##### Table of Contents



SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



---

FORM 10-QSB

QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 FOR THE QUARTERLY PERIOD ENDED September 30, 2003

Commission File Number: 0-24635

HYPERTENSION DIAGNOSTICS, INC.
(Exact name of small business issuer as specified in its charter)

MINNESOTA
(State of incorporation)
    
    41-1618036
(I.R.S. Employer Identification No.)


2915 WATERS ROAD, SUITE 108
EAGAN, MINNESOTA 55121-1562
(651) 687-9999
(Address of issuers principal executive offices and telephone number)

Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days.

Yes x
    
    No o


The number of shares of Common Stock outstanding as of October 31, 2003 was
22,940,390.

Transitional Small Business Disclosure Format:

Yes o
    
    No x


1



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HYPERTENSION DIAGNOSTICS, INC.

INDEX TO FORM 10-QSB

TABLE OF CONTENTS



|                                                  |                                                                                               |                                                                           |  |  |  |  |  | 
|------------------------------------------------- | --------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------- |  |  |  |  |  | 
|PART I. FINANCIAL INFORMATION:                   
|                                                  | Item 1. Financial Statements                                                                 
|                                                  |                                                                                               | Balance Sheets September 30, 2003 and June 30, 2003                     
|                                                  |                                                                                               | Statements of Operations  Three Months Ended September 30, 2003 and 2002
|                                                  |                                                                                               | Statements of Cash Flows  Three Months Ended September 30, 2003 and 2002
|                                                  |                                                                                               | Notes to Financial Statements                                            
|                                                  | Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
|                                                  | Item 4. Controls and Procedures                                                              
|PART II. OTHER INFORMATION:                      
|                                                  | Item 2. Changes in Securities                                                                
|                                                  | Item 6. Exhibits and Reports on Form 8-K                                                     
|SIGNATURES                                       
|EX-31.1 Certification of Chief Executive Officer 
|EX-31.2 Certification of Chief Financial Officer 
|EX-32 Certificate Pursuant to 18 USC Section 1350



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##### Table of Contents



Page No.PART I. FINANCIAL INFORMATION:Item 1. Financial Statements
    
    3Balance Sheets  September 30, 2003 and June 30, 2003
    
    3Statements of Operations  Three Months Ended
September 30, 2003 and 2002
    
    4Statements of Cash Flows  Three Months Ended
September 30, 2003 and 2002
    
    5Notes to Financial Statements
    
    6Item 2. Managements Discussion and Analysis of Financial Condition
and Results of Operations
    
    10Item 4. Controls and Procedures
    
    19PART II. OTHER INFORMATION:Item 2. Changes in Securities
    
    20Item 6. Exhibits and Reports on Form 8-K
    
    20SIGNATURES
    
    21CERTIFICATIONS
    
    22


2



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##### Table of Contents












PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Hypertension Diagnostics, Inc.

Balance Sheets

September 30,
    
    
    June 30,2003
    
    
    2003AssetsCurrent Assets:Cash and cash equivalents
    
    $
    1,758,409
    
    
    $
    90,335Accounts receivable
    
    
    96,208
    
    
    
    124,351Interest receivable
    
    
    17,345
    
    
    
    14,710Inventory
    
    
    276,206
    
    
    
    333,241Prepaids and other current assets
    
    
    70,055
    
    
    
    39,876Total Current Assets
    
    
    2,218,223
    
    
    
    602,513Property and Equipment:Leasehold improvements
    
    
    17,202
    
    
    
    17,202Furniture and equipment
    
    
    1,252,949
    
    
    
    1,222,169Less accumulated depreciation
    
    
    (776,016
    )
    
    
    (722,712
    )494,135
    
    
    
    516,659Prepaid Offering Expenses
    
    
    
    
    
    
    29,002Other Assets
    
    
    6,730
    
    
    
    6,730Total Assets
    
    $
    2,719,088
    
    
    $
    1,154,904Liabilities and Shareholders EquityCurrent Liabilities:Accounts payable
    
    $
    272,023
    
    
    $
    101,821Accrued payroll and payroll taxes
    
    
    266,854
    
    
    
    251,773Convertible notes payable
    
    
    
    
    
    
    481,492Deferred revenue
    
    
    68,297
    
    
    
    153,553Other accrued expenses
    
    
    31,281
    
    
    
    43,910Total Current Liabilities
    
    
    638,455
    
    
    
    1,032,549Shareholders Equity:Series A Convertible Preferred Stock, $.01 par value:Authorized
shares5,000,000
Issued and outstanding shares585,980 and -0-
    at September 30, 2003 and June 30, 2003, respectively
    
    
    5,860
    
    
    
    Common Stock, $.01 par value:Authorized
shares25,000,000
Issued and outstanding shares22,938,890 and 10,291,088
    at September 30, 2003 and June 30, 2003, respectively
    
    
    229,388
    
    
    
    102,911Additional paid-in capital
    
    
    23,713,871
    
    
    
    21,429,844Accumulated deficit
    
    
    (21,867,585
    )
    
    
    (21,410,400
    )Total Shareholders Equity
    
    
    2,080,633
    
    
    
    122,355Total Liabilities and Shareholders Equity
    
    $
    2,719,088
    
    
    $
    1,154,904


See accompanying notes.

3



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##### Table of Contents






Hypertension Diagnostics, Inc.

Statements of Operations

Three Months EndedSeptember 302003
    
    
    2002Revenue:Equipment sales
    
    $
    73,745
    
    
    $
    28,700Equipment rental
    
    
    89,896
    
    
    
    72,945Service/contract income
    
    
    85,257
    
    
    
    17,417248,898
    
    
    
    119,062Cost of Sales
    
    
    46,493
    
    
    
    15,730Gross Profit
    
    
    202,405
    
    
    
    103,332Expenses:Selling, general and administrative
    
    
    615,474
    
    
    
    997,193Total Expenses
    
    
    615,474
    
    
    
    997,193Operating Loss
    
    
    (413,069
    )
    
    
    (893,861
    )Other Income (Expense):Interest income
    
    
    6,069
    
    
    
    6,629Interest expense
    
    
    (50,185
    )
    
    
    (89,519
    )Net Loss
    
    $
    (457,185
    )
    
    $
    (976,751
    )Basic and Diluted Net Loss per Share
    
    $
    (0.3
    )
    
    
    (.14
    )Weighted Average Shares Outstanding
    
    
    14,876,805
    
    
    
    6,768,162


See accompanying notes.

