<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-19567
CARDIAC SCIENCE, INC.
----------------------------------------------------------------
(Exact name of Small Business Issuer as specified in its charter)
DELAWARE 33-046568
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1176 MAIN STREET, SUITE C, IRVINE, CALIFORNIA 92614
--------------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code: (714) 587-0357
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 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
--- ---
The number of shares of the Common Stock of the registrant outstanding as of
November 4, 1997 was 4,528,728.
1
<PAGE>
CARDIAC SCIENCE, INC.
INDEX TO FORM 10-QSB
PART I. FINANCIAL INFORMATION
PAGE NO.
--------
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets
September 30, 1997 (Unaudited) and
December 31, 1996 3
Consolidated Condensed Statements of Operations (Unaudited)
Three and nine months ended September 30, 1997
and 1996 4
Consolidated Condensed Statements of Cash Flows (Unaudited)
Nine months ended September 30, 1997 and 1996 5
Consolidated Condensed Notes to Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
CARDIAC SCIENCE, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE>
<CAPTION>
(Unaudited)
SEPTEMBER 30, DECEMBER 31,
1997 1996
------------- ------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 797,785 $ 413,311
Trade accounts receivable-net 244,792 --
Inventory 197,236 --
Prepaid expenses 66,858 10,893
----------- -----------
Total current assets 1,306,671 424,204
Equipment, at cost, net 56,039 24,647
Goodwill, net of amortization of $21,904 635,234 --
Other Assets 4,012 4,012
----------- -----------
$ 2,001,956 $ 452,863
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank line of credit $ 42,125 $ --
Accounts payable and accrued expenses 522,600 183,671
Note Payable 85,309 --
----------- -----------
Total current liabilities 650,034 183,671
----------- -----------
Stockholders' Equity:
Preferred Stock, $.001 par value; 1,000,000
shares authorized, -0- Issued and outstanding
at September 30, 1997 and December 31, 1996 -- --
Common stock, $ 0.001 par value, 20,000,000
shares authorized, 4,528,728 Issued and
outstanding at September 30, 1997 and
3,265,603 at December 31, 1996 4,529 3,266
Common stock subscribed, 145,833 at
September 30, 1997 and 158,958 at
December 31, 1996 250,000 268,000
Additional paid in capital 6,859,080 4,952,981
Accumulated deficit (5,761,687) (4,955,055)
----------- -----------
Total stockholders' Equity 1,351,922 269,192
----------- -----------
$ 2,001,956 $ 452,863
----------- -----------
----------- -----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
CARDIAC SCIENCE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
SALES $ 380,050 $ -- $ 789,048 $ --
Cost of Sales 238,088 -- 447,535 --
----------- ---------- ---------- ----------
Gross Profit 141,962 -- 341,513 --
OPERATING EXPENSES:
Research and development 127,663 97,860 257,591 319,928
Selling expenses 100,059 -- 215,252 --
General and administrative 279,080 74,526 671,839 293,990
----------- ---------- ---------- ----------
LOSS FROM OPERATIONS (364,840) (172,386) (803,169) (613,918)
Interest income (expense) net (1,545) 8,248 (2,663) 32,097
----------- ---------- ---------- ----------
Loss before provision for income taxes (366,385) (164,138) (805,832) (581,821)
Provision for income taxes 695 414 800 797
----------- ---------- ---------- ----------
Net loss $ (367,080) $ (164,552) $ (806,632) $ (582,618)
----------- ---------- ---------- ----------
Net loss per share $ (.10) $ (.05) $ (.23) $ (.17)
----------- ---------- ---------- ----------
Number of shares used in the computation of
loss per share (See Note 3) 3,821,300 3,411,436 3,558,261 3,388,686
----------- ---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
CARDIAC SCIENCE, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------------
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss for the period $ (806,632) $ (582,618)
----------- ------------
Adjustments to reconcile net loss to net
Cash used by operating activities:
Depreciation and amortization 31,923 9,605
Changes in operating assets and liabilities (net of
