<PAGE>
As filed with the Securities and Exchange Commission on November 30, 1999
Registration No. 333-88309
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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PRE-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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CARDIODYNAMICS INTERNATIONAL CORPORATION
(Exact name of Registrant as specified in its charter)
CALIFORNIA 95-3533362
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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6175 Nancy Ridge Drive, Suite 300, San Diego, California 92121
(619) 535-0202
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
------------------------
Michael K. Perry
Chief Executive Officer
CardioDynamics International Corporation
6175 Nancy Ridge Drive, Suite 300, San Diego, California 92121
(619) 535-0202
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
Copy to:
David R. Snyder, Esq.
Pillsbury Madison & Sutro LLP
101 West Broadway, Suite 1800
San Diego, California 92101
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PROSPECTUS
5,221,500 SHARES
CARDIODYNAMICS INTERNATIONAL CORPORATION
COMMON STOCK
Our common stock is traded on the Nasdaq SmallCap Market under the symbol
"CDIC." On September 30, 1999, the closing sale price of CardioDynamics common
stock as reported on the Nasdaq SmallCap Market was $[ ] per share.
These shares of common stock are being sold by 53 various selling
shareholders, who obtained them through a private placement completed on May 28,
1999 at $1.00 per share. We will not receive any part of the proceeds from the
sale.
See "Risk Factors" on page 3.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of the prospectus. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is November 30, 1999.
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WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, and Chicago. Please
call the SEC at 1-800-SEC-0330 for further information on the public reference
rooms. Our SEC filings are also available to the public at the SEC's web site
at http://www.sec.gov.
The SEC allows us to "incorporate by reference" the information we file
with them which means that we can disclose important information to you by
referring you to those documents instead of having to repeat the information in
this prospectus. The information incorporated by reference is considered to be
part of this prospectus, and later information that we file with the SEC will
automatically update and supersede this information. We incorporate by
reference the documents listed below and any future filings made with the SEC
under Sections 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of 1934
until the selling shareholders sells all the shares.
-- Annual Report on Form 10-KSB for the year ended November 30, 1998;
-- Quarterly Reports on Form 10-QSB for the quarters ended February 28,
1999, May 31, 1999 and August 31, 1999;
-- Current Report on Form 8-K dated June 5, 1999 for an event on May 28,
1999; and
-- Registration Statement on Form 8-A filed with the SEC on April 19,
1984. This filing describes the terms, rights and provisions applicable
to our common stock.
You may request a copy of these filings, at no cost, by writing or telephoning
us at the following address:
Shareholder Services
6175 Nancy Ridge Drive, Suite 300
San Diego, CA 92121
(619) 535-0202
You should rely only on the information incorporated by reference or
provided in this prospectus or any supplement. We have not authorized anyone
else to provide you with different information. The selling shareholders will
not make an offer of these shares in any state where the offer is not permitted.
You should not assume that the information in this prospectus or any supplement
is accurate as of any date other than the date on the front of those documents.
This prospectus is part of a registration statement we filed with the SEC
(Registration No. 333-88309).
ABOUT CARDIODYNAMICS INTERNATIONAL CORPORATION
At CardioDynamics International Corporation, we develop, manufacture and
market heart monitoring devices which provide physicians with continuous data on
a wide range of parameters relating to blood flow and heart function. Unlike
other cardiac function monitoring technologies, our monitors are non-invasive.
Our primary products, the BioZR System, the BioZ(TM) Portable, and the
BioZ.com(TM) use a technology called thoracic electrical bioimpedance to obtain
data which is typically available only through a time-consuming, costly, and
potentially dangerous invasive procedure known as right-heart catheterization,
or as pulmonary artery catheterization.
Our principal executive offices are located at 6175 Nancy Ridge Drive,
Suite 300, San Diego, California 92121, and our telephone number is (619) 535-
0202. Our common stock trades on the Nasdaq Stock MarketSM, under the symbol
CDIC.
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RISK FACTORS
This offering involves a high degree of risk. You should carefully
consider the risks described below and the other information contained in this
prospectus before deciding to invest in shares of our common stock.
DEPENDENCE ON BIOZ(R) PRODUCT LINE WHOSE MARKET ACCEPTANCE IS UNCLEAR
Our future is dependent upon the success of the BioZ(R) product line and
similar products that are based on the same technology. The market for thoracic
electrical bioimpedance products is in a relatively early stage of development,
and it is possible that this market will never fully develop. The long-term
commercial success of the BioZ(R) product line and any follow-on products
requires widespread acceptance of our thoracic electrical bioimpedance products
as safe, efficient, and cost-effective. Widespread acceptance would represent a
significant change in medical practice patterns. Historically, some medical
professionals have indicated hesitancy in using thoracic electrical bioimpedance
products such as analog-based monitors previously manufactured by us. Invasive
procedures, such as pulmonary artery catheterization, are generally accepted in
the medical community and have a long history of use.
We have limited clinical data with which to demonstrate the clinical
benefits of our products. However, we have sponsored and plan to continue to
sponsor and/or conduct clinical trials that we hope will demonstrate consistent
clinical benefits resulting from the use of our products. We cannot be certain
that these clinical trials will be completed or if they will have a positive
outcome or if a positive outcome in these trials would be sufficient to enable
acceptance of the BioZ(R) product line by the medical community. We are unable
to predict whether, if at all, our products will be widely accepted by members
of the medical community.
The following conditions may limit the accuracy of our products, such as:
. Severe shock;
. Aortic valve insufficiency;
. Very high blood pressure;
. Abnormal heart rhythms;
. Heart rates greater than 180 beats per minute;
. Patients who are shorter than 47";
. Patients who weigh less than 66 lbs.;
. Extreme patient movement.
Failure of the BioZ(R) product line to gain widespread acceptance in the
medical community, and to maintain such acceptance, would negatively impact our
ability to stay in business.
HISTORY OF LOSSES AND EXPECTED CONTINUED LOSSES
Since our emergence from bankruptcy proceedings in 1993, we have had large
annual losses in the course of researching, developing and enhancing our
technology and products and establishing our sales, marketing, and
administrative organizations. We anticipate that our operating expenses will
increase substantially in the foreseeable future as we increase our sales and
marketing activities, expand our operations and continue the development of our
technology. Accordingly, we expect to incur additional losses in the future and
it is possible that we will never achieve or sustain revenue growth or
profitability.
