Attached files
file | filename |
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EX-31.1 - EX-31.1 - Vicor Technologies, Inc. | y02565exv31w1.htm |
EX-31.2 - EX-31.2 - Vicor Technologies, Inc. | y02565exv31w2.htm |
EX-32.1 - EX-32.1 - Vicor Technologies, Inc. | y02565exv32w1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
þ | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Quarterly Period Ended September 30, 2009
OR
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 0-51475
VICOR TECHNOLOGIES, INC.
(Exact name of registrant as specified in its charter)
Delaware | 20-2903491 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) | |
2300 NW Corporate Boulevard, Suite 123, Boca Raton, Florida | 33431 | |
(Address of principal executive office) | (Zip Code) |
(561) 995-7313
(Registrants telephone number, including area code)
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes þ No o
Indicate by check mark whether the registrant has electronically submitted and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the Registrant was required to submit and post such files). Yes
o No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large
accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act. (Check one):
Large accelerated filer o
|
Accelerated filer o | Non-accelerated filer o | Smaller reporting company þ | |||
(Do not check if a smaller reporting company) |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act). Yes o No þ
APPLICABLE ONLY TO CORPORATE ISSUERS
As of September 30, 2009, there were 39,407,240 shares of the Registrants Common Stock,
$.0001 par value, outstanding.
Transitional Small Business Disclosure Form (Check one): Yes o No þ
VICOR TECHNOLOGIES, INC.
Quarterly Report on Form 10-Q for the Period Ended September 30, 2009
Quarterly Report on Form 10-Q for the Period Ended September 30, 2009
TABLE OF CONTENTS
Page | ||||
PART I Financial Information |
||||
Item 1. Condensed Consolidated Financial Statements: |
||||
Condensed Consolidated Balance Sheets as of December 31, 2008 and September 30, 2009 (unaudited) |
3 | |||
Condensed Consolidated Statements of Operations for the three and nine months ending September
30, 2008 and 2009 and the period from August 4, 2000 (inception) through September 30, 2009
(unaudited) |
4 | |||
Condensed Consolidated Statements of Cash Flows for the nine months ending September 30, 2008
and 2009 and the period from August 4, 2000 (inception) through September 30, 2009 (unaudited) |
5 | |||
Condensed Consolidated Statement of Changes in Net Capital Deficiency for the nine Months ended
September 30, 2009 (unaudited) |
7 | |||
Notes to Condensed Consolidated Financial Statements |
8 | |||
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations |
13 | |||
Item 3. Quantitative and Qualitative Disclosures about Market Risk |
17 | |||
Item 4T. Controls and Procedures |
17 | |||
PART II Other Information |
17 | |||
Item 1. Legal Proceedings |
17 | |||
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
17 | |||
Item 3. Defaults Upon Senior Securities |
18 | |||
Item 4. Submission of Matters to a Vote of Security Holders |
18 | |||
Item 5. Other Information |
18 | |||
Item 6. Exhibits |
18 | |||
Signatures |
19 | |||
Ex- 31.1 |
||||
Ex- 31.2 |
||||
Ex- 32.1 |
2
Vicor Technologies, Inc.
(A Development Stage Company)
(A Development Stage Company)
Condensed Consolidated Balance Sheets
As of December 31, 2008 and September 30, 2009
(Unaudited)
September 30, | ||||||||
December 31, 2008 | 2009 | |||||||
Current assets: |
||||||||
Cash |
$ | 182,000 | $ | 1,065,000 | ||||
Prepaid expenses |
14,000 | 43,000 | ||||||
Total current assets |
196,000 | 1,108,000 | ||||||
Furniture and fixtures, net of accumulated depreciation of $62,000
and $65,000 at December 31, 2008 and September 30, 2009, respectively |
2,000 | 24,000 | ||||||
Other assets: |
||||||||
Deposits |
12,000 | 12,000 | ||||||
Deferred charges |
| 567,000 | ||||||
Intellectual property, net of accumulated amortization of $186,000
and $214,000 at December 31, 2008 and September 30, 2009, respectively |
266,000 | 238,000 | ||||||
$ | 476,000 | $ | 1,949,000 | |||||
LIABILITIES AND NET CAPITAL DEFICIENCY |
||||||||
Current liabilities: |
||||||||
Accounts payable and accrued expenses |
$ | 1,000,000 | $ | 755,000 | ||||
Notes payable: |
||||||||
BB&T (formerly Colonial Bank) |
300,000 | 300,000 | ||||||
2004 notes |
250,000 | 250,000 | ||||||
12% convertible promissory notes |
150,000 | 110,000 | ||||||
15% promissory notes |
100,000 | 100,000 | ||||||
Other |
100,000 | | ||||||
Due to related parties |
100,000 | 100,000 | ||||||
Total current liabilities |
2,000,000 | 1,615,000 | ||||||
Long-term liabilities: |
||||||||
8% convertible notes |
| 1,295,000 | ||||||
Less unamortized discount |
| (684,000 | ) | |||||
8% convertible notes net |
| 611,000 | ||||||
Accrued dividends payable in shares of common stock |
434,000 | 744,000 | ||||||
Subscription deposits |
| 412,000 | ||||||
Derivative financial instruments payable in shares of common stock |
| 6,775,000 | ||||||
Total long-term liabilities |
434,000 | 8,542,000 | ||||||
Commitments and contingencies |
||||||||
Net capital deficiency: |
||||||||
Preferred stock, $.0001 par value; 10,000,000 shares authorized: |
||||||||
Series A Convertible Cumulative, 157,592 shares issued and outstanding at December 31, 2008 and September 30, 2009, respectively |
| | ||||||
Series B Voting Junior Convertible Cumulative, 4,781,295 and
5,370,851 shares issued and outstanding at December 31, 2008
and September 30, 2009, respectively |
| | ||||||
Common stock, $.0001 par value; 100,000,000 shares authorized;
32,971,619 and 39,407,240 shares issued and outstanding at
December 31, 2008 and September 30, 2009, respectively |
3,000 | 4,000 | ||||||
Additional paid-in capital |
44,782,000 | 45,808,000 | ||||||
Stock subscriptions in process |
577,000 | 600,000 | ||||||
Deficit accumulated during the development stage |
(47,320,000 | ) | (54,620,000 | ) | ||||
Net capital deficiency |
(1,958,000 | ) | (8,208,000 | ) | ||||
$ | 476,000 | $ | 1,949,000 | |||||
See accompanying notes to condensed consolidated financial statements.
3
Vicor Technologies, Inc.
