FORM 10-QSB
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 June 30, 1997
Commission File Number 2-96271-B
CAS MEDICAL SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 06-1123096
(State or other jurisdiction of (I.R.S. employer
incorporation of organization) identification no.)
21 Business Park Drive, Branford, Connecticut 06405
(Address of principal executive offices)
(Zip Code)
(203) 488-6056
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES [X] NO [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.004 par value: 9,329,277 shares as of June 30, 1997.
<PAGE>
PART I. - FINANCIAL INFORMATION
The condensed financial statements included herein have been prepared
by CAS Medical Systems, Inc. (the "Company"), without audit, pursuant to
the rules and regulations of the Securities and Exchange Commission. While
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, the Company believes that the disclosures made herein are
adequate to make the information presented not misleading. It is
recommended that these condensed financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report filed on Form 10-KSB for the year ended December
31, 1996.
In the opinion of the Company, all adjustments necessary to present
fairly the financial position of CAS Medical Systems, Inc. as of June 30,
1997, and the results of its operations and its cash flows for the three
months and six months ended June 30, 1997 and 1996 have been included.
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
<CAPTION>
(Unaudited) (Audited)
June 30, 1997 December 31, 1996
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $1,827,524 $1,606,979
Accounts receivable, net of allowance
for doubtful accounts 738,124 1,112,517
Inventory 819,932 759,762
Other current assets 135,532 190,229
---------- ---------
Total current assets 3,521,112 3,669,487
---------- ---------
Property and Equipment
Furniture and equipment 956,020 921,509
Leasehold improvements 58,985 47,181
----------- ---------
1,015,005 968,690
Less-Accumulated depreciation
and amortization 829,024 782,680
----------- ---------
185,981 186,010
Other Assets, net of accumulated
amortization 119,422 8,199
---------- ---------
Total assets $3,826,515 $3,863,696
__________ _________
</TABLE>
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<TABLE>
CAS MEDICAL SYSTEMS, INC.
BALANCE SHEETS
<CAPTION>
(Unaudited) (Audited)
June 30, 1997 December 31, 1996
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 123,891 $206,644
Income taxes payable 238,458 317,623
Accrued expenses 242,696 481,535
---------- --------
Total current liabilities 605,045 1,005,802
---------- --------
Shareholders' Equity:
Preferred stock, $.001 par value,
1,000,000 shares authorized, stated at
redemption value, Series C cumulative
preferred stock, zero shares issued
and outstanding in 1997 and 1996. - ,
Common stock, $.004 par value per share,
19,000,000 shares authorized, 9,329,277
shares issued and outstanding in 1997
and 1996. 37,317 37,317
Additional paid-in capital 2,697,364 2,697,364
Retained earnings 486,789 123,213
---------- ---------
Total shareholders' equity 3,221,470 2,857,894
---------- ---------
Total liabilities and
shareholders' equity $ 3,826,515 $3,863,696
__________ _________
<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, 1997 AND 1996
(Unaudited)
<CAPTION>
Six Months Ended Three Months
Ended
June 30, June 30,
1997 1996 1997
1996
________________
________________
<S> <C> <C> <C> <C>
REVENUES:
Net product sales $3,292,271 $3,319,420 $1,553,275
$1,645,314
Licensing fees 149,004 153,199 57,449
70,890
--------- --------- ---------
- ---------
3,441,275 3,472,619 $1,610,724
1,716,204
OPERATING EXPENSES:
Cost of product sales 1,388,658 1,481,633 653,700
692,674
Selling, general & administrative 1,231,359 1,019,531 666,510
508,754
Research & development 243,709 205,070 124,488
111,944
--------- --------- ---------
- ---------
Operating income 577,549 766,385 166,026
402,832
--------- --------- ---------
- ---------
Interest income, net 32,027 18,874 8,674
9,030
--------- --------- ---------
- ---------
Income Before Provision
