VYCOR MEDICAL INC - FORM 10-Q - November 13, 2020

Attached files

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EX-32.2 - VYCOR MEDICAL INC	ex32-2.htm
EX-32.1 - VYCOR MEDICAL INC	ex32-1.htm
EX-31.2 - VYCOR MEDICAL INC	ex31-2.htm
EX-31.1 - VYCOR MEDICAL INC	ex31-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)

[X]	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the fiscal quarter ended September 30, 2020

[ ]	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

	For the transition period from to

VYCOR MEDICAL, INC.

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

Delaware	001-34932	20-3369218
(State of	(Commission	(IRS Employer
Incorporation)	File Number)	Identification No.)

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 pursuant to Section 12(b) of the Act:

Title of each class		Trading Symbol		Name of each exchange on which registered
Common Stock		VYCO		OTCQB

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] 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 [ ] No [X]

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.

Large Accelerated Filer [ ]		Accelerated Filer [ ]
Non-accelerated Filer [ ] (Do not check if a smaller reporting company)		Smaller Reporting Company [X]

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

There were 26,895,692 shares outstanding of registrant’s common stock, par value $0.0001 per share, as of November 13, 2020.

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

TABLE OF CONTENTS

		Page
	PART I

Item 1.	Financial Statements	3

	Unaudited Consolidated Balance Sheets as of September 30, 2020 and December 31, 2019	3

	Unaudited Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2020 and 2019.	4

	Unaudited Consolidated Statement of Stockholders’ Deficiency for the three and nine months ended September 30, 2020 and 2019.	5

	Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2020 and 2019.	6

	Notes to Unaudited Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	17

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24

Item 4.	Controls and Procedures	24

	PART II

Item 1.	Legal Proceedings	25

Item 1A.	Risk Factors	25

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	25

Item 3.	Defaults Upon Senior Securities	25

Item 4.	Mine Safety Disclosures	25

Item 5.	Other Information	25

Item 6.	Exhibits	25

SIGNATURES		26

PART 1

ITEM 1. FINANCIAL STATEMENTS

VYCOR MEDICAL, INC.

Consolidated Balance Sheets

(Unaudited)

	September 30, 2020			December 31, 2019
ASSETS
Current Assets
Cash	$	74,935		$	60,717
Trade accounts receivable		137,397			274,551
Inventory		179,714			208,353
Prepaid expenses and other current assets		90,854			92,694
Current assets of discontinued operations		2,004			20,117
Total Current Assets		484,904			656,432

Fixed assets, net		389,146			364,953

Intangible and Other assets:
Patents, net of accumulated amortization		14,343			23,326
Security deposits		6,000			6,000
Operating lease - right of use assets		135,003			31,658
Long term assets of discontinued operations		-			9,574
Total Intangible and Other assets		155,346			70,558
TOTAL ASSETS	$	1,029,396		$	1,091,943

LIABILITIES AND STOCKHOLDERS’ DEFICIENCY
Current Liabilities
Accounts payable	$	131,117		$	245,412
Accrued interest: Other		316,798			280,765
Accrued interest: Related party		66,767			44,921
Accrued liabilities - Other		116,085			233,067
Accrued liabilities - Related Party		1,297,480			973,110
Notes payable: Other		555,666			328,032
Notes payable: Related Party		310,873			230,873
Current operating lease liabilities		44,079			28,010
Current liabilities of discontinued operations		9,884			82,216
Total Current Liabilities		2,848,749			2,446,406

Operating lease liability - Long term		88,097			-

STOCKHOLDERS’ DEFICIENCY
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 270,307 and 270,307 issued and outstanding as at September 30, 2020 and December 31, 2019 respectively		27			27
Common Stock, $0.0001 par value, 55,000,000 shares authorized at September 30, 2020 and December 31, 2019, 26,999,026 and 25,391,884 shares issued and 26,895,692 and 25,288,550 outstanding at September. 30, 2020 and December 31, 2019 respectively		2,700			2,539
Additional Paid-in Capital		28,699,931			28,306,592
Treasury Stock (103,334 shares of Common Stock as at September 30, 2020 and December 31, 2019 respectively, at cost)		(1,033	)		(1,033	)
Accumulated Deficit		(30,736,750	)		(29,790,258	)
Accumulated Other Comprehensive Income		127,675			127,670
Total Stockholders’ Deficiency		(1,907,450	)		(1,354,463	)
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY	$	1,029,396		$	1,091,943

See accompanying notes to consolidated financial statements

VYCOR MEDICAL, INC.

Consolidated Statements of Comprehensive Loss

(Unaudited)

	For the three months ended September 30,						For the nine months ended September 30,
	2020			2019			2020			2019

Revenue	$	275,925		$	322,884		$	850,430		$	1,061,393
Cost of Goods Sold		40,551			28,962			98,338			97,446
Gross Profit		235,374			293,922			752,092			963,947

Operating expenses:
Depreciation and Amortization		14,495			15,218			43,780			44,855
General and administrative		427,250			444,371			1,260,742			1,344,853
Total Operating expenses		441,745			459,589			1,304,522			1,389,708
Operating loss		(206,371	)		(165,667	)		(552,430	)		(425,761	)

Other income (expense)
Interest expense: Related Party		(7,836	)		(5,315	)		(21,846	)		(15,331	)
Interest expense: Other		(12,099	)		(12,109	)		(36,033	)		(36,074	)
Loss on foreign currency exchange		(484	)		(3	)		(829	)		(207	)
Gain on other income		6,000			-			6,000			-
Total Other Income (expense)		(14,419	)		(17,427	)		(52,708	)		(51,612	)

