Quarterly report pursuant to Section 13 or 15(d)

RESEARCH AND DEVELOPMENT

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RESEARCH AND DEVELOPMENT
6 Months Ended
Jun. 30, 2017
Notes to Financial Statements  
RESEARCH AND DEVELOPMENT

Devicix Prototype Manufacturing Agreement

 

In November 2013, the Company accepted a proposal from Devicix, a Minneapolis, Minnesota based FDA registered contract designer and developer, to develop a commercially viable prototype of its product that could be used to receive regulatory approval from the FDA and other international agencies for use on humans to relieve pain associated with Facet Joint Syndrome. Through June 30, 2017, we have paid approximately $1,769,000 to Devicix, of which approximately $16,000 was included in accounts payable as of June 30, 2017.

 

The development work commenced in December 2013. The total estimated cost of this work at contract signing was $960,000; however, the terms of the proposal allow either the Company or the designer and developer to cancel the development work with 10-days’ notice.

 

The Company incurred expenses of approximately $32,000 and $239,000, respectively, for the three and six months ended June 30, 2017. The Company incurred expenses of approximately $119,000 and $237,000, respectively, for the three and six months ended June 30, 2016.

 

Denervex Generator Manufacturing Agreement

 

The DenerveX device requires a custom electrocautery generator for power. As described in Note 6, in November 2014, the Company contracted with Bovie to customize one of their existing electrocautery generators for use with DenerveX Device, and then manufacture that unit on a commercial basis once regulatory approval for the DenerveX is obtained. The Bovie agreement requires a base $295,000 development fee to customize the unit, plus additional amounts if further customization is necessary beyond predetermined estimates.

 

The Company paid approximately $0 and $31,000, respectively, for the three and six months ended June 30, 2017 to Bovie. The Company paid approximately $24,000 for the three and six months ended June 30, 2016 to Bovie. Through June 30, 2017, we have paid approximately $420,000 to Bovie.

 

Nortech Manufacturing Agreement

 

In November 2014, the Company selected Nortech Systems Inc. (“Nortech”), a Minneapolis, Minnesota based FDA registered contract manufacturer, to produce 315 DenerveX devices from the prototype supplied by Devicix for use in final development and clinical trials. The agreement with Nortech includes agreed upon per unit prices for delivery of the devices.

 

Actual work on development of the final units began in November 2014. The Company paid approximately $68,000 and $140,000, respectively, to Nortech for the three and six months ended June 30, 2017. The Company paid approximately $83,000 and $112,000, respectively, to Nortech for the three and six months ended June 30, 2016.

 

Through June 30, 2017, we have incurred expenses of approximately $884,000 to Nortech, of which approximately $39,000 was included in accounts payable as of June 30, 2017.