Under the terms of the Offering, there were certain agreements with Related Parties:
On March 31 2014, in accordance with the terms the Consulting Agreement, the Company issued 6,276 shares of Common Stock (valued at $15,000) to Fountainhead.
There were no other related party transactions during the three months ended March 31, 2014 other than the payment or accrual of fees under the Fountainhead Consulting agreement described in Note 11 of the financial statements.
The Company evaluated subsequent events through the date the financial statements were issued and filed with this Form 10Q:
Share Issuance
During April to May 2014, the Company issued 2,222 shares of Common Stock (valued at $5,000) to Steven Girgenti, in consideration for services provided to the Board of Directors; and 727 and 1,453 shares of Common Stock respectively (valued at $1,563 and $3,125 respectively) to Alvaro Pascual-Leone and Josef Zihl in respect of their roles as members of the NovaVision, Inc. Scientific Advisory Board.
On April 25, 2014, the Company completed the sale of an additional $929,860 in Units in a final close of the Offering, which were issued pursuant to a Securities Purchase Agreement between the Company and the Investors. In the aggregate, the Company issued 516,594 shares of Common Stock, Series A Warrants to purchase an aggregate of 258,298 shares of Common Stock and Series B Warrants to purchase an aggregate of 258,298 shares of Common Stock.
Amendment to Offering Agreements and removal of anti-dilution
During April and May 2014, the Company requested waivers of certain anti-dilution provisions of the Stock Purchase Agreement and Series A Warrant Agreements (“Waivers”) which were executed with investors in the Company’s $5,000,000 private placement offering which was completed on April 25, 2014. Under the terms of the Waivers, the investors agreed to waive their anti-dilution rights (which arose in the event the Company sold securities at a price below $2.05 within one year of the date that the initial Registration Statement has been declared effective by the SEC) in consideration of the Company’s agreement not to sell any securities at a price below $2.05 within such one-year period. The Waivers become effective as to all the Common Stock issued in the offering once the Company receives the agreement of the holders of eighty percent (80%) of the Common Stock issued in the offering and the holders of eighty percent (80%) of the Common Stock issued in each closing. As of May 14, 2014, the Company had received waivers from the holders of 93.9 percent of the shares issued in the offering, and over 80 percent for each closing, and so the Waivers have been declared effective on 100 percent of the Common Stock issued in the Offering. The Company is continuing to seek Waivers from the remaining investors for their Common Stock and Series A Warrants. Waivers have also been received in respect of the Placement Agent Warrants and the Series A Warrants held by Fountainhead.
As stated in Note 2 (Warrant Derivative Liability) and Note 8, because the Warrants carry certain anti-dilution protection for the holders, the Company has recorded the Series A Warrants and Placement Agent Warrants as a liability, in accordance with the guidance contained in ASC 815-40-15-7D. Following the declaration of effectiveness of the Waivers, the Company will no longer be required to record any derivative liability on account of the Series A Warrants and Placement Agent warrants, with respect of the actual number of Warrants for which the Waivers have been executed.
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
We were 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” or the “Company”). On November 29, 2010,
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Vycor, through its wholly-owned subsidiary NovaVision Acquisition, Inc., completed the acquisition of substantially all of the assets of the former NovaVision, Inc., a company that had been in the business of researching, developing and providing medical technologies to restore the vision of patients with neurological visual loss. Subsequent to the purchase, NovaVision Acquisition, Inc. changed its name to NovaVision, Inc. (“NovaVision”). On January 4, 2012 Vycor, through its wholly-owned subsidiary NovaVision, completed the acquisition of all the shares of Sight Science Limited (“Sight Science”) a previous competitor to NovaVision, which provides an interactive computer-based therapy called Neuro-Eye Therapy (“NeET”).
2. Overview of Business
Vycor operates two distinct business units within the medical industry:
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Vycor Medicalmanufactures and distributes the ViewSite Brain Access System (VBAS), a suite of clear cylindrical disposable devices used to access target sites such as tumors within the brain and which provide a working channel during neurosurgery for their removal. The FDA 510(k) cleared system provides a minimally invasive approach into the brain, offering clinical advantages that have been validated in various peer-reviewed articles and have enabled previously inoperable procedures to take place, thereby saving and changing lives.
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NovaVision provides vision solutions targeted at a large and previously un-addressed market of people who have lost their sight as a result of Stroke or Traumatic Brain Injury (neurological brain damage). NovaVision addresses a significant target market, estimated at approximately $2 billion in the U.S. and over $13 billion globally, and has the only 510(k) cleared therapy targeted at the restitution of this type of vision loss. NovaVision has a broad portfolio of therapies that both restore lost vision and address other neurologically-induced vision issues. The Company’s lead Vision Restoration Therapy (VRT) while underpinned by significant clinical data is in development and not fully commercialized. Completion of the VRT development work is anticipated during 2014
Both businesses adopt a minimally or non-invasive approach. Both technologies have exceptional sales growth potential, address large potential markets and have the requisite regulatory approvals. The Company has a strong patent portfolio with 38 granted patents and a further 17 pending. The Company leverages joint resources across the divisions, to operate in a highly cost-efficient manner.
Vycor Medical
Introduction
Vycor Medical designs, develops and markets medical devices for use in neurosurgery. Vycor Medical is ISO 13485:2003 compliant, has U.S. FDA 510(k) clearance and CE Marking for Europe (Class III) for brain and spine surgeries, as well as applicable full or partial regulatory approvals in Australia, Canada, China, Japan, Korea and Russia for sale of its brain access system. Vycor Medical’s first product, VBAS, is a next generation retraction and access system that was fully commercialized in early 2010. The VBAS device is the first significant technological change to brain tissue retraction. The incumbent blade retractor technology has not changed materially in over 50 years in stark contrast to significant development in most other neuro-surgical technologies.
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Vycor Medical has a current product pipeline aimed at enhancing the ease of use and increasing the compatibility of its current VBAS range with Image Guided Systems, and separately also expanding the applicable procedures it addresses by expanding its VBAS range. A second potential product range focused on spinal procedures is the Cervical Access System (VCAS), which requires further prototyping and market testing prior to reaching a decision to commercialize. This product is designed to assist surgeons in cervical surgeries, allowing the surgeon to gain access to the anterior cervical surgery site; the VCAS is covered by Vycor’s 510(k) clearance.
