CAS MEDICAL SYSTEMS INC - FORM 8-K - July 26, 2017

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EX-99.1 - PRESS RELEASE DATED JULY 26, 2017 - CAS MEDICAL SYSTEMS INCexh99-1_18091.htm
EX-2.1 - ASSET PURCHASE AGREEMENT - CAS MEDICAL SYSTEMS INCexh2-1_18091.htm
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, DC  20549
 

FORM 8-K

 
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):  July 25, 2017
 


CAS MEDICAL SYSTEMS, INC.
(Exact name of Registrant as specified in its charter)


Delaware
(State or other jurisdiction
of incorporation)
0-13839
(Commission File Number)
06-1123096
(I.R.S. Employer
Identification No.)
 
44 East Industrial Road, Branford, Connecticut 06405
(Address of principal executive offices, including zip code)
 
 
(203) 488-6056
(Registrant's telephone number, including area code)
 

 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

☐  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
Emerging growth company   ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
 
 
 

 
Item 2.01 Completion of Acquisition or Disposition of Assets
 
On July 25, 2017, CAS Medical Systems, Inc. (the "Company") entered into an Asset Purchase Agreement (the "Purchase Agreement") with SunTech Medical Inc. (the "Buyer"), pursuant to which the Company simultaneously sold to the Buyer substantially all of the assets of the Company's non-invasive blood pressure product line (the "NIBP Business"), and the Buyer assumed certain specified liabilities in connection therewith.

Pursuant to the Purchase Agreement, the Company is receiving aggregate consideration of up to $6,500,000 consisting of: (i) $4,500,000 paid at closing in cash and (ii) up to $2,000,000 of contingent consideration, payable in 2019, based upon the amount of sales of the NIBP Business during the 24-month period ending June 30, 2019.  In addition to the foregoing, the Purchase Agreement contains customary representations, warranties, covenants, and indemnification obligations of the parties.  The Company will also provide the Buyer with certain services through September 2017 to facilitate customer and manufacturing transition, and the Buyer shall purchase any remaining product inventory of the NIBP Business upon the completion of a transition services period.

The Company intends to use the proceeds from the transaction for general working capital purposes.

The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, which is included as Exhibit 2.1 hereto and is incorporated herein by reference. The Company issued a press release with respect to the foregoing, a copy of which is included as Exhibit 99.1, hereto.
 
 
 

Item 9.01
Financial Statements and Exhibits.

(b)(1)
Pro forma financial information.

The following tables provide the pro forma financial results of the Company, as adjusted to reflect the discontinued NIBP Business, at and for the three months ended March 31, 2017, and for the 12 months ended December 31, 2016.

2
CAS MEDICAL SYSTEMS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
Unaudited
 
   
(In thousands)
       
   
Historical
          
Pro Forma
  
   
March 31,
    
Pro Forma
    
March 31,
  
   
2017
    
Adjustments
    
2017
  
                   
Cash and cash equivalents
  
$
4,663
          
$
4,663
  
Accounts receivable, net
    
3,095
      
(347
)
    
2,748
  
Notes and other receivables
    
—
              
—
  
Inventories
    
1,784
      
(327
)
    
1,457
  
Other current assets
    
325
              
325
  
Assets associated with discontinued operations
    
52
      
678
      
730
  
Total current assets
    
9,919
      
4
      
9,923
  
                         
Property and equipment
    
9,145
      
(84
)
    
9,061
  
Less accumulated depreciation
    
(6,641
)
    
83
      
(6,558
)
     
2,504
      
(1
)
    
2,503
  
                         
Intangible and other assets, net
    
800
      
(3
)
    
797
  
Total assets
    
13,223
      
—
      
13,223
  
                         
Accounts payable
    
1,138
      
(38
)
    
1,100
  
Accrued expenses
    
1,785
      
(2
)
    
1,783
  
Note payable
    
44
              
44
  
Current portion of long-term debt
    
1,518
              
1,518
  
Liabilities associated with discontinued operations
    
18
      
40
      
58
  
Total current liabilities
    
4,503
      
—
      
4,503
  
                         
Deferred gain on sale and leaseback of property
    
58
              
58
  
Long-term debt, less current portion
    
5,972
              
5,972
  
Other long-term liabilities
    
320
              
320
  
Total liabilities
    
10,853
      
—
      
10,853
  
                         
Series A convertible preferred stock
    
8,802
              
8,802
  
Series A exchangeable preferred stock
    
5,135
              
5,135
  
Common stock
    
113
              
113
  
Treasury stock
    
(101
)
            
(101
)
Additional paid-in capital
    
31,354
              
31,354
  
Accumulated deficit
    
(42,933
)
            
(42,933
)
Total stockholders' equity
    
2,370
      
—
      
2,370
  
                         
Total liabilities and stockholders' equity
  
$
13,223
    
$
—
    
$
13,223
  
 
 
 
1)   See accompanying notes to the unaudited pro forma financial information
 
3
 
CAS MEDICAL SYSTEMS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
 
 
   
Three Months Ended March 31, 2017
  
   
(In thousands, except per share information)
  
                   
         
Pro Forma
        
   
Historical
    
Adjustments
    
Pro Forma
  
                   
Net sales
  
$
5,225
    
$
(682
)
  
$
4,543
  
                         
Cost of sales
    
2,381
      
(320
)
    
2,061
  
Gross profit
    
2,844
      
(362
)
    
2,482
  
                         
Operating expenses:
                        
