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 February 29, 2004
| ¨ | 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 | 95-3533362 | |
| (State or other jurisdiction of incorporation or organization | (IRS Employer Identification No.) | |
| 6175 Nancy Ridge Drive, Suite 300, San Diego, California | 92121 | |
| (Address of principal executive offices) | (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 April 1, 2004, 47,605,578 shares of common stock and no shares of preferred stock were outstanding.
CARDIODYNAMICS INTERNATIONAL CORPORATION
FORM 10-Q
| Page No. | ||||
| PART I - FINANCIAL INFORMATION |
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| Item 1. |
Financial Statements: |
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| Balance Sheets (unaudited) at February 29, 2004 and November 30, 2003 |
3 | |||
| 5 | ||||
| 6 | ||||
| 8 | ||||
| Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operation |
15 | ||
| Item 3. |
21 | |||
| Item 4. |
21 | |||
| PART II - OTHER INFORMATION |
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| Item 1. |
22 | |||
| Item 2. |
22 | |||
| Item 3. |
22 | |||
| Item 4. |
22 | |||
| Item 5. |
22 | |||
| Item 6. |
22 | |||
| 23 | ||||
-2-
PART I - FINANCIAL INFORMATION
| Item 1. | Financial Statements |
CARDIODYNAMICS INTERNATIONAL CORPORATION
(Unaudited, in thousands, except share data)
| February 29, 2004 |
November 30, 2003 | |||||
| Assets | ||||||
| Current assets: |
||||||
| Cash and cash equivalents |
$ | 6,814 | $ | 4,762 | ||
| Short-term investments, available for sale |
3,575 | 4,583 | ||||
| Accounts receivable, net of allowance for doubtful accounts of $2,117 in 2004 and $1,940 in 2003 |
8,833 | 9,560 | ||||
| Inventory, net |
3,316 | 3,163 | ||||
| Current portion of long-term receivables |
1,592 | 1,723 | ||||
| Other current assets |
420 | 322 | ||||
| Total current assets |
24,550 | 24,113 | ||||
| Property and equipment, net |
692 | 634 | ||||
| Long-term receivables and note receivable, net |
1,721 | 1,781 | ||||
| Other assets |
134 | 120 | ||||
| Total assets |
$ | 27,097 | $ | 26,648 | ||
| Liabilities and Shareholders’ Equity | ||||||
| Current liabilities: |
||||||
| Accounts payable |
$ | 580 | $ | 795 | ||
| Accrued expenses |
103 | 180 | ||||
| Accrued salaries, wages and benefits |
1,245 | 1,421 | ||||
| Income taxes payable |
— | 44 | ||||
| Deferred revenue |
292 | 316 | ||||
| Current portion of deferred rent |
8 | 8 | ||||
| Reserve for warranty repairs – current |
150 | 138 | ||||
| Current portion of capital lease obligations |
7 | 7 | ||||
| Total current liabilities |
2,385 | 2,909 | ||||
| Long-term portion of deferred revenue |
126 | 104 | ||||
| Long-term portion of deferred rent |
98 | 102 | ||||
| Reserve for warranty repairs – long-term |
557 | 496 | ||||
| Long-term portion of capital lease obligations |
15 | 17 | ||||
| Total long-term liabilities |
796 | 719 | ||||
| Total liabilities |
3,181 | 3,628 | ||||
Continued
See accompanying notes to financial statements.
-3-
CARDIODYNAMICS INTERNATIONAL CORPORATION
Balance Sheets (Continued)
(Unaudited, in thousands, except share data)
| February 29, 2004 |
November 30, 2003 |
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| Commitments and contingencies |
||||||||
| Shareholders’ equity: |
||||||||
| Preferred stock, 18,000,000 shares authorized, no shares issued or outstanding at February 29, 2004 or November 30, 2003 |
— | — | ||||||
| Common stock, no par value, 100,000,000 shares authorized, issued and outstanding 46,564,764 at February 29, 2004 and 46,518,293 shares at November 30, 2003 |
$ | 50,781 | $ | 50,638 | ||||
| Accumulated other comprehensive loss |
(25 | ) | (17 | ) | ||||
| Accumulated deficit |
(26,840 | ) | (27,601 | ) | ||||
| Total shareholders’ equity |
23,916 | 23,020 | ||||||
| Total liabilities and shareholders’ equity |
$ | 27,097 | $ | 26,648 | ||||
See accompanying notes to financial statements.