Vycor Medical’s Products
Viewsite Brain Access System (VBAS)
To access a surgical site in the brain, a surgeon usually needs to remove part of the skull (craniotomy) and then make an entry incision in the outer protective brain tissue (corticotomy); the soft brain tissue is then parted (retracted) to access the target site. The current standard of care utilizes a metal blade retractor to pull the tissue apart; to maintain the opening the blades are attached to a head frame and parting tension is applied to the tissue. In a typical procedure somewhere between 2 and 5 blades are used.
Many clinical studies have shown that retractors can cause excessive pressure on brain tissues, resulting in damage and a prolonged patient recovery. The incidence of contusions (tissue injuries) or infarctions (blockage of blood supply) from brain retraction is as great as 5-10% in cranial surgeries.
Vycor’s VBAS is a significant improvement over current technologies for accessing regions within the brain. A disposable product that can be used with neuro-navigation systems (IGS), the VBAS includes an introducer and working channel. Available in multiple sizes, the current series consists of 12 disposable products, offered in four different port diameters of 12mm, 17mm, 21mm, and 28 mm and a choice of three lengths: 3cm, 5cm, and 7cm.
The Market For Vycor Medical’s VBAS Product
The market for Vycor Medical’s VBAS product range is limited to craniotomy procedures. Based on statistics from the American Association of Neurological Surgeons (AANS), management estimates 700,000 such procedures were performed in the US in 2012. Of this, management believe approximately 200,000 (28 percent) are addressable by the VBAS range currently, with another 125,000 (total of 325,000 or 46 percent) addressable by an expanded future range. Management estimates, for the global market, there exists a current addressable market of approximately 1,000,000 procedures with another 600,000 addressable by an expanded VBAS range.
Competition
The VBAS device is both a brain access system and a retractor and is therefore unique with no direct competitors. Competitive manufacturers of brain retractors include Cardinal Health (V. Mueller line), Aesculap, Integra Life Science and Codman (Division of Johnson & Johnson). Nico Corporation has a brain access device specifically designed to work with its Myriad resection and suction product.
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Cervical Access System competitors are more numerous and include Medtronic, Asculap/B. Braun, Cardinal and Nuvasive, Cloward Instruments, as well as the standard “blade retractors” distributed by the aforementioned companies. In addition companies such as Endius and EBI have announced cervical retractor systems.
Sales and Marketing
Domestic Sales Strategy
The VBAS sales strategy is focused on driving sales through leading neurosurgeons. In this regard, Vycor Medical has adopted a dual strategy of targeting both the neurosurgeons specializing in brain and the larger neurosurgical hospitals.
The surgeon is most interested in ease and simplicity of use, reduction in surgery times, less trauma to the patient and better overall outcomes; the surgeon is also interested in devices which can enable surgeries which would otherwise be difficult or possibly even inoperable. The Company believes there are approximately 3,500 neurosurgeons in the US, providing a well defined target audience. The hospital is most interested in reduction in surgery times, better outcomes, reduction in in-patient recovery times and the overall cost/benefit of the product. We believe VBAS targets the interests of both the surgeon and the hospital.
Vycor Medical sells to stocking regional distributors and direct to hospitals through independent representatives, all of whom have existing relationships with neurosurgeons and help drive sales at the target hospitals without the need for a large and costly dedicated Vycor regional sales team.
International Sales
Vycor Medical’s strategy is to target those countries or regions internationally where it has patent protection and either has or can obtain regulatory approval. Vycor Medical utilizes select medical device distributors with experience in neurosurgical devices in their countries or regions. In Europe, the Company currently only has a limited number of distributors and is only now turning its focus to this geographic region. Vycor Medical has regulatory approvals for VBAS in Australia, Canada, China, Europe (Class III), Korea and Japan and is seeking or has partial regulatory approvals in Russia, India, Vietnam and Taiwan with distribution agreements in place or being sought.
Vycor Medical plans on focusing on the international markets and is actively pursuing new distribution agreements.
VBAS Market and the Hospital Adoption Process
The market for VBAS in the US is relatively concentrated. Teaching hospitals not only carry out more relevant procedures but also provide a natural way to drive adoption through the conversion of new surgeons. We focus our efforts initially on surgeons as the principle proponent within the hospital. Vycor has found that the learning curve is only 1-2 cases for surgeons, who like the simplicity of design and ease of use after trialing the product. However, Hospital Administration is required to approve the purchase of a new product and sometimes even a trial or evaluation of the product in the hospital by the
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neurosurgeon and this is one of the key barriers to the speed of adoption as this process can take several month.
Experience has been that the approval process can take up to six months for each hospital, and in some cases may even be longer.
