##### 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 September 30, 2005
 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
(State of Incorporation)
    
    94-3300396
(IRS Employer Identification No.)
 3303 Monte Villa Parkway
Bothell, Washington 98021
 (425) 402-2000
 þ o
 þ o
 o þ




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TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATION
    
    
    3Item 1. Financial Statements (unaudited)
    
    
    3Item 2. Managements Discussion and Analysis of Financial Condition and
Results of Operations
    
    
    23Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    46Item 4. Controls and Procedures
    
    
    46PART II  OTHER INFORMATION
    
    
    48Item 1. Legal Proceedings
    
    
    48Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    49Item 3. Defaults Upon Senior Securities
    
    
    49Item 4. Submission of Matters to a Vote of Security Holders
    
    
    49Item 5. Other Information
    
    
    49Item 6. Exhibits
    
    
    49SIGNATURE
    
    
    55EXHIBIT 4.9EXHIBIT 10.59EXHIBIT 31.1EXHIBIT 31.2EXHIBIT 32.1EXHIBIT 32.2
  2




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 CARDIAC SCIENCE CORPORATION AND SUBSIDIARIES
 UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
 December 31,
    
    
    September 30,2004
    
    
    2005(in thousands, except share and pershare amounts)ASSETSCurrent Assets:Cash and cash equivalents
    
    $
    21,902
    
    
    $
    8,119Marketable equity securities
    
    
    646
    
    
    
    Accounts receivable, net of allowance for doubtful accounts
    
    
    13,649
    
    
    
    20,331Inventories
    
    
    11,047
    
    
    
    23,941Deferred income taxes
    
    
    5,542
    
    
    
    11,483Prepaid expenses and other current assets
    
    
    790
    
    
    
    2,583Total current assets
    
    
    53,576
    
    
    
    66,457Machinery and equipment, net of accumulated depreciation
    
    
    4,314
    
    
    
    7,640Deferred income taxes
    
    
    3,594
    
    
    
    22,986Intangible assets, net of accumulated amortization
    
    
    5,619
    
    
    
    36,975Investment in unconsolidated entity
    
    
    1,000
    
    
    
    1,000Goodwill
    
    
    9,072
    
    
    
    114,707Other assets
    
    
    
    
    
    
    239Total assets
    
    $
    77,175
    
    
    $
    250,004LIABILITIES AND SHAREHOLDERS EQUITYCurrent Liabilities:Accounts payable
    
    $
    5,615
    
    
    $
    12,840Accrued liabilities
    
    
    6,220
    
    
    
    11,424Warranty liability
    
    
    2,093
    
    
    
    2,334Deferred revenue
    
    
    4,754
    
    
    
    6,103Total current liabilities
    
    
    18,682
    
    
    
    32,701Other liabilities
    
    
    
    
    
    
    2,061Total liabilities
    
    
    18,682
    
    
    
    34,762Minority interest in consolidated entity
    
    
    159
    
    
    
    135Shareholders Equity:Preferred stock (10,000,000 shares authorized), $0.001 par
value, no shares outstanding in 2004 or 2005
    
    
    
    
    
    
    Common stock (65,000,000 shares authorized), $0.001 par
value, 10,850,031 and 22,391,370 shares issued and
outstanding at December 31, 2004 and September 30,
2005, respectively
    
    
    11
    
    
    
    22Additional paid-in capital
    
    
    62,645
    
    
    
    218,107Deferred stock-based compensation
    
    
    (33
    )
    
    
    Accumulated other comprehensive income
    
    
    22
    
    
    
    Accumulated deficit
    
    
    (4,311
    )
    
    
    (3,022
    )Total shareholders equity
    
    
    58,334
    
    
    
    215,107Total liabilities and shareholders equity
    
    $
    77,175
    
    
    $
    250,004
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 3




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CARDIAC SCIENCE CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(in thousands, except share and per share amounts)Revenues:Products
    
    $
    19,434
    
    
    $
    24,033
    
    
    $
    56,502
    
    
    $
    61,450Service
    
    
    3,064
    
    
    
    3,413
    
    
    
    9,296
    
    
    
    9,294Total revenues
    
    
    22,498
    
    
    
    27,446
    
    
    
    65,798
    
    
    
    70,744Cost of Revenues:Products
    
    
    10,800
    
    
    
    13,029
    
    
    
    31,666
    
    
    
    32,909Service
    
    
    1,798
    
    
    
    2,139
    
    
    
    5,556
    
    
    
    5,916Total cost of revenues
    
    
    12,598
    
    
    
    15,168
    
    
    
    37,222
    
    
    
    38,825Gross profit
    
    
    9,900
    
    
    
    12,278
    
    
    
    28,576
    
    
    
    31,919Operating Expenses:Research and development
    
    
    1,882
    
    
    
    2,262
    
    
    
    5,509
    
    
    
    5,979Sales and marketing
    
    
    4,768
    
    
    
    6,601
    
    
    
    13,506
    
    
    
    15,850General and administrative
    
    
    1,992
    
    
    
    4,697
    
    
    
    6,065
    
    
    
    9,008Total operating expenses
    
    
    8,642
    
    
    
    13,560
    
    
    
    25,080
    
    
    
    30,837Operating income (loss)
    
    
    1,258
    
    
    
    (1,282
    )
    
    
    3,496
    
    
    
    1,082Other income (expense):Interest income (expense), net
    
    
    38
    
    
    
    123
    
    
    
    (22
    )
    
    
    381Other income, net
    
    
    17
    
    
    
    34
    
    
    
    650
    
    
    
    148Total other income
    
    
    55
    
    
    
    157
    
    
    
    628
    
    
    
    529Income (loss) before income taxes and minority interest
in consolidated entity
    
    
    1,313
    
    
    
    (1,125
    )
    
    
    4,124
    
    
    
    1,611Income tax benefit (expense)
    
    
    
    
    
    
    558
    
    
    
    (70
    )
    
    
    (346
    )Income (loss) before minority interest in consolidated
entity
    
    
    1,313
    
    
    
    (567
    )
    
    
    4,054
    
    
    
    1,265Minority interest in (income) loss of consolidated entity
    
    
    5
    
    
    
    (2
    )
    
    
    35
    
    
    
    24Net income (loss)
    
    $
    1,318
    
    
    $
    (569
    )
    
    $
    4,089
    
    
    $
    1,289Net income (loss) per share  basic
    
    $
    0.12
    
    
    $
    (0.04
    )
    
    $
    0.41
    
    
    $
    0.11Net income
(loss) per share  diluted
    
    $
    0.12
    
    
    $
    (0.04
    )
    
    $
    0.38
    
    
    $
    0.10Weighted
average shares outstanding  basic
    
    
    10,760,222
    
    
    
    14,523,096
    
    
    
    10,034,853
    
    
    
    12,099,187Weighted
average shares outstanding  diluted
    
    
    11,345,635
    
    
    
    14,523,096
    
    
    
    10,768,674
    
    
    
