Delaware | 06-1123096 |
(State or other jurisdiction of
Incorporation or organization)
|
(I.R.S. Employer Identification No.) |
Title of Each Class | Name of Each Exchange on Which Registered |
Common Stock, $.004 par value
|
The NASDAQ Capital Market |
Large accelerated filer o | Accelerated filer o |
Non-accelerated filer o
(Do not check if a smaller reporting company)
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Smaller reporting company x |
Page | ||
PART I
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Item 1
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Business
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4
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Item 1A
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Risk Factors
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14
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Item 1B
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Unresolved Staff Comments
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20
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Item 2
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Properties
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20
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Item 3
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Legal Proceedings
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20
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Item 4
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Mine Safety Disclosures
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20
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PART II
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||
Item 5
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Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
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21
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Item 6
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Selected Financial Data
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22
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Item 7
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Management’s Discussion and Analysis of Financial Condition and Results of Operations
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22
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Item 7A
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Quantitative and Qualitative Disclosures About Market Risk
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27
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Item 8
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Financial Statements and Supplementary Data
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28
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Report of Independent Registered Public Accounting Firm
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F-1
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Consolidated Balance Sheets as of December 31, 2013 and 2012
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F-2 to F-3
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Consolidated Statements of Operations for the Years Ended December 31, 2013 and 2012
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F-4
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Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2013 and 2012
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F-5
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Consolidated Statements of Cash Flows for the Years Ended December 31, 2013 and 2012
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F-6
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Notes to Consolidated Financial Statements
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F-7 to F-20
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Item 9
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Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
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29
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Item 9A
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Controls and Procedures
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29
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Item 9B
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Other Information
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29
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PART III
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||
Item 10
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Directors, Executive Officers and Corporate Governance
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30
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Item 11
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Executive Compensation
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30
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Item 12
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Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
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30
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Item 13
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Certain Relationships and Related Transactions, and Director Independence
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30
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Item 14
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Principal Accountant Fees and Services
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30
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PART IV
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||
Item 15
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Exhibits and Financial Statement Schedules
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31
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Signatures
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34
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●
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Invest in FORE-SIGHT – Given the unique clinical value of FORE-SIGHT and its position as a best-in-class cerebral oximeter in an expanding market, we believe that substantial investment in the FORE-SIGHT opportunity is warranted. Therefore, over the past three years we have committed significant resources to expand, upgrade, and revitalize our FORE-SIGHT selling organization, and to increase our marketing and clinical support for the product. We also engaged in a major research and development initiative to launch a second generation FORE-SIGHT product, called FORE-SIGHT ELITE, to improve the functionality of the monitor, lower manufacturing costs, and meet the evolving needs of our customers. That monitor was introduced to the market in late-September 2013. The Company believes that the FORE-SIGHT ELITE will be the catalyst towards increased oximetry revenues, higher margins, expanded international distribution, and leveraged operating expenses.
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●
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Rejuvenate our Traditional Monitoring Products - We also commenced significant efforts to refresh and rebuild our offerings within our Traditional Monitoring product lines where we enjoy strong brand loyalty and long-term customers who value the high quality products and service we provide. We revamped our selling organizations for each of our Traditional Monitoring products and engaged in significant development efforts to design both a new non-invasive blood pressure suite of products and an upgraded and refreshed vital signs monitor. These new products were also introduced to the markets in the third quarter of 2013.
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●
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The Company launched its next-generation FORE-SIGHT ELITE cerebral oximetry monitor and sensors. That product brings state-of-the-art technology with industry-leading accuracy in an easy to use form with lower manufacturing costs for the Company.
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●
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Worldwide FORE-SIGHT sales increased 16% over 2012 levels led by a 20% growth in worldwide disposable sensor sales.
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●
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Worldwide cumulative net shipments of FORE-SIGHT monitors as of December 31, 2013, were 935, an increase of 26% from the cumulative total of 741 units as of December 31, 2012.
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●
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The Company shipped a net of 90 FORE-SIGHT monitors worldwide in the fourth quarter of 2013 following the launch of the next-generation FORE-SIGHT ELITE cerebral monitor and sensors at the end of the third quarter of 2013. This compares to the average net shipment of 35 monitors per quarter in the first three quarters of the year.
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●
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Throughout 2013, the Company introduced FORE-SIGHT into many of the top academic and cardiac hospitals. Our FORE-SIGHT customers now include nine of the top 20 adult cardiac hospitals in the U.S., as ranked by U.S. News and World Report, and three of the top ten pediatric cardiac hospitals.
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●
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The Company also launched three new products into its traditional monitoring market: the next-generation 740 SELECT™ and PPM3 vital signs monitors and its new MAX IQ™ non-invasive blood pressure technology.
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●
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In May 2013, the Company amended its term loan with East West Bank increasing the principal to $5.0 million and extending the maturity date to July 2016. The Company’s revolving line-of-credit was reduced to $2.0 million. As of December 31, 2013, the revolver remained undrawn.
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●
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During July 2013, the Company completed an underwritten public offering for the purchase of 5.2 million shares of its common stock. Net proceeds to the Company were $5.8 million.
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●
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In October 2013, Brian J. Wagner joined the Company’s executive management team as Chief Commercial Officer. Most recently, Mr. Wagner was Senior Vice President and Chief Marketing Officer at Phillips Imaging Systems. Prior to that, he held key positions in Kimberly-Clark Health Care, Rubbermaid Healthcare, Guidant Corporation, and Boston Scientific.
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●
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Tissue Oximetry Monitoring – includes sales of the Company’s FORE-SIGHT Absolute Tissue Oximeter monitors, sensors and accessories.
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●
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Traditional Monitoring – includes sales of the Company’s traditional vital signs products and services including: (i) sales to Original Equipment Manufacturers (“OEM”) of the Company’s proprietary non-invasive blood pressure technology (MAXNIBP and MAXIQ) for inclusion in the OEM customer’s own multi-parameter monitors; (ii) bedside vital signs monitors and accessories incorporating various combinations of measurement parameters for both human and veterinary use, such as non-invasive blood pressure, pulse oximetry, electrocardiography (ECG), temperature, and capnography (CO² measurements); (iii) neonatal intensive care vital signs supplies including electrodes and skin temperature probes; and (iv) service repair.
