719722--2/28/2006--CARDIODYNAMICS_INTERNATIONAL

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In addition to the other information contained in this Form 10-K, you should consider the following risk factors which could affect our business, financial condition and results of operations. We depend upon on our BioZ product line, which is in its early stages of market acceptance. Our success depends in part upon the availability of adequate third-party reimbursement. We must maintain and develop strategic relationships with third parties to increase market penetration of our product lines. We may not be able to make future acquisitions or successfully integrate our acquisitions. Our future financial results could be adversely impacted by asset impairments or other charges. Utilization of our deferred tax assets may be limited and is dependant on future taxable income. Technological change is difficult to predict and new product transitions are difficult to manage. We depend on management and other key personnel. We are subject to stock exchange and government regulation. We may not have adequate intellectual property protection. We face competition from other companies and technologies. If market conditions cause us to reduce the selling price of our products or sensors, our margins and operating results will decrease. Effective December 1, 2005, we will be required to account for stock options under our employee stock plans as a compensation expense, our net income and earnings per share could be significantly reduced. We have a history of losses and may experience continued losses. We may need additional capital, which may be unavailable. We may default on our credit agreements and have to immediately repay all amounts outstanding. We may not be able to manage growth successfully. Our international sales expose us to unique risks. We may not receive approvals by foreign regulators that are necessary for international sales. Our quarterly operating results frequently vary due to factors outside our control. We depend on third parties for development and manufacturing services. Our limited order backlog makes it difficult to predict sales and plan manufacturing requirements, which can lead to lower revenues, higher expenses and reduced margins. Our common stock is subject to price volatility. We may not continue to receive necessary FDA or other regulatory clearances or approvals. We are subject to product liability claims and product recalls that may not be covered by insurance. A low stock price could result in our being de-listed from the NASDAQ Market and subject us to regulations that could reduce our ability to raise funds. Corporate scandals involving accounting irregularities have resulted in unavailability of or significantly higher premiums for director and officer liability insurance. We do not know the effects of healthcare reform proposals. We do not intend to pay dividends in the foreseeable future.

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719722--2/28/2006--CARDIODYNAMICS_INTERNATIONAL_CORP