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Hypertension Diagnostics, Inc.

Statements of Cash Flows

Three Months EndedSeptember 302003
    
    
    2002Operating Activities:Net loss
    
    $
    (457,185
    )
    
    $
    (976,751
    )Adjustments to reconcile net loss to net
cash used in operating activities:Value of stock options, Common Stock and warrants
issued in lieu of cash
    
    
    
    
    
    
    150,000Depreciation
    
    
    53,304
    
    
    
    54,890Amortization
    
    
    
    
    
    
    1,700Amortization of debt discount
    
    
    48,531
    
    
    
    62,798Interest expense  converted to Common Stock
    
    
    11,956
    
    
    
    7,843Change in operating assets and liabilities:Accounts receivable
    
    
    28,143
    
    
    
    200,289Interest receivable
    
    
    (2,635
    )
    
    
    (2,392
    )Inventory
    
    
    26,256
    
    
    
    5,943Prepaids and other current assets
    
    
    (1,177
    )
    
    
    (42,163
    )Accounts payable
    
    
    170,202
    
    
    
    (21,621
    )Accrued payroll and payroll taxes
    
    
    15,081
    
    
    
    31,636Deferred revenue
    
    
    (85,256
    )
    
    
    (17,416
    )Other accrued expenses
    
    
    (12,629
    )
    
    
    (39,944
    )Net cash used in operating activities
    
    
    (205,409
    )
    
    
    (585,188
    )Financing Activities:Issuance of Preferred and Common Stock
    
    
    1,873,483
    
    
    
    Net cash provided by financing activities
    
    
    1,873,483
    
    
    
    Net increase (decrease) in cash and cash equivalents
    
    
    1,668,074
    
    
    
    (585,188
    )Cash and cash equivalents at beginning of period
    
    
    90,335
    
    
    
    1,824,238Cash and cash equivalents at end of period
    
    $
    1,758,409
    
    
    $
    1,239,050Supplemental Schedule of Noncash Financing Activities:Conversion of notes payable and accrued interest into Common Stock
    
    $
    541,980
    
    
    $
    337,340


See accompanying notes.

5



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Hypertension Diagnostics, Inc.
Notes to Financial Statements

September 30, 2003



|1. |  | Interim Financial Information
|-- |  | -----------------------------

The accompanying unaudited financial statements have been prepared in
accordance with the instructions to Form 10-QSB and do not include all the
information and notes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, these unaudited
financial statements reflect all adjustments, consisting only of normal and
recurring adjustments necessary for a fair presentation of the financial
statements. The results of operations for the three months ended September 30,
2003 are not necessarily indicative of the results that may be expected for the
full year ending June 30, 2004. The June 30, 2003 balance sheet was derived
from audited financial statements. For further information, refer to the
financial statements and notes included in the Companys Annual Report on Form
10-KSB, as amended, for the fiscal year ended June 30, 2003. The policies
described in that report are used for preparing quarterly reports.



|2. |  | Unit Placement
|-- |  | --------------

On August 28, 2003, the Company completed the private placement offering
(the Unit Placement) of 585,980 units (the Units) to a group of investors
led by Mark N. Schwartz, who is the Companys Chief Executive Officer. Gross
proceeds from this offering were approximately $2,300,000. The 585,980 Units
are comprised of 585,980 shares of Series A Convertible Preferred Stock,
9,318,866 shares of common stock, and warrants as follows:



| |  |  | Nine-month preferred stock purchase warrants permitting the holders
to purchase up to an aggregate of 585,980 shares of the Series A
Preferred Stock at an exercise price of $2.04 per share.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Nine-month common stock purchase warrants permitting the holders to
purchase up to an aggregate of 9,318,866 shares of common stock at an
exercise price of $0.17 per share.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Eighteen-month preferred stock purchase warrants permitting the
holders to purchase up to an aggregate of 468,797 shares of the Series
A Preferred Stock at an exercise price of $2.64 per share.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Eighteen-month common stock purchase warrants permitting the
holders to purchase up to an aggregate of 7,455,114 shares of common
stock at an exercise price of $0.22 per share.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sixty-month preferred stock purchase warrants permitting the
holders to purchase up to an aggregate of 410,198 shares of Series A
Preferred Stock at an exercise price of $3.60 per share; and
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Sixty-month common stock purchase warrants permitting the holders
to purchase up to an aggregate of 6,523,233 shares of common stock at
an exercise price of $0.30 per share.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6



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Hypertension Diagnostics, Inc.
Notes to Financial Statements (Continued)
September 30, 2003



|2. |  | Unit Placement (Continued)
|-- |  | --------------------------

As a condition to the Unit Placement, each of the investors in the Unit
Placement (each, an Investor and collectively, the Investors) entered into
a Shareholders Agreement, Voting Agreement, with an irrevocable proxy, and
Registration Rights Agreement.

The Shareholders Agreement contains provisions relating to, among other
things, preemptive rights, rights of first refusal and approval of certain
transactions. The Voting Agreement provides, among other things, that each
party to the Voting Agreement will agree to vote all of the Stock (which means
shares of common stock, preferred stock and any other class of our equity
securities and shall include any shares of common stock issuable upon exercise,
exchange or conversion of securities exercisable or exchangeable for or
convertible into shares of our common stock) held by such party in favor of
certain composition of the Board and an increase in the number of shares of
authorized common stock. To effectuate the Voting Agreement, each Investor
executed a proxy in favor of Mark N. Schwartz with respect to all shares of
Stock owned by such Investor. Pursuant to the Registration Rights Agreement,
during the period commencing 120 days after the final closing of the Unit
Placement and expiring 48 months after the final closing of the Unit Placement,
the holders of the Units are entitled to a one-time demand that we effect as
soon as practicable the registrations of the certain components of the Units,
subject to customary restrictions. The Registration Rights Agreement also
grants the Investors certain registration rights commonly called piggy-back
registration rights.

