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 19,816,50525,824,264 shares outstanding of registrant’s common stock, par value $0.0001 per share, as of November 6, 2017.May 11, 2020.

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

TABLE OF CONTENTS

PART 1

ITEM 1. FINANCIAL STATEMENTS 

VYCOR MEDICAL, INC.

Consolidated Balance Sheets

(Unaudited)

See accompanying notes to consolidated financial statements

VYCOR MEDICAL, INC.

Consolidated Statements of Comprehensive Loss

(unaudited)(Unaudited)

See accompanying notes to consolidated financial statements

VYCOR MEDICAL, INC.

Consolidated Statement of Cash Flows
(unaudited)Stockholders’ Deficiency

(Unaudited)

See Accompanying Notesaccompanying notes to Financial Statementsconsolidated financial statements

VYCOR MEDICAL, INC.

Consolidated Statement of Cash Flows

(Unaudited)

See accompanying notes to consolidated financial statements

VYCOR MEDICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2017March 31, 2020

(unaudited)(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 of Vycor Medical, Inc. (the “Company” or “Vycor”) 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, 20162019 derives from the audited financial statements at that date, but does not include all the information and footnotes required by GAAP. These unaudited consolidated 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, 2016.2019.

The unaudited consolidated financial statements as of and for the three and nine months ended September 30, 2017March 31, 2020 and 2016,2019, 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.operations and cash flows. The results of operations for the three and nine months ended September 30, 2017March 31, 2020 and 20162019 are not necessarily indicative of the results to be expected for any other interim period or for the entire year.

Certain amounts on prior periodAbility to continue as a Going Concern

The accompanying unaudited consolidated financial statements have been reclassifiedprepared assuming that the Company will continue as a going concern. The Company has incurred losses since its inception, including a net loss of $174,948 for the three months ended March 31, 2020 and has not generated sufficient positive cash flows from operations. As of March 31, 2020 the Company had a working capital deficiency of $560,861, excluding related party liabilities of $1,477,513. These conditions, among others, raise substantial doubt regarding our ability to conformcontinue as a going concern. The unaudited 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.

The Company is executing on a plan to achieve a reduction in cash operating losses. Included within the working capital deficiency above is a term note for $300,000 to EuroAmerican Investment Corp. (“EuroAmerican”), together with current year presentation.accrued interest of $292,732, which has a maturity date of June 30, 2020, having been extended on a number of occasions from its initial due date of June 11, 2011. At this time, it is not known whether any further extension of the note beyond June 30, 2020 will be available. However, the Company believes it may not have sufficient cash to meet its various cash needs through May 31, 2021 unless the Company is able to obtain additional cash from the issuance of debt or equity securities. Fountainhead, the Company’s largest shareholder, has 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.

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, other than as disclosed above, 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.

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 unaudited 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 unaudited consolidated balance sheets, but did not have a material impact on our unaudited consolidated statements of comprehensive loss. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases.

Net Loss Per Share

Basic net loss per share is computed by dividing net loss available to common shareholders 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:

Covid-19

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 Form 10-Q, several states in the United States remain in states of emergency, and travel restrictions continue to be applied in several countries around the world, including the United States. Vycor Medical experienced a reduction in demand during the three months ended March 31, 2020 in the US and Europe. Although neurosurgery is not generally an elective procedure, general hospital dislocation and diversion of resources has impacted our revenues during the three months ended March 31, 2020 and could continue to do so. 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. 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.

Related PartyParties 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:

In January 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 and the conversion terms of the Note were 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 2,822,535 shares of Common Stock as of March 31, 2020. 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 2,308,405 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.

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 that will expire on September 30, 2020. Based on the original lease agreement, the Company has the one-time option to renew the lease for another three years with minimum annual rent at market price, not less than the original lease payment amount.  In January 2020, the Company exercised the option to extend the original lease for another three years with the expiration date of August 31, 2023. In accordance with ASC 842-10-35, the Company considered this lease extension as the modification of the original lease and re-measured the lease liability and the right-of-use assets on the commencement date of the lease extension.

