ITEM 1. DESCRIPTION OF BUSINESS
General Information
ArtVentive Medical Group, Inc. (the “Company”) was incorporated on January 23, 2007. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is December 31.
ArtVentive Medical Group, Inc. (“AVTD” or the “Company”), is a Nevada Corporation listed on the OTC-BB (symbol AVTD).
The Company is a medical device corporation, focused on developing, manufacturing and marketing a family of Endoluminal Occlusion Devices (EOS™). Through its proprietary technology, the Company has developed minimally invasive occlusion devices and procedures, bringing the current interventional, image guided techniques to potentially resolve significant and unaddressed health issues. The ArtVentive EOS™ Peripheral Vascular device was developed and manufactured by the Company. The EOS™ device also serves as a proprietary technology platform for several major clinical areas including women's health, peripheral and neurological vascular disorders, and interventional cardiology procedures.
The Company contracted, and expects to continue contracting with specific American, European and international corporations and consulting groups to assist in the implementation of an ongoing strategic plan for the successful global sales, marketing and manufacturing of the Company’s products during 2015. In this regard, the Company entered into an agreement with the Chicago, Illinois based Medical Murray Inc. (“Medical Murray”), a leader in the field of medical device development and manufacturing. Medical Murray is recognized as being ISO certified and FDA registered.
The Company also entered into an agreement with the Northwest Clinical Research Group, Inc. (NCRG), located in Seattle, Washington. NCRG has assisted in building the complex infrastructure and support necessary for outlining regulatory and clinical strategy, in addition to providing a platform of quality controls parallel and synergistic to what Medical Murray is providing. Their responsibility also extends to encompass communication with the FDA and the European Notified Body (FDA counterpart).
The Company executed an agreement on August 23, 2010, with the firm of BSI Product Services Healthcare, headquartered in the UK. BSI is one of the leading international ISO 9000 ISO 13485 Registrars and CE
Marking Notified Bodies. BSI is internationally recognized for their conformity assessments, which support manufacturers’ objectives of achieving timely and predictable market access.
On October 10, 2012, the Company entered into an Agreement with the European Reimbursement Group, AIM (Assessment in Medicine). The Group assisted in implementing the Company’s strategic plan for the successful integration of a pricing strategy, payment structures and the development of relations with major European payment offices within the medical system of each country and region.
The Company implemented its Quality Management System (QMS), based on the requirements to comply with the following regulations and international standards:
·
US FDA Quality System Regulation, 21 CFR 820
·
EU Medical Device Directive (MDD), EEC 93/42
·
Canada Medical Devices Regulations (CMDR), SOR/98-282
·
ISO 13485:2003 Medical Devices - Quality Management Systems - Requirements Regulatory Purposes
The Document Control System and Design History Files for the EOS™ project are in a continuous process of updating. The highly secured system utilizes Egnyte software and is hosted on the Northwest Clinical Research Group’s server.
The Company has developed a solid portfolio of patents globally and will continue to explore the development of patents in all markets as it continues to advance innovative technologies that enhance and impact medical outcomes.
The following outlines the current status of the Company’s worldwide patent portfolio;
1.
US Patent No. 8,328,840. Granted 11-Dec-12
Methods and Apparatus for Rapid Endovascular Vessel Occlusion and Blood Flow Interruption.
2.
US Patent No. 8,771,309. Granted -8-July-2014
Methods and Apparatus for Rapid Endovascular Vessel Occlusion and Blood Flow Interruption.
3.
US Patent US2010/040491 29-Jun-10. Filed June 2010. Pending
Reducing Flow through a Tubular Structure.
4.
PCT/US Patent US2010/040491. Nat’l Phase
Reducing flow through a Tubular Structure.
5.
US Patent US 12/906,993 18-Oct-10. Pending
Expandable Device Delivery.
6.
PCT/US2010/056077 9-Nov-10. Pending
Expandable Device Delivery
7.
US Patent 13/367,338 6-Feb-12. Pending
Reversible Tubal Contraception Device.
8.
PCT 13/367,338 6-Feb-12
Reversible Tubal Contraception Device.
9.
EU 10854208.5 23-Jan-2013. Pending
Reducing Flow through a Tubular Structure.
10.
EU Expandable Device Delivery
Filed April 2013.
11.
US Patent. 086538-0030 (13/828,974, filed on 3/14/2103)
Methods and Apparatus for Rapid Endovascular Vessel Occlusion and Blood Flow Interruption.
12.
US Patent 12/826,593 29-Jun-10. Pending
Reducing Flow through a Tubular Structure.
13.
AU Patent 2013205292 05-Feb-13. Pending
Reversible Tubal Contraceptive Device
14.
US Patent 61/831,977 06-Jun-13. Pending
Lumen Occlusion Device
15.
US Patent 61/836,061 17-Jun-13. Pending
Lumen Occlusion Device
16.
US Patent 61/761,195 05-Feb-13. Pending
Methods and Apparatus for Rapid Endovascular Vessel Occlusion and Blood Flow Interruption.
17.
US Patent 14/044,794 02-Oct-13. Pending
Lumen Occlusion Device (Manufacturing of the Occlusion Device)
18.
US Patent 61/835,406 14-Jun-13. Pending
Implantable Luminal Medical Devices and Methods Using the Same
19.
US Patent 61/904,376 14-Nov-13. Pending
Implantable Luminal Medical Devices and Methods Using the Same
20.
US Patent 61/904,379 14-Nov-13. Pending
Torque Resistant Implant Carrier Tip
21.
US Patent 61/835,461 14-Jun-13. Pending
Methods and Apparatuses for Regulating Blood Vessel Pressure
22.
US Patent 14/101,171 09-Dec-13. Pending
Catheter-Based Cancer Therapy
23.
PCT Patent PCT/US2013/076964 20-Dec-13. Pending
Catheter-Assist Tumor Treatment
24. US Patent 61/987,446, 01-May-14. Pending
Treatment of Incompetent Vessels
As stated, the Company filed an International patent application expanding the patent reach of its ArtVentive EOS™ device for contraception as it prepares the foundation for the launch of the Women’s Health division during 2015. In addition, the Company received confirmation of its registration of the ArtVentive™ trademark for China.
To date, the Company’s activities have been focused on its corporate operations, research and development, the finalization of ArtVentive EOS™ device design and testing, implementation of quality controls and protocols, regulatory strategy for FDA and European trials, in addition to animal studies. In December 2010, the Company formally froze the ArtVentive EOS™ device design for the peripheral category of indications in preparation for the regulatory phase and prior to commercialization in Europe, followed by the USA.
The Company received its CE Mark certification for the EOS™ Peripheral device, on May 30, 2013 and FDA approval on December 3, 2014.
During 2013, the Company executed Distribution Agreements in Europe and expanded #5 distribution to include twenty European countries during 2014. The Company plans to expand its distribution reach throughout Europe during 2015 to include an additional European fourteen counties.
The Company expanded its Senior Management Team by adding a Director of Sales and Business Development, Europe, and expects to fill other senior management positions and support staff roles internationally.
The Company launched a Post Market Surveillance initiative throughout Europe and plans to expand such studies into the USA markets. Such studies are not mandatory, but initiated by the Company to support its global sales and marketing strategy. This clinical program is designed to collect supportive data to confirm the safety and performance of the ArtVentive Medical Group Endoluminal Occlusion System. Currently, two specific studies are planned with sites in the (OCCLUDE I and II). Additional post market studies will commence in the USA following FDA approval and commercialization.
The OCCLUDE I registry will be dedicated to venous indications with a planned 40 subjects to be enrolled with a maximum of 10 subjects per center. The OCCLUDE II registry will focus on arterial indications with up to 40 subjects enrolled in each study with a maximum of 10 subjects per center.
The Company also continues its corporate and international development, and will be required to raise further equity and/or debt capital to execute the business strategy of the Company.
