CardioGenics (CGNH) 10-Q 2014 Q2 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

[X] Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended April 30, 2014.

[  ] Transition report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from __________ to __________ .

Commission file number 000-28761

CARDIOGENICS HOLDINGS INC.

(Exact name of registrant as specified in its Charter)

Nevada	88-0380546
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

6295 Northam Drive, Unit 8

Mississauga, Ontario L4V 1WB

(Address of Principal Executive Offices)

(905) 673-8501

(Registrant’s Telephone Number, Including Area Code)

Indicate by check mark whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes [X] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer and “smaller reporting company” in Rule 12b-2 or the Exchange Act. (Check one):

Large Accelerated filer	[  ]	Accelerated Filer	[  ]
Non-Accelerated Filer	[  ]	Smaller Reporting Company	[X]
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)

Yes [  ] No [X]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [X] No [  ]

As of June 16, 2014 the Registrant had the following number of shares of its capital stock outstanding: 36,862,476 shares of Common Stock and 1 share of Series 1 Preferred Voting Stock, par value $0.0001, representing 13 exchangeable shares of the Registrant’s subsidiary, CardioGenics ExchangeCo Inc., which are exchangeable into 24,176,927 shares of the Registrant’s Common Stock.

CARDIOGENICS HOLDINGS INC.

FORM 10-Q

For the Quarter Ended April 30, 2014

INDEX

	Page
Part I. Financial Information
Item 1: Financial Statements (Unaudited)	F-1
Condensed Consolidated Balance Sheets at April 30, 2014 (Unaudited) and October 31, 2013	F-1
Condensed Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended April 30, 2014 and 2013 and Cumulative from November 20, 1997 (Date of Inception) to April 30, 2014	F-2
Condensed Consolidated Statements of Comprehensive Loss (Unaudited) for the Three and Six Months Ended April 30, 2014 and 2013 and Cumulative from November 20, 1997 (Date of Inception) to April 30, 2014	F-3
Condensed Consolidated Statement of Changes in Deficiency (Unaudited) for the Six Months ended April 30, 2014	F-4
Condensed Consolidated Statements of Cash Flows (Unaudited) for the Six Months ended April 30, 2014 and 2013 and Cumulative from November 20, 1997 (Date of Inception) to April 30, 2014	F-5
Notes to Condensed Consolidated Financial Statements (Unaudited)	F-6
Item 2: Management’s Discussion and Analysis of Financial Conditions and Results of Operations	3
Item 3: Quantitative and Qualitative Disclosures About Market Risk	6
Item 4: Controls and Procedures	6
Part II. Other Information	7
Item 1: Legal Proceedings	7
Item 1A: Risk Factors	7
Item 2: Unregistered Sales of Equity Securities and Use of Proceeds	7
Item 3: Defaults Upon Senior Securities	7
Item 4: Mine Safety Disclosures	7
Item 5: Other Information	7
Item 6: Exhibits	7
Signatures	7

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

CardioGenics Holdings Inc.

(A Development Stage Company)

Condensed Consolidated Balance Sheets

	April 30, 2014			October 31, 2013
	(Unaudited)			(Note 2)
Assets
Current Assets
Cash and Cash Equivalents	$	1,975		$	263,103
Accounts Receivable		234			246
Deposits and Prepaid Expenses		46,871			49,267
Refundable Taxes Receivable		3,505			3,302
Government Grants and Investment Tax Credits Receivable		70,867			60,104
		123,452			376,022
Long-Term Assets
Property and Equipment, net		48,068			53,496
Patents, net		115,016			118,432
		163,084			171,928
Total Assets	$	286,536		$	547,950
Liabilities and Deficiency
Current Liabilities
Accounts Payable and Accrued Expenses	$	989,459		$	1,050,115
Funds Held in Trust for Redemption of Class B Common Shares		4			4
Notes Payable, net of debt discount		14,104			11,983
Derivative Liability on Notes Payable		74,445			99,702
Total current liabilities		1,078,012			1,161,804
Long-Term Liabilities
Debentures Payable		413,956			303,190
Total Liabilities		1,491,968			1,464,994
Commitments and Contingencies
Deficiency
Preferred stock; par value $.0001 per share, 50,000,000 shares authorized, none issued		—			—
Common stock; par value $.00001 per share; 150,000,000 shares authorized, 36,604,143 and 34,726,668 common shares and 24,176,927 and 24,176,927 exchangeable shares issued and outstanding as at April 30, 2014 and October 31, 2013 respectively		584			565
Additional paid-in capital		44,540,834			44,514,000
Deficit accumulated during development stage		(45,706,012	)		(44,957,870	)
Accumulated other comprehensive loss		(40,838	)		(117,515	)
Total deficiency attributable to CardioGenics Holdings Inc.		(1,205,432	)		(560,820	)
Non-controlling interest		—			(356,224	)
Total deficiency		(1,205,432	)		(917,044	)
Total liabilities and deficiency	$	286,536		$	547,950

See notes to condensed consolidated financial statements.

F-1

CardioGenics Holdings Inc.