(A Development Stage Company)
(A Development Stage Company)
Condensed Consolidated Statements of Operations
For the three and nine
months ended September 30, 2008 and 2009 and the period
From August 4, 2000 (inception) to September 30, 2009
(Unaudited)
Three months | Three months | |||||||
ended September | ended September | |||||||
30, 2008 | 30, 2009 | |||||||
Revenues |
$ | | $ | | ||||
Operating expenses: |
||||||||
Research and development |
189,000 | 141,000 | ||||||
General and administrative |
502,000 | 1,540,000 | ||||||
Depreciation and amortization |
10,000 | 11,000 | ||||||
Interest expense |
48,000 | 1,112,000 | ||||||
Total operating expenses |
749,000 | 2,804,000 | ||||||
Unrealized loss on derivative financial instruments |
| (1,452,000 | ) | |||||
Net loss |
(749,000 | ) | (4,256,000 | ) | ||||
Dividends for the benefit of preferred stockholders: |
||||||||
Series A and Series B preferred stock |
(82,000 | ) | (115,000 | ) | ||||
Amortization of derivative discount on Series B preferred
stock |
| (408,000 | ) | |||||
Value of warrants issued in connection with sales of
Series B preferred stock |
(466,000 | ) | | |||||
Total dividends for the benefit of preferred stockholders |
(548,000 | ) | (523,000 | ) | ||||
Net loss applicable to common stock |
$ | (1,297,000 | ) | $ | (4,779,000 | ) | ||
Net loss per common share basic and diluted |
$ | (0.04 | ) | $ | (0.12 | ) | ||
Weighted average number of common shares outstanding |
30,368,776 | 38,352,329 | ||||||
Period from | ||||||||||||
August 4, 2000 | ||||||||||||
Nine months ended | Nine months ended | (inception) through | ||||||||||
September 30, | September 30, | September 30, | ||||||||||
2008 | 2009 | 2009 | ||||||||||
Revenues |
$ | | $ | | $ | 844,000 | ||||||
Operating expenses: |
||||||||||||
Research and development |
687,000 | 611,000 | 14,674,000 | |||||||||
General and administrative |
1,567,000 | 2,762,000 | 27,869,000 | |||||||||
Depreciation and amortization |
31,000 | 31,000 | 313,000 | |||||||||
Interest expense |
3,065,000 | 1,460,000 | 8,202,000 | |||||||||
Total operating expenses |
5,350,000 | 4,864,000 | 51,058,000 | |||||||||
Unrealized loss on derivative financial instruments |
| (1,834,000 | ) | (1,834,000 | ) | |||||||
Net loss |
(5,350,000 | ) | (6,698,000 | ) | (52,048,000 | ) | ||||||
Dividends for the benefit of preferred stockholders: |
||||||||||||
Series A and Series B preferred stock |
(171,000 | ) | (319,000 | ) | (753,000 | ) | ||||||
Amortization of derivative discount on Series B preferred
stock |
| (729,000 | ) | (729,000 | ) | |||||||
Value of warrants issued in connection with sales of
Series B preferred stock |
(1,536,000 | ) | | (1,536,000 | ) | |||||||
Total dividends for the benefit of preferred stockholders |
(1,707,000 | ) | (1,048,000 | ) | (3,018,000 | ) | ||||||
Net loss applicable to common stock |
$ | (7,057,000 | ) | $ | (7,746,000 | ) | $ | (55,066,000 | ) | |||
Net loss per common share basic and diluted |
$ | (0.24 | ) | $ | (0.21 | ) | ||||||
Weighted average number of common shares outstanding |
28,939,414 | 36,488,985 | ||||||||||
See accompanying notes to condensed consolidated financial statements.
4
Vicor Technologies, Inc.
(A Development Stage Company)
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
For the nine months
ended September 30, 2008 and 2009 and the period
From August 4, 2000 (inception) to September 30, 2009
(Unaudited)
Period from | ||||||||||||
Nine Months | Nine Months | August 4, 2000 | ||||||||||
ended | ended | (Inception) to | ||||||||||
September 30, | September 30, | September 30, | ||||||||||
2008 | 2009 | 2009 | ||||||||||
Cash flows from operating activities: |
||||||||||||
Net loss |
$ | (5,350,000 | ) | $ | (6,698,000 | ) | $ | (52,048,000 | ) | |||
Adjustment to reconcile net loss to net cash used in operating
activities: |
||||||||||||
Depreciation and amortization |
31,000 | 32,000 | 314,000 | |||||||||
Noncash interest imputed upon conversion of debt to equity |
2,906,000 | 1,321,000 | 6,610,000 | |||||||||
Noncash interest from deferred financing costs and debt-based
derivative liabilities |
| 391,000 | 391,000 | |||||||||
Unrealized loss on derivative financial instruments |
| 1,834,000 | 1,834,000 | |||||||||
Gain from sale of assets |
| | 48,000 | |||||||||
Securities issued for services |
46,000 | 280,000 | 481,000 | |||||||||
Contributed research and development services |
| | 95,000 | |||||||||
Merger-related costs |
| | 523,000 | |||||||||
Shares in settlement of interest expense |
11,000 | 22,000 | 283,000 | |||||||||
Warrants issued for consulting |
| | 204,000 | |||||||||
Equity-based compensation |
395,000 | 499,000 | 18,544,000 | |||||||||
Changes in assets and liabilities: |
||||||||||||
Accounts receivable |
| | (16,000 | ) | ||||||||
Prepaid expenses and other assets |
| (314,000 | ) | (410,000 | ) | |||||||
Accounts payable and accrued expenses |
204,000 | (11,000 | ) | 1,747,000 | ||||||||
Net cash used in operating activities |
(1,757,000 | ) | (2,644,000 | ) | (21,400,000 | ) | ||||||
Cash flows from investing activities: |
||||||||||||
Purchase of intellectual property |
| | (237,000 | ) | ||||||||
Net proceeds from sale of equipment |
| | 59,000 | |||||||||
Purchase of furniture, fixtures and equipment |
| (24,000 | ) | (178,000 | ) | |||||||
Net cash used in investing activities |
| (24,000 | ) | (356,000 | ) | |||||||
Cash flows from financing activities: |
||||||||||||
Due to related parties |
| | 315,000 | |||||||||
Proceeds from bank loans |
| | 300,000 | |||||||||
Proceeds from sale of preferred stock |
2,116,000 | 351,000 | 2,915,000 | |||||||||
Proceeds from sale of common stock |
| 128,000 | 11,268,000 | |||||||||
Repayment of notes |
(364,000 | ) | (300,000 | ) | (905,000 | ) | ||||||
Proceeds from bridge loan |
| 300,000 | 300,000 | |||||||||
Proceeds from sale of notes |
300,000 | 2,660,000 | 8,022,000 | |||||||||
Contributed capital |
| | 178,000 | |||||||||
Proceeds for securities to be issued |
| 412,000 | 428,000 | |||||||||
Net cash provided by financing activities |
2,052,000 | 3,551,000 | 22,821,000 | |||||||||
Net increase in cash |
295,000 | 883,000 | 1,065,000 | |||||||||
Cash at beginning of period |
4,000 | 182,000 | | |||||||||
Cash at end of period |
$ | 299,000 | $ | 1,065,000 | $ | 1,065,000 | ||||||
See accompanying notes to condensed consolidated financial statements.