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FUTURE ADDITIONAL CAPITAL REQUIREMENTS; NO ASSURANCE FUTURE CAPITAL WILL BE
AVAILABLE
Commercialization of the BioZ(R) product line and the development and
commercialization of any additional products will require substantial
expenditures. Our capital requirements will depend on numerous factors,
including:
. Our rate of sales growth--fast growth could actually increase our need
for additional capital to hire additional staff, purchase additional
component supplies, and supply additional support services;
. Our progress in marketing-related clinical evaluations and product
development programs--these programs represent potential avenues for
growth, but will require additional capital;
. Our receipt of, and the time required to obtain, regulatory clearances
and approvals--the longer regulatory approval takes, the more working
capital we need to support our regulatory and development efforts in
advance of sales;
. Resources we devote to the development, manufacture and marketing of our
products--any decision we make to improve, expand or simply change our
process, products or technology will require increased funds;
. Resources required to hire and develop medical sales representatives and
independent distributors and to develop internal manufacturing
capacity--requires substantial working capital;
. Facilities requirements--as we grow we may need additional
manufacturing, warehousing and administration facilities and the costs
of the facilities would be borne long before any increased revenue from
growth would occur;
. Market acceptance and demand for our products--although growth could
increase our capital needs, the lack of growth and continued losses
would also increase our need for capital; and
. Our ability to speed up hospitals' otherwise lengthy purchasing
processes by offering leasing programs as an alternative to outright
purchasing.
The timing and amount of such capital requirements cannot be accurately
predicted. We may be required to raise additional funds through public or
private financing, bank loans, collaborative relationships or other arrangements
earlier than expected. It is possible that banks, venture capitalists and other
investors may perceive our current debt load, our history of losses or our
technology's lack of acceptance as too great a risk to bear and, as a result,
such additional funding may not be available on attractive terms, or at all. If
we cannot obtain additional capital when needed we might be forced to agree to
unattractive finance terms, or to finance internally by discontinuing certain
operations, such as research and development, which we view as not essential to
day-to-day operations. Such decisions could impair our ability to go forward
with our current plans, or at all.
COMPETITION FROM OTHER PRODUCERS; AND TECHNOLOGICAL CHANGE WHICH MAY BENEFIT OUR
COMPETITORS
We compete with other companies that are developing and marketing non-
invasive hemodynamic monitors. We are also subject to competition from
invasive-technology companies, including Baxter Healthcare Corporation, which
have more established and larger marketing and sales organizations,
significantly greater financial and technical resources and a larger installed
base of customers than we do. Such competitors may be able to devote greater
resources to the development, promotion and sales of their products.
The current widespread acceptance of pulmonary artery catheterization, and
lack of widespread acceptance of thoracic electrical bioimpedance, is an
important competitive disadvantage that we must overcome. In addition, our
current and potential competitors may establish cooperative relationships with
large medical equipment companies to gain access to greater research and
development or marketing resources. Competition may result in price reductions,
reduced gross margins and loss of market share. Any of these could hurt our
business, results of operations and financial condition. It is possible that we
will not be able to compete successfully.
The introduction by others of products embodying new technologies and the
emergence of new industry standards could render our products obsolete and
unmarketable. Other companies may develop and introduce
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products and processes competitive with or superior to ours. In addition, other
technologies or products may be developed that have an entirely different
approach or means of accomplishing the intended purposes of our products.
Accordingly, our products' life cycles are difficult to estimate. To compete
successfully, we must continually develop and introduce new products that keep
pace with technological advancements, respond to evolving consumer requirements
and achieve market acceptance.
We may not succeed in satisfactorily and timely developing and introducing
additional products. Even if we succeed in developing and marketing products
that achieve market acceptance, our competitors may develop and market products
that will replace ours.
TECHNOLOGICAL CHANGE IS DIFFICULT TO PREDICT AND TO MANAGE
Although not in fact a new company, we currently face many of the
challenges that are typically faced by new companies just emerging from the
development phase. The BioZ(R) product line has required, and any future
products will require, substantial development efforts and compliance with all
governmental clearance/approval requirements. We have to continue to build up
our sales and marketing functions. We may encounter unforeseen technological or
scientific problems that may force abandonment or substantial change in the
development of a specific product or process. Technological change or product
developments by others may also have a significant negative effect on us.
ABILITY TO MANAGE GROWTH
If successful, we will experience a period of growth that could place a
significant strain upon our managerial, financial and operational resources.
Our infrastructure, procedures and controls may not be adequate to support our
operations and to achieve the rapid execution necessary to fully exploit any
future market opportunity for our products. Our future operating results will
also depend on our ability to complete our geographic network of direct sales
persons and distributors, expand our sales and marketing organizations, and fill
out our support staff organization. If we are unable to manage expansion
effectively, our business, results of operations and financial condition will
suffer. However, we are not promising you that such expansion or growth will
occur.
CONTROL BY OUR CO-CHAIRMEN
Allen E. Paulson and James C. Gilstrap, the co-chairmen of CardioDynamics,
beneficially own, directly or through CardioDynamics Holdings, LLC, which they
control, approximately 45% of the outstanding shares of our common stock
(including shares owned by others which CardioDynamics Holdings, LLC has the
right to vote). In addition, Mr. Paulson's sons beneficially own another 7% of
the outstanding shares of common stock. Accordingly, Messrs. Paulson and
Gilstrap, as a group, are able to control CardioDynamics and direct our affairs
and business, including any future issuances of common stock or other
securities, merger and acquisition decisions, declaration of dividends and the
election of directors. Further, in their position as holders of our stock, they
have no duty to act in the best interests of CardioDynamics. Our stock price
and our ability to raise capital could be injured if they were to sell even a
portion of their holdings on the open market.
WE MAY NOT CONTINUE TO RECEIVE NECESSARY APPROVALS FROM THE FOOD AND DRUG
ADMINISTRATION
Our products and activities are subject to extensive regulation by the FDA
and other governmental authorities. Delays in receipt of, or failure to obtain,
regulatory clearances and approvals, or any failure to comply with regulatory
requirements, could have a very negative effect on our business.
Our thoracic electrical bioimpedance products are subject to extensive and
rigorous regulation by the FDA and, to varying degrees, by state and foreign
regulatory agencies. Under the federal Food, Drug, and Cosmetic Act (the "FDC
Act"), the FDA regulates the clinical testing, manufacture, labeling, packaging,
marketing, distribution and record keeping for medical devices, in order to
ensure that medical devices distributed in the United States are safe and
effective for their intended use.
