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 September 30, 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 September 30,
1999.
<PAGE>
PART I. - FINANCIAL INFORMATION
The 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 September
30, 1999, and the results of its operations and its cash flows for the
three months and nine months ended September 30, 1999 and 1998 have been
included.
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
<CAPTION>
(Unaudited) (Audited)
September 30, 1999 December 31, 1998
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $2,408,372 $1,442,342
Accounts receivable, net of allowance
for doubtful accounts 1,246,409 895,699
Inventory 892,827 948,293
Deferred tax assets 94,500 94,500
Other current assets 33,817 79,711
---------- ---------
Total current assets 4,675,925 3,460,545
---------- ---------
Property and Equipment
Land and improvements 535,000 535,000
Building and improvements 1,379,590 1,379,590
Machinery and equipment 1,199,662 1,151,946
Construction in progress 26,346 -
----------- ---------
3,140,598 3,066,536
Less-Accumulated depreciation 829,527 704,849
----------- ---------
2,311,071 2,361,687
Other Assets 2,900 2,901
---------- ---------
Total assets $6,989,896 $5,825,133
__________ _________
<FN>
The accompanying notes to financial statements
are an integral part of these statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
<CAPTION>
(Unaudited) (Audited)
September 30, 1999 December 31, 1998
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 257,817 $614,355
Income taxes payable 216,293 444,720
Accrued payroll 10,250 259,697
Accrued professional fees 21,480 90,500
Accrued warranty 20,000 20,000
Current portion of long-term debt 33,000 10,000
Line of credit 400,000 -
Other accrued expenses 111,012 46,673
---------- --------
Total current liabilities 1,069,852 1,485,945
---------- --------
Long-term debt 1,255,067 -
Shareholders' Equity:
Common stock, $.004 par value per share,
19,000,000 shares authorized, 9,346,777
shares issued and outstanding 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 1,924,221 1,604,507
---------- ---------
Total shareholders' equity 4,664,977 4,339,188
---------- ---------
Total liabilities and
shareholders' equity $ 6,989,896 $5,825,133
__________ _________
<FN>
The accompanying notes to financial statements
are an integral part of these statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF INCOME
FOR THE NINE MONTHS AND THREE MONTHS ENDED
SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<CAPTION>
Nine Months Ended Three Months
Ended
September 30, September
30,
1999 1998 1999
1998
________________
________________
<S> <C> <C> <C> <C>
REVENUES:
Net product sales $5,628,241 $5,210,630 $1,933,842
$1,724,165
Licensing fees 202,373 222,373 56,444
81,564
--------- --------- ---------
- ---------
5,830,614 5,433,003 $1,990,286
1,805,729
OPERATING EXPENSES:
Cost of product sales 2,496,648 2,178,635 838,875
767,247
Selling, general & administrative 2,378,185 2,072,316 836,222
689,235
Research & development 425,810 410,463 158,762
139,226
--------- --------- ---------
- ---------
Operating income 529,971 771,589 156,427
210,021
--------- --------- ---------
- ---------
INTEREST (EXPENSE) INCOME, net ( 6,257) 84,657 5,948
20,534
--------- --------- ---------
- ---------
Income Before Income Taxes 523,714 856,246 162,375
230,555
PROVISION FOR INCOME TAXES 204,000 343,000 63,000
93,000
--------- --------- ---------
- ---------
Net Income $ 319,714 $ 513,246 $ 99,375 $
137,555
_________ _________ _________
_________
Weighted average number of
common shares outstanding:
Basic 9,343,147 9,329,277 9,346,777
9,329,277
_________ _________ _________
_________
Assuming dilution 9,754,671 9,864,743 9,696,005
9,737,421
_________ _________ _________
_________
Earnings per common share:
Basic $0.03 $0.06 $0.01
$0.01
_________ _________ _________
_________
Assuming Dilution $0.03 $0.05 $0.01
$0.01
_________ _________ _________
_________
<FN>
The accompanying notes to financial statements
are an integral part of these statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
<CAPTION>
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings
______________ __________ ___________
<S> <C> <C> <C> <C>
Balance,
December 31,
1997 (Audited) 9,329,277 $37,317 $2,697,364 $ 788,255
Net income for
nine months - - - 513,246
--------- ------- ---------- ------------
Balance
September 30, 9,329,277 $37,317 $2,697,364 $ 1,301,501
1999 (Unaudited) _________ _______ __________ ___________
<CAPTION>
