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VYCOR MEDICAL INC - Annual Report: 2015 (Form 10-K)

 

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iUNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
Form 10-K
☑              ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the fiscal year ended December 31, 2015
Or
 
☐              TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from   ___________ to ___________
 
Commission file number: 333-149782
VYCOR MEDICAL, INC.
(Exact name of registrant as specified in charter)
 
Delaware
20-3369218
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification No.)
 
6401 Congress Ave., Suite 140, Boca Raton, FL 33487
(Address of principal executive offices) (Zip Code)
 
Registrant's telephone Number: (561) 558-2000
Securities registered pursuant to section 12(g) of the Act:
Common Stock par value $.0001
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.      ☐ Yes     ☐  No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.      ☐   Yes     ☐  No
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     ☐   Yes     ☐   No
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, “non-accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large Accelerated Filer      ☐
 
Accelerated Filer      ☐
Non-accelerated Filer         ☐          (Do not check if a smaller reporting company)
 
Smaller Reporting Company   ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     ☐   Yes     ☐   No
State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant’s most recently completed second fiscal quarter. $8,397,712 (assuming $1.32 per share)
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 10,937,250 shares of common stock par value $0.0001 as of March 25, 2016
DOCUMENTS INCORPORATED BY REFERENCE: NONE
 
 
 
TABLE OF CONTENTS
 
 
 
Page
 
PART I
 
Item 1.
Business
 
Item 1A
Risk Factors
 
Item 1B
Unresolved Staff Comments
 
Item 2.
Properties
 
Item 3.
Legal Proceedings
 
Item 4.
Mine Safety Disclosures
 
 
 
 
 
PART II
 
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities
 
Item 6
Selected Financial Data
 
Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operation
 
Item 7A
Quantitative and Qualitative Disclosures About Market Risk
 
Item 8.
Financial Statements and Supplementary Data
 
Item 9.
Changes In and Disagreements with Accountants on Accounting and Financial Disclosure
 
Item 9A.
Controls and Procedures
 
Item 9B.
Other Information
 
 
 
 
 
PART III
 
Item 10.
Directors, Executive Officers, Promoters and Corporate Governance
 
Item 11.
Executive Compensation
 
Item 12.
Security Ownership of Certain Beneficial Owners and Management
 
 
and Related Stockholder Matters
 
Item 13.
Certain Relationships and Related Transactions, and Director Independence
 
Item 14.
Principal Accountant Fees and Services
 
 
 
 
 
PART IV
 
Item 15.
Exhibits, Financial Statement Schedules
 
 
 
SIGNATURES
 
 
 
 
 
mainpagescontinue
PART I
 
This Form 10-K contains some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertainties. Forward-looking statements include statements regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategies, (c) anticipated trends in our industries, (d) our future financing plans and (e) our anticipated needs for working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plans,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. These statements may be found under “Management's Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” as well as in this Form 10-K generally. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results.
Any or all of our forward-looking statements in this report may turn out to be inaccurate. They can be affected by inaccurate assumptions we might make or by known or unknown risks or uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this Form 10-K generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements. 
The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to publicly update any forward-looking statements, whether as the result of new information, future events, or otherwise.
 
ITEM 1. DESCRIPTION OF BUSINESS.
1. Organizational History
The Company was formed as a limited liability company under the laws of the State of New York on June 17, 2005 as “Vycor Medical LLC”. On August 14, 2007, we converted into a Delaware corporation and changed our name to “Vycor Medical, Inc.”. The Company’s listing went effective on February 2009 and on November 29, 2010 Vycor completed the acquisition of substantially all of the assets of NovaVision, Inc. (“NovaVision”) and on January 4, 2012 Vycor, through its wholly-owned NovaVision subsidiary, completed the acquisition of all the shares of Sight Science Limited (“Sight Science”), a previous competitor to NovaVision.
2. Overview of Business
Vycor is dedicated to providing the medical community with innovative and superior surgical and therapeutic solutions and operates two distinct business units within the medical 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 46 issued or allowed patents and a further 13 pending. The Company leverages joint resources across the divisions to operate in a cost-efficient manner.
In addition to our existing products and products in development we actively seek acquisition, joint venture and in-licensing opportunities in the medical device field which we believe are complementary, can benefit from our existing infrastructure and will add shareholder value.
 
