Company Quick10K Filing
Vycor Medical
Price0.14 EPS-0
Shares25 P/E-6
MCap3 P/FCF41
Net Debt-0 EBIT-1
TEV3 TEV/EBIT-6
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-09-30 Filed 2020-11-13
10-Q 2020-06-30 Filed 2020-08-17
10-Q 2020-03-31 Filed 2020-05-12
10-K 2019-12-31 Filed 2020-03-27
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-09
10-Q 2019-03-31 Filed 2019-05-13
10-K 2018-12-31 Filed 2019-03-29
10-Q 2018-09-30 Filed 2018-11-13
10-Q 2018-06-30 Filed 2018-08-10
10-Q 2018-03-31 Filed 2018-05-11
10-K 2017-12-31 Filed 2018-03-30
10-Q 2017-09-30 Filed 2017-11-13
10-Q 2017-06-30 Filed 2017-08-11
10-Q 2017-03-31 Filed 2017-05-11
10-K 2016-12-31 Filed 2017-03-31
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-09
10-Q 2016-03-31 Filed 2016-04-28
10-K 2015-12-31 Filed 2016-03-30
10-Q 2015-09-30 Filed 2015-11-13
10-Q 2015-06-30 Filed 2015-08-14
10-Q 2015-03-31 Filed 2015-05-15
10-K 2014-12-31 Filed 2015-03-31
10-Q 2014-09-30 Filed 2014-11-12
10-Q 2014-06-30 Filed 2014-08-12
10-Q 2014-03-31 Filed 2014-05-15
10-K 2013-12-31 Filed 2014-04-07
10-Q 2013-09-30 Filed 2013-11-15
10-Q 2013-06-30 Filed 2013-08-14
10-Q 2013-03-31 Filed 2013-05-15
10-K 2012-12-31 Filed 2013-04-01
10-Q 2012-09-30 Filed 2012-11-14
10-Q 2012-06-30 Filed 2012-08-14
10-Q 2012-03-31 Filed 2012-05-15
10-K 2011-12-31 Filed 2012-03-30
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-22
10-Q 2011-03-31 Filed 2011-05-13
10-K 2010-12-31 Filed 2011-03-31
10-Q 2010-09-30 Filed 2010-11-15
10-Q 2010-06-30 Filed 2010-08-16
10-Q 2010-03-31 Filed 2010-05-12
10-K 2009-12-31 Filed 2010-03-31
8-K 2020-06-30
8-K 2020-03-23
8-K 2019-03-29
8-K 2018-10-09
8-K 2018-03-30

VYCO 10Q Quarterly Report

Part I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
EX-31.1 ex31-1.htm
EX-31.2 ex31-2.htm
EX-32.1 ex32-1.htm
EX-32.2 ex32-2.htm

Vycor Medical Earnings 2017-06-30

Balance SheetIncome StatementCash Flow
4.93.21.6-0.1-1.7-3.42012201420172020
Assets, Equity
0.50.1-0.2-0.6-0.9-1.32012201420172020
Rev, G Profit, Net Income
3.92.91.90.8-0.2-1.22012201420172020
Ops, Inv, Fin

10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the fiscal quarter ended June 30, 2017
   
[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
   
  For the transition period from            to             

 

VYCOR MEDICAL, INC.

(Exact name of small business issuer as specified in its charter)

 

Delaware   333-149782   20-3369218
(State of   (Commission   (IRS Employer
Incorporation)   File Number)   Identification No.)

 

951 Broken Sound Parkway Suite 320, Boca Raton, FL 33487
(Address of principal executive offices) (Zip code)

 

Issuer’s telephone number: (561) 558-2020


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

Common Stock par value $0.0001

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X] No [  ]

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes[  ] No [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer [  ]   Accelerated Filer [  ]
Non-accelerated Filer [  ] (Do not check if a smaller reporting company)   Smaller Reporting Company [X]

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).[  ] Yes [  ] No

 

There were 19,708,401 shares outstanding of registrant’s common stock, par value $0.0001 per share, as of August 11, 2017.

 

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

 

 

 

 

 
  

 

TABLE OF CONTENTS

 

    Page
PART I
 
Item 1. Financial Statements 3
     
  Consolidated Balance Sheets as of June 30, 2017 (unaudited) and December 31, 2016 3
     
  Unaudited Consolidated Statements of Comprehensive Loss for the three months and six months ended June 30, 2017 and June 30, 2016. 4
     
  Unaudited Consolidated Statements of Cash Flows for the three and six months ended June 30, 2017 and June 30, 2016. 5
     
  Notes to Unaudited Consolidated Financial Statements 6
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation 14
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 26
     
Item 4. Controls and Procedures 26
     
PART II
 
Item 1. Legal Proceedings 28
     
Item 1A. Risk Factors 28
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 28
     
Item 3. Defaults Upon Senior Securities 28
     
Item 4. Mine Safety Disclosures 28
     
Item 5. Other Information 28
     
Item 6. Exhibits 28
     
SIGNATURES 29

 

 2 
   

 

 PART I

 

ITEM 1. FINANCIAL STATEMENTS

 

VYCOR MEDICAL, INC.
Consolidated Balance Sheets

(Unaudited)

 

   June 30, 2017   December 31, 2016 
ASSETS          
Current Assets          
Cash  $518,755   $56,859 
Trade accounts receivable, net   117,884    148,784 
Inventory   175,021    204,071 
Prepaid expenses and other current assets   84,416    127,375 
Total Current Assets   896,076    537,089 
Fixed assets, net   462,064    401,051 
Intangible and Other assets:          
Trademarks   251,157    251,157 
Patents, net of accumulated amortization   154,738    238,571 
Website, net of accumulated amortization   12,673    14,958 
Security deposits   46,669    42,424 
Total Intangible and Other assets   465,237    547,110 
TOTAL ASSETS  $1,823,377   $1,485,250 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)          
Current Liabilities          
Accounts payable  $120,993   $249,949 
Accrued interest: Other   160,568    136,765 
Accrued interest: Related party   12,840    12,161 
Accrued liabilities: Other   195,915    116,957 
Accrued liabilities: Related Party   162,185    330,000 
Monies in Escrow Related Party - Offering   -    101,000 
Notes payable: Related Party   -    248,000 
Notes payable: Other   316,893    316,856 
Total Current Liabilities   969,394    1,511,688 
STOCKHOLDERS’ EQUITY (DEFICIT)          
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 270,306 issued and outstanding as at June 30, 2017 and December 31, 2016 respectively   27    27 
Common Stock, $0.0001 par value, 25,000,000 shares authorized at June 30, 2017 and December 31, 2016, 19,811,735 and 11,439,357 shares issued and 19,708,401 and 11,336,023 outstanding at June 30, 2017 and December 31, 2016 respectively   1,981    1,144 
Additional Paid-in Capital   26,726,088    25,007,850 
Treasury Stock (103,334 shares of Common Stock as at June 30, 2017 and December 31, 2016 respectively, at cost)   (1,033)   (1,033)
Accumulated Deficit   (26,000,239)   (25,164,545)
Accumulated Other Comprehensive Income   127,159    130,119 
Total Stockholders’ Equity (Deficit)   853,983    (26,438)
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)  $1,823,377   $1,485,250 

 

See accompanying notes to financial statements

 

 3 
   

 

 VYCOR MEDICAL, INC.
Consolidated Statements of Comprehensive Loss
(unaudited)

 