Administration
The Company is currently managed by H. James Graham, CFO, CEO and Chairman of the Board, Dr. Leon Rudakov, PhD, President, CTO and a member of the Board of Directors in addition to John Rappe, Senior Vice President of Global Marketing and North American Sales and Henk van der Laak, Director of Sales and Business Development, Europe.
Employees
The Company has 3 employees, other than officers as of the date of this report.
Research and Development Expenditures
The Company, since its inception, incurred $8.0 million of research and development expenditures in developing minimally invasive occlusion devices and procedures.
Subsidiaries
The Company currently has one wholly-owned subsidiary, ArtVentive Women’s Health Group, Inc. This subsidiary has been inactive other than patent filings and is slated to move forward later in 2015.
ITEM 1A
ITEM 1A
RISK FACTORS
Not Applicable.
ITEM 1B
ITEM 1B
UNRESOLVED STAFF COMMENTS.
Not Applicable.
ITEM 2
ITEM 2
PROPERTIES
The Company’s corporate offices are located at 2766 Gateway Road, Carlsbad, California, 92009. The Company has no other properties.
ITEM 3
ITEM 3
LEGAL PROCEEDINGS.
Legal Proceedings
In the ordinary course of business, the Company may, from time to time, become subject to routine litigation or administrative proceedings, which are incidental to the business. The Company is not a party to or aware of any existing, pending or threatened lawsuits or other legal actions involving the Company.
ITEM 4
ITEM 4
MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5
ITEM 5
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
Market Information
“Bid” and ”ask” prices for the Company’s common stock have been quoted on the Over-The-Counter Bulletin Board (the “OTCBB”) under the symbol “AVTD.OB” since April 3, 2008. However, the Company’s stock has only traded once. Following is the high and low price for each quarter during the past 2 years.
Quarter Ended
High
Low
12/31/14
$.91
$.91
9/30/14
$.91
$.91
6/30/14
$.91
$.91
3/31/14
$.91
$.91
12/31/13
$.91
$.91
9/30/13
$.91
$.91
6/30/13
$.91
$.91
3/31/13
$.91
$.91
As of December 31, 2014, the Company had 34 shareholders of record.
Dividends
The Company has never declared any cash dividends with respect to its common stock. Future payment of dividends is within the discretion of the board of directors and will depend on the Company’s earnings, capital requirements, financial condition and other relevant factors. Although there are no material restrictions limiting, or that are likely to limit, the Company’s ability to pay dividends on its common stock, it presently intends to retain future earnings, if any, for use in its business and currently has no intention to offer cash dividends on its common stock.
Recent Sales of Unregistered Securities
During the fiscal year ended December 31, 2014, the Company issued a total of 4,200,000 shares of its common stock raising a total of $4,200,000. The Company sold these shares under an exemption available pursuant to Regulation D, Rule 506 of the Securities Act to accredited investors residing outside of the United States.
ITEM 6
ITEM 6
SELECTED FINANCIAL DATA
Not applicable.
ITEM 7.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
ArtVentive Medical Group, Inc. (the “Company”), is a Nevada Corporation traded on the OTCQB (symbol AVTD). On January 9, 2010, the Company completed the acquisition of all of the assets of ArtVentive Medical Inc., a California company.
The Company remains focused on developing, manufacturing and marketing a family of Endoluminal Occlusion devices (EOS™). The Company, through its proprietary technology has developed minimally invasive occlusion devices and procedures, allowing for the current interventional, image guided techniques to resolve potentially significant and unaddressed health issues. The ArtVentive EOS™ Peripheral device was developed by the Company to target the arterial and venous embolization peripheral vasculature markets. The
Company is currently expanding its EOS™ development to encompass several additional major clinical areas, including, but not limited to neurological vascular disorders, interventional oncology, women's health and interventional cardiology procedures.
The Company is expanding its product portfolio to include a proprietary Catheter-Assisted Endovascular Tumor Treatment (CAETT™) system to deliver drugs and agents for minimally invasive, controlled and localized treatment of tumors as the Company enters the interventional oncology arena.
The Company is also continuing its ongoing expansion of the ArtVentive EOS™ peripheral device by developing a second generation of the device in enhancing the profile reductions from the current 6fr to a 4fr catheter, while expanding the opportunity to advance into new areas in treating a larger range of vessel sizes, expanding clinical applications and market opportunities. The Generation II EOS™ technology will add additional sizes to its current EOS™ portfolio of 5mm, 8mm and 11 mm to include an 18mm device with the ability of treating vessels in the range of 2-22mm, while achieving a lower profile for the device.
The Company has contracted, and expects to continue contracting with specific American and European corporations and consulting groups to assist in the implementation of an ongoing strategic plan for the successful international market development, commercialization and manufacturing of the Company’s products. The Company entered into an agreement with Chicago, Illinois based Medical Murray Inc., a leader in the field of medical device development and manufacturing. Medical Murray Inc. is recognized as being ISO certified and FDA registered.
The Company entered into an agreement with the Northwest Clinical Research Group, Inc. (NCRG), located in Seattle, Washington. NCRG has played an intricate role in building the complex infrastructure and support necessary for outlining the regulatory and clinical strategy, in addition to providing a platform of quality controls parallel and synergistic to what Medical Murray is providing. Their responsibility also extends to encompass communication with the FDA and the European Notified Body (FDA counterpart).
The Company implemented its Quality Management System (QMS), based on the requirements of, and is intended to comply with, the following regulations and international standards:
·
US FDA Quality System Regulation, 21 CFR 820
·
EU Medical Device Directive (MDD), EEC 93/42
·
Canada Medical Devices Regulations (CMDR), SOR/98-282
·
ISO 13485:2003 Medical Devices - Quality Management Systems - Requirements Regulatory Purposes
A Document Control System and Design History File for the EOS project are in a continuous process of implementation. The secured system utilizes Egnyte software and is hosted on the NCRG’s server.
The Company completed a comprehensive ISO Certification audit performed by BSI Product Services. BSI is an international ISO 9000/ISO Registrar and CE Mark Notified Body required for the European Regulatory approval and subsequent CE Mark certification. The audit confirmed that the Company’s Document and Quality control systems were up to ISO standards and in compliance with international requirements for the maintaining quality of the products without non-conformities.
The Company received its CE Mark certification for the ArtVentive EOS™ Peripheral device on May 30, 2013, and implemented the planned EOS™ peripheral device transfer from Research and Development to commercialization, marketing, and distribution throughout Europe, simultaneous to making its FDA application. The Company received FDA approval for the ArtVentive EOS™ Peripheral device on December 3, 2014.
The Company filed additional patent applications expanding its patent reach of the ArtVentive EOS™ device to 25 patents or patent applications.
The Company launched a Post Market Human Surveillance initiative throughout Europe, Australia and New Zealand. This clinical program is progressing well and designed to collect confirmatory data in support of the safety and performance of the ArtVentive Medical Group Endoluminal Occlusion System - EOS™. Additional post market studies will commence in the US following FDA approval and commercialization.
The Company currently has agreements encompassing twenty European countries. Management is in the process of executing similar distribution agreements for several other European countries.
On August 3, 2011, the Company incorporated the ArtVentive Women’s Health Group, Inc., a wholly owned subsidiary of the Company.
Management reported that Mr. van der Laak join the Company in September 2014 as the Director of Sales for Europe. Mr. Harsa was added to the Company’s sales organization as Regional Sales Director for the Eastern Region of the U.S. effective January 1, 2015.
The Company has developed a customized, comprehensive technology platform that will support management, distribution, sales and marketing globally by implementing a far-reaching Customer Relation Management (CRM) System.
This state of the art integrated Sales and Management Platform is comprised of three modules, each designed to be complimentary to the others, cloud-based and provides the highest level of controlled information and intelligence to advance the Company’s information platform, marketing, sales and services to the interventional markets.
