FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1999
Commission File Number 2-96271-B
CAS MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1123096
(State or other jurisdiction of (I.R.S. employer
incorporation of organization) identification no.)
44 East Industrial Road, Branford, Connecticut 06405
(Address of principal executive offices)
(Zip Code)
(203) 488-6056
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.004 par value: 9,346,777 shares as of March 31, 1999.
<PAGE>
PART I
ITEM 1. FINANCIAL INFORMATION
The condensed financial statements included herein have been prepared
by CAS Medical Systems, Inc. (the "Company"), without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission. While
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, the Company believes that the disclosures made herein are
adequate to make the information presented not misleading. It is
recommended that these condensed financial statements be read in conjunction
with the financial statements and notes thereto included in the Company's
Annual Report filed on Form 10-KSB for the year ended December 31, 1998.
In the opinion of the Company, all adjustments necessary to present
fairly the financial position of CAS Medical Systems, Inc. as of March 31,
1999 and the results of its operations and its cash flows for the three
months ended March 31, 1999 and 1998 have been included.
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS AS OF MARCH 31, 1999 AND DECEMBER 31, 1998
<CAPTION>
March 31, 1999 December 31, 1998
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $2,002,387 $1,442,342
Accounts receivable, net of allowance
for doubtful accounts 828,218 895,699
Inventory 889,478 948,293
Deferred tax assets 94,500 94,500
Other current assets 71,568 79,711
---------- ---------
Total current assets 3,886,151 3,460,545
---------- ---------
Property and Equipment
Land and improvements 535,000 535,000
Buildings and improvements 1,379,590 1,379,590
Machinery and equipment 1,196,311 1,151,946
Construction in progress 17,795 -
---------- ---------
3,128,696 3,066,536
Less-Accumulated depreciation 758,966 704,849
---------- ---------
2,369,730 2,361,687
Other Assets 2,900 2,901
---------- ---------
Total assets $6,258,781 $5,825,133
__________ _________
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS AS OF MARCH 31, 1999 AND DECEMBER 31, 1998
<CAPTION>
March 31, 1999 December 31, 1998
(unaudited) (audited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 195,155 $614,355
Income taxes payable 237,531 444,720
Accrued payroll 20,374 259,697
Accrued professional fees 28,580 90,500
Accrued warranty 20,000 20,000
Other accrued expenses 39,422 56,673
---------- --------
Total current liabilities 541,062 1,485,945
---------- --------
Long-term Debt 1,271,616 -
Shareholders' Equity:
Common stock, $.004 par value per
share, 19,000,000 shares authorized,
9,346,777 shares issued and outstand-
ing in 1999 and 9,329,277 shares
issued and outstanding in 1998. 37,387 37,317
Additional paid-in capital 2,703,369 2,697,364
Retained earnings 1,705,347 1,604,507
---------- ---------
Total shareholders' equity 4,446,103 4,339,188
---------- ---------
Total liabilities and
shareholders' equity $ 6,258,781 $5,825,133
__________ _________
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
MARCH 31, 1999 AND 1998
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
1999 1998
<S> <C> <C>
REVENUES:
Net product sales $1,715,948 $1,677,450
Licensing fees 80,645 77,525
--------- ---------
1,796,593 1,754,975
OPERATING EXPENSES:
Cost of product sales 774,300 665,863
Selling, general and
administrative 733,540 687,673
Research and development 127,674 119,355
--------- ---------
Operating Income 161,079 282,084
--------- ---------
INTEREST (EXPENSE) INCOME, Net ( 1,239) 20,379
--------- ---------
Income Before Income Taxes 159,840 302,463
PROVISION FOR INCOME TAXES 59,000 120,000
--------- ---------
Net Income 100,840 182,463
_________ _________
Weighted average number of common
shares outstanding:
Basic 9,335,888 9,329,277
_________ _________
Assuming dilution 9,732,035 9,938,616
_________ _________
Earnings per common share:
Basic $ .01 $ .02
_________ _________
Assuming dilution $ .01 $ .02
_________ _________
<FN>
See Notes To Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1999 and 1998
<CAPTION>
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital (Deficit)
<S> <C> <C> <C> <C>
Balance,
December 31,
1997 (Audited) 9,329,277 $37,317 $2,697,364 $ 788,255
Net income for
three months - - - 182,463
--------- ------- ---------- ------------
Balance
March 31, 1998
(Unaudited) 9,329,277 $37,317 $2,697,364 $ 970,718
_________ _______ __________ ____________
<CAPTION>
Additional
Common Stock Paid-In Accumulated
Shares Amount Capital (Deficit)
<S> <C> <C> <C> <C>
Balance,
December 31,
1998 (Audited) 9,329,277 $37,317 $2,697,364 $ 1,604,507
