VYCOR MEDICAL INC - Quarter Report: 2022 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
| ☒ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| For the fiscal quarter ended June 30, 2022 | |
| ☐ | 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 | (Commission | (IRS Employer | ||
| of 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 pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| Common Stock | VYCO | OTCQB |
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 ☒ 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”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer ☐ | Accelerated Filer ☐ |
| Non-accelerated Filer ☐ | Smaller Reporting Company ☒ |
| Emerging Growth Company ☐ |
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 shares outstanding of registrant’s common stock, par value $0.0001 per share, as of August 15, 2022.
Transitional Small Business Disclosure Format (check one): Yes ☐ No ☒
TABLE OF CONTENTS
| 2 |
PART 1
ITEM 1. FINANCIAL STATEMENTS
VYCOR MEDICAL, INC.
Consolidated Balance Sheets
(Unaudited)
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 43,619 | $ | 90,941 | ||||
| Trade accounts receivable | 212,455 | 126,096 | ||||||
| Inventory | 201,717 | 207,521 | ||||||
| Prepaid expenses and other current assets | 54,693 | 62,473 | ||||||
| Current assets of discontinued operations | 312 | 380 | ||||||
| Total Current Assets | 512,796 | 487,411 | ||||||
| Fixed assets, net | 334,986 | 362,393 | ||||||
| Intangible and Other assets: | ||||||||
| Security deposits | 6,000 | 6,000 | ||||||
| Operating lease - right of use assets | 56,400 | 79,560 | ||||||
| Total Intangible and Other assets | 62,400 | 85,560 | ||||||
| TOTAL ASSETS | $ | 910,182 | $ | 935,364 | ||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 147,566 | $ | 227,720 | ||||
| Accrued interest: Other | 401,779 | 380,479 | ||||||
| Accrued interest: Related party | 124,350 | 106,444 | ||||||
| Accrued liabilities - Other | 148,322 | 126,959 | ||||||
| Accrued liabilities - Related Party | 1,784,035 | 1,621,850 | ||||||
| Notes payable: Other | 302,121 | 319,329 | ||||||
| Notes payable: Related Party | 400,873 | 320,873 | ||||||
| Current operating lease liabilities | 48,133 | 46,915 | ||||||
| Current liabilities of discontinued operations | (1,600 | ) | (572 | ) | ||||
| Total Current Liabilities | 3,355,579 | 3,149,997 | ||||||
| Loan Payable - SBA EIDL | $ | 147,879 | $ | 150,000 | ||||
| Operating lease liability - Long term | 6,021 | 30,580 | ||||||
| Total Long-term Liabilities | 153,900 | 180,580 | ||||||
| STOCKHOLDERS’ DEFICIENCY | ||||||||
| Preferred stock, $ par value, shares authorized, and issued and outstanding as at June 30, 2022 and December 31, 2021 respectively | 27 | 27 | ||||||
| Common Stock, $ par value, shares authorized at June 30, 2022 and December 31, 2021, and shares issued and and outstanding at June 30, 2022 and December 31, 2021 respectively | 3,209 | 3,092 | ||||||
| Additional Paid-in Capital | 29,303,715 | 29,172,169 | ||||||
| Treasury Stock ( shares of Common Stock as at June 30, 2022 and December 31, 2021 respectively, at cost) | (1,033 | ) | (1,033 | ) | ||||
| Accumulated Deficit | (32,032,889 | ) | (31,697,142 | ) | ||||
| Accumulated Other Comprehensive Income | 127,674 | 127,674 | ||||||
| Total Stockholders’ Deficiency | (2,599,297 | ) | (2,395,213 | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | 910,182 | $ | 935,364 | ||||
See accompanying notes to consolidated 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, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | 327,923 | $ | 491,427 | $ | 641,756 | $ | 787,176 | ||||||||
| Cost of Goods Sold | 27,885 | 39,328 | 61,294 | 67,805 | ||||||||||||
| Gross Profit | 300,038 | 452,099 | 580,462 | 719,371 | ||||||||||||
| Operating Expenses: | ||||||||||||||||
| Research and development | 3,929 | 6,629 | ||||||||||||||
| Depreciation and amortization | 14,649 | 17,602 | 29,298 | 31,547 | ||||||||||||
| Selling, general and administrative | 359,763 | 407,079 | 678,437 | 864,555 | ||||||||||||
| Total Operating Expenses | 374,412 | 428,610 | 707,735 | 902,731 | ||||||||||||
| Operating loss | (74,374 | ) | 23,489 | (127,273 | ) | (183,360 | ) | |||||||||
| Other income (Expense) | ||||||||||||||||
| Interest expense: Related Party | (9,994 | ) | (8,000 | ) | (17,906 | ) | (15,665 | ) | ||||||||
| Interest expense: Other | (13,370 | ) | (13,662 | ) | (25,684 | ) | (29,780 | ) | ||||||||
| Loss on foreign currency exchange | 12 | (884 | ) | (660 | ) | (999 | ) | |||||||||
| Total Other Income (Expense) | (23,352 | ) | (22,546 | ) | (44,250 | ) | (46,444 | ) | ||||||||
| Loss Before Credit for Income Taxes | (97,726 | ) | 943 | (171,523 | ) | (229,804 | ) | |||||||||
| Credit for income taxes | ||||||||||||||||
| Net Loss from continuing operations | (97,726 | ) | 943 | (171,523 | ) | (229,804 | ) | |||||||||
| Loss from discontinued operations | (1,284 | ) | (10,317 | ) | (2,039 | ) | (22,489 | ) | ||||||||
| Net Loss | (99,010 | ) | (9,374 | ) | (173,562 | ) | (252,293 | ) | ||||||||
| Preferred stock dividends | (162,185 | ) | (162,185 | ) | ||||||||||||
| Net Loss Available to Common Stockholders | $ | (99,010 | ) | $ | (9,374 | ) | $ | (335,747 | ) | $ | (414,478 | ) | ||||
| Other Comprehensive Loss | ||||||||||||||||
| Foreign Currency Translation Adjustment | (1 | ) | (5 | ) | 2 | |||||||||||
| Comprehensive Loss | (99,011 | ) | (9,379 | ) | (173,562 | ) | (252,291 | ) | ||||||||
| Net Loss Per Share - basic and diluted | ||||||||||||||||
| Loss from continuing operations | $ | (0.00 | ) | $ | 0.00 | $ | (0.01 | ) | $ | (0.01 | ) | |||||
| Loss from discontinued operations | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.00 | ) | ||||
| Net loss available to common stockholders | $ | (0.00 | ) | $ | (0.00 | ) | $ | (0.01 | ) | $ | (0.01 | ) | ||||
| Weighted Average Number of Shares Outstanding – Basic and Diluted | 31,461,631 | 29,670,235 | 31,444,736 | 28,755,966 | ||||||||||||
See accompanying notes to consolidated financial statements
| 4 |
VYCOR MEDICAL, INC.
