<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X)QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED FEBRUARY 29, 1996
OR
( )TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
COMMISSION FILE NUMBER 0-11868
CARDIODYNAMICS INTERNATIONAL CORPORATION
CALIFORNIA 95-3533362
6155 CORNERSTONE COURT EAST, SUITE 125
SAN DIEGO, CALIFORNIA 92121
ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE: (619) 535-0202
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act 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
----- -----
Check whether the registrant has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes X No
----- -----
As of April 1, 1996, 22,010,053 shares of Common Stock were outstanding.
Transitional Small Business Disclosure Format (check one): Yes No X
----- -----
1
<PAGE>
CARDIODYNAMICS INTERNATIONAL CORPORATION
REPORT ON FORM 10-QSB
TABLE OF CONTENTS
Page No.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements: Balance Sheets as of
February 29, 1996 (Unaudited) and November 30,
1995 (Audited) 3
Statements of Operations (Unaudited) for the
three months ended February 29, 1996 and
February 28, 1995 5
Statements of Cash Flows (Unaudited) for the
three months ended February 29, 1996 and
February 28, 1995 6
Statements of Changes in Stockholders'
Equity (Deficit) for the three months ended
February 29, 1996 and fiscal year ended
November 30, 1995 7
Notes to the Financial Statements (Unaudited) 8
Item 2. Management's Discussion and Analysis or
Plan of Operation 9
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 2. Changes in Securities 11
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of
Security-Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
<PAGE>
CARDIODYNAMICS INTERNATIONAL CORPORATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
February 29, November 30,
1996 1995
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
Current assets:
Cash & cash equivalents $ 30,341 $ 7,441
Accounts receivable, less allowance
for doubtful accounts of $32,354 in 1996
and $32,354 in 1995 19,678 75,861
Short-term marketable securities 224,633 173,883
Inventory, net 352,202 263,382
Prepaid expenses 9,220 642
------------ ------------
Total current assets 636,074 521,209
------------ ------------
Property and equipment, net 164,725 166,304
------------ ------------
Other assets:
Deposits 6,615 6,615
Long-term marketable securities 109,005 85,568
------------ ------------
Total other assets 115,620 92,183
------------ ------------
Total assets $ 916,419 $ 779,696
------------ ------------
------------ ------------
</TABLE>
3
<PAGE>
CARDIODYNAMICS INTERNATIONAL CORPORATION
BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
February 29, November 30,
1996 1995
(Unaudited) (Audited)
------------ ------------
<S> <C> <C>
Current liabilities:
Accounts payable 91,055 186,027
Accrued expenses 64,380 84,532
Accrued compensation 18,766 47,857
Customer deposits - 26,075
Current portion of long-term debt 14,231 14,231
------------ ------------
Total current liabilities 188,432 358,722
Long-term debt, less current maturities 40,188 48,496
------------ ------------
Commitments and contingencies:
Redeemable preferred stock, no par,
500,000 shares authorized; issued
246,793 shares 616,986 616,986
------------ ------------
Stockholder's equity (deficit):
Common stock, no par, 50,000,000
shares authorized; issued and outstanding
18,051,433 shares in 1996 and
17,951,320 shares in 1995 4,620,084 4,594,858
Common stock subscribed 851,000 325,000
Accumulated deficit (5,382,020) (5,071,928)
Unrealized gain (loss) on investment
securities, no net tax provision (18,251) (92,438)
------------ ------------
Total stockholder's equity (deficit) 70,813 (244,508)
------------ ------------
Total liabilities and stockholders' equity $ 916,419 $ 779,696
------------ ------------
------------ ------------
</TABLE>
4
<PAGE>
CARDIODYNAMICS INTERNATIONAL CORPORATION
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended
February 29, February 28,
1996 1995
------------ ------------
<S> <C> <C>
Net revenues $61,010 $74,566
------------ ------------
Costs and expenses:
Cost of sales 32,731 77,477
Selling, general and administrative expenses 264,033 271,054
Provision for doubtful accounts - 9,000
Research and development 73,361 14,277
------------ ------------
Total costs and expenses 370,125 371,808
Other (expenses) income:
Interest expense (177) (3,677)
Other income 0 11,670
------------ ------------
Total other income (expenses) (177) 7,993
------------ ------------
Loss before income taxes (309,292) (289,249)
Provision for income taxes (800) (800)
------------ ------------
Net loss ($310,092) ($290,049)
------------ ------------
------------ ------------
Net loss per common share (0.01) (0.03)
------------ ------------
------------ ------------
Weighted average number of shares outstanding 20,788,570 9,213,798
------------ ------------
------------ ------------
</TABLE>
5
<PAGE>
CARDIODYNAMICS INTERNATIONAL CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For The Three Months Ended
February 29, February 28,
1996 1995
(Unaudited) (Unaudited)
