of $191,132 in accounts payable and accrued expenses and a decrease in lease liability of $110,080.

Previous wording

The cash used in operations during the three months ended March 31, 2023, is a function of net loss of $1,032,618 adjusted for the following non-cash operating items: amortization of $4,785, $4,000 in stock based compensation, $5,007,740 in non-cash interest expense offset by $5,686,901 in change in fair value of derivative liability, a decrease of $338,105 in prepaid expenses and other current assets, an increase in deposits of $2,100 and a decrease of $282,078 in accounts payable and accrued expenses.

Current wording

The cash used in operations during the six months ended June 30, 2023, is a function of net loss of $5,055,523 adjusted for the following non-cash operating items: amortization of $9,578, $1,145,273 in stock based compensation, $6,050,785 in non-cash interest expense and $364,295 for loss on extinguishment of debt offset by $5,633,085 in change in fair value of derivative liability, an increase of $1,050 in accounts receivable, a decrease of $559,026 in prepaid expenses and other current assets, an increase in deposits of $7,900 and a decrease of $373,298 in accounts payable and accrued expenses.

Previous wording

Cash used in investing activities for the three months ended March 31, 2024 was $69,941 compared to $52,674 for the three months ended March 31, 2023. The cash used in investing activities for the three months ended March 31, 2024 was due to purchases of property and equipment and patent costs incurred. The cash used in investing activities for the three months ended March 31, 2023 was due to patent costs incurred.

Current wording

Cash used in investing activities for the six months ended June 30, 2024 was $271,010 compared to $140,273 for the six months ended June 30, 2023. The cash used in investing activities for the six months ended June 30, 2024 and 2023, respectively, was due to purchases of property and equipment and patent costs incurred.

Previous wording

Cash provided by financing activities for the three months ended March 31, 2024 was $1,582,607 as compared to $4,291,990 for the three months ended March 31, 2023. This change was due to $1,877,857 in proceeds from the sale of common stock offset by $140,250 in payments pursuant to a finance agreement and $155,000 in payments of placement agent fees and all of which occurred during the three months ended March 31, 2024. Cash provided by financing activities for the three months ended March 31, 2023 was due to $4,500,000 in proceeds from convertible notes payable, net of original issue discount (“OID”) of $500,000, $390,000 in proceeds from exercise of warrants, offset by $283,010 in payments of finance agreement and $315,000 in payments of placement agent fees during the three months ended March 31, 2023.

Current wording

Cash provided by financing activities for the six months ended June 30, 2024 was $2,741,056 as compared to $4,008,979 for the six months ended June 30, 2023. This change was due to $3,176,556 in proceeds from the sale of common stock and warrants offset by $280,500 in payments pursuant to a finance agreement and $155,000 in payments of placement agent fees and all of which occurred during the six months ended June 30, 2024. Cash provided by financing activities for the six months ended June 30, 2023 was due to $4,500,000 in proceeds from convertible notes payable, net of original issue discount of $500,000, $390,000 in proceeds from exercise of warrants, offset by $566,021 in payments of finance agreement and $315,000 in payments of placement agent fees during the six months ended June 30, 2023.

Previous wording

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has generated only nominal revenue in the past two years. The Company had a net loss of $4,163,584 for the three months ended March 31, 2024 and an accumulated deficit of $18,531,964 at March 31, 2024. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon its ability to obtain necessary equity financing and ultimately from generating revenues to continue operations. The Company expects that working capital requirements will continue to be funded through a combination of its existing funds and further issuances of securities. Working capital requirements are expected to increase in line with the growth of the business. The Company has no lines of credit or other bank financing arrangements. Additional issuances of equity or convertible debt securities will result in dilution to current stockholders. Further, such securities might have rights, preferences or privileges senior to common stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict business operations.

