UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 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 Identification No.)
incorporation or organization)
44 East Industrial Road, Branford, Connecticut 06405
(Address of principal executive offices) (Zip code)
Issuer's telephone number, including area code: (203) 488-6056
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Title of Each Class
Common Stock, $.004 par value
Check whether the issuer (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 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 [ ]
Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [X]
The Registrant's revenues for the fiscal year ended December 31, 1999 were
$8,511,230.
The aggregate market value of voting stock held by non-affiliates of the
Registrant as of March 22, 2000 was based upon the last sale price of such
stock on that date on the over-the counter market commonly referred to as the
"pink sheets" was $4,054,736. The number of shares of the Registrant's Common
Stock outstanding as of March 22, 2000 was 9,457,577.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the Registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held on June 14, 2000 are incorporated by reference in Part
III of this Report. Except as expressly incorporated by reference, the
Registrant's Proxy Statement shall not be deemed to be part of this Form
10-KSB.
<PAGE>
PART I
ITEM 1. BUSINESS
The Company
CAS Medical Systems, Inc. ("CAS" or the "Company") was organized in 1984
primarily to serve neonatal and pediatric units in hospitals. Today, CAS is
engaged in the business of developing, manufacturing and distributing
diagnostic equipment and medical products for use by adults and children in
many areas of the health care industry.
The Company designs, manufactures and markets medical products, specifically
blood pressure measurement equipment and products for neonatal intensive care.
The Company's products are designed to improve the quality of patient care
and provide exceptional value and performance. The Company has several other
products in various stages of development which it believes may be applicable
to both adult and neonatal/pediatric medicine.
Principal Products and Services
OscilloMate(R) Blood Pressure Monitors and Blood Pressure Measurement
Technology
CAS offers its non-invasive blood pressure technology in the form of both
stand-alone monitors that it has developed and manufactured and as modules for
inclusion into other manufacturers' multi-parameter monitoring systems.
The Company offers two monitors for use in the emergency medical service
(EMS) marketplace. The Company also has a line of monitors for the hospital,
alternate site and home care marketplaces. These monitors offer the basic
monitoring parameters of non-invasive blood pressure, pulse oximetry and
predictive temperature.
The Company has agreements to supply modules via original equipment
manufacturer (OEM) agreements to various companies throughout the world. These
modules are used in larger monitoring systems where non-invasive blood
pressure is but one measurement parameter. The Company's OEM agreements are
typically multi-year arrangements to supply technology.
Pedisphyg(R), Safe-Cuff(TM), and Tuff-Cuff(R) Blood Pressure Cuffs
The Company has developed and sells a complete line of blood pressure cuffs
for the full range of patient population - neonate through adult. These cuffs
are based on design criteria developed from scientific studies to ensure the
highest degree of accuracy and ease of use. CAS cuffs can be used with any
blood pressure monitor currently available, thereby not limiting their
potential marketplace.
<PAGE>
Klear-Trace(R) Electrodes
Specifically designed for neonatal application, Klear-Trace electrodes use a
water-based gel adhesive that is gentle to delicate skin and can remain on the
patient for extended periods of time without causing skin irritation.
NeoGuard Reflectors(R), Limboard(R) Arm Boards, Klear-Temp(R) Temperature
Probes, Klear-Wipe(TM) Preps
The product line includes a Reflector to hold skin temperature probes in
place for accurate monitoring, arm boards support IV sites, and sterile water
wipes to remove harmful agents from the skin.
Event-Link(R) Monitoring System
In October 1999, CAS acquired the Event-Link(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.
Sales and Marketing
The Company condusts its sales in the domestic hospital market by means of
exclusive distributors utilizing full time sales personnel. Sales to
emergency medical services are managed nationwide by a full time sales
manager. OEM sales and international sales are conducted by personnel located
within the Company.
Domestic sales are conducted by 25 specialty distributors across the country,
each of whom has exclusive sales rights in a limited geographic area and
covers either the hospital arena or emergency medical services. During 1998,
the Company had a non-exclusive Marketing and Distribution Agreement (the
"Agreement") with Graphic Controls Corporation ("Graphic Controls"), pursuant
to which Graphic Controls sold certain of the Company's neonatal specialty
products solely to specific large hospital purchasing groups. This Agreement
was mutually terminated by the parties in December 1998.
<PAGE>
The Company has sales agreements with several distributors internationally.
These agreements provide for distribution of products within an assigned
territory. Other agreements are being negotiated to allow for expanded
international distribution.
The Company sells its non-invasive blood pressure technology, in the form of
sub-assemblies to be joined to multi-parameter hospital monitors, to several
firms operating on both a domestic and international basis. The Company is in
the process of negotiating other agreements for the use of its technology as
components in other medical monitoring systems.
Financial Information Relating to Sales
Year Ended December 31,
1999 1998 1997
Domestic Sales $6,151,194 $4,765,323 $4,649,474
Export (including
licensing fees) 2,360,036 2,254,619 2,251,702
_________ _________ _________
$8,511,230 $7,019,942 $6,901,176
_________ _________ _________
Competition
The Company competes in the hospital market where there are many suppliers
with greater financial and personnel resources that sell a broad line of
commodity products and have a dedicated selling capability. The Company's
products are targeted to the neonatal and pediatric intensive care units
segment of the hospital market. The Company has been supplying competitively
priced, uniquely designed products responsive to this segment in which no
major company currently focuses its total resources.
