Cambridge Heart Inc. (OTC:CAMH) has $1.85 million in new funding, likely doubling its cash position in short order through a private placement of convertible preferred stock with a group of largely unidentified investors.
The deal, announced Monday by the Tewksbury, Mass.-based company, offered up 1,852 shares of Series D convertible preferred stock priced at $1,000 per share. Each preferred share can be converted into 12,195 shares of common stock — equal to 8.2 cents per common share, a 15-percent premium over the stock’s average price in recent weeks.
The participating investors also can purchase additional stock by exercising either short-term or long-term warrants issued as part of the deal. The short-term warrants are good through Dec. 21, 2010, and allow investors to buy up to half the number of common shares they would own after converting their preferred stock at 10.7 cents per share. The long-term warrants, expiring in December, 2014, can be exercised at 14.2 cents per share in quantities up to 30 percent of the holder’s original stake from last week’s private placement.
Cambridge Heart officials estimate the warrants could eventually generate another $2.1 million for the firm. Provisions included as part of the deal require investors to exercise all of their warrants if Cambridge Heart stock trades above 28.4 cents per share for 20 consecutive days.
Previous private placements of stock and warrants by the company, completed in May, 2003, and March, 2007, generated a combined $19 million in gross proceeds. Executives at Cambridge Heart said the current deal attracted one new institutional investor, who they declined to identify, as well as several existing investors. Three directors from the company board also added to their respective stakes, buying about $370,000 of the new convertible preferred shares.
The new funding arrives at opportune time for the company. Cambridge Heart reported a $2.1 million net loss in the September quarter on $798,000 in sales of its cardiac diagnostic devices. Quarterly revenues from down nearly 29 percent from year-ago levels, but perhaps more daunting is its dwindling cash reserves, which shrank to about $2.6 million by Sept. 30 — down $3.6 million from the $6.2 million on hand at the end of 2008.