SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-2
Registration Statement Under The Securities Act of 1933
CAS MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1123096
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
21 Business Park Drive
Branford, Connecticut 06405
(203) 488-6056
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
LOUIS P. SCHEPS
President and Chief Executive Officer
CAS MEDICAL SYSTEMS, INC.
21 Business Park Drive, Branford, Connecticut 06405
(203) 488-6056
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
Copies of all communications, including all communications sent to the agent
for service, should be sent to:
MICHAEL GRUNDEI, ESQ.
WIGGIN & DANA
One Century Tower, New Haven, Connecticut 06508
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date of this Registration Statement.
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box: [ X ]
If the registrant elects to deliver its latest annual report to security
holders, or a complete and legible facsimile thereof, pursuant to Item 11
(a)(1) of this form, check the following box. [ X ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ X ]
<PAGE>
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ X ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ X ]
CALCULATION OF REGISTRATION FEE
Proposed Proposed
Title of Amount Maximum Maximum
Securities to be Offering Aggregate Amount of
to be Registered Price Offering Registration
Registered (Shares) Per Share Price Fee
Common Stock
$.004 par value
per share 1,460,000 $0.72 (1) $1,051,200 (1) $318.55
Options to
purchase Common
Stock 96,000 -- (2) $ -- (2) $ -- (2)
Warrants to
purchase Common
Stock 1,364,000 -- (2) $ -- (2) $ -- (2)
TOTAL -- -- $1,051,200 $318.55
(1) The price is estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(c). The offering price and fee
are computed based on the average of the bid and asked prices of the
Common Stock as reported on the "pink sheets" on January 9, 1997.
(2) Amounts included in Common Stock amounts above pursuant to Rule 457(g).
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the
Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.
<PAGE>
SUBJECT TO COMPLETION - DATED JANUARY 15, 1997
PROSPECTUS
1,460,000 Shares Common Stock
CAS MEDICAL SYSTEMS, INC.
This Prospectus relates to 1,460,000 shares (the "Shares") of Common
Stock, par value $0.004 per share (the "Common Stock") of CAS Medical
Systems, Inc. ("CAS" or the "Company") which are being offered for sale by
certain selling stockholders (the "Selling Stockholders"). See "Selling
Stockholders." The Company will not receive any of the proceeds from sales
of the Shares by the Selling Stockholders although the Company will receive
proceeds from the exercise of certain options and warrants which are
exercisable by the Selling Stockholders into the Shares. If all of such
options and warrants are exercised by the Selling Stockholders, the Company
will receive proceeds of $708,545. The Company intends to use such proceeds
for general corporate purposes. The Shares may be offered from time to time
by the Selling Stockholders through ordinary brokerage transactions, in
negotiated transactions or otherwise, at market prices prevailing at the
time of sale or at negotiated prices. See "Plan of Distribution." The
Company's Common Stock is traded on the over-the-counter market, commonly
referred to as the "pink sheets". On January 9, 1997, the closing bid price
of the Common Stock was $0.625 per share.
The Selling Stockholders may be deemed to be "Underwriters" as defined
in the Securities Act of 1933, as amended (the "Securities Act"). If any
broker-dealers are used to effect sales, any commissions paid to
broker-dealers and, if broker-dealers purchase any of the Shares as
principals, any profits received by such broker-dealers on the resale of the
Shares may be deemed to be underwriting discounts or commissions under the
Securities Act. In addition, any profits realized by the Selling
Stockholders may be deemed to be underwriting commissions. All costs,
expenses and fees in connection with the registration of the Shares will be
borne by the Company. Brokerage commissions, if any, attributable to the
sale of the Shares will be borne by the Selling Stockholders.
For information concerning certain factors that should be considered by
prospective investors, see "Risk Factors" beginning on page 3 of this
Prospectus.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Prospectus is January , 1997
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement
becomes effective. This Prospectus shall not constitute an offer to sell or
the solicitation of an offer to buy nor shall there be any sale of these
securities in any state in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such state.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in
accordance therewith, files periodic reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information filed with the
Commission may be inspected and copied at the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and at the
regional offices of the Commission located at 500 West Madison Street,
Chicago, Illinois 60661, and Seven World Trade Center, New York, New York
10048. Copies of such material can be obtained from the Public Reference
Section of the Commission at prescribed rates by writing to the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549. In addition, reports, proxy
materials and other information concerning the Company may be inspected at
the offices of NASDAQ, 1735 K Street N.W., Washington, D.C. 20006. The
Commission maintains a World Wide Web site on the Internet at
http://www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants such as the Company that file
electronically with the Commission.
This Prospectus constitutes a part of a Registration Statement on Form
S-2 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") filed by the Company with the Commission under the
Securities Act. This Prospectus does not contain all of the information set
forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For further
information with respect to the Company and the Shares, reference is hereby
made to the Registration Statement. Statements contained herein concerning
the provisions of any document are not necessarily complete, and in each
instance reference is made to the copy of such document filed as an exhibit
to the Registration Statement or otherwise filed with the Commission. Each
such statement is qualified in its entirety by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which are on file with the Commission (File No.
2-96271-B), are incorporated in this Prospectus by reference and made a part
hereof:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995, as amended by Form 10-K/A.
<PAGE>
(b) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1996.
(c) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1996.
(d) The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended September 30, 1996.
This Prospectus is accompanied by a copy of all of the foregoing
documents incorporated herein by reference and such documents are an integral
part hereof.
RISK FACTORS
In addition to the other information in this Prospectus, the
following factors should be considered carefully in evaluating the Company
and its business before purchasing the Shares offered hereby.
Competition. The Company is engaged in a rapidly evolving field.
Competition from other medical device companies, diversified healthcare
companies and research and academic institutions is intense and expected to
increase. Many companies engaged in the medical device sector have
substantially greater financial and other resources and development
capabilities than the Company and have substantially greater experience in
testing of products, obtaining regulatory approvals and manufacturing and
marketing medical devices. Accordingly, certain of the Company's competitors
may succeed in obtaining approval for products more rapidly than the Company.
Other companies may succeed in developing and commercializing products
earlier than the Company. In addition to competing with universities and
other research institutions in the development of products, technologies and
processes, the Company may compete with other companies in acquiring rights
to products or technologies from universities. There can be no assurance
that the Company will develop products that are more effective or achieve
greater market acceptance than competitive products, or that the Company's
competitors will not succeed in developing products and technologies that are
more effective than those being developed by the Company or that would render
the Company's products and technologies less competitive or obsolete.
Product Liability Exposure. As a manufacturer of medical diagnostic
equipment, the Company could face product liability claims. The Company has
no pending product liability claims to date and maintains product liability
insurance in an aggregate amount of $4 million. There can be no assurance
that such coverage will be adequate to cover any product liability claims
which arise in the future or that product liability insurance will continue
to be available at reasonable prices. Any product liability judgments or
settlements in excess of insurance coverage could have a material adverse
effect on the Company.
<PAGE>
Government Regulation. The Company's business is subject to varying
degrees of governmental regulation in the countries in which it operates. In
the United States, the Company's products are subject to regulation as
medical devices by the United States Food and Drug Administration (the
"FDA"), as well as by other federal and state agencies. These regulations
pertain to the manufacturing, labeling, development and testing of the
Company's devices as well as to the maintenance of required records. An FDA
regulation also requires prompt reporting by all medical device manufacturers
of an event or malfunction involving a medical device where such device
caused or contributed to death or serious injury or is likely to do so.
Federal law provides for several routes by which the FDA reviews medical
devices prior to their entry into the marketplace. Medical products of the
type currently being marketed and under development by the Company are
subject to regulation under the Food, Drug and Cosmetic Act (the "FDA Act")
as amended in the Medical Device Amendments of 1976 (the "1976 Amendments")
and the 1990 "Safe Medical Devices Act", as well as additional regulations
promulgated thereunder. Under the 1976 Amendments, the Company must be a
registered device manufacturer and must comply with Good Manufacturing
Practice Regulations for Medical Devices. In addition, depending upon
product type, the Company must also comply with those regulations governing
the Conduct of Human Investigations, Pre-Market Approval Regulations and
other requirements, as promulgated by the FDA. The FDA is authorized to
inspect a device, its labeling and advertising, and the facilities in which
it is manufactured in order to ensure that the device is not manufactured or
labeled in a manner which could cause it to be injurious to health. Under
the 1976 Amendment and the Safe Medical Device Act, the FDA has adopted
regulations which classify medical devices based upon the degree of
regulation it believes is necessary to assure safety and efficacy. A device
is classified as a Class I, II, or III device. Class I devices are subject
only to general controls. Class II devices, in addition to general controls,
are or will be subject to "performance standards." Most Class II devices are
subject to the 501(k) pre-market notification provision. In addition, some
Class III devices require FDA pre-market approval before they may be marketed
commercially because their safety and effectiveness cannot be assured by the
general controls and performance standards of Class I or II devices. The
Company's products are primarily Class II devices. Several of them have
required FDA notification under Section 510(k) of the FDA Act.
Satisfaction of clearance or approval requirements may take up to several
years or more and varies substantially based upon the type, complexity and
novelty of the product. The effect of government regulation may be to delay
marketing of new products for a considerable or indefinite period of time, to
impose costly procedures upon the Company's activities and to furnish a
competitive advantage to larger companies that compete with the Company.
There can be no assurance that FDA or other regulatory clearance or approval
for any products developed by the Company will be granted on a timely basis,
if at all, or, once granted, that clearances or approvals will not be
withdrawn or other regulatory action taken which might limit the Company's
ability to market its proposed products. Any such delay in obtaining or
failure to obtain such clearances or approvals would adversely affect the
manufacturing and marketing of the Company's products and the ability to
generate additional product revenue.