In both the hospital and emergency medical service markets, the Company's
line of non-invasive blood pressure monitoring equipment has significant
advantages over competitive products. The equipment is compact, portable,
lightweight and user-friendly. The monitors maintain a high professional
standard of accuracy and quality in demanding environments such as those
encountered in hospital and transport situations.
With respect to all of its products, the Company competes on the basis of
price, features, product quality, promptness of delivery and customer service.
Customers
During 1999, 1998 and 1997, the Company had sales to one customer which in
the aggregate accounted for approximately 14%, 13% and 13% of sales,
respectively.
<PAGE>
Research and Development
In 1999, 1998 and 1997, the Company spent approximately $575,000, $548,000
and $519,000, respectively, on activities relating to the development of new
products and the improvement of existing products.
The Company wil continue to develop and expand its patient monitoring
capability, by adding new physiological parameters. In addition, plans are in
process to improve information processing within the monitor, using new screen
and communication technology. This will allow the Company to attempt to
significantly increase sales penetration in the Acute and Intensive Care
market.
Employees
As of December 31, 1999, the Company had 65 employees of whom 63 were
full-time. The Company has no collective bargaining agreements and believes
that relations with its employees are good.
Government Regulation
Government Regulation
Medical products of the type currently being marketed and under development
by the Company are subject to regulation under the Food, Drug and Cosmetic Act
(the "FDA Act") as amended in the Medical Device Amendments of 1976 (the "1976
Amendments") the 1990 "Safe Medical Devices Act", and most recently, the new
Quality System Regulation (QSR) which replaces the regulations formerly called
Good Manufacturing Practice (GMP's).
In addition, depending upon product type, the Company must also comply with
those regulations governing the Conduct of Human Investigations, Pre-Market
Approval Regulations and other requirements, as promulgated by the Food and
Drug Administration (FDA). The FDA is authorized to inspect a device, its
labeling and advertising, and the facilities in which it is manufactured in
order to ensure that the device is not manufactured or labeled in a manner
which could cause it to be injurious to health.
Under the 1976 Amendment and the Safe Medical Device Act, the FDA has adopted
regulations which classify medical devices based upon the degree of regulation
it believes is necessary to assure safety and efficacy. A device is
classified as a Class I, II, or III device. Class I devices are subject only
to general controls. Class II devices, in addition to general controls, are
or will be subject to "performance standards." Most devices are also subject
to the 501(K) pre-market notification provision. In addition, some Class III
devices require FDA pre-market approval before they may be marketed
commercially because their safety and effectiveness cannot be assured by the
general controls and performance standards of Class I or II devices. The
Company's products are mostly Class II devices and several of them have
required FDA notification under Section 510(k) of the FDA Act.
<PAGE>
The FDA has the authority to, among other things: deny marketing approval
until all regulatory protocols are deemed acceptable; halt the shipment of
defective products; and seize defective products sold to customers. Adverse
publicity from the FDA, if any, could have a negative impact upon sales. To
date, the Company has had no FDA oversight problems, and none are pending to
its knowledge.
Manufacturing and Quality Assurance
The Company assembles its products at its facility in Branford, Connecticut.
The various components for the products, which include plastic sheeting,
plastic moldings, wire, semi-conductor circuits, electronic and pneumatic
components and power supplies are obtained from outside vendors. The Company
does not anticipate any difficulties in obtaining the components necessary to
manufacture its products.
Quality control procedures are performed by the Company at its facility and
occasionally at its suppliers' facilities to standards set forth in the FDA's
"Quality System Regulation". These procedures include the inspection of
components and full testing of finished goods. The Company has a controlled
clean environment where the final assembly of single-patient-use products is
conducted.
ISO 9001
In September 1996, the quality system at CAS was certified to ISO 9001/EN
46001 by the accredited body, BSI Inc. This certification recognizes CAS for
its achievement in implementing and maintaining a world class quality system
and prepares CAS for the use of the "CE" mark. The CE mark is now required
for medical devices to gain access to the European Union common market. The
FDA, recognizing the value of a universally accepted quality system, has
patterened its new Quality System Regulation after ISO 9001. CAS is in full
compliance with the new Quality System Regulation.
Backlog
The Company's practice is to ship its products upon receipt of a customer's
order or pursuant to customer-requested ship dates. On December 31, 1999, the
Company had a backlog of orders from customers for products with requested
ship dates in 2000 totaling approximately $3,196,000, deliverable throughout
2000, as compared to $1,184,000 as of December 31, 1998. During the first
quarter of 2000, the Company will fulfill approximately $1,374,000 of this
backlog.
Trademarks, Patents and Copyrights
Certificates of Registration have been issued to the Company by the United
States Department of Commerce Patent and Trademark Office for the following
marks: CAS (Registered trademark), Pedisphyg (Registered trademark),
OscilloMate (Registered trademark), NeoGuard (Registered trademark), Tuff-Cuff
(Registered trademark), Limboard (Registered trademark), Klear-Trace
(Registered trademark), and the heart shaped mark for use as a thermal
reflector and the Company's corporate logo. The Company continues to use the
Safe-Cuff (Trademark) common law trademark.
