UNITED  STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549


                                  FORM 10-KSB

(Mark One)
[X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                 For the fiscal year ended:  November 30, 1999

                                      OR

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
     EXCHANGE ACT OF 1934

                        Commission file number:  0-11868


                   CARDIODYNAMICS INTERNATIONAL CORPORATION
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                                <C>
                      California                                               95-3533362
(State or other jurisdiction of incorporation or organization)     (I.R.S. Employer Identification No.)
</TABLE>

6175 Nancy Ridge Drive, Suite 300, San Diego, California          92121
      (Address of principal executive offices)                 (Zip Code)

      Registrant's telephone number, including area code: (858) 535-0202


          Securities registered pursuant to Section 12(b) of the Act:
                                     None

          Securities registered pursuant to Section 12(g) of the Act:
                          Common Stock, no par value
                               (Title of Class)


Indicate by check mark whether the registrant (1) 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
                                       ---    ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-B is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]

The issuer's revenues for the year ending November 30, 1999, were $7,280,908.

The aggregate market value of the common stock held by nonaffiliates of the
registrant at February 22, 2000, was approximately $130,344,793 based on the
closing price for the common stock in the Nasdaq SmallCap Market.  At February
22, 2000, 41,675,999 shares of registrant's common stock were outstanding.

Transitional Small Business Disclosure Format (check one): Yes       No  X.
                                                               ---      ---

This Form 10-KSB contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934.  These statements include statements regarding our plans,
goals, strategies, intent, beliefs or current expectations.  These statements
are expressed in good faith and we believe had a reasonable basis when
expressed, but there can be no assurance that these expectations will be
achieved or accomplished.  Sentences in this document containing verbs such as
"plan," "intend," "anticipate," "target," "estimate," "expect," etc., and/or
future-tense or conditional constructions ("will," "may," "could," "should,"
etc.) constitute forward-looking statements that involve risks and
uncertainties.  Items contemplating, or making assumptions about, actual or
potential future sales, market size, collaborations, trends or operating results
also constitute such forward-looking statements.  These statements are only
predictions and actual results could differ materially.  Certain factors that
might cause such a difference are discussed throughout this Form 10-KSB
including the section entitled "Risk Factors" on pages 16 to 25 of this
document.  Any forward-looking statement speaks only as of the date we made the
statement, and we do not undertake to update the disclosures contained in this
document or reflect events or circumstances that occur subsequently or the
occurrence of unanticipated events.



                                    PART I

ITEM 1.  DESCRIPTION OF BUSINESS

CardioDynamics International Corporation is a medical technology and information
solutions company that develops, manufactures, and markets noninvasive heart-
monitoring devices using our proprietary impedance cardiography (ICG)
technology, DISQ(TM) technology, and ZMarc(TM) algorithm.

Our primary products, the BioZ(R) System, the BioZ(TM) Portable, and the
BioZ.com(TM) have FDA approval, CE Mark for international distribution, and
Health Care Finance Association (HCFA) mandated Medicare reimbursement.  These
innovative devices provide physicians with continuous data on a wide range of
parameters relating to blood flow and heart function which previously were not
available in the physicians' offices or in many hospital departments.  Unlike
other cardiac function monitoring technologies, this vital patient information
is measured noninvasively, providing physicians and patients with immediate,
safe and cost effective access to blood flow and heart function information.
Previously, this information was only available through a potentially dangerous,
costly and invasive procedure known as right heart catheterization (RHC) or
pulmonary artery catheterization (PAC).  We are building awareness of the
availability of this new, accurate, innovative technology and its applications
to improve patient outcomes and reduce costs.  Physicians are currently
utilizing the BioZ Systems to help them assess, diagnose, and aggressively treat
patients with high blood pressure, congestive heart failure, diabetes, high-risk
pregnancies, kidney dysfunction, and pacemakers.

We currently offer stand-alone ICG monitoring devices and proprietary sensors.
In the longer term, we see our business expanding to include integration of our
proprietary technology into leading patient monitors, cardiology, and anesthesia
delivery systems, increasing the mix of recurring sensor revenue, expanding
outpatient distribution, and eventually, generating income from home healthcare
products and a hemodynamic medical data warehouse.  Our direct sales force
specializes in introducing medical technologies to the outpatient or physician
marketplace. This core competency is of value to large medical device companies
such as General Electric Marquette Medical Systems and Agilent Technologies, who
primarily focus on hospital distribution and are in need of a distribution
channel for the physician marketplace.  Therefore, our outpatient distribution
could include, not only our products, but strategic partners' applicable
products as well as new technologies.

                                       1

We also plan to empower medical professionals and their patients with
eHealth/Internet information exchange programs.  Our goal is to apply the power
of Internet to increase communication and the exchange of information between
doctors and patients with the potential of improving patient outcomes and
substantially decreasing costs.  To fully capitalize on this opportunity, we
intend to partner with leading eHealth Internet companies.  We anticipate that
these eHealth/Internet information exchange programs will utilize the speed and
convenience of the Internet and new wireless technology to provide medical
professionals and patients access to vital information that will help them
monitor, adjust treatment, and prevent complications.  This has the potential to
drastically reduce hospitalization admittance and length of stay, the use of
costly drug therapy, and the need for many in-person and follow-up appointments.

We were incorporated as a California Corporation in June 1980 as Bomed Medical
Manufacturing, Ltd. (Bomed) and changed our name to CardioDynamics International
Corporation in October 1993.  Our principal executive offices are located at
6175 Nancy Ridge Drive, Suite 300, San Diego, California 92121, and our
telephone numbers are (888) 522-2342 and (858) 535-0202.  Our common stock
trades on The Nasdaq Stock MarketSM, under the symbol CDIC.

Industry Overview and Company History

Researchers and medical professionals have long recognized the need for
noninvasive alternatives to hemodynamic monitoring.  It was not until the 1940's
that research commenced on a technology called impedance cardiography or
thoracic electrical bioimpedance (TEB).  In the 1960's the National Aeronautics
and Space Administration (NASA) saw the potential and funded research using the
technology to noninvasively monitor astronauts' cardiac functions in space
flight.

In 1980, the founders of Bomed saw the potential of this technology for
healthcare.  Bomed developed and manufactured a noninvasive, analog-based device
that was sold throughout the 1980s and early 1990s. These monitors had only
modest commercial success due to microprocessor limitations, inaccurate
physiological assumptions, and reimbursement disincentives.  Bomed entered
Chapter 11 bankruptcy in March 1992, and emerged in October 1993, under the name
of CardioDynamics International Corporation.

Recognizing the potential of ICG technology and the advancement of
microprocessors, a group of investors, which included Allen E. Paulson, James C.
Gilstrap, and Nicholas V. Diaco, M.D., purchased control of CardioDynamics in
February 1995.  A new management team was recruited to further develop the
technology and revitalize the business.

Over the next several years, a number of significant advances were made in key
areas including:

 .  Continued development of the core technologies related to our products;
 .  Establishment of a prominent medical advisory board;
 .  Completion of  significant clinical trials;
 .  Infusion of additional capital;
 .  Market release of 3 FDA cleared products;
 .  Implementation of quality assurance and regulatory programs resulting in ISO
   9001 and EN 46001 certification as well as CE Mark approval;
 .  HCFA reimbursement mandated for nationwide Medicare coverage; and
 .  Strategic alliance with General Electric Marquette Medical Systems including
   U.S. and international distribution and joint product development.

                                       2

Industry Overview and Company History - (Continued)

Our Proprietary Noninvasive ICG Technology

As electrocardiograms (ECG) noninvasively measures the heart's electrical
characteristics, our ICG technology makes it possible to measure the heart's
mechanical or blood flow characteristics.  For the first time, physicians now
have an easy, cost-effective way to access information about the heart's ability
to deliver blood to the body noninvasively. The BioZ System provides physicians
important hemodynamic information such as:

 .  The amount of blood pumped by the heart each minute - Cardiac Output;
 .  The force that the heart has to pump against to deliver blood to the body -
   Systemic Vascular Resistance;
 .  The speed and strength of the heart's contraction - Contractility; and
 .  The amount of fluid in the chest - Thoracic Fluid Content.

Impedance cardiography is based on Ohm's Law and the fact that blood is the most
electrically conductive substance in the body.  Blood volume and velocity change
with each heart beat and result in a change in the electrical conductivity, or
impedance, of the chest.

In order to measure this conductivity change, the BioZ(TM) Systems use four dual
sensors (two on the neck and two on the chest) to deliver a high frequency - 70
kHz, low magnitude - 4 mA, alternating current through the chest.  Use of a high
frequency current eliminates the possibility of interference with bioelectrical
activity of the heart and brain.  Additionally, at a high frequency, there is no
sensation to the patient.  With the delivered current set at a constant
magnitude, variations in blood volume and velocity in the descending thoracic
aorta cause a proportional voltage change.

The measured voltage change is processed by the BioZ(TM) Systems, using
sophisticated proprietary Digital Signal Processing (DSP) technology.  An
impedance waveform is captured and electronically processed to produce a rate of
impedance change.  The changes in impedance are then applied to the Z MARCTM
algorithm to continuously measure and/or calculate the hemodynamic status.
Following are the most widely used parameters:

 .  Stroke volume
 .  Cardiac output
 .  Systemic vascular resistance
 .  Thoracic fluid content
 .  Velocity index
 .  Acceleration index
 .  Pre-ejection period
 .  Left ventricular ejection time
 .  Heart rate

In the simplest of terms, ICG measures the change in conductivity, or the
inverse, which is impedance, over a change in time, and calculates the volume of
blood pumped with each heartbeat - stroke volume.  Similarly, pulmonary artery
catheterization utilizes a thermodilution method to measure the change in blood
temperature over a change in time to calculate stroke volume.

                                       3

Industry Overview and Company History - (Continued)

Some hemodynamic measurements using ICG are subject to inaccuracies when the
theoretical calculations do not fit a particular patient's clinical
circumstances.  The conditions that may limit the accuracy of the data include:

 .   Severe septic shock;
 .   Significant pulmonary hypertension;
 .   Severe aortic valve regurgitation;
 .   Severe hypertension;
 .   Severe irregular ventricular heartbeats;
 .   Tachycardia rates greater than 180 beats per minute;
 .   Patients shorter than 47 inches;
 .   Patients who weigh less than 66 pounds or more than 342 pounds; and
 .   Extreme patient movement.

The Invasive Alternative - Pulmonary Artery Catheterization

Although hemodynamic parameters are critical in assessing cardiac function,
historically, they have been difficult to obtain.  The primary method currently
used to measure hemodynamic parameters is pulmonary artery catheterization.

PAC is an invasive procedure involving an incision into a patient's neck or
groin region and insertion of catheter (plastic tube) through the vascular
system and through the heart directly into the pulmonary artery.  This procedure
can cause serious complications including pneumothorax, pulmonary artery
rupture, arrhythmia, infection, and death.  Complication rates are as high 24%
(Moore et al., Surgical Clinics of North America, August 1991).  Additionally, a
study which was reported in the September 1996 issue of the Journal of the
American Medical Association (JAMA) by Connors et al., determined that the use
of pulmonary artery catheterization to monitor cardiac output significantly
increased the risk of death in critically ill patients.

This study, which examined data from 5,735 intensive-care patients treated at
five U.S. medical centers, reported that patients who underwent pulmonary artery
catheterization had a 21% higher risk of death within 30 days of discharge
compared to those who did not undergo the procedure.  The importance of this
finding is underscored by the fact that patients in both groups were matched for
disease severity and prognosis.

Another significant drawback in the use of pulmonary artery catheterization is
cost.  The pulmonary artery catheterization procedure requires a hospital to
allocate valuable resources in terms of an intensive care unit bed, cardiac
catheterization laboratory, or operating room, highly skilled medical personnel
and expensive equipment to obtain non-continuous hemodynamic data.  According to
the above referenced JAMA article, the mean cost of the hospital stay for
critically ill patients having a pulmonary artery catheterization was $49,300,
which is $13,600 greater than the $35,700 cost for similar critically ill
patients who did not undergo pulmonary artery catheterization.  Currently, there
are an estimated one and one-half million pulmonary artery catheterizations
performed annually in the U.S.  The associated annual cost to the U.S.
healthcare system is estimated at $3 billion for the cost of catheters and their
insertion and an additional $18 billion per year for the cost of complications
arising from the procedure.

                                       4

Industry Overview and Company History - (Continued)

Many patients who might otherwise benefit from hemodynamic monitoring are
excluded presently because the risks and costs associated with pulmonary artery
catheterization often outweigh the potential benefits.  ICG technology
eliminates pulmonary artery catheterization-caused complications and death,
lower costs, reduces procedure time, expands clinical applications, and offers
immediate availability of vital, real-time hemodynamic data continuously.

Managed Care Environment

In the 1970's, the healthcare environment was not as focused on cost containment
as it is today.  Additionally, market acceptance of noninvasive cardiac function
methods was limited because of inaccuracies due to the technological limitations
of the then-available products.  In the early 1980s, national attention focused
on escalating healthcare costs.  Congress introduced a new Medicare payment
system called Diagnosis-Related Groups (DRG's) which limited reimbursement
amounts for patient care.  Additionally, third-party payers such as insurance
companies, employers and Health Maintenance Organizations (HMO's) identified
numerous factors driving healthcare costs, one of which was the growing number
of invasive procedures.

To induce providers to seek more cost-effective treatments, third-party payers
began to institute their own capitated payment systems, thereby shifting the
financial risk of offering patient care from the payer to the provider.  In this
environment, payment incentives are shifting away from the more expensive
invasive technologies.  Increasingly, providers are seeking technologies and
products that produce effective outcomes at lower cost.

In November 1998, HCFA mandated Medicare coverage for BioZ procedures on a
nationwide basis.  This approval provides for national coverage to over 75
million Americans.  We are currently working with HCFA to establish uniform
national pricing for the procedure.


Our Products, Services, and Solutions

BioZ(TM) System.  The BioZ(TM) System is a noninvasive cardiac ICG monitoring
device, with a suggested retail price of $22,900.  It consists of a Pentium-
based CPU, 15" high-resolution medical grade color monitor, and keyboard.
Included in the CPU is our proprietary DSP circuit board and software.  The
BioZ(TM) System is available in ergonomically designed shelf cart or pole cart
configurations.  With the application of four dual sensors to the patient's neck
and chest, the physician is able to immediately assess twelve hemodynamic
parameters.

Portable BioZ(TM) System.  The Portable BioZ(TM) System is a noninvasive ICG
monitoring device, with a suggested retail price of $24,540.  This more compact
version has a 10.4" active matrix color display and built-in keyboard.  Our
proprietary DSP circuit board and patented software are also an integral part of
this system.

                                       5

Our Products, Services, and Solutions - (Continued)

BioZ.com(TM) System.  This noninvasive cardiac function monitoring device, with
a suggested retail ranging from  $25,400 to $30,900 depending on accessories, is
even more compact than the BioZ(TM) Portable and features a transport battery,
integrated blood pressure module and the ability to directly interface with most
hospital patient monitoring systems.  The BioZ.com(TM) utilizes our proprietary
DISQTM technology and Z MARCTM algorithm, which provide improved measurement of
impedance waveforms and automatic electronic calibration.

BioZ(TM) Transducers and Sensors.  We also market disposable sensors designed
specifically for use with the BioZ(TM) Systems.  With each monitoring session,
four dual sensors are utilized.  These sensors are placed on the patient's neck
and chest and are generally replaced after each use or every 24 hours.  Sales of
this disposable component of the product mix should continue to increase as more
of our machines are sold.  The suggested retail price of the four dual sensors
is $9.95 per set.  An optional transducer sensor set with pre-attached lead
wires is priced at $29.95 per set.  The transducer sensors are preferred in
operating rooms or for patients with infectious diseases.

BioZ.buy.  As part of our eHealth information solutions service, we offer
BioZ.buy, our electronic commerce solution that provides the ability to
electronically acquire our products, services, and information.  This is the
first phase of our eHealth/Internet medical product, service and solution
development strategy.

The Features and Benefits of the BioZ(TM) Systems, as Compared to PAC

<TABLE>
<CAPTION>
Feature                                                             Benefit
----------------------------------------------------------------------------------------------------------------
<S>                            <C>
Noninvasive                    Painless
                               No complications or death from procedure
                               Reduced costs and liabilities
                               May be used on wider range of patients
----------------------------------------------------------------------------------------------------------------
Portable                       May be easily transported and used in many settings, including multiple hospital
                               departments, physician offices and clinics
----------------------------------------------------------------------------------------------------------------
Quick Setup                    Simple procedure performed by nurses or technicians
                               Rapid assessment with potential for improved patient outcomes
                               Immediate clinical decision capabilities
----------------------------------------------------------------------------------------------------------------
Continuous Data                Reports continuous changes
                               Potential for improved patient outcomes
----------------------------------------------------------------------------------------------------------------
Disposable Sensors             Reduced cost per evaluation
----------------------------------------------------------------------------------------------------------------
</TABLE>

                                       6

Our Products, Services, and Solutions - (Continued)

ICG Parameters Provided by BioZ(TM) Systems and Corresponding PAC Parameters

<TABLE>
<CAPTION>
BioZ(TM) System                               PAC                                  Comments
Parameters                                 Parameters
-------------------------------------------------------------------------------------------------------------------
<S>                                        <C>                 <C>
SV (stroke volume, ml) and SI                SV, SI            BioZ measures volume of blood flow; PAC measures
(stroke volume indexed, ml/m2)                                 pressure of blood flow.  SI = SV divided by body
                                                               surface area (BSA)
-------------------------------------------------------------------------------------------------------------------
CO (cardiac output, l/min) and CI            CO, CI            Calculated parameters in both techniques:
(cardiac output indexed, l/min/m2)                             CO = SV x HR, CI = CO divided by BSA

-------------------------------------------------------------------------------------------------------------------
SVR (systemic vascular resistance,            SVR              Calculated from Mean Arterial Pressure (mmHg) and
mmHg x min x liters-1)                                         Cardiac Output
-------------------------------------------------------------------------------------------------------------------
EDV (end diastolic volume, ml)            PAOP or "wedge       Wedge pressure provides an estimation of left
                                          pressure"            ventricular pressure and end diastolic volume via
                                                               measurement of the "back pressure" of blood flow in
                                                               the pulmonary artery. It is inaccurate in patients
                                                               with mitral valve disease. The BioZ EDV (which is an
                                                               estimated value) provides a left ventricular end
                                                               diastolic volume instead of pressure
-------------------------------------------------------------------------------------------------------------------
VI (velocity index, liters/seconds)       No similar           Index of velocity of blood in the aorta; provides
                                          measurement          insight into LV contractility
-------------------------------------------------------------------------------------------------------------------
ACI (acceleration index, liters           No similar           Index of acceleration of blood in the aorta;
per seconds2)                             measurement          provides insight into LV contractility
-------------------------------------------------------------------------------------------------------------------
LCW (left cardiac work,                   No similar           Useful clinical data regarding LV contractility and
kg x m x m-2)                             measurement          volume status
-------------------------------------------------------------------------------------------------------------------
PEP (pre-ejection period, msec)           No similar           Time from onset of ventricular depolarization to
                                          measurement          opening of aortic valve.  Used in calculation of STR
-------------------------------------------------------------------------------------------------------------------
LVET (left ventricular ejection           No similar           Time from opening to closing of the aortic valve.
time, msec)                               measurement          Used in calculation of STR
-------------------------------------------------------------------------------------------------------------------
STR (systolic time ratio)                 No similar           STR = PEP / LVET and is an index of LV performance.
                                          measurement          An increase in STR indicates LV dysfunction; whereas,
                                                               a decrease in STR indicates a stronger, more
                                                               athletic heart
-------------------------------------------------------------------------------------------------------------------
TFC (thoracic fluid content,              No similar           Useful clinical data regarding patients' thoracic
ohms-1)                                   measurement          fluid status (intravascular, interstitial,
                                                               intra-alveolar) and is important in distinguishing
                                                               between cardiac and pulmonary problems.
-------------------------------------------------------------------------------------------------------------------
No similar measurement                    PVR (pulmonary       Determines pressure within the pulmonary vascular
                                          Vascular             circulation
                                          Resistance)
-------------------------------------------------------------------------------------------------------------------
HR (heart rate, beats/min)                No similar           BioZ measures HR via modified ECG leads
                                          measurement
-------------------------------------------------------------------------------------------------------------------
</TABLE>

Warranty and Service

Our systems are sold with a limited thirteen-month parts and labor warranty
commencing at the date of shipment.  When warranty repairs are necessary, we
generally perform them at our headquarters or, in some cases, by our
distributors in authorized service centers.  We also provide field clinical
application specialists as necessary, as well as 24-hour on-call technical
support.  In addition to the standard warranty we offer extended service
agreements, called Z CARESM for hardware and software maintenance beyond the
warranty period.  Additionally, we also service equipment on a time and
materials basis.

                                       7

Marketing

Until recently, comprehensive hemodynamic information has been available only in
acute care settings, such as an intensive care unit (ICU) or operating room.
The BioZ(TM) Systems make obtaining and assessing this type of information
simple, rapid, cost-effective, safe, continuous and painless.  For these
reasons, the utilization of noninvasive ICG information is expanding in both
hospital and outpatient environments.

The primary targets in the outpatient market include: cardiologists/general
internists caring for congestive heart failure (CHF) and high blood pressure
patients, dialysis centers and surgicenters.  Among the patients in the United
States who can benefit from our technology are 60 million high blood pressure
patients, five million CHF patients, one million pacemaker patients, 50 million
emergency patients, and many patients requiring fluid management.  CHF-related
expenditures exceeded $40 billion in 1998, more than any other illness.  Our
strategy to the outpatient market has been designed to:

 .  Increase physicians' knowledge of ICG;

 .  Demonstrate the ability of the BioZ Systems to assist physicians in the
   objective identification of appropriate pharmacological treatment of CHF,
   high blood pressure, and fluid management patients;

 .  Show the ability of the BioZ Systems to assist physicians in the optimization
   of pacemakers;

 .  Educate physicians of the importance of hemodynamics in the treatment of
   patients who would normally not be monitored with a PAC, due to practice
   setting, costs, and complications;

 .  Demonstrate cost savings, through more efficient care, and revenue generation
   through HCFA-mandated Medicare reimbursement and private insurance
   reimbursement; and

 .  Increase penetration through sales force expansion to maintain our market
   leader position.

Within the hospital setting, departments serving high-risk surgical, intensive
care, acute dialysis, and emergency patients are our primary targets.  Our
marketing strategy has been designed to:

 .  Increase physicians' and hospital personnel's knowledge of ICG;

 .  Demonstrate the cost savings of providing ICG monitoring to patients;

 .  Remind physicians and hospital staff of the importance of hemodynamics in the
   treatment of patients who would normally not be monitored with a PAC, due to
   practice setting, costs, and complications;

 .  Present the BioZ(TM) Systems as the technology of choice; and

 .  Utilize GE - Marquette Medical Systems and international distribution
   capabilities to establish ourselves as the market leader.

The continued success of our products within the outpatient and hospital markets
will lay the foundation for the utilization of ICG-based products in the home
healthcare market. Although presently in development, this will allow patients
with chronic illnesses, such as congestive heart failure, to simply and
inexpensively monitor their hemodynamic status and transmit this information,
via telephone or Internet, on a regular basis to their physician.  We believe
this "telemedicine" application can effectively and efficiently alert the
physician to any changes in status, need to adjust medications, or patient
noncompliance with prescribed treatment.

                                       8

Marketing - (Continued)

Our marketing promotion strategy is based on key trade show participation, fax
and mail direct response programs, product and clinical education collateral
materials development.

In late 1998 we received authorization from TUV Rhineland of North America to
place the CE Mark on our BioZ.com(TM).  The CE Mark is recognized worldwide as
an essential European regulatory approval and enables us to expand our sales and
distribution of the BioZ.com(TM) throughout Europe.  We currently have
distribution agreements covering 24 European countries and over 50 countries
around the world.

We actively support research utilizing the BioZ(TM) Systems.  In addition to
providing further clinical validation for ICG, we plan to have each study
published in a peer-reviewed journal and/or presented at major medical
conferences.  Clinical publications and presentations at major medical
conferences provide us with the exposure necessary to establish credibility for
ICG and the BioZ(TM) Systems.

Sales and Distribution

The United States medical marketplace consists of two distinct segments: the
outpatient market, and the hospital market.  During fiscal 1997, we established
distribution agreements with seventeen regional specialty distributors as our
representatives in the hospital market. By the end of fiscal 1997, it was
apparent that we needed to broaden our sales channels.  We decided to add a
direct sales force targeted at both the hospital and outpatient markets in the
majority of the United States, and reduced the number of domestic distributors.

During 1998 and 1999, our direct sales force proved its ability to produce sales
in the outpatient market.  This was largely due to the fact that there are few,
if any, formal capital equipment budget processes in this market segment and
purchasing decisions can be made more quickly.  Consequently, we focused our
direct sales force primarily on the outpatient markets and sought an alliance
with a hospital-based industry leader that already had strong market presence to
penetrate the hospital market.  In October 1999, we announced a strategic
alliance with GE Marquette Monitoring Systems whereby their sales force would
represent our products in the domestic hospital market where they are well
established.

Currently, we have a direct sales force of 25, focused primarily on the
outpatient market.  Additionally, GE Marquette's 67 monitoring sales
representatives promote and sell our BioZ.com in the domestic hospital market.
Internationally, we utilize a variety of distributors, including GE Marquette
Medical Systems, to actively promote the BioZ.com in more than 50 countries
around the world.

Research and Development and Clinical Studies

Our research and development (R&D) team has extensive experience in the areas of
impedance cardiography, biological signal processing, hardware/software
development, and regulatory compliance.  The team is responsible for on-going
product engineering, new product development, and basic research into thoracic
electrical bioimpedance and additional noninvasive monitoring applications.

To supplement our engineering staff, we utilize Rivertek Medical Systems, Inc.
(Rivertek), located in Minneapolis, Minnesota.  Rivertek serves as an
engineering consulting firm for medical device manufacturers, including Guidant
Corporation and Medtronic, Inc., as well as emerging medical technology
companies. Dennis Hepp, our Chief Technology Officer, founded Rivertek in 1988.
Rivertek employs 28 medical hardware, software, and biomedical engineers.

                                       9


Research and Development and Clinical Studies - (Continued)

The R&D team participates in monitoring and analysis of Company-sponsored
clinical trials, for which we employ Clinical Application Specialists (CAS).
Each of these individuals has a strong clinical background and is responsible
for monitoring clinical studies and assisting in research and customer training.

Studies Utilizing Previous Generation Technology.  A considerable amount of
research has been published on ICG.  In fact, more than 80 research papers have
been published since 1993.  In general, these studies reported favorable results
when comparing cardiac output measurements with that of other techniques, such
as pulmonary artery catheterization.

Previous generation technology worked reasonably well, in a select group of
patients.  However, there were significant limitations of the technology.  These
became evident when monitoring patients with increasing heart rates, high heart
rates, abnormal heartbeats, high respiration rates, pacemakers, and hospitalized
ventilated patients.  These limitations related to both hardware and software
inadequacies.  As a result of intense focus and concerted effort we have
successfully addressed these limitations by improving the electronics and
processing as well as the algorithms.

Studies Utilizing the BioZ(TM) Systems.  We are committed to supporting well-
designed clinical research studies utilizing ICG technology.  Studies which are
of most importance to us are those which demonstrate:

 .   Validity;
 .   Reproducibility;
 .   Clinical utility; and
 .   Cost-effectiveness.

The results of several major studies addressing each of these areas have been
released with very positive results.

Medical Advisory Board

We have established a distinguished Medical Advisory Board consisting of 19
physicians, many of whom are affiliated with prestigious universities and well-
known medical institutions throughout the United States, such as Stanford
University School of Medicine, Cleveland Clinic, Scripps Clinic, University of
California, San Diego, and Baylor College of Medicine, Houston, Texas.  Members
of our Medical Advisory Board have expertise in cardiology, electrophysiology,
anesthesiology, hypertension, pulmonary and critical care, internal medicine,
heart failure, and emergency medicine.  The Medical Advisory Board provides
guidance regarding clinical trials, technological improvements and potential
uses for our products.

Members of the Medical Advisory Board receive reimbursement for their expenses
in attending company-sponsored meetings and, in certain cases, receive
consulting fees for time spent working on our behalf.  No fees were paid to the
MAB members in either of the fiscal years ended November 30, 1998 or 1999 for
their service on our Medical Advisory Board.

                                       10

Intellectual Property

Our success will, to some extent, depend on our ability to maintain patent
protection for our products and processes, to preserve our trade secrets and
proprietary technology and to operate without infringing upon the patents or
proprietary rights of others.  As of November 30, 1999, we have six United
States patents.

All of our existing patents were issued prior to the re-engineering of the
products to a DSP-based system.  As such, several of the patents are not
integral to the design of the BioZ(TM).  We also possess proprietary software,
which we have strategically elected not to disclose through patents.  In
addition, we may file new patent applications covering certain modifications to
our products and algorithms during 2000.

Manufacturing

We are licensed as a healthcare device manufacturer by the Food and Drug Branch
of the California Department of Health Services, which is essentially equivalent
to a State FDA, and operate under the United States FDA Good Manufacturing
Practice (GMP) regulation 21 CFR 820.

ISO 9000.  In concert with management's commitment to quality, we have
implemented quality procedures and documentation required for successful
International Organization for Standardization (ISO) 9001 certification. In June
1998, we received ISO 9001 and EN 46001 quality certification for developing and
marketing medical devices.

CE Mark.  In November 1998, we received authorization from TUV Rhineland of
North America to place the CE Mark on the BioZ.com(TM).  The CE Mark is
recognized worldwide as an essential European regulatory approval and enables us
to expand our sales and distribution of the BioZ.com(TM) throughout Europe.

Direct Competition

We are aware of three domestic and two international manufacturers of ICG
monitors.  Since all five companies are privately held, sales and financial
figures for these potential competitors are not available.  We believe that our
BioZ(TM) products provide the most advanced ICG monitoring, commercially
attractive designs, at prices that are competitive.  Thus far, sales and
marketing efforts by our competitors have not been visible to us.  No industry
ads, trade show participation, or significant direct sales efforts are known to
us.

Indirect Competition

Pulmonary Artery Catheterization - Also known as thermodilution, right heart
catheterization, and Swan-Ganz(TM) catheterization.  The PAC procedure was
introduced in the early 1970's and despite its limitations, costs, and risks, is
the most commonly used technology for monitoring a patient's hemodynamic status.
It is estimated that pulmonary artery catheterization procedures are used more
than one and one-half million times per year in the United States and more than
two million times per year worldwide.  The estimated cost to the U.S. healthcare
system is estimated at $3 billion for the cost of the catheters and their
insertion and $18 billion per year for the cost of complications arising from
the procedure.  Baxter Healthcare Corporation, Abbott Laboratories and B. Braun
Medical, Inc. produce the majority of right heart catheters used in the U.S. The
PAC procedure has significant limitations.  Some of the limitations of PAC
include:

                                       11


Indirect Competition - (Continued)

Limitations of the PAC Procedure

<TABLE>
<CAPTION>
Limitation                                            Explanation                      Reference (If Applicable)
------------------------------------------------------------------------------------------------------------------
<S>                                 <C>                                               <C>
Complications                       Rates of 10% to 24%, including infection,         Per Moore, op. cit.
                                    cardiac arrhythmia, air embolus, pulmonary
                                    infarction, pulmonary artery rupture
                                    pneumothorax, sepsis and death
------------------------------------------------------------------------------------------------------------------
Death                               Increased 30-day death rates in patients          Per Connors, op. cit.
                                    undergoing PAC as compared to those patients      American Society of
                                    not receiving PAC.  A publication of the          Anes-thesiologists Task
                                    American Society of Anesthesiologists indicated   Force, "Practice Guidelines
                                    the death rate associated with PACs in the U.S.   for PAC" Anesthesiology, V
                                    ranged from  0.02% to 1/5%                        78, No 2, Feb 1993, 380-394.
------------------------------------------------------------------------------------------------------------------
Costs                               Average increased hospitalization costs           Per Connors, op. cit.
                                    Of $13,600 per patient
------------------------------------------------------------------------------------------------------------------
Insertion requirements              Hospitalization in an intensive care setting,
                                    operating room or cardiac catheterization
                                    laboratory; sterile environment; physician,
                                    nurses and trained personnel required for
                                    insertion
------------------------------------------------------------------------------------------------------------------
Availability of data                Intermittent; requires multiple personnel
------------------------------------------------------------------------------------------------------------------
Variability of data                 +/-20% error/inconsistency                        Per Moore, op. cit.
------------------------------------------------------------------------------------------------------------------
Conditions that may limit           Obesity; anatomical, vascular and cardiac
Placement or accuracy               structure anomalies; tricuspid, pulmonary and
                                    mitral valve abnormalities

------------------------------------------------------------------------------------------------------------------
</TABLE>

Echocardiography.  Echocardiography (Echo) is a medical diagnostic tool
utilizing ultrasound frequency waves to detect anatomical abnormalities of the
heart and blood vessels.  Echo technology was developed during the 1970's, and
has advanced through the years with the addition of sophisticated electronics
and digitalization for acquisition of better images. A continuous wave
suprasternal Doppler echo measures cardiac output noninvasively by placing a
Doppler transducer on the chest, aiming it toward the ascending aorta, and
measuring aortic blood flow velocity.  Specifically, it measures the aortic
diameter and the moving red blood cells to determine the velocity and direction
of blood flow to calculate stroke volume, and hence calculate cardiac output.

Limitations in measuring cardiac output via Doppler echo:

 .   Inconsistency in images and in the data generated, due to differences in
    technician skill and experience, patient size and disease state;
 .   Difficulty in procuring images in patients with evidence of pulmonary
    disease, tracheotomies, chest wounds, or obesity;
 .   Time consuming procedure that typically requires 30-45 minutes; and
 .   In some patients, reliable, accurate images simply cannot be obtained by
    Doppler echo for unknown reasons.

                                       12

Indirect Competition - (Continued)

Trans-esophageal Echo. Trans-esophageal Echo (TEE) has been developed in recent
years to obtain closer images of the heart.  It is useful in-patients in whom
examination from the usual position is technically impossible and in-patients
undergoing cardiac surgery.  TEE is performed with the ultrasound transducer
placed invasively in the esophagus through the mouth.  Although this procedure
enables more direct, accurate images of the heart, several disadvantages
accompany this technique because of its invasive nature including increased
patient discomfort and the requirement for patient sedation to promote procedure
tolerance. In addition, patient airway complications may result, necessitating
the need for available emergency equipment, such as oxygen, intubation
equipment, and ECG monitoring.  Consequently, the procedure customarily is
performed with several attendants, usually an Echo technician, a nurse and a
physician.

Direct Fick.  Direct Fick was the original method conceived in the late 1800's
to measure cardiac output.  It is based on calculating the oxygen difference
between the arterial and venous blood, along with oxygen inhalation and
expiration.  The Direct Fick method is seldom used because it is time consuming,
costly, and complicated.  A variation of the Direct Fick method, called Fick
Partial Re-breathing, was introduced in late 1998 to the hospital surgical
market.  Fick Partial Re-breathing uses CO2 instead of oxygen to measure cardiac
output.  The Fick Partial Re-breathing method is limited to patients who are
mechanically ventilated, which severely restricts the number of patients who are
candidates for the procedure.  In addition, lack of HCFA-approved reimbursement
creates a barrier for adoption by clinicians.

Government Regulation

In November 1996, we received 510(k) clearance from the U.S. Food and Drug
Administration (FDA) to market the BioZ(TM) System.  In September 1997, the FDA
granted 510(k) clearance to market the BioZ(TM) Portable System and implement
our proprietary Digital Impedance Signal Quantifier (DISQ(TM)) technology into
our next generation of monitors.  DISQTM provides improved measurement of
impedance waveforms through enhanced digital signal processing and automatic
calibration.

In March 1998, we received 510(k) marketing clearance for our latest generation
monitoring system, the BioZ.com(TM) incorporating the Z MARC(TM) - Modulating
Aortic Compliance algorithm which allows the system to sense and modulate values
on patients with over or under compliant aortas. The BioZ.com(TM) is even more
compact than the BioZ(TM) Portable and features a transport battery, integrated
blood pressure module and the ability to directly interface with most hospital
central monitoring systems.  In November 1998, the BioZ.com received CE Mark
approval, which allows it to be sold in Europe.  Also in November 1998, the
Health Care Financing Administration mandated Medicare coverage for BioZ
procedures on a nationwide basis.

Our products and activities are subject to extensive regulation by the FDA and
other governmental and foreign regulatory agencies.  Delays in receipt of, or
failure to obtain, regulatory clearances and approvals, or any failure to comply
with regulatory requirements, could have a very negative effect on our business.

Under the federal Food, Drug, and Cosmetic Act, the FDA regulates the clinical
testing, manufacture, labeling, packaging, marketing, distribution and record
keeping for medical devices, in order to ensure that medical devices distributed
in the United States are safe and effective for their intended use.

                                       13


Government Regulation - (Continued)

Before a new device can be introduced into the market, the manufacturer
generally must obtain either FDA 510(k) clearance or approval of a premarket
approval application.  Following submission of a 510(k) or PMA application, the
manufacturer may not market the new device until an order is issued by the FDA
granting clearance or approval.  The process required to obtain FDA 510(k)
approval can entail an expensive, lengthy and uncertain process.  We have
received a marketing clearance for the BioZ(TM) System, the BioZ(TM) Portable
and the BioZ.com(TM).  However, such clearances are subject to continued FDA
audits and can be rescinded.  Further, we plan to submit additional new products
for FDA approval in the future.  It is possible that our future products might
not gain FDA approval in a timely fashion, or at all. It is also possible that
our current products may someday lose their FDA approval.

We are also subject to routine inspection by the FDA and state agencies, such as
the California Department of Health Services, for compliance with Good
Manufacturing Practice requirements, Medical Device Reporting requirements and
other applicable regulations.  Although we work hard at attempting to comply
with all governmental regulations, it is possible that an inspector could
someday find a violation.  Such a violation could result in government action
ranging from warning letters to fines to criminal prosecution.  Should we ever
incur a significant penalty it is possible it would be detrimental to us.  The
FDC Act requires that medical devices be manufactured in accordance with GMP
requirements.  GMP requirements specify, among other things, that:

 .   The manufacturing process be regulated and controlled by the use of written
    procedures;
 .   The ability to produce devices which meet the manufacturer's specifications
    be validated by the extensive and detailed testing of every aspect of the
    process; and
 .   Deficiencies in the manufacturing process or in the products produced
    be investigated and detailed records kept.

Manufacturing facilities are subject to FDA inspection on a periodic basis to
monitor compliance with current GMP requirements.  Labeling and promotional
activities are regulated by the FDA and, in certain circumstances, by the
Federal Trade Commission.  For any medical device cleared through the 510(k)
process, modifications or enhancements that could significantly affect the
safety or effectiveness of the device or that constitute a major change to the
intended use of the device require a new 510(k) submission.  If the FDA requires
us to submit a new 510(k) notice for any product modification, we may be
prohibited from marketing the modified product until the 510(k) notice is
cleared by the FDA.

The FDA also regulates computer software that performs the function of a
regulated device or that is intimately associated with a given device, such as
control software for diagnostic devices like our products.  The FDA is
reevaluating its regulation of such software, and if the FDA undertakes
increased or more rigorous regulation of such software, the BioZ(TM) product
line and related products may become subject to further regulatory processes and
clearance requirements.

Laws and regulations regarding the manufacture, sale and use of medical devices
are subject to change and depend heavily on administrative interpretations.
Future changes in the regulations or interpretations made by the FDA or other
regulatory bodies, with possible retroactive effect, may adversely affect us.

                                       14

Government Regulation - (Continued)

Sales of medical devices outside of the United States are subject to foreign
regulatory requirements that vary from country to country.  We currently rely on
our international distributors and sub-distributors for the receipt of pre-
market approvals and compliance with clinical trial requirements in those
countries that require them, and we expect to continue to rely on them in those
countries where we continue to use distributors.  If our international
distributors fail to obtain or maintain required pre-market approvals or fail to
comply with foreign regulations, foreign regulatory authorities may require us
to cause the applicable distributor to file revised governmental notifications,
cease commercial sales of our products in the applicable countries, or otherwise
cure the problem.  Such enforcement action by regulatory authorities could be
costly.

In order to sell our products within the European Economic Area, we have to
comply with the European Commission's Medical Device Directive and affix a "CE"
marking on our products to attest such compliance.  In November 1998, we
received authorization from TUV Rhineland of North America to place the CE Mark
on our BioZ.com(TM).

Third-Party Reimbursement

Most medical procedures are reimbursed by a variety of third-party payers,
including Medicare and private insurers.  Health Care Finance Association, the
governmental body that approves medical diagnosis and treatment for financial
reimbursement for Medicare coverage, determines whether to reimburse for a given
type of procedure and the dollar amount allowed.  In November 1998, we received
HCFA approval for Medicare coverage of BioZ procedures on a nationwide basis.
This reimbursement approval for our BioZ(TM) Systems has improved our ability to
penetrate the outpatient market.  We are currently working with HCFA to
establish national reimbursement pricing for the use of our equipment to reduce
the geographic variations in Medicare reimbursement amounts.

The financial and health care cost containment pressures at U.S. hospitals,
resulting from per-capita compensation techniques required by HMOs, are driving
medical departments to decrease costs.  In a managed care system involving
capitation, the health care provider is strongly induced to utilize the most
cost-efficient methods available in order to maintain per-patient costs within
the monthly fees.  Our products can reduce hospital costs by an estimated
minimum of $600 per patient in non-complicated cases (Clancy, T.V., et al.,
Journal of Trauma, August 1991) to as much as $13,600 where pulmonary artery
catheterization is used (Connors, op. cit.).  Therefore, a financial incentive
exists, independent of third-party reimbursement circumstances, for hospitals to
purchase and use our products.

Employees

As of February 22, 2000, we had 75 employees, three of which are considered
part-time.  We believe that the success of our business will depend, in part, on
our ability to identify, attract and retain qualified personnel.  In the future,
we will add additional skilled personnel or retain consultants in such areas as
research and development, manufacturing, administration and marketing and sales.
We consider our relationships with our employees to be good.

                                       15


Risk Factors

Dependence on BioZ(TM) Product Line Whose Market Acceptance is Unclear

Our future is dependent upon the success of the BioZ(TM) product line and
similar products that are based on the same core technology.  The market for
thoracic electrical bioimpedance products is in a relatively early stage of
development, and it is possible that this market will never fully develop.  The
long-term commercial success of the BioZ(TM) product line and any follow-on
products requires widespread acceptance of our thoracic electrical bioimpedance
products as safe, efficient, and cost-effective.  Widespread acceptance would
represent a significant change in medical practice patterns.  Historically, some
medical professionals have indicated hesitancy in using thoracic electrical
bioimpedance products such as previous generation analog-based monitors.
Invasive procedures, such as pulmonary artery catheterization, are generally
accepted in the medical community and have a long history of use.

We have limited clinical data with which to demonstrate the clinical benefits of
our products.  However, we have sponsored and plan to continue to sponsor and/or
conduct clinical trials that we hope will demonstrate consistent clinical
benefits resulting from the use of our products.  We cannot be certain that
these clinical trials will be completed or if they will have a positive outcome
or if a positive outcome in these trials would be sufficient to enable
widespread acceptance of the BioZ(TM) product line by the medical community

Some hemodynamic measurements using thoracic electrical bioimpedance are subject
to inaccuracies and may limit the accuracy of our products, such as:

 .   Severe septic shock;
 .   Significant pulmonary hypertension;
 .   Severe aortic valve regurgitation;
 .   Severe hypertension;
 .   Severe irregular ventricular heartbeats;
 .   Tachycardia rates greater than 180 beats per minute;
 .   Patients who are shorter than 47 inches;
 .   Patients who weigh less than 66 pounds or more than 342 pounds; and
 .   Extreme patient movement.

History of Losses and Expected Continued Losses

Since Bomed's emergence from bankruptcy proceedings in 1993, we have had large
annual losses in the course of researching, developing and enhancing our
technology and products and establishing our sales, marketing, and
administrative organizations.  We anticipate that our operating expenses will
increase substantially in the foreseeable future as we increase our sales and
marketing activities, expand our operations and continue the development of our
technology.  Accordingly, we expect to incur additional losses for fiscal 2000
and it is possible that we will never achieve or sustain adequate revenue levels
required for profitability.

                                       16

Future Additional Capital Requirements; No Assurance Future Capital Will Be
Available

Our commercialization of the BioZ(TM) product line and the development and
commercialization of any additional products will require substantial
expenditures.  Our capital requirements will depend on numerous factors,
including:

 .   Our rate of sales growth--fast growth could actually increase our need for
    additional capital to hire additional staff, purchase additional component
    inventories, finance the increase in accounts receivable, and supply
    additional support services;

 .   Our progress in marketing-related clinical evaluations and product
    development programs--these programs represent potential avenues for growth,
    but will require additional capital;

 .   Our receipt of, and the time required to obtain, regulatory clearances and
    approvals--the longer regulatory approval takes, the more working capital we
    need to support our regulatory and development efforts in advance of sales;

 .   Resources we devote to the development, manufacture and marketing of our
    products--any decision we make to improve, expand or simply change our
    process, products or technology will require increased funds;

 .   Resources required to hire and develop medical sales representatives and
    distributors and to develop internal manufacturing capacity--requires
    substantial working capital;

 .   Facilities requirements--as we grow we may need additional manufacturing,
    warehousing and administration facilities and the costs of the facilities
    would be borne long before any increased revenue from growth would occur;

 .   Market acceptance and demand for our products--although growth could
    increase our capital needs, the lack of growth and continued losses would
    also increase our need for capital; and

 .   Our ability to speed up hospitals' otherwise lengthy purchasing processes by
    offering leasing programs as an alternative to outright purchasing and
    provide outpatient offices with extended payment terms and funding options.

The timing and amount of such capital requirements cannot be accurately
predicted.  We may be required to raise additional funds through public or
private financing, bank loans, collaborative relationships or other arrangements
earlier than expected.  It is possible that banks, venture capitalists and other
investors may perceive our current debt load, our history of losses or our
technology's lack of acceptance as too great a risk to bear and, as a result,
such additional funding may not be available on attractive terms, or at all.  If
we cannot obtain additional capital when needed we might be forced to agree to
unattractive financing terms.

Competition From Other Producers; and Technological Change May Benefit Our
Competitors

We compete with other companies that are developing and marketing non-invasive
hemodynamic monitors.  We are also subject to competition from invasive-
technology companies, including Baxter Healthcare Corporation, which have more
established and larger marketing and sales organizations, significantly greater
financial and technical resources and a larger installed base of customers than
we do.  Such competitors may be able to devote greater resources to the
development, promotion and sales of their products.

                                       17

The current widespread acceptance of PAC, and lack of widespread acceptance of
ICG, is an important competitive disadvantage that we must overcome.  In
addition, our current and potential competitors may establish cooperative
relationships with large medical equipment companies to gain access to greater
research and development or marketing resources.  Competition may result in
price reductions, reduced gross margins and loss of market share.  Any of these
could hurt our business, results of operations and financial condition.  It is
possible that we will not be able to compete successfully.

The introduction by others of products embodying new technologies and the
emergence of new industry standards could render our products obsolete and
unmarketable.  Other companies may develop and introduce products and processes
competitive with or superior to ours.  In addition, other technologies or
products may be developed that have an entirely different approach or means of
accomplishing the intended purposes of our products.  Accordingly, our products'
life cycles are difficult to estimate.  To compete successfully, we must
continually develop and introduce new products that keep pace with technological
advancements, respond to evolving consumer requirements and achieve market
acceptance.

We may not succeed in satisfactorily and timely developing and introducing
additional products.  Even if we succeed in developing and marketing products
that achieve market acceptance, our competitors may develop and market products
that will replace ours.

Technological Change is Difficult to Predict and to Manage

Although not in fact a new company, we currently face many of the challenges
that are typically faced by new companies just emerging from the development
phase.  The BioZ(TM) product line has required, and any future products will
require, substantial development efforts and compliance with all governmental
clearance/approval requirements.  We have to continue to build up our sales and
marketing functions.  We may encounter unforeseen technological or scientific
problems that may force abandonment or substantial change in the development of
a specific product or process.  Technological change or product developments by
others may also have a significant negative effect on us.

Ability to Manage Growth

If successful, we will experience a period of growth that could place a
significant strain upon our managerial, financial and operational resources.
Our infrastructure, procedures and controls may not be adequate to support our
operations and to achieve the rapid execution necessary to fully exploit any
future market opportunity for our products.  Our future operating results will
also depend on our ability to complete our geographic network of direct sales
persons and distributors, expand our sales and marketing organizations, and fill
out our support staff organization.  If we are unable to manage expansion
effectively, our business, results of operations and financial condition will
suffer.  However, we are not promising you that such expansion or growth will
occur.

We May Not Continue to Receive Necessary Approvals from the Food and Drug
Administration

Our products and activities are subject to extensive regulation by the FDA and
other governmental authorities.  Delays in receipt of, or failure to obtain,
regulatory clearances and approvals, or any failure to comply with regulatory
requirements, could have a very negative effect on our business.

Our thoracic electrical bioimpedance products are subject to extensive and
rigorous regulation by the FDA and, to varying degrees, by state and foreign
regulatory agencies.  Under the federal Food, Drug, and Cosmetic Act, the FDA
regulates the clinical testing, manufacture, labeling, packaging, marketing,
distribution and record keeping for medical devices, in order to ensure that
medical devices distributed in the United States are safe and effective for
their intended use.

                                       18

We May Not Continue to Receive Necessary Approvals from the FDA -  (Continued)

Before a new device can be introduced into the market, the manufacturer
generally must obtain either FDA 510(k) clearance or approval of a pre-market
approval application (PMA).  Following submission of a 510(k) or PMA
application, the manufacturer may not market the new device until an order is
issued by the FDA granting clearance or approval, which can entail an expensive,
lengthy and uncertain process.  We have received a marketing clearance for the
BioZ System, the BioZ(TM) Portable and the BioZ.com(TM).  However, such
clearances are subject to continued FDA audits and can be rescinded.  Further,
we plan to submit additional new products for FDA approval in the future.  It is
possible that our future products might not gain FDA approval in a timely
fashion, or at all. It is also possible that our current products may someday
lose their FDA approval.

We are also subject to routine inspection by the FDA and state agencies, such as
the California Department of Health Services, for compliance with GMP
requirements, Medical Device Reporting requirements and other applicable
regulations.  Although we work hard at attempting to comply with all
governmental regulations, it is possible that an inspector could someday find a
violation.  Such a violation could result in government action ranging from
warning letters to fines to criminal prosecution.  Should we ever incur a
significant penalty it is possible it would be detrimental to us.  The FDC Act
requires that medical devices be manufactured in accordance with Good
Manufacturing Practice requirements.

Good Manufacturing Practice requirements specify, among other things, that:

 .   the manufacturing process be regulated and controlled by the use of written
    procedures;

 .   the ability to produce devices which meet the manufacturer's
    specifications be validated by the extensive and detailed testing of every
    aspect of the process; and

 .   any deficiencies in the manufacturing process or in the products produced
    be investigated and detailed records kept.

Manufacturing facilities are subject to FDA inspection on a periodic basis to
monitor compliance with current GMP requirements.  Labeling and promotional
activities are regulated by the FDA and, in certain circumstances, by the
Federal Trade Commission.  Current FDA enforcement policy prohibits the
marketing of approved medical devices for unapproved uses.  For any medical
device cleared through the 510(k) process, modifications or enhancements that
could significantly affect the safety or effectiveness of the device or that
constitute a major change to the intended use of the device require a new 510(k)
submission.  If the FDA requires us to submit a new 510(k) notice for any
product modification, we may be prohibited from marketing the modified product
until the 510(k) notice is cleared by the FDA.

The FDA regulates computer software that performs the function of a regulated
device or that is intimately associated with a given device, such as control
software for diagnostic devices like our products.  The FDA is reevaluating its
regulation of such software, and if the FDA undertakes increased or more
rigorous regulation of such software, the BioZ product line and related products
may become subject to further regulatory processes and clearance requirements.

Laws and regulations regarding the manufacture, sale and use of medical devices
are subject to change and depend heavily on administrative interpretations.
Future changes in the regulations or interpretations made by the FDA or other
regulatory bodies, with possible retroactive effect, may adversely affect us.

                                       19

Control by Our Co-Chairmen

Allen E. Paulson and James C. Gilstrap, the co-chairmen of CardioDynamics,
beneficially own, directly or through CardioDynamics Holdings, LLC, which they
control, approximately 35% of the outstanding shares of our common stock.  In
addition, Mr. Paulson's sons beneficially own another seven percent of the
outstanding shares of common stock.  Accordingly, Messrs. Paulson and Gilstrap,
as a group, are able to substantially control CardioDynamics and influence our
affairs and business, including any future issuances of common stock or other
securities, merger and acquisition decisions, declaration of dividends and the
election of directors.  Further, in their position as holders of our stock, they
have no duty to act in the best interests of CardioDynamics.  Our stock price
and our ability to raise capital could be injured if they were to sell even a
portion of their holdings on the open market.  CDH has been sued in United
States Bankruptcy Court on behalf of the creditors of a party from whom CDH
acquired some of its CardioDynamics stock.  Although CardioDynamics has been
dismissed as a defendant in this lawsuit, we cannot predict the impact on
CardioDynamics of an unfavorable outcome of this suit to CDH.

We May Not Receive Approvals by Foreign Regulators Which Are Necessary for
Foreign Sales

Sales of medical devices outside of the United States are subject to foreign
regulatory requirements that vary from country to country.  If we or our
international distributors fail to obtain or maintain required pre-market
approvals or fail to comply with foreign regulations, foreign regulatory
authorities may require us to file revised governmental notifications, cease
commercial sales of our products in the applicable countries, or otherwise cure
the problem   Such enforcement action by regulatory authorities could be costly.

In order to sell our products within the European Economic Area, we have to
comply with the European Commission's Medical Device Directive and to affix a
"CE" marking on our products to attest such compliance.  In November 1998 we
received authorization from independent certifying agency TUV Rhineland of North
America to place the CE Mark on our BioZ.com(TM).  However, future regulatory
changes could limit our ability to use the CE Mark and any new products we
develop may not qualify for the CE Mark.  Failure to obtain authorization to use
the CE Mark or loss of such authorization would render us unable to sell our
products in the European Economic Area and this would limit our potential.

Third-Party Reimbursement; Pricing Pressures

Our commercial success will depend in part on the availability of adequate
reimbursement from third-party healthcare payers, such as government and private
health insurers and managed care organizations.  Third-party payers are
increasingly challenging the pricing of medical products and services.  Even
with an FDA approved device, third-party payers may not cover the device and
related services, or they may place significant restrictions on the
circumstances in which coverage will be available.  Medicare reimbursement for
use of the BioZ product line is now available under the heading of
plethysmography, but private third-party payers are not required to follow
Medicare's lead.  We may not be able to obtain a specific code for reimbursement
of thoracic electrical bioimpedance tests in a reasonable time frame, or at all,
from either Medicare or private third-party payers.  In addition, reimbursement
may not be at or stay at price levels sufficient to allow medical professionals
to realize an appropriate return on an investment in our products.  Downward
pricing pressure in the industry could hurt our operations.

Our business plan contemplates an income stream from sales of disposable sensors
that are compatible with an installed base of our monitors.  We may be subject
to price competition from other sensor manufacturers.

                                       20

Dependence on Management and Other Key Personnel

We are dependent upon a limited number of key management and technical personnel
and we do not have insurance on these people.  The loss of the services of one
or more of such key employees could hurt our business.  In addition, our success
depends upon our ability to attract and retain additional highly qualified
sales, management, manufacturing and research and development personnel.  We
face intense competition in our recruiting activities and we may not be able to
attract and/or retain qualified personnel.

Dependence on Rivertek Medical Systems for Development Services and Other Third
Parties for Development and Manufacturing Services

Our strategy for development and commercialization of certain of our products
depends upon entering into various arrangements with third parties and upon the
subsequent success of these parties in performing their obligations.  It is
possible that we will not be able to negotiate acceptable arrangements in the
future or that our existing arrangements will not be successful.  We rely
heavily on contracted development services, particularly from Rivertek Medical
Systems, Inc.  Also, we currently assemble our BioZ product line from components
manufactured by others.  Therefore, we are dependent on contract manufacturers.

Small Market Float Can Produce Both Stock Price Volatility and a Potential Lack
of Liquidity

Market float is the aggregate value of all of a company's publicly traded stock.
Our market float is smaller than that of many other publicly traded companies.
Because our market float is smaller, changes in the opinion of one investor or
one analyst can have a significant effect on our stock price.  As a result, the
market price of our common stock is likely to be highly volatile and could be
subject to wide fluctuations in response to various factors beyond our control,
including:

 .   Quarterly variations in operating results;
 .   Announcements of technological innovations, new products or pricing by our
    competitors;
 .   Changes in, or failure to meet, financial estimates of securities analysts;
 .   The rate of adoption by physicians of thoracic electrical bioimpedance
    technology in targeted markets;
 .   Timing of patent and regulatory approvals;
 .   Timing and extent of technological advancements;
 .   Results of clinical studies;
 .   The sales of stock by affiliates; and
 .   General market conditions.

In addition, the stock market has experienced significant price and volume
fluctuations that have affected the market prices of the stock of many medical
device companies and that often have been unrelated to the operating performance
of such companies.  These broad market fluctuations may directly influence the
market price of our common stock.  Our somewhat small market float may not be
entirely adequate to provide market liquidity and mitigate stock price
volatility.

                                       21

Reliance on Patents and Proprietary Technology

Although we believe that we have effective patent protection, our patents and
proprietary technology may not be able to prevent effective competition by
others and our products could possibly be found to infringe the rights of
others.  Intellectual property litigation, whether defensive or offensive, would
have no certain outcome other than to drain our resources.

The validity and breadth of claims in medical technology patents involve complex
legal and factual questions.  Future patent applications may not be issued, the
scope of any patent protection may not exclude competitors and it may not
provide competitive advantages to us.  Further, our patents may be found to be
invalid, and other companies may claim rights in or ownership of the patents and
other proprietary rights held or licensed by us.  Also, our existing patents
might not cover products we want to bring out in the future.  Moreover, when our
key patents expire, the inventions will enter the public domain.

Since patent applications in the United States are maintained in secrecy until
patents issue, our patent applications may infringe patents that may be issued
to others.  In the event our products are found to infringe patents held by
competitors, we may have to modify our product to avoid infringement, and it is
possible that our modified products would not be commercially successful.

We Could be Required to Issue Additional Shares of Common Stock

The holders of warrants to purchase our common stock and certain purchasers of
our common stock in our December 3, 1999 private placement could require us to
issue additional shares of common stock to them pursuant to anti-dilution rights
we have provided them.  These rights would cause us to issue additional common
stock upon exercise of their warrants if we sell common stock at a price less
than the exercise price of their warrants or issue additional common stock to
the purchasers in the private placement if the market price falls below certain
target levels.  If we need to sell common stock at a time when the market price
for our shares is depressed, these anti-dilution rights could further depress
the market price and could, in turn, impair our ability to raise needed capital.

Anticipated Resales of Common Stock

We have filed or will file registration statements with the SEC covering the
potential resale by certain shareholders of up to 11,070,000 shares of common
stock.  The existence of a substantial number of shares of common stock subject
to immediate resale could depress the market price for the common stock and, in
turn, impair our ability to raise needed capital.

Risks Associated with International Activities

In fiscal 1999, international sales accounted for approximately 21% of our
revenue.  We believe it is possible that international sales will represent a
meaningful portion of our revenue in the future.  This would require significant
management attention and financial resources and subject us to the risks of
selling internationally.  These risks include unexpected changes in regulatory
requirements, tariffs and other barriers and restrictions, and an adverse effect
from reduced protection for intellectual property rights.  We would have to
comply with a variety of foreign laws.  In addition, fluctuations in the rates
of exchange could increase the price in local currencies of our products in
foreign markets and make our products relatively more expensive than
competitors' products that are denominated in local currencies.

                                       22


Low Stock Price Could Result in Our Being De-Listed from NASDAQ and Subject Us
to Regulations Which Could Reduce Our Ability to Raise Funds

If our stock price were to drop below $1.00 per share and remain below $1.00 per
share for an extended period of time, certain NASDAQ regulations would require
the de-listing of our shares and then our shares could no longer be traded on
NASDAQ.  In such an event, our shares could only be traded on over-the-counter
bulletin board systems.  This method of trading could significantly impair or
completely remove our ability to raise new capital.

In the event that we were de-listed from NASDAQ due to low stock price, we might
be subject to certain rules, called penny stock rules, that impose additional
sales practice requirements on broker-dealers who sell such securities.  For any
transaction involving a penny stock the rules require, among other things, the
delivery, prior to the transaction, of a disclosure schedule required by the SEC
relating to the market for penny stocks.  The broker-dealer also must disclose
the commissions payable both to the broker-dealer and the registered
representative and current quotations for the securities, and monthly statements
must be sent disclosing recent price information.

In the event our common stock becomes characterized as a penny stock, our market
liquidity could be severely affected.  In such event, the regulations relating
to penny stocks could limit the ability of broker-dealers to sell our common
stock and thus, the ability of purchasers in this offering to sell their common
stock in the secondary market.

Product Liability Risk and Product Recall; Limited Insurance Coverage

The nature of our business exposes it to risks of product liability or product
recalls that are typical in the medical devices industry.  Medical devices as
complex as ours frequently contain errors or failures, especially when first
introduced or when new versions are released.  Our products are designed to be
used in certain procedures where there is a high risk of serious injury or
death.  Such risks will exist even with respect to those products that have
received, or may in the future receive, regulatory clearance for commercial
sale.

We did not carry product liability insurance during certain periods before May
15, 1995.  So far, this has not hurt us.  Since then, we have maintained product
liability insurance at levels that we believe are sufficient and consistent with
industry standards for companies with our current sales levels.  We intend to
increase our product liability insurance policy limits as sales grow.
Currently, our product liability insurance policy limits are $10,000,000 per
occurrence and $10,000,000 in the aggregate.  Our product liability insurance
may not be adequate and it is possible that such insurance coverage may not
continue to be available on commercially reasonable terms or at all.  In
addition, product liability claims or recalls could hurt us in various ways even
if we have adequate insurance coverage.

No Dividends

We do not intend to pay any cash dividends on the common stock any time soon.
Payment of such cash dividends would, in any event, be prohibited or limited
under the terms of our bank loans.

                                       23


Uncertainty and Potential Negative Effects of Healthcare Reform

The healthcare industry is undergoing fundamental changes resulting from
political, economic and regulatory influences.  In the United States,
comprehensive programs have been proposed that seek to:

 .   Increase access to health care for the uninsured;
 .   Control the escalation of healthcare expenditures within the economy; and
 .   Use health care reimbursement policies to help balance the federal budget.

We anticipate that Congress and state legislatures will continue to review and
assess such proposals, and public debate of these issues will likely continue.
We cannot predict which, if any, of such reform proposals will be adopted and
when they might be adopted.  Other countries also are considering healthcare
reform.  Significant changes in healthcare systems could have a substantial
impact on the manner in which we conduct our business and could disrupt our
strategies.

We Have No Experience with Home Health Care or the Internet

We intend to enter the home health care market and the eHealth field in
conjunction with other parties.  We have not concluded any agreements or
understandings with any third parties and we may not be able to achieve such
arrangements on terms satisfactory to us.  Even if we are successful in
negotiating acceptable arrangements with third parties, the parties may not
perform their obligations to us for reasons beyond our control.  If we are not
able to negotiate arrangements with other parties to implement our home health
care and eHealth strategies, or if such arrangements, once negotiated, are not
successful, we will not be able to meet our business objectives


ITEM 2.  DESCRIPTION OF PROPERTY

Our executive offices are located in an approximately 19,000 square foot leased
facility in San Diego, California.  This facility houses all of our research,
development, manufacturing, marketing, sales and administrative activities
except for field and contract personnel. The five-year lease runs through June
2002.


ITEM 3.  LEGAL PROCEEDINGS

On February 8, 1999, the Official Post Confirmation Committee of Unsecured
Creditors of Helionetics, Inc. filed a complaint in United States Bankruptcy
Court for the Central District of California, Santa Ana Division, naming
CardioDynamics Holdings, LLC (CDH) and CardioDynamics as defendants.  The
complaint alleged fraudulent transfer of certain shares of our common stock from
Helionetics to CDH in February 1995 and sought various relief including return
of the shares to Helionetics and compensatory and punitive damages.   Subsequent
to our fiscal year end, on February 16, 2000, our motion to dismiss the
complaint was granted without leave for Helionetics to amend.  We are unable to
predict what effect, if any, an unfavorable outcome to CDH in this matter could
have on CardioDynamics.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

                                       24

                                    PART II


ITEM 5.  MARKET  FOR  COMMON  EQUITY  AND  RELATED SHAREHOLDER   MATTERS

Our common stock trades on the Nasdaq SmallCap market under the symbol CDIC.
The following table sets forth for the periods indicated the high and low
closing prices of the common stock as furnished by The Nasdaq Stock Market(SM).
<TABLE>
<CAPTION>

                                                                                          High    Low
                                                                                          -----  -----
<S>                                                                                       <C>    <C>
        Year Ending November 30, 1999
          Fourth Quarter................................................................  $3.35  $2.50
          Third Quarter ............................................................       3.75   1.38
          Second Quarter................................................................   1.88   1.50
          First Quarter ..............................................................     2.56   1.56

        Year Ending November 30, 1998
          Fourth Quarter................................................................  $2.75  $1.03
          Third Quarter.................................................................   3.00   1.75
          Second Quarter................................................................   3.94   2.19
          First Quarter .............................................................      3.31   2.38
</TABLE>

On February 22, 2000 there were approximately 575 holders of record of our
common stock.  We have not declared or paid any cash dividends on shares of our
common stock and do not anticipate paying any cash dividends in the foreseeable
future.  We currently intend to retain any future earnings for use in the
operation of our business.


                                       25

ITEM 6.  MANAGEMENT'S  DISCUSSION  AND  ANALYSIS  OR  PLAN  OF
          OPERATION

The following discussion should be read in along with our Financial Statements
and the Notes that go along with the financial statements, as well as the other
financial information included in this Form 10-KSB.  Some of our discussion is
forward-looking and involve risks and uncertainties.  For information regarding
risk factors that could have a material adverse effect on our company's
business, refer to Item I of this Form 10-KSB, Description of Business - Risk
Factors

Results of Operations (This discussion refers to fiscal years which end on
November 30)

In March 1998, we received FDA 510(k) marketing clearance for our BioZ.com(TM)
ICG monitoring system. The BioZ.com(TM) is even more compact than our BioZ(TM)
Portable system and features a transport battery, integrated blood pressure
module and the ability to directly interface with most hospital central
monitoring systems. The BioZ.com(TM) utilizes our proprietary DISQ(TM)
technology and Z MARC(TM) algorithm that provide improved measurement of
impedance waveforms and automatic electronic calibration. The BioZ.com(TM)
accounted for 90% of our overall equipment sales in fiscal 1999, up from 43% in
fiscal 1998.

Net sales in fiscal 1999 increased to $7,280,908, an increase of 247% over net
sales of  $2,098,696 recorded in fiscal 1998.  The significant sales growth in
fiscal 1999 is primarily due to the success of our domestic direct sales force,
expansion of our international distributor network, our strategic alliance with
GE Marquette Medical Systems and the growing awareness of the availability and
clinical usefulness of our BioZ(TM) noninvasive ICG monitoring systems.

Our direct sales force targets individual physician offices as well as hospitals
in the U.S. under 100 beds.  During fiscal 1999, we increased our direct sales
force from 15 territory sales representatives at the beginning of the year, to
25 territory sales representatives, three regional sales managers and a national
accounts manager at the end of the year.  In fiscal 2000 we plan to continue to
expand our direct sales force as qualified candidates are identified in targeted
metropolitan areas.  However, the success of our direct sales expansion will be
dependent, to a large degree, on our ability to identify, attract and retain
qualified sales representatives with successful medical industry sales
experience.

In November of 1998, we received CE Mark approval for our BioZ.com(TM), which
opened the door for distribution in Europe.  During fiscal 1998 and 1999 we
established international distribution agreements with 15 medical device
distributors and in August 1999, we entered into a strategic alliance with GE
Marquette Medical Systems for exclusive distribution of our BioZ.com(TM) to
select countries in Europe.  In January 2000 the GE Marquette distribution
agreement was expanded to include 18 additional counties including Russia,
Egypt, Saudi Arabia, and United Arab Emirates.  Through GE Marquette and our
other international distributors, we now have representation in over 50
countries including Europe, Asia Pacific, Africa, the Middle East, Australia,
New Zealand, and Latin America.

In October 1999, we entered into a distribution agreement with GE Marquette
Medical Systems for distribution of the BioZ.com(TM) in the U.S. hospital
market.  The agreement provides GE Marquette exclusive rights to market and sell
our BioZ.com(TM) in hospitals over 100 beds, where they have a significant
presence and are widely recognized for their success at introducing new
technologies, particularly in the areas of diagnostic cardiology, clinical
information systems, and patient monitoring systems.  Our direct sales force
continues to focus their efforts on the outpatient market and the smaller U.S.
hospitals.

                                       26

Results of Operations - (Continued)

In fiscal 1999, 70% of our overall sales were generated through our direct sales
force with 29% coming through our distributor network, including GE Marquette.
Of the sales generated through our distributor network, 21% was sold to
international distributors and the remaining 8% was sold to our domestic
distributors. International sales increased by 188% in fiscal 1999 over fiscal
1998.

Each time our BioZ(TM) products are used, disposable sets of four dual sensors
are required. We sell these disposable sensors for $9.95 per application. In
fiscal 1999, sales of our disposable sensors increased by 109% to $342,000, up
from $164,000 in fiscal 1998. As the installed base of BioZ(TM) equipment grows,
we anticipate the revenue generated by our disposable sensors will comprise an
increasingly larger percentage of our overall sales.

We achieved a gross margin of $4,681,717, or 64%, in fiscal 1999 compared to a
gross margin of $900,715, or 43%, in fiscal 1998. The significant improvement in
our gross margin percentage in fiscal 1999 is attributable to: (i) greater
utilization of our manufacturing capacity based on the increased volume of units
produced, (ii) the higher priced BioZ.com(TM) comprising a greater percentage of
our overall product mix and, (iii) increased average unit sales prices as a
result of a higher percentage of our BioZ products being sold though our sales
force directly to end users. Our average sales price per unit sold increased by
24% in fiscal 1999.

We continue to invest a significant portion of our resources into research,
clinical studies, further enhancements to the BioZ(TM) Systems and new product
development. During fiscal 1999 we increased our internal capabilities for
research and development, decreasing our reliance on outside engineering
consulting services.  As a result of this investment in internal resources, and
the fact that fiscal 1998 included substantial expenses related to the
accelerated 11-month development cycle of the BioZ.com(TM), research and
developments expenses in fiscal 1999 decreased by $395,556, or 17%, relative to
fiscal 1998. Included in research and development in fiscal 1999 is a non-cash
charge of $350,479 related to common stock warrants issued to GE Marquette to
obtain access to their technology which we are currently using for new product
development. We anticipate that costs associated with research, clinical
studies, further enhancements to the BioZ(TM) Systems and new product
development will continue to comprise a substantial portion of our overall
expense structure during the coming year.

Selling, general and administrative expenses in fiscal 1999 were $6,041,919, up
58% from $ 3,815,673 in fiscal 1998 as a result of our strategic decision to
dramatically increase our investment in sales and marketing related activities
in 1999.  As a result, our sales and marketing expenses increased 89% in fiscal
1999 over the fiscal 1998 level.  The majority of the investment was related to
expansion of both our domestic direct sales force and our international
distribution capabilities.  During 1999 we added 10 direct sales
representatives, three regional managers and a national accounts sales
representative and we plan to continue to expand our direct sales force and
increase our investment in sales and marketing activities in fiscal 2000 and
beyond.

Included in selling, general and administrative expenses in fiscal 1999 is
$1,369,144 of administrative expenses related to the overall infrastructure and
management of our company.  As a result of our continued focus on ongoing cost
containment and targeting our investments to areas of the business that directly
contribute to revenue growth, our general and administrative expenses increased
by only 1.6% from the $1,347,737 spent in fiscal 1998.

                                       27

Results of Operations - (Continued)

We incurred interest expense of $311,461 in fiscal 1999, up from $213,798 in
fiscal 1998.  The $97,663 increase is primarily the result of interest payments
on our term loan with City National Bank and borrowings on our private line of
credit agreement with our Chairmen.  We earned $90,944 of interest income on
invested funds in fiscal 1999, down 12% from the $104,358 earned in fiscal 1998
due primarily to decreased funds available for investment throughout the year.

To achieve an orderly conversion of the shares of our Series A convertible
preferred stock and minimize the potential impact on the market price of our
common stock, in June of 1999, we identified a group of strategic investors and
facilitated the private sale of the common shares issued upon conversion of the
remaining portion of the preferred stock by reducing the effective purchase
price.  As a result of this Series A preferred stock conversion, we recorded a
non-cash charge of $483,333 in fiscal 1999 that is included in our Statement of
Operations under "Other expense: Other, net".

Preferred stock dividends increased from $22,800 in fiscal 1998 to $226,030 in
fiscal 1999.  Prior to elimination of the preferred stock during the third
quarter of fiscal 1999, the preferred shareholders received $34,466 of dividends
in the form of common stock under the terms of the preferred stock agreement.
In the third fiscal quarter of 1999, we recorded a $191,564 preferred stock
dividend related to premium-priced warrants issued to the Series A preferred
stock investors in exchange for the elimination of their contractual right to
buy an additional three million dollars of convertible preferred stock.

Fiscal 1999's net loss to common shareholders was reduced by $1,138,792 to
$4,218,957, or $.12 per common share, versus a net loss to common shareholders
of $5,357,749, or $.17 per share, in fiscal 1998. The fiscal 1999 net loss
included $226,030 of dividends paid to the holders of Series A preferred stock.
Additionally, the fiscal 1999 net loss included two non-cash accounting charges:
$350,479 for warrants issued to GE Marquette and $483,333 for shares issued upon
conversion of the remaining shares of Series A preferred stock. Excluding these
non-cash charges, the net loss to common shareholders for fiscal 1999 was
$3,159,115, or $0.09 per share, down 41% from fiscal 1998.

The weighted-average number of common shares we had outstanding during fiscal
1999 increased by 13% primarily due to conversions during the year of 2,240
shares of Series A preferred stock and the $5.2 million common stock private
placement we completed in May 1999.

Liquidity and Capital Resources

In June 1997, we entered into a five-year lease for a 19,000 square-foot
manufacturing facility that also houses our research, development, marketing,
sales and administrative activities.  The lease commenced on September 1, 1997
with current lease payments of $16,486 per month.  In fiscal 1998 and 1999, we
invested $165,989 and $184,087 respectively, including equipment acquired under
capital lease, in property and equipment, principally for new computers and
software, and equipment to be used in our manufacturing process.

                                       28

Liquidity and Capital Resources - (Continued)

Over the past three years we have raised just over $15 million dollars in three
separate financings.  In early 1997 we raised approximately $7.2 million in a
private placement of common stock and we raised an additional $3 million in
August of 1998 through the issuance of Series A convertible preferred stock, and
in May of 1999 we raised another $5.2 million through a private placement of
common stock.  These financings, together with the bank loans and chairmen's
line of credit described below, have provided the capital required to fund
commercialization of our BioZ products, ongoing research and development
efforts, expansion of our direct sales force and international sales presence,
capital expenditures and to meet our working capital requirements including the
significant increase in accounts receivable resulting from the higher sales
volumes and extended payment terms.

In March 1998, we entered into an 18-month unsecured private line of credit
agreement with the co-chairmen of our Board of Directors.  Under the terms of
the agreement we can borrow up to $3,000,000 on an as-needed basis at an annual
interest rate of 10.0%.  In August of 1998 we borrowed $1,000,000 on this line
of credit and used the proceeds to reduce outstanding borrowings under the
Imperial Bank term loan.  In February 1999, this line of credit was extended to
September 30, 2000.  At November 30, 1999, $1,000,000 was outstanding under this
agreement.

In May of 1998, we entered into a six-month unsecured term loan agreement with
Imperial Bank.  Under the terms of the agreement we could borrow up to
$4,000,000, of which we borrowed $3,000,000.  The loan bore interest at one
percent above the bank's prime rate and was guaranteed by the co-chairmen of our
Board of Directors.  In August 1998, we repaid $1,000,000 of the $3,000,000,
reducing the outstanding balance to $2,000,000. In exchange, the Bank extended
the term of the loan until February 28, 1999.

On February 26, 1999 we entered into a three-year unsecured term loan agreement
with City National Bank at the bank's prime rate.  Under the terms of the
agreement we borrowed $2,000,000, the proceeds of which were used to repay the
Imperial Bank term loan.  The co-chairmen of our Board of Directors guarantee
the loan.  So far we have made interest only payments, however, beginning March
2000, we will commence monthly principal installments of $83,333 each plus
interest at one percent above the bank's prime rate.  At November 30, 1999,
$2,000,000 was outstanding under the agreement

In August of 1998, we raised $3,000,000 through the issuance of Series A
convertible preferred stock to a group of institutional investors.  During the
third fiscal quarter of 1999, we facilitated conversion of the remaining shares
of the Series A preferred stock into shares of our common stock under the terms
of the preferred stock agreement.  At November 30, 1999 all of the Series A
preferred stock have been converted into common stock.

To help provide the cash flow necessary to meet the increasing demand for our
products, in January 1999, we established a secured revolving credit line with
Imperial Bank.  The credit line provides for borrowings of up to $3,000,000 at
the bank's prime rate.  Under the terms of the agreement, we are required to
meet certain loan covenants, including maintenance of minimum quick ratio and
maximum quarterly losses.  All the assets of the Company collateralize the
credit line. At November 30, 1999 $1,000,000 was outstanding on the line of
credit. Subsequent to our fiscal year end, in February 2000, the credit line was
renewed through February 2001 at the bank's prime rate with the same borrowing
limit of $3,000,000.

On May 28, 1999 we completed a $5.2 million private placement of common stock to
institutional and other accredited investors including Domain Associates,
L.L.C., a Princeton, New Jersey-based venture capital group and Veritas Societe
Generale.  The investors purchased unregistered shares with a six-month holding
restriction for $1.00 per share, representing a 27% discount from the closing
bid price.

                                       29

Liquidity and Capital Resources - (Continued)

Subsequent to our fiscal year end, on December 3, 1999, we completed a $3.3
million private placement of common stock to institutional investors, including
Veritas Societe Generale and three additional European institutional investors.
The investors purchased unregistered shares with a four-month holding
restriction for $2.50 per share, representing a 9% discount from the 30-day
average closing bid price at the time of the transaction.

Nonetheless, without additional debt or equity financing, our ability to
continue expansion of our direct sales strategy will be constrained, due to the
strategy's higher cash requirements.  We expect our operating losses to continue
through at least the short term.  Longer term, our liquidity will depend on our
ability to successfully commercialize the BioZ(TM) Systems and other diagnostic
products and raise additional funds through public or private financing, bank
loans, collaborative relationships or other arrangements.  We can give no
assurance that such additional funding will be available on terms attractive to
us, or at all.

We have federal operating loss carryforwards of approximately $21,000,000.  The
Tax Reform Act of 1986 contains provisions which limit the federal net operating
loss carryforwards that can be used in any given year in the event of certain
occurrences, including significant ownership changes.  A valuation allowance has
been recognized for the full amount of the deferred tax asset created by these
carryforwards.

Other Matters

Year 2000 Compliance

During 1999 we implemented a plan to assure internal readiness of our computer
systems and the ability of our products to handle the year 2000 issue.  The plan
was comprehensive, however we did not have to spend significant amounts of money
to assure our compliance.  As of February 22, 2000 we have not experienced any
significant disruptions to our financial or operating activities caused by
failure of our computer systems resulting from Year 2000 issues.  We are not
aware of any Year 2000 related product performance issues.  We do not expect
Year 2000 issues to have a material adverse effect on our business, results of
operations, or financial condition.

                                       30

Item 7.  Financial Statements

                         Independent Auditors' Report

The Board of Directors and Shareholders
CardioDynamics International Corporation:

We have audited the accompanying balance sheets of CardioDynamics International
Corporation as of November 30, 1999 and 1998, and the related statements of
operations, shareholders' equity (deficit), and cash flows for the years then
ended.  These financial statements are the responsibility of the company's
management.  Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CardioDynamics International
Corporation as of November 30, 1999 and 1998, and the results of its operations
and its cash flows for the years then ended in conformity with generally
accepted accounting principles.


                                 /s/ KPMG LLP

San Diego, California
January 17, 2000

                                       31

                   CARDIODYNAMICS INTERNATIONAL CORPORATION
                                Balance Sheets

                          November 30, 1999 and 1998

<TABLE>
<CAPTION>
                        Assets (notes 4, 5 and 6)                                       1999                     1998
                                                                               -------------------      -------------------
Current assets:
<S>                                                                         <C>                       <C>
 Cash and cash equivalents                                                   $           2,405,710    $           2,633,086
 Accounts receivable, net of allowance for doubtful accounts
  and returns of  $552,648 in 1999 and $32,728 in 1998                                   4,226,470                  632,190
 Inventory, net (note 2)                                                                 1,344,527                  995,364
 Other current assets                                                                      116,070                   81,229
                                                                               -------------------      -------------------
   Total current assets                                                                  8,092,777                4,341,869
                                                                               -------------------      -------------------
Property and equipment, net (note 3)                                                       335,760                  266,917
Long-term receivables                                                                       25,973                       --
Deposits                                                                                    42,500                   40,099
                                                                               -------------------      -------------------
   Total assets                                                              $           8,497,010    $           4,648,885
                                                                               ===================      ===================

                     Liabilities and Shareholders' Equity
Current liabilities:
 Accounts payable                                                            $           1,125,068    $             577,836
 Accrued expenses                                                                          183,910                   89,663
 Accrued salaries, wages and benefits                                                      309,083                  276,179
 Current maturities of long-term debt (note 5)                                             885,932                   37,816
 Line of credit (note 4)                                                                 1,000,000                       --
 Note payable to bank (note 4)                                                                  --                2,000,000
 Notes payable related parties (notes 4 and 6)                                           1,000,000                       --
 Provision for inventory returns                                                                --                   23,040
                                                                               -------------------      -------------------
   Total current liabilities                                                             4,503,993                3,004,534

Note payable related parties (notes 4 and 5)                                                    --                1,000,000
Long-term debt, less current maturities (note 5)                                         1,350,425                  112,215
                                                                               -------------------      -------------------
    Total liabilities                                                                    5,854,418                4,116,749
Convertible preferred stock, no par value; 18,000,000 shares authorized;
 no shares issued or outstanding at November 30, 1999; issued and
 outstanding 2,240 Series A shares at November 30, 1998 (Note 7)                                --                2,152,294


Shareholders' equity: (notes  5, 6, 7 and 8)
Common stock, no par value; 50,000,000 shares authorized;  issued
 and outstanding 39,888,811 shares at November 30, 1999 and
 32,676,029 shares at November 30, 1998                                                 24,079,981               15,598,274

Accumulated deficit                                                                    (21,437,389)             (17,218,432)
                                                                               -------------------      -------------------
   Total shareholders' equity (deficit)                                                  2,642,592               (1,620,158)
                                                                               -------------------      -------------------
Commitments and contingencies (note 10)
   Total liabilities and shareholders' equity                                $           8,497,010    $           4,648,885
                                                                               ===================      ===================
</TABLE>

See accompanying notes to financial statements.
                                       32

                   CARDIODYNAMICS INTERNATIONAL CORPORATION

                           Statements of Operations

                For the years ended November 30, 1999 and 1998


<TABLE>
<CAPTION>
                                                                                        1999                     1998
                                                                               -------------------      -------------------
<S>                                                                         <C>                       <C>
Net sales                                                                    $           7,280,908    $           2,098,696
Cost of sales                                                                            2,599,191                1,197,981
                                                                               -------------------      -------------------
          Gross margin                                                                   4,681,717                  900,715

Operating expenses:
 Research and development                                                                1,913,920                2,309,476
 Selling, general, and administrative expenses                                           6,041,919                3,815,673
                                                                               -------------------      -------------------
          Total operating expenses                                                       7,955,839                6,125,149
                                                                               -------------------      -------------------
Loss from operations                                                                    (3,274,122)              (5,224,434)

Other expense:
 Interest, net                                                                            (220,517)                (109,440)
 Other, net (note 7)                                                                      (497,488)                    (275)
                                                                               -------------------      -------------------
          Total other expense:                                                            (718,005)                (109,715)

Loss before income taxes                                                                (3,992,127)              (5,334,149)
Income taxes (note 9)                                                                         (800)                    (800)
                                                                               -------------------      -------------------
          Net loss                                                                      (3,992,927)              (5,334,949)

Preferred stock dividends                                                                 (226,030)                 (22,800)
                                                                               -------------------      -------------------
Net loss to common shareholders                                              $          (4,218,957)   $          (5,357,749)
                                                                               ===================      ===================
Net loss per common share, basic and diluted                                 $                (.12)   $                (.17)
                                                                               ===================      ===================
Weighted-average number of common shares outstanding                                    36,296,495               32,117,853
                                                                               ===================      ===================
</TABLE>

See accompanying notes to financial statements.
                                       33

                   CARDIODYNAMICS INTERNATIONAL CORPORATION

                 Statements of Shareholders' Equity (Deficit)

                For the years ended November 30, 1999 and 1998

<TABLE>
<CAPTION>
                                                   Preferred Stock            Common Stock
                                                --------------------     ------------------------   Accumulated
                                                  Shares    Amount        Shares       Amount         Deficit          Total
                                                ---------- ---------     --------- --------------  --------------   -------------
<S>                                                 <C>       <C>       <C>           <C>            <C>              <C>
Balance at November 30, 1997                            --        --    32,085,743    $14,826,762    $(11,860,683)    $ 2,966,079

Issuance of common stock - upon exercise of
     stock options                                      --        --        28,000         29,700              --
Issuance of common stock - upon conversion of
 preferred stock                                        --        --       554,134        730,243              --

Preferred stock dividends paid in common stock          --        --         8,152         11,569         (22,800)        (11,231)
Net loss                                                --        --            --             --      (5,334,949)     (5,334,949)
                                                ---------- ---------     --------- --------------  --------------   -------------

Balance at November 30, 1998                            --        --    32,676,029     15,598,274     (17,218,432)     (1,620,158)
Compensatory stock options granted                      --        --            --          8,274              --           8,274
Issuance of common stock warrants                       --        --            --        554,174              --         554,174
Issuance of common stock, net                           --        --     5,527,272      5,577,338              --       5,577,338
Issuance of common stock - upon exercise of
     stock options                                      --        --        91,000        151,000              --
Issuance of common stock - upon conversion of
 convertible preferred stock                            --        --     1,567,962      2,145,224              --

Preferred stock dividends paid in common stock
 and warrants                                           --        --        26,548         45,697        (226,030)       (180,333)
Net loss                                                --        --            --             --      (3,992,927)     (3,992,927)
                                                ---------- ---------   ----------- --------------  --------------   -------------
Balance at November 30, 1999                            --    $   --    39,888,811    $24,079,981    $(21,437,389)    $ 2,642,592
                                                ========== =========   =========== ==============  ==============   =============
</TABLE>

See accompanying notes to financial statements
                                       34

                    CARDIODYNAMICS INTERNATIONAL CORPORATION

                            Statements of Cash Flows

                 For the years ended November 30, 1999 and 1998


<TABLE>
<CAPTION>
                                                                                       1999                    1998
                                                                               ------------------     --------------------
<S>                                                                         <C>                     <C>
Cash flows from operating activities:
 Net loss                                                                    $         (3,992,927)  $           (5,334,949)
 Adjustments to reconcile net loss to net cash used in operating
  activities:
  Depreciation and amortization                                                           116,807                   93,728
  Gain on sale of fixed assets                                                               (614)                  (3,000)
  Provision for obsolete inventory                                                         69,829                   80,822
  Provision for warranty repairs                                                           75,752                   53,602
  Reduction in reserve for  inventory returns                                             (23,040)                (591,820)
  Provision for refurbishment of demonstration inventory units                             60,459                  117,818
  Provision for doubtful receivables                                                      519,920                   13,609
  Compensatory stock options granted                                                        8,274                       --
  Warrants issued in exchange for technology                                              350,479                       --
  Non-cash expense for retirement of Series A preferred stock                             483,333                       --
  Changes in operating assets and liabilities:
   Accounts receivable                                                                 (4,114,200)                (594,231)
   Inventory                                                                             (479,451)                (287,895)
   Other current assets                                                                   (28,274)                  56,505
   Long-term receivables                                                                  (25,973)                      --
   Deposits                                                                                (2,401)                 (12,311)
   Accounts payable                                                                       547,232                  282,312
   Accrued expenses                                                                        29,726                     (456)
   Accrued salaries, wages and benefits                                                    32,904                  192,547
                                                                               ------------------     --------------------
          Net cash used in operating activities                                        (6,372,165)              (5,933,719)
                                                                               ------------------     --------------------
Cash flows from investing activities:
 Purchases of property and equipment                                                      (33,542)                 (58,771)
 Proceeds from sale of fixed assets                                                         1,498                   53,000
                                                                               ------------------     --------------------
          Net cash used in investing activities                                           (32,044)                  (5,771)
                                                                               ------------------     --------------------
</TABLE>

See accompanying notes to financial statements.

                                       35

                    CARDIODYNAMICS INTERNATIONAL CORPORATION

                     Statements of Cash Flows, (Continued)

                 For the years ended November 30, 1999 and 1998

<TABLE>
<CAPTION>
                                                                                       1999                    1998
                                                                               ------------------     --------------------
Cash flows from financing activities:
<S>                                                                         <C>  <C>                <C> <C>
 Repayment of long-term debt                                                 $            (66,666)  $              (27,260)
 Borrowing of long-term debt                                                            2,000,000                   32,250
 Proceeds from line of credit                                                           1,000,000                       --
 Proceeds from debt issuance to related parties                                                --                1,000,000
 Proceeds from note payable to bank                                                            --                3,000,000
 Repayment of note payable to bank                                                     (2,000,000)              (1,000,000)
 Issuance of preferred stock                                                                   --                3,000,000
 Preferred stock issuance costs                                                            (8,608)                (117,463)
 Issuance of common stock, net                                                          5,252,107                   29,700
                                                                               ------------------     --------------------

          Net cash provided by financing activities                                     6,176,833                5,917,227
                                                                               ------------------     --------------------

Net decrease in cash and cash equivalents                                                (227,376)                 (22,263)

Cash and cash equivalents at beginning of year                                          2,633,086                2,655,349
                                                                               ------------------     --------------------

Cash and cash equivalents at end of year                                     $          2,405,710   $            2,633,086
                                                                               ==================     ====================
</TABLE>

<TABLE>
<CAPTION>
                                                                                       1999                   1998
                                                                               ------------------     -------------------
Supplemental disclosures of cash flow information:
<S>                                                                         <C>  <C>               <C>  <C>
 Cash paid for interest                                                      $            311,461   $             213,798
 Cash paid for income taxes                                                  $                800   $                 800

Supplemental disclosures of non-cash investing and financing activities:
 Common stock issued upon redemption or conversion of preferred stock        $          2,145,224   $             730,243
 Fixed assets acquired by capital lease                                      $            152,992   $             107,218
 Preferred stock dividends paid in common stock and warrants                 $            226,030   $              22,800
</TABLE>

                                       36

                   CARDIODYNAMICS INTERNATIONAL CORPORATION

                         Notes to Financial Statements

                          November 30, 1999 and 1998


(1) Summary of Significant Accounting Policies

    Description of Business

    CardioDynamics International Corporation (the "Company") was incorporated in
    California in June 1980 as Bomed Medical Manufacturing, Ltd. and changed its
    name to CardioDynamics International Corporation in October 1993. The
    Company develops, manufactures and markets heart-monitoring devices that
    provide physicians with continuous data on a wide range of parameters
    relating to blood flow and heart function.  Unlike other cardiac function
    monitoring technologies, our monitors are non-invasive.  Our primary
    products, the BioZ(TM) System, the BioZ(TM) Portable, and the BioZ.com(TM)
    use a technology called thoracic electrical bioimpedance (TEB) to obtain
    data which is typically available only through a time-consuming, costly, and
    potentially dangerous invasive procedure known as right heart
    catheterization, or pulmonary artery catheterization.

    Many patients who might otherwise benefit from cardiac function monitoring
    are often not given such treatment because the risks and costs associated
    with pulmonary artery catheterization often outweigh the potential benefits.
    The BioZ(TM) Systems allow these patients to receive treatment in a safe,
    efficient, and cost-effective manner. Since the BioZ(TM) Systems provide
    cardiac function monitoring noninvasively, they have the potential to expand
    the number of clinical applications well beyond cardiology, intensive care,
    and surgery.  These include applications for congestive heart failure, high
    blood pressure, emergency, dialysis, immune suppressed, high risk obstetric,
    and pacemaker patients.

    Cash Equivalents

    Cash equivalents consist of short-term money market funds and commercial
    paper and are stated at cost, which approximates fair market value. The
    Company considers all highly liquid debt instruments with original
    maturities of three months or less to be cash equivalents.

    The Company maintains its cash in bank deposit accounts which, at times, may
    exceed the federally insured limits. The Company has not experienced any
    losses in such accounts and management believes it places its cash on
    deposit with financial institutions that are financially stable. At November
    30, 1999, the Company has cash deposits in excess of federally insured
    limits totaling $2,205,710.

                                       37

                   CARDIODYNAMICS INTERNATIONAL CORPORATION

                         Notes to Financial Statements

                          November 30, 1999 and 1998

    Inventory

    Inventory is stated at the lower of cost or market, cost being determined on
    a first-in, first-out (FIFO) basis. The Company evaluates inventory on hand
    against historical and planned usage to determine appropriate provisions for
    obsolete, slow-moving and non-saleable inventory.

    Property and Equipment

    Property and equipment are recorded at cost. Property and equipment acquired
    under capital leases are recorded at the present value of future minimum
    lease payments. Leasehold improvements are amortized using the straight-line
    method over the shorter of the remaining lease term or the estimated useful
    life. Depreciation is computed using the straight-line method over the
    estimated useful lives of the assets, generally three to seven years.

    Revenue Recognition

    Revenue is recognized when a product is shipped or a service is provided to
    the customer with appropriate provisions for estimated returns and
    allowances.

    Warranty Cost

    The Company provides, by a current charge to cost of goods sold, an amount
    it estimates will be needed to cover future warranty obligations for
    products sold during the year. The accrued liability for warranty costs is
    included in accrued expenses in the accompanying balance sheets.

    Research and Development

    All research and development costs are expensed in the period incurred.

    Patents

    Costs to obtain, maintain and defend patents are expensed in the period
    incurred.

    Advertising

    All advertising costs are expensed in the period incurred.  Advertising
    costs, including trade show expenses, amounted to $320,728 and $339,470 in
    1999 and 1998, respectively.

    Segment Reporting

    Statement of Financial Accounting Standard (SFAS) No. 131, Disclosures about
    Segments of an Enterprise and Related Information, establishes annual and
    interim reporting standards for an enterprise's operating segments and
    related disclosures about its products, services, geographic areas and major
    customers. An operating segment is defined as a component of an enterprise
    that engages in business activities from which it may earn revenues and
    incur expenses, and about which separate financial information is regularly
    evaluated by the chief operating decision maker in deciding how to allocate
    resources. All of the Company's business activities are aggregated into one
    reportable segment given the similarities of economic characteristics
    between the activities and the common nature of the Company's services and
    customers.


                                       38

                   CARDIODYNAMICS INTERNATIONAL CORPORATION

                         Notes to Financial Statements

                          November 30, 1999 and 1998


    Income Taxes

    Income taxes are accounted for under the asset and liability method.
    Deferred tax assets and liabilities are recognized for the future tax
    consequences attributable to differences between the financial statement
    carrying amounts of existing assets and liabilities and their respective tax
    bases and operating loss and tax credit carry-forwards. Deferred tax assets
    and liabilities are measured using enacted tax rates expected to apply to
    taxable income in the years in which those temporary differences are
    expected to be recovered or settled. The effect on deferred tax assets and
    liabilities of a change in tax rates is recognized in income in the period
    that includes the enactment date.

    Net Loss Per Share

    Net loss per common share is computed by dividing the net loss to common
    shareholders by the weighted average number of shares outstanding during the
    period. Diluted loss per share is calculated by including the additional
    common shares issuable upon exercise of outstanding options and warrants in
    the weighted average share calculation. Basic and diluted loss per common
    share are the same for the years ended November 30, 1999 and 1998 as all
    potentially dilutive securities are antidilutive. For the year ended
    November 30, 1999, 3,831,866 options and 2,993,184 warrants, each
    convertible into one share of common stock, were not included in the diluted
    earnings per share calculation as their effect was antidilutive. At November
    30, 1998, 3,550,000 options and 447,848 warrants were not included in the
    diluted earnings per share calculation.

    Significant Customers

    In August of 1999 the Company entered into a strategic alliance with GE
    Marquette for exclusive distribution of our BioZ.com in Europe. In October
    1999 the Company expanded on the European agreement by signing an U.S.
    hospital distribution agreement. During fiscal 1999 sales to GE Marquette
    resulted in $1,075,800 of revenue, representing 15% of net sales. Sales to
    international distributors including GE Marquette represented 21% of net
    sales during fiscal 1999. In fiscal 1998, sales to international
    distributors accounted for 25% of net sales. No one customer represented
    more than 10% of net sales in fiscal 1998.

    Fair Value of Financial Instruments

    The carrying amount of cash and cash equivalents, accounts receivable,
    accounts payable, accrued expenses and accrued salaries, wages and benefits,
    are considered to be representative of their fair values because of the
    short-term nature of these financial instruments. The carrying amount of the
    note payable to bank and long-term debt is a reasonable estimate of fair
    value as the loans bear interest based on market rates available for debt
    with similar terms. It is not practical to estimate the fair value of notes
    payable to related parties because of the related party nature.

                                       39

                   CARDIODYNAMICS INTERNATIONAL CORPORATION

                         Notes to Financial Statements

                          November 30, 1999 and 1998

    Stock-Option Plan

    The Company accounts for stock options granted to employees in accordance
    with the provisions of Accounting Principles Board ("APB") Opinion No. 25.
    As such, compensation expense is recorded on the date of grant only if the
    current market price of the underlying stock exceeds the exercise price. The
    Company applies the disclosure only provisions of Statement of Financial
    Accounting Standards ("SFAS") No. 123, which established accounting and
    disclosure requirements using fair-value-based method of accounting for
    stock based employee compensation plans.

    Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of

    In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
    Assets and for Long-Lived Assets to be Disposed of, the Company reviews
    long-lived assets and certain identifiable intangibles for impairment
    whenever events or changes in circumstances indicate that the carrying
    amount of an asset may not be recoverable. Impairment losses for long-lived
    assets to be held and used are recorded by reducing the carrying value, to
    the fair value of the asset. Assets to be disposed of are reported at the
    lower of the carrying amount or fair value, less costs to sell.

    Reclassifications

    Certain reclassifications have been made to certain prior year balances in
    order to conform to current year presentation.

    Use of Estimates

    Management of the Company has made a number of estimates and assumptions
    relating to the reporting of assets and liabilities, revenue and expenses,
    and the disclosure of contingent assets and liabilities to prepare these
    financial statements in conformity with generally accepted accounting
    principles. Actual results could differ from those estimates.

(2) Inventory

    Inventory at November 30, 1999 and 1998 consists of the following:

<TABLE>
<CAPTION>
                                                                    1999                     1998
                                                           -------------------      -------------------
<S>                                                     <C>                      <C>
Electronic components and subassemblies                  $             791,603    $             497,050
Finished goods                                                         552,025                  410,191
Demonstration units                                                    628,190                  547,101
Distributor inventory to be returned (note 9)                               --                   38,025
Less provision for obsolete inventory                                 (366,714)                (296,885)
Less provision for demonstration inventory                            (260,577)                (200,118)
                                                           -------------------      -------------------
                                                         $           1,344,527    $             995,364
                                                           ===================      ===================
</TABLE>

    In 1999 and 1998 the Company used a number of vendors for components and
    subassemblies and believes that, should these suppliers not be able to
    provide inventory to the Company in the future, it would be able to obtain
    alternate suppliers within a reasonable amount of time to meet production
    demands.

                                       40

                    CARDIODYNAMICS INTERNATIONAL CORPORATION

                         Notes to Financial Statements

                           November 30, 1999 and 1998
(3)  Property and Equipment

     Property and equipment at November 30, 1999 and 1998 consist of the
     following:

<TABLE>
<CAPTION>
                                                                                   1999                     1998
                                                                          -------------------      -------------------
<S>                                                                    <C>                      <C>
Furniture                                                               $              81,165    $              85,362
Exhibit booth                                                                           4,800                    4,800
Other equipment                                                                        93,779                  120,579
Lab equipment                                                                          58,175                   68,122
Manufacturing equipment and fixtures                                                   52,070                   26,429
Sales equipment                                                                        26,282                   57,626
Computer software and equipment                                                       193,134                   76,656
Leasehold improvements                                                                115,885                  115,885
                                                                          -------------------      -------------------
                                                                                      625,290                  555,459
Less accumulated depreciation and amortization                                       (289,530)                (288,542)
                                                                          -------------------      -------------------
                                                                        $             335,760    $             266,917
                                                                          ===================      ===================
</TABLE>

     At November 30, 1999 and 1998, the Company had $244,230 and $107,218 of
     property and equipment under capital lease, respectively.  Accumulated
     amortization on the leased equipment was $60,338 in 1999 and  $19,677 in
     1998.

(4)  Financing Agreements

     In May 1998, the Company entered into a six month unsecured term loan
     agreement with Imperial Bank. Under the terms of the agreement the Company
     could borrow up to $4,000,000, of which the Company borrowed $3,000,000.
     The loan bore interest at one percent above the Bank's Prime Rate and was
     guaranteed by the co-chairmen of the Company's Board of Directors. In
     August 1998, the Company repaid $1,000,000 of the $3,000,000, reducing the
     outstanding balance to $2,000,000. In exchange, the Bank extended the term
     of the loan until February 28, 1999. This note was repaid by the Company
     and retired on February 26, 1999.

     In March 1998, the Company entered into an 18 month unsecured private line
     of credit agreement with the co-chairmen of the Company's Board of
     Directors. Under the terms of the agreement the Company may borrow up to
     $3,000,000 on an as-needed basis at an annual interest rate of 10.0%. In
     August of 1998 the Company borrowed $1,000,000 on this line of credit and
     used the proceeds to reduce outstanding borrowings under the bank term
     loan. In February 1999, the line of credit was extended to September 30,
     2000. At November 30, 1999, $1,000,000 was outstanding under the agreement.

                                      41

                    CARDIODYNAMICS INTERNATIONAL CORPORATION

                         Notes to Financial Statements

                           November 30, 1999 and 1998


(4)  Financing Agreements - (Continued)

     In January 1999, the Company obtained a secured revolving credit line with
     Imperial Bank. The credit line provides for borrowing up to $3,000,000 at
     the bank's prime rate. Under the terms of the agreement, the Company is
     required to meet certain loan covenants, including maintenance of minimum
     quick ratio and maximum quarterly losses. All the assets of the Company
     collateralize the credit line. At November 30, 1999 $1,000,000 was
     outstanding on the line of credit. In February 2000 the credit line was
     renewed through February 2001 with a borrowing limit of $3,000,000 at the
     bank's prime rate.

(5)  Long-term Debt

     Long-term debt at November 30, 1999 and 1998 consists of the following:
<TABLE>
<CAPTION>
                                                                      1999                 1998
                                                              -----------------     ----------------
<S>                                                         <C>                   <C>
Prepetition and postpetition payroll taxes payable in
 installments including interest at 8%.                              $   22,513             $ 33,793

Note Payable to City National Bank, payable in monthly
 principal installments of $83,333 each plus interest at
 one percent above the bank's prime rate, beginning in
 March 2000, guaranteed by certain shareholders.                      2,000,000                   --

Capital lease obligations payable in monthly installments
 between $52 and  $1,192, bearing interest at rates
 between 10% and 20.8%, maturing from December 2000 to                  188,844               91,238
 February 2003.

Note payable to CardioDynamics Holdings, LLC, a related
 party, collateralized by a subordinated interest in
 substantially all assets of the Company, bearing
 interest at 7.5% per annum with interest-only payments
 due quarterly, maturing March 31, 2000. Convertible into
 common stock at a rate of $.25 per share.                               25,000               25,000
                                                              -----------------     ----------------
                                                                      2,236,357              150,031
Less current maturities of long-term debt                              (885,932)             (37,816)
                                                              -----------------     ----------------
                                                            $         1,350,425   $          112,215
                                                              =================     ================
</TABLE>

     The aggregate maturities of long-term debt subsequent to November 30, 1999
     are as follows: 2000, $885,932; 2001, $1,062,096; 2002, $284,412 and 2003,
     $3,917.

                                      42

                   CARDIODYNAMICS INTERNATIONAL CORPORATION

                         Notes to Financial Statements

                          November 30, 1999 and 1998


(6)  Shareholders' Equity

    During February 1995, the Company entered into an agreement with a related
    party, CardioDynamics Holdings, LLC ("CDH"), a California limited liability
    company, for the sale of approximately 37.6% of the Company's common stock.
    Additionally, the Company issued a five-year secured promissory note (the
    "CDH note") in the amount of $100,000. In fiscal 1996 and 1997, the CDH note
    was amended to increase the loan amount, establish a per share conversion
    price of $0.25 per share, subject to adjustment under specified
    circumstances, and change the maturity date to March 31, 2000. The CDH note
    is collateralized by a subordinated interest in substantially all of the
    assets of the Company. Advances under the CDH note accrue interest at 7.5%
    with interest-only payable quarterly through maturity at March 31, 2000. At
    November 30, 1999 and 1998, $25,000 was outstanding under this note (See
    Note 5).

    On March 6, 1997, in connection with the $7.2 million private placement the
    company issued 276,514 common stock warrants to EVEREN Securities, Inc.
    which served as placement agent. Each warrant represents the right to
    purchase one share of the Company's common stock at an exercise price of
    $3.56, until the expiration date of March 5, 2002.

    On May 15, 1998 in connection with the completion of the Imperial Bank
    financing agreement, 33,334 common stock purchase warrants were issued to
    the bank. Each warrant represents the right to purchase one share of the
    Company's common stock at an exercise price of $3.00, until the expiration
    date of May 14, 2003. On August 21, 1998 an additional 15,000 common stock
    purchase warrants were issued to the bank. Each warrant represents the right
    to purchase one share of the Company's stock at an exercise price of $2.00,
    until the expiration date of August 21, 2003.

    On August 21, 1998 the Company sold 3,000 shares of Series A convertible
    preferred stock to institutional investors. In conjunction with this
    financing 123,000 common stock purchase warrants were issued. Each warrant
    represents the right to purchase one share of the Company's common stock at
    an exercise price of $2.55, until the expiration date of August 21, 2003.

    In March 1999, in connection with the City National Bank financing
    agreement, the Company issued 50,000 common stock warrants. Each warrant
    represents the right to purchase one share of the Company's stock at an
    exercise price of $2.20, until the expiration date of March 7, 2004.

    On May 28, 1999 the Company completed a $5.2 million private placement of
    common stock to institutional and other accredited investors who purchased
    unregistered shares with a six-month holding restriction for $1.00 per
    share, representing a 27% discount from the closing bid price.

    On August 25, 1999 the Company issued 2,000,000 common stock warrants to
    GE Marquette. 1,000,000 of the warrants were granted to obtain access to
    GE Marquette's technology. In connection with these warrants, the Company
    recorded a non-cash accounting charge of $350,479 in fiscal 1999. The second
    1,000,000 warrants are performance based and will vest and be expensed after
    15 months, provided GE Marquette meets certain stated minimum sales
    objectives under the distribution agreements with the Company. Each warrant
    represents the right purchase one share of the Company's stock at an
    exercise price of $4.10, until the expiration date of August 25, 2004.

    On December 3, 1999, the Company completed a $3.3 million private placement
    of common stock to institutional investors who purchased unregistered shares
    with a four-month holding restriction for $2.50 per share, representing a 9%
    discount from the 30-day average closing bid price.

                                       43

                   CARDIODYNAMICS INTERNATIONAL CORPORATION

                         Notes to Financial Statements

                          November 30, 1999 and 1998

(7) Convertible Preferred Stock

    On August 21, 1998, the Company sold 3,000 shares of Series A convertible
    preferred stock and 123,000 warrants to institutional investors for
    $3,000,000, net of issuance costs of $117,463. The Series A preferred stock
    was convertible into common stock at the lesser of $2.70 or 95% of the then-
    current common stock market value (92% after August 21, 1999). The Series A
    preferred stock had a cumulative dividend of 3% per year, which could be
    paid in cash or the Company's common stock at the discretion of the Company.
    For the year ended November 30, 1999, the Company issued 26,548 shares of
    common stock as dividends to the preferred shareholders. For the year ended
    November 30, 1998, 8,152 shares were issued as dividends.

    To achieve an orderly conversion of the outstanding shares of the Series A
    convertible preferred stock, with minimum impact on the market price of the
    Company's common stock, in June 1999, the Company identified a group of
    strategic investors and facilitated the private sale of the common shares
    issued upon conversion. In conjunction with this transaction, the Company
    issued 305,772 additional shares of common stock at the market price of
    $1.56 per share and 20,336 common stock purchase warrants at an exercise
    price of $1.63, with an expiration date of June 2002. As a result of the
    Series A preferred stock retirement, in August 1999 the Company recorded a
    non-cash accounting charge of $483,333 which is included in other expenses.

    During fiscal 1999 all outstanding shares of the Series A preferred stock
    were converted into 1,567,962 shares of common stock. During fiscal 1998,
    the preferred shareholders converted 760 shares of Series A preferred stock
    in exchange for 554,134 shares of common stock.

    The original purchasers of the Series A preferred stock could, under certain
    conditions, require the Company to sell them up to 3,000 shares of Series B
    preferred stock. In August of 1999 $191,564 was recorded as a preferred
    stock dividend related to 375,000 premium priced warrants issued to the
    Series A preferred stock investors in exchange for the elimination of their
    right to buy the additional 3,000 shares of Series B preferred stock. Each
    warrant represents the right to purchase one share of the Company's common
    stock at an exercise price of $3.54 per share, until the expiration date in
    August 2004.

(8) Stock Options

    In 1995, the shareholders approved a Stock Option/Stock Issuance Plan (the
    "Option Plan") that provides for the granting of options to officers,
    directors and key employees to purchase the Company's common stock. Under
    the Option Plan, as amended in 1998, 4,000,000 shares of common stock have
    been reserved for granting of options at 100% of the fair market value of
    the Company's common stock on the date of grant.

                                       44

                   CARDIODYNAMICS INTERNATIONAL CORPORATION

                         Notes to Financial Statements

                          November 30, 1999 and 1998


(8) Stock Options - (Continued)

    The Option Plan also provides for monthly grants, at fair market value to
    each non-employee director of the Company, of options to purchase 1,000
    shares of Company common stock as payment for director fees for each full
    month of service. The options are exercisable immediately upon grant and
    expire upon the earlier of ten years from the date of grant or two years
    after the director terminates his position on the Board. During 1999 and
    1998, 81,000 and 100,000 options were granted to the Board of Directors. The
    Option Plan also provides for grants of options and issuance's of stock in
    exchange for professional services. During 1999 37,500 options, with a value
    of $8,274, were granted in exchange for services. During 1998, the Company
    did not grant any stock options in exchange for professional services.

    At November 30, 1999, there were 1,564,134 shares available for grant under
    the Option Plan. The per share weighted-average fair value of stock options
    granted during 1999 and 1998 was $.80 and $1.22 on the date of grant using
    the Black Scholes option-pricing model with the following weighted-average
    assumptions: 1999 - expected dividend yield 0%, risk-free interest rate of
    5.17%, expected volatility of 33.2% and an expected life of 4 years; 1998 -
    expected dividend yield 0%, risk-free interest rate of 4.86%, expected
    volatility of 74.5% and an expected life of 3 years.

    The Company applies APB Opinion No. 25 in accounting for its Option Plan
    and, accordingly, no compensation cost has been recognized in the financial
    statements for its stock options issued to officers, directors, and
    employees. Had the Company determined compensation cost based on the fair
    value at the grant date for its stock options under SFAS No. 123, the
    Company's net loss would have been increased to the pro forma amounts
    indicated below:

<TABLE>
<CAPTION>
                                                                                   1999                     1998
                                                                          -------------------      -------------------
<S>                                                                    <C>  <C>                 <C>  <C>
Net loss to common shareholders, as reported                           $           (4,218,957)   $          (5,357,749)
Pro forma net loss to common shareholders                              $           (4,740,510)   $          (6,595,785)
Net loss per share to common shareholders basic and diluted, as
 reported                                                              $                 (.12)   $                (.17)
Pro forma net loss per share to common shareholders basic and diluted
                                                                       $                 (.13)   $                (.21)
</TABLE>

                                       45

                    CARDIODYNAMICS INTERNATIONAL CORPORATION

                         Notes to Financial Statements

                           November 30, 1999 and 1998

(8)  Stock Options - (Continued)

     Stock option activity during the periods indicated is as follows:

<TABLE>
<CAPTION>
                                                                                                     Weighted-average
                                                                             Number of shares         exercise price
                                                                          -------------------      -------------------
<S>                                                                         <C>                 <C>
Balance at November 30, 1997                                                        1,444,000    $                2.50
Granted                                                                             1,464,000                     1.99
Exercised                                                                             (28,000)                    1.06
Forfeited                                                                            (537,832)                    2.85
Expired                                                                              (337,168)                    3.32
                                                                          -------------------      -------------------
Balance at November 30, 1998                                                        2,005,000    $                1.91

Granted                                                                               655,700                     2.34
Exercised                                                                             (91,000)                    1.66
Forfeited                                                                            (244,834)                    1.89
Expired                                                                               (38,000)                    2.85
                                                                          -------------------      -------------------
Balance at November 30, 1999                                                        2,286,866    $                2.04
                                                                          ===================      ===================
</TABLE>

     At November 30, 1999 the range of exercise prices and weighted-average
     remaining contractual life of outstanding options was $0.95- $4.56 and 7.7
     years. At November 30, 1999 and 1998, the number of options exercisable was
     968,269 and 604,002, respectively, and the weighted-average exercise price
     of those options was $2.15 and $2.21, respectively.

     The following table sets forth information regarding options outstanding at
     November 30, 1999:

<TABLE>
<CAPTION>
                                     Options Outstanding                            Options Exercisable
                    -----------------------------------------------------    ----------------------------------
                                            Weighted-
                                             average          Weighted-                             Weighted-
     Range of                               remaining          average                               average
     exercise             Number           contractual        exercise           Number             exercise
      prices           outstanding            life              price          exercisable           price
----------------    ----------------    ----------------    -------------    ---------------    ---------------
<S>               <C>                <C>                 <C>               <C>                  <C>
$  0.95 - 1.31           480,500              5.6           $    1.12            263,958        $         1.18
   1.50 - 2.25         1,209,200              8.7                1.87            329,310                  1.79
   2.34 - 3.50           550,166              7.3                3.04            366,001                  3.08
   3.57 - 4.56            47,000              6.4                3.81             39,000                  3.82
                    ----------------                                         ---------------
                       2,286,866              7.7           $    2.04            968,269        $         2.15
                    ================                                         ===============
</TABLE>

                                       46

                    CARDIODYNAMICS INTERNATIONAL CORPORATION

                         Notes to Financial Statements

                           November 30, 1999 and 1998


(8)  Stock Options - (Continued)

     On October 16, 1998, the Company adopted a Stock Option
     Cancellation/Regrant program. Each employee was given the opportunity to
     exchange their existing options for new options, exercisable at $1.625 per
     share, the fair value of the Company's common stock on October 16, 1998.
     All accrued vesting under the old stock options was forfeited, and the new
     options began a new vesting schedule (over the same number of years as the
     old option's vesting schedule). For all employees other than executive
     officers, the new options were granted for the same number of shares as the
     old options. For executive officers, the new options were granted for a
     fewer number of shares. The reduction in option shares for the executive
     officers was calculated by a formula based on the Black-Scholes option
     valuation model.

     Under the program 537,832 Plan options were forfeited with an average
     exercise price of $2.74. 673,000 new options were granted under the Plan
     with an exercise price of $1.625 per share and 135,168 options were
     forfeited. Eligible optionees representing 678,000 options with an average
     price $1.75 elected not to participate in the program. These amounts are
     included in the table above.

     In June 1995, the Company entered into an employment agreement with its
     then Chief Executive Officer, Richard Otto. Under the terms of the
     agreement, Mr. Otto was granted 500,000 non-transferable stock options (not
     under the Option Plan) at an exercise price of $0.50 per share. The options
     vest if the quoted market price of the Company's stock attains specified
     levels. Upon the attainment of the specified levels, the Company will
     record compensation cost. During 1997, Mr. Otto voluntarily agreed to
     reduce the number of options to 250,000. At November 30, 1999, none of
     these options were vested.

     On March 23, 1998, the Company entered into an employment agreement with
     Michael Perry who succeeded Mr. Otto as Chief Executive Officer. Under the
     terms of the agreement, Mr. Perry was granted 1,500,000 non-transferable
     stock options (not under the Option Plan) at an exercise price of $2.55 per
     share, subject to vesting requirements. The first tranche vested on
     September 23, 1998, and the final tranche was not scheduled to vest until
     March 23, 2002. Under the October 16, 1998 Stock Option
     Cancellation/Regrant program, Mr. Perry cancelled his 1,500,000 old options
     in exchange for a new grant of 1,295,000 options. The new options have an
     exercise price of $1.625 per share, and all accrued vesting was forfeited.
     The new options vest over a four-year period with a commencement date of
     October 16, 1998. At November 30, 1999, 323,750 of the options are vested.
     The options expire on October 15, 2008.

                                       47

                    CARDIODYNAMICS INTERNATIONAL CORPORATION

                         Notes to Financial Statements

                           November 30, 1999 and 1998

(9)  Income Taxes

     Income taxes in the accompanying statements of operations are comprised of
     the following:

<TABLE>
<CAPTION>
                             1999          1998
                          ---------     ---------
<S>                    <C>           <C>
Federal                 $        --   $        --
State                           800           800
                          ---------     ---------
                        $       800   $       800
                          =========     =========
</TABLE>

     At November 30, 1999, the Company had federal net operating loss
     carryforwards of approximately $21,465,300, expiring as follows:

<TABLE>
<S>          <C>               <C>          <C>
2000         $  328,900         2009        $  513,000
2001            442,500         2010         2,376,000
2002          1,284,000         2011         2,445,000
2005            752,600         2012         3,201,000
2006            787,400         2018         4,445,000
2007            556,600         2019         3,900,000
2008            433,300
</TABLE>

     These amounts may be subject to significant limitations under IRC Section
     382. The Tax Reform Act of 1986 contains provisions which limit the federal
     net operating loss carryforwards that can be used in any given year in the
     event of certain occurrences, including significant ownership changes. A
     valuation allowance has been recognized for the full amount of the deferred
     tax asset created by these carryforwards.

     At November 30, 1999, the Company had state net operating loss
     carryforwards of approximately $12,751,000 that expire in years 2000 to
     2005.

     The tax effects of temporary differences that give rise to significant
     portions of the deferred tax assets as of November 30, 1999 and 1998 are as
     follows:

<TABLE>
<CAPTION>
                                                              1999                   1998
                                                       ------------------      ---------------
<S>                                                    <C>                     <C>
Deferred tax assets:
 Net operating loss carryforwards                             $ 8,707,200      $     8,076,500
 Allowance for doubtful accounts and returns                      236,700                    0
 Inventory                                                        792,300              150,400
 Accrued expenses                                                 220,900              219,000
 Other                                                             21,900               18,500
                                                                               ---------------

          Total gross deferred tax assets                       9,979,000            8,464,500

Valuation allowance                                            (9,979,000)          (8,464,500)
                                                       ------------------      ---------------

          Net deferred tax assets                      $               --      $            --
                                                       ==================      ===============
</TABLE>

     A 100% valuation allowance has been applied to these net deferred tax
     assets. Accordingly, no tax benefit has been recorded for the years ended
     November 30, 1999 and 1998.

                                       48

                    CARDIODYNAMICS INTERNATIONAL CORPORATION

                         Notes to Financial Statements

                           November 30, 1999 and 1998


(10)  Leases

      In June 1997, the Company entered into a five-year operating lease for a
      19,000 square-foot manufacturing facility that also houses the Company's
      research, development, marketing, sales and administrative activities.
      Future minimum lease payments under all non-cancelable operating leases
      (with initial or remaining lease terms in excess of one year) as of
      November 30, 1999 are:

<TABLE>
<CAPTION>
Year ending November 30,
------------------------
<S>                                        <C>
        2000                               $  241,137
        2001                                  223,066
        2002                                  165,293
                                            ---------

        Total minimum lease payments       $  629,496
                                            =========
</TABLE>

     Rent expense under operating leases was $286,570 and $291,214 for the years
     ended November 30, 1999 and 1998, respectively.

(11)  401k Plan

      Effective April 1996, the Company established a qualified savings plan
      under Section 401(k) of the Internal Revenue Code. Employees who have
      completed three months of service and are 21 years of age are eligible to
      participate in the plan, subject to limitations. The Company may make
      discretionary contributions to the plan. Eligible employees may contribute
      up to 20% of eligible wages. Employer matching contributions were $24,107
      and $7,035 for the fiscal years ended November 30, 1999 and 1998,
      respectively.

(12)  Related Party Transactions

      The Company receives certain engineering, development and consulting
      services from a related party. The Company paid $391,293 and $454,801 for
      these services in 1999 and 1998, respectively. Amounts payable to this
      related party at November 30, 1999 and 1998 were $38,509 and $125,460,
      respectively.

(13)  Segment Information

      Revenues derived by geographic segment are as follows:

                                                1999            1998
                                                ----            ----
      U.S.                                   $5,759,630      $1,571,600
      International                           1,521,278         527,096
                                             ----------      ----------
                                             $7,280,908      $2,098,696
                                             ==========      ==========

                                       49

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
          FINANCIAL DISCLOSURE

          None.

                                    PART III

ITEM 9.   DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
          COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Directors and Executive Officers

The names of our directors and executive officers, together with certain
information regarding them, as of February 22, 2000 are as follows:
<TABLE>
<CAPTION>
               Name                        Age                            Position
----------------------------------  ------------------  --------------------------------------------
<S>                                 <C>                 <C>
Allen E. Paulson                            77          Co-Chairman of the Board of Directors
James C. Gilstrap                           63          Co-Chairman of the Board of Directors
Michael K. Perry                            39          Chief Executive Officer and Director
Rhonda F. Rhyne                             39          President
Stephen P. Loomis                           39          Chief Financial Officer
Richard E. Trayler                          49          Chief Operating Officer
Dennis G. Hepp                              51          Chief Technology Officer
Russell H. Bergen                           53          Vice President of Operations
Connie R. Curran, Ed.D., RN                 52          Director
Louis P. Ferrero                            57          Director
Cam L. Garner                               51          Director
Richard O. Martin, Ph.D.                    60          Director
</TABLE>
___________________

During the past five years, the business experience, principal occupations and
employment of our directors and executive officers have been as follows:

Allen E. Paulson.  Mr. Paulson has been Co-Chairman of our Board since June 1996
and Director since February 1995. Mr. Paulson owns numerous companies having
substantial investments in diverse industries, including aerospace; energy
exploration; horse breeding, training, and racing; automobile dealerships;
gaming and entertainment; and real estate and resorts. Mr. Paulson is the
founder and Chairman Emeritus of Gulfstream Aerospace Corporation, the world's
leading designer, manufacturer and marketer of large corporate jets. He has
earned numerous awards including the Horatio Alger Award for Distinguished
Americans, and the American Academy of Achievement's Golden Plate Award, as well
as five honorary doctorates.

                                       50

Directors and Executive Officers - (Continued)

James C. Gilstrap.  Mr. Gilstrap served as Chairman of the Board of our Company
from May 1995 to June 1996, and has been Co-Chairman of the Board since June
1996.  Mr. Gilstrap is retired from Jefferies & Company, where he served as
Senior Executive Vice President, Partner, and Member of the Executive Committee.
Mr. Gilstrap serves on the Board of Full House Resorts, Inc. and is past
President of the Dallas Securities Dealers as well as a past member of the Board
of Governors of the National Association of Securities Dealers, Inc.

Michael K. Perry.  Mr. Perry has been Chief Executive Officer and a Director of
our Company since April 1998.  From 1994 to 1997, Mr. Perry was Vice President
of Operations at Pyxis Corporation, and in 1995 assumed additional
responsibility for Research and Development.  Pyxis Corporation is a pioneer of
healthcare automation and information management services, in addition to
pharmacy management services to hospitals and outpatient facilities.  Mr. Perry
was part of the executive team that successfully acquired and integrated three
businesses into Pyxis, and in 1996, sold the company to Cardinal Health, Inc.
Prior to joining Pyxis, Mr. Perry served in several increasingly responsible
management assignments with Hewlett Packard Company's Medical Products Group in
manufacturing and finance.  Additionally, he was Director of Quality for a
division of Hewlett-Packard's Deskjet Printer Group.  Mr. Perry holds a Master's
Degree in Business Administration from Harvard University and a Bachelor's
degree in Mechanical Engineering from General Motors Institute.  Mr. Perry
serves on the Advisory Board of the University of California San Diego
Cardiovascular Center and the Board of Directors for Junior Achievement of San
Diego.

Rhonda F. Rhyne.  Ms. Rhyne has been President of our Company since June 1997.
She served as Vice President of Operations from June 1995 to January 1996 and as
Chief Operating Officer from February 1996 to May 1997.  Ms. Rhyne has over 15
years of healthcare experience, including medical product development, rapid
growth transitions, sales and marketing, and executive management.  From July
1992 until May 1995, Ms. Rhyne held the positions of President/Chief Executive
Officer, Vice President of Sales and Marketing, and Board member at Culture
Technology, Inc., a privately held biotechnology company specializing in
culturing autologous skin for burn patients.  Ms. Rhyne has also held positions
at GE Medical Systems and Quinton Instrument Company, both medical device
subsidiaries of publicly held companies. Ms. Rhyne holds a Bachelor of Pharmacy
from Washington State University and a Masters in Business Administration,
Executive Program, from UCLA Anderson School of Business in Los Angeles.

Stephen P. Loomis.  Mr. Loomis joined our Company in September 1996 as Vice
President of Finance and has held the positions of Chief Financial Officer and
Corporate Secretary since April 1997.  Mr. Loomis is a Certified Public
Accountant with more than 14 years experience in finance and business
development with both publicly traded and privately held companies.  From 1993
until joining CardioDynamics, he served as Director of Financial Reporting at
Kinko's Inc.  From 1988 to 1993, Mr. Loomis was the Chief Financial Officer for
Terminal Data Corporation, a publicly traded high-speed document imaging
company.  Prior to that, Mr. Loomis was with Peat Marwick.  He earned his
Bachelor of Science Degree in Business Administration from California State
University at Northridge.

Richard E. Trayler.  Mr. Trayler joined our Company in July 1997 as Chief
Operating Officer.  From 1982 to 1997, Mr. Trayler held positions of regional
and divisional sales manager at Quinton Instrument Company, a medical device
subsidiary of American Home Products Corporation.  He has also held positions at
the Heart Institute for CARE, the University of Washington, and the Boeing
Company where he assisted cardiologists in the clinical assessment of cardiac
patients.  Mr. Trayler earned a Bachelors Degree from Texas A&M University, a
Masters Degree from the University of Washington, and a Master of Christian
Leadership Degree from Western Conservative Baptist Seminary (Phoenix Seminary).

                                       51

Dennis G. Hepp.  Mr. Hepp was appointed Chief Technology Officer of our Company
in June 1997.  Mr. Hepp has served as a consultant to us since July 1995.  He
has over 30 years experience in cardiovascular clinical medicine and the medical
device industry.  From 1974 to 1986, Mr. Hepp held various engineering and
management positions at Medtronic, Inc.  In 1989, Mr. Hepp founded and he
continues to serve as Managing Director of Rivertek Medical Systems, Inc.,
Minneapolis, Minnesota, which serves as an engineering consulting firm to
medical device manufacturers, including Guidant Corporation and Medtronic, Inc.,
as well as emerging medical technology companies such as CardioDynamics. Mr.
Hepp holds a Bachelor of Electrical Engineering from the University of Detroit.

Russell H. Bergen.  Mr. Bergen joined our Company in September 1998 as Vice
President of Operations.  From 1971 to 1998, Mr. Bergen held several positions
at Hewlett-Packard Company's Instrument Group, Peripheral Products Group and Ink
Jet Business Unit, including Writing System Program Manager, Customer
Satisfaction Manager, Production Manager, Manufacturing Engineering Manager, New
Product Support Manager, and Materials Engineering Manager. Previously, Mr.
Bergen was employed at Honeywell, Inc.'s Peripheral Products Group as a
Procurement Engineer.  Mr. Bergen earned Bachelor of Science degrees in
Aerospace Engineering and Manpower Management from the University of Colorado,
Boulder.

Connie R. Curran, Ed.D., RN.  Dr. Curran has served as a Director of our
Company since February 2000.  Dr. Curran has been President and Chief Executive
Officer of CurranCare since 1995. CurranCare is a national management services
organization with a mission to change the way health care is delivered.  Dr.
Curran has held a variety of executive positions in academia, multi-system
health care operations, and as Vice President of the American Hospital
Association as well as the National Director of Patient Care for APM, Inc.  Dr.
Curran serves as Director for Allegiance Corporation and Finova Group.  Dr.
Curran holds a Masters Degree in Medical-Surgical Nursing from De Paul
University and a Doctorate in Educational Psychology from Northern Illinois
University.

Louis P. Ferrero.  Mr. Ferrero has served as a Director of our Company since
July 1997.  Mr. Ferrero has been Chairman and Chief Executive Officer of Conseco
Global Investments since 1991.  Conseco Global Investments is an investment
company, which identifies emerging investment opportunities for Conseco, Inc., a
major insurance holding company.  Before joining Conseco Global Investments, Mr.
Ferrero was Chairman and Chief Executive Officer of Anacomp, Inc., a full-
service provider of computer and micrographics equipment, service and supplies.
Mr. Ferrero holds a Bachelor of Economics and Marketing degree from the
University of Florida.

Cam L. Garner.  Mr. Garner has served as a Director of our Company since July
1997.  Mr. Garner has been Chairman, President and Chief Executive Officer of
Dura Pharmaceuticals, Inc., a respiratory products company, since 1990.  Prior
to joining Dura Pharmaceuticals, Inc., Mr. Garner was Senior Vice President of
Sales and Marketing with Hybritech, Inc., a division of Eli Lilly & Co.  Mr.
Garner serves as Director for Trega Biosciences, Inc., Nanogen, Inc., Safeskin
Corporation, Spiros Development Corporation and DJPharma, as well as for Dura
Pharmaceuticals.  Mr. Garner earned a Masters Degree in Business Administration
from Baldwin-Wallace College and a Bachelor of Arts degree in Biology from
Virginia Wesleyan.

Richard O. Martin, Ph.D.  Dr. Martin has served as a Director of our Company
since July 1997.  Dr. Martin is currently President of Medtronic-Physio-Control
Corporation, a medical device company which designs, manufactures and sells
external defibrillators and heart monitors.  Until Medtronic's acquisition in
1998 of Physio-Control Corporation, Dr. Martin was Chairman and CEO. Prior to
that he was Vice President of Cardiovascular Business Development with Sulzer
Medica and has held several management positions at Intermedics, Inc. and
Medtronic, Inc.  Dr. Martin serves on the Boards of Maxxim Medical, Inc., and
Encore Medical.  Dr. Martin earned a Doctorate in Electrical/ Biomedical
Engineering at Duke University.

                                       52

Section 16(a) Beneficial Ownership Reporting Compliance

We believe that each person who, at any time during the fiscal year ended
November 30, 1999, was a director, officer, or beneficial owner of more than 10%
of a class of registered equity securities of CardioDynamics, filed on a timely
basis all reports required by Section 16(a) of the Securities Exchange Act.


ITEM 9.   EXECUTIVE  COMPENSATION

The following table provides information regarding the annual and long-term
compensation earned for services rendered in all capacities to CardioDynamics
for the fiscal years ended November 30, 1997, 1998 and 1999 of those persons who
were, at November 30, 1999 (i) the Chief Executive Officer and (ii) the other
executive officers of CardioDynamics whose aggregate direct remuneration from
CardioDynamics during the fiscal year ended November 30, 1999 exceeded $100,000
(collectively, the "Named Officers").

                          SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                                                   Long Term Compensation
                                                                          -----------------------------------
                                                                                                   Awards
                                                     Annual Compensation (1)                   --------------
                                     --------------------------------------------------------    Securities
                                                                                 Other           Underlying
Name and                                                                        Annual            Options/
Principal Position           Year      Salary($)             Bonus($)       Compensation($)       SARs (#)
-----------------------     -------  --------------       --------------  -------------------  --------------
<S>                         <C>       <C>                 <C>               <C>                  <C>
Michael K. Perry               1999       $ 91,450             $216,170 (3)       $   -0-             45,000
  Chief Executive              1998              1 (4)              750             4,000 (2)      1,295,000
   Officer                     1997            n/a                  n/a               n/a                n/a

Rhonda F. Rhyne                1999        148,020               11,045            17,000 (5)         40,000
   President                   1998        127,833                  751            18,000 (5)        250,000
                               1997        111,308               17,228            15,000 (5)         75,000

Stephen P. Loomis              1999        137,543                8,520               -0-             30,000
   Chief Financial             1998        116,583                1,663               -0-            120,000 (6)
   Officer (7)                 1997        103,416               22,849               -0-             70,000 (7)

Richard E. Trayler             1999        129,584                8,745               -0-             35,000
   Chief Operating             1998        123,750                1,502               -0-             80,000 (6)
   Officer                     1997         60,000 (8)              -0-               -0-            100,000 (7)

Russell H. Bergen              1999        120,000                5,800               -0-                -0-
   Vice President of           1998         25,923 (9)              -0-               -0-             75,000
   Operations                  1997            n/a                  n/a               n/a                n/a
</TABLE>


                                       53

__________________
(1)  Employee benefits provided to each of the Named Officers under various
     Company programs do not exceed the disclosure thresholds
     established under the SEC rules and are therefore not included.

(2)  Amount represents Company paid allowance for automobile expenses.

(3)  Bonus amount paid in 1999 includes $205,000 pursuant to Mr. Perry's
     employment agreement dated March 23, 1998, under which Mr. Perry was paid a
     salary of $1.00 for the initial 14 months of his employment.  In exchange,
     he was eligible to receive a performance bonus based on achieving a 100%
     increase in sales during the 12-month period ending May 31, 1999, over the
     previous 12-month period.

(4)  Represents compensation earned by Mr. Perry from his employment with our
     Company commencing April of 1998.

(5)  Amounts represent Company paid lodging of  $12,000 in 1997, $12,000 in 1998
     and $11,000 in 1999.  The balance in each year is for automobile expenses.

(6)  Amounts represent options granted under Company Stock Option
     Cancellation/Regrant program.

(7)  In conjunction with our Stock Option Cancellation/Regrant program in 1998,
     these options were cancelled.

(8)  Represents compensation earned by Mr. Trayler from his employment with our
     Company commencing July of 1997.

(9)  Represents compensation earned by Mr. Bergen from his employment with our
     Company commencing September of 1998.


The following table provides information regarding option exercises during the
fiscal year ended November 30, 1999, as well as information with respect to
unexercised options to purchase our common stock granted to the Named Officers
in fiscal 1999. None of the Named Officers exercised any stock options during
fiscal 1999.  CardioDynamics has not granted any stock appreciation rights.


                     OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>

                           Individual Grants
                      ----------------------------------------------------------
                      Number of
                      Securities     % of Total
                      Underlying  Options Granted
                       Options      to Employees       Exercise      Expiration
Name                   Granted     in Fiscal 1999   Price($/Sh) (1)     Date
--------------------  ----------  ----------------  ---------------  -----------
<S>                   <C>         <C>               <C>              <C>
Michael K. Perry          45,000                7%            $2.25   01/00/2009
Rhonda F. Rhyne           40,000                6%            $2.25   01/00/2009
Stephen P. Loomis         30,000                5%            $2.25   01/00/2009
Richard E. Trayler        35,000                5%            $2.25   01/00/2009
Russell H. Bergen            -0-              n/a               n/a          n/a
</TABLE>
--------------------------------
(1)   All options were granted at fair market value (closing sale price for our
  common stock on the NASDAQ/AMEX Stock Market on the date of grant).

                                       54

The following table provides further information regarding the Named Officers'
outstanding stock options as of November 30, 1999.  No stock appreciation rights
were granted or exercised, and no stock options were exercised during fiscal
1999.


                    AGGREGATED OPTION/SAR EXERCISES IN LAST
               FISCAL YEAR AND FISCAL YEAR END OPTION/SAR VALUES

<TABLE>
<CAPTION>


                                                                              Number of
                                                                              Securities
                                                                              Underlying                Value(1) of
                                                                              Unexercised               Unexercised
                                                                             Options/SARs                In-the-Money
                                                                             at FY-End (#)           Options/SARs at FY-
                           Shares Acquired             Value                 Exercisable/            End ($) Exercisable/
Name                       on Exercise (#)          Realized ($)             Unexercisable             Unexercisable(2)
-------------------       ------------------      -----------------       -------------------       ----------------------
<S>                       <C>                      <C>                    <C>                      <C>
Michael K. Perry                      - 0 -                   - 0 -       323,750 / 1,016,250           445,156 /1,369,219
Rhonda F. Rhyne                       - 0 -                   - 0 -         175,000 / 340,000             93,750 / 423,750
Stephen P. Loomis                     - 0 -                   - 0 -          43,333 / 106,667             59,583 / 127,917
Richard E. Trayler                    - 0 -                   - 0 -           28,886 / 86,114              39,718 / 96,559
Russell H. Bergen                     - 0 -                   - 0 -           21,874 / 53,026              39,592 / 95,977
</TABLE>
___________________________________________
(1)  Represents the difference between the closing sale price of our common
     stock on the NASDAQ/AMEX Stock Market of $3.00 on November 30, 1999 and the
     exercise price of the options.

(2)  The respective Named Officers as of November 30, 1999 could not exercise
     these options and future exercisability is subject to certain vesting
     provisions including specific stock price thresholds and/or remaining in
     the employ of the Company for up to three additional years.

Stock Options

On October 16, 1998, we adopted a Stock Option Cancellation/Regrant program.
Each employee was given the opportunity to exchange his or her existing options
for new options, exercisable at $1.625 per share.  All accrued vesting under the
old stock options was forfeited, and the new optionee began a new vesting
schedule (over the same number of years as the old option's vesting schedule).
For all employees other than executive officers, the new options were granted
for the same number of shares as the old options.  For executive officers, the
new options were granted for a fewer number of shares.  The reduction in option
shares for the executive officers was calculated by a formula based on the
Black-Scholes option valuation model.

Under the program 2,267,000 options were cancelled with an average exercise
price of $2.74. In exchange, 1,968,000 new options were granted with an exercise
price of $1.625 per share and 299,000 options were forfeited with an average
price of $2.75. Eligible optionees representing 678,000 options with an average
price $1.75 elected not to participate in the program.

                                       55

Employment Agreements

On March 23, 1998, we entered into an employment agreement with Michael Perry
who succeeded Mr. Otto as Chief Executive Officer.  Under the terms of the
agreement, Mr. Perry was granted 1,500,000 non-transferable stock options (not
under our Option Plan) at an exercise price of $2.55 per share, subject to
vesting requirements.  The first tranche vested on September 23, 1998, and the
final tranche was not scheduled to vest until March 23, 2002.  Under the October
16, 1998 Stock Option Cancellation/Regrant program, Mr. Perry cancelled his
1,500,000 old options in exchange for a new grant of 1,295,000 options.  The new
options have an exercise price of $1.625 per share, and all accrued vesting was
forfeited.  The new options vest over the same four-year period with a
commencement date of October 16, 1998.  At November 30, 1999, 323,750 of the
options are vested.  The options expire on October 15, 2008.

We entered into a Compensation and Employment Agreement, dated June 16, 1995,
with our then Chief Executive Officer, Richard E. Otto.  Under the terms of the
agreement Mr. Otto was granted 500,000 non-transferable stock options (not under
our 1995 Plan) at an exercise price of $0.50 per share.  In June 1997, the
Company and Mr. Otto agreed to reduce the number of stock options to 250,000.
The options vest when and if the quoted market price of our common stock attains
and holds the following stock prices:
<TABLE>
<CAPTION>

               <C>     <S>      <C>
               50,000  vest at  $5.00
               50,000  vest at  $6.00
               50,000  vest at  $7.00
               50,000  vest at  $8.00
               50,000  vest at  $9.00
</TABLE>

At November 30, 1999, none of the options were vested.  The options expire June
15, 2005

Long Term Incentive Plans

We do not have any long-term incentive plans (as defined in the Securities and
Exchange Commission regulations).

Directors' Fees

Each non-employee director who has not been employed by us during the proceeding
two years receives 1,000 automatic monthly stock options granted at fair market
value (or, in the case of 10% shareholders Mr. Paulson and Mr. Gilstrap, at 110%
of fair market value) on the last day of the month for each full month of
service as a director of our Company.  On August 1, 1997, Cam L. Garner, a
Director of our Company, entered into a consulting agreement with our Company
whereby Mr. Garner is paid a monthly fee of $2,083.33 and received a one-time
grant of 5,000 stock options to purchase CardioDynamics' common stock in
exchange for consulting services.  Total fees paid to Mr. Garner in fiscal 1999
were $24,999.96, he was paid the same amount during fiscal 1998.

                                      56

ITEM 10.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Common Stock - Certain Beneficial Holders

The following are the only persons known by us to own beneficially, as of
February 22, 2000, five percent (5%) or more of the outstanding shares of our
common stock.

<TABLE>
<CAPTION>
                                    Shares Beneficially Owned
Name and Address of                ---------------------------
Beneficial Owner                   Number  (1)  Percentage (2)
---------------------------------  -----------  --------------
<S>                                <C>          <C>

Allen E. Paulson (3)               10,655,986            25.5%
P.O. Box 9660
Rancho Santa Fe, CA  92067

James C. Gilstrap (4)               3,357,897             8.0%
5067 Shore Drive
Carlsbad, CA  92008

Domain Partners LP                  4,500,000            10.6%
One Palmer Square
Princeton, NJ  08542

Societe Generale Veritas            3,000,000             7.0%
4 New York Plaza
New York, NY  10004

Edge Financial Group, Inc. (6)      2,214,059             5.2%
16225 Park Ten Place, Suite 380
Houston, TX  77084

Joe C. Richardson, Jr. (7)          2,195,538             5.1%
P.O. Box 8246
Amarillo, TX  79114
</TABLE>
______________________

1)   Except as indicated in the footnotes to this table, the persons named in
     the table have sole voting and investment power with respect to all shares
     of common stock shown as beneficially owned by them, subject to community
     property laws, where applicable.

2)   Percentage of ownership is calculated pursuant to SEC Rule 13d-3(d)(1).

3)   Includes 102,243 shares of common stock beneficially owned by
     CardioDynamics Holdings, LLC ("CDH"), of which Mr. Paulson is a member with
     a majority interest. Mr. Paulson disclaims beneficial ownership of these
     shares except to the extent of his individual ownership interest in CDH.
     See footnote (5). Includes 9,088,734 shares held in the Allen E Paulson
     Living Trust dated 12-23-86. Also includes 54,000 shares of common stock
     Mr. Paulson beneficially owns, by virtue of his right to acquire such
     shares from CardioDynamics under stock options now exercisable or
     exercisable within 60 days. Excludes 3,000,000 shares of common stock owned
     by Mr. Paulson's sons; Mr. Paulson disclaims beneficial ownership of such
     shares.

4)   Includes 102,243 shares of common stock beneficially owned by CDH, of which
     Mr. Gilstrap is a member with a minority interest. Mr. Gilstrap disclaims
     beneficial ownership of these shares except to the extent of his individual
     ownership interest in CDH. See footnote (5). Includes 3,195,654 shares held
     in the Jim and Sue Gilstrap Family Limited Partnership. Mr. Gilstrap
     disclaims beneficial ownership of these shares except to the extent of his
     and his wife's ownership interest in the Jim and Sue Gilstrap Family
     Limited Partnership. Also includes 54,000 shares of common stock Mr.
     Gilstrap beneficially owns, by virtue of his right to acquire such shares
     from CardioDynamics under stock options now exercisable or exercisable
     within 60 days. Excludes 544,033 shares of common stock owned by Mr.
     Gilstrap's daughters; Mr. Gilstrap disclaims beneficial ownership of such
     shares.

                                      57

Common Stock - Certain Beneficial Holders - (Continued)

5)   Includes 2,243 shares of common stock over which CDH exercises sole voting
     and investment power. Also includes 100,000 shares of common stock issuable
     upon conversion of a note issued by CardioDynamics.

6)   Includes 1,209,049 shares of common stock beneficially owned by Medical
     Assets, LLC, of which Edge Financial Group, Inc. is a member. Edge
     Financial Group, Inc. disclaims beneficial ownership of these shares except
     to the extent of its ownership interest in Medical Assets, LLC. See
     footnote (7).

7)   Includes 1,209,049 shares of common stock beneficially owned by Medical
     Assets, LLC, of which Mr. Richardson is a member. Mr. Richardson disclaims
     beneficial ownership of these shares except to the extent of his ownership
     interest in Medical Assets, LLC. Also includes 25,109 shares held by Vital
     Energy, Inc of which Mr. Richardson is CEO and majority shareholder. See
     footnote (6).

Common Stock - Management

The following table sets forth the beneficial ownership of common stock of
CardioDynamics as of February 22, 2000 by each Director and each officer of
CardioDynamics named in the Summary Compensation Table, and by all Directors and
executive officers of our Company as a group.  Each such person has a business
address, care of CardioDynamics.
<TABLE>
<CAPTION>

                                            Shares  Beneficially  Owned
                                           -----------------------------
Name                                         Number (1)     Percent (2)
--------------------------                 --------------  -------------
<S>                                        <C>             <C>
Russell H. Bergen (3)                             39,686         *

Connie Curran                                      2,000         *

Louis P. Ferrero (4)                             186,667         *

Cam L. Garner (5)                                 98,000         *

James C. Gilstrap (6)                          3,357,897        8.0%

Dennis G. Hepp (7)                                65,000         *

Stephen P. Loomis (8)                             39,978         *

Richard O. Martin, Ph.D. (9)                      86,667         *

Allen E. Paulson (10)                         10,655,986       25.5%

Michael Perry (11)                               304,811         *

Rhonda F. Rhyne (12)                             194,374         *

Richard E. Trayler (13)                          151,933         *

All Directors and executive
officers as a group - (12 persons) (14)       15,080,756       35.4%
</TABLE>
----------------
*Less than 1%

                                       58

Common Stock - Management - (Continued)

 (1) Except as indicated in the footnotes to this table, the persons named in
     the table have sole voting and investment power with respect to all shares
     of common stock shown as beneficially owned by them, subject to community
     property laws, where applicable.  Share ownership in each case includes
     shares issuable on exercise of certain outstanding options as described in
     the footnotes below.

 (2) Percentage of ownership is calculated pursuant to SEC Rule 13d-3d(1).

 (3) Includes 29,686 shares of common stock Mr. Bergen beneficially owes by
     virtue of his right to acquire shares under stock options now exercisable
     or exercisable within 60 days.

 (4) Includes 36,667 shares of common stock Mr. Ferrero beneficially owns, by
     virtue of his right to acquire such shares under stock options now
     exercisable or exercisable within 60 days.

 (5) Includes 40,000 shares of common stock Mr. Garner beneficially owns, by
     virtue of his right to acquire such shares under stock options now
     exercisable or exercisable within 60 days.

 (6) Includes 102,243 shares of common stock beneficially owned by CDH, of which
     Mr. Gilstrap is a member with a minority interest.  Mr. Gilstrap disclaims
     beneficial ownership of these shares except to the extent of his individual
     ownership interest in CDH. See footnote (14).  Includes 3,195,654 shares
     held in the Jim and Sue Gilstrap Family Limited Partnership. Mr. Gilstrap
     disclaims beneficial ownership of these shares except to the extent of his
     and his wife's ownership interest in the Jim and Sue Gilstrap Family
     Limited Partnership. Also includes 54,000 shares of common stock Mr.
     Gilstrap beneficially owns, by virtue of his right to acquire such shares
     from CardioDynamics under stock options now exercisable or exercisable
     within 60 days.  Excludes 544,033 shares of common stock owned by Mr.
     Gilstrap's daughters; Mr. Gilstrap disclaims beneficial ownership of such
     shares.

 (7) Includes 45,000 shares of common stock Mr. Hepp beneficially owns, by
     virtue of his right to acquire such shares under stock options now
     exercisable or exercisable within 60 days.

 (8) Includes 29,978 shares of common stock Mr. Loomis beneficially owns, by
     virtue of his right to acquire such shares under stock options now
     exercisable or exercisable within 60 days.

 (9) Includes 36,667 shares of common stock Dr. Martin beneficially owns, by
     virtue of his right to acquire such shares under stock options now
     exercisable or exercisable within 60 days.

(10) Includes 123,243 shares of common stock beneficially owned by CDH, of which
     Mr. Paulson is a member with a majority interest. Mr. Paulson disclaims
     beneficial ownership of these shares except to the extent of his individual
     ownership interest in CDH.  See footnote (14).  Also includes 54,000 shares
     of common stock Mr. Paulson beneficially owns, by virtue of his right to
     acquire such shares from CardioDynamics under stock options now exercisable
     or exercisable within 60 days.  Excludes 3,000,000 shares of common stock
     owned by Mr. Paulson's sons; Mr. Paulson disclaims beneficial ownership of
     such shares.

(11) Includes 287,811 shares of common stock Mr. Perry beneficially owes by
     virtue of his right to acquire shares under stock options now exercisable
     or exercisable within 60 days.

(12) Includes 167,499 shares of common stock Ms. Rhyne beneficially owes by
     virtue of her right to acquire shares under stock options now exercisable
     or exercisable within 60 days.

(13) Includes 50,933 shares of common stock Mr. Trayler beneficially owes by
     virtue of his right to acquire shares under stock options now exercisable
     or exercisable within 60 days.

(14) Shares beneficially owned include shares held by entities affiliated with
     certain directors and named Officers as described above in the footnotes.

                                       59

Preferred Stock

All previously outstanding preferred stock was converted to common stock during
fiscal 1998 and 1999.

ITEM 11.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During fiscal 1996, CardioDynamics Holdings, LLC and its members engaged in
several significant transactions with us, substantially all resulting in the
issuance of unregistered common stock or notes  convertible (and later
converted) into common stock.  As of November 30, 1999 CDH owns 2,243 shares of
our common stock and has the right under a $25,000 note bearing interest at 7.5%
to obtain an additional 100,000 shares upon conversion. Members of CDH
individually own 14,749,009 shares of common stock of CardioDynamics (aside from
CDH's own holdings); of the members' shares, Allen E. Paulson owns 10,553,743,
James C. Gilstrap owns 3,255,654.  At February 22, 2000, CDH and its members
together are the beneficial owners of 34.6% of our common stock.

In March 1998, we entered into an 18-month unsecured private line of credit
agreement with Allen E. Paulson and James C. Gilstrap.  Under the terms of the
agreement we can borrow up to $3,000,000 on an as-needed basis with monthly
interest-only payments at an annual interest rate of 10.0%.   In February 1999,
the term was extended one year, to September 2000.

Before and after becoming an executive officer of CardioDynamics in June 1997,
Dennis G. Hepp has served as a consultant and vendor to our Company since July
1995 through the company he founded in 1989, Rivertek Medical Systems, Inc.,
located in Minneapolis, Minnesota.  Rivertek, which is 100% owned by Mr. Hepp
and his wife, provides engineering consulting to medical device manufacturers,
and continues to be one of our largest vendors.  In fiscal 1999 and fiscal 1998,
we paid $391,293 and $454,801, respectively, to Rivertek.

                                      60

ITEM 12.  EXHIBITS AND REPORTS ON FORM 8-K

(a)            Exhibit Index

The following exhibits are attached to this Report and are incorporated herein
by reference:

<TABLE>
Exhibit         Title
---------       -----
<S>             <C>
2.1             Fourth Amended Plan of Reorganization.  (Incorporated by reference from November 30,
                1994 Form 10-KSB.)

2.2             Purchase Agreement dated February 7, 1995 between CardioDynamics and CardioDynamics
                Holdings, LLC.  (Incorporated by reference from February 28,1995 Form 10-QSB.)

2.3             Amendment to Purchase Agreement, dated March 31, 1996, between the Company and
                CardioDynamics Holdings, LLC, (Incorporated by reference from May 31, 1996 Form
                10-QSB.)

3.1             Bylaws, as amended through May 15, 1995.  (Incorporated by reference from May 31,
                1995 Form 10-QSB.)

3.2             Amendment to Bylaws, dated June 2, 1999. (Incorporated by reference from August 31,
                1999 Form 10-QSB.)

3.3             Restated Articles of Incorporation as filed July 24, 1998. (Incorporated by
                reference from August 31, 1998 Form 10-QSB.)

3.4             Certificate of Determination of Preferences of Series A Convertible preferred stock.
                (Incorporated by reference to Form 8-K for the event of August 21, 1998, filed
                September 3, 1998.)

4.1             Secured Convertible Promissory Note, dated February 7, 1995, in favor of
                CardioDynamics Holdings, LLC.  (Incorporated by reference from February 28,1995 Form
                10-QSB.)

4.2             First Amended and Restated Secured Convertible Promissory Note, dated March 30, 1995
                in favor of CardioDynamics Holdings, LLC.  (Incorporated by reference from May 31,
                1995 Form 10-QSB.)

4.3             Second Amended and Restated Secured Convertible Promissory Note, dated May 19, 1995
                in favor of CardioDynamics Holdings, LLC.  (Incorporated by reference from May 31,
                1995 Form 10-QSB.)

4.4             Third Amended and Restated Secured Convertible Promissory Note, dated March 31, 1996
                in favor of CardioDynamics Holdings, LLC.  (Incorporated by reference from May 31,
                1996 Form 10-QSB.)
</TABLE>

                                       61

<TABLE>
<CAPTION>
(a)             Exhibit Index - (Continued)

Exhibit         Title
-------         -----
<C>             <S>
4.5             Fourth Amended and Restated Secured Convertible Promissory Note, dated June 30, 1996
                in favor of CardioDynamics Holdings, LLC.  (Incorporated by reference from August
                31, 1996 Form 10-QSB.)

4.6             Fifth Amended and Restated Secured Convertible Promissory Note, dated February 1,
                1997 in favor of CardioDynamics Holdings, LLC.  (Incorporated by reference from
                February 28, 1997 Form 10-QSB.)

4.7             Sixth Amended and Restated Secured Convertible Promissory Note, dated August 15,
                1998 in favor of CardioDynamics Holdings, LLC. (Incorporated by reference from
                August 31, 1998 Form 10-QSB.)

10.1            Security Agreement, dated February 7, 1995 between the Company and CardioDynamics
                Holdings, LLC.  (Incorporated by reference from February 28,1995 Form 10-QSB.)

10.2            Patent Security Agreement, dated February 7, 1995 between the Company and
                CardioDynamics Holdings, LLC.  (Incorporated by reference from February 28, 1995
                Form 10-QSB.)

10.3            Offer to Grant Irrevocable Proxy and Agreement and Mutual General Release, dated
                February 2, 1995 between the Company and DaVinci Scientific Corporation.
                (Incorporated by reference from February 28, 1995.)

10.4            Notice to DaVinci Scientific Corporation, dated February 7, 1995.  (Incorporated by
                reference from February 28, 1995 Form 10-QSB.)

10.5*           Compensation and Employment Agreement with Richard E. Otto.  (Incorporated by
                reference from August 31, 1995 Form 10-QSB.)

10.5.1*         Amendment to Compensation and Employment Agreement, dated April 5, 1998, between the
                Company and Richard E. Otto. (Incorporated by reference from May 31, 1998 Form
                10-QSB.)

10.6            Warrants to purchase 276,514 shares of CardioDynamics International Corporation
                common stock to EVEREN Securities, Inc. dated February 26, 1997 and March 6, 1997.
                (Incorporated by reference from February 28, 1997 Form 10-QSB.)

10.7            Amendment No. 1 to Service Agreement among Rivertek Medical Systems, Inc., Dennis G.
                Hepp and the Company, dated July 25, 1997.  (Incorporated by reference from August
                31, 1997 Form 10-QSB.)

10.7.1          Amendment No. 2 to Service Agreement among Rivertek Medical Systems, Inc.,
                Dennis G. Hepp and the Company, dated October 16, 1998. (Incorporated by reference
                from November 30, 1998 Form 10-KSB.)

10.8*           Consulting Services Agreement, dated August 1, 1997, between Cam L. Garner and the
                Company. (Incorporated by reference from November 30, 1997 Form 10-KSB.)

10.9            Lease between AGBRI Nancy Ridge, LLC and the Company dated June 20, 1997.
                (Incorporated by reference from August 31, 1997 Form 10-QSB.)

10.10           Private Line of Credit Agreement, dated March 11, 1998, between Allen Paulson, James
                C. Gilstrap and the Company.  (Incorporated by reference from May 31, 1998 Form
                10-QSB.)
</TABLE>

                                       62

<TABLE>
<CAPTION>
(a)             Exhibit Index - (Continued)

Exhibit         Title
----------      -----

<S>             <C>
10.10.1         Amendment of Private Line of Credit Agreement, dated February 5, 1999, between Allen
                Paulson, James C. Gilstrap and the Company. (Incorporated by reference from February
                28, 1999 Form 10-QSB.)

10.11*          Employment Agreement, dated March 23, 1998, between the Company and Michael K.
                Perry. (Incorporated by reference from May 31, 1998 Form 10-QSB.)

10.12           Distribution Agreement dated March 31, 1998 between the Company and Cardiomedics,
                Inc. (Incorporated by reference from August 31, 1998 Form 10-QSB.)

10.13           Warrants to purchase 33,334 shares of CardioDynamics International Corporation
                common stock to Imperial Bank dated May 14, 1998. (Incorporated by reference from
                August 31, 1998 Form 10-QSB.)

10.14           Promissory Note and Credit Agreement, dated August 19, 1998 between Imperial Bank
                and the Company. (Incorporated by reference from August 31, 1998 Form 10-QSB.)

10.15           Amendment to 1995 Stock Option/Stock Issuance Plan dated May 20, 1998. (Incorporated
                by reference from August 31, 1998 Form 10-QSB.)

10.16           Warrants to purchase 15,000 shares of CardioDynamics International Corporation
                common stock to Imperial Bank dated August 21, 1998. (Incorporated by reference from
                August 31, 1998 Form 10-QSB.)

10.17           Securities Purchase Agreement dated August 21, 1998 between the Company and certain
                selling stockholders.  (Incorporated by reference to Form 8-K for event of August
                21, 1998, filed September 3, 1998.)

10.18           Form of Warrant issued August 21, 1998 to certain selling stockholders.
                (Incorporated by reference to Form 8-K for event of August 21, 1998, filed September
                3, 1998.)

10.19           Registration Rights Agreement dated August 21, 1998 between the Company and certain
                selling stockholders.  (Incorporated by reference to Form 8-K for event of August
                21, 1998, filed September 3, 1998.)

10.20           Certificate of Determination of Preferences of Series A Convertible preferred stock.
                (Incorporated by reference to Form 8-K for event of August 21, 1998, filed September
                3, 1998.)

10.21           Line of Credit Agreement with Imperial Bank, dated January 15, 1999. (Incorporated
                by reference from February 28, 1999 Form 10-QSB.)
</TABLE>

                                       63

<TABLE>
<CAPTION>
(a)             Exhibit Index - (Continued)

Exhibit         Title
-------         -----

<S>             <C>
10.22           Promissory Note dated February 25, 1999 between City National Bank and the Company.
                (Incorporated by reference from May 31, 1999 Form 10-QSB.)

10.23           Warrants to purchase 50,000 shares of CardioDynamics International Corporation
                common stock to City National Bank dated March 31, 1999.  (Incorporated by reference
                from May 31, 1999 Form 10-QSB.)

10.24           Form of common stock Purchase Agreement for the May 28, 1999 Private Placement.
                (Incorporated by reference from May 31, 1999 Form 10-QSB.)

10.25           Purchase agreement between CardioDynamics International Corporation and GE Marquette
                Medical Systems, Inc. dated August 25, 1999. (Incorporated by reference from August
                31, 1999 Form 10-QSB.)

10.26           Warrants to purchase 2,000,000 shares of CardioDynamics International Corporation
                common stock to GE Marquette Medical Systems, Inc., Dated August 25, 1999.
                (Incorporated by reference from August 31, 1999 Form 10-QSB.)

10.27           Purchase agreement between CardioDynamics International Corporation and GE Marquette
                Medical Systems, Inc. dated October 20, 1999.

23.1            Consent of Independent Auditors, KPMG LLP

27.0            Financial Data Schedule
</TABLE>
____________________
*    This management contract or compensatory plan or arrangement is required
     to be filed as an exhibit.

(b)    Reports on Form 8-K:

       None.

                                       64

                                   SIGNATURES

In accordance with the requirements of Section 13 or 15(d) of the Exchange Act,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

Dated: February 28, 2000      CARDIODYNAMICS  INTERNATIONAL  CORPORATION

                              By:  /s/ Michael K. Perry
                                   --------------------
                                   Michael K. Perry
                                   Director and Chief Executive Officer

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

<TABLE>
<CAPTION>

Signature                                    Title                     Date
----------------------------     ------------------------------  -----------------
<S>                              <C>                             <C>

/s/ Michael K. Perry             Director and Chief              February 28, 2000
----------------------------     Executive Officer
Michael K. Perry

/s/ Stephen P. Loomis            Vice President, Finance,        February 28, 2000
----------------------------     Chief Financial Officer and
Stephen P. Loomis                Corporate Secretary (Principal
                                 Accounting Officer)

/s/ Connie Curran, RN            Director                        February 28, 2000
----------------------------
Connie Curran

/s/ Louis P. Ferrero             Director                        February 28, 2000
----------------------------
Louis P. Ferrero

/s/ Cam L. Garner                Director                        February 28, 2000
----------------------------
Cam L. Garner

/s/ James C. Gilstrap            Director                        February 28, 2000
----------------------------
James C. Gilstrap

/s/ Richard O. Martin, Ph.D.     Director                        February 28, 2000
----------------------------
Richard O. Martin, Ph.D.

/s/ Allen E. Paulson             Director                        February 28, 2000
----------------------------
Allen E. Paulson
</TABLE>

                                      65