for Income Taxes 609,576 785,259 174,700
411,862
PROVISION FOR INCOME TAXES 246,000 305,000 72,000
220,000
--------- --------- ---------
- ---------
Net Income $ 363,576 $ 480,259 $ 102,700 $
191,862
_________ _________ _________
_________
PER SHARE DATA:
Net Income per Share:
(Note 2) $ .04 $ .05 $ .01
.02
_________ _________ _________
_________
Weighted Average Number
of Shares Outstanding 9,925,941 10,467,043 9,845,238
10,477,042
__________ __________ __________
__________
<FN>
See Notes To Financial Statements
</TABLE>
<PAGE>
<TABLE>
CAS MEDICAL SYSTEMS, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
<CAPTION>
Additional
Common Stock Preferred Stock Paid-In
Accumulated
Shares Amount Shares Amount Capital
(Deficit)
______________ _______________ __________
___________
<S> <C> <C> <C> <C> <C> <C>
Balance,
December 31,
1995 (Audited) 9,279,479 $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 Shares - - (3,000) (300,000) -
-
--------- ------- ----- -------- ----------
- ------------
Balance
June 30, 1996 9,311,779 $37,247 - $ - $2,684,479 $(
302,242)
(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,
1996 (Audited) 9,329,277 $37,317 - $ - $2,697,364 $
123,213
Net income for
six months - - - - -
363,576
--------- ------- ----- -------- ----------
- ----------
Balance
June 30, 1997 9,329,277 $37,317 - $ - $2,697,364 $
486,789
(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, 1997 AND 1996
(Unaudited)
<CAPTION>
Six Months Ended June 30,
1997 1996
__________ __________
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 363,576 $ 480,259
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 46,344 36,585
Decrease (increase) in accounts
receivable 374,393 ( 87,641)
(Increase) decrease in inventory ( 60,170) 22,871
Decrease in other current assets 54,697 56,606
Increase (decrease) in accounts payable
and accrued expenses (400,757) (126,581)
Decrease in deferred revenue - ( 44,444)
Other (111,223) ( 54,445)
________ _______
Net cash provided by operating
activities 266,860 283,210
________ _______
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment expenditures ( 46,315) ( 28,018)
________ _______
Net cash used in investing activities ( 46,315) ( 28,018)
________ _______
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock - 9,139
Redemption of shares of preferred stock - (300,000)
________ _______
Net cash used in financing activities - (290,861)
________ _______
Net increase (decrease) in cash and
cash equivalents 220,545 ( 35,669)
CASH AND CASH EQUIVALENTS, at beginning
of period 1,606,979 1,082,003
_________ _________
CASH AND CASH EQUIVALENTS, at end of period $1,827,524 $1,046,334
__________ _________
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for interest $ - $ 163
Cash paid during the period for income taxes $ 323,000 $ 202,400
<FN>
See Notes to Financial Statements
</TABLE>
<PAGE>
CAS MEDICAL SYSTEMS, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1997
Note 1. The Company:
CAS Medical Systems, Inc., (the Company), was organized in 1984
primarily to serve neonatal and pediatric units in hospitals. Today,
the Company is engaged in the business of developing, manufacturing and
distributing diagnostic equipment and medical products for use in the
health care and medical industry. These products are sold by the
Company through its own sales force, via distributors and pursuant to
original equipment manufacturer agreements internationally and in the
United States.
Note 2. Summary of Significant Accounting Policies:
Inventory
Inventory is stated at the lower of first-in, first-out (FIFO)
cost or market. At June 30, 1997 and December 31, 1996, inventory
consisted of the following:
June 30, December 31,
1997 1996
Raw Material $562,805 $472,761
Work-In-Process 114,942 135,955
Finished Inventory 142,185 151,046
------- -------
$819,932 $759,762
_______ _______
Property and Equipment
Property and equipment are stated at cost. Furniture and
equipment are depreciated, using the straight-line method over the
estimated useful lives of the assets which range from two to five
years. Leasehold improvements are amortized over the life of the
lease.
