As filed with the Securities and Exchange Commission on September 14, 2001
Registration No. 333-________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
CardioDynamics International Corporation
(Exact name of registrant as specified in its charter)
California 95-3533362
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification number)
______________________
6175 Nancy Ridge Drive, Suite 300, San Diego, California 92121
(858) 535-0202
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)
______________________
Michael K. Perry
Chief Executive Officer
CardioDynamics International Corporation
6175 Nancy Ridge Drive, Suite 300, San Diego, California 92121
(858) 535-0202
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
______________________
Copy to:
David R. Snyder, Esq.
Pillsbury Winthrop LLP
101 West Broadway, Suite 1800
San Diego, California 92101
______________________
Approximate date of commencement of proposed
sale to the public: As soon as practicable after the
effective date of this registration statement.
______________________
If the only securities being registered on this form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_] ___________________
If this form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_] ___________________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
==================================================================================================================================
Title of Shares Amount To Be Proposed Maximum Proposed Maximum Amount of
To Be Registered Registered Offering Price Per Unit/(1)/ Aggregate Offering Price/(1)/ Registration Fee
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Common stock, no par value
per share 765,000 shares $ 5.745 $ 4,394,925.00 $ 1,098.73
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(1) Estimated solely for the purpose of computing the registration fee in
accordance with Rule 457(c) of the Securities Act of 1933 based upon the
average of the high and low prices of the common stock on September 10,
2001.
The registrant hereby amends this registration statement on such date or dates
as may be necessary to delay its effective date until the registrant shall file
a further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Securities and Exchange Commission, acting
pursuant to said section 8(a), may determine.
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The information contained in this preliminary prospectus is not complete and may
be changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is declared effective. This
preliminary prospectus is not an offer to sell these securities, and it is not
soliciting to buy these securities, in any state where the offer or sale is not
permitted. You should rely only on the information contained in this preliminary
prospectus.
PRELIMINARY PROSPECTUS Subject to completion, dated September 14, 2001
- --------------------------------------------------------------------------------
765,000 Shares
CardioDynamics International Corporation
Common Stock
____________
These 765,000 shares are being sold by Scripps Medical Charitable LP as
selling shareholder. We will not receive any proceeds from the sale of shares by
the selling shareholder. This offering is not being underwritten. The last
reported sale price of our common stock on the Nasdaq National Market on
September 10, 2001 was $ 5.501 per share.
Nasdaq National Market Symbol--CDIC
Investing in our common stock involves a high degree of risk. See "Risk
Factors" beginning on page 6.
The selling shareholder may offer and sell their shares in negotiated
transactions. These sales may occur at fixed prices that are subject to change,
at prices that are determined by prevailing market prices, or at negotiated
prices.
The selling shareholder may sell shares to or through broker-dealers, who
may receive compensation in the form of discounts, concessions or commissions
from the selling shareholder, the purchasers of the shares, or both. We will not
receive any of the proceeds from the sale of the shares.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
____________
Prospectus dated September __, 2001
TABLE OF CONTENTS
Page
----
WHERE YOU CAN FIND ADDITIONAL INFORMATION ABOUT US....................... 2
INFORMATION INCORPORATED BY REFERENCE.................................... 2
ABOUT CARDIODYNAMICS INTERNATIONAL CORPORATION........................... 4
RISK FACTORS............................................................. 6
FORWARD-LOOKING STATEMENTS............................................... 14
USE OF PROCEEDS.......................................................... 14
SELLING SHAREHOLDER...................................................... 14
PLAN OF DISTRIBUTION..................................................... 16
LEGAL MATTERS............................................................ 16
EXPERTS.................................................................. 16
WHERE YOU CAN FIND WHERE YOU CAN FIND ADDITIONAL INFORMATION ABOUT US
We have filed with the Securities and Exchange Commission a
registration statement on Form S-3, including the exhibits and schedules
thereto, under the Securities Act of 1933 with respect to the offering and sale
of the common stock offered by this prospectus. This prospectus does not contain
all the information set forth in the registration statement. For further
information about us and the common stock to be sold in this offering, please
refer to the registration statement. Statements contained in this prospectus as
to the contents of any contract, agreement or other document are not necessarily
complete, and in each instance you should refer to the copy of the contract,
agreement or other document filed as an exhibit to the registration statement.
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy all or any portion of the
registration statement or any reports, statements or other information that we
file with the SEC at the SEC's public reference room at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the regional
offices of the SEC located at Seven World Trade Center, 13th Floor, New York,
New York 10048 and the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661. You can request copies of these documents
upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at
1-800-SEC-0330 for further information on the operation of the public reference
rooms. Our SEC filings, including the registration statement, will also be
available to you on the SEC's web site. The address of this site is
http://www.sec.gov.
INFORMATION INCORPORATED BY REFERENCE
We incorporate by reference the documents listed below and any future
filings made by us with the SEC under sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 from the date of the registration statement of
which this prospectus is a part until the sale of all of the shares of common
stock that are part of this offering. The information incorporated by reference
is considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information from the
date of the filing of such information. The documents that we are incorporating
by reference are as follows:
. our annual report on Form 10-KSB for the year ended November 30, 2000;
. our quarterly report on Form 10-Q for the quarter ended February 28,
2001;
2
. our quarterly report on Form 10-Q for the quarter ended May 31, 2001;
and
. the description of our common stock contained in our registration
statement on Form 8-A declared effective by the SEC on April 19, 1984,
including any amendments or reports filed for the purpose of updating
that description.
