================================================================================

                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-KSB


 Annual Report Under Section 13 or 15 (d) of the Securities Exchange Act of 1934
                   For the Fiscal Year Ended December 31, 2002

                        Commission File Number 2-96271-B

                            CAS MEDICAL SYSTEMS, INC.
                 (Name of small business issuer in its charter)

           Delaware                                     06-1123096
-------------------------------             ------------------------------------
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
 incorporation or organization)

              44 East Industrial Road, Branford, Connecticut 06405
              ----------------------------------------------------
                    (Address of principal executive offices)

                                 (203) 488-6056
                                 --------------
                (Issuer's telephone number, including area code)


       Securities registered under Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:

                          Common Stock, $.004 par value
                          -----------------------------
                                (Title of Class)

Check whether the issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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  [ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

The Registrant's revenues for the fiscal year ended December 31, 2002 were
$15,024,991.

The aggregate market value of common equity held by non-affiliates of the
Registrant as of February 18, 2003 based upon the last sale price of such stock
on that date on the over-the-counter market, commonly referred to as the "pink
sheets", was $4,822,539. The number of shares of the Registrant's Common Stock
outstanding as of February 28, 2003 was 9,645,077.

Transitional Small Business Disclosure format (check one): Yes [ ] No [X]

                      DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the Registrant's Proxy Statement for its Annual Meeting of
Stockholders to be held on June 11, 2003 are incorporated by reference in Part
III of this Report. Except as expressly incorporated by reference, the
Registrant's Proxy Statement shall not be deemed to be part of this Form 10-KSB.

================================================================================
<PAGE>
                                                                          Page 2

INDEX                                                                    Page
-----                                                                    ----
Item 1.   Description of  Business                                         3

Item 2.   Description of Property                                          7

Item 3.   Legal Proceedings                                                7

Item 4.   Submission of Matters to a Vote of Security Holders              7

Item 5.   Market for Common Equity and Related Stockholder Matters         7

Item 6.   Management's Discussion and Analysis of Financial
            Condition and Results of Operations                            8

Item 7.   Financial Statements                                            13

          Report of Independent Accountants                              F-1
          Report of Independent Public Accountants-Copy                  F-2
          Balance Sheets as of December 31, 2002 and 2001                F-3
          Statements of Operations for the Years Ended
             December 31, 2002, 2001 and 2000                            F-4
          Statements of Shareholders' Equity for the Years
            Ended December 31, 2002, 2001 and 2000                       F-5
          Statements of Cash Flows for the Years Ended
            December 31, 2002, 2001 and 2000                             F-6
          Notes to Financial Statements                              F-7 to F-17

Item 8.   Changes in and Disagreements with Accountants on
            Accounting and Financial Disclosure                           14

Item 9.   Directors, Executive Officers, Promoters and Control
            Persons; Compliance with Section 16(a) of the Exchange Act    14

Item 10.  Executive Compensation                                          14

Item 11.  Security Ownership of Certain Beneficial Owners and
            Management and Related Stockholder Matters                    14

Item 12.  Certain Relationships and Related Transactions                  14

Item 13.  Exhibits, List and Reports of Form 8-K                          14

Item 14.  Controls and Procedures                                         15

Signatures                                                                16

Certification                                                             17

<PAGE>
                                                                          Page 3
                                     PART I

Item 1. Description of Business
-------------------------------

The Company
-----------

CAS Medical Systems, Inc. ("CAS" or the "Company") is a Delaware corporation
that was organized in 1984 primarily to provide products for use in the neonatal
and pediatric units of hospitals. The Company currently designs, manufactures
and markets medical products, specifically blood pressure measurement equipment,
apnea monitoring equipment and products for a full range of patient
applications, including neonatal intensive care. The Company's products are
designed to improve the quality of patient care and provide exceptional value
and performance. The Company has several other products in various stages of
development which it believes may be applicable to both adult and
neonatal/pediatric medicine.

Principal Products and Services
-------------------------------

OscilloMate(R) Blood Pressure Monitors and Blood Pressure Measurement Technology
--------------------------------------------------------------------------------
CAS offers its non-invasive blood pressure technology in the form of both
stand-alone monitors that it has developed and manufactured and as modules for
inclusion into other manufacturers' multi-parameter monitoring systems.

The Company offers two monitors for use in the emergency medical service (EMS)
marketplace. The Company also has a line of monitors for the hospital, alternate
site and home care marketplaces. These monitors offer the basic monitoring
parameters of non-invasive blood pressure, pulse oximetry and predictive
temperature.

The Company has agreements to supply modules via original equipment manufacturer
(OEM) agreements to various companies throughout the world. These modules are
used in larger monitoring systems where non-invasive blood pressure is but one
measurement parameter. The Company's OEM agreements are typically multi-year
arrangements to supply products.

Cardio-Respiratory Monitors
---------------------------

In 1999 and 2000 respectively, the Company expanded its product offerings by
acquiring two apnea monitor product lines.

     Event-Link(R) Monitoring System
     -------------------------------
     In October 1999, CAS acquired the Event-Link(R) product line from a third
     party. The purchase includes the infant and adult apnea monitors and
     accessories for hospital and home use, as well as the Event-Link(R)
     Software for data retrieval and display. The Event-Link system offers
     options that combine cardio-respiratory monitoring, pulse oximetry and
     event recording to provide complete, objective documentation and
     monitoring of all age groups. The Event-Link(R) Monitoring system is a
     natural extension for both the neonatal specialty and diagnostic
     monitoring product lines, as CAS builds its hospital monitoring business
     and expands into the homecare marketplace.

     Apnea Product Line
     ------------------
     In November 2000, CAS purchased a complete line of apnea monitors from
     Mallinckrodt, Inc. The product line includes the Edentec Assurance(R)
     monitor, Edentrend(R) software, Aequitron 9500/9550 monitors, the AMI(R)
     and AMI(R) Plus monitor, and related report generating software programs.
     The acquisition of this product line further strengthened the Company's
     position in the apnea monitoring marketplace.

Pedisphyg(R), Safe-Cuff(TM) and Tuff-Cuff(R) Blood Pressure Cuffs
-----------------------------------------------------------------
The Company has developed and sells a complete line of blood pressure cuffs for
the full range of patient population - neonate through adult. These cuffs are
based on design criteria developed from scientific studies to ensure the highest
degree of accuracy and ease of use. CAS cuffs can be used with any blood
pressure monitor currently available.

<PAGE>
                                                                          Page 4
Klear-Trace(R) Electrodes
-------------------------
Specifically designed for neonatal application, Klear-Trace electrodes use a
water-based gel adhesive that is gentle to delicate skin and can remain on the
patient for extended periods of time without causing skin irritation.

NeoGuard(R)Reflectors, Limboard(R) Arm Boards, Klear-Temp(R) Temperature Probes
-------------------------------------------------------------------------------
This product line includes a reflector to hold skin temperature probes in place
for accurate monitoring and arm boards that support IV sites. Klear-Temp(R)
Temperature Probes are used to detect the skin temperature of infants being
cared for on a radiant warmer bed. The heater output of the warmer fluctuates
according to the infant's skin temperature. The NeoGuard(R) Reflector serves two
purposes - to hold the temperature probe securely to the baby's abdomen and to
insulate and shield the probe from the heater output of the radiant warmer, so
it can accurately detect skin temperature.

BiliBottoms(TM) Diapers
-----------------------

Phototherapy is used to reduce an infant's level of bilirubin; it is most
effective when the skin is exposed to the light. Physicians often request that
infants be placed naked under this light to maximize treatment. BiliBottoms
patented design uses a light permeable material allowing for maximum exposure of
skin surface to phototherapy. The diaper improves the use of nursing time by
containing urine and stool, reducing clean up and the need to change bedding.

Premie Nestie(R) Supportive Positioning Aid
-------------------------------------------

The Premie Nestie is designed to provide supportive positioning for premature
infants. It accomplishes three goals: to provide continuity in positioning and
containment, which are essential components of effective developmentally
supportive care; to reduce caregiver time spent on positioning; and to improve
ease of use through its one-piece design.

Sales and Marketing
-------------------

The Company conducts its sales in the North American marketplace through
hospital, homecare and emergency medical distribution channels.

Domestic sales are conducted by eighteen exclusive specialty distributors and
over forty manufacturer representatives working in conjunction with eleven full
time Company field managers. International sales are conducted by two direct
employees and through exclusive distributors in Europe. Pacific Rim and Latin
American sales are managed by internal personnel and specialty agents.

The Company also 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,

                                 2002          2001          2000
                             ---------------------------------------
Domestic Sales               $12,406,418   $11,861,727    $8,848,691
Export (including
  licensing fees)              2,618,573     2,955,460     3,283,381
                             ---------------------------------------
                             $15,024,991   $14,817,187   $12,132,072
                             ===========   ===========   ===========

<PAGE>
                                                                          Page 5
Competition
-----------

The Company competes in the medical equipment market where there are many
suppliers with greater financial and personnel resources that sell a broad line
of commodity products and have a dedicated selling capability. The Company's
products are targeted primarily to the neonatal and pediatric intensive care
units segment of the hospital market. The Company has been supplying
competitively priced, uniquely designed products responsive to this segment in
which no major company currently focuses its total resources.

In both the hospital and emergency medical service markets, the Company's line
of non-invasive blood pressure and apnea monitoring equipment has significant
advantages over competitive products. The equipment 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 and promptness of delivery and customer service.