Net Income Per Share
Net income per share has been computed by dividing net income
available for common stock, after cumulative preferred dividends
earned, by the weighted average number of common shares outstanding
each period. Weighted average shares outstanding include the common
equivalent shares calculated for the stock options and warrants 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. Debt:
At June 30, 1997, the Company had a line of credit with a Connecticut
bank totalling $500,000. Borrowing under the line of credit bears
interest at the prime rate plus 1.0%. At June 30, 1997 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 4. License Agreement:
On July 1994, the Company entered into a four year licensing agreement
with a major European manufacturer of patient monitors, granting a
non-exclusive license to use the Company's blood pressure technology
for a specific application, and allowing the exchange of technical
know-how. During February 1997, the Company amended the original
licensing agreement through the year 2000. As part of the agreement,
the Company will receive license fees of $1,500,000 plus royalties, of
which $650,000 has been received through June 30, 1997. The
manufacturer has the option to extend the license to the year 2006 and
only be liable for royalties. License fees are being recognized on a
straight-line basis over the contract period.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At June 30, 1997, the Company's cash and cash equivalents totalled
$1,828,000 compared to $1,607,000 at December 31, 1996. The Company's
working capital totaled $2,916,000 on June 30, 1997, compared to
$2,664,000 on December 31, 1996. The Company's increased cash position
is due to cash provided by operating activities.
<PAGE>
Notes to Financial Statements (Continued)
As of June 30, 1997, the Company had a line of credit with a
Connecticut bank totaling $500,000 which expires August 1, 1997.
Borrowing under the line bears interest at the prime rate plus 1.0%.
At June 30, 1997, there were no borrowings under the line.
The Company believes that the 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 six month period ended June 30, 1997 was
$364,000 or $0.04 per share, compared to $480,000 or $0.05 per share
for the same period of 1996. Net income for the second quarter of the
current year was $103,000 or $0.01 per share, compared to $192,000 or
$0.02 per share reported for the second quarter of 1996. The 1997
earnings performance was impacted by softness in sales of certain of
the Company's product lines and increased expenses by additional
personnel, both in the selling and research development departments.
The Company's revenues for the three month period ended June 30,
1997 were approximately $1,611,000 as compared to approximately
$1,716,000 for the comparable period in the prior year. Revenues for
the six month period ended June 30, 1997 reached approximately
$3,441,000, a tiny decrease from approximately $3,473,000 of the
comparable period of 1996. The small decrease in 1997 is due primarily
by softness in sales of Klear-Trace disposable products.
Gross profit increased to 57.8 percent from 55.4 percent when
comparing 1997 to 1996. The increase in gross profit reflects on going
quality and cost reduction efforts and a more profitable product mix.
Selling, general and administrative, research and development
expenses were approximately $1,475,000 for the six month period ended
June 30, 1997 as compared to $1,225,000 for the same period of 1996, an
increase of $250,000 or 20 percent. This increase in expenses for 1997
is due primarily to additional personnel both in the selling and
research development departments.
The Company currently invests its excess cash in low-risk, short
term interest bearing instruments. During the six month period ended
June 30, 1997, the Company earned approximately $32,000 of interest
income compared to approximately $19,000 for the same period of 1996.
<PAGE>
Notes to Financial Statements (Continued)
PART II
ITEM 6 EXHIBITS AND REPORTS
(A) Exhibits
11. See Notes to Financial Statements Note 2, regarding
computation of earnings per Share.
(B) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CAS MEDICAL SYSTEMS, INC.
Registrant
August 1, 1997 Louis P. Scheps
Date Louis P. Scheps
President and Chief Executive Officer
and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000764579
<NAME> CAS MEDICAL SYSTEMS, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,827,524
<SECURITIES> 0
<RECEIVABLES> 738,124
<ALLOWANCES> 0
<INVENTORY> 819,932
<CURRENT-ASSETS> 3,521,112
<PP&E> 1,015,005
<DEPRECIATION> 829,024
<TOTAL-ASSETS> 3,826,515
<CURRENT-LIABILITIES> 605,045
<BONDS> 0
<COMMON> 37,317
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,826,515
<SALES> 3,292,271
<TOTAL-REVENUES> 3,441,275
<CGS> 1,388,658
<TOTAL-COSTS> 1,475,068
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (32,027)
<INCOME-PRETAX> 609,576
<INCOME-TAX> 246,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 363,576
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
