Cardio Diagnostics Holdings, Inc.

PART I: FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED BALANCE SHEETS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

Six Months Ended June 30, 2026 and 2025

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS

(UNAUDITED)

Note 1 -Organization and Basis of Presentation

The condensed consolidated financial statements presented are those of Cardio Diagnostics Holdings, Inc., (the “Company”) and its wholly-owned subsidiary, Cardio Diagnostics, Inc. (“Legacy Cardio”). The Company was incorporated as Mana Capital Acquisition Corp. (“Mana”) under the laws of the state of Delaware on May 19, 2021, and Legacy Cardio was formed on January 16, 2017 as an Iowa limited liability company (Cardio Diagnostics, LLC) and was subsequently incorporated as a Delaware C-Corp on September 6, 2019. The Company was formed to develop and commercialize a patent-pending Artificial Intelligence (“AI”)-driven DNA biomarker testing technology (“Core Technology”) for cardiovascular disease invented at the University of Iowa by the Founders, with the goal of becoming one of the leading medical technology companies for enabling precision prevention, early detection and treatment of cardiovascular disease. The Company is transforming the approach to cardiovascular disease from reactive to proactive. The Core Technology is being incorporated into a series of products for major types of cardiovascular disease and associated co-morbidities including coronary heart disease (CHD), stroke, heart failure and diabetes.

Interim Financial Statements

The following (a) consolidated balance sheet as of December 31, 2025, which has been derived from audited financial statements, and (b) the unaudited condensed consolidated interim financial statements of the Company as of June 30, 2026 and for the six and three months ended June 30, 2026 and 2025 have been prepared in accordance with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six and three months ended June 30, 2026 are not necessarily indicative of results that may be expected for the year ending December 31, 2026 or any future periods. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2025 included in the Company’s Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on March 13, 2026.

Reverse Stock Split

On May 12, 2025, the Company filed a Certificate of Amendment to the Third Amended and Restated Certificate of Incorporation of the Company with the Delaware Secretary of State to effect a reverse stock split at a 1-for-30 ratio (the "Reverse Stock Split”), effective immediately after the close of trading on Nasdaq on May 12, 2025 (the “Effective Time”). At the Effective Time, every 30 shares of issued and outstanding Common Stock automatically combined into one issued share of common stock, with no change in par value. No fractional shares were issued as a result of the Reverse Stock Split. Instead of issuing fractional shares, the Company rounded shares up or down to the nearest whole number as determined by DTC at the participant level. The Reverse Stock Split did not modify any voting rights or other terms of the Common Stock. The Company’s Common Stock began trading on a reverse stock split-adjusted basis on The Nasdaq Capital Market at the open of the markets on May 13, 2025. As a result, the number of shares of Common Stock outstanding was reduced from 52,160,487 shares to 1,738,683 shares, exclusive of 27 whole shares issued for rounding up fractional shares (which were issued in May 2025), and the number of authorized shares of Common Stock remains 300 million shares.

Unless otherwise indicated, all issued and outstanding stock and per share amounts contained in the accompanying consolidated financial statements have been adjusted to reflect the 1-for-30 Reverse Stock Split for all prior periods presented. Proportionate adjustments were made to the exercise prices and number of shares issuable under the Company’s equity incentive plans, and the number of shares underlying outstanding equity awards, as applicable.

CARDIO DIAGNOSTICS HOLDINGS, INC.NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS(UNAUDITED)

Note 2 –Summary of Significant Accounting Policies

Principles of Consolidation

The condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Legacy Cardio. All intercompany accounts and transactions have been eliminated.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

Segments

The Company uses the “management approach” in determining reportable operating segments. The management approach considers the internal organization and reporting used by the Company’s chief operating decision maker (“CODM”), who is our chief executive officer, for making operating decisions and assessing performance as the source for determining the Company’s reportable segments. Management, including the CODM, reviews operating results solely by monthly revenue and operating results of the Company and, as such, the Company has determined that the Company has one operating segment (product testing) as defined by ASC Topic 280 “Segment Reporting”.

One hundred percent of the Company’s revenues are generated from products tests for major types of cardiovascular disease, and therefore the Company has one operating segment for financial reporting purposes. The Company’s principal products are its Epi+Gen CHD and PrecisionCHD tests. Epi+Gen CHD assesses the risk for a coronary heart disease event, including a heart attack, in the next three years. PrecisionCHD aids in diagnosing and managing coronary heart disease. The tests can be paid for by provider organizations, patients, and/or employers. Customers are generally charged for tests utilized or for the minimum committed test volume and the pricing can vary based on organization type, size and volume.