(A Development Stage Company)

Condensed Consolidated Statements of Operations (unaudited)

For the Three and Six Months Ended April 30, 2014 and 2013 and Cumulative from November 20, 1997 (Date of Inception) to April 30, 2014

													Cumulative
													From
													November 20, 1997
	For the three months Ended						For the six months Ended						(Date of Inception) to
	April 30,						April 30,						April 30,
	2014			2013			2014			2013			2014
Revenue	$	—		$	—		$	—		$	—		$	10,173
Operating Expenses
Depreciation and Amortization of Property and Equipment		2,685			3,443			5,428			6,967			239,656
Amortization of Patent Application Costs		1,690			1,695			3,416			3,429			29,994
Write-off of Patent Application Costs		—			—			—			—			239,530
General and Administrative		95,827			92,915			268,045			205,647			10,571,745
Write-off of Goodwill		—			—			—			—			12,780,214
Research and Product Development, Net of Investment Tax Credits		105,192			95,042			190,675			198,486			4,760,372
Cost of Settlement of Lawsuit		—			—			—			—			1,952,800
Total operating expenses		205,394			193,095			467,564			414,529			30,574,311
Operating Loss		(205,394	)		(193,095	)		(467,564	)		(414,529	)		(30,564,138	)
Other Expenses (Income)
Interest Expense and Bank Charges (Net)		125,658			32,892			237,580			36,716			2,696,007
Loss (Gain) on Change in Fair Value of Derivative Liability		23,465			(10,781	)		819			(10,781	)		12,538,505
Loss (Gain) on Foreign Exchange Transactions		(14,766	)		(4,116	)		42,179			3,923			225,875
Total other expenses		134,357			17,995			280,578			29,858			15,460,387
Loss from Continuing Operations		(339,751	)		(211,090	)		(748,142	)		(444,387	)		(46,024,525	)
Discontinued Operations
Gain on Sale of Subsidiary		—			—			—			—			90,051
Loss from Discontinued Operations		—			—			—			—			(127,762	)
Net Loss		(339,751	)		(211,090	)		(748,142	)		(444,387	)		(46,062,236	)
Net Loss attributable to non-controlling interest		—			(1,231	)		—			(2,721	)		(356,224	)
Net Loss attributable to CardioGenics Holdings Inc.	$	(339,751	)	$	(209,859	)	$	(748,142	)	$	(441,666	)	$	(45,706,012	)
Basic and Fully Diluted Net Loss per Common Share attributable to CardioGenics Holdings Inc. Shareholders	$	(0.01	)	$	(0.00	)	$	(0.01	)	$	(0.01	)
Weighted-average shares of Common Stock outstanding		60,447,704			56,676,166			59,915,908			56,676,166

See notes to condensed consolidated financial statements.

F-2

CardioGenics Holdings Inc.

(A Development Stage Company)

Condensed Consolidated Statements of Comprehensive Loss (unaudited)

For the Three and Six Months Ended April 30, 2014 and 2013 and Cumulative from November 20, 1997 (Date of Inception) to April 30, 2014

													Cumulative from
													November 20, 1997
	Three Months Ended						Six Months Ended						(Date of Inception)
	April 30						April 30						to April 30,
	2014			2013			2014			2013			2014
Net loss	$	(339,751	)	$	(211,090	)	$	(748,142	)	$	(444,387	)	$	(46,062,236	)
Net loss attributable to non-controlling interest		—			(1,231	)		—			(2,721	)		(356,224	)
Net loss attributable to Cardiogenics Holdings Inc.		(339,751	)		(209,859	)		(748,142	)		(441,666	)		(45,706,012
Other comprehensive income (loss), currency translation adjustments		(28,201	)		1,085			76,677			9,510			(40,838	)
Comprehensive loss	$	(367,952	)	$	(208,774	)	$	(671,465	)	$	(432,156	)	$	(45,746,850	)

See notes to condensed consolidated financial statements.

F-3

CarioGenics Holdings Inc.

(A Development Stage Company)

Condensed Consolidated Statements of Changes in Deficiency (unaudited)

For the Six Months Ended April 30, 2014

								Deficit
								Accumulated
								During			Accumulated
					Additional			the			Other
	Common Stock				Paid-in			Development			Comprehensive			Noncontrolling			Total
	Shares		Amount		Capital			Stage			Income (Loss)			Interest			Deficiency
Balance November 1, 2013		58,903,595	$	565	$	44,514,000		$	(44,957,870	)	$	(117,515	)	$	(356,224	)	$	(917,044	)
Issuance of common shares on conversion of notes payable January 2014		100,000		1		12,066												12,067
Issuance of warrants on settlement of suit January 2014		700,000		7		188,993												189,000
Issuance of common shares for cash January 2014 at $0.25		200,000		2		49,998												50,000
Issuance of common shares on conversion of shares of subsidiary		296,538		3		(356,227	)								356,224			-
Issuance of common shares on conversion of notes payable February 2014		154,658		2		18,557												18,559
Issuance of common shares on conversion of notes payable March 2014		150,000		1		14,894												14,895
Issuance of common shares on conversion of notes payable April 2014		160,000		2		12,478												12,480
Issuance of common shares for services rendered March 2014		83,333		1		17,916												17,917
Issuance of common shares for services rendered April 2014		32,946		0		7,083												7,083
Settlement of derivative value of notes payable on conversion to common shares						61,076												61,076
Comprehensive Income (Loss):
Net Loss									(748,142	)								(748,142	)
Other Comprehensive Income Currency Translation Adjustment												76,677						76,677
Total Comprehensive Income (Loss)									(748,142	)		76,677						(671,465	)
Balance April 30, 2014		60,781,070	$	584	$	44,540,834		$	(45,706,012	)	$	(40,838	)	$	-		$	(1,205,432	)

See notes to condensed consolidated financial statements.