Peer Review and Other Clinical Studies
The publication of clinical papers in neurosurgery journals by surgeon-users of VBAS regarding their experiences with the products (peer review papers), and the publication of other clinical data, is important for the Company as it continues to evidence the clinical superiority of VBAS. During the last 3 years the following papers were published:
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• | “Usage of a Minimally Invasive Tubular Retraction System for Deep-Seated Tumors in Pediatric Patients” inJournal of Neurosurgeryin May 2011: Pediatrics. Co-authors Pablo Recinos, M.D., of the Cleveland Clinic and George Jallo, M.D., of Johns Hopkins University conclude that while access to deep-seated, intra-axial tumors is challenging, the ViewSite™ tubular retractor and frameless neuro navigation facilitated the surgical approach and the combination of these technologies adds to the surgeon’s armamentarium to safely approach tumors in deep locations. |
• | “Vycor Viewsite TC: Endoscope-guided Intraparenchimal Brain Tumor Resection,” by Daniel Prevedello, M.D., Director of the Minimally Invasive Cranial Surgery Program at the Ohio State University. Dr Prevedello reported on a case with a patient taking Avastin®, which delays surgical wound healing. He said the Viewsite TC was essential to the surgery; otherwise, no procedure could have been performed on the patient. |
• | “Minimally Invasive Trans-Portal Resection of Deep Intracranial Lesions” inMinimally Invasive Neurosurgery,February 2011 a Johns Hopkins University paper by lead author A. Quinones Hinojosa. The authors reported a case series of 9 adult and pediatric patients with a variety of pathologies, including colloid cyst, DNET, papillary pineal tumor, anaplastic astrocytoma, toxoplasmosis and lymphoma. The locations of the lesions approached included: lateral ventricle, basal ganglia, pulvinar/posterior thalamus and insular cortex. Post-operative imaging was assessed to determine extent of resection and extent of white matter damage along the surgical trajectory. Satisfactory resection or biopsy was obtained in all patients. “VBAS lends itself well to minimally invasive microsurgical approaches and can be used in combination with modern navigational systems. The use of navigation permits not only the creation of a smaller craniotomy but also facilitates the creation of a trajectory that provides efficient and safe means for splitting white fiber tracts,” said the authors. |
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| “3D Endoscpe-Assisted Transcallosal Approach to the Third Ventricle Using a Minimally Invasive Tubular Retractor System – A Feasability Study” by Alireza Shoakazemi, Alexander I. Evins, Philip E. Stieg, Antonio Bernardo Published in J Neurol Surg B 2014; 75 - A047. Weill Cornell Medical Center.Conclusion. Though some authors have advocated the benefits of retractorless microsurgical techniques in approaching the third ventricle, the use of routine retractors and their potential complications, in some cases, cannot be avoided. An increased incidence of cortical damage has been reported in a rat model, wherein retractors were held in place for more than 15 minutes at a pressure of 20 mmHg. We found the interhemispheric 3D endoscope-assisted trancallosal approach through tubular |
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| retractors to be feasible for the management of pathologies of the third ventricle. |
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| “3D Endoscopic Transtubular Anterior Petrosectomy for Petroclival Meningiomas: Assessment of Resection in Varying Tumor Volumes Utilizing a Synthetic Tumor Model” Alexander I. Evins, Alireza Shoakazemi, Justin C. Burrell, Rahul Kapoor, Philip E. Stieg, Antonio Bernardo Published J Neurol Surg B 2014; 75 - A036. Weill Cornell Medical Center.Conclusion. The application of 3D endoscopic transtubular anterior transpetrosal approaches in the treatment of medium and large petroclival meningiomas is both feasible and effective. Despite the demonstrated efficacy on those tumor types, resection of specific giant petroclival meningiomas still necessitate the use of traditional skull base microsurgical techniques. Further clinical studies are necessary to determine potential clinical complications |
Manufacturing
Vycor Medical has an executed agreement with Lacey Manufacturing Company of Bridgeport, Connecticut (“Lacey”) to provide a full range of engineering, contract manufacturing and logistical support for our products. Lacey manufactures 6 of the VBAS 12 different sizes. Lacey is a recognized leader in the medical contract manufacturing sector, providing vertically integrated full services. Lacey is U.S. Food and Drug Administration registered and meets ISO standards and certifications. Lacey and C&J (C&J discussed below) each manufacture 6 of the VBAS 12 different sizes.
Vycor Medical had an executed agreement with C&J Industries, Meadville PA (“C&J”) to manufacture the remaining 6 of the VBAS 12 different sizes; this agreement formally expired in 2014. Vycor Medical holds sufficient inventory for its foreseeable needs and is in discussions with selected qualified sub-contract manufacturers to replace C&J.
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Intellectual Property
Patents
Vycor Medical maintains a portfolio of patent protection on its methods and apparatus for its Brain and Spine products and technology in the form of issued patents and applications, both domestically and internationally, with a total of 8 granted and 8 pending patents.
Vycor Medical’s 8 granted patents are in the China (Brain), Hong Kong (Brain), Russia (Brain), Japan (Brain and Spine) and US (Brain (2) and Spine).
Vycor Medical’s 8 pending patents are in: Canada (Brain, Spine), Europe (Brain, Spine), India (Brain, Spine), Hong Kong (Spine), US (Navigation Arm).
Trademarks
VYCOR MEDICAL is a registered trademark.
Vycor Growth Strategy
Vycor Medical’s growth strategy is centered around:
1.Increased U.S. market penetration through broader hospital coverage and targeted direct physician marketing.
2.Provision of more Clinical and Scientific Data supporting not only the products superiority over the blade retractor but also to demonstrate the product’s potential for cost savings.
3.International Market Growth Vycor Medical’s strategy is to target those countries or regions internationally where it has patent protection and either has or can obtain regulatory approval. Focus markets are: larger European markets, Russia, China, Japan and India.
4. New Product Development New Product Development is targeted at both driving the use of its existing VBAS product range through ancillaries that will facilitate the product’s use and through new product extensions to broaden VBAS applicability to procedures currently not addressed by the existing product line, including an image-guided system fully compatible device.
NovaVision, Inc.
Introduction
NovaVision provides vision solutions targeted at a large and previously un-addressed market of people who have lost their sight as a result of Stroke or Traumatic Brain Injury (neurological brain damage). NovaVision addresses a significant target market, estimated at approximately $2 billion in the U.S. and over $13 billion globally.
NovaVision has a broad portfolio of therapies that both restore lost vision and address other neurologically-induced vision issues:
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Restoration of Vision: NovaVision’s VRT and Sight Science’s Neuro-Eye Therapy (NeET), which aim to improve visual sensitivity. VRT delivers a series of light stimuli along the border of the patient’s visual field loss. These programmed light sequences stimulate the border zone between the “seeing” and “blind” visual fields, repetitively challenging the visual cortex in the border zone with mulitple stimuli over the course of time. NeET targets deep within the blind area by repeated stimulation, allowing patients to detect objects within the blind field. VRT is the only 510(k) cleared therapy targeted at the restitution of this type of Vision loss.
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NeuroEyeCoach™: re-trains ability of a patient to move their eyes, re-integrate left and right vision and to make the most of their remaining visual field
NovaVision operates in the US through our wholly-owned subsidiary, NovaVision, Inc., in Germany through our wholly-owned subsidiary, NovaVision GmbH and in the UK through our wholly-owned subsidiary, Sight Science Limited.
VRT is based on NovaVision’s platform technology which management believes induces neuroplasticity, the brain’s natural ability to compensate for damaged neural connections that cause vision loss.