Management also reported that it had contracted with SalesForce.com, a global leader in CRM solutions and Financial Force, a leading provider of accounting, supply chain, human capital management and other solutions. This cloud-based platform eliminates the need for the Company to make a significant investment in hardware, software and personnel to manage customer information. The Company’s management can access the customized applications via their laptop, iPad or iPhone.
Management showcased the ArtVentive EOS™ through its distribution partners when it attended the 17th European Vascular Conference in Maastricht, the Netherlands during March 2014, and the Charing Cross International Symposium (CX) in London during April 2014. The Company continued its directive to expand its reach as it prepares to launch into the US and global markets following regulatory approval by participating in the US Society of Interventional Radiology (SIR) conference in San Diego, California in March 2014 and the CIRSE conference in Glasgow, Scotland during September 2014.
Results of Operations
During the year ended December 31, 2014, Management amended Research and Development expenditures in line with its final phase of development and regulatory submission of the ArtVentive EOS™ Peripheral device. The Company has continued its focus on the European launch of the EOS™ device and raising additional financing for the next phase of its planned business development, including reimbursement, sales, marketing, branding, distribution, clinical studies, commercialization and FDA submission and USA launch.
The following summary are the results of operations, for the years ended December 31, 2014 and 2013, and should be read in conjunction with the audited consolidated financial statements contained herein.
Financial results for the years ended December 31, 2014 and 2013 are summarized as follows:
Revenue
Revenue commenced during first quarter 2014 and is derived solely from the sales of EOS devices. The Company’s revenues of $111,732 was for the twelve months ending December 31, 2014, compared to revenues of $0 for the twelve months ending December 31, 2013. Cost of goods sold increased by $111,732 for the twelve months ending December 31, 2014.
Expenses
The Company’s total operating expenses for the three and twelve month periods ended December 31, 2014 and 2013 are outlined in the table below:
Research and development costs increased by $1,081,054 for the twelve month period ended December 31, 2014 from the comparative period of 2013. Management expects research and development costs to be ongoing due to the enhancement of current products and the development of new devices. Management expects wages and salaries to increase substantially in the next twelve months as it expands its management, support staff and sales team. The increase was due to the initialization and transfer of the EOS device from research and ongoing development to commercialization. Management projects manufacturing costs to decrease over the next twelve months with the successful negotiation of a unit price cost from its manufacturing partner. The Company anticipates continued professional fees, mainly from regulatory, legal and accounting, due to ongoing SEC reporting requirements. General and administrative fees are for ongoing office expenses and other operating costs not directly related to the manufacturing costs. Such fees increased by $1,670,275 for the twelve months ended December 31, 2014 from the comparative period 2013.
Liquidity and Capital Resources
General
As of December 31, 2014, the Company had $104,030 in cash and cash equivalents. The Company does not expect its current cash and operating income to be sufficient to meet its financial needs for continuing operations over the next twelve months. To meet its need for cash management will need to raise additional funds. Management anticipates that it will require an additional $6,000,000 over the next twelve months to further develop its devices and increased manufacturing projections, for marketing, branding and launching into
North American markets, in addition to the continued development of its EOS devices and increased manufacturing projections.
Liquidity and Financial Condition
Working Capital
At
At
December 31,
December 31,
Increase/
(Decrease)
Current Assets
$
151,478
$
1,662,522
$
(1,511,044)
Current Liabilities
$
1,264,697
$
858,309
$
(406,388)
Working Capital/( Deficit)
$
(1,113,219)
$
804,213
$
(1,917,432)
The Company has no known demands or commitments and is not aware of any events or uncertainties as of December 31, 2014, that will result in or that are reasonably likely to materially increase or decrease our current liquidity.
Limited Operating History
There is no historical financial information about the Company on which to base an evaluation of our performance. The Company is a development stage corporation and has generated minimal revenues from operations. Management cannot guarantee that it will be successful in its business operations. The business is subject to risks inherent in the medical device business enterprise in a highly competitive industry, including limited capital resources, and possible cost overruns due to the price and cost increases in supplies and services.
The Company believes it does not have enough cash on hand or will be able to generate enough income from operations to pay operating costs for the next twelve months. In order to carry out the business plan, including the expansion of the product line, manufacturing of the EOS medical devices, the Company will be required to seek equity or debt financing. If management is unable to raise sufficient funds to increase its manufacturing and deliver products, as well as enhance and develop new innovative devices, the Company will have to curtail its operations until such funds are received. There is no guarantee that the Company will be successful in raising such funds.
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Not required by smaller reporting companies.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ArtVentive Medical Group, Inc.
Consolidated Financial Statements
December 31, 2014 and December 31, 2013
Consolidated Balance Sheets as of December 31, 2014 and December 31, 2013
Statement 1
Consolidated Statements of Operations and Comprehensive Loss for the years
ended December 31, 2014 and December 31, 2013
Statement 2
Consolidated Statements of Cash Flows for the years ended December 31, 2014
and December 31, 2013
Statement 3
Consolidated Statement of Changes in Stockholders’ Equity (Deficit)
December 31, 2014 and December 31, 2013
Statement 4
Notes to Consolidated Financial Statements
Statement 1
ArtVentive Medical Group, Inc.
Consolidated Balance Sheets
December 31, 2014 and December 31, 2013
ASSETS
December 31
December 31
CURRENT
Cash and cash equivalents
$104,030
$ 1,626,521
Accounts receivable
22,662
-
Prepaid expenses
1,048
9,098
Inventory
23,738
26,903
TOTAL CURRENT ASSETS
151,478
1,662,522
PROPERTY, PLANT AND EQUIPMENT
Office equipment
17,953
16,380
Accumulated Depreciation
(5,467)
(2,303)
NET PROPERTY, PLANT AND EQUIPMENT
12,486
14,077
OTHER ASSETS
Deposits
25,007
51,048
TOTAL OTHER ASSETS
25,007
51,048
TOTAL ASSETS
$ 188,971
$ 1,727,647
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT
Accounts payable
$ 221,397
$ 272,509
Accrued expenses
1,043,300
585,800
Payroll taxes payable
-
-
TOTAL CURRENT LIABILITIES
1,264,697
858,309
LONG-TERM LIABILITIES
Notes payable
500,000
-
TOTAL LONG-TERM LIABILITIES
500,000
-
TOTAL LIABILITIES
1,764,697
858,309
STOCKHOLDERS’ EQUITY
Common stock, par value $.001, 100,000,000 shares
authorized, 59,506,286 and 55,306,286 shares issued and outstanding at December 31, 2014 and December 31, 2013 respectively
59,506
55,306
Additional paid in capital
12,879,982
9,056,279
Deficit accumulated during the development stage
(14,515,214)
(8,242,247)
TOTAL STOCKHOLDERS’ EQUITY
(1,575,726)
869,338
TOTAL LIABILITIES AND STOCKHOLDER’S EQUITY
$ 188,971
$ 1,727,647
The accompanying notes are an integral part of these consolidated financial statements.
Statement 2
ArtVentive Medical Group, Inc.
Consolidated Statements of Operations and Comprehensive Loss
For the Years Ended December 31, 2014 and December 31, 2013
For the year ended December 31, 2014
For the year ended
December 31, 2013
REVENUES
$ 111,732
$ NIL
COST OF GOODS SOLD
111,732
NIL
GROSS PROFIT
-
-
OPERATING EXPENSES
Exploration costs
-
-
Research and development
3,127,850
2,046,796
Selling, general and administrative
3,142,652
1,448,821
Depreciation expense
3,164
1,460
OPERATING LOSS BEFORE OTHER ITEMS AND INCOME TAXES
(6,273,666)
(3,497,077)
OTHER INCOME
Interest income
Income taxes
-
-
NET LOSS AVAILABLE TO COMMON STOCKHOLDERS
(6,272,967)
(3,496,291)
COMPREHENSIVE LOSS FOR THE PERIOD
$ (6,272,967)
$ (3,496,291)
BASIC AND DILUTED LOSS PER COMMON SHARE
$ (0.11)
$ (0.07)
WEIGHTED AVERAGE SHARES OUTSTANDING
57,352,546
52,346,677
The accompanying notes are an integral part of these consolidated financial statements.
