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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 September 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 32,527,172 shares outstanding of registrant’s common stock, par value $0.0001 per share, as of November 11, 2022.

 

Transitional Small Business Disclosure Format (check one): Yes ☐ No ☒

 

 

 

 

 

 

TABLE OF CONTENTS

 

    Page
  PART I  
     
Item 1. Financial Statements 3
     
  Unaudited Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 3
     
  Unaudited Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021. 4
     
  Unaudited Consolidated Statement of Stockholders’ Deficiency for the three and nine months ended September 30, 2022 and 2021. 5
     
  Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2022 and 2021. 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 23
     
Item 4. Controls and Procedures 23
     
  PART II  
     
Item 1. Legal Proceedings 24
     
Item 1A. Risk Factors 24
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24
     
Item 3. Defaults Upon Senior Securities 24
     
Item 4. Mine Safety Disclosures 24
     
Item 5. Other Information 24
     
Item 6. Exhibits 24
     
SIGNATURES 25

 

2

 

 

PART 1

 

ITEM 1. FINANCIAL STATEMENTS

 

VYCOR MEDICAL, INC.

Consolidated Balance Sheets

(Unaudited)

 

   September 30,   December 31, 
   2022   2021 
ASSETS          
Current Assets          
Cash  $32,570   $90,941 
Trade accounts receivable   180,558    126,096 
Inventory   267,542    207,521 
Prepaid expenses and other current assets   98,244    62,473 
Current assets of discontinued operations   880    380 
Total Current Assets   579,794    487,411 
Fixed assets, net   319,422    362,393 
           
Intangible and Other assets:          
Security deposits   6,000    6,000 
Operating lease - right of use assets   44,600    79,560 
Total Intangible and Other assets   50,600    85,560 
TOTAL ASSETS  $949,816   $935,364 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIENCY          
Current Liabilities          
Accounts payable  $219,007   $227,720 
Accrued interest: Other   413,091    380,479 
Accrued interest: Related party   134,700    106,444 
Accrued liabilities - Other   97,445    126,959 
Accrued liabilities - Related Party   1,946,220    1,621,850 
Notes payable: Other   337,721    319,329 
Notes payable: Related Party   430,873    320,873 
Current operating lease liabilities   44,600    46,915 
Current liabilities of discontinued operations   (1,409)   (572)
Total Current Liabilities   3,622,248    3,149,997 
           
Loan Payable - SBA EIDL  147,070   150,000 
Operating lease liability - Long term   0    30,580 
Total Long-term Liabilities   147,070    180,580 
TOTAL LIABILITIES   3,769,318    3,330,577 
STOCKHOLDERS’ DEFICIENCY          
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 270,307 and 270,307 issued and outstanding as at September 30, 2022 and December 31, 2021 respectively   27    27 
Common Stock, $0.0001 par value, 55,000,000 shares authorized at September 30, 2022 and December 31, 2021, 32,630,506 and 30,921,701 shares issued and 32,527,172 and 30,818,367 outstanding at September 30, 2022 and December 31, 2021 respectively   3,263    3,092 
Additional Paid-in Capital   29,360,447    29,172,169 
Treasury Stock (103,334 shares of Common Stock as at September 30, 2022 and December 31, 2021 respectively, at cost)   (1,033)   (1,033)
Accumulated Deficit   (32,309,881)   (31,697,142)
Accumulated Other Comprehensive Income   127,675    127,674 
Total Stockholders’ Deficiency   (2,819,502)   (2,395,213)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY  $949,816   $935,364 

 

See accompanying notes to consolidated financial statements

 

3

 

 

VYCOR MEDICAL, INC.

