UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

For the transition period from ___________ to ___________

Commission file number:001-34932

VYCOR MEDICAL, INC.

(Exact name of registrant as specified in charter)

951 Broken Sound Boulevard, Suite, 320 Boca Raton, FL 33487

(Address of principal executive offices) (Zip Code)

Registrant’s telephone Number: (561) 558-2000

Securities registered pursuant to section 12(g) of the Act:

Common Stock par value $.0001

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. [  ] Yes [  ][X] No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. [  ] Yes [  ][X] No

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. [  ][X] Yes [  ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [  ]

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”, “non-accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). [  ] Yes [X] No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $3,091,340$1,706,421 (assuming $0.30$0.16 per share)

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date 23,140,69425,288,550 shares of common stock par value $0.0001 as of March 22, 201920, 2020

DOCUMENTS INCORPORATED BY REFERENCE: NONE

TABLE OF CONTENTS

PART I

This Form 10-K contains some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertainties. Forward-looking statements include statements regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategies, (c) anticipated trends in our industries, (d) our future financing plans and (e) our anticipated needs for working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. These statements may be found under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this Form 10-K generally. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results.

Any or all of our forward-looking statements in this report may turn out to be inaccurate. They can be affected by inaccurate assumptions we might make or by known or unknown risks or uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Form 10-K generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to publicly update any forward-looking statements, whether as the result of new information, future events, or otherwise.

ITEM 1. DESCRIPTION OF BUSINESS.

1. Organizational History

The Company was formed as a limited liability company under the laws of the State of New York on June 17, 2005 as “Vycor Medical LLC”. On August 14, 2007, we converted into a Delaware corporation and changed our name to “Vycor Medical, Inc.”. The Company’s listing went effective on February 2009 and on November 29, 2010 Vycor completed the acquisition of substantially all of the assets of NovaVision, Inc. (“NovaVision”) and on January 4, 2012 Vycor, through its wholly-owned NovaVision subsidiary, completed the acquisition of all the shares of Sight Science Limited (“Sight Science”), a previous competitor to NovaVision.

2. Overview of Business

Vycor is dedicated to providing the medical community with innovative and superior surgical and therapeutic solutions and operates two distinct business units within the medical device industry. Vycor Medical designs, develops and markets medical devices for use in neurosurgery. NovaVision provides non-invasive rehabilitation therapies for those who have vision disorders resulting from neurological brain damage such as that caused by a stroke. Both businesses adopt a minimally or non-invasive approach. Both technologies have strong sales growth potential, address large potential markets and have the requisite regulatory approvals. The Company has 6864 issued or allowed patents and a further 69 pending. The Company leverages joint resources across the divisions to operate in a cost-efficient manner.

The Company periodically engages in discussions with potential strategic partners for or purchasers of each or both of our operating divisions.divisions, and is evaluating its options regarding NovaVision.

Vycor Medical

Vycor Medical designs, develops and markets medical devices for use in neurosurgery. Vycor Medical’s ViewSite Brain Access System (“VBAS”) is a next generation retraction and access system that was fully commercialized in early 2010 and is the first significant technological change to brain tissue retraction in over 50 years in contrast to significant development in most other neuro-surgical technologies. Vycor Medical is ISO 13485:2016 certified and MDSAP (Medical Device Single Audit Program), certified, and VBAS has U.S. FDA 510(k) clearance and CE Marking for Europe (Class III) for brain and spine surgeries, and regulatory approvals in Australia, Brazil, Canada, China, Korea, Japan, Russiaa number of other international markets. Vycor Medical has 26 granted and Taiwan.9 pending patents.

NovaVision

NovaVision provides non-invasive, computer-based rehabilitation targeted at a substantial and largely un-addressed market of people who have lost their sight as a result of stroke or other brain injury, and has 4538 granted patents.

Competition

The VBAS device is both a brain access system and a retractor and is therefore unique with no direct competitors. Competitive manufacturers of brain retractors include Cardinal Health (V. Mueller line), Aesculap, Integra Life Science and Codman (Division of Johnson & Johnson). Nico Corporation has a brain access device specifically designed to work with its Myriad resection and suction product.

