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As Of Filer Filing For·On·As Docs:Size Issuer Agent 8/09/05 Cardiac Science Inc 8-K:2,9 8/03/05 3:439K Vintage/FA |
Document/Exhibit Description Pages Size 1: 8-K Current Report HTML 20K 2: EX-99.1 Miscellaneous Exhibit HTML 126K 3: EX-99.2 Miscellaneous Exhibit HTML 128K
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Operator:
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Ladies
and gentlemen, thank you for standing by. Welcome to the Cardiac
Science
2005 Second Quarter Six Months Results Conference Call.
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During
the presentation, all participants will be in a listen-only mode.
Afterwards, we will conduct a question and answer session. At
that time,
if you have a question, please press the star then the number
1 on your
telephone.
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If
you would like to withdraw your question, press star then the
number 2 on
your telephone.
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As
a reminder, this conference is being recorded Thursday, August
4.
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I
would now like to turn the conference over to Mr. Rene
Caron.
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Please
go ahead, sir.
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Rene
Caron:
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Thank
you, (Phyllis). And good day everyone and thank you for joining
us for the
Cardiac Science Second Quarter Results Conference
Call.
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Yesterday
afternoon after the close of the market, each of you should
have received
the copy by email or fax of the press release announcing the
results for
the second quarter and first six months ended June 30,
2005.
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If
any of you did not receive a copy of the press release, please
call Nathan
Abler at Allen & Caron’s office in California at 949-474-4300 after
the call and we’ll be happy to fax or email you a copy of the
release.
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Additionally,
a replay of the conference call will be available on the Internet
beginning within 24 hours after this call concludes. This replay
can be
accessed at the company’s Web site at
www.cardiacscience.com.
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Before
we get under way, I’ve been asked to make the following
statements.
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Certain
matters discussed and prepared statements on today’s call or answers that
may be given to questions asked on the call may include forward-looking
statements related to company’s operations, the proposed merger of Quinton
Cardiology Systems and Cardiac Science, and the combined companies’ future
financial or business performance.
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We
would like to remind listeners that actual results could differ
materially
from those anticipated in these forward-looking
statements.
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Management
cautions that these statements are subject to substantial risks
and
uncertainties and are qualified by important factors that could
cause
actual results to differ materially from those reflected by
the
forward-looking statements, and should not be relied upon by
investors
when making an investment decision.
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These
risks include the risk that the merged companies may not
achieve the
benefits and savings expected from the transaction, the risk
that the
transaction may be completed even though materially adverse
changes may
occur in one or both companies, the risk that the combined
company may not
be able to develop new competitive products, and the risk
the transaction
may not be completed or that the closing of this transaction
may be
delayed due to a failure to obtain shareholder approval or
meet other
customary closing conditions.
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Statements
made on this conference call should be considered in conjunction
with
Cardiac Science’s annual report on Form 10K, prior and subsequent
quarterly reports on Form 10Q, and filings on Forms 8K, all
of which can
be located at www.sec.gov or may be requested from Cardiac
Science.
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We’d
also like to advise investors that in the coming days and
weeks, Cardiac
Science management will continue to meet with investors and
financial
analysts to discuss the merger and the outlook of the combined
organization.
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The
information provided during these meetings will be publicly
disclosed
information only.
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The
company would also like to advise conference call participants
about
information related to the merger of Cardiac Science and
Quinton
Cardiology Systems. Under the terms of the merger, the parties
have formed
a new corporation, CSQ Holding Company, and two wholly owned
acquisition
subsidiaries of CSQ Holding Company that will merge with
and into Quinton
and Cardiac Science, respectively.
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As
a part of the transaction, Quinton will also merge into CSQ
Holding
Company.
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CSQ
Holding Company has filed a definitive proxy statement
prospectus on Form
S-4 in conjunction with the proposed merger transactions
and that was
announced on August 1, that S-4 has been declared effective
by the
Securities and Exchange Commission.
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As
a result, a definitive joint proxy statement and prospectus
was mailed on
or about August 3 to Cardiac Science stockholders of record
as of the
close of business on July 14, 2005.