Statement 3
ArtVentive Medical Group, Inc.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 2014 and December 31, 2013
For the year ended December 31, 2014
For the year ended
December 31, 2013
CASH FLOW FROM OPERATING ACTIVITIES
Net loss
$ (6,272,967)
$ (3,496,291)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH USED BY OPERATING ACTIVITIES
Non-cash expenses
-
-
Depreciation expense
3,164
1,460
Issuance of common stock and options for services
47,903
24,733
CHANGES IN OPERATING ASSETS AND LIABILITIES
Accounts receivable
(22,662)
-
Prepaid expenses
8,050
(3,050)
Inventory
3,165
(26,903)
Deposits
26,041
-
Accounts payable
(51,112)
262,459
Payroll taxes payable
-
(84)
Accrued expenses
37,500
-
NET CASH USED BY OPERATING ACTIVITIES
(6,220,918)
(3,237,676)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment
(1,573)
(11,634)
NET CASH USED BY INVESTING ACTIVITIES
(1,573)
(11,634)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash
4,200,000
4,358,000
Issuance of notes payable
500,000
-
Convertible note payable (see Note 5)
-
-
NET CASH PROVIDED BY FINANCING ACTIVITIES
4,700,000
4,358,000
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(1,522,491)
1,108,690
CASH, BEGINNING OF PERIOD
1,626,521
517,831
CASH, END OF PERIOD
$ 104,030
$ 1,626,521
CASH PAID DURING THE YEAR:
Interest paid
$ -
$ -
Income taxes paid
$ -
$ -
Non-cash investing and financing activites:
ACCRUAL OF STOCK ISSUANCE COST
$ 420,000
$ 435,800
The accompanying notes are an integral part of these consolidated financial statements.
Statement 4
ArtVentive Medical Group, Inc.
Consolidated Statements of Stockholders’ Equity (Deficit)
December 31, 2014 and December 31, 2013
Common
Share
Additional Paid in
Deficit Accumulated
Accumulated Other Stockholders’
Total Equity
Shares
Amount
For period
During Period
Income
(Deficit)
BALANCE, JANUARY 1, 2013
50,948,286
$ 50,949
$ 5,113,703
$ (4,745,956)
$ -
$ 418,696
Common shares issued in private placement
4,358,000
4,357
4,353,643
4,358,000
Common shares to be issued as finder’s fee
(435,800)
(435,800)
Stock options issued for services
24,733
24,733
Loss during year (2013)
(3,496,291)
(3,496,291)
BALANCE, DECEMBER 31, 2013
55,306,286
$ 55,306
$ 9,056,279
$ (8,242,247)
$ -
$ 869,338
Common shares issued in private placement
4,200,000
4,200
4,195,800
4,200,000
Common shares to be issued as finder’s fee
(420,000)
(420,000)
Stock options issued for services
47,903
47,903
Loss during year (2014)
(6,272,967)
(6,272,967)
BALANCE, DECEMBER 31, 2014
59,506,286
$ 59,506
$ 12,879,982
$ (14,515,214)
$ -
$ (1,575,726)
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
1.
BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying audited financial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission.
The information furnished in the financial statements includes normal recurring adjustments and reflects all adjustments which in the opinion of management are necessary for a fair presentation of such financial statements.
2.
ORGANIZATION
The Company was incorporated on January 23, 2007. The accounting and reporting policies of the Company conform to accounting principles generally accepted in the United States of America, and the Company’s fiscal year end is December 31.
The Company is a medical device corporation, focused on developing, manufacturing and marketing a family of Endoluminal Occlusion Devices (EOS™). Through its innovative, proprietary technology the Company has developed unique minimally invasive occlusion devices and procedures, bringing the current interventional, image guided techniques to a new level of sophistication, potentially resolving significant and unaddressed health issues. The EOS™ device being developed by the Company targets a substantive market demand in several major clinical areas, including women's health, peripheral and neurological vascular disorders, and interventional cardiology procedures.
To date, the Company’s activities have been committed to the development of the EOS™, intellectual property, animal studies, human studies, patent filings, and developing a regulatory strategy for initial clinical indications pertinent to European, manufacturing and FDA submissions and approvals, corporate operations and the raising of equity capital. The Company conducted the required human clinical studies during 2011 achieving 100% clinical and procedural success, validating the safety and efficiency of the ArtVentive EOSTM device. The Company received its CE Mark certification for the ArtVentive EOS™ Peripheral device on May 30, 2013. In 2014 the Company began commercialization and commenced shipping to its European distributors and preparing the foundation for marketing and sales into the USA markets following regulatory approval.
On August 3, 2011, the Company incorporated the ArtVentive Women’s Health Group, Inc., a wholly owned subsidiary of the Company and on December 3, 2014 the Company received FDA approval and began to prepare the foundation for its USA and global launch.
The accompanying notes are an integral part of these consolidated financial statements.
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
3.
SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the transactions of the Company and its subsidiary.
All inter-company accounts and transactions have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of the Company’s financial statements in conformity with accounting principles generally accepted in the United States 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 revenues and expenses during the reporting period. Such estimates include deferred tax assets arising as a result of the operating loss carry forwards. Actual results could differ from those estimates. The Company’s periodic filings with the Securities and Exchange Commission include, where applicable, disclosures of estimates, assumptions, uncertainties and markets that could affect the financial statements and future operations of the Company.
COMMON STOCK ISSUED FOR OTHER THAN CASH
Services purchased and other transactions settled in the Company’s common stock and stock options are recorded at the estimated fair value of the stock issued and options granted if that value is more readily determinable than the fair value of the consideration received.
EARNINGS PER SHARE OF COMMON STOCK
In accordance with accounting guidance now codified as FASB ASC Topic 260, “Earnings per Share,” basic earnings (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period.
Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during the period.
The Company had the following potential common stock equivalents at December 31, 2014:
Common stock warrants
4,200,000
Common stock options
305,000
Total common stock equivalents
4,505,000
Since the Company reflected a net loss in 2014 and 2013, respectively, the effect of considering any common stock equivalents, if outstanding, would have been anti-dilutive. A separate computation of diluted earnings (loss) per share is not presented.
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
The following table sets forth the computation of earnings per share:
December 31, 2014 December 31, 2013
Net income (loss) $ (6,272,967) $ (3,496,291)
Weighted average common shares outstanding 57,352,546 52,346,677
Net (loss) per share $ (0.11) $ (0.07)
PROPERTY AND EQUIPMENT
The Company records property and equipment at cost and uses straight-line depreciation methods.
Estimated Useful Lives
December 31, 2014
December 31, 2013
Computer equipment
Office furniture
5 years
7 years
$ 13,207
4,746
$ 11,634
4,746
Less accumulated depreciation
(5,467)
(2,303)
Net property and equipment
$ 12,486
$ 14,077
INVENTORY
The Company’s inventory is valued at the lower of cost or market using the first-in, first-out (FIFO) method. As of December 31, 2013 all inventory consisted of raw materials and as of December 31, 2014 all inventory consisted of finished goods.
As the Company begins its transition from the Research and development phase to production, management has estimated the cost of units sold to be equal to the revenue generated on those units. Other direct costs that may be associated with the production of these units has been reflected in Research and development expenses.
FOREIGN CURRENCY TRANSLATIONS
The Company’s functional and reporting currency is the US dollar. All transactions initiated in other currencies are translated into US dollars using the exchange rate prevailing on the date of transaction.
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
Monetary assets and liabilities denominated in foreign currencies are translated into the US dollar at the rate of exchange in effect at the balance sheet date. Unrealized exchange gains and losses arising from such transactions are deferred until realization and are included as a separate component of stockholders’ equity (deficit) as a component of other comprehensive income or loss. Upon realization, the amount deferred is recognized in income in the period when it is realized.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consist principally of funds on hand, on deposit with banks and liquid investment funds having maturity of three months or less at the time of the purchase. The Company has no cash equivalents. The Company had funds on deposit of $104,030 as of December 31, 2014.