Consolidated Statements of Comprehensive Loss

(Unaudited)

 

                     
   For the three months ended September 30,   For the nine months ended September 30, 
   2022   2021   2022   2021` 
                 
Revenue  $309,969   $332,087   $951,725   $1,119,263 
Cost of Goods Sold   42,199    35,145    103,493    102,950 
Gross Profit   267,770    296,942    848,232    1,016,313 
                     
Operating Expenses:                    
Research and development   -    1,825    -    8,454 
Depreciation and amortization   14,559    17,728    43,857    49,275 
Selling, general and administrative   341,256    365,785    1,019,693    1,230,340 
Total Operating Expenses   355,815    385,338    1,063,550    1,288,069 
Operating loss   (88,045)   (88,396)   (215,318)   (271,756)
                     
Other Income (Expense)                    
Interest expense: Related Party   (10,351)   (8,088)   (28,257)   (23,753)
Interest expense: Other   (13,511)   (12,685)   (39,195)   (42,465)
Loss on foreign currency exchange   (405)   (372)   (1,065)   (1,371)
Forgiveness of debt Paycheck Protection Program   -    117,200    -    117,200 
Total Other Income (Expense)   (24,267)   96,055    (68,517)   49,611 
                     
Income (Loss) Before Credit for Income Taxes   (112,312)   7,659    (283,835)   (222,145)
Credit for income taxes   -    -    -    - 
Net Income (Loss) from continuing operations   (112,312)   7,659    (283,835)   (222,145)
Loss from discontinued operations, net of tax   (2,495)   (3,966)   (4,534)   (26,455)
Net Income (Loss)   (114,807)   3,693    (288,369)   (248,600)
                     
Preferred stock dividends   (162,185)   (162,185)   (324,370)   (324,370)
Net Loss Available to Common Stockholders  $(276,992)  $(158,492)  $(612,739)  $(572,970)
Other Comprehensive Income (Loss)                    
Foreign Currency Translation Adjustment   1   4    1    6 
Comprehensive Income (Loss)  $(114,806)  $3,697   $(288,368)  $(248,594)
                     
Net Income (Loss) Per Share - basic and diluted                    
Income (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  $(0.01)  $(0.01)  $(0.02)  $(0.02)
                     
Weighted Average Number of Shares Outstanding – Basic and Diluted   31,997,281    30,219,556    31,432,040    29,249,192 

 

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 June 30, 2022   32,094,792   $3,209    1   $0    270,306   $27    (103,334)  $(1,033)  $29,303,715   $(32,032,889)  $127,674   $(2,599,297)
Issuance of stock for board and consulting fees   535,714    54                                  56,732              56,786 
Accumulated Comprehensive Income                                                     1    1 
Net loss for period available to common stockholders        -          -          -          -     -     (276,992)        (276,992)
Balance at September 30, 2022   32,630,506   $3,263    1   $0    270,306   $27    (103,334)  $(1,033)  $29,360,447   $(32,309,881)  $127,675   $(2,819,502)

 

                                   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   $3,092    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   1,607,142    161                                  176,089              176,250 
Issuance of stock for consulting fees   101,663    10                                  12,189              12,199 
Accumulated Comprehensive Income                                                     1    1 
Net loss for period available to common stockholders        -          -          -          -     -     (612,739)        (612,739)
Balance at September 30, 2022   32,630,506   $3,263    1   $0    270,306   $27    (103,334)  $(1,033)  $29,360,447   $(32,309,881)  $127,675   $(2,819,502)

 

                                   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 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)
Issuance of stock for board and consulting fees   535,714    53                                  77,089              77,142 
Accumulated Comprehensive Income                                                     4    4 
Net loss for period available to common stockholders        -         -         -         -    -    (158,492)        (158,492)
Balance at September 30, 2021   30,852,781   $3,085    1   $0    270,306   $27    (103,334)  $(1,033)  $29,120,212   $(31,510,080)  $127,675   $(2,260,114)

 

                                   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, 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   1,708,805    171                                  272,995              273,166 
Issuance of stock related to deferred compensation of directors   1,609,236    161                                  (161)             - 
Directors deferred compensation granted   -                                       21,000              21,000 
Accumulated Comprehensive Income                                                     6    6 
Net loss for period available to common stockholders        -          -          -          -     -     (572,970)        (572,970)
Balance at September 30, 2021   30,852,781   $3,085    1   $0    270,306   $27    (103,334)  $(1,033)  $29,120,212   $(31,510,080)  $127,675   $(2,260,114)

 

See accompanying notes to consolidated financial statements

 

5

 

 

VYCOR MEDICAL, INC.