Issuance of Common
stock 17,500 70 6,005 -
Net income for
three months - - - 100,840
--------- ------ --------- ----------
Balance,
March 31, 1999
(Unaudited) 9,346,777 $37,387 $2,703,369 $ 1,705,347
_________ _______ _________ __________
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(Unaudited)
<CAPTION>
Three Months Ended March 31,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $100,840 $ 182,463
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 54,117 26,235
Decrease in accounts receivable 67,481 134,691
Decrease (Increase) in inventory 58,815 (135,718)
Decrease (Increase) in other
current assets 8,144 ( 39,906)
(Decrease) in accounts payable
and accrued expenses (944,883) (265,031)
_________ _________
Net cash (used in) provided by
operating activities (655,486) ( 97,266)
_________ _________
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures ( 62,160) ( 56,247)
_________ _________
Net cash used in investing activities ( 62,160) ( 56,247)
_________ _________
CASH FLOWS FROM FINANCING ACTIVITIES:
Note payable 1,271,616 -
Proceeds from issuance of common stock 6,075 -
Net cash used in financing _________ _________
activities 1,277,691 -
_________ _________
Net (decrease) increase in cash and
cash equivalents 560,045 (153,513)
_________ _________
CASH AND CASH EQUIVALENTS, at beginning
of period 1,442,342 2,190,345
_________ _________
CASH AND CASH EQUIVALENTS, at end of period $2,002,387 $2,036,832
_________ _________
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 15,883 $ -
Cash paid during the period for income
taxes $ 258,900 $ 81,500
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(1) The Company:
CAS Medical Systems, Inc., the ("Company"), was organized in 1984
primarily to serve neonatal and pediatric units in hospitals. Today, the
Company is engaged in the business of developing, manufacturing and
distributing diagnostic equipment and medical products for use in the health
care and medical industry. These products are sold by the Company through its
own sales force via distributors and pursuant to Original Equipment
Manufacturer agreements internationally and in the United States.
(2) Summary of Significant Accounting Policies:
Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
Inventory
Inventory is stated at the lower of first-in, first-out (FIFO) cost or
market. At March 31, 1999 and December 31, 1998, inventory consisted of the
following:
March 31, December 31,
1999 1998
Raw Material $551,338 $622,501
Work-In-Process 121,333 89,866
Finished Goods 216,807 235,926
-------- -------
$889,478 $948,293
________ _______
Property and Equipment
Property and equipment are stated at cost. Property and equipment are
depreciated using the straight-line method based on the estimated useful lives
of the assets, which range from two to five years and the building which has a
life of 20 years.
Net Income Per Common Share
Net income per common share has been computed by dividing net income
available for common stock, by the weighted average number of common shares
outstanding. Weighted average shares outstanding include the common
equivalent shares calculated for the stock options and warrants under the
treasury stock method.
<PAGE>
Notes to Financial Statements - (Continued)
The following tables summarize the Company's calculation of Basic and
Diluted Earnings per Share ("EPS") for the three month periods ended March
31, 1998 and 1998:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1999
Income Shares Per Share
(Numerator) (Denominator) Amount
_____________________________________
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $100,840 9,335,888 $.01
Effective of Dilutive Securities:
Options - 108,126
Warrants - 288,021
_______ _________
Diluted EPS $100,840 9,732,035 $.01
_______ _________ ___
Three Months Ended
March 31, 1998
Income Shares Per Share
(Numerator) (Denominator) Amount
____________________________________
Basic EPS
Income available to common
stockholders $182,463 9,329,277 $.02
Effective of Dilutive Securities:
Options - 171,735
Warrants - 437,604
_______ _________
Diluted EPS $182,463 9,938,616 $.02
_______ _________ ___
</TABLE>
For the three month periods ended March 31, 1999 and 1998, 307,000 and
282,000 options and 445,000 and 245,000 warrants, respectively, were
excluded from the denominator in the calculation of Diluted EPS as the
effect would be antidilutive.
<PAGE>
Notes to Financial Statements - (Continued)
(3) Debt
At March 31, 1999, the Company had a line of credit with a Connecticut
bank totaling $1,000,000. Borrowings under the line of credit bear
interest at the prime rate plus 1.0%. At March 31, 1999, there were no
borrowings outstanding under this line. The bank has a first security
interest in all assets of the Company and requires a compensating
balance equal to 10% of the line of credit.
