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 June 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 June 30, 1999.
<PAGE>
PART I. - 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 June 30,
1999, and the results of its operations and its cash flows for the three
months and six months ended June 30, 1999 and 1998 have been included.
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
<CAPTION>
(Unaudited) (Audited)
June 30, 1999 December 31, 1998
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $2,040,887 $1,442,342
Accounts receivable, net of allowance
for doubtful accounts 965,404 895,699
Inventory 873,552 948,293
Deferred tax assets 94,500 94,500
Other current assets 34,567 79,711
---------- ---------
Total current assets 4,008,910 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 1,226,734 1,151,946
Construction in progress 5,052 -
----------- ---------
3,146,376 3,066,536
Less-Accumulated depreciation 817,040 704,849
----------- ---------
2,329,336 2,361,687
Other Assets 2,900 2,901
---------- ---------
Total assets $6,341,146 $5,825,133
__________ _________
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
<CAPTION>
(Unaudited) (Audited)
June 30, 1999 December 31, 1998
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 246,588 $614,355
Income taxes payable 163,341 444,720
Accrued payroll 19,478 259,697
Accrued professional fees 41,480 90,500
Accrued warranty 20,000 20,000
Other accrued expenses 21,241 56,673
---------- --------
Total current liabilities 512,128 1,485,945
---------- --------
Long-term debt 1,263,416 -
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 1,824,846 1,604,507
---------- ---------
Total shareholders' equity 4,565,602 4,339,188
---------- ---------
Total liabilities and
shareholders' equity $ 6,341,146 $5,825,133
__________ _________
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF INCOME
FOR THE SIX MONTHS AND THREE MONTHS ENDED
JUNE 30, 1999 AND 1998
(Unaudited)
<CAPTION>
Six Months Ended Three Months
Ended
June 30, June 30,
1999 1998 1999
1998
________________
________________
<S> <C> <C> <C> <C>
REVENUES:
Net product sales $3,694,399 $3,486,465 $1,978,451
$1,809,015
Licensing fees 145,929 140,809 65,284
63,284
--------- --------- ---------
- ---------
3,840,328 3,627,274 $2,043,735
1,872,299
OPERATING EXPENSES:
Cost of product sales 1,657,773 1,411,388 883,473
745,525
Selling, general & administrative 1,541,963 1,383,081 808,423
695,408
Research & development 267,048 271,237 139,374
151,882
--------- --------- ---------
- ---------
Operating income 373,544 561,568 212,465
279,484
--------- --------- ---------
- ---------
INTEREST (EXPENSE) INCOME, net ( 12,205) 64,123 ( 10,966)
43,742
--------- --------- ---------
- ---------
Income Before Income Taxes 361,339 625,691 201,499
323,226
PROVISION FOR INCOME TAXES 141,000 250,000 82,000
130,000
--------- --------- ---------
- ---------
Net Income $ 220,339 $ 375,691 $ 119,499 $
193,226
_________ _________ _________
_________
Weighted average number of
common shares outstanding:
Basic 9,341,333 9,329,277 9,346,777
9,329,277
_________ _________ _________
_________
Assuming dilution 9,774,033 9,931,044 9,796,770
9,910,223
_________ _________ _________
_________
Earnings per common share:
Basic $0.02 $0.04 $0.01
$0.02
_________ _________ _________
_________
Assuming Dilution $0.02 $0.04 $0.01
$0.02
_________ _________ _________
_________
<FN>
See Notes To Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 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
six months - - - 375,691
--------- ------- ---------- ------------
Balance
June 30, 1998 9,329,277 $37,317 $2,697,364 $ 1,163,946
(Unaudited) _________ _______ __________ ___________
<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
six months - - - 220,339
--------- ------- ---------- ----------
Balance
June 30, 1999 9,346,777 $37,387 $2,703,369 $1,824,846
(Unaudited) _________ _______ __________ __________
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
(Unaudited)
<CAPTION>
1999 1998
__________ __________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 220,339 $ 375,691
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 112,191 55,283
(Increase)/decrease in accounts
receivable ( 69,705) 31,559
Decrease/(increase) in inventory 74,741 (151,120)
Decrease in other current assets 45,145 50,218
(Decrease) in accounts payable and
accrued expenses (973,817) (278,028)
________ _______
Net cash (used in) provided by
operating activities (591,106) 83,603
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures ( 79,840) (743,330)
________ _______
Net cash used in investing activities ( 79,840) (743,330)
CASH FLOWS FROM FINANCING ACTIVITIES:
Note payable 1,263,416 -
Proceeds from issuance of common stock 6,075 -
_________ _______
Net cash used in financing activities 1,269,491
Net increase (decrease) in cash and
cash equivalents 598,545 (659,727)
CASH AND CASH EQUIVALENTS, at beginning
of period 1,442,342 2,190,345
_________ _________
CASH AND CASH EQUIVALENTS, at end of period $2,040,887 $1,530,618
__________ _________
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 39,480 $ -
Cash paid during the period for income taxes $ 161,700 $ 188,700
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 June 30, 1999 and December 31, 1998, inventory
consisted of the following:
June 30, December 31,
1999 1998
