10-Q 1 form10-q.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
   
  For the fiscal quarter ended June 30, 2019
   
[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
   
  For the transition period from            to                 

 

VYCOR MEDICAL, INC.

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

 

Delaware   001-34932   20-3369218
(State of   (Commission   (IRS Employer
Incorporation)   File Number)   Identification No.)

 

951 Broken Sound Parkway, Suite 320, Boca Raton, FL 33487

(Address of principal executive offices) (Zip code)

 

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

 

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

Common Stock par value $0.0001

 

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

 

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

 

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

 

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

 

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

 

There were 24,217,122 shares outstanding of registrant’s common stock, par value $0.0001 per share, as of August 8, 2019.

 

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

 

 

 

   
 

 

TABLE OF CONTENTS

 

    Page
PART I
 
Item 1. Financial Statements 3
     
  Unaudited Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018 3
     
  Unaudited Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2019 and 2018. 4
     
  Unaudited Consolidated Statement of Stockholders’ Deficiency for the six months ended June 30, 2019 and 2018. 5
     
  Unaudited Consolidated Statements of Cash Flows for the six months ended June 30, 2019 and 2018. 6
     
  Notes to Unaudited Consolidated Financial Statements 7
     
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operation 15
     
Item 3. Quantitative and Qualitative Disclosures About Market Risk 21
     
Item 4. Controls and Procedures 21
     
PART II
 
Item 1. Legal Proceedings 22
     
Item 1A. Risk Factors 22
     
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 22
     
Item 3. Defaults Upon Senior Securities 22
     
Item 4. Mine Safety Disclosures 22
     
Item 5. Other Information 22
     
Item 6. Exhibits 22
     
SIGNATURES 23

 

 2 
 

 

PART I

 

ITEM 1. FINANCIAL STATEMENTS

 

VYCOR MEDICAL, INC.

Consolidated Balance Sheets

(Unaudited)

 

   June 30, 2019   December 31, 2018 
ASSETS        
Current Assets          
Cash  $62,959   $86,481 
Trade accounts receivable   295,036    257,468 
Inventory   252,779    203,122 
Prepaid expenses and other current assets   76,927    82,575 
Total Current Assets   687,701    629,646 
           
Fixed assets, net   351,209    372,641 
           
Intangible and Other assets:          
Patents, net of accumulated amortization   29,314    35,303 
Website, net of accumulated amortization   -    187 
Operating lease right-of-use assets   

54,300

    - 
Other Assets - Long Term   6,306    6,000 
Total Intangible and Other assets   

89,920

    41,490 
TOTAL ASSETS  $

1,128,830

   $1,043,777 
           
LIABILITIES AND STOCKHOLDERS DEFICIENCY          
Current Liabilities          
Accounts payable  $154,672   $92,955 
Accrued interest: Other   256,568    232,765 
Accrued interest: Related Party   34,291    24,274 
Accrued liabilities - Other   310,313    295,056 
Accrued liabilities - Related Party   810,925    648,740 
Notes payable: Other   325,568    325,814 
Notes payable: Related Party   210,873    193,000 
Current operating lease   

46,621

    - 
Total Current Liabilities   2,149,831    1,812,604 
           
Long term Liabilities - Operating lease   7,679    - 
           
STOCKHOLDERS’ DEFICIENCY          
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 270,307 and 270,307 issued and outstanding as at June 30, 2019 and December 31, 2018 respectively   27    27 
Common Stock, $0.0001 par value, 55,000,000 shares authorized at June 30, 2019 and December 31, 2018, 24,320,456 and 23,244,028 shares issued and 24,217,122 and 23,140,694 outstanding at June 30, 2019 and December 31, 2018 respectively   2,432    2,324 
Additional Paid-in Capital   28,039,699    27,771,868 
Treasury Stock (103,334 shares of Common Stock as at June 30, 2019 and December 31, 2018 respectively, at cost)   (1,033)   (1,033)
Accumulated Deficit   (29,197,473)   (28,669,686)
Accumulated Other Comprehensive Income (Loss)   127,668    127,673 
Total Stockholders’ Deficiency   (1,028,680)   (768,827)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY  $

1,128,830

   $1,043,777 

 

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,

 
   2019   2018   2019   2018 
                 
Revenue  $429,890   $301,665   $780,556   $626,766 
Cost of Goods Sold   38,909    46,987    75,107    76,330 
Gross Profit   390,981    254,678    705,449    550,436 
                     
Operating expenses:                    
Depreciation and Amortization   14,811    43,329    29,896    85,332 
Selling, general and administrative   543,456    616,997    1,005,677    1,185,302 
Total Operating expenses   558,267    660,326    1,035,573    1,270,634 
Operating loss   (167,286)   (405,648)   (330,124)   (720,198)
                     
