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 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.

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 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.

Previous wording

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. On May 29. 2024, the American Clinical Laboratory Association filed a lawsuit challenging the FDA’s authority to regulate LDTs. The ultimate success of this lawsuit, or any future lawsuits that may be brought against the FDA challenging the LDT rule, is uncertain. It is also unclear whether a court would delay the implementation of the final rule while the litigation is ongoing, which means we may need to initiate steps to comply with the final rule even if it is ultimately overturned.

Current wording

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. Two lawsuits challenging FDA’s authority to regulate LDTs have been filed in federal court: the American Clinical Laboratory Association filed a lawsuit against FDA on May 29, 2024 in the Eastern District of Texas, while the Association for Molecular Pathology filed a lawsuit on August 19, 2024 in the Southern District of Texas. The lawsuits have been consolidated and briefing is expected to be completed by the end of 2024. The ultimate success of these lawsuits, or any future lawsuits that may be brought against the FDA challenging the LDT rule, is uncertain. It is also unclear whether a court would delay the implementation of the final rule while the litigation is ongoing, which means we may need to initiate steps to comply with the final rule even if it is ultimately overturned.

Previous wording

The following table presents summary of consolidated operating results for the six-month periods indicated:

Current wording

The following table presents summary of consolidated operating results for the nine-month periods indicated:

Previous wording

Cardio’s net loss for the three months ended June 30, 2024 was $1,287,995 as compared to $4,022,905 for the three months ended June 30, 2023, a decrease of $2,734,910. The decrease in net loss was primarily the result of a decrease in General and Administrative expenses related to stock compensation issued in the second quarter of 2023 and a decrease in interest expenses related to the sale and issuance of convertible debentures.

Current wording

Cardio’s net loss for the three months ended September 30, 2024 was $1,412,566 as compared to $1,932,382 for the three months ended September 30, 2023, a decrease of $519,816. The decrease in net loss was primarily the result of a decrease in interest expenses related to the sale and issuance of convertible debentures in 2023.

Previous 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.

Current wording

Cardio’s net loss for the nine months ended September 30, 2024 was $6,864,145 as compared to $6,987,905 for the nine months ended September 30, 2023, a decrease of $123,760. The decrease in net loss was primarily the result of a decrease in interest expense related to the sale and issuance of convertible debentures in 2023, offset by an increase in operating expenses and a decrease in other income resulting from the change in fair value of derivative liability.

Previous wording

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

Current wording

Cardio had $6,580 and $10,030 in revenue for the three months ended September 30, 2024 and 2023, respectively.

Previous wording

Cardio had $23,798 and $1,725 in revenue for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Cardio had $30,378 and $11,755 in revenue for the nine months ended September 30, 2024 and 2023, respectively.

Previous 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.

Current wording

Expenses related to sales and marketing for the three months ended September 30, 2024 were $52,059 as compared to $34,067 for the three months ended September 30, 2023, an increase of $17,992. The overall increase was due to an increase in sales and marketing activity in the third quarter of 2024 due to tradeshow attendance.

Previous wording

Expenses related to sales and marketing for the six months ended June 30, 2024 were $92,181 as compared to $81,159 for the six months ended June 30, 2023, an increase of $11,022. The overall increase was due to an increase in sales and marketing activity in the second quarter of 2024 due to tradeshow attendance.

Current wording

Expenses related to sales and marketing for the nine months ended September 30, 2024 were $144,240 as compared to $115,226 for the nine months ended September 30, 2023, an increase of $29,014. The overall increase was due to an increase in sales and marketing activity in the second and third quarters of 2024 due to tradeshow attendance.

Previous 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.

Current wording

Research and development expenses for the three months ended September 30, 2024 were $5,247 as compared to $38,708 for the three months ended September 30, 2023, a decrease of $33,461. 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.

Previous wording

Research and development expense for the six months ended June 30, 2024 was $18,120 as compared to $98,982 for the six months ended June 30, 2023, a decrease of $80,862. 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 first quarter of 2024.

Current wording

Research and development expenses for the nine months ended September 30, 2024 were $23,367 as compared to $137,690 for the nine months ended September 30, 2023, a decrease of $114,323. 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.

Previous wording

General and administrative expenses for the six months ended June 30, 2024 were $5,344,418 as compared to $4,068,276 for the six months ended June 30, 2023, an increase of $1,276,142. The overall increase is primarily due to an increase in stock compensation expenses of $1,400,862 (mainly as a result of new stock options issued in the first quarter of 2024), offset by the decrease in D&O insurance expense.