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●
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CASMED’s FORE-SIGHT ELITE monitors emit five wavelengths of light, permitting an increased level of signal acquisition thereby providing sufficient data to solve for other optical variables in the tissue sample, such as melanin in the skin, that would otherwise be confused as hemoglobin signals.
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●
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CASMED’s FORE-SIGHT sensors are designed with a preferred geometry, maximizing the distance between the light source and the farthest photo-detector, thereby providing a light pathway that penetrates deeper into the tissue giving a greater tissue sample for interrogation.
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●
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CASMED’s FORE-SIGHT patented algorithm utilizes a combination of patented and other methods to sort out optical signals created by non-critical background tissue.
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●
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Hypoxemia: a decrease of hemoglobin oxygen saturation in arterial blood (inadequate oxygenation of the supply).
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●
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Ischemia: a decrease in blood flow to the brain caused by inadequate cardiac output, occlusion of cerebral vessels, or increased intracranial pressure (inadequate volume of supply).
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●
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Anemia: a decrease in the concentration of red blood cells in the blood (inadequate oxygen carrying capacity).
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Incidence
Of
CDEs
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Procedure
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Citation
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73%
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Aortic arch
surgery
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Fischer GW, et.al. Noninvasive cerebral oxygenation may predict outcome in patients undergoing aortic arch surgery.
J Thorac Cardiovasc Surg. 2011;141(3):815-21.
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60%
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Cardiac Surgery
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Fedorow C, Grocott HP. Cerebral monitoring to optimize outcomes after cardiac surgery. Curr Opin Anaesthesiol. 2010 Feb;23(1):89-94.
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25% with shunts
3.9% without
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Carotid Endarterectomy
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DeNaeyer S, et.al. Non-invasive absolute cerebral oximetry and intraluminal shunting during carotid endarterectomy. Presented at American Society of Anesthesiologists Annual Meeting 2010 # A398.
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45.9± 134 (min-%)
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EP Lab
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Miller MA,et.al. Activation and entrainment mapping of hemodynamically unstable ventricular tachycardia using a percutaneous left ventricular assist device. J Am Coll Cardiol. 2011; 58(13):1363-71.
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26%
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General Abdominal Surgery, Elderly
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Casati A, et.al. Monitoring cerebral oxygen saturation in elderly patients undergoing general abdominal surgery: a prospective cohort study. Eur J Anaesthesiol. 2007 Jan;24(1):59-65. Epub 2006 Jul 7.
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50%
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ICU, Post-cardiac surgery
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Greenberg SB,et.al. The Incidence of cerebral oxygen desaturation event
in the intensive care unit (ICU) following cardiac surgery. Presented at American Society of Anesthesiologists Annual Meeting 2011 #A1454.
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18%
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Craniotomy from acute intracerebral bleeding
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Dylst D,et.al.Monitoring of absolute cerebral oxygen saturation during craniotomy for acute intracerebral bleeding. Eur J Anaesthesiol 2009; 26 (Suppl 45): 7AP5-6.
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80%
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Shoulder surgery- beach chair position
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Murphy GS,et.al. Cerebral oxygen desaturation events assessed by near-infrared spectroscopy during shoulder arthroscopy in the beach chair and lateral decubitus positions. Anesth Analg 2010; 111(20: 496-5.
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36%
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Spine surgery in prone position
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Hemmerling, Thomas M., et.al. Decrease of Cerebral Oxygen Saturation in Prone Position During Spine Surgery Measured by Absolute Cerebral Oximetry Presented at American Society of Anesthesiologists Annual Meeting 2010 #LB07.
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56%≤65%
10% < 55%
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Thoracic Surgery
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Kazan R, et.al. Reduced cerebral oxygen saturation measured by absolute cerebral oximetry during thoracic surgery correlates with postoperative complications. Br J Anaesth. 2009; 103(6):811-16.
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●
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Sales to Original Equipment Manufacturers (“OEM”) of the Company’s proprietary non-invasive blood pressure technology (MAXNIBP and MAXIQ) for inclusion in the OEM customers’ own multi-parameter monitors;
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●
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Vital signs monitors and accessories incorporating various combinations of measurement parameters for both human and veterinary use such as MAXNIBP non-invasive blood pressure, pulse oximetry, electro-cardiography (ECG), temperature, and capnography (CO2 measurements); and
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●
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Supplies and service including neonatal intensive care vital signs supplies (such as electrodes and skin temperature probes).
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Financial Information Relating to Sales
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||||||||
Year Ended December 31
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||||||||
2013
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2012
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|||||||
Domestic Sales
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$ | 17,114,215 | $ | 17,511,029 | ||||
International Sales
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4,801,579 | 5,158,036 | ||||||
Total
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$ | 21,915,794 | $ | 22,669,065 |
●
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FDA clearance;
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●
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The accuracy, reliability, and repeatability of measurements;
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●
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Publication of peer-reviewed clinical studies;
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●
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Acceptance by thought-leaders in anesthesia, surgery, perfusion, and other key clinical roles for new technologies such as cerebral oxygenation monitoring;
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●
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Documented improved patient outcomes;
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●
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The cost effectiveness of monitoring solutions and overall pricing;
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●
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Interfacing with multi-parameter patient monitoring and data solutions;
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●
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The overall ease of use and product quality;
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●
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Sales and marketing capability and established sales distribution channels;
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●
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Contractual arrangements with hospitals, hospital systems, buying groups, and professional service providers; and
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●
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IP protection and timing and acceptance of product innovation.
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●
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Advanced algorithm research;
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●
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Sensor and optical development;
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●
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Hardware development and support; and
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●
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Clinical research.