Other income (expense)                    
Interest expense: Other   (12,012)   (12,199)   (23,965)   (24,225)
Interest expense: Related Party   (5,257)   (646)   (10,016)   (646)
Loss on foreign currency exchange   (749)   (91)   (1,497)   (151)
Total Other Income (expense)   (18,018)   (12,936)   (35,478)   (25,022)
                     
Loss Before Credit for Income Taxes   (185,304)   (418,584)   (365,602)   (745,220)
Credit for income taxes   -    -    -    - 
Net Loss   (185,304)   (418,584)   (365,602)   (745,220)
Preferred stock dividends   -    -    (162,185)   (162,185)
Net Loss available to common stockholders   (185,304)   (418,584)   (527,787)   (907,405)
Comprehensive Loss                    
Foreign Currency Translation Adjustment   1    3,667    (5)   2,505 
Comprehensive Loss  $(185,303)  $(414,917)  $(527,792)  $(904,900)
                     
Net Loss Per Share                    
Basic and diluted  $(0.01)  $(0.02)  $(0.02)  $(0.04)
                     
Weighted Average Number of Shares Outstanding – Basic and Diluted   23,687,130    21,542,847    23,418,381    20,768,663 

 

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 December 31, 2018   23,244,028   $2,324    1   $0    270,307   $27    (103,334)  $(1,033)  $27,771,868   $(28,669,686)  $127,673   $(768,827)
Issuance of stock for board and consulting fees   1,076,428    108                                  225,831              225,939 
Directors deferred compensation granted   -                                       42,000              42,000 
Foreign currency translation adjustment                                                     (5)    (5) 
Net loss for the six months ended June 30, 2019                                                (527,787)        (527,787)
Balance at June 30, 2019   24,320,456   $2,432    1   $0    270,307   $27    (103,334)  $(1,033)  $28,039,699   $(29,197,473)  $127,668   $(1,028,680)
                                                             
Balance at December 31, 2017   19,925,322    1,993    1    0    270,307    27    (103,334)   (1,033)   26,921,574   $(26,965,960)   124,841    81,442 
Issuance of stock for board and consulting fees   1,281,125    128                                  449,872              450,000 
Directors deferred compensation granted   -                                       42,000              42,000 
Issuance of shares pursuant to exercise of warrants   1,113,936    111                                  (111)             - 
Share based compensation issued to management/employees                                           91,625              91,625 
Foreign currency translation adjustment                                                     2,505    2,505 
Net loss for the six months ended June 30, 2018                                                (907,405)        (907,405)
Balance at June 30, 2018   22,320,383   $2,232    1   $0    270,307   $27    (103,334)  $(1,033)  $27,504,960   $(27,873,365)  $127,346   $(239,833)

 

See accompanying notes to consolidated financial statements

 

 5 
 

 

VYCOR MEDICAL, INC.

Consolidated Statement of Cash Flows

(Unaudited)

 

   For the six months ended 
   June 30, 
   2019   2018 
Cash flows from operating activities:          
Net loss  $(365,602)  $(745,220)
Adjustments to reconcile net loss to cash used in operating activities:          
Amortization of intangible assets   5,989    25,166 
Depreciation of fixed assets   29,158    64,902 
Inventory provision   6,279    - 
Stock based compensation   267,940    358,625 
loss on foreign exchange   1,497    - 
           
Changes in assets and liabilities:          
Accounts receivable   (37,568)   (25,900)
Inventory   (55,936)   31,537 
Prepaid expenses   5,342    1,375 
Security Deposits   -    2,641 
Accrued interest - Related Party   10,017    646 
Accrued interest - Other   23,803    23,803 
Accounts payable   61,717    (23,341)
Accrued liabilities - Other   15,257    35,657 
Cash used in operating activities   (32,107)   (250,109)
Cash flows from investing activities:          
Purchase of fixed assets   (8,183)   (50,035)
Cash used in investing activities   (8,183)   (50,035)
Cash flows from financing activities:          
Proceeds from Notes Payable - Related Party   17,873    163,000 
Proceeds net of repayments Notes Payable - Other   (246)   4,687 
Cash provided by financing activities   17,627   167,687 
Effect of exchange rate changes on cash   (859)   2,977 
Net increase (decrease) in cash   (23,522)   (129,480)
Cash at beginning of period   86,481    206,213 
Cash at end of period  $62,959   $76,733 
           
Supplemental Disclosures of Cash Flow information:          
Cash paid for interest  $0   0 
Cash paid for income tax  $0   $0 
           