NovaVision provides restoration therapies (VRT and NeET) and compensation or saccadic therapies (NeuroEyeCoach) for those suffering vision loss as a result of neurological trauma. The other therapy type for this condition is substitution (optical aids such as prisms) and is not considered by NovaVision as competition. In restoration, there are a few very small companies or entities offering some form of vision rehabilitation product in Germany. Within compensation there are no real direct competitors. Other companies in the general rehabilitation space include RevitalVision, PositScience and Dynavision. In the professional market, NovaVision competes with aggregator products or those that provide a range of non-specific therapies, such a Rehacom, Sanet Vision Integrator and Bioness BITS. NovaVision’s products are dedicated to vision.

Strategy

The Company is executingcontinuing to execute on a plan to achieve revenue growth and a reduction in cash operating losses¹ and, while operating expenses are generally greater in the first two quarters, the Company generated a cash operating profit¹ in both the 3^rd and 4^th quarters.. For Vycor Medical this plan includes in particular: increasing market penetration in the US through targeted focus group programs with surgeons, closer cooperation with complementary product manufacturers and tight managementbroadening of the distribution network;network and programs to increase penetration in exiting hospitals; increasing international growth particularly in Europe and other territories where we are not represented or under represented; and continued new product development. The first phase of the modification of the existing VBAS product range to make it more easy to usecompatible with the most common IGS systems was completed in September 2017 and has been well received by surgeons; we are continuing our roll-out of this model throughsurgeons, resulting in increased hospital inventories.penetration and revenues particularly in the US. The second phase of the development of further IGS integration is in process and will then be completed in 2019.subject to regulatory clearances and approvals. Upon regulatory approval and product release of this new VBAS the Company intends to conduct a multi-center study to provide additional clinical data on the product. We will also be exploring with surgeons and focus groups additional selected development work targeted at increasing the ease and applicability of our products to additional common procedures. For NovaVision, given the company’s resources, and the large size and diversity of its end markets, we believe that the most efficient way to tackle the distribution of its broad range of patient and professional products is by partnering with entities that have either direct access to the end users or established distribution channelsa desire and financial wherewithal to leverage the NovaVision therapy platform. Management is determined to reduce the losses it is incurring in the various target marketsthis division and the financial resourcesis open to market and distribute the products effectively. The Company is in the process of identifying and talking to such partners. Thea broad range of alternatives for NovaVisionwhich could comprise distribution and marketing partnerships, licensing, merger, sale and/or a significant restructuring of its activities.activities including closure of part of its operations.

Manufacturing

Vycor Medical uses a sub-contract manufacturer to manufacture, package, label and sterilize its VBAS products. The Company has migrated all its VBAS manufacturing to Life Science Outsourcing, Inc. in Brea, California that is FDA-registered, ISO 13485:2016 certified and meets other applicable ISO standards and certifications.

Intellectual Property

Patents

Vycor Medical maintains a portfolio of patent protection on its methods and apparatus for its Brain and Spine products and technology in the form of issued patents and applications, both domestically and internationally, with a total of 2326 granted/allowed and 69 pending patents.

NovaVision maintains a portfolio of patent protection on its methods and apparatus in the form of issued patents and applications, both domestically and internationally, with a total of 4538 granted patents.

Trademarks

VYCOR MEDICAL is a registered trademark andVIEWSITE is a common law trademark.

NovaVision maintains a portfolio of registered trademarks forNOVAVISION, NOVAVISION VRT,VRT VISION RESTORATION THERAPY and NEUROEYECOACH, amongst others, along with relevant logos, both in the US and internationally.

3. Other Matters

Product Liability Insurance

We presently have Product Liability insurance for both Vycor Medical and NovaVision.

¹Operating Loss or Profit before Depreciation, Amortization and non-cash Stock Compensation

Government Regulations

We are committed to an integrated total quality management system. We believe that we have completed the necessary procedures and Vycor Medical is certified to the ISO standards expected of medical device manufacturers as follows:

ISO 13485:2016 Medical Devices — Quality Management Systems

The certification of a quality management system to ISO 1348:20165,2016, specifically for medical devices, is advantageous and often essential for medical companies to export their products to the global market, as well as maintain and enter into certain agreements and business growth opportunities within the U.S. For example, Canada requires that medical device manufacturers marketing their products in Canada must have a quality system certified to ISO 13485:2016 and from January 1, 2019 also be certified to MDSAP. The certification is also required for placement of branded devices into the European Union.

