FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended March 31, 1996
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: 9,288,279 shares as of March 31, 1996.
<PAGE>
PART I
ITEM 1. 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 disclosure 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, 1995.
In the opinion of the Company, all adjustments necessary to present
fairly the financial position of CAS Medical Systems, Inc. as of March 31,
1996 and December 31, 1995 and the results of its operations and its cash
flows for the three months ended March 31, 1996 and 1995 have been included.
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS AS OF MARCH 31, 1996 AND DECEMBER 31, 1995
<CAPTION>
March 31, 1996 December 31, 1995
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 792,256 $1,082,003
Accounts receivable, net of allowance
for doubtful accounts 836,021 733,875
Inventory 758,123 843,304
Other current assets 39,971 74,440
---------- ---------
Total current assets 2,426,371 2,733,622
---------- ---------
Property and Equipment
Furniture and equipment 854,762 837,175
Leasehold improvements 47,181 47,181
---------- ---------
901,943 884,356
Less-Accumulated depreciation
and amortization 724,349 705,712
---------- ---------
177,594 178,644
Other Assets, net of accumulated
amortization 8,199 8,199
---------- ---------
Total assets $2,612,164 $2,920,465
__________ _________
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS AS OF MARCH 31, 1996 AND DECEMBER 31, 1995
<CAPTION>
March 31, 1996 December 31, 1995
(unaudited) (audited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 157,437 $185,793
Accrued payroll 19,054 179,570
Accrued professional fees 23,150 54,500
Accrued warranty 45,000 45,000
Other accrued expenses 151,842 181,072
---------- --------
Total current liabilities 396,483 645,935
---------- --------
Deferred revenues (5,001) 44,444
Shareholders' Equity:
Common stock, $.004 par value per share,
19,000,000 shares authorized, 9,288,279
and 9,239,479 shares issued and outstand-
ing in 1996 and 1995, respectively 37,153 37,121
Preferred stock, $.001 par value,
1,000,000 shares authorized, stated at
redemption value, Series C cumulative
preferred stock, zero and 3,000 shares
issued and outstanding in 1996 and 1995,
respectively - 300,000
Additional paid-in capital 2,677,633 2,675,466
Accumulated deficit ( 494,104) ( 782,501)
---------- ---------
Total shareholders' equity 2,220,682 2,230,086
---------- ---------
Total liabilities and
shareholders' equity $ 2,612,164 $2,920,465
__________ _________
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
MARCH 31, 1996 AND 1995
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
1996 1995
<S> <C> <C>
REVENUES:
Net product sales $1,674,106 $1,628,832
Licensing fees 82,309 64,465
--------- ---------
1,756,415 1,693,297
OPERATING EXPENSES:
Cost of product sales 788,959 755,257
Selling, General administrative 510,777 641,787
Research & development 93,126 96,493
--------- ---------
Operating Income 363,553 199,760
--------- ---------
INTEREST/INCOME (EXPENSE), Net 9,844 ( 3,307)
--------- ---------
Income Before Income Taxes 373,397 196,453
PROVISION FOR INCOME TAXES 85,000 20,000
--------- ---------
Net Income 288,397 176,453
_________ _________
PER SHARE DATA:
Net Income per Share:
(Note 2) $ .03 $ .02
_________ _________
Weighted Average Number
of Shares Outstanding 9,288,279 9,239,479
_________ _________
<FN>
See Notes To Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1996
<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
three months
176,453
Preferred Dividends
(12,500)
--------- ------- ----- -------- ----------
- ------------
Balance
March 31, 1995
(Unaudited) 9,239,479 $36,963 5,000 $500,000 $2,664,723
$(1,427,439)
_________ _______ _____ ________ __________
____________
<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,
1995 (Audited) 9,279,479 $37,121 3,000 $300,000 $2,675,466 $(
782,501)
Net income for
three months
288,397
Common stock issued 8,800 32
Redemption of
Preferred stock (3,000) (300,000)
--------- ------- ----- -------- ----------
- ------------
Balance,
March 31, 1996
(Unaudited) 9,288,279 $37,153 0 $ 0 $2,677,633 $(
494,104)
_________ _______ _____ ________ __________
____________
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
<CAPTION>
Three Months Ended March 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $288,397 $ 176,453
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 18,637 16,525
(Increase) Decrease in accounts
receivable (102,146) (172,671)
Decrease (Increase) in inventory 85,181 130,009
Decrease in other current assets 34,469 23,796
(Decrease) in accounts payable
and accrued expenses (249,452) 33,796
(Decrease) in deferred revenue ( 49,445) ( 49,444)
Other - 2,250
_______ _______
Net cash (used in) provided by operating
activities 25,641 160,714
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures ( 17,587) ( 1,298)
_______ _______
Net cash used in investing activities ( 17,587) ( 1,298)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of notes payable - ( 34,893)
Preferred dividends - ( 12,500)
Proceeds from issuance of common stock 2,199 -
Redemption of shares of preferred stock (300,000) -
_______ _______
Net cash used in financing
activities (297,801) ( 47,393)
Net increase (decrease) in cash and
cash equivalents (289,747) 112,023
CASH AND CASH EQUIVALENTS, at beginning
of period 1,082,003 301,472
_________ _______
CASH AND CASH EQUIVALENTS, at end of period $ 792,256 $413,495
_________ _______
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 0 $ 3,390
Cash paid during the period for income
taxes $ 134,175 $ 23,950
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
(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 in the health
care and medical industry. These products are sold by the Company through its
own sales force via distributors and pursuant to Original Equipment
Manufacturer agreements internationally and in the United States.
(2) Summary of Significant Accounting Policies:
Inventory
Inventory is stated at the lower of first-in, first-out (FIFO) cost or
market. At March 31, 1996 and December 31, 1995, inventory consisted of the
following:
March 31, December 31,
1996 1995
Raw Material 403,462 505,159
Work-In-Process 149,630 160,215
Finished Inventory 205,031 177,930
-------- -------
$758,123 $843,304
________ _______
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
lines of the assets which range from two to five years. Leasehold
improvements are amortized over the life of the lease.
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 9,288,279 and 9,239,479 for the periods ended March 31, 1996 and
1995, 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)
(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 accounts 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 December 31, 1995, the Company has utilized substantially
all its net operating loss carryforwards.
(4) Debt
At March 31, 1996, 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%. At March 31, 1996 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.
(5) Long Term Payables to Related Parties:
The 10% note payable due December 1, 1995 was paid in full on May 1,
1995.
(6) License Agreement:
On July 27, 1994, the company entered into a four year licensing
agreement with a major European manufacturer of medical equipment,
canceling and superseding a prior licensing agreement with the
customer. The agreement granted a non-exclusive license to use the
company's blood pressure technology for a special application. As part
of the agreement, the Company will receive $750,000 plus royalties over
the initial four year term, of which $300,000 has been received through
March 31, 1996. 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. License fees from the
agreement are being recognized on a straight line basis over the
contract period.
<PAGE>
Notes to Financial Statements - (Continued)
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As of March 31, 1996, the Company's cash and cash equivalents totaled
$792,256 compared to $1,082,003 at December 31, 1995, and the Company's
working capital totaled $2,029,888 on March 31, 1996, compared to $2,087,687
on December 31, 1995. The company's decreased cash position is due to the
redemption of the remaining 3,000 shares of the Company's Series C preferred
stock at $100 per share.
At March 31, 1996, 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 March 31, 1996
were approximately $1,756,000 as compared to revenues of approximately
$1,693,000 for the comparable period in the prior year, an increase of $63,000
or 4 percent. The increase in revenues reflects a growth in disposable
product by 17 percent for the domestic market and a decline in international
sales by 16 percent, primarily due to a rescheduling of deliveries of
non-invasive blood pressure monitors and modules.
The cost of product sales increased as a percent of net product sales
from 1995 to 1996 from 46 percent to 47 percent, reflecting the effects of a
less profitable product mix.
Selling, general and administrative expenses decreased to approximately
$511,000 for the three month period ended March 31, 1996 from approximately
$642,000 in 1995, a decrease of $131,000. This decrease is due mainly to a
reduction in payroll related cost during the first quarter of 1996.
The provision for income taxes of $85,000 and $20,000 for the three
month period ended March 31, 1996 and 1995, respectively, represents state
income taxes and federal alternative minimum taxes for 1995 and total taxes
for 1996. As of December 31, 1995, the Company has utilized substantially all
of its net operating loss carryforwards.
These factors and licensing revenues resulted in net income of $288,000
for the first quarter of 1996, as compared to net income of $176,000 for the
comparable period in the prior year.
<PAGE>
PART II
ITEM 3 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)
April 24, 1996 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 792,256
<SECURITIES> 0
<RECEIVABLES> 836,021
<ALLOWANCES> 0
<INVENTORY> 758,123
<CURRENT-ASSETS> 2,426,371
<PP&E> 901,943
<DEPRECIATION> 724,349
<TOTAL-ASSETS> 2,612,164
<CURRENT-LIABILITIES> 396,483
<BONDS> 0
<COMMON> 37,153
0
0
<OTHER-SE> ( 494,104)
<TOTAL-LIABILITY-AND-EQUITY> 2,612,164
<SALES> 1,674,106
<TOTAL-REVENUES> 1,756,415
<CGS> 788,959
<TOTAL-COSTS> 603,903
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> ( 9,844)
<INCOME-PRETAX> 373,397
<INCOME-TAX> 85,000
<INCOME-CONTINUING> 288,397
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 288,397
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