F-4

CardioGenics Holdings Inc.

(A Development Stage Company)

Condensed Consolidated Statements of Cash Flows (unaudited)

Six Months Ended April 30, 2014 and 2013 and

Cumulative from November 20, 1997 (Date of Inception) to April 30, 2014

							Cumulative from
							November 20, 1997
	Six Months Ended						(Date of Inception)
	April 30						to April 30,
	2014			2013			2014
Cash flows from operating activities
Consolidated Net Loss for the Period	$	(748,142	)	$	(444,387	)	$	(46,062,236	)
Adjustments to reconcile consolidated net loss for the period to net cash used in operating activities
Depreciation and Amortization of Property and Equipment		5,428			6,967			239,656
Amortization of Patent Application Costs		3,416			3,429			29,994
Write-off of Patent Application Costs		—			—			239,530
Amortization of Deferred Consulting Contract Costs		—			—			163,750
Write-off of Goodwill		—			—			12,780,214
Amortization of Deferred Debt Issuance Costs		—			—			511,035
Loss on Extinguishment of Debt		—			—			275,676
Loss (Gain) on Change in Value of Derivative Liability		819			(10,781	)		12,538,505
Amortization of Discount on Notes Payable		60,121			22,900			73,983
Amortization of Discount on Debentures Payable		124,098			—			236,707
Interest Accrued and Foreign Exchange Loss on Debt		—			—			922,539
Unrealized Foreign Currency Exchange Gains		—			—			25,094
Beneficial Conversion Charge included in Interest Expense		—			—			452,109
Common Stock and Warrants issued on Settlement of Lawsuit		—			—			1,653,800
Common Stock Issued as Employee or Officer/Director Compensation		—			—			2,508,282
Common Stock Issued for Services Rendered		25,000			—			4,228,287
Stock Options Issued for Services Rendered		—			—			192,238
Stock Options Issued to Directors and Committee Chairman		—			—			54,582
Changes in Operating Assets and Liabilities, Net of Acquisition
Accounts Receivable		12			182			(234	)
Deposits and Prepaid Expenses		2,396			433			(48,237	)
Refundable Taxes Receivable		(203	)		38,058			(3,787	)
Government Grants and Investment Tax Credits Receivable		(10,763	)		40,378			(53,850	)
Accounts Payable and Accrued Expenses		128,345			87,380			565,143
Advances		—			200,262			131
Net cash used in operating activities		(409,473	)		(55,179	)		(8,477,089	)
Cash flows from investing activities
Cash Acquired from Acquisition		—			—			195,885
Purchase of Property and Equipment		—			(156	)		(223,643	)
Patent Application Costs		—			(13,087	)		(334,460	)
Net cash used in investing activities		—			(13,243	)		(362,218	)
Cash flows from financing activities		—			(100,000	)		100,000
Due to Shareholders
Proceeds from Notes Payable		35,000			75,000			170,000
(Repayment) of Capital Lease Obligations		—			(2,627	)		(43,917	)
Due to Director		—			—			725,330
Issue of Debentures		—			—			2,078,305
Issue of Common Shares on Exercise of Stock Options		—			—			2,781
Issue of Common Shares on Exercise of Warrants		—			—			45,652
Issue of Common Shares for Cash		50,000			—			6,036,669
Refund of Share Subscription		—			—			(15,000	)
Issue (Redemption) of 10% Senior Convertible Debentures		—			300,393			(394,972	)
Net cash provided by financing activities		85,000			272,766			8,704,848
Effect of foreign exchange on cash and cash equivalents		63,345			6,082			136,434
Cash and Cash Equivalents
Increase (decrease) in cash and cash equivalents during the period		(261,128	)		210,426			1,975
Beginning of Period		263,103			27,009			—
End of Period	$	1,975		$	237,435		$	1,975

See notes to condensed consolidated financial statements.

F-5

CardioGenics Holdings Inc.

(A Development Stage Company)

Notes to Condensed Consolidated Financial Statements (unaudited)

April 30, 2014 and 2013

1. Nature of Business

CardioGenics Inc. (“CardioGenics”) was incorporated on November 20, 1997 in the Province of Ontario, Canada, and carries on the business of development and commercialization of diagnostic test products to the In Vitro Diagnostics testing market. CardioGenics has several test products that are in various stages of development.