Non-Cash Transactions:          
Common stock issued to related party for payment of accrued liabilities  $0   $225,000 

 

See accompanying notes to consolidated financial statements

 

 6 
 

 

VYCOR MEDICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

(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, 2018 derives from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

 

The unaudited consolidated financial statements as of and for the three and six months ended June 30, 2019 and 2018, 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, 2019 and 2018 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 $365,602 for the six months ended June 30, 2019 and has not generated cash flows from operations. As of June 30, 2019 the Company had a working capital deficiency of $406,041, excluding related party liabilities of $1,056,089. As a result these conditions, among others, raise substantial doubt regarding our ability to continue as a going concern. The 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 revenue growth and 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 $256,568, which has a maturity date of December 31, 2019, having been extended on a number of occasions from its initial due date of June 11, 2011. The Company will seek an extension to the note, although it is not known whether the note will be extended or the terms of any extension. However, the Company believes it may not have sufficient cash to meet its various cash needs through August 31, 2020 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.

 

2. SIGNIFICANT ACCOUNTING POLICIES

 

Principles of Consolidation

 

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

 

Recent Accounting Pronouncements

 

The Company adopted Accounting Standards Codification 842, Leases (“ASC 842”) in the first quarter of 2019. As a result the Company updated its significant accounting policies for leases below. Refer to Note 4 for additional information related to the Company’s lease arrangements and the impact of the adoption of ASC 842 on the Company’s unaudited consolidated financial statements.

 

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

 

Leases

 

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

 

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

 

 7 
 

 

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:

 

   June 30, 2019   June 30, 2018 
Stock options outstanding   700,000    1,380,000 
Warrants to purchase common stock   3,717,826    3,717,826 
Debentures convertible into common stock   2,650,324    2,421,752 
Preferred shares convertible into common stock   1,272,052    1,272,052 
Directors Deferred Compensation Plan   975,909    615,619 
Total   9,316,111    9,407,249 

 

3. NOTES PAYABLE

 

Related Parties Notes Payable

 

Related Party Notes Payable consists of:

 

   June 30, 2019   December 31, 2018 
On June 25, 2018 the Company issued promissory notes to Peter Zachariou for $30,000. The notes bear interest at 10% per annum and are payable on the earlier of one year or five days following the delivery of written demand for payment by the Payee. The note was extended for another twelve months on its due date to June 25, 2020 or on demand by the Payee  $30,000   $30,000 
In March 2019 and between March 2018 and July 2018 the Company issued various promissory notes to Fountainhead Capital Management Limited for $180,873. 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. Five notes were extended for another twelve months on their due dates which will be due between March and July 2020 or on demand by the Payee.   180,873    163,000 
Total Related Party Notes Payable  $210,873   $193,000 

 

 8 
 

 

Other Notes Payable

 

Other Notes Payable consists of:

 

   June 30, 2019   December 31, 2018 
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 March 19, 2019, the note was extended to December 31, 2019. See further note below.  $300,000   $300,000 
Insurance policy finance agreements.   25,568    25,814 
Total Notes Payable:  $325,568   $325,814 

 

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 until December 31, 2018 and was further extended until December 31, 2019 in March 2019. The conversion terms of the Note were reduced to $0.21, the same as the offering price of the 2018 Offering. Conversion of the Note and accrued interest would result in the issuance of 2,650,324 shares of Common Stock as of June 30, 2019. Notwithstanding, EuroAmerican agreed that the Note could not be converted without first offering the Company the right to redeem the Note at principal and accrued interest, and secondly Fountainhead the right to purchase the Note, which cannot be converted prior to such offer and the failure of the Company and Fountainhead to exercise such option in accordance with the amendment terms. In addition, the Company agreed to issue warrants to purchase 2,308,405 shares of Common Stock at $0.27, the same terms as the 2018 Offering, exercisable for three years from January 1, 2018, if and when the conversion option is exercised. The amendment was recognized as a modification, based on the guidance in ASC 470-50.

 

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

 

4. LEASES

 

The Company recognized the following related to leases in its Unaudited Consolidated Balance Sheet at June 30, 2019:

 

   Six Months Ended June 30, 
   2019   2018 
Operating Lease Assets          
Right-of-use Assets  $54,300   $- 
Prepaid rent   

3,933

    - 
   $

58,233

   $- 
Operating Lease Liabilities          
Current portion  $

46,621

   $- 
Long-term portion   7,679    - 
   $

54,300

   $- 

 

Long term lease liabilities are due during 2020.