Diagnostic Monitoring assets and liabilities acquired):
Trade receivables (115,217) --
Inventory (75,230) --
Prepaid expenses (42,733) 1,343
Accounts payable and accrued expenses 60,626 (24,853)
----------- ------------
(140,631) (13,905)
----------- ------------
Net cash used by operating activities (947,263) (596,523)
----------- ------------
Cash provided by investing activities:
Purchase of equipment (24,069) --
Cash acquired in Diagnostic Monitoring acquisition 43,223 --
----------- ------------
Net cash provided by investing activities 19,154 --
----------- ------------
Cash provided by financing activities:
Proceeds from line of credit 23,221 --
Net proceeds from issuance of and subscription for Common
Stock 1,289,362 18,901
----------- ------------
Net cash provided by financing activities 1,312,583 18,901
----------- ------------
Net increase (decrease) in cash and cash equivalents 384,474 (577,622)
Cash and cash equivalents beginning of period 413,311 1,177,806
----------- ------------
Cash and cash equivalents end of period $ 797,785 $ 600,184
----------- ------------
Supplemental cash flow disclosures:
Cash paid during the period for:
Income taxes $ -- $ 797
Interest $ -- $ --
Non cash investing and financing activities
On April 11, 1997, the Company acquired
Diagnostic Monitoring (see note 2) $ 600,000 $ --
Accounts payable and accrued interest
paid by issuance of common stock $ -- $ 13,402
</TABLE>
The accompanying notes are an integral part of the financial statements
5
<PAGE>
CARDIAC SCIENCE, INC.
CONSOLIDATED CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
SEPTEMBER 30, 1997
1. ORGANIZATION AND OPERATIONS OF THE COMPANY
Until the acquisition of Innovative Physician Services, Inc. d/b/a
Diagnostic Monitoring ("Diagnostic Monitoring") on April 11, 1997 (see note
2), Cardiac Science, Inc. ("Cardiac Science" or the "Company") was a
development stage company engaged in the development of a line of
non-surgical, non-invasive automatic external cardioverter defibrillator
("AECD-Registered Trademark-") devices (the "Products") for the treatment of
arrhythmias that lead to cardiac arrest. Diagnostic Monitoring develops,
manufactures and distributes cardiac devices and supplies, primarily PC-based
Ambulatory ECG ("Holter") systems and Holter recorders on a worldwide basis.
BASIS OF PRESENTATION AND CONTINUED EXISTENCE
The consolidated condensed financial statements include the accounts
of the Company and of its wholly-owned subsidiary, Diagnostic Monitoring. All
inter-company accounts and transactions have been eliminated in
consolidation.
From May 20, 1991 (inception) through September 30, 1997, the
Company incurred losses of approximately $5.8 million. Recovery of the
Company's assets is dependent upon future events, the outcome of which is
indeterminable. Additionally, successful completion of the Company's
development program and its transition, ultimately, to attaining profitable
operations is dependent upon achieving a level of revenues adequate to
support the Company's cost structure.
While the acquisition of Diagnostic Monitoring provides Cardiac
Science with a revenue base, additional capital will be needed to fulfill the
Company's research and product development goals. The Company raised
$1,500,000 (before offering costs) through a private placement of its Common
Stock (see note 3).
In the opinion of the Company's management, the accompanying
consolidated condensed unaudited financial statements include all adjustments
(which consist only of normal recurring adjustments) necessary for a fair
presentation of its financial position at September 30, 1997 and results of
operations and cash flows for the periods presented. Although the Company
believes that the disclosures in these financial statements are adequate to
make the information presented not misleading, certain information and
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
and should be read in
6
<PAGE>
conjunction with the Company's audited financial statements included in the
Company's 1996 Annual Report on Form 10-K/A No.1. Results of operations for
the three and nine months ended September 30, 1997 are not necessarily
indicative of results for the full year.