Consolidated Statement of Stockholders’ Deficiency
(Unaudited)
| Additional | Accum | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Preferred C | Preferred D | Treasury Stock | Paid-in | Accumulated | OCI | ||||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | Number | Amount | Number | Amount | Capital | Deficit | (Loss) | Total | |||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | 31,457,415 | $ | 3,147 | 1 | $ | 0 | 270,306 | $ | 27 | (103,334 | ) | $ | (1,033 | ) | $ | 29,217,651 | $ | (31,933,879 | ) | $ | 127,675 | $ | (2,586,413 | ) | ||||||||||||||||||||||||
| Issuance of stock for board and consulting fees | 637,377 | 62 | 86,065 | 86,127 | ||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Comprehensive Loss | (1 | ) | (1 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss for period available to common stockholders | (99,010 | ) | (99,010 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | 32,094,792 | $ | 3,209 | 1 | $ | 0 | 270,306 | $ | 27 | (103,334 | ) | $ | (1,033 | ) | $ | 29,303,716 | $ | (32,032,889 | ) | $ | 127,674 | $ | (2,599,297 | ) | ||||||||||||||||||||||||
| Additional | ||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Preferred C | Preferred D | Treasury Stock | Paid-in | Accumulated | Accum | ||||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | Number | Amount | Number | Amount | Capital | Deficit | OCI | Total | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 30,921,701 | $ | 3,093 | 1 | $ | 0 | 270,306 | $ | 27 | (103,334 | ) | $ | (1,033 | ) | $ | 29,172,169 | $ | (31,697,142 | ) | $ | 127,674 | $ | (2,395,213 | ) | ||||||||||||||||||||||||
| Issuance of stock for board and consulting fees | 1,173,091 | 116 | 131,547 | 131,663 | ||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Comprehensive Loss | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss for period available to common stockholders | (335,747 | ) | (335,747 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2022 | 32,094,792 | $ | 3,209 | 1 | $ | 0 | 270,306 | $ | 27 | (103,334 | ) | $ | (1,033 | ) | $ | 29,303,716 | $ | (32,032,889 | ) | $ | 127,674 | $ | (2,599,297 | ) | ||||||||||||||||||||||||
| Additional | ||||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Preferred C | Preferred D | Treasury Stock | Paid-in | Accumulated | Accum | ||||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | Number | Amount | Number | Amount | Capital | Deficit | OCI | Total | |||||||||||||||||||||||||||||||||||||
| Balance at March 31, 2021 | 28,537,248 | $ | 2,854 | 1 | $ | 0 | 270,306 | $ | 27 | (103,334 | ) | $ | (1,033 | ) | $ | 28,948,707 | $ | (31,342,214 | ) | $ | 127,676 | $ | (2,263,983 | ) | ||||||||||||||||||||||||
| Issuance of stock for board and consulting fees | 637,377 | 64 | 94,530 | 94,594 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock related to deferred compensation of directors | 1,142,442 | 114 | (114 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Comprehensive Loss | (5 | ) | (5 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss for period available to common stockholders | (9,374 | ) | (9,374 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | 30,317,067 | $ | 3,032 | 1 | $ | 0 | 270,306 | $ | 27 | (103,334 | ) | $ | (1,033 | ) | $ | 29,043,123 | $ | (31,351,588 | ) | $ | 127,671 | $ | (2,178,768 | ) | ||||||||||||||||||||||||
| Common Stock | Preferred C | Preferred D | Treasury Stock | Paid-in | Accumulated | Accum OCI | ||||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | Number | Amount | Number | Amount | Capital | Deficit | (Loss) | Total | |||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | 27,534,740 | $ | 2,753 | 1 | $ | 0 | 270,306 | $ | 27 | (103,334 | ) | $ | (1,033 | ) | $ | 28,826,378 | $ | (30,937,110 | ) | $ | 127,669 | $ | (1,981,316 | ) | ||||||||||||||||||||||||
| Issuance of stock for board and consulting fees | 1,173,091 | 118 | 195,906 | 196,024 | ||||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock related to deferred compensation of directors | 1,609,236 | 161 | (161 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Directors deferred compensation granted | 21,000 | 21,000 | ||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Comprehensive Loss | 2 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||
| Net loss for period available to common stockholders | (414,478 | ) | (414,478 | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | 30,317,067 | $ | 3,032 | 1 | $ | 0 | 270,306 | $ | 27 | (103,334 | ) | $ | (1,033 | ) | $ | 29,043,123 | $ | (31,351,588 | ) | $ | 127,671 | $ | (2,178,768 | ) | ||||||||||||||||||||||||
See accompanying notes to consolidated financial statements
| 5 |
VYCOR MEDICAL, INC.