The diagnostic algorithm in the VRT product first maps the visual field and defines the areas of defect in patients suffering vision loss. The therapeutic algorithm in the VRT product is then specifically designed for each patient based upon the results of the diagnostic program and it repetitively challenges the visual cortex with thousands of stimuli over the course of time. VRT is generally performed over a four to six month period, twice a day for approximately an hour total, six days a week. The Company maintains very broad IP protection. NovaVision has collected significant amounts of data from clinical studies and peer reviewed papers that support the Company’s claims about the benefits of its VRT platform technology for vision restoration and other indications. NovaVision has received 510(k) clearance and CE Marking for VRT and NeET also has CE Marking (both Class I). NovaVision’s VRT is the only medical device aimed at the restoration of vision for neurologically induced vision loss which has FDA 510 (K) clearance to be marketed in the U.S.
NovaVision’s recently launched NeuroEyeCoach™ in the U.S. This is also a computer based program providing eye-movement training to those who have suffered a visual field loss as a result of neurological damage and is complementary to its existing VRT and NeET therapies.
The Market For NovaVision’s Therapies
The market for NovaVision’s therapies comprises those suffering from vision loss resulting from neurological trauma such as Stroke and Traumatic Brain Injury (TBI). The U.S. Centers for Disease Control (CDC) estimates there are 8 million Americans who have previously had a stroke incident, with 740,000 additional cases occurring annually. Additionally, approximately 5.3 million Americans live with long term deficits resulting from a TBI. Based on published reports of industry specialists, A. Pambakian and C. Kennard, it is estimated that approximately 16% of these patients experience a permanent visual field deficit, reducing mobility and other activities of daily living. NovaVision’s target market is this subset of patients who have suffered a permanent visual field deficit. Management estimates that NovaVision’s addressable target market is approximately 1.5 million people in the US,
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approximately 1.4 million people in Europe and approximately 6.4 million people throughout the rest of the world. The market potential is further increased by the introduction of NeuroEyeCoach which adds an additional 3.6m people in the US and Europe and 8m in the rest of the world
Competition
NovaVision provides restitution therapies for those suffering neurologically - induced vision loss, other therapies being substitution (optical aids such as prisms, which NovaVision does not really consider as competition) and compensation (eye movement training). Within compensation, competitors include RevitalVision, PositScience, Rehacom and NVT Systems. In restitution, competition has been reduced through NovaVision’s acquisition of Sight Science and really only leaves two small companies, Teltra and Visiontrainer in Germany. NovaVision believes that saccadic training (eye movement training) is complementary to its VRT and is in the advanced stage of developing its own saccadic therapy which will be called NeuroEyeCoach. This product will be sold as a standalone therapy or in the future as part of a NovaVision therapy regime with its VRT therapy.
Platform Technology
Although the exact mechanism by which VRT works has not been conclusively proven, management believes the light stimulation induces neuroplasticity, the brain’s natural ability to compensate for damaged neural connections that cause vision loss. Neuroplasticity has been discussed over the last 20 years or so and, as far back as 1990, Charles D. Gilbert and Torsten N Wiesel talked about the cortex not having a fixed functional architecture. The platform technology is comprised of proprietary algorithms that generate patient-specific therapies enabling NovaVision’s products to be used as both diagnostic and therapeutic tools. The platform technology generates light-based, or photic, stimulus programs. Patients are asked to focus on this fixation point, while at the same time a series of photic stimuli are delivered on the screen that are specific to the patient’s neurological requirements, and relayed directly to the brain using the eye as a conduit.
Management believes that it is these programmed light sequences that stimulate the border zone between the “seeing” and “blind” visual fields which induces neuroplasticity. While neuroplasticity for explaining VRT has never been conclusively demonstrated, a 2007 study by Randold S. Marshall, using MRI did demonstrate that VRT results in increased neural activity in the visual cortex. Irrespective of mechanism, patient studies and the Company’s ongoing experience point to significantly improved functional outcomes for patients who have done VRT treatment. This improvement manifests itself in greater confidence to move around and, according to data published by Romano JG et al (2008), an average shift of 4.9 degrees in the border between seeing and blind visual fields. The visual field is the portion of space surrounding an individual which is visible at any given time by that individual while their gaze is held stationary. To humans, the central 10° of visual field holds the greatest functional importance for focal and cognitive tasks.
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Clinical Data
VRT
NovaVision has accumulated significant amounts of clinical data as a result of company-sponsored trials as well as studies conducted by independent third parties, of which some of the key findings can be summarized as:
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| • | Approximately 70% of patients experience positive outcome reflected by an increase in their visual field and studies have indicated an average increase of 4.9 degrees (Mueller I, Mast H, Sabel BA (2007), Romano JG 2008). |
| • | Elapsed time since injury does not seem to impact VRT and NeET therapies success. Therefore, a massive historical backlog of patients can potentially be treated (Romano JG, Schulz P, Kenkel S, Todd DP (2008)). |
| • | Improvements are permanent and do not appear to be age or gender dependent. |
| • | Age at the onset of the injury is not a critical factor, allowing access to the therapy by both young and older adults with brain injuries (Romano JG, Schulz P, Kenkel S, Todd DP (2008)). |
NeuroEyeCoach
The PC-based treatment approach was originally developed by Prof. Zhl (1988, 1990) and has since been used with various modifications in 13 studies on a total of 556 patients with homonymous visual field loss and persistent visual disabilities.
The main outcome of saccadic training is a significant improvement in visual search performance accompanied by more efficient oculomotor strategies, and a reduction in visual disability as assessed by standardized questionnaires and behavioral measures. These include measures of improvement in navigation skills and object finding. The efficacy of this treatment approach for the improvement of visual overview and visual exploration is superior to practice with reading (Schuett et al., 2012), non-specific visual training (Roth et al., 2009), standard occupational therapy (Mödden et al., 2012) or counseling with regards to coping strategies (Zihl, 2011). Importantly, the treatment effect is not influenced by either the time since brain injury (Zihl, 2011) or the age of hemianopic patients (Schuett & Zihl, 2012) do not play a significant role in the treatment effect
Regulatory Matters
In the U.S., NovaVision’s products are regulated by the FDA; VRT is a Class U medical device subject to 510(k) clearances, and in Europe NovaVision has CE Marking for VRT and Sight Science for NeET, both as Class I devices. NovaVision received its 510(k) clearance for VRT specific to Stroke and TBI indications in 2003.