    12,429,725
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 4




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CARDIAC SCIENCE CORPORATION AND SUBSIDIARIES UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
 Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(in thousands)Operating Activities:Net income (loss)
    
    $
    1,318
    
    
    $
    (569
    )
    
    $
    4,089
    
    
    $
    1,289Adjustments to reconcile net income (loss) to net cash
flows from (used in) operating activitiesDepreciation and amortization
    
    
    392
    
    
    
    792
    
    
    
    1,180
    
    
    
    1,606Deferred income taxes
    
    
    4
    
    
    
    (541
    )
    
    
    14
    
    
    
    291Stock-based compensation
    
    
    18
    
    
    
    
    
    
    
    54
    
    
    
    39Minority interest in (income) loss of consolidated
entity
    
    
    (5
    )
    
    
    2
    
    
    
    (35
    )
    
    
    (24
    )Gain on sale of marketable equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (15
    )Gain on sale of hemodynamic monitoring business
    
    
    
    
    
    
    
    
    
    
    (633
    )
    
    
    Loss on disposal of equipment
    
    
    
    
    
    
    
    
    
    
    4
    
    
    
    Changes in operating assets and liabilities, net of
businesses acquired and divested:Accounts receivable
    
    
    (310
    )
    
    
    (481
    )
    
    
    (1,368
    )
    
    
    160Inventories
    
    
    563
    
    
    
    1,081
    
    
    
    1,020
    
    
    
    696Prepaid expenses and other assets
    
    
    50
    
    
    
    117
    
    
    
    (60
    )
    
    
    (18
    )Accounts payable
    
    
    25
    
    
    
    (1,864
    )
    
    
    (190
    )
    
    
    (1,967
    )Accrued liabilities
    
    
    372
    
    
    
    626
    
    
    
    (1,482
    )
    
    
    (791
    )Warranty liability
    
    
    (1
    )
    
    
    (188
    )
    
    
    (35
    )
    
    
    (222
    )Deferred revenue
    
    
    72
    
    
    
    190
    
    
    
    63
    
    
    
    498Net cash flows from (used in) operating
activities
    
    
    2,498
    
    
    
    (835
    )
    
    
    2,621
    
    
    
    1,542Investing Activities:Purchases of machinery and equipment
    
    
    (228
    )
    
    
    (164
    )
    
    
    (343
    )
    
    
    (491
    )Payments of acquisition related costs, net of cash acquired
    
    
    
    
    
    
    (14,806
    )
    
    
    
    
    
    
    (15,903
    )Proceeds from sale of marketable equity securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    625Purchase of technology
    
    
    
    
    
    
    
    
    
    
    (125
    )
    
    
    Net cash flows used in investing activities
    
    
    (228
    )
    
    
    (14,970
    )
    
    
    (468
    )
    
    
    (15,769
    )Financing Activities:Proceeds from exercise of stock options and issuance of
shares under employee stock purchase plan
    
    
    329
    
    
    
    234
    
    
    
    736
    
    
    
    584Proceeds from issuance of stock, net of issuance costs
    
    
    (340
    )
    
    
    (140
    )
    
    
    15,451
    
    
    
    (140
    )Repayments on bank line of credit, net
    
    
    
    
    
    
    
    
    
    
    (354
    )
    
    
    Payment of note payable in connection with purchase of
technology
    
    
    (125
    )
    
    
    
    
    
    
    (125
    )
    
    
    Payments of long term debt
    
    
    (90
    )
    
    
    
    
    
    
    (272
    )
    
    
    Net cash flows from (used in) financing
activities
    
    
    (226
    )
    
    
    94
    
    
    
    15,436
    
    
    
    444Net change in cash and cash equivalents
    
    
    2,044
    
    
    
    (15,711
    )
    
    
    17,589
    
    
    
    (13,783
    )Cash and cash equivalents, beginning of period
    
    
    15,730
    
    
    
    23,830
    
    
    
    185
    
    
    
    21,902Cash and cash equivalents, end of period
    
    $
    17,774
    
    
    $
    8,119
    
    
    $
    17,774
    
    
    $
    8,119
 The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
 5




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CARDIAC SCIENCE CORPORATION AND SUBSIDIARIES
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
     Basis of Presentation
   6




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Use of Estimates
  Net Income Per Share
   Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(in thousands, except share amounts)Numerator:Net income (loss)
    
    $
    1,318
    
    
    $
    (569
    )
    
    $
    4,089
    
    
    $
    1,289Denominator:Weighted average
shares for basic
calculation
    
    
    10,760,222
    
    
    
    14,523,096
    
    
    
    10,034,853
    
    
    
    12,099,187Incremental
shares from
employee stock
options
    
    
    585,413
    
    
    
    
    
    
    
    733,821
    
    
    
    330,538Weighted average
shares for
diluted
calculation
    
    
    11,345,635
    
    
    
    14,523,096
    
    
    
    10,768,674
    
    
    
    12,429,725
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Antidilutive shares
issuable upon
exercise of stock
options
    
    
    670,137
    
    
    
    2,051,836
    
    
    
    229,811
    
    
    
    956,593Antidilutive shares
issuable upon
exercise of
warrants
    
    
    
    
    
    
    110,313
    
    
    
    
    
    
    
    36,768
 7




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Accounting for Stock-Based Compensation
   Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(in thousands, except per share amounts)Net income
(loss)  as reported
    
    $
    1,318
    
    
    $
    (569
    )
    
    $
    4,089
    
    
    $
    1,289Add back: Stock-based employee compensation expense
included in reported income, net of related tax effects
    
    
    18
    
    
    
    
    
    
    
    54
    
    
    
    39Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards,
net of related tax effects of $0, $39, $0 and $150
    
    
    (567
    )
    
    
    (550
    )
    
    
    (1,543
    )
    
    
    (1,645
    )Net income
(loss)  pro forma
    
    $
    769
    
    
    $
    (1,119
    )
    
    $
    2,600
    
    
    $
    (317
    )Net income
(loss) per share  as reported  basic
    
    $
    0.12
    
    
    $
    (0.04
    )
    
    $
    0.41
    
    
    $
    0.11Net income (loss) per share  as reported  diluted
    
    $
    0.12
    
    
    $
    (0.04
    )
    
    $
    0.38
    
    
    $
    0.10Net income (loss) per share  pro forma  basic
    
    $
    0.07
    
    
    $
    (0.08
    )
    
    $
    0.26
    
    
    $
    (0.03
    )Net income (loss) per share  pro forma  diluted
    
    $
    0.07
    
    
    $
    (0.08
    )
    
    $
    0.25
    
    
    $
    (0.03
    )
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005Denominator:Pro forma weighted average shares for basic calculation
    
    
    10,760,222
    
    
    
    14,523,096
    
    
    
    10,034,853
    
    
    
    12,099,187Pro forma incremental shares from employee stock options
    
    
    79,535
    
    
    
    
    
    
    
    248,883
    
    
    