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●
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sell products that compete with products that they have contracted to sell for us;
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●
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sell our products outside of our pricing guidelines, distorting the market price of our products;
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●
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sell our products outside their designated territory or to non-authorized end-users, possibly in violation of the exclusive distribution rights of other distributors;
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●
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directly or indirectly distribute products lacking necessary U.S. certifications into the U.S. market in violation of applicable U.S. law;
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●
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fail to adequately promote our products; and/or
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●
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fail to provide proper training, repair and service to our end-users.
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Quarter Ended
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High
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Low
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||||||
March 31, 2012
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$ | 2.98 | $ | 1.62 | ||||
June 30, 2012
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$ | 2.75 | $ | 1.60 | ||||
September 30, 2012
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$ | 2.25 | $ | 1.65 | ||||
December 31, 2012
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$ | 2.29 | $ | 1.66 | ||||
March 31, 2013
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$ | 2.38 | $ | 1.79 | ||||
June 30, 2013
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$ | 2.37 | $ | 1.58 | ||||
September 30, 2013
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$ | 1.65 | $ | 1.29 | ||||
December 31, 2013
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$ | 2.00 | $ | 1.21 |
Title of Class
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Number of Stockholders
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Common stock, $.004 par value
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1,807
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●
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The Company launched four new products during 2013 – the next-generation FORE-SIGHT ELITE™ cerebral monitor and sensors; the next generation 740 SELECT™ and PPM3 vital signs monitors; and its new MAX IQ non-invasive blood pressure technology.
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●
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The total number of FORE-SIGHT monitors shipped during the year was 194, increasing the cumulative total, as of December 31, 2013, to 935, an increase of 26% from December 31, 2012.
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●
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Total FORE-SIGHT revenues increased 16%, led by a 23% growth in U.S. FORE-SIGHT sales.
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●
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In May 2013, the Company amended its term loan with East West Bank, increasing the principal amount to $5.0 million and extending the maturity date to July 2016.The Company’s revolving line-of-credit was reduced to $2.0 million. As of December 31, 2013, the revolver remained undrawn.
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●
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During July 2013, the Company completed an underwritten public offering for the purchase of 5.2 million shares of its common stock. Net proceeds to the Company were $5.8 million.
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($000's)
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||||||||||||||||
Year Ended
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Year Ended
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Increase /
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%
|
|||||||||||||
December 31, 2013
|
December 31, 2012
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(Decrease)
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Change
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|||||||||||||
Tissue Oximetry Monitoring
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$ | 9,051 | $ | 7,776 | $ | 1,275 | 16% | |||||||||
Traditional Vital Signs Monitoring
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12,865 | 14,893 | (2,028 | ) | (14%) | |||||||||||
$ | 21,916 | $ | 22,669 | $ | (753 | ) | (3%) | |||||||||
Domestic Sales
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$ | 17,114 | $ | 17,511 | $ | (397 | ) | (2%) | ||||||||
International Sales
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4,802 | 5,158 | (356 | ) | (7%) | |||||||||||
$ | 21,916 | $ | 22,669 | $ | (753 | ) | (3%) |
($000's)
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||||||||||||||||
Year Ended
|
Year Ended
|
Increase /
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%
