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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

(Mark One)

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

 

For the Quarterly Period Ended May 31, 2003

 

¨   TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For The Transition Period from                      to                     

 

Commission File Number: 0-11868

 

 

CARDIODYNAMICS INTERNATIONAL CORPORATION

(Exact name of registrant as specified in its charter)

 

California

(State or other jurisdiction of incorporation or organization)

  

95-533362

(IRS Employer Identification No.)

6175 Nancy Ridge Drive, Suite 300, San Diego, California

(Address of principal executive offices)

  

92121

(Zip Code)

 

(858) 535-0202

(Registrant’s telephone number)

 

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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  ¨

 

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

 

As of July 10, 2003, 46,200,724 shares of common stock and no shares of preferred stock were outstanding.

 

Table of Contents

CARDIODYNAMICS INTERNATIONAL CORPORATION

 

FORM 10-Q

 

TABLE OF CONTENTS

 

          Page No.
PART I – FINANCIAL INFORMATION     
Item 1.    Financial Statements:     
     Balance Sheets (unaudited) at May 31, 2003 and November 30, 2002.    3
     Statements of Operations (unaudited) for the three and six months ended May 31, 2003 and 2002.    5
     Statements of Cash Flows (unaudited) for the six months ended May 31, 2003 and 2002    6
     Notes to Financial Statements (unaudited).    8
Item 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operation    12
Item 3.    Quantitative and Qualitative Disclosures about Market Risk    18
Item 4.    Controls and Procedures    18
PART II – OTHER INFORMATION     
Item 1.    Legal Proceedings    20
Item 2.    Changes in Securities    20
Item 3.    Defaults Upon Senior Securities    20
Item 4.    Submission of Matters to a Vote of Security Holders    20
Item 5.    Other Information    20
Item 6.    Exhibits and Reports on Form 8-K    20
     Signatures    21

 

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Table of Contents

PART I – FINANCIAL INFORMATION

 

Item  1.    Financial   Statements

 

CARDIODYNAMICS INTERNATIONAL CORPORATION

 

Balance Sheets

(Unaudited, in thousands, except share data)

     May 31,
2003
    November 30,
2002

Assets

              

Current assets:

              

Cash and cash equivalents

    $ 7,179    $ 6,879

Accounts receivable, net of allowance for doubtful accounts of $2,230 in 2003 and $1,726 in 2002

      7,946      8,349

Inventory, net

      3,494      3,474

Current portion of long-term receivables

      2,487      2,522

Other current assets

      336      222
    
  

Total current assets

      21,442      21,446

Property and equipment, net

      539      414

Long-term receivables and note receivable, net

      1,785      1,654

Other assets

      52      52
    
  

Total assets

    $ 23,818    $ 23,566
    
  

Liabilities and Shareholders’ Equity

              

Current liabilities:

              

Accounts payable

    $ 1,111    $ 1,528

Accrued expenses

      111      173

Accrued salaries, wages and benefits

      1,147      1,195

Income taxes payable

      48      —

Current portion of deferred service revenue

      247      285

Current portion of deferred rent

      16      16

Reserve for warranty repairs – current

      18      69

Current portion of capital lease obligations

      16      16
    
  

Total current liabilities

      2,714      3,282
    
  

Long-term portion of deferred service revenue

      133      166

Long-term portion of deferred rent

      101      106

Reserve for warranty repairs – long-term

      440      264

Long-term obligations under capital leases

      11      24
    
  

Total long-term liabilities

      685      560
    
  

Total liabilities

      3,399      3,842

 

Continued

 

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CARDIODYNAMICS INTERNATIONAL CORPORATION

 

Balance Sheets (Continued)

(Unaudited, in thousands, except share data)

 

     May 31,
2003
     November 30,
2002
  

Commitments and contingencies

    $ —       $ —    

Shareholders’ equity:

                 

Preferred stock, 18,000,000 shares authorized, no shares issued or outstanding at May 31, 2003 or November 30, 2002

      —         —    

Common stock, no par value, 100,000,000 shares authorized, issued and outstanding 46,186,787 at May 31, 2003 and 46,171,584 shares at November 30, 2002

      49,832       49,774  

Accumulated other comprehensive income

      6       3  

Accumulated deficit

      (29,419 )     (30,053 )
    
 

Total shareholders’ equity

      20,419       19,724  
    
 

Total liabilities and shareholders’ equity

    $ 23,818     $ 23,566  
    
 

 

See accompanying notes to financial statements.