<PAGE>
In foreign countries, the degree of government regulation affecting the
Company varies considerably among countries, ranging from stringent testing
and approval procedures in certain locations to simple registration
procedures in others, while in some countries there is virtually no
regulation of the sale of the Company's products. In general, the Company
has not encountered material delays or unusual regulatory impediments in
marketing its products internationally. Establishment of uniform regulations
for European Community nations took place on January 1, 1995. The Company
believes it will be subject to a single regulatory scheme for all the
participating countries and has taken the necessary steps to assure ongoing
compliance with these new, more rigorous regulations, including obtaining
International Standards Organization certification for its manufacturing
operations which will allow the Company to market products in Europe with a
single registration applicable to all participating countries.
Challenges to Patents and Proprietary Rights. The Company relies on a
combination of patents, trade secrets, trademarks and non-disclosure
agreements to protect its proprietary rights. There can be no assurance that
patent applications filed by the Company will result in the issuance of
patents or that any patents now or hereafter owned by the Company will afford
protection against competitors which develop similar technology. There can
also be no assurance that the Company's non-disclosure agreements will
provide meaningful protection for the Company's trade secrets or other
proprietary information. Moreover, in the absence of patent protection, the
Company's business may be adversely affected by competitors who independently
develop substantially equivalent or superior technology.
It is possible that the Company may need to acquire licenses to, or to
contest the validity of, issued or pending patents of third parties relating
to the Company's technology or to products presently marketed or under
development by the Company. In addition, there can be no assurance that any
license required under any such patent would be made available to the Company
on acceptable terms, if at all, or that the Company would prevail in any such
contest.
Risks of Technological Obsolescence. The areas in which the Company is
developing, distributing, and/or licensing products involve rapidly
developing technology. Others may develop products which may render products
being developed, distributed or licensed by the Company obsolete or
uneconomical or result in products superior to the Company's products.
Risks Associated with International Sales. Since fiscal 1994, the
Company's international sales have grown faster than its sales to any other
market, and accounted for 33.5% of the Company's total net sales for the 1995
fiscal year. The Company expects that international sales will continue to
constitute a significant portion of its business. Although the Company sells
its products in United States dollars and is not subject to significant
currency risks, an increase in the value of the United States dollar relative
to foreign currencies in the Company's international markets could make the
Company's products less price competitive in such markets.
<PAGE>
Significant Influence of Insiders; Potential Anti-takeover Provisions.
The Company's directors, executive officers and other affiliates beneficially
own approximately 66% of the outstanding Common Stock of the Company. As a
result, such directors, officers and affiliates will be able to significantly
influence the election of all of the Company's directors and otherwise
influence control of the Company's operations. The Company's Board of
Directors is also authorized to issue from time to time, without stockholder
authorization, shares of preferred stock, in one or more designated series or
classes. The Company is also subject to a Delaware statute regulating
business combinations. Any of these provisions could discourage, hinder or
preclude an unsolicited acquisition of the Company and could make it less
likely that stockholders receive a premium for their shares as a result of
any such attempt.
Risks of Low-Priced Stock. Due to the low trading price of the Company's
Common Stock, it could in the future become subject to Rule 15g-9 under the
Exchange Act, which imposes additional sales practice requirements on
broker-dealers that sell "penny stocks". Commission regulations define a
penny stock to be any non-exchange or NASDAQ entity security that has a
market price (as therein defined) of less than $5.00 per share or with an
exercise price of less than $5.00 per share, subject to certain exceptions.
The Company's Common Stock is currently exempted from penny stock regulation
by virtue of the fact that the Company has net tangible assets in excess of
$2 million. For transactions covered by penny stock regulations, a
broker-dealer must make a special suitability determination for the purchaser
and have received the purchaser's written consent to the transaction prior to
sale. For any transaction by a broker-dealer involving a penny stock, unless
exempt, the rules require delivery, prior to any transaction in a penny
stock, of a disclosure schedule prepared by the Commission relating to the
penny stock market. Disclosure is also required to be made about commissions
payable to both the broker-dealer and the registered representative and
current quotations for the Common Stock. Finally, monthly statements are
required to be sent disclosing recent price information for the penny stock
held in the account and information on the limited market in penny stocks.
There can be no assurance that the Company's Common Stock will continue to
qualify for exemption from these restrictions. If the Company's Common Stock
were subject to the rules on penny stocks, it may adversely affect the
ability of broker-dealers to sell the Company's Common Stock and may
adversely affect the ability of purchasers in this offering to resell any of
the Common Stock acquired hereby in the secondary market.
Effect of Current Offering on Stock Price. Sales of a substantial
number of shares of the Company's Common Stock in the public market
originally issued pursuant to options or warrants could adversely affect the
market price of the Common Stock and may also adversely affect the Company's
ability to raise additional capital. 1,460,000 shares of Common Stock will
have been registered hereby under the Securities Act for resale to the
public. The Common Stock registered hereby constitutes approximately 13.5%
of the Company's Common Stock. Historically, the Common Stock has been
thinly traded. This low trading volume may have had a significant effect on
the market price of the Common Stock, which may not be indicative of the
market price in a more liquid market.
<PAGE>
Dependence on Key Personnel. The Company believes that its future
success will depend to a significant extent on the efforts and abilities of
its senior management, in particular Louis P. Scheps, its President and Chief
Executive Officer and Myron L. Cohen, its Executive Vice President. The loss
of the services of Mr. Scheps or Dr. Cohen could have a material adverse
effect on the Company.
Limitation of Liability of Officers and Directors. The Company's
Certificate of Incorporation provides that officers and directors of the
Company will not be personally liable to the Company or its stockholders for
monetary damages resulting from breaches of duty owed to the Company or its
stockholders, including breaches which constitute negligence in the
performance of their duties. As a result, the rights of the Company and its
stockholders to obtain monetary damages for acts or omissions of officers and
directors will be more limited than they would be in the absence of such
provisions.
No Anticipated Dividends. The Company has not paid cash dividends on
its Common Stock since inception, and at this time does not anticipate that
it will pay cash dividends in the foreseeable future.
THE COMPANY
The Company was organized in 1984 and is engaged in the business of
developing, manufacturing and distributing diagnostic equipment and medical
products for use by adults and children in many areas of the health care
industry. The Company has developed and is manufacturing a full line of
non-invasive blood pressure monitors, blood pressure cuffs for both adult and
neonatal patients, silver/silver chloride electrodes for neonatal hospital
intensive care units, and a line of disposable products for neonatal use.
These products are being sold by the Company directly through its own sales
force via distributors and pursuant to original equipment manufacturer (OEM)
agreements in Europe and the United States. The Company has agreements to
supply its blood pressure monitors, cuffs and electrodes to companies for
distribution in major segments of the international market. The Company also
has OEM agreements to supply custom versions of its blood pressure measuring
technology in the form of plug-in modules for patient monitoring systems.
The Company has several other products in various stages of development which
it believes are applicable to both adult and neonatal/pediatric medicine.
The Company's executive offices are located at 21 Business Park Drive,
Branford, Connecticut, 06405 and its telephone number is (203) 488-6056.
RECENT DEVELOPMENTS
Board of Directors
The Board of Directors was recently reduced by two members as a result
of the resignation of Jay M. Haft in October 1996 and the death of Stanley D.
Josephson in July 1996.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information as of December 15,
1996 (except as otherwise indicated) and as adjusted to reflect the sale of
the Common Stock in the offering, as to the security ownership of the Selling
Stockholders. Except as set forth below, the addresses of each of the
Selling Stockholders is c/o CAS Medical Systems, Inc., 21 Business Park
Drive, Branford, CT 06405.
<TABLE>
<CAPTION>
Percentage
Shares of Shares Shares of of Common
Common Stock of Common Stock Stock
Beneficially Stock Owned Beneficially
Owned Prior Being After Owned after
Name to Offering Sold Offering the Offering
<C> <C> <C> <C>
Louis P. Scheps (1) 958,325 (2) 900,000 (3) 433,325 4.7%
Myron L. Cohen, Ph.D.(4) 947,953 (5) 15,000 (6) 940,453 10.1%
Estate of Stanley D.
Josephson (7) 167,484 (8) 75,000 (9) 92,484
Lawrence S. Burstein
(10) 371,063 (11) 150,000 (12) 221,063 2.4%
Jerome Baron (13) 2,056,200 (14) 200,000 (15) 1,856,200 19.9%
Jay M. Haft (16) 1,071,575 (17) 60,000 (18) 1,011,575 10.9%
Saul S. Milles, M.D.
(19) 60,000 (20) 60,000 (20) 0 -
</TABLE>
(1) Mr. Scheps is President and Chief Executive Officer and a Director of
the Company.
(2) Includes warrants to purchase 444,000 shares and options to purchase
81,000 shares, each exercisable within 60 days.
(3) Consists of Common Stock underlying warrants to purchase 819,000
shares (including warrants to purchase 375,000 shares not exercisable
within 60 days) and Common Stock underlying options to purchase
81,000 shares.
(4) Dr. Cohen is Executive Vice President and a Director of the Company.
(5) Includes options to purchase 7,500 shares exercisable within 60 days.
(6) Consists of Common Stock underlying options to purchase 15,000 shares
(including options to purchase 7,500 shares not exercisable within 60
days).
(7) Mr. Josephson was a Director of the Company prior to his death in
July 1996.
<PAGE>
(8) Includes warrants to purchase 75,000 shares exercisable within 60
days.
(9) Consists of Common Stock underling warrants to purchase 75,000 shares.