 
Vycor Medical
Introduction
Vycor Medical designs, develops and markets medical devices for use in neurosurgery. Vycor Medical’s ViewSite Brain Access System (“VBAS”) is a next generation retraction and access system that was fully commercialized in early 2010 and is the first significant technological change to brain tissue retraction in over 50 years in contrast to significant development in most other neuro-surgical technologies. Vycor Medical is ISO 13485:2003 compliant, and VBAS has U.S. FDA 510(k) clearance and CE Marking for Europe (Class III) for brain and spine surgeries, full regulatory approvals in Australia, Brazil, Canada, China, Korea and Japan and is seeking or has partial regulatory approvals in India, Russia, Taiwan and Vietnam.
Vycor Medical’s Products
VBAS
To access a surgical site in the brain, a surgeon usually needs to remove part of the skull (craniotomy) and then make an entry incision in the outer protective brain tissue (corticotomy); the soft brain tissue is then parted (retracted) to access the targeted site. The current standard of care, the blade retractor, utilizes a metal blade retractor to pull the tissue apart; to maintain the opening the blades are attached to a head frame and parting tension is applied to the tissue. In a typical procedure 2 or more blades are used.
Many clinical studies have shown that retractors can cause excessive pressure on brain tissues, resulting in damage and a prolonged patient recovery. The incidence of contusions (tissue injuries) or infarctions (blockage of blood supply) from brain retraction is as great as 5-10%.
Vycor’s VBAS is a significant improvement over current technologies for accessing regions within the brain. A disposable product that can be used with microscopic, endoscopic and neuro-navigation systems (IGS), the VBAS includes an introducer and working channel. Available in multiple sizes, the current series consists of 12 disposable products, offered in four different port (working channel) diameters of 12mm, 17mm, 21mm, and 28 mm and a choice of three lengths: 3cm, 5cm, and 7cm; two new sizes with diameters of 6mm and lengths of 5cm and 7cm were introduced in March 2016. The surgeon makes a smaller corticotomy, inserts the clear, elliptical-shaped VBAS introducer through the brain tissue, removes the introducer and is left with a clear hollow working channel to provide access to the precise location desired for surgery.
VBAS’ clinical advantages are supported by a number of leading peer-reviewed articles (see Peer Review and Other Clinical Studies). Clinical benefits cited include: minimally invasive shape and less invasive procedure; resultant reduction of pressure on the brain; improved visual field; improved working channel; and more accurate target access. Management also believes, from anecdotal surgeon feedback, that although a disposable product VBAS offers potential cost savings from shorter operating theater time and reduced post-operative recovery time.
The Market For Vycor Medical’s VBAS Product
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 200,000 (28 percent) are addressable by the VBAS range currently, with another 125,000 (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 1,000,000 procedures with another 600,000 addressable by an expanded VBAS range.
Competition
The VBAS device is both a brain access system and a retractor and is therefore unique with no direct competitors. Competitive manufacturers of brain retractors include Cardinal Health (V. Mueller line), Aesculap, Integra Life Science and Codman (Division of Johnson & Johnson). Nico Corporation has a brain access device specifically designed to work with its Myriad resection and suction product.
 