 

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CARDIODYNAMICS INTERNATIONAL CORPORATION

 

Statements of Operations

(Unaudited – In thousands, except per share data)

 

    

Three Months Ended

May 31,

    

Six Months Ended

May 31,

  
     2003
     2002
     2003
     2002
  

Net sales

    $ 7,285     $ 5,623     $ 13,670     $ 9,989  

Cost of sales

      1,672       1,560       3,304       2,838  
    
 
 
 

Gross margin

      5,613       4,063       10,366       7,151  
    
 
 
 

Operating expenses:

                                 

Research and development

      784       611       1,520       1,253  

Selling and marketing

      3,870       3,049       7,351       5,770  

General and administrative

      479       422       978       861  
    
 
 
 

Total operating expenses

      5,133       4,082       9,849       7,884  
    
 
 
 

Income (loss) from operations

      480       (19 )     517       (733 )
    
 
 
 

Other income (expense):

                                 

Interest income

      82       76       175       182  

Interest expense

      (5 )     (3 )     (10 )     (6 )

Other, net

      —         (6 )     —         (25 )
    
 
 
 

Total other income

      77       67       165       151  
    
 
 
 

Income (loss) before provision for income taxes

      557       48       682       (582 )

Provision for income taxes

      (39 )     (1 )     (48 )     (1 )
    
 
 
 

Net income (loss)

    $ 518     $ 47     $ 634     $ (583 )
    
 
 
 

Net income (loss) per common share, basic and diluted

    $ .01     $ .00     $ .01     $ (.01 )
    
 
 
 

Weighted-average number of shares used in per share calculation:

                                 

Basic

      46,187       46,114       46,184       46,024  
    
 
 
 

Diluted

      47,104       47,433       47,176       46,024  
    
 
 
 

 

See accompanying notes to financial statements.

 

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CARDIODYNAMICS INTERNATIONAL CORPORATION

 

Statements of Cash Flows

(Unaudited – In thousands)

 

    

Six Months Ended

May 31,

  
     2003
     2002
  

Cash flows from operating activities:

                 

Net income (loss)

    $ 634     $ (583 )

Adjustments to reconcile net income (loss) to net cash provided by (used) in operating activities:

                 

Depreciation and amortization

      147       144  

Provision for obsolete inventory

      15       56  

Provision for warranty repairs

      125       78  

Provision for (reduction in) demonstration inventory

      8       (16 )

Provision for doubtful receivables

      504       188  

Provision for doubtful long-term receivables

      13       25  

Compensatory stock options granted

      19       36  

Other non-cash items

      3       —    

Changes in operating assets and liabilities:

                 

Accounts receivable

      (101 )     371  

Inventory

      (43 )     (760 )

Other current assets

      (114 )     (240 )

Long-term receivables and note receivable

      (109 )     (24 )

Accounts payable

      (417 )     112  

Accrued expenses

      (62 )     (15 )

Accrued salaries, wages and benefits

      (48 )     (82 )

Income taxes payable

      48       —    

Deferred rent

      (5 )     —    

Deferred service revenue

      (71 )     (10 )
    
 

Net cash provided by (used in) operating activities

      546       (720 )
    
 

Cash flows from investing activities:

                 

Purchases of property and equipment

      (272 )     (92 )
    
 

Net cash used in investing activities

      (272 )     (92 )
    
 

 

Continued

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes to financial statements.

 

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Table of Contents

CARDIODYNAMICS INTERNATIONAL CORPORATION

 

Statements of Cash Flows (Continued)

(Unaudited – In thousands)

 

     Six Months Ended
May 31,
  
     2003