|
|||||||||||||
December 31, 2013
|
December 31, 2012
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(Decrease)
|
Change
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|||||||||||||
Sensor Sales
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$ | 7,903 | $ | 6,567 | $ | 1,336 | 20% | |||||||||
Monitor and Accessories Sales
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1,148 | 1,209 | (61 | ) | (5%) | |||||||||||
$ | 9,051 | $ | 7,776 | $ | 1,275 | 16% | ||||||||||
Domestic Sales
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$ | 7,119 | $ | 6,063 | $ | 1,056 | 17% | |||||||||
International Sales
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1,932 | 1,713 | 219 | 13% | ||||||||||||
$ | 9,051 | $ | 7,776 | $ | 1,275 | 16% |
Contractual Obligations
|
Total
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Less than
One Year
|
2 - 3 Years
|
4 - 5 Years
|
More Than
Five Years
|
|||||||||||||||
Operating leases
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$ | 1,345,000 | $ | 445,000 | $ | 664,000 | $ | 236,000 | $ | — |
Item 8. Financial Statements and Supplementary Data
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Page
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|
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Report of Independent Registered Public Accounting Firm
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F-1
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Financial Statements
|
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Consolidated Balance Sheets as of December 31, 2013 and 2012
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F-2 to F-3
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Consolidated Statements of Operations for the Years Ended December 31, 2013 and 2012
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F-4
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Consolidated Statements of Changes in Stockholders’ Equity for the Years Ended December 31, 2013 and 2012
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F-5
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Consolidated Statements of Cash Flows for the Years Ended December 31, 2013 and 2012
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F-6
|
Notes to Consolidated Financial Statements
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F-7 to F-20
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ASSETS
|
2013
|
2012
|
||||||
CURRENT ASSETS:
|
||||||||
Cash and cash equivalents
|
$ | 8,190,302 | $ | 9,245,094 | ||||
Short-term investments
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— | 1,250,794 | ||||||
Accounts receivable, net of allowance
|
2,425,417 | 2,197,513 | ||||||
Inventories
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3,931,007 | 3,543,325 | ||||||
Other current assets
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510,710 | 612,082 | ||||||
Total current assets
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15,057,436 | 16,848,808 | ||||||
PROPERTY AND EQUIPMENT:
|
||||||||
Leasehold improvements
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139,970 | 311,320 | ||||||
Equipment at customers
|
3,365,636 | 3,407,836 | ||||||
Machinery and equipment
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5,597,385 | 5,439,521 | ||||||
9,102,991 | 9,158,677 | |||||||
Accumulated depreciation and amortization
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(6,849,543 | ) | (6,443,303 | ) | ||||
Property and equipment, net
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2,253,448 | 2,715,374 | ||||||
Intangible and other assets, net
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851,737 | 830,245 | ||||||
Total assets
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$ | 18,162,621 | $ | 20,394,427 | ||||
LIABILITIES AND STOCKHOLDERS' EQUITY
|
2013
|
2012
|
||||||
CURRENT LIABILITIES:
|
||||||||
Accounts payable
|
$ | 1,594,147 | $ | 1,906,327 | ||||
Accrued expenses
|
1,737,312 | 1,625,923 | ||||||
Current portion of long-term debt
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994,898 | 697,834 | ||||||
Total current liabilities
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4,326,357 | 4,230,084 | ||||||
Deferred gain on sale and leaseback of property
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495,515 | 630,152 | ||||||
Long-term debt, less current portion
|
3,915,949 | 2,685,560 | ||||||
Commitments and contingencies (Note 12)
|
||||||||
Total liabilities
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8,737,821 | 7,545,796 | ||||||
STOCKHOLDERS' EQUITY:
|
||||||||
Preferred stock, $.001 par value per share, 1,000,000 shares authorized
|
||||||||
Series A convertible preferred stock, 95,500 shares issued and
|
||||||||
outstanding, liquidation value of $11,433,473 at December 31, 2013
|
8,802,000 | 8,802,000 | ||||||
Series A exchangeable preferred stock, 54,500 shares issued and
|
||||||||
outstanding, liquidation value of $6,524,862 at December 31, 2013
|
5,135,640 | 5,135,640 | ||||||
Common stock, $.004 par value per share, 40,000,000 shares authorized,
|
||||||||
19,324,549 and 13,767,192 shares issued as of December 31, 2013
|
||||||||
and 2012, respectively, including shares held in treasury
|
77,298 | 55,069 | ||||||
Common stock held in treasury, at cost - 86,000 shares