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Cardiac
Science stockholders of record as of the record date will
be entitled to
vote on the proposed merger at a special meeting of stockholders
to be
held at 10:00 am Pacific Time on August 31, 2005 at the
Newport Beach,
California offices of Stradling Yocca Carlson &
Rauth.
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Investors
and security holders are urged to read the definitive proxy
- joint proxy
statement and prospectus carefully because it will set
forth important
information about the proposed transactions.
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Investors
and security holders may also obtain free copies of these
documents and
other documents filed with the Securities and Exchange
Commission at its
Web site at www.sec.gov.
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In
addition, investors and security holders may obtain free
copies of the
documents filed with the SEC by Cardiac Science by contacting
Cardiac
Science Investor Relations representative at Allen & Caron at
949-474-4300.
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Now
with all that said, on the call this morning from Cardiac
Science, we have
Raymond Cohen, Chairman and Chief Executive Officer of
Cardiac Science and
Roderick de Greef, the Cardiac Science Chief Financial
Officer.
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Ray
and Roderick will make short statements concerning results,
operations,
and plans going forward following which, there’ll be a question and answer
period.
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Good
morning, Ray. I’d like to turn the call over to you
now.
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Raymond
Cohen:
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Thank
you, Rene.
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And
we appreciate you providing all that important information
to our
shareholders, so good morning ladies and gentlemen.
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Before
Roderick and I discuss the Q2 financial results, I’d like to make certain
statements with respect to the pending merger with Quinton
Cardiology
Systems.
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After
these remarks, I’ll turn it over to Roderick who will summarize the
results for the Q and offer some comments on the financial
outlook for the
balance of 2005.
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Afterwards,
I will make some additional comments about the quarter,
discuss the joint
proxy statement and prospectus that shareholders will
be receiving. And
finally we’ll open it up for Q&A.
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With
respect to the pending merger with Quinton, please be
advised that as Rene
mentioned earlier, the joint proxy statement and prospectus
was mailed
early this week to stockholders and stockholders will
be receiving this
document some time this week or early next week from
- either directly
from the company or from their
stockbrokers.
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The
special meeting of the shareholders has been set for
August 31st and we
expect to close the merger on September 1st.
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Management
and the Board of Directors of Cardiac Science urge
you to vote “yes” on
the merger as we believe that the consummation of this
merger is in the
best interest of our stockholders and will greatly
benefit the
company.
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The
merger plays to the respective strengths of both organizations.
The
combination of the companies will create critical mass
and allow us to
significantly enhance our operating leverage and facilitate
the
elimination of $61 million in debt, generate positive
cash flow as a
company, and allow us to generate operating profit.
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As
mentioned by our colleagues at Quinton in their call
last night, we fully
expect to realize the aforementioned benefits while
achieving double-digit
sales growth in 2006.
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And
perhaps as importantly, this merger helps Cardiac Science
address the
single most troublesome challenge to our business.
Let me
explain.
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Potential
customers recognize that Cardiac Science has a broad
line of high quality
AEDs as well as world-class training and program
management.
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However,
our larger competitors consistently attempt to negatively
influence
prospective customers by suggesting that our modest
size and lack of
profitability is cause for concern, and they’ve had some degree of success
doing so.
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We
believe the new Cardiac Science will be a significantly
larger company
with a stronger financial position which will help
us dramatically
mitigate this competitive issue.
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As
a result, we believe once the pending merger closes,
given our increased
size and financial stability, this will allow Cardiac
Science to more
effectively compete and we will see our core AED
revenue once again grow
as or somewhat faster than the estimated 15% to 25%
growth of the
worldwide AED market.
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At
the end of the day, performance will determine stock
valuation. And to
that end, once the merger is completed, we expect
that the combined
company under the experienced and capable leadership
of John Hinson will
drive stockholder value by producing solid financial
results in 2006 and
beyond.
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With
those statements, I would like to turn it over to
Roderick de Greef, our
CFO, who will speak of Q2 and mid-year financial
results.