 
Sales and Marketing
Domestic
According to the American Board of Neurological Surgery (ABNS), there are approximately 3,500 neurosurgeons in the US, providing a well-defined target audience. Vycor Medical’s sales channels are to stocking regional distributors and direct to hospitals through independent representatives, all of whom have existing relationships with neurosurgeons and provide an experienced and efficient distribution infrastructure without the need for a large and costly dedicated Vycor regional sales team. The distributors and representatives are supported by Vycor Medical Sales, Marketing and Customer Service.
Vycor Medical has found that the learning curve is only 1-2 cases for surgeons, who like the simplicity of design and ease of use after trialing the product. However, Hospital Administration is required to approve the purchase of a new product and sometimes even a trial or evaluation of the product in the hospital by the neurosurgeon and this is one of the key barriers to the speed of adoption as this process can take several months.
International Sales
Vycor Medical utilizes select medical device distributors with experience in neurosurgical devices in their countries or regions. Vycor Medical has regulatory approvals for VBAS in Australia, Brazil, Canada, China, Europe (Class III), Korea and Japan and is seeking or has partial regulatory approvals in India, Russia, Taiwan and Vietnam with distribution agreements in place or being sought.
Peer Review and Other Clinical Studies
The publication of clinical papers in neurosurgery journals by surgeon-users of VBAS regarding their experiences with the products (peer review papers), and the publication of other clinical data, is important for Vycor Medical. Such papers continue to evidence the clinical superiority of VBAS, which in turn drives its adoption and accelerates the hospital approval process, which in turn drives revenues. To date the Company has already had 9 Peer Reviewed published and 4 other clinical papers, including the following during 2015:
●
“Endoscopic hematoma evacuation in patients with spontaneous supratentorial intracerebral hemorrhage”. Published in the Journal of the Chinese Medical Association, Feb 2015. By Wei-Hsin Wang, Yi-Chieh Hung, Sanford P.C. Hsu, Chun-Fu Lin, Hsin-Hung Chen, Yang-Hsin Shih, Cheng-Chia Lee of the Taipei Veterans General Hospital, and National Yang-Ming University School of Medicine. Taipei, Taiwan Conclusion: “With the introduction of the minimally invasive techniques and the evolution of the neuro-endoscope and hemostatic agents the median operative time and blood loss have been significantly decreased. Although the hematoma evacuation rates were similar between the endoscope (90%) and craniotomy (85%) groups, the median intensive care unit stay was decreased from 11 days to 6 days due to reduced surgical invasiveness. In addition, several series have reported a lower rate of rebleeding, morbidity and mortality in endoscopic hematoma evacuation surgery than in traditional craniotomy. The main reasons were less adjacent tissue injury, less blood loss, and less operation time. True minimally invasive surgery includes not only a minimal wound size but also minimal brain tissue trauma during the surgery”.
●
“Rigid endoscopic resection of deep-seated or intraventricular brain tumors”, by Yukinori Akiyama, Masahiko Wanibuchi, Takeshi Mikami, Yoshifumi Horita, of the Dept of Neurosurgery, Sapporo Medical University, School of Medicine, Hokkaido Japan. Published in Neurological Research, Mar 2015. Conclusion: Strong retraction may cause significant brain and vascular damage; tubular retractors can help minimize retraction injury. The rigid endoscopic technique using a thick tubular sheath [VBAS] provides an alternative medial approach that improves visualization and increases working space. We believe that this technique [rigid endoscope resection through a sheath] is a safer, more reliable, and less invasive method for the treatment of deep-seated brain tumors.
●
“3D Endoscope Transcallosal Approach to the Third Ventricle” by Alireza Shoakazemi, Alexander I. Evins, Justin C. Burrell, Philip E. Stieg and Antonio Bernardo of the Weill Cornell Medical Center. Published in The Journal of Neurosurgery, Mar 2015. Conclusion: A transtubular approach [utilizing VBAS] to the third ventricle is feasible and facilitates blunt dissection of the corpus callosum that may minimize retraction injury. This technique also provides an added degree of safety by limiting the free range of instrumental movement. The combination of 3D endoscopic visualization with a clear plastic retractor facilitates safe and direct monitoring of the surgical corridor.
●
“Microsurgical resection for lateral ventricular meningiomas with neuronavigation and tubular retractor”. Published in the China J Neurosurgery, April 2015. By Xiong Tao, Wanggou Siyi, Chen Xiaoyu, Peng Zefeng, Liu Qing, Yan Xianrui, Li Xuejun, Dpartment of Neurosurgery , Xiangya Hospital, Central South University; Changsha, China. Conclusion: The study’s objective was to study the microsurgical modality for lateral ventrical meningiomas with neuronavigation and tubular retractor system [VBAS] and evaluate its long term outcome. The study concluded that the use of neuronavigation and the VBAS does not reduce the ability to achieve total tumor resection but did have a positive post operative impact through reduced intra operative brain trauma and reduced intra operative complications. The study concluded that it led to an improvement in post-operative quality of life.
●
“Exoscope-Assisted Surgery for Deep-Seated Intraparenchymal Tumor”. Published in the Jpn J Neurosurg April 2015. Hideo Osada, M.D., Kimihiro Nagatani, M.D., Terushige Toyooka, M.D. Kojiro Wada, M.D., Naoki Otani, M.D., Arata Tomiyama, M.D., Satoshi Tomura, M.D., Hideaki Ueno, M.D., and Kentaro Mori, M.D of the Department of Neurosurgery, National Defense Medical College and Department of Neurosurgery, Kuki General Hospital. Conclusion: “The exoscope can provide a long working distance and a clear view from outside the operation field, so combined use with the ViewSite is very promising for surgery of deep-seated tumors”.
●
“Use of a Minimally Invasive Retractor System for Retrieval of Intracranial Fragments in Wartime Trauma”. Published in the World Neurosurgery, May 2015. George N. Rymarczuk, Laurence Davidson, Meryl A. Severson, Rocco A. Armonda of the Walter Reed Army Medical Center and the National Naval Medical Center Conclusion: “Wartime penetrating brain injury can result in deep-seated shrapnel, bullets and bone, posing risk of secondary injury. It has been recommended that aggressive removal of fragments be avoided. The goal of this study it to report our technique of minimally invasive removal of deep-seated fragments using a tubular retractor system [VBAS]. The authors feel that this technique offers a valid and safe option for treatment of patients that have incurred penetrating brain injuries and that have retained foreign bodies under circumstances in which removal is desirable”. In all cases the fragment was successfully removed. No patient had worsening of their neurological condition following surgery. The study concluded, “With this series of 6 service-members the authors have shown that VBAS can be used to successfully remove deep-seated foreign bodies from injuries sustained in war. Deep parenchymal and intraventricular fragments can be safely removed using a tubular retractor system [VBAS]”
●
“Single-Port Endoscopic Technique for the Treatement of Primary Intracerebral Hemorrhage” poster presented at the VII World Congress of Neuroendoscopy held in Mexico, November 2015. By Juan Antonio Ponce-Gomez M.D. Luis Alverto Ortega-Porcayo M.D. Victor Alcocer-Barradas M.D. Juan Barges-Coll M.D. Juan Luis Gomez Amador M.D.Department of Neurological Surgery, National Institute of Neurology and Neurosurgery “Manuel Velasco Suarez” Mexico City, Mexico. In a retrospective study done three different treatments were compared; medical management and observation, hematoma drainage through a single port [VBAS] with endoscopic assistance and finally drainage through a conventional crainiotomy. 64 patients were analysed 28 patients underwent medical treatment, 24 patients conventional crainiotomy and 12 patients were treated with the VBAS. Main risk in all cases was hypertension. The study showed that complete drainage using the VBAS was achieved in 83.3% of cases and that the average stay in hospital was 8 days which was statistically significantly shorter than the other two groups. Mortality after 6 months was also statistically significantly better than the medical treatment group. Conclusion: Treatment using the endoscope and VBAS offers lower morbidity and fewer days of hospital stay in the management of primary supratentorial intracerebral hemorrhage.
Manufacturing
Vycor Medical uses a sub-contract manufacturer to manufacture, package, label and sterilize its VBAS products. The Company is in the process of migrating all its VBAS manufacturing in phases to Life Science Outsourcing, Inc. in Brea, California which 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 10 granted/allowed and 11 pending patents. This includes the purchase in March 2015 of a portfolio of two pending United States patent applications that disclose approaches to integrating surgical navigation systems into optically-transparent neurosurgical obturators.
Vycor Medical’s 11 granted/allowed patents are in Canada (Brain) China (Brain), Hong Kong (Brain), Russia (Brain), Japan (Brain and Spine) and US (Brain (4) and Spine).
Vycor Medical’s 10 pending patents are in: Canada (Spine), Europe (Brain, Spine), India (Brain, Spine), Hong Kong (Spine), US (Brain (4).
Trademarks
VYCOR MEDICAL is a registered trademark and VIEWSITE is a common law trademark.
Vycor Growth Strategy
Vycor Medical’s growth strategy is centered around:
1. Increasing U.S. market penetration through broader hospital coverage and targeted direct physician marketing.
Vycor Medical’s sales and marketing strategy is to penetrate a well defined target market of 4,500 neurosurgeons by trade shows, significantly increased direct marketing with VBAS samples and existing clinical data, and through its existing distributors which it is continually evaluating and upgrading as well as adding additional distributors in regions where it has little to no presence. In marketing to these hospitals and surgeons, Vycor Medical leads with those neurosurgical procedures where VBAS’ competitive advantages are most easily understood – deep seated tumors and other complicated deep procedures. The focus is both on adding new hospitals and expanding to additional surgeons in hospitals where VBAS is already approved and to expand usage to a broader range of procedures. Vycor Medical prioritizes its attention on teaching hospitals, which not only carry out more relevant procedures but also provide a natural way to drive adoption through the conversion of new surgeons.
2. Provision of more Clinical and Scientific Data supporting the products superiority over the current standard of care blade retractors and to demonstrate the products potential for cost savings. Clinical and scientific data (in the form of peer reviewed articles, clinical studies and other reports and case studies) are critical in driving adoption, and in turn revenues, further and faster by demonstrating VBAS' superiority as a minimally invasive access system which helps VBAS move further up the hospital cost/benefit curve. To date the Company has already had 9 Peer Reviewed studies and 4 other clinical papers and anticipates further studies to be published.
3. International Market Growth
Vycor Medical utilizes select medical device distributors with experience in neurosurgical devices in their countries or regions. VBAS has full regulatory approvals in Australia, Brazil, Canada, China, Europe (EU – Class III), Korea, Japan and Taiwan and is seeking or has partial regulatory approvals in India, Russia and Vietnam. Vycor Medical is actively pursuing new distribution agreements in the countries where it does not have any in place.
4. New Product Development
New Product Development is targeted at both driving the use of its existing VBAS product range through ancillaries 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 Medical has a current product pipeline aimed at expanding the applicable procedures it addresses by extending its VBAS range and at increasing the compatibility of its current VBAS range.
 
