UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

VYCOR MEDICAL, INC.

(Exact name of small business issuer as specified in its charter)

951 Broken Sound Parkway, Suite 320, Boca Raton, FL 33487
(Address of principal executive offices) (Zip code)

Issuer’s telephone number: (561) 558-2020

Securities registered under Section 12(g) of the Exchange Act:

Common Stock par value $0.0001

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes[X]Yes [X] No [  ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes[Yes [  ] No [  ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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

There were 19,816,50521,876,140 shares outstanding of registrant’s common stock, par value $0.0001 per share, as of November 6, 2017.May 9, 2018.

Transitional Small Business Disclosure Format (check one): Yes[Yes [  ] No [X]

TABLE OF CONTENTS

PART 1I

VYCOR MEDICAL, INC.
Consolidated Balance Sheets

(Unaudited)

See accompanying notes to financial statements

VYCOR MEDICAL, INC.
Consolidated Statements of Comprehensive Loss
(unaudited)

See accompanying notes to financial statements

VYCOR MEDICAL, INC.
Consolidated Statement of Cash Flows
(unaudited)

See Accompanying Notes to Financial Statements

VYCOR MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2017MARCH 31, 2018
(unaudited)

The consolidated financial statements of the Company present the financial position, results of operations, and cash flows of Vycor Medical, Inc. and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated. The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 108 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in comprehensiveconsolidated financial statements have been omitted pursuant to such rules and regulations. The consolidated balance sheet as of December 31, 20162017 derives from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2017.

The unaudited consolidated financial statements as of and for the three and nine months ended September 30,March 31, 2018 and 2017, and 2016, in the opinion of management, include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the Company’s financial condition and results of operations. The results of operations for the three and nine months ended September 30,March 31, 2018 and 2017 and 2016 are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

Certain amounts on prior period financial statementsamounts have been reclassified to conform withto the current year presentation.

Ability to continue as a Going Concern

The accompanying unaudited 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 $326,636 and $312,791 for the three months ended March 31, 2018 and 2017 respectively and has not generated cash flows from operations. As of March 31, 2018 the Company had a working capital deficiency of $346,389, excluding related party liabilities of $751,974. As a result, these conditions, among others, raise substantial doubt regarding our ability to continue as a going concern. The 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.

The Company is executing on a plan to achieve growth in revenues for both the Vycor Medical and NovaVision divisions as well as a reduction in costs, thereby reducing its cash operating usage. However, the Company believes it may not have sufficient cash to meet its various cash needs through May 30, 2019 unless the Company is able to obtain additional cash from the issuance of debt or equity securities. Fountainhead, the Company’s largest shareholder, is currently providing 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.

Principles of Consolidation and Basis of Presentation

The unaudited consolidated financial statements include the accounts of Vycor Medical, Inc., and its wholly-owned subsidiaries, NovaVision, Inc. (a Delaware corporation), NovaVision GmbH (a German corporation) and Sight Science Limited (a UK corporation), both wholly owned subsidiaries of NovaVision, Inc. The Company is headquartered in Boca Raton, FL. All material inter-company accounts, transactions, and profits have been eliminated in consolidation.

Recent Accounting Pronouncements

In August 2014, the FASB issued ASU No. 2014-15 —Presentation of Financial Statements—Going Concern (Subtopic 205-40): Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The ASU requires management to evaluate whether there are conditions and events that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the financial statements are issued and if management’s plans will alleviate that doubt. Management is required to make this evaluation for both annual and interim reporting periods. The Company adopted this guidance for the fiscal year ended December 31, 2016. This adoption did not have a material impact on the Company’s consolidated financial statements.

From time to time new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that such recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental shares issuable upon exercise of stock options and warrants and conversion of preferred stock and convertible debt. Such potentially dilutive shares are excluded when the effect would be to reduce a net loss per share. No dilution adjustment has been made to the weighted average outstanding common shares in the periods presented because the assumed exercise of outstanding options and warrants and the conversion of preferred stock and debt would be anti-dilutive.

The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share:

Related Party Notes Payable

As of September 30, 2017 and December 31, 2016 Related Party Notes Payable consists of:

Other Notes Payable

As of September 30, 2017 and December 31, 2016, Other Notes Payable consists of:

On January 24, 2018 the Company entered into an amendment agreement (the “Amendment”) with EuroAmerican Investments (“EuroAmerican”) regarding its $300,000 loan note (the “Note”). Under the Amendment, the Note was extended until December 31, 2018 and the conversion terms of the Note reduced to $0.21, the same as the offering price of the 2018 Offering. Conversion of the Note and accrued interest would result in the issuance of 2,308,405 shares of Common Stock. Notwithstanding, EuroAmerican agreed that the Note could not be converted without first offering the Company the right to redeem the Note at principal and accrued interest, and secondly Fountainhead the right to purchase the Note, which cannot be converted prior to such offer and the failure of the Company and Fountainhead to exercise such option in accordance with the amendment terms. In addition, the Company agreed to issue warrants to purchase the same number of shares of Common Stock at $0.27, the same terms as the 2018 Offering, exercisable for three years from January 1, 2018, if and when the conversion option is exercised. The amendment was recognized as a modification, based on the guidance in ASC 470-50.