Consolidated Statement of Cash Flows
(Unaudited)
| For the six months ended | ||||||||
| June 30, | ||||||||
| 2022 | 2021 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | (173,562 | ) | $ | (252,293 | ) | ||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
| Amortization of intangible assets | 5,988 | |||||||
| Depreciation of fixed assets | 30,605 | 26,267 | ||||||
| Inventory provision | 8,660 | 6,180 | ||||||
| Stock based compensation | 127,546 | 201,927 | ||||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | (86,360 | ) | (45,849 | ) | ||||
| Inventory | (2,856 | ) | (16,642 | ) | ||||
| Prepaid expenses | 11,716 | 34,766 | ||||||
| Accrued interest - Related Party | 17,906 | 15,665 | ||||||
| Accrued interest - Other | 19,179 | 29,780 | ||||||
| Accounts payable | (80,154 | ) | 38,840 | |||||
| Accrued liabilities - Other | 21,364 | 11,292 | ||||||
| Changes in discontinued operations, net | (960 | ) | (3,610 | ) | ||||
| Cash used in operating activities | (106,916 | ) | 52,311 | |||||
| Cash flows from investing activities: | ||||||||
| Purchase of fixed assets | (3,198 | ) | (32,242 | ) | ||||
| Cash used in investing activities | (3,198 | ) | (32,242 | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from Notes Payable - Related Party | 80,000 | 10,000 | ||||||
| Proceeds from Paycheck Protection Program | 58,600 | |||||||
| Proceeds net of repayments Notes Payable - Other | (17,208 | ) | (25,987 | ) | ||||
| Cash provided by financing activities | 62,792 | 42,613 | ||||||
| Effect of exchange rate changes on cash | 3 | |||||||
| Net decrease in cash | (47,322 | ) | 62,685 | |||||
| Cash at beginning of period | 90,941 | 46,002 | ||||||
| Cash at end of period | $ | 43,619 | $ | 108,687 | ||||
| Supplemental Disclosures of Cash Flow information: | ||||||||
| Cash paid for interest | $ | 2,815 | $ | |||||
| Cash paid for income tax | $ | $ | ||||||
See accompanying notes to consolidated financial statements
| 6 |
VYCOR MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
(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, 2021 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, 2021.
The unaudited consolidated financial statements as of and for the three and six months ended June 30, 2022 and 2021, 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 and six months ended June 30, 2022 and 2021 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 $335,747 for the six months ended June 30, 2022 and has not generated sufficient positive cash flows from operations. As of June 30, 2022 the Company had a working capital deficiency of $533,525, excluding related party liabilities of $2,309,258. 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 $400,699, which has a maturity date of March 31, 2023, 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 March 31, 2023 will be available. However, the Company believes it may not have sufficient cash to meet its various cash needs through August 31, 2023 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 account balances, transactions, and profits have been eliminated in consolidation. Following the decision in April 2020 to close the German office of NovaVision, the activities of NovaVision GmbH have been accounted for as discontinued operations.
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 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.
Discontinued Operations
In accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations (which we presented as operations to be disposed and operations disposed), less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.
Accounting for forgivable loan received under the Small Business Administration Paycheck Protection Program
During the year ended December 31, 2020 the Company received a loan of $58,600 (“First Draw Loan”), pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act. During the year ended December 31, 2021 the Company received an additional PPP loan of $58,600 (“Second Draw Loan”). Under the terms of the PPP, both the First Draw Loan and Second Draw Loan were forgiven during the year ended December 31, 2021 as they were used for qualifying expenses as described in the CARES Act.
The Company accounted for the loans as a financial liability in accordance with FASB ASC 470 and accrued interest in accordance with the interest method under FASB ASC 835-30. For purposes of derecognition of the liability, FASB ASC 470-50-15-4 refers to guidance in FASB ASC 405-20. Based on this guidance, the proceeds of the loans were recorded as a liability until either (1) the loans are, in part or wholly, forgiven and the Company has been “legally released”, or (2) the Company pays off the loans. The Company has accordingly reduced the liability by the amount forgiven and recorded a gain on the extinguishment.
Basic net loss per share is computed by dividing net loss available to common stockholders 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.
| June 30, 2022 | June 30, 2021 | |||||||
| Debentures convertible into common stock | 3,336,662 | 3,108,092 | ||||||
| Preferred shares convertible into common stock | 1,272,052 | 1,272,052 | ||||||
| Total | 4,608,714 | 4,380,144 | ||||||
3. DISCONTINUED OPERATIONS
In April 2020, the board of Vycor took the decision to close the German operations of NovaVision, including the German office and NovaVision GmbH, and instead migrate to a licensed business model; in June 2020 Vycor announced that it would be entering into a license agreement and transition agreement (the “Agreements”) with HelferApp GmbH, a cognitive therapy specialist. Under the Agreements, HelferApp is licensed to provide NovaVision’s products and therapies in Germany, Austria and Switzerland to patients and professionals; and has assumed responsibility for the current patients of NovaVision in the territory. The NovaVision German office was closed effective June 30, 2020. The Company will continue to fund the remaining expenses of the German operations, which are non-material, until such a time as NovaVision GmbH is formally wound up.