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Roderick
de Greef:
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Thanks,
Ray.
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Good
morning.
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I’d
like to briefly summarize our financial results for
the second quarter and
six months ended June 30, 2005, as well as update
our guidance for the
full year.
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For
the second quarter, sales of AED products, related
accessories, and
training services were $15.2 million compared to
$15.9 million reported
last year.
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The
decrease was primarily attributable to a reduction
in training and program
management revenue and flat AED product and accessory
sales compared to
the prior year.
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Sequentially,
AED product, accessory, and service revenue was
up 4% due to a 19%
increase in the domestic market. This increase
was somewhat offset by
lower sequential sales in the UK based on having
completed the large
British government deployment in Q1 of this year.
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Total
revenue for the second quarter was $15.6 million
compared to $17.5 million
last year.
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Revenue
in the second quarter of last year included $1.3
million in sales from
product lines which we exited in the second half
of
2004.
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For
the first six months, sales of AED products, accessories,
and training
services were $29.8 million compared to $29.7 million
last
year.
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Total
revenue for the six months was $30.6 million, compared
to $33.1 million
last year.
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Revenue
for the second half of 2004 included $2.7 million
in sales from product
lines which we exited last year.
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The
gross profit margin for the second quarter and
six months was 52.6% and
55.4%, respectively, compared to 55.3% and 56.7%
in the same period last
year.
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The
gross profit margin in the second quarter was negatively
impacted by
$340,000 in expenses related to the closing out
of the 2004 product
recall.
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Excluding
these expenses, the gross margin for the second
quarter and six months
would have been 54.7% and 56.5%, respectively.
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Sales
and marketing expense for the second quarter
totaled $5.3 million or 34.2%
of revenue compared to $6.9 million or 39.7%
of revenue in the same period
last year.
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This
23% decrease is primarily attributable to lower
indirect channel and
training, selling expenses and reduced direct
marketing
cost.
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For
the six months, sales and marketing expenses
totaled $10.3 million or
33.5% of revenue compared to $13 million or 39.1%
of revenue for the prior
year period.
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Research
& development expense for the second quarter totaled
$1.8 million
compared to $1.5 million last year. The increase
is primarily due to costs
related to completing the traditional in-hospital
crash-cart defibrillator
product for GE Healthcare.
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For
the six months, R&D expense was $3.3 million compared to $3.1 million
in the 2004 period.
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G&A
expenses for the second quarter were $5.7 million
compared to $4.3 million
for the same period last year.
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This
quarter’s G&A expense includes $1.5 million of cost related
to our
pending merger with Quinton Cardiology Systems
and related shareholder
litigation.
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Legal
expense related to the Philips litigation totaled
$590,000 this quarter
compared to $550,000 in the same period last
year.
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G&A
expense for the six months was $10.9 million
compared to $8.5 million in
the same period last year and included $2.2
million in merger-related
expenses.
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For
the six months, legal expense related to the
Philips litigation was $1.3
million compared $1 million last year.
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Excluding
merger and shareholder litigation expenses
and the impact of the goodwill
impairment charge taken in the first quarter
of this year. Total operating
expenses for the three and six-month periods
in 2005 were $11.8 million
and $23.1 million, respectively.
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This
reflects a year-to-date decrease in operating
expenses of 10% resulting
from expense reductions implemented during
2004.
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Interest
and other expense for the quarter increased
to $2 million from $1.8
million in the prior year period primarily
as a result of a larger amount
of long-term debt, interest and other expense
for the six months was $5.3
million compared to 3.4 million in the prior
year
period.
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The
reported operating loss for the second quarter
was $5.1 million. Excluding
merger and shareholder litigation-related expenses,
the operating loss for
the 2005 period was $3.6 million compared to
$3.5 million for the same
quarter in 2004.
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For
the first six months of 2005, the operating
loss was $55.6
million.
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Excluding
goodwill impairment charge and merger and
shareholder litigation-related
expenses, the operating loss for the first
half of ’05 was $6.1 million,
down from $6.8 million for the first half
of 2004.