The Company recognized the following in its unaudited consolidated balance sheet at March 31, 2020:

(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.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 2020 and 2019, the Company granted 271,21099,999 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, 2020 these shares have yet to be issued.

FromDuring January to September 2017, the Company issued 106,451 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 FountainheadMarch 2020 and 2019, under the terms of athe Consulting Agreement and 1,571,429 sharesreferred to in note 9, the Company issued 535,714 of Common Stock (valued at $330,000) to Fountainhead following the achievementfor fees of certain enumerated milestones.

From January to September 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.$112,500.

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:

As of September 30, 2017,March 31, 2020, the weighted-average remaining contractual life of outstanding warrants and options is 2.360 and 1.471.24 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 each of the ninethree months ended September 30, 2017March 31, 2020 and 2016,2019, the Company recognized share-based compensation of $1,609 and $198,200, respectively,$0 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, 2020 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 each of the ninethree months ended September 30, 2017March 31, 2020 and 20162019 was $420,696 and $224,471, respectively, of which $245,197 and $167,471, respectively, related to stock issued during the periods.$133,500. The expense related to stock not issued during each of the periods comprise: $63,000ended March 31, 2020 and $57,000, respectively,2019 comprises $21,000, related to stock granted but not issued to directors under the Directors Deferred Compensation Plan;Plan. As of March 31, 2020, there was $0 of total unrecognized compensation costs related to warrant and $112,500stock awards and $0, respectively of fee4s payable in stock to Fountainhead that were accrued but not issued during the period.

During the nine months ended September 30, 2017 warrants with a value of $86,754 were granted with performance vesting conditions; the value of these options will not be recognized as share-based compensation unless or until the Company concludes that it is probably the performance conditions will be achieved.non-vested options.

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 assumptionsThere were used in calculationsno options or warrants issued during either of the Black-Scholes option pricing model for the nine months ended September 30, 2017periods ending March 31, 2020 and 2016:2019.

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, 2020.2020 and has been extended for a further three years to August 31, 2023. The Company’s subsidiary in Germany occupies premises on a short-termrolling 12 month lease agreement. Aggregate rentagreement with a 3 month notice period of EUR1,650 per month (approximately $1,815). Rent expense for the ninethree months ended September 30, 2017March 31, 2020 and 20162019 was $134,229$25,122 and $159,176$24,706 respectively. See Note 4.

Potential German tax liability

In June 2012 the Company’s NovaVision German subsidiary received a preliminary assessment for Magdeburg City trade tax of approximately €75,000 (approximately $85,000)$82,000), with an additional interest charge of €12,000 (approximately $13,200). 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 beenwas preliminarily reduced to zero. The Company hasdid not acceptedaccept this trade tax assessment and is in discussion withappealed against it to the relevant tax authorities with a view to its reduction. The relevant tax authorities have agreed to suspend the assessment pending the outcome of certain court hearings and proposed tax legislation, and the Company has agreed to make limited monthly payments on account. Toaccount totaling €75,000 (approximately $82,000) which were completed in October 2016 and fully expensed. At that time the extent that this assessment (either a higher or a reduced amount) is ultimately confirmed byCompany appealed against the interest charge of €12,000 (approximately $13,200) which the tax authorities did not accept but also agreed to suspend pending the Company believes it has a very strong claim against certain professional advisors which would offsetoutcome of the liability in full.hearings and proposed legislation outlined above. Accordingly, the Company has made no provision for this liability in the ninethree months ended September 30, 2017March 31, 2020 and the year ended December 31, 2016 respectively, other than recording the monthly payments as an expense.2019 respectively.

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, 2020:

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”Amended Agreement”) to increase. Under the annualAmended Agreement, 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 recent Private Placementhigher of $0.21 and the average price ($0.21)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 thatterms of the warrants issued inAmended Agreement, Fountainhead provides the Private Placement. Vestingexecutive management team of these options is subject to the achievementCompany, including the positions of certain milestones by March 31, 2018. These options are consistentCEO, President and CFO, whose employment agreements with the options granted to executive management underCompany stipulate they receive no remuneration from the March 2016 Compensation Plan.Company.