Vycor Medical has the following certification/licensing:

Vycor Medical’s products have been classified as Class II products by the FDA and cleared for marketing through the 510(k) process. NovaVision’s VRT product has been cleared as a Class U product through the 510(k) while its NeuroEyeCoach is registered as an exempt Class 1 device.

Vycor Medical has CE marking approval to allow for distribution of its VBAS products in Europe as a Class III device and has a Health Canada Medical Device License (MDL) for distribution in Canada as a Class II device. VBAS also has regulatory approvals in Australia, Brazil, China, Japan, Korea, Mexico and Russia.a number of other international markets. NovaVison’s VRT, NeuroEyeCoach and Sight Science’s NeET have CE mark registrations as Class I devices in Europe.

Vycor Medical has been undertaking a process of migrating its EU Notified Body for the last two years. While the audit and finding responses are complete, the final review and certification process has been delayed due to the intense level of activity being undertaken by EU Notified Bodies as a result of the replacement of the Medical Device Directive (MDD) with the Medical Device Regulation (MDR). Although Vycor’s process is nearly complete the delay has resulted in an inability to market the VBAS product in the EU as aggressively as the company would like.

Employees

We currently have 9 employees.

Website.

The Company operates websites at www.vycormedical.com, www.novavision.com, www.novavision.de and www.sightscience.com

ITEM 1A. RISK FACTORS

Smaller reporting companies are not required to provide the information required by this item. Notwithstanding, in addition to risk factors highlighted in previous reports, the Company adds the following additional risk factor:

We do not yet know the extent we could be affected by the Coronavirus (COVID-19) pandemic

In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China, and has since spread to a number of other countries, including the United States. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. In addition, as of the time of the filing of this Annual Report on Form 10-K, several states in the United States have declared states of emergency, and several countries around the world, including the United States, have taken steps to restrict travel. While our operations are principally located in the United States, and our sub-contract manufacturers are located in the United States, we participate in a global supply chain, and the existence of a worldwide pandemic, the fear associated with COVID-19, or any, pandemic, and the reactions of governments around the world in response to COVID-19, or any, pandemic, to regulate the flow of labor and products and impede the travel of personnel, may impact our ability to conduct normal business operations, which could adversely affect our results of operations and liquidity. Disruptions to our supply chain and business operations, or to our suppliers’ or customers’ supply chains and business operations, could include disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of our or our suppliers’ or customers’ products, any of which could have adverse ripple effects on our manufacturing output and delivery schedule. Although we have implemented business continuity plans for our offices and personnel to enable continuity of service remotely, if a critical number of our employees become too ill to work, or we are not able to access a sufficient quantity of our inventory for shipment due to enforced office closures, our production ability could be materially adversely affected in a rapid manner. Similarly, if our customers experience adverse business consequences due to COVID-19, or any other, pandemic, demand for our products could also be materially adversely affected in a rapid manner. Although neurosurgery is not generally an elective procedure, general hospital dislocation and diversion of resources could impact our revenues. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which we or our suppliers and customers operate. Any of these uncertainties could have a material adverse effect on our business, financial condition or results of operations.

ITEM 1B. UNRESOLVED STAFF COMMENTS

N/A

ITEM 2. PROPERTIES

The Company leases office space located at 951 Broken Sound Parkway, Suite 320, Boca Raton, FL 33487 from WPT Land 2 L.P., for a gross rent of approximately $5,700 plus sales tax per month. The lease terminates September 30, 2020.2020 and has been extended for a further three years to August 31, 2023. The Company’s subsidiariessubsidiary in Germany and the UK occupy propertiesoccupies premises on a short-term lease agreements.agreement of EUR1,650 per month (approximately $1,815).

ITEM 3. LEGAL PROCEEDINGS

We are subject from time to time to litigation, claims and suits arising in the ordinary course of business. As of the date of this Annual Report, we were not a party to any material litigation, claim or suit whose outcome could have a material effect on our financial statements.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET INFORMATION

Beginning on July 20, 2009, our Common Stock was quoted on the OTC Bulletin Board under the symbol “VYCO”.