 
 
Vycor Medical released two new smaller VBAS devices (the "VBAS Mini") in March 2016, and is in the advanced stages of development on a new set of VBAS devices that will be integrated with selected Image Guided Systems. Management strongly believes that the existing VBAS rigid structure lends itself well to being incorporated into the increasing trend of IGS surgery.
NovaVision, Inc.
Introduction
NovaVision provides non-invasive, computer-based rehabilitation targeted at a substantial and largely un-addressed market of people who have lost their sight as a result of stroke, Traumatic Brain Injury (TBI) or other neurological brain damage. NovaVision addresses a significant target market, estimated at approximately $2 billion in each of the U.S. and the EU and over $13 billion globally.
NovaVision has a family of therapies that both restore and compensate for lost vision:
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Restoration of vision: NovaVision’s VRT and Sight Science’s Neuro-Eye Therapy (NeET), aim to improve visual sensitivity in a persons blind area. VRT delivers a series of light stimuli along the border of the patient’s visual field loss. These programmed light sequences stimulate the border zone between the “seeing” and “blind” visual fields, repetitively challenging the visual cortex in the border zone with multiple stimuli over the course of time. NeET targets deep within the blind area by repeated stimulation, allowing patients to detect objects within the blind field.
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Compensation and re-training: Normal eye movements are also affected after brain injury adding to the problems of blindness. NeuroEyeCoach provides a complementary therapy to VRT and NeET, which re-trains a patient to move their eyes, re-integrate left and right vision and to make the most of their remaining visual field.
 