5
Vicor Technologies, Inc.
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 2008 and 2009 and the period
From August 4, 2000 (inception) to September 30, 2009
(Unaudited)
(A Development Stage Company)
Condensed Consolidated Statements of Cash Flows
For the nine months ended September 30, 2008 and 2009 and the period
From August 4, 2000 (inception) to September 30, 2009
(Unaudited)
Period from | ||||||||||||
Nine Months | Nine Months | August 4, 2000 | ||||||||||
ended | ended | (Inception) to | ||||||||||
September 30, | September 30, | September 30, | ||||||||||
2008 | 2009 | 2009 | ||||||||||
Supplemental cash flow information: |
||||||||||||
Issuance of previously-subscribed common stock |
$ | | $ | 16,000 | $ | 16,000 | ||||||
Conversion of accounts payable to note payable |
100,000 | | 100,000 | |||||||||
Repurchase of common stock for cancellation of subscription note
receivable |
| | 750,000 | |||||||||
Contributed research and development |
| | 95,000 | |||||||||
Acquisition of intellectual property from related party |
| | 200,000 | |||||||||
Beneficial conversion features for promissory notes |
| | 912,000 | |||||||||
Warrants issued in connection with 15% promissory notes |
| | 261,000 | |||||||||
Cash paid for interest expense |
208,000 | 69,000 | 941,000 | |||||||||
Accrued equity-based compensation |
152,000 | | 41,000 | |||||||||
Accrued dividends |
1,707,000 | 310,000 | 2,280,000 | |||||||||
Interest on promissory notes paid in common stock |
| | 520,000 | |||||||||
Promissory notes converted to common stock |
| 100,000 | 1,012,000 | |||||||||
Related party accrual converted to common stock |
325,000 | | 561,000 | |||||||||
Conversion of debt to Series B preferred Stock |
1,567,000 | | 1,567,000 | |||||||||
Conversion of notes payable to common stock |
1,479,000 | 1,405,000 | 3,184,000 | |||||||||
Accrued expenses paid with preferred stock |
| 108,000 | 108,000 | |||||||||
Accrued expenses paid with common stock |
| 772,000 | 772,000 | |||||||||
Fair value of equity-based derivative financial instruments issued |
| 816,000 | 816,000 | |||||||||
Fair value of debt-based derivative financial instruments issued |
| 479,000 | 479,000 | |||||||||
Deferred costs paid with common stock |
| 358,000 | 358,000 | |||||||||
Derivative discount on Series B preferred stock |
| 341,000 | 341,000 | |||||||||
See accompanying notes to condensed consolidated financial statements.
6
Vicor Technologies, Inc.
(A Development Stage Company)
(A Development Stage Company)
Condensed Consolidated Statements of Changes in Net Capital Deficiency
For the Nine Months ended September 30, 2009
(Unaudited)
Preferred Stock | Stock | |||||||||||||||||||||||||||||||||||||||
Common Stock | Class A | Class B | Additional | Subscriptions | Accumulated | |||||||||||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | Shares | Amount | Paid-In Capital | in Process | Deficit | Total | |||||||||||||||||||||||||||||||
Balance at December 31, 2008 |
32,971,619 | $ | 3,000 | 157,592 | $ | | 4,781,295 | $ | | $ | 44,782,000 | $ | 577,000 | $ | (47,320,000 | ) | $ | (1,958,000 | ) | |||||||||||||||||||||
Cumulative effect of change in accounting principle |
| | | | | | (4,049,000 | ) | | 480,000 | (3,569,000 | ) | ||||||||||||||||||||||||||||
Issuance of stock for services |
700,216 | 1,000 | | | 151,096 | | 429,000 | | | 430,000 | ||||||||||||||||||||||||||||||
Issuance of stock for cash |
373,500 | | | | 438,460 | | 478,000 | | | 478,000 | ||||||||||||||||||||||||||||||
Stock issued related to notes payable transactions |
2,902,592 | | | | | | 2,647,000 | | | 2,647,000 | ||||||||||||||||||||||||||||||
Issuance of common stock for interest payments |
47,328 | | | | | | 116,000 | | | 116,000 | ||||||||||||||||||||||||||||||
Accrued dividends on preferred stock |
| | | | | | | | (310,000 | ) | (310,000 | ) | ||||||||||||||||||||||||||||
Exercise of warrants |
500,000 | | | | | | | | | | ||||||||||||||||||||||||||||||
Issuance of warrants for services |
| | | | | | 101,000 | | (43,000 | ) | 58,000 | |||||||||||||||||||||||||||||
Fair value of derivative financial instruments issued in
connection with Series B preferred stock |
| | | | | | (472,000 | ) | | | (472,000 | ) | ||||||||||||||||||||||||||||
Issuance of stock options for services |
| | | | | | 252,000 | | | 252,000 | ||||||||||||||||||||||||||||||
Amortization of discounts related to derivative
financial instruments |
| | | | | | 729,000 | | (729,000 | ) | | |||||||||||||||||||||||||||||
Stock subscriptions in process: |
||||||||||||||||||||||||||||||||||||||||
To be issued in payment of accrued compensation |
| | | | | | 577,000 | (577,000 | ) | | | |||||||||||||||||||||||||||||
Other transactions net |
1,911,985 | | | | | | 218,000 | 600,000 | | 818,000 | ||||||||||||||||||||||||||||||
Net loss |
| | | | | | | | (6,698,000 | ) | (6,698,000 | ) | ||||||||||||||||||||||||||||
Balance at September 30, 2009 |
39,407,240 | $ | 4,000 | 157,592 | $ | | 5,370,851 | $ | | $ | 45,808,000 | $ | 600,000 | $ | (54,620,000 | ) | $ | (8,208,000 | ) | |||||||||||||||||||||
See accompanying notes to condensed consolidated financial statements.
7
NOTE 1 ORGANIZATION AND NATURE OF BUSINESS
Nature of the Business
Vicor Technologies, Inc. (Vicor or the Company) is a development-stage company dedicated
to the development of breakthrough diagnostic and therapeutic products. The Company is
commercializing innovative noninvasive diagnostic technology products based on its patented
Proprietary Point Correlation Dimension
(PD2i algorithm) algorithm and software. The PD2i® algorithm and
software facilitates the ability to accurately risk stratify a specific target population to
predict future pathological events. Vicor is currently commercializing its three (3) proprietary
diagnostic medical products: the PD2i Analyzer, the
PD2i-VSTM (Vital Sign) and the PD2i Cardiac Analyzer (CA).