The Company routinely finances all their insurance policies through a third party finance company assesses the value of the beneficial conversion feature of its convertible debt by determining the intrinsic value of such conversion, under ASC 470, atwhich requires a down payment and subsequent monthly payments, the time of issuance. At the time of issuance of the convertible debt instruments set out above, the fair value of the stock was either the same or less than the conversion price, and so there was no value attributableperiods vary from 10 months to any beneficial conversion feature.12 equal monthly payments.

(a) Business segments

The Company operates in two business segments: Vycor Medical, which focuses on devices for neurosurgery; and NovaVision, which focuses on neuro-stimulationneuro stimulation therapies and diagnostic devices for the treatment and screening of vision field loss and which includes Sight Science. Set out below are the revenues, gross profits and total assets for each segment.

(b) Geographic information

The Company operates in two geographic segments, the United States and Europe. Set out below are the revenues, gross profits and total assets for each segment.

Common Stock and Stock Grants

FromDuring January to September 2017,March 2018, the Company granted 271,21048,085 shares of Common Stock (valued at $63,000)$21,000) to non-employee Directors. Under the terms of the Directors Deferred Compensation Plan, the receipt of these shares is deferred until the January 15^th offollowing the year following termination of their services as a director. As of September 30, 2017March 31, 2018 these shares have yet to be issued.

FromDuring January to September 2017,March 2018, the Company issued 106,451250,000 shares of Common Stock (valued at $25,314) to members of the NovaVision, Inc. Scientific Advisory Board as compensation for their services.

From January to September 2017, the Company issued 644,286 shares of Common Stock (valued at $135,300) to Fountainhead under the termsfor fees of a Consulting Agreement and 1,571,429 shares of Common Stock (valued$92,500 accrued at $330,000) to Fountainhead following the achievement of certain enumerated milestones.

From January to SeptemberDecember 31, 2017 the Company issued 9,921 shares of Common Stock (valued at $2,084) to Techmed, Inc. in accordance with the terms of a consulting agreement.

Private Placement.

On January 11 and February 23, 2017, the Company completed the sale of $1,274,717 in shares of Vycor Common Stock (each a “Share”) and Warrants (together with the Shares, the “Securities”) to accredited investors (the “Investors”). The Shares were issued in a private placement (the “Private Placement”) pursuant to the terms of Stock Purchase Agreements between the Company and each of the Investors, and was limited to current shareholders of the Company as of November 9, 2016 (the “Record Date”).

Included in these gross proceeds was the conversion of $248,000 of debt on the balance sheet at December 31, 2016 and $101,000 funds held in escrow on the balance sheet at December 31, 2016. The Private Placement raised net cash proceeds, after debt conversion and expenses, of $943,207, of which $842,207 was received during the period.

The Securities comprised one Share at a purchase price $0.21 per share and a Warrant to purchase one Share at an exercise price of $0.27, exercisable over a period of three (3) years. A total of 6,070,079 Shares and Warrants to purchase 6,070,079 Shares were issued in the Private Placement.Consulting Agreement.

Warrants and Options

In August 2014, Fountainhead, Peter Zachariou (“the Related Party Noteholders”) and Craig Kirsch (collectively, the “Noteholders”) agreed, pursuant to a Securities Exchange Agreement (“Exchange Agreement”), to exchange their outstanding debt from the Company into shares of Company Series D Convertible Preferred Stock. Pursuant to the Exchange Agreement, on August 5, 2017 (the 3^rd anniversary of the exchange) the Noteholders were issued warrants exercisable into 628,619 shares of Common Stock, at a price of $0.30 per share, of which the Related Party Noteholders were issued warrants exercisable into 599,651 shares of Common Stock. The warrants expire on August 4, 2020 and were valued at $120,788 (of which $115,222 related to the Related Party Noteholders) and included in Other Income/Expense, Warrant Issuance Expense for the three months ending September 30, 2017.

The details of the outstanding warrants and options are as follows:

STOCK WARRANTS:

STOCK OPTIONS:

On March 23, 2017 options to purchase 660,000 shares of Common Stock were granted to Fountainhead under the terms of a Consulting Agreement. These options will vest on July 1, 2018 subject to the achievement of certain milestones by June 30, 2018. On March 26, 2018 options to purchase 660,000 shares of Common Stock were granted to Fountainhead under the terms of a Consulting Agreement. These options will vest on April 1, 2019 subject to the achievement of certain milestones by March 31, 2019. These options are not included in the above table until such a time as they vest.

As of September 30, 2017,March 31, 2018, the weighted-average remaining contractual life of outstanding warrants and options is 2.361.89 and 1.471.06 years, respectively.

Stock Option Plan

Under ASC Topic 718, the Company estimates the fair value of option awards on the date of grant using an option pricing model. The grant date fair value is recognized over the option-vesting period, the period during which an employee is required to provide service in exchange for the award. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. Under these standards, compensation cost for employee cost for employee stock-based awards is based on the estimated grant-date fair value and recognized over the vesting period of the applicable award on a straight-line basis.

For the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, the Company recognized share-based compensation of $1,609$4,871 and $198,200,$1,609, respectively, for employee stock options.

Stock appreciation rights may be granted either on a stand-alone basis or in conjunction with all or part of any other stock options granted under the plan. As of September 30, 2017March 31, 2018 there were no awards of any stock appreciation rights.

Non-Employee Stock Compensation

The Company from time to time issues common stock, stock options or common stock warrants to acquire services or goods from non-employees. Common stock, stock options and common stock warrants issued to other than employees or directors are recorded on the basis of their fair value, which is measured as of the “measurement date” using an option pricing model. The “measurement date” for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the life of the option or warrant.