RECEIVABLES
The accounts receivable balance of $22,662 as of December 31, 2014 is comprised of balances due from two customers; Medicor ($13,212) and Angiocare ($9,450). There were no accounts receivable as of December 31, 2013. No bad debts were written off.
REVENUE RECOGNITION
Revenue for the sale of goods in the course of the ordinary activities is measured at the fair value of the consideration received or receivable, net of returns. Revenue for sale of goods is recognized when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of the goods can be estimated reliably, there is no continuing involvement with the goods, and the amount of revenue can be measured reliably.
CONCENTRATION OF RISK
Certain financial instruments, which subject the Company to concentration of credit risk, consist of cash. The Company maintains cash balances at financial institutions, which, from time to time, may exceed Federal Deposit Insurance Corporation insured limits of $250,000. As of December 31, 2014, the Company had no deposits in excess of federally insured limits in its US bank. The Company has not experienced any losses with regard to its bank accounts and believes it is not exposed to any risk of loss on its cash in bank accounts.
4.
NOTE PAYABLE
On April 1, 2014, the Company borrowed $250,000 from an unrelated party and issued a note payable on or before December 31, 2014, with interest at 3% per annum. On December 31, 2014, the Company and the lender executed an extension of the note, which is now due on or before December 31, 2017. The interest remains at 3%. The lender may convert all of part of the debt, including interest, into common stock of the Company at any time at the rate of $1 per share.
On April 1, 2014, the Company borrowed $250,000 from an unrelated party and issued a note payable on or before December 31, 2014, with interest at 3% per annum. On December 31, 2014, the Company and the lender executed an extension of the note, which is now due on or before December 31, 2017. The interest remains at 3%. The lender may convert all of part of the debt, including interest, into common stock of the Company at any time at the rate of $1 per share.
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
December 31,
December 31, 2013
Note payable to a private party, with interest at 3.0%, with the balance, interest and principal, due December 31, 2017
$ 250,000
$ -
Note payable to a private party, with interest at 3.0%, with the balance, interest and principal, due December 31, 2017
250,000
-
Total
500,000
-
Less current maturities of long-term debt
-
-
Noncurrent maturities of long-term debt
$ 500,000
$ -
Maturities on long-term debt are as follows:
-
-
$ 500,000
$ 500,000
5.
SHARE CAPITAL
Effective April 22, 2008, the Company forward-split its issued common stock on a ratio of 5.8 shares for each original share. As a result of this transaction, 11,078,000 shares were issued. Effective February 12, 2010, the Company forward-split its issued common stock on a ratio of 1.65 shares for each one prior share. As a result of this transaction, 8,442,200 shares were issued.
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
Consideration for the issue of additional shares has been charged against additional paid in capital. The forward stock splits adjustments have been applied retroactively.
Effective February 7, 2013, 500,000 shares were issued in a private placement for the receipt of $500,000.
Effective March 5, 2013, 150,000 shares were issued in a private placement for the receipt of $150,000.
Effective April 22, 2013, 100,000 shares were issued in a private placement for the receipt of $100,000.
Effective June 4, 2013, 308,000 shares were issued in a private placement for the receipt of $308,000.
Effective July 16, 2013, 300,000 shares were issued in a private placement for the receipt of $300,000.
Effective August 30, 2013, 200,000 shares were issued in a private placement for the receipt of $200,000.
Effective September 11, 2013, 200,000 shares were issued in a private placement for the receipt of $200,000.
Effective September 22, 2013, 300,000 shares were issued in a private placement for the receipt of $300,000.
Effective October 3, 2013, 300,000 shares were issued in a private placement for the receipt of $300,000.
Effective October 21, 2013, 400,000 shares were issued in a private placement for the receipt of $400,000.
Effective November 7, 2013, 400,000 shares were issued in a private placement for the receipt of $400,000.
Effective November 26, 2013, 400,000 shares were issued in a private placement for the receipt of $400,000.
Effective December 6, 2013, 400,000 shares were issued in a private placement for the receipt of $400,000.
Effective December 24, 2013, 400,000 shares were issued in a private placement for the receipt of $400,000.
Effective January 7, 2014, 400,000 shares were issued in a private placement for the receipt of $400,000.
Effective February 11, 2014, 400,000 shares were issued in a private placement for the receipt of $400,000.
Effective March 6, 2014, 300,000 shares were issued in a private placement for the receipt of $300,000.
Effective May 23, 2014, 100,000 shares were issued in a private placement for the receipt of $100,000.
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
Effective June 24, 2014, 1,000,000 shares were issued in a private placement for the receipt of $1,000,000.
Effective July 23, 2014, 500,000 shares were issued in a private placement for the receipt of $500,000.
Effective August 29, 2014, 250,000 shares were issued in a private placement for the receipt of $250,000.
Effective September 29, 2014, 150,000 shares were issued in a private placement for the receipt of $150,000.
Effective September 30, 2014, 100,000 shares were issued in a private placement for the receipt of $100,000.
Effective October 15, 2014, 100,000 shares were issued in a private placement for the receipt of $100,000
Effective November 7, 2014, 80,000 shares were issued in a private placement for the receipt of $80,000.
Effective November 28, 2014, 70,000 shares were issued in a private placement for the receipt of $70,000.
Effective December 4, 2014, 250,000 shares were issued in a private placement for the receipt of $250,000.
Effective December 15, 2014, 250,000 shares were issued in a private placement for the receipt of $250,000
Effective December 29, 2014, 250,000 shares were issued in a private placement for the receipt of $250,000
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
6.
GOING CONCERN AND LIQUIDITY CONSIDERATIONS
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates, among other things, the realization of assets and satisfaction of liabilities in the normal course of business. As of December 31, 2014, the Company had a negative working capital balance of $1,113,219 and an accumulated deficit of $14,515,214. The Company intends to fund operations through equity financing arrangements, which may be insufficient to fund its capital expenditures, working capital and other cash requirements for the next twelve months.
The ability of the Company to implement its business plan is dependent upon, among other things, obtaining additional financing to continue operations, research, development and production of its product.
The Company has a present offering to a shareholder for 15,000,000 shares, of which 9,700,000 has been subscribed to date. The Company continues to offer the remaining 5,300,000 shares to that shareholder. With other potential future financing, management believes these initiatives alleviate the substantial doubt regarding the Company’s ability to continue as a going concern.
7. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
The Company has reviewed Accounting Standards Update (“ASU”) through ASU No. 2014-18 which contain technical corrections to existing guidance or affect guidance to specialized industries or entities. These updates have no current applicability to the Company or their effect on the financial statements would not have been significant.
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
8.
PROVISION FOR INCOME TAXES
The Company recognizes the tax effects of transactions in the year in which such transactions enter into the determination of net income, regardless of when reported for tax purposes. Deferred taxes are provided in the financial statements under ASC Topic 740 to give effect to the resulting temporary differences which may arise from differences in the bases of fixed assets, depreciation methods, allowances, and start-up costs based on the income taxes expected to be payable in future years. Exploration and development stage deferred tax assets arising as a result of net operating loss carryforwards have been offset completely by a valuation allowance due to the uncertainty of their utilization in future periods. Tax operating loss carryforwards generated during the period from January 23, 2007 (date of inception) through December 31, 2014 of approximately $14,492,206 will begin to expire in 2027. Accordingly, deferred tax assets of approximately $6,074,247 (2013 - $3,407,430) related to net operating loss carry-forwards and $99,915 related to stock-based compensation were offset by the valuation allowance in the same amount.
The Company adopted the provisions of FASB Interpretation No. 48 Accounting for Uncertainty in Income Taxes, on January 23, 2007. As a result of the implementation of Interpretation 48, the Company recognized no increase in the liability for unrecognized tax benefits.