|
(101,480 | ) | (101,480 | ) | ||||
Additional paid-in capital
|
18,939,869 | 12,023,721 | ||||||
Accumulated deficit
|
(23,428,527 | ) | (13,066,319 | ) | ||||
Total stockholders' equity
|
9,424,800 | 12,848,631 | ||||||
Total liabilities and stockholders' equity
|
$ | 18,162,621 | $ | 20,394,427 |
2013
|
2012
|
|||||||
NET SALES
|
$ | 21,915,794 | $ | 22,669,065 | ||||
Cost of sales
|
13,958,451 | 13,565,148 | ||||||
Asset impairment charge
|
407,141 | — | ||||||
Total cost of sales
|
14,365,592 | 13,565,148 | ||||||
Gross profit
|
7,550,202 | 9,103,917 | ||||||
OPERATING EXPENSES:
|
||||||||
Research and development
|
4,211,492 | 4,019,896 | ||||||
Selling, general and administrative
|
13,792,156 | 12,528,686 | ||||||
|
18,003,648 | 16,548,582 | ||||||
OPERATING LOSS
|
(10,453,446 | ) | (7,444,665 | ) | ||||
Interest expense
|
316,312 | 113,941 | ||||||
Other income
|
(407,550 | ) | (39,129 | ) | ||||
LOSS BEFORE INCOME TAXES
|
(10,362,208 | ) | (7,519,477 | ) | ||||
Income tax benefit
|
— | (211,159 | ) | |||||
NET LOSS
|
(10,362,208 | ) | (7,308,318 | ) | ||||
Preferred stock dividend accretion
|
1,203,953 | 1,123,239 | ||||||
NET LOSS APPLICABLE TO COMMON STOCKHOLDERS
|
$ | (11,566,161 | ) | $ | (8,431,557 | ) | ||
PER SHARE BASIC AND DILUTED LOSS APPLICABLE
|
||||||||
TO COMMON STOCKHOLDERS
|
$ | (0.73 | ) | $ | (0.63 | ) | ||
WEIGHTED-AVERAGE NUMBER OF COMMON
|
||||||||
SHARES OUTSTANDING - basic and diluted
|
15,771,760 | 13,286,553 | ||||||
Preferred Stock
|
Common Stock Issued
|
Held in Treasury
|
Additional Paid-in
|
Accumulated
|
||||||||||||||||||||||||||||||||
Shares
|
Amount
|
Shares
|
Amount
|
Shares
|
Amount
|
Capital
|
Deficit
|
Total
|
||||||||||||||||||||||||||||
BALANCE, December 31, 2011
|
150,000 | $ | 13,937,640 | 13,701,273 | $ | 54,805 | 86,000 | $ | (101,480 | ) | $ | 10,930,927 | $ | (5,758,001 | ) | $ | 19,063,891 | |||||||||||||||||||
Net loss
|
(7,308,318 | ) | (7,308,318 | ) | ||||||||||||||||||||||||||||||||
Common stock issued upon exercise of stock options
|
20,300 | 81 | 30,368 | 30,449 | ||||||||||||||||||||||||||||||||
Common stock issued under stock purchase plan
|
13,668 | 55 | 22,109 | 22,164 | ||||||||||||||||||||||||||||||||
Warrants issued to bank
|
145,732 | 145,732 | ||||||||||||||||||||||||||||||||||
Restricted stock issued, net of cancellations
|
31,951 | 128 | (128 | ) | — | |||||||||||||||||||||||||||||||
Stock compensation
|
894,713 | 894,713 | ||||||||||||||||||||||||||||||||||
BALANCE, December 31, 2012
|
150,000 | 13,937,640 | 13,767,192 | 55,069 | 86,000 | (101,480 | ) | 12,023,721 | (13,066,319 | ) | 12,848,631 | |||||||||||||||||||||||||
Net loss
|
(10,362,208 | ) | (10,362,208 | ) | ||||||||||||||||||||||||||||||||
Common stock issued in lieu of cash bonus
|
11,000 | 44 | 21,956 | 22,000 | ||||||||||||||||||||||||||||||||
Common stock issued in public offering
|
5,200,000 | 20,800 | 5,817,317 | 5,838,117 | ||||||||||||||||||||||||||||||||
Common stock issued under stock purchase plan
|
13,750 | 55 | 23,932 | 23,987 | ||||||||||||||||||||||||||||||||
Warrants issued to bank
|
31,878 | 31,878 | ||||||||||||||||||||||||||||||||||
Warrants exercised
|
300,000 | 1,200 | 91,800 | 93,000 | ||||||||||||||||||||||||||||||||
Restricted stock issued, net of cancellations
|
32,607 | 130 | (130 | ) | — | |||||||||||||||||||||||||||||||
Stock compensation
|
929,395 | 929,395 | ||||||||||||||||||||||||||||||||||
BALANCE, December 31, 2013
|
150,000 | $ | 13,937,640 | 19,324,549 | $ | 77,298 | 86,000 | $ | (101,480 | ) | $ | 18,939,869 | $ | (23,428,527 | ) | $ | 9,424,800 | |||||||||||||||||||
2013
|
2012
|
|||||||
OPERATING ACTIVITIES:
|
||||||||
Cash flows from operating activities
|
||||||||
Net loss
|
$ | (10,362,208 | ) | $ | (7,308,318 | ) | ||
Adjustments to reconcile net loss to net cash
|
||||||||
used in operating activities:
|
||||||||
Depreciation and amortization
|
1,392,541 | 1,066,743 | ||||||
Amortization of debt discount
|
59,332 | 29,126 | ||||||
Provision for doubtful accounts
|
14,653 | 52,953 | ||||||
Stock compensation
|
933,440 | 894,713 | ||||||
Proceeds from demutualization of insurance provider
|
(396,156 | ) | — | |||||
Impairment of capitalized patent costs
|
52,721 | 46,271 | ||||||
Impairment of assets at customer sites
|
407,141 | — | ||||||
Amortization of gain on sale and leaseback of property
|
(134,637 | ) | (134,637 | ) | ||||
Changes in operating assets and liabilities:
|
||||||||
Accounts receivable
|
(242,557 | ) | 284,865 | |||||
Income taxes payable/receivable
|
— | (211,159 | ) | |||||
Inventories
|
(387,682 | ) | (266,757 | ) | ||||
Other current assets
|
101,372 | (312,462 | ) | |||||
Accounts payable and accrued expenses
|
(178,793 | ) | 748,395 | |||||
Net cash used in operating activities
|
(8,740,833 | ) | (5,110,267 | ) | ||||
INVESTING ACTIVITIES:
|
||||||||
Expenditures for property and equipment
|
(1,230,397 | ) | (1,565,333 | ) | ||||
Short-term investments
|
1,250,794 | 1,239,793 | ||||||
Proceeds from demutualization of insurance provider
|
396,156 | — | ||||||
Purchase of intangible assets
|
(170,070 | ) | (111,081 | ) | ||||
Net cash provided by (used in) investing activities
|
246,483 | (436,621 | ) | |||||
FINANCING ACTIVITIES:
|
||||||||
Proceeds from long-term debt and warrants
|
1,500,000 | 3,500,000 | ||||||
Deferred financing costs
|