2. ACQUISITION OF DIAGNOSTIC MONITORING
On April 11, 1997, the Company acquired from Raymond W. Cohen, the
President and Chief Executive Officer of the Company, Diagnostic Monitoring,
a Nevada corporation engaged in the sale of medical diagnostic equipment,
particularly Holter technology, through a network of domestic and
international distributors, for 5,714.285 shares of the Company's Series A
Convertible Preferred Stock (the "Preferred Stock") plus a non-interest
bearing promissory note (the "Note") in the principal amount of $100,000,
payable in eighteen (18) equal consecutive monthly installments commencing
upon the earlier of April 9, 1999 or the completion of an equity financing by
the Company of not less than $2,000,000 of gross proceeds. Each share of
Preferred Stock is entitled to 1,000 votes per share; is convertible into
1,000 shares of the Company's common stock, par value $0.001 per share (the
"Common Stock"), at any time, and from time to time, at the holder's option,
without the payment of any additional consideration, and automatically shall
convert into 1,000 shares of Common Stock (subject to adjustment for any
reverse stock split, etc.) upon there being a sufficient number of authorized
but unissued shares of Common Stock to allow such conversion. On September
8, 1997, the Company effectuated a one-for-11.42857413 reverse stock split
and the shares of Preferred Stock automatically converted into Common Stock.
The total purchase price was estimated at $600,000, the fair market
value of Preferred Stock issued. The fair market value of the Preferred Stock
issued was estimated based on the trading value of the Common Stock less a
30% discount to take into consideration the lack of the ability to trade and
other features of the Preferred Stock. The fair market value of the Note
Payable represents the discounted value (at 11.25%) of the Note over 20
months.
The transaction was accounted for under the purchase method and the
purchase price was allocated to the fair market value of the assets and
liabilities acquired as follows:
Cash $ 43,223
Accounts receivable 129,575
Inventory 122,006
Other assets 13,232
Property and equipment 17,341
Goodwill 657,138
Bank line of credit (18,903)
Accounts payable and accrued expenses (280,637)
Note Payable (82,975)
---------
Preferred Stock Consideration $ 600,000
---------
---------
The $657,138 goodwill resulting from the purchase price allocation is
being amortized over 15 years
7
<PAGE>
using the straight-line method.
3. PRIVATE PLACEMENT
In January 1997, the Company entered into an advisory and consulting
agreement (the "Sorbus Agreement") with Sorbus Asset Strategies, S.A., a
Swiss company ("Sorbus"). Sorbus agreed, among other things, to locate, on a
best efforts basis, potential investors to purchase shares of Common Stock,
(the "Financing"). As a condition precedent to the Financing, the Sorbus
Agreement provides, among other things, that the Company shall have obtained
the approval of its Board of Directors and stockholders to amend the
Company's Certificate of Incorporation (i) to effectuate effect a
one-for-11.42857143 reverse stock split of the issued and outstanding shares
of the common stock, (the "Reverse Split") and (ii) to reduce the number of
authorized shares of Common Stock from 40,000,000 to 20,000,000 shares, (the
"Stock Reduction"). On April 9, 1997, the Board of Directors of the Company
unanimously approved the Reverse Split and the Stock Reduction. Stockholders
holding a majority of the issued and outstanding Common Stock and all of the
Preferred Stock approved the Reverse Split and the Stock Reduction on May 15,
1997. The Financing was consummated on August 29, 1997 when the Company sold
8,571,428 (750,000 post-Reverse Split) shares of Common Stock for $1,500,000
in gross proceeds.
On September 8, 1997, the Company effectuated the Reverse Split and
the Stock Reduction. The number of shares used in the computation of loss per
share for the periods presented have been restated to reflect the Reverse
Split.
4. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS- SFAS 128, SFAS 130
AND SFAS 131
In February 1997, the Financial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128,
Earnings Per Share". SFAS No. 128 requires companies to adopt its provisions
for fiscal years beginning after December 15, 1997 and requires restatement
of all prior period earnings per share ("EPS") data presented. Earlier
application is not permitted. SFAS No. 128 specifies the computation,
presentation and disclosure requirements for EPS. The implementation of SFAS
No. 128 is not expected to have a material effect on the EPS data presented
by the Company.
In June 1997, the FASB issued SFAS No. 130, "Reporting
comprehensive Income". SFAS No. 130 is effective for fiscal years beginning
after December 15, 1997 and requires restatement of earlier periods
presented, established standards for the reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. Comprehensive income is defined as the change in
equity of a business enterprise during a period from transactions and other
events and circumstances from nonowner sources. The implementation SFAS No.