   For the three months ended June 30,   For the six months ended June 30, 
   2017   2016   2017   2016 
                 
Revenue  $307,684   $379,406   $736,083   $779,492 
Cost of Revenues Sold   39,445    48,086    87,421    115,325 
Gross Profit   268,239    331,320    648,662    664,167 
                     
Operating expenses:                    
Depreciation and Amortization   69,264    66,310    138,636    129,595 
General and administrative   552,865    556,512    1,163,635    1,340,846 
Total Operating expenses   622,129    622,822    1,302,271    1,470,441 
Operating loss   (353,890)   (291,502)   (653,609)   (806,274)
                     
Other income (expense)                    
Interest expense: Other   (8,809)   (12,206)   (20,853)   (24,188)
Interest expense: Related Party   -    (1,247)   (679)   (1,247)
Gain (loss) on foreign currency exchange   1,982    (408)   1,632    (1,214)
Total Other Income (expense)   (6,827)   (13,861)   (19,900)   (26,649)
                     
Loss Before Credit for Income Taxes   (360,717)   (305,363)   (673,509)   (832,923)
     Credit for income taxes   -    -    -    - 
Net Loss   (360,717)   (305,363)   (673,509)   (832,923)
    Preferred stock dividends   -    -    (162,185)   (88,318)
Net Loss available to common shareholders   (360,717)   (305,363)   (835,694)   (921,241)
Comprehensive Loss                    
 Net Loss   (360,717)   (305,363)   (673,509)   (832,923)
 Foreign Currency Translation Adjustment   2,959    2,921    2,959    2,921 
 Comprehensive Loss   (357,758)   (302,442)   (670,550)   (830,002)
                     
Net Loss Per Share                    
Basic and diluted  ($0.02)  ($0.03)  ($0.05)  ($0.08)
                     
Weighted Average Number of Shares Outstanding – Basic and Diluted   18,674,287    11,007,522    16,970,241    10,971,203 

 

 

See accompanying notes to financial statements

 

 4 
   

 

VYCOR MEDICAL, INC.
Consolidated Statement of Cash Flows
(unaudited)

 

   For the six months ended
   June 30,
    2017    2016 
Cash flows from operating activities:          
Net loss  $(673,509)  $(832,923)
Adjustments to reconcile net loss to cash used in operating activities:          
Amortization of intangible assets   86,118    50,927 
Depreciation of fixed assets   60,214    83,395 
Inventory provision   2,544    2,544 
Share based compensation   197,868    347,950 
Loss on foreign exchange   1,634    1,214 
           
Changes in assets and liabilities:          
Accounts receivable   30,897    (116,299)
Inventory   26,507    50,299 
Prepaid expenses   47,970    59,468 
Accrued interest related party   680    1,247 
Accrued interest other   23,803    23,934 
Accounts payable   (128,956)   (95,186)
Accrued liabilities other   (3,542)   34,298 
Accrued liabilities related party   82,500    - 
Security Deposit   (4,245)   6,250 
Cash used in operating activities   (249,517)   (382,882)
Cash flows from investing activities:          
Purchase of fixed assets   (88,012)   (20,231)
Cash used in investing activities   (88,012)   (20,231)
Cash flows from financing activities:          
Proceeds from issuance of common stock, net   842,207    - 
Net proceeds from issuance of Notes Payable - Related Party   -    185,000 
Repayment of Notes Payable - Other   (37,735)   (39,475)
Cash provided by (used in) financing activities   804,472    145,525 
Effect of exchange rate changes on cash   (5,047)   (2,180)
Net increase (decrease) in cash   461,896    (259,768)
Cash at beginning of period   56,859    347,477 
Cash at end of period   518,755    87,709 
           
Supplemental Disclosures of Cash Flow information:          
Non-Cash Transactions:          
Preferred stock dividends satisfied in new preferred stock       $88,318 

  

See Accompanying Notes to Financial Statements

 

 5 
   

 

VYCOR MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2017
(unaudited)

 

1. BASIS OF PRESENTATION

 

The consolidated financial statements of the Company present the financial position, results of operations, and cash flows of Vycor Medical, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in comprehensive financial statements have been omitted pursuant to such rules and regulations. The consolidated balance sheet as of December 31, 2016 derives from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.

 

The consolidated financial statements as of and for the three and six months ended June 30, 2017 and 2016, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and results of operations. The results of operations for the three and six months ended June 30, 2017 and 2016 are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation and Basis of Presentation

 

The consolidated financial statements include the accounts of Vycor Medical, Inc., and its wholly-owned subsidiaries, NovaVision, Inc. (a Delaware corporation), NovaVision GmbH (a German corporation) and Sight Science Limited (a UK corporation), both wholly owned subsidiaries of NovaVision, Inc. The Company is headquartered in Boca Raton, FL. All material inter-company accounts, transactions, and profits have been eliminated in consolidation.

 

 6 
   

 

Recent Accounting Pronouncements

 

In August 2014, the FASB issued ASU No. 2014-15 —Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The ASU requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued and if management’s plans will alleviate that doubt. Management is required to make this evaluation for both annual and interim reporting periods. The Company adopted this guidance for the fiscal year ended December 31, 2016. This adoption did not have a material impact on the Company’s consolidated financial statements.

 

From time to time new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.

 

Net Loss Per Share

 

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental shares issuable upon exercise of stock options and warrants and conversion of preferred stock and convertible debt. Such potentially dilutive shares are excluded when the effect would be to reduce a net loss per share. No dilution adjustment has been made to the weighted average outstanding common shares in the periods presented because the assumed exercise of outstanding options and warrants and the conversion of preferred stock and debt would be anti-dilutive.

 

The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share:

 

   June 30, 2017   December 31, 2016 
Stock options outstanding   725,557    705,557 
Warrants to purchase common stock   7,875,417    6,007,048 
Debentures convertible into common stock   255,871    242,647 
Preferred shares convertible into common stock   1,272,052    1,272,052 
Directors Deferred Compensation Plan   364,356    176,479 
Total   10,493,253    8,403,783 

  

3. NOTES PAYABLE

 

Related Party Notes Payable

 

As of June 30, 2017 and December 31, 2016 Related Party Notes Payable consists of:

 

   June 30, 2017   December 31, 2016 
The Company issued promissory notes to Fountainhead Capital Management Limited for $248,000. The notes bear interest at 10% per annum and are payable on the earlier of one year or five days following the delivery of written demand for payment by the Payee. The notes were converted into 1,180,953,shares of common stock and 1,180,953 warrants in connection with the Private Placement in January 2017.   -   $248,000 
           
Total Related Party Notes Payable   -   $248,000 

 

 7 
   

 

 Other Notes Payable

 

As of June 30, 2017 and December 31, 2016, Other Notes Payable consists of:

 

   June 30, 2017   December 31, 2016 
On March 25, 2011 the Company issued a term note for $300,000 to EuroAmerican Investment Corp. (“EuroAmerican”). The term note bears interest at 16% per annum and was due June 25, 2011. In connection with the loan the Company also issued EuroAmerican warrants to purchase 400,000 shares of the Company’s common stock at an exercise price of $4.50 per share for a period of three (3) years. On June 25, 2011 the due date for this note was extended to September 25, 2011 and the Holder was granted the right to convert all or any amount of the principal face amount of the debenture then outstanding and accrued interest into shares of common stock of the Company an adjusted conversion price of $1.80 per share, subject to adjustment and does not require bifurcation. The due date for this note has been extended to December 31, 2017  $300,000   $300,000 
           
Insurance policy finance agreements. During the period ended June 30, 2017 the Company made payments of $37,735. The notes are due over the next twelve months.   16,893    16,856 
           
Total Notes Payable:  $316,893   $316,856 

 

The company assesses the value of the beneficial conversion feature of its convertible debt by determining the intrinsic value of such conversion, under ASC 470, at the time of issuance. At the time of issuance of the convertible debt instruments set out above, the fair value of the stock was either the same or less than the conversion price, and so there was no value attributable to any beneficial conversion feature.

 

4. SEGMENT REPORTING, GEOGRAPHICAL INFORMATION

 

(a) Business segments

 

The Company operates in two business segments: Vycor Medical, which focuses on devices for neurosurgery; and NovaVision, which focuses on neuro stimulation therapies and diagnostic devices for the treatment and screening of vision field loss and which includes Sight Science. Set out below are the revenues, gross profits and total assets for each segment.

 

 8 
   

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2017   2016   2017   2016 
Revenue:                    
   Vycor Medical  $252,324   $333,085   $622,210   $682,006 
   NovaVision  $55,360   $46,321   $113,873   $97,486 
   $307,684   $379,406   $736,083   $779,492 
Gross Profit                    
   Vycor Medical  $218,257   $288,812   $546,853   $575,420 
   NovaVision  $49,982   $42,508   $101,809   $88,747 
   $268,239   $331,320   $648,662   $664,167 

 

   June 30, 2017   December 31, 2016 
Total Assets:          
Vycor Medical  $1,246,660   $805,716 
NovaVision   576,717    679,534 
Total Assets  $1,823,377   $1,485,250 

 

(b) Geographic information

 

The Company operates in two geographic segments, the United States and Europe. Set out below are the revenues, gross profits and total assets for each segment.

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2017   2016   2017   2016 
Revenue:                    
   United States  $279,908   $356,170   $680,979   $728,476 
   Europe  $27,776   $23,236   $55,104   $51,016 
   $307,684   $379,406   $736,083   $779,492 
Gross Profit                    
   United States  $242,912   $309,318   $598,612   $616,556 
   Europe  $25,327   $22,002   $50,050   $47,611 
   $268,239   $331,320   $648,662   $664,167 

 

   June 30, 2017   December 31, 2016 
Total Assets:          
   United States  $1,607,988   $1,258,624 
   Europe   215,389    226,626 
Total Assets  $1,823,377   $1,485,250 

 

 9 
   

 

5. EQUITY

 

Common Stock and Stock Grants

 

From January to June 2017, the Company granted 187,877 shares of Common Stock (valued at $42,000) to non-employee Directors. Under the terms of the Directors Deferred Compensation Plan, the receipt of these shares is deferred until the January 15th following the termination of their services as a director. As of June 30, 2017 these shares have yet to be issued.

 

From January to June 2017, the Company issued 76,663 shares of Common Stock (valued at $16,875) to members of the NovaVision, Inc. Scientific Advisory Board in respect of their services.

 

From January to June 2017, the Company issued 644,286 shares of Common Stock (valued at $135,300) to Fountainhead in accordance with the terms of a Consulting Agreement and 1,571,429 shares of Common Stock (valued at $330,000) to Fountainhead following the achievement of certain milestones.

 

From January to June 2017, the Company issued 9,921 shares of Common Stock (valued at $2,084) to Techmed, Inc. in accordance with the terms of a consulting agreement.

 

Private Placement.

 

On January 11 and February 23, 2017, the Company completed the sale of $1,274,717 in shares of Vycor Common Stock (each a “Share”) and Warrants (together with the Shares, the “Securities”) to accredited investors (the “Investors”). The Shares were issued in a private placement (the “Private Placement”) pursuant to the terms of Stock Purchase Agreements between the Company and each of the Investors, and was limited to current shareholders of the Company as of November 9, 2016 (the “Record Date”).

 

Included in these gross proceeds was the conversion of $248,000 of debt on the balance sheet at December 31, 2016 and $101,000 funds held in escrow on the balance sheet at December 31, 2016. The Private Placement raised net cash proceeds, after debt conversion and expenses, of $943,207, of which $842,207 was received during the period.

 

The Securities comprised one Share at a purchase price $0.21 per share and a Warrant to purchase one Share at an exercise price of $0.27, exercisable over a period of three (3) years. A total of 6,070,079 Shares and Warrants to purchase 6,070,079 Shares were issued in the Private Placement.

 

Warrants and Options

 

The details of the outstanding warrants and options are as follows:

 

STOCK WARRANTS:

 

      Weighted average 
   Number of shares   exercise price per share 
Outstanding at December 31, 2015   6,007,048   $2.57 
Granted   -    - 
Exercised   -    - 
Cancelled or expired   -    - 
Outstanding at December 31, 2016   6,007,048   $2.57 
Granted   6,272,770   $0.27 
Exercised   -    - 
Cancelled or expired   (4,404,401)  $(2.52)
Outstanding at June 30, 2017   7,875,417   $0.76 

 

 10 
   

 

STOCK OPTIONS:

 

      Weighted average 
   Number of shares   exercise price per share 
Outstanding at December 31, 2015   25,557   $20.25 
Granted   680,000   $0.79 
Exercised   -    - 
Cancelled or expired   -    - 
Outstanding at December 31, 2016   705,557   $20.25 
Granted   20,000   $0.27 
Exercised   -    - 
Cancelled or expired   -    - 
Outstanding at June 30, 2017   725,557   $0.95 

 

As of June 30, 2017, the weighted-average remaining contractual life of outstanding warrants and options is 2.09 and 1.72 years, respectively.

 

6. SHARE-BASED COMPENSATION

 

Stock Option Plan

 

Under ASC Topic 718, the Company estimates the fair value of option awards on the date of grant using an option pricing model. The grant date fair value is recognized over the option-vesting period, the period during which an employee is required to provide service in exchange for the award. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. Under these standards, compensation cost for employee cost for employee stock-based awards is based on the estimated grant-date fair value and recognized over the vesting period of the applicable award on a straight-line basis.

 

For the six months ended June 30, 2017 and 2016, the Company recognized share-based compensation of $1,609 and $198,200, respectively, for employee stock options.

 

Stock appreciation rights may be granted either on a stand-alone basis or in conjunction with all or part of any other stock options granted under the plan. As of June 30, 2017 there were no awards of any stock appreciation rights.

 

Non-Employee Stock Compensation

 

The Company from time to time issues common stock, stock options or common stock warrants to acquire services or goods from non-employees. Common stock, stock options and common stock warrants issued to other than employees or directors are recorded on the basis of their fair value, which is measured as of the “measurement date” using an option pricing model. The “measurement date” for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the life of the option or warrant.

 

Aggregate stock-based compensation expense charged to operations for stock and warrants granted to non-employees for the six months ended June 30, 2017 and 2016 was $278,759 and $149,750, respectively, of which $236,759 and $20,562, respectively, related to stock issued during the periods; $42,000 and $36,000, respectively, related to stock granted but not issued to directors under the Directors Deferred Compensation Plan. During the six months ended June 30, 2017 warrants with a value of $86,754 were granted with performance vesting conditions; the value of these options will not be recognized as share-based compensation unless or until the Company concludes that it is probably the performance conditions will be achieved.

