Top executives at Cambridge Heart Inc. (NSDQ:CAMH) agreed to 10 percent paycuts this year and will give up cash bonuses for 2009 as the money-poor manufacturer works to commercialize its cardiac monitoring tools.
The Tewksbury, Mass.-based company also eliminated per-meeting cash payments received by the three non-employee members on its board of directors and halved the $140,000 consulting fee it pays to its scientific founder. The reductions, approved March 11, should result in savings of at least $300,000 during 2010, with about a third of the extra funds resulting from the cuts in board compensation.
It’s not the first cost-cutting measure for Cambridge Heart, which fired 12 full-time employees, or nearly a third of its workforce, in March 2009. It closed out 2009 with an $1.8 million private placement of stock but likely will remain severely strapped for operating funds for the foreseeable future.
Sales of its flagship MTWA Test device — designed to identify patients at risk of sudden cardiac arrest by measuring subtle fluctuations in the T-wave portion of electrocardiograms — sagged 34 percent last year, falling $750,000 to $1.5 million during the first nine months of 2009 compared with the same period in 2008. Net losses at Cambridge Heart through the end of September 2009 totaled just over $7 million, when the company was down to roughly $2.5 million in cash on hand. Financial results for the full year are expected out by the end of March.
In ratcheting down their own pay, board members obviously were trying to signal they were willing to take a hit with the rest of the team. Prior to the reductions adopted last week, the Cambridge Heart board met often and was relatively well-paid for the effort, receiving up to $3,125 for each board meeting they attended and $625 for attending committee meetings or teleconferencing.
Overall, the board met 30 times during 2008, the last year from which details were available, and the company paid out $365,000 in cash compensation to non-employee directors. Since that time, the board cut two positions — trimming membership from seven seats to five — and also reduced the yearly stipend for directors from $15,000 to $12,000.
To help soften the blow, however, the board and senior management will divvy up slightly more than 7 million new options to buy the company’s stock. The options, good for 10 years, are exercisable at 16 cents each and will fully vest as soon as nine months.
Included in the options largess is an exchange program allowing Cambridge Heart executives to turn in about 3 million previously awarded options that are extremely unlikely to reach their exercise price anytime soon. CEO Ali Haghighi-Mood will be the primary beneficiary of the options exchange and related awards, receiving over 3.2 million options after accepting a $27,500 salary cut and giving up a $77,000 cash bonus.