Intellectual Property
Patents
NovaVision maintains a portfolio of patent protection on its methods and apparatus in the form of issued patents and applications, both domestically and internationally, with a total of 31 granted and 8 pending patents (including Sight Science).
NovaVision’s 32 granted patents are in the U.S. (13), Canada (3), Europe (7), Australia (2), China (2), Hong Kong (1), Singapore (1), India (1) and Japan (2).
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NovaVision’s 7 pending patents are in Canada (2) and Europe (5).
Trademarks
NovaVision maintains a portfolio of registered trademarks for NOVAVISION, NOVAVISION VRT and VRT VISION RESTORATION THERAPY amongst others, both in the US and internationally.
Manufacturing and Operations
NovaVision is based at the Vycor Medical, Inc. group headquarters at a 10,000 square foot leased facility in Boca Raton, Florida. NovaVision purchases electronics and custom fabricated hardware from third party vendors and assembles and tests all of its medical devices within the facility. NovaVision has an FDA Establishment Registration and the Company does not have any long-term contractual obligations with its vendors to purchase products from them, nor are suppliers contractually obligated to sell products to NovaVision.
Sight Science
In January 2012 NovaVision acquired Sight Science, which was established in 2009 based on the research of Professor Arash Sahraie at the University of Aberdeen, and which provides an interactive computer-based therapy called Neuro-Eye Therapy (“NeET”), which patients administer at home. To date, over 150 patients have utilized NeET. Sight Science has 6 patents granted in the UK, France, Germany, Switzerland Singapore and Canada, and 1 patent pending in the U.S., all of which are included under the NovaVision Patents section above. Prof. Sahraie has conducted extensive research on blindsight and residual visual processing after brain injury, and is highly regarded in the field.
Both NovaVision’s VRT and Sight Science’s NeET work on the basis that repeated stimulation of the blind or transition areas by either bright patches of light (VRT) or the specific spatial patterns (NeET) which can lead to increases in sensitivity of the blind areas. Patients progress after VRT appears to be initiated at the blind and sighted borders whereas NeET results in changes deep within the blind field. Both therapies are able to demonstrate improvements in both visual sensitivity and activities of daily living. The Company believes that these therapies are complementary.
NovaVision’s Growth Strategy
NovaVision’s strategy is centered around driving the adoption of its therapies, through:
1. Reduced Cost and Greater scalability;enabled by a completely new therapy delivery mechanism moving away from hardware based to an asset light software solution allowing significant cost savings, which will be passed onto the patients. This different delivery mechanism and significant business process streamlining of currently largely manual tasks will enable NovaVision to provide an affordable and scalable therapy and thus service much a larger number of patients.
2. Introduction of a new therapy moduleinto the patient’s overall visual rehabilitation therapy regime that will provide additional functional benefits to patients who undergo the regime; this new therapy module, NeuroEyeCoach, is a new saccadic training program which is highly complementary to VRT and will ensure that more patients will receive greater benefit from the overall NovaVision therapy regime.
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3. New Potential Licensing model targeted at Rehabilitation Centers. Management is also in the advanced stages of exploring a leasing model under which NovaVision would lease a diagnostic-only VRT device to a rehabilitation center for a monthly fee. The center, be it in-patient or out-patient, would be able to efficiently screen its patients on their own for visual field deficits. NovaVision would receive leasing fees and benefit from incremental patient flow from referrals when they leave the center.
3. Other Matters
Product Liability Insurance
We presently have Product Liability insurance for both Vycor Medical and NovaVision.
Government Regulations
We are committed to an integrated total quality management system. We believe that we have completed the necessary procedures and Vycor Medical is certified to the ISO standards expected of medical device manufacturers as follows:
ISO 13485:2003 Medical Devices — Quality Management Systems
The certification of a quality management system to ISO 13485, specifically for medical devices, is advantageous and often essential for medical companies to export their products to the global market, as well as maintain and enter into certain agreements and business growth opportunities within the U.S. For example, Canada requires that medical device manufacturers marketing their products in Canada must have a quality system certified to ISO 13485:2003. The certification is also required for placement of branded devices into the European Union.
Vycor Medical has the following certification/licensing:
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Fully Quality Assurance System Directive 93/42/EEC for Medical Devices, Annex II (3)
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EC Design-Examination Certificate Directive 93/42/EEC for Medical Devices, Annex II (4)
·
ISO 13485.2003
Continuing Regulatory Requirements
Vycor Medical’s products have been classified as Class II products by the FDA and cleared for marketing through the 510(k) process. NovaVision’s VRT product has been cleared as a Class U product through the 510(k) while its HMP is registered as an exempt Class 1 device.
After a device is placed on the market, numerous regulatory requirements apply. These include:
| |
• | quality system regulation, which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures during the manufacturing process; |
• | labeling regulations, which prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; and |
• | medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur. |
Failure to comply with applicable regulatory requirements, and failure to respond to requested corrective actions on an ongoing basis, can result in enforcement action by the FDA.
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Medical device laws are also in effect in many of the countries outside of the United States in which we do business. These laws range from comprehensive device approval and quality system requirements for some or all of our medical device products to simple requests for product data or certifications. The number and scope of these requirements are increasing. In June 1998, the European Union Medical Device Directive became effective, and all medical devices must meet the Medical Device Directive standards and receive CE mark certification. CE mark certification involves a comprehensive Quality System program, and submission of data on a product to the Notified Body in Europe.
Vycor Medical has obtained the CE marking approval to allow for distribution of its VBAS products in Europe as a Class III device and has received HPB licensing approval for distribution in Canada. NovaVison’s VRT and Sight Science’s NeET have CE mark registrations as Class I devices in Europe. HMP does not have European regulatory clearance at this time.
Employees
We currently have 14 employees.
Website. The Company operates websites at www.vycormedical.com and www.novavision.com.