    Pro forma weighted average shares for diluted calculation
    
    
    10,839,757
    
    
    
    14,523,096
    
    
    
    10,283,736
    
    
    
    12,099,187
   8




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Goodwill
   Intangible Assets
  AccumulatedUseful life
    
    
    Cost
    
    
    Amortization
    
    
    Net(in thousands)Intangible assets not subject to
amortization:Burdick trade name
    
    
    
    
    
    $
    3,400
    
    
    $
    
    
    
    $
    3,400Cardiac Science trade name
    
    
    
    
    
    
    11,380
    
    
    
    
    
    
    
    11,380Intangible assets subject to amortization:Cardiac Science customer relationships
    
    5 years
    
    
    8,650
    
    
    
    (144
    )
    
    
    8,506Cardiac Science developed technology
    
    8 years
    
    
    11,810
    
    
    
    (98
    )
    
    
    11,712Burdick distributor relationships
    
    10 years
    
    
    1,400
    
    
    
    (385
    )
    
    
    1,015Burdick developed technology
    
    7 years
    
    
    860
    
    
    
    (338
    )
    
    
    522Patents and patent applications
    

5-10 years
    
    
    1,230
    
    
    
    (790
    )
    
    
    440$
    38,730
    
    
    $
    (1,755
    )
    
    $
    36,975
   9




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(in thousands)2005
    
    $
    9072006
    
    
    3,5832007
    
    
    3,5712008
    
    
    3,5332009
    
    
    3,5332010
    
    
    2,834Thereafter
    
    
    4,234$
    22,195
 Long-Lived Assets
  Revenue Recognition
   10




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Deferred Revenue
  Foreign Currency
  11




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##### Table of Contents



Purchase Accounting
  Recent Accounting Pronouncements
     12




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13




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##### Table of Contents




 
 
 
 
 
   (in thousands)Cash
    
    $
    20,000Shares
    
    
    146,911Options
    
    
    7,402Warrants
    
    
    1,320Accrued liabilities
    
    
    3,090Transaction costs
    
    
    2,213Total
    
    $
    180,936
  (in thousands)Cash and cash equivalents
    
    $
    6,295Accounts receivable, net of allowance for doubtful accounts
    
    
    6,842Inventories
    
    
    13,590Net deferred tax assets, current
    
    
    6,160Prepaid expenses and other current assets
    
    
    1,740Machinery and equipment
    
    
    3,958Net deferred tax assets, non-current
    
    
    19,450Other long term assets
    
    
    272Intangible assets
    
    
    31,840Goodwill
    
    
    105,635Total assets acquired
    
    
    195,782Current liabilities
    
    
    (12,785
    )Other liabilities
    
    
    (2,061
    )Net assets acquired
    
    $
    180,936
 14




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Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2004
    
    2005
    
    2004
    
    2005(in thousands, except per share amounts)Revenues
    
    $
    37,010
    
    
    $
    32,907
    
    
    $
    113,231
    
    
    $
    106,091Net loss
    
    $
    (2,339
    )
    
    $
    (4,716
    )
    
    $
    (7,099
    )
    
    $
    (59,007
    )Basic and diluted net loss per share
    
    $
    (0.11
    )
    
    $
    (0.21
    )
    
    $
    (0.34
    )
    
    $
    (2.64
    )
  15




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##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(in thousands)Diagnostic products
    
    $
    19,434
    
    
    $
    18,765
    
    
    $
    56,502
    
    
    $
    56,182Defibrillation products
    
    
    
    
    
    
    5,268
    
    
    
    
    
    
    
    5,268Service
    
    
    3,064
    
    
    
    3,413
    
    
    
    9,296
    
    
    
    9,294Total
    
    $
    22,498
    
    
    $
    27,446
    
    
    $
    65,798
    
    
    $
    70,744
  Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(in thousands)Domestic
    
    $
    20,895
    
    
    $
    24,188
    
    
    $
    61,408
    
    
    $
    64,174Foreign
    
    
    1,603
    
    
    
    3,258
    
    
    
    4,390
    
    
    
    6,570Total
    
    $
    22,498
    
    
    $
    27,446
    
    
    $
    65,798
    
    
    $
    70,744
 16




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##### Table of Contents



December 31,
    
    
    September 30,2004
    
    
    2005Domestic
    
    $
    4,250
    
    
    $
    7,456Foreign
    
    
    64
    
    
    
    184Total
    
    $
    4,314
    
    
    $
    7,640
    Accrued asBalance
    
    part of the
    
    
    
    
    
    
    
    
    
    Balance atat December 31,
    
    merger
    
    
    
    
    
    Cash
    
    September 30,2004
    
    transaction
    
    Additions
    
    expenditures
    
    2005(in thousands)Vacated facilities
    
    $
    
    
    
    $
    2,679
    
    
    $
    
    
    
    $
    
    
    
    $
    2,679Employee severance
and retention costs
    
    
    
    
    
    
    1,702
    
    
    
    645
    
    
    
    (181
    )
    
    
    2,166
      1  3
    
    3  5
    
    AfterTotal
    
    Less than 1 year
    
    years
    
    years
    
    5 years(in thousands)Total operating lease obligations
    
    $
    5,569
    
    
    $
    2,450
    
    
    $
    2,839
    
    
    $
    280
    
    
    $
    
 17




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##### Table of Contents



WarrantsOutstanding and
    
    
    Exercise price
    
    
    ExpirationGrant Date
    
    Exercisable
    
    
    per share
    
    
    Date1997
    
    
    7,500
    
    
    $
    22.50
    
    
    
    20072001
    
    
    300
    
    
    
    20.00
    
    
    
    20062002
    
    
    1,500
    
    
    
    18.00
    
    
    
    20072002
    
    
    2,500
    
    
    
    17.50
    
    
    
    20122003
    
    
    1,500
    
    
    
    32.70
    
    
    
    20082003
    
    
    75,000
    
    
    
    30.00
    
    
    
    20072003
    
    
    10,000
    
    
    
    46.10
    
    
    
    20082003
    
    
    22,333
    
    
    
    50.00
    
    
    
    20082004
    
    
    1,500
    
    
    
    19.50
    
    
    
    20092004
    
    
    208,776
    
    
    
    25.00
    
    
    
    2009Total
    
    
    330,909Weighted average exercise price
    
    
    
    
    
    $
    28.32
   18




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##### Table of Contents



December 31,
    
    
    September 30,2004
    
    
    2005(in thousands)Raw materials
    
    $
    7,879
    
    
    $
    17,809Work in process
    
    
    
    
    
    
    165Finished goods
    
    
    3,168
    
    
    
    5,967Total inventories
    
    $
    11,047
    
    
    $
    23,941
     Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(in thousands)
    
    
    (in thousands)Warranty liability, beginning of the period
    
    $
    2,010
    
    
    $
    2,059
    
    
    $
    2,059
    
    
    $
    2,093Assumed from CSI
    
    
    
    
    
    
    463
    
    
    
