Outlook

Looking ahead for the second quarter of 2009, the company expects revenue to be in a range between $37 million and $39 million, reflecting continued softness in global cardiac monitoring sales and Japanese defibrillation sales, with more stability in North American and other international AED sales and service revenue. The company expects to report a small net loss again in the second quarter in a range between $0.03 and $0.05 per share.

Despite near term revenue softness, we remain confident about our long term growth prospects, said Mike Matysik, chief financial officer. We expect operating cash flow to be neutral to positive in the near term. We will continue to incur relatively small GAAP losses during this time, as we continue to invest in and build capabilities that we expect will result in longer term growth, he concluded.

We were challenged during the quarter by the economy and the situation in Japan, but we are pursuing strategies that position the company for future growth and leadership, said Dave Marver, president and chief executive officer. We generated cash, improved our operations, and aggressively pared our organization to match sales levels. Over the coming months we expect to announce a series of new products and other developments that will strengthen the company.

First Quarter Financial Results

First quarter gross margin was 50.1%, up from the first quarter of 2008 of 49.4%. This increase is mostly due to favorable product mix.

Operating expenses in the first quarter of 2009 were $20.3 million, against $21.2 million for the first quarter of 2008, a reduction of 4%. First quarter 2009 operating expenses decreased 16% compared to the pro forma fourth quarter 2008 operating expenses of $24.1 million. Actual operating expenses in the fourth quarter of 2008 were $131.7 million, but included a goodwill impairment charge of $107.7 million.

EBITDA was $0.8 million for the first quarter of 2009. Adjusted EBITDA, which excludes stock-based compensation expense, was $1.5 million, or 4% of revenue.

The company generated $3.7 million in cash from operating activities during the quarter and had $37.6 million in cash and cash equivalents as of March 31, 2009.