Before a new device can be introduced into the market, the manufacturer
generally must obtain either FDA 510(k) clearance or approval of a pre-market
approval application. Following submission of a 510(k) or PMA application, the
manufacturer may not market the new device until an order is issued by the FDA
granting clearance
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or approval, which can entail an expensive, lengthy and uncertain process. We
have received a marketing clearance for the BioZ(R) System, the BioZ(TM)
Portable and the BioZ.com(TM). However, such clearances are subject to continued
FDA audits and can be rescinded. Further, we plan to submit additional new
products for FDA approval in the future. It is possible that our future products
might not gain FDA approval in a timely fashion, or at all. It is also possible
that our current products may someday lose their FDA approval.
We are also subject to routine inspection by the FDA and state agencies,
such as the California Department of Health Services, for compliance with Good
Manufacturing Practice (GMP) requirements, Medical Device Reporting requirements
and other applicable regulations. Although we work hard at attempting to comply
with all governmental regulations, it is possible that an inspector could
someday find a violation. Such a violation could result in government action
ranging from warning letters to fines to criminal prosecution. Should we ever
incur a significant penalty it is possible it would be detrimental to us. The
FDC Act requires that medical devices be manufactured in accordance with Good
Manufacturing Practice requirements.
Good Manufacturing Practice requirements specify, among other things, that:
. the manufacturing process be regulated and controlled by the use of
written procedures;
. the ability to produce devices which meet the manufacturer's
specifications be validated by the extensive and detailed testing of
every aspect of the process; and
. any deficiencies in the manufacturing process or in the products
produced be investigated and detailed records kept.
Manufacturing facilities are subject to FDA inspection on a periodic basis
to monitor compliance with current GMP requirements. Labeling and promotional
activities are regulated by the FDA and, in certain circumstances, by the
Federal Trade Commission. Current FDA enforcement policy prohibits the
marketing of approved medical devices for unapproved uses. For any medical
device cleared through the 510(k) process, modifications or enhancements that
could significantly affect the safety or effectiveness of the device or that
constitute a major change to the intended use of the device require a new 510(k)
submission. If the FDA requires us to submit a new 510(k) notice for any
product modification, we may be prohibited from marketing the modified product
until the 510(k) notice is cleared by the FDA.
The FDA regulates computer software that performs the function of a
regulated device or that is intimately associated with a given device, such as
control software for diagnostic devices like our products. The FDA is
reevaluating its regulation of such software, and if the FDA undertakes
increased or more rigorous regulation of such software, the BioZ(R) product line
and related products may become subject to further regulatory processes and
clearance requirements.
Laws and regulations regarding the manufacture, sale and use of medical
devices are subject to change and depend heavily on administrative
interpretations. Future changes in the regulations or interpretations made by
the FDA or other regulatory bodies, with possible retroactive effect, may
adversely affect us.
WE MAY NOT RECEIVE APPROVALS BY FOREIGN REGULATORS WHICH ARE NECESSARY FOR
FOREIGN SALES
Sales of medical devices outside of the United States are subject to
foreign regulatory requirements that vary from country to country. If we or our
international distributors fail to obtain or maintain required pre-market
approvals or fail to comply with foreign regulations, foreign regulatory
authorities may require us to file revised governmental notifications, cease
commercial sales of our products in the applicable countries, or otherwise cure
the problem Such enforcement action by regulatory authorities could be costly.
In order to sell our products within the European Economic Area, we have to
comply with the European Commission's Medical Device Directive and to affix a
"CE" marking on our products to attest such compliance. In November 1998 we
received authorization from TUV Rhineland of North America to place the CE Mark
on our BioZ.com(TM). However, future regulatory changes could limit our ability
to use the CE mark and any new products we develop may not qualify for the CE
mark. Failure to obtain authorization to use the CE mark or loss of such
authorization would render us unable to sell our products in the European
Economic Area and this would limit our potential.
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THIRD-PARTY REIMBURSEMENT; PRICING PRESSURES
Our commercial success will depend in part on the availability of adequate
reimbursement from third-party healthcare payers, such as government and private
health insurers and managed care organizations. Third-party payers are
increasingly challenging the pricing of medical products and services. Even
with an FDA approved device, third-party payers may not cover the device and
related services, or they may place significant restrictions on the
circumstances in which coverage will be available. Medicare reimbursement for
use of the BioZ(R) product line is now available under the heading of
plethysmography, but private third-party payers are not required to follow
Medicare's lead. We may not be able to obtain a specific code for reimbursement
of thoracic electrical bioimpedance tests in a reasonable time frame, or at all,
from either Medicare or private third-party payers. In addition, reimbursement
may not be at or stay at price levels sufficient to allow medical professionals
to realize an appropriate return on an investment in our products. Downward
pricing pressure in the industry could hurt our operations.
Our business plan contemplates an income stream from sales of disposable
sensors which are compatible with an installed base of our monitors. We may be
subject to price competition from other sensor manufacturers.
DEPENDENCE ON MANAGEMENT AND OTHER KEY PERSONNEL
We are dependent upon a limited number of key management and technical
personnel and we do not have insurance on these people. The loss of the
services of one or more of such key employees could hurt our business. In
addition, our success depends upon our ability to attract and retain additional
highly qualified sales, management, manufacturing and research and development
personnel. We face intense competition in our recruiting activities and we may
not be able to attract and/or retain qualified personnel.
DEPENDENCE ON RIVERTEK MEDICAL SYSTEMS FOR DEVELOPMENT SERVICES AND OTHER THIRD
PARTIES FOR DEVELOPMENT AND MANUFACTURING SERVICES
Our strategy for development and commercialization of certain of our
products depends upon entering into various arrangements with third parties and
upon the subsequent success of these parties in performing their obligations.
It is possible that we will not be able to negotiate acceptable arrangements in
the future or that our existing arrangements will not be successful. We rely
heavily on contracted development services, particularly from Rivertek Medical
Systems, Inc. Also, we currently assemble our BioZ(R) product line from
components manufactured by others. Therefore, we are dependent on contract
manufacturers.