Because of the Companys lack of sufficient authorized common stock, the
Company has agreed to seek the approval of its shareholders of an amendment to
its Articles of Incorporation increasing the number of shares of common stock
authorized to at least 150,000,000 shares (or such other number as may be
sufficient to allow for the reservation for issuance of all of the shares of
common stock underlying each outstanding security convertible or exercisable
for or exchangeable into, common stock) (the Proposal). In connection with
the closing of the Unit Placement, the Company agreed to call a meeting of its
shareholders and to obtain the approval of its shareholders of the Proposal
within 120 days of the final closing of the Unit Placement.

If the Proposal is not approved within 120 days of the final closing of
the Unit Placement, that is, on or before December 26, 2003, the following
events will occur:



| |  |  | The Company has authorized a twelve-to-one forward stock split of
the Series A Preferred Stock and a proportional increase in the
authorized Series A Preferred Stock, which will become effective
immediately and automatically;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The common stock purchase warrants issued in the Unit Placement
shall automatically convert to the right to purchase one-twelfth (1/12)
of one share of the Series A Preferred Stock for each share of common
stock, and the exercise price of each share issuable upon exercise of
such warrants shall automatically increase by a multiple of 12;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The registration rights relating to the common stock sold or
underlying other securities sold in the Unit Placement will become
registration rights with respect to the Series A Preferred Stock;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Series A Preferred Stock will accrue a cumulative and
compounding dividend, payable in arrears, equal to 11% per year from
the date of issuance to the date of payment; and
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | All common stock-based compensation payable to Mr. Mark N.
Schwartz, the Companys Chief Executive Officer, will be payable in
shares of Series A Preferred Stock.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

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Hypertension Diagnostics, Inc.
Notes to Financial Statements (Continued)
September 30, 2003



|2. |  | Unit Placement (Continued)
|-- |  | --------------------------

Bridge Financing Loans

To facilitate its continued operations pending a closing of the Unit
Placement, the Company obtained $20,000 bridge financing loans on August 4,
2003 from each of Kenneth W. Brimmer, a Director, and James S. Murphy, the
Companys Senior Vice President, Finance and Administration, and Chief
Financial Officer. On August 15, 2003, the Company obtained an additional
$75,000 bridge financing loan from Dr. Jay N. Cohn, a Director. The bridge
financing loans were each evidenced by unsecured promissory notes
(collectively, the Bridge Financing Notes). The Bridge Financing Notes
accrued interest at the annual rate of 8% and were due on demand of the holder
at any time after September 1, 2003. In connection with the Unit Placement,
the principal amounts due under the Bridge Financing Notes were automatically
converted into Units in the Unit Placement at the same rate as a cash
investment.

Satisfaction of the Notes

Pursuant to a Subscription Agreement dated March 27, 2002, the Company
issued three-year 8% Convertible Notes (the Notes) to Alpha Capital
Aktiengesellschaft (Alpha), Stonestreet Limited Partnership (Stonestreet),
Palisades Equity Fund, L.P. (Palisades), Ellis Enterprises Ltd. (Ellis) and
Bristol Investment Fund, Ltd. (Bristol) in an aggregate principal amount of
$2,000,000.

On August 28, 2003, the Company closed the transactions under a Conversion
and Voting Agreement dated August 1, 2003 (Conversion Agreement) with Alpha,
Stonestreet and Ellis (collectively, the Holders), the remaining holders of
the Notes, for the complete satisfaction and discharge of all amounts and
obligations under the Notes, including any penalties relating to the Notes. As
of August 1, 2003, all principal and interest under the Notes of Bristol and
Palisades had been converted into shares of our common stock pursuant to the
terms of the Notes.

Pursuant to the Conversion Agreement, the Holders converted 1/3 of the
outstanding principal and accrued but unpaid interest as of July 10, 2003 into
1,472,168 shares of common stock. The rate of this conversion was 1 share of
common stock for each $.12 of outstanding principal and accrued but unpaid
interest. Further, the Company issued to the Holders 1,766,599 shares of
common stock in connection with the satisfaction of the remaining 2/3 of the
outstanding principal and accrued but unpaid interest (a rate of conversion of
1 share of common stock for each $.20 of outstanding principal and accrued but
unpaid interest). As of July 10, 2003, there was $518,023.50 in outstanding
principal and $11,956.57 in accrued but unpaid interest relating to the Notes.

Each of the Holders also executed and delivered an irrevocable proxy in
favor of Mark N. Schwartz to vote in favor of the Proposal and such other
matters (provided such matters do not adversely effect the rights of the
Holders) as may be presented at meetings of security holders of the Company
during the term of the proxy.

8



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##### Table of Contents



Hypertension Diagnostics, Inc.
Notes to Financial Statements (Continued)
September 30, 2003



|2. |  | Unit Placement (Continued)
|-- |  | --------------------------

Other Transaction Documents

In connection with the Unit Placement, the Company entered into that
certain Reservation Agreement dated as of August 4, 2003 with Messrs. Brimmer,
Guettler and Murphy and Drs. Cohn and Chesney (the Optionees). Each of the
Optionees agreed that each option to purchase the Companys common stock held
by such Optionee may not be exercised until such time as the shareholders
approve the Proposal. The number of shares of common stock underlying options
granted to the Optionees are as follows: 379,428 shares, Greg H. Guettler;
532,474 shares, Charles F. Chesney; 308,124 shares, James S. Murphy; 469,211
shares, Jay N. Cohn; and 79,500 shares, Kenneth W. Brimmer. In connection with
the closing of the Unit Placement, the Optionees also delivered a proxy
appointing either of Kenneth W. Brimmer or Greg H. Guettler as proxies to vote
all of such Optionees securities for certain composition of the Board and in
favor of the Proposal.



|3. |  | Stock Based Compensation
|-- |  | ------------------------

The Company has adopted the disclosure-only provisions of Statement of
Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation (FASB 123), but applies Accounting Principles Board Opinion No.
25 (APB 25) and related interpretations in accounting for its plans. Under APB
25, when the exercise price of employee stock options equals the market price
of the underlying stock on the date of grant, no compensation expense is
recognized. In accordance with FASB 123 and EITF 96-18, Accounting for Equity
Instruments That Are Issued to Other Than Employees for Acquiring, or in
Conjunction with Selling, Goods or Services,transactions in which equity
instruments are issued in exchange for services are measured at the fair value
of the consideration received or the fair value of the equity instruments
issued, whichever is a more reliable measure.

