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 1
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 2020-03-31

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 March 31, 2020
   
[  ] 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   001-34932   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 25,824,264 shares outstanding of registrant’s common stock, par value $0.0001 per share, as of May 11, 2020.

 

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

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
PART I
 
Item 1. Financial Statements 3
     
  Unaudited Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019 3
     
  Unaudited Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2020 and 2019. 4
     
  Unaudited Consolidated Statement of Stockholders’ Deficiency for the three months ended March 31, 2020 and 2019. 5
     
  Unaudited Consolidated Statements of Cash Flows for the three months ended March 31, 2020 and 2019. 6
     
  Notes to Unaudited Consolidated Financial Statements 7
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation 16
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
     
Item 4. Controls and Procedures 22
     
PART II
 
Item 1. Legal Proceedings 23
     
Item 1A. Risk Factors 23
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 23
     
Item 3. Defaults Upon Senior Securities 23
     
Item 4. Mine Safety Disclosures 23
     
Item 5. Other Information 23
     
Item 6. Exhibits 23
     
SIGNATURES 24

 

2

 

 

PART 1

 

ITEM 1. FINANCIAL STATEMENTS 

VYCOR MEDICAL, INC.

Consolidated Balance Sheets

(Unaudited) 

 

   March 31,   December 31, 
   2020   2019 
ASSETS          
Current Assets          
Cash  $70,714   $72,239 
Trade accounts receivable   163,038    278,020 
Inventory   201,075    210,528 
Prepaid expenses and other current assets   107,060    95,645 
Total Current Assets   541,887    656,432 
           
Fixed assets, net   408,649    374,527 
           
Intangible and Other assets:          
Patents, net of accumulated amortization   20,332    23,326 
Security deposits   6,000    6,000 
Operating lease - right of use assets   156,251    31,658 
Total Intangible and Other assets   182,583    60,984 
TOTAL ASSETS  $1,133,119   $1,091,943 
           
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIENCY)          
Current Liabilities          
Accounts payable  $251,147   $251,927 
Accrued interest: Other   292,732    280,765 
Accrued interest: Related party   51,345    44,921 
Accrued liabilities - Other   170,060    308,768 
Accrued liabilities - Related Party   1,135,295    973,110 
Notes payable: Other   346,885    328,032 
Notes payable: Related Party   290,873    230,873 
Current operating lease liabilities   41,924    28,010 
Total Current Liabilities  2,580,261   2,446,406 
           
Operating lease liability - Long term  110,952   - 
           
STOCKHOLDERS’ DEFICIENCY          
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 270,306 and 270,306 issued and outstanding as at March 31, 2020 and December 31, 2019 respectively  27  27 
Common Stock, $0.0001 par value, 55,000,000 shares authorized at March 31, 2020 and December 31, 2019, 25,927,598 and 25,391,884 shares issued and 25,824,264 and 25,288,550 outstanding at March 31, 2020 and December 31, 2019 respectively   2,593    2,539 
Additional Paid-in Capital   28,440,038    28,306,592 
Treasury Stock (103,334 shares of Common Stock as at March 31, 2020 and December 31, 2019 respectively, at cost)   (1,033)   (1,033)
Accumulated Deficit   (30,127,391)   (29,790,258)
Accumulated Other Comprehensive Income (Loss)   127,672    127,670 
Total Stockholders’ Deficiency   (1,558,094)   (1,354,463)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY  $1,133,119   $1,091,943 

 

See accompanying notes to consolidated financial statements

 

3

 

 

VYCOR MEDICAL, INC.

Consolidated Statements of Comprehensive Loss

(Unaudited)

 

   For the three months ended March 31, 
   2020   2019 
         
Revenue  $351,051   $350,666 
Cost of Goods Sold   38,895    36,198 
Gross Profit   312,156    314,468 
           
Operating expenses:          
Depreciation and Amortization   14,643    15,085 
Selling, general and administrative   453,904    462,221 
Total Operating expenses   468,547    477,306 
Operating loss   (156,391)   (162,838)
           
Other income (expense)          
Interest expense: Related Party   (6,425)   (4,759)
Interest expense: Other   (11,967)   (11,953)
Loss on foreign currency exchange   (165)   (748)
Total Other Income (expense)   (18,557)   (17,460)
           
Loss Before Credit for Income Taxes   (174,948)   (180,298)
Credit for income taxes   -    - 
Net Loss   (174,948)   (180,298)
Preferred stock dividends   (162,185)   (162,185)
Net Loss available to common stockholders   (337,133)   (342,483)
Comprehensive Loss          
Foreign Currency Translation Adjustment   2    (6)
Comprehensive Loss  $(174,946)  $(180,304)
           
Net Loss Per Share Basic and diluted  $(0.01)  $(0.01)
           
Weighted Average Number of Shares Outstanding – Basic and Diluted   25,294,437    23,146,646 

 

See accompanying notes to consolidated financial statements

 

4

 

 

VYCOR MEDICAL, INC.