SMALL MARKET FLOAT CAN PRODUCE BOTH STOCK PRICE VOLATILITY AND A POTENTIAL LACK
OF LIQUIDITY
Market float is the aggregate value of all of a company's publicly traded
stock. Our market float is smaller than that of many other publicly traded
companies. Because our market float is smaller, changes in the opinion of one
investor or one analyst can have a significant effect on our stock price. As a
result, the market price of our common stock is likely to be highly volatile and
could be subject to wide fluctuations in response to various factors beyond our
control, including:
. Quarterly variations in operating results;
. Announcements of technological innovations, new products or pricing by
our competitors;
. Changes in, or failure to meet, financial estimates of securities
analysts;
. The rate of adoption by physicians of thoracic electrical bioimpedance
technology in targeted markets;
. Timing of patent and regulatory approvals;
. Timing and extent of technological advancements;
. Results of clinical studies;
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. The sales, by the Selling Shareholders or other persons, of derivative
securities relating to CardioDynamics stock such as entering into short
sales contracts which obligate the party to sell their shares for less
than current market value in the future;
. General market conditions.
In addition, the stock market has experienced significant price and volume
fluctuations that have affected the market prices of the stock of many medical
device companies and that often have been unrelated to the operating performance
of such companies. These broad market fluctuations may directly influence the
market price of our common stock. Our somewhat small market float may not be
entirely adequate to provide market liquidity and mitigate stock price
volatility.
RELIANCE ON PATENTS AND PROPRIETARY TECHNOLOGY
Although we believe that we have effective patent protection, our patents
and proprietary technology may not be able to prevent effective competition by
others and our products could possibly be found to infringe the rights of
others. Intellectual property litigation, whether defensive or offensive, would
have no certain outcome other than to drain our resources.
The validity and breadth of claims in medical technology patents involve
complex legal and factual questions. Future patent applications may not be
issued, the scope of any patent protection may not exclude competitors and it
may not provide competitive advantages to us. Further, our patents may be found
to be invalid, and other companies may claim rights in or ownership of the
patents and other proprietary rights held or licensed by us. Also, our existing
patents might not cover products we want to bring out in the future. Moreover,
when our key patents expire, the inventions will enter the public domain.
Since patent applications in the United States are maintained in secrecy
until patents issue, our patent applications may infringe patents that may be
issued to others. In the event our products are found to infringe patents held
by competitors, we may have to modify our product to avoid infringement, and it
is possible that our modified products would not be commercially successful.
WE COULD BE REQUIRED TO ISSUE ADDITIONAL SHARES OF COMMON STOCK
The holders of warrants to purchase our common stock and certain purchasers
of our common stock in our May 1999 private placement could require us to issue
additional shares of common stock to them pursuant to anti-dilution rights we
have provided them. These rights would cause us to issue additional common
stock upon exercise of their warrants if we sell common stock at a price less
than the exercise price of their warrants or issue additional common stock to
the purchasers in the private placement if the market price falls below certain
target levels. If we need to sell common stock at a time when the market price
for our shares is depressed, these anti-dilution rights could further depress
the market price and could, in turn, impair our ability to raise needed capital.
ANTICIPATED RESALES OF COMMON STOCK
We have filed or will file registration statements with the SEC covering
the potential resale by certain shareholders of up to 9,750,000 shares of common
stock (including the shares subject to this prospectus). The existence of a
substantial number of shares of common stock subject to immediate resale could
depress the market price for the common stock and, in turn, impair our ability
to raise needed capital.
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LOW STOCK PRICE COULD RESULT IN OUR BEING DE-LISTED FROM NASDAQ AND SUBJECT US
TO REGULATIONS WHICH COULD REDUCE OUR ABILITY TO RAISE FUNDS
If our stock price were to drop below $1.00 per share and remain below
$1.00 per share for an extended period of time, certain NASDAQ regulations would
require the de-listing of our shares and then our shares could no longer be
traded on NASDAQ. In such an event, our shares could only be traded on over-
the-counter bulletin board systems. This method of trading could significantly
impair or completely remove our ability to raise new capital.
In the event that we were de-listed from NASDAQ due to low stock price, we
might be subject to certain rules, called penny stock rules, that impose
additional sales practice requirements on broker-dealers who sell such
securities. For any transaction involving a penny stock the rules require,
among other things, the delivery, prior to the transaction, of a disclosure
schedule required by the SEC relating to the market for penny stocks. The
broker-dealer also must disclose the commissions payable both to the broker-
dealer and the registered representative and current quotations for the
securities, and monthly statements must be sent disclosing recent price
information.
In the event our common stock becomes characterized as a penny stock, our
market liquidity could be severely affected. In such event, the regulations
relating to penny stocks could limit the ability of broker-dealers to sell our
common stock and thus, the ability of purchasers in this offering to sell their
common stock in the secondary market.
RISKS ASSOCIATED WITH INTERNATIONAL ACTIVITIES
We believe it is possible that international sales will represent a
meaningful portion of revenue in the future (in fiscal 1998 international sales
accounted for approximately 15% of our revenue). This would require significant
management attention and financial resources and subject us to the risks of
selling internationally. These risks include unexpected changes in regulatory
requirements, tariffs and other barriers and restrictions, and an adverse effect
from reduced protection for intellectual property rights. We would have to
comply with a variety of foreign laws. In addition, fluctuations in the rates
of exchange could increase the price in local currencies of our products in
foreign markets and make our products relatively more expensive than
competitors' products that are denominated in local currencies.
PRODUCT LIABILITY RISK AND PRODUCT RECALL; LIMITED INSURANCE COVERAGE
The nature of our business exposes it to risks of product liability or
product recalls that are typical in the medical devices industry. Medical
devices as complex as ours frequently contain errors or failures, especially
when first introduced or when new versions are released. Our products are
designed to be used in certain procedures where there is a high risk of serious
injury or death. Such risks will exist even with respect to those products that
have received, or may in the future receive, regulatory clearance for commercial
sale.
We did not carry product liability insurance during certain periods before
May 15, 1995. So far, this has not hurt us. Since then, we have maintained
product liability insurance at levels that we believe are sufficient and
consistent with industry standards for companies with our current sales levels.
We intend to increase our product liability insurance policy limits as sales
grow. Currently, our product liability insurance policy limits are $5,000,000
per occurrence and $5,000,000 in the aggregate. Our product liability insurance
may not be adequate and it is possible that such insurance coverage may not
continue to be available on commercially reasonable terms or at all. In
addition, product liability claims or recalls could hurt us in various ways even
if we have adequate insurance coverage.