(4) License Agreement:
On July 27, 1994, the Company entered into a four year licensing
agreement with a major European manufacturer of patient monitors,
granting a non-exclusive license to use the Company's blood pressure
technology for a special application, and allowing the exchange of
technical know-how. During February 1997, the Company amended the
original licensing agreement through the year 2000. As part of the
agreement, the Company will receive license fees of $1,500,000 plus
royalties, of which $1,100,000 in license fees has been received
through March 31, 1999. The manufacturer has the option to extend the
license to the year 2006 and only be liable for royalties. License
fees are being recognized on a straight line basis over the contract
period.
(5) Long-Term Debt
During November 1998, the Company relocated to a 24,000 square foot
office, laboratory and manufacturing facility owned by the Company in
Branford, Connecticut. Total cost of this new facility was
approximately $1,933,000. The Company is the sole tenant of this new
facility.
During January 1999, the Company obtained a nineteen year, 7.25% fixed
rate $1,310,000 mortgage from a local bank. The mortgage is secured by
a first mortgage lien on the Company property consisting of 4.6 acres
of land and the 24,000 square foot industrial building. The monthly
payments, including interest, are approximately $11,000.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As of March 31, 1999, the Company's cash and cash equivalents
totaled $2,002,387 compared to $1,442,342 at December 31, 1998, and the
Company's working capital totaled $3,345,089 on March 31, 1999,
compared to $1,974,600 on December 31, 1998. The Company's increased
cash position is primarily due to the $1,310,000 mortgage obtained
during January, 1999.
<PAGE>
Notes to Financial Statements - (Continued)
At March 31, 1999, the Company had a line of credit with a Connecticut
bank totaling $1,000,000. Borrowings under the line of credit bears interest
at the prime rate plus 1.0%. At March 31, 1999, there were no borrowings
outstanding under this line.
The Company believes that cash generated from operations and its bank
line of credit will be sufficient to meet the Company's short-term liquidity
needs.
Results of Operations
Net income for the first quarter of the current year was approximately
$101,000 ($.01 per common share on a diluted basis), compared to $182,000
($.02 per common share on a diluted basis), reported for the first quarter of
1998. The 1999 earnings performance was impacted by softness in sales of
certain of the Company's product lines and the increased expenses by
additional personnel in the selling department.
The Company's revenues for the three month period ended March 31, 1999
were approximately $1,797,000 as compared to approximately $1,755,000 for the
comparable period in the prior year. The small increase in 1999 is due
primarily by softness in sales of certain disposable products whereas
diagnostic equipment reflected a significant increase of 54 percent for the
same period of 1998.
Total cost of product sales as a percent of net product sales was 45.1
percent for 1999 compared to 39.7 percent for 1998. The unfavorable impact is
due primarily to product mix during the first quarter of 1999.
Selling, general administrative, research and development expenses were
approximately $861,000 for the first quarter of 1999, compared to
approximately $807,000 for the same period of 1998, an increase of $54,000 or
7 percent. The overall increase in 1999 is the result of additional personnel
for the selling and marketing departments.
The provision for income taxes of $59,000 and $120,000 for the three
month period ended March 31, 1999 and 1998, respectively, represents state and
federal income taxes.
These factors resulted in net income of approximately $101,000 for the
first quarter of 1999, as compared to net income of approximately $182,000 for
the comparable period in the prior year.
<PAGE>
PART II
ITEM 3 EXHIBITS AND REPORTS
(A) Exhibits
11. See Notes to Financial Statements Note 2, regarding
computation of earnings per Share.
(B) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CAS MEDICAL SYSTEMS, INC.
(Registrant)
May 11, 1999 Louis P. Scheps
Date Louis P. Scheps
President and Chief Executive Officer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000764579
<NAME> CAS MEDICAL SYSTEMS, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,002,387
<SECURITIES> 0
<RECEIVABLES> 828,218
<ALLOWANCES> 0
<INVENTORY> 889,478
<CURRENT-ASSETS> 3,886,151
<PP&E> 3,128,696
<DEPRECIATION> 758,966
<TOTAL-ASSETS> 6,258,781
<CURRENT-LIABILITIES> 541,062
<BONDS> 0
<COMMON> 37,387
0
0
<OTHER-SE> 1,705,347
<TOTAL-LIABILITY-AND-EQUITY> 6,258,781
<SALES> 1,715,948
<TOTAL-REVENUES> 1,796,593
<CGS> 774,300
<TOTAL-COSTS> 733,540
<OTHER-EXPENSES> 127,674
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> ( 1,239)
<INCOME-PRETAX> 159,840
<INCOME-TAX> 59,000
<INCOME-CONTINUING> 100,840
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 100,840
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
