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CGNH > SEC Filings for CGNH > Form 10-Q on 17-Mar-2014All Recent SEC Filings

Show all filings for CARDIOGENICS HOLDINGS INC.

Form 10-Q for CARDIOGENICS HOLDINGS INC.


17-Mar-2014

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Conditions and 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 February 13, 2014.

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

Our discussion and analysis of our financial condition and results of operations are based upon our condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial statements filed with the Securities and Exchange Commission. The preparation of these condensed 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, derivative liabilities, 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, 2013, as outlined in our previously filed Form 10-K, have been applied consistently for the three months ended January 31, 2014.

Off-Balance Sheet arrangements

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

Results of operations

Three months ended January 31, 2014 as compared to three months ended January 31, 2013.

                                                    Three Months
                                                  Ended January 31,
                                                2014            2013          $ Change

Revenue                                     $         -     $         -     $         -

Operating expenses:
Depreciation and amortization of property
and equipment                                     2,743           3,524            (781 )
Amortization of patent application costs          1,726           1,734              (8 )
General and administrative expenses             172,218         112,732          59,486
Research and product development, net of
investment tax credits                           85,483         103,444         (17,961 )
Total operating expenses                        262,170         221,434          40,736
Operating Loss                                  262,170         221,434          40,736
Other expenses (income)
Interest expense and bank charges, net          111,922           3,824         108,098
(Gain) on change in fair value of
derivative liability                            (22,646 )             -         (22,646 )
Loss on foreign exchange                         56,945           8,039          48,906

Net loss                                    $   408,391     $   233,297     $   175,094

Revenues

During the three months ended January 31, 2014 and 2013 we generated no revenues 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) developing the QL Care Analyzer, a small, automated, robust and proprietary point of care testing device; and, c) customizing 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 increase in general and administrative expenses is attributable primarily to an increase in professional and 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 attributed primarily to a decrease in staff engaged in those activities in the current quarter vs. the same period in the prior year.

Interest expense

The increase in interest expense is attributed primarily to the cost of carrying notes and debentures payable.

Liquidity and Capital Resources

We have not generated significant revenues since inception. We incurred a net loss of approximately $408,000 and a cash flow deficiency from operating activities of approximately $183,000 for the three months ended January 31, 2014. We had sufficient cash at January 31, 2014 to fund approximately two months' operations. 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, 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 activities 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 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 and whenever possible, seeking to insure that subscription rates reflect increases in costs due to inflation.

Recent Accounting Pronouncements

The FASB had issued certain accounting pronouncements as of January 31, 2014 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 three months ended January 31, 2014 and 2013 or that they will have a significant effect at the time they become effective.

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