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The
net loss for the second quarter was $7.1
million or $0.08 cents per share.
Excluding merger and shareholder litigation
expenses, the net loss for the
2005 second quarter was $5.6 million or $0.06
cents per share compared to
$5.3 million or $0.07 cents per share in
the prior year
period.
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The
net loss for the first six months of 2005
was $60.9 million or $0.71 cents
per share. Excluding the goodwill impairment
charge and merger and
shareholder litigation expenses, the net
loss for the 2005 first six
months was $11.5 million or $0.13 cents per
share compared to $10.2
million or $0.13 cents per share in the corresponding
2004
period.
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We
ended the quarter with $7.3 million in cash,
and our DSO continues to
improve at 69 for the quarter.
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With
respect to outlook for the balance of ’05, on our last conference call, we
noted that our original 2005 guidance was
predicated on receiving Japanese
MOH approval of our biphasic AED and gaining
FDA regulatory clearance for
the GE defibrillator in Q2 of this year.
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We
also stated that if these regulatory clearances
were delayed or did not
materialize, the expected 2005 revenue range
could be reduced by as much
as $10 million, which in turn would materially
impact our results for the
balance of 2005.
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Based
primarily on the expectation that the regulatory
clearances will be
received late this quarter or early in
the fourth quarter, we are
modifying our guidance for 2005.
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We
expect revenue for 2005 to range from $65
million to $70 million which is
down from the previous estimates of $75
million to $80
million.
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We
expect the full year gross margin of 55%
to 57% revised from 56% to
58%.
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Excluding
the goodwill impairment charge and merger
and shareholder litigation
related expenses, we expect operating expenses
for 2005 to range between
$47 million and $48 million with some additional
variability possible as a
result of higher than expected legal fees
associated with the Philips
litigation in the second half of the year.
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Excluding
the goodwill impairment charge and merger
and shareholder litigation
related expenses, we anticipate that the
operating loss will range from
$7.6 million to $8.9 million, and a net
loss will range from $18.2 million
to $19.5 million or $0.21 cents to $0.23
cents per
share.
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Finally,
as previously discussed, the pending merger
with Quinton Cardiology
Systems is subject to approval by both
Cardiac Science and Quinton
shareholders.
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Management
currently anticipates that the merger will
close on September 1st
immediately after the shareholder meetings
which are scheduled for August
31st.
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If
the merger is not consummated, our expected
results for 2005 may be
negatively impacted by increased pressure
from our larger competitors who
may more aggressively emphasize the company’s size and financial position
as a reason not to do business with Cardiac
Science.
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Ray?
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Raymond
Cohen:
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Okay.
Thanks, Rod.
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So,
in addition to some of these comments,
I’d like to say that while our
financial results to date have not been
what we would have expected or
would have preferred, it’s important to note that literally hundreds
of
new customers are buying our products
every month based on the strength of
our technology, feature set, training
and program management service
offering.
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The
bottom line is that there are many reasons
to be optimistic, for us to be
optimistic about the AED market and the
company’s future
prospects.
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A
couple of those reasons include the fact
that the AED market is one of the
fastest growing medical markets in the
medical device
business.
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Recent
industry reports suggest that the overall
external defibrillator market in
the United States alone will top $600
million for 2005 and for the first
time in the history of the defibrillation
business, revenue from the sale
of AEDs in the US will be higher than
the sale of traditional
defibrillators.
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This
industry report suggests AED sales grow
in the 15% to 25% range for the
years to come.
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Even
in the US where AED sales account for
over 75% of the world uptake
penetration rates are in the single
digits in all but the fire, police,
and EMS market segments.
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The
consumer market is nascent. However,
product awareness is increasing
rapidly.
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To
this point, Jeff Bezos, Amazon.com’s CEO, in an interview this month with
Time magazine, stated that he expects
AEDs to be his biggest gift item at
Christmas this year.
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With
respect to Cardiac Science, our investment
in R&D and sales and
marketing will continue to pay dividends
in 2006 and
beyond.
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We
have more prospects in our sales pipeline
than ever before in the history
of the company. We have a talented
domestic and international sales and
sales management team that has persevered
through some difficult times and
is highly motivated and very enthusiastic
about the upcoming merger and
the elimination of their Number 1 point
of sale
objection.
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Our
R&D department continues to be very productive,
and we have a number
of new products that are due out yet
this year.
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Our
new traditional defibrillator product
that Rod talked about earlier is
complete and the product is now in
production in our manufacturing
facility.
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This
will allow us to get into a segment
of the business for the first time
which accounts for over $300 million
in annual worldwide
purchases.
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We
also have a new AED product, an expanded
version of our current Powerheart
AED G3, which has detailed voice
instruction and a number of other
enhancements that we expect to be
due out for sale in the September
period.
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We
have also completed human factors
testing and expect to file with FDA
for
OTC clearance for our fully automatic
AED product in the next few
months.
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We
continue to invest in clinical studies
to show survival, improved economic
benefit of our unique in-hospital
CRM fully automatic bedside
defibrillator monitor. We believe
that this technology has as much
promise
if not more than ever before.
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We
have also begun development of a
new line of AEDs which will allow
us to
further reduce cost of goods and
stay competitive in the AED business
for
years to come.
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And
of course, based upon the pending
merger, we have restructured - we
will
be restructuring the company from
a financial standpoint and addressing
the Number 1 risk issue for Cardiac
Science.
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With
respect to Q2 numbers, sales of AEDs,
products, accessories and AED/CPR
training and program management service
combined, as Rod mentioned, were
$15.2 million or 97% of the company’s revenue.
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Sales
of our in-hospital Powerheart CRM
and electrode accounted for 2% of
company’s sales or $330,000.
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The
overall AED result represents a
2% decrease over sales in the same
period
last year.
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However,
during the quarter, we were very
encouraged that our US direct sales
force
posted a strong 19% sequential
increase in our domestic sales
over Q1 of
this year despite the continued
pressure from our larger competitors,
who
continue to point to our relatively
small size and lack of profitability
as a reason not to do business
with Cardiac Science.
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Quantitatively,
the sequential increase was due
to an increase in AED sales to
schools and
the dental segment and a $1 million
sequential increase in sales to
the US
workforce segment, where corporate
and government workplace facilities
continue to be our two strongest
sectors in the domestic
market.
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In
Q2, the US market segment breakdown
was as follows: corporate and
government workplace has accounted
for 66% of our domestic sales;
schools,
14%; a non-hospital medical and
dental market, 11%; and fire, police,
and
EMS at 9%.
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Overall,
ASPs for AEDs in the US were relatively
stable with prices ranging from
$1,500 to $1,800 depending on the
model and the number of devices
purchased.
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Internationally,
ASPs are nearly flat year-over-year.
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International
sales for Q2 accounted for approximately
31% of the company’s total
revenue. Sales in the UK were down
sequentially as compared to the
particularly strong Q1 where we
delivered the balance of the 2,300
AEDs on
a government contract.
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However,
our day-to-day business was nearly
double from the same period last
year
aided by our new market-leading
position. We are extremely optimistic
about the ongoing prospects in
this market given the implicit
endorsement
of the British National Health
Service.
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With
respect to Japan, sales in the
first half of 2005 are essentially
flat
with the same period from last
year but off substantially from
the strong
second half 2004 results.
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As
stated in our news release, we
are awaiting approval by the
Japanese
Ministry of Health for our biphasic
version AED, which has been under
consideration for two years now.
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Currently,
only our monophasic AED is approved
for sale in Japan. While progress
has
been made, our biphasic AED is
not yet approved for sale in
Japan
regulators. And given this delay,
our Q3 shipments to Japan will
be
minimal.
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The
issue at hand is that as demand
for AEDs in Japan has grown as
the market
gains sophistication, customers
want to purchase a biphasic version
AED.
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Japan’s
AED market is growing rapidly
and in order for Cardiac Science
to avoid a
substantial decrease in shipments
to Japan in 2005, it’s important we gain
biphasic approval in the near
term.
