Vycor Medical Inc. Reports 41% Year-to-Date Revenue Growth
BOCA RATON, FL--(Marketwired - August 12, 2014) - Vycor Medical, Inc. ("Vycor") (OTCQB: VYCO), today announced financial results for the second quarter and first six months of 2014.
Company Highlights
- ViewSite Brain Access System (VBAS) continues to gain traction through product approval in five new U.S. hospitals during the second quarter. VBAS has been approved in 17 hospitals year to date, and is approved in more than 170 hospitals in the U.S. with additional hospitals in the approval process.
- Internationally, Vycor Medical entered into evaluation agreements with distributors in Brazil and India during the second quarter, in addition to France and Russia during the first quarter, and is in advanced discussions with a distributor in Sri Lanka.
- Weill Cornell Medical Center has informed the Company that two peer review papers which further evidence the clinical superiority of the VBAS device have been accepted for publication, and the Company continues to focus on gathering more clinical data to drive VBAS adoption.
- Completed the development of new VBAS prototypes specifically designed to house the pointer utilized in image-guided systems. The pointer will be firmly held in place in the introducer through a novel approach while the working channel will remain unchanged. The Company has commenced the testing of these devices.
- Entered into manufacturing agreement with new Asian-based manufacturer for the production of two new smaller VBAS devices that will facilitate endoscopic work within the ventricles including the placement of catheters, with particular relevance for the pediatric neurosurgical market. Vycor has initiated the manufacturing build and validation program and commenced the regulatory process.
- Developed and soft-launched two new professional model variations of its NeuroEyeCoach™ eye-training program: the Rehab Center model for centers to treat patients while in their care; and the Physician Model which enables physicians to commence treating patients who will then complete the therapy at home, supported by NovaVision staff.
- Commenced a three-center patient trial for NeuroEyeCoach in Germany, Austria and Italy, which will gather pre- and post- NeuroEyeCoach clinical data for publication.
- Closed its Offering at the maximum gross amount of $5 million, including exercising an overallotment due to investor demand, and subsequent to the quarter end completed a debt exchange which removes substantially all of the debt from the Company's balance sheet and replaces it with $2.4 million of equity, thereby considerably strengthening the balance sheet of the Company. The Company is now well capitalized to execute on its clearly articulated strategic plan for both divisions.
Peter Zachariou, Chief Executive Officer of Vycor, commented: "These results demonstrate that Vycor continues to build value and momentum with its existing products, with revenues up 27% overall compared to 2013 and up 39% up in the Vycor VBAS business. Clearly, Vycor is executing on its development plan and I am increasingly encouraged by our progress and the opportunities in front of us. We have moved into manufacturing implementation of our new small VBAS units and completed prototyping of the new IGS-compatible devices. We have expanded the NeuroEyeCoach suite and our VRT development is nearing completion. With the $5 million Offering completed in the second quarter and the $2.4 million debt exchange, we are well capitalized and in a position to take advantage of strategic opportunities as they arise and to continue to build shareholder value through the execution of our clearly articulated growth strategy."
Financial Results
For the second quarter of 2014, the Company reported revenue of $298,540, a 27% increase over the same period in 2013. The Vycor Medical division (VBAS) generated revenue of $203,191, a 39% increase compared to the same period in 2013, reflecting growth both in the US and internationally. Gross profit for 2014 was $262,773, a 27% increase over 2013, a margin of 88% for both periods.
For the first six months of 2014, the Company reported revenue of $656,662, a 41% increase over the same period in 2013. The Vycor Medical division (VBAS) generated revenue of $466,902, a 69% increase compared to the same period in 2013, reflecting growth both in the US and internationally. Gross profit for 2014 was $577,938, a 41% increase over 2013, a margin of 88% for both periods.