Consolidated Statement of Stockholders’ Deficiency

(Unaudited)

 

                                   Additional              
   Common Stock    Preferred  C    Preferred  D    Treasury Stock    Paid-in    Accumulated    Accum      
   Number    Amount    Number   Amount   Number    Amount    Number    Amount    Capital    Deficit    OCI (Loss)   Total  
                                                 
Balance at December 31, 2019   25,391,884   $2,539    1   $0    270,306   $27    (103,334)  ($1,033)  $28,306,592   ($29,790,258)  $127,670   ($1,354,463)
Issuance of stock for board and consulting fees   535,714    54                                  112,446              112,500 
Directors deferred compensation granted                                          21,000              21,000 
Issuance of shares pursuant to exercise of warrants                                                           
Accumulated Comprehensive Loss                                                     2    2 
Net loss for period ended March 31, 2020                                                (337,133)        (337,133)
Balance at March 31, 2020   25,927,598   $2,593    1   $0    270,306   $27    (103,334)  ($1,033)  $28,440,038   ($30,127,391)  $127,672   ($1,558,094)

 

                                   Additional              
   Common Stock    Preferred  C    Preferred  D    Treasury Stock    Paid-in    Accumulated    Accum      
   Number    Amount    Number   Amount   Number    Amount    Number    Amount    Capital    Deficit    OCI (Loss)   Total 
                                                 
Balance at December 31, 2018   23,244,028   $2,324    1   $0    270,306   $27    (103,334)  ($1,033)  $27,771,868   ($28,669,686)  $127,673   ($768,827)
Issuance of stock for board and consulting fees   535,714    54                                  112,446              112,500 
Directors deferred compensation granted   -                                       21,000              21,000 
Issuance of shares pursuant to exercise of warrants                                                          - 
Accumulated Comprehensive Loss                                                     (6)   (6)
Net loss for period ended March 31, 2019                                                (342,483)        (342,483)
Balance at March 31, 2019   23,779,742   $2,378    1   $0    270,306   $27    (103,334)  ($1,033)  $27,905,314   ($29,012,169)  $127,667   ($977,816)

 

See accompanying notes to consolidated financial statements

 

5

 

 

VYCOR MEDICAL, INC.

Consolidated Statement of Cash Flows

(Unaudited)

 

   For the three months ended 
   March 31, 
   2020   2019 
Cash flows from operating activities:          
Net loss  $(174,948)  $(180,298)
Adjustments to reconcile net loss to cash used in operating activities:          
Amortization of intangible assets   2,994    3,181 
Depreciation of fixed assets   13,243    14,816 
Inventory provision   3,139    3,139 
Stock based compensation   133,500    133,500 
Loss on foreign exchange   165    1,387 
           
Changes in assets and liabilities:          
Accounts receivable   114,982    (2,489)
Inventory   6,314    (54,403)
Prepaid expenses   (11,141)   (24,980)
Accrued interest - Related Party   6,424    4,758 
Accrued interest - Other   11,967    11,836 
Accounts payable   (780)   85,649 
Accrued liabilities - Other   (138,708)   (14,152)
Cash used in operating activities   (32,849)   (18,056)
Cash flows from investing activities:          
Purchase of fixed assets   (47,365)   (6,325)
Cash used in investing activities   (47,365)   (6,325)
Cash flows from financing activities:          
Proceeds from issuance of Notes Payable - Related Party   60,000    17,873 
Proceeds from and (repayment of) Notes Payable - Other   18,853    21,829 
Cash provided by financing activities   78,853    39,702 
Effect of exchange rate changes on cash   (164)   (748)
Net increase (decrease) in cash   (1,525)   14,573 
Cash at beginning of period   72,239    86,481 
Cash at end of period  $70,714   $101,054 
           
Supplemental Disclosures of Cash Flow information:          
Cash paid for interest  $-   $- 
Cash paid for income tax  $

-

   $- 

 

See accompanying notes to consolidated financial statements

 

6

 

 

VYCOR MEDICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2020

(Unaudited)

 

1. BASIS OF PRESENTATION

 

The accompanying unaudited consolidated financial statements of Vycor Medical, Inc. (the “Company” or “Vycor”) 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 8 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in consolidated financial statements have been omitted pursuant to such rules and regulations. The consolidated balance sheet as of December 31, 2019 derives from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These unaudited consolidated 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, 2019.