Current wording

General and administrative expenses for the nine months ended September 30, 2024 were $6,697,857 as compared to $5,444,920 for the nine months ended September 30, 2023, an increase of $1,252,937. The overall increase is primarily due to an increase in stock compensation expenses of $1,351,480 (mainly as a result of new stock options issued in the first quarter of 2024), offset by the decrease in D&O insurance expense.

Previous 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.

Current wording

Amortization expense for the nine months ended September 30, 2024 was $14,389 as compared to $14,380 for the nine months ended September 30, 2023. The total amortization expense for the nine months ended September 30, 2024 is for intangible assets of $12,000 and patent costs of $2,389, respectively, as compared to $12,000 for intangible assets and $2,380 for patent costs for the nine months ended September 30, 2023.

Previous 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.

Current wording

Total other expenses for the three months ended September 30, 2024, was $(3,599) as compared to $(488,191) for the three months ended September 30, 2023. The total other expenses for the three months ended September 30, 2024 consists of interest expense of $3,879 net of interest income of $280. The total other expenses for the three months ended September 30, 2023 consists of change in fair value of derivative liability of $31,033, interest expense of $570,385 offset by gain on extinguishment of debt of $112,944 and interest income of $283.

Previous wording

Total other expenses for the six months ended June 30, 2024, was $(11,071) as compared to $(799,253) for the six months ended June 30, 2023. The total other expenses for the six months ended June 30, 2024 consists of interest expense of $11,634 net of interest income of $563. The total other expenses for the six months ended June 30, 2023 consists of interest expense of $6,068,527 and loss on extinguishment of debt of $364,295 offset by change in fair value of derivative liability of $5,633,085 and interest income of $484.

Current wording

Total other expenses for the nine months ended September 30, 2024, was $(14,670) as compared to $(1,287,444) for the nine months ended September 30, 2023. The total other expenses for the nine months ended September 30, 2024 consists of interest expense of $15,513 net of interest income of $843. The total other expenses for the nine months ended September 30, 2023 consists of interest expense of $6,638,912 and loss on extinguishment of debt of $251,351 offset by change in fair value of derivative liability of $5,602,052 and interest income of $767.

Previous 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.

Current wording

Historically, our principal sources of liquidity have been proceeds from the issuance of equity. 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 November 13, 2024, we have received an aggregate of $6,774,902 in gross proceeds from the ATM sales of 19,262,588 shares of Common Stock, and we have available up to $10,225,098 in future sales of our Common Stock that we may elect to make under the Sales Agreement. We have paid Craig-Hallum $169,373 in sales commissions as of November 13, 2024.

Previous wording

On February 2, 2024, we closed a private placement with seven accredited investors, whereby we issued a total of 561,793 units ("Units”), with each Unit consisting of (i) one share of our Common Stock and (ii) one six-year Common Stock purchase warrant having an exercise price of $1.78 per share, subject to adjustment (the "Private Placement”). The Private Placement resulted in the issuance to investors of 561,793 shares of Common Stock and 561,793 warrants in an unregistered offering of securities. The purchase price of the securities was $1.78 per Unit, resulting in gross proceeds to the Company of $1,000,000, before deducting placement agent fees (10% or $100,000) and other offering expenses. We intend to use the net proceeds from the Private Placement for working capital and general corporate purposes.

Current wording

On February 2, 2024, we closed a private placement with seven accredited investors, whereby we issued a total of 561,793 units ("Units”), with each Unit consisting of (i) one share of our Common Stock and (ii) one six-year Common Stock purchase warrant having an exercise price of $1.78 per share, subject to adjustment (the "Private Placement”). The Private Placement resulted in the issuance to investors of 561,793 shares of Common Stock and 561,793 warrants in an unregistered offering of securities. The purchase price of the securities was $1.78 per Unit, resulting in gross proceeds to the Company of $1,000,000, before deducting placement agent fees (10% or $100,000) and other offering expenses. We used the net proceeds from the Private Placement for working capital and general corporate purposes.

Previous wording

At our annual stockholders meeting in December 2023, we obtained stockholder approval to offer and sell up to $10,000,000 in securities (up to 50,000,000 shares of Common Stock, subject to adjustment for stock splits, reverse stock splits and other similar recapitalization events) in a transaction or series of transactions not involving a public offering. This authorization expired in June 2024. At our 2024 annual meeting, we plan to ask our stockholders to make available this potential future issuance of securities for up to an additional six-month period. We currently have no specific plans for such future offering but believe having that option available provides our Board of Directors with added flexibility in meeting the Company’s liquidity needs.