Comparison of the Three Months Ended March 31, 2014 to the Three Months Ended March 31, 2013
Revenue and Gross Margin:
| | | 2014 | | 2013 | | %Change |
| Revenue: | | | | | | | | | | | | |
| Vycor Medical | | $ | 263,711 | | | $ | 130,665 | | | | 102 | % |
| NovaVision | | | 94,411 | | | | 101,009 | | | | (7 | )% |
| Total Revenue | | $ | 358,122 | | | $ | 231,674 | | | | 55 | % |
| | | | | | | | | | | | | |
| Gross Profit | | | | | | | | | | | | |
| Vycor Medical | | $ | 233,408 | | | $ | 116,279 | | | | 101 | % |
| NovaVision | | | 81,757 | | | | 85,377 | | | | (4 | )% |
| Total Gross Profit | | $ | 315,165 | | | $ | 201,656 | | | | 56 | % |
Vycor Medical recorded revenue of $263,711 from the sale of its products in for the three months ended March 31, 2014, an increase of $133,046, or 102%, over the same period in 2013, reflecting increased activity in the US and internationally. Gross margin of 89% was achieved in both 2014 and 2013.
NovaVision recorded revenues of $94,411 for the three months ended March 31, 2014, a decrease of $6,598 over the same period in 2013, and gross margin of 87%, compared to 85% for the same period in 2013. NovaVision’s therapy suite has been undergoing significant development to: substantially reduce costs of delivery; as a result drive down the price of VRT therapy to make it affordable; streamline business processes to make the therapy scalable; add a new saccadic program to broaden the range of benefits to patients from the therapy suite. As a result the Company is not intensively marketing its
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existing VRT program model and this, together with NovaVision’s intense focus on development particularly, impacted revenues.
Research and Development Expense:
Research and development (“R&D”) expenses were $15,356 for the three months ended March 31, 2014, as compared to $31,350 for the same period in 2013. The expense reduction partly reflects the capitalization of costs related to NeuroEyeCoach and VRT. Capitalized software development costs for the three months ended March 31, 2014 and 2013 were $29,633 and $0, respectively. During the period the Company’s VRT 7.0 program completed the preliminary project stage, following which there was a capitalization of $8,171 of software development costs. Additional costs of $21,463 were capitalized for the Company’s NeuroEyeCoach program prior to being brought into service in March 2014 with a total capitalized value of $119,106.
General and Administrative Expenses:
General and administrative expenses increased by $514,594 to $1,198,252 for the three months endedMarch 31, 2014 from $683,658 for the same period in 2013. Included within 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 endedMarch 31, 2014 was $168,655, an increase of $80,530 over $88,125 in 2013. Also included within General and Administrative Expenses are Sales Commissions, which increased by $18,718 to $46,383. The remaining General and Administrative expenses increased by $415,346 from $567,868 to $983,214, of which the Offering costs comprised $444,539.
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 |
| Offering costs | | $ | 444,539 | | | $ | — | |
| Investor relations costs | | | (790 | ) | | | 26,532 | |
| Board, financial and scientific advisory | | | (131,167 | ) | | | 53,998 | |
| Legal, professional and other consulting | | | 49,338 | | | | — | |
| Sales, marketing and travel | | | 19,075 | | | | — | |
| Payroll | | | 16,260 | | | | — | |
| Other | | | 18,091 | | | | — | |
| Total change | | $ | 415,346 | | | $ | 80,530 | |
Interest Expense:
Interest comprises expense on the Company’s debt and insurance policy financing. Related Party Interest expense for the three months ended March 31, 2014 increased by $4,862to $33,829 from $28,867for 2013. Other Interest expense for 2014 increased by $368to $14,294 from $13,926for 2013.
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Liquidity and Capital Resources
Liquidity
The following table shows cash flow and liquidity data for the periods ended March 31, 2014 and December 31, 2013:
| | | March 31, 2014 | | December 31, 2013 | | $ Change |
| Cash | | $ | 2,707,089 | | | $ | 31,303 | | | $ | 2,675,786 | |
| Accounts receivable, inventory and other current assets | | $ | 755,428 | | | $ | 627,649 | | | $ | 127,779 | |
| Total current liabilities | | $ | (2,710,183 | ) | | $ | (5,430,493 | ) | | $ | 2,720,310 | |
| Working capital/(deficit), excluding derivative liability | | $ | 2,263,367 | | | $ | (4,771,541 | ) | | $ | 7,034,908 | |
| Cash provided by financing activities | | $ | 3,845,223 | | | $ | 1,089,071 | | | $ | 2,756,152 | |
In January to March 2014 the Company held four separate closings (the “Closings”) of the sale of $4,070,140 in Units (the “Units”) comprising shares of common stock (“Common Stock”) and Series A and Series B Warrants (collectively, the “Warrants”) to accredited investors (the “Investors”) in a continuing offering (the “Offering”) which allowed for maximum proceeds of $5,000,000. These Closings raised net proceeds, after expenses, of $3,638,651. As of March 31, 2014 we had $2,707,089 cash, working capital of $2,263,367 (before taking into account the derivative warrant liability of $1,511,033) and an accumulated deficit of $17,820,415. Total Stockholders’ deficit at March 31, 2014 was $247,332. Total current debt at March 2014, included in working capital above, was $328,338. Long term debt at March 2014 was $2,398,487.
Uses of estimates in the preparation of financial statements
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the 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 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.
Research and Development
The Company expenses all research and development costs as incurred.
Cash and cash equivalents
The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. Cash balances may at times exceed the FDIC insured limits. Cash also includes a US investment account in a money market backed by government securities up to 105% of the account balance. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Included
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within cash are deposits paid by patients, held by the Company until the patient returns the VRT device at the end of therapy. At March 31, 2014 and December 31, 2013 patient deposits amounted to $27,914 and $25,467, respectively, and are reserved against in Other Current Liabilities
Property and equipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.
Income taxes
The Company accounts for income taxes in accordance with the current authoritative guidance. Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowances are established, when it is more likely than not that such benefit will not be realized.
