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, 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: 9,311,779 shares as of June 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 June 30,
1996, and the results of its operations and its cash flows for the three
months and six months ended June 30, 1996 and 1995 have been included.
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
June 30, 1996 December 31, 1995
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $1,046,334 $1,082,003
Accounts receivable, net of allowance
for doubtful accounts 821,516 733,875
Inventory 820,433 843,304
Other current assets 17,834 74,440
---------- ---------
Total current assets 2,706,117 2,733,622
---------- ---------
Property and Equipment
Furniture and equipment 865,193 837,175
Leasehold improvements 47,181 47,181
----------- ---------
912,374 884,356
Less-Accumulated depreciation
and amortization 742,297 705,712
----------- ---------
170,077 178,644
Other Assets, net of accumulated
amortization 62,644 8,199
---------- ---------
Total assets $2,938,838 $2,920,465
__________ _________
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
June 30, 1996 December 31, 1995
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 261,572 $185,793
Accrued payroll 19,497 179,570
Accrued professional fees 32,729 54,500
Accrued warranty 45,000 45,000
Other accrued expenses 160,556 181,072
Deferred revenues - 44,444
---------- --------
Total current liabilities 519,354 690,379
---------- --------
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, 9,311,779
and 9,279,479 shares issued and outstand-
ing in 1996 and 1995, respectively 37,247 37,121
Additional paid-in capital 2,684,479 2,675,466
Accumulated deficit (302,242) ( 782,501)
---------- ---------
Total shareholders' equity 2,419,484 2,230,086
---------- ---------
Total liabilities and
shareholders' equity $ 2,938,838 $2,920,465
__________ _________
<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, 1996 AND 1995
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
(Unaudited) (Unaudited)
Six Months Ended Three Months
Ended
June 30, June 30,
1996 1995 1996
1995
________________
________________
<S> <C> <C> <C> <C>
REVENUES:
Net product sales $3,319,420 $3,240,890 $1,645,314
$1,612,058
Licensing fees 153,199 138,099 70,890
73,634
--------- --------- ---------
- ---------
3,472,619 3,378,989 $1,716,204
1,685,692
OPERATING EXPENSES:
Cost of product sales 1,481,633 1,479,711 692,674
724,454
Selling, general & administrative 1,019,531 1,213,471 508,754
571,684
Research & development 205,070 195,327 111,944
98,834
--------- --------- ---------
- ---------
Operating Income 766,385 490,480 402,832
290,720
--------- ---------- ---------
- ---------
INTEREST INCOME (Expense) 18,874 ( 2,032) 9,030
1,275
--------- --------- ---------
- ---------
Income Before Income
Taxes 785,259 488,448 411,862
291,995
PROVISION FOR INCOME TAXES 305,000 50,000 220,000
30,000
--------- --------- ---------
- ---------
Net Income $ 480,259 $ 438,448 $ 191,862 $
261,995
_________ _________ _________
_________
PER SHARE DATA:
Net Income per Share:
(Note 2) $ .05 $ .04 $ .02
.03
_________ _________ _________
_________
Weighted Average Number
of Shares Outstanding 10,467,043 9,310,454 10,477,042
9,637,785
__________ _________ __________
_________
<FN>
See Notes To Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 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
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) _________ _______ ______ ________ __________
___________
<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
six months - - - - -
480,259
Common stock issued 32,300 126 - - 9,013
-
Redemption of
preferred stock - - (3,000) (300,000) -
-
--------- ------- ----- -------- ----------
- ------------
Balance
June 30, 1996 9,311,779 $37,247 - $ - $2,684,479 $
(302,242)
(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, 1996 AND 1995
(Unaudited)
(Amounts in thousands)
<CAPTION>
Six Months Ended June 30,
1996 1995
___________ __________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 480,259 $ 438,448
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 36,585 32,659
(Increase) Decrease in accounts
receivable (87,641) ( 14,720)
Increase in inventory 22,871 ( 39,562)
Decrease in other current assets 56,606 54,618
Increase (decrease) in accounts payable
and accrued expenses (126,581) 150,821
Decrease in deferred revenue ( 44,444) ( 92,222)
Other ( 54,445) 4,499
_______ _______
Net cash (used in) provided by operating
activities 283,210 534,541
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures ( 28,018) ( 36,906)
_______ _______
Net cash used in investing activities ( 28,018) ( 36,906)
_______ _______
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 9,139 -
Repayment of notes payable - (144,411)
Preferred dividends - ( 25,000)
Redemption of shares of preferred stock (300,000) -
_______ _______
Net cash used in financing activities (290,861) (169,411)
_______ _______
Net increase (decrease) in cash and
cash equivalents ( 35,669) 328,224
CASH AND CASH EQUIVALENTS, at beginning
of period 1,082,003 301,472
_________ _______
CASH AND CASH EQUIVALENTS, at end of period $1,046,334 $629,696
_________ _______
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ 163 $ 5,002
Cash paid during the period for income taxes $202,400 $ 43,338
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 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 June 30, 1996 and December 31, 1995, inventory
consisted of the following:
June 30, December 31,
1996 1995
Raw Material $509,578 $505,159
Work-In-Process 104,041 160,215
Finished Inventory 206,814 177,930
------- -------
$820,433 $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.
Reclassifications
Certain reclassifications were made to prior year amounts to
conform the 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.
Note 4. Debt:
At June 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 June 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 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
June 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
agreeement 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, 1996, the Company's cash and cash equivalents totalled
$1,046,324 compared to $1,082,003 at December 31, 1995. The Company's
working capital totaled $2,186,763 on June 30, 1996, compared to
$2,043,243 on December 31, 1995. The Company's decreased cash position
is due primarily to the redemption of the remaining 3,000 shares of the
Company's Series C preferred stock at $100 per share, partially offset
by increased earnings for the first six months of 1996.
<PAGE>
Notes to Financial Statements (Continued)
As of June 30, 1996, the Company had unused line of credit with a
Connecticut bank totalling $500,000. Borrowings under the line bears
interest at the prime 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,
1996 were $1,716,000 as compared to $1,686,000 for the comparable
period in the prior year. Revenues for the six month period ended June
30, 1996 reached a record of $3,473,000, an increase of 3 percent over
$3,379,000 for the comparable period of 1995. The increase for 1996 is
due primarily to OEM sales of non-invasive blood pressure modules and
Klear-Trace disposable products.
Total cost of product sales decreased as a percent of net product
sales from 45.7 percent in 1995 to 44.6 percent in 1996. This decrease
in cost reflects a more profitable product mix and manufacturing cost
reductions.
Selling, general and administrative expenses decreased to
approximately $1,020,000 for the period ended June 30, 1996 from
approximately $1,213,000 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 provision for income taxes of $305,000 and $50,000 for the
six month period ended June 30, 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
$480,000 for the period ended June 30, 1996, as compared to net income
of $438,000 for the comparable period in the prior year.
<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
August 2, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,046,334
<SECURITIES> 0
<RECEIVABLES> 821,516
<ALLOWANCES> 0
<INVENTORY> 820,433
<CURRENT-ASSETS> 2,706,117
<PP&E> 912,374
<DEPRECIATION> 742,297
<TOTAL-ASSETS> 2,884,393
<CURRENT-LIABILITIES> 374,354
<BONDS> 0
<COMMON> 37,247
0
0
<OTHER-SE> 2,527,237
<TOTAL-LIABILITY-AND-EQUITY> 2,884,393
<SALES> 3,319,420
<TOTAL-REVENUES> 3,472,619
<CGS> 1,481,633
<TOTAL-COSTS> 1,019,531
<OTHER-EXPENSES> 205,070
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (18,874)
<INCOME-PRETAX> 785,259
<INCOME-TAX> 160,000
<INCOME-CONTINUING> 625,259
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 625,259
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