During the ninethree months ended September 30, 2017,March 31, 2020 and March 31, 2019, under the terms of this amended Consultingthe Amended Agreement, Fountainhead received total fees of $255,000, of$133,500, which $135,300 waswere paid through the issuance of 644,286535,714 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, 2020, 58% of the sizeCompany’s Common Stock and 70% of its shareholding.the Company’s Preferred D Stock. Peter Zachariou owns 26% of 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 balanceeach 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 ninethree months ended September 30, 2017,March 31, 2020 and March 31, 2019, under the terms of this amendedthe Consulting Agreement referred to in Note 8, Fountainhead received total fees of $255,000, of which $135,300 was paid through the issuance of 644,286 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, 2017note 9, the Company completed the sale of $1,274,717 inissued 535,714 shares of Common Stock to Fountainhead for fees of $112,500.

During each of the three months ended March 31, 2020 and Warrants to accredited investors (the “Private Placement”). Fountainhead purchased a total2019, the Company accrued an aggregate of $477,939$162,185 of shares in the Private PlacementPreferred D Stock dividends, of which approximately $248,000 represented amounts that$113,019 was in respect of Fountainhead had already advanced to the Company and $41,693 was held by the Company in the formrespect 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.Peter Zachariou.

During the three months ended September 30, 2017 $112,500March 31, 2020 and 2019 the Company issued unsecured loan notes to Fountainhead for a total of fees payable$60,000 and $17,873, respectively. The loan notes bear interest at a rate of 10% and are due on demand or by their one-year anniversary.

There were no other related party transactions during the three months ended March 31, 2020 and 2019.

Vycor Medical sells its neurosurgical devices in stock were accrued; however these shares were not issued.the US primarily direct to hospitals, and internationally through distributors who in turn sell to hospitals.

In August 2014, FountainheadSales Concentration:

Accounts Receivable Concentration

The Company has three sub-contract manufacturers from which it purchases, respectively, VBAS injection molded parts, completed and Peter Zachariou (collectively, the “Related Party Noteholders”) agreed, pursuantsterilized VBAS units, and VBAS extension arms. Purchases from these manufacturers vary from quarter to a Securities Exchange Agreement (“Exchange Agreement”), to exchange their outstanding debtquarter, with no purchases in some quarters, however on an annual basis purchases from the Company into shareseach manufacturer represent over 10% 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 599,651 shares of Common Stock, at a price of $0.30 per share. The warrants expire on August 2, 2020 and were valued at $115,222.total annual purchases.

On April 8, 2020 the Board of Vycor resolved to evaluate and initiate the closure of the German office of NovaVision and to further evaluate migrating to a license model for NovaVision in Europe. For the year ended December 31, 2019 NovaVision Germany generated revenue of $88,851 but incurred an operating loss of $123,740. The Company believes a small proportion of these revenues can be maintained by internal transfers and by a potential licensing arrangement(s), without the incurrence of additional cost.

Other than the above stated Subsequent Event, the Company has evaluated the existence of events and transactions subsequent eventsto the balance sheet date through the date the unaudited 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 6664 issued or allowed patents and a further 119 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,2016 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.

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, and is believed to significantly reduce the pressure and hence trauma on the surrounding brain tissue.8 pending patents.

NovaVision

NovaVision provides non-invasive, computer-based rehabilitation therapies targeted at a substantial and largely un-addressed market of people who have lost their sightimpaired vision 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.injury, 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.38 granted patents.

Strategy

NovaVision also has models of VRTThe Company is continuing to execute on a plan to achieve revenue growth and NeuroEyeCoach for physicians and rehabilitation clinics, as well as VIDIT, a diagnostic program that enables therapists to perform high-resolution visual field testsreduction 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 marketedcash operating losses¹. For Vycor Medical this plan includes in the U.S; and NeuroEyeCoach is registeredparticular: increasing market penetration in the US through broadening of the distribution network and programs to increase penetration in exiting hospitals; increasing international growth in 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 compatible with the most common IGS systems was completed in September 2017 and has been well received by surgeons, resulting in increased hospital penetration and revenues particularly in the US. The second phase of the development of further IGS integration is in process and will then be 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 a desire and financial wherewithal to leverage the NovaVision therapy platform. Management is determined to reduce the losses it is incurring in this division, which is why it has now taken the decision to close the German office and migrate to a licensing model for NovaVision in Europe. Management is open to a broad range of alternatives for NovaVision as a Class I 510(k) exempt device. VRT, NECwhole, which could comprise distribution and NeET have CE Marking for the EU. NovaVision has 45 granted and 1 pending patents worldwide.