Research and development
    
824
      
(37
)
    
787
  
Selling, general and administrative
    
3,574
      
—
      
3,574
  
Total operating expenses
    
4,398
      
(37
)
    
4,361
  
                         
Operating loss
    
(1,554
)
    
(325
)
    
(1,879
)
                         
Interest expense
    
260
      
—
      
260
  
Other income
    
—
      
—
      
—
  
Loss from continuing operations before income taxes
    
(1,814
)
    
(325
)
    
(2,139
)
Income tax expense (benefit)
    
10
      
(114
)
    
(104
)
Loss from continuing operations
    
(1,824
)
    
(211
)
    
(2,035
)
                         
(Loss) income from discontinued operations,
    
(30
)
    
325
      
295
  
Income tax (benefit) expense
    
(10
)
    
114
      
104
  
(Loss) income from discontinued operations
    
(20
)
    
211
      
191
  
                         
Net loss
    
(1,844
)
    
—
      
(1,844
)
Preferred stock dividend accretion
    
387
      
—
      
387
  
Net loss applicable to common stockholders
  
$
(2,231
)
  
$
—
    
$
(2,231
)
                         
                         
Loss per common share from continuing
                        
operations - basic and diluted
  
$
(0.08
)
  
$
(0.01
)
  
$
(0.09
)
                         
(Loss) income per common share from discontinued
                        
operations - basic and diluted
    
(0.00
)
    
0.01
      
0.01
  
                         
Per share basic and diluted loss applicable to
                        
common stockholders
  
$
(0.08
)
  
$
—
    
$
(0.08
)
                         
Weighted average number of common
                        
shares outstanding:
                        
Basic and diluted
    
26,827
      
26,827
      
26,827
  
 
 
 
1)   See accompanying notes to the unaudited pro forma financial information
4
CAS MEDICAL SYSTEMS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited
 
 
 
   
Twelve Months Ended December 31, 2016
  
   
(In thousands, except per share information)
 
  
         
Pro Forma
        
   
Historical
    
Adjustments
    
Pro Forma
  
                   
Net sales
  
$
22,238
    
$
(3,564
)
  
$
18,674
  
                         
Cost of sales
    
10,091
      
(1,915
)
    
8,176
  
Gross profit
    
12,147
      
(1,649
)
    
10,498
  
                         
Operating expenses:
                        
Research and development
    
3,437
      
(160
)
    
3,277
  
Selling, general and administrative
    
13,575
      
(5
)
    
13,570
  
Total operating expenses
    
17,012
      
(165
)
    
16,847
  
                         
Operating loss
    
(4,865
)
    
(1,484
)
    
(6,349
)
                         
Interest expense
    
1,048
      
—
      
1,048
  
Other income
    
(43
)
    
—
      
(43
)
Loss from continuing operations before income taxes
    
(5,871
)
    
(1,484
)
    
(7,355
)
Income tax benefit
    
(948
)
    
(519
)
    
(1,468
)
Loss from continuing operations
    
(4,923
)
    
(965
)
    
(5,887
)
                         
(Loss) income from discontinued operations
    
(201
)
    
1,484
      
1,283
  
Gain on sale of discontinued operations
    
2,911
              
2,911
  
Income tax expense
    
948
      
519
      
1,468
  
Income from discontinued operations
    
1,761
      
965
      
2,726
  
                         
Net loss
    
(3,161
)
    
—
      
(3,161
)
Preferred stock dividend accretion
    
1,483
      
—
      
1,483
  
Net loss applicable to common stockholders
  
$
(4,644
)
  
$
—
    
$
(4,644
)
                         
                         
Loss per common share from continuing
                        
operations - basic and diluted
  
$
(0.24
)
  
$
(0.03
)
  
$
(0.27
)
                         
Income per common share from discontinued
                        
operations - basic and diluted
    
0.07
      
0.03
      
0.10
  
                         
Per share basic and diluted loss applicable to
                        
common stockholders
  
$
(0.17
)
  
$
—
    
$
(0.17
)
                         
Weighted-average number of common
                        
shares outstanding:
                        
Basic and diluted
    
26,827
      
26,827
      
26,827
  
 
 
5
1)   See accompanying notes to the unaudited pro forma financial information
 
(1)
Notes to Unaudited Pro Forma Financial Information


The historical financial statements have been adjusted in the pro forma financial statements to give effect to pro forma events that are (1) directly attributable to the divestiture of the NIBP Business, 2) factually supportable and (3) with respect to the pro forma statement of operations, expected to have a continuing impact on the results following the divestiture.

The pro forma financial statements do not necessarily reflect what the Company's financial condition or results of operations would have been had the divestiture occurred on the dates indicated. The statements also may not be useful in predicting the future financial condition and results of operations of the Company. The actual financial position and results of operations may differ from the pro forma amounts reflected herein due to a variety of factors.

The pro forma financial information does not reflect the realization of any expected cost savings or other synergies from the divestiture of the NIBP Business.

The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change.
 
 
 
 
 
 
 
 
 
6
 (d) Exhibits

2.1 Asset Purchase Agreement dated July 25, 2017 between the Company and SunTech Medical Inc.

99.1 Press release dated July 26, 2017

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

7
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
 
CAS MEDICAL SYSTEMS, INC.
  
       
       
       
Date:  July 26, 2017
By:
/s/ Jeffery A. Baird  
    Jeffery A. Baird  
    Chief Financial Officer  
       
 
 
 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 



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