Delaware
|
06-1123096
|
(State
or other jurisdiction of
|
(I.R.S.
employer
|
incorporation
or organization)
|
identification
no.)
|
PART
1
|
Financial
Information
|
Page
No.
|
Item
1
|
Financial
Statements
|
|
Condensed
Consolidated Balance Sheets as of June 30, 2005
|
||
and
December 31, 2004
|
3
|
|
Condensed
Consolidated Statements of Income for the Three and Six
|
||
Months
Ended June 30, 2005 and 2004 (Restated)
|
5
|
|
Condensed
Consolidated Statements of Cash Flow for the Six
|
||
Months
Ended June 30, 2005 and 2004 (Restated)
|
6
|
|
Notes
to Condensed Consolidated Financial Statements
|
7
|
|
Item
2
|
Management’s
Discussion and Analysis of Financial Condition
|
|
and
Results of Operations
|
13
|
|
Item
3
|
Controls
and Procedures
|
16
|
PART
II
|
Other
Information
|
|
Item
4
|
Submission
of Matters to a Vote of Security Holders
|
16
|
Item
6
|
Exhibits
|
17
|
Signatures
|
|
18 |
ITEM 1. |
FINANCIAL
STATEMENTS
|
Assets
|
June
30,
|
December
31,
|
|||||
2005
|
2004
|
||||||
Current
Assets:
|
|||||||
Cash
and cash equivalents
|
$
|
1,506,026
|
$
|
1,973,452
|
|||
Accounts
receivable, net of allowance
|
|||||||
for
doubtful accounts
|
3,656,492
|
2,929,167
|
|||||
Inventories
|
4,871,938
|
2,662,686
|
|||||
Deferred
income taxes
|
210,972
|
250,342
|
|||||
Other
current assets
|
231,876
|
355,367
|
|||||
|
|
||||||
Total
current assets
|
10,477,304
|
8,171,014
|
|||||
Property
and Equipment:
|
|||||||
Land
and improvements
|
535,000
|
535,000
|
|||||
Building
and improvements
|
1,477,398
|
1,473,698
|
|||||
Leasehold
improvements
|
106,761
|
—
|
|||||
Machinery
and equipment
|
3,480,122
|
2,908,376
|
|||||
5,599,281
|
4,917,074
|
||||||
Accumulated
depreciation and amortization
|
(2,840,074
|
)
|
(2,649,031
|
)
|
|||
Property
and equipment, net
|
2,759,207
|
2,268,043
|
|||||
Intangible
and other assets, net
|
207,513
|
167,990
|
|||||
Deferred
income taxes
|
384,954
|
385,935
|
|||||
Goodwill
|
3,093,586
|
—
|
|||||
Total
assets
|
$
|
16,922,564
|
$
|
10,992,982
|
June
30,
|
December
31,
|
||||||
Liabilities
and Stockholders’ Equity
|
2005
|
2004
|
|||||
Current
Liabilities:
|
|||||||
Accounts
payable
|
$
|
1,543,873
|
$
|
734,939
|
|||
Income
taxes
|
178,288
|
417,130
|
|||||
Accrual
for business acquisition
|
427,093
|
—
|
|||||
Accrued
expenses
|
789,020
|
854,410
|
|||||
Current
portion of long-term debt
|
557,107
|
58,929
|
|||||
Total
current liabilities
|
3,495,381
|
2,065,408
|
|||||
Long-term
debt, less current portion
|
4,707,253
|
1,034,495
|
|||||
Retirement
benefit obligation
|
777,559
|
736,988
|
|||||
Stockholders
Equity:
|
|||||||
Common
stock, $.004 par value per share,
|
|||||||
19,000,000
shares authorized, 10,017,494 and
|
|||||||
9,959,173
shares issued at June 30, 2005 and
|
|||||||
December
31, 2004, respectively, including
|
|||||||
shares