Current wording

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company has generated only nominal revenue since inception. The Company had a net loss of $5,451,579 for the six months ended June 30, 2024 and an accumulated deficit of $19,819,959 at June 30, 2024. These factors, among others, raise substantial doubt about the ability of the Company to continue as a going concern for a reasonable period of time. The Company’s continuation as a going concern is dependent upon its ability to obtain necessary equity financing and ultimately from generating revenues to continue operations. The Company expects that working capital requirements will continue to be funded through a combination of its existing funds and further issuances of securities. Working capital requirements are expected to increase in line with the growth of the business. The Company has no lines of credit or other bank financing arrangements. Additional issuances of equity or convertible debt securities will result in dilution to current stockholders. Further, such securities might have rights, preferences or privileges senior to the Company’s Common Stock. Additional financing may not be available upon acceptable terms, or at all. If adequate funds are not available or are not available on acceptable terms, the Company may not be able to take advantage of prospective new business endeavors or opportunities, which could significantly and materially restrict business operations.

Previous wording

On June 25, 2022, a plaintiffs’ securities law firm sent a demand letter to the Company alleging that the Company’s Registration Statement on Form S-4 filed (the "S-4 Registration Statement”) with the Securities and Exchange Commission ("SEC”) on May 31, 2022 omitted material information with respect to the Business Combination and demanding that the Company and its Board of Directors immediately provide corrective disclosures in an amendment or supplement to the Registration Statement. Subsequent thereto, the Company filed amendments to the S-4 Registration Statement on July 27, 2022, August 23, 2022, September 15, 2022, October 4, 2022 and October 5, 2022 in which it responded to various comments of the SEC staff and otherwise updated its disclosure. In October 2022, the SEC completed its review and declared the S-4 registration statement effective on October 6, 2022. On February 23, 2023 and February 27, 2023, plaintiffs’ securities law firm contacted the Company’s counsel asking who will be negotiating a mootness fee relating to the purported claims set forth in the June 25, 2022 demand letter. The Company vigorously denies that the S-4 Registration Statement, as amended and declared effective, is deficient in any respect and believes that no additional supplemental disclosures are material or required. The Company believes that the claims asserted in the Demand Letter are without merit and that no further disclosure is required to supplement the S-4 Registration Statement under applicable laws. As of the date of filing of this Annual Report on Form 10-K, no lawsuit has been filed against the Company by that firm. The firm has indicated its willingness to litigate the matter if a mutually satisfactory resolution cannot be agreed upon; however, Cardio believes that the final outcome will not have a material adverse impact on its financial condition.

Current wording

On June 25, 2022, a plaintiffs’ securities law firm sent a demand letter to the Company alleging that the Company’s Registration Statement on Form S-4 filed (the "S-4 Registration Statement”) with the Securities and Exchange Commission ("SEC”) on May 31, 2022 omitted material information with respect to the Business Combination and demanding that the Company and its Board of Directors immediately provide corrective disclosures in an amendment or supplement to the Registration Statement. Subsequent thereto, the Company filed amendments to the S-4 Registration Statement on July 27, 2022, August 23, 2022, September 15, 2022, October 4, 2022 and October 5, 2022 in which it responded to various comments of the SEC staff and otherwise updated its disclosure. In October 2022, the SEC completed its review and declared the S-4 registration statement effective on October 6, 2022. On February 23, 2023 and February 27, 2023, plaintiffs’ securities law firm contacted the Company’s counsel asking who will be negotiating a mootness fee relating to the purported claims set forth in the June 25, 2022 demand letter. The Company vigorously denies that the S-4 Registration Statement, as amended and declared effective, is deficient in any respect and believes that no additional supplemental disclosures are material or required. The Company believes that the claims asserted in the Demand Letter are without merit and that no further disclosure is required to supplement the S-4 Registration Statement under applicable laws. As of the date of filing of this Quarterly Report on Form 10-Q, no lawsuit has been filed against the Company by that firm. The firm has indicated its willingness to litigate the matter if a mutually satisfactory resolution cannot be agreed upon; however, Cardio believes that the final outcome will not have a material adverse impact on its financial condition.