The Company accounts for stock options under APB 25, under which no
compensation cost has been recognized. Had compensation cost for these options
been determined consistent with FASB 123, the net loss and basic and diluted
net loss per share would have been increased to the following pro forma amounts
for the three months ended September 30, 2003 and September 30, 2002:

Three Months Ended September 302003
    
    
    2002Net Loss:As Reported
    
    $
    (457,185
    )
    
    $
    (976,751
    )Pro Forma
    
    
    (504,341
    )
    
    
    (1,029,351
    )Basic and Diluted Net Loss per Share:As Reported
    
    $
    (.03
    )
    
    $
    (0.14
    )Pro Forma
    
    $
    (.03
    )
    
    $
    (0.15
    )


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##### Table of Contents






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

Forward-Looking Statements

This report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934. In addition, we may make
forward-looking statements orally in the future by or on behalf of the Company.
When used, the words believe, expect, will, can, estimate,
anticipate and similar expressions are intended to identify forward-looking
statements. We caution readers not to place undue reliance on any
forward-looking statements and to recognize that the statements are not
predictions of actual future results. Actual results could differ materially
from those anticipated in the forward-looking statements due to the risks and
uncertainties set forth in our 2003 Annual Report on Form 10-KSB, as amended,
under the caption Risk Factors, as well as others not now anticipated. These
risks and uncertainties include, without limitation: our ability to develop a
business model to timely generate acceptable levels of revenues; our lack of
authorized common stock to issue all securities in the Unit Placement; the
control exercised by the Schwartz Group; if the Proposal is not approved,
holders of our common stock will be adversely affected; existing shareholders
will suffer dilution as a result of the Unit Placement; negative effect on our
stock price resulting from available securities for sale; our need for
additional capital; our dependence on our CVProfilor® DO-2020; the availability
of third-party reimbursements for the use of our products; increased market
acceptance of our products; our marketing strategy may result in lower
revenues; the illiquidity of our securities on the OTC Bulletin Board and the
related restrictions on our securities relating to penny stocks; the
availability of integral components for our products; our ability to develop
distribution channels; increased competition; changes in government regulation;
health care reforms; exposure to potential product liability; our ability to
protect our proprietary technology; regulatory restrictions pertaining to data
privacy issues in utilizing the CDMF; the ability to manufacture our products
on a commercial scale and in compliance with regulatory requirements. We
undertake no responsibility to update any forward-looking statement. These
forward-looking statements are only made as of the date of this report. In
addition to the risks we have articulated above, changes in market conditions,
changes in our business and other factors may result in different or increased
risks to our business in the future that are not foreseeable at this time.

Overview

We are engaged in the design, development, manufacture and marketing of
proprietary medical devices that we believe non-invasively detect subtle
changes in the elasticity of both large and small arteries. We are currently
marketing three products: the HDI/PulseWave CR-2000 Research CardioVascular
Profiling System, the CVProfilor® DO-2020 CardioVascular Profiling System and
the CVProfilor® MD-3000 CardioVascular Profiling System.



| |  |  | The CR-2000 Research System is being marketed
worldwide for research purposes only to clinical research
investigators for the purpose of collecting data in
cardiovascular studies. Further, because the CR-2000 Research
System bears the CE Mark (CE0123) and meets the European
Union Medical Device Directive, physicians may use the CR-2000
Research System with patients in a clinical setting in the
European Union.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | In the U.S., the CVProfilor® DO-2020 System is
being marketed to primary care physicians and other health
care professionals on a per-patient-tested rental basis. It
can also be purchased or leased. Utilizing our Central Data
Management Facility (the CDMF), we are able to track
utilization of the CVProfilor® DO-2020 System in each
physicians office and medical clinic and to invoice our
physician customers on the number of CardioVascular Profile
Reports (CVProfile Reports) which they generate each month.
We anticipate that marketing the CVProfilor® DO-2020
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10



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##### Table of Contents





| |  |  | System under a per-patient-tested rental program (as opposed
to a capital sale approach) will allow us to accelerate the rate
of product acceptance in the medical marketplace and should
allow physician usage fees to eventually generate the majority
of our revenue.
| |  |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The CVProfilor® MD-3000 System is being marketed
through exclusive distributors to physicians outside the
United States. These distributors purchase the product from
us and then re-sell it to end-user physicians in their
geography. The CVProfilor® MD-3000 System has a CE Mark that
allows it to be marketed within European Union countries. The
CVProfilor® MD-3000 may require certain regulatory approval
for it to be marketed in other countries throughout the world.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The CVProfilor® DO-2020 System was launched late in the 3rd Quarter of
fiscal year 2001 (March 2001) and had its first reported revenue in the 1st
Quarter of fiscal year 2002 which ended September 30, 2001. Reductions in
comparative revenue between fiscal year 2002 and fiscal year 2003 relate to our
planned conversion from capital sales of our HDI/PulseWave CR-2000 Research
System in fiscal year 2001 to our per-patient-tested rental revenue model
associated with physician use of our FDA cleared CVProfilor® DO-2020 System in
fiscal year 2002. Although we are attempting to maintain a balance in
marketing the HDI/PulseWave CR-2000 on a capital sales basis with the
CVProfilor® DO-2020 on a per-patient-tested basis, we expect that our
per-patient-tested marketing of the CVProfilor® DO-2020 will ultimately
produce the majority of our revenue.

Critical Accounting Policies

The financial statements are prepared in accordance with accounting
principles generally accepted in the U.S., which requires us to make estimates
and assumptions in certain circumstances that affect amounts reported in the
accompanying financial statements and related footnotes. In preparing these
financial statements, management has made its best estimates and judgments of
certain amounts included in the financial statements, giving due consideration
to materiality. We do not believe there is a great likelihood that materially
different amounts would be reported related to the accounting policies
described below. However, application of these accounting policies involves
the exercise of judgment and use of assumptions as to future uncertainties and,
as a result, actual results could differ from these estimates.

Revenue Recognition. We recognize revenue in accordance with U.S.
Securities and Exchange Commissions Staff Accounting Bulletin (SAB) No. 101,
Revenue Recognition. Pursuant to SAB No. 101, the Company recognizes revenue
from the sale of equipment at the time of shipment to a customer or
distributor. Shipment occurs only after receipt of a valid purchase order.
Payments from customers and distributors are either made in advance of shipment
or within a short time frame after shipment. In the case of sales to
distributors, such payment is not contingent upon resale of the product to end
users. Shipping and handling costs are included as cost of equipment sales.
In addition, title passes to the customer or distributor upon shipment. At the
time of shipment, all of the criteria for recognition set forth in SAB No. 101
have been met: persuasive evidence of an arrangement exists, delivery has
occurred or services have been rendered, the selling price is fixed or
determinable and collectability is reasonably assured.

Equipment rental revenue, whether from the minimum monthly fee or from the
per-patient-tested fee, is recognized when collection is probable, which is
currently upon cash receipt. At the time of receipt of rental revenues, all
of the criteria for recognition set forth in SAB No. 101 have been met:
persuasive evidence of an arrangement exists, delivery has occurred or services
have been rendered, the selling price is fixed or determinable and
collectability is reasonably assured.

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In the case of either a sale or rental of our product, there are no
post-shipment obligations which affect the timing of revenue recognition.
Neither customers nor distributors have a right to return or exchange our
product. Warranty repairs on all of the above are handled on a repair or
replacement basis, at our discretion. Further, there is no installation of our
product; it is ready to use when plugged into an electrical outlet and no
specialized knowledge is required to ready it for use. For these reasons, we
have concluded that our revenue recognition policy is appropriate and in
accordance with SAB No. 101.

Allowance for Doubtful Accounts. Accounts receivable are reviewed to
determine the need for an allowance for amounts that may become uncollectible
in the future. The necessity of an allowance is based on managements review
of accounts receivable balances and historic write-offs.

Inventories and Related Allowance for Excess and Obsolete Inventory.
Inventories are valued at the lower of cost or market and reviewed to determine
the need for an allowance for excess and obsolete inventories. The need for an
allowance is based on managements review of inventories on hand compared to
estimated future usage and sales.

Results of Operations

As of September 30, 2003, we had an accumulated deficit of ($21,867,585),
attributable primarily to selling, general and administrative expenses. Until
we are able to generate significant revenue from our activities, we expect to
continue to incur operating losses. As of September 30, 2003, we have cash and
cash equivalents of $1,758,409. We anticipate that these funds, in conjunction
with revenue anticipated to be earned from placements of our CVProfilor®
DO-2020 Systems, anticipated sales of our CR-2000 Research Systems, as well as
anticipated operating cost reductions, will allow us to pursue our
business development strategy for at least the next fifteen months following
September 30, 2003.

Three Months Ended September 30, 2003 Compared to Three Months Ended September
30, 2002

The following is a summary of our Revenue and Cost of Sales for the three
months ended September 30, 2003 and 2002:

Three Months Ended September 30, 2003Equipment
    
    
    Equipment
    
    
    Service/Total
    
    
    Sales
    
    
    Rental
    
    
    ContractRevenue
    
    $
    248,898
    
    
    $
    73,745
    
    
    $
    89,896
    
    
    $
    85,257Cost of Sales
    
    
    46,493
    
    
    
    13,026
    
    
    
    21,766
    
    
    
    11,701Gross Profit
    
    $
    202,405
    
    
    $
    60,719
    
    
    $
    68,130
    
    
    $
    73,556


Three Months Ended September 30, 2002Equipment
    
    
    Equipment
    
    
    Service/Total
    
    
    Sales
    
    
    Rental
    
    
    ContractRevenue
    
    $
    119,062
    
    
    $
    28,700
    
    
    $
    72,945
    
    
    $
    17,417Cost of Sales
    
    
    15,730
    
    
    
    5,785
    
    
    
    9,945
    
    
    
    Gross Profit
    
    $
    103,332
    
    
    $
    22,915
    
    
    $
    63,000
    
    
    $
    17,417


Total Equipment Sales Revenue for the three months ended September
30, 2003 was $73,745, compared to $28,700 for the three months ended September
30, 2002. Revenue relating to international equipment sales was $51,495 for
the three months ended September 30, 2003 and $9,950

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for the three months ended
September 30, 2002. Although we continue to pursue sales of the CR-2000
Research Systems, the majority of our time and attention is now, and it is
expected to continue to be, focused on expanding CVProfilor® DO-2020 System
placements (per-patient-tested rental program) and attempting to increase its
utilization in U.S. physicians medical offices and clinics and seeking to
increase third party reimbursements for such utilization. The reason for the
shift in our strategic focus to the CVProfilor® DO-2020 System was: a) FDA
510(k) clearance to market it in the United States on November 1, 2000; and b)
the potential practicing physician market is significantly larger than the
research market for the CR-2000 Research System.

Placements of the CVProfilor® DO-2020 System, and satisfactory utilization
by physicians of those systems placed, has taken more time and resources than
originally anticipated due to delays in obtaining consistent and satisfactory
levels of third party reimbursements to physicians utilizing the CVProfilor®
DO-2020 System and delays in integrating the CVProfilor® DO-2020 System into
the clinic operations in which they are placed. We have commenced focusing our
resources on specific regional markets that we believe are more likely to
generate higher levels of acceptance of the CVProfilor® DO-2020 System by
physicians and a greater amount of reimbursements by third party payors to such
physicians. We believe this approach is the most effective method of both
increasing placements of the CVProfilor® DO-2020 System and increasing the
physician utilizations of such systems placed. Our current marketing strategy
focuses on marketing the CVProfilor® DO-2020 System to physicians who treat
patients with diabetes and hypertension. We believe these physicians have the
greatest interest in, and use for, our product. Therefore, the most critical
factor in our ability to increase rental revenue rests in our ability to expand
our marketing and distribution network to increase placements and utilization
of our CVProfilor® DO-2020 System. We believe there are three ways we could
expand our marketing and distribution network: 1) the development of an
internal sales force; 2) a strategic partnership with a firm that possesses a
distribution network calling on these same physicians; or 3) a combination of
the internal sales force and external distribution network methods. We believe
this dual method of expansion offers us the greatest opportunity for success.
We anticipate adding five to ten additional sales personnel at the same time
that we pursue discussions with firms that have an interest in representing our
CVProfilor® DO-2020 System nationwide. In the short term, we have been focused
on and will continue to focus on international sales of our CR-2000 Research
System and CVProfilor® MD-3000 System as a means of generating cash to support
operational expenses.

Further, the existence, timing and extent of reimbursement of physicians
for the use of our CVProfilor® DO-2020 System affects the availability of our
working capital. Reimbursement will always vary considerably by the patients
medical necessity, by physician, by provider, by geography and by provider
coverage plans, making the process of obtaining reimbursement for the
CVProfilor® DO-2020 System by current physician customers an important
component of our products success. To the extent that reimbursement is
unavailable or inadequate, physicians will be less likely to use the
CVProfilor® DO-2020 System. Therefore, we continue to devote considerable
effort to activities such as payer advocacy and coding clarification directed
at long-term reimbursement in our target markets. We provide assistance to
physicians with the ongoing process of insurance billing procedures in an
attempt to facilitate reimbursement coverage and payment on a nationwide basis.

In addition, because our CVProfilor® DO-2020 System is being marketed on a
per-patient-tested basis, we have a delay in the cost recovery of our working
assets. Although our per-patient-tested marketing approach reduces the risk
and thereby increases the potential rate of acceptance for physician customers
willing to use the CVProfilor® DO-2020 System as compared to a capital
acquisition approach, it also delays our cash flow recovery of product costs.
Physician payments for use of the CVProfilor® DO-2020 System follow actual
utilization by some 60-90 days; utilization in one month is invoiced in the
following month and payment is generally received within 30 to 60 days of
invoicing. This delay in payment, therefore, requires six to twelve months to
fully recover product costs. These cash flow delays mean that we will generate
little, if any, cash during the initial placement of the product and will
require cash from other sources to support our operations during this period.

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For the three months ended September 30, 2003, we recognized Revenue for
the CVProfilor® DO-2020 System per-patient-tested rental program of $89,896.
The per test fee is recognized as Revenue when we determine that collectibility
is probable, which currently is upon cash receipt.

For the three months ended September 30, 2003, Service/Contract Income was
$85,257. Of this amount, $17,417 pertains to a service warranty contract with
a customer who purchased certain CR-2000 Research Systems from us. The
balance, $67,840, represents contract income pertaining to our agreement with a
pharmaceutical company to attend certain hypertension and cardiology meetings
in both the U.S. and internationally. Under this agreement, we provide our
CardioVascular Profiling Systems and certain employees who test visitors to the
pharmaceutical companys exhibition booth.

Total expenses for the three months ended September 30, 2003 were
$615,474, compared to $997,193 for the three months ended September 30, 2002.
The following is a summary of the major categories included in selling, general
and administrative expenses:

Three Months EndedSeptember 302003
    
    
    2002Wages, related expenses and benefits
    
    $
    136,746
    
    
    $
    233,754Patents and related expenses
    
    
    8,291
    
    
    
    22,115Outside consultant
    
    
    21,746
    
    
    
    178,613Rent (building/equipment) and utilities
    
    
    24,554
    
    
    
    25,645Insurance-general and directors/officers liability
    
    
    16,654
    
    
    
    23,455Selling, marketing and promotion, including applicable wages
    
    
    193,486
    
    
    
    305,708Legal and audit/accounting fees
    
    
    106,246
    
    
    
    68,977Royalties
    
    
    4,909
    
    
    
    3,049Depreciation and amortization
    
    
    31,538
    
    
    
    46,644Convertible debt private placement expenses
    
    
    
    
    
    
    11,053Other-general and administrative
    
    
    71,304
    
    
    
    78,180Total selling, general and administrative expenses
    
    $
    615,474
    
    
    $
    997,193


Wages, related expenses and benefits decreased from $233,754 to $136,746
for the three months ended September 30, 2002 and September 30, 2003,
respectively. Our number of employees decreased from sixteen as of September
30, 2002 to thirteen as of September 30, 2003. In late December 2002, we
implemented a plan to conserve cash through reductions in selling, general and
administrative expenses, which included the reduction in the number of our
employees, transitioning some employees to part-time employment status and the
reduction in salaries of executive management. The reduction in salaries of
executive management amounted to approximately $112,000 for the period late
December 2002 through late June 2003. Executive management salaries were
restored to their original levels in late June 2003.

Outside consultants expense decreased from $178,613 for the three months
ended September 30, 2002 to $21,746 for the three months ended September 30,
2003. Included in the $178,613 expense amount for the three months ended
September 30, 2002 is a non-cash expense charge of $150,000 that relates to a
Consulting Agreement for investor communications and public relations
consulting services with HRI Consultants. In consideration for the consulting
services, we issued 300,000 shares of common stock and warrants to purchase
100,000 shares of common stock at $1.50 per share. The fair value of the
issued shares and warrants was based on the agreed upon contract price of
$400,000. The Consulting Agreement involved certain services to be performed,
including the following: introduce us to various

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interested parties in the
financial community; assist and consult us with respect to our relations with
brokers, dealers, analysts and other investment professionals; and financial
public relations generally. The fair value of this agreement was expensed as
services were provided.

Selling, marketing and promotion expense decreased from $305,708 for the
three months ended September 30, 2002 to $193,486 for the three months ended
September 30, 2003. This category includes wages and commissions paid by us
relating to our sales and marketing efforts, as well as travel and convention
expenses. Our planned conversion from capital sales of our HDI/PulseWave
CR-2000 Research System in fiscal year 2001 to our per-patient-tested rental
revenue model associated with our FDA cleared CVProfilor® DO-2020 System in
fiscal year 2002 had no material effect on our total expenses in this category,
as our sales force has merely redirected its efforts to placements of our
rental units in physicians offices. The decrease in our number of employees
accounted for most of this decrease in expenses.

Legal and audit/accounting fees increased from $68,977 to $106,246 for the
three months ended September 30, 2002 and 2003, respectively. This increase
was due primarily to additional expenses incurred in connection with the filing
of registration statements and other reports and communications with the U.S.
Securities and Exchange Commission.

Interest income was $6,069 and $6,629 for the three months ended September
30, 2003 and 2002, respectively.

Interest expense was $50,185 and $89,519 for the three months ended
September 30, 2003 and 2002, respectively. A further breakdown of the
components of interest expense is as follows:

Three Months EndedSeptember 302003
    
    
    2002Convertible Notes Payable:8% interest on outstanding principal balances
    
    $
    1,205
    
    
    $
    26,721Fair value basis allocation to the five-year warrants to purchase
250,000 shares of Common Stock ($315,789), being amortized
on a straight-line basis over the three (3) year term of the debt
agreement and as the debt is converted
    
    
    48,531
    
    
    
    62,798Other  miscellaneous
    
    
    449
    
    
    
    Total Interest Expense
    
    $
    50,185
    
    
    $
    89,519


Net loss was ($457,185) for the three months ended September 30, 2003,
compared to a net loss of ($976,751) for the three months ended September 30,
2002. For the three months ended September 30, 2003, basic and diluted net
loss per share was ($.03), based on weighted average shares outstanding of
14,876,805. For the three months ended September 30, 2002, basic and diluted
net loss per share was ($.14), based on weighted average shares outstanding of
6,768,162.

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Liquidity and Capital Resources

Cash and cash equivalents had a net increase of $1,668,074 and a net
decrease of ($585,188) for the three months ended September 30, 2003 and
September 30, 2002, respectively. The significant elements of these changes
were as follows:

Three Months Ended September 30Net cash used in operating activities:
    
    2003
    
    
    2002 net loss, as adjusted for non-cash items
    
    
    
    
    
    $
    (343,394
    )
    
    $
    (699,520
    ) increase (decrease) in accounts payable:
    
    
    (A
    )
    
    
    170,202
    
    
    
    (21,621
    )- (A) This increase mainly
relates to legal and audit fees
regarding the following
events/transactions that occurred
in August 2003 and September
2003: completion of private
placement offering of securities;
preparation and filing of Form
10-KSB annual report for fiscal
year ended June 30, 2003;
preparation of informational
statement for annual meeting of
shareholders; and preparation and
filing of amended Form 10-KSB
annual report for fiscal year
ended June 30, 2002. (decrease) in deferred revenue:
    
    
    (B
    )
    
    
    (85,256
    )
    
    
    (17,416
    )- (B) Approximately 80% of this
decrease pertains to deferred
revenue recognized relating to
our services contract agreement
with a pharmaceutical company.Net cash provided by financing activities: issuance of Preferred and Common Stock:
    
    
    (C
    )
    
    
    1,873,483
    
    
    
    - (C) On August 28, 2003, we
completed the private placement
offering (the Unit Placement)
of 585,980 units (the Units) to
a group of investors led by Mark
N. Schwartz, who is our Chief
Executive Officer. Gross
proceeds from this offering were
approximately $2,300,000 and net
proceeds were $1,873,483. The
585,980 Units are comprised of
585,980 shares of Series A
Convertible Preferred Stock,
9,318,866 shares of common stock,
and a series of six (6) purchase
warrants.


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We have incurred operating losses and have not generated positive cash
flow from operations. As of September 30, 2003, we had an accumulated deficit
of $(21,867,585).

As of September 30, 2003, we have cash and cash equivalents of $1,758,409,
and anticipate that these funds, in conjunction with revenue anticipated to be
earned from placements of our CVProfilor® DO-2020 Systems, anticipated sales of
our CR-2000 Research Systems, and anticipated operating cost reductions,
will allow us to fund operations for at least the next fifteen months
following September 30, 2003.

Our current marketing strategy focuses on marketing the CVProfilor®
DO-2020 System to physicians who treat patients with diabetes and hypertension.
We believe these physicians have the greatest interest in, and use for, our
product. Therefore, the most critical factor in our ability to increase rental
revenue rests in our ability to expand our marketing and distribution network
to increase placements and utilization of our CVProfilor® DO-2020 System. We
believe there are three ways we could expand our marketing and distribution
network: 1) the development of an internal sales force; 2) a strategic
partnership with a firm that possesses a distribution network calling on these
same physicians; or 3) a combination of the internal sales force and external
distribution network methods. We believe this dual method of expansion offers
us the greatest opportunity for success. We anticipate adding five to ten
additional sales personnel at the same time that we pursue discussions with
firms that have an interest in representing our CVProfilor® DO-2020 System
nationwide. In the short term, we have been focused on and will continue to
focus on international sales of our CR-2000 Research System and CVProfilor®
MD-3000 System as a means of generating cash to support operational expenses.

In late December 2002, we implemented a plan to conserve cash through
reductions in selling, general and administrative expenses to improve working
capital management. This expense reduction plan included the reduction in the
number of our employees, transitioning some employees to part-time employment
status and reducing salaries of executive management. The reduction in
salaries of executive management amounted to approximately $112,000 for the
period late December 2002 through late June 2003. Executive management
salaries were restored to their original levels in late June 2003. While these
measures reduced the rate at which we used our available cash, they have
compromised, and will continue to compromise, our ability to pursue and
generate placements of our CVProfilor® DO-2020 Systems and sales of our CR-2000
Research Systems. Until we increase our sales and marketing staff and other
programs, we do not expect to generate significant levels of revenue.

Further, the existence, timing and extent of reimbursement of physicians
for the use of our CVProfilor® DO-2020 affects the availability of our working
capital. Reimbursement will always vary considerably by the patients medical
necessity, by physician, by provider, by geography and by provider coverage
plans, making the process of obtaining reimbursement for the CVProfilor®
DO-2020 by current physician customers an important component of our products
success. To the extent that reimbursement is unavailable or inadequate,
physicians will be less likely to use the CVProfilor® DO-2020. Therefore, we
continue to devote considerable effort to activities such as payer advocacy and
coding clarification directed at long-term reimbursement in our target markets.
We provide assistance to physicians with the ongoing process of insurance
billing procedures in an attempt to facilitate reimbursement coverage and
payment on a nationwide basis.

In addition, because our CVProfilor® DO-2020 is being marketed on a
per-patient-tested basis, we have a delay in the cost recovery of our working
assets. Although our per-patient-tested marketing approach reduces the risk
and thereby increases the potential rate of acceptance for physician customers
willing to use the CVProfilor® DO-2020 as compared to a capital acquisition
approach, it also delays our cash flow recovery of product costs. Physician
payments for use of the CVProfilor® DO-2020 follow

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actual utilization by some 60-90 days; utilization in one month is invoiced in
the following month and payment is generally received within 30 to 60 days of
invoicing. This delay in payment, therefore, requires six to twelve months to
fully recover product costs. These cash flow delays mean that we will generate
little, if any, cash during the initial placement of the product and will
require cash from other sources to support our operations during this period.

No assurance can be given that additional working capital will be obtained
in a timely manner or on terms and conditions acceptable to us or our
shareholders. Our financing needs are based upon management estimates as to
future revenue and expense. Our business plan and our financing needs are also
subject to change based upon, among other factors, market conditions, and our
ability to materially increase the revenue generated by our CVProfilor® DO-2020
System and other cash flow from operations. Our efforts to raise additional
funds may be hampered by the fact that our securities are quoted on the OTC
Bulletin Board, are illiquid and are subject to the rules relating to penny
stocks.

We have historically obtained working capital from the issuance of our
securities. In July 1998, we completed our initial public offering of
2,587,500 units, each unit consisting of one share of our common stock and one
Redeemable Class A Warrant (the Class A Warrant) which resulted in total net
proceeds to us of $9,188,414. Beginning on January 23, 2001 and ending on
March 26, 2001, we offered our Redeemable Class B Warrants (the Class B
Warrants) for no additional consideration to those holders of our Class A
Warrants who properly exercised a Class A Warrant in the offering period. We
raised $1,964,371 (net of offering expenses of $73,062) in connection with this
offering of the Class B Warrants. On March 27, 2002, we completed a private
placement to five investors consisting of three-year 8% Convertible Notes in
the aggregate principal amount of $2,000,000. Beginning on June 6, 2002 and
ending on November 14, 2002, we offered Class B Warrants for no additional
consideration to those holders of the Class A Warrants who properly exercised a
Class A Warrant in the offering period. Total gross proceeds from this
offering were $57,400. On August 28, 2003, we completed the private placement
offering (the Unit Placement) of 585,980 units to a group of investors led by
Mark N. Schwartz. Net proceeds from this offering were approximately $1.87
million.

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Item 4. Controls and Procedures.

(a) Evaluation of Disclosure Controls and Procedures.

The Companys Chief Executive Officer, Mark N. Schwartz, and Chief
Financial Officer, James S. Murphy, have evaluated the Companys disclosure
controls and procedures as of the end of the period covered by this report.
Based upon that review, they have concluded that these controls and procedures
are effective in ensuring that material information related to the Company is
made known to them by others within the Company.

(b) Changes in Internal Controls over Financial Reporting.

There have been no significant changes in internal control financial
reporting that occurred during the fiscal period covered by this report that
have materially affected, or are reasonably likely to materially affect, the
registrants internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 2. Changes in Securities

See Item 5. Market for Common Equity and Related Stockholder Matters,
Recent Sales of Unregistered Securities of our Annual Report on Form 10-KSB
for the year ended June 30, 2003 for a description of issuances of unregistered
securities during the quarter ended September 30, 2003 in connection with the
Unit Placement and the closing of the Conversion and Voting Agreement.

Item 6. Exhibits and Reports on Form 8-K



|(a) |  | The following Exhibits are furnished pursuant to Item 601 of Regulation
S-B:
|--- |  | ----------------------------------------------------------------------------

31.1
    
    
    Certification of Chief Executive Officer pursuant to
13a-14 and 15d-14 of the Exchange Act31.2
    
    
    Certification of Chief Financial Officer pursuant to
13a-14 and 15d-14 of the Exchange Act32
    
    
    Certificate pursuant to 18 U.S.C. § 1350




|(b) |  | Reports on Form 8-K.
|--- |  | --------------------



| |  | The Company filed the following Current Reports on Form 8-K during the
quarter covered by this Form 10-QSB:
| |  | -----------------------------------------------------------------------------------------------------------



| |  |  | Current Report on Form 8-K dated August 28,
2003 reporting under Item 1 an offering of units to
accredited investors, with each unit consisting of shares
of the Companys common stock, Series A Convertible
Preferred Stock, and a series of six (6) purchase warrants.
The offering resulted in a change of control, whereby Mark
N. Schwartz obtained voting control of approximately 56% of
the Companys voting securities.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Current Report on Form 8-K dated September
29, 2003 reporting under Item 12 the disclosure of material
non-public information regarding the Companys results of
operations for the year ended June 30, 2003.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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SIGNATURES

In accordance with the requirements of the Exchange Act, the Registrant
has caused this Form 10-QSB to be signed on its behalf by the undersigned,
thereunto duly authorized.

HYPERTENSION DIAGNOSTICS, INC.By /s/ James S. MurphyJames S. MurphySenior Vice President, Finance and
Administration and Chief Financial Officer
(principal financial officer)


Date: November 14, 2003

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