The market price of our common stock, like that of other early stage medical device companies, is highly volatile and is subject illiquidity and to fluctuations in response to variations in operating results, announcements of technological innovations or new products, or other events or factors. Our stock price may also be affected by broader market trends unrelated to our performance.

Holders

As of March 22, 201921, 2020 there were 23,244,02825,391,884 and 23,140,69425,288,550 shares of common stock issued and outstanding, respectively, and approximately 146150 stockholders of record.

Transfer Agent and Registrar

Our transfer agent is Corporate Stock Transfer, 3200 Cherry Creek Dr. South Suite 430 Denver, CO 80209; telephone (303) 282-4800.

Dividend Policy

We have never paid any cash dividends on our Common Stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements of our business. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant. The Company’s Series D Convertible Preferred Stock bears a 7%12% per annum dividend payable in cash or Series D Preferred Stock at the option of the Company.

RECENT SALES OF UNREGISTERED SECURITIES

Below is a list of securities sold by us from January 1, 20182019 through March 22, 201921, 2020 which were not registered under the Securities Act

Common Stock:

The securities issued in the above mentioned transactions were issued in connection with private placements exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended, pursuant to the terms of Section 4(2) of that Act and Rule 506 of Regulation D.

ITEM 6. SELECTED FINANCIAL DATA

Not applicable

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

RESULTS OF OPERATIONS

Comparison of the Year Ended December 31, 20182019 to the Year Ended December 31, 20172018

Revenue and Gross Margin:

Vycor Medical recorded revenue of $1,311,311$1,299,830 from the sale of its products for the year ended December 31, 2018, an increase2019, a decrease of $133,248 or 11%$11,481 (or 1%) over 2017. Following2018. The US continued to experience growth (increase of 28%), primarily as a result of increased adoption and usage following the releaseintroduction of the enhanced VBAS model at the end ofin September 2017, Vycor took the decision in February 2018, based on surgeon feedback, to accelerate the roll-outhowever this was offset by two large international orders representing approximately $196,000 of the enhanced model and cease shipment of the previous model. As a result, manufacturing of the enhanced model needed to be accelerated and this caused some delays, which resulted in lost revenue through the first six months of the year, at which point sales had decreased by 15% over the same period in 2017. However, as manufacturing resumed and with surgeons reacting well to the enhanced product, the lost sales were recovered and the division increased revenues by 40% in the second six months of 2018 compared to the same period in 2017, ending the year with revenues increasing 11% over 2017.which were not repeated during 2019.

Gross margin of 88%90% was recorded for the year ended December 31, 20182019 compared to 83%88% in 2017.2018.

NovaVision recorded revenues of $198,019$181,921 for the year ended December 31, 2018,2019, a decrease of $8,889$16,098 from 2017,2018, and gross margin of 91%90%, compared to 89%91% for 2017.2018.

Research and Development Expense:

Research and development expenses were $0 in 2018 compared to $3,015 for 2017. Capitalized software development costs in NovaVision for the year ended December 31, 20182019 and 2017 were $0 and $2,745, respectively.2018.

Selling, General and Administrative Expenses:

Selling, General and administrativeAdministrative expenses decreased by $8,464$183,314 to $2,000,191 in 2019 from $2,183,505 in 2018 from $2,191,969 in 2017.2018. Included within Selling, General and Administrative Expenses are non-cash charges for share-based compensation as the result of amortizing employee and non-employee shares warrants and options which have been issued by the Company over various periods. The charge for 20182019 was $534,940, a decrease of $90,685 from $625,625 an increase of $65,653 from $559,972 in 2017, primarily2018, as a result of the changed compensation structure for management and Fountainhead.expensing of options in 2018. Also included within Selling, General and Administrative Expenses are Sales Commissions, which increased by $62,901$3,227 to $259,233, mainly as$262,460, which was not a result ofsignificant change from the payment of commissions to an international distributor. prior year.

The remaining Selling, General and Administrative expenses decreased by $137,018$95,856 from $1,435,665$1,298,647 to $1,298,647. $1,202,790. The reduction is primarily the result of personnel efficiencies and the curtailment of online marketing expenditure for NovaVision. The Company is in the process of migrating to a new EU Notified Body for VBAS, with a resultant significant increase in regulatory fees for this migration during 2019; patent fees were also higher due to the filing of 8 new patents for VBAS.

