UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1995
Commission File Number 2-96271-B
CAS MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1123096
(State or other jurisdiction of (I.R.S. employer
incorporation of organization) identification no.)
21 Business Park Drive, Branford, Connecticut 06405
(Address of principal executive offices)
(Zip Code)
(203) 488-6056
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.004 par value: 9,269,479 shares as of September 30, 1995.
Preferred Stock, $.001 par value: 3,000 shares as of September 30, 1995.
<PAGE>
PART I. - FINANCIAL INFORMATION
The condensed financial statements included herein have been prepared
by CAS Medical Systems, Inc. (the "Company"), without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. While
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, the Company believes that the disclosures made herein are
adequate to make the information presented not misleading. It is
recommended that these condensed financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report filed on Form 10-K for the year ended December 31,
1994.
In the opinion of the Company, all adjustments necessary to present
fairly the financial position of CAS Medical Systems, Inc. as of September
30, 1995 and December 31, 1994 and the results of its operations and its
cash flows for the three months and nine months ended September 30, 1995
and 1994 have been included.
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
September 30, 1995 December 31, 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 830,880 $ 301,472
Accounts receivable, net of allowance
for doubtful accounts 778,440 794,559
Inventory 789,456 810,988
Other current assets 19,018 75,081
---------- ---------
Total current assets 2,417,794 1,982,100
---------- ---------
Property and Equipment
Furniture and equipment 809,706 768,036
Leasehold improvements 47,181 46,572
----------- ---------
856,887 814,608
Less-Accumulated depreciation
and amortization 687,398 635,623
----------- ---------
169,489 178,985
Other Assets, net of accumulated
amortization 10,449 17,199
---------- ---------
Total assets $2,597,732 $2,178,284
__________ _________
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
September 30, 1995 December 31, 1994
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 148,846 $150,928
Accrued payroll 36,365 32,587
Accrued professional fees 35,800 35,000
Other accrued expenses 253,112 112,842
Payable to related party - 144,411
---------- --------
Total current liabilities 474,123 475,768
---------- --------
Deferred revenues 93,889 92,222
Shareholders' Equity:
Common stock, $.004 par value per share,
19,000,000 shares authorized, 9,269,479
shares issued and outstanding in 1995
and 1994 37,081 36,963
Preferred stock, $.001 par value,
1,000,000 shares authorized, stated at
redemption value, Series C cumulative
preferred stock, 3,000 shares issued and
outstanding in 1995 and 1994. 300,000 500,000
Additional paid-in capital 2,672,406 2,664,723
Accumulated deficit ( 972,767) (1,591,392)
---------- ---------
Total shareholders' equity 2,029,720 1,610,294
---------- ---------
Total liabilities and
shareholders' equity $ 2,597,732 $2,178,284
__________ _________
<FN>
See Notes to Financial Statements
</TABLE>
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<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF INCOME
FOR THE NINE MONTHS AND THREE MONTHS ENDED
SEPTEMBER 30, 1995 AND 1994
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
(Unaudited) (Unaudited)
Nine Months Ended Three Months
Ended
September 30, September
30,
1995 1994 1995
1994
________________
________________
<S> <C> <C> <C> <C>
REVENUES:
Net product sales $4,678,997 $3,270,112 $1,438,107
$1,178,538
Licensing fees 203,263 120,889 65,164
100,889
--------- --------- ---------
- ---------
4,882,260 3,391,001 $1,503,271
1,279,427
OPERATING EXPENSES:
Cost of product sales 2,139,136 1,669,574 659,425
586,638
Selling, general & administrative 1,735,227 1,391,019 521,756
410,103
Research & development 296,521 251,966 101,194
92,603
--------- --------- ---------
- ---------
Operating Income 711,376 78,442 220,896
190,083
--------- ---------- ---------
- ---------
INTEREST EXPENSE, Net 2,749 (24,089) 4,781
(8,932)
--------- --------- ---------
- ---------
Income Before Income Taxes 714,125 54,353 225,677
181,151
PROVISION FOR INCOME TAXES 70,000 5,000 20,000
4,000
--------- --------- ---------
- ---------
Net Income 644,125 49,353 205,677
177,151
_________ _________ _________
_________
PER SHARE DATA:
Net Income per Share:
(Note 2) $ .06 $ - $ .02
.02
_________ _________ _________
_________
Weighted Average Number
of Shares Outstanding 9,649,512 9,383,009 10,005,967
9,383,009
_________ _________ __________
_________
<FN>
See Notes To Financial Statements
</TABLE>
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<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
<CAPTION>
Additional
Common Stock Preferred Stock Paid-In
Accumulated
Shares Amount Shares Amount Capital
(Deficit)
______________ _______________ __________
___________
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1993 (Audited) 9,239,479 $36,963 5,000 $500,000 $2,664,723
$(1,842,799)
Net income for
nine months - - - - -
49,353
Preferred Dividends - - - - - (
37,500)
--------- ------- ----- -------- ----------
- ------------
Balance
September 30,
1994 9,239,479 $36,963 5,000 $500,000 $2,664,723
$(1,830,946)
(Unaudited) _________ _______ ______ ________ __________
___________
<CAPTION>
Additional
Common Stock Preferred Stock Paid-In
Accumulated
Shares Amount Shares Amount Capital
(Deficit)
______________ _______________ __________
___________
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1994 (Audited) 9,239,479 $36,963 5,000 $500,000 $2,664,723
$(1,591,392)
Net income for
nine months - - - - -
644,125
Preferred Dividends - - - - -
(32,500)
Additional common
shares issued 30,000 120 - - 7,683
-
Redeem Preferred
shares - (2) (2,000) (200,000) -
-
--------- ------- ----- -------- ----------
- ------------
Balance
September 30,
1995 9,269,479 $37,081 3,000 $300,000 $2,672,406 $(
979,767)
(Unaudited) _________ _______ _____ ________ __________
____________
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(Unaudited)
(Amounts in thousands)
<CAPTION>
Nine Months Ended September 30,
1995 1994
___________ __________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 644,125 $ 49,753)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 51,775 74,186
Loss on disposal of assets - 5,375
Decrease in accounts receivable 16,119 186,931
Decrease in inventory 21,532 ( 96,556)
Decrease in other current assets 56,063 84,377
(Decrease) in accounts payable ( 2,082) ( 77,747)
Increase (decrease) in accrued expenses 144,848 ( 70,576)
Decrease in deferred revenue 1,667 16,111
Other 6,750 ( 1,449)
_______ _______
Net cash provided by (used in) operating
activities 940,797 170,005
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures ( 42,279) ( 24,934)
_______ _______
Net cash used in investing activities ( 42,279) ( 24,934)
CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued as compensation 7,801 -
Borrowings under line of credit - ( 51,526)
Repayment of notes payable (144,411) ( 96,700)
Preferred dividends ( 32,500) ( 37,500)
Repayment of debt (200,000) ( 44,055)
_______ _______
Net cash used in financing activities (369,110) (229,781)
_______ _______
Net increase (decrease) in cash and
cash equivalents 529,408 ( 84,710)
CASH AND CASH EQUIVALENTS, at beginning
of period 301,472 261,453
_______ _______
CASH AND CASH EQUIVALENTS, at end of period $830,880 $176,743
_______ _______
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 8,206 $ 25,653
Cash paid during the period for income taxes $ 37,625 $ 38,408
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
Note 1. The Company:
CAS Medical Systems, Inc., the ("Company"), was organized in 1984
primarily to serve neonatal and pediatric units in hospitals. Today,
the Company is engaged in the business of developing, manufacturing and
distributing diagnostic equipment and medical products for use by
adults and children in many areas of the health care industry.
Note 2. Summary of Significant Accounting Policies:
Inventory
Inventory is stated at the lower of first-in, first-out (FIFO)
cost or market. At September 30, 1995 and December 31, 1994, inventory
consisted of the following:
September 30, December 31,
1995 1994
Raw Material 458,214 575,915
Work-In-Process 108,607 112,782
Finished Inventory 222,635 122,291
------- -------
$789,456 $810,988
_______ _______
Property and Equipment
Property and equipment are stated at cost. Furniture and
equipment are depreciated, using the straight-line method based on the
estimated useful lives of the assets which range from two to five
years. Leasehold improvements are amortized over the shorter of the
life of the lease or the estimated useful life of the asset.
Net Income Per Share
Net income per share has been computed by dividing net income
available for common stock, after cumulative preferred dividends
earned, by the weighted average number of common shares outstanding
each period. Weighted average shares were 9,649,512 and 9,383,009 for
the periods ended September 30, 1995 and 1994, respectively. Weighted
average shares outstanding include the common equivalent shares
calculated for the stock options under the treasury stock method.
Reclassifications
Certain reclassifications were made to prior year amounts to
conform to current year presentation.
<PAGE>
Notes to Financial Statements (Continued)
Note 3. Income Taxes:
On January 1, 1993, the Company adopted Statement of Accounting
Standards No. 109 "Accounting for Income Taxes" (SFAS 109). SFAS 109
requires the Company to provide deferred taxes based on enacted tax
rates which would apply in the period the taxes become payable, and to
adjust deferred tax acounts for known changes in future tax rates.
Deferred tax assets are subject to continuous valuation assessments
based on several criteria including benefit realization periods, tax
planning strategies and the results of operations.
As of September 30, 1995, the Company had approximately $800,000
and $600,000 of net operating loss carryforwards for financial
statement and tax reporting purposes, respectively, subject to view by
the Internal Revenue Service. These loss carryforwards begin to expire
in the year 2000. A valuation allowance of $330,000 was recorded
against the entire operating loss carryforwards. In the event that tax
benefits from the use of existing net operating loss carryforwards are
realized, these benefits will be reflected as a reduction in the
current income tax provision.
Note 4. Debt:
At September 30, 1995, the Company had a line of credit with a
Connecticut bank totalling $500,000. Borrowings under the line of
credit bear interest at the prime rate plus 1.5%. At September 30,
1995 there were no borrowings outstanding under this line. The bank
has a first security interest in all assets of the Company and requires
a compensating balance equal to 20% of the line of credit.
Note 5. Long Term Payables to Related Parties:
The 10% note payable, due December 1, 1995, was paid in full on May 1,
1995.
December 31, 1994
10% term note payable due December 1, 1995 $144,244
Dividends payable 167
_______
144,411
Less current portion (144,411)
_______
$ -
_______
Note 6. Acquisition:
In May 1995, the Company acquired 19% of the voting common stock of
Medical Products Development Company ("MPDC") for $1. MPDC is a
development-stage company in the business of developing and licensing
medical product information and technology, with no operations to date.
The Company will account for this investment under the cost method.
<PAGE>
Notes to Financial Statements (Continued)
Note 7. License Agreement:
In July 1994, the Company entered into a four year licensing agreement
(the "Agreement") with a major manufacturer of patient monitors, granting a
non-exclusive license to use the Company's blood pressure technology for a
specific application; the Company will also exchange technical know-how.
Under the Agreement, the Company will receive $750,000 over the initial
four year term, plus royalties. The manufacturer has the option to extend
the license for an additional three year period upon payment of an
additional $600,000 plus royalties over the extended term. This Agreement
replaced a prior licensing agreement with the manufacturer. License fees
from the Agreement are being recognized on a straight line basis over the
contract period.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
At September 30, 1995, the Company had working capital of $1,943,671
compared to $1,506,332 at December 31, 1994. The increase in working
capital of $437,339 is primarily the result of cash generated from
operations.
At September 30, 1995, The Company had a line of credit with a
Connecticut bank totalling $500,000. Borrowing under the line bears
interest at the prime rate plus 1.5%.
The Company believes that cash generated from operations and its bank
line of credit will be sufficient to meet the Company's short-term
liquidity needs.
Results of Operations
The Company's revenues for the three month period ended September 30,
1995 were $1,503,271 as compared to $1,279,427 for the comparable period in
the prior year, an increase of $223,844. Revenues for the nine month
period ended September 30, 1995 increased by 44 percent from $3,391,001 in
1994 to $4,882,260 in 1995. This impressive growth in revenue reflects
increased sales of non-invasive blood pressure technology, both domestic
and international. Also, 1995 revenues include $148,000 of new disposable
products that were introduced during the first quarter.
Total cost of product sales decreased as a percent of net product
sales from 1994 to 1995 from 51 percent to 46 percent, respectively. This
decrease in cost reflects a more profitable product mix and manufacturing
cost reductions.
<PAGE>
Notes to Financial Statements (Continued)
Selling, general and administrative expenses increased to $1,735,227
in 1995 from $1,391,019 in 1994, an increase of 25 percent. This increase
was due primarily to market studies performed for a new product and
additional marketing sales expenses resulting from the hiring of three
additional sales support coordinators to the staff.
The provision for income taxes of $70,000 and $5,000 for the nine
month periods ended September 30, 1995 and 1994, respectively, represents
state income taxes and federal alternative minimum taxes.
These factors and licensing fee revenues resulted in net profit for
the period ended September 30, 1995 of $644,125, as compared to net income
of $49,353 for the same period in 1994, an increase of $594,772.
PART II
ITEM 6 EXHIBITS AND REPORTS
(A) Exhibits
11. See Notes to Financial Statements Note 2, regarding
computation of earnings per Share.
(B) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CAS MEDICAL SYSTEMS, INC.
Registrant
October 15, 1995 Louis P. Scheps
Date Louis P. Scheps
President and Chief Executive Officer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000764579
<NAME> CAS MEDICAL SYSTEMS, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 830,880
<SECURITIES> 0
<RECEIVABLES> 778,440
<ALLOWANCES> 0
<INVENTORY> 789,456
<CURRENT-ASSETS> 2,417,794
<PP&E> 856,887
<DEPRECIATION> 687,398
<TOTAL-ASSETS> 2,597,732
<CURRENT-LIABILITIES> 474,123
<BONDS> 0
<COMMON> 37,081
0
300,000
<OTHER-SE> ( 979,767)
<TOTAL-LIABILITY-AND-EQUITY> 2,597,732
<SALES> 4,678,997
<TOTAL-REVENUES> 4,882,260
<CGS> 2,139,136
<TOTAL-COSTS> 2,031,748
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,749
<INCOME-PRETAX> 714,125
<INCOME-TAX> 70,000
<INCOME-CONTINUING> 644,125
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 644,125
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