Loss Before Credit for Income Taxes		(220,790	)		(183,094	)		(605,138	)		(477,373	)
Credit for income taxes		-			-			-			-
Net Loss from continuing operations		(220,790	)		(183,094	)		(605,138	)		(477,373	)
Income (Loss) from discontinued operations, net of tax		22,503			(26,515	)		(16,984	)		(97,838	)
Net loss		(198,287	)		(209,609	)		(622,122	)		(575,211	)

Preferred stock dividends		(162,185	)		(162,185	)		(324,370	)		(324,370	)
Net Loss available to common stockholders	$	(360,472	)	$	(371,794	)	$	(946,492	)	$	(899,581	)
Other Comprehensive Loss
Foreign Currency Translation Adjustment		3			7			5			2
Comprehensive Loss		(198,284	)		(209,602	)		(622,117	)		(575,209	)

Net Loss Per Share – basic and diluted
Loss from continuing operations	$	(0.01	)	$	(0.01	)	$	(0.02	)	$	(0.02	)
Income (Loss) from discontinued operations	$	0.00		$	(0.00	)	$	(0.00	)	$	(0.00	)
Net loss available to common stockholders	$	(0.01	)	$	(0.02	)	$	(0.04	)	$	(0.04	)

Weighted Average Number of Shares Outstanding – Basic and Diluted		26,365,801			24,222,946			25,832,084			23,689,516

See accompanying notes to consolidated financial statements

VYCOR MEDICAL, INC.

Consolidated Statement of Stockholders’ Deficiency

(Unaudited)

																			Additional					Accum
	Common Stock				Preferred C				Preferred D				Treasury Stock						Paid-in		Accumulated			OCI
	Number		Amount		Number		Amount		Number		Amount		Number			Amount			Capital		Deficit			(Loss)		Total

Balance at June 30, 2020		26,463,312	$	2,646		1	$	0		270,306	$	27		(103,334	)	$	(1,033	)	$	28,573,484	$	(30,376,278	)	$	127,672	$	(1,673,482	)
Issuance of stock for board and consulting fees		535,714		54																112,447							112,501
Directors deferred compensation granted		-																		14,000							14,000
Issuance of shares pursuant to exercise of warrants																											-
Accumulated Comprehensive Loss																									3		3
Net loss for period ended September 30, 2020																						(360,472	)				(360,472	)
Balance at September 30, 2020		26,999,026	$	2,700		1	$	0		270,306	$	27		(103,334	)	$	(1,033	)	$	28,699,931	$	(30,736,750	)	$	127,675	$	(1,907,450	)

																			Additional					Accum
	Common Stock				Preferred C				Preferred D				Treasury Stock						Paid-in		Accumulated			OCI
	Number		Amount		Number		Amount		Number		Amount		Number			Amount			Capital		Deficit			(Loss)		Total

Balance at December 31, 2019		25,391,884	$	2,539		1	$	0		270,306	$	27		(103,334	)	$	(1,033	)	$	28,306,592	$	(29,790,258	)	$	127,670	$	(1,354,463	)
Issuance of stock for board and consulting fees		1,607,142		161																337,339							337,500
Directors deferred compensation granted		-																		56,000							56,000
Issuance of shares pursuant to exercise of warrants																											-
Accumulated Comprehensive Loss																									5		5
Net loss for period ended September 30, 2020																						(946,492	)				(946,492	)
Balance at September 30, 2020		26,999,026	$	2,700		1	$	0		270,306	$	27		(103,334	)	$	(1,033	)	$	28,699,931	$	(30,736,750	)	$	127,675	$	(1,907,450	)

																			Additional					Accum
	Common Stock				Preferred C				Preferred D				Treasury Stock						Paid-in		Accumulated			OCI
	Number		Amount		Number		Amount		Number		Amount		Number			Amount			Capital		Deficit			(Loss)		Total

Balance at June 30, 2019		24,320,456	$	2,432		1	$	0		270,306	$	27		(103,334	)	$	(1,033	)	$	28,039,699	$	(29,197,473	)	$	127,668	$	(1,028,680	)
Issuance of stock for board and consulting fees		535,714		54																112,447							112,501
Directors deferred compensation granted		-																		21,000							21,000
Issuance of shares pursuant to exercise of warrants																											-
Accumulated Comprehensive Loss																									7		7
Net loss for period ended September 30, 2019																						(371,794	)				(371,794	)
Balance at Setember 30, 2019		24,856,170	$	2,486		1	$	0		270,306	$	27		(103,334	)	$	(1,033	)	$	28,173,146	$	(29,569,267	)	$	127,675	$	(1,266,966	)

																			Additional					Accum
	Common Stock				Preferred C				Preferred D				Treasury Stock						Paid-in		Accumulated			OCI
	Number		Amount		Number		Amount		Number		Amount		Number			Amount			Capital		Deficit			(Loss)		Total

Balance at December 31, 2018		23,244,028	$	2,324		1	$	0		270,306	$	27		(103,334	)	$	(1,033	)	$	27,771,868	$	(28,669,686	)	$	127,673	$	(768,827	)
Issuance of stock for board and consulting fees		1,612,142		162																338,278							338,440
Directors deferred compensation granted		-																		63,000							63,000
Issuance of shares pursuant to exercise of warrants																											-
Accumulated Comprehensive Loss																									2		2
Net loss for period ended September 30, 2019																						(899,581	)				(899,581	)
Balance at September 30, 2019		24,856,170	$	2,486		1	$	0		270,306	$	27		(103,334	)	$	(1,033	)	$	28,173,146	$	(29,569,267	)	$	127,675	$	(1,266,966	)

See accompanying notes to consolidated financial statements

VYCOR MEDICAL, INC.