An analysis of the change in cash and non-cash G&A is shown in the table below:

Impairment of Assets:

WhileDuring the Company believes there is real intrinsic value in NovaVision, it has made clear in its filings that the business needs to be partnered with an entity with the cash resourcesyear ended December 31, 2018, and routes to market to enable NovaVision to fulfill its potential. Underfollowing the applicable guidance, the intangible assets and capitalized software must be assessed on the basis of the potential future cash flows of the business as it currently exists today; on this basis the Company has concluded the assets of NovaVision are impaired and has made a full provision of $307,576 against thesethe NovaVision intangible assets during the year ended December 31, 2018,and capitalized software, of which $256,790 iswas in respect of Trademarks and Website and $50,786 iswas in respect of unamortized software development costs.

Interest Expense:

Interest comprises expense on the Company’s debt and insurance policy financing. Related Party Interest expense for 20182019 increased $10,754$9,213 following the issuance of related party notes during 2018 and 2019 to $20,647 from $11,434 for 2018 to $11,434 from $680 for 2017.2018. Other Interest expense for 2018 increased2019 decreased by $278$764 to $48,036 from $48,800 from $48,522 for 2017.

2018.

Liquidity and Capital Resources

Liquidity

The following table shows cash flow and liquidity data for the periods ended December 31, 20182019 and December 31, 2017:2018:

Operating Activities. Cash used in operating activities comprises net loss adjusted for non-cash items and the effect of changes in working capital and other activities. The net repayment of normal insurance financing should also be taken into account when considering cash used in operating activities.

The following table shows the principal components of cash used in operating activities during the year ended December 31, 20182019 and 2017,2018, with a commentary of changes during the periods and known or anticipated changes:

The adjustments to reconcile net loss to cash used of $810,642$619,326 in the period have no impact on Liquidity. The decrease in net loss (as adjusted for non-cash items) by $201,889$84,262 to $261,138$176,876 was primarily due to an increase in gross profit and a reduction in cash operating expenses during the period, resulting in a reduction in operating loss.period. The net change in accounts receivable, accounts payable and accrued liabilities is the result of a reduction in accounts receivable and accounts payable, offset by an increase in accrued liabilities. accounts payable; this is mainly due to expenditure on regulatory and testing for the VBAS development occurring during the fourth quarter.

The Company is in the process of modifying the VBAS product suite to make it easier to integrate with IGS. The first phase of this project was completed in September 2017 and additional inventory of $104,615approximately $128,000 was purchased during the period.2019. The Company anticipates completingis progressing the second phase of this project during the next six months and as a result will purchaseof this and normal inventory management anticipates purchasing additional new inventory of approximately $96,000.$95,000.

Investing Activities.Cash used in investing activities for the year ended December 31, 20182019 was $63,523,$58,253, which primarily reflected expenditure on the second phase of modifying the VBAS product suite to make it easier to integrate with IGS. The Company anticipates additional expenditures for this second phase, during 2019, including work to obtain regulatory approvals, of approximately $120,000$75,000.

Financing Activities.During the year ended December 31, 20182019 the Company received funds of $193,000$37,873 in respect of loans from Fountainhead and Peter Zachariou (the Company’s Chief Executive Officer).Fountainhead.

Liquidity and Plan of Operations, Ability to Continue as a Going Concern

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses since its inception, including a net loss of $1,379,356$796,202 and $1,477,045$1,379,356 for the years ending December 31, 20182019 and 20172018 respectively and has not generated sufficient cash flows from operations. As at December 31, 20182019 the Company had stockholder’s deficit of $768,827, cash of $86,481 and a working capital deficiency of $316,944,$541,070, excluding related party liabilities of $866,014.$1,248,904. As a result these conditions, among others, raise substantial doubt regarding our ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.uncertainty