Any statement contained in a document that is incorporated by reference
will be modified or superseded for all purposes to the extent that a statement
contained in this prospectus (or in any other document that is subsequently
filed with the SEC and incorporated by reference) modifies or is contrary to
that previous statement. Any statement so modified or superseded will not be
deemed a part of this prospectus except as so modified or superseded.
You may request a copy of these filings (other than exhibits unless
such exhibits are specifically incorporated by reference therein) at no cost by
writing or telephoning Ms. Bonnie Dupuis in our investor relations department at
the following address and telephone number:
CardioDynamics International Corporation
6175 Nancy Ridge Drive, Suite 300
San Diego, California 92121
(858) 535-0202, extension 1005
3
ABOUT CARDIODYNAMICS INTERNATIONAL CORPORATION
CardioDynamics International Corporation is a medical technology and
information solutions company that develops, manufactures, and markets
noninvasive heart-monitoring devices using our proprietary impedance
cardiography (ICG) technology, DISQ(TM) technology, and Zmarc(TM) algorithm.
Our proprietary, patented technology noninvasively monitors the heart's
ability to deliver blood to the body. Our products measure 12 hemodynamic (blood
flow) parameters, the most significant of which is cardiac output, or the amount
of blood pumped by the heart each minute. Our lead stand-alone product, the
BioZ.com(R), has been cleared by the Federal Drug and Administration (FDA) and
carries the CE mark. We sell to US physicians through our own direct sales force
and distribute our products to domestic hospitals and targeted international
markets through a strategic alliance with GE Medical Systems Information
Technologies and a network of international distributors. In November 1998,
Health Care Finance Administration (HCFA) mandated Medicare reimbursement for
our BioZ(R) procedures and in January 2001, implemented uniform reimbursement
throughout the United States. To date, we have an installed base of
approximately 1,400 units in over 850 physician offices and hospital sites
throughout the world.
Our products help physicians assess, diagnose and treat cardiovascular
disease, which is the number one killer of adults in the United States.
According to the American Heart Association (AHA), approximately one in five
Americans has some form of cardiovascular disease. The AHA estimates that over
$300 billion was spent in the United States during 2000 as a result of
cardiovascular disease and stroke. This figure includes both the direct costs
associated with physicians and other professionals, hospital and nursing home
services and medication and the indirect costs associated with lost productivity
resulting from morbidity and mortality.
Electrocardiogram (EKG) is a widely used noninvasive assessment of the
heart that measures the electrical characteristics of the heart. Our ICG
technology makes it possible to noninvasively measure the mechanical functioning
of the heart. Conditions that can interfere with the proper mechanical
functioning of the heart include hypertension (high blood pressure), congestive
heart failure, pulmonary disease, high-risk pregnancy and kidney dysfunction.
Our technology complements the EKG and supplements information obtained through
the five vital signs - heart rate, respiration rate, body temperature, blood
pressure and oxygen saturation - immediately, safely and cost effectively. We
consider noninvasive cardiac output to be the "Sixth Vital Sign(TM)."
The primary method currently being used to measure hemodynamic
parameters is pulmonary artery catheterization (PAC). The invasive, costly and
risky PAC procedure requires hospitalization and involves an incision into the
patient's neck or groin region and the insertion of a catheter (plastic tube)
through the heart directly into the pulmonary artery. Complications associated
with this procedure occur in as many as one in four reported cases and include
irregular heartbeats, infection, pulmonary artery rupture and death.
Because of the high risk of complications, physicians generally
prescribe PAC only for critically ill patients. Because PAC is not available in
the physician's office or outpatient clinic, in the great majority of
situations, the physician seeking to diagnose cardiovascular disease must
indirectly assess the patient's hemodynamic status by measuring blood pressure,
checking the pulse, looking at neck veins and employing subjective examination
techniques that are prone to human error. A compelling need exists for
objective, safe, cost-effective, noninvasive measurement tools, such as our
BioZ(R) systems, that physicians can safely prescribe PAC more frequently and at
an earlier stage in treatment.
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During ICG monitoring using our BioZ(R) systems, an undetectable
electrical signal is transmitted through the chest via four proprietary sensors
on the patient's neck and chest. Our sophisticated Digital Impedance Signal
Quantifier (DISQ(TM)) technology and impedance modulating aortic compliance
(ZMARC(TM)) algorithm analyze and record significant hemodynamic parameters.
Based on this data, a physician can assess the patient's condition, customize
treatment, monitor patient compliance and the effectiveness of prescribed
medications and more accurately identify potential complications.
Our objective is to establish the BioZ(R) product line as a standard of
care in cardiovascular medicine. Specifically, our strategy is to:
. accelerate market penetration through our direct sales force;
. broaden our distribution channels through strategic relationships;
. secure additional recurring revenue through enhanced proprietary sensors;
. maintain market leadership through product improvements and extensions;
. target new market opportunities through technology development; and
. develop ICG products for home healthcare.