Customers
---------

During 2002, 2001 and 2000 the Company had sales to one customer which in the
aggregate accounted for approximately 20%, 16% and 22% of sales, respectively.

Research and Development
------------------------

In 2002, 2001 and 2000, the Company spent approximately $1,675,200, $1,102,000
and $732,000, respectively, on activities relating to the development of new
products and the improvement of existing products. Our 2002 product development
efforts focused on the new 740 series of vital signs monitors and advancements
in OEM non-invasive blood pressure technology; near-infrared spectroscopy
research; apnea product development and neonatal product support.

The Company will continue to develop and expand its patient monitoring
capability, by adding new physiological parameters. In addition, plans are in
process to improve information processing within the monitors, using new screen
and communication technology. This will allow the Company to attempt to
significantly increase sales penetration in the Acute and Intensive Care
markets.

Grant Award
-----------

On September 22, 2000, the Company was awarded a grant by the National Institute
of Neurological Disorders and Stroke of the National Institutes of Health (NIH)
under its Small Business Innovative Research Program. Funds under this grant are
expected to be between $800,000 and $1,000,000, and are being used to continue
development of a new technology that can non-invasively measure the brain
oxygenation level of a neonatal patient. In accordance with the terms of the
grant, the Company is being reimbursed for qualifying expenditures under the
agreement. Funding provided to the Company is being recorded as a reduction of
the related research expenses as such qualifying expenditures are incurred.
During the year ended December 31, 2002, approximately $284,157 was reimbursed
under the grant.

Employees
---------

As of December 31, 2002, the Company had 83 employees, of which 81 are
full-time. The Company has no collective bargaining agreements and believes that
relations with its employees are good.

Government Regulation
---------------------

Medical products of the type currently being marketed and under development by
the Company are subject to

<PAGE>
                                                                          Page 6

regulation under the Food, Drug and Cosmetic Act (the "FDA Act") and numerous
acts and amendments such as the new Quality System Regulations (QSR) which
replace the regulations formerly called Good Manufacturing Practices (GMP's).

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 Devices 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 also subject to the 510(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 and 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. The FDA completed a
factory audit in March 2002. There were no material non-conformities.

Manufacturing and Quality Assurance
-----------------------------------

The Company assembles its products at its facilities in Branford, Connecticut.
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 facilities and
occasionally at its suppliers' facilities to standards set forth in the FDA's
"Quality System Regulations." These procedures include the inspection of
components and full testing of finished goods. The Company has a controlled
clean room environment where the final assembly of single-patient-use products
is conducted.

ISO 9001
--------

In September 1996, the quality system at CAS was certified to ISO 9001/EN 46001
by the accredited body, BSI Inc. This certification recognizes CAS for its
achievement in implementing and maintaining a world-class quality system and
prepares CAS for the use of the "CE" mark. The CE mark is now required for
medical devices to gain access to the European Union common market. The FDA,
recognizing the value of a universally accepted quality system, has patterned
its new Quality System Regulations after ISO 9001. CAS is in full compliance
with the new Quality System Regulations. Recently, CAS has become certified to
another universal Quality System Standard, ISO 13485, meeting a requirement for
sales in Canada.

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, 2002, the
Company had a backlog of orders from customers for products with requested ship
dates in 2003 totaling approximately $1,159,500, deliverable throughout 2003, as
compared to $2,369,000 as of December 31, 2001. During the first quarter of
2003, the Company anticipates fulfilling
<PAGE>
                                                                          Page 7
approximately $890,000 of this backlog.

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(R), Pedisphyg(R), OscilloMate(R), NeoGuard(R), Tuff-Cuff(R),
Limboard(R), Klear-Trace(R), BiliBottoms(TM), Premie Nestie(R), and the heart
shaped mark for use as a thermal reflector and the Company's corporate logo. The
Company continues to use the Safe-Cuff(TM) common law trademark.

The Company also holds trademarks for the Event-Link(R) monitoring system, the
Edentec Assurance(R) monitor, Edentrend(R) software and the AMI(R) and AMI(R)
Plus monitors.

The Company filed a patent application on behalf of an employee covering the
method of operation of its blood pressure measurement monitor. This patent,
issued under Patent Number 4,796,184, was 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
and apnea monitors.

Item 2. Description of Property
-------------------------------

During November 1998, the Company relocated to a 24,000 square foot office,
laboratory and manufacturing facility owned by the Company in Branford,
Connecticut. Total cost of this facility was approximately $1,933,000. The
Company is the sole tenant of this facility.

During January 1999, the Company obtained a nineteen-year, 7.25 percent fixed
rate, $1,310,000 mortgage from a local bank. The mortgage is secured by a first
mortgage lien on the Company property consisting of 4.6 acres of land and the
24,000 square foot industrial building. The payments are approximately $11,000
per month. The Company believes that the insurance on the property is adequate.

During November 2000, the Company leased new facilities comprised of
approximately 7,300 square feet of manufacturing space, located at 31 Business
Park Drive, Branford, Connecticut 06405. The lease expires on December 31, 2003.
The Company does not intend to renew the lease. Minimum annual rentals under the
Company's lease agreement are $47,650 for 2003. This amount is in addition to
the Company's share of 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.
                                     PART II

Item 5. Market for Common Equity and Related Stockholder Matters
----------------------------------------------------------------

          (a) The Common Stock of the Company is traded in the over-the-counter
          market, commonly referred to as the "pink sheets", under the symbol
          "CAMY." The following table shows the high and low bid quotations for
          the Company's Common Stock for each quarterly period for the last two
          years. These prices reflect inter-dealer prices and may not represent
          actual transactions and do not include retail mark-ups, mark-downs or
          commissions.
<PAGE>
                                                                          Page 8

     Period Ended                   High         Low
     ------------                   ----         ---

     March 31, 2001                 1.81         .80
     June 30, 2001                  1.10         .80
     September 30, 2001              .93         .40
     December 31, 2001               .75         .54
     March 31, 2002                  .68         .52
     June 30, 2002                   .62         .52
     September 30, 2002              .70         .37
     December 31, 2002               .50         .30


          (b) The following table sets forth the approximate number of holders
          of record of Common Stock of the Company on December 31, 2002.

          Title of Class                                Number of Shareholders
          --------------                                ----------------------
          Common Stock, $.004 par value                          291

          (c) No cash dividends have been declared on the Company's common stock
          during 2002 or 2001.

          (d) Securities Authorized for Issuance Under Equity Compensation Plans
          The following table provides information regarding our equity
          compensation plans as of December 31, 2002:
<TABLE><CAPTION>
                               Number of securities                             Number of securities
                                 to be issued upon     Weighted-average     remaining available for future
                                    exercise of        exercise price of        issuance under equity
      Plan Category             outstanding options   outstanding options        compensation plans
----------------------------------------------------------------------------------------------------------
<S>                                  <C>                    <C>                        <C>
Equity compensation plans
 approved by security holders         757,800                $0.62                      71,600

Equity compensation plans
 not approved by security
 holders                            1,395,000                $0.51                         --

Total                               2,152,800                $0.55                      71,600
</TABLE>

The equity compensation plans not approved by security holders consist
of warrants granted to employees (including officers) and directors of
the Company as compensation for services rendered to the Company.
These warrants have no expiration date. See Note 8 to the Company's
Financial Statements.

Item 6. Management's Discussion and Analysis of Financial Condition and Results
-------------------------------------------------------------------------------
of Operations
-------------

Critical Accounting Policies
----------------------------

     The Company's financial statements have been prepared in accordance with
generally accepted accounting principles in the United States. In preparing the
financial statements, the Company is required to make estimation judgments. Such
judgments are based upon historical experience and certain assumptions that are
believed to be reasonable in the particular circumstances. Those judgments
affect both balance sheet items and

<PAGE>
                                                                          Page 9

income statement categories. The Company evaluates its assumptions on an ongoing
basis by comparing actual results with its estimates. Actual results may differ
from the original estimates. The following accounting policies are those that
the Company believes to be most critical in the preparation of its financial
statements.

Inventory Valuation--The Company's inventories are stated at the lower of cost
or market. The Company writes down its inventory for any material that has
become obsolete or may become unsaleable based on estimates of future demand in
the market. Assumptions are reviewed periodically and adjustments are made, as
necessary, to reflect changed conditions.

Deferred Tax Assets--The Company has recorded deferred tax assets for the
estimated benefit of future tax deductions on inventory, fixed assets and
various tax credits. Based on the Company's projection of future taxable income
and certain prudent tax planning strategies, management has made a judgment that
no valuation allowance against these deferred tax assets is considered
necessary. Should circumstances change and the Company determine that some or
all of the deferred tax assets would not be realized, a valuation allowance
would be recorded resulting in a charge to income in the period the
determination is made.

Accrued Warranty Costs--The Company warranties its products for up to three
years and records the estimated cost of such product warranties at the time the
sale is recorded. Estimated warranty costs are based upon actual past experience
of product returns and the related estimated cost of labor and material to make
the necessary repairs. If actual future product return rates or the actual costs
of material and labor differ from the estimates, adjustments to the accrued
warranty liability would be made.

Results of Operations
---------------------

     2002 Compared to 2001
     ---------------------

     For the year ended December 31, 2002, the Company reported a net loss of
$325,086, compared to net income of $173,606 reported for the same period of
2001. The net loss for 2002 was due primarily to the write off of slow moving
and excess inventory in the third and fourth quarter of 2002, resulting from a
slowdown in sales growth and the Company's decision in the fourth quarter of
2002 to discontinue the sale, service and repair of former Mallinkrodt and other
apnea monitors (including models 9500/9550 and A-2000).