Consolidated Statement of Cash Flows

(Unaudited)

	For the nine months ended
	September 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(622,121	)	$	(575,211	)
Adjustments to reconcile net loss to cash used in operating activities:
Amortization of intangible assets		8,983			9,170
Depreciation of fixed assets		35,939			37,201
Inventory provision		9,418			9,418
Stock based compensation		393,500			401,440

Changes in assets and liabilities:
Accounts receivable		137,154			44,521
Inventory		19,221			(34,455	)
Prepaid expenses		2,661			(33,309	)
Accrued interest - Related Party		21,846			15,332
Accrued interest - Other		36,033			35,901
Accounts payable		(114,295	)		104,518
Accrued liabilities - Other		(116,982	)		(25,818	)
Changes in discontinued operations, net		(54,218	)		497
Cash used in operating activities		(242,862	)		(10,795	)
Cash flows from investing activities:
Purchase of fixed assets		(60,132	)		(21,560	)
Changes in investing activities of discontinued operations, net		9,574			2,496
Cash used in investing activities		(50,558	)		(19,064	)
Cash flows from financing activities:
Proceeds from Notes Payable - Related Party		80,000			17,873
Proceeds from Paycheck Protection Program and EIDL		208,600			-
Proceeds net of repayments Notes Payable - Other		19,034			25,244
Cash provided by financing activities		307,634			43,117
Effect of exchange rate changes on cash		4			(1,093	)
Net increase (decrease) in cash		14,218			12,165
Cash at beginning of period		60,717			78,011
Cash at end of period	$	74,935		$	90,176

Non-Cash Transactions:
Common stock issued to related party for payment of accrued liabilities	$	0		$	0

See accompanying notes to consolidated financial statements

VYCOR MEDICAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2020

(Unaudited)

1. BASIS OF PRESENTATION

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 8 of Regulation S-X of the Securities Exchange Commission. In accordance with those rules and regulations certain information and footnote disclosures normally included in consolidated financial statements have been omitted pursuant to such rules and regulations. The consolidated balance sheet as of December 31, 2019 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, 2019.

The unaudited consolidated financial statements as of and for the nine months ended September 30, 2020 and 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, results of operations and cash flows. The results of operations for the nine months ended September 30, 2020 and 2019 are not necessarily indicative of the results to be expected for any other interim period or for the entire year. Certain prior period amounts on the unaudited consolidated financial statements have been reclassified to conform to the current period 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 $946,492 for the nine months ended September 30, 2020 and has not generated sufficient positive cash flows from operations. As of September 30, 2020 the Company had a working capital deficiency of $688,725, excluding related party liabilities of $1,675,120. These conditions, among others, raise substantial doubt regarding our ability to continue 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 accrued interest of $316,798, which has a maturity date of December 31, 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 December 31, 2020 will be available. However, the Company believes it may not have sufficient cash to meet its various cash needs through November 30, 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.

2. SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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. Following the decision in April 2020 to close the German office of NovaVision, the activities of NovaVision GmbH have been accounted for as discontinued operations.

Recent Accounting Pronouncements

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.

Discontinued Operations

In accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations (which we presented as operations to be disposed and operations disposed), less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.

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 stockholders 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:

	September 30, 2020		September 30, 2019
Stock options outstanding		680,000		700,000
Warrants to purchase common stock		-		3,717,826
Debentures convertible into common stock		2,937,133		2,707,933
Preferred shares convertible into common stock		1,272,052		1,272,052
Directors Deferred Compensation Plan		1,442,571		1,075,908
Total		6,331,756		9,473,719

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 nine months ended September 30, 2020 in the US and Internationally. Although neurosurgery is not considered an elective procedure, general hospital dislocation and diversion of resources away from non-emergency surgeries, or surgeries that can be postponed for a short period without harm, has impacted our revenues during the nine months ended September 30, 2020 and could continue to do so. In addition, sales and marketing efforts by Vycor’s representatives have been disrupted or curtailed due to lockdown and social distancing, and this has and may continue to hinder the recovery of revenues. 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.

3. DISCONTINUED OPERATIONS

In April 2020, the board of Vycor took the decision to close the German operations of NovaVision, including the German office and NovaVision GmbH, and instead migrate to a licensed business model; in June 2020 Vycor announced that it would be entering into a license agreement and transition agreement (the “Agreements”) with HelferApp GmbH, a cognitive therapy specialist. Under the Agreements, HelferApp is licensed to provide NovaVision’s products and therapies in Germany, Austria and Switzerland to patients and professionals; and has assumed responsibility for the current patients of NovaVision in the territory. The NovaVision German office was closed effective June 30, 2020. The Company will continue to fund the remaining expenses of the German operations, which are non-material, until such a time as NovaVision GmbH will be formally wound up.