 

The unaudited consolidated financial statements as of and for the three months ended March 31, 2020 and 2019, 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, results of operations and cash flows. The results of operations for the three months ended March 31, 2020 and 2019 are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

 

Ability to continue as a Going Concern

 

The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses since its inception, including a net loss of $174,948 for the three months ended March 31, 2020 and has not generated sufficient positive cash flows from operations. As of March 31, 2020 the Company had a working capital deficiency of $560,861, excluding related party liabilities of $1,477,513. These conditions, among others, raise substantial doubt regarding our ability to continue as a going concern. The unaudited consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

 

The Company is executing on a plan to achieve a reduction in cash operating losses. Included within the working capital deficiency above is a term note for $300,000 to EuroAmerican Investment Corp. (“EuroAmerican”), together with accrued interest of $292,732, which has a maturity date of June 30, 2020, having been extended on a number of occasions from its initial due date of June 11, 2011. At this time, it is not known whether any further extension of the note beyond June 30, 2020 will be available. However, the Company believes it may not have sufficient cash to meet its various cash needs through May 31, 2021 unless the Company is able to obtain additional cash from the issuance of debt or equity securities. Fountainhead, the Company’s largest shareholder, has provided working capital funding to the Company on an as-needed basis, although there is no guarantee that this will continue to be the case. The Company may consider seeking additional equity or debt funding, although there is no assurance that this would be available on acceptable terms or at all. If adequate funds are not available, the Company may have to delay or curtail development or commercialization of products, or cease some of its operations.

 

7

 

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

The unaudited 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.

 

Recent Accounting Pronouncements

 

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, other than as disclosed above, 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.

 

Leases

 

The Company has one leased building in Boca Raton, Florida that is classified as operating lease right-of use (“ROU”) assets and operating lease liabilities in the Company’s unaudited consolidated balance sheet as per ASC 842. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component of the agreement. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of Selling, General and Administrative expenses.

 

The standard was effective for us beginning January 1, 2019. The Company elected the available practical expedients on adoption. The adoption had a material impact on our unaudited consolidated balance sheets, but did not have a material impact on our unaudited consolidated statements of comprehensive loss. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases.

 

Net Loss Per Share

 

Basic net loss per share is computed by dividing net loss available to common shareholders 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:

 

   March 31, 2020   March 31, 2019 
Stock options outstanding   680,000    700,000 
Warrants to purchase common stock   -    3,717,826 
Debentures convertible into common stock   2,822,535    2,593,337 
Preferred shares convertible into common stock   1,272,052    1,272,052 
Directors Deferred Compensation Plan   1,275,906    875,910 
Total   6,050,493    9,159,125 

 

Covid-19

 

In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China, and has since spread to a number of other countries, including the United States. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. In addition, as of the time of the filing of this Form 10-Q, several states in the United States remain in states of emergency, and travel restrictions continue to be applied in several countries around the world, including the United States. Vycor Medical experienced a reduction in demand during the three months ended March 31, 2020 in the US and Europe. Although neurosurgery is not generally an elective procedure, general hospital dislocation and diversion of resources has impacted our revenues during the three months ended March 31, 2020 and could continue to do so. While our operations are principally located in the United States, and our sub-contract manufacturers are located in the United States, we participate in a global supply chain, and the existence of a worldwide pandemic, the fear associated with COVID-19, or any, pandemic, and the reactions of governments around the world in response to COVID-19, or any, pandemic, to regulate the flow of labor and products and impede the travel of personnel, may impact our ability to conduct normal business operations, which could adversely affect our results of operations and liquidity. Disruptions to our supply chain and business operations, or to our suppliers’ or customers’ supply chains and business operations, could include disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of our or our suppliers’ or customers’ products, any of which could have adverse ripple effects on our manufacturing output and delivery schedule. Although we have implemented business continuity plans for our offices and personnel to enable continuity of service remotely, if a critical number of our employees become too ill to work, or we are not able to access a sufficient quantity of our inventory for shipment due to enforced office closures, our production ability could be materially adversely affected in a rapid manner. Similarly, if our customers experience adverse business consequences due to COVID-19, or any other, pandemic, demand for our products could also be materially adversely affected in a rapid manner. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which we or our suppliers and customers operate. Any of these uncertainties could have a material adverse effect on our business, financial condition or results of operations.