Reportable segment information is presented below:

The accounting policies of the product testing segment are the same as those described in the summary of significant accounting policies. The measure of segment assets is reported on the balance sheet as total consolidated assets.

CARDIO DIAGNOSTICS HOLDINGS, INC.NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS(UNAUDITED)

Reportable segment operating results are presented below:

CARDIO DIAGNOSTICS HOLDINGS, INC.NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS(UNAUDITED)

Research and Development

Research and development costs are expensed as incurred. Research and development costs charged to operations for the six months ended June 30, 2026 and 2025 were $292,705 and $297,320, respectively, and for the three months ended June 30, 2026 and 2025 were $162,929 and $178,536, respectively.

Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs of $24,061 and $50,435 were charged to operations for the six months ended June 30, 2026 and 2025, respectively, and of $5,141 and $8,615 for the three months ended June 30, 2026 and 2025, respectively.

Cash and Cash Equivalents

Cash and cash equivalents are comprised of cash and highly liquid investments with original maturities of 90 days or less at the date of purchase. The Company doesnot have any cash equivalents as of June 30, 2026 and December 31, 2025. Cash is maintained at a major financial institution. Accounts held at U.S. financial institutions are insured by the FDIC up to $250,000. The Company is exposed to credit risk in the event of default by the financial institutions or the issuers of these investments to the extent the amounts on deposit or invested are in excess of amounts that are insured. The Company’s accounts at this major financial institution may, at times, exceed the federally insured limits. The amount in excess of the FDIC insurance as of June 30, 2026 and December 31, 2025, was approximately $5.2 million and $4.8 million, respectively. The Company has not experienced any losses on these accounts and management believes, based upon the quality of this major financial institution, that the credit risk with regard to these deposits is not significant.

Reclassification

Certain prior period amounts have been reclassified to conform with the current period presentation. On the consolidated statements of operations, prior period amounts of sales and marketing, research and development, and general and administrative under operating expenses have been reclassified to conform with 2026 fiscal year presentation for better reflecting the function of these expenses.

Recent Accounting Pronouncements

Recently adopted accounting pronouncements

Income Taxes

In December 2023, the FASB issued ASU No. 2023-09, Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 is intended to improve income tax disclosures primarily through enhanced disclosure of income tax rate reconciliation items, and disaggregation of income (loss) from continuing operations, income tax expense (benefit) and income taxes paid, net disclosures by federal, state and foreign jurisdictions, among others. ASU 2023-09 was effective for annual reporting periods beginning after December 15, 2024. We adopted this ASU on a prospective basis effective January 1, 2025.

Financial Instruments – Measurement of Credit Losses for Accounts Receivable and Contract Assets

In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets. The amendments in this update provide a practical expedient permitting an entity to assume that conditions at the balance sheet date remain unchanged over the life of the asset when estimating expected credit losses for current classified accounts receivable and contract assets. This update is effective for annual periods beginning after December 15, 2025, including interim periods within those fiscal years. Adoption of this ASU can be applied prospectively for reporting periods after its effective date. Early adoption is permitted. We adopted this ASU on a prospective basis effective January 1, 2026 and the adoption did not have a material impact on our consolidated financial statements.

Recently issued accounting pronouncements not yet adopted

Disaggregation of Income Statement Expenses

In November 2024, the FASB issued ASU No. 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses”, which requires disaggregated disclosure of income statement expenses for public business entities. ASU 2024-03 requires new financial statement disclosures in tabular format, disaggregating information about prescribed categories underlying any relevant income statement expense caption. The prescribed categories include, among other things, purchases of inventory, employee compensation, depreciation, and intangible asset amortization. Additionally, entities must disclose the total amount of selling expenses and, in annual reporting periods, an entity’s definition of selling expenses. ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and for interim reporting periods within fiscal years beginning after December 15, 2027. The guidance can be applied prospectively with an option for retrospective application. Early adoption is also permitted. We are currently evaluating the provisions of this ASU.

CARDIO DIAGNOSTICS HOLDINGS, INC.NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS(UNAUDITED)

Interim Reporting: Narrow-Scope Improvements

In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Topic 270): Narrow-Scope Improvements. The ASU clarifies interim disclosure requirements and the applicability of Topic 270. The objective of the amendments is to provide further clarity about the current interim disclosure requirements. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027. Adoption of this ASU can be applied either a prospective or a retrospective approach. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.