(10) Mr. Burstein is a Director of the Company.
(11) Includes warrants to purchase 150,000 shares exercisable within 60
days. Also includes 92,500 shares held in Mr. Burstein's IRA
rollover account and 9,375 shares owned directly and indirectly by a
family member.
(12) Consists of Common Stock underlying warrants to purchase 150,000
shares.
(13) Mr. Baron is a Director of the Company.
(14) Includes warrants to purchase 200,000 shares exercisable within 60
days. Also includes 1,832,000 shares owned by Haulbowline Ltd., as to
which shares Mr. Baron has voting and dispositive power.
(15) Consists of Common Stock underlying warrants to purchase 200,000
shares.
(16) Mr. Haft was a Director of the Company until October 1996.
(17) Includes warrants to purchase 60,000 shares exercisable within 60
days. Also includes 980,575 shares owned by Venture Capital
Associates, Ltd., a limited partnership of which the general
partner is a corporation in which Mr. Haft is a controlling
shareholder.
(18) Consists of Common Stock underlying warrants to purchase 60,000
shares.
(19) Dr. Milles is a Director of the Company.
(20) Consists of Common Stock underlying warrants to purchase 60,000
shares.
DESCRIPTION OF CAPITAL STOCK
The Company is authorized to issue up to 19,000,000 shares of Common
Stock, $.004 par value, 9,329,279 shares of which were issued and outstanding
at November 15, 1996, and 1,000,000 shares of Preferred Stock, $.001 par
value, none of which are issued and outstanding at November 15, 1996.
Common Stock
Holders of Common Stock of the Company are entitled to one vote per
share on all matters submitted to a vote of the stockholders, including the
election of directors, and except as otherwise required by law or as provided
in any resolution adopted by the Board of Directors with respect to any
series of Preferred Stock, the holders of such shares will exclusively
possess all voting power. The Company's certificate of incorporation does
not provide for cumulative voting for the election of directors. Subject to
the preferential rights of any outstanding series of Preferred Stock, the
holders of Common Stock will be entitled to such dividends as may be declared
from time to time by the Board of Directors from funds legally available
therefor, and will be entitled to receive pro rata all assets of the Company
available for distribution to such holders upon liquidation. No shares of
the Common Stock have any preemptive, redemption or conversion rights or the
benefits of any sinking fund. All outstanding shares of Common Stock are
validly issued, fully paid and nonassessable.
<PAGE>
PLAN OF DISTRIBUTION
The Company is registering the Shares on behalf of the Selling
Stockholders. All costs, expenses and fees in connection with the
registration of the Shares offered hereby will be borne by the Company.
Brokerage commissions, if any, attributable to the sale of Shares will be
borne by the Selling Stockholders.
Sales of Shares may be effected from time to time in transactions (which
may include block transactions) on the NASDAQ OTC Bulletin Board, in
negotiated transactions, or a combination of such methods of sale, at fixed
prices, at market prices prevailing at the time of sale, or at negotiated
prices. The Selling Stockholders have advised the Company that they have not
entered into any agreements, understandings or arrangements with any
underwriters or broker-dealers regarding the sale of their securities. The
Selling Stockholders may effect such transactions by selling Shares directly
to purchasers or to or through broker-dealers which may act as agents or
principals. Such broker-dealers may receive compensation in the form of
discounts, concessions, or commissions from the Selling Stockholder and/or
the purchasers of Shares for whom such broker-dealers may act as agents or to
whom they sell as principal, or both (which compensation as to a particular
broker-dealer might be in excess of customary commissions). The Selling
Stockholders and any broker-dealers that act in connection with the sale of
the Shares might be deemed to be "underwriters" within the meaning of Section
2(11) of the Securities Act and any commission received by them and any
profit on the resale of the Shares as principal might be deemed to be
underwriting discounts and commissions under the Securities Act. The Selling
Stockholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the shares against certain
liabilities, including liabilities arising under the Securities Act.
Liabilities under the federal securities laws cannot be waived.
Because the Selling Stockholders may be deemed to be "underwriters"
within the meaning of Section 2(11) of the Securities Act, the Selling
Stockholders will be subject to prospectus delivery requirements under the
Securities Act. Furthermore, in the event of a "distribution" of the shares,
such Selling Stockholder, any selling broker or dealer and any "affiliated
purchasers" may be subject to Rule 10b-6 under the Exchange Act, which Rule
would prohibit, with certain exceptions, any such person from bidding for or
purchasing any security which is the subject of such distribution until his
participation in that distribution is completed. In addition, Rule 10b-7
under the Exchange Act prohibits any "stabilizing bid" or "stabilizing
purchase" for the purpose of pegging, fixing or stabilizing the price of
Common Stock in connection with this offering.
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the Shares offered
hereby have been passed upon for the Company by Wiggin & Dana, New Haven,
Connecticut.
EXPERTS
The financial statements and schedules incorporated by reference in this
prospectus and elsewhere in the registration statement have been audited by
Arthur Andersen LLP, independent public accountants, as indicated in their
reports with respect thereto, and are incorporated by reference herein in
reliance upon the authority of said firm as experts in accounting and
auditing in giving said reports.
No person is authorized in connection with any offering made hereby to
give any information or to make any representation not contained in this
Prospectus, and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company. This Prospectus
does not constitute an offer to sell or a solicitation of an offer to buy any
security other than the Shares offered hereby, nor does it constitute an
offer to sell or a solicitation of an offer to buy any of the securities
offered hereby to any person in any jurisdiction in which it is unlawful to
make such an offer or solicitation. Neither the delivery of this Prospectus
nor any sale made hereunder shall under any circumstances create any
implication that the information contained herein is correct as of any date
subsequent to the date hereof.
1,460,000 Shares
Common Stock
TABLE OF CONTENTS
Page CAS MEDICAL SYSTEMS, INC.
Available Information . . . .2
Incorporation of Certain
Documents by Reference. . . .2
Risk Factors . . . . . . . . .3
The Company. . . . . . . . . .7
Recent Developments. . . . . .7 PROSPECTUS
Selling Stockholders . . . . .8
Description of Capital Stock .9
Plan of Distribution . . . . 10
Legal Matters . . . . . . . 11 January , 1997
Experts . . . . . . . . . . 11
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. Other Expenses of Issuance and Distribution.
The following is an itemized statement of the estimated amounts of all
expenses payable by the Registrant in connection with the registration of the
Shares:
Registration Fee--Securities and Exchange Commission. . . $ 318.55
Legal fees and expenses . . . . . . . . . . . . . . . . . $10,000.00*
Accounting fees and expenses. . . . . . . . . . . . . . $ 5,000.00*
Printing and engraving expenses . . . . . . . . . . . . . $ 5,000.00*
Miscellaneous . . . . . . . . . . . . . . . . . . . . . . $ 681.45*
Total. . . . . . . . . . . . . . . . . . . . . . . .$ 21,000.00*
*estimate
ITEM 15. Indemnification of Directors and Officers.
Section 145 of the General Corporation Law of the State of Delaware
permits indemnification of directors, officers and employees of a corporation
under certain conditions and subject to certain limitations. The Company's
Certificate of Incorporation states that the Company shall indemnify officers
and directors to the full extent permitted by the laws of the State of
Delaware.
ITEM 16. Exhibits.
5 - Opinion of Wiggin & Dana*
13.1 - Form 10-K for Year ended December 31, 1995
13.2 - Form 10-K/A for Year ended December 31, 1995
13.3 - Form 10-Q for Quarter ended March 31, 1996
13.4 - Form 10-Q for Quarter ended June 30, 1996
13.5 - Form 10-Q for Quarter ended September 30, 1996
23.1 - Consent of Arthur Andersen LLP
23.2 - Consent of Wiggin & Dana (included in Exhibit 5)*
24 - Power of Attorney (included on signature page)
* To be filed by amendment.
<PAGE>
ITEM 17. Undertakings.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement;
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply
if the information required to be included in a post-effective amendment by
those paragraphs is contained in periodic reports filed by the registrant
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination
of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of
the registrant's annual report pursuant to Section 13(a) or Section 15(d) of
the Securities Exchange Act of 1934 that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(h) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
under Item 15 above, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the successful
<PAGE>
defense of any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
(i) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the registrant certifies that it has reasonable grounds to believe that it
meets all of the requirements for filing on Form S-2 and has duly caused this
registration statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Town of Branford, State of Connecticut on
January 14, 1997.
CAS MEDICAL SYSTEMS, INC.
(Registrant)
By:/s/ Louis P. Scheps
Name: Louis P. Scheps
Title: President and Chief Executive Officer
POWER OF ATTORNEY
KNOWN ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Louis P. Scheps and Myron L. Cohen his
true and lawful attorneys-in-fact and agents, each acting alone, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any or all amendments to this
Registration Statement, including post-effective amendments, and to file the
same, with all exhibits thereto, and all documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as he
might or could do in person, and hereby ratifies and confirms all that said
attorneys-in-fact and agents, each acting alone, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
this registration statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
/s/ Myron L. Cohen, Ph.D. Chairman of the Board January 14, 1997
Mryon L. Cohen, Ph.D. and Executive
Vice President
/s/ Louis P. Scheps President, Chief January 14, 1997
Louis P. Scheps Executive Officer
and Director
(Principal Executive,
Financial and Accounting Officer)
/s/ Lawrence S. Burstein Director January 14, 1997
Lawrence S. Burstein
/s/ Jerome Baron Director January 14, 1997
Jerome Baron
/s/ Saul S. Milles, M.D. Director January 14, 1997
Saul S. Milles, M.D.