 

 9 
 

 

5. SEGMENT REPORTING, GEOGRAPHICAL INFORMATION

 

(a) Business segments

 

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

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2019   2018   2019   2018 
Revenue:                    
Vycor Medical  $390,627   $253,292   $687,733   $531,103 
NovaVision  39,263   48,373   92,823   95,663 
   $429,890   $301,665   $780,556   $626,766 
Gross Profit                    
Vycor Medical  $355,415   $209,998   $622,338   $463,567 
NovaVision  35,566   44,680   83,111   86,869 
   $390,981   $254,678   $705,449   $550,436 

 

   June 30, 2019   December 31, 2018 
Total Assets:          
Vycor Medical  $1,078,815   $981,553 
NovaVision   50,015    62,224 
Total Assets  $1,128,830   $1,043,777 

 

(b) Geographic information

 

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

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2019   2018   2019   2018 
Revenue:                    
United States  $410,145   $276,952   $730,761   $577,123 
Europe  19,745   24,713   49,795   49,643 
   $429,890   $301,665   $780,556   $626,766 
Gross Profit                    
United States  $374,034   $242,912   $662,325   $598,612 
Europe  16,947   25,327   43,124   50,050 
   $390,981   $254,678   $705,449   $550,436 

 

 10 
 

 

   June 30, 2019   December 31, 2018 
Total Assets:          
United States  $1,100,857   $1,010,067 
Europe   27,973    33,710 
Total Assets  $1,128,830   $1,043,777 

 

6. EQUITY

 

Common Stock and Stock Grants

 

During January to June 2019 and 2018, the Company granted 199,998 and 105,092 shares, respectively, of Common Stock (valued at $42,000 during each period) to non-employee Directors. Under the terms of the Directors Deferred Compensation Plan, the receipt of these shares is deferred until the January 15th following the termination of their services as a director. As of June 30, 2019 these shares have yet to be issued.

 

During January to June 2019, under the terms of the Consulting Agreement referred to in note 9, the Company issued 1,071,428 shares of Common Stock to Fountainhead for fees of $225,000. During January to June 2018, under the terms of the Consulting Agreement, the Company issued 1,281,125 shares of Common Stock to Fountainhead for fees of $450,000 of which $225,000 was accrued at December 31, 2017.

 

During the period ended June 30, 2019 the Company issued 5,000 shares of Common Stock to Robert Anderson for fees of $940 for consultancy.

 

On April 20, 2018, the Company issued an aggregate of 1,113,936 shares of Company Common Stock on the cashless exercise of an aggregate of Warrants to purchase 3,111,560 shares of Common Stock.

 

Warrants and Options

 

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

 

STOCK WARRANTS:

 

      

Weighted

average

 
  

Number of

shares

   exercise price
per share
 
Outstanding at December 31, 2018   3,717,826   $0.27 
Granted   -    - 
Exercised   -    - 
Cancelled or expired   -    - 
Outstanding at June 30, 2019   3,717,826   $0.27 

 

STOCK OPTIONS:

 

      

Weighted

average

 
  

Number of

shares

   exercise price
per share
 
Outstanding at December 31, 2018   1,380,000   $0.53 
Granted   -    - 
Exercised   -    - 
Cancelled or expired   (680,000)   (0.79)
Outstanding at June 30, 2019   700,000   $0.28 

 

As of June 30, 2019, the weighted-average remaining contractual life of outstanding warrants and options is 0.62 and 1.96 years, respectively.

 

 11 
 

 

7. SHARE-BASED COMPENSATION

 

Stock Option Plan

 

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

 

For the six months ended June 30, 2019 and 2018, the Company recognized share-based compensation of $0 and $4,871 respectively, for employee stock options.

 

Stock appreciation rights may be granted either on a stand-alone basis or in conjunction with all or part of any other stock options granted under the plan. As of June 30, 2019 there were no awards of any stock appreciation rights.

 

Non-Employee Stock Compensation

 

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

 

Aggregate stock-based compensation for stock and warrants granted to non-employees for the six months ended June 30, 2019 and 2018 was $267,940 and $353,754. The expense related to stock not issued during the periods ended June 30, 2019 and 2018 comprise: $42,000, respectively for both periods, related to stock granted but not issued to directors under the Directors Deferred Compensation Plan. As of June 30, 2019, there was $0 of total unrecognized compensation costs related to warrant and stock awards and non-vested options.

 

During the six months ended June 30, 2019 and 2018, options with a value of $0 and $216,582, respectively, were granted to Fountainhead with performance vesting conditions, (see Note 9). The performance conditions of the options granted during 2018 were not met and these options were cancelled.