Codification Improvements

In December 2025, the FASB issued ASU No. 2025-12, Codification Improvements. The ASU addresses thirty-three items, representing the changes to the Codification that (1) clarify, (2) correct errors, or (3) make minor improvements. Generally, the amendments in this Update are not intended to result in significant changes for most entities. The ASU is effective for interim reporting periods within annual reporting periods beginning after December 15, 2026. The adoption method of this ASU may vary, on an issue-by-issue basis. Early adoption is permitted. We are currently evaluating the provisions of this ASU and do not expect this ASU to have a material impact on our consolidated financial statements.

We have reviewed other recent accounting pronouncements and concluded they are either not applicable to the business, or no material effect is expected on the consolidated financial statements as a result of future adoption.

Note 3 –Property and Equipment

Property and equipment are carried at cost and consist of the following at June 30, 2026 and December 31, 2025:

Depreciation expense of $88,523 and $75,441 was charged to operations for the six months ended June 30, 2026 and 2025, respectively, and of $44,283 and $37,785 for the three months ended June 30, 2026 and 2025, respectively.

Note 4 –Patent Costs

As of June 30, 2026, our patent portfolio includes seven patent families. In the first family of Patents and patent applications owned solely by UIRF and exclusively licensed by Cardio, there are granted patents in the US (two), EU (subsequently validated in the United Kingdom, France, Germany, Italy, Switzerland, Ireland and Hong Kong), China, Australia, India, and Japan and other pending patent applications. The Company also has pending patent applications in patent families two, three, four, five, six and seven. Legal fees associated with the patents totaled $970,782 and $873,182, net of accumulated amortization of $77,945 and $66,820 as of June 30, 2026 and December 31, 2025, respectively and are presented in the consolidated balance sheets as patent costs. Patents are amortized over their estimated useful lives of approximately 14 and 15 years, respectively. Amortization expense charged to operations was $11,125 and $48,590 for the six months ended June 30, 2026 and 2025, respectively, and $5,593 and $7,152 for the three months ended June 30, 2026 and 2025, respectively.

Note 5 –Operating Leases

The Company determines if a contract is, or contains, a lease at contract inception. Operating leases are included in operating lease right-of-use (“ROU”) assets, current portion of operating lease liabilities and operating lease liabilities, net of current portion in the Company’s consolidated balance sheets. Finance leases are included in property and equipment, current portion of finance lease obligations and finance lease obligations, net of current portion in the Company’s consolidated balance sheets.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. ROU assets and lease liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. In addition, ROU assets include initial direct costs incurred by the lessee as well as any lease payments made at or before the commencement date and exclude lease incentives. The Company used the implicit rate in the lease in determining the present value of lease payments. Lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Leases with a term of one year or less are generally not included in ROU assets and corresponding operating lease liabilities.

CARDIO DIAGNOSTICS HOLDINGS, INC.NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS(UNAUDITED)

In 2023, the Company entered into a lease agreement for office space in Chicago, Illinois, commencing on August 1, 2023 for a term of three years and four months and expiring on November 30, 2026. The monthly rent for August to November 2023 was abated and the Company started to make monthly rental installments from December 2023 of $12,847. The monthly rental payment increases by approximately 2% every August starting from 2024.

On July 20, 2023, the Company entered into another lease agreement for laboratory in Iowa City, Iowa, commencing on August 1, 2023 for a term of five years and four months and expiring on November 30, 2028. The monthly rent for August to November 2023 was abated and the Company agreed to pay a monthly rent of $8,505 ($102,060 annually) commencing December 1, 2023. In addition, the landlord agreed to provide the Company with a one-time Tenant Improvement Allowance (“TIA”) in the amount of up to, but not exceeding $50 per rentable square foot of the premises for a maximum allowance of $253,000. Pursuant to ASC Topic 842 Leases, the Company accounted for both leases as operating leases and accounted for the TIA as a lease incentive. The Company received the TIA from landlord in maximum amount of $253,000 on January 16, 2024.

During the year ended December 31, 2023, the Company recorded ROU assets of $663,875 and operating lease liabilities of $642,523 at the lease commencement date. The discount rate used to determine the present value is the incremental borrowing rate, estimated to be 4.57% for Chicago lease and 4.24% for Iowa City lease, respectively, as the interest rate implicit in our lease is not readily determinable.