     The Company's revenues by product line are approximately as follows:

                                       2002              2001

          Monitors                $  5,047,536      $  5,428,477
          Modules                    4,029,734         3,136,428
          Accessories                3,346,418         3,360,999
          Electrodes                 1,211,768         1,330,086
          Other                      1,389,535         1,561,197
                                  ------------      ------------
                                  $ 15,024,991      $ 14,817,187
                                  ============      ============

     The Company generated revenue of $15,024,991 for the year ended December
31, 2002, a slight increase of $207,804 over the comparable period of 2001. The
increase in revenues during 2002 was primarily attributable to module sales to
Original Equipment Manufacturers ("OEMs"), which increased by $893,306 or 28.5
percent. This increase was offset primarily by overall sales of our monitor
products, which decreased by $380,941 or 7 percent.

     The Company believes that 2003 will bring increased revenues and increased
profits. The introduction of a new vital signs monitor offers improved product
to our existing markets and will provide an entry to expand into new market
areas.

<PAGE>
                                                                         Page 10

     Shortly after the November 2000 acquisition of certain assets and
assumption of certain liabilities related to the AMI(R) Plus home infant apnea
monitor product line from Mallinkrodt, Inc., the two companies concluded that
certain apnea monitors previously sold required modifications and associated
upgrades to address a design deficiency which existed prior to the acquisition.
Under the auspices of the FDA, the modifications and upgrades were started
during December 2001 and are expected to be completed by December 31, 2003.
Mallinkrodt, Inc. has agreed to indemnify and reimburse the Company for related
engineering costs to redesign the upgrade, costs to administer the retrofit, the
cost of the modifications and upgrades, and a reasonable profit margin. The
reimbursement received from Mallinkrodt for the cost of the upgrade plus a
reasonable profit margin is being recorded as revenue, while the reimbursements
received related to costs to administer retrofit and costs to redesign the
upgrade have been recorded as reductions of expense as follows:

                                                        2002           2001
                                                        ----           ----

          Revenues                                    $840,592       $261,025
          Selling, general and administrative              --          60,507
          Research and development                     133,859        210,185
                                                      --------       --------
                                                      $974,451       $531,717
                                                      ========       ========

     Cost of product sales for the year ended December 31, 2002, increased by
$816,104 to $9,005,220. Cost of product sales as a percentage of net product
sales was 59.9 percent for 2002, compared to 55.3 percent for the same period of
2001. The unfavorable impact for 2002 was due primarily to the write off of slow
moving and obsolete inventory. The write off of inventory resulted from the
build up of inventory in anticipation of sales growth which did not materialize,
the continued decrease in demand of certain AMI Plus monitors in light of the
product design deficiency described above, and the Company's decision to
discontinue the sale, service and repair of certain products. As a result, the
Company recorded $648,000 in inventory provisions, including $175,000 in the
third quarter and $473,000 in the fourth quarter to write off unsaleable
inventory. The unfavorable impact to cost of sales was also due to the service
and repair of certain apnea monitors, which have a lower gross profit margin.
The Company anticipates that the discontinued service and repair of the
9500/9550 and A-2000 monitors will ultimately stimulate an increase of sales on
the Company's new apnea software and increase sales of AMI Plus and 511 apnea
monitors.

     Selling, General and Administrative (SG&A) aggregate expenses for the years
ended December 31, 2002 and 2001 were $5,239,036 and $5,631,936, respectively.
The decrease in SG&A expenses of $392,900 is due primarily to the reduction of
advertising and promotional expenses for the apnea product line that was heavily
promoted in 2001.

     Research and Development ("R&D") aggregate expenses for the year ended
December 31, 2002 were $1,675,167 compared to $1,102,366 from the same period of
2001. The increase was primarily the result of increased headcount ($320,000),
higher salary and related payroll expense ($63,000) and increased clinical
research and outside consulting ($48,000). Approximately $284,157 and $242,116,
respectively, was received under a Phase II Grant from the National Institutes
of Health (NIH), and $133,859 and $210,185, respectively, was received from
Mallinkrodt reducing aggregate R&D expenses to $1,257,151 and $650,065 for the
years ended December 31, 2002 and 2001.

     The Company received $7,848 in interest income and incurred $254,293 of
interest expense during 2002, compared with interest income of $26,879 and
interest expense of $238,344 during the prior year.

     Income tax benefits of $397,775 and $39,000, respectively, were recorded by
the Company during the years ended December 31, 2002 and 2001, respectively. The
implied effective tax rate was 55.0% in 2002 and differed from the statutory
rate as a result primarily of benefits from federal and state research and
development tax credits. During 2001, the tax benefit recorded was due to
foreign sales and the reversal of income tax reserves no longer required.

<PAGE>
                                                                         Page 11
2001 Compared to 2000
---------------------

     Net income for the year ended December 31, 2001 was approximately $174,000
($0.02 per common share on a diluted basis), compared to approximately $636,000
($0.06 per common share on a diluted basis) reported for the same period of
2000. While overall sales increased on a comparative basis over the prior year,
approximately $4,000,000 of these sales were attributable to our new apnea
product line acquired in November 2000. The mix of product sold during 2001, as
compared to the same period last year, has been heavily weighted toward product
with traditionally lower gross margins. In addition, production and support
costs associated with the new product line are higher than expected due to
investment necessary to build and strengthen our manufacturing capacity and
know-how to support the new line. The Company also expanded and invested in
building its sales force and administrative functions necessary to support
anticipated sales growth for its apnea product line acquired in November 2000.

     The Company's revenues for the year ended December 31, 2001 increased by
approximately $2,685,000 or 22 percent to $14,817,000 compared to revenues of
approximately $12,132,000 for the comparable period of 2000. Sales of the apnea
product line acquired in November 2000 were primarily responsible for the
increase in overall sales, while sales to OEMs and electrode products decreased
by 17 percent and 28 percent, respectively.

     The Company's revenues by product line were approximately as follows:

                                       2001              2000

          Monitors                $  5,428,000      $  3,854,000
          Modules                    3,136,000         3,723,000
          Accessories                2,278,000           510,000
          Electrodes                 1,330,000         1,864,000
          Other                      2,645,000         2,181,000
                                  ------------      ------------
                                  $ 14,817,000      $ 12,132,000
                                  ============      ============

     Cost of product sales as a percentage of net product sales was 55.3 percent
for the year ended December 31, 2001, compared to 49.2 percent for the same
period in 2000. The unfavorable impact was due primarily to product mix, reduced
sales of OEM product and component cost increase.

     Selling, General and Administrative (SG&A) expenses for the years ended
December 31, 2001 and 2000 were approximately $5,632,000 and $4,432,000,
respectively. The increase in SG&A expenses of approximately $1,200,000 from the
prior year resulted primarily from increases in personnel in sales and marketing
functions, increases in selling and marketing expenses, including commissions
related to increased sales, as well as increases in insurance and other
administrative expenses. These increases were attributable to our new apnea
product line acquired in November 2000.

     Research and Development ("R&D") expenses for the year ended December 31,
2001 were approximately $1,102,000. The reimbursements of $210,000 from
Mallinkrodt, Inc. in connection with product line engineering costs and the
grant of $242,000 received from the National Institutes of Health (NIH) reduced
R&D expenses to approximately $650,000.

     The Company received $27,000 in interest income and incurred $238,000 of
interest expense during 2001, compared with interest income of $73,000 and
interest expense of $110,000 during the prior year. The increase in interest
expense resulted primarily from the debt associated with the acquisition of the
apnea product line during November 2000.

     An income tax benefit of $39,000 was recorded on a greater loss in 2001.
This compared to an income tax expense of $414,000 recorded on pre-tax income in
2000. The implied effective tax rate was 30.0 percent and 39.4 percent,
respectively, in 2001 and 2000.

<PAGE>
                                                                         Page 12
Financial Condition, Liquidity and Capital Resources
----------------------------------------------------

     As of December 31, 2002, the Company's cash and cash equivalents totaled
$325,670 compared to $337,129 at December 31, 2001, a decrease of 3.4 percent.
The Company's working capital, including cash, totaled $4,608,677 on December
31, 2002, compared to $5,319,951 on December 31, 2001. Cash flows from
operations totaled $406,796 during the year ended December 31, 2002. This
improvement over the year-ago period (when operations consumed $244,098) was
driven by improved collections of accounts receivable, a slowdown in payments to
vendors and reduced inventory levels. Cash provided by operations during 2002
was offset by purchases or property and equipment totaling $226,417, capitalized
software costs of $107,200 and net repayments of debt totaling $84,638. A
portion of the Company's cash equivalents is invested in short-term notes, which
earned interest of approximately $7,850 as of December 31, 2002.

     In January 1999, the Company obtained a nineteen-year, 7.25 percent fixed
rate, $1,310,000 mortgage from a local bank. The mortgage is secured by a first
mortgage lien on the Company `s facility consisting of 4.6 acres of land and the
24,000 square foot building. The monthly payments, including interest, are
approximately $11,000. In November 2000, the Company obtained a five-year, 8.59
percent fixed rate, $1,900,000 note payable from a local bank to finance the
acquisition of the apnea monitor product line. The monthly installments,
including interest, are approximately $39,100. The Company's scheduled debt
maturities over the next five years on these two long-term obligations are as
follows: 2003, $419,995; 2004, $458,742; 2005, $499,047; 2006, $55,238, 2007
$59,379 and $913,819 thereafter.