 

Stock-based Compensation Valuation Methodology

 

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

 

 12 
 

 

The following assumptions were used in calculations of the Black-Scholes option pricing model for the six months ended June 30, 2019 and 2018:

 

   Six Months Ended June 30, 
   2019   2018 
Risk-free interest rates   -%   1.72-2.41 % 
Expected life   -    1.5-4.0 years 
Expected dividends   -%   0%
Expected volatility   -%   102-107%
Vycor Common Stock fair value  $-   $ 0.20-0.49 

 

8. COMMITMENTS AND CONTINGENCIES

 

Lease

 

The Company leases office space located at 951 Broken Sound Parkway, Suite 320, Boca Raton, FL 33487 from WPT Land 2 L.P., for a gross rent of approximately $5,700 plus sales tax per month. The lease terminates September 30, 2020. The Company’s subsidiary in Germany occupies premises on a short-term lease agreement. Rent expense for the six months ended June 30, 2019 and 2018 was $49,354 and $49,979 respectively.

 

Potential German tax liability

 

In June 2012 the Company’s NovaVision German subsidiary received a preliminary assessment for Magdeburg City trade tax of a maximum of approximately €630,000 preliminarily reduced to €75,000, with an additional interest charge of €12,000. This assessment is for the 2010 fiscal year and relates to the Company’s acquisition of the assets of the former NovaVision, Inc. An initial assessment for corporate tax of the same 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 totalling €75,000 which were completed in October 2016 and fully expensed. At that time the Company appealed against the interest charge of €12,000 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, 2019 and the year ended December 31, 2018 respectively.

 

9. CONSULTING AND OTHER AGREEMENTS

 

The following agreements were entered into or remained in force during the period ended June 30, 2019:

 

Consulting Agreement with Fountainhead

 

In March 2017 and effective April 1, 2017, the Company amended the Fountainhead Consulting Agreement (“the Amended Agreement”). Under the Amended Agreement, fees of $450,000 are payable to Fountainhead, with an option to receive $5,000 per month in cash and the remainder payable in Company Common Stock issued at the higher of $0.21 and the average price for the 30 days prior to issuance, and deliverable at the end of each fiscal quarter. The Consulting Agreement also contains provisions for Fountainhead to receive a higher proportion of its fees in cash subject to certain future liquidity events and Board approval.

 

During the six months ended June 30, 2019, under the terms of the Amended Agreement, Fountainhead received total fees of $225,000, which were paid through the issuance of 1,071,428 shares of Company Common Stock. During the six months ended June 30, 2018, under the terms of the Consulting Agreement, the Company issued 1,281,125 shares of Common Stock to Fountainhead for fees of $450,000 of which $225,000 was accrued at December 31, 2017.

 

During the six months ended June 30, 2019 and 2018, options pursuant to the Vycor Medical, Inc. 2018 Stock Option Plan with a value of $0 and $216,582, respectively, were granted to Fountainhead with performance vesting conditions. The performance conditions of the options granted during 2018 were not met and these options were cancelled.

 

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10. RELATED PARTY TRANSACTIONS

 

Peter Zachariou and David Cantor, directors of the Company, are investment managers of Fountainhead which owned, at June 30, 2019, 55% of the Company’s Common Stock and 70% of the Company’s Preferred D Stock. Adrian Liddell, Chairman, is a consultant for Fountainhead.

 

During the six months ended June 30, 2019, under the terms of the Consulting Agreement referred to in note 9, the Company issued 1,071,428 shares of Common Stock to Fountainhead for fees of $225,000. During the six months ended June 30, 2018, under the terms of the Consulting Agreement, the Company issued 1,281,125 shares of Common Stock to Fountainhead for fees of $450,000 of which $225,000 was accrued at December 31, 2017.

 

During the six months ended June 30, 2019 and 2018, the Company accrued an aggregate of $162,185 of Preferred D Stock dividends, of which an aggregate of $154,712 Preferred D Stock dividends were in respect of related parties for both periods.

 

During the six months ended June 30, 2019 and 2018 the Company issued unsecured loan notes to Fountainhead for a total of $17,873 and $133,000, respectively. The loan notes bear interest at a rate of 10% and are due on demand or by their one-year anniversary. (See Note 3)

 

11. CONCENTRATION

 

Vycor Medical sells its neurosurgical devices in the US primarily direct to hospitals, and internationally through distributors who in turn sell to hospitals. For the three months ended June 30, 2019 sales to no customer represented over 10% of total sales and for the three months ended June 30, 2018 sales to two customers represented 15% and 25%, respectively, of total sales. For the six months ended June 30, 2019 sales to no customer represented over 10% of total sales and for the six months ended June 30, 2018 sales to two customers represented 12% and 12%, respectively, of total sales. As of June 30, 2019 accounts receivable from two customers represented 35% and 11%, respectively, of total accounts receivable, and as of December 31, 2018 accounts receivable from two customers represented 40% and 13%, respectively, of total accounts receivable.