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss ($310,092) ($290,049)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 10,770 5,625
Provision for doubtful accounts - 18,000
Changes in operating assets and liabilities:
Decrease in accounts receivable 56,183 30,445
(Increase) decrease in inventories (88,820) 12,112
(Increase) in other current assets (8,578) (5,014)
(Decrease) increase in accounts payable (94,972) 53,465
(Decrease) increase in accrued expenses (20,152) 93,864
(Decrease) in accrued compensation (29,091) (14,247)
(Decrease) in customer deposits (26,075) -
------------ ------------
Net cash used in operating activities (510,827) (95,799)
------------ ------------
Cash flows from investing activities:
Capital expenditures (9,191) -
------------ ------------
Net cash (used in) provided by investing
activities (9,191) 0
------------ ------------
Cash flows from financing activities:
Repayment of long-term borrowings (8,308) (127,584)
Increases in long-term borrowings 0 114,379
Proceeds from exercise of Class A Warrants 226 -
Proceeds from subscribed common stock 551,000 -
Proceeds from sale of common stock - 225,739
------------ ------------
Net cash provided by (used in) financing
activities 542,918 212,534
------------ ------------
Net increase in cash and cash equivalents 22,900 116,735
Cash and cash equivalents at beginning
of period 7,441 17,386
------------ ------------
Cash and cash equivalents at end of period $30,341 $134,121
------------ ------------
------------ ------------
</TABLE>
6
<PAGE>
CARDIODYNAMICS INTERNATIONAL CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
Common Stock Common Stock Unrealized Gain (Loss)
Issued and Outstanding Subscribed on Investment in Accumulated
Shares Amount Shares Amount Securities Deficit Total
---------------------- -------------------- ---------------------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at November 30, 1994 8,912,813 2,479,119 - (2,669,455) (190,336)
Issuance of common stock 8,688,507 2,028,239 2,028,239
---------
Issuance of common stock for
professional services 350,000 87,500 87,500
Common stock subscribed 1,300,000 325,000 325,000
Unrealized loss on investment
securities, no net tax provision (92,438) (92,438)
Net loss (2,402,473) (2,402,473)
---------- ---------- --------- -------- ---------- ----------- -----------
Balance at November 30, 1995 17,951,320 $4,594,858 1,300,000 $325,000 ($92,438) ($5,071,928) ($244,508)
---------- ---------- --------- -------- ---------- ----------- -----------
Issuance of common stock 100,000 25,000 (100,000) (25,000)
Common stock subscribed 2,204,000 551,000 551,000
Unrealized gain on investment
securities, no net tax provision 74,187 74,187
Exercise of Class A warrants 113 226 226
Net loss (310,092) (310,092)
---------- ---------- ---------- -------- ---------- ----------- -----------
Balance at February 29, 1996 18,051,433 $4,620,084 3,404,000 $851,000 ($18,251) ($5,382,020) $70,813
---------- ---------- ---------- -------- ---------- ----------- -----------
---------- ---------- ---------- -------- ---------- ----------- -----------
</TABLE>
7
<PAGE>
CARDIODYNAMICS INTERNATIONAL CORPORATION
NOTES TO THE FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED FEBRUARY 29, 1996
Note 1: Basis of Presentation:
The accompanying financial statements have been prepared in accordance
with the requirements for Form 10-QSB and therefore do not include all
information and footnotes which would be presented were such financial
statements prepared in accordance with generally accepted accounting principles.
These statements should be read in conjunction with the Company's audited
financial statements as presented in the Company's Form 10-KSB for the fiscal
year ended November 30, 1995. In the opinion of management, the information
contained herein reflects all adjustments necessary to make the results of
operations for the interim periods a fair statement of such operations. All
such adjustments are of a normal recurring nature.
8
<PAGE>
CARDIODYNAMICS INTERNATIONAL CORPORATION
REPORT ON FORM 10-QSB
PART I: FINANCIAL INFORMATION (CONTINUED)
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following discussion should be read in conjunction with the attached
financial statements and notes thereto, and with the Company's audited financial
statements for the fiscal year ended November 30, 1995.
RESULTS OF OPERATIONS
After the end of the second quarter of fiscal 1995, the Board of Directors
concluded that spending at the levels directed by the Chief Executive Officer
was unwise, replaced him, and instituted different strategies for marketing,
sales, administration and cash conservation. New management then determined
that selling efforts were inefficient, that inventory of saleable machines was
inadequate, that substantial product redesign was necessary and that quality
control and component supply issues needed to be resolved. New management
devoted the third and fourth quarters of fiscal 1995 and the first quarter of
fiscal 1996 toward attempting to put the Company's house in order internally on
these matters.