Aggregate stock-based compensation expense charged to operations for stock and warrants granted to non-employees for the ninethree months ended September 30,March 31, 2018 and 2017 was $133,500 and 2016 was $420,696 and $224,471, respectively,$141,938 of which $245,197$0 and $167,471,$38,438, respectively, related to stock issued during the periods. The expense related to stock not issued during the periods comprise: $63,000 and $57,000,$21,000, respectively for both periods, related to stock granted but not issued to directors under the Directors Deferred Compensation Plan; and $112,500 and $0,$82,500, respectively of fee4sfees payable in stock to Fountainhead that were accrued but not issued during the period. As of March 31, 2018, there was $0 of total unrecognized compensation costs related to warrant and stock awards and non-vested options.

During the ninethree months ended September 30,March 31, 2018 and 2017, warrantsoptions with a value of $216,582 and $86,754, respectively, were granted to Fountainhead with performance vesting conditions;conditions, (see Note 8); the value of these options will not be recognized as share-based compensation unless or until the Company concludes that it is probablyprobable the performance conditions will be achieved.

Stock-based Compensation Valuation Methodology

Stock-based compensation resulting from the issuance of Common Stock is calculated by reference to the valuation of the Stock on the date of issuance, the expense being recognized as the compensation is earned. Stock-based compensation expenses related to employee options and warrants granted to non-employees are recognized as the stock options and warrants are earned. The fair value of the stock options or warrants granted is estimated at the grant date, using the Black-Scholes option pricing model, and the expense is recognized on a straight-line basis over the shorter of the period over which services are to be received or the life of the option or warrant. The grant date fair value of employee share options and similar instruments is estimated using the Black-Scholes option pricing model on the basis of the fair value of the underlying common stock on the measurement date, adjusted for the unique characteristics of those equity instruments, using the assumptions noted in the table below. Expected volatility is based on the historical volatility of a peer group of publicly traded companies. The expected term of options and warrants was based upon the expected life of the option or warrant, and the risk-free rate is based on the U.S. Treasury Constant Maturity rate.

The following assumptions were used in calculations of the Black-Scholes option pricing model for the ninethree months ended September 30, 2017March 31, 2018 and 2016:2017:

Lease

The Company leased office space located at 6401 Congress Ave., Suite 140, Boca Raton, FL 33487 from Catexor Limited Partnership for a gross rent of $15,439 plus sales tax per month. The term of the lease was 5 years and 6 months and terminated July 30, 2017. Effective August 1, 2017 the Company leasedleases office space located at 951 Broken Sound Parkway, Suite 320, Boca Raton, FL 33487 from WPT Land 2L.P.2 L.P., for a gross rent of approximately $5,700 plus sales tax per month. The lease terminates September 30, 2020. The Company’s subsidiary in Germany occupies premises on a short-term lease agreement. Aggregate rentRent expense for the ninethree months ended September 30,March 31, 2018 and 2017 was $25,168 and 2016 was $134,229 and $159,176$51,513 respectively.

Potential German tax liability

In June 2012 the Company’s German subsidiary received a preliminary assessment for Magdeburg City trade tax of approximately €75,000 (approximately $85,000). This assessment is for the 2010 fiscal year and relates to the Company’s acquisition of the assets of the former NovaVision, Inc. An initial assessment for corporate tax for the same period has been preliminarily reduced to zero. The Company has not accepted this trade tax assessment and is in discussion with the relevant tax authorities with a view to its reduction. The tax authorities have agreed to suspend the assessment pending the outcome of certain court hearings, and the Company has agreed to make limited monthly payments on account.account which were completed in October 2016. To the extent that this assessment (either a higher or a reduced amount) is ultimately confirmed by the tax authorities, the Company believes it has a very strong claim against certain professional advisors which would offset the liability in full. Accordingly, the Company has made no provision for this liability in the ninethree months ended September 30, 2017March 31, 2018 and the year ended December 31, 20162017 respectively, other than recording the monthly payments as an expense.

Potential Patent Infringement

The Company was made aware in 2012 that a competitor in China had been granted a patent for related technology, and appeared to be entering the market with products that infringe the Company’s own issued patent in China. Following investigation, the Company initiated an invalidation of the competitor’s patent; in March 2014 the Patent Re-examination Board issued an Examination Decision invalidating all the claims of the competitor’s patent. The competitor appealed the decision, but the Patent Review Board denied the appeal and affirmed the Examination Decision, and the time for appeal has now passed. The Company has been made aware that an additional two or more Chinese companies are marketing the products that appear to infringe the Company’s Chinese patent, and is investigating this information to determine whether infringing products are being sold and the extent of such sales. As a general rule the Company intends to take all necessary action to protect its patent portfolio to address any material violation thereof, and the success of the above case confirms to competitors the priority of the Company’s Chinese patent. As with all patent infringement actions, there is some risk that the accused infringer will not be found to infringe the claims, and an additional risk that the accused infringer will successfully challenge the validity of the asserted claims.

The following agreements were entered into or remained in force during the nine monthsperiod ended September 30, 2017:March 31, 2018:

During the period ended September 30, 2017, following the achievement of certain milestones established in the March 2016 Compensation Plan, the Company accrued deferred compensation of $82,500. This togetherConsulting Agreement with the balance of the deferred compensation accrued during the year ended December 31, 2016, was paid to Fountainhead by the issuance of 1,571,429 shares of Common Stock (valued at $330,000) during the period ended September 30, 2017.