 

12. SUBSEQUENT EVENTS

 

The Company has evaluated the existence of events and transactions subsequent to the balance sheet date through the date the 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.

 

 14 
 

 

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

 

Forward Looking Statements

 

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

 

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

 

1. Organizational History

 

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

 

2. Overview of Business

 

Vycor is dedicated to providing the medical community with innovative and superior surgical and therapeutic solutions and operates two distinct business units within the medical device industry. Vycor Medical designs, develops and markets medical devices for use in neurosurgery. NovaVision provides non-invasive rehabilitation therapies for those who have vision disorders resulting from neurological brain damage such as that caused by a stroke. Both businesses adopt a minimally or non-invasive approach. Both technologies have strong sales growth potential, address large potential markets and have the requisite regulatory approvals. The Company has 68 issued or allowed patents and a further 6 pending. The Company leverages joint resources across the divisions to operate in a cost-efficient manner.

 

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

 

Vycor Medical

 

Vycor Medical designs, develops and markets medical devices for use in neurosurgery. Vycor Medical’s ViewSite Brain Access System (“VBAS”) is a next generation retraction and access system that was fully commercialized in early 2010 and is the first significant technological change to brain tissue retraction in over 50 years in contrast to significant development in most other neuro-surgical technologies. Vycor Medical is ISO 13485:2016 and MDSAP (Medical Device Single Audit Program) certified, and VBAS has U.S. FDA 510(k) clearance and CE Marking for Europe (Class III) for brain and spine surgeries, and regulatory approvals in Australia, Brazil, Canada, China, Korea, Japan, Russia and Taiwan. Vycor Medical has 25 granted patents

 

NovaVision

 

NovaVision provides non-invasive, computer-based rehabilitation targeted at a substantial and largely un-addressed market of people who have lost their sight as a result of stroke or other brain injury, and has 38 granted patents.

 

 15 
 

 

Strategy

 

The Company is continuing to execute on a plan to achieve revenue growth and a reduction in cash operating losses. For Vycor Medical this plan includes in particular: increasing market penetration in the US through targeted focus group programs with surgeons, closer cooperation with complementary product manufacturers and tight management of the distribution network; increasing international growth in territories where we are not represented or under represented; and continued new product development. The first phase of modification of the existing VBAS product range to make it more easy to use with the most common IGS systems was completed in September 2017 and has been well received by surgeons, resulting in increased hospital penetration and revenues. The second phase of the development of further IGS integration is in process and will then be subject to regulatory clearances and approvals. Upon regulatory approval and product release of this new VBAS AC the Company intends to conduct a multi-center study with selected surgeons who are familiar with the VBAS. We will also be exploring with surgeons and focus groups additional selected development work targeted at increasing the ease and applicability of our products to common procedures. For NovaVision, given the company’s resources, and the large size and diversity of its end markets, we believe that the most efficient way to tackle the distribution of its broad range of patient and professional products is by partnering with entities that have either direct access to the end users or a desire and financial wherewithal to leverage the NovaVision therapy platform into new indications.. The Company is in the process of identifying and talking to such partners. The range of alternatives for NovaVision could comprise distribution and marketing partnerships, licensing, merger, sale and/or a significant restructuring of its activities.

 

Comparison of the Three Months Ended June 30, 2019 to the Three Months Ended June 30, 2018

 

Revenue and Gross Margin:

 

   Three months ended 
   June 30, 
   2019   2018   % Change 
Revenue:               
Vycor Medical  $390,627   $253,292    54%
NovaVision  $39,263   $48,373    -19%
   $429,890   $301,665    43%
Gross Profit               
Vycor Medical  $355,415   $209,998    69%
NovaVision  $35,566   $44,680    -20%
   $390,981   $254,678    54%

 

Vycor Medical recorded revenue of $390,627 from the sale of its products for the three months ended June 30, 2019, an increase of $137,335 over the same period in 2018. The increase in revenue is largely attributed to the increasing adoption of the enhanced tip VBAS product. Gross margin of 91% was recorded for the three months ended June 30, 2019 compared to 83% for the same period in 2018. Gross margin is affected by the revenue mix and also by inventory validation charges during the 2018 period.

 

NovaVision recorded revenues of $39,263 for the three months ended June 30, 2019, a decrease of $9,110 over the same period in 2018, and gross margin of 91%, compared to 92% for the same period in 2018. NovaVision revenue is susceptible to short-term variation, with the first quarter of 2019 seeing a large number of new patient starts.