The Company has no tax positions at December 31, 2014 and 2013 for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
The Company’s tax returns for the years ended December 31, 2014, 2013, 2012 and 2011 are open for examination under Federal Statute of Limitations and for the years ended December 31, 2014, 2013 and 2012 under the State of California Statute of Limitations.
The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company had no accruals for interest and penalties since inception.
Components of income tax benefits are as follows:
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
A reconciliation of the provision for income tax expense with the expected income tax computed by applying the federal statutory income tax to income before provision for income taxes is as follows:
9.
WARRANTS AND OPTIONS
During the fiscal year ended December 31, 2014, the Company granted 4,200,000 warrants to purchase shares of Common Stock which all have a 1 year exercise term. The Company valued these warrants utilizing a Black-Scholes option pricing model and the fair value was recorded in additional paid-in capital.
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
The following is a summary of the Company’s warrant activity:
Warrants
Weighted Average Exercise Price
Granted-2013
4,358,000
$ 1.50
Exercised-2013
-
-
Forfeited-2013
(1,500,000)
$ 1.50
Outstanding - December 31, 2013
4,358,000
$ 1.50
Exercisable - December 31, 2013
4,358,000
$ 1.50
Warrants
Weighted Average Exercise Price
Granted-2014
4,200,000
$ 1.50
Exercised-2014
-
-
Forfeited-2014
(4,358,000)
$ 1.50
Outstanding - December 31, 2014
4,200,000
$ 1.50
Exercisable - December 31, 2014
4,200,000
$ 1.50
Warrants outstanding and exercisable at December 31, 2014 are as follows:
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
Stock option activity is as follows:
Effective November 2, 2010, the Board of Directors of the Company granted 50,000 non-statutory stock options to a former consultant at an exercise price of $.001 per share with the vesting date of November 2, 2013 and an expiration date of November 2, 2016.
Effective February 1, 2013, the Board of Directors of the Company granted 20,000 non-statutory stock options to a current consultant at an exercise price of $1.00 per share with the vesting date of February 1, 2013 and an expiration date of February 1, 2018.
Effective February 1, 2013, the Board of Directors of the Company granted 5,000 non-statutory stock options to a current consultant at an exercise price of $1.00 per share with the vesting date of February 1 2013 and an expiration date of February 1, 2018.
Effective February 1, 2013, the Board of Directors of the Company granted 10,000 non-statutory stock options to a current consultant at an exercise price of $1.00 per share with the vesting date of February 1 2013 and an expiration date of February 1, 2018.
Effective March 1, 2013, the Board of Directors of the Company granted 10,000 non-statutory stock options to a current consultant at an exercise price of $1.00 per share with the vesting date of March 1, 2013 and an expiration date of March 1, 2018.
Effective December 1, 2013, the Board of Directors granted 200,000 stock options deemed an Incentive Stock Option (ISO) to a current employee, at an exercise price of $1.00 per share with 25% exercisable on January 1, 2014; and an additional 25% exercisable on each of the next succeeding three anniversaries of December 1, on a cumulative basis, so that the Option, or any unexercised portion, shall be fully exercisable on and after December 1, 2017. The stock options have an expiration date of November 30, 2023.
Effective December 27, 2013, the Board of Directors of the Company granted 10,000 non-statutory stock options to a current consultant at an exercise price of $1.00 per share with the vesting date of December 27, 2013, and an expiration date of December 27, 2018.
Effective December 27, 2013, the Board of Directors of the Company granted 10,000 non-statutory stock options to a current consultant at an exercise price of $1.00 per share with the vesting date of December 27, 2013, and an expiration date of December 27, 2018.
During the period that the options were issued, the Company had no public trading activity for the Company’s common stock. However, the majority shareholder sold in private transactions shares at $.90 per share. In order to value the Company’s options, the Company chose to use the minimum value method, even though the Company is a public company since there was no measurable trading activity. The fair value of the options was recorded in additional paid-in capital.
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
Warrant activity is as follows:
Warrants issued during 2013, totaling 4,358,000, expired during 2014.
Effective January 7, 2014, 400,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year.
Effective February 11, 2014, 400,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year.
Effective March 6, 2014, 300,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year.
Effective May 23, 2014, 100,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year.
Effective June 24, 2014, 1,000,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year.
Effective July 23, 2014, 500,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year
Effective August 29, 2014, 250,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year
Effective September 29, 2014, 150,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year
Effective September 30, 2014, 100,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year
Effective October 15, 2014, 100,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year
Effective November 7, 2014, 80,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
Effective November 28, 2014, 70,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year
Effective December 4, 2014, 250,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year
Effective December 15, 2014, 250,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year.
Effective December 31, 2014, 250,000 warrants were issued. The warrants allow the purchase of common shares at an exercise price of $1.50. There is no vesting period, and the warrants expire in 1 year.
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
Options outstanding and exercisable at December 31, 2014 are as follows:
Options
Weighted Average Exercise Price
Granted-2013
255,000
$
1.00
Exercised-2013
-
-
Forfeited-2013
-
$
-
Outstanding - December 31, 2013
305,000
$
0.836
Exercisable - December 31, 2013
105,000
$
0.524
Options
Weighted Average Exercise Price
Granted-2014
-
$
-
Exercised-2014
-
-
Forfeited-2014
-
-
Outstanding - December 31, 2014
305,000
$
0.836
Exercisable - December 31, 2014
155,000
$
0.678
Options outstanding and exercisable at December 31, 2014 are as follows:
ArtVentive Medical Group, Inc.
Notes to Consolidated Financial Statements
For the Year Ended December 31, 2014
10.
SUBSEQUENT EVENTS
The Company evaluated all events or transactions that occurred after December 31, 2014, up through the date these consolidated financial statements were issued.
Effective January 1, 2015, the Board of Directors granted 50,000 stock options deemed an Incentive Stock Option (ISO) to a current employee, at an exercise price of $1.00 per share with 25% exercisable on January 1, 2016; and an additional 25% exercisable on each of the next succeeding three anniversaries of January 1, on a cumulative basis, so that the Option, or any unexercised portion, shall be fully exercisable on and after January 1, 2019. The stock options have an expiration date of January 1, 2025.
Effective January 5, 2015, the Company issued 250,000 shares in a private placement for a receipt of $300,000
Effective January 23, 2015, the Company issued 250,000 shares in a private placement for a receipt of $300,000
ITEM 9A.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Our Disclosure Controls and Internal Controls
Under the supervision and with the participation of senior management, including the Company’s CEO and CFO, Jim Graham, the management conducted an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this annual report (the “Evaluation Date”). Based on this evaluation, the CEO and CFO concluded as of the Evaluation Date that, due to the small size of the Company and lack of segregation of duties, the disclosure controls and procedures were not effective such that the information relating to the Company including its consolidated subsidiaries, required to be disclosed in its Securities and Exchange Commission (“SEC”) reports (i) is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) is accumulated and communicated to management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.
Management’s Annual Report on Internal Control over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. The internal control process has been designed, under management’s supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company’s financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.
Management conducted an assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2014, including (i) the control environment, (ii) risk assessment, (iii) control activities, (iv) information and communication, and (v) monitoring. Based on this assessment, management has determined that the Company’s internal control over financial reporting as of December 31, 2014 was not effective due to the small size of the Company and lack of segregation of duties.
The Company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance of achieving their control objectives. In evaluating the effectiveness of the Company’s internal control over financial reporting, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”-1992) in Internal Control - Integrated Framework.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by its registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.
Officers’ Certifications
Appearing as exhibits to this Annual Report are “Certifications” of the Company’s Chief Executive Officer and Chief Financial Officer. The Certifications are required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (the “Section 302 Certifications”). This section of the Annual Report contains information concerning the Controls Evaluation referred to in the Section 302 Certification. This information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
Changes in Internal Control over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting that occurred during the quarter ended December 31, 2014, that have materially affected or are reasonably likely to materially affect the internal control over financial reporting.