Consolidated Statement of Cash Flows

(Unaudited)

 

           
   For the nine months ended 
   September 30, 
   2022   2021 
Cash flows from operating activities:          
Net loss  $(288,369)  $(248,600)
Adjustments to reconcile net loss to cash used in operating activities:          
Amortization of intangible assets   -    8,983 
Depreciation of fixed assets   46,073    41,665 
Inventory provision   11,360    9,270 
Stock based compensation   187,381    284,102 
Forgiveness of debt Paycheck Protection Program   -    (117,200)
           
Changes in assets and liabilities:          
Accounts receivable   (54,462)   (17,646)
Inventory   (71,381)   (49,838)
Prepaid expenses   (32,638)   2,871 

Accounts payable

   (8,713)   9,468 

Accrued interest - Related Party

   28,256    23,753 

Accrued interest - Other

   29,682    40,271 
Accrued liabilities - Other   (29,514)   6,608 
Changes in discontinued operations, net   (1,337)   (3,791)
Cash used in operating activities   (183,662)   (10,084)
Cash flows from investing activities:          
Purchase of fixed assets   (3,102)   (38,690)
Cash used in investing activities   (3,102)   (38,690)
Cash flows from financing activities:          
Proceeds from Notes Payable - Related Party   110,000    10,000 
Proceeds from Paycheck Protection Program   -    58,600 
Proceeds net of repayments Notes Payable - Other   18,392    12,740 
Cash provided by financing activities   128,392    81,340 
Effect of exchange rate changes on cash   1    5 
Net increase (decrease) in cash   (58,371)   32,571 
Cash at beginning of period   90,941    46,002 
Cash at end of period  $32,570   $78,573 
           
Supplemental Disclosures of Cash Flow information:          
Cash paid for interest  $6,579   $2,193 
Cash paid for income tax  $0   $0 

 

See accompanying notes to consolidated financial statements

 

6

 

 

VYCOR MEDICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 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 nine months ended September 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 nine months ended September 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 $612,739 for the nine months ended September 30, 2022 and has not generated sufficient positive cash flows from operations. As of September 30, 2022 the Company had a working capital deficiency of $530,661, excluding related party liabilities of $2,511,793. 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 $412,798, 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 November 30, 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.

 

Net Loss Per Share

 

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.

 

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

 

           
  

September 30,

2022

  

September 30,

2021

 
Debentures convertible into common stock   3,394,276    3,165,705 
Preferred shares convertible into common stock   1,272,052    1,272,052 
Total   4,666,328    4,437,757 

 

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

 

           
   September 30,   December 31, 
   2022   2021 
ASSETS          
Current Assets          
Cash  $880   $380 
Total Current Assets   880    380 
           
TOTAL ASSETS  $880   $380 
           
LIABILITIES          
Current Liabilities          
Accounts payable  $4    4 
Other current liabilities   (1,413)   (576)
Total Current Liabilities  $(1,409)  $(572)

 

Major line items constituting loss from discontinued operations

 

                     
   For the three months ended September 30,   For the nine months ended September 30, 
   2022   2021   2022   2021 
Revenue  $-   $-   $-   $- 
Cost of Goods Sold   -    -    -    - 
Gross Profit   -    -    -    - 
                     
Operating Expenses:                    
Selling, general and administrative   2,420    3,921    4,413    25,567 
Total Operating Expenses   2,420    3,921    4,413    25,567 
Operating Loss   (2,420)   (3,921)   (4,413)   (25,567)
                     
Other Income (Expense)                    
Loss on foreign currency exchange   (75)   (45)   (121)   (888)
Total Other Income (Expense)   (75)   (45)   (121)   (888)
                     