(11,500 | ) | (147,931 | ) | ||||
Proceeds from issuance of common stock, net
|
5,951,058 | 52,613 | ||||||
Net cash provided by financing activities
|
7,439,558 | 3,404,682 | ||||||
Net change in cash and cash equivalents
|
(1,054,792 | ) | (2,142,206 | ) | ||||
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
|
9,245,094 | 11,387,300 | ||||||
CASH AND CASH EQUIVALENTS, END OF YEAR
|
$ | 8,190,302 | $ | 9,245,094 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
|
||||||||
INFORMATION:
|
||||||||
Cash paid during the year for interest
|
$ | 248,800 | $ | 68,239 | ||||
Accrued liability settled with common stock
|
$ | 22,000 | $ | — |
Fair value measurements
as of December 31, 2013
|
||||||||||||||||
Total impairment charge
|
||||||||||||||||
for the year ended
|
||||||||||||||||
Level 1
|
Level 2
|
Level 3
|
December 31, 2013
|
|||||||||||||
Assets:
|
||||||||||||||||
Equipment at Customers
|
$ | — | $ | — | $ | 3,365,636 | $ | (407,141 | ) | |||||||
Total
|
$ | — | $ | — | $ | 3,365,636 | $ | (407,141 | ) |
2013
|
2012
|
|||||||
Patents and other assets
|
$ | 896,921 | $ | 714,810 | ||||
Patents pending
|
276,691 | 348,256 | ||||||
Purchased technology
|
33,893 | 46,026 | ||||||
Deferred financing costs
|
159,431 | 147,931 | ||||||
1,366,936 | 1,257,023 | |||||||
Accumulated amortization
|
(515,199 | ) | (426,778 | ) | ||||
$ | 851,737 | $ | 830,245 |
2014
|
$
|
90,000
|
||
2015
|
$
|
80,000
|
||
2016
|
$
|
57,000
|
||
2017
|
$
|
26,000
|
||
2018
|
$
|
23,000
|
2013
|
2012
|
|||||||
Beginning balance
|
$ | 100,000 | $ | 369,171 | ||||
Provision
|
55,865 | 42,014 | ||||||
Warranty costs incurred
|
(55,865 | ) | (311,185 | ) | ||||
Ending balance
|
$ | 100,000 | $ | 100,000 |
2013
|
2012
|
|||||||
Net loss
|
$ | (10,362,208 | ) | $ | (7,308,318 | ) | ||
Preferred stock dividend accretion
|
1,203,953 | 1,123,239 | ||||||
Net loss applicable to common stockholders
|
$ | (11,566,161 | ) | $ | (8,431,557 | ) | ||
Weighted-average shares outstanding, net
|
||||||||
of unvested restricted common shares -
|
||||||||
used to compute basic and diluted loss per
|
||||||||
share applicable to common stockholders
|
15,771,760 | 13,286,553 |
2013
|
2012
|
|||||||
Balance at beginning of year
|
$ | 175,000 | $ | 175,000 | ||||
Provision
|
14,653 | 52,953 | ||||||
Accounts written off
|
(79,653 | ) | (52,953 | ) | ||||
Balance at end of year
|
$ | 110,000 | $ | 175,000 |
2013
|
2012
|
|||||||
Raw materials
|
$ | 2,388,380 | $ | 2,489,750 | ||||
Work in process
|
10,319 | 34,384 | ||||||
Finished goods
|
1,532,308 | 1,019,191 | ||||||
$ | 3,931,007 | $ | 3,543,325 |
2013
|
2012
|
|||||||
Balance of bank term loan
|
$ | 5,000,000 | $ | 3,500,000 | ||||
Debt discount
|
(89,153 | ) | (116,606 | ) | ||||
4,910,847 | 3,383,394 | |||||||
Current portion
|
994,898 | 697,834 | ||||||
Long-term portion
|
$ | 3,915,949 | $ | 2,685,560 |
2013
|
2012
|
|||||||
Payroll
|
$ | 810,046 | $ | 537,798 | ||||
Professional fees
|
300,788 | 462,147 | ||||||
Warranty
|
100,000 | 100,000 | ||||||
Travel and entertainment
|
41,045 | 56,781 | ||||||
Other
|
485,433 | 469,197 | ||||||
$ | 1,737,312 | $ | 1,625,923 |
2013
|
2012
|
|||||||||||||||||||||||
Weighted-
|
Aggregate
|
Weighted-
|
Aggregate
|
|||||||||||||||||||||
Option
|
Average
|
Intrinsic
|
Option
|
Average
|
Intrinsic
|
|||||||||||||||||||
Shares
|
Exercise Price
|
Value
|
Shares
|
Exercise Price
|
Value
|
|||||||||||||||||||
Outstanding at beginning of year
|
2,007,125 | $ | 2.25 | 1,697,425 | $ | 2.30 | ||||||||||||||||||
Granted
|
661,500 | 1.67 | 482,500 | 2.15 | ||||||||||||||||||||
Exercised
|
— | — | (20,300 | ) | 1.50 | |||||||||||||||||||
Cancelled
|
(50,000 | ) | 2.56 | (152,500 | ) | 2.56 | ||||||||||||||||||
Outstanding at end of year
|
2,618,625 | $ | 2.10 | $ | 112,875 | 2,007,125 | $ | 2.25 | $ | 307,406 | ||||||||||||||
Exercisable at end of year
|
1,204,708 | $ | 2.30 | $ | 23,350 | 747,500 | $ | 2.36 | $ | 127,423 | ||||||||||||||
Vested and expected to vest at end of year
|
2,576,272 | $ | 2.10 | $ | 110,189 | 1,969,381 | $ | 2.25 | $ | 302,013 | ||||||||||||||
Weighted-average grant-date fair value of options granted during the year
|
$ | 1.21 | $ | 1.52 |
Weighted
|
|||||||||||||||
Remaining
|
Average
|
Average
|
|||||||||||||
Range of
|
Number
|
Contractual
|
Exercise
|
Number
|
Exercise
|
||||||||||
Exercise Prices
|
Outstanding
|
Life in Years
|
Price
|
Exercisable
|
Price
|
||||||||||
$1.35 - $1.74 | 811,625 | 7.7 | $ | 1.56 | 324,125 | $ | 1.63 | ||||||||
1.87 - 2.30 | 1,301,500 | 8.4 | 2.05 | 487,292 | 2.12 | ||||||||||
2.50 - 3.16 | 470,500 | 6.3 | 3.01 | 358,291 | 3.01 | ||||||||||
3.59 - 4.50 | 35,000 | 1.6 | 3.98 | 35,000 | 3.98 | ||||||||||
$1.35 - $4.50 | 2,618,625 | 7.7 | $ | 2.10 | 1,204,708 | $ | 2.30 |
2013
|
2012
|
|||||||
Outstanding at beginning of year
|
320,476 | 436,150 | ||||||
Granted
|
37,266 | 34,284 | ||||||
Cancelled
|
(4,658 | ) | (2,333 | ) | ||||
Vested
|
(111,725 | ) | (147,625 | ) | ||||
Outstanding at end of year
|
241,359 | 320,476 |
2013
|
2012
|
|||||||
Current benefit:
|
||||||||
Federal
|
$ | — | $ | — | ||||
State
|
— | (211,159 | ) | |||||
— | (211,159 | ) | ||||||
Deferred benefit:
|
||||||||
Federal
|
— | — | ||||||
State
|
— | — | ||||||
— | — | |||||||
Income tax benefit
|
$ | — | $ | (211,159 | ) | |||
2013
|
2012
|
|||||||
Income tax benefit at the statutory rate
|