     During August 2002, the Company renewed its $3,000,000 line of credit with
a Connecticut bank. The line is repayable upon demand and matures in September
2003. Borrowings under the line of credit bear interest at the bank's base rate,
which may change from time to time. (Base rate as of December 31, 2002 was
4.25%). At December 31, 2002, there was $600,000 outstanding under this line.
The bank has a first security interest in substantially all assets of the
Company.

     In January 2003, the Company's co-founder and Executive Vice-President, Dr.
Myron Cohen passed away. As one of the Company's key employees, the Company held
an insurance policy for Dr. Cohen, where his estate and the Company would each
receive proceeds upon his death. In February 2003, the Company received proceeds
of $500,000 pursuant to this policy.

     Management has implemented a plan to achieve revenue growth, control
manufacturing costs and other operating costs, and achieve profitability and
positive cash flow in 2003. This plan includes several actions completed in
December 2002 such as reduction of 15 employees (approximately 15% of
workforce), deferral of scheduled salary and wage increases and salary
reductions for several members of the senior management team. These actions were
necessary to realign our operating costs with our current strategies and
expectations for growth.

     Based on cash on hand at December 31, 2002 and management's current
operating plan, the Company believes it has sufficient cash to meet all its
obligations as they come due through at least January 1, 2004. Management
further believes that with the anticipated improved cash flow and profit margin,
that the existing line of credit will be renewed in September 2003, although
there is no assurance the bank will renew such line of credit at terms
acceptable to the Company, or at all.

New Accounting Pronouncements
-----------------------------

     In July 2002, the Financial Accounting Standards Board issued SFAS No. 146,
"Accounting for Costs Associated with Exit or Disposal Activities." SFAS No. 146
addresses financial and accounting reporting for costs associated with exit or
disposal activities and nullifies Emerging Issues Task Force Issue No. 94-3,
"Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including certain costs Incurred in a Restructuring)." The
provisions of SFAS No. 146 are effective for exit or disposal activities
initiated

<PAGE>
                                                                         Page 13

after December 31, 2002. However, as encouraged in the statement, the Company
has early adopted SFAS No. 146 and has applied its respective provisions to the
workforce reduction activity undertaken in 2002.

     In December 2002, the Financial Accounting Standards Board issued SFAS No.
148, "Accounting for Stock-Based Compensation - Transition and Disclosure". SFAS
No. 148 amends SFAS No. 123 to address alternative methods of transition for a
voluntary change from the intrinsic to the fair value method of accounting for
stock-based employee compensation. The statement also amends certain disclosure
provisions in SFAS No. 123. CAS continues to utilize the intrinsic value method
to account for stock-based employee compensation. However, the disclosure
provisions of SFAS No. 148 have been implemented in the 2002 financial
statements.

     In November 2002 , the Financial Accounting Standards Board issued FIN 45,
"Guarantor's Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others." FIN 45 clarifies the
requirements of SFAS No. 5, "Accounting for Contingencies," relating to a
guarantor's accounting for, and disclosure of, certain guarantees that it has
issued including warranty costs. FIN 45 does not change any accounting for the
Company, but the Company has updated its 2002 disclosures to comply with the
requirements of this new pronouncement.

Item 7. Financial Statements
----------------------------
                                                                         Page

REPORT OF INDEPENDENT ACCOUNTANTS                                        F-1

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - COPY                          F-2

FINANCIAL STATEMENTS

     Balance Sheets as of December 31, 2002 and 2001                     F-3

     Statements of Operations for the Years Ended
      December 31, 2002, 2001 and 2000                                   F-4

     Statements of Shareholders' Equity for the Years
      Ended December 31, 2002, 2001 and 2000                             F-5

     Statements of Cash Flows for the Years Ended
      December 31, 2002, 2001 and 2000                                   F-6

NOTES TO FINANCIAL STATEMENTS                                        F-7 to F-17

Schedules called for under Regulation S-X are not submitted because they are not
applicable or are not required, or because the required information is included
in the financial statements or notes thereto.
<PAGE>


                                                                             F-1

                        Report of Independent Accountants


To the Board of Directors and Shareholders
of CAS Medical Systems, Inc.:


In our opinion, the accompanying balance sheet as of December 31, 2002 and
related statements of operations, of shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of CAS Medical
Systems, Inc. at December 31, 2002, and the results of its operations and its
cash flows for the year then ended in conformity with accounting principles
generally accepted in the United States of America. 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 audit. We
conducted our audit of these statements in accordance with auditing standards
generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion. The
financial statements of the Company as of December 31, 2001, and for each of the
two years in the period then ended, were audited by other independent
accountants who have ceased operations. Those independent accountants expressed
an unqualified opinion on those financial statements in their report dated
February 8, 2002.




/s/ PricewaterhouseCoopers LLP
Hartford, Connecticut
January 30, 2003
<PAGE>

                                                                             F-2

The following report is a copy of a report previously issued by Arthur Andersen
LLP and has not been reissued by Arthur Andersen LLP.

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, 2001 and 2000*, and the related
statements of income, shareholders' equity and cash flows for each of the three
years in the period ended December 31, 2001. 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 auditing standards generally accepted
in the United States. 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, 2001 and 2000*, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 2001 in
conformity with accounting principles generally accepted in the United States.


/s/ ARTHUR ANDERSEN LLP


Hartford, Connecticut
February 8, 2002

*- The 2000 financial statements are not required to be presented in the 2002
annual report.
<PAGE>

                                                                             F-3

CAS MEDICAL SYSTEMS, INC.

Balance Sheets
December 31, 2002 and 2001
<TABLE><CAPTION>
<S>                                                                                  <C>               <C>
ASSETS                                                                                   2002              2001
CURRENT ASSETS:
     Cash and cash equivalents                                                       $    325,670      $    337,129
     Accounts receivable, net of allowance for doubtful accounts
        of approximately $55,562 and $55,375 in 2002 and
        2001, respectively                                                              2,459,511         2,805,881
     Inventories                                                                        3,250,007         3,691,811
     Deferred tax assets                                                                  370,411           100,500
     Other current assets                                                                 336,767           194,510
                                                                                     ------------      ------------
            Total current assets                                                        6,742,366         7,129,831
                                                                                     ------------      ------------

PROPERTY AND EQUIPMENT:
     Land and improvements                                                                535,000           535,000
     Buildings and improvements                                                         1,472,162         1,472,162
     Machinery and equipment                                                            2,358,755         2,132,338
                                                                                     ------------      ------------
                                                                                        4,365,917         4,139,500

     Less - Accumulated Depreciation                                                   (1,920,042)       (1,540,450)
                                                                                     ------------      ------------
      Property and Equipment, net                                                       2,445,875         2,599,050
                                                                                     ------------      ------------
INTANGIBLE ASSETS, net                                                                    258,161           219,110
                                                                                     ------------      ------------
DEFERRED INCOME TAXES                                                                     139,333            56,000
                                                                                     ------------      ------------
            Total assets                                                             $  9,585,735      $ 10,003,991
                                                                                     ============      ============

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
     Current portion of long-term debt                                               $    419,995      $    387,654
     Line-of-credit                                                                       600,000           300,000
     Accounts payable                                                                     609,122           667,799
     Income taxes payable                                                                  70,287           144,514
     Accrued expenses                                                                     434,285           309,913
                                                                                     ------------      ------------
            Total current liabilities                                                   2,133,689         1,809,880
                                                                                     ------------      ------------
LONG-TERM DEBT, less current portion                                                    1,986,225         2,403,204
                                                                                     ------------      ------------
COMMITMENTS AND CONTINGENCIES (Note 13)

SHAREHOLDERS' EQUITY:
     Series A cumulative convertible preferred stock, $.001 par
         value per share, 1,000,000 shares authorized, no shares
         issued or outstanding in 2002 and 2001                                              --                --
     Common stock, $.004 par value per share, 19,000,000
        shares authorized, 9,645,077 shares issued and
        outstanding in 2002 and 2001                                                       38,581            38,581
     Additional paid-in capital                                                         2,834,913         2,834,913
     Retained earnings                                                                  2,592,327         2,917,413
                                                                                     ------------      ------------
            Total shareholders' equity                                                  5,465,821         5,790,907
                                                                                     ------------      ------------

            Total liabilities and shareholders' equity                               $  9,585,735      $ 10,003,991
                                                                                     ============      ============
</TABLE>

<PAGE>

                                                                             F-4

CAS MEDICAL SYSTEMS, INC.