We were incorporated as a California corporation in 1980 and changed
our name in 1993. Our principal executive offices are located at 6175 Nancy
Ridge Drive, Suite 300, San Diego, California 92121, and our telephone number is
858-535-0202. Our common stock trades under the symbol CDIC on the Nasdaq-Amex
National Market System. Our website address is www.cdic.com.
Information contained in our web site should not be considered part of
this prospectus. In this prospectus, the terms "we," "us," "our" and
"CardioDynamics" mean CardioDynamics International Corporation (unless the
context indicates another meaning).
BioZ(R), BioZ.com(R), BioZ.sim(TM), BioZ.tel(TM), BioZ.pc(TM),
BioZ.net(TM), BioZtect(TM), BioZ.buy(TM), Sixth Vital Sign(TM), DISQ(TM),
ZMARC(TM), ZCare(R) and the CardioDynamics logo are our trademarks. All rights
reserved. All other trademarks, servicemarks or trade names referred to in this
prospectus are the property of their respective owners.
You should read this entire prospectus carefully, as well as the
documents incorporated by reference in this prospectus, before deciding to
invest in shares of our common stock.
5
RISK FACTORS
You should carefully consider the risks described below before making
an investment decision. The risks and uncertainties described below are not the
only ones facing our company. Additional risks and uncertainties not presently
known to us or that we currently believe are immaterial may also impair our
business operations. If any of the following risks actually occur, our business,
financial condition or results of operations could be materially adversely
affected. In such a case, the trading price of our common stock could decline,
and you may lose all or part of your investment.
We depend upon on our BioZ(R) product line, the market acceptance of which is in
its early stages.
Our future is dependent upon the success of the BioZ(R) product line
and similar products that are based on the same core technology. The market for
these products is in a relatively early stage of development and may never fully
develop as we expect. The long-term commercial success of the BioZ(R) product
line requires widespread acceptance of our products as safe, efficient and
cost-effective. Widespread acceptance would represent a significant change in
medical practice patterns. In the past, some medical professionals have
hesitated to use ICG products because of limitations experienced with older,
analog-based monitors. Invasive procedures, such as PAC, are generally accepted
in the medical community and have a long history of use.
We have sponsored and will continue to sponsor or conduct clinical
trials. We cannot be certain that clinical trials will be completed, that they
will have a positive outcome or that a positive outcome in these trials will be
sufficient to promote widespread acceptance of our products within the medical
community.
Technological change is difficult to predict and to manage.
We face the challenges that are typically faced by companies emerging
from the development phase. Our product line has required, and any future
products will require, substantial development efforts and compliance with
governmental clearance or approval requirements. We may encounter unforeseen
technological or scientific problems that force abandonment or substantial
change in the development of a specific product or process.
We must maintain and develop strategic relationships with third parties to
increase market penetration of our product lines.
We distribute our products to domestic hospitals and targeted
international markets through our strategic alliance with GE Medical Systems
Information Technologies. We intend to enter into similar agreements with other
major patient monitoring companies and to establish technology partnerships with
pacemaker and other medical product and technology companies. Widespread
acceptance of our BioZ(R) products is dependent on our establishing and
maintaining these strategic relationships with third parties and on the
successful distribution efforts of third parties.
Many aspects of our relationships with third parties, and the success
with which third parties promote distribution of our products, are beyond our
control. We may be unsuccessful in maintaining our existing strategic
relationships and in identifying and entering into future development and
distribution agreements with third parties.
Our success depends in part upon the availability of third-party reimbursement
at adequate price levels.
Our success will depend in part on the availability of adequate
reimbursement from third-party healthcare payers, such as Medicare, private
health insurers and managed care organizations. Third-party
6
payers increasingly challenge the pricing of medical products and services.
Third-party payers may not cover the cost of a device and related services, or
they may place significant restrictions on the circumstances in which coverage
will be available. In addition, reimbursement may not be at or remain at price
levels adequate to allow medical professionals to realize an appropriate return
on the purchase of our products.
We depend on management and other key personnel.
We are dependent on a limited number of key management and technical
personnel. The loss of one or more of our key employees may hurt our business if
we are unable to identify other individuals to provide us with similar services.
We do not maintain "key person" insurance on any of our employees. In addition,
our success depends upon our ability to attract and retain additional highly
qualified sales, management, manufacturing and research and development
personnel. We face intense competition in our recruiting activities and may not
be able to attract or retain qualified personnel.
We depend on Rivertek Medical Systems and other third parties for development
and manufacturing services.
Our strategy for development and commercialization of some of our
products depends upon entering into various arrangements with third parties and
upon the subsequent success of these parties in performing their obligations. We
may not be able to negotiate acceptable arrangements in the future, and our
existing arrangements may not be successful. We rely heavily on contracted
development services, particularly from Rivertek Medical Systems, Inc. Also, we
currently assemble our products from components manufactured by a limited number
of manufacturers. Therefore, we are dependent on component and subassembly
manufacturers. If we experience a termination, modification or disruption of any
of our development or manufacturing arrangements, we may be unable to deliver
products to our customers on a timely basis, which may lead to customer
dissatisfaction and damage to our reputation.
We may not have adequate intellectual property protection.
Although we believe that we have effective patent protection, our
patents and proprietary technology may not be able to prevent competition by
others. Our lead patent expired in May 2001. In addition, in the future our
products may be found to infringe upon the rights of others. From time to time,
we have received communications from third parties asserting that features of
some of our products may infringe on the intellectual property rights of others.
