##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission File Number 000-51512
 
 Cardiac Science Corporation
  Delaware
    
    94-3300396(State or Other Jurisdiction of 
Incorporation or Organization)
    
    (I.R.S. Employer
Identification No.)3303 Monte Villa Parkway, Bothell, WA
    
    98021(Address of Principal Executive Offices)
    
    (Zip Code)
 (425) 402-2000  (Registrants Telephone Number, Including Area Code)
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer þ
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ




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TABLE OF CONTENTS
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial Statements (unaudited)
    
    
    3Item 2. Managements Discussion and Analysis of Financial
Condition and Results of Operations
    
    
    16Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    26Item 4. Controls and Procedures
    
    
    26PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    27Item 1A. Risk Factors
    
    
    27Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    28Item 3. Defaults Upon Senior Securities
    
    
    29Item 4. Removed and Reserved
    
    
    29Item 5. Other Information
    
    
    29Item 6. Exhibits
    
    
    29SIGNATURE
    
    
    30EX-31.1EX-31.2EX-32.1EX-32.2
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PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 CARDIAC SCIENCE CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    December 31,(in thousands, except share amounts)
    
    2010
    
    
    2009ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    21,005
    
    
    $
    26,866Accounts receivable, net of allowance for doubtful accounts of $934 and
$1,017, respectively
    
    
    21,384
    
    
    
    24,228Inventories
    
    
    25,556
    
    
    
    23,581Prepaid expenses and other current assets
    
    
    3,139
    
    
    
    3,702Total current assets
    
    
    71,084
    
    
    
    78,377Other assets
    
    
    852
    
    
    
    872Machinery and equipment, net of accumulated depreciation and amortization
of $18,097 and $17,490, respectively
    
    
    8,457
    
    
    
    8,406Deferred income taxes
    
    
    31
    
    
    
    31Intangible assets, net of accumulated amortization of $18,856 and $17,876,
respectively
    
    
    26,996
    
    
    
    27,988Investments in unconsolidated entities
    
    
    493
    
    
    
    386Total assets
    
    $
    107,913
    
    
    $
    116,060LIABILITIES AND EQUITYCurrent Liabilities:Accounts payable
    
    $
    11,075
    
    
    $
    11,030Accrued liabilities
    
    
    13,082
    
    
    
    12,216Warranty liability
    
    
    4,053
    
    
    
    4,028Deferred revenue
    
    
    8,448
    
    
    
    7,919Corrective action liabilities
    
    
    13,505
    
    
    
    15,249Total current liabilities
    
    
    50,163
    
    
    
    50,442Deferred income taxes
    
    
    5,389
    
    
    
    5,389Total liabilities
    
    
    55,552
    
    
    
    55,831Equity:Cardiac Science Corporation shareholders equity:Preferred stock (10,000,000 shares authorized), $0.001 par value, no shares
issued or outstanding as of March 31, 2010 and December 31, 2009,
respectively
    
    
    
    
    
    
    Common stock (65,000,000 shares authorized), $0.001 par value,
23,647,872 and 23,566,320 shares issued and outstanding at
March 31, 2010 and December 31, 2009, respectively
    
    
    231,829
    
    
    
    231,159Accumulated other comprehensive income
    
    
    310
    
    
    
    304Accumulated deficit
    
    
    (181,114
    )
    
    
    (172,527
    )Total Cardiac Science Corporation shareholders equity
    
    
    51,025
    
    
    
    58,936Noncontrolling interests
    
    
    1,336
    
    
    
    1,293Total equity
    
    
    52,361
    
    
    
    60,229Total liabilities and equity
    
    $
    107,913
    
    
    $
    116,060
  Page 3 of 34




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CARDIAC SCIENCE CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three Months EndedMarch 31,(In thousands, except share and per share data)
    
    2010
    
    
    2009Revenues:Products
    
    $
    28,767
    
    
    $
    35,265Service
    
    
    4,340
    
    
    
    4,399Total revenues
    
    
    33,107
    
    
    
    39,664Cost of Revenues:Products
    
    
    15,028
    
    
    
    16,634Service
    
    
    3,163
    
    
    
    3,151Total cost of revenues
    
    
    18,191
    
    
    