CardioGenics’ business is that of a development-stage company, with a limited history of operations and whose revenues, to date, have been primarily comprised of grant revenue and Scientific Research Tax Credits from government agencies. There can be no assurance that the Company will be successful in obtaining regulatory approval for the marketing of any of the existing or future products that the Company will succeed in developing.

On October 27, 2009, the name of the Company was changed from JAG Media Holdings, Inc. to CardioGenics Holdings, Inc.

2. Basis of Presentation

In the opinion of management, the unaudited condensed interim consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary to present fairly the condensed interim consolidated financial position of CardioGenics Holdings Inc. and its subsidiaries under generally accepted accounting principles in the United States (“US GAAP”) as of April 30, 2014, their results of operations for the three and six months ended April 30, 2014 and 2013, and the period from November 20, 1997 (date of inception) to April 30, 2014, changes in deficiency for the six months ended April 30, 2014 and cash flows for the six months ended April 30, 2014 and 2013, and the period from November 20, 1997 (date of inception) to April 30, 2014. CardioGenics Holdings Inc. and its subsidiaries are referred to together herein as the “Company”. Pursuant to rules and regulations of the SEC, certain information and disclosures normally included in financial statements prepared in accordance with US GAAP have been condensed or omitted from these consolidated financial statements unless significant changes have taken place since the end of the most recent fiscal year. Accordingly, these condensed interim consolidated financial statements should be read in conjunction with the consolidated financial statements, notes to consolidated financial statements and the other information in the audited consolidated financial statements of the Company as of October 31, 2013 and 2012 (the “Audited Financial Statements”) included in the Company’s Form 10-K that was previously filed with the SEC on February 13, 2014 and from which the October 31, 2013 consolidated balance sheet was derived.

The results of the Company’s operations for the six months ended April 30, 2014 are not necessarily indicative of the results of operations to be expected for the full year ending October 31, 2014.

The accompanying condensed interim consolidated financial statements have been prepared using the accounting principles generally accepted in the United States of America applicable to a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

The Company has incurred operating losses and has experienced negative cash flows from operations since inception. The Company has an accumulated deficit at April 30, 2014 of approximately $45.7 million. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. The Company has funded its activities to date almost exclusively from debt and equity financings. These conditions raise substantial doubt about the Company’s ability to continue as a going concern.

F-6

CardioGenics Holdings Inc.

(A Development Stage Company)

Notes to Condensed Consolidated Financial Statements (unaudited)

April 30, 2014 and 2013

The Company will continue to require substantial funds to continue research and development, including preclinical studies and clinical trials of its products, and to commence sales and marketing efforts, if the FDA and other regulatory approvals are obtained. In order to meet its operating cash flow requirements management’s plans include financing activities such as private placements of its common stock and issuances of convertible debt instruments. Management is also actively pursuing industry collaboration activities including product licensing and specific project financing.

While the Company believes it will be successful in obtaining the necessary financing to fund its operations, meet revenue projections and manage costs, there are no assurances that such additional funding will be achieved and that it will succeed in its future operations. The accompanying condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts of liabilities that might be necessary should the Company be unable to continue in existence.

3. Summary of Significant Accounting Policies.

Derivative Instruments

The Company’s derivative liabilities are related to embedded conversion features of the Notes Payable. For derivative instruments that are accounted for as liabilities, the derivative instrument is initially recorded at its fair value and is then re-valued at each reporting date, with changes in fair value recognized in earnings each reporting period. The Company uses the Black-Scholes model to value the derivative instruments at inception and subsequent valuation dates and the value is re-assessed at the end of each reporting period, in accordance with Accounting Standards Codification (“ASC”) 815. Derivative instrument liabilities are classified in the consolidated balance sheet as current or non-current based on whether or not the net-cash settlement of the derivative instrument could be required within twelve months of the consolidated balance sheet date.

Beneficial Conversion Charge

The intrinsic value of beneficial conversion features arising from the issuance of convertible debentures with conversion rights that are in-the-money at the commitment date is recorded as debt discount and amortized to interest expense over the term of the debentures. The intrinsic value of a beneficial conversion feature is determined after initially allocating an appropriate portion of the proceeds received from the sale of the debentures to any detachable instruments, such as warrants, included in the sale or exchange based on relative fair values.

4. Income Taxes

Based on the Company’s evaluation, management has concluded that there are no significant tax positions requiring recognition in the condensed interim consolidated financial statements.

The Company has incurred losses in Canada since inception, which have generated net operating loss carryforwards for income tax purposes. The net operating loss carryforwards arising from Canadian sources as of April 30, 2014, approximated $9,615,000 (2013 - $6,750,000) which will expire from 2015 through 2033. All fiscal years as originally filed have been assessed. Claims relating to research and development credits are open for review for the fiscal years ended October 2013, 2012, 2011, 2010, 2009, 2008 and 2007 and July 2009.

F-7

CardioGenics Holdings Inc.

(A Development Stage Company)

Notes to Condensed Consolidated Financial Statements (unaudited)

April 30, 2014 and 2013

As of April 30, 2014, the Company had net operating loss carryforwards from US sources of approximately $41,305,000 (2012 - $40,769,000) available to reduce future Federal taxable income which will expire from 2020 through 2033. Returns for the years 2008 through 2013 are yet to be filed.