Any claims resulting in intellectual property litigation, whether defensive or
offensive, would have no certain outcome other than to drain our resources.
The validity and breadth of claims in medical technology patents
involve complex legal and factual questions. Future patent applications may not
be issued, the scope of any patent protection may not exclude competitors, and
our patents may not provide competitive advantages to us. Our patents may be
found to be invalid, and other companies may claim rights in or ownership of the
patents and other proprietary rights held or licensed by us. Also, our existing
patents may not cover products that we develop in the future. Moreover, when our
key patents expire, the inventions will enter the public domain.
Since patent applications in the United States are maintained in
secrecy until patents issue, our patent applications may infringe patents that
may be issued to others. If our products were found to infringe patents held by
competitors, we may have to modify our products to avoid infringement, and it is
possible that our modified products would not be commercially successful.
7
We face competition from other companies and technologies.
We compete with other companies that are developing and marketing
noninvasive hemodynamic monitors. We are also subject to competition from
companies that support invasive technologies. Many of these companies have more
established and larger marketing and sales organizations, significantly greater
financial and technical resources and a larger installed base of customers than
we do. The introduction by others of products embodying new technologies and the
emergence of new industry standards may render our products obsolete and
unmarketable. In addition, other technologies or products may be developed that
have an entirely different approach or means of accomplishing the intended
purposes of our products. Accordingly, the life cycles of our products are
difficult to estimate. To compete successfully, we must develop and introduce
new products that keep pace with technological advancements, respond to evolving
consumer requirements and achieve market acceptance. We may be unable to develop
new products that address our competition.
Our business plan contemplates an income stream from sales of
disposable sensors that are compatible with an installed base of our monitors.
We may be subject to price competition from other sensor manufacturers whose
products are also compatible with our monitors. To mitigate this we successfully
developed proprietary sensor technology that provides enhanced features to our
customers and promotes the exclusive use of our proprietary sensors with our
equipment.
The current widespread acceptance of PAC, and the lack of widespread
acceptance of noninvasive technologies like ours, is an important competitive
disadvantage that we must overcome. In addition, our current and potential
competitors may establish cooperative relationships with large medical equipment
companies to gain access to greater research and development or marketing
resources. Competition may result in price reductions, reduced gross margins and
loss of market share.
The cost and availability of power in the State of California is subject to
uncertainty.
In late 2000 and continuing into 2001, the State of California has been
subject to a deterioration in the ability of major utilities to provide energy
for the State's needs. In Northern California, the crisis has resulted in
"rolling blackouts" where certain areas are not provided with any electricity
for periods of up to two hours. To date the most immediate impact has been the
significant increase in power rates for most users, including us. In addition,
the major utility providers are purchasing power on a "spot" basis. The cost of
such purchases has exceeded their ability to fully collect the increases from
their customers. Any future interruption in power or further increases in power
costs could delay production or increase our operating costs and could have a
material adverse effect on our operations.
We have no experience with home healthcare.
We intend to enter the home healthcare market through strategic
relationships with other parties. We have not concluded any agreements or
understandings with any third parties, and we may not be able to enter into any
arrangements on terms satisfactory to us. Even if we are successful in
negotiating acceptable arrangements with third parties, the parties may not
perform their obligations to us for reasons beyond our control. If we are not
able to negotiate arrangements with other parties to implement our home
healthcare strategy, or if such arrangements, once negotiated, are not
successful, we will not be able to meet our business objectives in this area.
We have a history of losses and may experience continued losses.
We have experienced losses every year. These losses have resulted
because we have expended more money in the course of researching, developing and
enhancing our technology and products and establishing our sales, marketing and
administrative organizations than we have generated in revenues.
8
We expect that our operating expenses will increase substantially in the
foreseeable future as we increase our sales and marketing activities, expand our
operations and continue to develop our technology. It is possible that we will
never achieve or sustain the revenue levels required for profitability.
We may need additional capital, which may be unavailable.
The commercialization of our product line and the development and
commercialization of any additional products may require greater expenditures
than expected in our current business plan. Our capital requirements will depend
on numerous factors, including:
. our rate of sales growth, as fast growth may actually increase our need
for additional capital to hire additional staff, purchase additional
component inventories, finance the increase in accounts receivable and
supply additional support services;
. our progress in marketing-related clinical evaluations and product
development programs, all of which will require additional capital;
. our receipt of, and the time required to obtain, regulatory clearances
and approvals--the longer regulatory approval takes, the more working
capital we will need to support our regulatory and development efforts
in advance of sales;
. the level of resources that we devote to the development, manufacture
and marketing of our products--any decision we make to improve, expand
or simply change our process, products or technology will require
increased funds;
. facilities requirements--as we grow we may need additional
manufacturing, warehousing and administration facilities and the costs
of the facilities would be borne long before any increased revenue from
growth would occur;
. market acceptance and demand for our products--although growth may
increase our capital needs, the lack of growth and continued losses
would also increase our need for capital; and
. financing strategies--our attempt to accelerate the otherwise lengthy
purchasing processes of hospitals by offering leasing programs as an
alternative to outright purchasing and by providing purchasers with
extended payment terms and financing options will require additional
capital.
