(CASM) Our Vision That no patient is harmed by undetected tissue hypoxia. LD MICRO Conference Los Angeles, CA June 8, 2016 Tom Patton, CEO
Safe Harbor Statement CAS Medical Systems Inc. ( CASM ) has filed a registration statement on Form S-3 with the Securities and Exchange Commission ( SEC ) for the offering to which this communication relates (the Registration Statement ) and a related prospectus supplement. The information contained in this presentation does not purport to be all-inclusive or to contain all of the information a prospective or existing investor may desire. All of the financial information and other information regarding CASM contained in this presentation (including any oral statements transmitted to the recipients of this presentation) is qualified in its entirety by the Registration Statement and related prospectus supplement (including the documents incorporated by reference therein). Before you invest, you should read the Registration Statement, prospectus supplement and documents incorporated by reference therein for more complete information about CASM and the offering. You may obtain the Registration Statement and prospectus supplement for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, you can request a copy of the prospectus supplement and base prospectus in the Registration Statement from Craig-Hallum Capital Group LLC, 222 South Ninth Street, Suite 350, Minneapolis, MN 55402, Attention: Capital Markets, Phone 612-334-6342 / Fax 612-334-6348, Email: jack.mccarthy@craig-hallum.com. This presentation (including any oral statements transmitted to the recipients of this presentation) contains forwardlooking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding CASM s current expectations about its future operating results, prospects and opportunities. CASM has tried to identify these forward looking statements by using words such as expect, anticipate, potential, estimate, plan, will, would, should, believe or similar expressions, but these words are not the exclusive means for identifying such statements. CASM cautions that a number of risks, uncertainties and other important factors could cause CASM s actual results, prospects and opportunities to differ materially from those expressed in, or implied by, the forward-looking statements. For a detailed discussion of factors that could affect CASM s future operating results, prospects and opportunities, please see the Registration Statement, prospectus supplement and documents incorporated by reference therein, including the disclosures under Risk Factors and Cautionary Note Regarding Forward-Looking Statements. You should not place undue reliance on any forward-looking statements. Except as expressly required by the federal securities laws, CASM undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, changed circumstances or future events or for any other reason. 2
Introduction Cerebral oximetry is a critical patient monitoring parameter. Early stage of adoption with current market $100m Addressable market $800m+ FORE-SIGHT oximetry is taking share and expanding market. Q1 16 FORE-SIGHT revenue grew 31% worldwide; 37% in U.S. Corporate Headquarters: Branford, Connecticut FORE-SIGHT ELITE launch in late 2013 was a financial inflection point. High-margin disposable sensor use tracks monitor shipments. U.S. monitor installed base has grown steadily to 960 at YE 15, driving five-year U.S. sensor revenue CAGR of 32%. Company s transition to a high-margin disposable model is complete. Divested legacy products are reported as discontinued operations. FORE-SIGHT is ~ 80% of revenues; FORE-SIGHT disposables are ~ 70%. CASMED s top line revenue growth was 21% in Q1 2016. 3