As of June 30, 2026 and December 31, 2025, operating lease ROU assets and operating lease liabilities are recorded on the condensed consolidated balance sheets as follows:

As of June 30, 2026, the weighted-average remaining lease terms of the two operating leases were 0.42 years and 2.42 years, respectively. As of December 31, 2025, the weighted-average remaining lease terms of the two operating leases were 0.9 years and 2.9 years, respectively.

The following table summarizes maturities of operating lease liabilities based on lease terms as of December 31:

At June 30, 2026, the Company had the following future minimum payments due under the non-cancelable lease:

Consolidated rental expense for all operating leases was $121,661 and $126,525 for the six months ended June 30, 2026 and 2025, respectively, and $60,830 and $68,939 for the three months ended June 30, 2026 and 2025, respectively.

CARDIO DIAGNOSTICS HOLDINGS, INC.NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS(UNAUDITED)

The following table summarizes the cash paid and related right-of-use operating lease recognized for the six months ended June 30, 2026 and 2025.

Note 6 –Finance Agreement Payable

On October 25, 2024, the Company entered into an agreement with a premium financing company to finance its Directors and Officers insurance premiums for 12-month policies effective October 25, 2024. The amount financed of $383,455 is payable in 10 monthly installments plus interest at a rate of 8.80% through August 25, 2025. Accordingly, Directors and Officers insurance premiums of $451,124 has been recorded in prepaid expenses and was amortized over the life of the policy until October 25, 2025. As of October 31, 2025, this finance agreement was paid in full and insurance premiums were fully amortized.

On October 25, 2025, the Company entered into an agreement with a premium financing company to finance its Directors and Officers insurance premiums for 12-month policies effective October 25, 2025. The amount financed of $337,238 is payable in 10 monthly installments plus interest at a rate of 7.35% through August 25, 2026. Accordingly, Directors and Officers insurance premiums of $396,750 has been recorded in prepaid expenses and is being amortized over the life of the policy until October 25, 2026. The finance agreement payable for this agreement was $67,448 and $269,790 at June 30, 2026 and December 31, 2025, respectively. Unamortized balance of Directors and Officers insurance premiums was $127,177 and $323,922 as of June 30, 2026 and December 31, 2025, respectively.

Note 7 -Earnings (Loss) Per Common Share

The Company calculates net income (loss) per common share in accordance with ASC 260 “Earnings Per Share” (“ASC 260”). Basic and diluted net earnings (loss) per common share was determined by dividing net earnings (loss) applicable to common stockholders by the weighted average number of common shares outstanding during the period. The Company’s potentially dilutive shares, which include shares of Common Stock presented below on a post-reverse stock split basis that are exercisable or issuable from outstanding common stock options and common stock warrants, have not been included in the computation of diluted net loss per share for the six months ended June 30, 2026 and 2025 as the result would be anti-dilutive.

Note 8 –Stockholders’ Equity

2022 Equity Incentive Plan

On October 25, 2022, the Company’s stockholders approved the Cardio Diagnostics Holdings, Inc. 2022 Equity Incentive Plan (the “2022 Plan”). The purpose of the 2022 Plan is to promote the interests of the Company and its stockholders by providing eligible employees, officers, directors and consultants with additional incentives to remain with the Company and its subsidiaries, to increase their efforts to make the Company more successful, to reward such persons by providing an opportunity to acquire shares of Common Stock on favorable terms and to attract and retain the best available personnel to participate in the ongoing business operations of the Company. The 2022 Plan permits the grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock, Restricted Stock Units, Stock Appreciation Rights, Performance Units and Performance Shares.

CARDIO DIAGNOSTICS HOLDINGS, INC.NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS(UNAUDITED)

The 2022 Plan, as approved, permits the issuance of up to 108,850 shares (3,265,516 prior to the Reverse Stock Split) of Common Stock (the “Share Reserve”) upon exercise or conversion of grants and awards made from time to time to officers, directors, employees and consultants, provided however that the Share Reserve will increase on January 1st of each calendar year and ending on and including January 1, 2027 (each, an “Evergreen Date”), in an amount equal to the lesser of (i) 7% of the total number of shares of Common Stock outstanding on the December 31st immediately preceding the applicable Evergreen Date and (ii) such lesser number of shares of Common Stock as determined to be appropriate by the Compensation Committee, which administers the 2022 Plan, in its sole discretion. In January 2024, the Compensation Committee approved an annual increase in the Share Reserve of 35,349 shares (1,060,458 prior to the Reverse Stock Split). On March 31, 2025, the Compensation Committee approved an increase in the Share Reserve of 95,721 shares (2,871,638 prior to the Reverse Stock Split).