 

Selling, General and Administrative Expenses:

 

Selling, general and administrative expenses decreased by $73,541 to $543,456 for the three months ended June 30, 2019 from $616,997 for the same period in 2018. 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 three months ended June 30, 2019 was $134,439 a decrease of $85,815 over $220,254 in 2018. Also included within Selling, General and Administrative Expenses are Sales Commissions, which increased by $38,013 from $37,022 to $75,035 in 2019, as a result of higher revenues in the US market. The remaining Selling, General and Administrative expenses decreased by $25,739 from $359,721 to $333,982 in 2019.

 

 16 
 

 

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   (49,341)   - 
Sales, marketing and travel   (31,866)   - 
Board, financial and scientific advisory   (1,586)   (85,815)
Other (travel/regulatory/premises)   26,726    - 
Legal, professional and other consulting   30,328    - 
Commissions   38,013      
Total change   12,274    (85,815)

 

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, 2019 was $5,257 compared to $646 for 2018. Other Interest income and expense for 2019 decreased by $187 to $12,012 from $12,199 for 2018.

 

Comparison of the Six Months Ended June 30, 2019 to the Six Months Ended June 30, 2018

 

Revenue and Gross Margin:

 

   Six months ended 
   June 30, 
   2019   2018   % Change 
Revenue:               
Vycor Medical  $687,733   $531,103    29%
NovaVision  $92,823   $95,663    -3%
   $780,556   $626,766    25%
Gross Profit               
Vycor Medical  $622,338   $463,567    34%
NovaVision  $83,111   $86,869    -4%
   $705,449   $550,436    28%

 

Vycor Medical recorded revenue of $687,733 from the sale of its products for the six months ended June 30, 2019, an increase of $156,630, or 29%, over the same period in 2018. The increase in revenue is largely attributed to the increasing adoption of the enhanced tip VBAS product. Gross margin of 90% was recorded for the six months ended June 30, 2019 compared to 87% for the same period in 2018.

 

 17 
 

 

NovaVision recorded revenues of $92,823 for the six months ended June 30, 2019, a decrease of $2,840 over the same period in 2018 although new patient starts were up 7%, and gross margin of 90%, compared to 91% for the same period in 2018.

 

Selling, General and Administrative Expenses:

 

Selling, general and administrative expenses decreased by $179,625 to $1,005,677 for the six months ended June 30, 2019 from $1,185,302 for the same period in 2018. 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, 2019 was $267,940 a decrease of $90,685 over $358,625 in 2018. Also included within Selling, General and Administrative Expenses are Sales Commissions, which increased by $44,902 from $85,959 to $130,861, as a result of higher revenues in the US market. The remaining Selling, General and Administrative expenses decreased by $133,842 from $740,718 to $606,876.

 

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   (104,323)   (4,871)
Sales, marketing and travel   (44,624)   - 
Legal, professional and other consulting   (4,510)   - 
Board, financial and scientific advisory   (309)   (85,814)
Other (travel/regulatory/premises)   19,924    - 
Commissions   44,902      
Total change   (88,940)   (90,685)

 

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, 2019 was $10,016 compared to $646 for 2018. Other Interest expense for 2019 decreased by $260 to $23,965 from $24,225 for 2018.

 

Liquidity

 

The following table shows cash flow and liquidity data for the periods ended June 30, 2019 and December 31, 2018:

 

   June 30, 2019   December 31, 2018   $ Change 
Cash  $62,959   $86,481   $(23,522)
Accounts receivable, inventory and other current assets  $

624,742

   $543,165   $81,577 
Total current liabilities  $(2,149,831)  $(1,812,604)  $(290,606)
Working capital  $(1,462,130)  $(1,182,958)  $(232,551)
Cash provided by financing activities  $

17,627

   $200,421   $(182,794)

 

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

 

 18 
 

 

The following table shows the principle components of cash used in operating activities during the six months ended June 30, 2019 and 2018, with a commentary of changes during the periods and known or anticipated future changes:

 

   June 30, 2019   June 30, 2018   $ Change 
Net loss  $(365,602)  $(745,220)  $379,618 
                
Adjustments to reconcile net loss to cash used in operating activities:               
Amortization and depreciation of assets  35,147   90,068   (54,921)
Share based compensation   267,940    358,625    (90,685)
Other   7,776    -    7,776 
   310,863   448,693   (137,830)
                
Net loss adjusted for non-cash items  (54,739)  (296,527)  241,788 
Changes in working capital               
Accounts receivable, accounts payable and accrued liabilities   39,406    (10,943)   50,349 
Inventory   (55,936)   31,537    (87,473)
Prepaid expenses and net insurance financing repayments   5,096    6,062    (996)
Accrued interest (not paid in cash)   33,820    24,449    9,371 
   22,386   51,105   (28,719)
                
Cash used in operating activities, adjusted for net insurance repayments  $(32,353)  $(245,422)  $213,069 

 

The adjustments to reconcile net loss to cash of $310,863 in the period have no impact on liquidity. The decrease in net loss (as adjusted for non-cash items) by $241,788 to $54,739 was primarily a result of increased revenues, as well as reduced expenses. There was an increase in accounts receivable offset by an increase in accounts payable.