We may be unable to predict accurately the timing and amount of our
capital requirements. We may be required to raise additional funds through
public or private financing, bank loans, collaborative relationships or other
arrangements earlier than expected. It is possible that banks, venture
capitalists and other investors may perceive our capital structure, our history
of losses or the need to achieve widespread acceptance of our technology as too
great a risk to bear. As a result, additional funding may not be available on
attractive terms, or at all. If we cannot obtain additional capital when needed,
we may be forced to agree to unattractive financing terms, to change our method
of operation or to curtail our operations.
We may not be able to manage growth.
If successful, we will experience a period of growth that could place a
significant strain upon our managerial, financial and operational resources. Our
infrastructure, procedures and controls may not be adequate to support our
operations and to achieve the rapid execution necessary to successfully market
our products. Our future operating results will also depend on our ability to
expand our direct sales force
9
and our internal sales, marketing and support staff. If we are unable to manage
future expansion effectively, our business, results of operations and financial
condition will suffer, our senior management will be less effective, and our
revenues and product development efforts may decrease.
Our quarterly operating results frequently vary due to factors outside our
control.
We have experienced and expect to continue to experience fluctuations
in quarterly operating results as a result of a number of factors. We cannot
control many of these factors, which include the following:
. the timing and number of new product introductions;
. the mix of sales of higher and lower margin products in a quarter;
. the market acceptance of our products;
. development and promotional expenses relating to the introduction
of new products or enhancements of existing products;
. product returns;
. changes in pricing policies by us and our competitors;
. the timing of orders from major customers and distributors; and
. delays in shipment.
For these reasons, you should not rely on period-to-period comparisons
of our financial results as indications of future results.
We may not continue to receive necessary FDA clearances or approvals.
Our products and activities are subject to extensive, ongoing
regulation by the Food and Drug Administration and other governmental
authorities. Delays in receipt of, or failure to obtain or maintain, regulatory
clearances and approvals, or any failure to comply with regulatory requirements,
could delay or prevent our ability to market our product line.
We may not receive approvals by foreign regulators, which are necessary for
international sales.
Sales of medical devices outside the United States are subject to
foreign regulatory requirements that vary from country to country. If we, or our
international distributors, fail to obtain or maintain required pre-market
approvals or fail to comply with foreign regulations, foreign regulatory
authorities may require us to file revised governmental notifications, cease
commercial sales of our products in the applicable countries or otherwise cure
the problem. Such enforcement action by regulatory authorities may be costly.
In order to sell our products within the European community, we must
comply with the European community's medical device directive. The CE marking on
our products attests to this compliance. Future regulatory changes may limit our
ability to use the CE mark, and any new products we develop may not qualify for
the CE mark. If we lose this authorization or fail to obtain authorization on
future products, we will not be able to sell our products in the European
community.
10
Members of our board of directors control a large percentage of our common stock
and may influence our decisions.
J. Michael Paulson and James C. Gilstrap, both of whom are members of our
board of directors, beneficially own approximately 27% of the outstanding shares
of our common stock as of September 10, 2001. Accordingly, Messrs. Paulson and
Gilstrap are able to substantially influence us and our affairs and business,
including any future issuances of common stock or other securities, merger and
acquisition decisions, declaration of dividends and the election of directors.
In addition, our stock price and our ability to raise capital could be injured
if these shareholders were to sell a significant portion of their holdings on
the open market.
We do not know the effects of healthcare reform proposals.
The healthcare industry is undergoing fundamental changes resulting from
political, economic and regulatory influences. In the United States,
comprehensive programs have been proposed that seek to increase access to
healthcare for the uninsured, control the escalation of healthcare expenditures
within the economy and use healthcare reimbursement policies to balance the
federal budget.
We expect that Congress and state legislatures will continue to review and
assess healthcare proposals, and public debate of these issues will likely
continue. We cannot predict which, if any, of such reform proposals will be
adopted and when they might be adopted. Other countries also are considering
healthcare reform. Significant changes in healthcare systems could have a
substantial impact on the manner in which we conduct our business and could
require us to revise our strategies.
We are subject to product liability claims and product recalls that may not be
covered by insurance.
The nature of our business exposes us to risks of product liability claims
and product recalls. Medical devices as complex as ours frequently experience
errors or failures, especially when first introduced or when new versions are
released. Our products are sometimes used in procedures where there is a high
risk of serious injury or death. These risks will exist even with respect to
those products that have received, or may in the future receive, regulatory
clearance for commercial sale.
We did not carry product liability insurance during some periods before May
15, 1995. We currently maintain product liability insurance at $20,000,000 per
occurrence and $20,000,000 in the aggregate. Our product liability insurance may
not be adequate. In the future, insurance coverage may not be available on
commercially reasonable terms, or at all. In addition, product liability claims
or product recalls could damage our reputation even if we have adequate
insurance coverage.
Our common stock is subject to price volatility.
The market price of our common stock has been and is likely to continue to
be highly volatile. Our stock price could be subject to wide fluctuations in
response to various factors beyond our control, including:
. quarterly variations in operating results;
. changes in, or failure to meet, financial estimates of securities analysts;
. the rate of adoption by physicians of ICG technology in targeted markets;
. the timing of patent and regulatory approvals;
11
. the timing and extent of technological advancements;
. results of clinical studies;
. the sales of our common stock by affiliates or other shareholders with
large holdings; and
. general market conditions.