As described earlier in this ITEM 1 “Strategy”, the Company is executingcontinuing to execute on a plan to achieve revenue growth and a reduction in cash operating losses² and, while operating expenses generally are greater in the first two quarters, the Company generated a cash operating profit² in both the 3^rd and 4^th quarters.. For Vycor Medical this plan includes in particular: increasing market penetration in the US through targeted focus group programs with surgeons, closer cooperation with complementary product manufacturers, and tight managementbroadening of the distribution network;network and programs to increase penetration in exiting hospitals; increasing international growth particularly in Europe and other territories where we are not represented or under represented; and continued new product development. The first phase of the modification of the existing VBAS product range to make it more easy to usecompatible with the most common IGS systems was completed in September 2017 and has been well received by surgeons; we are continuing our roll-out of this model throughsurgeons, resulting in increased hospital inventories.penetration and revenues particularly in the US. The second phase of the development of further IGS integration is in process and will then be completed in 2019.subject to regulatory clearances and approvals. Upon regulatory approval and product release of this new VBAS the Company intends to conduct a multi-center study to provide additional clinical data on the product. We will also be exploring with surgeons and focus groups additional selected development work targeted at increasing the ease and applicability of our products to additional common procedures. For NovaVision, given the company’s resources, and the large size and diversity of its end markets, we believe that the most efficient way to tackle the distribution of its broad range of patient and professional products is by partnering with entities that have either direct access to the end users or established distribution channels ina desire and financial wherewithal to leverage the various target markets and the financial resources to market and distribute the products effectively.NovaVision therapy platform. The Company is in the process of identifying and talking to such partners. TheManagement is determined to reduce the losses it is incurring in this division and is open to a broad range of alternatives for NovaVisionwhich could comprise distribution and marketing partnerships, licensing, merger, sale and/or a significant restructuring of its activities.activities including closure of part or all of its operations.

However, the Company believes it may not have sufficient cash to meet its various cash needs through March 31, 20202021 unless the Company is able to obtain additional cash from the issuance of debt or equity securities. Included within the working capital deficiency above is a term note for $300,000 to EuroAmerican Investment Corp. (“EuroAmerican”), together with accrued interest of $232,765,$280,765, which has a maturity date of December 31, 2019,June 30, 2020, having been extended on a number of occasions from its initial due date of June 11, 2011. The Company would intend to seek an extension to the note, althoughAt this time it is not known whether any further extension of the note beyond June 30, 2020 will be extended or the terms of any extension.available. Fountainhead, the Company’s largest shareholder, is currently providinghas provided working capital funding to the Company on an as-needed basis, although there is no guarantee that this will continue to be the case. The Company may consider seeking additional equity or debt funding, although there is no assurance that this would be available on acceptable terms or at all. If adequate funds are not available, the Company may have to delay or curtail development or commercialization of products, or cease some of its operations.

In December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China, and has since spread to a number of other countries, including the United States. On March 11, 2020, the World Health Organization characterized COVID-19 as a pandemic. In addition, as of the time of the filing of this Annual Report on Form 10-K, several states in the United States have declared states of emergency, and several countries around the world, including the United States, have taken steps to restrict travel. While our operations are principally located in the United States, and our sub-contract manufacturers are located in the United States, we participate in a global supply chain, and the existence of a worldwide pandemic, the fear associated with COVID-19, or any, pandemic, and the reactions of governments around the world in response to COVID-19, or any, pandemic, to regulate the flow of labor and products and impede the travel of personnel, may impact our ability to conduct normal business operations, which could adversely affect our results of operations and liquidity. Disruptions to our supply chain and business operations, or to our suppliers’ or customers’ supply chains and business operations, could include disruptions from the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, personnel absences, or restrictions on the shipment of our or our suppliers’ or customers’ products, any of which could have adverse ripple effects on our manufacturing output and delivery schedule. Although we have implemented business continuity plans for our offices and personnel to enable continuity of service remotely, if a critical number of our employees become too ill to work, or we are not able to access a sufficient quantity of our inventory for shipment due to enforced office closures, our production ability could be materially adversely affected in a rapid manner. Similarly, if our customers experience adverse business consequences due to COVID-19, or any other, pandemic, demand for our products could also be materially adversely affected in a rapid manner. Although neurosurgery is not generally an elective procedure, general hospital dislocation and diversion of resources could impact our revenues. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which we or our suppliers and customers operate. Any of these uncertainties could have a material adverse effect on our business, financial condition or results of operations.

²Operating Loss or Profit before Depreciation, Amortization and non-cash Stock Compensation

Off-Balance Sheet Arrangements

As of December 31, 2018,2019, we had no off-balance sheet arrangements.