In March 2017 and effective April 1, 2017, as part of a streamlining of compensation arrangements with executive management, the Company established the March 2017 Compensation Plan. Under this Plan, the Company amended the Fountainhead Consulting Agreement (“the Amendment”) to increase. Under the annualAmendment, fees of $450,000 are payable to Fountainhead, by $330,000 to a total of $37,500 per month. Concurrently, annual compensation payable to executive management under the March 2016 Compensation Plan was reduced by $330,000 to $0. These changes had no financial impact on the Company. The other terms of the Consulting Agreement remained the same, including the ability of Fountainhead at itswith an option to receive $5,000 per month in cash and the remainder payable in Company Common Stock issued at the recenthigher of the Private Placement price ($0.21) and the average price for the 30 days prior to issuance, and deliverable at the end of each fiscal quarter. The Consulting Agreement also contains provisions for Fountainhead to receive a higher proportion of its fees in cash subject to certain future liquidity events and Board approval. Under the Amendment, Fountainhead was granted options pursuant to the Vycor Medical, Inc. 2008 Stock Option Plan, to purchase 660,000 shares of Company Common Stock at the same $0.27 exercise price as that of the warrants issued in the Private Placement. Vesting of these options is subject to the achievement of certain milestones by March 31, 2018. TheseIn March 2018 the Company extended the time period for the achievement of these milestones to June 30, 2018.

In March 2018 Fountainhead was granted options are consistent withpursuant to the Vycor Medical, Inc. 2018 Stock Option Plan, to purchase 660,000 shares of Company Common Stock at an exercise price of $0.46 (the average closing price for the 5 trading days before the grant). Vesting of these options grantedis subject to executive management under the achievement of certain milestones by March 2016 Compensation Plan.

31, 2019.

During the ninethree months ended September 30, 2017,March 31, 2018, under the terms of this amended Consulting Agreement, Fountainhead received total fees of $255,000, of$112,500, which $135,300 waswere paid after the period end through the issuance of 644,286234,375 shares of Company Common Stock, $7,200 was paid in cash and $112,500 was accrued but not yet paid.Stock.

Peter Zachariou, and David Cantor, directors of the Company, are investment managers of Fountainhead which is a related party due toowned, at March 31, 2018, 47% of the sizeCompany’s Common Stock and 95% of its shareholding.the Company’s Preferred D Stock. Adrian Liddell, Chairman is a consultant for Fountainhead.

During the period ended September 30, 2017, following the achievement of certain milestones established in the March 2016 Compensation Plan, the Company accrued deferred compensation of $82,500. This together with the balance of the deferred compensation accrued during the year ended December 31, 2016, was paid to Fountainhead through the issuance 1,571,429 shares of Common Stock (valued at $330,000) during the period ended September 30, 2017.

During the nine months ended September 30, 2017, under the terms of this amended Consulting AgreementAs referred to in Note 8,3, on January 24, 2018 the Company entered into the Amendment with EuroAmerican. regarding its $300,000 Note. Under the Amendment, EuroAmerican granted a right of first refusal prior to converting or selling or the Note a) first to Vycor to redeem the Note and accrued interest at face value and b) if not exercised second to Fountainhead received total fees of $255,000, of which $135,300to purchase the Note and accrued interest at face value on the same terms.

In March 2018 Fountainhead was paid throughgranted options pursuant to the issuance of 644,286Vycor Medical, Inc. 2018 Stock Option Plan, to purchase 660,000 shares of Company Common Stock, $7,200 was paid in cash and $112,500 was accrued but not yet paid.

On January 11, and February 23, 2017 the Company completed the sale of $1,274,717 in shares of Common Stock and Warrants to accredited investors (the “Private Placement”). Fountainhead purchased a total of $477,939 of shares in the Private Placement of which approximately $248,000 represented amounts that Fountainhead had already advanced to the Company and was held by the Company in the form of notes. As a result, Fountainhead was issued 2,275,901 shares of Common Stock and three-year Warrants to purchase 2,275,901 shares of Common Stock at an exercise price of $0.27.$0.46 (the average closing price for the 5 trading days before the grant). Vesting of these options is subject to the achievement of certain milestones by March 31, 2019.

During the three months ended September 30, 2017 $112,500March 31, 2018, under the terms of fees payablethe Consulting Agreement referred to in stock were accrued; however these shares were not issued.

In August 2014, Fountainhead and Peter Zachariou (collectively, the “Related Party Noteholders”) agreed, pursuant to a Securities Exchange Agreement (“Exchange Agreement”), to exchange their outstanding debt fromnote 8, the Company into shares of Company Series D Convertible Preferred Stock. Pursuant to the Exchange Agreement, on August 5, 2017 (the 3^rd anniversary of the exchange) the Related Party Noteholders were issued warrants exercisable into 599,651250,000 shares of Common Stock to Fountainhead for fees of $92,500 accrued at December 31, 2017 and accrued fees of $112,500, which were paid after the period end through the issuance of 234,375 shares of Company Common Stock.

During the three months ended March 31, 2018, the Company accrued an aggregate of $162,185 of Preferred D Stock dividends, of which an aggregate of $154,712 Preferred D Stock dividends were in respect of related parties.