    
    
    
    
    463Charged to cost of revenues
    
    
    207
    
    
    
    396
    
    
    
    986
    
    
    
    1,159Warranty expenditures
    
    
    (208
    )
    
    
    (584
    )
    
    
    (1,036
    )
    
    
    (1,381
    )Warranty liability, end of the period
    
    $
    2,009
    
    
    $
    2,334
    
    
    $
    2,009
    
    
    $
    2,334
 19




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##### Table of Contents



Three months ended
    
    
    Nine months endedSeptember 30,
    
    
    September 30,2004
    
    
    2005
    
    
    2004
    
    
    2005(in thousands)
    
    
    (in thousands)Net income (loss)
    
    $
    1,318
    
    
    $
    (569
    )
    
    $
    4,089
    
    
    $
    1,289Other comprehensive loss, net of
related tax effects of $0, $0,
$0 and $13
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22
    )Total comprehensive income (loss)
    
    $
    1,318
    
    
    $
    (569
    )
    
    $
    4,089
    
    
    $
    1,267
      
    
    Deborah Silver v. Cardiac Science, Inc., et al., Case No. 1138-N;
    
    Lisa A. Weber v. Cardiac Science, Inc., et al. Case No. 1140-N;
    
    Suan Investments, Inc. v. Raymond W. Cohen, et al., Case No. 1148-N;
    
    David Shaev, et al. v. Cardiac Science, Inc., et al., Case No. 1153-N;
    
    Irvin M. Chase, et al., v. Cardiac Science, Inc., et al., Case No. 1159-N; and
    
    James Stellato v. Cardiac Science, Inc., et al., Case No. 1162-N.
 20




---



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
    
    Albert Rosenfeld v. Cardiac Science, Inc., et al. Case No. 05CC00057; and
    
    Jerrold Schaffer v. Cardiac Science, Inc., et al., Case No. 05CC00059.
 Oppenheim
Pramerica Asset Management v. Cardiac Science, Inc. et al.
         21




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22




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Item 2. Managements Discussion and Analysis of Financial Condition and Results of
Operations
      Critical Accounting Estimates and Policies
  23




---



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Critical Accounting Estimates
 Purchase Price Allocations.
   Goodwill.
 24




---



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Intangible Assets.
   Deferred Tax Assets and Income Taxes.
 Valuation of Long-Lived Assets.
 25




---



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Litigation and Other Contingencies.
 Restructuring Costs.
 Critical Accounting Policies
 Segment Reporting.
 Revenue Recognition
    26




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Results of Operations
 Three months ended
    
    Nine months endedSeptember 30,
    
    September 30,2004
    
    2005
    
    2004
    
    2005(as a percentage of revenues)Revenues:Products
    
    
    86.4
    %
    
    
    87.6
    %
    
    
    85.9
    %
    
    
    86.9
    %Service
    
    
    13.6
    
    
    
    12.4
    
    
    
    14.1
    
    
    
    13.1Total revenues
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0
    
    
    
    100.0Gross Profit:Products (as a percentage of products revenues)
    
    
    44.4
    
    
    
    45.8
    
    
    
    44.0
    
    
    
    46.4Service (as a percentage of service revenues)
    
    
    41.3
    
    
    
    37.3
    
    
    
    40.2
    
    
    
    36.3Gross profit
    
    
    44.0
    
    
    
    44.7
    
    
    
    43.4
    
    
    
    45.1Operating Expenses:Research and development
    
    
    8.3
    
    
    
    8.2
    
    
    
    8.4
    
    
    
    8.5Sales and marketing
    
    
    21.2
    
    
    
    24.1
    
    
    
    20.5
    
    
    
    22.4General and administrative
    
    
    8.9
    
    
    
    17.1
    
    
    
    9.2
    
    
    
    12.7Total operating expenses
    
    
    38.4
    
    
    
    49.4
    
    
    
    38.1
    
    
    
    43.6Operating income (loss)
    
    
    5.6
    
    
    
    (4.7
    )
    
    
    5.3
    
    
    
    1.5Total other income
    
    
    0.2
    
    
    
    0.6
    
    
    
    1.0
    
    
    
    0.8Income tax benefit (expense)
    
    
    0.0
    
    
    
    2.0
    
    
    
    (0.1
    )
    
    
    (0.5
    )Minority interest in loss of
consolidated entity
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0
    
    
    
    0.0Net income (loss)
    
    
    5.8
    %
    
    
    (2.1
    )%
    
    
    6.2
    %
    
    
    1.8
    %
 27




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Three-Month Period Ended September 30, 2005 Compared to the Three-Month Period Ended
September 30, 2004
  Revenues
     Gross Profit
   28




---



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Operating Expenses
    Other Income and Expense
  Income Taxes
 29




---



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Nine-Month Period Ended September 30, 2005 Compared to the Nine-Month Period Ended
September 30, 2004
  Revenues
     30




---



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Gross Profit
    Operating Expenses
    31




---



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Other Income and Expense
  Income Taxes
   Consolidation of Operations
  Liquidity and Capital Resources
  32




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33




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##### Table of Contents



Contractual Obligations
  Less than
    
    
    1  3
    
    
    3  5
    
    
    AfterTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 years(in thousands)Contractual ObligationsOperating leases
    
    $
    9,392
    
    
    $
    3,678
    
    
    $
    5,255
    
    
    $
    459
    
    
    $
    Purchase obligations
    
    
    13,214
    
    
    
    13,214
    
    
    
    
    
    
    
    
    
    
    
    Total contractual cash obligations
    
    $
    22,606
    
    
    $
    16,892
    
    
    $
    5,255
    
    
    $
    459
    
    
    $
    
  Less than
    
    
    1  3
    
    
    3  5
    
    
    AfterTotal
    
    
    1 year
    
    
    years
    
    
    years
    
    
    5 years(in thousands)Other commercial commitmentsLine of credit
    
    $
    175
    
    
    $
    100
    
    
    $
    75
    
    
    $
    
    
    
    $
    Guarantees
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total commercial commitments
    
    $
    175
    
    
    $
    100
    
    
    $
    75
    
    
    $
    
    
    
    $
    
   Certain Factors that May Affect Future Results
 In addition to the other information contained in this report, the following risk
factors could affect our actual results and could cause our actual results to differ materially
from those achieved in the past or expressed in our forward-looking statements or could cause
the trading price of our common stock to decline. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial also may impair our business
operations or negatively impact the trading price of our common stock.
 We may not achieve the benefits expected from the merger transaction, which may have a material
adverse effect on our business.
  
    
    retaining existing customers and strategic partners of each company;
    
    retaining and integrating management and other key employees of both Quinton and CSI;
    
    bringing together the companies marketing efforts so that the industry receives
useful information about our business and product offerings;
    
    identifying and streamlining redundant operations and assets;
    
    coordinating research and development activities to enhance introduction of new products and technologies;
    
    integrating purchasing and procurement operations in multiple locations;
    
    combining product offerings effectively and quickly;
 34




---



##### Table of Contents




    
    enabling customers to do business easily with us;
    
    transitioning all facilities to a common information technology system;
    
    offering products and services of Quinton and CSI to each others customers; and
    
    developing and maintaining uniform standards, controls, procedures and policies.
  