held in treasury
|
40,070
|
39,837
|
|||||
Additional
paid-in capital
|
3,083,994
|
3,031,387
|
|||||
Common
stock held in treasury, at cost - 86,000 shares
|
(101,480
|
)
|
(101,480
|
)
|
|||
Retained
earnings
|
4,919,787
|
4,186,347
|
|||||
Total
stockholders equity
|
7,942,371
|
7,156,091
|
|||||
Total
liabilities and stockholders equity
|
$
|
16,922,564
|
$
|
10,992,982
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2004
|
|
2004
|
|||||||||||
|
2005
|
Restated
|
2005
|
Restated
|
|||||||||
REVENUES:
|
$
|
5,882,755
|
$
|
4,882,875
|
$
|
10,831,266
|
$
|
9,439,317
|
|||||
OPERATING
EXPENSES:
|
|||||||||||||
Cost
of product sales
|
3,262,918
|
2,723,502
|
5,966,108
|
5,233,413
|
|||||||||
Research
and development
|
282,574
|
246,866
|
535,304
|
520,515
|
|||||||||
Selling,
general and administrative
|
1,726,754
|
1,490,801
|
3,198,993
|
3,026,805
|
|||||||||
Operating
income
|
610,509
|
421,706
|
1,130,861
|
658,584
|
|||||||||
Interest
expense
|
33,796
|
21,410
|
36,741
|
49,190
|
|||||||||
Income
before income taxes
|
576,713
|
400,296
|
1,094,120
|
609,394
|
|||||||||
Income
taxes
|
195,180
|
138,757
|
360,680
|
131,430
|
|||||||||
NET
INCOME
|
$
|
381,533
|
$
|
261,539
|
$
|
733,440
|
$
|
477,964
|
|||||
Weighted
average number of
|
|||||||||||||
common
shares outstanding:
|
|||||||||||||
Basic
|
9,908,087
|
9,786,568
|
9,898,875
|
9,755,285
|
|||||||||
Diluted
|
11,567,912
|
11,065,039
|
11,512,587
|
11,048,745
|
|||||||||
Earnings
per common share:
|
|||||||||||||
Basic
|
$
|
0.04
|
$
|
0.03
|
$
|
0.07
|
$
|
0.05
|
|||||
Diluted
|
$
|
0.03
|
$
|
0.02
|
$
|
0.06
|
$
|
0.04
|
Six
Months Ended
|
|||||||
|
June
30,
|
||||||
|
June
30,
|
2004
|
|||||
2005
|
Restated
|
||||||
OPERATING
ACTIVITIES:
|
|||||||
Net
income
|
$
|
733,440
|
$
|
477,964
|
|||
Adjustments
to reconcile net income to
|
|||||||
net
cash (used in) provided by operating activities:
|
|||||||
Depreciation
and amortization
|
239,919
|
242,531
|
|||||
Deferred
income taxes
|
16,107
|
(4,355
|
)
|
||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(306,971
|
)
|
784,041
|
||||
Inventories
|
(788,856
|
)
|
(606,574
|
)
|
|||
Other
current assets
|
139,844
|
335,344
|
|||||
Retirement
benefit obligation
|
40,571
|
101,044
|
|||||
Accrual
for business acquisition
|
427,093
|
—
|
|||||
Accounts
payable and accrued expenses
|
(555,840
|
)
|
345,557
|
||||
|
|||||||
Net
cash (used) provided by operating activities
|
(54,693
|
)
|
1,675,552
|
||||
|
|||||||
INVESTING
ACTIVITIES:
|
|||||||
Purchase
of property and equipment
|
(438,561
|
)
|
(268,663
|
)
|
|||
Business
acquisition, net of cash acquired of $250,060
|
(4,111,721
|
)
|
—
|
||||
Purchase
of intangible assets
|
(84,473
|
)
|
(59,477
|
)
|
|||
Net
cash used by investing activities
|
(4,634,755
|
)
|
(328,140
|
)
|
|||
FINANCING
ACTIVITIES:
|
|||||||
Repayments
under notes payable
|
—
|
(207,398
|
)
|
||||
Repayments
under long-term debt
|
(30,821
|
)
|
(634,129
|
)
|
|||
Proceeds
from long-term debt agreement
|
4,200,000
|
—
|
|||||
Purchase
of stock held for treasury
|
—
|
(101,480
|
)
|
||||
Proceeds
from issuance of common stock
|
52,843
|
123,730
|
|||||
Net
cash provided by (used in) financing activities
|
4,222,022
|
(819,277
|
)
|
||||
Change
in cash and cash equivalents
|
(467,426
|
)
|
528,135
|
||||
CASH
AND CASH EQUIVALENTS, beginning of period
|
1,973,452
|
881,087
|
|||||
CASH
AND CASH EQUIVALENTS, end of period
|
$
|
1,506,026
|
$
|
1,409,222
|
|||
|
|
||||||
SUPPLEMENTAL
DISCLOSURES OF CASH FLOW INFORMATION:
|
|||||||
Cash
paid for interest
|
$
|
31,255
|
$
|
55,840
|
|||
Cash
paid for income taxes
|
$
|
678,191
|
$
|
173,506
|
(1) |
The
Company
|
(2) |
Basis
of Presentation
|
(3) |
Restatement
|
(4) |
Acquisition
|
Cash
paid
|
$
|
4,200,000
|
||
Working
capital adjustment payable
|
404,593
|
|||
Transaction
costs
|
184,281
|
|||
Total
purchase price
|
$
|
4,788,874
|
Cash
|
$
|
250,060
|
||
Accounts
receivable
|
420,354
|
|||
Inventory
|
1,521,059
|
|||
Other
current assets
|
16,353
|
Property
and equipment
|
243,646
|
|||
Goodwill
|
3,093,586
|
|||
Other
intangibles
|
3,926
|
|||
Accounts
payable
|
(579,067
|
)
|
||
Accrued
expenses
|
(108,616
|
)
|
||
Deferred
income taxes
|
(56,455
|
)
|
||
Capital
lease obligations
|
(15,972
|
)
|
||
$
|
4,788,874
|
(5) |
Pro
Forma Disclosures Related to
Acquisition
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30, 2005
|
June
30, 2004
|
June
30, 2005
|
June
30, 2004
|
||||||||||
|
|||||||||||||
Net
Revenues ($000’s)
|
$
|
6,841.3
|
$
|
6,233.8
|
$
|
13,623.8
|
$
|
12,071.3
|
|||||
Net
Income ($000’s)
|
$
|
478.4
|
$
|
331.5
|
$
|
901.9
|
$
|
577.0
|
|||||
Net
Income per
|
|||||||||||||
Common
share
|
|||||||||||||
-
Basic
|
$
|
0.05
|
$
|
0.03
|
$
|
0.09
|
$
|
0.06
|
|||||
-
Diluted
|
$
|
0.04
|
$
|
0.03
|
$
|
0.08
|
$
|
0.05
|
June
30,
|
December
31,
|
||||||
2005
|
2004
|
||||||
Raw
material
|
$
|
3,595,252
|
$
|
1,727,578
|
|||
Work-in-process
|
41,185
|
144,628
|
|||||
Finished
inventory
|
1,235,501
|
790,480
|
|||||
$
|
4,871,938
|
$
|
2,662,686
|
(7) |
Goodwill
|
(8) |
Warranty
Costs
|
Six
Months Ended June 30,
|
|||||||
2005
|
2004
|
||||||
Beginning
balance
|
$
|
122,000
|
$
|
122,000
|
|||
Provisions
|
38,000
|
59,000
|
|||||
Warranty
costs incurred
|
(38,000
|
)
|
(59,000
|
)
|
|||
Ending
balance
|
$
|
122,000
|
$
|
122,000
|
(9) |
Post-Retirement
Health Benefit Plan
|
Three
Months Ended June 30
|
Six
Months Ended June 30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Service
cost
|
$
|
9,980
|
$
|
22,216
|
$
|
26,616
|
$
|
44,432
|
|||||
Interest
cost
|
7,444
|
11,729
|
19,706
|
23,459
|
|||||||||
Prior
service cost recognition
|
(8,258
|
)
|
28,265
|
7,832
|
56,530
|
||||||||
Gain
recognition
|
(31
|
)
|
(5,002
|
)
|
(420
|
)
|
(10,005
|
)
|
|||||
Net
periodic benefit cost
|
$
|
8,852
|
$
|
57,208
|
$
|
53,734
|
$
|
114,416
|
(10) |
Earnings
per Common Share
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30
|
June
30
|
||||||||||||
2004
|
2004
|
||||||||||||
2005
|
Restated
|
2005
|
Restated
|
||||||||||
Net
income
|
$
|
381,533
|
$
|
261,539
|
$
|
733,440
|
$
|
477,964
|
|||||
Weighted
average shares outstanding
|
9,908,087
|
9,786,568
|
9,898,875
|
9,755,285
|
|||||||||
Dilutive
effect of warrants and options
|
1,659,825
|
1,278,471
|
1,613,712
|
1,293,460
|
|||||||||
Total
weighted average shares of
|
|||||||||||||
dilutive
securities outstanding
|
11,567,912
|
11,065,039
|
11,512,587
|
11,048,745
|
|||||||||
Earnings
per share:
|
|||||||||||||
Basic
|
$
|
0.04
|
$
|
0.03
|
$
|
0.07
|
$
|
0.05
|
|||||
Diluted
|
$
|
0.03
|
$
|
0.02
|
$
|
0.06
|
$
|
0.04
|
(11) |
Stock-Based
Compensation
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30
|
June
30
|
||||||||||||
2004
|
2004
|
||||||||||||
2005
|
Restated
|
2005
|
Restated
|
||||||||||
Net
income:
|
|||||||||||||
As
reported
|
$
|
381,533
|
$
|
261,539
|
$
|
733,440
|
$
|
477,964
|
|||||
Compensation
expense for stock
|
|||||||||||||
options
based on fair value
|
146,639
|
25,541
|
215,343
|
26,642
|
|||||||||
Pro
forma
|
$
|
234,894
|
$
|
235,998
|
$
|
518,097
|
$
|
451,322
|
Earnings
per share:
|
|||||||||||||
As
reported - Basic
|
$
|
0.04
|
$
|
0.03
|
$
|
0.07
|
$
|
0.05
|
|||||
Pro
forma - Basic
|
$
|
0.02
|
$
|
0.02
|
$
|
0.05
|
$
|
0.05
|
|||||
As
reported - Diluted
|
$
|
0.03
|
$
|
0.02
|
$
|
0.06
|
$
|
0.04
|
|||||
Pro
forma - Diluted
|
$
|
0.02
|
$
|
0.02
|
$
|
0.05
|
$
|
0.04
|
(12) |
Financing
Arrangements
|
(13) |
Grant
Awards
|
ITEM 2 |
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
ITEM3 |
CONTROLS
AND PROCEDURES
|
Nominee
|
For
|
Against
|
|
Louis
P. Scheps
|
8,567,490
|
25,928
|
|
Lawrence
S. Burstein
|
8,572,270
|
21,148
|
|
Jerome
S. Baron
|
8,567,440
|
25,978
|
|
Saul
S. Milles
|
8,567,586
|
25,832
|
For
|
Against
|
Abstain
|
|
|
|
|
|
8,561,275
|
16,915
|
15,228
|
31.1 |
Certification
pursuant to Rule 13a-14(a) of Louis P. Scheps, President and Chief
Executive Officer
|
31.2 |
Certification
pursuant to Rule 13a-14(a) of Jeffery A. Baird, Chief Financial
Officer
|
32.1 |
Certification of Periodic Financial Report of Louis P. Scheps, President and Chief Executive Officer
and Jeffery A. Baird, Chief Financial Officer
|
CAS
MEDICAL SYSTEMS, INC.
(Registrant)
|
||
|
|
|
Date: August 11, 2005 | By: | /s/ Louis P. Scheps |
Louis P. Scheps |
||
Chairman
of the Board, President and
Chief
Executive Officer
|
|
|
|
Date: August 11, 2005 | By: | /s/ Jeffery A. Baird |
Jeffery A. Baird |
||
Chief
Financial
Officer
|