 

8

 

 

3. NOTES PAYABLE

 

Related Parties Notes Payable

 

Related Party Notes Payable consists of:

 

   March 31, 2020   December 31, 2019 
         
On June 25, 2018 the Company issued promissory notes to Peter Zachariou for $30,000. 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 note was extended for another twelve months on its due date to June 25, 2020 or on demand by the Payee.  $30,000   $30,000 
Between March 26, 2018 and February 27, 2020 the Company issued various promissory notes to Fountainhead Capital Management Limited for $260,873. 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. Six notes were extended on their due dates for another twelve months. The Notes will be due between July 2020 and May 2021 or on demand by the Payee.   260,873    200,873 
Total Related Party Notes Payable  $290,873  

$

230,873 

 

Other Notes Payable

 

Other Notes Payable consists of:

 

   March 31, 2020   December 31, 2019 
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, and has been extended on a number of occasions. On the note’s most recent due date, the note was extended to June 30, 2020. The note is personally guaranteed by certain officers and directors of the Company. See further note below  $300,000   $300,000 
Insurance policy finance agreements.   46,885    28,032 
Total Other Notes Payable: 

$

346,885   $328,032 

 

9

 

 

In January 2018 the Company entered into an amendment agreement (the “Amendment”) with EuroAmerican Investments (“EuroAmerican”) regarding its $300,000 loan note (the “Note”). Under the Amendment, the Note was extended and the conversion terms of the Note were reduced to $0.21, the same as the offering price of the 2018 Offering. Conversion of the Note and accrued interest would result in the issuance of 2,822,535 shares of Common Stock as of March 31, 2020. Notwithstanding, EuroAmerican agreed that the Note could not be converted without first offering the Company the right to redeem the Note at principal and accrued interest, and secondly Fountainhead the right to purchase the Note, which cannot be converted prior to such offer and the failure of the Company and Fountainhead to exercise such option in accordance with the amendment terms. In addition, the Company agreed to issue warrants to purchase 2,308,405 shares of Common Stock at $0.27, the same terms as the 2018 Offering, exercisable for three years from January 1, 2018, if and when the conversion option is exercised. The amendment was recognized as a modification, based on the guidance in ASC 470-50.

 

The Company routinely finances all their insurance policies through a third party finance company which requires a down payment and subsequent monthly payments, the time periods vary from 10 months to 12 equal monthly payments.

 

4. LEASE

 

The Company leases office space located at 951 Broken Sound Parkway, Suite 320, Boca Raton, FL 33487 from WPT Land 2 L.P., for a gross rent of approximately $5,700 plus sales tax per month that will expire on September 30, 2020. Based on the original lease agreement, the Company has the one-time option to renew the lease for another three years with minimum annual rent at market price, not less than the original lease payment amount.  In January 2020, the Company exercised the option to extend the original lease for another three years with the expiration date of August 31, 2023. In accordance with ASC 842-10-35, the Company considered this lease extension as the modification of the original lease and re-measured the lease liability and the right-of-use assets on the commencement date of the lease extension.

 

The Company recognized the following in its unaudited consolidated balance sheet at March 31, 2020:

 

   March 31, 2020   December 31, 2019 
         
Operating Lease ROU Assets  $156,251   $31,658 
   $156,251   $31,658 
           
Operating Lease Liabilities          
   Current portion   41,924    28,010 
   Long-term portion  $110,952   $- 
   $152,876   $28,010 

 

5. 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

 

   Three Months Ended March 31, 
   2020   2019 
Revenue:        
     Vycor Medical  $307,287   $297,106 
     NovaVision  $43,764   $53,560 
   $351,051   $350,666 
Gross Profit          
     Vycor Medical  $270,857   $266,923 
     NovaVision  $41,299   $47,545 
   $312,156   $314,468 

 

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   March 31,   December 31, 
   2020   2019 
Total Assets:          
Vycor Medical  $1,076,433   $1,036,857 
NovaVision   56,686    55,086 
Total Assets  $1,133,119   $1,091,943 

 

(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 March 31, 
   2020   2019 
Revenue:          
     United States  $327,815   $320,616 
     Europe  $23,236   $30,050 
   $351,051   $350,666 
Gross Profit          
     United States  $290,521   $288,291 
     Europe  $21,635   $26,177 
   $312,156   $314,468 

 

   March 31,   December 31, 
   2020   2019 
Total Assets:          
     United States  $1,096,911   $1,055,312 
     Europe   36,208    36,631 
Total Assets  $1,133,119   $1,091,943 

 

11

 

 

6. EQUITY

 

Common Stock and Stock Grants

 

During January to March 2020 and 2019, the Company granted 99,999 shares of Common Stock (valued at $21,000) 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 March 31, 2020 these shares have yet to be issued.

 

During January to March 2020 and 2019, under the terms of the Consulting Agreement referred to in note 9, the Company issued 535,714 of Common Stock to Fountainhead for fees of $112,500.

 

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, 2019   3,717,826   $0.27 
Granted   -    - 
Exercised   -    - 
Cancelled or expired   (3,717,826)  $0.27 
Outstanding at March 31, 2020   -   $0.00 

 

STOCK OPTIONS:

 

       Weighted average 
   Number of shares   exercise price per share 
Outstanding at December 31, 2019   700,000   $0.28 
Granted   -    - 
Exercised   -    - 
Cancelled or expired   (20,000)   (0.27)
Outstanding at March 31, 2020   680,000   $0.28 

 

As of March 31, 2020, the weighted-average remaining contractual life of outstanding warrants and options is 0 and 1.24 years, respectively.

