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Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-03-31 · 484 added, 194 removed, 5 unchanged (99% of the section changed)

Management’s Discussion and Analysis of Financial Condition

and Results of Operations

Special Note Regarding Forward-Looking Statements

All statements other than statements

of historical fact included in this Form 10-K including, without limitation, statements under “Management’s Discussion and

Analysis of Financial Condition and Results of Operations” regarding the Company’s financial position, business strategy and

the plans and objectives of management for future operations, are forward-looking statements.

When used in this Form 10-K, words such

as “anticipate,” “believe,” “estimate,” “expect,” “intend” and similar expressions,

as they relate to us or the Company’s management, identify forward-looking statements.

Such forward-looking statements are based

on the beliefs of management, as well as assumptions made by, and information currently available to, the Company’s management.

Actual results could differ materially from those contemplated by the forward-looking statements as a result of certain factors detailed

in our filings with the SEC.

The following discussion and analysis

of our financial condition and results of operations should be read in conjunction with the financial statements and the notes thereto

contained elsewhere in this Report.

Certain information contained in the discussion and analysis set forth below includes forward-looking

statements that involve risks and uncertainties.

We were formed on May 19, 2021 for the purpose

of engaging in a merger, stock exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business

combination, which we refer to throughout this report as our initial business combination, with one or more businesses or entities with

one or more target businesses.

Our efforts to identify a prospective target business will not be limited to a particular industry or geographic

We intend to utilize cash derived from the proceeds of our initial public offering and contemporaneous private placement and our

securities, debt or a combination of cash, securities and debt, in effecting a business combination.

The issuance of additional shares

of common stock or preferred stock:

significantly reduce the equity interest of our stockholders;

subordinate the rights of holders of shares of common stock if we issue shares of preferred stock with rights senior to those afforded

to our shares of common stock;

likely cause a change in control if a substantial number of our shares of common stock are issued, which may affect, among other things,

our ability to use our net operating loss carry forwards, if any, and most likely will also result in the resignation or removal of our

present officers and directors;

adversely affect prevailing market prices for our securities.

Similarly, if we issue debt securities, it could

and foreclosure on our assets if our operating revenues after a business combination are insufficient to pay our debt obligations;

• acceleration

of our obligations to repay the indebtedness even if we have made all principal and interest payments when due if the debt security contains

covenants that required the maintenance of certain financial ratios or reserves and we breach any such covenant without a waiver or renegotiation

of that covenant;

immediate payment of all principal and accrued interest, if any, if the debt security is payable on demand;

inability to obtain additional financing, if necessary, if the debt security contains covenants restricting our ability to obtain additional

financing while such security is outstanding;

inability to pay dividends on our common stock;

a substantial portion of our cash flow to pay principal and interest on our debt, which will reduce the funds available for dividends

on our common stock if declared, expenses, capital expenditures, acquisitions and other general corporate purposes;

• limitations

on our flexibility in planning for and reacting to changes in our business and in the industry in which we operate;

vulnerability to adverse changes in general economic, industry and competitive conditions and adverse changes in government regulation;

• limitations

on our ability to borrow additional amounts for expenses, capital expenditures, acquisitions, debt service requirements, execution of

our strategy and other purposes and other disadvantages compared to our competitors who have less debt.

have neither engaged in any operations nor generated any revenues to date.

We expect to continue to incur significant costs in

the pursuit of our acquisition plans.

We cannot assure you that our plans to complete a business combination will be successful.

We are an emerging growth company as defined in

the JOBS Act.

As an emerging growth company, we have elected to delay the adoption of new or revised accounting standards that have different

effective dates for public and private companies until those standards apply to private companies.

As such, our financial statements may

not be comparable to companies that comply with public company effective dates.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

As a result of the closing of the Business

Combination, which was accounted for as a reverse recapitalization in accordance with U.S.

GAAP as discussed in Note 2 – Merger

Agreement and Reverse Recapitalization, the consolidated financial statements of Cardio Diagnostics, Inc., a Delaware corporation and

our wholly owned subsidiary, are now the financial statements of the Company.

You should read the following discussion and analysis of

our financial condition and results of operations together with our audited consolidated financial statements as of December 31, 2022

and 2021 and for each of the two years in the period ended December 31, 2022 and the related notes included in Part II, Item 8 of this

Annual Report.

