CARDIAC SCIENCE INC - 10-Q Quarterly Report

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended March 31, 2005

	OR

¨	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

Commission file number 0-19567

CARDIAC SCIENCE, INC.

(Exact name of Registrant as specified in its charter)

DELAWARE	33-0465681
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1900 Main Street, Suite 700, Irvine, California, 92614

(Address of principal executive offices)

Registrant’s telephone number, including area code: (949) 797-3800

Check whether the registrant (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 ¨

Indicate by check mark if the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2). Yes x No ¨

The number of shares of the Common Stock of the registrant outstanding as of May 6, 2005 was 85,945,368.

INDEX TO FORM 10-Q

PART I. FINANCIAL INFORMATION

		Page No.
Item 1.	Unaudited Financial Statements:
	Consolidated Condensed Balance Sheets as of March 31, 2005 and December 31, 2004	1
	Consolidated Condensed Statements of Operations for the three months ended March 31, 2005 and 2004	2
	Consolidated Condensed Statements of Comprehensive Loss for the three months ended March 31, 2005 and 2004	3
	Consolidated Condensed Statements of Cash Flows for the three months ended March 31, 2005 and 2004	4
	Notes to Consolidated Condensed Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	14
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	24
PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Submission of Matters to a Vote of Security Holders	26
Item 5.	Other Information	26
Item 6.	Exhibits	26

Signatures		27

PART I. FINANCIAL INFORMATION

Item 1. Unaudited Financial Statements

CARDIAC SCIENCE, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

(In thousands, except share data)

	March 31, 2005			December 31, 2004
ASSETS
Current assets:
Cash and cash equivalents	$	9,624		$	13,913
Accounts receivable, net of allowance for doubtful accounts of $3,862 at March 31, 2005 and $3,611 at December 31, 2004		13,623			17,978
Inventories, net		12,180			9,680
Prepaid expenses and other current assets		4,323			2,517
Total current assets		39,750			44,088
Property and equipment, net		4,816			4,932
Goodwill		92,268			140,544
Intangibles, net		9,178			9,677
Other assets		6,559			4,093
	$	152,571		$	203,334
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	8,629		$	8,266
Accrued expenses		5,920			6,820
Deferred revenue		1,375			1,940
Current portion of long term debt		12			16
Total current liabilities		15,936			17,042
Deferred revenue		657			697
Senior secured promissory notes		54,113			52,623
Other long term debt		21			25
Other liabilities		32			32
Total liabilities		70,759			70,419

Commitments and contingencies (Note 8 )

Stockholders’ equity:
Preferred stock—$.001 par value; 1,000,000 shares authorized, none issued or outstanding		—			—
Common stock—$.001 par value; 160,000,000 shares authorized, 85,945,368 and 86,258,913 shares issued at March 31, 2005 and December 31, 2004, respectively; and 85,945,368 and 85,981,231 shares outstanding at March 31, 2005 and December 31, 2004, respectively		86			86
Additional paid-in capital		259,950			257,211
Accumulated other comprehensive loss		(25	)		(25	)
Accumulated deficit		(178,199	)		(124,357	)
Total stockholders’ equity		81,812			132,915
	$	152,571		$	203,334

The accompanying notes are an integral part of these unaudited financial statements.

CARDIAC SCIENCE, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share data)

	Three Months Ended
	March 31, 2005			March 31, 2004
Net revenue	$	15,011		$	15,604
Cost of revenue		6,267			6,508
Gross profit		8,744			9,096
Operating expenses:
Sales and marketing		4,906			6,003
Research and development		1,457			1,669
General and administrative		5,198			4,166
Amortization of intangible assets		403			503
Goodwill impairment charge		47,269			—
Total operating expenses		59,233			12,341
Loss from operations		(50,489	)		(3,245	)
Interest and other expense, net		(3,353	)		(1,587	)
Loss before income taxes		(53,842	)		(4,832	)
Provision for income taxes		—			—
Net loss	$	(53,842	)	$	(4,832	)
Net loss per share (basic and diluted)	$	(0.63	)	$	(0.06	)
Weighted average number of shares used in the computation of net loss per share		86,018,766			80,532,811

The accompanying notes are an integral part of these unaudited financial statements.

CARDIAC SCIENCE, INC.

CONSOLIDATED CONDENSED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(In thousands)

		Three Months Ended
		March 31, 2005			March 31, 2004