    
    the impairment of relationships with employees, customers, distributors, strategic partners and suppliers;
    
    the potential disruption of our ongoing business and the distraction of our management;
    
    not achieving expected synergies; and
    
    unanticipated expenses related to integration of the two companies or our operations post-integration.
 Charges to earnings resulting from the application of the purchase method of accounting may
adversely affect the market value of our common stock.
  Our stock price may be volatile.
  
    
    actual or anticipated variations in quarterly operating results;
    
    changes in financial estimates or recommendations by securities analysts;
    
    conditions or trends in medical devices and diagnostic cardiology products markets;
    
    announcements by us or our competitors of significant customer wins or losses, gains
or losses of distributors, technological innovations, new products or services;
    
    announcements by us or our competitors of significant acquisitions, strategic
partnerships, joint ventures or capital commitments;
    
    additions or departures of key personnel;
    
    sales of a large number of shares of our common stock;
    
    adverse litigation;
    
    unfavorable legislative or regulatory decisions; and
    
    general market conditions.
  35




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##### Table of Contents



The unpredictability of our quarterly revenues and operating results may cause the trading price
of our stock to decrease.
  
    
    the impact of acquisitions, divestitures, strategic alliances, and other significant
corporate events;
    
    changes in our ability to obtain products and product components that are
manufactured for us by third parties;
    
    delays in the development or commercial introduction of new versions of products;
    
    the ability to attain and maintain production volumes and quality levels for our
products and product components;
    
    effects of domestic and foreign economic conditions on our industry and/or customers;
    
    changes in the demand for our products;
    
    varying sales cycles that can take up to a year or more;
    
    changes in the mix of products we sell, which could affect our revenue levels as well as our gross margins;
    
    unpredictable budgeting cycles of our customers;
    
    delays in obtaining regulatory clearance for new versions of our products;
    
    increased product and price competition;
    
    the impact of regulatory changes on the availability of third-party reimbursement to
customers of our products;
    
    the loss of key personnel;
    
    the loss of key distributors or distribution companies; and
    
    seasonality in the sales of our products.
   Failure to successfully develop and commercialize new versions of our products would cause our
operating results to suffer.
  
    
    accurately assess customer needs;
 36




---



##### Table of Contents




    
    develop products that are easy to use;
    
    minimize the time required to obtain, as well as the costs of, required regulatory clearance or approval;
    
    price competitively;
    
    manufacture and deliver on time;
    
    accurately predict and control costs associated with manufacturing, installation, warranty and maintenance;
    
    manage customer acceptance and payment;
    
    limit demands by our customers for retrofits;
    
    access new interface standards needed for product connectivity;
    
    anticipate and meet demands of our international customers for products featuring
local language capabilities; and
    
    anticipate and compete effectively with our competitors efforts.
  If we fail to maintain our relationships with our distribution or strategic partners or such
organizations fail to successfully distribute our products, our sales and operating results may
suffer.
    If suppliers discontinue production of purchased components of our products, and we are unable
to secure alternative sources for these components on a timely basis, our ability to ship
products to our customers may be adversely affected, our revenues may decline and costs may
increase as a result.
  37




---



##### Table of Contents



Inadequate levels of reimbursement from governmental or other third-party payers for procedures
using our products may cause revenues to decrease.
  If we fail to obtain or maintain applicable regulatory clearances or approvals for our products,
or if clearances or approvals are delayed, we will be unable to commercially distribute and
market our products in the U.S. and other jurisdictions.
  Our business is subject to intense competition, which may reduce the demand for our products.
  
    
    greater financial and other resources;
    
    greater variety of products;
    
    greater pricing flexibility;
    
    more extensive technical capabilities;
    
    patent portfolios that may present an obstacle to our conduct of business;
    
    stronger name recognition; and
    
    larger distribution networks.
  38




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##### Table of Contents



If we do not maintain or grow revenues from our support services or consumables, our
operating and financial results may be negatively impacted.
  Our lack of customer purchase contracts and our limited order backlog make it difficult
to predict sales and plan manufacturing requirements, which can lead to lower revenues,
higher expenses and reduced margins.
  
    
    if we overestimate our requirements we may be obligated to purchase more components
or third-party products than is required;
    
    if we underestimate our requirements, our third-party manufacturers and suppliers
may have an inadequate product or product component inventory, which could interrupt
manufacturing of our products and result in delays in shipments and revenues;
    
    we may also experience shortages of product components from time to time, which also
could delay the manufacturing of our products; and
    
    over or under production can lead to higher expense, lower than anticipated
revenues, and reduced margins.
 If market conditions cause us to reduce the selling price of our products, or our market
share is negatively affected by the activities of our competitors, our margins and
operating results will decrease.
  
    
    lengthening of buying or selling cycles;
    
    the introduction of competing products;
    
    price reductions by our competitors;
    
    development of more effective products by our competitors;
    
    hospital budgetary constraints; and
    
    changes in the reimbursement policies of government and third-party payers.
  39




---



##### Table of Contents



We are dependent upon licensed and purchased technology for some of our products, and we may not
be able to renew these licenses or purchase agreements in the future.
  We are exposed to numerous risks associated with international operations.
  
    
    political instability;
    
    economic instability and recessions;
    
    exposure to currency fluctuations;
    
    less favorable third-party reimbursement policies;
    
    longer payment cycles;
    
    difficulties of administering foreign operations generally;
    
    reduced protection for intellectual property rights;
    
    increased risk of exposure to terrorist activities;
    
    potentially adverse tax consequences; and
    
    obligations to comply with a wide variety of foreign laws and other regulatory requirements.
  If we are unable to retain our executive officers and hire and retain other key personnel, we
may not be able to sustain or grow our business.
  Undetected product errors or defects could result in increased warranty costs, loss of revenues,
product recalls, delayed market acceptance, and claims against us.
  40




---



##### Table of Contents




    
    failure to achieve market acceptance;
    
    loss of customers, revenues, and market share;
    
    diversion of development resources;
    
    increased service and warranty costs;
    
    legal actions by its customers; and
    
    increased insurance costs.
  We may face product liability claims, which could cause our operating results to suffer.
  Our technology may become obsolete, which could negatively impact our ability to sell our
products.
  Failure to adequately protect our intellectual property rights will likely cause our business to
suffer.
  
    
    additional patents may not be issued to us;
    
    the scope of any existing or future patents may not exclude competitors or provide
us with competitive advantages;
    
    any of our patents may not be held valid and enforceable if challenged; or
    
    others may claim rights in or ownership to our patents and other proprietary rights.
  41




