<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
---------------------------------------
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
Commission file number 0-19567
-------
CARDIAC SCIENCE, INC.
-----------------------------------------------------------------
(Exact name of Small Business Issuer as specified in its charter)
DELAWARE 33-0465681
------------------------------- ----------------
(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)
Issuer's telephone number, including area code: (949) 587-0357
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
----- -----
The number of shares of the Common Stock of the registrant outstanding as of
August 4, 1998 was 5,159,560.
1
<PAGE>
CARDIAC SCIENCE, INC.
INDEX TO FORM 10-QSB
PART I. FINANCIAL INFORMATION
-----------------------------
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets as of June 30, 1998 (Unaudited)
and December 31, 1997 3
Consolidated Condensed Statements of Operations (Unaudited) for the
Three and Six months ended June 30, 1998 and 1997 4
Consolidated Condensed Statements of Cash Flows (Unaudited) for the
Six months ended June 30, 1998 and 1997 5
Consolidated Condensed Notes to Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operation 9
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings 13
Item 2. Changes in Securities and Use of Proceeds 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
Item 5. Other Information 13
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
</TABLE>
2
<PAGE>
ITEM 1. FINANCIAL STATEMENTS
CARDIAC SCIENCE, INC.
---------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
-------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
June 30, December 31,
1998 1997
ASSETS ----------- ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 410,736 $ 561,351
Trade accounts receivable-net of allowances of $8,000 and $16,028,
respectively 161,223 216,162
Inventory 281,864 209,413
Prepaid expenses 35,259 99,267
----------- -----------
Total current assets 889,082 1,086,193
Equipment, net 97,817 85,927
Intangible assets, net of amortization of $82,141 and $49,285, respectively 574,997 607,853
Other assets 4,012 4,012
----------- -----------
$ 1,565,908 $ 1,783,985
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Bank line of credit $ 200,000 $ ---
Accounts payable and accrued expenses 1,551,751 1,016,323
Notes payable 46,693 70,233
----------- -----------
Total current liabilities 1,798,444 1,086,556
----------- -----------
Stockholders' Equity (Deficit):
Preferred Stock - $.001 par value; 1,000,000 shares authorized, none
issued or outstanding --- ---
Common stock - $ 0.001 par value; 20,000,000 shares authorized, 5,159,560
issued and outstanding at June 30, 1998 and 4,974,560 at
December 31, 1997 5,160 4,975
Common stock subscribed 1,000,000
Additional paid-in capital 7,336,963 7,472,107
Accumulated deficit (8,574,659) (6,779,653)
----------- -----------
Total stockholders' equity (deficit) (232,536) 697,429
----------- -----------
$ 1,565,908 $ 1,783,985
----------- -----------
----------- -----------
</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 Six months ended
------------------ ----------------
June 30, 1998 June 30, 1997 June 30, 1998 June 30, 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales $ 355,644 $ 408,998 $ 802,356 $ 408,998
Cost of sales 226,650 209,447 517,013 209,447
----------- --------- ----------- -----------
Gross profit 128,994 199,551 285,343 199,551
Operating expenses:
Research and development 577,452 51,392 997,190 129,928
Selling expenses 215,292 115,193 354,810 115,193
General and administrative 414,653 299,283 716,823 392,759
----------- --------- ----------- -----------
Loss from operations (1,078,403) (266,317) (1,783,480) (438,329)
Interest (expense) net (5,097) (4,656) (9,126) (1,119)
----------- --------- ----------- -----------
Loss before provision for income taxes (1,083,500) (270,973) (1,792,606) (439,448)
Provision for income taxes --- 105 2,400 105
----------- --------- ----------- -----------
Net loss $(1,083,500) $(271,078) $(1,795,006) $ (439,553)
----------- --------- ----------- -----------
----------- --------- ----------- -----------
Basic and diluted loss per share $ (0.22) $ (.08) $ (0.36) $ (.13)
----------- --------- ----------- -----------
----------- --------- ----------- -----------
Number of shares used in the computation of loss
per share 5,015,329 3,424,561 5,000,030 3,424,561
----------- --------- ----------- -----------
----------- --------- ----------- -----------
</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>
Six months Six months
ended ended
June 30, 1998 June 30, 1997
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net loss for the period $(1,795,006) $(439,553)
Adjustments to reconcile net loss to net
Cash used in operating activities:
Depreciation and amortization 47,131 16,971
Expenses paid with common stock 20,000 ---
Changes in operating assets and liabilities:
Trade receivables 54,939 (65,787)
Inventory (72,451) 2,372
Prepaid expenses 64,008 (31,629)
Accounts payable and accrued expenses 475,428 71,485
--------- ---------
Net cash used in operating activities (1,205,951) (446,141)
--------- ---------
Cash from (used) by investing activities:
Cash acquired in Diagnostic Monitoring acquisition --- 43,223
Purchase of equipment (26,165) (10,705)
--------- ---------
Net cash from (used) provided by investing activities (26,165) 32,518
--------- ---------
Cash provided by financing activities:
Payments of note payable to stockholder (23,540) ---
Proceeds from line of credit 200,000 16,095
Proceeds from exercise of warrants 2,000 ---
Proceeds from common stock subscribed 1,000,000 ---
Costs of equity subscriptions (96,959) ---
--------- ---------
Net cash provided by financing activities 1,081,501 16,095
--------- ---------
Net decrease in cash and cash equivalents (150,615) (397,528)
Cash and cash equivalents at beginning of period 561,351 413,311
--------- ---------
Cash and cash equivalents at end of period $ 410,736 $ 15,783
--------- ---------
--------- ---------
</TABLE>
The accompanying notes are an integral part of the financial statements
5
<PAGE>
CARDIAC SCIENCE, INC.
