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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 2000
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
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(Address of principal executive offices) (Zip Code)
(203) 488-6056
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(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: 9,457,577 shares as of March 31, 2000.
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<PAGE>
FORM 10-Q
MARCH 31, 2000
PAGE 2
PART I.
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ITEM 1. 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-K for the year ended December 31, 1999.
In the opinion of the Company, all adjustments necessary to present fairly
the financial position of CAS Medical Systems, Inc. as of March 31, 2000, and
the results of its operations and its cash flows for the three months ended
March 31, 2000 and 1999 have been included.
<PAGE>
FORM 10-Q
MARCH 31, 2000
PAGE 3
CAS Medical Systems, Inc.
Balance Sheets as of March 31, 2000 and December 31, 1999
---------------------------------------------------------
Assets
- ------ March 31, December 31,
2000 1999
---- ----
(unaudited) (audited)
Current Assets:
Cash and cash equivalents $1,440,321 $1,255,450
Accounts receivable, net of allowance
for doubtful accounts 1,632,218 1,624,676
Inventory 1,734,667 1,429,692
Deferred tax assets 137,500 137,500
Other current assets 49,067 61,810
---------- ----------
Total current assets 4,993,773 4,509,128
---------- ----------
Property and Equipment
Land and improvements 535,000 535,000
Building and improvements 1,392,837 1,392,837
Machinery and equipment 1,454,521 1,414,141
---------- ----------
3,382,358 3,341,978
Less-Accumulated depreciation 962,122 891,493
---------- ----------
2,420,236 2,450,485
---------- ----------
Other Assets 210,400 221,650
---------- ----------
Total assets $7,624,409 $7,181,263
========== ==========
The accompanying notes are an integral part of these financial statements
<PAGE>
FORM 10-Q
MARCH 31, 2000
PAGE 4
CAS Medical Systems, Inc.
Balance Sheets as of March 31,2000 and December 31, 1999
--------------------------------------------------------
March 31, December 31,
Liabilities and Shareholders' Equity 2000 1999
- ------------------------------------ ---- ----
(unaudited) (audited)
Current Liabilities:
Current portion of long-term debt $ 35,560 $ 35,560
Accounts payable 525,837 286,533
Income taxes payable 440,951 321,870
Accrued payroll 36,086 147,087
Accrued professional fees 40,880 73,816
Accrued warranty expenses 30,000 30,000
Other accrued expenses 181,472 165,861
---------- ----------
Total current liabilities 1,290,786 1,060,727
---------- ----------
Long-term Debt 1,235,349 1,244,005
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Shareholders' Equity:
Common stock, $.004 par value per share,
19,000,000 shares authorized, 9,457,577
shares issued and outstanding in 2000 and
1999 37,831 37,831
Additional paid-in capital 2,730,626 2,730,626
Retained earnings 2,329,817 2,108,074
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Total shareholders' equity 5,098,274 4,876,531
---------- ----------
Total liabilities and shareholders' equity $7,624,409 $7,181,263
========== ==========
The accompanying notes are an integral part of these financial statements
<PAGE>
FORM 10-Q
MARCH 31, 2000
PAGE 5
CAS Medical Systems, Inc.
Statements of Income
--------------------
For the Three Months Ended
--------------------------
March 31, 2000 and 1999
-----------------------
(Unaudited)
Three Months Ended
March 31,
2000 1999
----------------------
REVENUES:
Net product sales $ 2,917,082 $ 1,715,948
Licensing fees 86,444 80,645
----------- -----------
3,003,526 1,796,593
OPERATING EXPENSES:
Cost of product sales 1,345,200 774,300
Selling, general & administrative 1,062,981 733,540
Research & development 208,166 127,674
----------- -----------
Operating income 387,179 161,079
INTEREST (EXPENSE), net (15,436) (1,239)
----------- -----------
Income before income taxes 371,743 159,840
PROVISION FOR INCOME TAXES 150,000 59,000
----------- -----------
Net Income $ 221,743 $ 100,840
=========== ===========
Weighted average number of
common shares outstanding:
Basic 9,457,577 9,335,888
=========== ===========
Assuming dilution 9,978,820 9,732,035
=========== ===========
Earnings per common share:
Basic $ 0.02 $ 0.01
=========== ===========
Assuming dilution $ 0.02 $ 0.01
=========== ===========
The accompanying notes are an integral part of these financial statements
<PAGE>
FORM 10-Q
MARCH 31, 2000
PAGE 6
CAS Medical Systems, Inc.