Reconciliation of the Major Line Items constituting Loss from discontinued operations, net of tax, that are presented in the Consolidated Statements of Comprehensive Loss

	For the three months ended September 30,						For the nine months ended September 30,
	2020			2019			2020			2019
Major line items constituting loss from discontinued operations
Revenue	$	2,851		$	23,424		$	41,527		$	65,471
Cost of Goods Sold		616			2,565			4,835			9,188
Gross Profit		2,235			20,859			36,692			56,283

Operating expenses:
Depreciation and Amortization		-			(103	)		-			156
Selling, general and administrative		15,304			47,045			87,986			152,240
Total Operating expenses		15,304			46,942			87,986			152,396
Operating loss		(13,069	)		(26,083	)		(51,294	)		(96,113	)

Other income (expense)
Loss on foreign currency exchange		(879	)		(432	)		(2,141	)		(1,725	)
Other income (loss)		36,451						36,451
Total Other Income (expense)		35,572			(432	)		34,310			(1,725	)

Income (loss) Before Credit for Income Taxes		22,503			(26,515	)		(16,984	)		(97,838	)
Credit for income taxes		-			-			-			-
Loss from discontinued operations, net of tax	$	22,503		$	(26,515	)	$	(16,984	)	$	(97,838	)

Other income comprises the net of non-cash adjustments made in connection with the Agreements with HeflerApp and the closure of the German operation: adjustments for assets and liabilities transferred to HelferApp or NovaVision Inc. or otherwise written off - $12,308; elimination of historic balance for NovaVision GmbH legal expenses funded by NovaVision Inc. - $34,727; and certain accruals for employee costs – ($10,584).

4. NOTES PAYABLE

Related Parties Notes Payable

Related Party Notes Payable consists of:

	September 30, 2020		December 31, 2019

On June 25, 2018 the Company issued promissory notes to Peter Zachariou for $30,000. The notes bear interest at 10% per annum and are payable on the earlier of one year or five days following the delivery of written demand for payment by the Payee. The note was extended for another twelve months on its due date to June 25, 2021 or on demand by the Payee.	$	30,000	$	30,000
Between March 26, 2018 and April 24, 2020 the Company issued various promissory notes to Fountainhead Capital Management Limited for $280,873. The notes bear interest at 10% per annum and are payable on the earlier of one year or five days following the delivery of written demand for payment by the Payee. Six notes were extended on their due dates for another twelve months. The Notes will be due between December 2020 and July 2021 or on demand by the Payee.		280,873		200,873
Total Related Party Notes Payable	$	310,873	$	230,873

Other Notes Payable

Other Notes Payable consists of:

	September 30, 2020		December 31, 2019
On March 25, 2011 the Company issued a term note for $300,000 to EuroAmerican Investment Corp. (“EuroAmerican”). The term note bears interest at 16% per annum and was due June 25, 2011, and has been extended on a number of occasions. On the note’s most recent due date, the note was extended to December 31, 2020. The note is personally guaranteed by certain officers and directors of the Company. See further note below	$	300,000	$	300,000
On May 16, 2020, the Company was granted a loan from Citizens Bank N.A. in the aggregate amount of $58,600, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The Loan, which was in the form of a Note dated May 16, 2020 issued by the Borrower, matures on May 16, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing on November 16, 2020. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Under the terms of the PPP, the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. The Company’s use of the Loan qualifies and intends to apply once the forgiveness program commences.		58,600		-
On July 7, 2020, the Company was advised that the Small Business Administration (SBA) had approved a $150,000 loan under the Economic Injury Disaster Loan Program pursuant to the Coronavirus Aid, Relief and Economic Security (CARES) Act (“Loan”). The Loan, evidenced by a promissory note dated July 7, 2020, has a term of thirty (30) years, bears interest at a fixed rate of three and three-quarters percent (3.75%) per annum, with monthly payments in the amount of $731.00 per month commencing twelve (12) months from the date of the note and is secured by essentially all of the assets of the Company. The proceeds of the Loan will be used for general working capital purposes to alleviate economic injury caused by disaster occurring in the month of January 2020 and continuing thereafter.		150,000		-
Insurance policy finance agreements and other.		47,066		28,032
Total Other Notes Payable:	$	555,666	$	328,032

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 2,937,133 shares of Common Stock as of September 30, 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 which requires a down payment and subsequent monthly payments, the time periods vary from 10 months to 12 equal monthly payments.

5. LEASE

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 had 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 September 30, 2020 and December 31, 2019:

	September 30, 2020		December 31, 2019

Operating Lease ROU Assets	$	135,003	$	31,658
	$	135,003	$	31,658

Operating Lease Liabilities
Current portion		44,079		28,010
Long-term portion	$	88,097	$	-
	$	132,176	$	28,010

6. SEGMENT REPORTING, GEOGRAPHICAL INFORMATION

(a) Business segments

The Company operates in two business segments: Vycor Medical, which focuses on devices for neurosurgery; and NovaVision, which focuses on neuro stimulation therapies and diagnostic devices for the treatment and screening of vision field loss and which includes Sight Science. Discontinued operations were part of NovaVision and revenues and assets were in Europe; see Note 3. Set out below are the revenues, gross profits and total assets for each segment:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenue:
Vycor Medical	$	250,648	$	301,053	$	776,932	$	988,786
NovaVision	$	25,277	$	21,831	$	73,498	$	72,607
	$	275,925	$	322,884	$	850,430	$	1,061,393
Gross Profit
Vycor Medical	$	211,089	$	273,146	$	683,125	$	895,484
NovaVision	$	24,285	$	20,776	$	68,967	$	68,463
	$	235,374	$	293,922	$	752,092	$	963,947

	September 30, 2020		December 31, 2019
Total Assets:
Vycor Medical	$	990,852	$	1,036,857
NovaVision		36,540		25,395
Discontinued operations		2,004		29,691
Total Assets	$	1,029,396	$	1,091,943

(b) Geographic information

The Company operates in two geographic segments, the United States and Europe. Discontinued operations were part of NovaVision and revenues and assets were in Europe; see Note 3. Set out below are the revenues, gross profits and total assets for each segment.

