1323115--3/16/2010--Cardiac_Science

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We face numerous challenges in implementing a field initiative to address the component issue that led to our AED ship-hold in late June 2009 and our business, financial position and results of operations may be negatively impacted by the costs and other commitments needed to carry out the initiative. We face numerous challenges in implementing a recall announced on February 3, 2010, and our business, financial position and results of operations may be negatively impacted by the costs and other commitments needed to carry out the recall and correct the product issue. Our cash and cash equivalents may not be sufficient to fund future operations and we may not be able to secure additional sources of financing or obtain financing on acceptable terms. We may be required to implement other costly product recalls or corrective actions. Quality problems with our processes, goods and services could harm our reputation for producing high quality products and erode our competitive advantage. Warranty and product liability claims could adversely impact our earnings and reputation. Our business may be adversely affected by deteriorating economic conditions. We rely significantly on our distributors and strategic selling alliances to generate sales of our products; if we do not maintain our relationships with these parties or they fail to successfully distribute our products, our sales and operating results will likely suffer. We are dependent upon licensed and purchased technology for some of our products, and we may not be able to renew these licenses or purchase agreements in the future. Our international business is subject to risks that could adversely affect our profitability and operating results. Our business is subject to intense competition, which may reduce the demand for our products. We may be unable to increase sales of our cardiac monitoring products and services, which could cause our stock price to decrease. Our financial results could be impacted by the credit risk of our customers. Our stock price is volatile, and you may not be able to sell your shares for a profit. We were not profitable in 2008 or 2009 and we may be unable to return to profitability in the future, which could result in a decline in our stock price. Our business may be adversely affected by restructurings. Our quarterly revenues and operating results are unpredictable and may vary significantly. If we are unsuccessful in developing and commercializing new versions of our products, our operating results will suffer. Interruption or cancellation of supply, and our inability to secure alternative suppliers on a timely basis, would likely harm our ability to ship products to our customers, decrease our revenues and increase our costs. Inadequate levels of reimbursement from governmental or other third-party payers for procedures using our products may cause revenues to decrease. If we do not maintain or grow revenues from our support services or consumables, our operating and financial results may be negatively impacted. Our lack of customer purchase contracts and our limited order backlog make it difficult to predict sales and plan manufacturing requirements, which can lead to lower revenues, higher expenses and reduced margins. If market conditions cause us to reduce the selling price of our products, or our market share is negatively affected by the activities of our competitors, our margins and operating results will decrease. If we are unable to retain our executive officers and hire and retain other key personnel, we may not be able to sustain or grow our business. Failure to adequately protect our intellectual property rights may cause our expenses to increase and our business to suffer. Our technology may become obsolete, which would negatively impact our ability to sell our products. Our reliance on a principal manufacturing facility may impair our ability to respond to natural disasters or other unforeseen catastrophic events. We may make future acquisitions, which involve numerous risks that could impact our business and results of operations. We may need additional capital to continue our acquisition growth strategy. Our internal research and product development activities are complemented by acquisitions, investments and alliances. We cannot guarantee that any previous or future acquisitions, investments or alliances will be successful for the purpose of complementing our internal research and product development activities. Future issuances of our common stock could dilute existing stockholders and cause our stock price to decline. Our charter documents and Delaware law contain provisions that could make it more difficult for a third party to acquire us. Realization of our deferred tax assets is uncertain. Changes in tax laws and unanticipated tax liabilities could adversely affect our effective income tax rate and profitability. Our future financial results could be adversely impacted by asset impairments.

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1323115--3/16/2010--Cardiac_Science_CORP