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.
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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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VYCOR MEDICAL, INC. 