	Three Months Ended September 30,				Nine Months Ended September 30,
	2020		2019		2020		2019
Revenue:
United States	$	270,851	$	320,476	$	839,992	$	1,051,237
Europe	$	5,074	$	2,408	$	10,438	$	10,156
	$	275,925	$	322,884	$	850,430	$	1,061,393
Gross Profit
United States	$	230,321	$	291,536	$	741,675	$	953,861
Europe	$	5,053	$	2,386	$	10,417	$	10,086
	$	235,374	$	293,922	$	752,092	$	963,947

	September 30, 2020		December 31, 2019
Total Assets:
United States	$	1,014,817	$	1,055,312
Europe		12,575		6,940
Discontinued operations		2,004		29,691
Total Assets	$	1,029,396	$	1,091,943

7. EQUITY

Common Stock and Stock Grants

During January to September 2020 and 2019, the Company granted 266,664 shares of Common Stock (valued at $56,000) to non-employee Directors. Under the terms of the Directors Deferred Compensation Plan, the receipt of these shares is deferred until the January 15^thfollowing the termination of their services as a director. As of September 30, 2020 these shares have yet to be issued.

During January to September 2020 and 2019, under the terms of the Consulting Agreement referred to in note 10, the Company issued 1,607,142 of Common Stock to Fountainhead for fees of $337,500 in each period respectively.

Warrants and Options

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

STOCK WARRANTS:

				Weighted average
	Number of shares			exercise price per share
Outstanding at December 31, 2019		3,717,826		$	0.27
Granted		-			-
Exercised		-			-
Cancelled or expired		(3,717,826	)	$	0.27
Outstanding at September 30, 2020		-		$	0.00

STOCK OPTIONS:

				Weighted average
	Number of shares			exercise price per share
Outstanding at December 31, 2019		700,000		$	0.28
Granted		-			-
Exercised		-			-
Cancelled or expired		(20,000	)		(0.27	)
Outstanding at September 30, 2020		680,000		$	0.28

As of September 30, 2020, the weighted-average remaining contractual life of outstanding warrants and options is 0 and 0.74 years, respectively.

8. SHARE-BASED COMPENSATION

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 nine months ended September 30, 2020 and 2019, the Company recognized share-based compensation of $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, 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”. 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 for stock granted to non-employees for each of the nine months ended September 30, 2020 and 2019 was $266,664 and $299,997. The expense related to stock not issued during each of the periods ended September 30, 2020 and 2019 comprises $56,000 and $63,000, related to stock granted but not issued to directors under the Directors Deferred Compensation Plan. As of September 30, 2020, there was $0 of total unrecognized compensation costs related to warrant and stock awards and 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.

There were no options or warrants issued during either of the periods ending September 30, 2020 and 2019.

9. COMMITMENTS AND CONTINGENCIES

Lease

The Company leases office space located at 951 Broken Sound Parkway, Suite 320, Boca Raton, FL 33487 from WPT Land 2 L.P., for a gross rent of approximately $5,700 plus sales tax per month. The lease terminates September 30, 2020 and has been extended for a further three years to August 31, 2023. The Company’s subsidiary in Germany occupied premises on a rolling 12 month lease agreement with a 3 month notice period of EUR1,650 per month (approximately $1,815), which was terminated effective June 30, 2020. Rent expense for the nine months ended September 30, 2020 and 2019 for the continuing operations was $59,008 and $57,202 respectively. See Note 5.

Potential German tax liability

In June 2012 the Company’s NovaVision German subsidiary received a preliminary assessment for Magdeburg City trade tax of €75,000 (approximately $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 was preliminarily reduced to zero. The Company did not accept this trade tax assessment and appealed against it to the relevant tax authorities with a view to its reduction. The relevant tax authorities agreed to suspend the assessment pending the outcome of certain court hearings and proposed tax legislation, and the Company agreed to make monthly payments on account totaling €75,000 (approximately $82,000) which were completed in October 2016 and fully expensed. At that time the Company 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 outcome of the hearings and proposed legislation outlined above. Accordingly, the Company has made no provision for this liability in the nine months ended September 30, 2020 and the year ended December 31, 2019 respectively.

10. CONSULTING AND OTHER AGREEMENTS

The following agreements were entered into or remained in force during the period ended September 30, 2020:

Consulting Agreement with Fountainhead

In March 2017 and effective April 1, 2017, the Company amended the Fountainhead Consulting Agreement (“the Amended Agreement”). Under the Amended Agreement, fees of $450,000 are payable to Fountainhead, with an option to receive $5,000 per month in cash and the remainder payable in Company Common Stock issued at the higher of $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 terms of the Amended Agreement, Fountainhead provides the executive management team of the Company, including the positions of CEO, President and CFO, whose employment agreements with the Company stipulate they receive no remuneration from the Company.

During the nine months ended September 30, 2020 and September 30, 2019, under the terms of the Amended Agreement, Fountainhead received total fees of $337,500, which were paid through the issuance of 1,607,142 shares of Company Common Stock.

11. RELATED PARTY TRANSACTIONS

Peter Zachariou and David Cantor, directors of the Company, are investment managers of Fountainhead which owned, at September 30, 2020, 59.7% of the Company’s Common Stock and 70% of 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 each of the nine months ended September 30, 2020 and September 30, 2019, under the terms of the Consulting Agreement referred to in note 10, the Company issued 1,607,142 shares of Common Stock to Fountainhead for fees of $337,500.