Statements of Operations
For the Years Ended December 31, 2002, 2001 and 2000

<TABLE><CAPTION>
<S>                                                             <C>               <C>               <C>
                                                                    2002              2001             2000
REVENUES:
     Net product sales                                          $ 15,024,991      $ 14,817,187      $ 11,960,900
     Licensing fees                                                     --                --             171,172
                                                                ------------      ------------      ------------
                                                                  15,024,991        14,817,187        12,132,072

OPERATING EXPENSES:
     Cost of product sales                                         9,005,220         8,189,115         5,881,258
     Selling, general and administrative                           5,239,036         5,631,936         4,431,745
     Research and development                                      1,257,151           650,065           731,777
                                                                ------------      ------------      ------------
                        Operating (loss) income                     (476,416)          346,071         1,087,292

INTEREST INCOME                                                        7,848            26,879            72,862
INTEREST EXPENSE                                                    (254,293)         (238,344)         (110,421)
                                                                ------------      ------------      ------------

                        (Loss) income before (benefit from)
                           provision for income taxes               (722,861)          134,606         1,049,733

(BENEFIT FROM) PROVISION FOR INCOME TAXES                           (397,775)          (39,000)          414,000
                                                                ------------      ------------      ------------
                        Net (loss) income                       $   (325,086)     $    173,606      $    635,733
                                                                ============      ============      ============

WEIGHTED AVERAGE NUMBER OF COMMON
     SHARES OUTSTANDING:
     Basic                                                         9,645,077         9,603,954         9,468,070
                                                                ============      ============      ============
     Diluted                                                            --          10,563,995        10,578,461
                                                                ============      ============      ============
(LOSS) EARNINGS PER COMMON SHARE:
     Basic                                                      $       (.03)     $        .02      $        .07
                                                                ============      ============      ============
     Diluted                                                    $       --        $        .02      $        .06
                                                                ============      ============      ============
</TABLE>
<PAGE>

                                                                             F-5

CAS MEDICAL SYSTEMS, INC.

Statements of Changes in Shareholders' Equity
For the Years Ended December 31, 2002, 2001 and 2000

<TABLE><CAPTION>

                                                               Additional
                                       Common Stock              Paid-In        Retained
                                  Shares          Amount         Capital        Earnings           Total

<S>                            <C>             <C>             <C>             <C>              <C>
BALANCE, December 31, 1999       9,457,577     $    37,831     $ 2,730,626     $ 2,108,074      $ 4,876,531

     Net income                       --              --              --           635,733          635,733
     Common stock issued            40,000             160          23,678            --             23,838
                               -----------     -----------     -----------     -----------      -----------

BALANCE, December 31, 2000       9,497,577          37,991       2,754,304       2,743,807        5,536,102

     Net income                       --              --              --           173,606          173,606
     Common stock issued           147,500             590          80,609            --             81,199
                               -----------     -----------     -----------     -----------      -----------

BALANCE, December 31, 2001       9,645,077          38,581       2,834,913       2,917,413        5,790,907

      Net loss                        --              --              --          (325,086)        (325,086)
                                               -----------     -----------     -----------      -----------

BALANCE, December 31, 2002       9,645,077     $    38,581     $ 2,834,913     $ 2,592,327      $ 5,465,821
                               ===========     ===========     ===========     ===========      ===========
</TABLE>
<PAGE>

                                                                             F-6

CAS MEDICAL SYSTEMS, INC.

Statements of Cash Flows
For the Years Ended December 31, 2002, 2001 and 2000

<TABLE><CAPTION>
<S>                                                                     <C>              <C>              <C>

                                                                            2002             2001             2000
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net (loss) income                                                  $  (325,086)     $   173,606      $   635,733
     Adjustments to reconcile net (loss) income to net cash
      provided by (used in) operating activities:
           Depreciation and amortization                                    447,741          426,234          329,678
           Deferred income taxes                                           (353,244)           4,000          (23,000)
           Non-cash stock compensation                                         --              8,200             --
     Changes in operating assets and liabilities:
           Accounts receivable                                              346,370          (77,567)      (1,103,638)
           Inventories                                                      441,804         (363,499)        (258,620)
           Other current assets                                            (142,257)        (107,438)         (24,677)
           Accounts payable, income taxes payable and
             accrued expenses                                                (8,532)        (307,634)         334,693
                                                                        -----------      -----------      -----------
                Net cash provided by (used in) operating activities         406,796         (244,098)        (109,831)
                                                                        -----------      -----------      -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Capitalized software development                                      (107,200)            --               --
     Purchase of assets                                                        --               --         (1,900,000)
     Expenditures for property and equipment                               (226,417)        (353,529)        (218,993)
                                                                        -----------      -----------      -----------
                Net cash used in investing activities                      (333,617)        (353,529)      (2,118,993)
                                                                        -----------      -----------      -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Borrowing under long-term debt                                            --               --          1,900,000
     Repayments under long-term debt                                       (384,638)        (353,124)         (35,583)
     Borrowings under line-of-credit, net                                   300,000          300,000             --
     Proceeds from issuance of common stock                                    --             72,999           23,838
                                                                        -----------      -----------      -----------
               Net cash provided by (used in) financing activities          (84,638)          19,875        1,888,255
                                                                        -----------      -----------      -----------
               Net decrease in cash and cash
                             equivalents                                    (11,459)        (577,752)        (340,569)

CASH AND CASH EQUIVALENTS, beginning of year                                337,129          914,881        1,255,450
                                                                        -----------      -----------      -----------
CASH AND CASH EQUIVALENTS, end of year                                  $   325,670      $   337,129      $   914,881
                                                                        ===========      ===========      ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW
     INFORMATION:
        Cash paid during the year for interest                          $   254,293      $   250,140      $    91,596
        Cash paid during the year for income taxes, net of refunds           (5,720)           2,490          568,038
</TABLE>
<PAGE>

                                                                             F-7

CAS MEDICAL SYSTEMS, INC.

Notes to Financial Statements

(1)      THE COMPANY

         CAS Medical Systems, Inc. (the "Company") operates in one business
         segment and 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 both internationally and in the
         United States. The Company's operations and manufacturing facilities
         are located in the United States. During 2002, 2001 and 2000, the
         Company had sales to one customer which, in the aggregate, accounted
         for approximately 20%, 16% and 22% of revenues, respectively. The
         Company generated revenues from international sales (principally to
         Europe), including licensing fee revenues, of approximately $2.6
         million, $3.0 million and $3.3 million, respectively, in 2002, 2001,
         and 2000.

         The Company's revenues by product line are approximately as follows:

                                      2002            2001            2000

                  Monitors        $ 5,047,536     $ 5,428,477     $ 3,854,000
                  Modules           4,029,734       3,136,428       3,723,000
                  Accessories       3,346,418       3,360,999         510,000
                  Electrodes        1,211,768       1,330,086       1,864,000
                  Other             1,389,535       1,561,197       2,181,000
                                  -----------     -----------     -----------

                                  $15,024,991     $14,817,187     $12,132,000
                                  ===========     ===========     ===========

         During November 2000, the Company acquired certain assets and assumed
         certain liabilities related to the AMI(R) Plus Home Infant Apnea
         Monitor product line from a third party for $1.9 million, which was
         financed with the proceeds from a note payable to a bank. This product
         line includes apnea monitors, accessories and related data retrieval
         software programs for hospital and home use. The acquisition included
         inventories, related manufacturing equipment and intangible assets and
         accrued expenses.

          Shortly after the November 2000 acquisition of certain assets and
         assumption of certain liabilities related to the AMI(R) Plus home
         infant apnea monitor product line from Mallinkrodt, Inc., the two
         companies concluded that certain apnea monitors previously sold
         required modifications and associated upgrades to address a design
         deficiency which existed prior to the acquisition. Under the auspices
         of the FDA, the modifications and upgrades were started during December
         2001 and are expected to be completed by December 31, 2003.
         Mallinkrodt, Inc. has agreed to indemnify and reimburse the Company for
         related engineering costs to redesign the upgrade, costs to administer
         the retrofit, the cost of the modifications and upgrades, and a
         reasonable profit margin. The reimbursement received from Mallinkrodt
         for the cost of the upgrade plus a reasonable profit margin is being
         recorded as revenue, while the reimbursements received related to costs
         to administer retrofit and costs to redesign the upgrade have been
         recorded as reductions of expense as follows:

                                                   2002         2001
                                                 --------     --------

         Revenues                                $840,592     $261,025
         Selling, general and administrative         --         60,507
         Research and development                 133,859      210,185
                                                 --------     --------
                                                 $974,451     $531,717
                                                 ========     ========
<PAGE>

                                                                             F-8

 (2)     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

         CASH AND CASH EQUIVALENTS

         The Company considers all highly liquid investments with an original
         maturity of three months or less to be cash equivalents.

         PROPERTY AND EQUIPMENT

         Property and equipment are stated at cost. Property 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 for
         machinery and equipment, and 20 years for building and improvements.
         Maintenance and repairs are charged to expense for machinery and
         equipment when incurred. Depreciation expense on property and equipment
         totaled $379,592, $354,970, and $248,588 in 2002, 2001 and 2000,
         respectively.

         LONG-LIVED ASSETS

         Impairments of long-lived assets are accounted for in accordance with
         the provisions of Statement of Financial Accounting Standards (SFAS)
         No. 144, "Accounting for the Impairment of Long-Lived Assets and
         Long-Lived Assets to be Disposed of." SFAS No. 144 requires a company
         to review long-lived assets for impairment whenever events or changes
         in circumstances indicate that the carrying amount of an asset may not
         be recoverable. The Company believes that long-lived assets are fully
         recoverable, and accordingly, no impairment is reflected in the
         Company's reported results of operations for the years ended December
         31, 2002, 2001 and 2000.