VRT and NeuroEyeCoach, provided in the US in an Internet-delivered suite since June 2015 and in Europe since December 2015, are therefore highly complementary and ensure broad benefits to NovaVision's patients.
NovaVision also has models of VRT and NeuroEyeCoach for physicians and rehabilitation clinics, as well as VIDIT, a diagnostic program that enables therapists to perform high resolution visual field tests in less than ten minutes.
NovaVision operates in the US through our wholly-owned subsidiary, NovaVision, Inc., in Germany through our wholly-owned subsidiary, NovaVision GmbH and in the UK through our wholly-owned subsidiary, Sight Science Limited.
NovaVision’s VRT is the only medical device aimed at the restoration of vision lost as a result of neurological damage which has FDA 510(k) clearance to be marketed in the U.S; and NeuroEyeCoach is registered in the US as a Class I 510(k) exempt device. VRT, NEC and NeET have CE Marking for the EU. NovaVision has 35 granted and 3 pending patents worldwide.
NovaVision’s Products
VRT and NeET
VRT and NeET are aimed at those suffering from vision loss resulting from neurological brain damage such as stroke and traumatic brain injury (TBI). It is estimated that approximately 30% experience a visual field disorder (or which approximately 20% permanently), reducing mobility and other activities of daily living.
Both VRT and NeET work on the basis that repeated stimulation of the blind or transition areas by either bright patches of light (VRT) or specific spatial patterns (NeET) can lead to increases in sensitivity of the blind areas. Patient progress after VRT appears to be initiated at the blind and sighted borders whereas NeET results in changes deep within the blind field. Both therapies are able to demonstrate improvements in both visual sensitivity and activities of daily living.
VRT and NeET are patient-specific diagnostic and therapeutic platforms with extensive clinical data supporting their ability to increase a patient’s visual field. The diagnostic algorithm first maps the visual field and defines the areas of defect in patients suffering vision loss. The therapeutic algorithm is then specifically designed for each patient based upon the results of the diagnostic program. The therapies are delivered through a computer device in the patient’s home and are generally performed over a six month period, twice a day for approximately an hour total, five to six days a week.
 
 
With VRT therapy, the patient first focuses on a fixation point on a display screen. Then, a series of light stimuli are presented along the border of the patient’s visual field loss. These programmed light sequences stimulate the border zone between the “seeing” and “blind” visual fields, repetitively challenging the visual cortex in the border zone with thousands of stimuli over the course of the therapy. With NeET, the patient responds to the images that appear on the screen, initially in the border area of the patient’s visual field loss and over time deeper within the damaged field of vision.
NeuroEyeCoach
NeuroEyeCoach is also a computer-based program providing eye-movement training to those who have suffered a visual field loss as a result of neurological damage.
The program is supported by several decades of scientific findings and was developed as collaboration between NovaVision and Josef Zihl, a NovaVision Scientific Advisor who is a world thought leader in saccadic training and the pioneer of this computer based training technique. The program is designed to re-train the ability of a patient to scan the environment, re-integrate left and right vision and make the most of their remaining visual field. The therapy can be completed in two to four weeks to result in a meaningful improvement in the patients visual search performance resulting in improvements in their navigation and object finding skills. Given that NeuroEyeCoach addresses the patient’s difficulty with their eye movements and their ability to integrate visual information while VRT and NeET focuses on the restoration of lost vision the two therapy types are highly complementary.
NeuroEyeCoach is provided by NovaVision in one Internet-delivered therapy suite with VRT, providing broad benefits to patients, and is also provided on a standalone basis; those suffering non-permanent defects or those otherwise unsuited to VRT can benefit from NeuroEyeCoach. The program is also provided as a clinic-based version to enable healthcare professionals to provide the therapy to patients under supervision.
Vision Diagnostic (VIDIT)
NovaVision VIDIT is a diagnostic system that enables therapists in rehabilitation centers and other clinics to perform high-resolution visual field tests to screen for central visual field deficits commonly associated with stroke or brain injury. As an undetected visual field deficit may adversely impact other rehabilitation modalities, early detection and treatment are critical steps towards improving overall patient care and this diagnostic is therefore a valuable tool for such centers and clinics. Tests take less than 10 minutes while the patient is in the facility’s care.
The Market For NovaVision’s Therapies
The market for NovaVision’s therapies comprises those suffering from vision loss resulting from neurological trauma such as Stroke and Traumatic Brain Injury (TBI). 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.
Competition
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 really only leaves two small companies, Teltra and Visiontrainer in Germany. Within compensation, competitors include RevitalVision, PositScience, Dynavision and Rehacom.
 