EXHIBIT 13.1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1995
Commission File Number 2-96271-B
CAS MEDICAL SYSTEMS, INC.
(Exact name of Registrant as specified in 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 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.
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.004 par value Preferred Stock, $.001 par value
The aggregate market value of the Common Stock held by non-affiliates of
the registrant was $7,162,996 on December 31, 1995.
The registrant had 9,279,479 shares of Common Stock outstanding as of
December 31, 1995.
<PAGE>
PART I
ITEM 1. BUSINESS
The Company
CAS Medical Systems, Inc. (CAS) was organized in 1984 primarily to serve
neonatal and pediatric units in hospitals. Today, CAS is engaged in the
business of developing, manufacturing and distributing diagnostic equipment
and medical products for use by adults and children in many areas of the
health care industry.
The Company has developed and is manufacturing a full line of non-invasive
blood pressure monitors, blood pressure cuffs for both adult and neonatal
patients, silver/silver chloride electrodes for neonatal hospital intensive
care units, and a line of disposable products for neonatal use. These
products are being sold by the Company directly through its own sales force
via distributors and pursuant to original equipment manufacturer (OEM)
agreements in Europe and the United States. The Company has agreements to
supply its blood pressure monitors, cuffs and electrodes to companies for
distribution in major segments of the international market. The Company also
has OEM agreements to supply custom versions of its blood pressure measuring
technology in the form of plug-in modules for patient monitoring systems.
The Company has several other products in various stages of development which
it believes are applicable to both adult and neonatal/pediatric medicine.
Narrative Description of Business
Principal Products and Services
OscilloMate Blood Pressure Monitors
The Company manufactures a complete line of state-of-the-art blood pressure
monitors which it has developed. Distribution is to the hospital and
professional markets through its sales force and distributors, and through
international distributors and OEM agreements.
Pedisphyg, Safe-Cuff, Tuff-Cuff and PAPERCUFF Blood Pressure Cuffs
The Company manufactures and sells complete lines of disposable and multi-use
blood pressure cuffs for hospital use. These cuffs are based on design
criteria developed from scientific studies to ensure the highest degree of
accuracy. They can be used with all of the blood pressure monitors currently
available in hospitals, thus permitting hospitals to standardize with one
company for blood pressure cuffs.
Klear-Trace Electrodes
The Company manufactures and sells prewired, X-ray translucent
electrocardiographic electrodes. They utilize a conductive solid-gel
adhesive that allows them to remain on the patient for extended periods of
time without causing skin irritation.
<PAGE>
NeoGuard Reflectors, Klear-Temp Disposable Temperature Probes
The Company manufactures and sells thermal reflectors to shield temperature
probes while in use within radiant warmers. They perform an important role
in maintaining the proper thermal environment for neonates while assuring
that no skin irritation takes place. Klear-Temp disposable skin temperature
probes are designed to be a standard replacement part in all incubators and
radiant warmers.
NeoGuard Limboard Arm Boards
The Company manufactures and sells a line of neonatal arm boards used to
immobilize and support intravenous sites with minimal patient skin trauma.
The electrodes, arm boards, and reflectors utilize a polymeric solid gel
adhesive to minimize damage to neonatal skin.
Sales and Marketing
The Company conducts its sales in the domestic hospital market by means of
exclusive distributors managed by full time sales managers. Sales to
emergency medical services are managed nationwide by a single company sales
manager. OEM sales and international sales are conducted by personnel
located within the Company.
Domestic sales are conducted by 25 distributors across the country each of
whom has exclusive sales rights in a limited geographic area.
The Company has sales agreements with several distributors internationally.
These agreements provide for distribution of products within an assigned
territory. Other agreements are being negotiated to allow for expanded
international distribution.
The Company sells its non-invasive blood pressure technology, in the form of
sub-assemblies to be joined to multi-parameter hospital monitors, to several
firms operating on both a domestic and international basis. The Company is
in the process of negotiating other agreements for the use of its technology
as components in other medical monitoring systems.
Financial Information Relating to Sales
Year Ended December 31,
1995 1994 1993
Domestic Sales $4,273,483 $3,431,374 $3,529,335
Export (Including
Licensing Revenues) 2,155,748 1,463,974 1,516,524
$6,429,231 $4,895,348 $5,045,859
<PAGE>
Competition
The Company competes in the hospital market where there are many suppliers
with greater financial and personnel resources with full service commodity
products and dedicated selling capability. Neonatal and pediatric intensive
care units are such areas. Here, the Company has been supplying
competitively priced, uniquely designed products responsive to this market in
which no major company currently focuses its total effort.
In both the hospital and emergency medical service markets, the Company's
line of non-invasive blood pressure monitoring equipment has significant
advantages over competitive products. It is compact, portable, lightweight
and user-friendly. The monitors maintain a high professional standard of
accuracy and quality in demanding environments such as those encountered in
hospital and transport situations.
With respect to all of its products, the Company competes on the basis of
price, features, product quality, promptness of delivery and customer service.
Customers
During 1995, 1994 and 1993, the Company had sales to one customer which in
the aggregate accounted for approximately 12%, 13% and 13% of sales,
respectively.
Research and Development
In 1995, 1994 and 1993, the Company spent approximately $405,000, $335,000
and $329,000, respectively, on activities relating to the development of new
products and the improvement of existing products.
The Company is building on its base of non-invasive blood pressure technology
by developing a family of next-generation patient-monitoring equipment.
Employees
As of December 31, 1995, the Company had 46 employees of whom 44 were
full-time. The Company has no collective bargaining agreements and believes
that relations with its employees are good. The Company maintains employee
benefit plans providing for disability income, life insurance and medical and
hospitalization coverage. The Company sponsors a 401(K) benefit plan for its
employees which generally allows participants to make contributions by salary
deductions up to allowable internal revenue service limits on tax-deferred
basis and discretionary contributions by the Company. The Company did make
discretionary contributions in 1995.
Government Regulation
Medical products of the type currently being marketed and under development
by the Company are subject to regulation under the Food, Drug and Cosmetic
Act (the "FDA Act") as amended in the Medical Device Amendments of 1976 (the
"1976 Amendments") and the 1990 "Safe Medical Devices Act", as well as
additional regulations promulgated thereto. Under the 1976 Amendments, the
Company must be a registered device manufacturer and must comply with Good
Manufacturing Practice Regulations for Medical Devices.
<PAGE>
In addition, depending upon product type, the Company must also comply with
those regulations governing the Conduct of Human Investigations, Pre-Market
Approval Regulations and other requirements, as promulgated by the Food and
Drug Administration (FDA). The FDA is authorized to inspect a device, its
labeling and advertising, and the facilities in which it is manufactured in
order to ensure that the device is not manufactured or labeled in a manner
which could cause it to be injurious to health.
Under the 1976 Amendment and the Safe Medical Device Act, the FDA has adopted
regulations which classify medical devices based upon the degree of
regulation it believes is necessary to assure safety and efficacy. A device
is classified as a Class I, II, or III device. Class I devices are subject
only to general controls. Class II devices, in addition to general controls,
are or will be subject to "performance standards." Most devices are subject
to the 501(K) pre-market notification provision. In addition, some Class III
devices require FDA pre-market approval before they may be marketed
commercially because their safety and effectiveness cannot be assured by the
general controls and performance standards of Class I or II devices. The
Company's products are mostly Class II devices. Several of them have
required FDA notification under Section 510(k) of the FDA Act.
The FDA has the authority to, among other things: deny marketing approval
until all regulatory protocols are deemed acceptable; halt the shipment of
defective products; and seize defective products sold to customers. Adverse
publicity from the FDA, if any, could have a negative impact upon sales. To
date, the Company has had no FDA oversight problems, and none are pending to
its knowledge.
Manufacturing and Quality Assurance
The Company assembles its products at its facility. The various components
for the products, which include plastic sheeting, plastic moldings, wire,
semi-conductor circuits, electronic and pneumatic components and power
supplies are obtained from outside vendors. The Company does not anticipate
any difficulties in obtaining the components necessary to manufacture its
products.
Quality control procedures are performed by the Company at its facility and
occasionally at its suppliers' facilities to standards set forth in the "Good
Manufacturing Practices". These procedures include the inspection of
components and full testing of finished goods. The Company has a controlled
clean environment where the final assembly of single-patient-use products is
conducted. The Company has charted a course to becoming certified to ISO
9000 and relevent European Union Directives in order to broaden European
markets and make domestic quality system improvements.
Backlog
The Company's practice is to ship its products upon receipt of a customer's
order or pursuant to customer-requested ship dates. On December 31, 1995,
the Company had a backlog of orders from customers for products with
requested ship dates in 1996 totaling approximately $880,000, deliverable
throughout 1996, as compared to $691,000 as of December 31, 1994. During the
first quarter of 1996, the Company will fulfill approximately $273,000 of
this backlog.
<PAGE>
Trademarks, Patents and Copyrights
Certificates of Registration have been issued to the Company by the United
States Department of Commerce Patent and Trademark Office for the following
marks: CAS (Registered trademark), Pedisphyg (Registered trademark),
OscilloMate (Registered trademark), NeoGuard (Registered trademark),
Tuff-Cuff (Registered trademark), Limboard (Registered trademark),
Klear-Trace (Registered trademark), and the heart shaped mark for use as a
thermal reflector and the Company's corporate logo. The Company continues to
use the PAPERCUFF (Trademark) and Safe-Cuff (Trademark) trademark.
The Company filed a patent application on behalf of an employee covering the
method of operation of its blood pressure measurement monitor. This patent
was issued under Patent Number 4,796,184 and assigned to the Company. The
Company also holds Patent Number 4,966,992 which covers the design of a blood
pressure monitor for use with hyperbaric chambers. The Company holds Patent
Number 5,101,830 which covers the design of a blood pressure cuff.
The Company has copyright protection for the software used in its blood
pressure monitors.
ITEM 2. PROPERTIES
The Company has leased new facilities comprising approximately 17,500 square
feet of office, laboratory and assembly space, including a controlled clean
environment, located at 21 Business Park Drive, Branford, Connecticut 06405.
Minimum annual rentals under the Company's lease agreement are:
1996 $101,000
1997 $104,000
1998 $110,000
These amounts are in addition to the Company's share of increases in real
estate taxes and certain utility costs.
ITEM 3. LEGAL PROCEEDINGS
No material legal proceedings involving the Company are pending at this time.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
(a) The Common Stock of the Company is traded over-the-counter.
The following table shows the high and low bid quotations for the
Company's Common Stock for each quarterly period for the last three
years. These prices do not represent actual transactions and do not
include retail mark-ups, mark-downs or commissions.
Period Ended High Low
March 31, 1993 5/8 1/2
June 30, 1993 3/8 1/4
September 30, 1993 5/16 1/8
December 31, 1993 1/4 1/8
March 31, 1994 3/8 1/4
June 30, 1994 5/16 1/4
September 30, 1994 1/4 1/8
December 31, 1994 1/4 3/16
March 31, 1995 9/32 1/8
June 30, 1995 19/32 9/32
September 30, 1995 15/32 19/32
December 31, 1995 1 5/8 15/16
(b) The following table sets forth the approximate number of
holders of record of Common Stock of the Company on December 31,
1995.
Title of Class Number of Shareholders
Common Stock, $.004 par value 400
Preferred Stock, $.001 par value 1
(c) No cash dividends have been declared on the Company's common
stock for 1995, 1994 and 1993.
(d) Cash dividends were declared and paid during 1995, 1994 and
1993, in the amount of $40,000, $50,000 and $50,000 respectively, on
the Series C cumulative preferred stock.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL INFORMATION
<CAPTION>
Year Ended December 31,
1995 1994 1993 1992
----------------------------------------------
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net revenues $6,429,231 $4,895,348 $5,045,859 $4,464,618
Operating income 920,511 351,276 526,069 313,562
Interest income
(expense), net 13,380 ( 29,869) ( 33,721) ( 60,775)
Net income 848,891 301,407 475,348 241,787
Net income per share (1) .08 .03 .05 .02
BALANCE SHEET DATA:
Working capital 2,087,687 1,506,332 1,400,198 1,204,886
Total assets 2,920,465 2,178,284 2,314,660 2,186,944
Deferred revenue 44,444 92,222 160,000 120,000
Long-term liabilities 0 0 144,244 389,354
Shareholders' equity 2,230,086 1,610,294 1,358,887 933,539
</TABLE>
(1) Based on weighted average number of shares outstanding during the years.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition, Liquidity and Capital Resources
As of December 31, 1995, the Company's cash and cash equivalents totaled
$1,082,003, compared to $301,472 at December 31, 1994 (an increase of 359%),
and the Company's working capital totaled $2,087,687 on December 31, 1995,
compared to $1,506,332 on December 31, 1994. The Company's increased cash
position is due to cash provided by operating activities in 1995. As a
result of improved liquidity in 1995, the Company was able to internally
finance approximately $70,000 of property and equipment additions and paid
the outstanding debt in full.
The Company's working capital ratio improved from 4.17 at December 31,
1994 to 4.23 at December 31, 1995.
At December 31, 1994, the Company had a line of credit with a Connecticut
bank totaling $500,000. On August 1, 1995, this line was extended through
August 1, 1996. Borrowings under the line bears interest at prime plus 1.5%.
At December 31, 1995, there were no borrowings outstanding under this line.
On July 27, 1994, the Company entered into a new four year licensing
agreement with a major 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. Under
this agreement, the Company will receive $750,000 over the initial four year
<PAGE>
term, plus royalties. 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. This agreement replaces a prior
licensing agreement with the manufacturer. License fees are being recognized
on a straight line basis over the contract period.
The Company believes that existing funds together with internally
generated funds from 1996 operations and its existing line of credit
arrangement will provide the Company with adequate liquidity and capital
resources to meet its 1996 financial requirements.
Results of Operations
1995 Compared to 1994
The Company earned $849,000 ($.08 per common share) in 1995, compared to
$301,000 ($.03 per common share) in 1994. The 1995 earnings performance was
favorably impacted by incremental gross margin generated by higher sales
volume and an increase in licensing fee revenues partially offset by
additional sales support costs.
The Company's revenues increased by 31 percent to approximately
$6,429,000 for 1995 compared to revenues of approximately $4,895,000 for the
previous year. Sales of NIBP modules to Original Equipment Manufacturers
("OEM") who utilize the Company's technology in their systems, were
responsible for approximately $862,000 of the growth in overall sales
revenues. Sales of our blood pressure monitors were 33 percent higher than
the same period in 1994. The Company expects continued improvement in
overall sales next year.
Total cost of product sales decreased as a percentage of net product
sales from 49.5 percent to 45.9 percent when comparing the current year to
1994. The decrease in cost reflects an on-going quality and cost reduction
efforts and a more profitable product mix.
Research and development expenses increased by 21 percent during 1995 to
approximately $405,000 compared to $335,000 for the same period of 1994,
primarily due to development cost of new products.
Selling, general and administrative expenses increased to approximately
$2,272,000 for the year ended December 31, 1995 compared to the prior year of
approximately $1,898,000, an increase of 20 percent. However, as a
percentage of net revenues, 1995 decreased to 35 percent from 39 percent in
1994. The increase in expenses was primarily due to salaries and related
expenses, legal fees for patent applications for new product and
telemarketing expenses for various products.
The Company's strong cash position enabled all outstanding debt to be
paid in full and resulted in excess cash. The Company earned approximately
$19,000 from various investment accounts.
<PAGE>
During 1995, the Company utilized approximately $874,000 of net operating
loss carryforwards to reduce its provision for taxes for financial reporting
purposes. The tax benefit associated with this utilization of net operating
loss carryforwards was approximately $297,000 or $.03 per common share. As
of December 31, 1995, the company has utilized substantially all of its net
operating loss carryforwards.
1994 Compared to 1993
The Company earned $301,000 ($.03 per common share) in 1994, compared to
$475,000 ($.05 per common share) in 1993. The 1994 earnings performance was
impacted by softness in sales of certain of the Company's product lines
partially offset by an increase in licensing fee revenues.
The Company's revenues decreased from $5,045,859 in 1993 to $4,895,348 in
1994, a decrease of $150,511. The decrease in revenues reflects a decrease
in international product sales attributed primarily to delays in shipments of
non-invasive blood pressure modules and declines in domestic sales of
disposable products due to increased competition. This decrease in product
revenues was partially offset by an increase in licensing fee revenues from
$40,000 in 1993 to $220,833 in 1994 as a result of a new licensing agreement.
Cost of product sales increased as a percent of net product sales from 45
percent in 1993 to 49 percent in 1994. This increase mainly reflects under
absorption of overhead expenses due to decreased sales and production.
Selling, general and administrative expenses decreased to $1,898,039 in
1994 from $1,934,808 in 1993, a decrease of $36,769. The decrease is due
primarily to a reduction in payroll costs beginning in the second quarter of
1994, and reimbursement of certain professional fees and expenses upon
signing of the license agreement previously discussed.
Net interest expense decreased in 1994 to $29,869 from $33,721 in 1993.
The decrease was due to net debt principal reductions of approximately
$130,500 during 1994.
During 1994, the Company utilized approximately $290,000 of net operating
loss carryforwards to reduce its provision for taxes for financial reporting
purposes. The tax benefit associated with this utilization of net operating
loss carryforwards was approximately $104,000 or $.01 per common share.
ITEM 8. INDEX TO FINANCIAL STATEMENTS
Report of Independent Public Accountants F-1
Balance Sheets - December 31, 1995 and 1994 F-2 to F-3
Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993 F-4
Statements of Shareholders' Equity for the
Years Ended December 31, 1995, 1994 and 1993 F-5
<PAGE>
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 F-6 to F-7
Notes to Financial Statements F-8 to F-12
Schedules called for under Regulation S-X are not submitted because they are
not applicable or not required, or because the required information is
included in the financial statements or notes thereto.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to the section entitled "Election of Directors" in the
Registrant's definitive proxy statement to be mailed to shareholders on or
about April 22, 1996, and filed with the Securities and Exchange Commission.
ITEM 11. EXECUTIVE COMPENSATION
Reference is made to the sections entitled "Compensation of Executive
Officers" and "Election of Directors" in the Registrant's definitive proxy
statements to be mailed to shareholders on or about April 22222996, and filed
with the Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND STOCKHOLDERS
Reference is made to the sections entitled "Principal Stockholders" and
"Election of Directors" in the Registrant's definitive proxy statements to be
mailed to shareholders on or about April 22, 1996, and filed with the
Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 17, 1990, by agreement, the Company and Dr. Myron L. Cohen
amended Dr. Cohen's employment contract and provided that he shall be
employed as Executive Vice President of the Company until December 31, 1995
in accordance with the terms of the agreement. Compensation for 1995 is
approximately $165,862. On January 1, 1996, the Company extended Dr. Myron
L. Cohen's employment contract to December 31, 1996.
In September of 1993, the Company entered into a three year employment
agreement with Louis P. Scheps as President and Chief Executive Officer.
Compensation is approximately $175,000 for 1995.