During each of the nine months ended September 30, 2020 and 2019, the Company accrued an aggregate of $324,370 of Preferred D Stock dividends, of which $226,037 was in respect of Fountainhead and $83,386 was in respect of Peter Zachariou.

During the nine months ended September 30, 2020 and 2019 the Company issued unsecured loan notes to Fountainhead for a total of $80,000 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 nine months ended September 30, 2020 and 2019.

12. CONCENTRATION

Vycor Medical sells its neurosurgical devices in the US primarily direct to hospitals, and internationally through distributors who in turn sell to hospitals.

Sales Concentration:

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Number of customers over 10%		0			1			1			1
Percentage of sales		0	%		12	%		14	%		10	%

Accounts Receivable Concentration

	At September 30,			At December 31,
	2020			2019

Number of customers over 10%		2			1
Percentage of accounts receivable		11% and 15	%		37	%

The Company has three sub-contract manufacturers from which it purchases, respectively, VBAS injection molded parts, completed and sterilized VBAS units, and VBAS extension arms. Purchases from these manufacturers vary from quarter to quarter, with no purchases in some quarters, however on an annual basis purchases from each manufacturer represent over 10% of total annual purchases.

13. SUBSEQUENT EVENTS

The Company has evaluated the existence of events and transactions subsequent to the balance sheet date through the date the unaudited consolidated financial statements were issued and has determined that there were no significant subsequent events or transactions which would require recognition or disclosure in the financial statements.

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”).

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 65 issued or allowed patents and a further 9 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. In April 2020, the board of Vycor took the decision to close the German operations of NovaVision, including the German office and NovaVision GmbH, and instead migrate to a licensed business model; in June 2020 Vycor announced that it would be entering into a license agreement and transition agreement (the “Agreements”) with HelferApp GmbH, a cognitive therapy specialist. Under the Agreements, HelferApp is licensed to provide NovaVision’s products and therapies in Germany, Austria and Switzerland to patients and professionals; and has assumed responsibility for the current patients of NovaVision in the territory. The NovaVision German office was closed effective June 30, 2020.

Vycor Medical

Vycor Medical designs, develops and markets medical devices for use in neurosurgery. Vycor Medical’s ViewSite Brain Access System (“VBAS”) is a next generation retraction and access system that was fully commercialized in early 2010 and is the first significant technological change to brain tissue retraction in over 50 years in contrast to significant development in most other neuro-surgical technologies. Vycor Medical is ISO 13485:2016 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 a number of other international markets. Vycor Medical has 27 granted and 9 pending patents.

NovaVision

NovaVision provides non-invasive, computer-based rehabilitation therapies targeted at people who have impaired vision as a result of stroke or other brain injury, and has 38 granted patents.

Strategy

The Company is continuing to execute on a plan to achieve revenue growth and a reduction in cash operating losses¹. For Vycor Medical this plan includes in particular: increasing market penetration in the US through broadening of the distribution network and programs to increase penetration in existing 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 complete, subject to regulatory clearances and approvals. Upon regulatory clearances and product release of this new VBAS AC model range 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. As a result, the Company has now closed the NovaVision German office and is entering into a license agreement with HelferApp, a cognitive therapy specialist, for Germany, Austria and Switzerland, and is seeking similar partnerships in other territories with regional companies able to leverage NovaVision’s clinically supported vision therapies. Management is also open to a broad range of alternatives for NovaVision as a whole, which could comprise distribution and marketing partnerships, licensing, merger or sale.

The NovaVision German operation accounted for a very substantial proportion of Vycor’s operating cash loss¹during the year ended December 31, 2019. This proportion has been reduced during the nine months ended September 30, 2020 for two reasons: firstly, the selling, general and administrative expenses of NovaVision Germany have been reduced as the operation has been wound down; and secondly due to the impact on Vycor revenues from Covid-19 discussed below.

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

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 September 30, 2020 in the US and Europe. Although neurosurgery is not considered an elective procedure, general hospital dislocation and diversion of resources away from non-emergency surgeries, or surgeries that can be postponed for a short period without harm, has impacted our revenues during the nine months ended September 30, 2020 and could continue to do so. In addition, sales and marketing efforts by Vycor’s representatives have been disrupted or curtailed due to lockdown and social distancing, and this has and may continue to hinder the recovery of revenues. 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.

Comparison of the Three Months Ended September 30, 2020 to the Three Months Ended September 30, 2019

Revenue and Gross Margin:

	Three months ended
	September 30,
	2020		2019		% Change
Revenue:
Vycor Medical	$	250,648	$	301,053		-17	%
NovaVision	$	25,277	$	21,831		16	%
	$	275,925	$	322,884		-15	%
Gross Profit
Vycor Medical	$	211,089	$	273,146		-23	%
NovaVision	$	24,285	$	20,776		17	%
	$	235,374	$	293,922		-20	%

Vycor Medical recorded revenue of $250,648 from the sale of its products for the three months ended September 30, 2020, a decrease of $50,405 over the same period in 2019. Sales of VBAS devices have been significantly disrupted during the 2020 period in the US and internationally by COVID-19. Although neurosurgery is not considered an elective procedure, general hospital dislocation and diversion of resources away from non-emergency surgeries, or surgeries that can be postponed for a short period without harm, has impacted our revenues during the three months ended September 30, 2020. In addition, sales and marketing efforts by Vycor’s representatives have been disrupted or curtailed due to lockdown and social distancing, and this has hindered the recovery of revenues. Sales in the three months ended September 30, 2020 showed some recovery over the three month period ended June 30, 2020, increasing by $31,651 or 14%, primarily in the US. Gross margin of 84% and 91% was recorded for the three months ended September 30, 2020 and 2019, respectively.