$ | (3,523,151 | ) | $ | (2,557,646 | ) | ||
State income taxes, net of Federal effect
|
(138,162 | ) | (29,735 | ) | ||||
R&D and other tax credits
|
(189,812 | ) | 15,918 | |||||
De-recognition of uncertain tax position
|
— | (211,159 | ) | |||||
Change in valuation allowance
|
3,837,816 | 2,542,337 | ||||||
Other
|
13,309 | 29,126 | ||||||
Income tax benefit
|
$ | — | $ | (211,159 | ) |
2013
|
2012
|
|||||||
Inventories
|
$ | 227,873 | $ | 220,742 | ||||
Warranty accrual
|
34,990 | 34,990 | ||||||
Allowance for doubtful accounts
|
38,489 | 61,233 | ||||||
Tax credits
|
600,342 | 410,530 | ||||||
Deferred gain on sale and leaseback
|
173,381 | 220,491 | ||||||
Restricted stock
|
660,460 | 448,817 | ||||||
Net operating loss carry forwards
|
8,203,163 | 5,004,965 | ||||||
Other
|
555,288 | 461,830 | ||||||
10,493,986 | 6,863,598 | |||||||
Prepaid expenses
|
(159,397 | ) | (165,586 | ) | ||||
Fixed assets
|
(436,061 | ) | (637,300 | ) | ||||
Deferred income tax assets and liabilities
|
9,898,528 | 6,060,712 | ||||||
Valuation allowance
|
(9,898,528 | ) | (6,060,712 | ) | ||||
Net deferred income tax assets and liabilities
|
$ | — | $ | — |
2013
|
2012
|
|||||||
Balance at beginning of year
|
$ | — | $ | 211,159 | ||||
Tax positions taken during a prior year
|
— | — | ||||||
Increase for tax positions taken in current year
|
— | (211,159 | ) | |||||
Balance at end of year
|
$ | — | $ | — |
2014
|
$ | 445,000 | ||
2015
|
361,000 | |||
2016
|
303,000 | |||
2017
|
209,000 | |||
2018
|
27,000 | |||
Total
|
$ | 1,345,000 |
First
|
Second
|
Third
|
Fourth
|
Total
|
||||||||||||||||
Quarter
|
Quarter
|
Quarter
|
Quarter
|
Year
|
||||||||||||||||
Year ended December 31, 2013
|
||||||||||||||||||||
Net sales
|
$ | 5,575,838 | $ | 5,042,420 | $ | 5,353,166 | $ | 5,944,370 | $ | 21,915,794 | ||||||||||
Cost of sales
|
3,350,856 | 3,124,411 | 3,920,046 | 3,970,279 | 14,365,592 | |||||||||||||||
Gross profit
|
2,224,982 | 1,918,009 | 1,433,120 | 1,974,091 | 7,550,202 | |||||||||||||||
Loss from operations
|
(1,909,632 | ) | (2,572,353 | ) | (2,877,079 | ) | (3,094,383 | ) | (10,453,446 | ) | ||||||||||
Net loss
|
(1,587,183 | ) | (2,633,869 | ) | (2,960,122 | ) | (3,181,034 | ) | (10,362,208 | ) | ||||||||||
Preferred stock accretion
|
293,201 | 298,333 | 303,553 | 308,866 | 1,203,953 | |||||||||||||||
Net loss applicable to common stockholders
|
$ | (1,880,384 | ) | $ | (2,932,202 | ) | $ | (3,263,675 | ) | $ | (3,489,900 | ) | $ | (11,566,161 | ) | |||||
Per share basic and diluted loss applicable to common stockholders (1)
|
$ | (0.14 | ) | $ | (0.22 | ) | $ | (0.19 | ) | $ | (0.19 | ) | $ | (0.73 | ) | |||||
Year ended December 31, 2012
|
||||||||||||||||||||
Net sales
|
$ | 5,408,819 | $ | 5,198,300 | $ | 6,110,813 | $ | 5,951,133 | $ | 22,669,065 | ||||||||||
Cost of sales
|
3,373,745 | 3,015,656 | 3,596,056 | 3,579,691 | 13,565,148 | |||||||||||||||
Gross profit
|
2,035,074 | 2,182,644 | 2,514,757 | 2,371,442 | 9,103,917 | |||||||||||||||
Loss from operations
|
(1,962,564 | ) | (1,664,242 | ) | (1,522,854 | ) | (2,295,005 | ) | (7,444,665 | ) | ||||||||||
Net loss
|
(1,946,092 | ) | (1,649,609 | ) | (1,564,752 | ) | (2,147,865 | ) | (7,308,318 | ) | ||||||||||
Preferred stock accretion
|
273,545 | 278,332 | 283,203 | 288,159 | 1,123,239 | |||||||||||||||
Net loss applicable to common stockholders
|
$ | (2,219,637 | ) | $ | (1,927,941 | ) | $ | (1,847,955 | ) | $ | (2,436,024 | ) | $ | (8,431,557 | ) | |||||
Per share basic and diluted loss applicable to common stockholders (1)
|
$ | (0.17 | ) | $ | (0.15 | ) | $ | (0.14 | ) | $ | (0.18 | ) | $ | (0.63 | ) | |||||
Number of securities
|
Number of securities
|
|||||||||||
to be issued upon
|
Weighted-average
|
remaining available
|
||||||||||
exercise of
|
exercise price of
|
for future issuance
|
||||||||||
outstanding options
|
outstanding options
|
under equity
|
||||||||||
Plan Category
|
and warrants
|
and warrants
|
compensation plans
|
|||||||||
Equity compensation plans approved by security holders
|
2,118,625 | $ | 2.02 | 443,109 | ||||||||
Equity compensation plans not approved by security holders
|
1,252,991 | 1.43 | — | |||||||||
Total
|
3,371,616 | $ | 1.80 | 443,109 |
1.1
|
Form of Purchase Agreement, dated July 16, 2013, by and between CAS Medical Systems, Inc. and Northland Securities (21)
|
2.1
|
Stock Purchase Agreement dated May 15, 2005 among CAS Medical Systems, Inc., Statcorp, Inc., and the Stockholders of Statcorp, Inc. (1)
|
3.1
|
Certificate of Incorporation of Registrant (2)
|
3.2
|
Amended and Restated Bylaws of Registrant (9)
|
10.1*
|
1994 Employees’ Incentive Stock Option Plan (4)
|
10.2*
|
CAS Medical Systems, Inc. Employee Stock Purchase Plan (5)
|
10.3*
|
CAS Medical Systems, Inc. 2003 Equity Incentive Plan (6)
|
10.4*
|
Form of Option Agreement (3)
|
10.5
|
Purchase and Sale Agreement between CAS Medical Systems, Inc. and Davis Marcus Partners, Inc. dated June 18, 2007 (7)
|
10.6
|
Lease Agreement between CAS Medical Systems, Inc. and DMP New Branford, LLC dated September 6, 2007 (7)
|
10.7
|
Subscription Agreement dated May 9, 2008 with jVen Capital, LLC (10)
|
10.8
|
Amendment to the CAS Medical Systems, Inc. 2003 Equity Incentive Plan (11)
|
10.9*
|
Employment Agreement with Jeffery A. Baird dated August 10, 2009 (12)
|
10.10
|
Subscription Agreement dated June 16, 2010 with several Subscribers (13)