Patents and Other Intangible Assets
The Company capitalizes legal and related costs associated with the establishment and enhancement of patents for its products once patents have been applied for. Costs associated with the development of the patented item or processes are charged to research and development costs and expensed as incurred. The capitalized costs are amortized over the life of the patent. The Company reviews intangible assets on an annual in accordance with the authoritative guidance. Trademarks have an indefinite life and are also reviewed annually by management for impairment in accordance with the authoritative guidance.
Revenue Recognition
Vycor Medical generates revenue from the sale of its surgical access system to hospitals and other medical professionals. Vycor Medical records revenue when a completed contract for the sale exists, the product is invoiced and shipped to the customer. Vycor Medical does provide for product returns or warranty costs.
NovaVision generates revenues from various programs, therapy services and other sources such as government grants. Therapy services revenues represent fees from NovaVision’s vision restoration therapy software, diagnostic software, medical devices, clinic set up and training fees, and the professional and support services associated with the therapy. NovaVision recognizes revenue for providing the vision restoration therapy as the Company’s work effort is expended. NovaVision provides vision restoration therapy directly to patients. The typical vision restoration therapy consists of six modules, performed on average over 6 months in the U.S. and 10 months in Germany. A patient contract comprise set-up fees and monthly therapy fees. Set-up fees are recognized at the outset of the contract and therapy revenue is recognized ratably over the therapy period. Patient therapy is restricted to being completed by a patient within a specified time frame.
Deferred revenue results from patients paying for the therapy in advance of receiving the therapy.
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Accounts Receivable and Allowance for Doubtful Accounts Receivable
We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We extend credit to our customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and maintain an allowance for potential bad debts if required. We determine whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also record a general allowance as necessary. Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate that we should abandon such efforts.
Inventory
Inventories are stated at the lower of cost, determined using the weighted average cost method, and net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product.
If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company's consolidated statements of operations.
Foreign Currency
The Euro is the local currency of the country in which NovaVision GmbH conducts its operations and is considered the functional currency of this entity; the GB Pound is the local currency of the country in which Sight Science Limited conducts its operations and is considered the functional currency of this entity. All balance sheet amounts are translated to U.S. dollars using the U.S. exchange rate at the balance sheet date except for the equity section which is translated at historical rates. Operating statement amounts are translated using an average exchange rate for the period of operations. Foreign currency translation effects are accumulated as part of the accumulated other comprehensive income (loss) and included in shareholders’ (deficit) in the accompanying Consolidated Balance Sheet.
Educational marketing and advertising expenses
The Company may incur costs for the education of customers on the uses and benefits of its products. The Company will include education, marketing and advertising expense as a component of selling, general and administrative costs as such costs are incurred.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
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ITEM 4. CONTROLS AND PROCEDURES
(a)
Disclosure Controls and Procedures
We are required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer (also our principal executive officer) and our chief financial officer (also our principal financial and accounting officer) to allow for timely decisions regarding required disclosure.
The Company’s management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, our CEO and our CFO have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective as of that date to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that information required to be disclosed by the Company in the reports its files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its CEO and its CFO, as appropriate, to allow timely decisions regarding required disclosure. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
(b)
Changes in Internal Controls
There have not been any changes in the Company's internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.
The Company’s management, including the Company’s CEO and CFO, does not expect that the Company’s internal control over financial reporting will prevent all errors and all fraud. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.
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PART II
ITEM 1. LEGAL PROCEEDINGS
We are subject from time to time to litigation, claims and suits arising in the ordinary course of business. As of May 12, 2014, 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
On January 2, 2014, the Company completed the initial closing of an offering (the “Offering”) of Units comprising shares of common stock (“Common Stock”) (collectively, the “Shares” and individually, a “Share”) and Series A and Series B Warrants (collectively, the “Warrants”) (collectively, the “Units”) to accredited investors (the “Investors”) in a private placement. The initial closing comprised the sale of $1,276,900 in the Units), which were issued pursuant to separate Securities Purchase Agreements between the Company and each of the Investors. In the aggregate, the Company issued 709,398 shares of Common Stock, Series A Warrants to purchase an aggregate of 354,704 shares of Common Stock and Series B Warrants to purchase an aggregate of 354,704 shares of Common Stock.
Each Unit was priced at $1.80 and comprised of one share of Common Stock, a series A warrant (the “Series A Warrants”) and a series B warrant (the “Series B Warrants”). The Series A Warrants were detachable and were exercisable over a three-year term and were issued with respect to the purchase of a number of shares of Common Stock equal to 50% of the number of Shares purchased by such investor at an exercise price per share of $2.05. The Series B Warrants were detachable and were exercisable over a three-year term and were issued with respect to the purchase of a number of shares of Common Stock equal to 50% of the number of Shares purchased by such investor at an exercise price per share of $3.08.
The Warrants are subject to adjustment for stock splits, stock dividends or recapitalizations.
Also on January 2, 2014, Fountainhead exchanged an aggregate of $1,426,542 of consulting fees owed to it by the Company for the Units issued in the Offering. In the aggregate, the Company issued to Fountainhead 792,523 shares of Common Stock, Series A Warrants to purchase an aggregate of 386,262 shares of Common Stock and Series B Warrants to purchase an aggregate of 386,262 shares of Common Stock.
On January 31, 2014, the Company completed the sale of an additional $1,784,200 in the Units, which were issued pursuant to separate Securities Purchase Agreements between the Company and each of the Investors. In the aggregate, the Company issued 991,232 shares of Common Stock, Series A Warrants to purchase an aggregate of 495,621 shares of Common Stock and Series B Warrants to purchase an aggregate of 495,621 shares of Common Stock.
Based on the subscription terms applicable to the holders of the Company’s previously-issued Series C Convertible Preferred Stock, such holders were given the option of exchanging their investment in such
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unconverted Series C Convertible Preferred Stock and the related warrants into the securities which are the subject of the Offering, based on the amount of their investment in the Series C Convertible Preferred Stock and the related warrants. As of February 24, 2014, the holders of 15.15 shares of Series C Convertible Preferred Stock (representing an aggregate investment of $757,700) exchanged their Series C Convertible Preferred Stock and related warrants for an aggregate of 420,838 shares of Common Stock, Series A Warrants to purchase an aggregate of 210,419 shares of Common Stock and Series B Warrants to purchase an aggregate of 210,419 shares of Common Stock. As of this date, only one share of Series C Convertible Preferred Stock remains outstanding, representing an investment of $50,000.