         INTANGIBLE ASSETS

         Intangible assets consist of:
                                                           2002         2001
                                                        ---------    ---------

         Intangible assets and purchased technology     $ 337,600    $ 338,350
         Capitalized software                             107,200         --
                                                        ---------    ---------
                                                          444,800      338,350
         Accumulated amortization                        (186,639)    (119,240)
                                                        ---------    ---------
                                                        $ 258,161    $ 219,110
                                                        =========    =========

         The purchased intangible assets and licensed technology acquired in
         connection with the product line acquisitions in 2000 and 1999 are
         being amortized over five years on the straight-line basis.
         Amortization expense associated with these intangible assets was
         approximately $67,399, $67,000, and $45,000 for the years ended
         December 31, 2002, 2001 and 2000, respectively.

         Costs associated with the development of new external use software
         products are expensed as incurred until technological feasibility has
         been established in accordance with SFAS No. 86 "Accounting for the
         Costs of Computer Software to be Sold, Leased or Otherwise Marketed."
         Technological feasibility is demonstrated by the completion of a
         detailed design plan. Capitalization will cease when the product is
         available for general release to customers. For the year ended December
         31, 2002, the Company has capitalized $107,200 of costs related to
         development of new apnea monitor software and expects to begin
         amortization of these costs in 2003 when the software is released.
<PAGE>

                                                                             F-9

         Scheduled amortization expenses of intangible assets over the next five
         years are as follows:

                2003                               $  94,200
                2004                                  96,800
                2005                                  58,100
                2006                                   9,061
                                                   ---------
                                                   $ 258,161
                                                   =========

         REVENUE RECOGNITION

         Revenues from product sales are recognized when evidence of an
         arrangement exists, delivery has occurred, the selling price is fixed
         and determinable, and collectibility is reasonably assured.

         ACCRUED WARRANTY COSTS

         The Company warrants some of its products against defects and failures
         for up to three years and records the estimated cost of such product
         warranties at the time the sale is recorded. Estimated warranty costs
         are based upon actual past experiences of product returns and the
         related estimated cost of labor and material to make the necessary
         repairs.

                                               2002

         Beginning balance                  $  60,000
         Additions to reserve                 150,010
         Warranty costs incurred             (115,010)
                                            ----------
         Ending balance                     $   95,000
                                            ==========

         RESEARCH AND DEVELOPMENT COSTS

         The Company expenses all research and development costs as incurred.
         Research and development expense includes direct costs for salaries,
         employee benefits, facility related expenses and depreciation.

         EARNINGS PER COMMON SHARE

         The Company computes earnings per common share in accordance with SFAS
         No. 128, "Earnings Per Share." Under SFAS No. 128, basic earnings per
         share is calculated by dividing net income by the weighted average
         number of shares of common stock outstanding during the year. No
         dilution for any potentially dilutive securities is included. Diluted
         earnings per share assumes the exercise or conversion of dilutive
         securities using the treasury stock method. Under SFAS 128, Diluted EPS
         equals Basic EPS in periods of net loss, as the inclusion of any
         outstanding options or warrants would be anti-dilutive.

         As of December 31, 2002, the Company had outstanding options and
         warrants allowing for the purchase of 757,800 and 1,395,000 shares of
         common stock, respectively.
<PAGE>

                                                                            F-10

         Under SFAS No. 128, a summary of the Company's basic and diluted (loss)
         earnings per share is as follows:

<TABLE><CAPTION>
                                                              2002            2001            2000
<S>                                                       <C>             <C>             <C>
         Net (loss) income                                $  (325,086)    $   173,606     $   635,733
                                                          ===========     ===========     ===========

         Weighted average shares outstanding                9,645,077       9,603,954       9,468,070
         Add: Dilutive effect of outstanding warrants
              and options                                        --           960,041       1,110,391
                                                          -----------     -----------     -----------
         Total weighted average shares of dilutive
              securities outstanding                             --        10,563,995      10,578,461
                                                          ===========     ===========     ===========
         Earnings (loss) per share - basic                $      (.03)    $       .02     $       .07
                                                          ===========     ===========     ===========
         Earnings per share - dilutive                    $      --       $       .02     $       .06
                                                          ===========     ===========     ===========
</TABLE>

         USE OF ESTIMATES

         The preparation of financial statements in conformity with accounting
         principles generally accepted in the United States 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. Such
         estimates that are particularly sensitive to change in the near term
         are inventory valuation, capitalized software development costs,
         allowance for doubtful accounts and warranty accrual. Actual results
         could differ from those estimates.

         SEGMENT REPORTING

         SFAS No. 131, "Disclosure about Segments of an Enterprise and Related
         Information," establishes annual and interim reporting standards for an
         enterprise's operating segments and related disclosures about its
         products, services, geographic areas and major customers. The Company
         operates in only one segment. In addition, all long-lived assets are
         maintained in the United States.

         STOCK-BASED COMPENSATION

         The Company primarily grants qualified stock options for a fixed number
         of shares to employees with an exercise price equal to the fair market
         value of the shares at the date of the grant. The Company has adopted
         the disclosure only provisions of SFAS No. 123, "Accounting for
         Stock-Based Compensation," as amended by SFAS No. 148, "Accounting for
         Stock-Based Compensation Transition and Disclosure.

         SFAS No. 123, "Accounting for Stock-Based Compensation," encourages,
         but does not require, companies to record compensation cost for
         stock-based employee compensation plans at fair value. The Company has
         chosen to continue to account for stock-based compensation using the
         intrinsic value method prescribed in Accounting Principles Board
         Opinion No. 25, "Accounting for Stock Issued to Employees," and related
         interpretations. Accordingly, had compensation cost for the 1994 Plan
         been determined consistent with SFAS No. 123, the Company's 2002, 2001
         and 2000 net (loss) income and earnings per share would have been
         changed to the following pro forma amounts:
<PAGE>

                                                                            F-11

<TABLE><CAPTION>
<S>                                                        <C>            <C>           <C>
                                                              2002           2001          2000

         Net (loss) income:     As reported                $(325,086)     $ 173,606     $ 635,733
                                Compensation expense for
                                stock options based on
                                fair value                   118,652         88,900        68,165
                                Pro forma                   (443,738)        84,706       567,568

         (Loss) Earnings
            per share:          As reported -                   (.03)           .02           .07
                                Pro forma - Basic               (.05)           .01           .06
                                As reported - Diluted            --             .02           .06
                                Pro forma - Diluted              --             .01           .05
</TABLE>

         FAIR VALUE OF FINANCIAL INSTRUMENTS

         The carrying value of long-term debt approximates its fair value based
         upon currently available debt instruments having similar interest rates
         and maturities. The carrying amounts of the Company's other financial
         instruments approximate their fair value.

         NEW ACCOUNTING PRONOUNCEMENTS

         In July 2001, the FASB issued SFAS No. 141, "Business Combinations",
         and SFAS No. 142, "Goodwill and Other Intangible Assets." The primary
         changes resulting from these standards consist of the cessation of the
         "pooling of interests" method of accounting, and addition of criteria
         for how goodwill and intangible assets will be segregated, amortized
         (or not amortized), reviewed for impairment (if any), and disclosed
         within the footnotes to financial statements. The Company's adoption of
         SFAS No. 141 and No. 142 had no impact on the historical financial
         statements. The adoption of SFAS No. 142 did not impact the Company's
         accounting for intangible assets with an aggregate carrying value of
         $258,161 at December 31, 2002 and such assets will continue to be
         amortized.

          In July 2002, the Financial Accounting Standards Board issued SFAS No.
         146, "Accounting for Costs Associated with Exit or Disposal
         Activities." SFAS 146 addresses financial and accounting reporting for
         costs associated with exit or disposal activities and nullifies
         Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for
         Certain Employee Termination Benefits and Other Costs to Exit an
         Activity (including certain costs Incurred in a Restructuring)." The
         provisions of SFAS No. 146 are effective for exit or disposal
         activities initiated after December 31, 2002. However, as encouraged in
         the statement, the Company has early adopted SFAS No. 146 and has
         applied its respective provisions to the exit activity undertaken in
         2002. In December 2002, the Company announced a program to reduce costs
         and enhance profitability in 2003. As part of this plan, CAS
         reorganized certain departments and eliminated 15 positions,
         approximately 15% of its total workforce. The total amount of costs
         accrued was $53,070 and properly recognized as a December 2002 expense.
         The severance payments were paid to terminated employees subsequent to
         year-end.

          In December 2002, the Financial Accounting Standards Board issued SFAS
         No. 148, "Accounting for Stock-Based Compensation - Transition and
         Disclosure". SFAS No. 148 amends SFAS No. 123 to address alternative
         methods of transition for a voluntary change from the intrinsic to the
         fair value method of accounting for stock-based employee compensation.
         The statement also amends certain disclosure provisions in SFAS No.
         123. CAS continues to utilize the intrinsic value method as specified
         under APB No. 25, "Accounting for Stock Issued to Employees," to
         account for stock-based employee compensation. However, the disclosure
         provisions of SFAS No. 148 have been implemented in the 2002 financial
         statements.
<PAGE>

                                                                            F-12

         In November 2002, the Financial Accounting Standards Board issued FIN
         45, "Guarantor's Accounting and Disclosure Requirements for Guarantees,
         Including Indirect Guarantees of Indebtedness of Others." FIN 45
         elaborates on the disclosures to be made by a guarantor in its interim
         and annual financial statements about its obligations under certain
         guarantees that it has issued, including warranty costs. The Company
         has updated its 2002 disclosures to comply with the requirements of
         these new pronouncements.