    19,785Gross profit
    
    
    14,916
    
    
    
    19,879Operating Expenses:Research and development
    
    
    4,205
    
    
    
    3,471Sales and marketing
    
    
    12,802
    
    
    
    11,198General and administrative
    
    
    6,393
    
    
    
    5,616Total operating expenses
    
    
    23,400
    
    
    
    20,285Operating loss
    
    
    (8,484
    )
    
    
    (406
    )Other Income (Loss):Interest income
    
    
    10
    
    
    
    13Other income (loss), net
    
    
    131
    
    
    
    (148
    )Total other income (loss)
    
    
    141
    
    
    
    (135
    )Loss before income tax benefit (expense)
    
    
    (8,343
    )
    
    
    (541
    )Income tax benefit (expense)
    
    
    (133
    )
    
    
    166Net loss
    
    
    (8,476
    )
    
    
    (375
    )Less: Net income attributable to noncontrolling interests
    
    
    (111
    )
    
    
    (163
    )Net loss attributable to Cardiac Science Corporation
    
    $
    (8,587
    )
    
    $
    (538
    )Net loss per share attributable to Cardiac
Science Corporation:Basic
    
    $
    (0.36
    )
    
    $
    (0.02
    )Diluted
    
    $
    (0.36
    )
    
    $
    (0.02
    )Weighted average shares outstanding:Basic
    
    
    23,593,905
    
    
    
    23,056,214Diluted
    
    
    23,593,905
    
    
    
    23,056,214
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CARDIAC SCIENCE CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three Months EndedMarch 31,(In thousands)
    
    2010
    
    
    2009Operating Activities:Net loss
    
    $
    (8,476
    )
    
    $
    (375
    )Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:Stock-based compensation
    
    
    585
    
    
    
    659Depreciation and amortization
    
    
    1,588
    
    
    
    1,525Deferred income taxes
    
    
    
    
    
    
    (367
    )Changes in operating assets and liabilities, net of
businesses acquired:Accounts receivable, net
    
    
    2,644
    
    
    
    7,987Inventories
    
    
    (2,018
    )
    
    
    (1,241
    )Prepaid expenses and other assets
    
    
    574
    
    
    
    428Accounts payable
    
    
    133
    
    
    
    (2,339
    )Accrued liabilities
    
    
    969
    
    
    
    (1,336
    )Warranty liability
    
    
    57
    
    
    
    (102
    )Corrective action liabilities
    
    
    (1,744
    )
    
    
    Deferred revenue
    
    
    529
    
    
    
    (1,096
    )Net cash provided by (used in) operating activities
    
    
    (5,159
    )
    
    
    3,743Investing Activities:Purchases of machinery and equipment
    
    
    (676
    )
    
    
    (885
    )Proceeds from repayment of note
    
    
    2
    
    
    
    73Cash paid for acquisitions
    
    
    
    
    
    
    (54
    )Net cash used in investing activities
    
    
    (674
    )
    
    
    (866
    )Financing Activities:Proceeds from exercise of stock options and issuance of
shares under employee stock purchase plan
    
    
    95
    
    
    
    234Minimum tax withholding on restricted stock awards
    
    
    (30
    )
    
    
    (97
    )Net cash provided by financing activities
    
    
    65
    
    
    
    137Effect of exchange rate changes on cash and cash equivalents
    
    
    (93
    )
    
    
    (106
    )Net change in cash and cash equivalents
    
    
    (5,861
    )
    
    
    2,908Cash and cash equivalents, beginning of period
    
    
    26,866
    
    
    
    34,655Cash and cash equivalents, end of period
    
    $
    21,005
    
    
    $
    37,563Supplemental disclosures of noncash investing and financing activities:Decrease in accrued machinery and equipment purchases
    
    $
    (16
    )
    
    $
    (396
    )
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CARDIAC SCIENCE CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies
 Organization and Description of Business
 ® ® ®
  Basis of Presentation
    Liquidity
  Page 6 of 34




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Use of Estimates
  Net Loss Per Share
  Page 7 of 34




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Three Months EndedMarch 31,(in thousands, except share data)
    
    2010
    
    
    2009Numerator:Net loss attributable to Cardiac Science Corporation
    
    $
    (8,587
    )
    