During March 2018 the Company issued unsecured loan notes to Fountainhead for a total of $30,000. The loan notes bear interest at a pricerate of $0.30 per share. The warrants expire10% and are due on August 2, 2020 and were valued at $115,222.demand or by their one-year anniversary.

Vycor sells its neurosurgical devices in the US primarily direct to hospitals, and internationally through distributors who in turn sell to hospitals. The sales to one international distributor represented 0% and 17%, respectively, of total sales for the three months ended March 31, 2018 and 2017.

The

Other than the foregoing, the Company has evaluated the existence of events and transactions subsequent eventsto the balance sheet date through the date the consolidated financial statements were issued and filed with this Quarterly Report:has determined that there were no significant subsequent events or transactions which would require recognition or disclosure in the financial statements.

None

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

This Interim Report on Form 10-Q contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 (“PLSRA”), Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) regarding Vycor Medical, Inc. (the “Company” or “Vycor,” also referred to as “us”, “we” or “our”). 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 “Description of Business,” as well as in this Form 10-Q 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-Q 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. We intend that all forward-looking statements be subject to the safe harbor provisions of the PSLRA.

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 6668 issued or allowed patents and a further 117 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.

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 13485:2003 compliant, 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, Russia and Taiwan.

We believe VBAS offers several advantages over other brain retractor systems, commonly known as ribbon or blade retractors that are metallic, including having the potential to significantly reduce brain tissue trauma that arises from excessive pressure at the edges of the blade. The design of VBAS can minimize the size of the brain entry access necessary for surgical procedures, Vycor has 23 granted and is believed to significantly reduce the pressure and hence trauma on the surrounding brain tissue.

6 pending patents worldwide.

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. NovaVision addresses a significant target market, estimated at approximately $2 billion in each of the U.S. and the EU and over $13 billion globally.

NovaVision has a family of therapies that both restore and compensate for lost vision:

VRT and NeuroEyeCoach are therefore highly complementary and are provided in an Internet-delivered suite to ensure broad benefits to NovaVision’s patients.

NovaVision also has models of VRT and NeuroEyeCoach for physicians and rehabilitation clinics, as well as VIDIT, a diagnostic program that enables therapists to perform high-resolution visual field tests in less than ten minutes.

NovaVision’s VRT is the only medical device aimed at the restoration of vision lost as a result of neurological damage which has FDA 510(k) clearance to be marketed in the U.S; and NeuroEyeCoach is registered in the US as a Class I 510(k) exempt device. VRT, NEC and NeET have CE Marking for the EU. NovaVision has 45 granted and 1 pending patents worldwide.

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, competition has been reduced through NovaVision’s acquisition of Sight Science and 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.

The Market For the Company’s Products And Therapies

VBAS is used for craniotomy procedures. Based on statistics from the American Association of Neurological Surgeons (AANS), management estimates 700,000 such procedures are performed in the US annually. Of this, management believe approximately 225,000 (32 percent) are addressable by the VBAS range currently, with another 100,000 (total of 325,000 or 46 percent) addressable by an expanded future range. Management estimates, for the global market, there exists a current addressable market of approximately 1,100,000 procedures with another 500,000 addressable by an expanded VBAS range.

The market for NovaVision’s therapies comprises those suffering from vision loss resulting from neurological trauma such as stroke or other brain injury. The U.S. Centers for Disease Control (CDC) estimates there are approximately 8 million Americans who have previously had a stroke incident, with 795,000 additional strokes occurring annually; adjusting for repeat strokes and deaths, there are 481,000 new stroke survivors each year. Additionally, approximately 5.3 million Americans live with the long-term effects of a TBI, with 275,000 hospitalizations each year. The most recent scientific research estimates that approximately 28.5% experience some visual impediment and 20.5% of these patients experience a permanent visual field deficit, reducing mobility and other activities of daily living. The target market for VRT and NeET is this 20.5% subset of patients who have suffered a permanent visual field deficit; NeuroEyeCoach addresses all 28.5% of patients who experience visual impediments. Management estimates that the addressable target market for its therapies is approximately 2.9 million people in the US, approximately 2.8 million people in Europe and approximately 12.9 million people throughout the rest of the world.

Our Growth Strategy

Vycor Medical

Vycor Medical’s growth strategy includes:

1. Increasing U.S. market penetration through broader hospital coverage and targeted direct physician marketing. Vycor Medical’s sales and marketing strategy is to penetrate a well-defined US target market of 4,500 neurosurgeons. Vycor markets direct to surgeons as well as marketing and distributing through independent distributors, with a focus both on adding new hospitals and expanding to additional surgeons in hospitals where VBAS is already approved, and to expand usage to a broader range of procedures. Vycor is pursuing a policy of continually evaluating and upgrading its distributors as well as adding additional distributors in regions where it has little to no presence.

 2. Provision of more Clinical and Scientific Data supporting the products superiority over the current standard-of-care blade retractors and to demonstrate VBAS’ potential for cost savings. Clinical and scientific data (in the form of peer reviewed articles, clinical studies and other reports and case studies) are critical in driving adoption, and in turn revenues, further and faster by demonstrating VBAS’ superiority as a minimally invasive access system that helps VBAS move further up the hospital cost/benefit curve. To date the Company has already had 11 Peer Reviewed studies and 6 other clinical papers published or presented.