 

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7. 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 each of the three months ended March 31, 2020 and 2019, the Company recognized share-based compensation of $0 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 March 31, 2020 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”. 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 for stock granted to non-employees for each of the three months ended March 31, 2020 and 2019 was $133,500. The expense related to stock not issued during each of the periods ended March 31, 2020 and 2019 comprises $21,000, related to stock granted but not issued to directors under the Directors Deferred Compensation Plan. As of March 31, 2020, there was $0 of total unrecognized compensation costs related to warrant and stock awards and non-vested options.

 

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.

 

There were no options or warrants issued during either of the periods ending March 31, 2020 and 2019.

 

8. COMMITMENTS AND CONTINGENCIES

 

Lease

 

The Company leases office space located at 951 Broken Sound Parkway, Suite 320, Boca Raton, FL 33487 from WPT Land 2 L.P., for a gross rent of approximately $5,700 plus sales tax per month. The lease terminates September 30, 2020 and has been extended for a further three years to August 31, 2023. The Company’s subsidiary in Germany occupies premises on a rolling 12 month lease agreement with a 3 month notice period of EUR1,650 per month (approximately $1,815). Rent expense for the three months ended March 31, 2020 and 2019 was $25,122 and $24,706 respectively. See Note 4.

 

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Potential German tax liability

 

In June 2012 the Company’s NovaVision German subsidiary received a preliminary assessment for Magdeburg City trade tax of €75,000 (approximately $82,000), with an additional interest charge of €12,000 (approximately $13,200). 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 was preliminarily reduced to zero. The Company did not accept this trade tax assessment and appealed against it to the relevant tax authorities with a view to its reduction. The relevant tax authorities agreed to suspend the assessment pending the outcome of certain court hearings and proposed tax legislation, and the Company agreed to make monthly payments on account totaling €75,000 (approximately $82,000) which were completed in October 2016 and fully expensed. At that time the Company appealed against the interest charge of €12,000 (approximately $13,200) which the tax authorities did not accept but also agreed to suspend pending the outcome of the hearings and proposed legislation outlined above. Accordingly, the Company has made no provision for this liability in the three months ended March 31, 2020 and the year ended December 31, 2019 respectively.

 

9. CONSULTING AND OTHER AGREEMENTS

 

The following agreements were entered into or remained in force during the period ended March 31, 2020:

 

Consulting Agreement with Fountainhead

 

In March 2017 and effective April 1, 2017, the Company amended the Fountainhead Consulting Agreement (“the Amended Agreement”). Under the Amended Agreement, fees of $450,000 are payable to Fountainhead, with an option to receive $5,000 per month in cash and the remainder payable in Company Common Stock issued at the higher of $0.21 and the average price for the 30 days prior to issuance, and deliverable at the end of each fiscal quarter. The Consulting Agreement also contains provisions for Fountainhead to receive a higher proportion of its fees in cash subject to certain future liquidity events and Board approval. Under the terms of the Amended Agreement, Fountainhead provides the executive management team of the Company, including the positions of CEO, President and CFO, whose employment agreements with the Company stipulate they receive no remuneration from the Company.

 

During the three months ended March 31, 2020 and March 31, 2019, under the terms of the Amended Agreement, Fountainhead received total fees of $133,500, which were paid through the issuance of 535,714 shares of Company Common Stock.

 

10. RELATED PARTY TRANSACTIONS

 

Peter Zachariou and David Cantor, directors of the Company, are investment managers of Fountainhead which owned, at March 31, 2020, 58% of the Company’s Common Stock and 70% of the Company’s Preferred D Stock. Peter Zachariou owns 26% of the Company’s Preferred D Stock. Adrian Liddell, Chairman, is a consultant for Fountainhead.

 

During each of the three months ended March 31, 2020 and March 31, 2019, under the terms of the Consulting Agreement referred to in note 9, the Company issued 535,714 shares of Common Stock to Fountainhead for fees of $112,500.

 

During each of the three months ended March 31, 2020 and 2019, the Company accrued an aggregate of $162,185 of Preferred D Stock dividends, of which $113,019 was in respect of Fountainhead and $41,693 was in respect of Peter Zachariou.

 

During the three months ended March 31, 2020 and 2019 the Company issued unsecured loan notes to Fountainhead for a total of $60,000 and $17,873, respectively. The loan notes bear interest at a rate of 10% and are due on demand or by their one-year anniversary.

 

There were no other related party transactions during the three months ended March 31, 2020 and 2019.