    $
    (538
    )Denominator:Weighted average shares for basic calculation
    
    
    23,593,905
    
    
    
    23,056,214Weighted average shares for diluted calculation
    
    
    23,593,905
    
    
    
    23,056,214
  Three Months EndedMarch 31,2010
    
    
    2009Antidilutive shares issuable upon exercise of stock options
    
    
    3,029,996
    
    
    
    3,000,194Antidilutive shares issuable upon exercise of warrants
    
    
    
    
    
    
    212,776Antidilutive shares related to non-vested stock awards and
ESPP
    
    
    1,737,339
    
    
    
    383,907Total
    
    
    4,767,335
    
    
    
    3,596,877
 Customer and Vendor Concentrations
   Subsequent Events
  Recent Accounting Pronouncements
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2. Corrective Action Liabilities
   Charged toBeginning
    
    
    product cost
    
    
    
    
    
    
    
    
    
    
    End of(in thousands)
    
    of period
    
    
    of revenues
    
    
    Adjustments
    
    
    Expenditures
    
    
    periodThree months ended March 31, 2010
    
    $
    15,249
    
    
    $
    
    
    
    $
    
    
    
    $
    (1,744
    )
    
    $
    13,505
   Page 9 of 34




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3. Equity
and Comprehensive Income (Loss)
   Page 10 of 34




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Attributable toCardiac Science
    
    
    Noncontrolling
    
    
    Total(in thousands)
    
    Corporation
    
    
    Interests
    
    
    EquityEquity at December 31, 2009
    
    $
    58,936
    
    
    $
    1,293
    
    
    $
    60,229Comprehensive income (loss):Net income (loss)
    
    
    (8,587
    )
    
    
    111
    
    
    
    (8,476
    )Unrealized gains on available for sale securities
    
    
    107
    
    
    
    
    
    
    
    107Foreign currency translation adjustments
    
    
    (101
    )
    
    
    (68
    )
    
    
    (169
    )Comprehensive income (loss)
    
    
    (8,581
    )
    
    
    43
    
    
    
    (8,538
    )Stock-based transactions and compensation expense under
employee benefit plans
    
    
    670
    
    
    
    
    
    
    
    670Equity at March 31, 2010
    
    $
    51,025
    
    
    $
    1,336
    
    
    $
    52,361Equity at December 31, 2008
    
    $
    131,703
    
    
    $
    545
    
    
    $
    132,248Comprehensive income (loss):Net income (loss)
    
    
    (538
    )
    
    
    163
    
    
    
    (375
    )Unrealized losses on available for sale securities,
net of related tax of $14
    
    
    (28
    )
    
    
    
    
    
    
    (28
    )Foreign currency translation adjustments
    
    
    (81
    )
    
    
    (50
    )
    
    
    (131
    )Comprehensive income (loss)
    
    
    (647
    )
    
    
    113
    
    
    
    (534
    )Stock-based transactions and compensation expense under
employee benefit plans
    
    
    824
    
    
    
    
    
    
    
    824Equity at March 31, 2009
    
    $
    131,880
    
    
    $
    658
    
    
    $
    132,538
 4. Segment Reporting
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Three Months EndedMarch 31,(in thousands)
    
    2010
    
    
    2009Defibrillation products
    
    $
    15,862
    
    
    $
    22,916Cardiac monitoring products
    
    
    12,905
    
    
    
    12,349Service
    
    
    4,340
    
    
    
    4,399Total
    
    $
    33,107
    
    
    $
    39,664
  Three Months EndedMarch 31,(in thousands)
    
    2010
    
    
    2009Domestic
    
    $
    24,489
    
    
    $
    25,864Foreign
    
    
    8,618
    
    
    
    13,800Total
    
    $
    33,107
    
    
    $
    39,664
    5. Inventories
  March 31,
    
    
    December 31,(in thousands)
    
    2010
    
    
    2009Raw materials
    
    $
    17,528
    
    
    $
    18,752Finished goods
    
    
    8,028
    
    
    
    4,829Total inventories
    
    $
    25,556
    
    
    $
    23,581
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6. Intangible Assets
  AccumulatedUseful life
    