For the six months ended April 30, 2014 and 2013, the Company’s effective tax rate differs from the statutory rate principally due to the net operating losses for which no benefit was recorded.

5. Notes Payable

On November 19, 2012 the Company entered into an agreement (“Line”) with JMJ Financial (“Lender”) whereby the Company may borrow up to $350,000 from the Lender in increments of $50,000. The Line is subject to an original issue discount of $50,000. Advances under the Line (“Notes”) have a maturity date of one year from the date of the advance. If the advance is repaid within three months the advance is interest free. If not repaid within three months, the advance may not be repaid before maturity and carries interest at 5%. The Lender has the right at any time to convert all or part of the outstanding principal and accrued interest (and any other fees) into shares of fully paid and non-assessable shares of common stock of the Company at a price equal to the lesser of $0.23 and 60% of the lowest trade price in the 25 trading days previous to the conversion. Unless agreed in writing by the parties, at no time will the Lender convert any amount owing under the Line into common stock that would result in the Lender owing more than 4.99% of the common stock outstanding.

A summary of the Notes is as follows:

	April 30, 2014			October 31, 2013
Convertible Note Payable, due June 27, 2014	$	-		$	25,000
Convertible Note Payable, due September 26, 2014		12,653			35,000
Convertible Note Payable, due February 20, 2015		35,000			-
Debt Discount - value attributable to conversion feature attached to notes, net of accumulated amortization of $14,104 and $11,983		(33,549	)		(48,017	)
Total		14,104			11,983
Less: Current portion		14,104			11,983
Total Long-term portion	$	-		$	-

As described in further detail in Note 6, “Derivative Liabilities”, the Company determines the fair value of the embedded derivatives and records them as a discount to the Notes and as a derivative liability. The discount to the Notes is amortized to Loss (Gain) in Change in Value of Derivative Liability over the life of the Note or until conversion. The amount charged to Loss (Gain) in Change in Value of Derivative Liability for the three and six months ended April 30, 2014 and 2013 was $23,465 and $819, respectively. Upon conversion of the Notes and related interest and original issue discount to Common Stock, any remaining unamortized discount is charged to financing expense. During the three and six months ended April 30, 2014 and 2013, Notes in the principal amount of $37,497 and $47,347, respectively, plus interest and original issue discount totaling $8,437 and $10,654, respectively, were exchanged for 464,658 and 564,658 common shares, respectively.

F-8

CardioGenics Holdings Inc.

(A Development Stage Company)

Notes to Condensed Consolidated Financial Statements (unaudited)

April 30, 2014 and 2013

6. Derivative Liabilities

Convertible notes - embedded conversion features:

The Notes meet the definition of a hybrid instrument, as defined in Accounting Standards Codification (ASC) 815. The hybrid instrument is comprised of a i) a debt instrument, as the host contract and ii) an option to convert the debentures into common stock of the Company, as an embedded derivative. The embedded derivatives derive their value based on the underlying fair value of the Company’s common stock. The embedded derivatives are not clearly and closely related to the underlying host debt instrument since the economic characteristics and risk associated with these derivatives are based on the common stock fair value.

The Company determines the fair value of the embedded derivatives and records them as a discount to the Notes and a derivative liability. The Company has recognized a derivative liability of $74,445 and $99,702 at April 30, 2014 and October 31, 2013, respectively. Accordingly, changes in the fair value of the embedded derivative are immediately recognized in earnings and classified as a gain or loss on the embedded derivative financial instrument in the accompanying statements of operations.

The Company estimated the fair value of the embedded derivatives using a Black Scholes model with the following assumptions: conversion price $0.078 per share according to the agreements; risk free interest rate of .11%; expected life of 1 year; expected dividend of zero; a volatility factor of 154%, as of April 30, 2014. The expected lives of the instruments are equal to the contractual term of the conversion option. The expected volatility is based on the historical price volatility of the Company’s common stock. The risk-free interest rate represents the U.S. Treasury constant maturities rate for the expected life of the related conversion option. The dividend yield represents anticipated cash dividends to be paid over the expected life of the conversion option.

7. Fair Value Measurements

As defined by the ASC, fair value measurements and disclosures establish a hierarchy that prioritizes fair value measurements based on the type of inputs used for the various valuation techniques (market approach, income approach and cost approach). The levels of hierarchy are described below:

● Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities.

● Level 2: Inputs other than quoted market prices that are observable for the asset or liability, either directly or indirectly; these include quoted prices for similar assets or liabilities in active markets, such as interest rates and yield curves that are observable at commonly-quoted intervals.

● Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions, as there is little, if any, related market activity.

F-9

CardioGenics Holdings Inc.

