UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended September 30, 1997
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 practical date.
Common Stock, $.004 par value: 9,329,277 shares as of September 30, 1997.
<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-KSB for the year ended December
31, 1996.
In the opinion of the Company, all adjustments necessary to present
fairly the financial position of CAS Medical Systems, Inc. as of September
30, 1997 and December 31, 1996 and the results of its operations and its
cash flows for the three months and nine months ended September 30, 1997
and 1996 have been included.
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
September 30, 1997 December 31, 1996
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $2,229,819 $1,606,979
Accounts receivable, net of allowance
for doubtful accounts 672,894 1,112,517
Inventory 797,252 759,762
Other current assets 144,982 190,229
---------- ---------
Total current assets 3,844,947 3,669,487
---------- ---------
Property and Equipment
Furniture and equipment 957,271 921,509
Leasehold improvements 58,958 47,181
----------- ---------
1,016,256 968,690
Less-Accumulated depreciation
and amortization 852,435 782,680
----------- ---------
163,821 186,010
Other Assets, net of accumulated
amortization 15,699 8,199
---------- ---------
Total assets $4,024,467 $3,863,696
__________ _________
<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, 1997 December 31, 1996
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 137,758 $ 206,644
Income taxes payable 159,981 317,623
Accrued expenses 460,553 481,535
---------- --------
Total current liabilities 758,292 1,005,802
---------- --------
Shareholders' Equity:
Preferred stock, $.001 par value,
1,000,000 shares authorized, stated
at redemption value, Series C
cumulative preferred stock, zero
shares issued and outstanding in
1997 and 1996. - -
Common stock, $.004 par value per share
19,000,000 shares authorized, 9,329,277
shares issued and outstanding in 1997
and 1996. 37,317 37,317
Additional paid-in capital 2,697,364 2,697,364
Retained earnings 531,494 123,213
---------- ---------
Total shareholders' equity 3,266,175 2,857,894
---------- ---------
Total liabilities and
shareholders' equity $ 4,024,467 $3,863,696
__________ _________
<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, 1997 AND 1996
(Unaudited)
(Amounts in thousands, except per share data)
<CAPTION>
(Unaudited) (Unaudited)
Nine Months Ended Three Months
Ended
September 30, September
30,
1997 1996 1997
1996
________________
________________
<S> <C> <C> <C> <C>
REVENUES:
Net product sales $4,646,181 $4,945,177 $1,353,910
$1,625,757
Licensing fees 201,943 211,844 52,939
58,645
--------- --------- ---------
- ---------
4,848,124 5,157,021 $1,406,849
1,684,402
OPERATING EXPENSES:
Cost of product sales 2,008,707 2,166,722 620,049
685,089
Selling, general & administrative 1,843,427 1,542,416 612,068
522,885
Research & development 375,528 314,534 131,819
109,464
--------- --------- ---------
- ---------
Operating Income 620,462 1,133,349 42,913
366,964
--------- ---------- ---------
- ---------
Interest Income, net 59,819 28,729 27,792
9,855
--------- --------- ---------
- ---------
Income Before Provision for
Income Taxes 680,281 1,162,078 70,705
376,819
PROVISION FOR INCOME TAXES 272,000 450,000 26,000
145,000
--------- --------- ---------
- ---------
Net Income $ 408,281 $ 712,078 $ 44,705 $
231,819
_________ _________ _________
_________
PER SHARE DATA:
Net Income per Share:
(Note 2) $ 0.04 $ 0.07 $ -
0.02
_________ _________ _________
_________
Weighted Average Number
of Shares Outstanding 9,961,443 10,322,468 10,019,412
10,216,441
_________ __________ __________
__________
<FN>
See Notes To Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 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,
1995 (Audited) 9,279,477 $37,121 3,000 $300,000 $2,675,466 $(
782,501)
Net income for
nine months - - - - -
712,078
Common stock
issued 49,800 196 - - 21,898
-
Redeem preferred
shares - - (3,000) (300,000) -
-
--------- ------- ----- -------- ----------
- ------------
Balance
September 30, 1996
(Unaudited) 9,329,277 $37,317 - $ - $2,697,364 $(
70,423)
_________ _______ _____ ________ __________
___________
<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,
1996 (Audited) 9,329,277 $37,317 - $ - $2,697,364 $
123,213
Net income for
nine months - - - - -
408,281
--------- ------- ----- -------- ----------
- ------------
Balance
September 30,
1997 9,329,277 $37,317 - $ - $2,697,364 $
531,494
(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, 1997 AND 1996
(Unaudited)
(Amounts in thousands)
<CAPTION>
Nine Months Ended September 30,
1997 1996
___________ __________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 408,281 $ 712,078
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 69,755 56,116
Decrease in accounts receivable 439,623 45,135
(Increase) decrease in inventory ( 37,490) 48,986
Decrease (Increase) in other current
assets 45,247 ( 68,389)
(Decrease) Increase in accounts payable
and accrued expenses (247,510) 10,365
Increase (Decrease) in deferred revenue - ( 44,444
Other ( 7,500) -
_______ _______
Net cash provided by operating activities 670,406 759,847
_______ _______
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures ( 47,566) ( 53,663)
_______ _______
Net cash used in investing activities ( 47,566) ( 53,663)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 22,094
Redemption of shares of preferred stock - (300,000)
_______ _______
Net cash used in financing activities - (277,906)
_______ _______
Net increase in cash and cash equivalents 622,840 428,278
CASH AND CASH EQUIVALENTS, at beginning
of period 1,606,979 1,082,003
_________ _________
CASH AND CASH EQUIVALENTS, at end of period $2,229,819 $1,510,281
_________ _________
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ - $ 1,093
Cash paid during the period for income taxes $427,500 $281,025
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
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, 1997 and December 31, 1996, inventory
consisted of the following:
September 30, December 31,
1997 1996
Raw Material $522,785 $472,761
Work-In-Process 142,515 135,955
Finished Inventory 131,952 151,046
------- -------
$797,252 $759,762
_______ _______
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. Debt:
At September 30, 1997, the Company had a line of credit with a
Connecticut bank totalling $750,000. Borrowings under the line of
credit bear interest at the prime rate plus 1.0%. At September 30,
1997, the amount outstanding under this line was $100,000. 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 4. License Agreement
On July 27, 1994, the Company entered into a four year licensing
agreement with a major European manufacturer of patient monitors,
granting a nonexclusive license to use the Company's blood pressure
technology for a specific application, and allowing the exchange of
technical know-how. During February 1997, the Company amended the
original license agreement through the year 2000. As part of the
agreement, the Company will receive license fees of $1,500,000 plus
royalties, of which $865,000 has been received through September 30,
1997. The manufacturer has the option to extend the license to the
year 2006 and only be liable for royalties. License fees are being
recognized on a straight line basis over the contract period.
Note 5. Distribution Agreement
On October 21, 1997, the Company announced that it has entered
into a definitive agreement with Graphic Controls Corporation of
Buffalo, New York, to partner its distribution efforts with regard to
certain major national purchasing groups. The Company has agreed to
supply Graphic Controls with Klear-Trace (R) Electrodes and other
neonatal specialty products solely for resale by Graphic Controls to
certain major national purchasing groups.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At September 30, 1997, the Company's cash and cash equivalents
totalled $2,230,000 compared to $1,607,000 at December 31, 1996. The
Company's working capital totalled $3,087,000 on September 30, 1997,
compared to $2,664,000 on December 31, 1996. The Company's increased
cash position is due to cash provided by operating activities.
<PAGE>
Notes to Financial Statements (Continued)
At September 30, 1997, the Company had a line of credit with a
Connecticut bank totaling $750,000. Borrowing under the line bears
interest at the prime rate plus 1.0%.
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, 1997 was
$408,000 or $0.04 per share, compared to $712,000 or $0.07 per share for
the same period of 1996. Net income for the third quarter of the current
year was $45,000 compared to $232,000 reported for the third quarter of
1996. The 1997 earnings performance was impacted by softness in sales of
certain of the Company's product lines and the increased expenses by
additional personnel, both in the selling and research development
departments.
The Company's revenues for the three month period ended September 30,
1997 were approximately $1,407,000 as compared to approximately $1,684,000
for the comparable period in the prior year. Revenues for the nine month
period ended September 30, 1997 reached approximately $4,848,000, a
decrease of approximately $309,000 from the comparable period of 1996. The
decrease in 1997 is due primarily by softness in sales of Klear-Trace
disposable products and non-invasive blood pressure modules.
Selling, general and administrative, research and development
expenses were approximately $2,219,000 for the nine month period ended
September 30, 1997 as compared to approximately $1,857,000 for the same
period of 1996, an increase of $362,000 or 19 percent. This increase in
expenses for 1997 is due primarily to additional personnel both in the
selling and research development departments.
The Company currently invests its excess cash in low-risk short term
interest bearing instruments. During the nine month period ended September
30, 1997, the Company earned approximately $60,000 in interest income
compared to approximately $28,000 for the same period of 1996.
<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
November 5, 1997 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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,229,819
<SECURITIES> 0
<RECEIVABLES> 672,894
<ALLOWANCES> 0
<INVENTORY> 797,252
<CURRENT-ASSETS> 3,844,947
<PP&E> 1,016,256
<DEPRECIATION> 852,435
<TOTAL-ASSETS> 4,024,467
<CURRENT-LIABILITIES> 758,292
<BONDS> 0
<COMMON> 37,317
0
0
<OTHER-SE> 531,494
<TOTAL-LIABILITY-AND-EQUITY> 4,024,467
<SALES> 4,646,181
<TOTAL-REVENUES> 4,848,124
<CGS> 2,008,707
<TOTAL-COSTS> 1,843,427
<OTHER-EXPENSES> 375,528
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (59,819)
<INCOME-PRETAX> 680,281
<INCOME-TAX> 272,000
<INCOME-CONTINUING> 408,281
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 408,281
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