Seasonality

Our operating results are not affected by seasonality.

Inflation

Our business and operating results are not affected in any material way by inflation.

Critical Accounting Policies and Estimates

Uses of estimates in the preparation of financial statements

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimated. To the extent management’s estimates prove to be incorrect, financial results for future periods may be adversely affected. Significant estimates and assumptions contained in the accompanying consolidated financial statements include management’s estimate of the allowance for uncollectible accounts receivable, amortization of intangible assets, and the fair values of options and warrant included in the determination of debt discounts and share based compensation.

Cash and cash equivalents

The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. Cash balances may at times exceed the FDIC insured limits. Cash also includes a US investment account in a money market backed by government securities up to 105% of the account balance. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Included within cash are deposits paid by patients, held by the Company until the patient returns the VRT device or chinrest at the end of therapy. At December 31, 20182019 and 20172018 patient deposits amounted to $44,605$46,191 and $41,172,$44,605, respectively, and are included in other current liabilities.

Fixed assets

The Company records fixed assets at cost and calculates depreciation using the straight-line method over the estimated useful life of the assets, which is estimated to be between three and seven years. Maintenance, repairs and minor renewals are charged to expense when incurred. Replacements and major renewals are capitalized.

Leases

The Company has one leased building in Boca Raton, Florida that is classified as operating lease right-of use (“ROU”) assets and operating lease liabilities in the Company’s consolidated balance sheet as per ASC 842. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component of the agreement. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of Selling, General and Administrative expenses.

The standard was effective for us beginning January 1, 2019. The Company elected the available practical expedients on adoption. The adoption had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated statements of comprehensive loss. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases.

Income taxes

We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.

ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.

Patents and Other Intangible Assets

The Company capitalizes legal and related costs associated with the establishment and enhancement of patents for its products once patents have been applied for. Costs associated with the development of the patented item or processes are charged to research and development costs as incurred. The capitalized costs are amortized over the life of the patent. The Company reviews intangible assets on an annual in accordance with the authoritative guidance. Trademarks have an indefinite life and are reviewed annually by management for impairment in accordance with the authoritative guidance.

WhileDuring the Company believes there is real intrinsic value in NovaVision, it has made clear in its filings that the business needs to be partnered with an entity with the cash resourcesyear ended December 31, 2018, and routes to market to enable NovaVision to fulfill its potential. Underfollowing the applicable guidance, the intangible assets and capitalized software must be assessed on the basis of the potential future cash flows of the business as it currently exists today; on this basis the Company has concluded the assets of NovaVision are impaired and has made a full provision of $307,576 against thesethe NovaVision intangible assets during the year ended December 31, 2018,and capitalized software, of which $256,790 iswas in respect of Trademarks and Website and $50,786 iswas in respect of unamortized software development costs.

Software Development Costs

The authoritative accounting guidance requires software development costs to be capitalized upon completion of the preliminary project stage. Accordingly, direct internal and external costs associated with the development of the features and functionality of the Company’s software, incurred during the application development stage, are capitalized and amortized using the straight-line method over the estimated life of five years. As part of the impairment review referred to above, software development costs were written down by $50,786 to $0 during the year ended December 31, 2018.

Revenue Recognition

On January 1, 2018, the Company adopted the new accounting standard, ASC 606, Revenue from Contracts with Customers and all the related amendments (new revenue standard) to all contracts. The adoption of the new accounting standard had no impact on company’s consolidated financial statements.

Vycor Medical generates revenue from the sale of its surgical access system to hospitals and other medical professionals. Vycor Medical records revenue from product sales when obligations under the terms of a contract with customers are satisfied. Generally, this occurs with the transfer of control of the goods to customers. Vycor Medical does not provide for product returns or warranty costs.

Vycor determines revenue recognition through the following steps:

Accounts Receivable and Allowance for Doubtful Accounts Receivable

The Company’s accounts receivable are due from the hospitals and distributors in the case of Vycor Medical, and from patients directly for therapy or physicians for diagnostic products in the case of NovaVision. Accounts receivable are due once products have been delivered or at the time the therapy is initiated; however, for NovaVision therapy patients sometimes credit is extended through various payment plans based on individual financial conditions, generally not to exceed the 9 or 10 month therapy period. The outstanding balances are stated net of an allowance for doubtful accounts.