---



##### Table of Contents



Our predecessors have been, and in the future we may be, involved in claims alleging
infringement of intellectual property rights, which could be costly and time consuming.
   Our reliance on a principal manufacturing facility may impair our ability to respond to natural
disasters or other unforeseen catastrophic events.
  42




---



##### Table of Contents



We may make future acquisitions, which involve numerous risks that could impact our business and
results of operations.
  
    
    difficulties in integrating the operations, technologies, and products of the acquired companies;
    
    the risk of diverting managements attention from normal daily operations of the business;
    
    potential difficulties in completing projects associated with in-process research and development;
    
    risks of entering markets in which we have no or limited direct prior experience and
where competitors in such markets have stronger market positions;
    
    initial dependence on unfamiliar supply chains or relatively small supply partners;
    
    insufficient revenues to offset increased expenses associated with acquisitions;
    
    the risk that acquired lines of business may reduce or replace the sales of existing products; and
    
    the potential loss of key employees of the acquired companies.
  We may need additional capital to continue our acquisition growth strategy.
  If we fail to successfully enter into strategic alliances to generate growth, our
operating results may be negatively affected.
  Future issuances of our common stock could cause our stock price to decline.
  43




---



##### Table of Contents



Significant decreases in our stock price could result if we issued an adverse opinion related to
our internal control over financial reporting.
  Compliance with changing regulation of corporate governance, public disclosure and accounting
matters may result in additional expenses.
  Future changes in the accounting treatment for employee stock options may cause adverse
fluctuations and affect our reported results of operations.
  44




---



##### Table of Contents



Our charter documents and Delaware law contain provisions that could make it more difficult for
a third party to acquire us.
   Utilization of our deferred tax assets may be limited and is dependent on future taxable income.
   Cardiac Science, Inc. may be required to recognize cancellation of indebtedness income as a
result of the exchange of its senior notes for shares of our common stock and cash, which may
adversely affect the availability of certain tax benefits for us.
   45




---



##### Table of Contents



Our future financial results could be adversely impacted by asset impairments.
   
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
   
 Item 4. Controls and Procedures
  46




---



##### Table of Contents



47




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
    
    
    Deborah Silver v. Cardiac Science, Inc., et al., Case No. 1138-N;
    
    Lisa A. Weber v. Cardiac Science, Inc., et al. Case No. 1140-N;
    
    Suan Investments, Inc. v. Raymond W. Cohen, et al., Case No. 1148-N;
    
    David Shaev, et al. v. Cardiac Science, Inc., et al., Case No. 1153-N;
    
    Irvin M. Chase, et al., v. Cardiac Science, Inc., et al., Case No. 1159-N; and
    
    James Stellato v. Cardiac Science, Inc., et al., Case No. 1162-N.
  
    
    Albert Rosenfeld v. Cardiac Science, Inc., et al. Case No. 05CC00057; and
    
    Jerrold Schaffer v. Cardiac Science, Inc., et al., Case No. 05CC00059.
 Oppenheim
Pramerica Asset Management v. Cardiac Science, Inc. et al.
  48




---



##### Table of Contents



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  
 Item 5. Other Information
  
 Item 6. Exhibits
 Exhibits2.1
    
    Agreement and Plan of Merger dated as of February 28, 2005, as amended on June 23, 2005,
among Quinton Cardiology Systems, Inc., Cardiac Science, Inc., CSQ Holding Company,
Rhythm Acquisition Corporation, and Heart Acquisition Corporation (1)2.2
    
    Stock Purchase Agreement dated December 23, 2002 by and among Spacelabs Medical, Inc.,
Spacelabs Burdick, Inc., Quinton Cardiology Systems, Inc. and Datex-Ohmeda, Inc. (3)2.3
    
    ABPM Private Label Distribution Agreement by and between Spacelabs Medical, Inc. and
Spacelabs Burdick, Inc. (3)2.4
    
    Agreement for Purchase and Sale of Assets Between Innovative Physician Services, Inc.
(DBA Diagnostic Monitoring) and Biosensor Corporation, dated December 31, 1998 (17)
 49




---



##### Table of Contents



Exhibits2.5
    
    Agreement and Plan of Merger, dated June 22, 2000, between Cardiac Science, Inc., Cardiac
Acquisition Corp., and Cadent Medical Corporation (20)2.6
    
    Press Release, dated January 10, 2001, announcing tender offer to acquire outstanding
shares of Artema Medical AB (14)2.7
    
    Agreement and Plan of Merger, dated February 14, 2001, among Cardiac Science, Inc.,
Cardiac Science Acquisition Corp., and Survivalink Corporation (22)2.8
    
    Asset Purchase Agreement, dated as of October 21, 2003, by and among Compliant
Corporation, CPR Limited Partnership and Cardiac Science, Inc. (24)3.1
    
    Amended and Restated Certificate of Incorporation (2)3.2
    
    Amended and Restated Bylaws (2)4.1
    
    Specimen Stock Certificate (2)4.2
    
    Second Amended and Restated Registration Rights Agreement dated as of February 28, 2005
among Cardiac Science, Inc. and the investors listed on the signature pages thereto (1)4.3
    
    Investors Rights Agreement (4)4.4
    
    Security Agreement, dated May 30, 2002, between Cardiac Science, Inc. and its
subsidiaries, the Perseus Funds, and HSBC Bank USA as collateral agent (23)4.5
    
    Form of Guaranty Agreement (23)4.6
    
    Common Stock and Warrant Purchase Agreement, dated July 20, 2004, by and among Cardiac
Science, Inc., Perseus Market Opportunity Fund, L.P., Winterset Master Fund, L.P., Mill
River Master Fund, L.P., Massachusetts Mutual Life Insurance Company and Walter Villager
(26)4.7
    
    Amended and Restated Registration Rights Agreement, dated July 20, 2004, by and among
Cardiac Science, Inc., Perseus Market Opportunity Fund, L.P., Winterset Master Fund,
L.P., Mill River Master Fund, L.P., Massachusetts Mutual Life Insurance Company and
Walter Villager (26)4.8
    
    Form of Warrant (26)4.9
    
    Form of Warrant issued to Perseus Acquisition /Recapitalization Fund, L.L.C., Perseus
Market Opportunity Fund, L.P. and Cardiac Science Co-Investment, L.P.10.1
    
    Senior Note and Warrant Conversion Agreement dated as of February 28, 2005 among CSQ
Holding Company, Cardiac Science, Inc. and the purchasers listed on the signature pages
thereto (1)10.2 *
    
    Employment Agreement between Quinton Cardiology Systems, Inc. and John R. Hinson dated as
of February 6, 2004 (10)10.3
    
    Assumption and Amendment Agreement dated as of September 28, 2005 among Silicon Valley
Bank, Cardiac Science Corporation, Quinton Cardiology, Inc. and Cardiac Science Operating
Company (28)10.4
    
    Lease Termination Agreement effective as of September 14, 2005 between Cardiac Science,
Inc. and Terrace Tower Orange County, LLC (29)10.5*
    