Three months ended Six months ended
June 30, % June 30, %
------------------- -------------------
2014 2013 change 2014 2013 change
--------- --------- ------- --------- --------- -------
Revenue
Vycor $ 203,191 $ 146,358 39% $ 466,902 $ 277,024 69%
NovaVision 95,349 88,596 8% 189,760 189,604 0%
--------- --------- ------- --------- --------- -------
Total $ 298,540 $ 234,954 27% $ 656,662 $ 466,628 41%
--------- --------- ------- --------- --------- -------
Gross Profit
Vycor $ 177,717 $ 135,152 31% $ 411,125 $ 251,431 64%
NovaVision 85,056 71,908 18% 166,813 157,285 6%
--------- --------- ------- --------- --------- -------
Total $ 262,773 $ 207,060 27% $ 577,938 $ 408,716 41%
--------- --------- ------- --------- --------- -------
On a non-GAAP basis (see below), the Company reported Operating Expenses for the second quarter of 2014 of $679,528 compared to $672,116 in 2013, a non-GAAP net operating loss for the quarter of $416,755 compared to $465,056 in 2013, a reduction of 10%, and a non-GAAP net comprehensive loss of $462,695 compared to $511,995 in 2013.
For the six months to June 30 the Company reported non-GAAP Operating Expenses of $1,315,421 compared to $1,326,652 in 2013, a non-GAAP net operating loss of $737,483 compared to $917,936 in 2013, a reduction of 20%, and a non-GAAP net comprehensive loss of $831,546 compared to $1,007,767 in 2013.
Cash and cash equivalents were $2,840,052 at June 30, 2014. Non-GAAP Shareholder's Equity, before taking into account the debt exchange on August 5 discussed below, was $1,523,941.
Debt Exchange to Increase Shareholders' Equity
On August 5, 2014 Fountainhead, along with certain other related and non-related parties (together, the "Fountainhead Parties"), exchanged all of their $2,355,587 of debt into an equivalent amount of preferred equity in the company.
This equity exchange will result in Vycor's Shareholders' Equity being increased by $2,355,587, equivalent to the current debt. Following on from the closing in April of a $5 million Common Stock and Warrants Offering at $1.80 per share, this exchange is a significant milestone towards Vycor's objective of seeking an up-listing on a national stock exchange. This exchange is in addition to the conversion by Fountainhead in January 2014 of $1,426,542 of accrued consulting fees into an investment in the Offering, over and above the $5 million raised from investors.
On a pro forma basis reflecting the debt exchange, Shareholders' Equity at June 30, 2014 was $3,842,376 ($3,879,528 on a Non-GAAP basis).
Reconciliation of Non-GAAP Information and Pro Forma Balance Sheet
Non-GAAP Reconciliation
Management uses certain non-GAAP financial measures (including non-GAAP operating expenses and non-GAAP net loss and loss per share), which exclude non-cash amortization of acquired intangible assets, non-cash stock-based, one-time Offering costs and the change in value of derivative warrant liability. Management does not consider these costs in evaluating the continuing operations of the Company. Therefore, management calculates the non-GAAP financial measures provided in this earnings release excluding these costs and uses these non-GAAP financial measures to enable it to analyze further, and more consistently, the period-to-period financial performance of its core business operations. Management believes that providing investors with these non-GAAP measures gives them additional important information to enable them to assess, in the same way management assesses, the Company's current and future continuing operations. There are limitations in using these non-GAAP financial measures because they are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for GAAP financial measures. Investors and potential investors should consider non-GAAP financial measures only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP. Set forth below are reconciliations of the non-GAAP financial measures to the comparable GAAP financial measures.
On a GAAP basis the Company reported Operating Expenses for the second quarter of 2014 of $966,381, a net operating loss of $703,608 and a net comprehensive loss of $1,278,385, or $0.12 per share. For the first six months the Company reported Operating Expenses of $2,274,084, a net operating loss of $1,696,146 and a net comprehensive loss of $2,066,395, or $0.21 per share.
Vycor's GAAP operating costs for the second quarter and first six months of 2014 include non-cash amortization of acquired intangible assets ($58,617 and $117,234 respectively), non-cash stock compensation charges ($91,073 and $259,727 respectively), and one-time offering costs ($137,163 and $581,702 respectively). Vycor's other income includes change in the value of warrant derivative liability ($523,277 and $269,993 respectively) and Vycor's Comprehensive Loss includes foreign currency translation adjustment ($5,560 and $6,193 respectively). The Company is providing additional non-GAAP financial measures that exclude these charges and expenses, and reconciliation of GAAP to non-GAAP results is provided in the tables included in this release.
