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, 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: 9,329,279 shares as of September 30, 1996.
<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,
1995.
In the opinion of the Company, all adjustments necessary to present
fairly the financial position of CAS Medical Systems, Inc. as of September
30, 1996 and December 31, 1995 and the results of its operations and its
cash flows for the three months and nine months ended September 30, 1996
and 1995 have been included.
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
September 30, 1996 December 31, 1995
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $1,510,281 $1,082,003
Accounts receivable, net of allowance
for doubtful accounts 688,740 733,875
Inventory 794,318 843,304
Other current assets 142,829 74,440
---------- ---------
Total current assets 3,136,168 2,733,622
---------- ---------
Property and Equipment
Furniture and equipment 890,838 837,175
Leasehold improvements 47,181 47,181
----------- ---------
938,019 884,356
Less-Accumulated depreciation
and amortization 761,828 705,712
----------- ---------
176,191 178,644
Other Assets, net of accumulated
amortization 8,199 8,199
---------- ---------
Total assets $3,320,558 $2,920,465
__________ _________
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
September 30, 1996 December 31, 1995
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 364,751 $185,793
Accrued payroll 28,256 179,570
Accrued professional fees 52,479 54,500
Accrued warranty 45,000 45,000
Other accrued expenses 165,814 181,072
Deferred revenues - 44,444
---------- --------
Total current liabilities 656,300 690,379
---------- --------
Shareholders' Equity:
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
Common stock, $.004 par value per share
19,000,000 shares authorized, 9,329,279
and 9,279,479 shares issued and out-
standing in 1996 and 1995, respectively 37,317 37,121
Additional paid-in capital 2,697,364 2,675,466
Accumulated deficit ( 70,423) ( 782,501)
---------- ---------
Total shareholders' equity 2,664,258 2,230,086
---------- ---------
Total liabilities and
shareholders' equity $ 3,320,558 $2,920,465
__________ _________
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF INCOME
FOR THE NINE MONTHS AND THREE MONTHS ENDED
SEPTEMBER 30, 1996 AND 1995
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
(Unaudited) (Unaudited)
Nine Months Ended Three Months
Ended
September 30, September
30,
1996 1995 1996
1995
________________
________________
<S> <C> <C> <C> <C>
REVENUES:
Net product sales $4,945,177 $4,678,997 $1,625,757
$1,438,107
Licensing fees 211,844 203,263 58,645
65,164
--------- --------- ---------
- ---------
5,157,021 4,882,260 $1,684,402
1,503,271
OPERATING EXPENSES:
Cost of product sales 2,166,722 2,139,136 685,089
659,425
Selling, general & administrative 1,542,416 1,735,227 522,885
521,756
Research & development 314,534 296,521 109,464
101,194
--------- --------- ---------
- ---------
Operating Income 1,133,349 711,376 366,964
220,896
--------- ---------- ---------
- ---------
INTEREST, Income 28,729 2,749 9,855
4,781
--------- --------- ---------
- ---------
Income Before Income Taxes 1,162,078 714,125 376,819
225,677
PROVISION FOR INCOME TAXES 450,000 70,000 145,000
20,000
--------- --------- ---------
- ---------
Net Income $ 712,078 $ 644,125 $ 231,819 $
205,677
_________ _________ _________
_________
PER SHARE DATA:
Net Income per Share:
(Note 2) $ 0.07 $ 0.06 $ 0.02
0.02
_________ _________ _________
_________
Weighted Average Number
of Shares Outstanding 10,322,468 9,649,512 10,216,441
10,005,967
_________ _________ __________
_________
<FN>
See Notes To Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<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
stock issued 30,000 120 - - 7,683
-
Redeem preferred
shares - (2) (2,000) (200,000) -
-
--------- ------- ----- -------- ----------
- ------------
Balance
September 30, 1995
(Unaudited) 9,269,479 $37,081 3,000 $300,000 $2,672,406 $(
979,767)
_________ _______ ______ ________ __________
___________
<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
nine months - - - - -
712,078
Additional common
stock issued 49,800 196 - - 21,898
-
Redemption of
Preferred Shares - - (3,000) (300,000) -
-
--------- ------- ----- -------- ----------
- ------------
Balance
September 30,
1996 9,329,279 $37,317 - $ - $2,697,364 $(
70,423)
(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, 1996 AND 1995
(Unaudited)
(Amounts in thousands)
<CAPTION>
Nine Months Ended September 30,
1996 1995
___________ __________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 712,078 $ 644,125
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 56,116 51,775
Decrease in accounts receivable 45,135 16,119
Decrease in inventory 48,986 21,532
(Increase) Decrease in other current
assets ( 68,389) 56,063
Increase in accounts payable
and accrued expenses 10,365 142,766
Increase (Decrease) in deferred revenue ( 44,444) 1,667
Increase, Other - 6,750
_______ _______
Net cash provided by operating activities 759,847 940,797
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures ( 53,663) ( 42,279)
_______ _______
Net cash used in investing activities ( 53,663) ( 42,279)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 22,094 7,801
Repayment of notes payable - (144,411)
Preferred dividends - ( 32,500)
Redemption of shares of preferred stock (300,000) (200,000)
_______ _______
Net cash used in financing activities (277,906) (369,110)
_______ _______
Net increase in cash and cash equivalents 428,278 529,408
CASH AND CASH EQUIVALENTS, at beginning
of period 1,082,003 301,472
_________ _______
CASH AND CASH EQUIVALENTS, at end of period $1,510,281 $830,880
_________ _______
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 1,093 $ 8,206
Cash paid during the period for income taxes $281,025 $ 37,625
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
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 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.
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, 1996 and December 31, 1995, inventory
consisted of the following:
September 30, December 31,
1996 1995
Raw Material $477,299 $505,159
Work-In-Process 159,218 160,215
Finished Inventory 157,801 177,930
------- -------
$794,318 $843,304
_______ _______
Property and Equipment
Property and equipment are stated at cost. Furniture and
equipment are depreciated using the straight-line method over the
estimated useful lives 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 outstanding include the common
equivalent shares calculated for the stock options under the treasury
stock method.
<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.
Note 4. Debt:
At September 30, 1996, 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,
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.
Note 5. 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
September 30, 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.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At September 30, 1996, the Company's cash and cash equivalents
totalled $1,510,000 compared to $1,082,000 at December 31, 1995. The
Company's working capital totalled $2,376,000 on September 30, 1996,
compared to $2,043,000 on December 31, 1995. The Company's increased
cash position is due to earnings for the first nine months of 1996,
partially offset by the redemption of the remaining 3,000 shares of the
Company's Series C preferred stock at $100 per share.
<PAGE>
Notes to Financial Statements (Continued)
At September 30, 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
Net income for the nine month period ended September 30, 1996 was
$712,000 or $0.07 per share, compared to $644,000 or $0.06 per share for
the same period of 1995. Net income for the third quarter of the current
year was $232,000 or $0.02 per share, compared to $206,000 or $0.02 per
share reported for the third quarter of 1995. 1996 results for both the
nine month period and the third quarter include provision for income taxes
of $450,000 and $145,000, compared to $70,000 and $20,000 for 1995,
respectively. As of December 31, 1995, the Company has utilized
substantially all of its operating loss carryforwards.
The company's revenues for the three month period ended September 30,
1996 were approximately $1,684,000 as compared to approximately $1,503,000
for the comparable period in the prior year. Revenues for the nine month
period ended September 30, 1996 reached a record of approximately
$5,157,000, an increase of 6 percent over approximately $4,882,000 for the
comparable period of 1995. The increase in 1996 is due primarily to NIBP
modules of Original Equipment Manufacturers ("OEM") and Klear-Trace
disposable products.
Total cost of product sales decreased as a perentage of net product
sales from 1995 to 1996 from 45.7 percent to 43.8 percent, respectively.
This decrease in cost reflects a more profitable product mix and
manufacturing cost reductions.
Selling, general and administrative expenses decreased to
approximately $1,542,000 for the period ended September 30, 1996 from
approximately $1,735,000 in 1995, a decrease of $193,000. This decrease is
due mainly to a reduction of payroll related cost beginning in the first
quarter of 1996.
The Company currently invests its excess cash in low-risk short term
interest bearing instruments. During the nine month period ended September
30, 1996, the Company earned approximately $29,000 of interest income from
its short term investment, compared to approximately $3,000 for the same
period of 1995.
<PAGE>
Notes to Financial Statements (Continued)
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, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,510,281
<SECURITIES> 0
<RECEIVABLES> 688,740
<ALLOWANCES> 0
<INVENTORY> 794,318
<CURRENT-ASSETS> 3,032,278
<PP&E> 938,019
<DEPRECIATION> 761,828
<TOTAL-ASSETS> 3,320,558
<CURRENT-LIABILITIES> 656,300
<BONDS> 0
<COMMON> 37,317
0
0
<OTHER-SE> ( 70,423)
<TOTAL-LIABILITY-AND-EQUITY> 3,320,558
<SALES> 4,945,177
<TOTAL-REVENUES> 5,157,021
<CGS> 2,166,722
<TOTAL-COSTS> 1,856,950
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (28,729)
<INCOME-PRETAX> 1,162,077
<INCOME-TAX> 450,000
<INCOME-CONTINUING> 712,078
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 712,078
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