Cerebral Oxygen Desaturations "We routinely use FORE-SIGHT in our cardiac surgery cases [because it] allows for immediate recognition and treatment of cerebral desaturation events that would otherwise be undetected with conventional intraoperative monitoring. Glenn S. Murphy, MD Associate Professor of Anesthesiology University of Chicago Pritzker School of Medicine 4
Cerebral Oximetry = The Answer Disruptions to autoregulation can occur due to anesthesia, illness, surgery, and/or unique biology, exposing brain to oxygen deprivation. Standard monitoring only allows inference of cerebral oxygenation. Clinician inferences are wrong with alarming frequency. Oxygen desaturations can cause severe harm to patients, up to and including death. Procedure Cardiac Surgery (U.S.) 61% Cardiac Surgery (Canada) 63% Abdominal Surgery (elderly) 26% Aortic Arch Surgery 73% Shoulder Surgery (beach chair) 80% ICU, post-cardiac 53% Spine Surgery (prone) 36% Desaturation Incidence Thoracic Surgery 56% Fischer GW et al. J Thoracic Cardiovascular Surgery. 2010 Jun 23, Vol 141, No.3. 5
Cerebral Oximetry: Market Opportunity Still in the early stage of adoption Current market $100 million Current market growth rate 10-12% (est.) $800+ million surgical market potential > 2.0 million applicable patients p/y in US alone Movement towards standard of care > 200 papers, posters and abstracts on FORE-SIGHT Better patient outcomes, lower cost of care Perfusion society recommends its use Some Applicable Patient Procedures Market Penetration Phase Adult Cardiac (CABG, valves, AA, etc.) Pediatric Cardiac (congenital) Vascular (Carotids, EP Ablations, etc.) Head-up Shoulder Beach Chair Thoracic Surgery Market Introduction Phase Adult Post-Cardiac ICU NICU and PICU Monitoring Hip Replacements and other orthopedic Trans-catheter Aortic Valve Implantation Cardiac Arrest 6
FORE-SIGHT: How it Works Light Source Detectors Light source: Light from five LEDs penetrate to the brain. Interrogates oxy-hgb, deoxy- Hgb, and background tissues. Scalp Skull Brain Wide spacing of detectors: Distance between near and far detectors permits deeper tissue interrogation and more robust reading. Unique and patented algorithms: Sorts various optical signatures (derived from more than 15 years of accumulated research). Provides absolute Hgb saturation values to clinicians. 7
FORE-SIGHT: Accuracy Matters FORE-SIGHTELITE S t O 2 v Ref CX (Adults) FORE-SIGHT Elite S t O 2 (%) 100 80 60 40 20 FS2 S t O 2 Right FS2 S t O 2 Left 0 0 20 40 60 80 100 Ref CX (%) 25 subjects 225 data points A RMS = 3.05 FORE-SIGHT ELITE FORE-SIGHT INVOS EQUANOX Advance Precision (±1SD) 3.05 1 3.90 2 9.72 2 6.27 2 A RMS 3.05 1 4.30 2 9.72 2 6.88 2 1) Validation of the Next Generation FORE-SIGHT Elite Tissue Oximeter for Adult Cerebral Tissue Oxygen Saturation. MacLeod D: Anesth Analg 2013; 116(SCA Suppl):1-182 2) Factors affecting the performance of 5 cerebral oximeters during hypoxia in healthy volunteers. Bickler P et al: Anesth Analg 2013:117(4):813-23. 8
FORE-SIGHT ELITE: Inflection Point FORE-SIGHT ELITE launched September 2013 Replaced FORE-SIGHT first-generation launched in 2007 U.S. ELITE sensor margins have already improved to high 60 s Q3 15 Launch of FORE-SIGHT pediatric applications Addresses ~25% of the current market Well-validated pre-launch performance Preliminary data and customer conversions are encouraging Product Line is now complete R&D focus turns to lowering costs further and new technology enhancements 9
FORE-SIGHT Success Metrics Taking market share and expanding the market We win a majority of accounts that conduct a FORE-SIGHT clinical evaluation in U.S. Of new U.S. FORE-SIGHT accounts in past 12 months: o o ~ ½ were taken from competition ~ ½ were first-time users of cerox ~ 50% of new monitor placements go to existing customers to expand cerox use U.S. market share for FORE-SIGHT has grown to approximately 20% 10 of top 20 U.S. Adult Cardiac Hospitals use FORE-SIGHT oximetry 10