Vicors therapeutic products have been developed by using an innovative drug discovery platform
which focuses on naturally occurring biomolecules derived from state-dependent physiologies such as
hibernation.
The Companys first product, the PD2i Analyzer, displays and analyzes
electrocardiographic information that measures heart rate variability (HRV). The PD2i
Analyzer received 510(k) marketing clearance from the Food and Drug
Administration (FDA) on December 29, 2008. The Company is completing software programming changes
for the PD2i Analyzer to enable the capture and display of HRV information
during paced respiration and controlled exercise. Following completion of these programming
changes, the labeling for the original 510(k) will be expanded to include the measurement of heart
rate variability during paced respiration and controlled exercise. This expanded labeling will
facilitate the use of the PD2i Analyzer for screening diabetic and cardiac
patients with reimbursement available to the physicians from insurers for these types of tests. The
Company anticipates the PD2i Analyzer will be in use in selected physicians
practices late in the fourth quarter of 2009.
The Company will be performing a normal range study for the PD2i Analyzer
at the University of Mississippi Medical Center as soon as routine Institutional Review
Board approval is received. This study of approximately 200 age and gender matched normal
patients will enable the establishment of normal ranges of PD2i® values
for these groups for both a resting patient and a patient performing paced respiration and/or
controlled exercise. A 510(k) application will then be filed with the FDA to establish normal ranges for
PD2i® values.
The Companys second
product, the PD2i-VS (Vital Sign), is being
developed in collaboration with the United States Army and is used to assess the severity of injury
of critically injured trauma victims to determine the need for an immediate life saving
intervention in those trauma victims who are at high risk of imminent death. It is anticipated that
the PD2i-VS will be used for civilian triage and trauma emergency response.
The Companys third
product, the PD2i Cardiac Analyzer, is able to
accurately risk stratify patients into those at high or low risk of suffering a fatal arrhythmic
event, or Sudden Cardiac Death (SCD), within a six to twelve-month time frame. The PD2i Cardiac
Analyzer is the subject of an ongoing research collaboration. On February 5,
2009 the Company signed a Research Agreement with the University of Rochester and the Catalan
Institute of Cardiovascular Sciences in Barcelona to collaborate on the PD2i®
analysis of data collected for the Merte Subita en Insufficiencia Cardiaca (MUSIC)
trial. The collaboration is entitled Prognostic Significance of Point Correlation Dimension
Algorithm (PD2i) in Chronic Heart Failure. Vicor plans to use the PD2i Cardiac
Analyzer to retrospectively identify those who suffered SCD in the
congestive heart failure patients who participated in the MUSIC
trial. When this analysis is completed, the Company believes it will yield a dataset sufficient to support a 510(k) submission to
include a claim for SCD.
The Company has two (2) wholly-owned subsidiaries, Non-Linear Medicine, Inc. (NMI) and
Stasys Technologies, Inc. (STI). Vicor has no operations independent of its wholly-owned
subsidiaries. NMI owns all of Vicors intellectual property related to diagnostic products. STI
owns all of Vicors intellectual property related to therapeutic products.
The Company is subject to all the risks inherent in an early stage company in the
biotechnology industry, which is subject to rapid technological change. The Company has numerous
competitors, including major pharmaceutical and chemical companies, medical device manufacturers,
specialized biotechnology firms, universities and other research institutions. These competitors
may succeed in developing technologies and products that are more effective than any that are being
developed by the Company or that would render the Companys technology and products obsolete and
noncompetitive. Many of these competitors have substantially greater financial and technical
resources and production and marketing capabilities than the Company. In addition, many of the
Companys competitors have significantly greater experience than the Company in pre-clinical
testing and human clinical trials of new or improved pharmaceutical products and in obtaining FDA
and other regulatory approvals on products for use in health care. The Company is aware of various
products under development or manufactured by competitors, which may use therapeutic approaches
that compete directly with certain of the Companys products.
8
The Company has limited experience in conducting and managing pre-clinical testing necessary
to enter clinical trials required to obtain government approvals and has limited experience in
conducting clinical trials. Accordingly, the Companys competitors may succeed in obtaining FDA
approval for products more rapidly than the Company, which could adversely affect the Companys
ability to further develop and market its products. If the Company commences significant commercial
sales of its products, it will also be competing with respect to manufacturing efficiency and
marketing capabilities, areas in which the Company has limited or no current experience.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company and the
notes thereto have been prepared in accordance with the instructions for Form 10-Q and Article 10
of Regulation S-X of the Securities and Exchange Commission (SEC). The December 31, 2008
condensed consolidated balance sheet data was derived from audited financial statements, but does
not include all disclosures required by accounting principles generally accepted in the United
States of America. The September 30, 2009 unaudited condensed consolidated financial statements do
not include all of the information and disclosures required by accounting principles generally
accepted in the United States of America. The unaudited condensed consolidated financial statements
included herein should be read in conjunction with the audited consolidated financial statements
and the notes thereto that are included in the Companys Annual Report on Form 10-K for the year
ended December 31, 2008. The accompanying condensed consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. All significant intercompany accounts
and transactions have been eliminated in consolidation. The Companys condensed consolidated
financial statement amounts have been rounded to the nearest thousand dollars.
The information presented as of September 30, 2009 and for the nine months ended September 30,
2008 and 2009 has not been audited. In the opinion of management, the unaudited interim financial
statements include all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Companys consolidated financial position as of September 30, 2009, the
consolidated results of its operations for the three and nine months ended September 30, 2008 and
2009 and its consolidated cash flows and net capital deficiency for the nine months ended September
30, 2008 and 2009. The results of operations for the nine months ended September 30, 2008 and 2009
are not necessarily indicative of the results for the full year.
Liquidity and Going Concern
The Companys financial statements as of and for the three and nine months ended September 30,
2008 and 2009 have been prepared on a going concern basis, which contemplates the realization of
assets and the settlement of liabilities and commitments in the normal course of business. The
Company incurred a net loss of $6,698,000 for the nine months ended September 30, 2009 and had a
working capital deficit and net capital deficiency of $507,000 and $8,208,000, respectively, as of
September 30, 2009. The Company expects to continue to incur substantial expenditures to further
the commercial development of its products. The Companys cash balance at September 30, 2009 will
not be sufficient to meet such objectives. These matters raise substantial doubts about the
Companys ability to continue as a going concern. The financial statements do not include any
adjustments that may result from the outcome of this uncertainty. (See Note 7).
Management recognizes that the Company must generate additional financing to successfully
commercialize its products. Management plans include the sale of additional equity or debt
securities, alliances or other partnerships with entities interested in and having the resources to
support the further development of its products, as well as other business transactions to assure
continuation of the Companys development and operations. The Company is in the process of
executing its plan to secure additional capital.
