CARDIODYNAMICS INTERNATIONAL CORP - 10-Q Quarterly Report

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, 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 July 1, 2004, 47,989,314 shares of common stock and no shares of preferred stock were outstanding.

CARDIODYNAMICS INTERNATIONAL CORPORATION

FORM 10-Q

TABLE OF CONTENTS


		Page No.
PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements:

	Consolidated Balance Sheets (unaudited) at May 31, 2004 and November 30, 2003	3

	Consolidated Statements of Operations (unaudited) for the three and six months ended May 31, 2004 and 2003	5

	Consolidated Statements of Cash Flows (unaudited) for the six months ended May 31, 2004 and 2003	6

	Notes to Consolidated Financial Statements (unaudited)	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	25

Item 4.	Controls and Procedures	26

PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	26

Item 2.	Changes in Securities	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 and Reports on Form 8-K	26

Signatures		28

PART I - FINANCIAL INFORMATION

Item 1.

Financial Statements

CARDIODYNAMICS INTERNATIONAL CORPORATION

Consolidated Balance Sheets

(Unaudited, in thousands, except share data)


	May 31, 2004		November 30, 2003
Assets
Current assets:
Cash and cash equivalents	$	5,554	$	4,762
Short-term investments, available for sale		711		4,583
Accounts receivable, net of allowance for doubtful accounts of $2,269 in 2004 and $1,940 in 2003		9,692		9,560
Inventory, net		4,671		3,163
Current portion of long-term receivables		1,569		1,723
Other current assets		441		322

Total current assets		22,638		24,113
Long-term receivables and note receivable, net		1,751		1,781
Property, plant and equipment, net		3,425		634
Intangible assets, net		4,014		90
Goodwill		9,798		—
Other assets		238		30

Total assets	$	41,864	$	26,648

Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	1,965	$	795
Accrued expenses		214		180
Accrued salaries, wages and benefits		1,407		1,421
Income taxes payable		83		44
Current portion of deferred revenue		271		316
Current portion of deferred rent		8		8
Reserve for warranty repairs – current		120		138
Current portion of long-term debt		1,757		7

Total current liabilities		5,825		2,909

Long-term portion of deferred revenue		73		104
Long-term portion of deferred rent		94		102
Reserve for warranty repairs – long-term		441		496
Long-term debt, less current portion		4,972		17
Other long-term liabilities		71		—

Total long-term liabilities		5,651		719

Total liabilities		11,476		3,628

Continued

See accompanying notes to consolidated financial statements.

CARDIODYNAMICS INTERNATIONAL CORPORATION

Consolidated Balance Sheets (Continued)

(Unaudited, in thousands, except share data)


	May 31, 2004			November 30, 2003
Commitments and contingencies
Shareholders’ equity:
Preferred stock, 18,000,000 shares authorized, no shares issued or outstanding at May 31, 2004 and November 30, 2003		—			—
Common stock, no par value, 100,000,000 shares authorized, issued and outstanding 47,704,572 at May 31, 2004 and 46,518,293 shares at November 30, 2003	$	56,282		$	50,638
Accumulated other comprehensive loss		(12	)		(17	)
Accumulated deficit		(25,882	)		(27,601	)

Total shareholders’ equity		30,388			23,020

Total liabilities and shareholders’ equity	$	41,864		$	26,648

See accompanying notes to consolidated financial statements.

CARDIODYNAMICS INTERNATIONAL CORPORATION

Consolidated Statements of Operations

(Unaudited - In thousands, except per share data)


	Three Months Ended May 31,						Six Months Ended May 31,
	2004			2003			2004			2003
Net sales	$	10,270		$	7,285		$	18,285		$	13,670
Cost of sales		2,880			1,672			4,735			3,304

Gross margin		7,390			5,613			13,550			10,366

Operating expenses:
Research and development		1,225			784			2,058			1,520
Selling and marketing		4,293			3,870			8,306			7,351
General and administrative		762			479			1,339			978
Amortization of intangible assets		78			—			78			—

Total operating expenses		6,358			5,133			11,781			9,849

Income from operations		1,032			480			1,769			517

Other income (expense):
Interest income		90			82			186			175
Interest expense		(64	)		(5	)		(65	)		(10	)

Total other income		26			77			121			165

Income before provision for income taxes		1,058			557			1,890			682
Provision for income taxes		(100	)		(39	)		(171	)		(48	)

Net income	$	958		$	518		$	1,719		$	634

Net income per common share:
Basic	$	.02		$	.01		$	.04		$	.01

Diluted	$	.02		$	.01		$	.03		$	.01

Weighted-average number of shares used in per share calculation:
Basic		47,396			46,187			46,975			46,184

Diluted		50,326			47,104			49,926			47,176

See accompanying notes to consolidated financial statements.

CARDIODYNAMICS INTERNATIONAL CORPORATION

Consolidated Statements of Cash Flows

(Unaudited - In thousands)


	Six Months Ended May 31,
	2004			2003
Cash flows from operating activities:
Net income	$	1,719		$	634
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation		192			147
Amortization of intangible assets		78			—
Provision for (reduction in) warranty repairs		(73	)		125
Provision for doubtful accounts		282			504
Provision for doubtful long-term receivables		28			13
Stock based compensation expense		7			19
Other non-cash items		—			3
Changes in operating assets and liabilities, excluding the effects of acquisitions:
Accounts receivable		55			(101	)
Inventory		(516	)		(20	)
Other current assets		(119	)		(114	)
Long-term receivables and note receivable		156			(109	)
Other assets		(211	)		—
Accounts payable		375			(417	)
Accrued expenses		34			(62	)
Accrued salaries, wages and benefits		(14	)		(48	)
Income taxes payable		39			48
Deferred revenue		(76	)		(71	)
Deferred rent		(8	)		(5	)

Net cash provided by operating activities		1,948			546

Cash flows from investing activities:
Maturities of short-term investments		3,877			—
Purchases of property and equipment		(456	)		(272	)

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