Deferred Revenue from Related Party
In June 1989, the Company and a majority preferred shareholder, (the
"Shareholder"), entered into an agreement, whereby the Shareholder agreed to
fund $100,000 for the Company's purchase of certain components needed to
establish an electrode manufacturing facility ("the System"). In exchange,
the Company agreed to pay the Shareholder an amount equal to five percent of
the net invoice price of all electrodes manufactured and sold by the Company
using the System, during a period of five years.
<PAGE>
The System became fully operational and the five year period commenced on
January 8, 1990. The agreement expired as of December 31, 1994, there fore
there were no earning expenses relating to royalties during 1995. During
1994 and 1993, royalties earned by the shareholder to the agreement totaled
$78,181 and $91,807, respectively. The Company recognized revenue on a
straight-line basis over the agreement period ($20,000 per year). Net
royalty expense was $58,181 and $71,807 during 1994 and 1993, respectively.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) 1. The financial statements and schedules listed in the
accompanying index to financial statements are filed as a part
of this report.
2. See (a) 1 above.
3. (a) Certificate of Incorporation of Registrant*
(b) By-Laws of Registrant*
* Incorporated by reference from the Exhibits filed in the Registrant's
Prospectus, dated April 15, 1985, filed with the Securities and Exchange
Commission.
(B) Reports on Form 8-K
None filed.
<PAGE>
CAS MEDICAL SYSTEMS, INC.
INDEX TO FINANCIAL STATEMENTS
Report of Independent Public Accountants F-1
Balance Sheets -- December 31, 1995 and 1994 F-2 to F-3
Statements of Income for the Years Ended
December 31, 1995, 1994 and 1993 F-4
Statements of Shareholders' Equity for the
Years Ended December 31, 1995, 1994 and 1993 F-5
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 F-6 to F-7
Notes to Financial Statements F-8 to F-12
Schedules called for under Regulation S-X are not submitted because they are
not applicable or not required, or because the required information is
included in the financial statements or notes thereto.
<PAGE>
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors of
CAS Medical Systems, Inc.:
We have audited the accompanying balance sheets of CAS Medical Systems, Inc.
(a Delaware corporation) as of December 31, 1995 and 1994, and the related
statements of income, shareholders' equity and cash flows for each of the
three years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of CAS Medical Systems, Inc. as
of December 31, 1995 and 1994, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1995, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Stamford, Connecticut,
January 23, 1996
<PAGE>
<TABLE>
F-2
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS -- DECEMBER 31, 1995 AND 1994
<CAPTION>
ASSETS 1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $1,082,003 $ 301,472
Accounts receivable, net of allowance for
doubtful accounts of $28,819 and $14,600
in 1995 and 1994, respectively 733,875 794,559
Inventories (Note 3) 843,304 810,988
Other current assets 74,440 75,081
---------- ----------
Total current assets 2,733,622 1,982,100
---------- ----------
PROPERTY AND EQUIPMENT (Note 2):
Furniture and equipment 837,175 768,036
Leasehold improvements 47,181 46,572
---------- ----------
884,356 814,608
Less- accumulated depreciation 705,712 635,623
---------- ----------
178,644 178,985
---------- ----------
Other assets, net of accumulated 8,199 17,199
amortization
---------- ----------
Total assets $2,920,465 $2,178,284
<FN>
The accompanying notes to financial statements are an integral part of these
balance sheets.
</TABLE>
<PAGE>
<TABLE>
F-3
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS -- DECEMBER 31, 1995 AND 1994
(continued)
<CAPTION>
1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 185,793 $150,928
Accrued payroll 179,570 32,587
Accrued professional fees 54,500 35,000
Accrued warranty 45,000 20,000
Other accrued expenses 181,072 92,842
Payables to related party (Note 5) - 144,411
---------- ----------
Total current liabilities 645,935 475,768
---------- ----------
DEFERRED REVENUE (Note 6) 44,444 92,222
---------- ----------
SHAREHOLDERS' EQUITY (Notes 2, 7 and 8):
Preferred stock, $.001 par value, 1,000,000
shares authorized, stated at redemption
value, Series C cumulative preferred
stock, 3,000 and 5,000 shares issued and
outstanding in 1995 and 1994,
respectively 300,000 500,000
Common stock, $.004 par value per share,
19,000,000 shares authorized, 9,279,479
and 9,239,479 shares issued and
outstanding in 1995 and 1994,
respectively 37,121 36,963
Additional paid-in capital 2,675,466 2,664,723
Accumulated deficit (782,501) (1,591,392)
---------- ----------
Total shareholders' equity 2,230,086 1,610,294
---------- ----------
Total liabilities and shareholders'
equity $2,920,465 $2,178,284
<FN>
The accompanying notes to financial statements are an integral part of these
balance sheets.
</TABLE>
<PAGE>
<TABLE>
F-4
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
REVENUES:
Net product sales $6,163,848 $4,674,515 $5,005,859
Licensing fees (Note 6) 265,383 220,833 40,000
---------- ---------- ---------
6,429,231 4,895,348 5,045,859
---------- ---------- ---------
OPERATING EXPENSES:
Cost of product sales 2,831,369 2,311,304 2,255,891
Selling, general and
administrative 2,272,329 1,898,039 1,934,808
Research and development 405,022 334,729 329,091
---------- ---------- ---------
Operating income 920,511 351,276 526,069
INTEREST INCOME (EXPENSE), net 13,380 (29,869) (33,721)
---------- ---------- ---------
Income before income taxes 933,891 321,407 492,348
PROVISION FOR INCOME TAXES 85,000 20,000 17,000
(Note 9)
---------- --------- ---------
Net income $ 848,891 $ 301,407 $ 475,348
PER SHARE DATA:
Net income per common share $ .08 $ .03 $ .05
(Note 2)
Weighted average number of
shares outstanding 9,858,916 9,239,785 9,362,508
<FN>
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
<PAGE>
<TABLE>
F-5
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
Preferred Stock Common Stock
------------------ ------------------ Additional Accumulated
Shares Amount Shares Amount Paid-In Capital Deficit
<S> <C> <C> <C> <C> <C> <C>
BALANCE, December 31, 1992 5,000 $500,000 9,239,479 $36,963 $2,664,723 $(2,268,147)
Net Income - - - - - 475,348
Preferred Dividends - - - - - (50,000)
------ -------- --------- ------- ---------- ----------
BALANCE, December 31, 1993 5,000 500,000 9,239,479 36,963 2,664,723 (1,842,799)
Net income - - - - - 301,407
Preferred dividends - - - - - (50,000)
------ -------- --------- ------- ---------- ----------
BALANCE, December 31, 1994 5,000 500,000 9,239,479 36,963 2,664,723 (1,591,392)
Common stock issued - - 40,000 158 10,743 -
Redemption of Preferred
Stock (2,000) (200,000) - - - -
Net income - - - - - 848,891
Preferred dividends (40,000)
------ -------- --------- ------- ---------- -----------
BALANCE, December 31, 1995 3,000 $300,000 9,279,479 $37,121 $2,675,466 $ (782,501)
<FN>
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
F-6
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 848,891 $ 301,407 $ 475,348
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 79,089 104,683 107,001
Loss on sale of equipment - 4,824 -
Decrease (increase) in accounts
receivable 60,684 106,601 (160,060)
(Increase) in inventory (32,316) (19,204) (36,195)
Decrease (increase) in other
current assets 641 22,249 (75,904)
Increase (decrease) in accounts
payable and accrued expenses 314,578 (85,186) (94,189)
(Increase) in other assets - (8,199) -
(Decrease) increase in deferred
revenue (47,778) (67,778) 40,000
--------- --------- ---------
Net cash provided by operating
activities 1,223,789 359,397 256,001
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures (69,748) (35,109) (139,427)
Proceeds from sale of equipment - 550 -
Proceeds from sale of long-term
investment - - 7,500
--------- --------- ---------
Net cash used in investing
activities (69,748) (34,559) (131,927)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayment under line of credit - (5,000) -
Preferred dividends (40,000) (50,000) (50,000)
Repayment of debt to related
parties (144,411) (183,293) (188,973)
Repayment of debt to unrelated
parties - (46,526) (113,994)
Proceeds from financing agreement - - 59,524
Proceeds from issuance of common
stock 10,901 - -
Redemption of shares of preferred
stock (200,000) - -
--------- --------- ---------
Net cash used in financing
activities (373,510) (284,819) (293,443)
--------- --------- ---------
</TABLE>
<PAGE>
<TABLE>
F-7
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
(Continued)
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Net increase (decrease) in cash
and cash equivalents 780,531 40,019 (169,369)
CASH AND CASH EQUIVALENTS, at
beginning of year 301,472 261,453 430,822
--------- --------- ---------
CASH AND CASH EQUIVALENTS, at end
of year $1,082,003 $ 301,472 $ 261,453
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Cash paid during the year for
interest $ 5,458 $ 31,510 $ 70,092
Cash paid during the year for
taxes 52,650 25,500 6,028
<FN>
The accompanying notes to financial statements are an integral part of these
statements.
</TABLE>
<PAGE>
F-8
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
(1) The Company:
CAS Medical Systems, Inc. (the "Company") is engaged in the business of
developing, manufacturing and distributing diagnostic equipment and
medical products for use in the healthcare 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. The Company's operations and
manufacturing facilities are located in the United States. During 1995,
1994 and 1993, the Company had sales to one customer which in the
aggregate accounted for approximately 12%, 13% and 13% of sales,
respectively, and had export sales principally to Europe, including
licensing fee revenues, of $2,155,748, $1,463,974 and $1,516,524,
respectively.