However, no assurances can be given that the Company will be successful in raising additional
capital or entering into business alliances. Further, there can be no assurance, assuming the
Company successfully raises additional funds or enters into a business alliance, that the Company
will achieve profitability or positive cash flow. If the Company is not able to timely and
successfully raise additional capital and/or achieve profitability or positive cash flow, its
operating business, financial condition, cash flows and results of operations will be materially
and adversely affected.
NOTE 2 Summary of Significant Accounting Policies
Revenue Recognition
As a development-stage enterprise, the Company has no significant operating revenue but
expects revenue in the first quarter of 2010. Revenue will be recognized when products are shipped
and services rendered.
9
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amount of revenue and expenses during the reporting period.
Actual results could differ from those estimates and the differences could be material.
Accounting for Stock-Based Compensation
The Company uses the fair value-based method of accounting for stock-based employee
compensation arrangements under which compensation cost is determined using the fair value of
stock-based compensation determined as of the grant date and is recognized over the periods in
which the related services are rendered.
The Company has also granted stock purchase warrants to independent consultants, contractors
and note holders and values these warrants using the fair value-based method described in the
preceding paragraph. The compensation cost so determined is recognized over the period the services
are provided which usually results in compensation cost being recognized at the date of the grant.
Fair Value of Derivative Financial Instruments
Certain of the Companys derivative financial instruments (warrants and conversion rights
embedded in convertible preferred stock and conversion rights embedded in convertible debt) are
recorded at fair value. Periodic changes in fair value are recorded in the statement of operations.
The value of a derivative financial instrument is classified as an asset or liability
depending on the nature of the instrument. The Companys derivative financial instruments are
liabilities payable only through the issuance of shares of common stock and not through the payment
of cash or other assets.
Recent Pronouncements
On June 30, 2009 the Financial Accounting Standards Board (the FASB) adopted Statement of
Financial Accounting Standards No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principles a replacement of FASB Statement No. 162
(the FASB Codification). The purpose of the FASB Codification was to reorganize all existing U.S.
accounting and reporting standards issued by the FASB and other related private-sector standard
setters into one authoritative body of literature, which will ease research of accounting
literature and reduce the risk of noncompliance. Going forward, all revisions will be made in real
time to the FASB Codification. The FASB Codification is effective for all financial statements
issued for interim and annual periods ending after
September 15, 2009.
September 15, 2009.
As a result of the adoption of the FASB Codification, all references in public company
financial statements and related notes will be to the classification system set forth in the FASB
Codification, rather than to the applicable previously existing literature. Conforming changes will
also need to be made throughout a companys disclosure documents, with changes most likely arising
in the Managements Discussion and Analysis of Financial Condition and Results of Operations and,
most particularly, in the discussion of critical accounting policies usually contained in that
discussion.
On August 18, 2009 the Securities and Exchange Commission published interpretive guidance
titled Commission Guidance Regarding the Financial Accounting Standards Boards Accounting
Standards Codification. In its guidance, the SEC stated that concurrent with the Effective Date,
references in the SECs rules and SEC staff guidance to specific standards under U.S. generally
accepted accounting principles should be understood to mean the corresponding reference in the FASB
Codification. The SEC also stated that the FASB Codification does not supersede any SEC rules or
regulations, is not the authoritative source for SEC rules or SEC staff guidance, and the inclusion
of any SEC rules or SEC staff guidance in the FASB Codification will not affect how such items may
be updated in the future by the SEC.
NOTE 3 DEBT
8% Convertible Promissory Notes
During the nine months ended September 30, 2009 the Company sold 8% convertible notes that are
due two years from date of issue and are convertible into common stock at the option of the holder
any time prior to maturity. The conversion rights embedded in
10
the notes are derivative financial instruments due to the conversion terms of the notes. The
fair values of the derivative financial instruments at their issue dates are $1,948,000.
Notes sold |
$ | 2,660,000 | ||
Notes converted through September 30, 2009 |
(1,365,000 | ) | ||
1,295,000 | ||||
Less unamortized discount |
(684,000 | ) | ||
Balance at September 30, 2009 |
$ | 611,000 | ||
As notes were converted, debt discount of $1,073,000 was amortized to noncash interest
expense.
Other Notes Payable
The holder of a $100,000 note agreed to convert the note into 200,000 shares of Vicor common
stock. The conversion resulted in recognition of $79,000 of noncash interest expense.
NOTE 4 OUTSTANDING COMMON STOCK PURCHASE WARRANTS AND OPTIONS
At September 30, 2009 the Company had 11,349,069 warrants outstanding with an average exercise
price of $1.00 and had 2,415,000 options outstanding with an average exercise price of $0.78.
NOTE 5 RELATED PARTY TRANSACTIONS
The Company is party to a service agreement (Service Agreement) with ALDA & Associates
International, Inc. (ALDA), a consulting company owned and controlled by the Companys Chief
Executive and Financial Officer, whereby all of the Companys employees serve as ALDA employees
under a professional employer organization arrangement. The Service Agreement provides for
reimbursing ALDA for its actual payroll and insurance related costs for these employees. For the
three and nine months ended September 30, 2009, $212,000 and $652,000, respectively, of costs were
incurred related to the Service Agreement.
NOTE 6 COMMITMENTS AND CONTINGENCIES
The Company from time to time may be subject to claims and suits arising in the ordinary
course of business. The Company is currently not involved in any claims or suits.
NOTE 7 SUBSEQUENT EVENTS
Subsequent to
September 30, 2009 the Company raised $761,000 through the sale of 8% subordinated convertible notes due in 2012 and immediately exercisable
five-year warrants to purchase shares of the Companys common stock for $1.00 per share. Interest
on the notes is accrued, and the notes and accrued interest are convertible into shares of common
stock at the lesser of $0.80 or 80% of the underlying common stock price in a subsequent qualified
financing (as defined by the note) of at least $3,000,000.
On October 20, 2009 the holder of the 15% promissory note agreed to convert the balance of the
note into 200,000 shares of Vicor common stock.
The $100,000 loan with BB&T(formerly Colonial Bank) has been extended until October 26, 2010
at an interest rate of 4.83%
NOTE 8 FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows the provisions of FASB Codification Topic 820, Fair Value Measurements
and Disclosures. This Topic defines fair value, establishes a measurement framework and expands
disclosures about fair value measurements.
The Company measures financial assets in three levels, based on the markets in which the
assets and liabilities are traded and the reliability of the assumptions used to determine fair
value. These levels are:
11
| Level 1 Valuations for assets and liabilities traded in active exchange markets, or interest in open-end mutual funds that allow a company to sell its ownership interest back at net asset value (NAV) on a daily basis. Valuations are obtained from readily available pricing sources for market transactions involving identical assets, liabilities or funds. |
| Level 2 Valuations for assets and liabilities traded in less active dealer, or broker markets, such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active. |
| Level 3 Valuations for assets and liabilities that are derived from other valuation methodologies, such as option pricing models, discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. |
The availability of observable inputs can vary from instrument to instrument and in certain
cases the inputs used to measure fair value may fall into different levels of the fair value
hierarchy. In such cases, an instruments level within the fair value hierarchy is based on the
lowest level of input that is significant to the fair value measurement. The Companys assessment
of the significance of a particular input to the fair value measurement of an instrument requires
judgment and consideration of factors specific to the instrument.
