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Sales in the second quarter of 2007 totaled $2,436,000, a decrease ofapproximately 45% as compared with $4,392,000 of sales in the prior yearquarter. The lower revenue in the current year quarter is primarilyattributable to a $1,146,000, or 38%, decline in disposable handpiece revenue,and an $849,000, or 79%, decline in capital sales as compared with the prioryear quarter. During the second quarter of 2007 the company sold 1 laser and512 handpieces as compared to 5 lasers and 798 handpieces during the secondquarter of 2006.
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Sales in the first six months of 2007 totaled $5,806,000, a decrease ofapproximately 37% from the $9,241,000 recorded in the first six months of2006. The year to date decrease as compared with the prior year period isprimarily attributable to a $1,991,000, or 32%, decline in disposablehandpiece revenue and a $1,502,000, or 61%, decline in capital sales. For thefirst half of 2007, the company sold 6 lasers and 1,168 handpieces as comparedto 11 lasers and 1,717 handpieces for the first half of 2006.
The company attributed the decrease in sales for both the second quarterand first half of 2007 primarily to turnover of its sales force. Approximatelytwo-thirds of the sales force joined the company within the last 5 monthswhich significantly impacted sales in both the second quarter and first halfof 2007. Cardiogenesis President Richard P. Lanigan said, "During the secondquarter we largely completed our sales force expansion effort, successfullyrecruiting, hiring and training several new sales professionals. At quarterend, we had 14 of the targeted 16 domestic territory manager positions filled.Our new sales professionals appear to be gaining traction in their respectiveterritories and we are encouraged by the fact that during July, a normallyslow time of year, we experienced the highest monthly handpiece volume sinceFebruary."
Gross margin was 78% of sales for the quarter ended June 30, 2007 ascompared with an 81% gross margin realized in the second quarter of 2006.Gross profit in absolute dollars decreased by $1,656,000 to $1,905,000 for thecurrent year quarter as compared with $3,561,000 for the 2006 second quarter.The decrease in gross margin resulted primarily from the replacement of keycomponents on lasers being used at two international heart centers, at nocharge to the customer, to facilitate the re-implementation of TMR programs atthose centers. In addition, the company wrote off inventory previouslylocated in Europe to support sales of PMC product. For the six months endedJune 30, 2007, gross profit decreased to 80% of net revenues as compared to81% of the net revenues for the six months ended June 30, 2006. Gross profitin absolute dollars decreased by $2,888,000 to $4,632,000 for the six monthsended June 30, 2007, as compared to $7,520,000 for the six months endedJune 30, 2006.
Research and development costs were $297,000 in the second quarter of 2007as compared with $283,000 in the 2006 second quarter. Year to date, researchand development expenses of $509,000 were $130,000 below the prior yearperiod. The lower year to date R&D expenses are primarily due to researchexpenses for the TMR mechanism of action study included in the first half of2006 that did not recur in the current year period.
Sales, general and administrative ("SG&A") expense of $1,864,000 decreased$1,365,000, or 42%, for the quarter ended June 30, 2007 as compared with$3,229,000 in the prior year quarter. The decrease in SG&A expendituresduring the current year quarter was primarily due to lower commission expense,which decreased approximately $524,000 as a result of the reduced sales leve