 

The Company is in the process of modifying the VBAS product suite to make it easier to integrate with IGS. The first phase of this project was completed in September 2017 and additional inventory of $108,000 was purchased during the six months ended June 30, 2019. The Company is progressing the second phase of this project and as a result anticipates purchasing additional new inventory of approximately $40,000 during the remainder of 2019.

 

Investing Activities. Cash used in investing activities for the six months ended June 30, 2019 was $8,183, which primarily reflected expenditure on the second phase of modifying the VBAS product suite to make it easier to integrate with IGS. The Company anticipates additional expenditures for this second phase, including work to obtain regulatory clearances and approvals, of approximately $120,000.

 

Financing Activities. During the period ending June 30, 2019 the Company received funds of $17,873 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 $365,602 for the six months ended June 30, 2019 and has not generated cash flows from operations. As of June 30, 2019 the Company had a working capital deficiency of $406,041, excluding related party liabilities of $1,056,089. As a result these conditions, among others, raise substantial doubt regarding our ability to continue as a going concern. The 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 executing on a plan to achieve revenue growth and a reduction in cash operating losses. For Vycor Medical this plan includes in particular: increasing market penetration in the US through targeted focus group programs with surgeons, closer cooperation with complementary product manufacturers and tight management of the distribution network; increasing international growth in territories where we are not represented or under represented; and continued new product development. The first phase of modification of the existing VBAS product range to make it more easy to use with the most common IGS systems was completed in September 2017 and has been well received by surgeons, resulting in increased hospital penetration and revenues. The second phase of the development of further IGS integration is in process and will then be subject to regulatory clearances and approvals. Upon regulatory approval and product release of this new VBAS AC the Company intends to conduct a multi-center study with selected surgeons who are familiar with the VBAS. We will also be exploring with surgeons and focus groups additional selected development work targeted at increasing the ease and applicability of our products to common procedures. For NovaVision, given the company’s resources, and the large size and diversity of its end markets, we believe that the most efficient way to tackle the distribution of its broad range of patient and professional products is by partnering with entities that have either direct access to the end users or a desire and financial wherewithal to leverage the NovaVision therapy platform into new indications. The Company is in the process of identifying and talking to such partners. The range of alternatives for NovaVision could comprise distribution and marketing partnerships, licensing, merger, sale and/or a significant restructuring of its activities.

 

However, the Company believes it may not have sufficient cash to meet its various cash needs through August 31, 2020 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 $256,568, which has a maturity date of December 31, 2019, having been extended on a number of occasions from its initial due date of June 11, 2011. The Company will seek an extension to the note, although it is not known whether the note will be extended or the terms of any extension. Fountainhead, the Company’s largest shareholder, has provided working capital funding to the Company on an as-needed basis, although there is no guarantee that this will continue to be the case. The Company may consider seeking additional equity or debt funding, although there is no assurance that this would be available on acceptable terms or at all. If adequate funds are not available, the Company may have to delay or curtail development or commercialization of products, or cease some of its operations.

 

Critical Accounting Policies and Estimates

 

Uses of estimates in the preparation of financial statements

 

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

 

 20 
 

 

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, 2018.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Not applicable

 

ITEM 4. CONTROLS AND PROCEDURES

 

(a) Disclosure Controls and Procedures

 

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

 

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

 

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(b) Changes in Internal Controls

 

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

 

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

 

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 8, 2019, 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

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not applicable.

 

ITEM 5. OTHER INFORMATION

 

None

 

Index to Exhibits

 

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

 

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SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on August 9, 2019.

 

  Vycor Medical, Inc.
  (Registrant)
     
  By: /s/ Peter C. Zachariou
    Peter C. Zachariou
    Chief Executive Officer and Director
(Principal Executive Officer)
     
  Date August 9, 2019
     
  By: /s/ Adrian Liddell
    Adrian Liddell
    Chairman of the Board and Director
    (Principal Financial and Accounting Officer)
     
  Date August 9, 2019

 

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