(A Development Stage Company)

Notes to Condensed Consolidated Financial Statements (unaudited)

April 30, 2014 and 2013

The following table summarizes the financial liabilities measured at fair value on a recurring basis as of April 30, 2014, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

									Total Increase
	Quoted Prices in								(Reduction)
	Active Markets for		Significant Other		Significant				in Fair Value
Balance Sheet	Identical Assets or		Observable Inputs		Unobservable		April 30, 2014		Recorded at
Location	Liabilities (Level 1)		(Level 2)		Inputs (Level 3)		Total		April 30, 2014
Liabilities:
Derivative liability – on Notes Payable	$	-	$	-	$	74,445	$	74,445	$	23,465

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liability, or derivative liabilities related to the senior secured convertible notes and warrants, for the six months ended April 30, 2014:

Balance at beginning of period	$	99,702
Additions to derivative instruments		35,000
Change in fair value of derivative liabilities		819
Settlements		(61,076	)
Balance at end of period	$	74,445

8. Debentures Payable

In February 2013, shareholder loans were converted on a dollar-for-dollar basis for Series A Convertible Debenture Units (the “A Units”). Each A Unit includes a debenture having a term of three years, bearing interest at 10%, and a warrant having a term of three years. The debentures are convertible at any time into common shares of the Company’s stock at a price of $0.25 per share. The warrants entitle the holder to purchase 2 times the number of common shares of the Company’s stock allowed in conjunction with the debentures at any time up to three years.

A summary of the Debentures is as follows:

	April 30, 2014			October 31, 2013
Series A Convertible Debentures Payable, interest at 10% per annum to maturity at February 27, 2016	$	282,482		$	288,584
Series B Convertible Debentures Payable, interest at 10% per annum to maturity at May 31, 2016		500,000			500,000
Series B Convertible Debentures Payable, interest at 10% per annum to maturity at June 3, 2016		141,423			148,653
Debt Discount - value attributable to conversion feature attached to notes		(509,949	)		(634,047	)
Total		413,956			303,190
Less: Current portion		-			-
Total Long-term portion	$	413,956		$	303,190

Debt discount is amortized to interest expense over the life of the debentures. The amount amortized to interest expense for the period was $124,098.

F-10

CardioGenics Holdings Inc.

(A Development Stage Company)

Notes to Condensed Consolidated Financial Statements (unaudited)

April 30, 2014 and 2013

9. Stock Based Compensation

Stock-based employee compensation related to stock options for the six months ended April 30, 2014 and 2013 amounted to $-0-.

The following is a summary of the common stock options outstanding, granted, forfeited or expired and exercised under the Plan:

			Weighted
			Average
			Exercise
	Options		Price
Outstanding – October 31, 2012		30,000	$	0.90
Granted		—		—
Forfeited/Expired		—		—
Exercised		—		—
Outstanding – October 31, 2013		30,000	$	0.90
Granted		—		—
Forfeited/Expired		—		—
Exercised		—		—
Outstanding – April 30, 2014		30,000	$	0.90

Options typically vest immediately at the date of grant. As such, the Company does not have any unvested options or unrecognized compensation expense at April 30, 2014.

10. Warrants

Outstanding warrants are as follows:

	April 30, 2014		October 31, 2013
Issued to Flow Capital Advisors Inc. on settlement of lawsuit in August 2011, entitling the holder to purchase 1 common share in the Company at an exercise price of $0.30 per common share up to and including August 23, 2016		250,000		250,000
Issued to Flow Capital Advisors Inc. on settlement of lawsuit August 2011, entitling the holder to purchase 1 common share in the Company at an exercise price of $0.50 per common share up to and including August 23, 2016		250,000		250,000
Issued to Flow Capital Advisors Inc. on settlement of lawsuit August 2011, entitling the holder to purchase 1 common share in the Company at an exercise price of $0.75 per common share up to and including August 23, 2016		500,000		500,000
Issued to Flow Capital Advisors Inc. on settlement of lawsuit August 2011, entitling the holder to purchase 1 common share in the Company at an exercise price of $1.00 per common share up to and including August 23, 2016		500,000		500,000
Issued to Flow Capital Advisors Inc. on settlement of lawsuit August 2011, entitling the holder to purchase 1 common share in the Company at an exercise price of $0.75 per common share up to and including August 23, 2016		500,000		500,000
Issued to debenture holders February 2013 entitling the holders to purchase 1 common share in the Company at an exercise price of $0.25 per common share up to and including February 27, 2016		600,000		600,000
Issued to debenture holders May 2013 entitling the holders to purchase 1 common share in the Company at an exercise price of $0.15 per common share up to and including June 3, 2016		750,000		750,000
Issued to debenture holders June 2013 entitling the holders to purchase 1 common share in the Company at an exercise price of $0.15 per common share up to and including June 3, 2016		232,500		232,500
Issued to consultants on August 5, 2013 entitling the holders to purchase 1 common share in the Company at an exercise price of $0.15 per common share up to and including August 4, 2023		2,500,000		2,500,000
Issued to consultants on August 5, 2013 entitling the holders to purchase 1 common share in the Company at an exercise price of $0.10 per common share up to and including August 4, 2023		1,500,000		1,500,000
Issued to consultant on September 3, 2013 entitling the holder to purchase 1 common share in the Company at an exercise price of $0.50 per common share up to and including July 31, 2018		500,000		500,000
Issued to shareholder on October 29, 2013 entitling the holder to purchase 1 common share in the Company at an exercise price of $0.15 per common share up to and including October 29, 2016		250,000		250,000
Issued to shareholder on November 7, 2013 entitling the holder to purchase 1 common share in the Company at an exercise price of $0.15 per common share up to and including November 7, 2016		125,000		-
Total Warrants outstanding		8,457,500		8,332,500

F-11

CardioGenics Holdings Inc.