On a non-GAAP basis, taking into account these adjustments, Operating Expenses for the second quarter of 2014 were $679,528, non-GAAP net operating loss was $416,755 and non-GAAP net comprehensive loss was $462,695, or $0.04 per share. For the first six months non-GAAP Operating Expenses were $1,315,421, non-GAAP net operating loss was $737,483 and non-GAAP net comprehensive loss was $831,546, or $0.08 per share.
On a GAAP basis the Company reported Shareholders' Equity of $1,486,789. This includes the recording of a derivative liability related to the issuance of Series A Warrants in connection with the Offering of $37,152. The Company is providing additional non-GAAP financial measures that exclude this derivative liability, and reconciliation of GAAP to non-GAAP results is provided in the tables included in this release. On a non-GAAP basis, taking into account this adjustment, the Company reported Shareholders' Equity of $1,523,941.
Pro Forma Balance Sheet
The pro forma balance sheet at June 30, 2014 reflects the exchange of the Fountainhead Parties debt of $2,355,837 into Series D preferred shares and the associated issuance of warrants, as if it had occurred at June 30, 2014. Under ASC 405 and 470, the exchange is accounted for as an extinguishment of debt. The debt is extinguished from the balance sheet at carrying value and the preferred shares and warrants issued in exchange are valued and recorded at fair value. The total theoretical value of the new securities is approximately $3,000,000 compared to the carrying value of the debt of $2,355,587. This results in a theoretical cost of debt extinguishment of approximately $645,000. The net increase in Shareholders' Equity on a pro forma basis is $2,355,837.
VYCOR MEDICAL, INC.
Consolidated Statements of Comprehensive Loss
(unaudited)
For the three months ended For the six months ended
June 30, June 30,
-------------------------- ------------------------
2014 2013 2014 2013
------------ ------------ ----------- -----------
Revenue $ 298,540 $ 234,954 $ 656,662 $ 466,628
Cost of Goods Sold 35,767 27,894 78,724 57,912
------------ ------------ ----------- -----------
Gross Profit 262,773 207,060 577,938 408,716
Operating expenses:
Research and
development 37,395 21,285 52,751 52,635
Depreciation and
Amortization 98,997 89,276 193,093 175,546
General and
administrative 829,989 706,111 2,028,240 1,389,769
------------ ------------ ----------- -----------
Total Operating
expenses 966,381 816,672 2,274,084 1,617,950
------------ ------------ ----------- -----------
Operating loss (703,608) (609,612) (1,696,146) (1,209,234)
Other expense
Interest expense -
Related Party (33,613) (32,811) (67,442) (61,778)
Interest expense -
Other (12,327) (14,128) (26,621) (28,054)
Change in fair
value derivative
liability (523,277) - (269,993) -
------------ ------------ ----------- -----------
Total Other
expense (569,217) (46,939) (364,056) (89,832)
------------ ------------ ----------- -----------
Net Loss $ (1,272,825) $ (656,551) $(2,060,202) $(1,299,066)
Comprehensive Income
(Loss)
Foreign Currency
Translation
Adjustment (5,560) 8,725 (6,193) (11,432)
------------ ------------ ----------- -----------
Net Comprehensive Loss
$ (1,278,385) $ (647,826) $(2,066,395) $(1,310,498)
============ ============ =========== ===========
Loss Per Share
Basic and diluted $ (0.12) $ (0.10) $ (0.21) $ (0.21)
============ ============ =========== ===========
Weighted Average
Number of Shares
Outstanding 10,570,609 6,264,362 9,787,198 6,107,053
============ ============ =========== ===========
VYCOR MEDICAL, INC.