Recurring Fair Value Measurement Valuation Techniques
The fair value for certain financial instruments is derived using pricing models and other
valuation techniques that involve significant management judgment. The price transparency of
financial instruments is a key determinant of the degree of judgment involved in determining the
fair value of the Companys financial instruments. Financial instruments for which actively quoted
prices or pricing parameters are available will generally have a higher degree of price
transparency than financial instruments that are thinly traded or not quoted. In accordance with
FASB Codification Topic 820, the criteria used to determine whether the market for a financial
instrument is active or inactive is based on the particular asset or liability. As a result, the
valuation of these financial instruments included significant management judgment in determining
the relevance and reliability of market information available. The Company considered the
inactivity of the market to be evidenced by several factors, including limited trading of the
Companys stock since the commencement of trading in July of 2007.
Derivative Financial Instruments
The Companys derivative financial instruments consist of conversion options embedded in 8%
convertible notes, Series B Preferred Stock and warrants to purchase common stock issued with
preferred stock. These instruments are valued with pricing models commonly used by the financial
services industry using inputs generally observable in the financial services industry. These
models require significant judgment on the part of management, including the inputs utilized in its
pricing models. The Companys derivative financial instruments are categorized in Level 3 of the
fair value hierarchy. The Company estimates the fair value of derivatives utilizing the
Black-Scholes option pricing model and the following assumptions:
January 1, 2009 | September 30, 2009 | |||||||
Conversion feature: |
||||||||
Risk-free interest rate |
2.10 | % | 1.30% -2.64 | % | ||||
Expected volatility |
63 | % | 63 | % | ||||
Expected life (in years) |
5 | 2-5 | ||||||
Expected dividend yield |
0 | % | 0 | % | ||||
Warrants: |
||||||||
Risk-free interest rate |
2.10 | % | 2.64 | % | ||||
Expected volatility |
63 | % | 63 | % | ||||
Expected life (in years) |
5 | 5 | ||||||
Expected dividend yield |
0 | % | 0 | % | ||||
Fair value: |
||||||||
Conversion feature |
$ | 1,664,000 | $ | 3,696,000 | ||||
Warrants |
$ | 1,905,000 | $ | 3,079,000 |
Prior to January 1, 2009 the Company used the historical prices of its common stock to
determine its volatility. Subsequently, the Company determined that the historical prices of its
common stock was not the best proxy to estimate such volatility. Effective
12
January 1, 2009 the
Companys methodology to estimate volatility of its common stock is based on an average of
published volatilities contained in the most recent audited financial statements of other
publicly-reporting companies in industries similar to that of the Company.
Level 3 Assets and Liabilities
Level 3 liabilities include instruments whose value is determined using pricing models and for
which the determination of fair value requires significant management judgment or estimation. As of
September 30, 2009 instruments measured at fair value on a recurring basis categorized as Level 3
represented approximately 79% of the Companys total liabilities.
Fair values of liabilities measured on a recurring basis at September 30, 2009 are as follows:
Quoted Prices in | ||||||||||||||||
Active Markets | Significant Other | Significant | ||||||||||||||
for Identical | Observable | Unobservable | ||||||||||||||
Liabilities | Inputs | Inputs | ||||||||||||||
Fair Value | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Liabilities |
||||||||||||||||
Derivative financial instruments |
$ | 6,775,000 | | $ | | $ | 6,775,000 | |||||||||
Total |
$ | 6,775,000 | | $ | | $ | 6,775,000 | |||||||||
Both observable and unobservable inputs may be used to determine the fair value of positions
that the Company has classified within the Level 3 category. As a result, the unrealized gains for
liabilities within the Level 3 category presented in the tables below may include changes in fair
value that were attributable to both observable and unobservable inputs. The following table
presents additional information about Level 3 assets and liabilities measured at fair value on a
recurring basis for the nine months ended September 30, 2009:
Unrealized Loss - | ||||
Derivative Financial | ||||
Instruments | ||||
Included in Earnings (1) |
$ | 1,834,000 | ||
Total (2) |
$ | 1,834,000 | ||
Purchases, Sales, Other |
||||
Settlements and Issuances, Net |
| |||
Net Transfers In and/or (out) of Level 3 |
| |||
September 30, 2009 |
$ | 1,834,000 | ||
(1) | Unrealized loss included in earnings is reported as unrealized loss on derivative financial instruments. | |
(2) | Total unrealized loss related to Level 3 instruments held at September 30, 2009. |
Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
In this Quarterly Report on Form 10-Q, Vicor, and the terms Company, we, us and our
refer to Vicor Technologies, Inc. and its subsidiaries, unless the context indicates otherwise.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and
uncertainties that could cause our actual results to differ materially. When used in this report,
the words expects, anticipates, intends, plans, believes, seeks, estimates and
similar expressions are generally intended to identify forward-looking statements. You should not
place undue reliance on these forward-looking statements, which reflect our opinions only as of the
date of this Quarterly Report. We undertake no obligation to publicly release any revisions to the
forward-looking statements after the date of this Quarterly Report. You should carefully review the
risk factors described in other documents we file from time to time with the U.S. Securities and
Exchange Commission, including our Annual Report on Form 10-K for our fiscal year ended December
31, 2008.
13
Overview of the Business
We are a medical diagnostics company focused on commercializing noninvasive diagnostic
technology products based on our patented, proprietary Point Correlation Dimension algorithm (the
PD2i® algorithm) and software. The PD2i® algorithm and
software facilitates the ability to accurately risk stratify a specific target population to
predict future pathological events.
We are currently commercializing three(3) proprietary diagnostic medical products which employ
software utilizing the
PD2i®
algorithm: the PD2i Analyzer,
the PD2i-VS (Vital Sign) and the PD2i Cardiac Analyzer
TM (CA).
Vicors therapeutic products have been developed by using an
innovative drug discovery platform which focuses on naturally
occurring biomolecules derived from state-dependent physiologies such
as hibernation.
Our first product, the PD2i Analyzer displays and analyzes
electrocardiographic (ECG) information that measures heart rate variability (HRV). The PD2i
Analyzer received 510(k) marketing clearance from the Food and Drug
Administration (FDA) on December 29, 2008.