CONSOLIDATED CONDENSED NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
JUNE 30, 1998
1. ORGANIZATION AND CAPITALIZATION OF THE COMPANY
Cardiac Science, Inc. (the "Company") was incorporated on May 20,
1991 to develop, manufacture and market a line of non-invasive (non-surgical)
Automatic External Cardioverter Defibrillator ("AECD") devices (the
"Products") to treat persons suffering from or at high risk of
life-threatening arrhythmias. The Products are designed to continuously
monitor, quickly detect and then automatically, through transmission of
electrical energy charges to the patient's heart, terminate the ventricular
tachyarrhythmia (dangerously fast heart rate) and/or ventricular fibrillation
(quivering of the heart following tachyarrhythmia, which usually results in
death). Among the cardioverter/defibrillator devices under development by the
Company are ambulatory (mobile) AECD devices similar in function to the
Implantable Cardioverter Defibrillator ("ICD") devices that are either
currently approved for sale by the U.S. Food and Drug Administration (the
"FDA") or are undergoing clinical trials. However, the Company's planned AECD
Products will not require surgery to implant the devices. Moreover, the
Products will not require the presence of a human operator to activate the
device and deliver the defibrillator charge, as is the case with existing
devices.
2. BASIS OF PRESENTATION AND CONTINUED EXISTENCE
Until the acquisition of Innovative Physician Services, Inc. d/b/a
Diagnostic Monitoring ("Diagnostic Monitoring") on April 11, 1997 (see Note
4), the Company was a development stage company engaged in the development of
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.
While the acquisition of Diagnostic Monitoring provides the Company
with a revenue base, additional capital is needed to fulfill the Company's
marketing, research and product development goals. From May 20, 1991
(inception) through June 30, 1998, the Company incurred losses of $8,574,659.
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 to attain profitable
operations is dependent upon achieving a level of revenues adequate to
support the Company's cost structure. The Company is currently attempting to
identify other sources of financing. There can be no assurance that the
Company will be successful in these areas.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The consolidated 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.
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 June 30, 1998 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
6
<PAGE>
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted and should be
read in conjunction with the Company's audited financial statements included
in the Company's 1997 Annual Report on Form 10-KSB. Results of operations for
the six months ended June 30, 1998 are not necessarily indicative of results
for the full year.
4. ACQUISITION OF DIAGNOSTIC MONITORING
On April 11, 1997, the Company acquired Diagnostic Monitoring for
500 shares (5,714.285 pre-split) 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 was entitled to 1,000 votes per share was convertible into
1,000 shares of the Company's common stock, at any time, and from time to
time, at the holder's option, without the payment of any additional
consideration, and was automatically convertible 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. There were no dividend rights on the Preferred
Stock. On September 8, 1997, the Company effectuated a one-for- 11.42857413
reverse stock split and the shares of Preferred Stock automatically converted
into 500,000 shares of common stock.
The total purchase price for Diagnostic Monitoring was $682,975, the
fair market value of the Preferred Stock issued and the Note. 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 represents the discounted value (at 11.25%) of the
Note over 20 months.
The transaction was accounted for under the purchase method of
accounting and the purchase price was allocated to the fair market value of
the assets acquired and liabilities assumed. The intangible assets resulting
from the purchase price allocation is being amortized over 10 years using the
straight-line method.
5. COMMON STOCK SUBSCRIBED
Through June 30, 1998, the Company sold an aggregate of 500,000
shares of its common stock, at $2.00 per share, to foreign investors in
offshore transactions pursuant to Regulation S promulgated under the
Securities Act of 1933, as amended. In connection with such transactions, the
Corporation is obligated to pay a finder's fee equal to ten percent of the
gross proceeds of the sale, payable in cash or common stock of which $40,000
had been paid at June 30, 1998 and $60,000 was included in accrued expenses.