As a result, the Company's first quarter revenue was minimal (even less than the
first quarter revenues of fiscal 1995), and the Company incurred an operating
loss. Management anticipates that by late Spring 1996 it will be able to
introduce its digital BioZ System using the Company's proprietary Thoracic
Electrical Bioimpedance technology.
Operating costs were approximately 1/2% lower in the first quarter of fiscal
1996 than in the first quarter of fiscal 1995. However, the research and
development portion of the operating costs was up 81% in the first quarter of
fiscal 1996 as compared to the first quarter of fiscal 1995, due to the product
redesign effort.
The Company's number of shares outstanding increased significantly during fiscal
1995 and the first quarter of fiscal 1996 due to the necessity of selling shares
to CardioDynamics Holdings, LLC and to its individual members. CardioDynamics
Holdings, LLC obtained control of the Company in the first quarter of fiscal
1995.
9
<PAGE>
CARDIODYNAMICS INTERNATIONAL CORPORATION
REPORT ON FORM 10-QSB
PART I: FINANCIAL INFORMATION (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
Working capital at February 29, 1996 was $447,642 compared to $162,487 at
November 30, 1995. Such working capital levels are inadequate to sustain the
Company long at present sales levels. In the fiscal 1995 year-end audit
reports, the Company's auditors expressed substantial doubt about the Company's
ability to continue as a going concern. The Company was in bankruptcy
proceedings from March 6, 1992 to October 21, 1993.
To fund its operating losses, the Company is currently relying on periodic
purchases of unregistered common stock, and/or advances under a secured
convertible promissory note, by members of the Board of Directors and/or
CardioDynamics Holdings, LLC. There are no binding obligations for such
purchases or advances to continue.
10
<PAGE>
CARDIODYNAMICS INTERNATIONAL CORPORATION
REPORT ON FORM 10-QSB
PART II: OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
During October 1994, a complaint entitled B. BO SRAMEK AND HEVKA H.
SRAMEK V. CARDIODYNAMICS INTERNATIONAL CORPORATION was filed in San Diego County
Superior Court. The complaint sought damages of approximately $86,000 on behalf
of B. Bo Sramek, a former CDIc officer, for breach of an alleged Consulting
Services Agreement dated June 2, 1993. The complaint seeks additional damages
of approximately $45,000 on behalf of Hevka H. Sramek for the alleged breach of
an employment agreement by CDIc. The Company answered the complaint denying all
allegations and filed a cross-complaint seeking repayment of monies paid Hevka
H. Sramek in excess of the guidelines set forth in the Chapter 11 Bankruptcy
Plan of Reorganization. The case was tried in San Diego Superior Court in
January 1996, and on February 29, 1996, the Court awarded the Srameks $60,970.29
and the costs of their suit.
Item 2. CHANGES IN SECURITIES.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
None.
Item 5. OTHER INFORMATION.
Effective February 1, 1996, Jouko Rissanen resigned as Vice President
of CardioDynamics International Corporation.
In February 1996, Rhonda F. Pederson was promoted from Vice President
of Operations to the newly created position of Chief Operating Officer. In
January 1996, CDIc hired Dr. Markus J. Osypka to the newly created position of
Engineering Director, New Product Development. Dr. Osypka has a Ph.D. in
electrical engineering with applied research experience in electrical
bioimpedance, which is the basis of CardioDynamics' product line.
11
<PAGE>
CARDIODYNAMICS INTERNATIONAL CORPORATION
REPORT ON FORM 10-QSB
PART II: OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS.
27. Financial Data Schedule.
(b) REPORTS ON FORM 8-K.
None.
12
<PAGE>
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.
CARDIODYNAMICS INTERNATIONAL CORPORATION
Date: April 12, 1996 By: /s/ Richard E. Otto
---------------
Richard E. Otto
President and CEO
Date: April 12, 1996 By: /s/ Gayle A. Manakas
----------------
Gayle A. Manakas
Controller (Chief Accounting Officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
QUARTER ENDED FEBRUARY 29, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATMENTS.
</LEGEND>
<CIK> 0000719722
<NAME> CARDIODYNAMICS INT'L CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-START> DEC-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 39,561
<SECURITIES> 224,633
<RECEIVABLES> 19,678
<ALLOWANCES> 0
<INVENTORY> 352,202
<CURRENT-ASSETS> 636,074
<PP&E> 413,398
<DEPRECIATION> 248,673
<TOTAL-ASSETS> 916,419
<CURRENT-LIABILITIES> 188,432
<BONDS> 0
616,986
0
<COMMON> 5,471,084
<OTHER-SE> (18,251)
<TOTAL-LIABILITY-AND-EQUITY> 916,419
<SALES> 61,010
<TOTAL-REVENUES> 61,010
<CGS> 32,731
<TOTAL-COSTS> 370,125
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 177
<INCOME-PRETAX> (309,292)
<INCOME-TAX> 800
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (310,092)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> 0
</TABLE>