|
10.11*
|
Employment Agreement between CAS Medical Systems, Inc. and Thomas M. Patton dated August 27, 2010 (14)
|
10.12*
|
Inducement Non-Qualified Stock Option Agreement with Thomas M. Patton dated August 27, 2010 (14)
|
10.13*
|
Inducement Restricted Stock Agreement between CAS Medical Systems, Inc. and Thomas M. Patton dated August 27, 2010 (14)
|
10.14*
|
Inducement Restricted Stock Agreement between CAS Medical Systems, Inc. and Thomas M. Patton dated August 27, 2010 (14)
|
10.15
|
Asset Purchase Agreement dated November 5, 2010 by and among CAS Medical Systems, Inc., Statcorp, Inc. and OSI Optoelectronics, Inc. (15)
|
10.16*
|
Employment Agreement with Matthew J. Herwig dated January 7, 2011 (16)
|
10.17*
|
Inducement Non-Qualified Stock Option Agreement with Matthew J. Herwig dated January 7, 2011 (16)
|
10.18*
|
Inducement Restricted Stock Agreement with Matthew J. Herwig dated January 7, 2011 (16)
|
10.19
|
Investment Agreement, dated June 8, 2011, among CAS Medical Systems, Inc. and several Purchasers named therein (17)
|
10.20
|
Registration Rights Agreement, dated June 9, 2011, among CAS Medical Systems, Inc. and the several Purchasers named therein (17)
|
10.21
|
Form of Indemnification Agreement, dated June 9, 2011, between CAS Medical Systems, Inc. and the individual members of the Board of Directors of CAS Medical Systems, Inc. (17)
|
10.22*
|
CAS Medical Systems, Inc. 2011 Equity Incentive Plan, as amended (18)
|
10.23
|
Loan and Security Agreement, dated July 31, 2012, by and between the Company and East West Bank (19)
|
10.24
|
Warrant to Purchase Stock, dated July 31, 2012, issued by the Company to East West Bank (19)
|
10.25
|
Second Amendment to Loan and Security Agreement dated May 10, 2013 between the Company and East West Bank (20)
|
10.26
|
Warrant to Purchase Stock dated May 10, 2013 issued to East West Bank (20)
|
10.27*
|
Employment Agreement with John K. Gamelin dated August 5, 2013 (22)
|
10.28*
|
Employment Agreement with Paul Benni dated May 1, 2008 (22)
|
10.29*
|
Employment Agreement with Brian J. Wagner dated October 2, 2013
|
10.30
|
Third Amendment to Loan and Security Agreement dated March 17, 2014, between the Company and East West Bank
|
21.1
|
Subsidiaries of the Registrant
|
23.1
|
Consent of Independent Registered Public Accounting Firm
|
31.1
|
Certification of CEO Pursuant to Rule 13a-14
|
31.2
|
Certification of CFO Pursuant to Rule 13a-14
|
32.1
|
Certification of CEO and CFO Pursuant to 18 U.S.C. 1350
|
101
|
Interactive data files pursuant to Rule 405 of Regulation S-T
|
(1)
|
Incorporated by reference to the Company’s Form 8-K/A filed July 29, 2005
|
(2)
|
Incorporated by reference to the Company’s Form 10-Q filed August 12, 2011
|
(3)
|
Incorporated by reference to the Company’s Form 10-KSB filed March 31, 2005
|
(4)
|
Incorporated by reference to the Company’s Form S-8 filed October 4, 2000
|
(5)
|
Incorporated by reference to the Company’s Form S-8 filed June 10, 2004, (333-116348)
|
(6)
|
Incorporated by reference to the Company’s Form S-8 filed June 10, 2004, (333-116349)
|
(7)
|
Incorporated by reference to the Company’s Form 8-K filed September 10, 2007
|
(8)
|
Incorporated by reference to the Company’s Form 8-K filed November 30, 2007
|
(9)
|
Incorporated by reference to the Company’s Form 8-K filed February 14, 2008
|
(10)
|
Incorporated by reference to the Company’s Form 8-K filed May 14, 2008
|
(11)
|
Incorporated by reference to the Company’s Form 8-K filed December 31, 2008
|
(12)
|
Incorporated by reference to the Company’s Form 10-Q filed August 12, 2009
|
(13)
|
Incorporated by reference to the Company’s Form 8-K filed June 16, 2010
|
(14)
|
Incorporated by reference to the Company’s Form 8-K filed August 27, 2010
|
(15)
|
Incorporated by reference to the Company’s Form 10-Q filed November 10, 2010
|
(16)
|
Incorporated by reference to the Company’s Form 8-K filed January 10, 2011
|
(17)
|
Incorporated by reference to the Company’s Form 8-K filed June 13, 2011
|
(18)
|
Incorporated by reference to the Company’s Proxy Statement filed April 26, 2013
|
(19)
|
Incorporated by reference to the Company’s Form 8-K filed August 2, 2012
|
(20)
|
Incorporated by reference to the Company’s Form 8-K filed May 13, 2013
|
(21)
|
Incorporated by reference to the Company’s Form 8-K filed July 17, 2013
|
(22)
|
Incorporated by reference to the Company’s Form 10-Q filed August 7, 2013
|
CAS MEDICAL SYSTEMS, INC.
|
|||
(Registrant)
|
|||
/s/ Thomas M. Patton
|
Date: March 19, 2014
|
||
By: Thomas M. Patton
|
|||
President and Chief Executive Officer
|
|||
|
|||
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
|
|||
/s/ Lawrence Burstein
|
Date: March 19, 2014
|
||
Lawrence Burstein, Director
|
|||
/s/ Gregory P. Rainey
|
Date: March 19, 2014
|
||
Gregory P. Rainey, Director
|
|||
/s/ James E. Thomas
|
Date: March 19, 2014
|
||
James E. Thomas, Director
|
|||
/s/ Kathleen A. Tune
|
Date: March 19, 2014
|
||
Kathleen A. Tune, Director
|
|||
/s/ Kenneth R. Weisshaar
|
Date: March 19, 2014
|
||
Kenneth R. Weisshaar, Director
|
|||
/s/ Thomas M. Patton
|
Date: March 19, 2014
|
||
Thomas M. Patton, President, Chief Executive
|
|||
Officer and Director
|
|||
/s/ Jeffery A. Baird
|
Date: March 19, 2014
|
||
Jeffery A. Baird, Chief Financial Officer
|
|||
(Principal Financial and Accounting Officer)
|