| 8 |
Reconciliation of the major line items from discontinued operations that are presented in the unaudited consolidated balance sheets and unaudited consolidated statements of comprehensive loss are as follows:
Major line items constituting assets and liabilities in the unaudited consolidated balance sheets
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | 312 | 380 | |||||
| Total Current Assets | 312 | 380 | ||||||
| TOTAL ASSETS | $ | 312 | 380 | |||||
| LIABILITIES | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | 4 | 4 | |||||
| Accrued liabilities - Other | ||||||||
| Other current liabilities | (1,604 | ) | (576 | ) | ||||
| Total Current Liabilities | $ | (1,600 | ) | (572 | ) | |||
Major line items constituting loss from discontinued operations
| For the three months ended June 30, | For the six months ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue | $ | $ | $ | $ | ||||||||||||
| Cost of Goods Sold | ||||||||||||||||
| Gross Profit | ||||||||||||||||
| Operating Expenses: | ||||||||||||||||
| Selling, general and administrative | 1,243 | 10,078 | 1,994 | 21,647 | ||||||||||||
| Total Operating Expenses | (1,243 | ) | (10,078 | ) | (1,994 | ) | (21,647 | ) | ||||||||
| Operating Loss | (1,243 | ) | (10,078 | ) | (1,994 | ) | (21,647 | ) | ||||||||
| Other Income (Expense) | ||||||||||||||||
| Loss on foreign currency exchange | (41 | ) | (239 | ) | (45 | ) | (842 | ) | ||||||||
| Total Other Income (Expense) | (41 | ) | (239 | ) | (45 | ) | (842 | ) | ||||||||
| Loss Before Credit for Income Taxes | (1,284 | ) | (10,317 | ) | (2,039 | ) | (22,489 | ) | ||||||||
| Credit for income taxes | ||||||||||||||||
| Loss from discontinued operations, net of tax | $ | (1,284 | ) | $ | (10,317 | ) | $ | (2,039 | ) | $ | (22,489 | ) | ||||
| 9 |
4. NOTES PAYABLE
Related Parties Notes Payable
Related Party Notes Payable consists of:
| June 30, 2022 | December 31, 2021 | |||||||
| 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, 2023 or on demand by the Payee. | $ | 30,000 | $ | 30,000 | ||||
| Between March 26, 2018 and March 25, 2022 the Company issued eleven promissory notes to Fountainhead Capital Management Limited for $370,873. 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. Ten notes were extended on their due dates for another twelve months. The Notes will be due between July 2022 and July 2023 or on demand by the Payee. | 370,873 | 290,873 | ||||||
| Total Related Party Notes Payable | $ | 400,873 | $ | 320,873 | ||||
Other Notes Payable
Other Notes Payable consists of:
| June 30, 2022 | December 31, 2021 | |||||||
| 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 amended and extended to March 23, 2023. See further note below. | $ | 300,000 | $ | 300,000 | ||||
| Current portion of Long-Term Notes payable, see below | 2,121 | |||||||
| Insurance policy finance agreements. | 19,329 | |||||||
| Total Notes Payable: | $ | 302,121 | $ | 319,329 | ||||
Long-Term Notes Payable consists of:
| June 30, 2022 | December 31, 2021 | |||||||
| On July 7, 2020, the Company was advised that the Small Business Administration (SBA) had approved a $150,000 loan under the Economic Injury Disaster Loan Program pursuant to the Coronavirus Aid, Relief and Economic Security (CARES) Act (“Loan”). The Loan, evidenced by a promissory note dated July 7, 2020, has a term of thirty (30) years, bears interest at a fixed rate of three and three-quarters percent (3.75%) per annum, with monthly payments in the amount of $731.00 per month commencing July 7, 2021 and is secured by essentially all of the assets of the Company. The proceeds of the Loan have been used for general working capital purposes to alleviate economic injury caused by disaster occurring in the month of January 2020 and continuing thereafter. | $ | 147,879 | $ | 150,000 | ||||
| Total Long-Term Notes Payable: | $ | 147,879 | $ | 150,000 | ||||
| 10 |
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 shares of Common Stock as of June 30, 2021. 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. 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.
5. LEASE
The Company recognized the following related to a lease in its unaudited consolidated balance sheet at June 30, 2022 and December 31, 2021:
| June 30, 2022 | December 31, 2021 | |||||||
| Operating Lease ROU Assets | $ | 56,400 | $ | 79,560 | ||||
| $ | 56,400 | $ | 79,560 | |||||
| Operating Lease Liabilities | ||||||||
| Current portion | 48,133 | 46,915 | ||||||
| Long-term portion | $ | 6,021 | $ | 30,580 | ||||
| $ | 54,154 | $ | 77,495 | |||||
6. 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. Discontinued operations were part of NovaVision and revenues and assets were in Europe; see Note 3. Set out below are the revenues, gross profits and total assets for each segment:
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue: | ||||||||||||||||
| Vycor Medical | $ | 298,723 | $ | 462,318 | $ | 586,079 | $ | 725,031 | ||||||||
| NovaVision | $ | 29,200 | $ | 29,109 | $ | 55,677 | $ | 62,145 | ||||||||
| $ | 327,923 | $ | 491,427 | $ | 641,756 | $ | 787,176 | |||||||||
| Gross Profit | ||||||||||||||||
| Vycor Medical | $ | 272,485 | $ | 424,261 | $ | 528,822 | $ | 660,194 | ||||||||
| NovaVision | $ | 27,553 | $ | 27,838 | $ | 51,640 | $ | 59,177 | ||||||||
| $ | 300,038 | $ | 452,099 | $ | 580,462 | $ | 719,371 | |||||||||
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| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Total Assets: | ||||||||
| Vycor Medical | $ | 869,746 | $ | 901,930 | ||||
| NovaVision | 40,124 | 33,054 | ||||||
| Discontinued operations | 312 | 380 | ||||||
| Total Assets | $ | 910,182 | $ | 935,364 | ||||
(b) Geographic information
The Company operates in two geographic segments, the United States and Europe. Discontinued operations were part of NovaVision and revenues and assets were in Europe; see Note 3. Set out below are the revenues, gross profits and total assets for each segment.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||
| 2022 | 2021 | 2022 | 2021 | |||||||||||||
| Revenue: | ||||||||||||||||
| United States | $ | 325,507 | $ | 487,908 | $ | 636,112 | $ | 776,688 | ||||||||
| Europe | $ | 2,416 | $ | 3,519 | $ | 5,644 | $ | 10,488 | ||||||||
| $ | 327,923 | $ | 491,427 | $ | 641,756 | $ | 787,176 | |||||||||
| Gross Profit | ||||||||||||||||
| United States | $ | 297,632 | $ | 448,610 | $ | 574,844 | $ | 708,982 | ||||||||
| Europe | $ | 2,406 | $ | 3,489 | $ | 5,618 | $ | 10,389 | ||||||||
| $ | 300,038 | $ | 452,099 | $ | 580,462 | $ | 719,371 | |||||||||
| June 30, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Total Assets: | ||||||||
| United States | $ | 905,661 | $ | 928,761 | ||||
| Europe | 4,209 | 6,223 | ||||||
| Discontinued operations | 312 | 380 | ||||||
| Total Assets | $ | 910,182 | $ | 935,364 | ||||
7. EQUITY
Common Stock Grants
During January to June 2022 and 2021, under the terms of the Consulting Agreement referred to in note 10, the Company issued of Common Stock to Fountainhead valued at $119,464 and $175,895, respectively.