3. International Market Growth

Vycor Medical utilizes select medical device distributors with experience in neurosurgical devices in their countries or regions. VBAS has regulatory approvals in Australia, Brazil, Canada, China, Europe (EU – Class III), Korea, Mexico, Japan, Russia and Taiwan. Vycor Medical is actively pursuing new distribution agreements in the countries where it does not have any market presence.

4. New Product Development

New Product Development is targeted at both driving the use of its existing VBAS product range through ancillary products and modalities that will facilitate the product’s use and through new product extensions to broaden VBAS applicability to procedures currently not addressed by the existing product line.

Vycor is modifying its existing VBAS product suite to make it easier to integrate with Image Guidance Systems (IGS) by re-engineering its VBAS product range so that the entire range of 12 devices, excluding the VBASmini, will be able to more easily accommodate pointers from the leading IGS system providers, the first phase of this was completed in September 2017. Increasingly, all major neuro centers have image guidance systems, and where this is in place management believes over 90% of surgeries are carried out using IGS and management strongly believes that the existing VBAS rigid structure lends itself well to being incorporated into this increasing trend.

NovaVision

While speech, physical, and occupational therapies are the long-standing treatment standards for stroke and TBI survivors, VRT is the first and only FDA-cleared clinical component of vision restoration to physically enhance the visual field after a stroke or brain injury. Increasingly the healthcare community, partly driven by strong lobbying by stroke associations worldwide, are recognizing that vision is not only a significant issue post stroke or brain injury, but that visual field loss can have a significant impact on the success of other rehabilitation modalities and the quality of life.

NovaVision is now able to provide a clinically supported, cost-effective and scalable visual therapy solution offering broad benefits to those suffering visual impairment following neurological brain damage, to both patients and medical professionals alike.

NovaVision has four routes-to-market aimed at patients and professionals, comprising: direct-to-patient; rehabilitation centers and clinics; stroke associations and support groups; and physicians. Given the company’s resources NovaVision is initially focused on direct-to-patient, with a website lead-driven inbound and outbound marketing strategy targeted at prospective patients and relatives.

Following the pilot launch of our NovaVision Center Model, comprising the Vision Diagnostics program and the NeuroEyeCoach training program, we have substantially broadened the delivery and licensing model in response to feedback from clinics. The new Center Model has a complete suite for the professional market, including options for software download, CD Rom, Cloud based and Hardware delivery with flexible and cost-effective pricing options, and is now being offered in both the US and Europe.

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 and meets 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 21 granted/allowed and 10 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 45 granted and 1 pending patents (including Sight Science).

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.

Employees

We currently have 12 employees.

Comparison of the Three Months Ended September 30, 2017March 31, 2018 to the Three Months Ended September 30, 2016March 31, 2017

Revenue and Gross Margin:

Vycor Medical recorded revenue of $326,843$277,811 from the sale of its products for the three months ended September 30, 2017, an increaseMarch 31, 2018, a decrease of $47,028, or 17%,$92,076 over the same period in 2016. Vycor has been2017. One international distributor that did not place an order in the process, during 2017,first quarter of modifying its existing VBAS product suite2018 accounted for $61,750 of the decrease; international sales tend to make it easier to integrate with Imaging Guided Systems. The Company experienced manufacturing delays in connection with this re-engineering during the first halfbe irregular as international distributors follow a pattern of 2017 and as a result was unable to fulfil shipments of certain models, particularly for someplace large internationalstocking orders. These delays were resolved and back orders were filled during the third quarter. Gross margin of 85%91% was recorded for the three months ended September 30, 2017March 31, 2018 compared to 88%89% for the same period in 2016.2017.

NovaVision recorded revenues of $52,230$47,290 for the three months ended September 30, 2017, an increaseMarch 31, 2018, a decrease of 14%$11,222 over the same period in 2016,2017, and gross margin of 89%, compared to 93%for both periods. There was an unusually large number of new patient starts in the first quarter of 2017; new patient starts for the first quarter of 2018 were the same period in 2016.

Research and Development Expense:

Research and development (“R&D”) expenses were $0as the average for the three months ended September 30, 2017 and $4,153 for the three months ended September 30, 2016.whole of 2017.

Selling,General and Administrative Expenses:

GeneralSelling, general and administrative expenses increaseddecreased by $11,080$42,468 to $546,615$568,305 for the three months ended September 30, 2017March 31, 2018 from $535,535$610,773 for the same period in 2016.2017. Included within Selling, General and Administrative Expenses are non-cash charges for share based compensation fromas the amortizationresult of amortizing employee and non-employee shares, warrants and options which have been issued by the Company over various periods. The charge for the three months ended September 30, 2017March 31, 2018 was $141,937, an increase$138,371, a decrease of $67,216$5,176 over $74,721$143,547 in 2016.2017. Also included within Selling, General and Administrative Expenses are Sales Commissions, which decreased by $4,796$21,992 from $70,930 to $43,712.$48,938 in 2018. The remaining Selling, General and Administrative expenses decreased by $51,340$15,300 from $412,306$396,296 to $360,966.

$380,996 in 2018.

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

Interest Expense:

Interest comprises expense on the Company’s debt and insurance policy financing. Related Party Interest expense for the three months ended September 30, 2017 and 2016March 31, 2018 was $0 and $4,663, respectively.compared to $678 for 2017. Other Interest expense for 2016 decreased2018 increased by $988$17 to $11,360$12,026 from $12,348$12,043 for 2016.2017.