NovaVision recorded revenues of $25,277 for the three months ended September 30, 2020, an increase of $3,446 over the same period in 2019. Gross margin was 96%, compared to 95% for the same period in 2019.

Selling, General and Administrative Expenses:

Selling, general and administrative expenses decreased by $17,121 to $427,250 for the three months ended September 30, 2020 from $444,371 for the same period in 2019. Included within Selling, General and Administrative Expenses are non-cash charges for stock based compensation as the result of amortizing employee and non-employee shares, warrants and options which have been issued by the Company over various periods. The charge for the three months ended September 30, 2020 was $126,500, a $7,000 decrease from the charge in 2019 of $133,500, following the departure from the Board of Oscar Bronsther from July 1, 2020. Also included within Selling, General and Administrative Expenses are Sales Commissions, which decreased by $3,955 from $56,761 to $52,806 in 2020, reflecting the reduced level of sales in the US due to COVID-19.

The remaining Selling, General and Administrative expenses decreased by $6,166 from $254,110 to $247,944 in 2020.

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

	Cash G&A			Non-Cash G&A
Legal, patent, audit/accounting, regulatory		(11,872	)		-
Board, financial and scientific advisory		(6,075	)		(7,000	)
Payroll		(2,380	)		-
Other (sales/travel/regulatory/premises)		14,161			-
Commissions		(3,955	)		-
Total change		(10,121	)		(7,000	)

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, 2020 was $7,836 compared to $5,315 for 2019. Other Interest expense for the three months ended September 30, 2020 was $12,099 compared to $12,109 for 2019.

Comparison of the Nine Months Ended September 30, 2020 to the Nine Months Ended September 30, 2019

Revenue and Gross Margin:

	September 30,
	2020		2019		% Change
Revenue:
Vycor Medical	$	776,932	$	988,786		-21	%
NovaVision	$	73,498	$	72,607		1	%
	$	850,430	$	1,061,393		-20	%
Gross Profit
Vycor Medical	$	683,125	$	895,484		-24	%
NovaVision	$	68,967	$	68,463		1	%
	$	752,092	$	963,947		-22	%

Vycor Medical recorded revenue of $776,932 from the sale of its products for the nine months ended September 30, 2020, a decrease of $211,854. Sales of VBAS devices have been significantly disrupted, particularly from March to June, in the US and internationally by COVID-19 Although neurosurgery is not considered an elective procedure, general hospital dislocation and diversion of resources away from non-emergency surgeries, or surgeries that can be postponed for a short period without harm, has impacted our revenues during the six months ended September 30, 2020. In addition, sales and marketing efforts by Vycor’s representatives have been disrupted or curtailed due to lockdown and social distancing, and this has hindered the recovery of revenues. Gross margin of 88% was recorded for the nine months ended September 30, 2020 versus 91% for the same period in 2019.

NovaVision recorded revenues of $73,498 for the nine months ended September 30, 2020, an increase of $891 over the same period in 2019 and gross margin of 94%, compared to 94% for the same period in 2019.

Selling, General and Administrative Expenses:

Selling, general and administrative expenses decreased by $84,111 to $1,260,742 for the nine months ended September 30, 2020 from $1,344,853 for the same period in 2019. Included within Selling, General and Administrative Expenses are non-cash charges for share based compensation as the result of amortizing employee and non-employee shares, warrants and options which have been issued by the Company over various periods. The charge for the nine months ended September 30, 2020 was $393,500, a decrease of $7,940 over $401,440 in 2019, following the departure from the Board of Oscar Bronsther from July 1, 2020. Also included within Selling, General and Administrative Expenses are Sales Commissions, which decreased by $38,259 from $187,622 to $149,363, reflecting the reduced level of sales in the US due to COVID-19.

The remaining Selling, General and Administrative expenses decreased by $37,912 from $755,791 to $717,879. Regulatory fees reduced by $49,367 reflecting the completion of the transition to a new EU Notified Body for Vycor; patent fees reduced by $20,296 reflecting the level of patent filing and prosecution activity in the 2019 period; the professional fees related to the closure of NovaVision Germany and the license agreement resulted accounting and legal fees increasing by $17,303.

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

	Cash G&A			Non-Cash G&A
Legal, patent, audit/accounting, regulatory		(47,495	)		-
Board, financial and scientific advisory		(18,915	)		(7,000	)
Sales, marketing and travel		(7,215	)		-
Payroll		12,234			(939	)
Other (travel/regulatory/premises)		23,478			-
Commissions		(38,259	)		-
Total change		(76,172	)		(7,939	)

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, 2020 was $21,846 compared to $15,331 for 2019. Other Interest expense for the nine months ended September 30, 2020 was $36,033 compared to $36,074 for 2019.

Income (loss) from Discontinued Operations:

The reduction in operating loss for the three and nine months ended September 30, 2020 compared to the same periods in 2019, from $26,083 to $13,069 and from $96,113 to $51,294, respectively, is primarily due to a reduction in Selling, general and administrative expenses as a result of the wind-down of operations in Germany.