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings
______________ __________ ___________
<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
nine months - - - 319,714
--------- ------- ---------- ----------
Balance
September 30, 9,346,777 $37,387 $2,703,369 $1,924,221
1999 (Unaudited) _________ _______ __________ __________
<FN>
The accompanying notes to financial statements
are an integral part of these statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(Unaudited)
<CAPTION>
September 30,
1999 1998
__________ __________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 319,714 $ 513,246
Adjustments to reconcile net income
to net cash (used in)/provided by
operating activities:
Depreciation and amortization 124,678 84,443
(Increase)/decrease in accounts
receivable (350,710) 125,914
Decrease/(increase) in inventory 55,466 (231,393)
Decrease in other current assets 45,895 ( 14,484)
(Decrease) in accounts payable and
accrued expenses (416,093) 314,735
________ _______
Net cash (used in)/provided by
operating activities (221,050) 792,461
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures ( 74,062) (1,325,329)
________ _______
Net cash (provided by) investing activities ( 74,062) (1,325,329)
CASH FLOWS FROM FINANCING ACTIVITIES:
Note payable 1,255,067 -
Proceeds from issuance of common stock 6,075 -
_________ _______
Net cash used in financing activities 1,261,142
Net increase (decrease) in cash and
cash equivalents 966,030 (532,868)
CASH AND CASH EQUIVALENTS, at beginning
of period 1,442,342 2,190,345
_________ _________
CASH AND CASH EQUIVALENTS, at end of period $2,408,372 $ 1,657,477
__________ _________
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 62,927 $ 34
Cash paid during the period for income taxes $ 163,850 $ 277,262
<FN>
The accompanying notes to financial statements
are an integral part of these statements
</TABLE>
<PAGE>
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1999
Note 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.
Note 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 September 30, 1999 and December 31, 1998, inventory
consisted of the following:
September 30, December 31,
1999 1998
Raw Material $522,394 $622,501
Work-In-Process 119,505 89,866
Finished Inventory 250,928 235,926
------- -------
$892,827 $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.
<PAGE>
CAS Medical Systems, Inc.
Notes to Financial Statements - September 30, 1999
Note 3. Net Income Per Common Share:
The following tables summarize the Company's calculation of Basic and
Diluted Earnings per Share ("EPS") for the three and nine month periods
ended September 30, 1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1999
____________________________________
Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
____________________________________
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $ 99,375 9,346,777 $.01
Effective of Dilutive Securities:
Options 94,756
Warrants 253,472
_______ _________ ___
Diluted EPS $ 99,375 9,696,005 $.01
_______ _________ ___
Nine Months Ended
September 30, 1999
____________________________________
Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
____________________________________
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $319,714 9,343,147 $.03
Effective of Dilutive Securities:
Options 112,416
Warrants 299,108
_______ _________ ___
Diluted EPS $319,714 9,754,671 $.03
_______ _________ ___
</TABLE>
<PAGE>
CAS Medical Systems, Inc.
Notes to Financial Statements - September 30, 1999
<TABLE>
<CAPTION>
Three Months Ended
September 30, 1998
___________________________________
Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
___________________________________
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $137,555 9,329,277 $.01
Effective of Dilutive Securities:
Options 115,048
Warrants 293,096
_______ _________ ___
Diluted EPS $137,555 9,737,421 $.01
_______ _________ ___
Nine Months Ended
September 30, 1998
___________________________________
Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
___________________________________
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $513,246 9,329,277 $.06
Effective of Dilutive Securities:
Options 152,038
Warrants 383,428
_______ _________ ___
Diluted EPS $513,246 9,864,743 $.05
_______ _________ ___
</TABLE>
For the nine month periods ended September 30, 1999 and 1998, 307,000 and
198,000 options and 445,000 and 479,000 warrants, respectively, were
excluded from the denominator in the calculation of Diluted EPS as the
effect would be antidilutive.