Statements of Shareholders' Equity
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For the Three Months Ended March 31, 2000 and 1999
--------------------------------------------------
<TABLE><CAPTION>
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings Total
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<S> <C> <C> <C> <C> <C>
Balance,
December 31, 1998
(Audited) 9,329,277 $ 37,317 $2,697,364 $1,604,507 $4,339,188
Issuance of common stock 17,500 70 6,005 -- 6,075
Net income for three months
(Unaudited) -- -- -- 100,840 100,840
---------- ---------- ---------- ---------- ----------
Balance
March 31, 1999
(Unaudited) 9,346,777 $ 37,387 $2,703,369 $1,705,347 $4,446,103
========== ========== ========== ========== ==========
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings Total
----------------------------------------------------------------------
Balance,
December 31,
1999 (Audited) 9,457,577 $ 37,831 $2,730,626 $2,108,074 4,876,531
Net income for three months
(Unaudited) -- -- -- 221,743 221,743
---------- ---------- ---------- ---------- ----------
Balance,
March 31, 2000
(Unaudited) 9,457,577 $ 37,831 $2,730,626 $2,329,817 $5,098,274
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
FORM 10-Q
MARCH 31, 2000
PAGE 7
CAS Medical Systems, Inc.
Statements of Cash Flows
------------------------
For the Three Months Ended March 31, 2000 and 1999
--------------------------------------------------
(Unaudited)
March 31,
2000 1999
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 221,743 $ 100,840
Adjustments to reconcile net income
to net cash provided by/(used in)
operating activities:
Depreciation and amortization 70,629 54,117
Accounts receivable (7,542) 67,481
Inventory (304,975) 58,815
Other current assets 23,993 8,144
Accounts payable and accrued expenses 230,059 (944,883)
----------- -----------
Net cash provided by/(used in) operating
activities 233,907 (655,486)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures (40,380) (62,160)
----------- -----------
Net cash used in investing activities (40,380) (62,160)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments under long-term debt (8,656) (38,384)
Note payable-long term -- 1,310,000
Proceeds from issuance of common stock -- 6,075
----------- -----------
Net cash (used in)/provided by financing activities (8,656) 1,277,691
----------- -----------
Net increase in cash and cash equivalents 184,871 560,045
CASH AND CASH EQUIVALENTS, at beginning
of period 1,255,450 1,442,342
----------- -----------
CASH AND CASH EQUIVALENTS, at end of period $ 1,440,321 $ 2,002,387
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 23,808 $ 15,883
Cash paid during the period for income taxes $ 111,573 $ 258,900
The accompanying notes are an integral part of these financial statements
<PAGE>
FORM 10-Q
MARCH 31, 2000
PAGE 8
CAS Medical Systems, Inc.
Notes to Financial Statements
March 31, 2000
(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.
During October 1999, the Company acquired the Event-Line(R) product line
from a third party. The purchase includes the infant and adult apnea monitors
and accessories for hospital and home use, as well as the Event-Link(R) Software
for data retrieval and display. The Event-Link system offers options that
combine cardio-respiratory monitoring, pulse oximetry and event recording to
provide complete, objective documentation and monitoring of all age groups. The
Event-Link(R) Monitoring system is a natural extension for both the neonatal
specialty and diagnostic monitoring product lines, as CAS builds its hospital
monitoring business and expands into the homecare marketplace. The purchase
price was allocated to the assets acquired based upon their estimated fair
values at the date of acquisition as follows:
Inventory $370,000
Equipment 130,000
Licensed technology 225,000
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$725,000
========
(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, 2000 and December 31, 1999, inventory consisted of the
following:
March 31, December 31,
2000 1999
----------------------------
Raw Material $995,251 $916,837
Work-In-Process 506,342 256,402
Finished Inventory 233,074 256,453
---------- ----------
$1,734,667 $1,429,692
========== ==========
<PAGE>
FORM 10-Q
MARCH 31, 2000
PAGE 9
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.
New Accounting Pronouncements
In December 1999, Staff Accounting Bulletin No. 101 (SAB 101), "Revenue
Recognition," was issued. SAB 101 will require a company to defer revenue
recognition on product shipments until contractual terms of customer acceptance,
including inspection and installation requirements, are met. The Company will be
required to adopt this new accounting principle through a cumulative charge to
retained earnings in accordance with the provisions of APB Opinion No. 20 no
later than the second quarter of fiscal 2000. The Company does not believe that
the adoption of this standard will have a material impact on its future
operating results.