On February 28, 2014, the Company completed the sale of an additional $27,000 in the Units, which were issued pursuant to a Securities Purchase Agreement between the Company and the Investor. In the aggregate, the Company issued 15,000 shares of Common Stock, Series A Warrants to purchase an aggregate of 7,500 shares of Common Stock and Series B Warrants to purchase an aggregate of 7,500 shares of Common Stock.
On March 11, 2014 the Company entered into an Amendment Agreement with GSS. Under the Amendment Agreement, the Company agreed to issue 30,000 shares of Common Stock (valued at $66,000) on the date of the Amendment Agreement in respect of the period January to June 2014, rather than 7,500 shares per month under the original agreement.
On March 31, 2014, the Company completed the sale of an additional $982,040 in the Units, which were issued pursuant to a Securities Purchase Agreement between the Company and the Investors. In the aggregate, the Company issued 545,584 shares of Common Stock, Series A Warrants to purchase an aggregate of 272,796 shares of Common Stock and Series B Warrants to purchase an aggregate of 272,796 shares of Common Stock.
During January to March 2014, the Company issued 2,294 shares of Common Stock (valued at $5,000) to Steven Girgenti, 2,222 shares of Common Stock (valued at $5,000) to Oscar Bronsther and 2,222 shares of Common Stock (valued at $5,000) to Lowell Rush in consideration for services provided to the Board of Directors; and 710 shares of Common Stock (valued at $1,563) to Alvaro Pascual-Leone, 1,420 shares of Common Stock (valued at $3,125) to Josef Zihl and 694 shares of Common Stock (valued at $1,563) to each of Jason Barton and Jose Romano in respect of their roles as members of the NovaVision, Inc. Scientific Advisory Board.
During January 2014, the Company issued 3,000 and 2,000 shares of Common Stock (valued at $5,400 and $3,600) to Del Mar Consulting Group, LLC and Alex Partners respectively under the terms of their advisory amendment agreements.
During March 2014, in accordance with the terms of an investor relations advisory agreement, the Company issued 2,500 shares of Common Stock (valued at $4,700) to J and M Group, LLC.
On March 31 2014, in accordance with the terms the Consulting Agreement, the Company issued 6,276 shares of Common Stock (valued at $15,000) to Fountainhead.
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During April to May 2014, the Company issued 2,222 shares of Common Stock (valued at $5,000) to Steven Girgenti, in consideration for services provided to the Board of Directors; and 727 and 1,453 shares of Common Stock respectively (valued at $1,563 and $3,125 respectively) to Alvaro Pascual-Leone and Josef Zihl in respect of their roles as members of the NovaVision, Inc. Scientific Advisory Board.
On April 25, 2014, the Company completed the sale of an additional $929,860 in Units in a final close of the Offering, which were issued pursuant to a Securities Purchase Agreement between the Company and the Investors. In the aggregate, the Company issued 516,594 shares of Common Stock, Series A Warrants to purchase an aggregate of 258,298 shares of Common Stock and Series B Warrants to purchase an aggregate of 258,298 shares of Common Stock.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
Subsequent events
Share Issuance
During April to May 2014, the Company issued 2,222 shares of Common Stock (valued at $5,000) to Steven Girgenti, in consideration for services provided to the Board of Directors; and 727 and 1,453 shares of Common Stock respectively (valued at $1,563 and $3,125 respectively) to Alvaro Pascual-Leone and Josef Zihl in respect of their roles as members of the NovaVision, Inc. Scientific Advisory Board.
On April 25, 2014, the Company completed the sale of an additional $929,860 in Units in a final close of the Offering, which were issued pursuant to a Securities Purchase Agreement between the Company and the Investors. In the aggregate, the Company issued 516,594 shares of Common Stock, Series A Warrants to purchase an aggregate of 258,298 shares of Common Stock and Series B Warrants to purchase an aggregate of 258,298 shares of Common Stock.
Amendment to Offering Agreements and removal of anti-dilution
During April and May 2014, the Company requested waivers of certain anti-dilution provisions of the Stock Purchase Agreement and Series A Warrant Agreements (“Waivers”) which were executed with investors in the Company’s $5,000,000 private placement offering which was completed on April 25, 2014. Under the terms of the Waivers, the investors agreed to waive their anti-dilution rights (which arose in the event the Company sold securities at a price below $2.05 within one year of the date that the initial Registration Statement has been declared effective by the SEC) in consideration of the Company’s agreement not to sell any securities at a price below $2.05 within such one-year period. The Waivers become effective as to all the Common Stock issued in the offering once the Company receives the agreement of the holders of eighty percent (80%) of the Common Stock issued in the offering and the holders of eighty percent (80%) of the Common Stock issued in each closing. As of May 14, 2014, the Company had received waivers from the holders of 93.9 percent of the shares issued in the offering, and over 80 percent for each closing, and so the Waivers have been declared effective on 100 percent of the Common Stock issued in the Offering. The Company is continuing to seek Waivers from the remaining investors for their Common Stock and Series A Warrants. Waivers have also been received in respect of the Placement Agent Warrants and the Series A Warrants held by Fountainhead.
As stated in Note 2 (Warrant Derivative Liability) and Note 8 of the Financial Statements, because the Warrants carry certain anti-dilution protection for the holders, the Company has recorded the Series A Warrants and Placement Agent Warrants as a liability, in accordance with the guidance contained in ASC 815-40-15-7D. Following the declaration of effectiveness of the Waivers, the Company will no longer be required to record any derivative liability on account of the Series A Warrants and Placement Agent warrants, with respect of the actual number of Warrants for which the Waivers have been executed.
ITEM 6. EXHIBITS
Index to Exhibits
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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 November 14, 2013.
| | |
| |
| VYCOR MEDICAL, INC. |
| | |
| By: | /s/Peter C. Zachariou |
| | Peter C. Zachariou |
| | President and |
| | Director (Principal Executive Officer) |
| | |
| By: | /s/Adrian C. Liddell |
| | Adrian C. Liddell |
| | Chairman of the Board and |
| | Director (Principal Financial Officer) |
| | |
| | |
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