Loss Before Credit for Income Taxes   (2,495)   (3,966)   (4,534)   (26,455)
Credit for income taxes   -    -    -    - 
Loss from discontinued operations, net of tax  $(2,495)  $(3,966)  $(4,534)  $(26,455)

 

9

 

 

4. NOTES PAYABLE

 

Related Parties Notes Payable

 

Related Party Notes Payable consists of:

 

  

September 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 
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 August 26, 2022 the Company issued thirteen promissory notes to Fountainhead Capital Management Limited for $400,873. 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. Eleven notes were extended on their due dates for another twelve months. The Notes will be due between December 2022 and August 2023 or on demand by the Payee.   400,873    290,873 
Total Related Party Notes Payable  $430,873   $320,873 

 

Other Notes Payable

 

Other Notes Payable consists of:

 

  

September 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 31, 2023. See further note below.  $300,000   $300,000 
Current portion of Long-Term Notes payable, see below   2,930    - 
Insurance policy finance agreements.   34,791    19,329 
Total Notes Payable:  $337,721   $319,329 

 

Long-Term Notes Payable consists of:

 

  

September 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.  $147,070   $150,000 
Total Long-Term Notes Payable:  $147,070   $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 3,394,276 shares of Common Stock as of September 30, 2022. 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 September 30, 2022 and December 31, 2021:

 

   September 30, 2022   December 31, 2021 
         
Operating Lease ROU Assets  $44,600   $79,560 
Operating Lease ROU Assets  $44,600   $79,560 
           
Operating Lease Liabilities          
Current portion  $44,600   $46,915 
Long-term portion  -   30,580 
Operating Lease Liabilities  $44,600   $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 September 30,   Nine Months Ended September 30, 
   2022   2021   2022   2021 
Revenue:                
Vycor Medical  $289,706   $301,540   $875,785   $1,026,572 
NovaVision  $20,263   $30,547   $75,940   $92,691 
Revenue  $309,969   $332,087   $951,725   $1,119,263 
Gross Profit                    
Vycor Medical  $249,141   $269,986   $777,963   $930,180 
NovaVision  $18,629   $26,956   $70,269   $86,133 
Gross Profit  $267,770   $296,942   $848,232   $1,016,313 

 

           
   September 30,   December 31, 
   2022   2021 
Total Assets:          
Vycor Medical  $924,752   $901,930 
NovaVision   24,184    33,054 
Discontinued operations   880    380 
Total Assets  $949,816   $935,364 

 

11

 

 

(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

September 30,

  

Nine Months Ended

September 30,

 
   2022   2021   2022   2021 
Revenue:                
United States  $308,368   $328,250   $944,480   $1,104,939 
Europe  $1,601   $3,837   $7,245   $14,324 
Revenue  $309,969   $332,087   $951,725   $1,119,263 
Gross Profit                    
United States  $266,168   $293,187   $841,012   $1,002,169 
Europe  $1,602   $3,755   $7,220   $14,144 
Gross Profit  $267,770   $296,942   $848,232   $1,016,313 

 

           
   September 30,   December 31, 
   2022   2021 
Total Assets:          
United States  $942,756   $928,761 
Europe   6,180    6,223 
Discontinued operations   880    380 
Total Assets  $949,816   $935,364 

 

7. EQUITY

 

Common Stock Grants

 

During January to September 2022 and 2021, under the terms of the Consulting Agreement referred to in Note 10, the Company issued 1,607,142 of Common Stock to Fountainhead valued at $176,250 and $253,037, respectively.

 

On April 1, 2022 and 2021 the Company issued 101,663 shares of Common Stock to Ricardo Komotar (RJK Consulting), a consultant, in accordance with the terms of a consulting agreement (see Note 10).

 

During January to September 2021, 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 was deferred until the January 15th following the termination of their services as a director, or following the termination of the Plan. The Plan was terminated on April 1, 2021 and the Company issued 575,649 and 566,793 shares of common stock to Steve Girgenti and Lowell Rush in respect of their Deferred Compensation shares following their resignations from the board.