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UNCERTAINTY AND POTENTIAL NEGATIVE EFFECTS OF HEALTHCARE REFORM
The healthcare industry is undergoing fundamental changes resulting from
political, economic and regulatory influences. In the United States,
comprehensive programs have been proposed that seek to:
. Increase access to health care for the uninsured;
. Control the escalation of healthcare expenditures within the economy;
. Use of health care reimbursement policies to help balance the federal
budget.
We anticipate that Congress and state legislatures will continue to review and
assess such proposals, and public debate of these issues will likely continue.
We cannot predict which, if any, of such reform proposals will be adopted and
when they might be adopted. Other countries also are considering healthcare
reform. Significant changes in healthcare systems could have a substantial
impact on the manner in which we conduct our business and could disrupt our
strategies.
NO DIVIDENDS
We do not intend to pay any cash dividends on the common stock any time
soon. Payment of such cash dividends would, in any event, be prohibited or
limited under the terms of our bank loans.
YEAR 2000 RISKS
Many computer systems experience problems handling dates beyond the year
1999. This issue will impact virtually any business that relies on computers.
In addition to our own potential problems, there are governmental agencies,
financial institutions, utilities and other basic service providers that may
encounter problems that are outside of our control. In order to correct this
issue, some computer hardware and software will need to be modified prior to the
year 2000 in order for it to remain functional. We have taken steps to assess
the internal readiness of our computer systems and the compatibility of our
products for handling the year 2000 issue. We have created a Year 2000 task
force which is addressing these issues. The project has been broken down into
the following phases.
. Awareness: To create awareness of the potential business implications of
the Year 2000 challenge within CardioDynamics. Our employees, when
appropriate, will be kept informed of the news and issues related to the
Year 2000 issue. We have focused on both our information technology
systems as well as our products.
. Inventory and Assessment: We have inventoried all of our computer
software and hardware as well as facilities, telecommunications, and
external interfaces. Significant third party vendors will be contacted
to determine their Year 2000 readiness.
. Renovation: As problems are discovered, strategies will be developed to
either correct the problem or determine if new equipment or software is
necessary.
. Testing: Testing of our systems will continue to occur to determine
whether they are performing reliably under Year 2000 conditions. All of
our internal systems and workstations have been successfully tested for
Year 2000 compliance.
. Implementation: Upon successful completion of the testing process the
assets will be reintroduced into production in order to allow adequate
time to prevent any unforeseen circumstances.
As of August 31, 1999 we have completed the awareness and inventory and
assessment stages and anticipate completing any necessary renovation, testing
and implementation within the next two months. We have already determined that
our internal information systems, including individual workstations and our
manufacturing requirements planning system, are certified as Year 2000
complaint. Additionally, our newest products have been specifically tested for
Year 2000 performance and no significant Year 2000 problems have been
identified. We are still in the process of certifying key third party vendors'
Year 2000 compliance. Renovation and testing has begun as problems are
identified. In addition, we have and
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<PAGE>
continue to consider contingency plans in the event that our internal systems,
products or suppliers are not Year 2000 compliant.
We plan to have all stages of the Year 2000 project completed no later than the
fall of 1999. Thus far, we have not had to spend significant amounts of money
through this stage of the process. We currently believe that the cost of
addressing this issue will be less than $50,000 and will not have a significant
effect on us. Based on our assessments, the most likely worst case scenario
could include: vendors of our most important goods and services, or suppliers
of our necessary energy, telecommunications and transportation needs, failing to
provide us with the materials and services which are necessary to produce and
sell our products.
FORWARD-LOOKING STATEMENTS
This prospectus and the documents incorporated by reference into this
prospectus contain forward-looking statements that are based on current
expectations, estimates and projections about our industry, management's
beliefs, and assumptions made by management. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," and variations
of such words and similar expressions are intended to identify such forward-
looking statements. These statements are not guarantees of future performance
and are subject to certain risks, uncertainties and assumptions that are
difficult to predict; therefore, actual results may differ materially from those
expressed or forecasted in any forward-looking statements. Such risks and
uncertainties include those noted in "Risk Factors" above and in the documents
incorporated by reference. We undertake no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise.
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of shares of our
common stock by the selling shareholders.
SELLING SHAREHOLDERS
We completed a private placement of our common stock on May 28, 1999 in
which we sold an aggregate of 5,221,500 shares of common stock to 53 different
investors, the selling shareholders, for $1.00 per share. The subscription
agreements we entered into with each of the 53 investors provide that if the
average closing price for our common stock for the month of November 1999 is
less than $1.00, we must issue to each of the investors additional shares of
common stock, for no additional payment by the investors. The number of
additional shares we must issue in this case is calculated by dividing the
purchase price paid by the investor by the average closing price for the month
of November 1999, then deducting the number of shares initially purchased.
Except as otherwise indicated in this prospectus, the selling shareholders
have not had a material relationship with us within the past three years other
than as a result of ownership of our securities. The numbers set forth in the
column "Number of Shares Being Offered" below constitute all of the shares
(excluding the additional shares we might be required to issue on November 30,
1999) that the investors listed below, as the selling shareholders, may
distribute in this offering; however, there are currently no agreements,
arrangements or understandings with respect to the sale of any of the shares and
the table below assumes the sale of all shares. The shares are being registered
to permit public secondary trading of the shares, and the selling shareholders
may offer the shares for resale from time to time after the shares are issued
upon exercise.
In connection with the receipt of the shares, each selling shareholder
represented that it was acquiring the shares for investment and not with a view
to distributing our common stock, and that the selling shareholder was an
accredited investor, as defined in Rule 501(a) under the Securities Act. We
agreed in the subscription agreements that the shares purchased by the selling
shareholders would be registered for resale in a Registration Statement on Form
S-3. The registration rights provisions require us to bear all registration
expenses other than fees and expenses of counsel for the selling shareholders
and underwriting discounts and commissions and brokerage commissions and fees.
Accordingly, we filed with the Commission a Registration Statement on Form S-3,
of which this Prospectus forms a part, with respect to the resale of the shares
from time to time. We also agreed to prepare and file such amendments and
supplements to the Registration Statement as may be necessary to keep the
Registration Statement
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<PAGE>
effective until all of our common stock offered hereby has been sold or until
the shares are no longer, by reason of Rule 144 under the Securities Act,
required to be registered for resale.