Non-GAAP Reconciliation of Operating Loss and Net Comprehensive Loss
Three months ended June 30, Six months ended June 30,
--------------------------- --------------------------
2014 2013 2014 2013
------------- ------------ ------------ ------------
GAAP Operating
Expenses $ 966,381 $ 816,672 $ 2,274,084 $ 1,617,950
Non-cash
amortization of
acquired
intangible
assets (1) (58,617) (58,617) (117,234) (117,234)
Non-cash stock-
based
compensation (2) (91,073) (85,939) (259,727) (174,064)
Offering Costs
(3) (137,163) - (581,702) -
------------- ------------ ------------ ------------
Total Non-GAAP
Operating
Expense
Adjustments (286,853) (144,556) (958,663) (291,298)
------------- ------------ ------------ ------------
Non-GAAP Operating
Expenses $ 679,528 $ 672,116 $ 1,315,421 $ 1,326,652
============= ============ ============ ============
GAAP Operating Loss $ (703,608) $ (609,612) $ (1,696,146) $ (1,209,234)
Non-GAAP
Operating
Expense
Adjustments, as
above 286,853 144,556 958,663 291,298
------------- ------------ ------------ ------------
Non-GAAP Operating
Loss $ (416,755) $ (465,056) $ (737,483) $ (917,936)
============= ============ ============ ============
GAAP Net
Comprehensive Loss $ (1,278,385) $ (647,826) $ (2,066,395) $ (1,310,498)
Non-GAAP
Operating
Expense
Adjustments, as
above 286,853 144,556 958,663 291,298
Change in value
of derivative
liability (4) 523,277 - 269,993 -
Foreign currency
translation
adjustment (5) 5,560 (8,725) 6,193 11,433
------------- ------------ ------------ ------------
Non-GAAP Net
Comprehensive Loss $ (462,695) $ (511,995) $ (831,546) $ (1,007,767)
============= ============ ============ ============
Non-GAAP Loss Per
Share
Basic and diluted $ (0.04) $ (0.08) $ (0.08) $ (0.17)
============= ============ ============ ============
Weighted Average
Number of Shares
Outstanding 10,570,609 6,264,362 9,787,198 6,107,053
============= ============ ============ ============
Non-GAAP Reconciliation of Shareholder's Equity
June 30, 2014
----------------
GAAP Additional Paid-in Capital $ 20,624,282
Derivative Liability: Warrants (4) 37,152
----------------
Non-GAAP Additional Paid-in Capital $ 20,661,434
================
GAAP Shareholder's Equity $ 1,486,789
Derivative Liability: Warrants, as above 37,152
----------------
Non-GAAP Shareholder's Equity $ 1,523,941
================
(1) Non-Cash Amortization on acquired intangible assets.These are non-cash
charges related to acquired intangible assets such patents and software that
can be impacted by the timing and magnitude of acquisitions. We consider our
operating results without these charges when evaluating our ongoing costs
and performance, and therefore exclude such charges when presenting non-GAAP
financial measures.
(2) Non-Cash Stock-based compensation expense consists of expense relating
to stock-based awards issued to employees, outside directors and non
employees including stock options, restricted common stock, and warrants.
Because of varying available valuation methodologies, subjective assumptions
and the fact that these amounts vary in size and timing, we believe that the
exclusion of stock-based compensation expense allows for a more accurate
comparison of our financial results to previous periods. In addition, we
believe it is useful to investors to understand the specific impact of
stock-based compensation expenses on our operating results.
(3) Offering Costs comprises the broker commissions, banking fees, legal
fees and other costs associated with the four separate closings of an
offering of units of Common Stock and Warrants (the "Offering") during the
three months ended March 31, 2014. These costs are one-time for the period
of the Offering and are disregarded by management in evaluating and
predicting earnings trends and are therefore excluded by us when presenting
non-GAAP financial measures.
(4) Derivative Liability: Warrant. The Company accounts for the remaining
34,723 Series A Warrants issued in connection with the Offering which still
carry anti-dilution rights in accordance with the guidance contained in ASC
815-40-15-7D, whereby under that provision, because they have anti-dilution
rights, they do not meet the criteria for equity treatment and must be
recorded as a liability. Accordingly, the Company classifies the warrant
instrument as a liability at its fair value and adjusts the instrument to
fair value at each reporting period. This liability is subject to re-
measurement at each balance sheet date until exercised or until the anti-
dilution provisions contained within the warrant agreements expire, and is
classified in the balance sheet as a current liability. Because this
treatment is limited in time and is calculated using subjective valuation
assumptions, we believe that the exclusion of the derivative liability on
the balance sheet, and the change in valuation on the statement of
operations, allows for a more accurate reflection of our financial result,
and has therefore been excluded by us when presenting non-GAAP financial
measures.
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