130 is not expected to have a material effect on the Company's financial
statement presentation.
8
<PAGE>
In June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information". SFAS No. 131 is
effective for fiscal years beginning after December 15, 1997 and requires
restatement of earlier periods presented, establishes standards for the way
that a public enterprise reports information about key revenue-producing
segments in the annual financial statements and selected information in
interim financial reports. It also establishes standards for related
disclosures about products and services, geographic areas and major
customers. The Company intends to implement SFAS 131 in 1998 and does not
anticipate that this new format will have a material effect on the Company's
financial presentation.
9
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
GENERAL
The following discussion should be read in conjunction with the
consolidated condensed financial statements and notes thereto appearing
elsewhere in this Quarterly Report on Form 10-QSB.
The Company is engaged in the development of non-invasive automatic
defibrillator devices for the treatment of arrhythmias that lead to cardiac
arrest. The Company commenced operations in May 1991. Until its acquisition
of Diagnostic Monitoring in April 1997, its operations have consisted
primarily of research and development activities and clinical FDA testing.
Cardiac Science's Automatic External Cardioverter Defibrillator
(AECD-Registered Trademark-) devices are designed to treat persons suffering
from, or at high risk of, life-threatening arrhythmias (abnormal rhythms of
the heart), such as ventricular tachycardia (dangerously rapid heart rate)
and ventricular fibrillation (quivering of the heart), that lead to cardiac
arrest. The AECD-Registered Trademark- products will continuously monitor a
patient's cardiac activity, detect abnormalities within seconds, and
automatically, without human interaction, via disposable defibrillator pads
attached to the patient's chest, transmit electrical shock (defibrillation)
to convert the patient's heart to a normal rhythm. Reducing time to
defibrillation is widely recognized as the most effective way to increase
survival from cardiac arrest.
There are four AECD-Registered Trademark- devices under development
by the Cardiac Science. The Company's initial product, the
Powerheart-Registered Trademark- monitor-defibrillator for in-hospital use,
received 510(k) clearance from the United States Food and Drug Administration
in October 1997 to allow it to begin marketing its Powerheart-Registered
Trademark- AECD-Registered Trademark- in the United States. The additional
AECD-Registered Trademark- products under development include a
Powerheart-Registered Trademark- bedside monitor-defibrillator for use in
alternative care and nursing home institutions, a light-weight, ambulatory
vest model which can be worn continuously by at-risk cardiac patients and a
fully automatic public access defibrillator which can be used by first
responders and other non-technical individuals outside of the hospital
environment.
The Company's primary objective is to pioneer the commercialization
of AECD-Registered Trademark- devices that obviate the need for human
intervention to successfully treat arrhythmias that lead to cardiac arrest.
The Company believes that the Products will be ideally suited for
hospitalized and non-hospitalized patients temporarily at risk (periods
ranging from days to months) of suffering cardiac arrest. Through its
investment in clinical research, the Company believes it has established
competitive functional and technological advantages in the development of
AECD-Registered Trademark- devices. The Company has been issued one patent,
and has one additional patent under exclusive license relating to its
AECD-Registered Trademark- technology.
In September 1997 the Company entered into a contract with RELA,
Inc., a contract engineering and medical device manufacturer, to complete
development and begin production of the Powerheart-Registered Trademark-
commercial model, a process that may take up to nine months. Upon completion
of the commercial model, the Company plans to sell the Powerheart-Registered
Trademark- through a strategic US distribution partner and overseas through
it's existing international distribution network.
10
<PAGE>
Diagnostic Monitoring develops, manufactures and distributes cardiac
devices and supplies, primarily PC-based Ambulatory ECG ("Holter") systems
and Holter recorders on a worldwide basis. Sales are made through qualified
domestic and international distributors, pursuant to strategic distribution
agreements, and managed by Diagnostic Monitoring employees on a
country-by-country basis. Distribution is currently in place with market
coverage in 47 countries worldwide. In the United States, products are sold
by distributors, as well as directly by Diagnostic Monitoring to hospitals,
physicians, and medical centers at prices that reflect market conditions.
Diagnostic Monitoring's products are primarily made in the United States.
Certain products and components are subcontracted and manufactured to
Diagnostic Monitoring's specifications.
RESULTS OF OPERATIONS
For the three and nine months ended September 30, 1997, the Company had
revenues of $380,050 and $789,048, and a net loss of $367,080 and $806,632,
respectively, compared to no revenues and a net loss of $164,552 for the
three month period ended September 30, 1996 and no revenues and a net loss of
$582,618 for the nine month period ending September 30, 1996.
Revenues generated for the quarter and nine months ended September 30,
1997 are attributable to the sale of products by its subsidiary, Diagnostic
Monitoring. Gross profit on sales for the quarter ending September 30, 1997
was 37% and gross profit for the nine months ending September 30, 1997 was
43%. Sales of Diagnostic Monitoring's Windows 95-Registered Trademark-
compatible Holter software and systems, Holter Recorder products, and related
Holter supplies represented 82% of the Company's total revenue. Sales of
Spirometers accounted for 8.5% and PC-based Electrocardiographs accounted for
5.0%. Export sales of Diagnostic Monitoring's products to international
countries represented 71% of the Company's revenue, with the balance of sales
coming from within the United States.
The increased loss for the quarter and nine months ended September 30,
1997 is primarily attributable to increased operating costs offset by an
increase in gross margins.
Research and development expenses increased to $127,663 and decreased to
$257,591, respectively, for the three and nine months ended September 30,
1997, from $97,860 and $319,928, respectively, for the three and nine months
ended September 30, 1996. The increase in research and development expenses
for the quarter ending September 30, 1997 was due to pre-production costs
associated with the commercialization of the Company's initial
AECD-Registered Trademark-product, the Powerheart-Registered Trademark-. The
decrease for the nine month period ending September 30, 1997 is related to
decreased overall expenses for initial research, engineering and clinical
tests for the Powerheart-Registered Trademark- product.
General and administrative expenses increased to $279,080 and $671,839,
respectively, for the three and nine months ended September 30, 1997, from
$74,526, and $293,990 for the three and nine months ended September 30, 1996,
primarily due to increased professional fees, increases in personnel and
related costs, and moving costs.
11
<PAGE>
Sales and marketing expenses for the three and nine months ended
September 30, 1997 were $100,059 and $215,252, respectively, compared to no
expenses in the three and nine months ending September 30, 1996 reflecting
the marketing efforts for Diagnostic Monitoring's products.
Interest income (expense) net, decreased to ($1,545) and ($2,664)
respectively, for the three and nine months ended September 30, 1997, from
$8,248 and $32,097 for the same period in the prior year, due to the decrease
in investable cash as a result of expenditures for operations and the
interest expense inputed on the note payable resulting from the Diagnostic
Monitoring acquisition.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1997, the Company had cash and cash equivalents of
$797,785 and working capital of $656,637 as compared to cash and cash
equivalents of $413,311 and negative working capital of $240,533 at December
31, 1996. Cash of $947,263 was used for operations, and cash of $19,154 and
$1,312,583 was provided by investing and financing activities respectively.
Cash provided by financing activities relate mainly to the Financing as
described in Note 3 to the Financial Statements.
In April 1997, the Company acquired Diagnostic Monitoring, a corporation
involved in the worldwide distribution of cardiac devices and supplies. The
acquisition of Diagnostic Monitoring provides Cardiac Science with a revenue
base, however, additional capital will be required to finance the Company's
research and product development plans.
On August 29, 1997, the Company consummated a private placement of
8,571,428 (750,000 post-reverse split) shares of common stock, par value
$0.001 per share to various foreign investors pursuant to Regulation S
promulgated under the Securities Act of 1933, as amended. The gross proceeds
of the offering totaled $1,500,000.
The Company expects to incur substantial additional operating losses as
a result of expenditures related to the marketing and sales support
functions, research and product development activities, completion and
initiation of clinical trials for current and future products and costs
associated with the development of a commercial model and pre-production
costs for the Powerheart-Registered Trademark- product. The timing and
amounts of these expenditures will depend upon many factors, some of which
are beyond the Company's control, such as the results of clinical trials, the
requirements for and time required to obtain approval of 510(k) applications
or other regulatory approvals, the progress of the Company's research and
development programs, and market acceptance of the Company's products.
Until the Company achieves sustained profitability through increased
sales (including the sale of the Powerheart-Registered Trademark- product)
and cost containment, it will remain dependent upon its ability to obtain
outside financing either through the issuance of additional shares of its
common or preferred stock or through borrowing. Based on the Company's
current business plan, working capital should be sufficient to enable the
company to meet its obligations through the second quarter of 1998. There
are no assurances that the Company will be successful in obtaining the
additional financing required to sustain its operations. The condensed
consolidated financial statements do not give effect to any adjustments
12
<PAGE>
that might be necessary if the Company were unable to meet its obligations or
continue as a going concern.
FORWARD LOOKING STATEMENTS
The Company desires to take advantage of certain provisions of the
Private Securities Litigation Reform Act of 1995 that provide a "safe harbor"
for forward looking statements made by or on behalf of the Company. Except
for the historical information contained herein, the matters discussed herein
are forward looking statements. The forward looking statements contained in
this Quarterly Report on Form 10-QSB are subject to various risks,
uncertainties and other factors that could cause actual results to differ
materially from the results anticipated in such forward looking statements.
Included among the important risks, uncertainties and other factors are those
hereinafter discussed, the accuracy of which is necessarily subject to risks
and uncertainties.
Few of the forward looking statements in this Quarterly Report on Form
10-QSB deal with matters that are within the unilateral control of the
Company. There is substantial regulation of the manufacture and sale of
medical products, including many of the Company's products, by governmental
agencies in the United States and foreign countries. These government
agencies often have considerable discretion in determining whether and when
to approve the marketing of the Company's products that have not yet received
such approval.
The availability of equity and debt financing to the Company is affected
by, among other things, domestic and world economic conditions and the
competition for funds. Rising interest rates might affect the feasibility of
debt financing that is offered. Potential investors and lenders will be
influenced by their evaluations of the Company and its products and
comparisons with alternative investment opportunities.
Many of the Company's competitors have greater financial resources and
technical capabilities than the Company, which may enable such competitors to
design and produce superior products or to market their products in a manner
that achieves commercial success even in the face of technical superiority on
the part of the Company's products.
The Company's patents may not offer effective protection against
competitors. Competitors may be able to design around the Company's patents
or employ technologies not covered by such patents. In addition, the
Company's patents may be challenged, and even if such patents are upheld, the
diversion of financial and human resources associated with patent litigation
could adversely affect the Company. The Company may be found to be violating
the patents of others and forced to obtain a license under such patents or
modify the design of its products.
Rapid technological developments are expected to continue in the
industries in which the Company competes. The Company may not be able to
develop, manufacture and market products which meet changing user
requirements or which successfully anticipate or respond to technological
changes in a cost-effective and timely manner.
13
<PAGE>
CARDIAC SCIENCE, INC.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None.
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
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 11 -- Computation of Per Share Information.
b) The Company filed a report on Form 8-K dated September 9, 1997
with the Commission relating to the sales of equity securities
pursuant to Regulation S promulgated under the Securities Act
of 1933, as amended.
14
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the issuer caused this report to be signed on its behalf by the
undersigned, hereunto duly authorized.
CARDIAC SCIENCE, INC.
Date: November 4, 1997 /s/ RAYMOND W. COHEN
---------------------
Raymond W. Cohen
President,
Chief Executive Officer and
Chief Financial Officer
15
<PAGE>
EXHIBIT 11
CARDIAC SCIENCE, INC.
COMPUTATION OF PER SHARE INFORMATION
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------------- -------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Earnings:
Net income (loss) $ (367,080) $ (164,552) $ (806,633) $ (582,618)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Computation of primary per share information:
Shares: Weighted average number of
shares outstanding 3,821,300 3,411,436 3,558,261 3,388,686
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Primary earnings per share:
Net income (loss) $ (.10) $ (.05) $ (.23) $ (.17)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 797,785
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0
600,000
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</TABLE>