The following table sets forth the name of the selling shareholders and the
number of shares of our common stock which may be offered pursuant to this
Prospectus (excluding the additional shares we might be required to issue on
November 30, 1999).
NUMBER OF SHARES
SELLING SHAREHOLDERS BEING OFFERED
----------------------------------------------------------- -------------------
Russell H. Bergen* 10,000
BWM Corporation 200,000
Marguerite C. Calvert F.B.O. The Calvert Family Trust 25,000
Catalyst Ventures, LLC 50,000
David W. Cortney 12,500
Crescent International Ltd. 100,000
Domain Partners IV, L.P. 1,464,897
DP IV Associates, L.P. 35,103
Daniel J. Epstein, Trustee Epstein Family Trust dtd 4/14/93 75,000
Richard E. Evans 12,500
Amy Factor 25,000
Lou Ferrero* 150,000
Edward H. Fish and Beverly C. Fish 50,000
Stephen Foster 25,000
Patrick Galvin 25,000
Cam L. Garner* 50,000
Eberhard Gersing & Lieselotte Gersing 10,000
Edward Goldzimmer, Trustee North County Pulmonary Medical 25,000
Group, Inc. Profit Sharing Plan
Howard E. Greene, Jr., Trustee Greene Family Trust 25,000
Kenneth E. Haigler 50,000
Harvey Family LLC 100,000
Heather Hejmanowski 50,000
Paul Hejmanowski 25,000
Kathryn Hendrickson 10,000
D.G. Hepp, Trustee, Rivertek Medical Systems, Profit Sharing 20,000
Plan and Trust*
Foster M. Johns, III** 125,000
Dean Witter Reynolds c/f Stephen W. Kenney Rollover IRA 25,000
Rollover IRA of Cheryl Calvert Kenney 20,000
John P. Lewis 25,000
Meldon Levy, M.D. 20,000
Theresa Levi** 50,000
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<PAGE>
NUMBER OF SHARES
SELLING SHAREHOLDERS BEING OFFERED
----------------------------------------------------------- -------------------
Stephen P. Loomis and Susan A. Loomis Trustees, 10,000
The Loomis Family Trust dtd 11/13/94*
Kenneth P. Marcus** 35,000
Richard O. Martin* 50,000
Paul T. Moher 50,000
John C. Miles 50,000
Robert J. Miles 50,000
George E. Morgan 30,000
Multi-Capital Corporation, Defined Benefit Plan 50,000
Thomas Osypka 25,000
Markus J. Osypka & Heike M. Hause-Osypka 40,000
Rhonda F. Pederson* 25,000
David M. Perry and Hilda K. Perry 65,000
Perry Children 1997 Trust, David M. Perry, Trustee, 5,000
FBO Kirstyn L. Perry, DTD*
Perry Children 1997 Trust, David M. Perry, Trustee, 5,000
FBO Katilyn M. Perry, DTD 7/30/97*
Reno Contracting Inc. 75,000
Marc Shalek 25,000
Steven Shapiro 46,500
Michael A. Smith 25,000
John E. Strobek, M.D., Ph.D. 20,000
Thomas F. Taft, Sr. 50,000
Richard Trayler* 100,000
Ralf von Ziegesar 1,500,000
=========
TOTALS 5,221,500
* Denotes shares beneficially owned by an officer or director of
CardioDynamics.
** Denotes shares beneficially owned by a principal of a distributor of
CardioDynamics.
PLAN OF DISTRIBUTION
We are registering the shares on behalf of the selling shareholders and any
donees and pledgees who may sell shares received from the named selling
shareholders after the date of this Prospectus. All costs, expenses and fees in
connection with the registration of the shares offered hereby (other than
certain fees and expenses of the selling shareholders' counsel) will be borne by
us. Brokerage commissions and similar selling expenses, if any, attributable to
the sale of shares will be borne by the selling shareholders. Sales of shares
may be effected by the selling shareholders from time to time in one or more
types of transactions (which may include block transactions) on the Nasdaq
SmallCap Market, in the over-the-counter market, in negotiated transactions,
through put or call transactions relating to the shares, through short sales of
shares, or a combination of such methods of sale, at market prices prevailing at
the time of sale, or at negotiated prices. Such transactions may or may not
involve brokers or dealers. Each selling shareholder has advised us that it has
not entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of its securities, nor is
there an underwriter or coordinating broker acting in connection with the
proposed sale of shares by the selling shareholders.
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<PAGE>
The selling shareholders may effect such transactions by selling shares
directly to purchasers or to or through broker-dealers, which may act as agents
or principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the selling shareholders and/or the
purchasers of shares for whom such broker-dealers may act as agents or to whom
they sell as principal, or both (which compensation as to a particular broker-
dealer might be in excess of customary commissions).
The selling shareholders and any broker-dealers that act in connection with
the sale of shares might be deemed to be "underwriters" within the meaning of
Section 2(11) of the Securities Act, and any commissions received by such
broker-dealers and any profit on the resale of the shares sold by them while
acting as principals might be deemed to be underwriting discounts or commissions
under the Securities Act. The selling shareholders may agree to indemnify any
agent, dealer or broker-dealer that participates in transactions involving sales
of the shares against certain liabilities, including liabilities arising under
the Securities Act.
Because the selling shareholders may be deemed to be "underwriters" within
the meaning of Section 2(11) of the Act, the selling shareholders will be
subject to the prospectus delivery requirements of the Securities Act. We have
informed the selling shareholders that the anti-manipulative provisions of
Regulation M promulgated under the Exchange Act may apply to its sales in the
market.
The selling shareholders also may resell all or a portion of the shares in
open market transactions in reliance upon Rule 144 under the Securities Act,
provided it meets the criteria and conforms to the requirements of such Rule.
When any selling shareholder notifies us that a material arrangement has
been entered into with a broker-dealer for the sale of shares through a block
trade, special offering, exchange distribution or secondary distribution or a
purchase by a broker or dealer, a supplement to this Prospectus will be filed,
if required, pursuant to Rule 424(b) under the Securities Act, disclosing (i)
the name of the selling shareholder and of the participating broker-dealer(s),
(ii) the number of shares involved, (iii) the price at which such shares were
sold, (iv) the commissions paid or discounts or concessions allowed to such
broker-dealer(s), where applicable, (v) that such broker-dealer(s) did not
conduct any investigation to verify the information set out or incorporated by
reference in this Prospectus and (vi) other facts material to the transaction.
