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 June 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: 9,239,479 shares as of June 30, 1995.
Preferred Stock, $.001 par value: 5,000 shares as of June 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 June 30,
1995 and December 31, 1994 and the results of its operations and its cash
flows for the three months and six months ended June 30, 1995 and 1994 have
been included.
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
June 30, 1995 December 31, 1994
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 629,696 $ 301,472
Accounts receivable, net of allowance
for doubtful accounts 809,279 794,559
Inventory 850,550 810,988
Other current assets 20,463 75,081
---------- ---------
Total current assets 2,309,988 1,982,100
---------- ---------
Property and Equipment
Furniture and equipment 804,333 768,036
Leasehold improvements 47,181 46,572
----------- ---------
851,514 814,608
Less-Accumulated depreciation
and amortization 668,282 635,623
----------- ---------
183,232 178,985
Other Assets, net of accumulated
amortization 12,700 17,199
---------- ---------
Total assets $2,505,920 $2,178,284
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
June 30, 1995 December 31, 1994
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 215,482 $150,928
Accrued payroll 36,267 32,587
Accrued professional fees 35,000 35,000
Other accrued expenses 195,429 112,842
Payable to related party 144,411
---------- --------
Total current liabilities 482,178 475,768
---------- --------
Deferred revenues - 92,222
Shareholders' Equity:
Common stock, $.004 par value per share,
19,000,000 shares authorized, 9,239,479
shares issued and outstanding in 1995
and 1994 36,963 36,963
Preferred stock, $.001 par value,
1,000,000 shares authorized, stated at
redemption value, Series C cumulative
preferred stock, 5,000 shares issued and
outstanding in 1995 and 1994.
500,000 500,000
Additional paid-in capital 2,664,723 2,664,723
Accumulated deficit (1,177,944) (1,591,392)
---------- ---------
Total shareholders' equity 2,023,742 1,610,294
---------- ---------
Total liabilities and
shareholders' equity $ 2,505,920 $2,178,284
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF INCOME
FOR THE SIX MONTHS AND THREE MONTHS ENDED
JUNE 30, 1995 AND 1994
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
(Unaudited) (Unaudited)
Six Months Ended Three Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
REVENUES:
Net product sales $3,240,890 $2,091,574 $1,612,058 $1,085,795
Licensing fees 138,099 20,000 73,634 10,000
--------- --------- --------- ---------
3,378,989 2,111,574 $1,685,692 1,095,795
OPERATING EXPENSES:
Cost of product sales 1,479,711 1,082,936 724,454 656,440
Selling, general & administrative 1,213,471 980,916 571,684 495,545
Research & development 195,327 159,363 98,834 72,561
--------- --------- --------- ---------
Operating Income (Loss) 490,480 (111,641) 290,720 (128,751)
--------- ---------- --------- ---------
INTEREST EXPENSE, Net ( 2,032) (15,157) 1,275 (8,870)
--------- --------- --------- ---------
Income (Loss) Before
Income Taxes 488,448 (126,798) 291,995 (137,621)
PROVISION FOR INCOME TAXES 50,000 1,000 30,000 -
--------- --------- --------- ---------
Net Income (Loss) 438,448 (127,798) 261,995 (137,621)
PER SHARE DATA:
Net Income per Share:
(Note 2) $ .04 $ - $ .03 -
Weighted Average Number
of Shares Outstanding 9,310,454 9,239,479 9,637,785 9,239,479
<FN>
See Notes To Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 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 loss for
six months ( 127,798)
Preferred Dividends ( 25,000)
--------- ------- ----- -------- ---------- ------------
Balance
June 30, 1994 9,239,479 $36,963 5,000 $500,000 $2,664,723 $(1,995,597)
(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
six months 438,448
Preferred Dividends (25,000)
--------- ------- ----- -------- ---------- ------------
Balance
June 30, 1995 9,239,479 $36,963 5,000 $500,000 $2,664,723 $(1,177,944)
(Unaudited)
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(Unaudited)
(Amounts in thousands)
<CAPTION>
Six Months Ended June 30,
1995 1994
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 438,448 $(127,798)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 32,659 50,680
Loss on disposal of assets - 5,375
(Increase) Decrease in accounts
receivable ( 14,720) 199,788
Increase in inventory ( 39,562) (116,481)
Decrease in other current assets 54,618 49,480
Increase (decrease) in accounts payable 64,554 ( 60,357)
Increase (decrease) in accrued expenses 86,267 ( 61,372)
Decrease in deferred revenue ( 92,222) ( 30,000)
Other 4,499 ( 3,699)
Net cash provided by (used in) operating
activities 534,541 ( 94,384)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures ( 36,906) ( 23,143)
Net cash used in investing activities ( 36,906) ( 23,143)
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit - 98,474
Repayment of notes payable (144,411) ( 35,388)
Preferred dividends ( 25,000) ( 25,000)
Repayment of debt - ( 63,661)
Net cash used in financing activities (169,411) ( 25,575)
Net increase (decrease) in cash and
cash equivalents 328,224 (143,102)
CASH AND CASH EQUIVALENTS, at beginning
of period 301,472 261,453
CASH AND CASH EQUIVALENTS, at end of period $629,696 $118,351
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 5,002 $ 16,644
Cash paid during the period for income taxes $ 43,338 $ 17,000
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 June 30, 1995 and December 31, 1994, inventory consisted
of the following:
June 30, December 31,
1995 1994
Raw Material 505,945 575,915
Work-In-Process 134,532 112,782
Finished Inventory 210,073 122,291
------- -------
$850,550 $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 9,239,479 for the periods ended June 30,
1995 and 1994. 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 June 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 June 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 June 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)
$ 0
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 June 30, 1995, the Company had working capital of $1,827,810 compared
to $1,506,332 at December 31, 1994. The increase in working capital of
$321,478 is primarily the result of cash generated from operations.
At June 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 June 30, 1995
were $1,685,692 as compared to $1,095,795 for the comparable period in the
prior year, an increase of $589,897. Revenues for the six month period
ended June 30, 1995 were up by 60 percent from $2,111,574 in 1994 to
$3,378,989 in 1995. The significant growth in revenue reflects increased
sales of blood pressure measuring devices, both domestic and international.
Also, 1995 revenues include $138,099 in licensing fee revenues as a result
of a licensing agreement finalized in 1994 with a major European
manufacturer of medical equipment.
Cost of product sales decreased as a percent of net product sales from
52 percent in 1994 to 46 percent in 1995. This decrease in cost reflects a
more profitable product mix, primarily in non-invasive blood pressure
equipment.
<PAGE>
Notes to Financial Statements (Continued)
Selling, general and administrative expenses increased to $1,213,471 in
1995 from $981,916 in 1994, an increase of 24 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 $50,000 and $1,000 for the six month
periods ended June 30, 1995 and 1994, respectively, represents state income
taxes and federal alternative minimum taxes.
These factors resulted in net profit for the period ended June 30, 1995
of $438,448, as compared to net loss of $127,798 for the same period in 1994,
an increase of $566,246.
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
August 15,1995 Louis P. Scheps
Date Louis P. Scheps
President and Chief Executive Officer
and Chief Financial Officer
