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

November 05, 2009 | About:
10qk

10qk

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CAS Medical Systems Inc. (CASM) filed Quarterly Report for the period ended 2009-09-30.

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 $18.7 million; its shares were traded at around $1.62 with and P/S ratio of 0.5.

Highlight of Business Operations:

For the three months ended September 30, 2009, the Company reported net income of $197,000 or $0.02 per basic and diluted common share compared to net income of $329,000 or $0.03 per basic and diluted common share reported for the three months ended September 30, 2008. During the third quarter ended September 30, 2009, the Company recorded a recovery of legal expenses and reimbursements for asset write-downs totaling $712,000 related to the Analogic settlement. Excluding the benefit from the Analogic settlement, pre-tax income of $315,000 would have been a pre-tax loss of $397,000. Revenues for the third quarter of 2009 declined $2,542,000 or 22% from the third quarter of 2008 while operating expenses,

Operating expenses for the three months ended September 30, 2009 decreased $806,000 or 22% to $2,825,000 from $3,631,000 for the three months ended September 30, 2008. During the third quarter of 2009, $712,000 of amounts received from the settlement of the Analogic arbitration reduced G&A expenses to offset previously reported legal and other expenses. Operating expenses for the first nine months of 2009 decreased $264,000 or 2% to $10,418,000 from $10,682,000 reported for the same period the prior year.

Research and development (“R&D”) expenses increased $135,000 or 24% to $689,000 or 7% of revenues for the three months ended September 30, 2009 compared to $554,000 or 5% of revenues for the three months ended September 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 nine months of 2009 increased $361,000 or 24% to $1,893,000 from $1,532,000 reported for the first nine 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 nine months ended September 30, 2009, NIH reimbursements totaled $187,000 and $601,000, respectively, compared to $108,000 and $363,000 for the three and nine-month periods ended September 30, 2008. As of September 30, 2009, a maximum of approximately $1.2 million remains available under the $2.8 million multi-year NIH award received during 2007.

Selling, general and administrative expenses (“S,G&A”) decreased $941,000 or 31% to $2,136,000 for the three months ended September 30, 2009 compared to $3,077,000 for the three months ended September 30, 2008. Excluding the $712,000 of benefits associated with the Analogic arbitration settlement, S,G&A expenses for the third quarter of 2009 would have been $2,848,000, a decrease of $229,000 or 7% from the $3,077,000 of S,G&A expenses recorded for the third quarter of 2008. G&A expenses decreased approximately $783,000 of which $712,000 was related to the Analogic settlement. Salaries and related benefits and general insurance also declined and were partially offset by increased non-Analogic legal expenses including approximately $124,000 of Somanetics litigation related costs. Sales and marketing expenses declined $158,000 for the third quarter of 2009 compared to the third quarter of the prior year primarily from reductions in sales administration personnel costs and non-Fore-Sight related marketing expenditures.

S,G&A expenses for the first nine months of 2009 totaled $8,525,000, a decrease of $625,000, or approximately 7%, from the $9,150,000 reported for the first nine months of 2008. G&A expenses accounted for $524,000 of the reduction while sales and marketing expenses accounted for the remainder of $101,000. G&A expense reductions were primarily driven by decreases in salaries and related benefits including incentive expenses, and 401(k) plan company matching contributions, insurance expenses, accounting and Sarbanes-Oxley internal control fees, partially offset by increased legal fees related to the Somanetics litigation. Fore-Sight related sales and marketing expenses were $2,807,000, an increase of $598,000 over expenses reported for the same period of the prior year. Offsetting the increases in Fore-Sight related sales and marketing expenses were decreases in non-Fore-Sight related sales and marketing spending primarily driven by reductions in sales administration and support and marketing salaries and .related fringe benefits.

Cash provided by operations for the nine months ended September 30, 2009 was $519,000 compared to cash provided by operations of $407,000 for the first nine months of the prior year. Reductions in inventories of $1,379,000 and other receivables were primarily responsible for the increase and were partially offset by increases in deferred income taxes and accounts receivable. Cash provided by operations for the three months ended September 30, 2009 was $1,614,000 driven by income before depreciation and amortization and reductions in inventories. Cash provided by operations of $407,000 for the nine months ended September 30, 2008 resulted primarily from increases in accounts payable and accrued expenses of $897,000 and earnings before depreciation and amortization of $847,000 and were partially offset by increases in inventory of $1,184,000.

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