On April 1, 2022 the Company issued shares of Common Stock to Ricardo Komotar (RJK Consulting), a consultant, in accordance with the terms of a consulting agreement.
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Stock Options
Number of shares | Weighted average exercise price per share | |||||||
| Outstanding at December 31, 2020 | 680,000 | $ | 0.28 | |||||
| Granted | ||||||||
| Exercised | ||||||||
| Cancelled or expired | (680,000 | ) | 0.28 | |||||
| Outstanding at December 31, 2021 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Cancelled or expired | ||||||||
| Outstanding at June 30, 2022 | $ | |||||||
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, or their contractual value if different in the case of common stock. 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.
Non-Employee Stock Compensation
Aggregate stock-based compensation for stock granted to non-employees for each of the six months ended June 30, 2022 and 2021 was $ and $, respectively.
9. 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 $4,000 per month, plus other charges of approximately $1,500 per month. The lease terminated September 30, 2020 and was extended for a further three years to August 31, 2023. Rent expense for the six months ended June 30, 2022 and 2021 for the continuing operations was $38,053 and $38,954 respectively. See Note 5.
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 six months ended June 30, 2022 and the year ended December 31, 2021 respectively. The Company is in the process of winding down the entity, as disclosed in Note 3.
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10. CONSULTING AND OTHER AGREEMENTS
The following agreements were entered into or remained in force during the period ended June 30, 2022:
Consulting Agreement with Fountainhead
In March 2017 and effective April 1, 2017, the Company amended the Fountainhead Consulting 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 $ 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.
Effective January 1, 2021, the Company made a slight amendment to the Fountainhead Consulting Agreement (“the Amended Agreement”). Under the Amended Agreement, fees are payable to Fountainhead, with an option to receive $ per month in cash, and the remainder payable in Company Common Stock (“Shares”) as follows: 1) Shares on the last day of each quarter; to the extent there are cash retainer payments during the quarter, the Shares shall be reduced by a number calculated by dividing the cash amount by the average closing price of the Shares for the 30 trading days prior to issuance; or 2) if the average closing price of the Shares for the 30 trading days prior to issuance is above $, a number of Shares calculated by dividing $112,500 by the average closing price of the Shares for the 30 trading days prior to issuance. 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 continues to provide 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 six months ended June 30, 2022 and June 30, 2021, under the terms of the Amended Agreement, Fountainhead received shares of Company Common Stock, valued at $119,464 and $175,895, respectively.
Other Agreements
On March 30, 2021, Vycor entered into a Consulting Agreement with Ricardo J. Komotar, M.D. (the “Agreement”) to provide certain specified services over the three-year term of the Agreement. Under the Agreement, Dr. Komotar will provide general scientific advisory consultancy services, and will also provide scientific advisory services based around certain specific pre-determined milestones. In consideration of the Consultant’s services, the Company agreed to deliver to the Consultant over the course of the three-year term, a total of shares of Company Common Stock in respect of the general consultancy, and up to shares of Company Common Stock in respect of the milestones, the actual number of shares to be delivered being determined by the achievement of the pre-determined milestones. On April 1, 2021 and 2022 shares of Company Common Stock were issued under the terms of the Agreement.
11. RELATED PARTY TRANSACTIONS
Peter Zachariou and David Cantor, directors of the Company, are investment managers of Fountainhead that owned, at June 30, 2022, 61.9% of the Company’s Common Stock and 69.7% of the Company’s Series D Preferred Stock. Peter Zachariou owns 0.15% of the Company’s Common Stock and 25.7% of the Company’s Series D Preferred Stock. Adrian Liddell, Chairman is a consultant to Fountainhead.
| 14 |
During each of the six months ended June 30, 2022 and June 30, 2021, under the terms of the Amended Agreement referred to in note 10, the Company issued shares of Common Stock to Fountainhead valued at $119,464 and $175,895 respectively.
During each of the six months ended June 30, 2022 and 2021, the Company accrued an aggregate of $162,185 of Preferred D Stock dividends, of which $113,019 was regarding Fountainhead and $41,693 was regarding of Peter Zachariou. Total accrued Preferred D Stock dividends at June 30, 2022 and 2021 was $1,784,040 and $1,459,669, respectively, of which $1,243,205 and $1,017,167, respectively, was regarding Fountainhead and $458,622 and $375,237, respectively, was regarding of Peter Zachariou.
During the six months ended June 30, 2022 and 2021 the Company issued unsecured loan notes to Fountainhead for a total of $80,000 and $10,000, respectively. The loan notes bear interest at a rate of 10% and are due on demand or by their one-year anniversary (see Note 4).