    
    Cost
    
    
    Amortization
    
    
    NetIntangible assets not subject to amortization:Burdick trade name
    
    
    
    
    
    $
    3,400
    
    
    $
    
    
    
    $
    3,400Cardiac Science trade name
    
    
    
    
    
    
    11,380
    
    
    
    
    
    
    
    11,380Cardiac Science Deutschland trade name
    
    
    
    
    
    
    180
    
    
    
    
    
    
    
    180Total intangible assets not subject to
amortization
    
    
    
    
    
    
    14,960
    
    
    
    
    
    
    
    14,960Intangible assets subject to amortization:Cardiac Science customer relationships
    
    5 years
    
    
    8,650
    
    
    
    (7,929
    )
    
    
    721Cardiac Science developed technology
    
    8 years
    
    
    11,330
    
    
    
    (6,491
    )
    
    
    4,839Burdick distributor relationships
    
    10 years
    
    
    1,400
    
    
    
    (1,015
    )
    
    
    385Burdick developed technology
    
    7 years
    
    
    860
    
    
    
    (860
    )
    
    
    Patents and patent applications
    
    5-10 years
    
    
    960
    
    
    
    (935
    )
    
    
    25Patent rights
    
    6-13 years
    
    
    7,692
    
    
    
    (1,626
    )
    
    
    6,066Total intangible assets subject to amortization
    
    
    
    
    
    
    30,892
    
    
    
    (18,856
    )
    
    
    12,036Total
    
    
    
    
    
    $
    45,852
    
    
    $
    (18,856
    )
    
    $
    26,996
  2010 (excluding Q1 2010)
    
    $
    2,3632011
    
    
    2,1902012
    
    
    2,1872013
    
    
    1,5672014
    
    
    623Thereafter
    
    
    3,106
 7. Credit Facility
  8. Warranty Liability
  Three Months Ended(in thousands)
    
    March 31, 2010Warranty liability, beginning of the period
    
    $
    4,028Charged to product cost of revenues, net
    
    
    437Warranty expenditures
    
    
    (412
    )Warranty liability, end of the period
    
    $
    4,053
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9. Stock-Based Compensation Plans
    10. Commitments and Contingencies
       11. Income Taxes
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12. Derivatives
    13. Fair Value Measurement
    Total Carrying
    
    
    Quoted Prices inValue at March 31,
    
    
    Active Markets(in thousands of dollars)
    
    2010
    
    
    (Level 1)Assets:Cash equivalents
    
    $
    8,617
    
    
    $
    8,617Investments in
unconsolidated entities
    
    $
    413
    
    
    $
    413
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14. Restructuring Costs
   
 Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 This Quarterly Report on Form 10-Q contains forward-looking statements relating to Cardiac
Science Corporation. Except for historical information, the following discussion contains
forward-looking statements within the meaning of the Private Securities Litigation Reform Act of
1995. All statements other than statements of historical fact, including future results of
operations or financial position, made in this Quarterly Report on Form 10-Q are forward looking.
The words believe, expect, intend, anticipate, will, may, variations of such words,
and similar expressions identify forward-looking statements, but their absence does not mean that
the statement is not forward-looking. These forward-looking statements reflect managements current
expectations and involve risks and uncertainties. Our actual results could differ materially from
results that may be anticipated by such forward-looking statements due to various uncertainties.
 The principal factors that could cause or contribute to such differences include, but are not
limited to, the factors discussed in the section entitled Risk Factors in Part 1  Item 1A of
our Annual Report on Form 10-K for the year ended December 31, 2009 and those discussed elsewhere
in this report. Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this report. We undertake no obligation to revise
any forward-looking statements to reflect events or circumstances that may subsequently arise.
Readers are urged to review and consider carefully the various disclosures made in this report and
in our other filings made with the Securities and Exchange Commission (SEC) that disclose and
describe the risks and factors that may affect our business, prospects and results of operations.
  Business Overview
 ® ® ®
 Critical Accounting Estimates and Policies
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and
 Deferred Tax Assets and Income Taxes
  Stock-Based Compensation.
 Indefinite Lived Intangible Assets.
   Valuation of Long-Lived Assets.
 Page 17 of 34




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Accounts Receivable.
 Inventories.
 Warranty.
 Corrective Action Costs.
   Software Revenue Recognition.
 Page 18 of 34




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Revenue Recognition.
     Recent Accounting Pronouncements
   Page 19 of 34




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Results of Operations
 Summary of Results for the Three Months Ended March 31, 2010
 
    
    We generated revenue of $33.1 million for the three months ended March 31, 2010, a
decrease of approximately 17% over the three month period ended March 31, 2009, which
included an overall AED decline of 31%.
 