(3)      RECEIVABLES

         Receivables are net of the allowance for doubtful accounts. The
         reconciliation of the allowance for doubtful accounts is as follows:

<TABLE><CAPTION>
<S>                                                  <C>           <C>           <C>
                                                            Year Ended December 31,
                                                       2002          2001          2000
                                                     --------      --------      --------
         Balances at beginning of period             $ 55,375      $ 61,800      $ 30,054
         Doubtful accounts provision                   65,000        15,000        30,000
           Accounts (written off) recovered, net      (64,813)      (21,425)        1,746
                                                     --------      --------      --------
         Balance at end of period                    $ 55,562      $ 55,375      $ 61,800
                                                     ========      ========      ========
</TABLE>

(4)      INVENTORIES

         Inventories are stated at the lower of first-in, first-out (FIFO) cost
         or market and consist of the following:

                                      2002                 2001

         Raw materials             $1,987,746           $2,013,824
         Work in process              438,047              896,477
         Finished goods               824,214              781,510
                                   ----------           ----------

                                   $3,250,007           $3,691,811
                                   ==========           ==========

         In 2002, the Company recorded $648,000 in inventory provisions,
         including $175,000 in the third quarter and $473,000 in the fourth
         quarter to write off unsaleable inventory. The write off of inventory
         resulted from the build-up of inventory in anticipation of sales growth
         which did not materialize, the continued decrease in demand of certain
         AMI Plus monitors in light of the product design deficiency described
         in Note 1 and the Company's decision to discontinue the sale, service
         and repair of certain products.

(5)      FINANCING ARRANGEMENTS

         LINE-OF-CREDIT

         During August 2002, the Company renewed its $3,000,000 line-of-credit
         with a Connecticut bank. The line is repayable upon demand and matures
         in September 2003. Borrowings under the line-of-credit bear interest at
         the bank's base rate, which may change from time to time (4.25% at
         December 31, 2002). At December 31, 2002, borrowings outstanding under
         this line totaled $600,000. Substantially all assets of the Company
         have been pledged as collateral under the line-of-credit.
<PAGE>

                                                                            F-13

         LONG-TERM DEBT

         Long-term debt consists of the following:
<TABLE><CAPTION>
<S>                                                                     <C>            <C>
                                                                           2002           2001
         Mortgage payable to a bank in monthly installments,
              including interest, of approximately $11,000 at 7.25%
              per annum, collateralized  by the Company's primary
              operating facility (matures January 2018)                 $1,160,940     $1,205,731

         Note payable to a bank in monthly installments,
              including interest, of approximately $39,100 at
              8.59% per annum, collateralized by substantially all
              corporate assets (matures December 2005)                   1,245,280      1,585,127
                                                                        ----------     ----------

                                                                         2,406,220      2,790,858

         Less: current portion                                             419,995        387,654
                                                                        ----------     ----------

                                                                        $1,986,225     $2,403,204
                                                                        ==========     ==========
</TABLE>

         Scheduled maturities of principal under long-term debt over the next
         five years are as follows:

                  2003                             $  419,995
                  2004                                458,742
                  2005                                499,047
                  2006                                 55,238
                  2007                                 59,379
                  Thereafter                          913,819
                                                   ----------
                                                   $2,406,220
                                                   ==========

(6)      ACCRUED EXPENSES

         Accrued expenses consist of the following:

                                                2002         2001
                                              --------     --------
                Accrued payroll               $191,662     $ 99,977
                Accrued professional fees       49,628       55,324
                Accrued warranty expenses       95,000       60,000
                Other accrued expenses          97,995       94,612
                                              --------     --------
                                              $434,285     $309,913
                                              ========     ========

(7)      LICENSE AGREEMENT

         On July 27, 1994, the Company entered into a four-year licensing
         agreement (subsequently amended through the year 2000) with a major
         European manufacturer of medical equipment, canceling and superseding a
         prior licensing agreement with this company. 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 received
         $1,500,000 and the right to earn royalties through the year 2000. The
         manufacturer had the option to extend the license, but elected not to
         do so. During the year ended December 31, 2000, the Company earned
         royalties totaling $171,172 pursuant to this agreement.
<PAGE>

                                                                            F-14

(8)      STOCK-BASED COMPENSATION PROGRAMS

         Stock options

         In June 1994, the Board of Directors and shareholders adopted the 1994
         Employee's Incentive Stock Option Plan (the "1994 Plan"). The exercise
         price for common stock issued under the 1994 Plan is to be no less than
         the fair value of the stock at the grant date of the options. Pursuant
         to the 1994 Plan, 1,250,000 shares of common stock have been reserved
         for employee (including officers and directors) option exercises. An
         option granted under the 1994 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 option holder's percentage of ownership
         of the Company. In the event employment is terminated, the employee no
         longer has the right to exercise options unless expressly permitted by
         the Board of Directors.

         The fair value of each option is estimated on the date of grant using
         the Black-Scholes option pricing model with the following
         weighted-average assumptions used for grants in 2002, 2001 and 2000:
         risk-free interest rates of 5.5%, 5.3% and 6.1%, expected lives of 10
         years; dividend yield of 0% and expected volatility of 118%, 77% and
         78%, respectively. A summary of the Company's stock option plans and
         changes during the years then ended is presented below:

<TABLE><CAPTION>
                                                       2002                        2001                        2000
                                                            Weighted                    Weighted                   Weighted
                                                            Average                     Average                     Average
                                                            Exercise                    Exercise                    Exercise
                                               Shares         Price        Shares        Price         Shares         Price
<S>                                            <C>          <C>            <C>          <C>            <C>          <C>
         Outstanding at
              beginning of year                946,400      $    .65       886,400      $    .57       963,900      $    .57
                 Granted                       235,500           .61       275,000           .83        25,000           .50
                 Exercised                        --            --        (137,500)          .53       (40,000)          .60
                 Canceled                     (424,100)          .69       (77,500)          .67       (62,500)          .52
                                              --------                    --------                    --------
         Outstanding at end
              of year                          757,800      $    .62       946,400      $    .65       886,400      $    .57
                                              ========                    ========                    ========
         Exercisable at end
              of year                          482,300      $    .60       671,400      $    .57       671,700      $    .58
                                              ========                    ========                    ========

         Weighted average grant-date fair
              value of options
              granted during
              the year                                      $    .58                    $    .71                    $    .42
</TABLE>
<PAGE>

                                                                            F-15

         The following table summarizes information about stock options
         outstanding at December 31, 2002:

<TABLE><CAPTION>
                                                 Weighted
                                                  Average       Weighted                      Weighted
                                                 Remaining       Average                       Average
              Range of           Number         Contractual     Exercise       Number         Exercise
           Exercise Prices     Outstanding      Life (Years)      Price      Exercisable        Price

<S>      <C>                       <C>              <C>         <C>              <C>          <C>
         $ .31 -  $  .38            35,000           1.3         $  .31           35,000       $  .31
           .51 -     .65           561,300           7.9            .57          290,800          .54
           .75 -    1.52           161,500           6.4            .86          156,500          .79
         ---------------      ------------                                  ------------
         $ .31 -  $ 1.52           757,800           7.3            .62          482,300          .60
         ===============      ============                                  ============
</TABLE>

         WARRANTS

         Warrants to purchase 1,395,000 shares of common stock at a weighted
         average exercise price of $.51 per share remain outstanding at December
         31, 2002. These warrants have no specific expiration date and have an
         exercise price range of $0.31 to $1.00 per share.

(9)      LIFE INSURANCE

         During 2002, 2001 and 2000, the Company paid term-life insurance
         premiums of approximately $45,600, $40,700, and $33,000, respectively,
         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, respectively. 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. In January 2003, one of the
         officers died and in February 2003, the Company received proceeds of
         $500,000 pursuant to one of the policies.

(10)     401(k) PLAN

         The Company maintains 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 which are matched in part by discretionary
         contributions by the Company. The 2002, 2001 and 2000 contributions by
         the Company were $56,494, $50,386, and $49,961, respectively.

         The Company does not provide any other post-retirement or other
         post-employment benefits.

(11)     INCOME TAXES

         The Company follows SFAS No. 109, "Accounting for Income Taxes", 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 No. 109
         requires the recognition of future tax benefits to the extent that
         realization of such benefits are more likely than not.
<PAGE>

                                                                            F-16

         The (benefit from) provision for taxes consisted of the following at
         December 31:

<TABLE><CAPTION>
<S>                                                                <C>            <C>            <C>
                                                                      2002           2001           2000
         Current:
              Federal                                              $ (50,374)     $ (48,000)     $ 377,000
              State                                                    5,843          5,000         60,000
                                                                   ---------      ---------      ---------

                     Total                                           (44,531)       (43,000)       437,000
                                                                   ---------      ---------      ---------
         Deferred:
              Federal                                               (284,515)         3,000        (20,000)
              State                                                  (68,729)         1,000         (3,000)
                                                                   ---------      ---------      ---------

                     Total                                          (353,244)         4,000        (23,000)
                                                                   ---------      ---------      ---------

                     (Benefit from) provision for income taxes     $(397,775)     $ (39,000)     $ 414,000
                                                                   =========      =========      =========
</TABLE>

         During 2000 and 2001, the effective tax rate differed from the federal
         statutory rate of 34% in each year principally due to state income
         taxes. During the year ended December 31, 2002, the effective tax rate
         of 55% is greater than the the federal statutory rate of 34% due to
         state tax benefit of 6%, recognition of prior year R&D tax credits
         claimed of 10%, and current year R&D tax credits of 5%.