<PAGE>
The Company filed a patent application on behalf of an employee covering the
method of operation of its blood pressure measurement monitor. This patent,
issued under Patent Number 4,796,184, was assigned to the Company. The
Company also holds Patent Number 4,966,992, which covers the design of a blood
pressure monitor for use with hyperbaric chambers. The Company holds Patent
Number 5,101,830, which covers the design of a blood pressure cuff.
The Company has copyright protection for the software used in its blood
pressure monitors and Event-Link monitors.
ITEM 2. PROPERTIES
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 payments are approximately
$11,000 per month. The Company believes that insurance on the property is
adequate.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings involving the Company are pending at this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) The Common Stock of the Company is traded in the over-the-counter
market, commonly referred to as the "pink sheets". The following table shows
the high and low bid quotations for the Company's Common Stock for each
quarterly period for the last two years. These prices reflect inter-dealer
prices and may not represent actual transactions and do not include retail
mark-ups, mark-downs or commissions.
Period Ended High Low
March 31, 1998 $ 21/32 $ 19/32
June 30, 1998 11/16 5/8
September 30, 1998 33/64 25/64
December 31, 1998 21/32 19/32
March 31, 1999 7/16 7/16
June 30, 1999 7/16 7/16
September 30, 1999 13/32 13/32
December 31, 1999 15/32 15/32
<PAGE>
(b) The following table sets forth the approximate number of holders of
record of Common Stock of the Company on December 31, 1999.
Title of Class Number of Shareholders
Common Stock, $.004 par value 415
(c) No cash dividends have been declared on the Company's common stock
during 1999 or 1998.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
1999 Compared to 1998
The Company earned $504,000 ($.05 per common share on a diluted basis) in
1999, compared to $816,000 ($.08 per common share on a diluted basis) in 1998.
The 1999 earnings performance was impacted unfavorably by increased personnel
costs in the sales and research and development departments, in contrast to
1998 when earnings in 1998 were favorably impacted by non-operating income
from one-time contract settlement.
The Company's revenues were aproximately $8,511,000 for 1999 and exceeded
the prior year by approximately $1,491,000 or 21.2 percent. Revenues for 1999
reflected strong sales of non-invasive blood pressure monitors, and NIPB
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 42.9
percent for 1999 compared to 43.6 percent for 1998. The favorable impact of
product cost is the result of added production efficiency and product cost
reduction.
Research and development (R&D) expenses increased by 5 percent
during 1999 to approximately $575,000 compared to approximately $548,000
for the same period of 1998. This increase during 1999 is due primarily
to development cost of new products.
Selling, general and administrative expenses were approximately
$3,402,000 in the year ended December 31, 1999 compared to approximately
$3,011,000 in the prior year, an increase of 13 percent. The overall increase
in 1999 is the result of aditional sales personnel, both domestic and abroad.
The Company received $83,810 in interest income and incurred $87,826 of
interest expense during 1999 compared with interest income of $106,425 in the
same period of 1998. The increase in interest expenses for 1999 is largely
due to the mortgage obtained from a local bank on the Company's new facilities
in Branford, Connecticut.
<PAGE>
1998 Compared to 1997
The Company earned $816,000 ($.08 per common share on a diluted basis) in
1998, compared to $665,000 ($.07 per common share on a diluted basis) in 1997.
The 1998 earnings performance was favorably impacted by revenues from a
one-time contract settlement and an increase in licensing fee revenues.
The Company's revenues for the year ended December 31, 1998 were
approximately $7,020,000 and exceeded the comparable period in 1997 by
approximately $119,000. Revenues for 1998 reflect a significant increase of
22 percent for Klear-Trace disposable products, whereas diagnostic equipment
sales decreased by 21 percent. This is attributed to the loss of a few key OEM
accounts due to their corporate restructuring.
Total cost of product sales as a percentage of net product sales was 43.6
percent for 1998 compared to 42.7 percent for 1997. The slight increase in
cost is due primarily to product mix.
Research and development expenses increased by 6 percent during 1998 to
approximately $548,000 compared to approximately $519,000 for the same period
of 1997, primarily due to development cost of new products.
Selling, general and administrative expenses were approximately
$3,011,000 in the year ended December 31, 1998 compared to approximately
$2,502,000 in the prior year, an increase of 20 percent. The increase is due
to the continued growth in personnel in sales and marketing, both domestic and
international.
During 1998, the Company earned approximately $106,000 of interest income
compared to approximately $76,000 for 1997.
Financial Condition, Liquidity and Capital Resources
As of December 31, 1999, the Company's cash and cash equivalents totaled
$1,255,450, compared to $1,442,342 at December 31, 1998 (a decrease of 15%),
and the Company's working capital totaled $3,448,401 on December 31, 1999,
compared to $1,974,600 on December 31, 1998. The Company's decreased cash
position is due to internally financing the acquisition of the Event-Link(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 purchase price
was $725,000.