(3) Earnings Per Common Share:
The following tables summarize the Company's calculation of Basic and
Diluted Earnings per Share ("EPS") for the three month period ended March 31,
2000 and 1999:
Three Months Ended
March 31, 2000
-----------------------------------------
Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS -----------------------------------------
Income available to common
stockholders $221,743 9,457,577 $.02
Effect of Dilutive Securities:
Options 132,157
Warrants 389,086
-------- --------- ----
Diluted EPS $221,743 9,978,820 $.02
======== ========= ====
Three Months Ended
March 31, 1999
-----------------------------------------
Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
Basic EPS -----------------------------------------
Income available to common
stockholders $100,840 9,335,888 $.01
Effect of Dilutive Securities:
Options 108,126
Warrants 288,021
-------- --------- ----
Diluted EPS $100,840 9,732,035 $.01
======== ========= ====
<PAGE>
FORM 10-Q
MARCH 31, 2000
PAGE 10
(4) Debt
At March 31, 2000, 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 .50%. At March 31, 2000, there were no borrowings outstanding
under the 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.
(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 nonexclusive
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 license agreement through the year 2000.
As part of the agreement, the Company will receive license fees of $1,500,000
plus royalties, of which $1,300,000 in license fees has been received through
March 31, 2000. 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.
(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
- --------------
Results of Operations
- ---------------------
Net income for the first quarter of the current year was approximately
$222,000 ($0.02 per common share on a diluted basis), compared to approximately
$101,000 ($0.01 per common share on a diluted basis), reported for the first
quarter of 1999. The 2000 earnings performance was impacted by a significant
increase in sales of certain of the Company's product lines.
The Company's revenues for the three month period ended March 31, 2000 were
approximately $3,003,000, exceeding the comparable period in 1999 by
approximately $1,206,000 or 67 percent. The increased sales are attributed
across the full line of products with emphasis on strong sales of non-invasive
blood pressure modules to Original Equipment Manufacturers ("OEM") who utilize
the Company's technology in their systems.
Total cost of product sales as a percentage of net product sales was 46
percent for 2000 compared to 45 percent for 1999. The unfavorable impact is due
primarily to an increase in manufacturing overhead.
Selling, general and administrative expenses were approximately $1,063,000
for the first quarter of 2000, compared to approximately $734,000 for the same
period of 1999, an increase of $329,000 or 45 percent. The overall increase in
2000 is the result of additional personnel for the selling and marketing
departments, both domestic and international.
<PAGE>
FORM 10-Q
MARCH 31, 2000
PAGE 11
Research and development expenses increased by 63 percent to $208,166
during the first quarter of 2000, as compared to $127,674 for the comparable
period in the prior year. The increase is due to new product development,
including a non-invasive method of detecting brain oxygenation in newborns and
support for the existing product line.
The provision for income taxes of $150,000 and $59,000 for the three month
period ended March 31, 2000 and 1999, respectively, represents federal and state
income taxes.
These factors and licensing revenues resulted in net income of
approximately $222,000 for the period ending March 31, 2000, as compared to net
income of approximately $101,000 for the comparable period in the prior year.
Liquidity and Capital Resources
- -------------------------------
At March 31, 2000, the Company's cash and cash equivalents totaled
$1,440,321 compared to $1,255,450 at December 31, 1999. The Company's working
capital totaled $3,702,987 on March 31, 2000, compared to $3,448,401 on December
31, 1999. The Company's increased cash position is due to cash provided by
operating activities. As a result of improved liquidity, the Company invests in
short-term notes, earning interest of approximately $8,000 for the first quarter
of 2000.
At March 31, 2000, 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 March 31, 2000, there were no borrowings outstanding under
the line.
During January 1999, the Company obtained a nineteen year, 7.25 percent
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 payments are approximately
$11,000 per month. The Company believes that the insurance on the property is
adequate.
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.
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
<PAGE>
FORM 10-Q
MARCH 31, 2000
PAGE 12
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)
/s/ Louis P. Scheps Date: May 10, 2000
- -------------------------------------- ----------------
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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,440,321
<SECURITIES> 0
<RECEIVABLES> 1,632,218
<ALLOWANCES> 0
<INVENTORY> 1,734,667
<CURRENT-ASSETS> 4,993,773
<PP&E> 3,382,358
<DEPRECIATION> 962,122
<TOTAL-ASSETS> 7,624,409
<CURRENT-LIABILITIES> 1,290,786
<BONDS> 0
<COMMON> 37,831
0
0
<OTHER-SE> 2,329,817
<TOTAL-LIABILITY-AND-EQUITY> 7,624,409
<SALES> 2,917,082
<TOTAL-REVENUES> 3,003,526
<CGS> 1,345,200
<TOTAL-COSTS> 1,062,981
<OTHER-EXPENSES> 208,166
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (15,436)
<INCOME-PRETAX> 371,743
<INCOME-TAX> 150,000
<INCOME-CONTINUING> 221,743
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 221,743
<EPS-BASIC> .02
<EPS-DILUTED> .02
</TABLE>