As a result, the Company has the ability to initially issue an aggregate of 239,920 shares (on a post-reverse stock split basis) of Common Stock under the 2022 Equity Incentive Plan, of which 168,556 options have been granted and are currently exercisable. In addition, after deduction of 14,972 shares (on a post-reverse stock split basis) in settlement of RSUs issued to our independent directors and advisors in 2023 to 2025, a total of 56,392 shares were available for issuance under the 2022 Equity Plan at June 30, 2026.

Common Stock Issued

At-the-Market Issuance

In connection with an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) that the Company entered into with a placement agent on January 26, 2024, the Company sold 1,133,418 shares of Common Stock at various amounts per share to investors for gross proceeds totaling $3,788,175 before deducting sales commissions of $94,705 to the placement agent, during the six months ended June 30, 2026.

In connection with an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) that the Company entered into with a placement agent on January 26, 2024, the Company sold 206,713 shares (6,201,377 prior to the Reverse Stock Split) of Common Stock at various amounts per share to investors for gross proceeds totaling $3,511,040 before deducting sales commissions of $87,256 to the placement agent, during the six months ended June 30, 2025.

Other Common Stock Issuance

During the three and six months ended June 30, 2025, the Company issued 1,559 shares and 2,061 shares (on a Reverse Stock Split-adjusted basis) of Common Stock to a consultant for services pursuant to vesting of Restricted Stock Units granted, valued at $6,000 and $12,000, respectively.

Warrants

Warrant activity during the six months ended June 30, 2026 and 2025 was as follows:

CARDIO DIAGNOSTICS HOLDINGS, INC.NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS(UNAUDITED)

Options

On March 31, 2025, the Company authorized an additional 95,721 shares (2,871,638 prior to the Reverse Stock Split) to the 2022 Plan.

On March 31, 2025, the Company granted 2,524 stock options (75,756 prior to the Reverse Stock Split) to the board of directors, which vested immediately on grant date. Each option has an exercise price of $9.90 per share ($0.33 prior to the Reverse Stock Split) with an expiration date of March 31, 2035. These immediately vested stock options were valued at $24,612 at grant date based on the Black-Scholes Option Pricing model. The following assumptions were utilized in the Black-Scholes valuation of these immediately vested stock options during the year ended December 31, 2025, risk free interest rate of 4.3908%, volatility of 148% and an exercise price of $9.90 ($0.33 prior to the Reverse Stock Split).

On June 30, 2025, the Company granted 6,944 stock options to the board of directors, which vested immediately on grant date. Each option has an exercise price of $3.60 per share with an expiration date of June 30, 2035. These immediately vested stock options were valued at $24,778 at grant date based on the Black-Scholes Option Pricing model. The following assumptions were utilized in the Black-Scholes valuation of these immediately vested stock options during the year ended December 31, 2025, risk free interest rate of 4.39%, volatility of 161% and an exercise price of $3.60.

On March 31, 2026, the Company granted 12,820 stock options to the board of directors, which vested immediately on grant date. Each option has an exercise price of $1.95 per share with an expiration date of March 31, 2036. These immediately vested stock options were valued at $24,733 at grant date based on the Black-Scholes Option Pricing model. The following assumptions were utilized in the Black-Scholes valuation of these immediately vested stock options during the six months ended June 30, 2026, risk free interest rate of 4.3601%, volatility of 157% and an exercise price of $1.95.

On June 30, 2026, the Company granted 11,416 stock options to the board of directors, which vested immediately on grant date. Each option has an exercise price of $2.19 per share with an expiration date of June 30, 2036. These immediately vested stock options were valued at $24,352 at grant date based on the Black-Scholes Option Pricing model. The following assumptions were utilized in the Black-Scholes valuation of these immediately vested stock options during the three and six months ended June 30, 2026, risk free interest rate of 4.3199%, volatility of 135% and an exercise price of $2.19.

Option activity during the six months ended June 30, 2026 and 2025 was as follows:

CARDIO DIAGNOSTICS HOLDINGS, INC.NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS(UNAUDITED)

Note 9 –Commitments and Contingencies

Prior Relationship of Cardio with Boustead Securities, LLC

At the commencement of efforts to pursue what ultimately ended in a 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.