(A Development Stage Company)

Notes to Condensed Consolidated Financial Statements (unaudited)

April 30, 2014 and 2013

11. Issuance of Common Stock

During the six months ended April 30, 2014, the Company issued the following common shares:

Issued for services rendered	116,279
Issued to shareholder for cash at $0.25 per share	200,000
Issued on conversion of notes payable	564,658
Issued on settlement of suit	700,000
Issued to minority shareholders on conversion of subsidiary’s shares	296,538
	1,877,475

12. Net Loss per Share

The following table sets forth the computation of weighted-average shares outstanding for calculating basic and diluted earnings per share (EPS):

	Three Months Ended April 30,				Six Months Ended April 30,
	2014		2013		2014		2013
Weighted-average shares - basic		60,447,704		56,676,166		59,915,908		56,676,166
Effect of dilutive securities		—		—		—		—
Weighted-average shares - diluted		60,447,704		56,676,166		59,915,908		56,676,166

Basic earnings per share “EPS” and diluted EPS for the three and six months ended April 30, 2014 and 2013 have been computed by dividing the net loss available to common stockholders for each respective period by the weighted average shares outstanding during that period. All outstanding options, warrants and shares to be issued upon the exercise of the outstanding options and warrants and conversion of debt representing 12,918,436 and 2,917,085 incremental shares, respectively, have been excluded from the three and six months ended April 30, 2014 and 2013 computation of diluted EPS as they are antidilutive given the net losses generated.

13. Supplemental Disclosure of Cash Flow Information

	For the Six Months Ended
	April 30
	2014		2013
Cash paid during the year for:
Interest	$	7,834	$	6,735
Income taxes	$	—	$	—
Non-cash financing activities
Conversion of notes payable	$	58,001	$	—
Settlement of derivative liability	$	61,076	$	—
Issuance of shares on settlement of suit	$	189,000	$	—

14. Commitments and Contingent Liabilities

Lawsuit

On April 22, 2009, the Company was served with a statement of claim from a former employee claiming compensation for wrongful dismissal and ancillary causes of action including payment of monies in realization of his investment in the Company, with an aggregate claim of $514,000. On January 3, 2014 the suit was settled for cash consideration of $10,000 plus 700,000 common shares.

F-12

CardioGenics Holdings Inc.

(A Development Stage Company)

Notes to Condensed Consolidated Financial Statements (unaudited)

April 30, 2014 and 2013

15. Subsequent Events

(i)	On May 20, 2014, notes payable amounting to $15,500, including interest and original discount, were converted for 258,333 common shares in the Company’s stock.
(ii)	In May 2014, an officer of the Company advanced $22,810 to the Company.
(iii)	In June 12, 2014, the Company sold $1.3 million of its common stock in a private placement to European institutional and other investors. Closing of the transaction is subject to listing of the shares on the NewConnect Market of the Warsaw Stock Exchange. As a result of this financing, the Company will issue 12 million shares of common stock to European investors (13 entities in total, including three institutional investors) at $.11 per share.

F-13

Item 2. Management’s Discussion and Analysis of Financial Condition and 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 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

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, derivative liability, 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 six months ended April 30, 2014.

Related Party Transactions

None

Off-Balance Sheet arrangements

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

Results of operations

Six months ended April 30, 2014 as compared to six months ended April 30, 2013

	Six Months
	Ended April 30,
	2014			2013			$ Change
Revenue	$	▬		$	▬		$	▬
Operating expenses:
Depreciation and amortization of property and equipment		5,428			6,967			(1,539	)
Amortization of patent application costs		3,416			3,429			(13	)
General and administrative expenses		268,045			205,647			62,398
Research and product development, net of investment tax credits		190,675			198,486			(7,811	)
Total operating expenses		467,564			414,529			53,035
Operating Loss		(467,564	)		(414,529	)		(53,035	)
Other expenses (income)
Interest expense and bank charges, net		237,580			36,716			200,864
Loss (gain) on change in value of derivative liability		819			(10,781	)		11,600
Loss (gain) on foreign exchange transactions		42,179			3,923			38,256
Net loss	$	(748,142	)	$	(444,387	)	$	(303,755	)

3

Revenues

During the six months ended April 30, 2014 and 2013 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 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 increase in general and administrative expenses is attributable primarily to an increase 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. Research and development expenses have remained relatively unchanged from the previous year.

Interest expense and bank charges

Interest expense consists primarily of interest on debentures and debt discount amortization on those debentures. The majority of the debentures were issued in the third quarter of 2013 so that the interest and discount in the 2014 period was substantially higher than that in 2013.