 

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Stock-based Compensation Valuation Methodology

 

Stock-based compensation resulting from the issuance of Common Stock is calculated by reference to the valuation of the Stock on the date of issuance, the expense being recognized as the compensation is earned. Stock-based compensation expenses related to employee options and warrants granted to non-employees are recognized as the stock options and warrants are earned. The fair value of the stock options or warrants granted is estimated at the grant date, using the Black-Scholes option pricing model, and the expense is recognized on a straight-line basis over the shorter of the period over which services are to be received or the life of the option or warrant. The grant date fair value of employee share options and similar instruments is estimated using the Black-Scholes option pricing model on the basis of the fair value of the underlying common stock on the measurement date, adjusted for the unique characteristics of those equity instruments, using the assumptions noted in the table below. Expected volatility is based on the historical volatility of a peer group of publicly traded companies. The expected term of options and warrants was based upon the expected life of the option or warrant, and the risk-free rate is based on the U.S. Treasury Constant Maturity rate.

 

The following assumptions were used in calculations of the Black-Scholes option pricing model for the six months ended June 30, 2017 and 2016:

 

   Six Months Ended June 30, 
   2017   2016 
Risk-free interest rates   1.50%   0.91%
Expected life   1.5 years    1.5 years 
Expected dividends   0%   0%
Expected volatility   104%   101%
Vycor Common Stock fair value  $0.20   $2.00 

  

7. COMMITMENTS AND CONTINGENCIES

 

Lease

 

The Company leased office space located at 6401 Congress Ave., Suite 140, Boca Raton, FL 33487 from Catexor Limited Partnership for a gross rent of $15,439 plus sales tax per month. The term of the lease was 5 years and 6 months and terminated July 30, 2017. Effective August 1, 2017 the Company has leased office space located at 951 Broken Sound Parkway, Suite 320, Boca Raton, FL 33487 from WPT Land 2L.P. for a gross rent of approximately $5,700 plus sales tax per month . The lease terminates September 30, 2020. The Company’s subsidiary in Germany occupies premises on a short-term lease agreement. Rent expense for the six months ended June 30, 2017 and 2016 was $100,978 and $106,450 respectively.

 

Potential German tax liability

 

In June 2012 the Company’s German subsidiary received a preliminary assessment for Magdeburg City trade tax of approximately €75,000 (approximately $85,000). This assessment is for the 2010 fiscal year and relates to the Company’s acquisition of the assets of the former NovaVision, Inc. An initial assessment for corporate tax for the same period has been preliminarily reduced to zero. The Company has not accepted this trade tax assessment and is in discussion with the relevant tax authorities with a view to its reduction. The tax authorities have agreed to suspend the assessment pending the outcome of certain court hearings, and the Company has agreed to make limited monthly payments on account. To the extent that this assessment (either a higher or a reduced amount) is ultimately confirmed by the tax authorities, the Company believes it has a very strong claim against certain professional advisors which would offset the liability in full. Accordingly, the Company has made no provision for this liability in the six months ended June 30, 2017 and the year ended December 31, 2016 respectively, other than recording the monthly payments as an expense.

 

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Potential Patent Infringement

 

The Company was made aware in 2012 that a competitor had been granted a patent for related technology, and appeared to be entering the market with products that infringe the Company’s own issued patent. Following investigation, the Company initiated an invalidation of the competitor’s patent; in March 2014 the Patent Re-examination Board issued an Examination Decision invalidating all the claims of the competitor’s patent. The competitor appealed the decision, but the Company has contested the appeal. A final decision on the appeal is pending. The Company has been made aware that two or more Chinese companies are marketing the products that appear to infringe the Company’s Chinese patent, and is investigating this information to determine whether infringing products are being sold. As a general rule the Company intends to take all necessary action to protect its patent portfolio. As with all patent infringement actions, there is some risk that the accused infringer will not be found to infringe the claims, and an additional risk that the accused infringer will successfully challenge the validity of the asserted claims.

 

8. CONSULTING AND OTHER AGREEMENTS

 

The following agreements were entered into or remained in force during the six months ended June 30, 2017:

 

In March 2017 and effective April 1, 2017, as part of a streamlining of compensation arrangements with executive management, the Company established the March 2017 Compensation Plan. Under this Plan, the Company amended the Fountainhead Consulting Agreement (“the Amendment”) to increase the annual fees by $330,000 to a total of $37,500 per month; at the same time, annual compensation payable to executive management under the March 2016 Compensation Plan was reduced by $330,000 to $0. These changes therefore had no financial impact on the Company. The other terms of the Consulting Agreement remained the same, including the ability of Fountainhead at its option to receive $5,000 per month in cash and the remainder payable in Company Common Stock issued at the recent Private Placement price and deliverable at the end of each fiscal quarter. The Consulting Agreement also contains provisions for Fountainhead to receive a higher proportion of fees in cash subject to certain future liquidity events, and subject to Board approval. Under the Amendment, Fountainhead was granted options pursuant to the Vycor Medical, Inc. 2008 Stock Option Plan, to purchase 660,000 shares of Company Common Stock at the same $0.27 exercise price as that of the warrants issued in the Private Placement. Vesting of these options is subject to the achievement of certain milestones by March 31, 2018. These options are equivalent to a grant of options to executive management under the March 2016 Compensation Plan, the change being made as part of the same streamlining.

 

During the six months ended June 30, 2017, under the terms of this amended Consulting Agreement, Fountainhead was paid $217,800 in Company Common Stock and $7,200 in cash.

 

9. RELATED PARTY TRANSACTIONS

 

Peter Zachariou, director and David Cantor, director are investment managers of Fountainhead Capital Management (“Fountainhead”) which is a related party due to the size of its shareholding. Adrian Liddell, Chairman is a consultant for Fountainhead.

 

During the period ended June 30, 2017, in accordance with the terms of the Consulting Agreement, the Company issued 644,286 shares of Common Stock (valued at $135,300) and $7,200 in cash to Fountainhead.

 

On January 11, and February 23, 2017 the Company completed the sale of $1,274,717 in shares of Common Stock and Warrants to accredited investors (the “Private Placement”). Fountainhead subscribed a total of $477,939 of shares in the Private Placement of which approximately $248,000 represented amounts that Fountainhead had already advanced to the Company and was held in the form of notes. As a result, Fountainhead was issued 2,275,901 shares of Common Stock and Warrants to purchase 2,275,901 shares of Common Stock an exercise price of $0.27.

 

During the period ended June 30, 2017, following the achievement of certain milestones established in the March 2016 Compensation Plan, the Company accrued deferred compensation of $82,500. This together with the balance of the deferred compensation accrued during the year ended December 31, 2016, was paid to Fountainhead in 1,571,429 shares of Common Stock (valued at $330,000) during the period ended June 30, 2017.

 

10. SUBSEQUENT EVENTS

 

The Company evaluated subsequent events through the date the financial statements were issued and filed with this Form 10Q:

 

None.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

Forward Looking Statements

 

This Interim Report on Form 10-Q contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PLSRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding Vycor Medical, Inc. (the “Company” or “Vycor,” also referred to as “us”, “we” or “our”). Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertainties. Forward-looking statements include statements regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategies, (c) anticipated trends in our industries, (d) our future financing plans and (e) our anticipated needs for working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Description of Business,” as well as in this Form 10-Q generally. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results.

 

Any or all of our forward-looking statements in this report may turn out to be inaccurate. They can be affected by inaccurate assumptions we might make or by known or unknown risks or uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Form 10-Q generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements. The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to publicly update any forward-looking statements, whether as the result of new information, future events, or otherwise. We intend that all forward-looking statements be subject to the safe harbor provisions of the PSLRA.