 
Clinical Data
VRT
NovaVision has accumulated significant amounts of clinical data as a result of company-sponsored trials as well as studies conducted by independent third parties, of which some of the key findings can be summarized as:
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Approximately 70% of patients experience positive outcome reflected by an increase in their visual field and studies have indicated an average increase of 4.9 degrees (Mueller I, et al., 2007; Romano JG, et al., 2008).
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Elapsed time since injury does not seem to impact VRT and NeET therapies success. Therefore, a large historical backlog of patients can potentially be treated (Romano JG, et al., 2008).
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Improvements are permanent and do not appear to be age or gender dependent.
NeuroEyeCoach
The PC-based treatment approach was originally developed by Prof. Zihl (1988, 1990) and has since been used with various modifications in 13 studies on a total of 551 patients with homonymous visual field loss and persistent visual disabilities.
The main outcome is a significant improvement in visual search performance accompanied by more efficient oculomotor strategies, and a reduction in visual disability as assessed with standardized questionnaires and behavioral measures. The efficacy of this treatment approach for the improvement of visual overview and visual exploration is superior to practice with reading (Schuett et al., 2012), non-specific visual training (Roth et al., 2009), standard occupational therapy (Mödden et al., 2012) or counseling with regards to coping strategies (Zihl, 2011). Importantly, time since brain injury (Zihl, 2011) and age of hemianopic patients (Schuett & Zihl, 2012) d not play a significant role for the treatment effect. In conclusion, there is convincing scientific empirical evidence for the efficacy of the visual search treatment method. It is important to note that visual field borders do not change after the treatment, indicating that visual search training represents a compensatory technique and not a restorative approach; by addressing both compensation and restoration NovaVision is providing a broad solution to this large patient demographic.
Intellectual Property
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 35 granted and 3 pending patents (including Sight Science).
NovaVision’s 35 granted patents are in the U.S. (13), Canada (5), Europe (8), Australia (2), China (2), Hong Kong (1), Singapore (1), India (1) and Japan (2).
NovaVision’s 3 pending patents are in Europe.
Trademarks
NovaVision maintains a portfolio of registered trademarks for NOVAVISION, NOVAVISION VRT, VRT VISION RESTORATION THERAPY and NEUROEYCOACH, amongst others, along with relevant logos, both in the US and internationally.
NovaVision’s Growth Strategy
Our strategic vision for NovaVision has been to develop and provide a clinically supported, affordable and scalable visual therapy solution offering broad benefits to those suffering visual impairment following neurological brain damage; and to offer solutions for both patients and physicians alike. VRT was, in effect, a prototype with a delivery and service model too costly to be affordable and scalable, and with 70% of patients experiencing significant positive outcome but 30% of patients therefore experiencing little to no improvement.
 
 
 
Our first steps were to build a world-class scientific advisory board and acquire Sight Science, the only credible competitor, from Prof. Arash Sahraie and the University of Aberdeen. Prof. Sahraie, Chair in Vision Sciences at the University, became our Chief Scientific Officer and led the advisory board made up of experts in the field from Harvard Medical School, Univ. of Miami Miller School of Medicine and the Max Planck Institute in Germany, to develop the strategy to deliver our vision:
●
Broadening Patient Benefits: the creation of NeuroEyeCoach. Two things happen when someone suffers from vision related disorders following a stroke or the like: there is a loss of visual field as well as difficulty with eye movement, affecting the ability to integrate visual information. NeuroEyeCoach addresses patients' difficulty with their eye movements and their ability to integrate visual information. While VRT addresses the restoration of lost vision, NeuroEyeCoach enables the patient to make the most of their remaining vision; the two therapies provided in a suite are therefore highly complementary and ensure broad benefits to NovaVision's patients.
●
Cost Effective and Affordable. Migrated therapy delivery from provided-hardware to internet-delivered onto patients' computers, significantly reducing cost without changing the therapy itself. Further cost reduction has been achieved through considerable business process streamlining. The Internet-delivered therapy suite was made commercially available in June 2015 in the US and in Europe in December 2015.
●
Scalable. NovaVision's therapy is now affordable, with broader benefits and truly scalable and deliverable to the mass market.
NovaVision completed its development work and launched its Internet-based therapy suite in June 2015 in the US, and December 2015 in Europe, and is now positioned for the first time with the suite of therapies and product offerings to deliver on our strategic vision: to provide a clinically supported, affordable and scalable visual therapy solution offering broad benefits to those suffering visual impairment following neurological damage; and to offer solutions for both patients and physicians alike.
For Patients:
●
VRT and NeuroEyeCoach Therapy Suite. NovaVision's two complementary therapies are offered in internet-delivered in a package for $900 in the US and equivalent pricing in Europe.
●
NeuroEyeCoach. For patients with visual impairments who are not suitable, for whatever reason, for VRT, we provide NeuroEyeCoach on its own for $450 in the US and equivalent pricing in Europe.
For Physicians:
●
Vision Diagnostic (VIDIT). A diagnostic system that enables therapists to perform high-resolution visual field tests in less than 10 minutes to screen for visual field deficits as a result of neurological brain damage. NovaVision has received approval for and entered into an agreement to offer VIDIT throughout the 100+ network of HealthSouth rehabilitation centers in the U.S.; therapists are then able to refer patients to NovaVision. We are marketing this to the HealthSouth network as well as to other rehabilitation chains and centers.
●
NeuroEyeCoach Pro Center. Enables stroke rehabilitation and other centers to treat patients while in their care, both as in-patient and out-patient. NovaVision has entered into an additional agreement with HealthSouth to be able to offer NeuroEyeCoach Pro Center to the HealthSouth rehabilitation centers in the U.S. We are marketing this to the HealthSouth network as well as to other rehabilitation chains and centers.
●
NovaVision Pro Physician. Enables physicians to register patients in their clinic who complete our therapies at home, supported by NovaVision but monitored by the physician through a dedicated portal.
We believe NovaVision's therapy and product offerings for patients and physicians are unique, and that we are now well placed to deliver value from this large potential market.
 