    Quinton Cardiology Systems, Inc. 1998 Amended and Restated Equity Incentive Plan (4)10.6*
    
    Quinton Cardiology Systems, Inc. 2002 Stock Incentive Plan (4)10.7*
    
    Quinton Cardiology Systems, Inc. 2002 Employee Stock Purchase Plan (4)10.8*
    
    Quinton Cardiology Systems, Inc. Stock Option Grant Program for Nonemployee Directors (5)10.9*
    
    Quinton Cardiology Systems, Inc. 2003 Management Incentive Plan (8)10.10
    
    Lease Agreement between Quinton Inc. and AHP Subsidiary Holding Corporation regarding
premises at Bothell, Washington, June 1, 1998, as amended (4)10.11
    
    First Amendment to Lease between Quinton Inc. and AHP Subsidiary Holding Corporation,
dated August 31, 1998 (4)10.12
    
    OEM Agreement between Quinton Inc. and Mortara Instrument, Inc. dated August 1, 2000 (4)
 50




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##### Table of Contents



Exhibits10.13
    
    OEM Agreement between Quinton Inc. and Mortara Instrument, Inc. dated October 17, 2000 (4)10.14
    
    OEM Agreement between Quinton Inc. and Mortara Instrument, Inc. dated October 1, 2001 (6)10.15
    
    Addendum No. 1 to the OEM Agreement between Mortara Instrument, Inc. and Quinton Inc.
dated August 1, 2001 (4)10.16
    
    Loan and Security Agreement between Quinton Cardiology Systems, Inc. and Quinton Inc. and
Silicon Valley Bank dated December 30, 2002 (7)10.17
    
    Amendment to Loan Documents between Quinton Cardiology Systems, Inc., Quinton Inc. and
Burdick, Inc. and Silicon Valley Bank dated January 9, 2003 (7)10.18
    
    Streamline Facility Agreement between Quinton Cardiology Systems, Inc. and Quinton Inc.
and Silicon Valley Bank dated as of December 30, 2002 (7)10.19
    
    Cross-Corporate Continuing Guaranty between Quinton Cardiology Systems, Inc. and Quinton
Inc. and Silicon Valley Bank dated December 30, 2002 (7)10.20
    
    Intellectual Property Security Agreement between Quinton Cardiology Systems, Inc. and
Quinton Inc. and Silicon Valley Bank dated December 30, 2002 (7)10.21
    
    Assumption Agreement between Quinton Cardiology Systems, Inc., Quinton Inc. and Burdick,
Inc. and Silicon Valley Bank dated January 9, 2003 (7)10.22
    
    Cross-Corporate Continuing Guaranty between Burdick Inc. and Silicon Valley Bank dated
January 9, 2003 (7)10.23
    
    Intellectual Property Security Agreement between Burdick, Inc. and Silicon Valley Bank
dated January 9, 2003 (7)10.24
    
    Lease Agreement between Carl Ruedebusch LLC and Burdick, Inc. regarding premises at
Deerfield Industrial Park in Deerfield, Wisconsin dated as of April 6, 1998 (7)10.25
    
    Lease Agreement between Quinton Cardiology Systems, Inc. and Hibbs/ Woodinville
Associates, L.L.C. regarding premises at Bothell, Washington, dated August 29, 2003 (8)10.26*
    
    Letter Agreement between Quinton Cardiology Systems, Inc. and Darryl Lustig dated October
9, 2003 (9)10.27*
    
    Letter Agreement between Quinton Cardiology Systems, Inc. and Darryl Lustig dated March
21, 2003 (9)10.28*
    
    Form of Quinton Cardiology Systems, Inc. Stock Option Grant Notice and Stock Option
Agreement (This exhibit represents other substantially identical documents that have been
omitted because they are substantially identical to this document in all material
respects and an Appendix attached to this exhibit sets forth material details by which
the omitted documents differ from this exhibit.) (9)10.29*
    
    Quinton Cardiology Systems, Inc. Stock Option Grant Notice and Stock Option Agreement
between Quinton Cardiology Systems, Inc. and Atul Jhalani, dated as of October 23, 2003
(9)10.30*
    
    Employment Agreement between Quinton Cardiology Systems, Inc. and Ruediger
Naumann-Etienne dated as of February 6, 2004 (10)10.31*
    
    Employment Agreement between Quinton Cardiology Systems, Inc. and Michael K. Matysik
dated as of February 6, 2004 (10)10.32*
    
    Employment Agreement between Quinton Cardiology Systems, Inc. and Darryl Lustig dated as
of February 6, 2004 (10)10.33*
    
    Employment Agreement between Quinton Cardiology Systems, Inc. and John R. Serino dated as
of February 6, 2004 (10)10.34*
    
    Quinton Cardiology Systems, Inc. Stock Option Grant Notice and Stock Option Agreement
between Quinton Cardiology Systems, Inc. and Allan Criss, dated as of March 10, 2004 (10)10.35
    
    Employment Agreement between Quinton Cardiology Systems, Inc. and Allan Criss dated as of
March 1, 2004 (11)
 51




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##### Table of Contents



Exhibits10.36
    
    Amendment to Loan Documents between Quinton Cardiology Systems, Inc., Quinton Cardiology,
Inc. and Silicon Valley Bank dated December 30, 2004 (12)10.37*
    
    Employment Agreement between Quinton Cardiology Systems, Inc. and Atul Jhalani dated as
of February 6, 2004 (13)10.38*
    
    Form of Stock Option Grant Notice and Stock Option Agreement for grants made pursuant to
the Quinton Cardiology Systems, Inc. 2002 Stock Incentive Plan (13)10.39*
    
    Quinton Cardiology Systems, Inc. Senior Executives  Base Compensation Adjustments  2005
dated as of February 28, 2005 (13)10.40*
    
    Summary of Non-Employee Director Compensation (13)10.41*
    
    Quinton Cardiology Systems, Inc. 2004 Sales Bonus Plan for Darryl Lustig, as amended on
March 14, 2005 (13)10.42*
    
    Quinton Cardiology Systems, Inc. 2004 Sales Bonus Plan for Allan Criss, as amended on
March 14, 2005 (13)10.43*
    
    Quinton Cardiology Systems, Inc. 2005 Sales Incentive Plan for Darryl Lustig (13)10.44*
    
    Quinton Cardiology Systems, Inc. 2005 Sales Incentive Plan for Allan Criss (13)10.45*
    
    Employment Agreement between Quinton Cardiology Systems, Inc. and Brian Lee dated as of
February 6, 2004 (13)10.46*
    
    Employment Agreement between Quinton Cardiology Systems, Inc. and Feroze Motafram dated
as of February 6, 2004 (13)10.47*
    
    Quinton Cardiology Systems, Inc. Stock Option Grant Notice and Stock Option Agreement
between Quinton Cardiology Systems, Inc. and Feroze Motafram dated as of July 23, 2003
(13)10.48*
    