Competitionmarketing partnerships, licensing, merger or sale.

The VBAS device is both a brain access system

¹Operating Loss before Depreciation, Amortization 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.non-cash Stock Compensation

 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 MedicalCOVID-19

Vycor Medical’s growth strategy includes:

1. Increasing U.S. market penetration through broader hospital coverageIn December 2019, an outbreak of a novel strain of coronavirus (COVID-19) originated in Wuhan, China, 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 usagehas since spread to a broader rangenumber 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 supportingother countries, including the products superiority overUnited States. On March 11, 2020, 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’ superiorityWorld Health Organization characterized COVID-19 as a minimally invasive access system that helps VBAS move further uppandemic. In addition, as of the hospital cost/benefit curve. To datetime of the Company has already had 11 Peer Reviewed studiesfiling of this Form 10-Q, several states in the United States remain in states of emergency, and 6 other clinical papers published or presented.

3. International Market Growth

travel restrictions continue to be applied in several countries around the world, including the United States. Vycor Medical utilizes select medical device distributors with experienceexperienced a reduction 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 indemand during 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, boththree months ended March 31, 2020 in the US and internationally.

Employees

We currentlyEurope. Although neurosurgery is not generally an elective procedure, general hospital dislocation and diversion of resources has impacted our revenues during the three months ended March 31, 2020 and could continue to do so. 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 12 employees.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. 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.

Comparison of the Three Months Ended September 30, 2017March 31, 2020 to the Three Months Ended September 30, 2016March 31, 2019

Revenue and Gross Margin:

Vycor Medical recorded revenue of $326,843$307,287 from the sale of its products for the three months ended September 30, 2017,March 31, 2020, an increase of $47,028, or 17%,$10,181 over the same period in 2016.2019. Although we do not yet know the extent we could be affected by the Coronavirus (COVID-19) pandemic, Vycor has beenMedical experienced a decline in revenues in the process, during 2017,US and certain international regions, particularly in March, which was offset by the shipment 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-engineeringan advance order during the first halfquarter to one international distributor to ensure protection 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.its supply chain. Gross margin of 85%88% and 90% was recorded for the three months ended September 30, 2017 compared to 88% forMarch 31, 2020 and 2019, respectively. Gross margin is affected by the same period in 2016.revenue mix and also by manufacturing validation charges.

NovaVision recorded revenues of $52,230$43,764 for the three months ended September 30, 2017, an increaseMarch 31, 2020, a decrease of 14%$9,796 over the same period in 2016,2019, mainly as a result of reduced patient volumes and grossrevenues in Europe. Gross margin of 89%was 94%, compared to 93%89% for the same period in 2016.2019.

Research and Development Expense:

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

Selling, General and Administrative Expenses:

GeneralSelling, general and administrative expenses increaseddecreased by $11,080$8,317 to $546,615$453,904 for the three months ended September 30, 2017March 31, 2020 from $535,535$462,221 for the same period in 2016.2019. Included within Selling, General and Administrative Expenses are non-cash charges for sharestock 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, 2020 and 2019 was $141,937, an increase of $67,216 over $74,721 in 2016.$133,500. Also included within Selling, General and Administrative Expenses are Sales Commissions, which decreased by $4,796$5,870 from $55,825 to $43,712. $49,955 in 2020.

The remaining Selling, General and Administrative expenses decreased by $51,340$2,447 from $412,306$272,896 to $360,966.$270,449 in 2020.

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, 2020 was $0 and $4,663, respectively.$6,425 compared to $4,759 for 2019. Other Interest expense for 2016 decreased by $988 to $11,360 from $12,348 for 2016.

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

Revenue and Gross Margin: