FORM 10QSB
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, 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 practicable date.
Common Stock, $.004 par value: 9,329,277 shares as of March 31, 1997.
<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 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 March 31,
1997 and the results of its operations and its cash flows for the three
months ended March 31, 1997 and 1996 have been included.
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
<CAPTION>
March 31, 1997 December 31, 1996
(unaudited) (audited)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $1,660,119 $1,606,979
Accounts receivable, net of allowance
for doubtful accounts 1,035,653 1,112,517
Inventory 769,718 759,762
Deferred tax asset 112,000 112,000
Other current assets 65,041 78,229
---------- ---------
Total current assets 3,642,531 3,669,487
---------- ---------
Property and Equipment
Furniture and equipment 956,626 921,509
Leasehold improvements 58,985 47,181
---------- ---------
1,015,611 968,690
Less-Accumulated depreciation
and amortization 805,892 782,680
---------- ---------
209,719 186,010
Other Assets, net of accumulated
amortization 8,199 8,199
---------- ---------
Total assets $3,860,449 $3,863,696
__________ _________
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
<CAPTION>
March 31, 1997 December 31, 1996
(unaudited) (audited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 163,231 $206,644
Income taxes payable 364,656 317,623
Accrued payroll 48,429 255,880
Accrued professional fees 61,166 67,729
Accrued warranty 37,000 45,000
Other accrued expenses 67,197 112,926
---------- --------
Total current liabilities 741,679 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 outstand-
ing in 1997 and 1996. 37,317 37,317
Additional paid-in capital 2,697,364 2,697,364
Retained earnings 384,089 123,213
---------- ---------
Total shareholders' equity 3,118,770 2,857,894
---------- ---------
Total liabilities and
shareholders' equity $ 3,860,449 $3,863,696
__________ _________
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED
MARCH 31, 1997 AND 1996
<CAPTION>
(Unaudited)
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
REVENUES:
Net product sales $1,738,996 $1,674,106
Licensing fees 91,555 82,309
--------- ---------
1,830,551 1,756,415
OPERATING EXPENSES:
Cost of product sales 734,958 788,959
Selling, general and
administrative 564,849 510,777
Research and development 119,221 93,126
--------- ---------
Operating Income 411,523 363,553
--------- ---------
INTEREST INCOME, Net 23,353 9,844
--------- ---------
Income Before Income Taxes 434,876 373,397
PROVISION FOR INCOME TAXES 174,000 85,000
--------- ---------
Net Income 260,876 288,397
_________ _________
PER SHARE DATA:
Net Income per Common Share:
(Note 2) $ .03 $ .03
_________ _________
Weighted Average Number
of Shares Outstanding 9,960,817 9,288,279
_________ _________
<FN>
See Notes To Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 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
three months - - - - -
288,397
Common stock issued 8,800 32 - - 2,167
-
Redemption of
Preferred Stock - - (3,000) (300,000) -
-
--------- ------- ----- -------- ----------
- ------------
Balance
March 31, 1996
(Unaudited) 9,288,277 $37,153 - $ - $2,677,633 $(
494,104)
_________ _______ _____ ________ __________
____________
<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
three months - - - - -
260,876
--------- ------- ----- -------- ----------
- -----------
Balance,
March 31, 1997
(Unaudited) 9,329,277 $37,317 - $ - $2,697,364 $
384,089
_________ _______ _____ ________ __________
____________
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
<CAPTION>
Three Months Ended March 31,
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $260,876 $ 288,397
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 23,212 18,637
(Increase) Decrease in accounts
receivable 76,864 (102,146)
Decrease (Increase) in inventory ( 9,956) 85,181
Decrease in other current assets 13,188 34,469
(Decrease) in accounts payable
and accrued expenses (264,123) (249,452)
(Decrease) in deferred revenue - ( 49,445)
_________ _________
Net cash provided by operating
activities 100,061 25,641
_________ _________
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures ( 46,921) ( 17,587)
_________ _________
Net cash used in investing activities ( 46,921) ( 17,587)
_________ _________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 2,199
Redemption of shares of preferred stock - (300,000)
_________ _________
Net cash used in financing
activities - (297,801)
Net increase (decrease) in cash and
cash equivalents 53,140 (289,747)
_________ _________
CASH AND CASH EQUIVALENTS, at beginning
of period 1,606,979 1,082,003
_________ _________
CASH AND CASH EQUIVALENTS, at end of period $1,660,119 $ 792,256
_________ _________
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ - $ -
Cash paid during the period for income
taxes $ 125,000 $134,175
<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, 1997 and December 31, 1996, inventory consisted of the
following:
March 31, December 31,
1997 1996
Raw Material 525,670 472,761
Work-In-Process 125,541 135,955
Finished Inventory 118,507 151,046
-------- -------
$769,718 $759,762
________ _______
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 life of the lease.
Net Income Per Common Share
Net income per common 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. Weighted average
shares outstanding include the common equivalent shares calculated for the
stock options and warrants 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) Debt
At March 31, 1996, the Company had a line of credit with a Connecticut
bank totalling $500,000. Borrowing under the line of credit bears
interest at the prime rate plus 1.0%. 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.
(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 non-exclusive license to use the Company's blood pressure
technology for a special application, and allowing the exchange of
technical know-how. During February 1997, the Company amended the
original licensing agreement through the year 2000. As part of the
agreement, the Company will receive license fees of $1,500,000 plus
royalties, of which $650,000 has been received through March 31, 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.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
As of March 31, 1997, the Company's cash and cash equivalents
totaled $1,660,000 compared to $1,607,000 at December 31, 1996, and the
Company's working capital totaled $2,878,000 on March 31, 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 March 31, 1997, The Company had a line of credit with a Connecticut
bank totalling $500,000 which expires August 1, 1997. Borrowing under the
line bears interest at the prime rate plus 1.0%. At March 31, 1997, there
were no borrowings outstanding under this line.
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, 1997
were approximately $1,831,000 as compared to revenues of approximately
$1,756,000 for the comparable period in the prior year, a net increase of 4
percent. Increased revenue in 1997 reflects a 10 percent increase in domestic
sales and a 23 percent increase in international sales, respectively, for the
Company's blood pressure monitor and OEM non-invasive blood pressure modules.
However, demand for disposable products was significantly below the prior
period of 1996.
Total cost of product sales decreased as a percent of net product sales
from 47 percent to 42 percent, when comparing 1997 and 1996. The decrease in
cost reflects on-going quality and cost reduction efforts and a more
profitable product mix.
Selling, general administrative, research and development expenses were
approximately $684,000 for the first quarter of 1997 as compared to
approximately $604,000 for the same period of 1996, an increase of $80,000 or
13 percent. This increase was due primarily to additional personnel, both in
the selling and reserch development departments.
The Company's strong cash position enabled all outstanding debt to be
paid in full and resulted in investable cash. The Company currently invests
its excess cash in low-risk, short term interest bearing instruments. The
Company earned approximately $23,000 in 1997 from various investment accounts.
The provision for income taxes of $174,000 and $85,000 for the three
month periods ended March 31, 1997 and 1996, respectively, represents state
and federal income taxes.
These factors and licensing revenues resulted in net income of
approximately $261,000 for the first quarter of 1997, as compared to net
income of approximately $288,000 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, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1,660,119
<SECURITIES> 0
<RECEIVABLES> 1,035,653
<ALLOWANCES> 0
<INVENTORY> 769,718
<CURRENT-ASSETS> 3,642,531
<PP&E> 1,015,611
<DEPRECIATION> 805,892
<TOTAL-ASSETS> 3,860,449
<CURRENT-LIABILITIES> 741,679
<BONDS> 0
<COMMON> 37,317
0
0
<OTHER-SE> 384,089
<TOTAL-LIABILITY-AND-EQUITY> 3,860,449
<SALES> 1,738,996
<TOTAL-REVENUES> 1,830,551
<CGS> 734,958
<TOTAL-COSTS> 684,070
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> ( 23,353)
<INCOME-PRETAX> 434,876
<INCOME-TAX> 174,000
<INCOME-CONTINUING> 260,876
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 260,876
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