Some of the information contained in this

discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans, estimates and strategy

for our business, includes forward-looking statements based upon current expectations that involve risks and uncertainties.

read the sections titled “Risk Factors” and “Cautionary Note Regarding Forward Looking Statements” for a discussion

of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking

statements contained in the following discussion and analysis.

Our historical results are not necessarily indicative of the results that

may be expected for any period in the future.

context requires otherwise, references to “Cardio,” the “Company,” “we,” “us” and “our” refer

to Cardio Diagnostics Holdings, Inc., a Delaware corporation, together with its consolidated subsidiary.

Cardio was formed to further develop and commercialize

a series of products for major types of cardiovascular disease and associated co-morbidities, including coronary heart disease (“CHD”),

stroke, heart failure and diabetes, by leveraging our Artificial Intelligence (“AI”)-driven Integrated Genetic-Epigenetic

As a company, we aspire to give every American adult insight into their unique risk for various cardiovascular diseases.

Cardio aims to become one of the leading medical technology companies for enabling improved prevention, early detection and treatment

of cardiovascular disease.

Cardio is transforming the approach to cardiovascular disease from reactive to proactive and hope to accelerate

the adoption of Precision Medicine for all.

We believe that incorporating Cardio’s solutions into routine practice in primary care

and prevention efforts can help alter the trajectory that nearly one in two Americans is expected to develop some form of cardiovascular

disease by 2035.

believes 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)

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

Cardio’s ongoing strategy for expanding

its business operations includes the following:

Develop blood-based and saliva-based products for stroke, congestive heart failure and diabetes;

Build out clinical and health economics evidence in order to obtain payer reimbursement for Cardio’s tests;

Expand its testing process outside of a single high complexity CLIA laboratory to multiple laboratories, including hospital laboratories;

Introduce the test across several additional key channels, including health systems and self-insured employers;

Pursue the potential acquisition of one or more laboratories and/or synergistic companies in the telemedicine, AI or remote patient monitoring space.

Recent Developments

The Business Combination

On October 25, 2022, we consummated the Business Combination.

to the Business Combination Agreement, Merger Sub merged with and into Legacy Cardio, with Legacy Cardio surviving the merger and becoming

a wholly-owned direct subsidiary of Mana.

Thereafter, Merger Sub ceased to exist, and Mana was renamed Cardio Diagnostics Holdings, Inc.

The Business Combination was accounted for as

a reverse recapitalization, in accordance with GAAP.

Under the guidance in ASC 805, Mana was treated as the “acquired” company

for financial reporting purposes.

Legacy Cardio was deemed the accounting predecessor of the combined business, and Cardio Diagnostics

Holdings, Inc., as the parent company of the combined business, was the successor SEC registrant, meaning that our financial statements

for previous periods will be disclosed in the registrant’s periodic reports filed with the SEC.

The Business Combination

had a significant impact on the Company’s reported financial position and results as a consequence of the reverse recapitalization.

As noted in Note 1 to the Company’s consolidated financial statements, the Company’s financial position reflects current liabilities

that include existing, deferred liabilities originally incurred by Mana that are payable by the Company to Ladenburg Thalmann & Co.,

(“Ladenburg”) and I-Bankers Securities, Inc.

(“I-Bankers”), the underwriters of Mana’s initial public

offering, and The Benchmark Company, LLC (“Benchmark”), the

M&A advisor Mana retained in connection with the Business Combination.

The aggregate amount of the liabilities owed to these investment

bankers, as assumed by the Company in connection with the Business Combination, totals $928,500.

This sum reflects a decrease in the amount

of the original liabilities incurred by Mana, including a 30% decrease in the liability owed to Ladenburg and I-Bankers and a 46% decrease

in the original liability incurred by Mana to Benchmark .

The $928,500 is due and payable to the investment bankers on October 25, 2023.

However, on March 25, 2023, Ladenburg offered us a 15%

early pay discount on the balance due.

On March 27, 2023, we accepted the early pay discount and paid Ladenburg the net balance due and

payable of $419,475.

The balance of $435,000 owed to Benchmark remains due and payable on October 25, 2023.

In addition, the Company acquired only $4,021

in cash after the payment of transaction costs and outstanding accounts payable, primarily as a result of a redemption rate of over 99%

by the holders of Mana’s publicly-traded Common Stock, which shares had a redemption right in connection with the Business Combination.