 

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1. Organizational History

 

The Company was formed as a limited liability company under the laws of the State of New York on June 17, 2005 as “Vycor Medical LLC”. On August 14, 2007, we converted into a Delaware corporation and changed our name to “Vycor Medical, Inc.”. The Company’s listing went effective on February 2009 and on November 29, 2010 Vycor completed the acquisition of substantially all of the assets of NovaVision, Inc. (“NovaVision”) and on January 4, 2012 Vycor, through its wholly-owned NovaVision subsidiary, completed the acquisition of all the shares of Sight Science Limited (“Sight Science”), a previous competitor to NovaVision.

 

2. Overview of Business

 

Vycor is dedicated to providing the medical community with innovative and superior surgical and therapeutic solutions and operates two distinct business units within the medical device industry. Vycor Medical designs, develops and markets medical devices for use in neurosurgery. NovaVision provides non-invasive rehabilitation therapies for those who have vision disorders resulting from neurological brain damage such as that caused by a stroke. Both businesses adopt a minimally or non-invasive approach. Both technologies have strong sales growth potential, address large potential markets and have the requisite regulatory approvals. The Company has 66 issued or allowed patents and a further 11 pending. The Company leverages joint resources across the divisions to operate in a cost-efficient manner.

 

The Company periodically engages in discussions with potential strategic partners for or purchasers of each or both of our operating divisions.

 

Vycor Medical

 

Vycor Medical designs, develops and markets medical devices for use in neurosurgery. Vycor Medical’s ViewSite Brain Access System (“VBAS”) is a next generation retraction and access system that was fully commercialized in early 2010 and is the first significant technological change to brain tissue retraction in over 50 years in contrast to significant development in most other neuro-surgical technologies. Vycor Medical is ISO 13485:2003 compliant, and VBAS has U.S. FDA 510(k) clearance and CE Marking for Europe (Class III) for brain and spine surgeries, and regulatory approvals in Australia, Brazil, Canada, China, Korea, Japan, Russia and Taiwan.

 

 

 

We believe VBAS offers several advantages over other brain retractor systems, commonly known as ribbon or blade retractors that are metallic, including having the potential to significantly reduce brain tissue trauma that arises from excessive pressure at the edges of the blade. The design of VBAS can minimize the size of the brain entry access necessary for surgical procedures, and is believed to significantly reduce the pressure and hence trauma on the surrounding brain tissue.

 

NovaVision

 

NovaVision provides non-invasive, computer-based rehabilitation targeted at a substantial and largely un-addressed market of people who have lost their sight as a result of stroke or other brain injury. NovaVision addresses a significant target market, estimated at approximately $2 billion in each of the U.S. and the EU and over $13 billion globally.

 

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NovaVision has a family of therapies that both restore and compensate for lost vision:

 

  Restoration of vision: NovaVision’s VRT and Sight Science’s Neuro-Eye Therapy (NeET), aim to improve visual sensitivity in a person’s blind area. VRT delivers a series of light stimuli along the border of the patient’s visual field loss. These programmed light sequences stimulate the border zone between the “seeing” and “blind” visual fields, repetitively challenging the visual cortex in the border zone with a large number of stimuli over the course of time. NeET targets deep within the blind area by repeated stimulation, allowing patients to detect objects within the blind field.
     
  Compensation and re-training: Normal eye movements are also affected after brain injury adding to the problems of blindness. NeuroEyeCoach provides a complementary therapy to VRT and NeET, which re-trains a patient to move their eyes, re-integrate left and right vision and to make the most of their remaining visual field.

 

VRT and NeuroEyeCoach are therefore highly complementary and are provided in an Internet-delivered suite to ensure broad benefits to NovaVision’s patients.

 

 

 

 NovaVision also has models of VRT and NeuroEyeCoach for physicians and rehabilitation clinics, as well as VIDIT, a diagnostic program that enables therapists to perform high-resolution visual field tests in less than ten minutes.

 

NovaVision’s VRT is the only medical device aimed at the restoration of vision lost as a result of neurological damage which has FDA 510(k) clearance to be marketed in the U.S; and NeuroEyeCoach is registered in the US as a Class I 510(k) exempt device. VRT, NEC and NeET have CE Marking for the EU. NovaVision has 45 granted and 1 pending patents worldwide.

 

Competition

 

The VBAS device is both a brain access system and a retractor and is therefore unique with no direct competitors. Competitive manufacturers of brain retractors include Cardinal Health (V. Mueller line), Aesculap, Integra Life Science and Codman (Division of Johnson & Johnson). Nico Corporation has a brain access device specifically designed to work with its Myriad resection and suction product.

 

NovaVision provides restoration therapies (VRT and NeET) and compensation or saccadic therapies (NeuroEyeCoach) for those suffering vision loss as a result of neurological trauma. The other therapy type for this condition is substitution (optical aids such as prisms) and is not considered by NovaVision as competition.

 

In restoration, competition has been reduced through NovaVision’s acquisition of Sight Science and there are a few very small companies or entities offering some form of vision rehabilitation product in Germany. Within compensation there are no real direct competitors. Other companies in the general rehabilitation space include RevitalVision, PositScience and Dynavision. In the professional market, NovaVision competes with aggregator products or those that provide a range of non-specific therapies, such a Rehacom, Sanet Vision Integrator and Bioness BITS. NovaVision’s products are dedicated to vision.

 

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The Market For the Company’s Products And Therapies

 

VBAS is used for craniotomy procedures. Based on statistics from the American Association of Neurological Surgeons (AANS), management estimates 700,000 such procedures are performed in the US annually. Of this, management believe approximately 225,000 (32 percent) are addressable by the VBAS range currently, with another 100,000 (total of 325,000 or 46 percent) addressable by an expanded future range. Management estimates, for the global market, there exists a current addressable market of approximately 1,100,000 procedures with another 500,000 addressable by an expanded VBAS range.

 

The market for NovaVision’s therapies comprises those suffering from vision loss resulting from neurological trauma such as stroke or other brain injury. The U.S. Centers for Disease Control (CDC) estimates there are approximately 8 million Americans who have previously had a stroke incident, with 795,000 additional strokes occurring annually; adjusting for repeat strokes and deaths, there are 481,000 new stroke survivors each year. Additionally, approximately 5.3 million Americans live with the long-term effects of a TBI, with 275,000 hospitalizations each year. The most recent scientific research estimates that approximately 28.5% experience some visual impediment and 20.5% of these patients experience a permanent visual field deficit, reducing mobility and other activities of daily living. The target market for VRT and NeET is this 20.5% subset of patients who have suffered a permanent visual field deficit; NeuroEyeCoach addresses all 28.5% of patients who experience visual impediments. Management estimates that the addressable target market for its therapies is approximately 2.9 million people in the US, approximately 2.8 million people in Europe and approximately 12.9 million people throughout the rest of the world.

 

Our Growth Strategy

 

Vycor Medical

 

Vycor Medical’s growth strategy includes:

 

1. Increasing U.S. market penetration through broader hospital coverage and targeted direct physician marketing. Vycor Medical’s sales and marketing strategy is to penetrate a well-defined US target market of 4,500 neurosurgeons. Vycor markets direct to surgeons as well as marketing and distributing through independent distributors, with a focus both on adding new hospitals and expanding to additional surgeons in hospitals where VBAS is already approved, and to expand usage to a broader range of procedures. Vycor is pursuing a policy of continually evaluating and upgrading its distributors as well as adding additional distributors in regions where it has little to no presence.