The Company is completing software programming changes for the PD2i Analyzer
to enable the capture and display of HRV information during paced respiration and
controlled exercise. Following completion of these programming changes, the labeling for the
original 510(k) will be expanded to include the measurement of heart rate variability during paced
respiration and controlled exercise. This expanded labeling will facilitate the use of the PD2i
Analyzer for screening diabetic and cardiac patients with reimbursement
available to the physicians from insurers for these types of tests. We anticipate the PD2i
Analyzer will be in use in selected physicians practices late in the fourth
quarter of this year.
The Company will be performing a normal range study for the PD2i Analyzer
at the University of Mississippi Medical Center as soon as routine Institutional Review
Board approval is received. This study of approximately 200 age and gender matched normal
patients will enable the establishment of normal ranges of PD2i® values
for these groups for both a resting patient and a patient performing paced respiration and/or
controlled exercise. A 510(k) will then be filed with the FDA to establish normal ranges for
PD2i® values.
The Companys second product, the PD2i-VS (Vital Sign), is being
developed in collaboration with the United States Army and is used to assess the severity of injury
of critically injured trauma victims to determine the need for an immediate life saving
intervention in those trauma victims who are at high risk of imminent death. It is anticipated that
the PD2i-VS will be used for civilian triage and trauma emergency response.
The Companys third product, the PD2i Cardiac Analyzer is able to
accurately risk stratify patients into those at high or low risk of suffering a fatal arrhythmic
event, or Sudden Cardiac Death (SCD), within a six to twelve-month time frame. The PD2i Cardiac
Analyzer is the subject of an ongoing research collaboration. On February 5, 2009 the Company
signed a Research Agreement with the University of Rochester and the Catalan Institute of
Cardiovascular Sciences in Barcelona to collaborate on the PD2i®
analysis of data collected for the Merte Subita en Insufficiencia Cardiaca (MUSIC) trial. The
collaboration is entitled Prognostic Significance of Point Correlation Dimension Algorithm (PD2i)
in Chronic Heart Failure. Vicor plans to use the PD2i Cardiac Analyzer to
retrospectively identify those who suffered SCD in the congestive heart failure patients who
participated in the MUSIC trial. When this analysis is completed the Company believes it will
yield a dataset sufficient to support a 510(k) submission to include a claim for SCD.
At September 30, 2009, our cash balance was $1,065,000. Management believes that we have
sufficient funds to continue operations through March 31, 2010.
Our plan of operations includes:
1. | Continued progress in various clinical trials and 510(k) submissions as discussed in the preceding paragraphs: | ||
2. | Development of strategies for initial product rollouts in both the United States and overseas. This includes education of physicians regarding existing CPT (current procedural terminology) codes that can be used for tests involving our products. | ||
3. | Raising additional capital with which to fund ongoing operations and successfully commencing revenue-generating activities. | ||
4. | Securing CE Mark clearance in Europe for the PD2i Cardiac Analyzer and PD2i- VS . | ||
5. | Maintaining the Companys general and administrative expenses at approximately $200,000 to $300,000 per month. | ||
6. | Commencing the generation of revenues. |
However, we may not be successful in raising additional capital or in generating revenue.
Furthermore, even if we raise additional capital and generate revenue, we may never achieve
profitability or positive cash flow. If we are not able to timely and successfully
14
raise additional capital and/or achieve profitability or positive cash flow, our operating
business, financial condition, cash flows and results of operations may be materially and adversely
affected.
Critical Accounting Estimates
The following are deemed to be the most significant accounting estimates affecting us and our
results of operations:
Research and Development Costs
Research and development costs include payments to collaborative research partners and costs
incurred in performing research and development activities, including wages and associated employee
benefits, facilities and overhead costs. These are expensed as incurred.
Intellectual Property
Intellectual property, consisting of patents and other proprietary technology, are stated at
cost and amortized on the straight-line basis over their estimated useful economic lives. Costs and
expenses incurred in creating intellectual property are expensed as incurred. The cost of purchased
intellectual property is capitalized. Software development costs are expensed as incurred.
Revenue Recognition
As a development-stage enterprise, we currently have no significant revenue. We have received
FDA 510(k) marketing clearance for our first product (and will continue to seek CE Mark clearance
in Europe); accordingly, we expect to recognize revenue as products are shipped or services are
rendered.
Accounting for Stock-Based Compensation
We recorded equity-based compensation expense for employees and nonemployees in accordance
with the fair-value provisions of FASB Codification Topic 718, principally the result of granting
stock options and warrants to employees with an exercise price below the fair value of the shares
on the date of grant.
Accounting for Derivative Financial Instruments
We evaluate financial
instruments using the guidance provided by FASB Codification Topic
815 and apply the provisions thereof to the accounting of items identified as derivative financial
instruments not indexed to our stock.
Fair Value of Financial Instruments
The Company follows
the provisions of FASB Codification Topic 820. This Topic defines fair value, establishes a measurement framework and expands
disclosures about fair value measurements.
The Company uses fair value measurements for determining the valuation of derivative financial
instruments payable in shares of its common stock. This primarily involves option pricing models
that incorporate certain assumptions and projections to determine fair value. These require
management judgment.
Results of Operations
Three months ended September 30, 2009 compared to the three months ended September 30, 2008
Research and Development
Research and development expenses represent 5.6% and 25.2% of total operating expenses for
the three months ended September 30, 2009 and 2008, respectively.
Research and development costs decreased by $48,000 to $141,000 for the three months ended
September 30, 2009. The principal reason for the decrease was the VITAL Trial with costs of $56,000
in 2008 that did not occur in 2009 due to the trial being suspended in March 2009.
15
General and Administrative Expenses
General and administrative expenses represent 61.7% and 67.0% of total operating expenses for
the three months ended September 30, 2009 and 2008, respectively.
General and administrative expenses were $1,540,000 for the three months ended September 30,
2009 compared with $502,000 for the three months ended September 30, 2008. The $1,038,000 increase
was due to increases of $487,000 in consulting and computer programming fees, $237,000 in legal and
accounting fees, $223,000 in offering costs and $120,000 in note conversion fees.
Interest Expense
Interest expense represents 39.7% and 6.4% of total operating expenses for the three months
ended September 30, 2009 and 2008, respectively.
Interest
expense was $1,112,000 for the three months ended September 30, 2009 compared with
$48,000 for the three months ended September 30, 2008. The $1,064,000 increase is due
to incurring
$972,000 in noncash interest upon conversion of 8% notes to common stock and $103,000 in
amortization of discounts on derivative financial instruments.
Nine months ended September 30, 2009 compared to the nine months ended September 30, 2008
Research and Development
Research and development expenses represent 13.4% and 12.8% of total operating expenses for
the nine months ended September 30, 2009 and 2008, respectively.
Research and development
expenses decreased by $76,000 to $611,000 for the nine months ended September 30,
2009. This decrease primarily results from decreased 2008 costs for the VITAL Trial (suspended in
March 2009) of $276,000 and $217,000 of costs for the MUSIC Trial and programming costs incurred in
2009.