In 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 operting facilities consisting of 4.6 acres
of land and the 24,000 square foot building. The monthly payments, including
interest, are approximately $11,000. The borrowing provided additional
working capital in 1999. Consequently, the Company's working capital ratio
increased from 2.31 at December 31, 1998 to 4.25 at December 31, 1999.
<PAGE>
At December 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 prime plus 0.5%. At December 31, 1999, there were no borrowings
outstanding under this line.
On July 27, 1994, the Company entered into a new 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 licensing agreement through
the year 2000. As part of this 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 December 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.
The Company believes that existing funds together with internally
generated funds from 2000 operations and its existing line of credit
arrangement will provide the Company with adequate liquidity and capital
resources to meet its 2000 financial requirements.
Year 2000 Compliance
The Year 2000 ("Y2K") issue: There have been no adverse effects on the
Company's systems or operations or with its suppliers.
ITEM 7. INDEX TO FINANCIAL STATEMENTS
Report of Independent Public Accountants F-1
Balance Sheets - December 31, 1999 and 1998 F-2
Statements of Income for the Years Ended
December 31, 1999, 1998 and 1997 F-3
Statements of Shareholders' Equity for the
Years Ended December 31, 1999, 1998 and 1997 F-4
Statements of Cash Flows for the Years Ended
December 31, 1999, 1998 and 1997 F-5
Notes to Financial Statements F-6 to F-12
Schedules called for under Regulation S-X are not submitted because they
are not applicable or not required, or because the required information is
included in the financial statements or notes thereto.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Reference is made to the sections entitled "Election of Directors" and
"Compliance with Section 16(a) of the Securities Exchange Act of 1934" in the
Registrant's definitive proxy statement to be mailed to shareholders on or
about April 21, 2000 and to be filed with the Securities and Exchange
Commission.
ITEM 10. EXECUTIVE COMPENSATION
Reference is made to the sections entitled "Compensation of Executive
Officers" and "Election of Directors" in the Registrant's definitive proxy
statement to be mailed to shareholders on or about April 21, 2000, and to be
filed with the Securities and Exchange Commission.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to the sections entitled "Stock Ownership" and
"Election of Directors" in the Registrant's definitive proxy statement to be
mailed to shareholders on or about April 21, 2000, and to be filed with the
Securities and Exchange Commission.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company and Louis P. Scheps have entered into an employment agreement
pursuant to which Mr. Scheps serves as President and Chief Excutive Officer of
the Company. As of September 1, 1998, the employment agreement was amended
(as amended, the "Employment Agreement") to extend its term through August 31,
2000 and provide for a base salary of $185,000 per year. The Employment
Agreement also provides that if a "Change of Control" (as defined below)
occurs, and upon such Change of Control occuring, the Employment Agreement is
not extended for a period of at least one year following the stated
termination date of the Employment Agreement, then Mr. Scheps shall be paid a
lump sum of $250,000 on such stated termination date. "Change of Control" is
defined in the Employment Agreement to mean (i) a sale of all or substantially
all of the Compay's assets, (ii) a merger involving the Company in which the
Company is not the survivor and the Company's stockholders prior to the merger
control less than fifty percent of the voting stock of the surviving entity,
(iii) a sale by the Company's stockholders to an acquiror or acquirors acting
in concert of more than a majority of the then outstanding stock of the
Company owned by the Company's stockholders, or (iv) any event similar to any
of the foregoing. In connection with the amendment of the Employment
Agreement, Mr. Scheps was granted a warrant to purchase 100,000 shares of the
Company common stock at an exercise price of $1.00 per share. This warrant is
exercisable solely in the event of a Change of Control.
The Company also has an employment agreement with Dr. Myron Cohen under
which he serves as Executive Vice President of the Company through December
31, 2000 at an annual base salary of $102,400. There are no benefits payable
to Dr. Cohen upon termination of the agreement.
<PAGE>
PART IV
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K
(A) 3.1 (a) Certificate of Incorporation of Registrant*
(b) By-Laws of Registrant*
23.1 Consent of Independent Public Accountants
27.1 Financial Data Schedule
* Incorporated by reference from the Exhibits filed in the Registrant's
Registration Statement dated April 15, 1985, filed with the Securities and
Exchange Commission.
(B) Reports on Form 8-K
None filed.
<PAGE>
CAS MEDICAL SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
Page
Report of Independent Public Accountants F-1
Balance Sheets -- December 31, 1999 and 1998 F-2 to F-3
Statements of Income for the Years Ended December 31, F-4
1999, 1998 and 1997
Statements of Shareholders' Equity for the Years Ended F-5
December 31, 1999, 1998 and 1997
Statements of Cash Flows for the Years Ended December
31, 1999, 1998 and 1997 F-6
Notes to Financial Statements F-7 to F-15
Schedules called for under Regulation S-X are not submitted because they are
not applicable or not required, or because the required information is
included in the financial statements or notes thereto.
<PAGE>
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
CAS Medical Systems, Inc.:
We have audited the accompanying balance sheets of CAS Medical
Systems, Inc. (a Delaware corporation) as of December 31, 1999 and
1998, and the related statements of income, shareholders' equity and
cash flows for each of the three years in the period ended December
31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of CAS
Medical Systems, Inc. as of December 31, 1999 and 1998, and the
results of its operations and its cash flows for each of the three
years in the period ended December 31, 1999, in conformity with
accounting principles generally accepted in the United States.
/s/ARTHUR ANDERSEN LLP
Stamford, Connecticut,
January 28, 2000
<PAGE>
<TABLE>
F-2
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS -- DECEMBER 31, 1999 AND 1998
<CAPTION>
ASSETS 1999 1998
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $1,255,450 $1,442,342
Accounts receivable, net of allowance for
doubtful accounts of $30,000 and $17,000
in 1999 and 1998, respectively 1,624,676 895,699
Inventories 1,429,692 948,293
Deferred tax asset 137,500 94,500
Other current assets 61,810 79,711
Total current assets 4,509,128 3,460,545
PROPERTY AND EQUIPMENT:
Land and improvements 535,000 535,000
Buildings and improvements 1,392,837 1,379,590
Machinery and equipment 1,414,141 1,151,946
3,341,978 3,066,536
Less-accumulated depreciation 891,493 704,849
2,450,485 2,361,687
OTHER ASSETS, net 221,650 2,901
Total Assets $7,181,263 $5,825,133
<FN>
The accompanying notes to financial statements are an integral part of these
statements
</FN>
</TABLE>
<PAGE>
<TABLE>
F-3
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS -- DECEMBER 31, 1999 AND 1998
(continued)
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1999 1998
<S> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt $ 35,560 $ -
Accounts payable 286,533 614,355
Income taxes payable 321,870 444,720
Accrued payroll 147,087 259,697
Accrued professional fees 73,816 90,500
Accrued warranty expense 30,000 20,000
Other accrued expenses 165,861 56,673
Total current liabilities 1,060,727 1,485,945
LONG-TERM DEBT 1,244,005 -
COMMITMENTS AND CONTINGENCIES
(Notes 7, 8 and 11)
SHAREHOLDERS' EQUITY:
Common stock, $.004 par value, 19,000,000
shares authorized, 9,457,577 and
9,329,277 shares issued and outstanding
in 1999 and 1998, respectively 37,831 37,317
Additional paid-in capital 2,730,626 2,697,364
Retained earnings 2,108,074 1,604,507
Total shareholders' equity 4,876,531 4,339,188
Total liabilities and shareholders' equity $7,181,263 $5,825,133
<FN>
The accompanying notes to financial statements are an integral part of these
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
F-4
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
REVENUES:
Net product sales $8,266,392 $6,726,764 $6,620,328
Licensing fees 244,838 293,178 280,848
8,511,230 7,019,942 6,901,176
OPERATING EXPENSES:
Cost of product sales 3,531,003 2,933,512 2,826,718
Selling, general and administrative 3,571,166 3,010,884 2,501,894
Research and development 575,478 547,718 519,227
Operating income 833,583 527,828 1,053,337
OTHER INCOME , - 725,000 -
INTEREST (EXPENSE) INCOME, net ( 4,016) 106,424 75,706
Income before provision for
income taxes 829,567 1,359,252 1,129,043
PROVISION FOR INCOME TAXES 326,000 543,000 464,000
Net income $ 503,567 $ 816,252 $ 665,043
--------- -------- --------
Weighted average number of common
shares outstanding:
Basic 9,347,748 9,329,277 9,329,277
--------- --------- ---------
Assuming dilution 9,703,854 9,839,689 9,979,489
--------- ---------- ---------
Earnings per common share:
Basic $.05 $.09 $.07
--------- ---------- ---------
Assuming dilution $.05 $.08 $.07
--------- ---------- ---------
<FN>
The accompanying nots to financial statements are an integral part of these
statements
</FN>
</TABLE>
<PAGE>
<TABLE>
F-5
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<CAPTION>
Common Stock Additional
------------------ Paid-In Retained
Shares Amount Capital Earnings
Total
______ ______ __________
_________ ________
<S> <C> <C> <C> <C>
<C>
BALANCE, December 31,1996 9,329,277 $37,317 $2,697,364 $
123,212 $2,857,893
Net income - - -
665,043 665,043
BALANCE, December 31, 1997 9,329,277 $37,317 $2,697,364 $
788,255 $3,522,936
Net income - - -
816,252 816,252
--------- ------ ---------
- --------- ---------
BALANCE, December 31, 1998 9,329,277 $37,317 $2,697,364
$1,604,507 4,339,188
Net income - - -
503,567 503,567
Common stock issued 128,300 514 33,262
- - 33,776
--------- ------ ---------
- --------- ---------
BALANCE, December 31, 1999 9,457,577 $37,831 $2,730,626
$2,108,074 $4,876,531
<FN>
The accompanying notes to financial statements are an integral part of these
statements
</FN>
</TABLE>
<PAGE>
<TABLE>
F-6
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 503,567 $ 816,252 $ 665,043
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 192,894 124,066 92,175
Deferred income taxes ( 43,000) 17,500 -
Changes in operating assets and
liabilities:
Accounts receivable (728,977) 160,182 56,636
Inventories (111,399) (223,172) 34,641
Other current assets 17,902 ( 4,074) 7,890
Accounts payable and accrued expenses (460,778) 615,342 (135,199)
--------- --------- -------
Net cash (used in) provided by
operating activities (629,791) 1,506,096 721,186
--------- --------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of assets (725,000) - -
Expenditures for property and equipment (145,442) (2,254,099) (137,820)
Net cash used in investing activities (870,442) (2,254,099) (137,820)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing under long-term debt 1,310,000 - -
Repayments under long-term debt ( 30,435) - -
Proceeds from issuance of common stock 33,776 - -
--------- --------- -------
Net cash provided by financing
activities 1,313,341 - -
--------- --------- -------
Net (decrease) increase in cash and
cash equivalents (186,892) ( 748,003) 583,366
CASH AND CASH EQUIVALENTS, beginning of
year 1,442,342 2,190,345 1,606,979
CASH AND CASH EQUIVALENTS, end of year $1,255,450 $1,442,342 $2,190,345
--------- --------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for interest $ 86,153 $ 1,040 $ 765
Cash paid during the year for taxes 489,353 329,000 543,000
<FN>
The accompanying notes to financial statements are an integral part of these
statements
</FN>
</TABLE>
<PAGE>
F-7
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(1) THE COMPANY:
CAS Medical Systems, Inc. (the "Company") operates in one business segment
and is engaged in the business of developing, manufacturing and distributing
diagnostic equipment and medical products for use in the healthcare 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. The Company's operations
and manufacturing facilities are located in the United States. During 1999,
1998 and 1997, the Company had sales to one customer which in the aggregate
accounted for approximately 14%, 13% and 13%, respectively, of revenues in
each of the three years reported. The Company generated revenues from
international sales (principally to Europe), including licensing fee revenues,
of approximately $2.4 million, $2,3 million and $2.3 million, respectively, in
each of the three years reported.
During October 1999, the Company acquired certain assets related to the
Event-Link (R) product line from a third party for a purchase price of
$725,000. This product line includes 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 acquisition included inventory, related
manufacturing equipment, intellectual property and licensed technology. Sales
related to the new line were approximately $83,000 in 1999. 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
-------
$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.
<PAGE>
F-8
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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.
Licensed Technology
Licensed technology acquired in connection with the product line assets
acquired in 1999 is being amortized over five years on the straight-line basis
and is included within other assets in the accompanying balance sheet at
December 31, 1999. Amortization expense associated with this intangible asset
was $6,250 for the year ended December 31, 1999.
Revenue Recognition-
Revenues from product sales are recognized upon passage of title, generally
upon shipment. Revenues from licensing fees are recognized over the term of
the agreement (Note 5).
Research and Development Costs
The Company expenses all research and development costs as incurred.
Earnings per Common Share-
The Company computes earnings per common share in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS No.
128"). Under SFAS No. 128, basic earnings per share is calculated by dividing
net income by the weighted average nunmber of shares of common stock
outstanding during the year. No dilution for any potentially dilutive
securities is included. Diluted earnings per share assumes the conversion of
all potentially dilutive securities using the treasury stock method.
As of December 31, 1999, the Company had outstanding options and warrants to
purchase 514,500 and 1,295,000 shares of common stock, respectively.
<PAGE>
F-9
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Under SFAS No. 128, a summary of the Company's basic and diluted earnings per
share are as follows:
1999 1998 1997
Net income $ 503,567 816,252 665,043
Weighted average shares outsanding 9,347,748 9,329,277 9,329,277
Add: Dilutive warrants and options 356,106 510,412 650,212
--------- --------- ---------
Total weighted average shares and
dilutive securities outstanding 9,703,854 9,839,689 9,979,489
--------- ---------- ---------
Earnings per share - basic $.05 $.09 $.07
--------- ---------- ---------
Earnings per share - assuming dilution $.05 $.08 $.07
--------- ---------- ---------
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
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 first quarter of fiscal 2001. The
Company does not believe that the adoption of this standard will have a
material impact on its future operating results.
<PAGE>
F-10
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(3) INVENTORIES:
Inventories include costs of materials, labor and manufacturing overhead.
Inventories are stated at the lower of first-in, first-out (FIFO) cost or
market and consist of the following:
1999 1998
Raw materials $ 916,837 $622,501
Work in process 256,402 89,866
Finished goods 256,453 235,926
_______ _______
$1,429,692 $948,293
(4) FINANCING ARRANGEMENTS
Line of Credit
At December 31, 1999, the Company's line of credit arrangement allowed for
maximum borrowings of $1,000,000, all of which was available. The line of
credit arrangement expires on September 1, 2000 and bears interest at the
prime rate (8.5% at December 31, 1999) plus 0.5%. There were no borrowings on
the line in 1998. During 1999, the maximum month end borrowing outstanding
under this line was $400,000, the weighted average borrowing was $19,726 and
the weighted average interest rate on amounts outstanding were 8.75%. There
were no borrowings outstanding at December 31, 1999. The bank has a first
security interest in substantially all assets of the Company and requires a
compensating balance equal to 10% of the line of credit.
Long-term Debt
In February 1999, the Company obtained a nineteen year, 7.25% fixed rate
$1,310,000 mortgate from a bank. The mortgage is secured by a first mortgage
lien on the Company's operating facilities consisting of 4.6 acres of land and
the 24,000 square foot industrial building. The monthly payments, including
interest, are approximately $11,000. Scheduled maturities of principal under
the mortgage over the next five years is as follows:
2000 $ 35,560
2001 38,250
2002 41,120
2003 44,200
2004 47,510
Thereafter 1,072,925
---------
$1,279,565
<PAGE>
F-11
CAS Medical Systems, Inc.
Notes to Statements
December 31, 1999
(5) LICENSE AGREEMENTS:
On July 27, 1994, the Company entered into a four year licensing agreement
(subsequently amended through the year 2000) with a major European
manufacturer of medical equipment, canceling and superseding a prior licensing
agreement with this company. The agreement grants a nonexclusive license to
use the Company's blood pressure technology for a specific application. As
part of this agreement, the Company will receive $1,500,000 plus royalties
through the year 2000, of which $1,300,000 has been received through December
31, 1999. The manufacturer has the option to extend the license to 2006 for
which the Company will earn royalties. License fees from this agreement and
deferred revenue of $140,000 from the prior license agreement are being
recognized over the life of the current agreement.
(6) Stock-Based Compensation Programs:
Stock Options
In December 1984, the Board of Directors and shareholders adopted the 1984
Employee Incentive Stock Option Plan (the "1984 Plan"). The exercise price
for common stock issued under the 1984 Plan is to be no less than the fair
value of the stock at the grant date of the options. Pursuant to the 1984
Plan, 750,000 shares of common stock have been reserved for employee
(including officers and directors) purchases. An option granted under the
1984 Plan becomes exercisable in two equal annual installments, commencing one
year from the date of the grant of the option. Options begin to expire
between five and ten years from the date of grant, depending on the
optionholder's percentage of ownership of the Company. In the event
employment is terminated, the employee no longer has the right to exercise his
or her options unless expressly permitted by the Board of Directors.
In June 1994, the Board of Directors and shareholders adopted the 1994
Employees' Incentive Stock Option Plan (the "1994 Plan"). Pursuant to the
1994 Plan, 250,000 shares of common stock have been reserved for employee
(including officers and directors) purchase. The 1994 Plan is the successor
to the 1984 Plan and contains provisions which are similar to those of the
1984 Plan.
During 1999, the Board of Directors approved an increase in the number of
shares of common stock issuable under stock options under the 1994 Plan to
1,250,000. This amendment is contingent upon the approval of the shareholders
of the Company within twelve months from the date of the amendment.
<PAGE>
F-12
CAS Medical Systems, Inc.
Notes to Statements
December 31, 1999
Statement of Financial Accounting Standard No. 123, "Accounting for
Stock-Based Compensation" ("SFAS No. 123"), encourages, but does not require,
companies to record compensation cost for stock-based employee compensation
plans at fair value. The Company has chosen to continue to account for
stock-based compensation using the intrinsic value method prescribed in
Accounting Principles Board Opinion No. 25, "Accounting for Stock issued to
Employees," and related interpretations. Accordingly, had compensation cost
for these plans been determined consistent with SFAS No. 123, the Company's
1999, 1998 and 1997 net income and earnings per share would have been reduced
to the following pro forma amounts:
1999 1998 1997
Net income: As reported $503,567 $816,252 $665,043
Pro Forma 498,305 795,584 639,074
Earnings per share: As reported-Basic .05 .09 .07
Pro forma-Basic .05 .09 .07
As reported-Diluted .05 .08 .07
Pro forma-Diluted .05 .08 .06
The fair value of each option is estimated on the date of grant using the
Black-Scholes option pricing model with the following weighted-average
assumptions used for grants in 1999 and 1998 (none were granted in 1997):
risk free interest rates of 6.3% and 5.1%, expected lives of 10 years;
expected volatility of 73% and 75%, respectively.
<PAGE>
<TABLE>
F-13
CAS Medical Systems, Inc.
Notes to Statements
December 31, 1999
A summary of the Company's stock option plans at December 31, 1999, 1998 and
1997 and
changes during the years then ended is presented below:
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------
Weighted Weighted
Weighted
Average Average
Average
Exercise Exercise
Exercise
Shares Price Shares Price Shares
Price
<S> <C> <C> <C> <C> <C>
<C>
Outstanding at
beginning of year 650,100 $ .57 625,100 $.57 625,100 $
.57
Granted 25,000 .65 25,000 .50 -
Exercised (128,300) .26 - -
Cancelled ( 32,300) 1.10 - -
_________ _______ _______
Outstanding at
end of year 514,500 $ .60 650,100 $.57 625,100 $
.57
Exercisable at
end of year 483,250 $ .61 625,100 $.57 569,350 $
.52
Weighted average
fair value of
options granted
during the year $ .53 $.41 $
-
The following table summarizes information about stock options outstanding at
December 31,
1999:
<CAPTION>
Options Outstanding Options
Exercisable
__________________________________________________________
_______________________
Number Weighted Number
Outstanding Average Weighted Exercisable
Weighted
at Remaining Average at
Average
Range of December 31, Contractual Life Exercise December 31,
Exercise
Exercise Prices 1999 (Years) Price 1999
Price
<C> <C> <C> <C> <C>
<C>
$.31 to $.38 212,500 3.0 $.36 212,500 $
.36
.50 to .75 190,500 3.9 .70 159,250
.73
.82 to .93 111,500 6.0 .91 111,500
.91
____________ _______ __________ ____ _______
_____
$.31 to $.93 514,500 4.0 $.60 483,250 $
.61
</TABLE>
<PAGE>
F-14
CAS Medical Systems, Inc.
Notes to Statements
December 31, 1999
Warrants
Prior to 1999, the Company granted outstanding warrants to purchase 1,395,000
shares of common stock at exercise prices ranging from $.31 to $1.00 per
common share. None of the warrants have been exercised as of December 31,
1999.
(7) LIFE INSURANCE
During 1999, 1998 and 1997, the Company paid term life insurance premiums of
approximately $27,900, $23,000 and $20,000, respectively, for life insurance
policies on the lives of two officers of the Company. The policies are in the
face amounts of $1,000,000 and $650,000. The beneficiaries of $250,000 and
$150,000, respectively, of the policies are designated by the insured. The
Company is the beneficiary of the balance.
(8) 401(k) PLAN
The Company maintains a 401(k) benefit plan for its employees which generally
allows participants to make contributions by salary deductions up to allowable
Internal Revenue Service limits on a tax-deferred basis and discretionary
contributions by the Company. The 1999, 1998 and 1997 contributions by the
Company were $44,075, $48,553 and $32,260, respectively.
The Company does not provide other post-retirement or other
post-employment benefits.
(9) INCOME TAXES
The Company follows Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"), which requires the recognition
of deferred tax assets and liabilities for future tax consequences resulting
from differences between the book and tax basis of existing assets and
liabilities. In addition, SFAS No. 109 requires the recognition of future tax
benefits to the extent that realization of such benefits are more likely than
not.
<PAGE>
F-15
CAS Medical Systems, Inc.
Notes to Statements
December 31, 1999
<TABLE>
The 1999, 1998 and 1997 provisions are comprised of the following:
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Current:
Federal $286,000 $446,700 $392,000
State 83,000 78,800 72,000
_______ _______ _______
Total 369,000 525,500 464,000
Deferred (Benefit):
Federal ( 33,000) 15,300 -
State ( 10,000) 2,200 -
_______ _______ _______
Total ( 43,000) 17,500 -
Provision for income taxes
$326,000 $543,000 $464,000
</TABLE>
The effective tax rate differs for the federal statutory rate of 34% in each
year principally due to state income taxes.
The components of the Company's deferred tax assets at December 31, 1999 and
1998 are as follows:
1999 1998
____ ____
Inventories $ 74,000 $ 52,200
Warranty reserve 12,000 7,400
Bad debt reserve 12,000 6,700
Other 39,500 28,200
_______ ______
$137,500 $94,500
(10) OTHER INCOME
During 1998, the Company and a third party distributor terminated a sales
contract. The Company received a $725,000 settlement from the third party and
has recorded this amount in other income due to its non-operating nature.
(11) COMMITMENTS AND CONTINGENCIES:
Employment Agreements
The Company is committed under employment agreements with two officers for
payments aggregating approximately $287,000 per year which expire on August
31, 1999 and December 31, 2000.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange 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)
March 23, 2000 Louis P. Scheps
Date Louis P. Scheps
President and Chief Executive Officer
and Chief Financial Officer
In accordance with the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
March 23, 2000 Myron L. Cohen
Date Myron L. Cohen
Director
March 23, 2000 Lawrence Burstein
Date Lawrence Burstein
Director
March 23, 2000 Jerome Baron
Date Jerome Baron
Director
March 23, 2000 Saul Milles
Date Saul Milles
Director
March 23, 2000 Louis P. Scheps
Date Louis P. Scheps
Director
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CAS Medical Systems, Inc.:
As independent public accountants, we hereby consent to the incorporation
by reference of our report included in this Form 10-KSB into the Company's
previously filed Registration Statements on Form S-8 Files Nos. 33-90512
and 33-90514.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Stamford, Connecticut
March 15, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000764579
<NAME> CAS MEDICAL SYSTEMS, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,255,450
<SECURITIES> 0
<RECEIVABLES> 1,624,676
<ALLOWANCES> 0
<INVENTORY> 1,429,692
<CURRENT-ASSETS> 4,509,128
<PP&E> 3,341,978
<DEPRECIATION> 891,493
<TOTAL-ASSETS> 7,181,263
<CURRENT-LIABILITIES> 1,060,727
<BONDS> 0
<COMMON> 37,831
0
0
<OTHER-SE> 2,108,074
<TOTAL-LIABILITY-AND-EQUITY> 7,181,263
<SALES> 8,266,392
<TOTAL-REVENUES> 8,511,230
<CGS> 3,531,003
<TOTAL-COSTS> 3,571,166
<OTHER-EXPENSES> 575,478
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (4,016)
<INCOME-PRETAX> 829,567
<INCOME-TAX> 326,000
<INCOME-CONTINUING> 503,567
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 503,567
<EPS-BASIC> .05
<EPS-DILUTED> .05
</TABLE>