Specifically, Mana’s public stockholders exercised their right to redeem 6,465,452 shares of Common Stock, which constituted approximately

99.5% of the shares with redemption rights, for cash at a redemption price of approximately $10.10 per share, for an aggregate redemption

amount of $65,310,892 .

In accounting for the reverse

recapitalization, Legacy Cardio’s 1,976,749 issued and outstanding common shares were reversed, and the Mana common shares totaling

9,514,743 were recorded, as described in Note 7.

As additional consideration for the transaction, Cardio will issue to each holder

who was entitled to merger consideration at the Closing, its pro rata proportion of up to 1,000,000 shares of our authorized

but unissued common stock (the “Earnout Shares” or “Contingently Issuable Common Stock”), if on or prior to the

fourth anniversary of the Closing Date (the “Earnout Period”), the VWAP of the Company’s Common Stock equals or exceeds

four different price triggers for 30 of any 40 consecutive trading days, as follows:

(i) one-quarter of the Earnout Shares will be issued

if the VWAP equals or exceeds $12.50 per share for the stated period;

(ii) one-quarter of the Earnout Shares will be issued if the VWAP

equals or exceeds $15.00 per share for the stated period;

(iii) one-quarter of the Earnout Shares will be issued if the VWAP equals or

exceeds $17.50 for the stated period;

and (iv) one-quarter of the Earnout Shares will be issued if the VWAP equals or exceeds $20.00 for

the stated period.

As an SEC-registered and Nasdaq-listed company,

post-merger, the Company will need to hire additional personnel and implement procedures and processes to address public company regulatory

requirements and customary practices.

The Company expects to incur additional annual expenses as a public company for, among other things,

directors’ and officers’ liability insurance, director fees, and additional internal and external accounting, legal and administrative

COVID-19 Impact

The global COVID-19 pandemic continues to evolve.

The extent of the impact of the COVID-19 pandemic on Cardio’s business, operations and development timelines and plans remains uncertain

and will depend on certain developments, including the duration and spread of the outbreak and its impact on Cardio’s development

activities, third-party manufacturers, and other third parties with whom Cardio does business, as well as its impact on regulatory authorities

and Cardio’s key scientific and management personnel.

The ultimate impact of the COVID-19 pandemic

is highly uncertain and subject to change.

To the extent possible, Cardio is conducting business as usual, with necessary or advisable

modifications to employee travel and with certain of its employees working remotely all or part of the time.

Cardio will continue to actively

monitor the evolving situation related to COVID-19 and may take further actions that alter our operations, including those that federal,

state or local authorities may require, or that we determine in the best interests of our employees and other third parties with whom

we do business.

At this point, the extent to which the COVID-19pandemic may affect our future business, operations and development timelines

and plans, including the resulting impact on Cardio’s expenditures and capital needs, remains uncertain.

Results of Operations

We have neither engaged in any operations nor generated

any revenues to date.

Our only activities from inception through December 31, 2021 were organizational activities, those necessary to

prepare for our initial public offering, described below, and subsequently identifying a target business for a business combination.

do not expect to generate any operating revenues until after the completion of our business combination.

We generate non-operating income

in the form of interest income on marketable securities held in the trust account with Continental Stock Transfer & Trust Company

after the initial public offering.

We are incurring expenses as a result of being a public

company (for legal, financial reporting, accounting and auditing compliance), as well as for due diligence expenses in connection with

completing a business combination.

For the period from May 19, 2021 (date of

inception) through December 31, 2021, we had a net loss of $144,837, which consisted of formation costs and operating expenses of

$20,887 and a provision for income taxes of $124,434, which was partially offset by interest income on marketable securities held in the

Trust Account of $484.

The results of operations presented below should

be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this Annual Report on Form 10-K.

The following table sets forth Cardio’s results of operations data for the periods presented:

Comparisons for the years ended December 31, 2022 and 2021:

Ended December 31,

Operating Expenses

Sales and marketing

Research and development

General and administrative expenses

Total operating expenses

Other (expense) income

Net Loss Attributable to Legacy Cardio

Cardio’s net loss

attributable for the year ended December 31, 2022, was $4,660,985 as compared to $620,448 for the year ended December 31, 2021, an increase

of $4,040,537 primarily as a result of an increase in General and Administrative expenses.