There were no other related party transactions during the six months ended June 30, 2022 and 2021.
12. 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 June 30, | ||||||||
| 2022 | 2021 | |||||||
| Number of customers over 10% | ||||||||
| Percentage of sales | 0 | % | 0 | % | ||||
Six Months Ended June 30, | ||||||||
| 2022 | 2021 | |||||||
| Number of customers over 10% | ||||||||
| Percentage of sales | 0 | % | 0 | % | ||||
Accounts Receivable Concentration
| At June 30, | At December 31, | |||||||
| 2022 | 2021 | |||||||
| Number of customers over 10% | 1 | 1 | ||||||
| Percentage of accounts receivable | 13 | % | 11 | % | ||||
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.
13. SUBSEQUENT EVENTS
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.” (“Vycor”). 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. The Company has 61 issued or allowed patents and a further 11 pending. The Company leverages joint resources across the divisions to operate in a cost-efficient manner.
| 16 |
The Company periodically engages in discussions with potential strategic partners for or purchasers of each or both of our operating divisions. In April 2020, the board of Vycor took the decision to close the German operations of NovaVision, including the German office and NovaVision GmbH, and instead migrate to a licensed business model; in June 2020 Vycor announced that it would be entering into a license agreement and transition agreement (the “Agreements”) with HelferApp GmbH, a cognitive therapy specialist. Under the Agreements, HelferApp is licensed to provide NovaVision’s products and therapies in Germany, Austria and Switzerland to patients and professionals. The NovaVision German office was closed effective June 30, 2020.
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. 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 30 granted and 11 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 31 granted patents.
Strategy
The Company is continuing to execute on a plan to achieve revenue growth and a reduction in annual cash operating losses1 and generated a cash operating profit1 during the six months ended June 30, 2022. For Vycor Medical this plan includes: increasing market penetration in the US; increasing international growth in territories where we are not represented or under-represented and continued new product development in response to market demands and demonstrating applicability in a broader range of pathologies. In the US the Company is focused on increasing market penetration through targeting neurosurgeons systematically, both through its distribution network and also directly by leveraging existing KOL neurosurgeon VBAS supporters to access new neurosurgeon users.
The Company continues to target key international territories including Europe where it intends to drive adoption of its VBAS product through selected key KOL neurosurgeon VBAS users in each territory to identify both new potential users and also high-quality distribution partners to bolster our existing network.
1 Operating Income or Loss before Depreciation, Amortization and non-cash Stock Compensation
The Company has for some time been working to better integrate its VBAS with neuronavigation. The first phase of the modification of the existing VBAS product range was completed in September 2017 and has been well received by surgeons. The second phase involves the introduction of an optional Alignment Clip accessory that will snap onto the VBAS and allow for a neuronavigation pointer to be fully integrated into the body of the VBAS. This VBAS AC model range has received US FDA 510(k) clearance, EU clearance and regulatory approvals elsewhere internationally; it is envisaged that it will be available during 2022. The Company will continue to work with neuronavigation companies to seek ways to further integrate the VBAS with neuronavigation and with other companies with complementary technologies used in neurosurgery. We will also be exploring with neurosurgeons 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 in selected geographies that have either direct access to the end users or a desire and financial wherewithal to leverage the NovaVision therapy platform, including into new areas. As a result, the Company closed the NovaVision German office and entered into a license agreement with HelferApp, a cognitive therapy specialist, for Germany, Austria and Switzerland, and is seeking similar partnerships in other territories with regional companies able to leverage NovaVision’s clinically supported vision therapies. Management is also open to a broad range of alternatives for NovaVision as a whole, which could comprise distribution and marketing partnerships, licensing, merger or sale.
| 17 |
Comparison of the Three Months Ended June 30, 2022 to the Three Months Ended June 30, 2021
Revenue and Gross Margin:
| Three months ended | ||||||||||||
| June 30, | ||||||||||||
| 2022 | 2021 | % Change | ||||||||||
| Revenue: | ||||||||||||
| Vycor Medical | $ | 298,723 | $ | 462,318 | -35 | % | ||||||
| NovaVision | $ | 29,200 | $ | 29,109 | 0 | % | ||||||
| $ | 327,923 | $ | 491,427 | -33 | % | |||||||
| Gross Profit | ||||||||||||
| Vycor Medical | $ | 272,485 | $ | 424,261 | -36 | % | ||||||
| NovaVision | $ | 27,553 | $ | 27,838 | -1 | % | ||||||
| $ | 300,038 | $ | 452,099 | -34 | % | |||||||
Vycor Medical recorded revenue of $298,723 from the sale of its products for the three months ended June 30, 2022, a decrease of $163,595, or 35%, over the same period in 2021. The 2021 period had an unusually high level of activity as Vycor’s markets, particularly the US, recovered from Covid and hospitals re-stocked their inventories and recommenced surgeries and procedures that had been deferred or postponed. The three months ended June 30, 2022 recorded an increase in revenues over both the three months ended March 31, 2022 and the three months ended December 31, 2021, demonstrating that progress continues to be made. Gross margin of 91% and 92% was recorded for the three months ended June 30, 2022 and 2021, respectively.
NovaVision recorded revenues of $29,200 for the three months ended June 30, 2022, approximately the same for 2021. Gross margin was 94%, compared to 96% for the same period in 2021.
Selling, General and Administrative Expenses:
Selling, general and administrative expenses decreased by $47,316 to $359,763 for the three months ended June 30, 2022 from $407,079 for the same period in 2021. 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 June 30, 2022 was $76,978, a $2,519 decrease from the charge in 2021 of $79,497. Also included within Selling, General and Administrative Expenses are Sales Commissions, which decreased by $44,986 from $103,656 to $58,670 in 2021.