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To
that end, we had been working
diligently with Nihon Kohden
Corporation,
our Japanese OEM partner over
the last several months, to satisfy
the
Ministry of Health’s remaining request. And we believe
we have submitted
all the final documents required
to gain marketing
clearance.
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Accordingly,
we are optimistic that the
final regulatory clearance
will be forthcoming.
Nihon Kohden reports that substantial
demand exists for our biphasic
AED
product and we are confident
that we can realize significant
sales upon
gaining approval.
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The
Nihon Kohden branded biphasic
AED is in production and on
the shelf and
ready for immediate shipment.
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With
respect to the new traditional
in-hospital external defibrillator
which
has been under development
for sale by GE, we are pleased
to report that
we have successfully completed
the development of this new
product as
planned and we have begun manufacturing
commercial product in our
Minneapolis facility under
the GE Responder brand name.
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We
are actively working with the
FDA on obtaining 510k clearance
and while it
is taking longer than expected,
we believe that we can gain
clearance
later this quarter or early
in the fourth quarter.
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As
is the case with the existing
line of Cardiac Science AEDs,
the new
defibrillator product will
be manufactured under the Powerheart
brand for
sale by GE in the US hospital
market and also manufactured
by us on a
private label basis under the
GE Responder brand name for
sale by GE in
Europe, Asia, the Middle East,
and other international
markets.
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To
remind investors, this is a
new product for Cardiac Science
and we have
not had a product offering
in this category to date. This
new product will
allow us for the first time
to gain a share of the replacement
market for
traditional hospital external
defibrillators, which is estimated
at
approximately $300 million
in annual worldwide
purchases.
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|
With
respect to the Philips patent
litigation, Roderick provided
an update on
the amount of money that we
spent to this case - on this
case year-to-date
and compare it to last year.
|
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|
To
remind investors, Cardiac Science
has sued Philips for patent
infringement. There are total
of 21 patents currently at
issue in this
case.
|
|
We
remained confident about
our position. We feel that
our case is as strong
as ever. And this is the
same opinion that is shared
also by our
colleagues at Quinton.
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In
the post-merger environment,
we intend to continue to
vigorously pursue
this case and expect a positive
outcome.
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Okay.
In closing, I would like
to encourage or I should
say before we get into
the Q&A, I would like to encourage
people - shareholders to
read the
proxy materials and to vote
your shares. It’s critically important that
everyone votes their shares
and sends in their proxy
material. Every vote
counts.
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|
When
you’re reading the materials,
we suggest that you read
the Risk Factors as
outlined on Page 26. We also
would encourage you to read
Cardiac Science’s
reasons for the transaction
which are outlined on Page
60 to
62.
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To
recap, we believe that the
merger will allow us to take
advantage of
significantly improved economies
of scale for Cardiac Science
and allow us
to effectively compete more
aggressively in the AED marketplace
against
competitors who have greater
size and somewhat better
financial
flexibility.
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|
We
believe that the combined
entity will have predictable
and stable sources
of revenue and will be
able to meet customer needs
by providing a enhanced
product line.
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|
We
believe that we will take
advantage of product distribution
to the
domestic medical marketplaces
for Cardiac Science AED
products by
utilizing Quinton’s established distributor
channels, and we expect
fully
to take advantage and leverage
the combined technology
manufacturing
strengths of Cardiac Science
and Quinton that will create
operating
synergies for both companies.
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As
we mentioned previously
and our colleagues from
Quinton mentioned again
last night, we fully expect
to realize annual cost
saving of approximately
$10 million and an additional
$2 million to $4 million
in additional
operating expense reductions
have been identified and
are
expected.
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In
addition, it is important
to remember that this merger
will eliminate
Cardiac Science senior
notes and allow us to retire
and eliminate
approximately $61 million
in debt and accrued interest.
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And
of course, we fully expect
that the companies will
generate positive cash
flow from operations upon
the consummation of the
merger and achieve
sustainable profitability
sooner than Cardiac Science
would as a
stand-alone company.