         The components of the Company's deferred tax assets at December 31 are
         approximately as follows:

                                                         2002         2001

         Inventories                                   $317,729     $ 60,000
         Warranty reserve                                33,241       21,000
         Bad debt reserve                                19,441       19,500
         Tax credits                                     50,098         --
         Depreciation/Amortization                       89,235         --
         Other                                             --         56,000
                                                       --------     --------

                                                       $509,744     $156,500
                                                       ========     ========

(12)     GRANT AWARD

         In September 2000, the Company was awarded a Phase II grant by the
         National Institute of Neurological Disorders and Stroke of the National
         Institutes of Health under its Small Business Innovative Research
         Program. This grant, expected to be between $800,000 and $1,000,000 in
         the aggregate, will be used to continue development of a new technology
         that can non-invasively measure the brain oxygenation level of a
         neonatal patient. In accordance with the terms of the grant, the
         Company will be reimbursed for qualifying expenditures under the
         agreement. Funding provided to the Company is recorded as a reduction
         of research and development expenses. During the years ended December
         31, 2002, 2001 and 2000, approximately $284,157, $242,116 and $73,758,
         respectively, of costs were reimbursed under the grant. The Company
         recognizes grant funds as the qualifying costs are incurred.

(13)     COMMITMENTS AND CONTINGENCIES

         During November 2000, the Company leased facilities comprised of
         approximately 7,300 square feet of manufacturing space, located at 31
         Business Park Drive, Branford, CT 06405. The lease expires on December
         31, 2003. The annual base lease payment under this lease is
         approximately $47,650 for 2003. Rent expense was $65,807, $60,462 and
         $3,571 for 2002, 2001 and 2000, respectively.
<PAGE>

                                                                            F-17

         The Company is committed under an employment agreement with one officer
         for payments aggregating approximately $215,000 per year, which expires
         on August 31, 2003.
<PAGE>

                                                                         Page 14

Item 8.  Changes in and Disagreements with Accountants on Accounting and
------------------------------------------------------------------------
         Financial Disclosure
         --------------------

         None.

                                    PART III

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
----------------------------------------------------------------------
         Compliance with Section 16(a) of the Exchange Act
         -------------------------------------------------


          Reference is made to the sections entitled "Election of Directors",
"Management", and "Section 16(a) Beneficial Ownership Reporting Compliance" in
the Registrant's definitive proxy statement to be mailed to shareholders on or
about April 21, 2003, and to be filed with the Securities and Exchange
Commission.

Item 10.  Executive Compensation
--------------------------------

          Reference is made to the sections entitled "Compensation of Executive
Officers" and "Election of Directors" in the Registrant's definitive proxy
statement to be mailed to shareholders on or about April 21, 2003, and to be
filed with the Securities and Exchange Commission.

Item 11.  Security Ownership of Certain Beneficial Owners and Management and
----------------------------------------------------------------------------
          Related Stockholder Matters
          ---------------------------

          Reference is made to the section entitled "Stock Ownership" in the
Registrant's definitive proxy statement to be mailed to shareholders on or about
April 21, 2003, and to be filed with the Securities Exchange Commission.
Information with respect to securities authorized for issuance under equity
compensation plans is set forth in Part II, Item 5.

Item 12.  Certain Relationships and Related Transactions
--------------------------------------------------------

          The Company and Louis P. Scheps have entered into an employment
agreement pursuant to which Mr. Scheps serves as President and Chief Executive
Officer of the Company. As of September 1, 2000, the employment agreement was
amended (as amended, the "Employment Agreement") to extend its term through
August 31, 2003 and provide for a base salary of $215,000 per year. The
Employment Agreement also provides that if a "Change of Control" (as defined
below) occurs, and upon such Change of Control occurring, the Employment
Agreement is not extended for a period of at least one year following the stated
termination date of the Employment Agreement, then Mr. Scheps shall be paid a
lump sum of $250,000 on such stated termination date. "Change of Control" is
defined in the Employment Agreement to mean (i) a sale of all or substantially
all of the Company's assets, (ii) a merger involving the Company in which the
Company is not the survivor and the Company's stockholders prior to the merger
control less than fifty percent of the voting stock of the surviving entity,
(iii) a sale by the Company's stockholders to an acquirer or acquirers acting in
concert of more than a majority of the then outstanding stock of the Company
owned by the Company's stockholders, or (iv) any event similar to any of the
foregoing. In connection with the amendment of the Employment Agreement, Mr.
Scheps was granted a warrant to purchase 100,000 shares of the Company common
stock at an exercise price of $1.00 per share. This warrant is exercisable
solely in the event of a Change of Control.

Item 13.  Exhibits, List and Reports on Form 8-K
------------------------------------------------

          (A) 3.1 (a)  Certificate of Incorporation of Registrant*

                  (b)  By-Laws of Registrant*
<PAGE>

                                                                         Page 15

         10.1     Employment Agreement dated September 1, 1993 between the
                  Company and Louis P. Scheps

         10.2     Amendment Number One to Employment Agreement dated September
                  1, 1998 between the Company and Louis P. Scheps

         10.3     Amendment Number Two to Employment Agreement dated September
                  1, 2000 between the Company and Louis P. Scheps

         10.4     Amendment Number Three to Employment Agreement dated September
                  1, 2002 between the Company and Louis P. Scheps

         23.1     Consent of Independent Public Accountants

* Incorporated by reference from the Exhibits filed in the Registrant's
Registration Statement, dated April 15, 1985, filed with the Securities and
Exchange Commission.

          (B)  Reports on Form 8-K
               None filed during the fourth quarter of 2002.

Item 14.  Controls and Procedures
---------------------------------

     Within 90 days of the filing of this report, an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures was conducted under the supervision and with the participation of
the Chief Executive Officer and Chief Financial Officer. Based on this
evaluation, the Chief Executive Officer and Chief Financial Officer has
concluded that the Company's disclosure controls and procedures were adequate
and designed to ensure that information required to be disclosed by the Company
in this report is recorded, processed, summarized and reported in a timely
manner, including that such information is accumulated and communicated to
management, including the Chief Executive Officer and Chief Financial Officer,
as appropriate to allow timely decisions regarding required disclosure.

     There were no significant changes in internal controls or in other factors
that could significantly affect internal controls, including any corrective
actions with regard to significant deficiencies and material weaknesses in
internal controls, subsequent to the evaluation described above.
<PAGE>

                                                                         Page 16

SIGNATURES
----------

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.


CAS MEDICAL SYSTEMS, INC.
-------------------------

(Registrant)




/s/ Louis P. Scheps                            Date:  March 26, 2003
-----------------------------------
By:  Louis P. Scheps
     (President, Chief Executive Officer and
     Chief Financial and Accounting Officer)

In accordance with the Securities Exchange Act of 1934, the following persons on
behalf of the Registrant and in the capacities and on the dates indicated have
signed this report below.




/s/ Lawrence Burstein                          Date:  March 26, 2003
-----------------------------------
Lawrence Burstein, Director




/s/ Jerome Baron                               Date:  March 26, 2003
-----------------------------------
Jerome Baron, Director




/s/ Saul Milles                                Date:  March 26, 2003
-----------------------------------
Saul Milles, Director




/s/ Louis P. Scheps                            Date:  March 26, 2003
-----------------------------------
Louis P. Scheps, Director
<PAGE>

                                                                         Page 17

CERTIFICATIONS

I, Louis P. Scheps, certify that:

1.   I have reviewed this annual report on Form 10-KSB of CAS Medical Systems,
     Inc.;

2.   Based on my knowledge, this annual report does not contain any untrue
     statement of a material fact or omit to state a material fact necessary to
     make the statements made, in light of the circumstances under which such
     statements were made, not misleading with respect to the period covered by
     this annual report;

3.   Based on my knowledge, the financial statements, and other financial
     information included in this annual report, fairly present in all material
     respects the financial condition, results of operations and cash flows of
     the registrant as of, and for, the periods presented in this annual report;

4.   I am responsible for establishing and maintaining disclosure controls and
     procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the
     registrant and have:

     a.   Designed such disclosure controls and procedures to ensure that
          material information relating to the registrant, is made known to me
          particularly during the period in which this annual report is being
          prepared;

     b.   Evaluated the effectiveness of the registrant's disclosure controls
          and procedures as of a date within 90 days prior to the filing date of
          this annual report (the "Evaluation Date"); and

     c.   Presented in this annual report our conclusions about the
          effectiveness of the disclosure controls and procedures based on our
          evaluation as of the Evaluation Date;

5.   I have disclosed, based on my most recent evaluation, to the registrant's
     auditors and the audit committee of registrant's board of directors (or
     persons performing the equivalent functions):

     a.   All significant deficiencies in the design or operation of internal
          controls which could adversely affect the registrant's ability to
          record, process, summarize and report financial data and have
          identified for the registrant's auditors any material weaknesses in
          internal controls; and

     b.   Any fraud, whether or not material, that involves management or other
          employees who have a significant role in the registrant's internal
          controls; and

6.   I have indicated in this annual report whether or not there were
     significant changes in internal controls or in other factors that could
     significantly affect internal controls subsequent to the date of my most
     recent evaluation, including any corrective actions with regard to
     significant deficiencies and material weaknesses.

/s/ Louis P. Scheps
-----------------------------
Louis P. Scheps
President, Chief Executive Officer and Chief Financial and Accounting Officer


Date: March 26, 2003