General and Administrative Expenses
General and administrative expenses represent 60.6% and 29.3% of total operating expenses for
the nine months ended September 30, 2009 and 2008, respectively.
General and administrative expenses were $2,762,000 for the nine months ended September 30,
2009 compared with $1,567,000 for the nine months ended September 30, 2008. The principal reason
for the increase was due to increases of $487,000 in consulting and computer programming fees,
$237,000 in legal and accounting fees, $223,000 in offering costs and $120,000 in note conversion
fees.
Interest Expense
Interest expense
represents 30.1% and 57.3% of total operating expenses for the nine months
ended September 30, 2009 and 2008, respectively.
Interest expense
was $1,460,000 for the nine months ended September 30, 2009 compared with
$3,065,000 for the nine months ended September 30, 2008. The $1,605,000 decrease is the result of
significant reductions in debt since April 1, 2008, including $2,056,000 related to the conversion
of notes to common and preferred stock and more than $664,000 of interest-related fees incurred in
2008. These decreases were offset by $666,000 in noncash interest upon conversion of 8% notes to
common stock and $103,000 in amortization of discounts on derivative financial instruments.
Liquidity and Capital Resources
As a development-stage company, we have no revenue and must raise capital to execute our
business plan and commercialize our products. At September 30, 2009 we had a working capital
deficiency of $507,000 and $1,065,000 in cash. Our working capital is not sufficient to meet our
objectives.
Management recognizes that the Company must generate additional resources to successfully
commercialize its products. Management plans include the sale of additional equity and debt
securities. We have raised approximately $23,600,000 since our inception in 2000 in a series of
private placements of our common stock, convertible preferred stock and convertible notes to
accredited investors, a number of which are physicians.
16
However, we may not be successful in raising additional capital. Further, assuming that we
raise additional funds, the Company may not achieve profitability or positive cash flow. If we are
not able to timely and successfully raise additional capital and/or achieve profitability or
positive cash flow, our operating business, financial condition, cash flows and results of
operations may be materially and adversely affected.
Going Concern
We have prepared our financial statements for the three and nine months ended September 30,
2009 on a going concern basis, which contemplates the realization of assets and the settlement of
liabilities and commitments in the normal course of business. We incurred a net loss of $6,698,000
for the nine months ended September 30, 2009 and had a net capital deficiency of $8,208,000 at
September 30, 2009. We expect to incur substantial expenditures to further the commercial
development of our products, and our working capital at September 30, 2009 will not be sufficient
to meet such objectives. Management recognizes that the Company must generate additional cash to
successfully commercialize its products. Management plans include the sale of additional equity or
debt securities, establishing alliances or other partnerships with entities interested in and that
have resources to support the further development of the Companys products as well as other
business transactions to assure continuation of our operations.
Off-Balance Sheet Arrangements
We have not entered into any transaction, agreement or other contractual arrangement with an
unconsolidated entity under which we have:
| A retained or contingent interest in assets transferred to the unconsolidated entity or similar arrangement that serves as credit; |
| Liquidity or market risk support to such entity for such assets; or |
| An obligation, including a contingent obligation, arising out of a variable interest in an unconsolidated entity that is held by, and material to us, where such entity provides financing, liquidity, market risk or credit risk support to, or engages in leasing, hedging, or research and development services with us. |
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Item 4T. Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures
As of the end of the period covered by this report, we conducted an evaluation, under the
supervision and with the participation of David H. Fater, our Chief Executive and Financial
Officer, and Thomas J. Bohannon, our Chief Accounting Officer, of our disclosure controls and
procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) of the Exchange Act). Based upon this
evaluation, our Chief Executive and Financial Officer and our Chief Accounting Officer concluded
that at September 30, 2009 our disclosure controls and procedures are effective to ensure that
information required to be disclosed by us in the reports that we file or submit under the Exchange
Act is recorded, processed, summarized and reported, within the time periods specified in the
Commissions rules and forms.
(b) Changes in Internal Controls
There was no change in our internal controls or in other factors that could affect these
controls during the quarter ended September 30, 2009 that has materially affected, or is reasonably
likely to materially affect, our internal controls over financial reporting.
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
There are no known claims or litigation pending, the outcome of which would individually or in
the aggregate have a material effect on our consolidated results of operations, financial position,
or cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
During the three months ended September 30, 2009, Vicor:
17
| Issued 2,184 shares of common stock to David Fater as compensation for providing standby collateral in connection with the BB&T (formerly Colonial Bank) loans. | ||
| Issued 300,000 options to the three independent directors at an exercise price of $0.90 pursuant to the Companys Stock Option Plan. | ||
| Issued 74,506 shares of common stock to an employee and consultants for services rendered. | ||
| Sold $425,500 of 8% convertible notes. | ||
| Issued 7,500 shares of Series B preferred stock and 7,500 warrants with an exercise price of $1.00 to a consultant for services rendered. | ||
| Issued 2,285,002 shares of common stock to noteholders converting $1,215,000 of 8% convertible notes. | ||
| Repriced 120,000 warrants from an exercise price of $2.50 to $0.50 and 25,000 warrants from an exercise price of $1.00 to $0.50 for services rendered. | ||
| Issued 200,000 shares of common stock to redeem a $100,000 note and recognized $79,000 of noncash interest expense |
These
securities issued in the foregoing transactions were exempt from
registration under Section 4(2) of the Securities Act of 1933, as
amended (Securities Act) or Rule 506 of Regulation D, as
transactions by an issuer not involving a public offering. All of the
investors were knowledgeable, sophisticated and had access to
comprehensive information about the Company and represented their
intention to acquire the securities for investment only and not with
a view to distribute or sell the securities. The Company placed
legends on the certificates stating that
the securities were not registered under the Securities Act and set
forth the restrictions on their transferability and sale.
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
None.
Item 6. Exhibits
Exhibit No. | Description | |
31.1
|
Certification of David H. Fater, Chief Executive Officer, President and Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.* | |
31.2
|
Certification of Thomas J. Bohannon, Chief Accounting Officer, pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.* | |
32.1
|
Certification of David H. Fater, Chief Executive Officer, President and Chief Financial Officer and Thomas J. Bohannon, Chief Accounting Officer, of Vicor Technologies, Inc., pursuant to 18 U.S.C. 1350.* |
* | Filed herewith |
18
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, as amended, the
Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly
authorized.
Dated: November 13, 2009 | Vicor Technologies, Inc. |
|||
By: | /s/ David H. Fater | |||
David H. Fater | ||||
Chief Executive Officer, President and Chief Financial Officer |
||||
By: | /s/ Thomas J. Bohannon | |||
Name: | Thomas J. Bohannon | |||
Title: | Chief Accounting Officer |
19