 

12

 

 

Stock Options

 

The details of the outstanding stock options are as follows:

 

  

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 September 30, 2022   -   $- 

 

8. STOCK-BASED COMPENSATION

 

The Company from time to time issues common stock, stock options or common stock warrants to acquire services or goods from non-employees. Common stock, stock options and common stock warrants issued to other than employees or directors are recorded on the basis of their fair value, which is measured as of the “measurement date” using an option pricing model, 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 nine months ended September 30, 2022 and 2021 was $187,381 and $284,102, 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 $2,500 per month. The lease terminated September 30, 2020 and was extended for a further three years to August 31, 2023. Rent expense for the nine months ended September 30, 2022 and 2021 for the continuing operations was $58,666 and $58,691 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 nine months ended September 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.

 

13

 

 

10. CONSULTING AND OTHER AGREEMENTS

 

The following agreements were entered into or remained in force during the period ended September 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 $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.

 

Effective January 1, 2021, the Company made an amendment to the Fountainhead Consulting Agreement (“the Amended Agreement”). Under the Amended Agreement, fees are payable to Fountainhead, with an option to receive $5,000 per month in cash, and the remainder payable in Company Common Stock (“Shares”) as follows: 1) 535,714 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 $0.21, 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 nine months ended September 30, 2022 and September 30, 2021, under the terms of the Amended Agreement, Fountainhead received 1,607,142 of Common Stock to Fountainhead valued at $176,250 and $253,037, 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 304,989 shares of Company Common Stock in respect of the general consultancy, and up to 1,219,957 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 101,663 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 September 30, 2022, 62.5% 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.

 

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During each of the nine months ended September 30, 2022 and September 30, 2021, under the terms of the Amended Agreement referred to in Note 10, the Company issued 1,607,142 shares of Common Stock to Fountainhead valued at $176,250 and $253,037, respectively.

 

During each of the nine months ended September 30, 2022 and 2021, the Company accrued an aggregate of $324,370 of Preferred D Stock dividends, of which $226,038 was regarding Fountainhead and $83,386 was regarding Peter Zachariou. Total accrued Preferred D Stock dividends at September 30, 2022 and 2021 was $1,946,220 and $1,621,850, respectively, of which $1,356,224 and $1,130,186, respectively, was regarding Fountainhead and $500,315 and $416,929, respectively, was regarding Peter Zachariou.

 

During the nine months ended September 30, 2022 and 2021 the Company issued unsecured loan notes to Fountainhead for a total of $110,000 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 nine months ended September 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

September 30,

 
   2022   2021 
         
Number of customers over 10%   1    - 
Percentage of sales   10%   0%

 

  

Nine months ended

September 30,

 
   2022   2021 
         
Number of customers over 10%   -    - 
Percentage of sales   0%   0%

 

Accounts Receivable Concentration

 

   At September 30,   At December 31, 
   2022   2021 
         
Number of customers over 10%   1    1 
Percentage of accounts receivable   11%   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

 

On October 3, 2022 the Company issued unsecured loan notes to Fountainhead for $10,000.

 

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, other than the above, there were no significant subsequent events or transactions which would require recognition or disclosure in the financial statements.

 

15

 

 

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.

 

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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, entering into a license agreement with HelferApp GmbH, a cognitive therapy specialist. Under the agreement, 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 nine months ended September 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 snaps onto the VBAS and allows for a neuronavigation pointer to be fully integrated into the body of the VBAS; this new model range, known as the VBAS AC, was launched in September 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 September 30, 2022 to the Three Months Ended September 30, 2021

 

Revenue and Gross Margin:

 

   Three months ended 
   September 30, 
   2022   2021   % Change 
Revenue:            
Vycor Medical  $289,706   $301,540    -4%
NovaVision  $20,263   $30,547    -34%
   $309,969   $332,087    -7%
Gross Profit               
Vycor Medical  $249,141   $269,986    -8%
NovaVision  $18,629   $26,956    -31%
   $267,770   $296,942    -10%

 

Vycor Medical recorded revenue of $289,706 from the sale of its products for the three months ended September 30, 2022, a decrease of $11,834, or 4%, over the same period in 2021. Gross margin of 86% and 90% was recorded for the three months ended September 30, 2022 and 2021, respectively.

 

NovaVision recorded revenues of $20,263 for the three months ended September 30, 2022, a decrease of $10,284, or 34% over the same period in 2021. Gross margin was 92%, compared to 88% for the same period in 2021.

 

Selling, General and Administrative Expenses:

 

Selling, general and administrative expenses decreased by $24,529 to $341,256 for the three months ended September 30, 2022 from $365,785 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 September 30, 2022 was $59,836, a $22,339 decrease from the charge in 2021 of $82,175. Also included within Selling, General and Administrative Expenses are Sales Commissions, which decreased by $9,987 from $61,598 to $51,611 in 2022.

 

The remaining Selling, General and Administrative expenses increased by $7,797 to $229,809 from $222,012 in 2021. Patent costs increased by $17,147 mainly due to quarterly timing differences, and payroll costs increased by $14,252. Scientific and software development decreased by $10,099.

 

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

 

   Cash G&A   Non-Cash G&A 
Payroll   14,252    - 
Other (travel/insurance/premises)   5,615    - 
Legal, patent, audit/accounting   2,197    - 
Regulatory   (4,168)   - 
Commissions   (9,987)   - 
Scientific advisory   (10,099)     
Board and financial   -    (22,339)
Total change   (2,190)   (22,339)

 

Interest Expense:

 

Interest comprises expense on the Company’s debt and insurance policy financing. Related Party Interest expense for the three months ended September 30, 2022 and 2021 was $10,351 and $8,088, respectively. Other Interest expense for the three months ended September 30, 2022 and 2021 was $13,511 and $12,685, respectively.

 

Operating loss from Discontinued Operations:

 

Operating loss from Discontinued Operations decreased by $1,471 to $2,495 in 2022 from $3,966 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 Nine months ended September 30, 2022 to the Nine months ended September 30, 2021

 

Revenue and Gross Margin:

 

`  Nine months ended 
   September 30, 
   2022   2021   % Change 
Revenue:            
Vycor Medical  $875,785   $1,026,572    -15%
NovaVision  $75,940   $92,691    -18%
   $951,725   $1,119,263    -15%
Gross Profit               
Vycor Medical  $777,963   $930,180    -16%
NovaVision  $70,269   $86,133    -18%
   $848,232   $1,016,313    -17%

 

Vycor Medical recorded revenue of $875,785 from the sale of its products for the nine months ended September 30, 2022, a decrease of $150,787, or 15%, 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, 2021. Gross margin of 89% and 91% was recorded for the nine months ended September 30, 2022 and for the same period in 2021.

 

NovaVision recorded revenues of $75,940 for the nine months ended September 30, 2022, a decrease of $16,751 over the same period in 2021, and gross margin of 93%, for the both periods in 2022 and 2021.

 

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Selling, General and Administrative Expenses:

 

Selling, general and administrative expenses decreased by $210,646 to $1,019,693 for the nine months ended September 30, 2022 from $1,230,340 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 nine months ended September 30, 2022 was $187,381, a decrease of $96,721 over $284,102 in 2021. Also included within Selling, General and Administrative Expenses are Sales Commissions, which decreased by $45,317 from $212,924 to $167,607.

 

The remaining Selling, General and Administrative expenses decreased by $68,609 from $733,314 to $664,705. Patent costs decreased by $22,183 and scientific and software development costs by $28,329, reflecting lower levels of activity compared to 2021; payroll increased by $25,026.

 

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   25,026    - 
Regulatory   (3,680)   - 
Scientific advisory   (28,329)     
Other (travel/insurance/premises)   (28,446)   - 
Legal, patent, audit/accounting   (33,180)   - 
Commissions   (45,317)   - 
Board and financial   -    (96,721)
Total change   (113,926)   (96,721)

 

Interest Expense:

 

Interest comprises expense on the Company’s debt and insurance policy financing. Related Party Interest expense for the nine months ended September 30, 2022 was $28,257 compared to $23,753 for 2021. Other Interest expense for the nine months ended September 30, 2022 was $39,195 compared to $42,465 for 2021 following the forgiveness of PPP loans.