-4-
CARDIODYNAMICS INTERNATIONAL CORPORATION
(Unaudited - In thousands, except per share data)
| Three Months Ended |
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| February 29, 2004 |
February 28, 2003 |
|||||||
| Net sales |
$ | 8,015 | $ | 6,385 | ||||
| Cost of sales |
1,855 | 1,632 | ||||||
| Gross margin |
6,160 | 4,753 | ||||||
| Operating expenses: |
||||||||
| Research and development |
833 | 736 | ||||||
| Selling and marketing |
4,013 | 3,481 | ||||||
| General and administrative |
577 | 499 | ||||||
| Total operating expenses |
5,423 | 4,716 | ||||||
| Income from operations |
737 | 37 | ||||||
| Other income (expense): |
||||||||
| Interest income |
96 | 93 | ||||||
| Interest expense |
(1 | ) | (5 | ) | ||||
| Total other income |
95 | 88 | ||||||
| Income before provision for income taxes |
832 | 125 | ||||||
| Provision for income taxes |
(71 | ) | (9 | ) | ||||
| Net income |
$ | 761 | $ | 116 | ||||
| Net income per common share, basic and diluted |
$ | .02 | $ | .00 | ||||
| Weighted-average number of shares used in per share calculation |
||||||||
| Basic |
46,550 | 46,181 | ||||||
| Diluted |
49,532 | 47,240 | ||||||
See accompanying notes to financial statements.
-5-
CARDIODYNAMICS INTERNATIONAL CORPORATION
(Unaudited - In thousands)
| Three Months Ended |
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| February 29, 2004 |
February 28, 2003 |
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| Cash flows from operating activities: |
||||||||
| Net income |
$ | 761 | $ | 116 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
| Depreciation and amortization |
80 | 57 | ||||||
| Provision for (reduction in) obsolete inventory |
(6 | ) | 12 | |||||
| Provision for warranty repairs |
73 | 55 | ||||||
| Provision for demonstration inventory |
21 | 3 | ||||||
| Provision for doubtful accounts |
177 | 217 | ||||||
| Provision for doubtful long-term receivables |
27 | 3 | ||||||
| Stock based compensation expense |
4 | 10 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Accounts receivable |
550 | (299 | ) | |||||
| Inventory |
(168 | ) | (55 | ) | ||||
| Other current assets |
(98 | ) | (69 | ) | ||||
| Long-term receivables and note receivable |
164 | 119 | ||||||
| Other assets |
(17 | ) | — | |||||
| Accounts payable |
(215 | ) | (2 | ) | ||||
| Accrued expenses |
(77 | ) | 63 | |||||
| Accrued salaries, wages and benefits |
(176 | ) | (63 | ) | ||||
| Income taxes payable |
(44 | ) | 9 | |||||
| Deferred revenue |
(2 | ) | (57 | ) | ||||
| Deferred rent |
(4 | ) | (2 | ) | ||||
| Net cash provided by operating activities |
1,050 | 117 | ||||||
| Cash flows from investing activities: |
||||||||
| Maturities of short-term investments |
1,000 | 500 | ||||||
| Purchases of short-term investments |
— | (500 | ) | |||||
| Purchases of property and equipment |
(135 | ) | (56 | ) | ||||
| Net cash provided by (used in) investing activities |
865 | (56 | ) | |||||
Continued
See accompanying notes to financial statements.
-6-
CARDIODYNAMICS INTERNATIONAL CORPORATION
Statements of Cash Flows (Continued)
(Unaudited - In thousands)
| Three Months Ended |
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| February 29, 2004 |
February 28, 2003 |
|||||||
| Cash flows from financing activities: |
||||||||
| Repayment of capital lease obligations |
$ | (2 | ) | $ | (9 | ) | ||
| Exercise of stock options and warrants |
134 | 25 | ||||||
| Issuance of common stock, net |
5 | — | ||||||
| Net cash provided by financing activities |
137 | 16 | ||||||
| Net increase in cash and cash equivalents |
2,052 | 77 | ||||||
| Cash and cash equivalents at beginning of period |
4,762 | 2,375 | ||||||
| Cash and cash equivalents at end of period |
$ | 6,814 | $ | 2,452 | ||||
| Supplemental disclosures of cash flow information: |
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| Cash payments during the period for: |
||||||||
| Interest |
$ | 1 | $ | 5 | ||||
| Income taxes |
$ | 132 | $ | 1 | ||||
| Supplemental disclosure of non-cash investing and financing activities: |
||||||||
| Unrealized holding gain (loss) on available-for-sale securities, less deferred tax effect |
$ | (8 | ) | $ | 9 | |||
See accompanying notes to financial statements.
-7-
CARDIODYNAMICS INTERNATIONAL CORPORATION
(Unaudited)
| 1. | Description of Business |
CardioDynamics International Corporation (“CardioDynamics” or “the Company”) is the innovator and market leader of a breakthrough technology called Impedance Cardiography (ICG). The Company develops, manufactures and markets noninvasive diagnostic and monitoring technologies.
The Company’s proprietary, patented ICG technology non-invasively monitors the heart’s ability to deliver blood to the body and the amount of fluid in the chest. The Company’s systems provide 12 hemodynamic (blood flow) parameters, the most significant of which is cardiac output, or the amount of blood pumped by the heart each minute. The Company’s lead product, the BioZ® ICG Monitor (previously known as the BioZ.com®), has been approved by the U.S. Federal Drug Administration (FDA) and carries the CE mark, which is a required certification of essential environmental and safety compliance by the European Community for sale of electronic equipment. The Company sells to physicians and hospitals in the United States through it’s own direct sales force and distribute its products to domestic hospitals and targeted international markets through a network of distributors.
The Company was incorporated as a California corporation in June 1980 and changed it’s name to CardioDynamics International Corporation in October 1993.