    
    Cardiac monitoring revenue of $12.9 million increased 5% over the three month period
ended March 31, 2009, reflecting results of our recent leadership changes and demand
generation activities.
 
    
    We incurred a net loss of $8.6 million, or $0.36 per share attributable to Cardiac
Science Corporation, for the three months ended March 31, 2010 compared a net loss of
$0.5 million, or $0.02 per share attributable to Cardiac Science Corporation, for the
three months ended March 31, 2009.
 
    
    We used cash from operations of $5.2 million for the three months ended March 31,
2010 compared to cash generated from operations of $3.7 million for the three months
ended March 31, 2009.
 
    
    We successfully negotiated a new line of credit agreement with Silicon Valley Bank
for $5.0 million which expires in April 2011.
 
    
    We made significant progress in implementing our previously announced voluntary
corrective actions associated with our AED products, including an initial release of the
software update relating to the field corrective action announced in November 2009,
earlier than originally communicated, as well as the replacement of a significant number
of the devices included in our medical device recall announced in February 2010.
 
    
    We continued to make progress toward multiple product releases which are expected in
upcoming quarters.
 Looking Forward
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Revenues
  Page 21 of 34




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Three MonthsEnded
    
    
    % Change
    
    
    Three Months Ended(dollars in thousands)
    
    March 31, 2010
    
    
    2009 to 2010
    
    
    March 31, 2009Defibrillation products
    
    $
    15,862
    
    
    
    (30.8
    %)
    
    $
    22,916% of revenue
    
    
    47.9
    %
    
    
    
    
    
    
    57.8
    %Cardiac monitoring products
    
    
    12,905
    
    
    
    4.5
    %
    
    
    12,349% of revenue
    
    
    39.0
    %
    
    
    
    
    
    
    31.1
    %Service
    
    
    4,340
    
    
    
    (1.3
    %)
    
    
    4,399% of revenue
    
    
    13.1
    %
    
    
    
    
    
    
    11.1
    %Total revenues
    
    $
    33,107
    
    
    
    (16.5
    %)
    
    $
    39,664
    Gross Profit
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Three Months
    
    
    
    
    
    
    Three MonthsEnded
    
    
    % Change
    
    
    Ended(dollars in thousands)
    
    March 31, 2010
    
    
    2009 to 2010
    
    
    March 31, 2009Products
    
    $
    13,739
    
    
    
    (26.3
    %)
    
    $
    18,631% of products revenue
    
    
    47.8
    %
    
    
    
    
    
    
    52.8
    %Service
    
    
    1,177
    
    
    
    (5.7
    %)
    
    
    1,248% of service revenue
    
    
    27.1
    %
    
    
    
    
    
    
    28.4
    %Total gross profit
    
    $
    14,916
    
    
    
    (25.0
    %)
    
    $
    19,879% of total revenue
    
    
    45.1
    %
    
    
    
    
    
    
    50.1
    %
   Operating Expenses
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Three Months
    
    
    
    
    
    
    Three MonthsEnded
    
    
    % Change
    
    
    Ended(dollars in thousands)
    
    March 31, 2010
    
    
    2009 to 2010
    
    
    March 31, 2009Research and development
    
    $
    4,205
    
    
    
    (21.1
    %)
    
    $
    3,471% of total revenue
    
    
    12.7
    %
    
    
    
    
    
    
    8.8
    %Sales and marketing
    
    
    12,802
    
    
    
    (14.3
    %)
    
    
    11,198% of total revenue
    
    
    38.7
    %
    
    
    
    
    
    
    28.2
    %General and administrative
    
    
    6,393
    
    
    
    (13.8
    %)
    
    
    5,616% of total revenue
    
    
    19.3
    %
    
    
    
    
    