Our future operating results may fall below the expectations of securities
industry analysts or investors. Any such shortfall could result in a significant
decline in the market price of our common stock. In addition, the stock market
has experienced significant price and volume fluctuations that have affected the
market prices of the stock of many medical device companies and that often have
been unrelated to the operating performance of such companies. These broad
market fluctuations may directly influence the market price of our common stock.
We may be required to issue additional shares of common stock at prices that are
below then market value.
The holders of warrants to purchase our common stock could require us to
issue additional shares of common stock to them pursuant to anti-dilution
rights. These rights would cause us to issue additional common stock upon
exercise of their warrants if we sell common stock at a price less than the
exercise price of their warrants. If we need to sell common stock at a time when
the market price for our shares is depressed, these anti-dilution rights could
further depress the market price and impair our ability to raise needed capital.
Our international sales expose us to unique risks.
In fiscal 2000, international sales accounted for approximately 9% of our
revenue. We believe that international sales will represent a meaningful portion
of our revenue in the future. We rely on GE Medical Systems Information
Technologies and other regional distributors to assist us with our international
operations. In addition, we are exposed to risks from international sales, which
include unexpected changes in regulatory requirements, tariffs and other
barriers and restrictions and reduced protection for intellectual property
rights. Moreover, fluctuations in the rates of exchange may increase the price
in local currencies of our products in foreign markets and make our products
relatively more expensive than competitive products.
Common stock which is available for immediate resale may depress our market
price.
We have filed registration statements with the Securities and Exchange
Commission covering the potential resale by our shareholders of up to 19,882,000
shares of common stock (including the shares of common stock covered by this
registration statement and other registration statements filed concurrently with
this registration statement), the majority of which have not been sold. The
existence of a substantial number of shares of common stock subject to immediate
resale could depress the market price for our common stock and impair our
ability to raise needed capital.
A low stock price could result in our being de-listed from the Nasdaq National
Market and subject us to regulations which could reduce our ability to raise
funds.
If our stock price were to drop below $1.00 per share and remain below
$1.00 per share for an extended period of time, or if we fail to maintain other
Nasdaq criteria, Nasdaq may de-list our common stock from the Nasdaq-Amex
National Market. In such an event, our shares could only be traded on over-the-
counter bulletin board systems. This method of trading could significantly
impair our ability to raise new capital.
12
In the event that our common stock was de-listed from the Nasdaq National
Market due to low stock price, we may become subject to special rules, called
penny stock rules, that impose additional sales practice requirements on broker-
dealers who sell our common stock. The rules require, among other things, the
delivery, prior to the transaction, of a disclosure schedule required by the
Securities and Exchange Commission relating to the market for penny stocks. The
broker-dealer also must disclose the commissions payable both to the broker-
dealer and the registered representative and current quotations for the
securities, and monthly statements must be sent disclosing recent price
information.
In the event that our common stock becomes characterized as a penny stock,
our market liquidity could be severely affected. The regulations relating to
penny stocks could limit the ability of broker-dealers to sell our common stock
and thus the ability of purchasers in this offering to sell their common stock
in the secondary market.
We do not intend to pay dividends in the foreseeable future.
We do not intend to pay any cash dividends on our common stock in the
foreseeable future. Payment of such cash dividends would, in any event, be
prohibited or limited under the terms of our line of credit with Imperial Bank.
13
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements within the meaning
of section 27A of the Securities Act of 1933 and section 21E of the Securities
Exchange Act of 1934. These statements include statements regarding our plans,
goals, strategies, intentions, beliefs or current expectations. These statements
are expressed in good faith and we believe had a reasonable basis when
expressed, but we cannot assure you that these expectations will be achieved or
accomplished. Sentences in this prospectus containing verbs such as "plan,"
"intend," "anticipate," "target," "predict," "estimate," "believe" or "expect,"
or future-tense or conditional constructions (such as "will," "may," "could,"
"should," etc.) constitute forward-looking statements that involve risks and
uncertainties. Items contemplating, or making assumptions about, actual or
potential future sales, market size, collaborations, trends or operating results
also constitute such forward-looking statements. These statements are only
predictions and actual results could differ materially. Certain factors that
might cause such a difference are discussed throughout this prospectus,
including the section entitled "Risk Factors" on pages 6 to 13 of this document.
We believe it is important to communicate our expectations to our
investors. However, there may be events in the future that we are not able to
predict accurately or over which we have no control. The considerations
discussed in "Risk Factors" and elsewhere in this prospectus provide examples of
risks, uncertainties and events that may cause our actual results to differ
materially from the expectations we describe in our forward-looking statements.
Before you invest in our common stock, you should be aware that the occurrence
of the events described in "Risk Factors" and elsewhere in this prospectus could
have a material adverse effect on our business, operating results and financial
condition.
You should read and interpret any forward-looking statements in
conjunction with our most recent annual report on Form 10-KSB, our quarterly
reports on Form 10-Q and our other SEC filings, as well as the considerations
discussed in "Risk Factors."
