CAS Medical Systems Inc. develops and manufactures high-quality blood pressure measurement devices vital signs monitors apnea monitors and neonatal supplies that are the first choice of health care professionals around the world. CAS has earned a reputation for providing innovative reliable products and backing them up with expert technical support. It works closely with health care providers to significantly improve the quality of patient care. CAS Medical Systems Inc. has a market cap of $20.4 million; its shares were traded at around $1.8 with and P/S ratio of 0.5. Highlight of Business Operations:For the three months ended March 31, 2009, the Company reported a net loss of $903,000 or ($0.08) per basic and diluted common share compared to a net loss of $530,000 or ($0.05) per basic and diluted common share reported for the three months ended March 31, 2008. The net loss resulted largely from shortfalls in anticipated sales volumes to both U.S. and international customers which were significantly influenced by difficult worldwide economic conditions. The economic climate has affected many of the Company s customers including hospitals, distributors, and OEM partners. The shortfall in sales also impacted gross profit for the first three months of 2009 as the Company incurred fixed manufacturing overhead costs which were not inventoriable. On-going sales and marketing expenses related to FORE-SIGHT also contributed to the operating loss for the period. Pre-tax losses for the three-month periods ended March 31, 2009 and 2008 were also affected by approximately $78,000 and $140,000 respectively, of stock compensation expense.
Sales to the U.S. market accounted for $6,370,000 or 76% of the total revenues reported for the three months ended March 31, 2009, an increase of $37,000 or 1% from the $6,333,000 in sales reported for the three months ended March 31, 2008. International sales accounted for $2,036,000 or 24% of the total revenues reported for the three months ended March 31, 2009, a decrease of $593,000 or 23% from the $2,629,000 reported for the same period of the prior year. Shortfalls in international sales were primarily led by Analogic products, blood pressure cuffs and OEM modules partially offset by increases in FORE-SIGHT product sales.
Research and development (“R&D”) expenses increased $115,000 or 23% to $626,000 or 7.4% of revenues for the three months ended March 31, 2009 compared to $511,000 or 5.7% of revenues for the three months ended March 31, 2008. Increases in FORE-SIGHT related engineering project costs were primarily responsible for the increase in R&D expenses. The project expenses were largely funded by reimbursements from the National Institutes of Health (“NIH”) pertaining to the Company s Near-Infrared Spectroscopy (“NIRS”) technology. R&D expenses are reported net of reimbursements from the NIH. Reimbursements were $225,000 and $130,000, respectively, for the three months ended March 31, 2009 and 2008. As of March 31, 2009, a maximum of approximately $1.5 million remains available under the $2.8 million multi-year NIH award received during September 2007.
Selling, general and administrative expenses (“S,G&A”) increased $190,000 or 6% to $3,211,000, for the three months ended March 31, 2009 compared to $3,021,000 for the three months ended March 31, 2008. Sales and marketing expenses directly associated with the FORE-SIGHT cerebral oximetry effort totaled approximately $1,108,000 and increased approximately $434,000 over the same three months of the prior year primarily as a result of increased field sales personnel related costs and marketing related meeting and convention expenses. Other sales and marketing expenses totaled $1,077,000 and decreased $299,000 from the $1,376,000 of expenses reported for the three months ended March 31, 2008. General and administrative expenses (“G&A”) increased $56,000 or 6% to $1,025,000 compared to $969,000 during the three months ended March 31, 2008 primarily as a result of legal expenses partially offset by reduced Sarbanes Oxley related costs and stock compensation expense. Legal expenses associated with the Analogic arbitration accounted for $138,000 of total G&A expenses for the quarter ended March 31, 2009.
At March 31, 2009, the Company's cash and cash equivalents totaled $1,089,000 compared to $1,083,000 at December 31, 2008. Working capital decreased $1,073,000 to $9,746,000 at March 31, 2009, from $10,819,000 on December 31, 2008. The Company s current ratio decreased to 2.33 to 1 from 2.88 to 1.
Cash used by operations for the three months ended March 31, 2009 was $891,000 compared to cash provided of $621,000 for the first three months of the prior year. Operating losses net of non-cash stock compensation, depreciation and amortization, combined with increases in accounts receivable and other receivables of $323,000 and deferred income taxes of $508,000 were responsible for the use of cash. Partially offsetting these requirements were $410,000 provided from increases in accounts payable and accrued expenses. Increases in inventory of $10,000 for the three months ended March 31, 2009 were nominal. Inventory balances were heightened by lower than expected product shipments for the period.
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