 

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11. CONCENTRATION

 

Vycor Medical sells its neurosurgical devices in the US primarily direct to hospitals, and internationally through distributors who in turn sell to hospitals.

 

Sales Concentration:

 

   Three Months Ended March 31, 
   2020   2019 
         
Number of customers over 10%   1    0 
Percentage of sales   24%   0%

 

Accounts Receivable Concentration

 

   March 31,   December 31, 
   2020   2019 
         
Number of customers over 10%   1    1 
Percentage of accounts receivable   39%   37%

 

The Company has three sub-contract manufacturers from which it purchases, respectively, VBAS injection molded parts, completed and sterilized VBAS units, and VBAS extension arms. Purchases from these manufacturers vary from quarter to quarter, with no purchases in some quarters, however on an annual basis purchases from each manufacturer represent over 10% of total annual purchases.

 

12. SUBSEQUENT EVENTS

 

On April 8, 2020 the Board of Vycor resolved to evaluate and initiate the closure of the German office of NovaVision and to further evaluate migrating to a license model for NovaVision in Europe. For the year ended December 31, 2019 NovaVision Germany generated revenue of $88,851 but incurred an operating loss of $123,740. The Company believes a small proportion of these revenues can be maintained by internal transfers and by a potential licensing arrangement(s), without the incurrence of additional cost.

 

Other than the above stated Subsequent Event, the Company has evaluated the existence of events and transactions subsequent to the balance sheet date through the date the unaudited consolidated financial statements were issued and has determined that there were no significant subsequent events or transactions which would require recognition or disclosure in the financial statements.

 

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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.

 

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”).

 

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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 64 issued or allowed patents and a further 9 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 13485:2016 and MDSAP (Medical Device Single Audit Program) certified, 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 a number of other international markets. Vycor Medical has 26 granted and 8 pending patents.

 

NovaVision

 

NovaVision provides non-invasive, computer-based rehabilitation therapies targeted at people who have impaired vision as a result of stroke or other brain injury, and has 38 granted patents.

 

Strategy

 

The Company is continuing to execute on a plan to achieve revenue growth and a reduction in cash operating losses1. For Vycor Medical this plan includes in particular: increasing market penetration in the US through broadening of the distribution network and programs to increase penetration in exiting hospitals; increasing international growth in territories where we are not represented or under represented; and continued new product development. The first phase of the modification of the existing VBAS product range to make it more compatible with the most common IGS systems was completed in September 2017 and has been well received by surgeons, resulting in increased hospital penetration and revenues particularly in the US. The second phase of the development of further IGS integration is in process and will then be subject to regulatory clearances and approvals. Upon regulatory approval and product release of this new VBAS the Company intends to conduct a multi-center study to provide additional clinical data on the product. We will also be exploring with surgeons and focus groups additional selected development work targeted at increasing the ease and applicability of our products to additional common procedures. For NovaVision, given the company’s resources, and the large size and diversity of its end markets, we believe that the most efficient way to tackle the distribution of its broad range of patient and professional products is by partnering with entities that have either direct access to the end users or a desire and financial wherewithal to leverage the NovaVision therapy platform. Management is determined to reduce the losses it is incurring in this division, which is why it has now taken the decision to close the German office and migrate to a licensing model for NovaVision in Europe. Management is open to a broad range of alternatives for NovaVision as a whole, which could comprise distribution and marketing partnerships, licensing, merger or sale.

 

 

1 Operating Loss before Depreciation, Amortization and non-cash Stock Compensation

 

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COVID-19

 

In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China, and has since spread to a number of other countries, including the United States. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. In addition, as of the time of the filing of this Form 10-Q, several states in the United States remain in states of emergency, and travel restrictions continue to be applied in several countries around the world, including the United States. Vycor Medical experienced a reduction in demand during the three months ended March 31, 2020 in the US and Europe. Although neurosurgery is not generally an elective procedure, general hospital dislocation and diversion of resources has impacted our revenues during the three months ended March 31, 2020 and could continue to do so. While our operations are principally located in the United States, and our sub-contract manufacturers are located in the United States, we participate in a global supply chain, and the existence of a worldwide pandemic, the fear associated with COVID-19, or any, pandemic, and the reactions of governments around the world in response to COVID-19, or any, pandemic, to regulate the flow of labor and products and impede the travel of personnel, may impact our ability to conduct normal business operations, which could adversely affect our results of operations and liquidity. Disruptions to our supply chain and business operations, or to our suppliers’ or customers’ supply chains and business operations, could include disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of our or our suppliers’ or customers’ products, any of which could have adverse ripple effects on our manufacturing output and delivery schedule. Although we have implemented business continuity plans for our offices and personnel to enable continuity of service remotely, if a critical number of our employees become too ill to work, or we are not able to access a sufficient quantity of our inventory for shipment due to enforced office closures, our production ability could be materially adversely affected in a rapid manner. Similarly, if our customers experience adverse business consequences due to COVID-19, or any other, pandemic, demand for our products could also be materially adversely affected in a rapid manner. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which we or our suppliers and customers operate. Any of these uncertainties could have a material adverse effect on our business, financial condition or results of operations.

