Commenting on the results of the quarter, Cambridge Heart chief executive officer Ali Haghighi-Mood said, “The decrease in sequential revenue reflects the ongoing weakness in sales of medical capital equipment in general, and our limited distribution footprint specifically. While we continue to negotiate with potential distribution partners, which we believe is important to increasing adoption of our MTWA technology, we are also re-focusing the efforts of our clinical specialist team on our installed base, which we believe will increase utilization of our proprietary technology.”
Financial Results for the three months ended March 31, 2009
On a sequential basis, total revenue decreased $176,000, or 17%, from total revenue of $1,012,000 for the quarter ended December 31, 2008.
Cost of sales for the Q1 2009 was $493,000 compared to $560,000 in the Q1 2008. Gross margin as a percent of revenue for the first quarter was 41% compared to 52% for the same period last year. This decrease in gross margin is primarily attributable to the lower sales volume relative to our fixed manufacturing overhead costs.
Selling, general and administrative expenses for the Q1 2009 were $2,433,000, a decrease of $622,000, or 20%, compared to the Q1 2008. The decrease in selling expense from the 2008 period was primarily driven by lower variable selling expenses as a result of lower sales of commissionable products, and lower non-cash compensation expense related to unvested stock options that were forfeited as a result of the recent reduction in force. Further, the first quarter of 2008 included commission costs related to the co-marketing agreement with St. Jude Medical, which are no longer recurring. General and Administrative expenses were also lower compared to the 2008 period due to lower non-cash compensation expense related to unvested stock options that were forfeited as a result of the resignation of a director, and less legal expenses.
The operating loss for the Q1 2009 was $2,165,000, compared to an operating loss of $2,549,000 for the same period in the prior year. Included in the operating loss for the three-month periods in 2008 and 2009 was $743,000 and $513,000 of non-cash stock-based compensation expense, which relate to previously granted stock options and restricted stock awards and are expensed over the respective vesting periods. The net loss for the quarter was $2,155,000 or $0.03 per share, compared to a net loss of $2,383,000, or $0.04 per share, in the comparable 2008 period.
The company’s cash used by operations was $1,201,000 for Q1 2009, compared to $997,000 for the same period in 2008. The increase in cash use compared to 2008 is primarily attributable to lower revenue, which was partially offset by lower SG&A expense in the first quarter of 2009. The company ended the first quarter of 2009 with cash and cash equivalents of $5,001,000.
The company currently has a total of 69.1 million shares of common stock and common stock equivalents issued and outstanding, including the effect of converting the Series A preferred stock and Series C preferred stock. Further, there are options and warrants outstanding to purchase 7.9 million common equivalent shares, bringing the fully diluted share count to 77 million common equivalent shares.
