vyco~FinancialAnalysis:
We believe Vycor is in the early stages of hyper-growth, making predicting and appropriately valuing the
business quite challenging. However, we have modeled the business and its likely current "fair" value based
upon the following assumptions.
VBAS Revenue and Gross Margin Assumptions:
• We forecast total units for FY11 (not including China) to be 884, at an average net selling price of $428, to
growing slightly in the US to 1,000 for 2012. This is because FY11 saw an inventory build up at new
facilities - such buildups can often results in flat or down unit sales comparisons until normalized sales rates
are realized. This will be offset by new customers coming on board, but predicting both inventory balancing
and new inventory build-ups is still nearly impossible. For FY13 we are forecasting 3,000 units in the US.
• We expect Chinese sales to begin in FY12 (the first order was shipped in 2011 for a value of $170,000) and
result in 9,000 units sold. As is evidenced by our forecast, given the distribution relationship with Vycor’s
Chinese partner, we expect these units will be sold at significantly lower pricing but in significantly higher
volumes. For FY13 we are forecasting 10,000 units in China.
• We expect normalized COGS of $25/unit throughout the forecast horizon. Though we believe these margins
could be improved, we are not forecasting such an improvement until volume increases suggest it is likely.
• Vycor has signed numerous VBAS distribution agreements in other regions including Japan, Russia, India
and etc. Such agreements come with annual minimums and we believe those minimums can drive unit sales
of 2,600 units in 2012 and 4,000 in 2013. We believe those will come at lower margins as is typical of
distributed (vs. directly sold) products, but should still entail healthy incremental gross profits.