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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 June 30, 2000
Commission File Number 2-96271-B
CAS MEDICAL SYSTEMS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 06-1123096
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(State or other (I.R.S. employer
jurisdiction of identification no.)
incorporation of
organization)
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
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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 June 30, 2000.
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<PAGE>
Form 10-QSB
June 30, 2000
Page 2
PART I.
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ITEM 1. FINANCIAL INFORMATION
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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, 1999.
In the opinion of the Company, all adjustments necessary to present
fairly the financial position of CAS Medical Systems, Inc. as of June 30, 2000,
and the results of its operations and its cash flows for the three months and
six months ended June 30, 2000 and 1999 have been included.
<PAGE>
Form 10-QSB
June 30, 2000
Page 3
CAS Medical Systems, Inc.
Balance Sheets as of June 30, 2000 and December 31, 1999
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Assets
------ June 30, December 31,
2000 1999
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(unaudited) (audited)
Current Assets:
Cash and cash equivalents $1,216,328 $1,255,450
Accounts receivable, net of allowance
for doubtful accounts 1,963,566 1,624,676
Inventory 1,937,158 1,429,692
Deferred tax assets 137,500 137,500
Other current assets 70,583 61,810
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Total current assets 5,325,135 4,509,128
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Property and Equipment
Land and improvements 535,000 535,000
Building and improvements 1,392,837 1,392,837
Machinery and equipment 1,486,574 1,414,141
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3,414,411 3,341,978
Less-Accumulated depreciation 1,034,683 891,493
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2,379,728 2,450,485
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Other Assets 199,150 221,650
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Total assets $7,904,013 $7,181,263
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<PAGE>
Form 10-QSB
June 30, 2000
Page 4
CAS Medical Systems, Inc.
Balance Sheets as of June 30, 2000 and December 31, 1999
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June 30, December 31,
Liabilities and Shareholders' Equity 2000 1999
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(unaudited) (audited)
Current Liabilities:
Line of credit $ 300,000 $ --
Current portion of long-term debt 35,560 35,560
Accounts payable 330,066 286,533
Income taxes payable 286,606 321,870
Accrued payroll 63,155 147,087
Accrued professional fees 31,050 73,816
Accrued warranty 30,000 30,000
Other accrued expenses 262,516 165,861
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Total current liabilities 1,338,953 1,060,727
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Long-term Debt 1,226,535 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 2,570,068 2,108,074
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Total shareholders' equity 5,338,525 4,876,531
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Total liabilities and shareholders' equity $7,904,013 $7,181,263
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See Notes to Financial Statements
<PAGE>
Form 10-QSB
June 30, 2000
Page 5
CAS Medical Systems, Inc.
Statements of Income
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For the Six Months and Three Months Ended
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June 30, 2000 and 1999
----------------------
<TABLE><CAPTION>
(Unaudited) (Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES:
Net product sales $ 5,962,678 $ 3,694,399 $ 3,045,596 $ 1,978,451
Licensing fees 142,888 145,929 56,444 65,284
------------ ------------ ------------ ------------
6,105,566 3,840,328 $ 3,102,040 2,043,735
OPERATING EXPENSES:
Cost of product sales 2,799,315 1,657,773 1,454,115 883,473
Selling, general & administrative 2,141,389 1,541,963 1,078,408 808,423
Research & development 377,568 267,048 169,402 139,374
------------ ------------ ------------ ------------
Operating income 787,294 373,544 400,115 212,465
------------ ------------ ------------ ------------
INTEREST (EXPENSE) INCOME, net (20,300) (12,205) (4,864) (10,966)
------------ ------------ ------------ ------------
Income before income taxes 766,994 361,339 395,251 201,499
PROVISION FOR INCOME TAXES 305,000 141,000 155,000 82,000
------------ ------------ ------------ ------------
Net income $ 461,994 $ 220,339 $ 240,251 $ 119,499
============ ============ ============ ============
Weighted average number of
common shares outstanding:
Basic 9,457,577 9,341,333 9,457,577 9,346,777
============ ============ ============ ============
Assuming dilution 10,196,998 9,774,033 10,456,050 9,796,770
============ ============ ============ ============
Earnings per common share:
Basic $ 0.05 $ 0.02 $ 0.03 $ 0.01
============ ============ ============ ============
Assuming dilution $ 0.05 $ 0.02 $ 0.02 $ 0.01
============ ============ ============ ============
</TABLE>
See Notes To Financial Statements
<PAGE>
Form 10-QSB
June 30, 2000
Page 6
CAS Medical Systems, Inc.
Statements of Shareholders' Equity
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For the Six Months Ended June 30, 2000 and 1999
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<TABLE><CAPTION>
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings Total
---------- ---------- ---------- ---------- ----------
<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 six months -- -- -- 220,339 220,339
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Balance, June 30, 1999
(Unaudited) 9,346,777 $ 37,387 $2,703,369 $1,824,846 $4,565,602
========== ========== ========== ========== ==========
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 six months -- -- -- 461,994 461,994
---------- ---------- ---------- ---------- ----------
Balance, June 30, 2000
(Unaudited) 9,457,577 $ 37,831 $2,730,626 $2,570,068 $5,338,525
========== ========== ========== ========== ==========
</TABLE>
See Notes to Financial Statements
<PAGE>
Form 10-QSB
June 30, 2000
Page 7
CAS Medical Systems, Inc.
Statements of Cash Flows
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For the Six Months Ended June 30, 2000 and 1999
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(Unaudited)
<TABLE><CAPTION>
2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 461,994 $ 220,339
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 143,190 112,191
Accounts receivable (338,890) (69,705)
Inventory (507,466) 74,741
Other current assets 13,727 45,145
Accounts payable and accrued expenses (21,774) (973,817)
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Net cash used in operating activities (249,219) (591,106)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures (72,433) (79,840)
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Net cash used in investing activities (72,433) (79,840)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit 300,000 --
Repayments under long-term debt (17,470) (46,584)
Note payable - long term -- 1,310,000
Proceeds from issuance of common stock -- 6,075
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Net cash provided by financing activities 282,530 1,269,491
Net (decrease) increase in cash and
cash equivalents (39,122) 598,545
CASH AND CASH EQUIVALENTS, at beginning
of period 1,255,450 1,442,342
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CASH AND CASH EQUIVALENTS, at end of period $ 1,216,328 $ 2,040,887
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 49,030 $ 39,480
Cash paid during the period for income taxes $ 331,794 $ 161,700
</TABLE>
See Notes to Financial Statements
<PAGE>
Form 10-QSB
June 30, 2000
Page 8
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.
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
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(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, 2000 and December 31, 1999, inventory consisted of the
following:
June 30, December 31,
2000 1999
------------------------
Raw Material $1,031,917 $ 916,837
Work-In-Process 515,525 256,402
Finished Inventory 389,716 256,453
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$1,937,158 $1,429,692
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<PAGE>
Form 10-QSB
June 30, 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 (SAAB 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 fourth 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) 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, 2000
and 1999:
Three Months Ended
June 30, 2000
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Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
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Basic EPS
Income available to common
stockholders $ 240,251 9,457,577 $ .03
Effect of Dilutive Securities:
Options -- 368,972
Warrants -- 629,501
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Diluted EPS $ 240,251 10,456,050 $ .02
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Six Months Ended
June 30, 2000
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Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
---------- ---------- ----------
Basic EPS
Income available to common
stockholders $ 461,994 9,457,577 $ .05
Effect of Dilutive Securities:
Options -- 240,528
Warrants -- 498,893
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Diluted EPS $ 461,944 10,196,998 $ .05
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<PAGE>
Form 10-QSB
June 30, 2000
Page 10
Three Months Ended
June 30, 1999
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Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
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Basic EPS
Income available to common
stockholders $ 119,499 9,346,777 $ .01
Effective of Dilutive Securities:
Options -- 123,678
Warrants -- 326,315
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Diluted EPS $ 119,499 9,796,770 $ .01
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Six Months Ended
June 30, 1999
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Weighted Average
Income Shares Per Share
(Numerator) (Denominator) Amount
---------- ---------- ----------
Basic EPS
Income available to common
stockholders $ 220,339 9,341,333 $ .02
Effective of Dilutive Securities:
Options -- 118,450
Warrants -- 314,250
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Diluted EPS $ 220,339 9,774,033 $ .02
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(4) Debt
At June 30, 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 June 30, 2000, the amount outstanding under this line
was $300,000. 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.
(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
June 30, 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.
<PAGE>
Form 10-QSB
June 30, 2000
Page 11
(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
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OF OPERATIONS
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Results of Operations
---------------------
Net income for the six month period ended June 30, 2000 was approximately
$462,000 ($0.05 per share assuming dilution), compared to approximately $220,000
($0.02 per share assuming dilution), reported for the same period of 1999. Net
income for the second quarter of the current year was approximately $240,000
($0.02 per share assuming dilution), compared to approximately $119,000 ($0.01
per share assuming dilution), for the second quarter of 1999. The favorable
increase in earnings for the current year was impacted by a significant increase
in sales of certain of the Company's product lines.
The Company's revenues were approximately $5,963,000 for the six month
period ended June 30, 2000 and exceeded the comparable period of the prior year
by approximately $2,269,000 or 61.9 percent. Revenues for the current period
reflected strong sales of non-invasive blood pressure monitors and NIBP modules
to Original Equipment Manufacturer's ("OEM") who utilize the Company's
technology in their systems.
Cost of product sales as a percentage of net product sales was 47.0 percent
for the six month period ended June 30, 2000 compared to 44.9 percent for the
same period in 1999. The unfavorable impact is due primarily to an increase in
manufacturing overhead.
Selling, general and administrative expenses were approximately $2,141,000
as of June 30, 2000 as compared to approximately $1,542,000 for the same period
of 1999, an increase of approximately $599,000 or 39 percent. The overall
increase in 2000 is the result of additional personnel for the selling and
marketing departments, both domestic and abroad.
Research and development expenses increased by 42 percent to $378,000 during
the period ended June 30, 2000 as compared to the comparable period in the prior
year. The increase is due to new product development, including a non-invasive
method to detect brain oxygenation in newborns and support for the existing
product lines.
The provision for income taxes of $305,000 and $141,000 for the six month
period ended June 30, 2000 and 1999, respectively, represents state and federal
income taxes.
These factors and licensing revenues resulted in net income of approximately
$462,000 for the period ending June 30, 2000, as compared to net income of
approximately $220,000 for the comparable period in the prior year.
<PAGE>
Form 10-QSB
June 30, 2000
Page 12
Liquidity and Capital Resources
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At June 30, 2000, the Company's cash and cash equivalents totaled $1,216,328
compared to $1,255,450 at December 31, 1999. The Company's working capital
totaled $3,986,182 on June 30, 2000, compared to $3,448,401 on December 31,
1999. During the quarter ended June 30, 2000, the Company invested in short-term
notes, earning interest of approximately $29,000 as of June 30, 2000.
At June 30, 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 June 30, 2000, the amount outstanding under this line was
$300,000.
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.
PART II
ITEM 3 EXHIBITS AND REPORTS
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(A) Exhibits
11. See Notes to Financial Statements Note 2, regarding
computation of earnings per Share.
(B) Reports on Form 8-K
None
(C) Exhibit 27
SIGNATURES
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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.
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(Registrant)
/s/ Louis P. Scheps Date: July 26, 2000
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Louis P. Scheps
(President and Chief Executive Officer
and Chief Financial Officer)