The remaining Selling, General and Administrative expenses increased marginally from $223,926 to $224,115 in 2021. Patent costs decreased by $23,330 and software development costs by $10,274, reflecting lower levels of activity compared to 2021; regulatory costs increased by $19,091 due to EU regulatory audit and other activity during the period and payroll increased by $11,398 from the addition of staff.
| 18 |
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 | |||||||
| Regulatory | 19,091 | - | ||||||
| Payroll | 11,398 | - | ||||||
| Board and financial | - | (2,519 | ) | |||||
| Other (travel/insurance/premises) | (5,614 | ) | - | |||||
| Scientific, clinical and software development | (10,274 | ) | - | |||||
| Legal, patent, audit/accounting | (14,413 | ) | ||||||
| Commissions | (44,986 | ) | - | |||||
| Total change | (44,798 | ) | (2,519 | ) | ||||
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, 2022 and 2021 was $9,994 and $8,000, respectively. Other Interest expense for the three months ended June 30, 2022 and 2021 was $13,370 and $13,662, respectively.
Operating loss from Discontinued Operations:
Operating loss from Discontinued Operations decreased by $9,033 to $1,284 in 2022 from $10,317 in 2021; the Company has some ongoing costs related to the wind-down of the discontinued operations in Germany but no revenues.
Comparison of the Six Months Ended June 30, 2022 to the Six Months Ended June 30, 2021
Revenue and Gross Margin:
| Six months ended | ||||||||||||
| June 30, | ||||||||||||
| 2022 | 2021 | % Change | ||||||||||
| Revenue: | ||||||||||||
| Vycor Medical | $ | 586,079 | $ | 725,031 | -19 | % | ||||||
| NovaVision | $ | 55,677 | $ | 62,145 | -10 | % | ||||||
| $ | 641,756 | $ | 787,176 | -18 | % | |||||||
| Gross Profit | ||||||||||||
| Vycor Medical | $ | 528,822 | $ | 660,194 | -20 | % | ||||||
| NovaVision | $ | 51,640 | $ | 59,177 | -13 | % | ||||||
| $ | 580,462 | $ | 719,371 | -19 | % | |||||||
Vycor Medical recorded revenue of $586,079 from the sale of its products for the six months ended June 30, 2022, a decrease of $138,952, or 19%, over the same period in 2021. The 2021 period had an unusually high level of activity as Vycor’s markets, particularly the US, recovered from Covid and hospitals re-stocked their inventories and recommenced surgeries and procedures that had been deferred or postponed, particularly in the three months ended June 30, 2022. The three months ended June 30, 2022 recorded an increase in revenues over both the three months ended March 31, 2022 and the three months ended December 31, 2021, demonstrating that progress continues to be made. Gross margin of 90% and 91% was recorded for the six months ended June 30, 2022 and for the same period in 2021.
| 19 |
NovaVision recorded revenues of $55,677 for the six months ended June 30, 2022, a decrease of $6,468 over the same period in 2021, and gross margin of 93%, compared to 95% for the same period in 2021.
Selling, General and Administrative Expenses:
Selling, general and administrative expenses increased by $186,118 to $678,437 for the six months ended June 30, 2022 from $864,555 for the same period in 2021. Included within Selling, 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, 2022 was $127,546, a decrease of $74,381 over $201,927 in 2021. Also included within Selling, General and Administrative Expenses are Sales Commissions, which decreased by $35,330 from $151,326 to $115,996.
The remaining Selling, General and Administrative expenses decreased by $76,407 from $511,302 to $434,895. Patent costs decreased by $39,329 and software development costs by $9,269, reflecting lower levels of activity compared to 2021; payroll increased by $10,773 from the addition of staff.
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 | |||||||
| Payroll | 10,773 | - | ||||||
| Regulatory | 487 | - | ||||||
| Scientific, clinical and software development | (18,231 | ) | ||||||
| Other (travel/insurance/premises) | (34,061 | ) | - | |||||
| Commissions | (35,330 | ) | - | |||||
| Legal, patent, audit/accounting | (35,375 | ) | - | |||||
| Board and financial | - | (74,381 | ) | |||||
| Total change | (111,737 | ) | (74,381 | ) | ||||
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, 2022 was $17,906 compared to $15,665 for 2021. Other Interest expense for the six months ended June 30, 2022 was $25,684 compared to $29,780 for 2021 following the forgiveness of PPP loans.
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Liquidity
The following table shows cash flow and liquidity data for the periods ended June 30, 2022 and December 31, 2021:
| June 30, 2022 | December 31, 2021 | $ Change | ||||||||||
| Cash | $ | 43,619 | $ | 90,941 | $ | (47,322 | ) | |||||
| Accounts receivable, inventory and other current assets | $ | 469,177 | $ | 396,470 | $ | 72,707 | ||||||
| Total current liabilities | $ | (3,355,579 | ) | $ | (3,149,997 | ) | $ | (205,582 | ) | |||
| Working capital | $ | (2,842,783 | ) | $ | (2,662,586 | ) | $ | (180,197 | ) | |||
| Cash provided by financing activities | $ | 62,792 | $ | 42,613 | $ | 20,179 | ) | |||||
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 provided by (used in) operating activities.