 

2. Provision of more Clinical and Scientific Data supporting the products superiority over the current standard-of-care blade retractors and to demonstrate VBAS’ potential for cost savings. Clinical and scientific data (in the form of peer reviewed articles, clinical studies and other reports and case studies) are critical in driving adoption, and in turn revenues, further and faster by demonstrating VBAS’ superiority as a minimally invasive access system that helps VBAS move further up the hospital cost/benefit curve. To date the Company has already had 10 Peer Reviewed studies and 4 other clinical papers and anticipates further studies to be published.

 

3. International Market Growth

 

Vycor Medical utilizes select medical device distributors with experience in neurosurgical devices in their countries or regions. VBAS has regulatory approvals in Australia, Brazil, Canada, China, Europe (EU – Class III), Korea, Mexico, Japan, Russia and Taiwan. Vycor Medical is actively pursuing new distribution agreements in the countries where it does not have any market presence.

 

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4. New Product Development

 

New Product Development is targeted at both driving the use of its existing VBAS product range through ancillary products and modalities that will facilitate the product’s use and through new product extensions to broaden VBAS applicability to procedures currently not addressed by the existing product line.

 

Vycor is modifying its existing VBAS product suite to make it easier to integrate with Image Guidance Systems (IGS) by re-engineering its VBAS product range so that the entire range of 12 devices, excluding the VBASmini, will be able to more easily accommodate pointers from the leading IGS system providers. Increasingly, all major neuro centers have image guidance systems, and where this is in place management believes over 90% of surgeries are carried out using IGS and management strongly believes that the existing VBAS rigid structure lends itself well to being incorporated into this increasing trend.

 

NovaVision

 

While speech, physical, and occupational therapies are the long-standing treatment standards for stroke and TBI survivors, VRT is the first and only FDA-cleared clinical component of vision restoration to physically enhance the visual field after a stroke or brain injury. Increasingly the healthcare community, partly driven by strong lobbying by stroke associations worldwide, are recognizing that vision is not only a significant issue post stroke or brain injury, but that visual field loss can have a significant impact on the success of other rehabilitation modalities and the quality of life.

 

NovaVision is now able to provide a clinically supported, cost-effective and scalable visual therapy solution offering broad benefits to those suffering visual impairment following neurological brain damage, to both patients and medical professionals alike.

 

NovaVision has four routes-to-market aimed at patients and professionals, comprising: direct-to-patient; rehabilitation centers and clinics; stroke associations and support groups; and physicians. Given the company’s resources NovaVision has initially focused on direct-to-patient, with a website lead-driven inbound and outbound marketing strategy targeted at prospective patients and relatives. Website metrics are positive, although below management’s expectations, showing good growth in traffic and rankings, and have been effective in generating leads. Our analysis of the campaign metrics in the US (including paid search) during 2016 highlighted some key improvements that are being implemented and which we believe could have a material impact on our lead generation.

 

Following the pilot launch of our NovaVision Center Model, comprising the Vision Diagnostics program and the NeuroEyeCoach training program, we have substantially broadened the delivery and licensing model in response to feedback from clinics. The new Center Model has a complete suite for the professional market, including options for software download, CD Rom, Cloud based and Hardware delivery with flexible and cost-effective pricing options, and is now being offered in both the US and Europe.

 

Manufacturing

 

Vycor Medical uses a sub-contract manufacturer to manufacture, package, label and sterilize its VBAS products. The Company has migrated all its VBAS manufacturing to Life Science Outsourcing, Inc. in Brea, California that is FDA-registered and meets ISO standards and certifications.

 

Intellectual Property

 

Patents

 

Vycor Medical maintains a portfolio of patent protection on its methods and apparatus for its Brain and Spine products and technology in the form of issued patents and applications, both domestically and internationally, with a total of 21 granted/allowed and 10 pending patents.

 

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NovaVision maintains a portfolio of patent protection on its methods and apparatus in the form of issued patents and applications, both domestically and internationally, with a total of 45 granted and 1 pending patents (including Sight Science).

 

Trademarks

 

VYCOR MEDICAL is a registered trademark and VIEWSITE is a common law trademark.

 

NovaVision maintains a portfolio of registered trademarks for NOVAVISION, NOVAVISION VRT, VRT VISION RESTORATION THERAPY and NEUROEYECOACH, amongst others, along with relevant logos, both in the US and internationally.

 

Employees

 

We currently have 12 employees.

 

Comparison of the Three Months Ended June 30, 2017 to the Three Months Ended June 30, 2016

 

Revenue and Gross Margin:

 

   Three months ended 
   June 30, 
   2017   2016   % Change 
Revenue:               
Vycor Medical  $252,324   $333,085    -24%
NovaVision  $55,360   $46,321    20%
   $307,684   $379,406    -19%
Gross Profit               
Vycor Medical  $218,257   $288,812    -24%
NovaVision  $49,982   $42,508    18%
   $268,239   $331,320    -19%

 

Vycor Medical recorded revenue of $252,324 from the sale of its products for the three months ended June 30, 2017, a decrease of $80,761, or 24%, over the same period in 2016. Most of this decrease was accounted for by reduced international sales. International sales tend to be irregular as international distributors follow a pattern of placing large stocking orders. In addition, Vycor has been in the process, during 2017, of modifying its existing VBAS product suite to make it easier to integrate with Imaging Guided Systems. The Company experienced manufacturing delays in connection with this re-engineering during the first half of 2017 and as a result has been unable to fulfil shipments of certain models, particularly for some large international orders. These delays have now been resolved and product will start to flow through during the third quarter. Gross margin of 86% was recorded for the three months ended June 30, 2017 compared to 87% for the same period in 2016.

 

NovaVision recorded revenues of $55,360 for the three months ended June 30, 2017, an increase of 20% over the same period in 2016, and gross margin of 90%, compared to 92% for the same period in 2016. New patient starts were up 61% compared to the same period in 2016.

 

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Research and Development Expense:

 

Research and development (“R&D”) expenses were $0 for the three months ended June 30, 2017 and 2016.

 

General and Administrative Expenses:

 

General and administrative expenses decreased by $3,647 to $552,865 for the three months ended June 30, 2017 from $556,512 for the same period in 2016. Included within General and Administrative Expenses are non-cash charges for share based compensation as the result of amortizing employee and non-employee shares, warrants and options which have been issued by the Company over various periods. The charge for the three months ended June 30, 2017 was $136,821, an increase of $43,634 over $93,187 in 2016. Also included within General and Administrative Expenses are Sales Commissions, which increased by $6,383 to $48,057. The remaining General and Administrative expenses decreased by $53,664 from $421,651 to $367,987.

 

An analysis of the change in cash and non-cash G&A is shown in the table below:

 

   Cash G&A   Non-Cash G&A 
Legal, professional and other consulting   28,429    - 
Board, financial and scientific advisory   7,959    71,134 
Commissions   6,383      
Sales, marketing and travel   (5,024)   - 
Investor relations and road show costs   (19,550)   (27,500)
Other (travel/regulatory/premises)   (20,810)   - 
Payroll   (44,668)   - 
Total change   (47,281)   43,634 

 

Interest Expense:

 

Interest comprises expense on the Company’s debt and insurance policy financing. Related Party Interest expense for the three months ended June 30, 2017 and 2016 was $0 and $1,247, respectively. Other Interest expense for 2016 decreased by $3,397 to $8,809 from $12,206 for 2016.