<PAGE>
CAS Medical Systems, Inc.
Notes to Financial Statements - September 30, 1999
Note 4. Debt:
At September 30, 1999, the Company had a line of credit with a
Connecticut bank totalling $1,000,000. Borrowings under the line of
credit bear interest at the prime rate plus .50%. At September 30, 1999
the amount outstanding under this line was $400,000. 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.
Note 5. 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 specific 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 September 30, 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.
Note 6. 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.
On January 19, 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
At September 30, 1999, the Company's cash and cash equivalents
totaled $2,408,372 compared to $1,442,342 at December 31, 1998. The
Company's working capital totaled $3,606,073 on September 30, 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>
CAS Medical Systems, Inc.
At September 30, 1999, the Company had a line of credit with a
Connecticut bank totaling $1,000,000. Borrowings under the line bear
interest at the prime rate plus .50%. At September 30, 1999, the amount
outstanding under this line was $400,000.
The Company believes that the 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 nine month period ended September 30, 1999 was
approximately $320,000 ($0.03 per share assuming dilution), compared to
approximately $513,000 ($0.05 per share assuming dilution), for the same
period of 1998. Net income for the third quarter of the current year was
approximately $99,000 ($.01 per share assuming dilution), compared to
approximately $138,000 ($0.01 per share assuming dilution), reported for
the third quarter of 1998. The 1999 earnings performance was impacted by
the investments incurred to increase personnel in the selling and
marketing departments.
The Company's revenues for the third quarter ended September 30,
1999 were approximately $1,934,000 as compared to approximately $1,724,000
for the comparable period in the prior year. Revenues for the nine month
period ended September 30, 1999 reached approximately $5,628,000, compared
to approximately $5,211,000 reported for the same period of 1998.
Revenues for 1999 reflect a significant increase of 43 percent for
diagnostic equipment whereas disposable products decreased slightly from
the prior year.
Total cost of product sales as a percentage of net product sales was
44.3 percent for 1999 compared to 41.8 percent for 1998. The unfavorable
impact is due primarily to product mix.
Selling, general and administrative expenses were approximately
$2,378,000 for the nine month period ended September 30, 1999 as compared
to approximately $2,072,000 for the same period of 1998, an increase of
$306,000 or 15 percent. This increase in expenses for 1999 is due
primarily to additional personnel, both domestic and international.
The provision for income taxes of $204,000 and $343,000 for the nine
month period ended September 30, 1999 and 1998, respectively, represents
state and federal income taxes.
These factors and licensing revenues resulted in net income of
approximately $320,000 for the period ended September 30, 1999, as
compared to net income of approximately $513,000 for the comparable period
in the prior year.
<PAGE>
CAS Medical Systems, Inc.
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
November 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 2,048,372
<SECURITIES> 0
<RECEIVABLES> 1,246,409
<ALLOWANCES> 0
<INVENTORY> 892,827
<CURRENT-ASSETS> 4,675,925
<PP&E> 3,140,598
<DEPRECIATION> 829,527
<TOTAL-ASSETS> 6,989,896
<CURRENT-LIABILITIES> 1,069,852
<BONDS> 0
<COMMON> 37,387
0
0
<OTHER-SE> 1,924,221
<TOTAL-LIABILITY-AND-EQUITY> 6,989,896
<SALES> 5,628,241
<TOTAL-REVENUES> 5,830,614
<CGS> 2,496,648
<TOTAL-COSTS> 2,378,185
<OTHER-EXPENSES> 425,810
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,257)
<INCOME-PRETAX> 523,714
<INCOME-TAX> 204,000
<INCOME-CONTINUING> 319,714
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 319,714
<EPS-BASIC> .03
<EPS-DILUTED> .03
</TABLE>