The following table shows the principle components of cash provided by (used in) operating activities during the six months ended June 30, 2022 and 2021, with a commentary of changes during the periods and known or anticipated future changes:
| June 30, 2022 | June 30, 2021 | $ Change | ||||||||||
| Net loss | $ | (173,562 | ) | $ | (252,293 | ) | $ | 78,731 | ||||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||||||
| Amortization and depreciation of assets | $ | 30,605 | $ | 32,255 | $ | (1,650 | ) | |||||
| Share based compensation | $ | 127,546 | $ | 201,927 | $ | (74,381 | ) | |||||
| Other | $ | 8,660 | $ | 6,180 | $ | 2,480 | ||||||
| $ | 166,811 | $ | 240,362 | $ | (73,551 | ) | ||||||
| Net loss adjusted for non-cash items | $ | (6,751 | ) | $ | (11,931 | ) | $ | 5,180 | ||||
| Changes in working capital | ||||||||||||
| Accounts receivable | $ | (86,360 | ) | $ | (45,849 | ) | $ | (40,511 | ) | |||
| Accounts payable and accrued liabilities | $ | (58,790 | ) | $ | 50,132 | $ | (108,922 | ) | ||||
| Inventory | $ | (2,856 | ) | $ | (16,642 | ) | $ | 13,786 | ||||
| Prepaid expenses and net insurance financing repayments | $ | (5,492 | ) | $ | 8,779 | $ | (14,271 | ) | ||||
| Accrued interest (not paid in cash) | $ | 37,085 | $ | 45,445 | $ | (8,360 | ) | |||||
| Changes in discontinued operations, net | $ | (960 | ) | $ | (3,610 | ) | $ | 2,650 | ||||
| $ | (117,373 | ) | $ | 38,255 | $ | (155,628 | ) | |||||
| Cash used in operating activities, adjusted for net insurance repayments | $ | (124,124 | ) | $ | 26,324 | $ | (150,448 | ) | ||||
The adjustments to reconcile net loss to cash of $166,811 in the period have no impact on liquidity, and the change in net loss of $5,180 is not material. The change in accounts payable and accrued liabilities of $108,922 between the 2022 and 2021 periods was mainly due to the settlement of expenses during the 2021 period incurred during the final quarter of 2020.
Additional inventory of $46,357 was purchased during the six months ended June 30, 2022 as part of normal production, and the Company anticipates purchasing additional new inventory of approximately $100,000 during the next twelve months for VBAS and VBAS AC.
Investing Activities. Cash used in investing activities of continuing operations for the six months ended June 30, 2022 was $3,198.
Financing Activities. During the six months ended June 30, 2022 the Company received funds of $80,000 in respect of loans from Fountainhead.
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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 $335,747 for the six months ended June 30, 2022 and has not generated sufficient positive cash flows from operations. As of June 30, 2022 the Company had a working capital deficiency of $533,525, excluding related party liabilities of $2,309,258. 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.
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 annual cash operating losses1 and generated a small cash operating profit1 during the six months ended June 30, 2022. For Vycor Medical this plan includes: increasing market penetration in the US; increasing international growth in territories where we are not represented or under-represented and continued new product development in response to market demands and demonstrating applicability in a broader range of pathologies. In the US the Company is focused on increasing market penetration through targeting neurosurgeons systematically, both through its distribution network and also directly by leveraging existing KOL neurosurgeon VBAS supporters to access new neurosurgeon users. The Company continues to target key international territories including Europe where it intends to drive adoption of its VBAS product through selected key KOL neurosurgeon VBAS users in each territory to identify both new potential users and also high-quality distribution partners to bolster our existing network. The Company has for some time been working to better integrate its VBAS with neuronavigation. The first phase of the modification of the existing VBAS product range was completed in September 2017 and has been well received by surgeons. The second phase involves the introduction of an optional Alignment Clip accessory that will snap onto the VBAS and allow for a neuronavigation pointer to be fully integrated into the body of the VBAS. This VBAS AC model range has received US FDA 510(k) clearance, EU clearance and is going through the regulatory process elsewhere internationally; it is envisaged that it will be available during 2022. The Company will continue to work with neuronavigation companies to seek ways to further integrate the VBAS with neuronavigation and with other companies with complementary technologies used in neurosurgery. We will also be exploring with neurosurgeons 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 in selected geographies that have either direct access to the end users or a desire and financial wherewithal to leverage the NovaVision therapy platform, including into new areas. As a result, the Company closed the NovaVision German office and entered into a license agreement with HelferApp, a cognitive therapy specialist, for Germany, Austria and Switzerland, and is seeking similar partnerships in other territories with regional companies able to leverage NovaVision’s clinically supported vision therapies. Management is also open to a broad range of alternatives for NovaVision as a whole, which could comprise distribution and marketing partnerships, licensing, merger or sale.
2 Operating Income or Loss before Depreciation, Amortization and non-cash Stock Compensation
However, the Company believes it may not have sufficient cash to meet its various cash needs through August 31, 2023 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 $400,699, which has a maturity date of March 31, 2023, 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 March 31, 2023 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.
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Critical Accounting Policies and Estimates
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, 2021.
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 a material weakness occurred as of April 1, 2021 with the resignation of the independent members of the Company’s Audit Committee as of that date. Effective that date, our disclosure and controls were no longer effective to ensure 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.
The matter involving internal controls and procedures that our management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were a lack of a functioning audit committee with independent members, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. This weakness occurred as of April 1, 2021 due to the resignation of the independent members of the Audit Committee from the Board of Directors effective as of April 1, 2021.
Management believes that the material weakness set forth did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors, results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
(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 15, 2022, 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 | 1,071,428 | ||
| Consulting agreement fees: Ricardo Komotar | Common | 101,663 |
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. | |
| 101.INS | Inline XBRL Instance Document | |
| 101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
| 101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
| 101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
| 101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
| 101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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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 15, 2022
| Vycor Medical, Inc. | ||
| (Registrant) | ||
| By: | /s/ Peter C. Zachariou | |
| Peter C. Zachariou | ||
| Chief Executive Officer and Director (Principal Executive Officer) | ||
| Date | August 15, 2022 | |
| By: | /s/ Adrian Liddell | |
| Adrian Liddell | ||
| Chairman of the Board and Director | ||
| (Principal Financial and Accounting Officer) | ||
| Date | August 15, 2022 | |
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