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In
closing on this particular
point, it’s clear that management
and the board
of directors feel very
strongly about the merger
and that we highly
encourage our investors
to vote “yes.” And if there’s any questions at
all, if you have not received
your proxies, if you need
additional
materials or you do not
receive the materials,
please contact the company
and your broker and we’ll make sure that you get
the materials that you
need to be able to vote
on this important
measure.
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At
this point, Rene, we’d like to open it up
for questions and
answers.
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Operator:
|
Thank
you.
|
|
Ladies
and gentlemen, if you
would like to register
a question, please press
the
star-1 on your telephone.
|
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|
If
your question has been
answered and you would
like to withdraw your
registration, please
press star-2.
|
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|
If
you are using a speakerphone,
please lift your handset
before entering
your request.
|
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One
moment please for the
first question.
|
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Our
first question comes
from the line of Stephen
Dunn with Dawson
James.
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Stephen
Dunn:
|
Gentlemen,
on your - I guess, Ray,
your guidance for sales,
$65 million to $70
million, I guess, what
are your assumptions
there? Are you assuming
Japanese biphasic approval?
You’re assuming the 510k
approval for the
crash-cart? Are you assuming
the 510k for your OTC
AED? I mean what are
your assumptions in that
sales number?
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Raymond
Cohen:
|
Yeah.
I’m going to let Rod actually
answer that.
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Stephen
Dunn:
|
Okay.
|
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Roderick
de Greef:
|
The
key assumption to that,
is that we received
the regulatory clearance
from
MOH in the fourth quarter
and that we received
the clearance for the
GE
defibrillator some
time late in the third
quarter early fourth
quarter as
well.
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There
is no assumption about
any other new product
introduction. And in
fact, if
you take a look at
the reduction in revenue
guidance from $75 million
to
$80 million to the
$65 to $70 million
we just provided, 80%
of that
reduction or 80% of
that $10 million comes
as a result of the
delay
associated with Japan
and the GE defibrillator.
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Stephen
Dunn:
|
All
right. As I recall,
the issue on the voice
activate - well not
the voice
activator, change in
the voice on the AED
related to achieving
the 510k
for the over-the-counter
AED, you know, can
you update us on the
progress
of that (thing)?
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Raymond
Cohen:
|
Sure.
|
|
Basically,
we have completed the
work necessary from
a product perspective
to be able
to make our filing
with the FDA. The key
for us was to modify
the voice
prompts on the device
to have the device
be more effusive in
its speaking,
to provide more simple
prompts for lay users,
and that we needed
to also
conduct a human factors
test to be able to
show equivalency to
the one
product that is currently
cleared for OTC today,
which is the Philips
product.
|
|
|
We
have done that. We
believe that this work
that we’ve done will also be
attractive to all of
our customers in the
marketplace. And we’re going to
be coming out with
a new version product
that will allow customers
to buy
that - those enhanced
voice prompts for everyday
use.
|
|
We
also, as I mentioned
in my remarks that
we will then go to
FDA and file
for specific clearance
for OTC. So this
is - we’re not - we’re talking
about this because
we think this is
an important market
for the future.
But this is something
that from a financial
perspective, a revenue
perspective, we’ve not factored at
all into 2005.
|
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Stephen
Dunn:
|
All
right. Thanks, guys.
|
|
Raymond
Cohen:
|
You’re
welcome.
|
|
Operator:
|
Our
next question comes
from the line of
Jason Aryeh with
Jalaa
Equities.
|
|
Jason
Aryeh:
|
Good
afternoon, gentlemen.
|
|
Question
regarding the Philips
patent infringement
litigation. I guess
a couple of
questions surrounding
that.
|
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|
Ray,
can you discuss what
your views are on
whether this would
- how meaningful
this could be financially
to the Newco? And
how might the merger
with
Quinton affect Philips
strategy in fighting
the
litigation?
|
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And
then lastly, the
Philips OTC product
that you just mentioned,
is that
involved in the litigation
as well so that Cardiac
Science is potentially
in line to receive
damages on all of
the OTC sales as
well? Thank
you.
|
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|
Raymond
Cohen:
|
Okay.