Comparison of the Nine months Ended September 30, 2017 to the Nine months Ended September 30, 2016

Revenue and Gross Margin:

Vycor Medical recorded revenue of $949,053 from the sale of its products for the nine months ended September 30, 2017, a decrease of $12,786, or 1%, over the same period in 2016. Sales grew by 6% in the US in 2017 compared to 2016, offset by reduced international sales. International sales tend to be irregular as international distributors follow a pattern of placing large stocking orders. In addition, Vycor has been in the process, during 2017, of modifying its existing VBAS product suite to make it easier to integrate with Imaging Guided Systems. The Company experienced manufacturing delays in connection with this re-engineering during the first half of 2017 and as a result was unable to fulfil shipments of certain models, particularly for some large international orders. These delays were resolved and back orders were filled during the third quarter. Gross margin of 87% was recorded for the three months ended September 30, 2017 compared to 85% for the same period in 2016.

NovaVision recorded revenues of $166,102 for the nine months ended September 30, 2017, an increase of 16% over the same period in 2016, and gross margin of 89%, compared to 92% for the same period in 2016.

Research and Development Expense:

Research and development (“R&D”) expenses were $0 for the nine months ended September 30, 2017 and $4,153 for the nine months ended September 30, 2016.

General and Administrative Expenses:

General and administrative expenses decreased by $166,138 to $1,710,244 for the nine months ended September 30, 2017 from $1,876,382 for the same period in 2016. Included within General and Administrative Expenses are non-cash charges for share based compensation from the amortization of employee and non-employee shares, warrants and options which have been issued by the Company over various periods. The charge for the nine months ended September 30, 2017 was $422,305, an increase of $366 over $422,671 in 2016. Also included within General and Administrative Expenses are Sales Commissions, which increased by $20,085 to $162,699. The remaining General and Administrative expenses decreased by $185,857 from $1,311,097 to $1,125,240.

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

Interest Expense:

Interest comprises expense on the Company’s debt and insurance policy financing. Related Party Interest expense for the nine months ended September 30, 2017 was $679 compared to $5,910 for 2016. Other Interest expense for 2016 decreased by $4,318 to $32,217 from $36,535 for 2016.

Liquidity and Capital Resources

Liquidity

The following table shows cash flow and liquidity data for the periods ended September 30, 2017March 31, 2018 and December 31, 2016:2017:

Operating Activities.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 principle components of cash used in operating activities during the ninethree months ended September 30,March 31, 2018 and 2017, and 2016, with a commentary of changes during the periods and known or anticipated future changes:

The adjustments to reconcile net loss to cash used of $769,268$183,689 in the period have no impact on Liquidity.liquidity. The reductionincrease in net loss (as adjusted for non-cash items) by $200,314$49,298 to $332,641$142,947 was primarily due to a reductionresult of $170,925 in cash operating expenses duringreduced revenues. During the period. Thefirst quarter of 2017 a number of material and unusual items impacted the net change in accounts receivable, accounts payable and accrued liabilities is primarilyliabilities; these have been reversed in the result of:first quarter of 2018. In addition, the paymentCompany typically renews a large number of annual expense contracts such as insurances and licenses during the first quarter, of $69,314 of accounts payable deferred at the end of December 2016; andwhich has an increase in accounts receivable of $89,381 due in particular to a large customer order placed prior to the quarter end. During the period theimpact on cash usage. The Company purchased VBAS inventory for $85,748. Vycor is in the process of modifying the VBAS product suite to make it easier to integrate with IGSIGS. The first phase of this project was completed in September 2017 and additional inventory of $10,306 was purchased during the period. The Company anticipates completing the second phase of this project during 2018 and as a result will be purchasingpurchase additional new inventory in the fourth quarter of approximately $35,000.

$45,000.

Investing Activities.Cash used in investing activities for the ninethree months ended September 30, 2017March 31, 2018 was $160,324, of$13,230, which $146,793primarily reflected expenditure on the second phase of modifying the VBAS product suite to make it easier to integrate with IGS; there will beIGS. The Company anticipates additional mold expenditureexpenditures for this second phase during 2018 of approximately $20,000 in the fourth quarter.$90,000.

Financing Activities.On January 11, During and February 23, 2017subsequent to the period ending March 31, 2018 the Company completed the salereceived funds of $1,274,717 in shares of Common Stock and Warrants to accredited investors (the “Private Placement”). Included in these gross proceeds is the conversion of $248,000 of debt on the balance sheet at December 31, 2016, so that proceeds net of debt conversion were $1,026,717. The Private Placement raised net cash proceeds, after debt conversion and expenses, of $943,207. $101,000 of these proceeds and $7,050 of these expenses were reflected in the in the balance sheet at December 31, 2016 and so the net increase in liquidity during the period from the Private Placement was $849,259.

During the year ended December 31, 2016 Vycor’s largest shareholder, Fountainhead, had provided $248,000 of funding in the form of notes payable, which was converted into Common Stock as part of the Private Placement Initial Closing. Fountainhead also advanced $101,000 during the year ended December 31, 2016$73,000 in respect of the Private Placement. This amount was held in escrow at December 31, 2016 and represented part of the Private Placement Initial Closing.a loan from Fountainhead.