6. STATEMENT OF FINANCIAL STANDARDS ADOPTED
In June 1997, the FASB issued SFAS No. 131, "Disclosures About
Segments of an Enterprise and Related Information". The Company has adopted
the provisions of SFAS No. 131 with respect to it's wholly-owned subsidiary
Diagnostic Monitoring, which was acquired April 11, 1997 (Note 4).
All revenues reported for the six month period ending June 30, 1998,
were derived from Diagnostic Monitoring. Net profit for this segment for the six
month period ended June 30, 1998 was $14,046. Prior to the acquisition, all
items of income and expense were derived from the operations of Cardiac Science,
Inc. and therefore prior periods have not been restated to reflect segment data.
7
<PAGE>
7. YEAR 2000 ISSUE
In the next eighteen months, many companies will face a potentially
serious information systems (computer) problem because many software
applications and operational programs written in the past may not properly
recognize calendar dates beginning in the Year 2000. This problem could force
computers to either shut down or provide incorrect information and could
result in an inability to process transactions or engage in normal business
activities. Based on a recent assessment the Company believes that the
software utilized by the Company will not be impacted by the Year 2000 Issue.
The Company believes that its existing information systems equipment,
primarily composed of personal computers, will be minimally impacted by the
Year 2000 Issue, as the Company intends to replace those systems which may be
affected by this problem by the end of 1999 due to technological
obsolescence. The Company is in the process of responding to initial customer
inquiries, and intends to initiate communications with its vendors regarding
the Year 2000 Issue in the fourth quarter of 1998. If the Company determines
a particular vendor will be impacted by this problem, the Company may attempt
to identify additional or replacement vendors, which could delay
accessibility of the products and/or services provided by such vendors. Such
a delay or failure to identify an additional or replacement vendor could have
a material adverse effect on the Company's business, operating results and
financial condition.
8
<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 financial statements of the Company and notes thereto set forth
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-R-) 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
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 three AECD devices under development by the Company. The
Company's initial product, the Powerheart-R- defibrillator-monitor 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
AECD in the United States. The additional AECD products under development
include 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 devices that obviate the need for human intervention to successfully treat
arrhythmias that lead to cardiac arrest. The Company believes the AECD Products
are 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
devices. The Company has been issued one patent, and has one additional patent
under exclusive license relating to its AECD technology.
In September 1997 the Company began work to complete development and
begin production of the Powerheart(R) commercial model. Upon completion of the
commercial model, of which there can be no assurance, the Company plans to sell
the Powerheart(R) through a strategic U.S. distribution partner and overseas
through existing its existing network of international distributors.
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 over 40 countries worldwide. In the United States, products are sold
directly by
9
<PAGE>
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 six months ended June 30, 1998, the Company had
revenues of $355,644 and $802,356, and a net loss of $1,083,500 or $(0.22)
per share and $1,795,006 or $(0.36) per share, respectively, compared to
revenues of $408,998 and $408,998 and a net loss of $271,078 or $(0.08) per
share and $439,553 or $(0.13) per share, respectively, for the three and six
months ended June 30, 1997.
Revenues generated for all periods are attributable to the sale of
products by the Company's subsidiary, Diagnostic Monitoring. Gross profit on
sales for the period ending June 30, 1998 was 36%. Sales of Diagnostic
Monitoring's Windows 95(R) compatible Holter software and systems, Holter
Recorder products, and related Holter supplies represented 80% of the
Company's total revenue. Sales of Spirometers accounted for 4% and PC- based
Electrocardiographs accounted for 5%. Export sales of Diagnostic Monitoring's
products to international countries represented 86% of the Company's revenue,
with the balance of sales coming from within the United States.
The increased loss for the quarter and year to date period ended
June 30, 1998 is primarily attributable to increased operating costs offset
by an increase in gross margins.
Research and development expenses increased to $577,452 and
$997,190, respectively, for the three and six months ended June 30, 1998,
from $51,392 and $129,928, respectively, for the three and six months ended
June 30, 1997. This increase was due to pre-production costs associated with
the commercialization of the Company's initial AECD(R) product, the
Powerheart(R).
Selling expenses increased to $215,292 and $354,810, respectively,
for the three and six months ended June 30, 1998, from $115,193 for both the
three and six months ended June 30, 1997 reflecting the marketing efforts for
the Holter Product line and pre-marketing expense for the Powerheart(R).
General and administrative expenses increased to $414,653 and
$716,823, respectively, for the three and six months ended June 30, 1998,
from $299,283 and $392,759 for the three and six months ended June 30, 1997.