 

Liquidity

 

The following table shows cash flow and liquidity data for the periods ended September 30, 2022 and December 31, 2021:

 

   September 30, 2022   December 31, 2021   $ Change 
Cash  $32,570   $90,941   ($58,371)
Accounts receivable, inventory and other current assets  $547,224   $396,470   $150,754 
Total current liabilities  $(3,622,248)  $(3,149,997)  $(472,251)
Working capital  $(3,042,454)  $(2,662,586)  $(379,868)
Cash provided by financing activities  $128,392   $61,945   $(66,447)

 

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 nine months ended September 30, 2022 and 2021, with a commentary of changes during the periods and known or anticipated future changes:

 

   September 30, 2022   September 30, 2021   $ Change 
Net loss  $(288,369)  $(248,600)  $(39,769)
                
Adjustments to reconcile net loss to cash used in operating activities:               
Amortization and depreciation of assets  $46,073   $50,648   $(4,575)
Stock based compensation  $187,381   $284,102   $(96,721)
Other  $11,360   $(107,930)  $119,290 
   $244,814   $226,820   $17,994 
                
Net loss adjusted for non-cash items  $(43,555)  $(21,780)  $(21,775)
Changes in working capital               
Accounts receivable  $(54,462)  $(17,646)  $(36,816)
Accounts payable and accrued liabilities  $(38,227)  $16,076   $(54,303)
Inventory  $(71,381)  $(49,838)  $(21,543)
Prepaid expenses and net insurance financing repayments  $(14,246)  $15,611   $(29,857)
Accrued interest (not paid in cash)  $57,938   $64,024   $(6,086)
Changes in discontinued operations, net  $(1,337)  $(3,791)  $2,454 
   $(121,715)  $24,436   $(146,151)
                
Cash provided by (used in) operating activities, adjusted for net insurance repayments  $(165,270)  $2,656   $(167,926)

 

The adjustments to reconcile net loss to cash of $244,814 in the period have no impact on liquidity. The change in accounts payable and accrued liabilities of $54,303 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 $136,932 was purchased during the nine months ended September 30, 2022 as part of normal production, and the Company anticipates purchasing additional new inventory of approximately $130,000 during the next twelve months for VBAS and VBAS AC.

 

Investing Activities. Cash used in investing activities of continuing operations for the nine months ended September 30, 2022 was $3,102.

 

Financing Activities. During the nine months ended September 30, 2022 the Company received funds of $110,000 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 $612,739 for the nine months ended September 30, 2022 and has not generated sufficient positive cash flows from operations. As of September 30, 2022 the Company had a working capital deficiency of $530,661, excluding related party liabilities of $2,511,793. 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 cash operating profit1 during the nine months ended September 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 snaps onto the VBAS and allows for a neuronavigation pointer to be fully integrated into the body of the VBAS; this new model range, known as the VBAS AC, was launched in September 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 November 30, 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 $412,798, 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.

 

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.

 

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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.

 

23

 

 

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 November 11, 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

 

The Company issued the following unregistered securities during the period from January 1, 2022 through November 11, 2022:

 

Issuance Type  Security  Shares 
FHC Management Fees  Common   1,607,142 
Consulting agreement fees: Ricardo Komotar  Common   101,663 
         
Total  Common   

1,708,805

 

 

There were no cash proceeds from these issuances

 

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)

 

24

 

 

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 November 14, 2022

 

  Vycor Medical, Inc.
  (Registrant)
     
  By: /s/ Peter C. Zachariou
    Peter C. Zachariou
    Chief Executive Officer and Director (Principal Executive Officer)
     
  Date November 14, 2022
     
  By: /s/ Adrian Liddell
    Adrian Liddell
    Chairman of the Board and Director
    (Principal Financial and Accounting Officer)
     
  Date November 14, 2022

 

25

 

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