Cardio has earned only nominal revenue since

Revenue for the year ended December 31, 2022 was $950 compared to $901 for the year ended December 31, 2021.

Revenue was generated

through the Elicity telemedicine platform.

Sales and Marketing

Expenses related to sales and marketing for

the year ended December 31, 2 022 were $92,700 as compared to $103,318 for

the year ended December 31, 2021, a decrease of $10,618.

The overall decrease

was due to a decrease in outsourced sales and marketing contracting related to the launching of our first product, Epi+Gen CHD™

in January 2021 as opposed to an increase in 2022 of hiring of staff utilized for sale and marketing efforts.

Research and Development

Research and development expense for year ended

December 31, 2022, was $40,448 as compared to $31,468 for year ended December 31, 2021, an increase of $8,980.

The increase was attributable

to laboratory runs performed in the 2022 period, whereas less laboratory runs were performed in the corresponding period in 2021.

General and Administrative Expenses

and administrative expenses for the year ended December 31,2022 were $4,400,253 as compared to $470,563 for the

year ended December 31, 2021, an increase of $3,929,690.

The overall increase is primarily due to an increase in personnel and legal and

accounting expenses related to financing and merger transactional activity .

Amortization expense for year ended December

31, 2022 was $16,000 as compared to $16,000 for the year ended December 31, 2021.

The total amortization expense includes the amortization

of intangible assets.

Liquidity and Capital Resources

On November 26, 2021, we consummated the initial public

offering of 6,200,000 units at a price of $10.00 per unit, generating gross proceeds of $62,000,000.

Simultaneously with the closing of

the initial public offering, we consummated the sale of an aggregate of 2,500,000 private warrants for a total purchase price of $2,500,000

in a private placement to our sponsor.

On November 30, 2021, we sold an additional 300,000 units to the underwriter pursuant to the partial

exercise of the over-allotment option at an offering price of $10.00 per unit, generating additional gross proceeds to the Company of

$3,000,000, or $65,000,000 in total.

Following the initial public offering

and the sale of the private placement warrants, a total of $65,000,000 was placed in the trust account located in the United States and

we had $900,000 of cash held outside of the trust account, after payment of costs related to the Initial Public Offering, and available

for working capital purposes.

We incurred $1,697,431 in transaction costs, including $1,300,000 of underwriting fees and $397,431 of other

For the year ended December 31,

2021, cash used in operating activities was $300,944.

Net loss of $144,837 was affected by interest earned on marketable securities held

in the trust account of $484 and changes in operating assets and liabilities, which provided $300,944 of cash used in operating activities.

As of December 31, 2021, we had cash and marketable

securities of $65,000,484 held in the trust account.

We intend to use substantially all of the funds held in the trust account, including

any amounts representing interest earned on the trust account primarily to identify and evaluate prospective acquisition candidates, perform

business due diligence on prospective target businesses, travel to and from the offices, plants or similar locations of prospective target

businesses, review corporate documents and material agreements of prospective target businesses, select the target business to acquire

and structure, negotiate and consummate a Business Combination.

We may withdraw interest to pay taxes.

During the period ended December

31, 2021, we did not withdraw any interest earned on the trust account.

To the extent that our capital stock or debt is used, in whole

or in part, as consideration to complete our business combination, the remaining proceeds held in the trust account will be used as working

capital to finance the operations of the target business or businesses, make other acquisitions and pursue our growth strategies.

In order to fund working capital deficiencies or finance

transaction costs in connection with an intended initial business combination, our founders, officers and directors and their affiliates

may, but are not obligated to, loan us funds as may be required.

If we complete our initial business combination, we may repay such loaned

amounts out of the proceeds of the trust account released to us.

In the event that our initial business combination does not close, we

may use a portion of the working capital held outside the trust account to repay such loaned amounts but no proceeds from our trust account

would be used for such repayment.

Up to $2,400,000 of such loans may be convertible into working capital warrants at a price of $1.00

per warrant at the option of the lender.

The warrants would be identical to the private placement warrants issued to our initial stockholders.

The terms of such loans by our founders, officers and directors and their affiliates if any, have not been determined and no written agreements

exist with respect to such loans.