    Employment Agreement between Quinton Cardiology Systems, Inc. and David Hadley dated as
of February 6, 2004 (13)10.49*
    
    Cardiac Science, Inc. 1997 Stock Option/Stock Issuance Plan, as amended (15)10.50*
    
    Employment Agreement between Cardiac Science, Inc. and Raymond Cohen, dated December 31,
2002 (25)10.51*
    
    Employment Agreement between Cardiac Science, Inc. and Kurt Lemvigh, dated December 1,
2001 (25)10.52
    
    Facility lease, dated September 9, 1999, for 16931 Millikan Avenue, Irvine, CA (18)10.53
    
    Integration and Distribution Letter Agreement between Data Critical Corporation
Technology and Cardiac Science, Inc., dated March 17, 2000 (16)10.54
    
    Assignment of Patent, dated July 1, 2000, by Lindell Bradley, M.D., and Thang-Quang
Nguyen in favor of Cardiac Science, Inc. (19)10.55
    
    Patent Acquisition Agreement, dated July 1, 2000, by and among Lindell Bradley, M.D. and
Thang-Quang Nguyen together with Cardiac Science, Inc. (19)10.56
    
    Amendment, dated June 10, 2005, to the OEM Purchase Agreement dated July 29, 2003, as
amended, between Cardiac Science, Inc. and GE Medical Systems Information Technologies,
Inc. (27)10.57+
    
    Amendment, dated June 10, 2005, to the OEM Purchase and Supply Agreement dated July 29,
2003, as amended, between Cardiac Science, Inc. and GE Medical Systems Information
Technologies, Inc. (27)10.58+
    
    Exclusive Distribution Agreement for United States and Canadian Hospitals dated June 13,
2005, between Cardiac Science, Inc. and GE Medical Systems Information Technologies, Inc.
(27)10.59*
    
    Employment Agreement between
Cardiac Science, Inc. and Peter Foster, dated August 30, 200431.1
    
    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.
 52




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##### Table of Contents



Exhibits32.1
    
    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.
 
 *
    
    Indicates management contract or compensatory plan or arrangement.+
    
    Portions of this exhibit are omitted and were filed separately with the Securities and
Exchange Commission pursuant to Cardiac Science Inc.s application requesting confidential
treatment under Rule 24b-2 of the Securities Exchange Act of 1934.(1)
    
    Incorporated by reference to the Registrants Amendment No. 3 to the Registration
Statement on Form S-4/A (File No. 333-124514) filed on July 28, 2005.(2)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K (File No.
000-51512) filed on September 1, 2005.(3)
    
    Incorporated by reference to Quinton Cardiology Systems, Inc.s Current Report on Form
8-K (File No. 000-49755) filed on January 17, 2003.(4)
    
    Incorporated by reference to Quinton Cardiology Systems, Inc.s Registration Statement
on Form S-1 (File No. 333-83272) filed on February 22, 2002.(5)
    
    Incorporated by reference to Quinton Cardiology Systems, Inc.s Amendment No. 1 to the
Registration Statement on Form S-1/A (File No. 333-83272) filed on March 26, 2002.(6)
    
    Incorporated by reference to Quinton Cardiology Systems, Inc.s Amendment No. 3 to the
Registration Statement on Form S-1/A (File No. 333-83272) filed on April 3, 2002.(7)
    
    Incorporated by reference to Quinton Cardiology Systems, Inc.s Annual Report on Form
10-K for the year ended December 31, 2002 (File No. 000-49755).(8)
    
    Incorporated by reference to Quinton Cardiology Systems, Inc.s Quarterly Report on
Form 10-Q for the quarter ended September 30, 2003 (File No. 000-49755).(9)
    
    Incorporated by reference to Quinton Cardiology Systems, Inc.s Annual Report on Form
10-K for the year ended December 31, 2003 (File No. 000-49755).(10)
    
    Incorporated by reference to Quinton Cardiology Systems, Inc.s Quarterly Report on
Form 10-Q for the quarter ended March 31, 2004 (File No. 000-49755).(11)
    
    Incorporated by reference to Quinton Cardiology Systems, Inc.s Quarterly Report on
Form 10-Q for the quarter ended June 30, 2004 (File No. 000-49755).(12)
    
    Incorporated by reference to Quinton Cardiology Systems, Inc.s Current Report on Form
8-K (File No. 000-49755) filed on January 5, 2005.(13)
    
    Incorporated by reference to Quinton Cardiology Systems, Inc.s Annual Report on Form
10-K for the year ended December 31, 2004 (File No. 000-49755).(14)
    
    Incorporated by reference to Cardiac Science, Inc.s Current Report on Form 8-K (File
No. 000-19567) filed on January 16, 2001.(15)
    
    Incorporated by reference to Cardiac Science, Inc.s Definitive Proxy Statement for
the Annual Meeting of Stockholders (File No. 000-19567) held on September 9, 2002.(16)
    
    Incorporated by reference to Cardiac Science, Inc.s Annual Report on Form
10-K for the year ended December 31, 1999 (File No. 000-19567).(17)
    
    Incorporated by reference to Cardiac Science, Inc.s Annual Report on Form 10-KSB for
the year ended December 31, 1998 (File No. 000-19567).(18)
    
    Incorporated by reference to Cardiac Science, Inc.s Quarterly Report on Form 10-QSB
for the quarter ended September 30, 1999 (File No. 000-19567).(19)
    
    Incorporated by reference to Cardiac Science, Inc.s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2000 (File No. 000-19567).(20)
    
    Incorporated by reference to Cardiac Science, Inc.s Current Report on Form 8-K (File
No. 000-19567) filed on July 17, 2000.(21)
    
    Incorporated by reference to Cardiac Science, Inc.s Current Report on Form 8-K (File
No. 000-19567) filed on March 27, 2001.(22)
    
    Incorporated by reference to Cardiac Science, Inc.s Current Report on Form 8-K (File
No. 000-19567) filed on March 23, 2001. 53




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##### Table of Contents



(23)
    
    Incorporated by reference to Cardiac Science, Inc.s Current Report on Form 8-K (File
No. 000-19567) filed on June 6, 2002.(24)
    
    Incorporated by reference to Cardiac Science, Inc.s Current Report on Form 8-K (File
No. 000-19567) filed on November 4, 2003.(25)
    
    Incorporated by reference to Cardiac Science, Inc.s Annual Report on Form 10-K for
the year ended December 31, 2002 (File No. 000-19567).(26)
    
    Incorporated by reference to Cardiac Science, Inc.s Current Report on Form 8-K (File
No. 000-19567) filed on July 22, 2004.(27)
    
    Incorporated by reference to Cardiac Science, Inc.s Quarterly Report on Form 10-Q for
the quarter ended June 30, 2005 (File No. 000-19567).(28)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K (File No.
000-51512) filed on September 30, 2005.(29)
    
    Incorporated by reference to the Registrants Current Report on Form 8-K (File No.
000-51512) filed on October 3, 2005. 54




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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 and Accounting Officer)  55