Any forward-looking statement speaks only as of the date that we made
the statement, and we do not undertake to update the disclosures contained in
this prospectus or reflect events or circumstances that occur subsequently or
the occurrence of unexpected events.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the shares by the
selling shareholder. All proceeds from the sale of the shares will be for the
account of the selling shareholder, as described below. See "Selling
Shareholder" and "Plan of Distribution" below.
SELLING SHAREHOLDER
Scripps Medical Charitable LP was organized by James C. Gilstrap and
holds shares originally acquired from Mr. Gilstrap. Mr. Gilstrap has served as a
member of our board of directors since May 1995, as co-chairman of our board
from June 1996 to July 2000, and as chairman of our board from July 2000 to the
present.
Scripps Medical Charitable LP anticipates the need to sell shares from
time to time in one or more private transactions to meet its various needs and
objectives. To facilitate the orderly sale of shares by Scripps Medical
Charitable LP, we agreed that we would file a registration statement on Form S-3
with respect to 765,000 shares and would use our best efforts to cause such
registration statement to be declared effective. Accordingly, we filed with the
Commission a registration statement on Form S-3, of which this prospectus forms
a part, with respect to the resale of the shares from time to time. We
14
currently intend to prepare and file such amendments and supplements to the
registration statement as may be necessary to keep the registration statement
effective until the earliest of (a) the date on which all of the shares of
common stock offered hereby have been re-sold in accordance with the Securities
Act of 1933, (b) two years from the effective date of the registration statement
or (c) the date on which the Scripps Medical Charitable LP's shares could be
sold in a single three-month period pursuant to Rule 144 of the Securities Act.
We have agreed to pay for all of the direct and indirect registration expenses
incurred in registration of the shares offered hereby.
The following table sets forth the name of the selling shareholder, the
number of shares of our common stock which the selling shareholder owned prior
to the offering and the number of shares of our common stock which may be
offered pursuant to this prospectus.
Shares Shares
Beneficially Number of Beneficially
Owned Prior to Shares Being Owned After
Offering (1) Offered for Sale (2) Offering (3)
Selling ------------------------- -------------------- -------------------------
Shareholder Number Percentage Number Percentage
----------- ------ ---------- ------ ----------
Scripps Medical
Charitable LP (4) 765,000 2.1% 765,000 - -
___________________
(1) Calculated based on Rule 3d-3(i) of the Exchange Act, using 45,648,522
shares of common stock outstanding as of September 10, 2001.
(2) This registration statement also shall cover any additional shares of
common stock which become issuable in connection with the shares registered
for sale hereby by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration which results in an increase in the number of outstanding
shares of our common stock.
(3) Assumes the sale of all shares that may be sold in the offering.
(4) Excludes 2,182,654 shares of common stock held by James C. Gilstrap,
103,764 shares of common stock beneficially owned by CardioDynamics
Holdings, LLC (CDH), of which Mr. Gilstrap is a member with a minority
interest. Also excludes 68,000 shares of common stock Mr. Gilstrap
beneficially owns, by virtue of his right to acquire such shares from
CardioDynamics under stock options now exercisable or exercisable within 60
days. Scripps Medical Charitable LP disclaims beneficial ownership of all
such shares held beneficially owned by Mr. Gilstrap, CDH and any shares Mr.
Gilstrap beneficially owns by virtue of his right to acquire such shares
from CardioDynamics under stock options now exercisable or exercisable
within 60 days.
15
PLAN OF DISTRIBUTION
The selling shareholder may, from time to time, sell any or all of its
shares of common stock in private transactions. These sales may be at fixed or
negotiated prices. There can be no assurance that the selling shareholder will
sell any or all of the shares of common stock pursuant to the prospectus. The
selling shareholder may also sell shares under Rule 144 under the Securities
Act, if available, rather than under this prospectus.
Broker-dealers engaged by the selling shareholder may arrange for other
brokers-dealers to participate in sales. Broker-dealers may receive commissions
or discounts from the selling shareholder (or, if any broker-dealer acts as
agent for the purchaser of shares, from the purchaser) in amounts to be
negotiated. The selling shareholder does not expect these commissions and
discounts to exceed what is customary in the types of transactions involved.
The selling shareholder and any broker-dealers or agents that are
involved in selling the shares acquired by selling shareholder under the
securities purchase agreement may be considered "underwriters" by the Securities
and Exchange Commission within the meaning of the Securities Act in connection
with sales under this registration statement. Accordingly, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed underwriting commissions or discounts
under the Securities Act.
We have agreed to indemnify the selling shareholder against certain
losses, claims, damages and liabilities, including liabilities under the
Securities Act in connection with the resale of the shares. We are required to
pay all our fees and expenses incident to the registration of the shares, for
which we will receive no reimbursement.
LEGAL MATTERS
The validity of the common stock offered by this prospectus will be
passed upon for us by Pillsbury Winthrop LLP, San Diego, California.
EXPERTS
The financial statements of CardioDynamics International Corporation as
of November 30, 2000 and 1999 and for each of the years in the two-year periods
ended November 30, 2000 have been incorporated by reference in this prospectus
and in the registration statement of which this prospectus is a part in reliance
upon the report of KPMG LLP, certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses in connection
with the sale and distribution of the securities being registered. All of the
amounts shown are estimates except the Securities and Exchange Commission
registration fee.
