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CAS Medical Systems Inc. Reports Operating Results (10-Q)

August 12, 2009 | About:

CAS Medical Systems Inc. (CASM) filed Quarterly Report for the period ended 2009-06-30.

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 $17.8 million; its shares were traded at around $1.56 with and P/S ratio of 0.4.

Highlight of Business Operations:

For the three months ended June 30, 2009, the Company reported a net loss of $834,000 or ($0.07) per basic and diluted common share compared to a net loss of $32,000 or $0.00 per basic and diluted common share reported for the three months ended June 30, 2008. Shortfalls in revenues of $1,975,000 compared to the prior year second quarter and increased Fore-Sight related operating expenses of approximately $263,000 were primarily responsible for the increased losses. Pre-tax losses for the three-month periods ended June 30, 2009 and 2008 were also affected by approximately $89,000 and $91,000 respectively, of stock compensation expense.

The Company reported a net loss of $1,737,000 or ($0.15) per basic and diluted common share for the six months ended June 30, 2009 compared to a net loss of $562,000 or ($0.05) per basic and diluted common share for first six months of 2008. Revenue shortfalls of $2,530,000 compared to the first six months of the prior year and increased Fore-Sight related expenses of approximately $815,000 were largely responsible for the increased losses. Pre-tax income for the six-month periods ended June 30, 2009 and 2008 was also affected by $166,000 and $231,000 respectively, of stock compensation expense.

Operating expenses for the three months ended June 30, 2009 increased $237,000 or 7% to $3,756,000 from $3,519,000 for the three months ended June 30, 2008. Operating expenses for the first six months of 2009 increased $542,000 or 8% to $7,593,000 from $7,051,000 reported for the same period the prior year. Operating expenses for both periods include increases in Fore-Sight related spending as well as significant expenditures for legal fees related to the Analogic arbitration matter. Effective May 4, 2009 the Company initiated efforts to reduce expenses and improve cash flows through certain personnel cutbacks, Company-wide wage rate reductions approximating 5% of base pay levels and other benefit adjustments. These reductions are expected to create over $1,000,000 of annualized savings.

Research and development (“R&D”) expenses increased $111,000 or 24% to $578,000 or 7% of revenues for the three months ended June 30, 2009 compared to $467,000 or 4% of revenues for the three months ended June 30, 2008. Increases in Fore-Sight project related expenses partially offset by increased reimbursements from the National Institutes of Health (“NIH”) pertaining to the Company s Near-Infrared Spectroscopy (“NIRS”) technology compared to the same period of the prior year were primarily responsible for the increase in net R&D expenses. Increased Fore-Sight related clinical research expenses also contributed to the overall increase in R&D expenses for this period. R&D expenses for the first six months of 2009 increased $226,000 or 23% to $1,204,000 from $978,000 reported for the first six months of the prior year. Engineering project expenses and clinical expenses were responsible for the increase and were partially offset by increased NIH reimbursements. For the three months and six months ended June 30, 2009, NIH reimbursements totaled $188,000 and $413,000, respectively, compared to $124,000 and $255,000 for the three and six-month periods ended June 30, 2008. As of June 30, 2009, a maximum of approximately $1.4 million remains available under the $2.8 million multi-year NIH award received during 2007.

Selling, general and administrative expenses (“S,G&A”) increased $126,000 or 4% to $3,178,000, or 37% of revenues for the three months ended June 30, 2009 compared to $3,052,000, or 29% of revenues for the three months ended June 30, 2008. Sales and marketing expenses directly associated with the Fore-Sight cerebral oximetry effort totaled $986,000 and increased approximately $163,000 or 20% over the same three months of the prior year primarily as a result of costs associated with additional field sales and marketing personnel. Other sales and marketing expenses totaled $1,054,000 and decreased $241,000 from the $1,295,000 of expenses reported for the three months ended June 30, 2008. General and administrative expenses increased $204,000 or 22% to $1,138,000 as a result of increased legal expenses related to the Analogic arbitration partially offset by reduced salaries and related benefits.

S,G&A expenses for the first six months of 2009 totaled $6,389,000, an increase of $316,000, or approximately 5%, over the $6,073,000 reported for the first six months of 2008. Fore-Sight related sales and marketing expenses were $2,094,000 and accounted for $595,000 of the increase in S,G&A expenses. Increases in spending were primarily driven by additional sales and marketing personnel. Other sales and marketing expenses totaled $2,132,000 and decreased approximately $539,000 or 20% from the $2,671,000 reported for the six months ended June 30, 2008. G&A expenses totaled $2,163,000 and increased approximately $260,000 or 14% as a result of increased legal expenses related to the Analogic matter partially offset by reductions in patent related legal fees, salaries and related benefits and various other expenses including strategic planning costs, recruitment, supplies and stock compensation expense.

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