 

Comparison of the Six Months Ended June 30, 2017 to the Six Months Ended June 30, 2016

 

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Revenue and Gross Margin:

 

   Six months ended 
   June 30, 
   2016   2015   % Change 
Revenue:               
Vycor Medical  $622,210   $682,006    -9%
NovaVision  $113,873   $97,486    17%
   $736,083   $779,492    -6%
Gross Profit               
Vycor Medical  $546,853   $575,420    -5%
NovaVision  $101,809   $88,747    15%
   $648,662   $664,167    -2%

 

Vycor Medical recorded revenue of $622,210 from the sale of its products for the six months ended June 30, 2017, a decrease of $59,796, or 9%, over the same period in 2016. Sales grew by 11% in the US in 2017 compared to 2016, offset by reduced international sales. International sales tend to be irregular as international distributors follow a pattern of placing large stocking orders. In addition, Vycor has been in the process, during 2017, of modifying its existing VBAS product suite to make it easier to integrate with Imaging Guided Systems. The Company experienced manufacturing delays in connection with this re-engineering during the first half of 2017 and as a result has been unable to fulfil shipments of certain models, particularly for some large international orders. These delays have now been resolved and product will start to flow through during the third quarter. Gross margin of 88% was recorded for the three months ended June 30, 2017 compared to 84% for the same period in 2016.

 

NovaVision recorded revenues of $113,873 for the six months ended June 30, 2017, an increase of 17% over the same period in 2016, and gross margin of 89%, compared to 91% for the same period in 2016. New patient starts were up 55% compared to the same period in 2016.

 

Research and Development Expense:

 

Research and development (“R&D”) expenses were $0 for the six months ended June 30, 2017 and 2016.

 

General and Administrative Expenses:

 

General and administrative expenses decreased by $177,211 to $1,163,635 for the six months ended June 30, 2017 from $1,340,846 for the same period in 2016. Included within General and Administrative Expenses are non-cash charges for share based compensation as the result of amortizing employee and non-employee shares, warrants and options which have been issued by the Company over various periods. The charge for the six months ended June 30, 2017 was $280,368 a decrease of $67,582 over $347,950 in 2016. Also included within General and Administrative Expenses are Sales Commissions, which increased by $24,878 to $118,986. The remaining General and Administrative expenses decreased by $134,507 from $898,788 to $764,281.

 

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An analysis of the change in cash and non-cash G&A is shown in the table below:

 

   Cash G&A   Non-Cash G&A 
Commissions   24,878    - 
Other (travel/regulatory/premises)   8,830    - 
Board, financial and scientific advisory   4,263    (36,795)
Sales, marketing and travel   (3,789)   - 
Legal, professional and other consulting   (8,758)   - 
Investor relations and road show costs   (49,438)   (27,500)
Payroll   (85,615)   (3,287)
Total change   (109,629)   (67,582)

 

Interest Expense:

 

Interest comprises expense on the Company’s debt and insurance policy financing. Related Party Interest expense for the six months ended June 30, 2017 was $679 compared to $1,247 for 2016. Other Interest expense for 2016 decreased by $3,335 to $20,853 from $24,188 for 2016.

 

Liquidity and Capital Resources

 

Liquidity

 

The following table shows cash flow and liquidity data for the periods ended June 30, 2017 and December 31, 2016:

 

   June 30, 2017   December 31, 2016   $ Change 
Cash  $518,755   $56,859   $461,896 
Accounts receivable, inventory and other current assets  $377,321   $480,230   $(102,909)
Total current liabilities  $(969,394)  $1,511,688   $(2,481,082)
Working capital  $(73,318)  $(1,031,458)  $958,140 
Cash provided by financing activities  $804,472   $145,525   $658,947 

 

Operating Activities. Cash used in operating activities comprises net loss adjusted for non-cash items and the effect of changes in working capital and other activities. The net repayment of normal insurance financing should also be taken into account when considering cash used in operating activities.

 

The following table shows the principle components of cash used in operating activities during the six months ended June 30, 2017 and 2016, with a commentary of changes during the periods and known or anticipated future changes:

  

   June 30, 2017   June 30, 2016   $ Change 
Net loss  $(673,509)  $(832,923)  $159,414 
                
Adjustments to reconcile net loss to cash used in operating activities:               
Amortization and depreciation of assets  $146,332   $134,322   $12,010 
Share based compensation  $197,868   $347,950   $(150,082)
Accrued share based compensation  $82,500    -   $82,500 
Loss on foreign exchange  $1,634   $1,214   $420 
Other  $2,544   $2,544   $0 
   $430,878   $486,030   $(55,152)
                
Net loss adjusted for non-cash items  $(242,631)  $(346,893)  $104,262 
Changes in working capital               
Accounts receivable, accounts payable and accrued liabilities  $(101,601)  $(177,187)  $75,586 
Inventory  $26,507   $50,299   $(23,792)
Prepaid expenses, change in security deposit and net insurance financing repayments  $5,990   $26,243   $(20,253)
Accrued interest (not paid in cash)  $24,483   $25,181   $(698)
   $(44,621)  $(75,464)  $30,843 
                
Cash used in operating activities, adjusted for net insurance repayments  $(287,252)  $(422,357)  $135,105

 

 

 

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The adjustments to reconcile net loss to cash of $430,878 in the period have no impact on Liquidity. The reduction in net loss (as adjusted for non-cash items) by $104,262 to $242,631 was primarily a result of lower levels of operating expenses during the period. The net change in accounts receivable, accounts payable and accrued liabilities includes the payment during the first quarter of $69,314 of accounts payable deferred at the end of December 2016. During the period the Company purchased VBAS inventory for $10,306. Vycor is in the process of modifying the VBAS product suite to make it easier to integrate with IGS and as a result will be purchasing new inventory throughout 2017.

 

Investing Activities. Cash used in investing activities for the six months ended June 30, 2017 was $88,012, which primarily reflected expenditure on modifying the VBAS product suite to make it easier to integrate with IGS, as well as expenditure to make NovaVision Sight Science’s Neuro-Eye Therapy Internet-deliverable. The VBAS expenditure will continue over the next two quarters, although at a lower level.

 

Financing Activities. On January 11, and February 23, 2017 the Company completed the sale of $1,274,717 in shares of Common Stock and Warrants to accredited investors (the “Private Placement”). Included in these gross proceeds is the conversion of $248,000 of debt on the balance sheet at December 31, 2016, so that proceeds net of debt conversion were $1,026,717. The Private Placement raised net cash proceeds, after debt conversion and expenses, of $943,207. $101,000 of these proceeds and $7,050 of these expenses were reflected in the in the balance sheet at December 31, 2016 and so the net increase in liquidity during the period from the Private Placement was $849,259.

 

During the year ended December 31, 2016 Vycor’s largest shareholder, Fountainhead, had provided $248,000 of funding in the form of notes payable, which was converted into Common Stock as part of the Private Placement Initial Closing. Fountainhead also advanced $101,000 during the year ended December 31, 2016 in respect of the Private Placement. This amount was held in escrow at December 31, 2016 and represented part of the Private Placement Initial Closing.