Raw Material $554,237 $622,501
Work-In-Process 137,001 89,866
Finished Inventory 182,314 235,926
------- -------
$873,552 $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>
Notes to Financial Statements (Continued)
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 six month periods ended June 30,
1999 and 1998:
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1999
____________________________________
Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
____________________________________
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $119,499 9,346,777 $.01
Effective of Dilutive Securities:
Options - 123,678
Warrants - 326,315
_______ _________
Diluted EPS $119,499 9,796,770 $.01
_______ _________ ___
Six Months Ended
June 30, 1999
____________________________________
Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
____________________________________
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $220,339 9,341,333 $.02
Effective of Dilutive Securities:
Options - 118,450
Warrants - 314,250
_______ _________
Diluted EPS $220,339 9,774,033 $.02
_______ _________ ___
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
June 30, 1998
___________________________________
Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
___________________________________
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $193,226 9,329,277 $.02
Effective of Dilutive Securities:
Options - 165,252
Warrants - 415,694
_______ _________
Diluted EPS $193,226 9,910,223 $.02
_______ _________ ___
Six Months Ended
June 30, 1998
___________________________________
Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
___________________________________
<S> <C> <C> <C>
Basic EPS
Income available to common
stockholders $375,691 9,329,277 $.04
Effective of Dilutive Securities:
Options - 170,078
Warrants - 431,689
_______ _________
Diluted EPS $375,691 9,931,044 $.04
_______ _________ ___
</TABLE>
For the six month periods ended June 30, 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>
Note 4. Debt:
At June 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 1.0%. At June 30, 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.
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 June 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 June 30, 1999, the Company's cash and cash equivalents totaled
$2,040,887 compared to $1,442,342 at December 31, 1998. The Company's
working capital totaled $3,496,782 on June 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>
Notes to Financial Statements (continued)
At June 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 1.0%. At June 30, 1999, there were no borrowings
outstanding under the line.
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 six month period ended June 30, 1999 was
approximately $220,000 ($0.02 per share assuming dilution), compared to
approximately $376,000 ($0.04 per share assuming dilution), for the same
period of 1998. Net income for the second quarter of the current year was
approximately $119,000 ($.01 per share assuming dilution), compared to
approximately $193,000 ($0.02 per share assuming dilution), reported for
the second 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 three month period ended June 30,
1999 were approximately $2,044,000 as compared to approximately $1,872,000
for the comparable period in the prior year. Revenues for the six month
period ended June 30, 1999 reached approximately $3,840,000, compared to
approximately $3,627,000 of the comparable period of 1998. Revenues for
1999 reflect a significant increase of approximately $436,000 for
non-invasive blood pressure equipment, whereas Klear-Trace and disposable
products decreased by approximately $223,000.
Cost of product sales as a percentage of net product sales was 44.9
percent for 1999 compared to 40.5 percent for 1998. The unfavorable
impact is due primarily to product mix.
Selling, general and administrative expenses were approximately
$1,542,000 for the six month period ended June 30, 1999 as compared to
approximately $1,383,000 for the same period of 1998, an increase of
$159,000 or 11 percent. This increase in expenses for 1999 is due
primarily to additional personnel both in the selling and marketing
departments.
The provision for income taxes of $141,000 and $250,000 for the six
month period ended June 30, 1999 and 1998, respectively, represents state
and federal income taxes.
These factors and licensing revenues resulted in net income of
approximately $220,000 for the period ended June 30, 1999, as compared to
net income of approximately $376,000 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
August 4, 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> JUN-30-1999
<CASH> 2,040,887
<SECURITIES> 0
<RECEIVABLES> 965,404
<ALLOWANCES> 0
<INVENTORY> 873,552
<CURRENT-ASSETS> 4,008,910
<PP&E> 3,146,379
<DEPRECIATION> 817,040
<TOTAL-ASSETS> 6,341,146
<CURRENT-LIABILITIES> 512,128
<BONDS> 0
<COMMON> 37,387
0
0
<OTHER-SE> 1,824,846
<TOTAL-LIABILITY-AND-EQUITY> 6,341,146
<SALES> 3,694,399
<TOTAL-REVENUES> 3,840,328
<CGS> 1,657,773
<TOTAL-COSTS> 1,541,963
<OTHER-EXPENSES> 267,048
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (12,205)
<INCOME-PRETAX> 361,339
<INCOME-TAX> 141,000
<INCOME-CONTINUING> 220,339
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 220,339
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