We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We extend credit to our customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and maintain an allowance for potential bad debts if required. We determine whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also record a general allowance as necessary. Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate that we should abandon such efforts.

Inventory

Inventories are stated at the weighted average cost method. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product. If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified. The provision for inventory for the years ended December 31, 2019 and 2018 was $12,558 and 2017 was $6,279, and $44,760, respectively. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales.

Foreign Currency

The Euro is the local currency of the country in which NovaVision GmbH conducts its operations and is considered the functional currency of this entity; the GB Pound is the local currency of the country in which Sight Science Limited conducts its operations and is considered the functional currency of this entity. All balance sheet amounts are translated to U.S. dollars using the U.S. exchange rate at the balance sheet date except for the equity section which is translated at historical rates. Operating statement amounts are translated using an average exchange rate for the period of operations. Foreign currency translation effects are accumulated as part of the accumulated other comprehensive income (loss) and included in shareholders’ (deficit)stockholders’ equity (deficiency) in the accompanying Consolidated Balance Sheet.Sheets.

Educational marketing and advertising expenses

The Company may incur costs for the education of customers on the uses and benefits of its products. The Company will include education, marketing and advertising expense as a component of selling, general and administrative costs as such costs are incurred.

Stock Compensation

The Company recognizes the cost of all share-based payments under the relevant authoritative accounting guidance. Share-based payments include any remuneration paid by the Company in shares of the Company’s common stock or financial instruments that grant the recipient the right to acquire shares of the Company’s common stock. For share-based payments to employees, which consist only of awards made under the stock option plan described below, the Company accounts for the payments in accordance with the provisions of ASC Topic 718, “Stock Compensation”. Share-based payments to consultants, service providers and other non-employees are accounted for under in accordance with ASC Topic 718, ASC Topic 505, “Equity Payments to Non-Employees” or other applicable authoritative guidance.

Contractual Obligations

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial information required by Item 8 begins on the following page.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To Stockholders and the Board of Directors
of Vycor Medical, Inc.

To the Stockholders and Board of Directors of

Vycor Medical, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheetsheets of Vycor Medical, Inc. (“("the Company”Company") as of December 31, 2019 and 2018, and the related consolidated statements of comprehensive loss, stockholders’ deficiency,stockholders' equity (deficiency), and cash flows for the yearyears ended December 31, 2019 and 2018, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the yearyears ended December 31, 2019 and 2018, in conformity with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in noteNote 1 to the financial statements, the Company has incurred net losses since inception, including a net loss of $796,202 and $1,379,356 for the yearyears ended December 31, 2019 and 2018 respectively, and has not generated cash flows from its operations. As of December 31, 2018,2019, the Company had working capital deficiency of $316,944,$541,070, excluding related party liabilities of $866,014.$1,248,904. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are described in Note 1 to the financial statements. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

We have served as the Company’s auditor since 2018

Hackensack, New Jersey

March 28, 2019

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and
Stockholders of Vycor Medical Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Vycor Medical, Inc (the Company) as of December 31, 2017, and the related consolidated statements of comprehensive loss, stockholders’ equity (deficiency), and cash flows for the year ended December 31, 2017, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017, and the results of its operations and its cash flows for the year ended December 31, 2017, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’sCompany's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’sCompany's internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in notes to the financial statements, the Company has incurred a net loss since inception, including a net loss of $1,477,045 for the year ended December 31, 2017, and has not generated cash flows from operations. As of December 31, 2017, the Company had working capital deficiency of $197,297, excluding related party liabilities of $562,210. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are described in Note 1 to the financial statements. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 /s/ Prager Metis CPAs, LLC

We have served as the Company’sCompany's auditor since 20072018.

Hackensack, New Jersey

March 29, 201827, 2020

VYCOR MEDICAL, INC.

Consolidated Balance Sheets

See accompanying notes to consolidated financial statements

VYCOR MEDICAL, INC.

Consolidated Statements of Comprehensive Loss

See accompanying notes to consolidated financial statements

VYCOR MEDICAL, INC.

Consolidated Statement of Stockholders’ Equity (Deficiency)