 

Liquidity and Plan of Operations

 

The balance of cash at June 30, 2017 is $518,755. Management has evaluated the effects of the Private Placement described above on the Company’s financial condition, as well as the continued revenue growth coupled with improved margins and control of expenses. Management is of the opinion that any potential going concern uncertainty that previously existed has been remediated, and that its existing cash and cash equivalents following the Private Placement, together with the continued reduction in losses as a result of initiatives outlined below, will be sufficient to meet its anticipated cash requirements through at least August 31, 2018.

 

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As described earlier in this ITEM 2 “Our Growth Strategy”, the Company is executing on a plan to achieve a growth in revenues for both the Vycor Medical and NovaVision divisions, and thereby further reduce its cash operating usage. For Vycor Medical this includes in particular: increasing penetration in the US market through targeted marketing; increased international market growth; and new product development centered around the modification of its VBAS product range to make it easier to integrate with IGS systems. For NovaVision, after a prolonged and now complete period of re-development, the Company is focusing its resources on direct-to-patient marketing through a website lead-driven inbound and outbound marketing strategy. In addition, the Company is now starting to market its NovaVision Center Model to medical professionals, with a broad and flexible range of delivery and licensing options.

 

Critical Accounting Policies and Estimates

 

Uses of estimates in the preparation of financial statements

 

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimated. To the extent management’s estimates prove to be incorrect, financial results for future periods may be adversely affected. Significant estimates and assumptions contained in the accompanying consolidated financial statements include management’s estimate of the allowance for uncollectible accounts receivable, amortization of intangible assets, and the fair values of options and warrant included in the determination of debt discounts and share based compensation.

 

Research and Development

 

The Company expenses all research and development costs as incurred.

 

Cash and cash equivalents

 

The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. Cash balances may at times exceed the FDIC insured limits. Cash also includes a US investment account in a money market backed by government securities up to 105% of the account balance. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Included within cash are deposits paid by patients, held by the Company until the patient returns the VRT device or chinrest at the end of therapy. At June 30, 2017 and December 31, 2016 patient deposits amounted to $37,636 and $33,351, respectively, and are included in Accrued Liabilities

 

Fixed assets

 

The Company records fixed assets at cost and calculates depreciation using the straight-line method over the estimated useful life of the assets, which is estimated to be between three and seven years. Maintenance, repairs and minor renewals are charged to expense when incurred. Replacements and major renewals are capitalized.

 

Income taxes

 

We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

 

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ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

 

Patents and Other Intangible Assets

 

The Company capitalizes legal and related costs associated with the establishment and enhancement of patents for its products once patents have been applied for. Costs associated with the development of the patented item or processes are charged to research and development costs as incurred. The capitalized costs are amortized over the life of the patent. The Company reviews intangible assets on an annual in accordance with the authoritative guidance. Trademarks have an indefinite life and are reviewed annually by management for impairment in accordance with the authoritative guidance.

 

Software Development Costs

 

The authoritative accounting guidance requires software development costs to be capitalized upon completion of the preliminary project stage. Accordingly, direct internal and external costs associated with the development of the features and functionality of the Company’s software, incurred during the application development stage, are capitalized and amortized using the straight-line method over the estimated life of five years.

 

Revenue Recognition

 

Vycor Medical generates revenue from the sale of its surgical access system to hospitals and other medical professionals. Vycor Medical records revenue when a completed contract for the sale exists, the product is invoiced and shipped to the customer. Vycor Medical does not provide for product returns or warranty costs.

 

NovaVision generates revenues from various programs, therapy services and other sources such as license sales. Therapy services revenues represent fees from NovaVision’s vision restoration therapy software, eye movement training software, diagnostic software, clinic set up and training fees, and the professional and support services associated with the therapy. NovaVision provides vision restoration therapy directly to patients. The typical vision restoration therapy consists of six modules, performed on average over 6 months. A patient contract comprises set-up fees and monthly therapy fees. Set-up fees are recognized at the outset of the contract and therapy revenue is recognized ratably over the therapy period. Patient therapy is restricted to being completed by a patient within a specified time frame. NovaVision’s saccadic training software is generally completed within 2-4 weeks and revenue is therefore recognized fully at commencement.

 

Deferred revenue results from patients paying for the therapy in advance of receiving the therapy.

 

Accounts Receivable and Allowance for Doubtful Accounts Receivable

 

The Company’s accounts receivable are due from the hospitals and distributors in the case of Vycor Medical, and from patients directly for therapy or physicians for diagnostic products in the case of NovaVision. Accounts receivable are due once products have been delivered or at the time the therapy is initiated; however, some NovaVision therapy patients make monthly payments during the therapy program. The outstanding balances are stated net of an allowance for doubtful accounts. The Company determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, and the customer’s ability to pay its obligations. The Company writes off accounts receivable when they become uncollectible.

 

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Inventory

 

Inventories are stated at the weighted average cost method. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product. If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified. The provision for inventory for the years ended June 30, 2017 and 2016 was $2,544, respectively. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales.

 

Foreign Currency

 

The Euro is the local currency of the country in which NovaVision GmbH conducts its operations and is considered the functional currency of this entity; the GB Pound is the local currency of the country in which Sight Science Limited conducts its operations and is considered the functional currency of this entity. All balance sheet amounts are translated to U.S. dollars using the U.S. exchange rate at the balance sheet date except for the equity section which is translated at historical rates. Operating statement amounts are translated using an average exchange rate for the period of operations. Foreign currency translation effects are accumulated as part of the accumulated other comprehensive income (loss) and included in shareholders’ (deficit) in the accompanying Consolidated Balance Sheet.

 

Educational marketing and advertising expenses

 

The Company may incur costs for the education of customers on the uses and benefits of its products. The Company will include education, marketing and advertising expense as a component of selling, general and administrative costs as such costs are incurred.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable.

 

ITEM 4. CONTROLS AND PROCEDURES

 

(a) Disclosure Controls and Procedures

 

We are required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer (also our principal executive officer) and our chief financial officer (also our principal financial and accounting officer) to allow for timely decisions regarding required disclosure.

 

The Company’s management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, our CEO and our CFO have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective as of that date to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that information required to be disclosed by the Company in the reports its files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its CEO and its CFO, as appropriate, to allow timely decisions regarding required disclosure. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

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(b) Changes in Internal Controls

 

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

The Company’s management, including the Company’s CEO and CFO, does not expect that the Company’s internal control over financial reporting will prevent all errors and all fraud. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

 

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 PART II

 

ITEM 1. LEGAL PROCEEDINGS

 

We are subject from time to time to litigation, claims and suits arising in the ordinary course of business. As of August 11, 2017, we were not a party to any material litigation, claim or suit whose outcome could have a material effect on our financial statements.

 

ITEM 1A. RISK FACTORS.

 

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

 

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Issuance Type  Security  Shares 
Fountainhead Management Fees  Common   2,215,715 
Advisory Board Fees  Common   76,663 
Outsider Consultants  Common   9,921 
Private Placement Offering Fountainhead  Common   2,275,901 
Private Placement Offering Others  Common   3,794,178 

 

 ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None.

 

Index to Exhibits

 

31.1 Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
31.2 Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
   
32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
   
32.2 Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 11, 2017.

 

  Vycor Medical, Inc.
  (Registrant)
     
  By: /s/ Peter C. Zachariou
    Peter C. Zachariou
    Chief Executive Officer and Director (Principal Executive Officer)
  Date  August 11, 2017
     
  By: /s/ Adrian Liddell
    Adrian Liddell
    Chairman of the Board and Director
    (Principal Financial and Accounting Officer)
  Date  August 11, 2017

 

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