In addition, when any selling shareholder notifies us that a donee or pledgee
intends to sell more than 500 shares, we will file a supplement to this
Prospectus.
In order to comply with the securities laws of certain states, if
applicable, the shares may be sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain states the shares may
not be sold unless they have been registered or qualified for sale or an
exemption from registration or qualification requirements is available and is
complied with.
LEGAL MATTERS
Our outside law firm, Pillsbury Madison & Sutro LLP, San Diego, California
will issue an opinion about the legality of the shares.
EXPERTS
The financial statements of CardioDynamics International Corporation as of
November 30, 1998 and 1997, and for the years then ended, have been incorporated
by reference herein and in the registration statement in reliance upon the
report of KPMG LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
INDEMNIFICATION
Section 317 of the California General Corporation Law allows companies to
indemnify their officers and directors against expenses, judgments, fines and
amounts paid in settlement under certain conditions and subject to certain
limitations.
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<PAGE>
Article Three of our Bylaws provides that we shall indemnify any person who
is or was a director, officer, employee or agent of ours, or any person who is
or was serving at our request as a director, officer, employee or agent of
another corporation, subject to certain limitations. In addition, expenses
incurred by a director, officer, employee or agent in defending a lawsuit by
reason of that person's relationship with us, may be paid by us in advance of
the final disposition of such lawsuit after we receive an undertaking by or on
behalf of such person to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by us.
Our Articles of Incorporation, as amended, provide that none of our
directors shall be liable for monetary damages in an action by or in
CardioDynamics' right for breach of a director's duties to us and our
shareholders, as set forth in Section 309 of the California Corporations Code.
However, such provision does not eliminate or limit the liability of a director:
(i) for acts or omissions that involve intentional misconduct or knowing
or culpable violation of law;
(ii) for acts or omissions that a director believes to be contrary to our
best interests or those of our shareholders or that involve the
absence of good faith on the part of a director;
(iii) for any transaction from which a director derives an improper
personal benefit;
(iv) for acts or omissions that show a reckless disregard of the
director's duty in circumstances in which the director was aware, or
should have been aware in the ordinary course of performing the
director's duties, of a risk of serious injury to us or to our
shareholders;
(v) for acts or omissions that constitute an unexecuted pattern of
inattention that amounts to an abdication of the director's duty to
us;
(vi) under Section 310 of the California Corporations Code; or
(vii) under Section 316 of the California Corporations Code.
Such provision eliminating liability does not eliminate or limit the liability
of an officer for any act or omission as an officer notwithstanding that the
officer is also a director or that his or her actions, if negligent or improper,
have been ratified by the directors.
We are authorized to provide indemnification of our agents (as defined in
Section 317 of the California Corporations Code) for breach of duty to us and
our shareholders through bylaw provisions or through agreements with the agents,
or both, in excess of the indemnification otherwise permitted by Section 317 of
the California Corporations Code, subject to the limits on such excess
indemnification set forth in Section 204 of the California Corporations Code.
We have entered into such indemnification agreements with each of our directors
and officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
CardioDynamics pursuant to these provisions, or otherwise, we have been advised
that, in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
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<PAGE>
CARDIODYNAMICS INTERNATIONAL CORPORATION
TABLE OF CONTENTS
Page
----
WHERE YOU CAN FIND MORE INFORMATION.............. 2
ABOUT CARDIODYNAMICS INTERNATIONAL CORPORATION... 2
RISK FACTORS..................................... 3
FORWARD-LOOKING STATEMENTS....................... 11
USE OF PROCEEDS.................................. 11
SELLING SHAREHOLDERS............................. 11
PLAN OF DISTRIBUTION............................. 13
LEGAL MATTERS.................................... 14
EXPERTS.......................................... 14
INDEMNIFICATION.................................. 14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution
The following table sets forth the various costs and expenses we are paying
with respect to the sale and distribution of the securities being registered.
All of the amounts shown are estimates except the SEC registration fee.
<TABLE>
<S> <C>
SEC Registration Fee........................................................... $ 4,093.45
Printing Expenses *............................................................ $ 1,000.00
Expenses associated with complying with various states' registrations*......... $ 3,000.00
Legal Fees and Expenses*....................................................... $ 3,000.00
Nasdaq SmallCap Market Listing Fee*............................................ $ 7,500.00
Accounting Fees and Expenses*.................................................. $ 2,000.00
Miscellaneous*................................................................. $ 1,406.55
Total........................................................................ $22,000.00
==========
</TABLE>
-------------------
*Estimated
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 317 of the California General Corporation Law allows companies to
indemnify their officers and directors against expenses, judgments, fines and
amounts paid in settlement under certain conditions and subject to certain
limitations.
Article Three of our Bylaws provides that we shall indemnify any person who
is or was a director, officer, employee or agent of ours, or any person who is
or was serving at our request as a director, officer, employee or agent of
another corporation, subject to certain limitations. In addition, expenses
incurred by a director, officer, employee or agent in defending a lawsuit by
reason of that person's relationship with us, may be paid by us in advance of
the final disposition of such lawsuit after we receive an undertaking by or on
behalf of such person to repay such amount if it shall ultimately be determined
that he or she is not entitled to be indemnified by us.
Our Articles of Incorporation, as amended, provide that none of our
directors shall be liable for monetary damages in an action by or in
CardioDynamics' right for breach of a director's duties to us and our
shareholders, as set forth in Section 309 of the California Corporations Code.
However, such provision does not eliminate or limit the liability of a director:
(i) for acts or omissions that involve intentional misconduct or knowing
or culpable violation of law;
(ii) for acts or omissions that a director believes to be contrary to our
best interests or those of our shareholders or that involve the
absence of good faith on the part of a director;
(iii) for any transaction from which a director derives an improper
personal benefit;
(iv) for acts or omissions that show a reckless disregard of the
director's duty in circumstances in which the director was aware, or
should have been aware in the ordinary course of performing the
director's duties, of a risk of serious injury to us or to our
shareholders;
II-1
<PAGE>
(v) for acts or omissions that constitute an unexecuted pattern of
inattention that amounts to an abdication of the director's duty to
us;
(vi) under Section 310 of the California Corporations Code; or
(vii) under Section 316 of the California Corporations Code;
Such provision eliminating liability does not eliminate or limit the liability
of an officer for any act or omission as an officer notwithstanding that the
officer is also a director or that his or her actions, if negligent or improper,
have been ratified by the directors.
We are authorized to provide indemnification of our agents (as defined in
Section 317 of the California Corporations Code) for breach of duty to us and
our shareholders through bylaw provisions or through agreements with the agents,
or both, in excess of the indemnification otherwise permitted by Section 317 of
the California Corporations Code, subject to the limits on such excess
indemnification set forth in Section 204 of the California Corporations Code.
We have entered into such indemnification agreements with each of our directors
and officers.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of
CardioDynamics pursuant to these provisions, or otherwise, we have been advised
that, in the opinion of the SEC, such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
ITEM 16. EXHIBITS
EXHIBIT NUMBER
5.1 Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of KPMG LLP, Independent Auditors.
23.2 Consent of Pillsbury Madison & Sutro LLP (included in Exhibit 5.1).
99.1 Form of Common Stock Subscription Agreement dated May 28, 1999
between the Company and the Purchasers of common stock (incorporated
by reference from CardioDynamics' Quarterly Report on Form 10-QSB
for the quarter ended May 31, 1999 Exhibit 10.3).
ITEM 17. UNDERTAKINGS
We hereby undertake:
(1) To file, during any period in which we offer or sell securities, a
post-effective amendment to this registration statement to include any
additional or changed material information on the plan of distribution;
(2) That, for determining liability under the Securities Act, each such
post-effective amendment shall be treated as a new registration statement of the
securities offered, and the offering of the securities at that time shall be
treated as the initial bonafide offering; and
(3) To file a post-effective amendment to remove from registration any
of the securities that remain unsold at the end of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the SEC such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by us of expenses incurred or paid by our director, officer, or
controlling person in the successful defense of any action, suit, or proceeding)
is asserted by such director, officer, or controlling person in connection with
the securities being registered, we will, unless in the opinion of our counsel
the question has been settled by controlling
II-2
<PAGE>
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by us is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, we certify that
we have reasonable grounds to believe that we meet all of the requirements for
filing on Form S-3 and have duly caused this Registration Statement to be signed
on our behalf by the undersigned, thereunto duly authorized, in the City of San
Diego, State of California, on the 30th day of November, 1999.
CARDIODYNAMICS INTERNATIONAL CORPORATION
By /s/ Michael K. Perry
--------------------------------------------
Michael K. Perry, Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Michael K. Perry Director and Chief Executive Officer November 30, 1999
-------------------------------------------- (Principal Executive Officer)
Michael K. Perry
/s/ Stephen P. Loomis Vice President, Finance and Chief November 30, 1999
-------------------------------------------- Financial Officer (Principal Financial
Stephen P. Loomis Officer and Principal Accounting Officer)
/s/ Louis P. Ferrero Director November 30, 1999
--------------------------------------------
Louis P. Ferrero *
/s/ Cam L. Garner Director November 30, 1999
--------------------------------------------
Cam L. Garner *
/s/ James C. Gilstrap Director November 30, 1999
--------------------------------------------
James C. Gilstrap *
/s/ Richard O. Martin Director November 30, 1999
--------------------------------------------
Richard O. Martin *
/s/ Allen E. Paulson Director November 30, 1999
--------------------------------------------
Allen E. Paulson *
</TABLE>
* by Michael K. Perry,
Attorney in-Fact
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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-3
UNDER
SECURITIES ACT OF 1933
CARDIODYNAMICS INTERNATIONAL CORPORATION
II-5
<PAGE>
EXHIBIT INDEX
-------------
Exhibit
Number Exhibit
------- -------
5.1 Opinion of Pillsbury Madison & Sutro LLP.
23.1 Consent of KPMG LLP, Independent Auditors.
23.2 Consent of Pillsbury Madison & Sutro LLP
(included in Exhibit 5.1).
99.1 Form of Common Stock Subscription Agreement dated May 28, 1999
between the Company and the Purchasers of common stock
(incorporated by reference from CardioDynamics' Quarterly Report
on Form 10-QSB for the quarter ended May 31, 1999 Exhibit 10.3).
II-6
<PAGE>
EXHIBIT 5.1
OPINION OF PILLSBURY MADISON & SUTRO LLP
October 1, 1999
CardioDynamics International Corporation
6175 Nancy Ridge Drive
Suite 300
San Diego, California 92121
Re: CardioDynamics International Corporation Registration
Statement on Form S-3 for Resale of 5,221,500 Shares
of common stock
Ladies and Gentlemen:
We have acted as counsel to CardioDynamics International Corporation, a
California corporation (the "Company"), in connection with the registration for
resale of 5,221,500 shares of common stock (the "Shares"). The Shares were
purchased pursuant to a private placement completed as of May 28, 1999, as
described in the Company's Registration Statement on Form S-3 ("Registration
Statement") filed with the Securities and Exchange Commission under the
Securities Act of 1933, as amended (the "Act").
This opinion is being furnished in accordance with the requirements of Item
16 of Form S-3 and Item 601(b)(5)(i) of Regulation S-B.
We have reviewed the Company's charter documents, the corporate proceedings
taken by the Company in connection with the original issuance of the Shares, and
a certificate of a Company officer regarding (among other things) the Company's
receipt of consideration upon the original issuance of the Shares. Based on
such review, we are of the opinion that the Shares are duly authorized, validly
issued, fully paid and nonassessable.
We consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement and to the reference to this firm under the caption "Legal Matters" in
the prospectus which is part of the Registration Statement. In giving this
consent, we do not thereby admit that we are within the category of persons
whose consent is required under Section 7 of the Act, the rules and regulations
of the Securities and Exchange Commission promulgated thereunder, or Item 509 of
Regulation S-B.
This opinion letter is rendered as of the date first written above and we
disclaim any obligation to advise you of facts, circumstances, events or
developments which hereafter may be brought to our attention and which may
alter, affect or modify the opinion expressed herein. Our opinion is expressly
limited to the matters set forth above and we render no opinion, whether by
implication or otherwise, as to any other matters relating to the Company or the
Shares.
Very truly yours,
/s/ Pillsbury Madison & Sutro LLP
EXHIBIT 5.1
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
The Board of Directors
CardioDynamics International Corporation:
We consent to the use of our report incorporated herein by reference and to the
reference to our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
San Diego, California
September 30, 1999