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

The balanceCompany has incurred losses since its inception, including a net loss of $326,636 and $312,791 for the three months ended March 31, 2018 and 2017 respectively and has not generated cash at September 30, 2017 is $315,017. Management has evaluatedflows from operations. As of March 31, 2018 the effectsCompany had a working capital deficiency of $346,389, excluding related party liabilities of $751,974. As a result, these conditions among others raise substantial doubt regarding our ability to continue as a going concern. The financial statements do not include any adjustments to reflect the Private Placement described abovepossible future effects on the Company’s financial condition, as well asrecoverability and classification of assets or the continued revenue growth coupled with improved marginsamounts and controlclassification of expenses. Management isliabilities that may result from the outcome of the opinion that any potential going concern uncertainty that previously existed has been remediated, and that its existing cash and cash equivalents following the Private Placement, together with the continued reduction in losses as a result of initiatives outlined below and short-term funding from Fountainhead, will be sufficient to meet its anticipated cash requirements through at least November 30, 2018.this uncertainty.

As described earlier in this ITEM 2 “Our Growth Strategy”, the Company is executing on a plan to achieve a growth in revenues for both the Vycor Medical and NovaVision divisions andas well as reduction in costs, thereby further reducereducing its cash operating usage. For Vycor Medical this includes in particular: increasing penetration in the US market through targeted marketing;marketing and a potential new medical education program; increased international market growth; and new product development centered around the modification of its existing VBAS product range to make it easiermore easy to integrateuse with the most common IGS systems, the first phase of which was completed in September 2017. For NovaVision, after a prolonged and now complete period of re-development, the Company is focusing its resources on direct-to-patient marketing through a website lead-driven inbound and outbound marketing strategy. In addition,Given the company’s resources, and the size and diversity of the professional market, NovaVision believes the best route to the professional market for its products is by partnering with entities who have already established distribution channels and expertise in the various professional target markets. The Company is identifying and is in dialogue with such qualified entities; the range of alternatives for NovaVision could comprise distribution partnerships, merger, sale and/or restructuring of its activities.

However, the Company believes it may not have sufficient cash to meet its various cash needs through May 31, 2019 unless the Company is now startingable to marketobtain additional cash from the issuance of debt or equity securities. Fountainhead, the Company’s largest shareholder, is currently providing 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 NovaVision Center Model to medical professionals, with a broad and flexible range of delivery and licensing options.operations.

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 basedshare-based compensation.

Research and Development

The Company expenses all research and development costs as incurred.

Cash and cash equivalents

The Company maintains cash balances at various financial institutions. Accounts at each institution are insured byA detailed description of our significant accounting policies can be found in our most recent Annual Report on Form 10-K for 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 September 30, 2017 andyear ended December 31, 2016 patient deposits amounted to $40,073 and $33,351, respectively, and are included in Accrued 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.

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.

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.

Revenue Recognition

Vycor Medical generates revenue from the sale of its surgical access system to hospitals and other medical professionals. Vycor Medical records revenue when a completed contract for the sale exists, the product is invoiced and shipped to the customer. Vycor Medical does not provide for product returns or warranty costs.

NovaVision generates revenues from various programs, therapy services and other sources such as license sales. Therapy services revenues represent fees from NovaVision’s vision restoration therapy software, eye movement training software, diagnostic software, clinic set up and training fees, and the professional and support services associated with the therapy. NovaVision provides vision restoration therapy directly to patients. The typical vision restoration therapy consists of six modules, performed on average over 6 months. A patient contract comprises set-up fees and monthly therapy fees. Set-up fees are recognized at the outset of the contract and therapy revenue is recognized ratably over the therapy period. Patient therapy is restricted to being completed by a patient within a specified time frame. NovaVision’s saccadic training software is generally completed within 2-4 weeks and revenue is therefore recognized fully at commencement.

Deferred revenue results from patients paying for the therapy in advance of receiving the therapy.2017.

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, some NovaVision therapy patients make monthly payments during the therapy program. The outstanding balances are stated net of an allowance for doubtful accounts. The Company determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, and the customer’s ability to pay its obligations. The Company writes off accounts receivable when they become uncollectible.

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 September 30, 2017 and 2016 was $2,544 and $7,630, 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) in the accompanying Consolidated Balance Sheet.

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.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not applicable.applicable

ITEM 4. CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures

We are required to maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer (also our principal executive officer) and our chief financial officer (also our principal financial and accounting officer) to allow for timely decisions regarding required disclosure.

The Company’s management, including our Chief Executive Officer (“CEO”) and our Chief Financial Officer (“CFO”), have evaluated the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, our CEO and our CFO have concluded that, as of the end of such period, the Company’s disclosure controls and procedures were effective as of that date to provide reasonable assurance that the information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that information required to be disclosed by the Company in the reports its files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its CEO and its CFO, as appropriate, to allow timely decisions regarding required disclosure. There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

(b) Changes in Internal Controls

There have not been any changes in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) under the Exchange Act) during the fiscal period to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company’s management, including the Company’s CEO and CFO, does not expect that the Company’s internal control over financial reporting will prevent all errors and all fraud. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.

PART II

ITEM 1. LEGAL PROCEEDINGS

We are subject from time to time to litigation, claims and suits arising in the ordinary course of business. As of November 6, 2017,May 9, 2018, we were not a party to any material litigation, claim or suit whose outcome could have a material effect on our financial statements.

ITEM 1A. RISK FACTORS.

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

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following is a list of securities issued for cash or services rendered, during the period from January 1, 2017 through November 6, 2017, which were not registered under the Securities Act:

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None.None

Index to Exhibits

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on November 13, 2017.May 11, 2018.