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CGNH > SEC Filings for CGNH > Form 10-Q on 17-Sep-2013All Recent SEC Filings

Show all filings for CARDIOGENICS HOLDINGS INC. | Request a Trial to NEW EDGAR Online Pro

Form 10-Q for CARDIOGENICS HOLDINGS INC.


17-Sep-2013

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition & Results of Operations

You should read this Management's Discussion and Analysis ("MD&A") in combination with the accompanying unaudited condensed interim consolidated financial statements and related notes as well as the audited consolidated financial statements and the accompanying notes to the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") included within the Company's Annual Report on Form 10-K filed on January 29, 2013.

Our discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed interim consolidated financial statements, which have been prepared in accordance with U.S. GAAP for interim financial statements filed with the Securities and Exchange Commission.

Critical Accounting Policies and Estimates

The preparation of these unaudited condensed interim consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to accounts receivable, equipment, stock-based compensation, income taxes and contingencies. We base our estimates on historical experience and on various other assumptions that are believed to be 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. Actual results may differ from these estimates under different assumptions or conditions.

The accounting policies and estimates used as of October 31, 2012, as outlined in our previously filed Form 10-K, have been applied consistently for the nine months ended July 31, 2013.

Related Party Transactions

During the nine months ended July 31, 2013, the Company received from officer/directors $200,000 for the subscription of 200,000 of the Company's Series A Convertible Debentures and $155,000 from officer/directors for the subscription of 155,000 of the Company's Series B Convertible Debentures. On the day that the subscription for Series A Convertible Debentures was received, a shareholder's loan in the amount of $100,000 was converted to 100,000 of the Company's Series A Convertible Debentures.

Off-Balance Sheet arrangements

We are not party to any off-balance sheet arrangements.

Results of operations

Nine months ended July 31, 2013 as compared to the nine months ended July 31, 2012

                                                        Nine Months
                                                      Ended July 31,
                                                    2013           2012         $ Change

Revenue                                          $        -     $    1,136     $   (1,136 )

Operating expenses:
Depreciation and amortization of property and
equipment                                            10,341         13,635         (3,294 )
Amortization of patent application costs              5,089          3,775          1,314
General and administrative expenses                 344,177        516,357       (172,180 )

Research and product development, net of
investment tax credits                              288,546        422,453       (133,907 )
Total operating expenses                            648,153        956,220       (308,067 )
Operating loss                                     (648,153 )     (955,084 )      306,931
Other expenses (income)
Interest expense and bank charges, net              132,613         14,887        117,726
(Gain) on change in value of derivative
liability                                            (7,250 )            -         (7,250 )
Loss on foreign exchange transactions               (11,897 )      (20,041 )        8,144

Net loss                                         $ (761,619 )   $ (949,930 )   $  188,311

Revenues

During the nine months ended July 31, 2013 and 2012, we generated $0 and $1,136 of revenue in 2013 and 2012, respectively, from sales of paramagnetic beads.

Operating expenses

Operating expenses include the costs to a) develop and patent a method for controlling the delivery of compounds to a chemical reaction; b) develop the QL Care Analyzer, a small, automated, robust and proprietary point of care testing device; and c) custom paramagnetic beads through our proprietary method which improves their light collection. In addition, the Company is in the process of adapting test products for the Point Of Care ("POC") disposable, single-use cartridge-format. Detailed manufacturing specifications and costing have been created and custom manufacturers have been sourced.

General and administrative expenses

General and administrative expenses consist primarily of compensation to officers, occupancy costs, professional fees, listing costs and other office expenses. The decrease in general and administrative expenses is attributable primarily to a decrease in consulting fees.

Research and product development, net of investment tax credits

Research and development expenses consist primarily of salaries and wages paid to officers and employees engaged in those activities and supplies consumed therefor. The decrease in research and development expenses is attributable primarily to the decrease in staff engaged in those activities in the current nine month period vs. the same nine month period in the prior year.

Three months ended July 31, 2013 as compared to the three months ended July 31, 2012

                                                       Three Months
                                                      Ended July 31,
                                                    2013           2012         $ Change

Revenue                                          $        -     $        -     $        -

Operating expenses:
Depreciation of property and equipment                3,374          4,541         (1,167 )
Amortization of patent application costs              1,660          1,215            445
General and administrative expenses                 138,530        154,869        (16,339 )
Research and product development, net of
investment tax credits                               90,060         73,715         16,345
Total operating expenses                            233,624        234,340           (716 )
Operating loss                                     (233,624 )     (234,340 )         (716 )
Other expenses (income)
Interest expense and bank charges, net               95,897          5,402         90,495
Loss on change in value of derivative
liability                                             3,531              -          3,531
Gain on foreign exchange transactions               (15,820 )         (915 )      (14,905 )

Net loss                                         $ (317,232 )   $ (238,827 )   $   78,405

Revenues

During the three months ended July 31, 2013 and 2012, we generated no revenues.

Operating expenses

Operating expenses include the costs to a) develop and patent a method for controlling the delivery of compounds to a chemical reaction; b) develop the QL Care Analyzer, a small, automated, robust and proprietary point of care testing device; and c) custom paramagnetic beads through our proprietary method which improves their light collection. In addition, the Company is in the process of adapting test products for the POC disposable, single-use cartridge-format. Detailed manufacturing specifications and costing have been created and custom manufacturers have been sourced.

General and administrative expenses

General and administrative expenses consist primarily of compensation to officers, occupancy costs, professional fees, listing costs and other office expenses. The decrease in general and administrative expenses is attributable primarily to a decrease in consulting fees.

Research and product development, net of investment tax credits

Research and development expenses consist primarily of salaries and wages paid to officers and employees engaged in those activities and supplies consumed therefor. The increase in research and development expenses is attributable primarily to the decrease in investment tax credits realized in 2013 vs. 2012.

Liquidity and Capital Resources

We have not generated significant revenues since inception. We incurred a net loss of approximately $762,000 and a cash flow deficiency from operating activities of $623,433 for the nine months ended July 31, 2013. We have not yet established an ongoing source of revenues sufficient to cover our operating costs and allow us to continue as a going concern. We have funded our activities to date almost exclusively from debt and equity financings. These matters raise substantial doubt about our ability to continue as a going concern.

We will continue to require substantial funds to continue research and development, including preclinical studies and clinical trials of our products, to fund the ongoing operations and to commence sales and marketing efforts. Our plans include financing activities such as private placements of our common stock and issuances of convertible debt instruments. We are also actively pursuing industry collaboration including product licensing and specific project financing.

We believe we will be successful in obtaining the necessary financing to fund our operations, meet revenue projections and manage costs; however, there are no assurances that such additional funding will be achieved and that we will succeed in obtaining the funding to support our future operations.

Seasonality

We do not believe that our business is subject to seasonal trends or inflation. On an ongoing basis, we will attempt to minimize any effect of inflation on our operating results by controlling operating costs.

Recent Accounting Pronouncements

The FASB had issued certain accounting pronouncements as of July 31, 2013 that will become effective in subsequent periods; however, we do not believe that any of those pronouncements would have significantly affected our financial accounting measurements or disclosures had they been in effect during the nine months ended July 31, 2013 and 2012 or that they will have a significant effect at the time they become effective.

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