The increase was a result of expenditures incurred to support both the Holter
Product line (acquired in 1997) and infrastructure necessary to commercialize
the Powerheart and begin initial preparations for market release. Expenses,
which increased in 1998 as compared to 1997, included amortization of
intangible assets, personnel costs and related fringes, insurance premiums
for both product liability and directors and officers insurance, and
professional fees.
Interest expense, net, increased to $5,097 and $9,126 for the three
month and year to date period ended June 30, 1998 as compared to $4,656 and
$1,119, respectively, for the same periods in the prior year, due to the debt
incurred in the acquisition of Diagnostic Monitoring and borrowings on the
bank line of credit in 1998.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1998, the Company had cash and cash equivalents of
$410,736 and a working capital deficit of $909,362 as compared to cash and
cash equivalents of $561,351 and negative working capital of $363 at December
31, 1997. From inception, the Company's sources of funding for operations
were derived from
10
<PAGE>
equity placements aggregating approximately $8,500,000. The Company has
incurred losses of $8,574,659 since inception and 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(R) 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.
The Company's cash resources are minimal and the Company has
borrowed $200,000 from a bank on a revolving line of credit secured by all of
the Company's assets. In obtaining the line of credit, the Company covenanted
to maintain a minimum liquidity ratio and a minimum stated net worth. At June
30, 1998 and at July 31, 1998 the Company was not in compliance with the
minimum stated net worth requirement. The bank, however, has agreed to
forbear exercising its remedies for those stated periods. Unless and until
the Company is able to raise additional equity capital, the Company does not
anticipate being in compliance with the minimum stated net worth requirement
and will be required to seek the bank's waiver or forbearance in exercising
its remedies for those periods in which the Company is not in compliance.
There can be no assurance that such waivers or forbearance will be granted.
The Company anticipates that its current cash balance will be
sufficient to meet the Company's cash requirements for at least the next two
months. Given the current sales volume and applications of cash, the Company
expects that further capital additions will be necessary to sustain growth
until the Company becomes cash positive. In this respect, the Company has
engaged an investment banker to act as its exclusive agent in connection with
a private placement of the Company's common stock. The private placement is
currently in progress. However, there can be no assurance that any such
transactions will be consummated or that any financing transaction will not
be dilutive to current stockholders or that the Company will have sufficient
working capital to fund future operations.
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
11
<PAGE>
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.
12
<PAGE>
CARDIAC SCIENCE, INC.
---------------------
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None.
Item 2. Changes in Securities and Use of Proceeds
-----------------------------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On May 12, 1998 the Company held an Annual Meeting of
Stockholders in Irvine, California. The stockholders voted on
three matters.
The following votes were cast for the nominees for election of
directors, and all such nominees were elected.
<TABLE>
<CAPTION>
Votes For Votes Against Votes Abstain
<S> <C> <C> <C>
Raymond Cohen 2,678,294 0 179
Paul Quadros 2,678,248 0 225
Peter Crosby 2,678,292 0 181
Howard Evers 2,678,250 0 223
J. Desmond Fitzgerald 2,678,215 0 258
</TABLE>
The following votes were cast for the ratification and approval
of the Company's 1997 Stock Option/Stock Issuance Plan:
2,128,907 votes for the ratification and approval
547,502 votes against the ratification and approval
2,064 votes abstained from voting
The votes cast on the ratification of the selection of Coopers &
Lybrand LLP (now PricewaterhouseCoopers LLP), as independent
public accountants for the Company for the year ending December
31, 1998 were as follows:
2,676,240 votes for the ratification and appointment 392 votes
against the ratification and appointment 1,841 votes abstained
from voting
Item 5. Other Information
None.
13
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
a) None.
b) The Company filed reports on Form 8-K dated April 26, 1998,
May 15, 1998, June 16, 1998 and June 30, 1998 with the
Commission relating to sales of equity securities pursuant
to Regulation S promulgated under the Securities Act of
1933, as amended.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, hereunto duly
authorized.
CARDIAC SCIENCE, INC.
---------------------
Date: August 14, 1998 /s/ Brett L. Scott
- --------------------- -------------------
Brett L. Scott
Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 410,736
<SECURITIES> 0
<RECEIVABLES> 161,223
<ALLOWANCES> 0
<INVENTORY> 281,864
<CURRENT-ASSETS> 889,082
<PP&E> 184,711
<DEPRECIATION> 86,894
<TOTAL-ASSETS> 1,565,908
<CURRENT-LIABILITIES> 1,798,444
<BONDS> 0
0
0
<COMMON> 5,160
<OTHER-SE> (237,696)
<TOTAL-LIABILITY-AND-EQUITY> 1,565,908
<SALES> 355,644
<TOTAL-REVENUES> 355,644
<CGS> 226,650
<TOTAL-COSTS> 1,434,047
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
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