ITEM 9B.
ITEM 9B. OTHER INFORMATION.
Within the next 60 days, to strengthen the Company’s manufacturing capacity, the Company expects to enter into a manufacturing partnership with the international medical device leader, Creganna-Tactx Medical. Creganna is headquartered in Galway, Ireland with offices and manufacturing facilities in Singapore, Costa Rica and the USA embracing over 1800 employees. Creganna’s management has an exceptional range of professional and hands-on experience in medical device design, development, regulation, and manufacturing.
PART II
ITEM 10
ITEM 10
DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Executive Officers, Directors and Key Employees
Directors serve until the next annual meeting of the stockholders; until their successors are elected or appointed and qualified, or until their prior resignation or removal. Officers serve for such terms as determined by the board of directors. Each officer holds office until such officer’s successor is elected or appointed and qualified or until such officer’s earlier resignation or removal.
The following table sets forth certain information, as of December 31, 2014, with respect to the directors and executive officers.
Name
Positions Held
Age
H. James Graham
CEO, CFO, Chairman
Leon Rudakov
President, CTO, Director
Mr. Graham has held the positions of CEO and director since April 28, 2008. He resigned as CEO on February 11, 2010, but agreed to continue on as President and Chairman of the Board. Dr. Rudakov was appointed as CEO and CTO and as a member of the Board of Directors on February 11, 2010. On February 11, 2011, Mr. Graham and Dr. Rudakov resigned from their respective positions as President, CEO and CFO. On February 11, 2011, Mr. Graham was appointed CEO and CFO, and Dr. Rudakov was appointed President.
Certain biographical information of our directors and officers is set forth below as follows;
H. James Graham has acted as President and CEO of a number of successful corporations, including start-up companies. Since 2010, Mr. Graham has led corporations through the development of global business and marketing strategies in addition to drafting and negotiating international management and distribution agreements. In 2000, Mr. Graham co-founded CyberBroadcastOne Inc., an interactive broadcast company based on the foundation of education, entertainment and commerce. Mr. Graham served as the President and CEO through to 2006.
From 1993 to 2007, he served as a member of the Board of Directors of Kodiak Oil and Gas, an emerging oil and gas company with its head office in Denver, Colorado and operations throughout America. The Company’s shares trade on the New York Stock Exchange under the symbol KOG.
In 1998, Mr. Graham co-founded Pyrotech International Ltd., Singapore, a corporation committed to the development of a revolutionary fire fighting gel recognized globally under the brand name of Barricade. Mr. Graham served as CEO from 1998 to 2000. Previously, Mr. Graham co-founded and was the President of Tri-Pacific Resources Corporation, a Hong Kong based technology corporation specializing in onboard power supply and energy management systems.
Mr. Graham served as President of Hunter Douglas Canada, Inc., a vertically integrated supplier of aluminum and home fashions products to the international market. Hunter Douglas acquired the HJ Graham Company Ltd., which was previously founded and headed by Mr. Graham until the acquisition. Mr. Graham also served on the Board of Directors of Bradbury International, Ltd., a diversified Canadian financial investment corporation, which traded on the Vancouver Stock Exchange.
Dr. Leon Rudakov has more than 25 years’ experience in R&D, engineering, product development and project management. He holds a Ph.D. in mechanical engineering from the Moscow Institute of Aviation, and completed Business Executive Program at the Fuqua Business School of the Duke University, NC. He held several executive management and R&D positions with international corporations and start-up companies.
In 2003 Dr. Rudakov joined Merlin Medical, a Singapore-based company, where he held the position of vice-president of Research and Development and chief technology officer. He was responsible for the company's business strategy, and directed its product development and regulatory pathway. Under his leadership the Company developed a new, unique intracranial device for the treatment of intracranial aneurysms with potential for the treatment of ischemic disease. He also established the Company’s intellectual property and led the device development from the initial concept formulation to its production and the clinical studies in several European Union countries. Dr. Rudakov also developed the coronary stent "X'Calibur" and its delivery catheter through to its CE Mark approval and current market presence in Asia.
Dr. Rudakov also served as a Director of Engineering with the Silicon Valley corporation CardioVasc Inc., and led a cross functional group of engineers through the production of several coronary devices, from development to commercial implementation. Among these CardioVasc projects, Dr. Rudakov led the development of a new coronary stent and delivery system, which was subsequently sold to the Japanese corporation "Goodman Co". He also participated in the device regulatory process leading to its approval in Japan.
Additionally, Dr. Rudakov, managed development of a coated stent-graft, for the treatment of failing saphenous vein graft (SVG). This device has received CE Mark and is marketed and sold in the EU by the CardioVasc Corporation.
Dr. Rudakov has served as a Regional Director of Operations for Booz Allen & Hamilton, a worldwide leader in management consulting. He managed the company's operations and regional business development, while working with key corporate clients, providing strategic business planning, corporate restructuring and re-engineering.
In 2009, Dr. Rudakov joined ArtVentive, Inc., of San Marcos, California, as Chief Executive Officer and Chief Technology Officer.
John Rappe brings over twenty years of experience in marketing, sales management, sales training and business development in the medical device industry. His background includes global responsibilities in marketing, working with distribution partners, direct sales, and management with small and large companies alike.
Mr. Rappe began his career with Dentsply International where he undertook sales and marketing roles of increasing responsibility over an eight-year period. Following his tenure with Dentsply, he joined the Young Innovations Corporation, where he was responsible for the Company’s direct sales organization, and led Young Innovations sales to six consecutive years of record revenues. During his time at Young Innovations, Mr. Rappe spearheaded a global branding initiative across two business units and was responsible for all aspects of sales.
Henk van der Laak brings extensive experience to his position heading the Company’s marketing and sales in Europe. He was most recently with Hemocue AB, a producer of diagnostic testing devices for the healthcare industry, and previously served in European sales leadership roles with SenoRx, Inc. and the Cordis Corporation, a Johnson and Johnson Company.
Mr. van der Laak will lead and assist the Company’s Distribution partners, analyze and define market opportunities and will also be responsible for clinical training, leadership, sales training and market development. This is essential in meeting the European demand for the EOS™ Device and the long-range growth of the Company’s European business.
Term of Office
Company directors are elected for one-year terms, to hold office until the next annual general meeting of the shareholders, or until removed from office in accordance with the bylaws of the Company. Officers are appointed by the board of directors and hold office until removed by the board.
Significant Employees
The Company has no significant employees other than the officers and directors described above.
Employment Agreement
On February 2, 2010, the Company entered into an Employment Agreement with its then Chief Executive Officer (CEO) and Chief Technology Officer (CTO), Dr. Leon Rudakov. Under the terms of the Employment Agreement, Dr. Rudakov was compensated with an annual salary of $120,000, plus benefits. As of February 1, 2011, the base salary was amended to $170,000 per annum to reflect his current positions as the President and CTO. The agreement includes other employment benefits. Effective June 1, 2013, the agreement was amended to reflect a term to December 31, 2018, with an annual salary of $250,000 per annum.
On April 1, 2010, the Company entered into a Consulting Agreement with its then President and Chairman of the Board, H. James Graham. Under the terms of a consulting Agreement, effective March 1, 2010, Mr. Jim Graham was compensated with annual base fee of $100,000 per annum, plus benefits. As of February 1, 2011, the agreement was amended to reflect Mr. Graham’s current positions of Chief Executive Officer, Chief Financial Officer and Chairman of the Board of Directors to reflect a base annual fee of $180,000 per annum. Effective June 1, 2013, the agreement was amended to reflect a term to December 31, 2018, with an annual fee of $260,000 per annum.