Current wording

At our annual stockholders meeting in December 2023, we obtained stockholder approval to offer and sell up to $10,000,000 in securities (up to 50,000,000 shares of Common Stock, subject to adjustment for stock splits, reverse stock splits and other similar recapitalization events) in a transaction or series of transactions not involving a public offering. This authorization has expired. At our 2024 annual meeting scheduled for November 15, 2024, we plan to ask our stockholders to make available this potential future issuance of securities for a new three-month period together with the potential to obtain Nasdaq’s consent, which we cannot guarantee, for an additional three-month period thereafter, resulting in a possible six-month period to conduct a financing within the parameters of the stockholder authority, if granted. We currently have no specific plans for such future offering but believe having that option available provides our Board of Directors with added flexibility in meeting the Company’s liquidity needs.

Previous 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.

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. 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 $0.36 on November 12, 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 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:

Current wording

Cash at September 30, 2024 totaled $1,982,590 as compared to $1,283,523 at December 31, 2023, an increase of $699,067. 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 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.

Current wording

Cash used in operating activities for the nine months ended September 30, 2024 was $3,600,809 as compared to $3,986,498 for the nine months ended September 30, 2023. The cash used in operations during the nine months ended September 30, 2024 is a function of net loss of $6,864,145 adjusted for the following non-cash operating items: depreciation of $76,341, amortization of $115,632, $2,568,753 in stock-based compensation, an increase of $9,140 in accounts receivable, a decrease of $846,715 in prepaid expenses and other current assets, a decrease of $168,405 in accounts payable and accrued expenses and a decrease in lease liability of $166,560.

Previous 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.

Current wording

The cash used in operations during the nine months ended September 30, 2023 is a function of net loss of $6,987,905 adjusted for the following non-cash operating items: depreciation of $1,377, amortization of $48,426, $1,217,273 in stock based compensation, $6,612,298 in non-cash interest expense, and $251,351 for loss on extinguishment of debt offset by $5,602,052 in change in fair value of derivative liability, an increase of $350 in accounts receivable, a decrease of $876,066 in prepaid expenses and other current assets, an increase in deposits of $7,900, a decrease of $401,638 in accounts payable and accrued expenses and an increase in lease liability $6,556.

Previous 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.

Current wording

Cash used in investing activities for the nine months ended September 30, 2024 was $349,577 compared to $227,343 for the nine months ended September 30, 2023. The cash used in investing activities for the nine months ended September 30, 2024 was due to purchases of property and equipment of $211,127 and patent costs incurred of $138,450. The cash used in investing activities for the nine months ended September 30, 2023 was due to purchases of property and equipment of $38,610, payments for right of use asset of $21,352 and patent costs incurred of $167,381.

Previous 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.

Current wording

Cash provided by financing activities for the nine months ended September 30, 2024 was $4,649,453 as compared to $3,725,968 for the nine months ended September 30, 2023. This change was due to $5,178,453 in proceeds from the sale of common stock and warrants offset by $374,000 in payments pursuant to a finance agreement and $155,000 in payments of placement agent fees, all of which occurred during the nine months ended September 30, 2024. Cash provided by financing activities for the nine months ended September 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 $849,032 payments of finance agreement and $315,000 in payments of placement agent fees during the nine months ended September 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 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.

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 $6,864,145 for the nine months ended September 30, 2024 and an accumulated deficit of $21,232,525 at September 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. Existing working capital, further advances and debt instruments, and anticipated cash flow are expected to be adequate to fund operations over the next twelve months. 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

At the commencement of efforts to pursue what ultimately ended in the terminated business acquisition referred to above under "Deposit for Acquisition,” Legacy Cardio entered into a Placement Agent and Advisory Services Agreement (the "Placement Agent Agreement”), dated April 12, 2021, with Boustead Securities, LLC ("Boustead Securities”). This agreement was terminated in April 2022, when Legacy Cardio terminated the underlying agreement and plan of merger and the accompanying escrow agreement relating to that proposed business acquisition after efforts to complete the transaction failed, despite several extensions of the closing deadline.

Current wording

At the commencement of efforts to pursue what ultimately ended in the terminated business acquisition, Legacy Cardio entered into a Placement Agent and Advisory Services Agreement (the "Placement Agent Agreement”), dated April 12, 2021, with Boustead Securities, LLC ("Boustead Securities”). This agreement was terminated in April 2022, when Legacy Cardio terminated the underlying agreement and plan of merger and the accompanying escrow agreement relating to that proposed business acquisition after efforts to complete the transaction failed, despite several extensions of the closing deadline.