Three months ended April 30, 2014 as compared to three months ended April 30, 2013

	Three Months
	Ended April 30,
	2014			2013			$ Change
Revenue	$	▬		$	▬		$	▬
Operating expenses:
Depreciation of property and equipment		2,685			3,443			(758	)
Amortization of patent application costs		1,690			1,695			(5	)
General and administrative expenses		95,827			92,915			2,912
Research and product development, net of investment tax credits		105,192			95,042			10,150
Total operating expenses		205,394			193,095			12,299
Operating Loss		(205,394	)		(193,095	)		(12,299	)
Other expenses (income)
Interest expense and bank charges, net		125,658			32,892			92,766
Loss (gain) on change in value of derivative liability		23,465			(10,781	)		34,246
Loss (gain) on foreign exchange transactions		(14,766	)		(4,116	)		(10,650	)
Net loss	$	(339,751	)	$	(211,090	)	$	(128,661	)

4

Revenues

During the three months ended April 30, 2014 and 2013 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.

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. Research and development expenses in 2014 are greater than for the same period in 2013 due to the absence of scientific tax credits in the current period.

Interest expense and bank charges

Interest expense consists primarily of interest on debentures and debt discount amortization on those debentures. The majority of the debentures were issued in the third quarter of 2013 so that the interest and discount in the 2014 period was substantially higher than that in 2013.

Liquidity and Capital Resources

We have not generated significant revenues since inception. We incurred a net loss of approximately $748,000 and a cash flow deficiency from operating activities of $409,473 for the six months ended April 30, 2014. 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

In June 2014, the FASB issued ASU 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements. ASU 2014-10 eliminates the distinction of a development stage entity and certain related disclosure requirements, including the elimination of inception-to-date information on the statements of operations, cash flows and stockholders’ equity. The amendments in ASU 2014-10 will be effective prospectively for annual reporting periods beginning after December 15, 2014, and interim periods within those annual periods, however early adoption is permitted. The Company is currently evaluating the impact of ASU 2014-10 on the condensed consolidated financial statements.

5

Item 3. Quantitative and Qualitative Disclosure About Market Risk

N/A.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures:

Management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) of the Exchange Act) to provide reasonable assurance regarding the reliability of our financial reporting and preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. A control system, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Because of the inherent limitations in all control systems, internal controls over financial reporting may not prevent or detect misstatements. The design and operation of a control system must also reflect that there are resource constraints and management is necessarily required to apply its judgment in evaluating the cost-benefit relationship of possible controls.

Our management assessed the effectiveness of our internal controls over financial reporting for the quarter ended April 30, 2014 based on the criteria established inInternal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 1992. Based on such assessment, our management concluded that during the period covered by this report, our internal controls over financial reporting were not effective. Management has identified the following material weaknesses in our internal controls over financial reporting:

● lack of documented policies and procedures;

● there is no effective separation of duties, which includes monitoring controls, between the members of management;

● lack of resources to account for complex and unusual transactions; and

● inadequate coordination between executive and financial management that led to transactions not being properly recorded in the current period.

Management is currently evaluating what steps can be taken in order to address these material weaknesses.

(b) Changes in Internal Control over Financial Reporting:

During the fiscal quarter ended April 30, 2014, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

6

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

On April 22, 2009, the Company was served with a statement of claim from a former employee claiming compensation for wrongful dismissal and ancillary causes of action including payment of monies in realization of his investment in the Company, with an aggregate claim of $514,000. On January 3, 2014 the suit was settled for cash consideration of $10,000 plus 700,000 common shares.

Item 1A. Risk Factors

Not Applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

Item 6. Exhibits

31.1	Section 302 Certification of Chief Executive Officer*
31.2	Section 302 Certification of Chief Financial Officer*
32.1	Section 906 Certification of Chief Executive Officer and Chief Financial Officer*
101 INS	XBRL Instance Document**
101 SCH	XBRL Schema Document**
101 CAL	XBRL Calculation Linkbase Document**
101 LAB	XBRL Label Linkbase Document**
101 PRE	XBRL Presentation Linkbase Document**
101 DEF	XBRL Definition Linkbase Document**

*	Filed herewith
**	In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

7

SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CARDIOGENICS HOLDINGS INC.
Date: June 16, 2014	By:	/s/ Yahia Gawad
	Name:	Yahia Gawad
	Title:	Chief Executive Officer
Date: June 16, 2014	By:	/s/ James Essex
	Name:	James Essex
	Title:	Chief Financial Officer

8

EXHIBIT INDEX

31.1	Section 302 Certification of Chief Executive Officer*
31.2	Section 302 Certification of Chief Financial Officer*
32.1	Section 906 Certification of Chief Executive Officer and Chief Financial Officer*
101 INS	XBRL Instance Document**
101 SCH	XBRL Schema Document**
101 CAL	XBRL Calculation Linkbase Document**
101 LAB	XBRL Label Linkbase Document**
101 PRE	XBRL Presentation Linkbase Document**
101 DEF	XBRL Definition Linkbase Document**

*	Filed herewith
**	In accordance with Regulation S-T, the XBRL-formatted interactive data files that comprise Exhibit 101 in this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed.”

9