CAS Medical Systems Inc. Reports Operating Results (10-Q)
Cas Medical Systems Inc. has a market cap of $18.5 million; its shares were traded at around $1.6 with and P/S ratio of 0.5. CASM is in the portfolios of Chuck Royce of Royce& Associates.
Highlight of Business Operations:For the three months ended March 31, 2010, the Company reported net income of $208,000 or $0.02 per basic and diluted common share compared to a net loss of $903,000 or ($0.08) per basic and diluted common share reported for the three months ended March 31, 2009. Improvements in gross profit as a percentage of sales and reductions in operating expenses compared to the first three months of 2009 were responsible for the improvement in income before taxes. Reductions in operating expenses resulted primarily from headcount reductions initiated during both the second and fourth quarters of 2009. Pre-tax results for the three months ended March 31, 2010 included approximately $200,000 of legal costs related to the Somanetics litigation.
Sales to the U.S. market accounted for $5,621,000 or 66% of the total revenues reported for the three months ended March 31, 2010, a decrease of $749,000 or 12% from the $6,370,000 in sales reported for the three months ended March 31, 2009. Lower sales to the VA were primarily responsible for the shortfall. International sales accounted for $2,874,000 or 34% of the total revenues reported for the three months ended March 31, 2010, an increase of $838,000 or 41% from the $2,036,000 reported for the same period of the prior year. Increases in international sales were led by FORE-SIGHT monitors, blood pressure cuffs and OEM modules partially offset by decreases in vital signs monitors and accessories sales.
Research and development (“R&D”) expenses decreased $162,000 or 26% to $464,000 or 5.5% of revenues for the three months ended March 31, 2010 compared to $626,000 or 7.4% of revenues for the three months ended March 31, 2009. Reductions in salaries and related benefits from both reductions in personnel and transfers outside of R&D and reductions in engineering project expenses, recruitment and relocation, outside services and equipment amortization expenses accounted for the decrease in R&D expenses. Partially offsetting the decreases were reductions in 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. As of March 31, 2010, a maximum of approximately $0.9 million remains available under the $2.8 million multi-year NIH award received during September 2007.
Selling, general and administrative expenses (“S,G&A”) decreased $1,013,000 or 32% to $2,198,000, for the three months ended March 31, 2010 compared to $3,211,000 for the three months ended March 31, 2009. Sales and marketing expenses directly associated with the FORE-SIGHT cerebral oximetry effort totaled approximately $788,000 and decreased approximately $321,000 over the same three months of the prior year. Reductions in spending were primarily affected by decreased sales management expenses, field sales start-up costs incurred during the first quarter of 2009, and meeting and convention, advertising and recruitment expenses. Other sales and marketing expenses totaled $567,000 and decreased $510,000 from the $1,077,000 of expenses reported for the three months ended March 31, 2009 primarily as a result of reductions in personnel initiated during both the second and fourth quarters of 2009. General and administrative expenses (“G&A”) accounted for approximately $183,000 of the decrease in S,G&A expenses. Decreases in salaries due to both wage levels and workforce reductions and outside services were partially offset by increases in legal fees. During the first quarter of 2010, the Company recorded $200,000 of expenses related to the Somanetics legal action which were partially offset by reductions in other legal expenses. During the first quarter of 2009, the Company incurred legal costs of $138,000 related to the Analogic matter which were recovered later in 2009.
At March 31, 2010, the Company's cash and cash equivalents totaled $1,649,000 compared to $1,187,000 at December 31, 2009, an increase of approximately $462,000. Working capital increased $107,000 to $8,014,000 at March 31, 2010, from $7,907,000 on December 31, 2009. The Company s current ratio increased to 2.31 to 1 from 2.21 to 1.
Cash used in financing activities for the three months ended March 31, 2010 was $1,005,000 compared to cash provided of $1,029,000 for the first three months of the prior year. During the three months ended March 31, 2010, the Company repaid $695,000 against its line-of-credit to support its operations and repaid $160,000 of long-term debt. Deferred financing costs of $111,000 were associated with the Company s bank debt refinancing completed during March 2010.
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