Audit Committee
The Company does not currently have a standing audit committee, an audit committee financial expert, or any committee or person performing a similar function. The Corporation has limited working capital and no revenues. Management does not believe that it would be in the best interest of the Company, at this time to retain independent directors to sit on an audit committee. When appropriate, the Company will retain independent directors and form an audit, compensation committee in addition to other pertinent committees.
Board of Directors
The Company does not have an independent director at this time. Directors are reimbursed for expenses, if any, for attendance at meetings of the Board of Directors. The Board of Directors may designate from among its members an executive committee and one or more other committees but has not done so to date. The Company does not have a nominating committee or a nominating committee charter. Further, the Company does not have a policy with regard to the consideration of any director candidates recommended by security holders. To date this has not been a problem as no security holders have made any such recommendations. Directors perform all functions that would otherwise be performed by committees. Given the present size of the board it is not practical for the Company to have such committees.
Compliance with Section 16(a) of the Exchange Act
The Company’s common stock is not registered pursuant to Section 12 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Accordingly, officers, directors and principal shareholders are not subject to the beneficial ownership reporting requirements of Section 16(a) of the Exchange Act.
Code of Ethics
The Company adopted a Code of Conduct and Ethics filed on September 13, 2013.
ITEM 11
ITEM 11
EXECUTIVE COMPENSATION
The following summary compensation table indicates the compensation earned during the years ended December 31, 2014 and 2013 by each person who served as a principal executive officer or principal financial officer.
Name and Principal Position
Year
Salary ($)
Bonus ($)
Stock Awards ($)
Option Awards ($)
NonEquity Incentive Plan Compensation ($)
Nonqualified Deferred Compensation Earnings ($)
All Other Compensation (4)
Total
Leon Rudakov(1)
$250,000
$216,667
$250,000
$216,667
H. James Graham(2)
$260,000
$226,667
$260,000
$226,667
(1)
Leon Rudakov has served as President and as Chief Technology Officer since February 2, 2011. Dr. Rudakov previously served as CEO from February 11, 2010, until February 2, 2011.
(2)
H. James Graham has served as CFO since July 19, 2010. Mr. Graham has served as CEO since February 2, 2011. Mr. Graham previously served as CEO from April 29, 2008 until February 11, 2010.
There are no annuity, pension or retirement benefits proposed to be paid to officers, directors, or employees of the corporation in the event of retirement at normal retirement date pursuant to any presently existing plan provided or contributed to by the corporation or any of its subsidiaries.
Director Compensation
Members of the Company’s Board of Directors do not receive compensation, as such, at this time, but are paid consulting fees for specific services as incurred.
Stock Option Grants
As of the date of this Report, the Company has granted 305,000 stock options to consultants for services rendered.
Indemnification
Under the bylaws of the Company, it may indemnify an officer or director who is made a party to any proceeding, including a lawsuit, because of his position, if he acted in good faith and in a manner he reasonably believed to be in the Company’s best interest. The Company may advance expenses incurred in defending a proceeding. To the extent that the officer or director is successful on the merits in a proceeding as to which he is to be indemnified, we must indemnify him against all expenses incurred, including attorney’s fees. With respect to a derivative action, indemnity may be made only for expenses actually and reasonably incurred in defending the proceeding, and if the officer or director is judged liable, only by a court order. The indemnification is intended to be to the fullest extent permitted by the laws of the State of Nevada.
Regarding indemnification for liabilities arising under the Securities Act, which may be permitted to directors or officers under Nevada law, the Company is informed that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy, as expressed in the Act and is, therefore, unenforceable.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information with respect to the beneficial ownership of our common stock known by us as of December 31, 2014, by:
·
each person or entity known by us to be the beneficial owner of more than 5% of our common stock;
·
each of our directors;
·
each of our executive officers; and
·
all of our directors and executive officers as a group.
The percentages in the table have been calculated on the basis of treating as outstanding for a particular person, all shares of our common stock outstanding on such date and all shares of our common stock issuable to such holder in the event of exercise of outstanding options, warrants, rights or conversion privileges owned by such person at said date which are exercisable within 60 days of February 2, 2013. Except as otherwise indicated, the persons listed below have sole voting and investment power with respect to all shares of our common stock owned by them, except to the extent such power may be shared with a spouse.
(1)
As used herein, the term beneficial ownership with respect to a security is defined by Rule 13d-3 under the Securities Exchange Act of 1934 as consisting of sole or shared voting power (including the power to vote or direct the vote) and/or sole or shared investment power (including the power to dispose or direct the disposition of) with respect to the security through any contract, arrangement, understanding, relationship or otherwise, including a right to acquire such power(s) during the next 60 days.
(2)
Percentage based upon 60,006,286 shares of common stock issued and outstanding as of March 26, 2015.
(3)
H. James Graham is a beneficial shareholder of Cassin Route Holdings and these shares are also included in the calculation of ownership for purposes of disclosing the amount of shares controlled by the officers and directors.
(4)
H. James Graham is a beneficially holder of Cassin Route Holdings. Those shares are being including in the calculation of the number of shares controlled by the officers and directors
(5)
H. James Graham is a beneficial shareholder of Cassin Route Holdings and these shares are included in the calculation of the number of shares controlled by the officers and directors
ITEM 13
ITEM 13
CERTAIN RELATIONSHIP AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Other than as set forth in this section, none of the following parties has, since the date of incorporation, any material interest, direct or indirect, in any transaction with the Company or in any presently proposed transaction that has or will materially affect the Company:
* Director or Officer;
* Any person proposed as a nominee for election as a director;
*
Any person who beneficially owns, directly or indirectly, shares carrying more than 10% of the voting rights attached to our outstanding shares of common stock;
* Any promoters;
*
Any relative or spouse of any of the foregoing persons who has the same house as such person.
ITEM 14
ITEM 14
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed to the Company by its principal accountant for services rendered during the fiscal year ended December 31, 2014 and 2013 is set forth in the table below:
Fee Category
Fiscal year ended December 31, 2014
Fiscal year ended
December 31, 2013
Audit fees (1)
$27,000
$23,000
Audit-related fees (2)
Tax fees (3)
All other fees (4)
Total fees
$27,000
$23,000
(1) Audit fees consist of fees incurred for professional services rendered for the audit of our financial statements, for reviews of the interim financial statements included in the Company’s quarterly reports on Form 10-Q and for services that are normally provided in connection with statutory or regulatory filings or engagements.
(2) Audit-related fees consist of fees billed for professional services that are reasonably related to the performance of the audit or review of the Company’s consolidated financial statements, but are not reported under “Audit fees.”
(3) Tax fees consist of fees billed for professional services relating to tax compliance, tax planning, and tax advice.
(4) All other fees consist of fees billed for all other services.
Audit Committee’s Pre-Approval Practice
The Company does not have an audit committee at this time. The board of directors currently performs the function of an audit committee. Section 10A (i) of the Securities Exchange Act of 1934, as amended, prohibits the Company’s auditors from performing audit services for the Company as well as any services not considered to be audit services unless such services are pre-approved by the audit committee or, in cases where no such committee exists, by the board of directors (in lieu of an audit committee) or unless the services meet certain de minimis standards.
PART IV
ITEM 15
ITEM 15
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
Exhibits
The following exhibits are included as part of this report:
(1)
Filed with the Securities and Exchange Commission on June 29, 2007, as an exhibit, numbered as indicated above, to the Registrant’s registration statement on the Registrant’s Registration Statement on Form SB-2 (file no. 333-144226), which exhibit is incorporated herein by reference.
(2)
XBRL Information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended and otherwise is not subject to liability under these sections.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
ARTVENTIVE MEDICAL GROUP, INC.
March 30, 2015
/s/ Dr. Leon Rudakov
Dr. Leon Rudakov
President, CTO
/s/ H. James Graham
H. James Graham
CEO, CFO
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ Dr. Leon Rukaov
Date: March 30, 2015
Dr. Leon Rudakov, Director
/s/ H. James Graham
Date: March 30, 2015
H. James Graham, Chairman