Securities and Exchange Commission registration fee............... $ 1,098.73
Accounting fees and expenses*..................................... 3,000.00
Legal fees and expenses*.......................................... 5,000.00
Printing and engraving fees*...................................... 500.00
Miscellaneous fees and expenses*.................................. 401.27
---------
Total
$ 10,000.00
=========
____________________
* Estimated
Item 15. Indemnification of Directors and Officers.
California Law permits indemnification of officers, directors and other
corporate agents under specified circumstances and subject to specified
limitations. Our certificate of incorporation and bylaws provide that we shall
indemnify our directors, officers, employees and agents to the full extent
permitted by California law, including in circumstances in which indemnification
is otherwise discretionary under California law. In addition, with the approval
of our board of directors and our shareholders, we have entered into separate
indemnification agreements with our directors, officers and some of employees
which require us, among other things, to indemnify them against liabilities
which may arise by reason of their status or service (other than liabilities
arising from willful misconduct of a culpable nature) and to obtain directors'
and officers' insurance, if available on reasonable terms.
These indemnification provisions may be sufficiently broad to permit
indemnification of our officers, directors and other corporate agents for
liabilities (including reimbursement of expenses incurred) arising under the
Securities Act of 1933.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of ours in which indemnification is
being sought nor are we aware of any threatened litigation that may result in a
claim for indemnification by any director, officer, employee or other agent of
ours.
We have obtained liability insurance for the benefit of our directors
and officers.
II-1
Item 16. Exhibits.
The following exhibits are filed with this registration statement:
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ----------------------
4.1 Form of common stock certificate (incorporated by reference to
the exhibit of the same number included in our registration
statement on Form 8-A declared effective on April 19, 1984
(File No. 000-11868)).
5.1 Opinion of Pillsbury Winthrop LLP.
23.1 Consent of KPMG LLP, independent auditors.
23.2 Consent of Pillsbury Winthrop LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included in the signature page contained in
Part II of this registration statement).
Item 17. Undertakings.
We hereby undertake to file, during any period in which offers or sales
are being made, a post-effective amendment to this registration statement:
(a) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(b) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the registration statement;
notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Securities and Exchange Commission pursuant to Rule
424(b) under the Securities Act of 1933 if, in the aggregate, the
changes in volume and price represent no more than a 20% change
in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective
registration statement;
(c) To include any material information with respect to the plan of
distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (a) and (b) do not apply if the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the Securities and
Exchange Commission by us pursuant to section 13 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
In addition, we hereby undertake:
(a) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new registration statement
II-2
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial
bona fide offering thereof; and
(b) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
We hereby undertake that, for purposes of determining any liability
under the Securities Act of 1933, each filing of our annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to our directors, officers, and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission this indemnification is
against public policy as expressed in the Securities Act of 1933 and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by us of expenses incurred or paid by a
director, officer or controlling person of ours in the successful defense of any
action, suit or proceeding) is asserted by such director, officer, or
controlling person in connection with the securities being registered, we will,
unless in the opinion of our counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, we certify
that we have reasonable grounds to believe that we meet all of the requirements
for filing on Form S-3 and have duly caused this registration statement to be
signed on our behalf by the undersigned, thereunto duly authorized, in the City
of San Diego, State of California on September 14, 2001.
CardioDynamics International Corporation
By: /s/ Michael K. Perry
---------------------------------------
Michael K. Perry
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Michael K. Perry and Stephen P. Loomis
and each of them, as his or her true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this registration statement
on Form S-3, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-facts and agents, or either of them, or
their or his substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ Michael K. Perry
- ----------------------------- Chief Executive Officer and Director September 14, 2001
Michael K. Perry (Principal Executive Officer)
/s/ Stephen P. Loomis
- ----------------------------- Vice President, Finance and Chief Financial September 14, 2001
Stephen P. Loomis Officer (Principal Financial and
Accounting Officer)
/s/ Connie R. Curren
- ----------------------------- Director September 14, 2001
Connie R. Curren, Ed.D. RN
/s/ Jacques C. Douziech
- ----------------------------- Director September 14, 2001
Jacques C. Douziech
/s/ Cam L. Garner
- ----------------------------- Director September 14, 2001
Cam L. Garner
/s/ James C. Gilstrap
- ----------------------------- Director September 14, 2001
James C. Gilstrap
/s/ Richard O. Martin
- ----------------------------- Director September 14, 2001
Richard O. Martin, Ph.D.
/s/ J. Michael Paulson
- ----------------------------- Director September 14, 2001
J. Michael Paulson
II-4
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
EXHIBITS
TO
FORM S-3
UNDER
SECURITIES ACT OF 1933
CARDIODYNAMICS INTERNATIONAL CORPORATION
EXHIBIT INDEX
-------------
Exhibit
Number Exhibit
- ------- -------
4.1 Form of Common Stock Certificate (incorporated by reference to the
exhibit of the same number included in our registration statement
on Form 8-A declared effective on April 19, 1984
(File No. 0-11868).
5.1 Opinion of Pillsbury Winthrop LLP.
23.1 Consent of KPMG LLP, independent auditors.
23.2 Consent of Pillsbury Winthrop LLP (included in Exhibit 5.1).
24.1 Power of Attorney (included in the signature page contained in Part
II of this registration statement).