Distribution Build Build-out and upgrade of U.S. field sales org (FSO) continues. From 14 FTEs at YE 14 to 22 at YE 15 Plus 2 commissioned independent agents Total of 24 personnel in 13 territories Tenured reps are outselling new reps, but gap is closing Rep productivity continues to increase. Driving cash flow improvement Disposable model means revenue compounds. U.S. Sensor revenues of $12,500+ p/monitor Customers are sticky. Ex-U.S. distribution can contribute growth. High-quality distribution established in top markets ex-u.s. in 2014 is now gaining traction. ($ Thousands) Average Quarterly Sensor Revenue / Rep 11
Traditional Monitoring Revenue declines over past four years have masked FORE-SIGHT success. Two (2) segments recently divested (now reported as discontinued ops). Financial contribution of remaining segment is positive. MAX IQ Non-invasive Blood Pressure Module Provided to third-party monitor manufacturers Stabilized at ~$2.5m revenue run-rate RECENTLY DIVESTED CLEAR-TRACE Neonatal ECG leads Divested in March 2016 for $3.3 million Vital Signs Monitors Divested in October 2015 12
Financials: U.S. FORE-SIGHT Monitors Drive Sensors U.S. MONITORS + INSTALLED BASE U.S. DAILY SENSOR SALES 1000 960 $55,000 900 914 26% 26% (1) $50,000 $45,000 800 725 $40,000 700 33% $35,000 600 544 $30,000 24% 500 $25,000 400 2013 2014 2015 2016 Q1 $20,000 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 (1) v. Q1 15 13
Financials: Sales Mix Drives Margins ($ Thousands) TOTAL SALES (1) GROSS MARGIN (1) (2) $25,000 65% 61% $20,000 $19.5M 60% 59% 59% $17.0M 56% 57% 57% $15,000 $14.3M 55% 50% 51% 52% $10,000 50% $5,000 $5.5M 45% 45% $0 2013 2014 2015 2016 Q1 FORE-SIGHT Other 40% Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Total Gross Profit Margin Q3 '15 Q4 '15 Q1 '16 (1) Excludes discontinued products VSM and Neo. (2) Excludes Other Costs (Service & Manufacturing) 14
Recent Financial Highlights (1) ($ Thousands) 2015 2014 Q1 2016 Q1 2015 FORE-SIGHT $ 15,399 $ 12,416 $ 4,277 $ 3,275 All Other 4,088 4,603 1,178 1,245 Sales from Continuing Ops. 19,487 17,019 5,456 4,521 GM% - FORE-SIGHT 59.8% 52.8% 60.4% 56.8% GM% - TRADITIONAL 52.8% 52.3% 52.2% 56.0% GP % 51.2% 45.9% 52.8% 50.1% Gross Profit $ 9,970 7,808 2,881 2,265 Operating Expenses 16,612 15,222 4,323 3,717 Operating Loss (6,642) (7,414) (1,443) (1,452) Interest/Other 855 769 194 217 Pre-Tax Loss from Continuing Ops. (7,497) (8,183) (1,637) (1,669) Income Tax Benefit (216) (245) (1,091) (59) Loss from Continuing Ops. (7,281) (7,938) (546) (1,611) Income from Discontinued Ops., Net of Taxes 382 336 2,027 92 Net (Loss) Income (6,899) (7,602) 1,481 (1,518) Net (Loss) Income Applic. to Stockholders $ (8,282) $ (8,892) $ 1,120 $ (1,855) Ending Cash Balance $ 7,528 $ 8,365 (1) All periods report VSM and Neo as discontinued operations. 15
Investment Summary CASMED s cerebral oximeters have the potential to become the standard of care in a $800+ million addressable market opportunity. Data shows that cerebral oximetry addresses a serious problem, can improve care, and can lower costs. Desaturation of cerebral tissue can cause severe harm, including severe cognitive impairment and even death. Best-in-class FORE-SIGHT ELITE oximetry Gaining share from competitors and expanding the market Growth rates accelerated since ELITE product launch (+37% for 2014, +24% 2015) Monitor placements drive high-margin disposable sales from customers. Revenue Growth Drivers: U.S. direct distribution expansion, increased sales force productivity, pediatric and neonatal launch, and international leverage. Thank you! 16