Thanks, Jason.
|
|
That
was a multi-part
question. I’ll start with the
last part of
it.
|
|
The
answer is yes.
The product that
is currently marketed
on an OTC basis
by
Philips is included
in the litigation
for IP
infringement.
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|
So,
that’s the fact there.
|
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|
Regarding
the prospects for
financial remuneration
for the company
as we’ve
mentioned before,
it’s very, very difficult
for us, of course,
to predict
or to speculate
on what that potential
might be for the
company.
|
|
|
However,
you know, there’s no question that
if we prevail in
this case, it would
be
material to the
Newco.
|
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|
As
far as Philips’ strategy or lack
there of in the
post-merger environment
for the combined
entities, I think
that, you know,
it’s difficult of
course to predict
exactly what they
will do or won’t do. However,
we do
know that the way
that they’ve been managing
this case has been
on the
basis that they
would expect that
we’re going to run
of
gas.
|
|
|
And
that at some point
in time, we’re not going to
be able to or we
would not
have the resources
to continue to
press forward with
this particular
effort.
|
|
|
So,
you know, this
is a type of situation
where, you know,
this case has been
looked at very
closely by management
or the future management
of the
company, Mr. Hinson,
who will be the
CEO of the combined
company, has
experienced in
litigation. He
has experience
specifically with
Philips in
litigation and
the fact of the
matter is that,
you know, we fully
expect
to pursue this
aggressively.
|
|
|
And
we think part of
what has driven
Philips’ strategy in this
particular case
is they felt that
Cardiac Science
was financially
weak. And they
could get
away with it.
|
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|
So,
we hope to dissuade
them of that opinion
and continue to
pursue it
aggressively.
|
|
Jason
Aryeh:
|
And
Ray, as Cardiac
Science shareholders
in analyzing
this case in
some
depths, I mean
we believe that
the optionality
of it is probably
maybe two
times as great
as the entire
market capital
of Cardiac Science
right now.
Do you have a
commitment from
the Newco management
team that I know
you’ll
be chairman of
the company,
but is there
a commitment
there to pursue
this
so that the shareholders
hopefully do
see the final
outcome?
|
|
Roderick
de Greef:
|
Jason,
its’ Rod here.
|
|
I
think that the
best way to put
that or answer
that question
is that in the
projections for
Newco going forward
that we’ve developed
in conjunction
with the Quinton
management team,
there is a fully
loaded Philips
litigation line
in there assuming
that it goes
all the way to
trial. So
they are committed
to doing that
and that’s not been identified
as a cost
synergy here.
|
|
|
Jason
Aryeh:
|
Right.
Thank you, guys.
|
|
Raymond
Cohen:
|
Thank
you, Jason.
|
|
Roderick
de Greef:
|
Thank
you.
|
|
Operator:
|
Mr.
Cohen, there
are no further
questions at
this time. I
will now turn
the
call back to
you.
|
|
Please
continue with
your presentation
or closing remarks.
|
|
|
Raymond
Cohen:
|
Okay.
Thank you, operator.
|
|
Thank
you, ladies and
gentlemen. We
certainly appreciate
you listening
in today.
Roderick and
I appreciate
your support
as shareholders
for the
company.
|
|
|
Once
again, on behalf
of Cardiac Science
management, the
board of directors,
we
are urged you
to open up your
prospectus to
read the merger
proxy
materials and
to vote “yes” on this transaction.
|
|
|
So,
thank you for
your support
once again and
have a nice
day.
|
|
|
Operator:
|
Ladies
and gentlemen,
that does conclude
the conference
call for today.
We thank
you for your
participation
and ask that
you please disconnect
your
line.
|
| This ‘8-K’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 8/31/05 | ||||
| Filed on: | 8/9/05 | 10-Q, 425 | ||
| 8/4/05 | ||||
| For Period End: | 8/3/05 | |||
| 7/14/05 | ||||
| 6/30/05 | 10-Q, 425 | |||
| List all Filings | ||||