Prior to the completion of our business combination, we do not expect to seek loans from parties other

than our founders, officers and directors and their affiliates if any, as we do not believe third parties will be willing to loan such

funds and provide a waiver against any and all rights to seek access to funds in our trust account.

We do not believe we will need to raise additional

funds in order to meet the expenditures required for operating our business.

If our estimates of the costs of unde rtaking

in-depth due diligence and negotiating an initial business combination is less than the actual amount necessary to do so, or we earn less

interest on the funds held in the trust account than anticipated, we may have insufficient funds available to operate our business prior

to our initial business combination.

Moreover, we may need to obtain additional financing either to consummate our initial business combination

or because we become obligated to redeem a significant number of our public shares upon consummation of our initial business combination,

in which case we may issue additional securities or incur debt in connection with such business combination.

We do not have a maximum

debt leverage ratio or a policy with respect to how much debt we may incur.

The amount of debt we will be willing to incur will depend

on the facts and circumstances of the proposed business combination and market conditions at the time of the potential business combination.

At this time, we are not party to any arrangement or understanding with any third party with respect to raising additional funds through

the sale of our securities or the incurrence of debt.

Subject to compliance with applicable securities laws, we would only consummate

such financing simultaneously with the consummation of our initial business combination.

In the current economic environment, it has become

especially difficult to obtain acquisition financing.

If we are unable to complete our Business Combination because we do not have

sufficient funds available to us, we will be forced to cease operations and liquidate the trust account.

In addition, following our Business

Combination, if cash on hand is insufficient, we may need to obtain additional financing in order to meet our obligations.

Liquidity describes the ability of a company

to generate sufficient cash flows in the short- and long-term to meet the cash requirements of its business operations, including working

capital needs, debt service, acquisitions and investments, and other commitments

and contractual obligations.

We consider liquidity in terms of cash flows from operations and other sources, and their sufficiency to

fund our operating and investing activities.

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, we issued and sold to YA II PN, Ltd.

(“Yorkville”) a Convertible

Debenture in the principal amount of $5.0million for a purchase price of $4.5 million (the “First YA Convertible Debenture”)

to provide additional liquidity.

Pursuant to the YA Securities Purchase Agreement, the parties further agreed that we will issue and sell

to Yorkville, and Yorkville will purchase from us, a second YA Convertible Debenture in the principal amount of $6.2 million for a purchase

price of $5.58 million, subject to the satisfaction or waiver of the conditions set forth in the YA Securities Purchase Agreement.

conditions include, but are not limited to:

(i) the SEC shall have declared effective a resale registration statement covering shares

of Common Stock issuable upon conversion of the First YA Convertible Debenture;

and (ii) we shall have obtained stockholder approval for

the issuance of the shares of Common Stock issuable upon conversion of the YA Convertible Debentures that would be in excess of the “Exchange

Cap” (as defined in the YA Securities Purchase Agreement).

Our primary cash needs are for day-to-day operations,

to fund working capital requirements, to fund our growth strategy, including investments and acquisitions, and to pay $435,000 of deferred

contractual obligations originally incurred by Mana to one of its investment bankers, which is payable on October 25, 2023, as well as

other accounts payable.

Our principal uses of cash in recent periods

have been funding operations and paying expenses associated with the Business Combination.

Our long-term future capital requirements will

depend on many factors, including revenue growth rate, the timing and the amount of cash received from customers, the expansion of sales

and marketing activities, the timing and extent of spending to support investments, including research and development efforts, and the

continuing market adoption of our products.

each fiscal year since our inception, we have incurred losses from operations

and generated negative cash flows from operating activities.

We also have negative working capital and stockholders’ deficit as

of December 31, 2022.

Our total current liabilities as of December 31, 2022 are $1,947,770.

As noted above, on March 8, 2023, we

issued and sold the First YA Convertible Debenture, thereby increasing our current liabilities by $5.0 million, with the expectation that

we will issue and sell the Second YA Convertible Debenture in the principal amount of $6.2 million in the second quarter of 2023.

We received less proceeds from the Business

Combination than we initially expected.

The projections that we prepared in June 2022 in connection with the Business Combination assumed

that we would receive at least an aggregate of $15 million in capital from the Business Combination and the Legacy Cardio private placements

conducted in 2022 prior to the Business Combination.

This base amount anticipated at least $5.0 million in proceeds remaining in the Trust

Account following payment of the requested redemptions.

At Closing, we received only $4,021 in cash from the Trust Account due to higher

than expected redemptions by Mana public stockholders and higher than expected expenses in connection with the Business Combination and

residual Mana expenses.

Accordingly, we have less cash available to pursue our anticipated growth strategies and new initiatives than

we projected.

This has caused, and may continue to cause, significant delays in, or limit the scope of, our planned acquisition strategy

and our planned product expansion timeline.

Our failure to achieve our projected results could harm the trading price of our securities

and our financial position, and adversely affect our future profitability and cash flows.

Because of the extremely high rate of redemptions

by Mana public stockholders in connection with the Business Combination and higher than anticipated transaction costs, we have almost

no Trust fund proceeds available to pursue our anticipated growth strategies and new initiatives, including our acquisition strategy.

This has had a material impact on our projected estimates and assumptions and actual results of operations and financial condition.

recorded nominal revenue in 2022 of $950.

It is likely that revenue in 2023 will also fall short of the projections.

Nevertheless, we

believe that the fundamental elements of our business strategy remain unchanged, although the scale and timing of specific initiatives

have been temporarily negatively impacted as a result of having significantly less than anticipated capital on hand following the Business

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

Successful transition to attaining profitable operations depends upon achieving a level of revenue adequate to support the

post-merger company.

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.

Existing working capital, further advances

and debt instruments, and anticipated cash flow are expected to be adequate to fund operations over the next 12 months.

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

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,

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.

The exercise prices of our currently outstanding

warrants range from a high of $11.50 to a low of $3.90 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 $4.25 on March 27, 2023.

If the trading price of our Common Stock is less than the

respective exercise prices of our outstanding Warrants, we believe holders of our Public Warrants, Sponsor Warrants and Private Placement

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.

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.

Cash at December

31, 2022 totaled $4,117,521 as compared to $512,767 at December 31, 2021, an increase of $3,604,754.

following table shows Cardio’s cash flows from operating activities, investing activities and financing activities for the stated

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Cash Used in Operating Activities

Cash used in operating activities for the year

ended December 31, 2022 was $5,090,968, as compared to $585,291 for the year ended December 31, 2021.

The cash used in operations during

the year ended December 31, 2022, is a function of net loss of $4,660,985, adjusted for the following non-cash operating items:

of $16,000 and $112,534 in acquisition related expense, offset by a decrease in accounts receivable of $901, an increase of $690,821 in

prepaid expenses and other current assets, an increase in deposits of $4,950 and an increase of $136,353 in accounts payable and accrued

Cash Used in Investing Activities

Cash used in investing activities for the year

ended December 31, 2022, was $368,001 compared to $364,029 for the year ended December 31, 2021.

The cash used in investing activities

for the year ended December 31, 2022 was due to $4,021 cash acquired from acquisition, $137,466 repayment of deposit for acquisition,

$433,334 payments for notes receivable and $76,154 in patent costs incurred.

Cash Provided by Financing Activities

Cash provided by financing activities for the

year ended December 31, 2022 was $9,063,723 as compared to $1,225,000 for the year ended December 31, 2021.

This change was due to $11,986,037

in proceeds from the sale of common stock, offset by $188,674 in payments of finance agreement, $1,535,035 in payments of recapitalization

transaction costs and $1,198,604 in placement agent fees, during the year ended December 31, 2022.

Off-Balance Sheet Financing Arrangements

We have no obligations, assets or liabilities, which

would be considered off-balance sheet arrangements as of December 31, 2021.

We do not participate in transactions that create relationships

with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established

for the purpose of facilitating off-balance sheet arrangements.

We have not entered into any off-balance sheet financing arrangements,

established any special purpose entities, guaranteed any debt or commitments of other entities, or purchased any non-financial assets.

did not have any off-balance sheet arrangements as of December 31, 2022.

Contractual Obligations

We do not have any long-term debt,

capital lease obligations, operating lease obligations or long-term liabilities.

Pursuant to a Business Combination Marketing Agreement,

we have engaged Ladenburg Thalmann & Co.

and I-Bankers Securities, Inc.

as advisors in connection with our business combination to

assist us in holding meetings with our stockholders to discuss the potential business combination and the target business’s attributes,

introduce us to potential investors that are interested in purchasing our securities in connection with the potential business combination,

provide financial advisory services to assist us in our efforts to obtain any stockholder approval for the business combination and assist

us with our press releases and public filings in connection with the business combination.

This agreement will provide that we will pay

Ladenburg Thalmann and I-Bankers Securities, Inc.

the marketing fee for such services upon the consummation of our initial business combination

in an amount equal to, in the aggregate, 2.5% of the gross proceeds of our initial public offering.

As a result, Ladenburg Thalmann and

I-Bankers Securities, Inc.

will not be entitled to such fee unless we consummate our initial business combination.

Critical Accounting Policies

The following summarizes Cardio’s

contractual obligations as of December 31 , 2022 and the effects that

such obligations are expected to have on its liquidity and cash flows in future periods:

Deposit for Acquisition

On April 14, 2021, Legacy Cardio deposited $250,000

with an escrow agent in connection with a planned business acquisition.

Legacy Cardio subsequently decided to terminate the acquisition

and recorded expenses of $112,534 in connection with the termination, which amount is presented as other expenses in the consolidated

statements of operations.

The remaining escrow balance of $137,466 was returned to Legacy Cardio on July 26, 2022.

Related Party Transactions

The Company reimburses Behavioral Diagnostic,

LLC (“BDLLC”), a company owned by its Chief Medical Officer for a portion of the salaries of

the Company’s Chief Executive Officer and its Chief Technology Officer, who is the husband of the CEO.

Payments to BDLLC for salaries

totaled $83,767 and $0 for the years ended December 31 , 2021 and 2022,

respectively.

Prior Mana Obligations

to its Investment Bankers

See “ Recent Developments – Business

Combination ” above for a discussion of the contractual obligations due and payable on October 25, 2023 to Ladenburg/I-Bankers

and Benchmark in the aggregate amount of $928,500 for deferred investment banking fees originally entered into by Mana prior to the Business

Combination, as reduced at and after the closing of the Business Combination.

On March 25, 2023, Ladenburg offered the Company a 15% early

pay discount on the balance due.

On March 27, 2023, we accepted the early pay discount and paid Ladenburg the net balance due and payable

The balance of $435,000 owed to Benchmark remains due and payable on October 25, 2023.

Prior Relationships

of Cardio with Boustead Securities, LLC

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.

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 is currently contending 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

No legal proceedings have been instigated by either party, and Cardio believes that the final outcome will not have a material

adverse impact on its financial condition.

The Benchmark Company,

LLC Right of First Refusal

As noted in Note 1, the Company

completed a business combination with Mana 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,

Cardio assumed the contractual engagement entered into by Mana.

On November 14, 2022, Cardio and Benchmark entered into Amendment No.

1 Engagement Letter (the “Amendment Engagement”).

Pursuant to the Amendment Engagement, 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.

In this regard, the Company and Benchmark are in

discussions regarding whether Benchmark might have any rights arising from the Company having entered into the convertible debenture financing

in March 2023.

No legal proceedings have been instigated, and the parties are continuing to discuss a resolution to this matter.

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 2023, 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.

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

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.

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.

Critical Accounting Policies and Significant Judgments and Estimates

Cardio’s consolidated financial statements

are prepared in accordance with GAAP in the United States.

The preparation of its consolidated financial statements and

related disclosures requires it to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs

and expenses, and the disclosure of contingent assets and liabilities in Cardio’s financial statements.

Cardio bases its estimates

on historical experience, known trends and events and various other factors that it believes are reasonable under the circumstances, the

results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent

from other sources.

Cardio evaluates its estimates and assumptions on an ongoing basis.

Cardio’s actual results may differ from

these estimates under different assumptions or conditions.

While Cardio’s significant accounting

policies are described in more detail in Note 2 to its consolidated financial statements, Cardio believes that the following accounting

policies are those most critical to the judgments and estimates used in the preparation of its consolidated financial statements.

Principles of Consolidation

The consolidated financial statements include the

accounts of the Company and its wholly owned-subsidiary, Cardio Diagnostics, LLC.

All intercompany accounts and transactions have

been eliminated.

Use of Estimates in

the Preparation of Financial Statements

and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management

to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities

at the date of the financial statements, and income and expenses during the periods reported.

Actual results could materially differ from

those estimates.

We have identified the following critical accounting policies:

Shares subject to redemption

We account for our shares of common

stock subject to possible conversion in accordance with the guidance in Accounting Standards Codification (“ASC”) Topic 480

“ Distinguishing Liabilities from Equity .” Shares subject to mandatory redemption are classified as a liability instrument

and are measured at fair value.

Conditionally redeemable shares (including shares that feature redemption rights that are either within

the control of the holder or subject to redemption upon the occurrence of uncertain events not solely within our control) are classified

as temporary equity.

At all other times, shares are classified as shareholders’ equity.

Our shares feature certain redemption rights

that are considered to be outside of our control and subject to occurrence of uncertain future events.

Accordingly, shares subject to

possible redemption are presented at redemption value as temporary equity, outside of the shareholders’ equity section of our balance

Recent accounting pronouncements

Management does not believe that

any other recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on our financial

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.

Fair Value Measurements

The Company adopted the provisions of ASC Topic

820, Fair Value Measurements and Disclosures, which defines fair value as used in numerous accounting pronouncements,

establishes a framework for measuring fair value and expands disclosure of fair value measurements.

The estimated fair value of certain financial

instruments, including cash and cash equivalents, accounts payable and accrued expenses are carried at historical cost basis, which approximates

their fair values because of the short-term nature of these instruments.

The carrying amounts of our short- and long-term credit obligations

approximate fair value because the effective yields on these

obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or

embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.

ASC 820 defines fair value as the exchange price

that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the

asset or liability in an orderly transaction between market participants on the measurement date.

ASC 820 also establishes a fair value

hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring

ASC 820 describes three levels of inputs that may be used to measure fair value:

Level 1 – quoted prices in active markets for

identical assets or liabilities

Level 2 – quoted prices for similar assets

and liabilities in active markets or inputs that are observable

Level 3 – inputs that are unobservable (for

example cash flow modeling inputs based on assumptions)

Revenue Recognition

The Company hosts

its product, Epi+Gen CHD™ on InTeleLab’s Elicity platform (the “Lab”).

The Lab collects payments from patients

upon completion of eligibility screening.

Patients then send their samples to MOgene, a high complexity CLIA lab, which perform the biomarker

Upon receipt of the raw biomarker data from MOgene, the Company

performs all quality control, analytical assessments and report generation and shares test reports with the Elicity healthcare provider

via the Elicity platform.

Revenue is recognized upon receipt of payments from the Lab for each test at the end of each month.

Company accounts for revenue under (“ASU”) 2014-09, “Revenue from Contracts with Customers (Topic 606)”, using

the modified retrospective method.

The modified retrospective adoption used by the Company did not result in a material cumulative effect

adjustment to the opening balance of accumulated deficit.

The Company determines the measurement of revenue

and the timing of revenue recognition utilizing the following core principles:

the contract with a customer;

the performance obligations in the contract;

the transaction price;

the transaction price to the performance obligations in the contract;

revenue when (or as) the Company satisfies its performance obligations.

Cardio accounts for patents in accordance with

ASC 350-30, General Intangibles Other than Goodwill .

The Company capitalizes patent costs representing legal fees associated

with filing patent applications and amortize them on a straight-line basis.

are in the process of evaluating its patents' estimated useful life and will begin amortizing the patents when they are brought to the

market or otherwise commercialized.

Stock-Based Compensation

Cardio accounts for its stock-based awards granted

under its employee compensation plan in accordance with ASC Topic No.

718-20, Awards Classified as Equity, which requires

the measurement of compensation expense for all share-based compensation granted to

employees and non-employee directors at fair value on the date of grant and recognition of compensation expense over the related service

period for awards expected to vest.

The Company uses the Black-Scholes option pricing model to estimate the fair value of its stock

options and warrants.

The Black-Scholes option pricing model requires the input of highly subjective assumptions including the expected

stock price volatility of the Company’s common stock, the risk-free interest rate at the date of grant, the expected vesting term

of the grant, expected dividends, and an assumption related to forfeitures of such grants.

Changes in these subjective input assumptions

can materially affect the fair value estimate of the Company’s stock options and warrants.

Quantitative and Qualitative Disclosures About Market Risk

As of December 31, 2022, we were not subject

to any market or interest rate risk.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis