Cardio Diagnostics Holdings, Inc. — Form 10-Q Summary
Reporting period: Quarter ended September 30, 2022. The filing’s financial statements are for Mana Capital Acquisition Corp. (the SPAC), before its business combination with Legacy Cardio Diagnostics, Inc. The combination closed October 25, 2022; the quarter’s statements do not include Legacy Cardio’s operating results.
Financial results and liquidity
| Metric | Three months ended September 30, 2022 | Nine months ended September 30, 2022 |
|---|---|---|
| Revenue | $0 | $0 |
| Operating costs | $115,291 | $740,962 |
| Franchise tax expense | $50,000 | $150,000 |
| Trust-account investment income | $367,387 | $377,637 |
| Net income (loss) | $202,269 | $(513,045) |
| Cash used in operating activities | — | $587,016 |
- At September 30, cash outside the trust account was $177,681; trust-account investments were $65,573,383, primarily U.S. Treasury securities. Trust assets were subject to the SPAC transaction and redemption arrangements, not ordinary unrestricted operating cash.
- Current liabilities were $631,748, including a $433,334 non-interest-bearing promissory note from Legacy Cardio for two extension payments and $196,434 of franchise tax payable. The notes were to convert into company shares upon the combination.
- Total assets were $65,801,435. The balance sheet reported $65,523,383 of common stock subject to possible redemption as temporary equity and a stockholders’ deficit of $353,696.
- No operating margins are meaningful because the SPAC had no revenue or operating business during the period. The filing reports no long-term debt or off-balance-sheet arrangements.
Changes and significant events
- For the comparable 2021 period, the filing reports only a $721 net loss from inception through September 30, 2021; it does not provide a comparable three-month 2021 operating period. The company’s 2022 activity remained that of a SPAC rather than the diagnostics business.
- On October 25, 2022, the business combination closed. Holders redeemed 6,465,452 SPAC shares for approximately $65.3 million, or about $10.10 per share. After closing, 9,514,743 common shares were outstanding; former Legacy Cardio stockholders held approximately 72.8%, excluding potential earnout shares.
- Up to 1,000,000 additional shares may be issued to Legacy Cardio stockholders if specified share-price thresholds of $12.50, $15.00, $17.50 and $20.00 are met during the four-year earnout period.
Outlook, risks and controls
- The filing provides no operating-company revenue guidance or forecast. Management’s discussion describes the pre-combination SPAC and states it had not generated operating revenue.
- Before the combination, management cited the risk that failure to complete a business combination within the permitted period would require the SPAC to cease operations, redeem public shares and liquidate. It also noted possible funding shortfalls if transaction costs exceeded estimates or trust interest was lower than expected, and the potential need for additional financing.
- Management said the COVID-19 pandemic could adversely affect the company or its search for a target, but the impact was not readily determinable.
- Management concluded disclosure controls and procedures were ineffective as of September 30, 2022. It said it performed additional analysis to support the financial statements; no material change in internal control over financial reporting during the nine-month period was reported.
- The filing reports no legal proceedings and no material changes to previously disclosed risk factors.
Key facts for investors to verify
- Post-combination financial statements and liquidity after the approximately $65.3 million of redemptions, including the cash available to fund operations.
- Legacy Cardio’s operating performance, revenue, cash burn and financing needs, which are not reflected in this quarter’s SPAC financial statements.
- Whether and how management addresses the disclosed ineffective disclosure controls.
- Potential dilution from earnout shares, warrants and other securities issued or assumed in the combination.