(2) Summary of Significant Accounting Policies:
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.
Revenue Recognition-
Revenues from product sales are recognized upon passage of title,
generally upon shipment. Revenues from licensing fees are recognized
over the term of the agreement (see Note 6).
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 includes the common equivalent shares
calculated for outstanding stock options and warrants under the
treasury stock method.
Use of Estimates-
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
<PAGE>
F-9
Recently Issued Accounting Pronouncements-
The Company does not believe any recently issued accounting standards
will have a material impact on its financial condition or results of
operations. The Company plans to continue to apply the recognition and
measurement provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and adopt the disclosure
requirements of Statement of Financial Accounting Standards No. 123,
"Accounting for Stock Based Compensation" ("FAS 123"), beginning in
1996. Accordingly, the issuance of FAS 123 will not impact the
Company's consolidated financial statements.
Reclassifications-
Certain reclassifications were made to prior year amounts to conform to
current year presentation.
(3) Inventories:
Inventories include costs of materials, labor and manufacturing overhead.
Inventories are stated at the lower of first-in, first-out (FIFO) cost
or market and consist of the following:
1995 1994
Raw materials $505,159 $575,915
Work in process 160,215 112,782
Finished goods 177,930 122,291
-------- --------
$843,304 $810,988
(4) Debt:
At December 31, 1995, the Company's line of credit arrangement allowed
for maximum borrowings of $500,000, all of which was available. The
line of credit arrangement expires on August 1, 1996, and bears interest
at the prime rate (8.50% at December 31, 1995) plus 1.5%. During 1995,
1994 and 1993, the maximum month end borrowings outstanding under this
line were $50,000, $200,000 and $115,000, the weighted average
borrowings were approximately $4,167, $92,100 and $25,500, and the
weighted average interest rates on amounts outstanding were 10.3%, 8.3%
and 7.5%, respectively. 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 ($100,000 at December 31, 1995).
(5) Debt to Related Parties:
During the fourth quarter of 1990, a majority preferred shareholder
exchanged a 10% convertible note for a new term note which matured and
was repaid in December 1995. The holder of the 10% term note was the
Series C preferred shareholder and had a security interest in all
tangible and intangible assets of the Company.
<PAGE>
F-10
(6) License Agreements:
In June 1989, the Company and a majority preferred shareholder (the
"Shareholder") entered into an agreement, whereby the Shareholder agreed
to fund $100,000 for the Company to purchase certain components needed
to establish an electrode manufacturing facility ("the System"). In
exchange, the Company agreed to pay the Shareholder an amount equal to
five percent of the net invoice price of all electrodes manufactured and
sold by the Company using the System for a period of five years. The
System became fully operational and the five year period commenced on
January 8, 1990. The agreement expired as of December 31, 1994, and,
accordingly, there were no related royalty revenues or expenses during
1995. During 1994 and 1993, royalties earned by the Shareholder
pursuant to this agreement totaled $78,181 and $91,807, respectively.
The Company recognized revenue on a straight-line basis over the
agreement period ($20,000 per year), and, accordingly, net royalty
expense was $58,181 and $71,807 during 1994 and 1993, respectively.
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 this
customer. The agreement granted a nonexclusive license to use the
Company's blood pressure technology for a specific application. As part
of this agreement, the Company will receive $750,000 plus royalties over
the initial four year term, of which $300,000 has been received through
December 31, 1995. 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 this agreement and deferred revenue of $140,000 from the prior
license agreement are being recognized on a straight line basis over the
new contract period.
(7) Capital Stock:
Holders of the Series C cumulative preferred stock are entitled to a
cumulative dividend, payable quarterly, at the annual rate of $10 per
share. The Company has the right to redeem the preferred stock in whole
or in part, at a price equal to $100 per share plus all accrued and
unpaid dividends. On July 1, 1995, 2,000 shares of the Company's
Series C preferred stock were redeemed at $100 per share plus all
dividends accrued at that time. Upon redemption, the shares were
retired and the Company filed with the State of Delaware a certificate
of reduction of stated capital. No dividends may be paid on common
stock unless all accumulated dividends have been paid on the Series C
cumulative preferred stock. Dividends in the amount of $40,000, $50,000
and $50,000 were paid on these shares in 1995, 1994 and 1993,
respectively.
On January 17, 1996, the remaining 3,000 shares of the Company's Series
C preferred stock were redeemed at $100 per share.
(8) Employee Benefit Programs: Stock Options-
In December 1984, the Board of Directors and stockholders adopted an
Employee Incentive Stock Option 1984 Plan (the "1984 Plan"). The
exercise price for common stock issued under the 1984 Plan is to be no
<PAGE>
F-11
less than the fair market value of the stock at the grant date of the
options. Pursuant to the 1984 Plan, 750,000 shares of common stock
have been reserved for employee (including officers and directors)
purchase. An option granted under the 1984 Plan becomes exercisable in
two equal annual installments, commencing one year from the date of the
grant of the option. Options begin to expire between five and ten years
from the date of grant, depending on the optionholder's percentage of
ownership of the Company. In the event employment is terminated, the
employee no longer has the right to exercise his or her options unless
expressly permitted by the Board of Directors.
In June 1994, the Board of Directors and stockholders adopted the 1994
Employees' Incentive Stock Option Plan (the "1994 Plan"). Pursuant to
the 1994 Plan, 250,000 shares of common stock have been reserved for
employee (including officers and directors) purchase. The 1994 Plan is
the successor to the 1984 Plan and contains provisions which are
similar to those of the 1984 Plan.
Transactions in stock options under the Plans are summarized as follows:
Exercise Price
Shares per Option
Outstanding at December 31, 1992 973,400 $.20 to $.75
Exercised (17,500) .25
Canceled (35,000) .375 to .75
--------
Outstanding at December 31, 1993 920,900 $.20 to $.75
Granted 120,000 .31
Canceled (50,000) .275
--------
Outstanding at December 31, 1994 990,900 $.20 to $.75
Granted 75,000 .82
Canceled/Exercised (85,000) .25 to .75
--------
Outstanding at December 31, 1995 980,900 $.20 to $.82
Exercisable at December 31, 1995 845,900 $.20 to $.75
In 1993, the Company granted a warrant to purchase 750,000 shares of
common stock to an officer of the Company. The exercise price ($.31 per
share) was equal to the fair market value of the stock at the grant date
of the warrant. The warrant has no expiration date.
Life Insurance-
During 1995, 1994 and 1993, the Company paid life insurance premiums of
approximately $10,000 for life insurance policies on the lives of two
officers of the Company. The policies are in the face amounts of
$1,000,000 and $650,000. The beneficiaries of $250,000 and $150,000,
respectively, of the policies are designated by the insured. The
Company is the beneficiary of the balance.
<PAGE>
F-12
401(k) Plan-
During 1992, the Company established a 401(k) benefit plan for its
employees which generally allows participants to make contributions by
salary deductions up to allowable Internal Revenue Service limits on a
tax-deferred basis and discretionary contributions by the Company. The
1995 contribution was $28,166. The Company did not make
discretionary contributions in 1994 or 1993.
The Company does not provide other post-retirement benefits.
(9) Income Taxes:
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109),
which requires the recognition of deferred tax assets and liabilities
for future tax consequences resulting from differences between the book
and tax basis of existing assets and liabilities. In addition, SFAS 109
requires the recognition of future tax benefits of net operating loss
carryforwards to the extent that realization of such benefit is more
likely than not. This change in accounting had no significant effect on
the Company's financial position or results of operations.
The 1995, 1994 and 1993 provisions for income taxes of $85,000, $20,000
and $17,000, respectively, represent state income taxes and in 1994 and
1993 federal alternative minimum taxes, and are net of tax benefits of
net operating loss carryforwards utilized in 1995, 1994 and 1993 of
$874,000, $104,000, and $253,000, respectively. As of December 31,
1995, the Company has utilized substantially all of its net operating
loss carryforwards. The 1995 provision for income taxes includes
deferred tax benefits of approximately $25,000 due to temporary
differences related primarily to certain accruals not currently
deductible for income tax purposes.
(10) Commitments and Contingencies:
Employment Agreements-
The Company is committed under employment agreements with certain
officers aggregating $175,000 and which expire in 1996.
Other Commitments-
Minimum annual rentals under the Company's noncancelable lease agreement
covering its principal office space, which expires on December 31, 1998
and includes escalations for real estate taxes, are as follows:
1996 $101,000
1997 104,000
1998 110,000
--------
$315,000
Rent expense was approximately $102,000, $105,000 and $62,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange 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)
March 25, 1996 Louis P. Scheps
Date Louis P. Scheps
President and Chief Executive Officer
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
March 25, 1996 Myron L. Cohen
Date Myron L. Cohen
Executive Vice President
March 25, 1996 Lawrence Burstein
Date Lawrence Burstein
Director
March 25, 1996 Stanley Josephson
Date Stanley Josephson
Director
March 25, 1996 Jerome Baron
Date Jerome Baron
Director
March 25, 1996 Jay Haft
Date Jay Haft
Director
March 25, 1996 Saul Milles
Date Saul Milles
Director
EXHIBIT 13.2
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For the Fiscal Year Ended December 31, 1995
Commission File Number 2-96271-B
CAS MEDICAL SYSTEMS, INC.
(Exact name of Registrant as specified in 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 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.
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.004 par value Preferred Stock, $.001 par value
The aggregate market value of the Common Stock held by non-affiliates of the
registrant was $7,162,996 on December 31, 1995.
The registrant had 9,279,479 shares of Common Stock outstanding as of
December 31, 1995.
<PAGE>
Statements of Cash Flows for the Years Ended
December 31, 1995, 1994 and 1993 F-6 to F-7
Notes to Financial Statements F-8 to F-12
Schedules called for under Regulation S-X are not submitted because they are
not applicable or not required, or because the required information is
included in the financial statements or notes thereto.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ELECTION OF DIRECTORS
Seven Directors are to be elected at the Meeting to serve for a term of
one year or until their respective successors are duly elected and qualify.
The shares represented by the proxies will be voted in favor of the election
as Directors of the persons named below unless authority to do so is
withheld. If any nominee is not a candidate for election at the Meeting, an
event which the Board of Directors does not anticipate, the proxies will be
voted for a substitute nominee and the others named below.
Louis P. Scheps - Director since 1990
Mr. Scheps, 64, was appointed President and CEO of the Company in
September of 1990. He had held the position of Director of Manufacturing
since 1986. Prior thereto, Mr. Scheps was employed by Posi-Seal International
as Vice President from 1969 to 1985. Mr. Scheps received his engineering
degree from Purdue University and his business education from the GE
Management Program.
Myron L. Cohen, Ph.D. - Director since 1984
Dr. Cohen, 62, founder of the Company, has been involved in developing
and marketing medical products for over 20 years. Dr. Cohen was Director of
Research and Development for the Hospital Products Division of
Chesebrough-Pond's Inc. from 1978 to 1983. From 1966 through 1978, Dr. Cohen
was Professor of Mechanical Engineering at Stevens Institute of Technology
and was co-founder and director of the Institute's Medical Engineering
Laboratory.
Dr. Cohen was awarded the Humboldt Prize by the Federal Republic of
Germany for his work in biomedical engineering. He has lectured throughout
the European Economic Community countries on problems in technology and
medicine.
Stanley D. Josephson - Director since 1984
Mr. Josephson, 66, is an attorney in private practice in Branford,
Connecticut. Mr. Josephson is a graduate of New York University Law School
and specializes in corporate development law and international marketing. He
is a member of the Board of Directors and is General Counsel to several
privately held companies.
<PAGE>
Lawrence S. Burstein - Director since 1985
Mr. Burstein, 53, has been an officer, director and stockholder
of Trinity Capital Corporation since October 1982. Mr. Burstein is a
director of four other public companies, THQ, Inc., a manufacturer of
video game cartridges and toys, The MNI Group, Inc., a company that
markets specially formulated medical foods, U.S. Communications, Inc.,
a company engaged in the activation of wireless products and Trinity
Americas, Inc. Mr. Burstein is President of Trinity Americas, Inc.,
which is engaged in the acquisition of other companies.
Jerome S. Baron - Director since 1986
Mr. Baron, 69, has been in the securities industry since 1944. He
was a Vice President in the International Department at Loeb Rhoades &
Company, a Partner at Andreson & Company, and Chairman and Chief
Executive Officer of Foster Securities, Inc., which he founded in
1974. In 1977, Foster Securities merged with Brean Murray Securities
Inc. Mr. Baron manages individual portfolios, oversees compliance, and
is a member of the Investment Advisory Board for BMI Capital Corp.,
the firm's investment management affiliate. He is a Director of USC
Corporation, a public cellular telephone software company and
Haulbowline Ltd., a private offshore company. He attended Kings Point
Merchant Marine Academy and Pace University.
Jay M. Haft - Director since 1991
Mr. Haft, 60, has been engaged in the practice of law for more
than ten years and is counsel to the firm of Parker Duryee Rosoff &
Haft. Mr. Haft is a director of six other public companies, Viragen,
Inc., a medical products company, Noise Cancellation Technologies,
Inc., a company engaged in the design of noise suppression equipment,
Extech, Inc., a company engaged in hotel management and other
businesses, Robotic Vision Systems, Inc., a manufacturer of testing
systems for semiconductor equipment, ORYX Technology, Inc., a company
manufacturing and developing power controls and test products, and
Nova Technology, Inc., a company engaged in the development of a
hospital bed and patient transport system. He is currently acting CEO
of Noise Cancellation Technologies, Inc. Mr. Haft received a B.A. and
a LL.B. from Yale University.
Saul S. Milles, M.D. - Director since 1991
Dr. Milles, 65, is a Medical Director for Corporate Medical
Operations of the General Electric Corporation headquartered in
Fairfield, Connecticut since 1984. He has been actively involved in
issues related to medical screening, employing the handicapped,
employee assistance program design and assessment, and the development
of policies related to smoking abatement and the control of substance
abuse. He has served as an advisor to the Congress of the United
States, Office of Technology Assessment on screening tests and their
ethical and socioeconomic implications. Dr. Milles attended Cornell
University and received his M.D. degree from the University of
Rochester and received specialty training in Internal medicine and
Gastroenterology at Yale Medical Center. He is also currently Clinical
Associate Professor of Medicine at Yale Medical School.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth information concerning the compensation
during the last three fiscal years of the executive officers of the Company
(hereinafter referred to collectively as the named executive officers).
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long
All Rest- Term All
Annual ricted Incen- Other
Compen- Stock tive Compen-
Salary Bonus sation Awards SARs Payouts sation
Principal Position Year ($) ($) ($) ($) (#) ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Louis P. Scheps 1995 175,000 40,000 0 0 0 0 1,700
President 1994 150,000 0 0 0 0 0 1,318
and CEO 1993 133,333 22,500 0 0 750,000 0 1,015
Myron L. Cohen 1995 165,862 10,000 5,000 0 0 0 2,695
Executive Vice 1994 150,645 0 5,000 0 0 0 2,000
President 1993 136,950 7,500 5,000 0 0 0 1,325
<FN>
No warrants/options/SARs were granted in 1995.
</FN>
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND STOCKHOLDERS
STOCK OWNERSHIP
Stock Ownership of Certain Beneficial Owners
The following table sets forth information as to the beneficial
ownership of each person known to the Company to own more than 5% of the
outstanding Common Stock as of May 3, 1996:
Name and Address of
Beneficial Owner or Amount and Nature of Percentage
Identity of Group Beneficial Ownership (1) of Class
Estate of Garry Evans 500,000 5.3%
Weybridge, Surrey
United Kingdom
Venture Capital Associates, Ltd. 980,575 10.5%
c/o Jay M. Haft
529 Fifth Avenue
New York, NY 10022
Haulbowline Ltd. 1,832,000 19.7%
c/o The Bank of Bermuda Limited
6 Front Street
PO Box HM 1020
Hamilton HMDX, Bermuda
Stock Ownership of Directors and Executive Officers
The following table reflects shares of Common Stock beneficially owned
(or deemed to be beneficially owned pursuant to the rules of the Securities
and Exchange Commission) as of May 3, 1996 by each director of the Company,
each of the executive officers named in the Summary Compensation Table
included elsewhere herein and the current directors and executive officers
of the Company as a group:
Amount and Nature of Percentage
Name Beneficial Ownership (1) of Class
Louis P. Scheps 1,333,325 (2) 14.3%
Myron L. Cohen, Ph.D. 940,453 10.1%
Stanley D. Josephson 167,484 (3) 1.8%
Lawrence S. Burstein 463,563 (4) 4.9%
Jerome Baron 2,054,500 (5) 22.1%
Jay M. Haft 1,071,575 (6) 11.5%
Saul S. Milles, M.D. 60,000 (7) 0.6%
All officers and directors
as a group (7 persons) 6,090,900 65.6%
<PAGE>
(1) Pursuant to the rules of the Securities and Exchange Commission, shares
of Common Stock which an individual or group has a right to acquire
within 60 days pursuant to the exercise of options or warrants are
deemed to be outstanding for the purpose of computing the percentage
ownership of such individual or group, but are not deemed to be
outstanding for the purpose of computing the percentage ownership of any
other person shown in the table. Except as otherwise indicated, the
persons named herein have sole voting and dispositive power with respect
to the shares beneficially owned.
(2) Includes options to purchase 900,000 shares.
(3) Includes options to purchase 75,000 shares.
(4) Includes options to purchase in the aggregate 150,000 shares; 185,000
shares owned by Trinity Capital Corporation Pension Trust, of which a
director is a trustee and a beneficiary; 9,375 shares owned, directly
and indirectly, by a family member.
(5) Includes options to purchase 200,000 shares; also includes 1,832,000
shares owned by Haulbowline Ltd., as to which shares Mr. Baron has
voting and dispositive power.
(6) Includes options to purchase 60,000 shares; also includes 980,575 shares
owned by Venture Capital Associates, Ltd., a limited partnership of
which the general partner is a corporation in which Mr. Haft is a
controlling shareholder.
(7) Includes options to purchase 60,000 shares.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange 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)
March 25, 1996 Louis P. Scheps
Date Louis P. Scheps
President and Chief Executive Officer
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Registrant
and in the capacities and on the dates indicated.
March 25, 1996 Myron L. Cohen
Date Myron L. Cohen
Executive Vice President
March 25, 1996 Lawrence Burstein
Date Lawrence Burstein
Director
March 25, 1996 Stanley Josephson
Date Stanley Josephson
Director
March 25, 1996 Jerome Baron
Date Jerome Baron
Director
March 25, 1996 Jay Haft
Date Jay Haft
Director
March 25, 1996 Saul Milles
Date Saul Milles
Director
</TABLE>
EXHIBIT 13.3
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
EXHIBIT 13.4
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
EXHIBIT 13.5
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
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
To CAS Medical Systems, Inc.:
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report dated January 23,
1996, included in the Company's Form 10-K for the year ended December 31,
1995, and to all references to our Firm included in this registration
statement.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Stamford, Connecticut
January 13, 1996