Under the terminated Placement Agent Agreement, Legacy Cardio agreed to certain future rights in favor of Boustead Securities, including (i) a two-year tail period during which Boustead Securities would be entitled to compensation if Cardio were to close on a transaction (as defined in the Placement Agent Agreement) with any party that was introduced to Legacy Cardio by Boustead Securities; and (ii) a right of first refusal to act as the Company’s exclusive placement agent for 24-months from the end of the term of the Placement Agent Agreement (the “right of first refusal”). Cardio has taken the position that due to Boustead Securities’ failure to perform as contemplated by the Placement Agent Agreement, these provisions purporting to provide future rights are null and void.

Boustead Securities responded to the termination of the Placement Agent Agreement by disputing Legacy Cardio’s contention that it had not performed under the Placement Agent Agreement because, among other things, Boustead Securities had never sought out prospective investors. In its response, Boustead Securities included a list of funds that they had supposedly contacted on Legacy Cardio’s behalf. While Boustead Securities’ contention appears to contradict earlier communications from Boustead Securities in which they indicated that they had not made any such contacts or introductions, Boustead Securities contended that they are due success fees for two years following the termination of the Placement Agent Agreement on any transaction with any person on the list of supposed contacts or introductions. Legacy Cardio strongly disputes this position. Notwithstanding the foregoing, the Company has not consummated any transaction, as defined, with any potential party that purportedly was a contact of Boustead Securities in connection with the Placement Agent Agreement and has no plans to do so at any time during the tail period. No legal proceedings have been instigated by either party.

The Benchmark Company, LLC Right of First Refusal

The Company completed the business combination on October 25, 2022. In connection with the proposed business combination, by agreement dated May 13, 2022, Mana engaged The Benchmark Company, LLC (“Benchmark”) as its M&A advisor. Upon closing of the business combination, Legacy Cardio assumed the contractual engagement entered into by Mana. On November 14, 2022, the Company and Benchmark entered into Amendment No. 1 Engagement Letter (the “Amendment Engagement”). Pursuant to the Amendment Engagement, the parties agreed that the Company would pay Benchmark $230,000 at the closing of the business combination and an additional $435,000 on October 25, 2023. Both of those payments have been made in full. In addition, the Amendment Engagement provided that Benchmark has been granted a right of first refusal to act as lead or joint-lead investment banker, lead or joint-lead book- runner and/or lead or joint-lead placement agent for all future public and private equity and debt offerings through October 25, 2023. Based on the right of first refusal, Benchmark alleges that it is owed damages because the Company entered into the Yorkville Convertible Debenture Transaction without first offering Benchmark the right to serve as the lead or joint-lead placement agent for the transaction. No legal proceedings have been instigated.

Demand Letter and Potential Mootness Fee Claim

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 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 was 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.

CARDIO DIAGNOSTICS HOLDINGS, INC.NOTES TO CONDENSED CONSOLIDATEDFINANCIAL STATEMENTS(UNAUDITED)

Northland Securities, Inc.

In January 2024, following the Company’s termination of its agreement with Yorkville and in connection with the Company’s at the market offering and/or its February 2024 private placement, a managing director of Northland Securities, Inc. (“Northland”) contacted the Company claiming the right to be paid a fee of approximately $150,000 pursuant to the agreement of March 1, 2023 between the Company and Northland regarding the Yorkville financing. Subsequently, the Company has been advised by another representative of Northland that Northland would not proceed with any such claim and no legal proceedings have been instituted.

The Company cannot preclude the possibility that claims or lawsuits brought relating to any alleged securities law violations or breaches of fiduciary duty could potentially require significant time and resources to defend and/or settle and distract its management and board of directors from focusing on its business.

Directors and Officers Insurance

In connection with the Company’s various contractual obligations arising in the ordinary course of business, the Company is required to maintain insurance coverage for claims against its directors and officers.

The University of Iowa Research Foundation Exclusive License Agreement

The Company has a worldwide exclusive license agreement with the University of Iowa Research Foundation (UIRF) relating to its patent and patent-pending technology (the “Exclusive License Agreement”). Under the terms of the Exclusive License Agreement, the Company will have to pay each of: (1) 1% of either: (i) the aggregate consideration (and trailing consideration, if any) for a liquidation event; or (ii) pre-money valuation for an initial public offering, (the “Equity Rights”) (2) 2% of annual net sales, and (3) 15% of non-royalty fees paid to licensee if it enters into one or more sublicensing agreements. Upon the Closing of the Business Combination, the Company issued 3,639 (109,170 prior to the Reverse Stock Split) Shares of Common Stock to UIRF in accordance with the Equity Rights under the Exclusive License Agreement. The Company has had minimal sales of $76,671 to date and has paid 2% or approximately $1,400 in total royalty fees to UIRF under the exclusive license.