    
    14.2
    %Total operating expenses
    
    $
    23,400
    
    
    
    (15.4
    %)
    
    $
    20,285% of total revenue
    
    
    70.7
    %
    
    
    
    
    
    
    51.1
    %
    Other Income and Expense
  Income Taxes
    Page 24 of 34




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##### Table of Contents



Liquidity and Capital Resources
 Three Months
    
    
    
    
    
    
    Three MonthsEnded
    
    
    % Change
    
    
    Ended(dollars in thousands)
    
    March 31, 2010
    
    
    2009 to 2010
    
    
    March 31, 2009Cash provided by (used in) operating activities
    
    $
    (5,159
    )
    
    
    (237.8
    %)
    
    $
    3,743Cash used in investing activities
    
    
    (674
    )
    
    
    22.2
    %
    
    
    (866
    )Cash provided by financing activities
    
    
    65
    
    
    
    (52.6
    %)
    
    
    137Effect of exchange rates on cash and cash equivalents
    
    
    (93
    )
    
    
    12.3
    %
    
    
    (106
    )Net change in cash and cash equivalents
    
    $
    (5,861
    )
    
    
    (301.5
    %)
    
    $
    2,908
       Page 25 of 34




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##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk
  
 Item 4. Controls and Procedures
  Page 26 of 34




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##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
  
 Item 1A.
    
    Risk Factors
 We face numerous challenges in implementing a field initiative to address the component issue
that led to our AED ship-hold in late June 2009 and our business, financial position and results
of operations may be negatively impacted by the costs and other commitments needed to carry out
the initiative.
   
    
    since we have no experience designing and carrying out a field initiative or other
corrective action plan of the magnitude under contemplation, we are likely to encounter
challenges that could cause a delay in the implementation of the field initiative or
negatively impact its effectiveness;
 
    
    the actual costs to implement the proposed field initiative could exceed the $18.5
million estimate taken as a charge in the third quarter of 2009 due to a variety of
factors, including the number of impacted devices, the customer and geographical segments
related to the impacted devices, the logistical processes we employ to carry out any
field upgrades involved in the initiative, the customer response rate in implementing any
field upgrades involved in the process and the level of required follow up with
customers, the extent to which we may rely on third parties to carry out the field
initiative and associated costs, and the length of time and other resources required to
complete the field initiative;
 
    
    implementation of the proposed field initiative, as well as attendant publicity, may
create a negative perception of our AED products in the market, leading to a decline in
sales that could materially adversely impact our financial position and results of
operations;
 
    
    we will need to devote technical, management, logistics and other resources to the
implementation of the proposed field initiative, which could detract from our ability to
operate our core business and hinder our ability to carry out initiatives relating to new
products or product enhancements;
 
    
    despite implementation of the field initiative, some devices may still fail at a time
when they are being used to deliver therapy, which could lead to product liability claims
against us that, if successful, could adversely impact our financial position and results
of operations or negatively impact the markets perception of our products; and
 
    
    the plan will require the expenditure of significant amounts of cash which, in
combination with expected operating losses in 2010, may negatively impact our liquidity
or at least constrain our ability to pursue strategic initiatives such as acquisitions,
new product development, or other growth initiatives.
 Page 27 of 34




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Our cash and cash equivalents may not be sufficient to fund future operations and we may not be
able to secure additional sources of financing or obtain financing on acceptable terms.
    Changes in tax laws and unanticipated tax liabilities could adversely affect our effective
income tax rate and profitability.
 .
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  Page 28 of 34




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##### Table of Contents



Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    Removed and Reserved
 
 Item 5.
    
    Other Information
  
 Item 6.
    
    Exhibits
 No.
    
    Description10.1
    
    
    Second Amended and Restated Loan and Security Agreement dated as of April 27, 2010 among Silicon
Valley Bank and Cardiac Science Corporation (1)31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 (1)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K (File No.
000-51512) filed April 30, 2010. Page 29 of 34




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##### Table of Contents



SIGNATURE
  CARDIAC SCIENCE CORPORATIONBy:
    /s/ Michael K. MatysikMichael K. MatysikSenior Vice President and Chief Financial Officer
(Principal Financial Officer) Date: May 7, 2010 Page 30 of 34