 

Comparison of the Three Months Ended March 31, 2020 to the Three Months Ended March 31, 2019

 

Revenue and Gross Margin:

 

   Three months ended 
   March 31, 
   2020   2019   % Change 
Revenue:               
Vycor Medical  $307,287   $297,106    3%
NovaVision  $43,764   $53,560    -18%
   $351,051   $350,666    0%
Gross Profit               
Vycor Medical  $270,857   $266,923    1%
NovaVision  $41,299   $47,545    -13%
   $312,156   $314,468    -1%

 

Vycor Medical recorded revenue of $307,287 from the sale of its products for the three months ended March 31, 2020, an increase of $10,181 over the same period in 2019. Although we do not yet know the extent we could be affected by the Coronavirus (COVID-19) pandemic, Vycor Medical experienced a decline in revenues in the US and certain international regions, particularly in March, which was offset by the shipment of an advance order during the quarter to one international distributor to ensure protection of its supply chain. Gross margin of 88% and 90% was recorded for the three months ended March 31, 2020 and 2019, respectively. Gross margin is affected by the revenue mix and also by manufacturing validation charges.

 

NovaVision recorded revenues of $43,764 for the three months ended March 31, 2020, a decrease of $9,796 over the same period in 2019, mainly as a result of reduced patient volumes and revenues in Europe. Gross margin was 94%, compared to 89% for the same period in 2019.

 

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Selling, General and Administrative Expenses:

 

Selling, general and administrative expenses decreased by $8,317 to $453,904 for the three months ended March 31, 2020 from $462,221 for the same period in 2019. Included within Selling, General and Administrative Expenses are non-cash charges for stock 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 March 31, 2020 and 2019 was $133,500. Also included within Selling, General and Administrative Expenses are Sales Commissions, which decreased by $5,870 from $55,825 to $49,955 in 2020.

 

The remaining Selling, General and Administrative expenses decreased by $2,447 from $272,896 to $270,449 in 2020.

 

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, patent, audit/accounting, regulatory  $8,909    - 
Sales, marketing and travel   (3,688)   - 
Board, financial and scientific advisory   (6,849)   - 
Payroll   (9,563)   - 
Other (travel/regulatory/premises)   8,744    - 
Commissions   (5,870)   - 
Total change  $(8,317)   - 

 

Interest Expense:

 

Interest comprises expense on the Company’s debt and insurance policy financing. Related Party Interest expense for the three months ended March 31, 2020 was $6,425 compared to $4,759 for 2019. Other Interest expense for the three months ended March 31, 2020 was $11,967 compared to $11,953 for 2019.

 

Liquidity

 

The following table shows cash flow and liquidity data for the periods ended March 31, 2020 and December 31, 2019:

 

Cash  $70,714   $72,239   $(1,525)
Accounts receivable, inventory and other current assets  $471,173   $584,193   $(113,020)
Total current liabilities  $(2,580,261)  $(2,446,406)  $(133,855)
Working capital  $(2,038,374)  $(1,789,974)  $(248,400)
Cash provided by financing activities  $78,853   $40,091   $38,762 

 

Operating Activities. Cash provided by/(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 provided by/(used in) operating activities.

 

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The following table shows the principle components of cash provided by/(used in) operating activities during the three months ended March 31, 2020 and 2019, with a commentary of changes during the periods and known or anticipated future changes:

 

   March 31, 2020   March 31, 2019   $ Change 
Net loss  $(174,948)  $(180,298)  $5,350 
                
Adjustments to reconcile net loss to cash used in operating activities:               
Amortization and depreciation of assets  $16,237   $17,997   $(1,760)
Stock based compensation  $133,500   $133,500   $0 
Other  $3,304   $4,526   $(1,222)
   $153,041   $156,023   $(2,982)
                
Net loss adjusted for non-cash items  $(21,907)  $(24,275)  $2,368 
                
Changes in working capital               
Accounts receivable, accounts payable and accrued liabilities  $(24,506)  $69,008   $(93,514)
Inventory  $6,314   $(54,403)  $60,717 
Prepaid expenses and net insurance financing repayments  $7,712   $(3,151)  $10,863 
Accrued interest (not paid in cash)  $18,391   $16,594   $1,797 
   $7,911   $28,048   $(20,137)
                
Cash provided by (used in) operating activities, adjusted for net insurance repayments  $(13,996)  $3,773   $(17,769)

 

The adjustments to reconcile net loss to cash of $153,041 in the period have no impact on liquidity. At December 31, 2019 there was an increase in accounts payable mainly due to expenditure on regulatory and testing for the VBAS development occurring during the fourth quarter. The net change in accounts receivable, accounts payable and accrued liabilities was mainly due to the settlement of these accounts.