Liquidity

The following table shows cash flow and liquidity data for the periods ended September 30, 2020 and December 31, 2019:

	September 30, 2020			December 31, 2019			$ Change
Cash	$	74,935		$	60,717		$	14,218
Accounts receivable, inventory and other current assets	$	409,969		$	595,715		$	(185,746	)
Total current liabilities	$	(2,848,749	)	$	(2,446,406	)	$	(402,343	)
Working capital	$	(2,363,845	)	$	(1,789,974	)	$	(573,871	)
Cash provided by financing activities	$	307,634		$	43,117		$	264,517

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

The following table shows the principle components of cash used in operating activities during the nine months ended September 30, 2020 and 2019, with a commentary of changes during the periods and known or anticipated future changes:

	September 30, 2020			September 30, 2019			$ Change
Net loss	$	(622,122	)	$	(575,211	)	$	(46,911	)

Adjustments to reconcile net loss to cash used in operating activities:
Amortization and depreciation of assets	$	44,922		$	46,371		$	(1,449	)
Share based compensation	$	393,500		$	401,440		$	(7,940	)
Other	$	9,418		$	9,418		$	0
	$	447,840		$	457,229		$	(9,389	)

Net loss adjusted for non-cash items	$	(174,282	)	$	(117,982	)	$	(56,300	)
Changes in working capital
Accounts receivable	$	137,154		$	44,521		$	92,633
Accounts payable and accrued liabilities	$	(231,277	)	$	78,700		$	(309,977	)
Inventory	$	19,221		$	(34,455	)	$	53,676
Prepaid expenses and net insurance financing repayments	$	21,695		$	(8,065	)	$	29,760
Accrued interest (not paid in cash)	$	57,879		$	51,233		$	6,646
Changes in discontinued operations, net	$	(54,218	)	$	497		$	(54,715	)
	$	(49,546	)	$	132,431		$	(181,977	)

Cash provided by (used in) operating activities, adjusted for net insurance repayments	$	(223,828	)	$	14,449		$	(238,277	)

The adjustments to reconcile net loss to cash of $174,282 in the period have no impact on liquidity. The change in Net loss adjusted for non-cash items of ($56,300) was primarily due to the impact of COVID-19 on the Vycor division sales, which also accounts for the reduction in accounts receivable of $137,154. At December 31, 2019 there was an increase in accounts payable and accrued liabilities mainly due to expenditure on regulatory for the transition to a new EU Notified Body, and regulatory and testing for the VBAS development occurring during the fourth quarter. The change in accounts payable and accrued liabilities of $231,277 was mainly due to the settlement of these accounts. The net change of $54,218 in discontinued operations comprised a reduction of $72,331 in liabilities being transferred to the license partner, NovaVision, Inc. or eliminated; offset by a $18,113 reduction in assets being to the license partner, NovaVision, Inc. or written off.

Additional inventory of $40,559 was purchased during the nine months ended September 30, 2020 as part of normal production, and the Company anticipates purchasing additional new inventory of approximately $80,000 during the next twelve months.

Investing Activities. Cash used in investing activities of continuing operations for the nine months ended September 30, 2020 was $60,132, which reflected expenditure on the second phase of modifying the VBAS product suite to make it easier to integrate with IGS. The Company anticipates additional expenditures for this second phase, including work to obtain regulatory clearances and approvals, of approximately $40,000. The $9,574 change in investing activities of discontinued operations was due the writing off of long term assets.

Financing Activities. During the nine months ended September 30, 2020 the Company received funds of $80,000 in respect of loans from Fountainhead. The Company also received a loan of $58,600 during the period, pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act, and a $150,000 loan from the Small Business Administration (“SBA”) EIDL program.

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

As described earlier in this ITEM 2 “Strategy”, the Company is continuing to execute on a plan to achieve revenue growth and a reduction in cash operating losses². For Vycor Medical this plan includes in particular: increasing market penetration in the US through broadening of the distribution network and programs to increase penetration in existing 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 complete subject to regulatory clearances and approvals. Upon regulatory clearances and product release of this new VBAS AC model range 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. As a result, the Company has now closed the NovaVision German office and is entering into a license agreement with HelferApp, a cognitive therapy specialist, for Germany, Austria and Switzerland, and is seeking similar partnerships in other territories with regional companies able to leverage NovaVision’s clinically supported vision therapies. Management is also open to a broad range of alternatives for NovaVision as a whole, which could comprise distribution and marketing partnerships, licensing, merger or sale.

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

However, the Company believes it may not have sufficient cash to meet its various cash needs through November 30, 2021 unless the Company is able to obtain additional cash from the issuance of debt or equity securities. Included within the working capital deficiency above is a term note for $300,000 to EuroAmerican Investment Corp. (“EuroAmerican”), together with accrued interest of $316,798, which has a maturity date of December 31, 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 December 31, 2020 will be available. 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.

Critical Accounting Policies and Estimates

Uses of estimates in the preparation of financial statements

The preparation of unaudited consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the unaudited 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 unaudited 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 stock-based compensation.

A detailed description of our significant accounting policies can be found in our most recent Annual Report on Form 10-K for the year ended December 31, 2019.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not 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 13, 2020, 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

Issuance Type		Security				Shares
FHC Management Fees			Common				1,607,142

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

None

Index to Exhibits

31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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, 2020

	Vycor Medical, Inc.
	(Registrant)

	By:	/s/ Peter C. Zachariou
		Peter C. Zachariou
		Chief Executive Officer and Director (Principal Executive Officer)

	Date	November 13, 2020

	By:	/s/ Adrian Liddell
		Adrian Liddell
		Chairman of the Board and Director
		(Principal Financial and Accounting Officer)

	Date	November 13, 2020

VYCOR MEDICAL INC - FORM 10-Q - November 13, 2020

Attached files

VYCOR MEDICAL INC Reports