 

Additional inventory of $20,120 was purchased during the three months ended March 31, 2020 as part of normal production, and the Company anticipates purchasing additional new inventory of approximately $100,000 during the next twelve months.

 

Investing Activities. Cash used in investing activities for the three months ended March 31, 2020 was $47,365, which reflected expenditure on the second phase of modifying the VBAS product suite to make it easier to integrate with IGS. The Company anticipates additional expenditures for this second phase, including work to obtain regulatory clearances and approvals, of approximately $80,000.

 

Financing Activities. During the period ending March 31, 2020 the Company received funds of $60,000 in respect of loans from Fountainhead.

 

Liquidity and Plan of Operations, Ability to Continue as a Going Concern

 

The accompanying unaudited consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses since its inception, including a net loss of $174,948 for the three months ended March 31, 2020 and has not generated sufficient positive cash flows from operations. As of March 31, 2020 the Company had a working capital deficiency of $560,861, excluding related party liabilities of $1,477,513. These conditions, among others, raise substantial doubt regarding our ability to continue as a going concern. The unaudited consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

 

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As described earlier in this ITEM 2 “Strategy”, the Company is continuing to execute on a plan to achieve revenue growth and a reduction in cash operating losses2. For Vycor Medical this plan includes in particular: increasing market penetration in the US through broadening of the distribution network and programs to increase penetration in exiting hospitals; increasing international growth in territories where we are not represented or under represented; and continued new product development. The first phase of the modification of the existing VBAS product range to make it more compatible with the most common IGS systems was completed in September 2017 and has been well received by surgeons, resulting in increased hospital penetration and revenues particularly in the US. The second phase of the development of further IGS integration is in process and will then be subject to regulatory clearances and approvals. Upon regulatory approval and product release of this new VBAS the Company intends to conduct a multi-center study to provide additional clinical data on the product. We will also be exploring with surgeons and focus groups additional selected development work targeted at increasing the ease and applicability of our products to additional common procedures. For NovaVision, given the company’s resources, and the large size and diversity of its end markets, we believe that the most efficient way to tackle the distribution of its broad range of patient and professional products is by partnering with entities that have either direct access to the end users or a desire and financial wherewithal to leverage the NovaVision therapy platform. Management is determined to reduce the losses it is incurring in this division, which is why it has now taken the decision to close the German office and migrate to a licensing model for NovaVision in Europe. Management is open to a broad range of alternatives for NovaVision as a whole, which could comprise distribution and marketing partnerships, licensing, merger or sale.

 

However, the Company believes it may not have sufficient cash to meet its various cash needs through May 31, 2021 unless the Company is able to obtain additional cash from the issuance of debt or equity securities. Included within the working capital deficiency above is a term note for $300,000 to EuroAmerican Investment Corp. (“EuroAmerican”), together with accrued interest of $292,732, which has a maturity date of June 30, 2020, having been extended on a number of occasions from its initial due date of June 11, 2011. At this time, it is not known whether any further extension of the note beyond June 30, 2020 will be available.. Fountainhead, the Company’s largest shareholder, has provided working capital funding to the Company on an as-needed basis, although there is no guarantee that this will continue to be the case. The Company may consider seeking additional equity or debt funding, although there is no assurance that this would be available on acceptable terms or at all. If adequate funds are not available, the Company may have to delay or curtail development or commercialization of products, or cease some of its operations.

 

Critical Accounting Policies and Estimates

 

Uses of estimates in the preparation of financial statements

 

The preparation of unaudited consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the unaudited 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 unaudited 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 stock-based compensation.

 

A detailed description of our significant accounting policies can be found in our most recent Annual Report on Form 10-K for the year ended December 31, 2019.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable

 

 

2 Operating Loss before Depreciation, Amortization and non-cash Stock Compensation

 

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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.

 

(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 May 11, 2020, 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
FHC Management Fees   Common   535,714

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None

 

Index to Exhibits

 

 

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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 May 12, 2020.

 

  Vycor Medical, Inc.
  (Registrant)
     
  By: /s/ Peter C. Zachariou
    Peter C. Zachariou
    Chief Executive Officer and Director
(Principal Executive Officer)
     
  Date May 12, 2020
     
  By: /s/ Adrian Liddell
    Adrian Liddell
    Chairman of the Board and Director
    (Principal Financial and Accounting Officer)
     
  Date May 12, 2020

 

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