 
 
3. Other Matters
Product Liability Insurance
We presently have Product Liability insurance for both Vycor Medical and NovaVision.
Government Regulations
We are committed to an integrated total quality management system. We believe that we have completed the necessary procedures and Vycor Medical is certified to the ISO standards expected of medical device manufacturers as follows:
ISO 13485:2003 Medical Devices — Quality Management Systems
The certification of a quality management system to ISO 13485, specifically for medical devices, is advantageous and often essential for medical companies to export their products to the global market, as well as maintain and enter into certain agreements and business growth opportunities within the U.S. For example, Canada requires that medical device manufacturers marketing their products in Canada must have a quality system certified to ISO 13485:2003. The certification is also required for placement of branded devices into the European Union.
Vycor Medical has the following certification/licensing:
●
Fully Quality Assurance System Directive 93/42/EEC for Medical Devices, Annex II (3)
●
EC Design-Examination Certificate Directive 93/42/EEC for Medical Devices, Annex II (4)
●
ISO 13485.2003
Continuing Regulatory Requirements
 
●
quality system regulation, which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures during the manufacturing process;
●
labeling regulations, which prohibit the promotion of products for unapproved or “off-label” uses and impose other restrictions on labeling; and
●
medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur.
 
Vycor Medical’s products have been classified as Class II products by the FDA and cleared for marketing through the 510(k) process. NovaVision’s VRT product has been cleared as a Class U product through the 510(k) while its NeuroEyeCoach is registered as an exempt Class 1 device.
After a device is placed on the market, numerous regulatory requirements apply. These include:
 
Failure to comply with applicable regulatory requirements, and failure to respond to requested corrective actions on an ongoing basis, can result in enforcement action by the FDA.
 
Medical device laws are also in effect in many of the countries outside of the United States in which we do business. These laws range from comprehensive device approval and quality system requirements for some or all of our medical device products to simple requests for product data or certifications. The number and scope of these requirements are increasing. In June 1998, the European Union Medical Device Directive became effective, and all medical devices must meet the Medical Device Directive standards and receive CE mark certification. CE mark certification involves a comprehensive Quality System program, and submission of data on a product to the Notified Body in Europe.
 
Vycor Medical has obtained the CE marking approval to allow for distribution of its VBAS products in Europe as a Class III device and has received HPB licensing approval for distribution in Canada as a Class II device. VBAS also has full regulatory or partial approvals in Australia, Brazil, China, Korea, Japan and Russia. NovaVison’s VRT, NeuroEyeCoach and Sight Science’s NeET have CE mark registrations as Class I devices in Europe.
 
Employees
We currently have 14 employees.
 
 
 
Website. The Company operates websites at www.vycormedical.com, www.vycorvbas.com and www.novavision.com.
 
ITEM 1A. RISK FACTORS
Smaller reporting companies are not required to provide the information required by this item.
ITEM 1B. UNRESOLVED STAFF COMMENTS
N/A
ITEM 2. PROPERTIES
The Company leases approximately 10,000 sq. ft located at 6401 Congress Ave., Suite 140, Boca Raton, FL 33487 from Catexor Limited Partnership for a gross rent of $14,260 plus sales tax per month. The term of the lease is 5 years and 6 months terminating July, 2017. The Company’s subsidiaries in Germany and the UK occupy properties on short-term lease agreements.
ITEM 3. LEGAL PROCEEDINGS
 
We are subject from time to time to litigation, claims and suits arising in the ordinary course of business. As of the date of this Annual Report, we were not a party to any material litigation, claim or suit whose outcome could have a material effect on our financial statements.
 
 
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable 
 
PART II
 
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.
 
MARKET INFORMATION
 
Beginning on July 20, 2009, our Common Stock was quoted on the OTC Bulletin Board under the symbol “VYCO”.
 
The following table shows the high and low prices of our common shares on the OTC Bulletin Board for each quarter for fiscal years 2014 and 2015. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions:
 
 
 
 
Period
 
High
 
 
Low
 
January 1, 2014-March 31, 2014
  $3.06 
  $1.76 
April 1, 2014-June 30, 2014
  $2.80 
  $1.80 
July 1, 2014-September 30, 2014
  $3.12 
  $2.06 
October 1, 2014-December 31, 2014
  $2.37 
  $1.46 
January 1, 2015-March 31, 2015
  $2.10 
  $1.46 
April 1, 2015-June 30, 2015
  $1.91 
  $1.32 
July 1, 2015-September 30, 2015
  $1.70 
  $1.06 
October 1, 2015-December 31, 2015
  $1.50 
  $0.61 
 
The market price of our common stock, like that of other technology companies, is highly volatile and is subject to fluctuations in response to variations in operating results, announcements of technological innovations or new products, or other events or factors. Our stock price may also be affected by broader market trends unrelated to our performance.
 
Holders
As of March 25, 2016 there were 10,937,250 shares of common stock outstanding and approximately 115 stockholders of record.
 
Transfer Agent and Registrar
Our transfer agent is Corporate Stock Transfer, 3200 Cherry Creek Dr. South Suite 430 Denver, CO 80209; telephone (303) 282-4800.
 
Dividend Policy
We have never paid any cash dividends on our Common Stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements of our business. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant. The Company’s Series D Convertible Preferred Stock bears a 7% per annum dividend payable in cash or Series D Preferred Stock at the option of the Company.
RECENT SALES OF UNREGISTERED SECURITIES
Below is a list of securities sold by us from January 1, 2015 through March 25, 2016 which were not registered under the Securities Act
 
Common Stock:
 
Name of Purchaser
Issue Date
Security
 Shares
Consideration
STEVE GIRGENTI
1/1/2015
Common
         2,717
Board Fees
ALVARO PASCUAL-LEONE M.D.
2/1/2015
Common
            919
Consulting Fees
FOUNTAINHEAD CAPITAL MANAGEMENT LIMITED
2/5/2015
Series D. Pref.
         5,745
Series D Dividend
PETER C. ZACHARIOU
2/5/2015
Series D. Pref.
         2,119
Series D Dividend
CRAIG KIRSCH
2/5/2015
Series D. Pref.
            380
Series D Dividend
JOSEF ZIHL
2/1/2015
Common
         1,838
Consulting Fees
 
 
 
 
ACORN MANAGEMENT PTS
3/6/2015
Common
       13,889
Consulting Fees
STEVE GIRGENTI
4/1/2015
Common
         2,660
Board Fees
OSCAR BRONSTHER
3/31/2015
Common
         2,660
Board Fees
LOWELL RUSH
3/31/2015
Common
         2,660
Board Fees
JASON BARTON
3/31/2015
Common
            831
Consulting Fees
JOSE ROMANO
3/31/2015
Common
            831
Consulting Fees
FOUNTAINHEAD CAPITAL MANAGEMENT LIMITED
3/31/2015
Common
         8,152
Consulting Fees
ALVARO PASCUAL-LEONE M.D.
4/30/2015
Common
            925
Consulting Fees
JOSEF ZIHL
4/30/2015
Common
         1,849
Consulting Fees
ACORN MANAGEMENT PTS
4/15/2015
Common
         4,630
Consulting Fees
JASON BARTON
3/31/2015
Common
         1,070
Consulting Fees
JOSE ROMANO
6/30/2015
Common
         1,070
Consulting Fees
OSCAR BRONSTHER
6/30/2015
Common
         3,425
Board Fees
LOWELL RUSH
6/30/2015
Common
         3,425
Board Fees
FOUNTAINHEAD CAPITAL MANAGEMENT LIMITED
6/30/2015
Common
         8,333
Consulting Fees
STEVE GIRGENTI
7/1/2015
Common
         3,425
Board Fees
ALVARO PASCUAL-LEONE M.D.
7/31/2015
Common
         1,184
Consulting Fees
JOSEF ZIHL
7/31/2015
Common
         2,367
Consulting Fees
FOUNTAINHEAD CAPITAL MANAGEMENT LIMITED
8/5/2015
Series D. Pref.
         5,946
Series D Dividend
PETER C. ZACHARIOU
8/5/2015
Series D. Pref.
         2,194
Series D Dividend
CRAIG KIRSCH
8/5/2015
Series D. Pref.
            393
Series D Dividend
LIOLIOS GROUP, INC.
8/6/2015
Common
         2,646
Consulting Fees
ACORN MANAGEMENT PTS
8/15/2015
Common
         4,630
Consulting Fees
LIOLIOS GROUP, INC.
9/4/2015
Common
         2,096
Consulting Fees
ACORN MANAGEMENT PTS
9/15/2015
Common
         4,630
Consulting Fees
JASON BARTON
9/30/2015
Common
         1,056
Consulting Fees
JOSE ROMANO
9/30/2015
Common
         1,056
Consulting Fees
OSCAR BRONSTHER
9/30/2015
Common
         3,378
Board Fees
 
 
 
 
LOWELL RUSH
9/30/2015
Common
         3,378
Board Fees
FOUNTAINHEAD CAPITAL MANAGEMENT LIMITED
9/30/2015
Common
       16,667
Consulting Fees
STEVE GIRGENTI
10/1/2015
Common
         3,378
Board Fees
LIOLIOS GROUP, INC.
10/4/2015
Common
         2,252
Consulting Fees
ALVARO PASCUAL-LEONE M.D.
1/31/2015
Common
         1,995
Consulting Fees
JOSEF ZIHL
1/31/2015
Common
         2,216
Consulting Fees
JASON BARTON
12/31/2015
Common
         3,196
Consulting Fees
JOSE ROMANO
12/31/2015
Common
         3,196
Consulting Fees
OSCAR BRONSTHER
12/31/2015
Common
         5,682
Board Fees
LOWELL RUSH
12/31/2015
Common
         5,682
Board Fees
STEVE GIRGENTI
1/1/2016
Common
         5,682
Board Fees, Deferred
FOUNTAINHEAD CAPITAL MANAGEMENT LIMITED
12/31/2015
Common
       16,667
Consulting Fees
ALVARO PASCUAL-LEONE M.D.
1/31/2016
Common
         3,801
Consulting Fees
JOSEF ZIHL
1/31/2016
Common
         4,223
Consulting Fees
FOUNTAINHEAD CAPITAL MANAGEMENT LIMITED
2/5/2016
Series D. Pref.
         6,154
Series D Dividend
PETER C. ZACHARIOU
2/5/2016
Series D. Pref.
         2,720
Series D Dividend
CRAIG KIRSCH
2/5/2016
Series D. Pref.
            407
Series D Dividend
 
 
The securities issued in the above mentioned transactions were issued in connection with private placements exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended, pursuant to the terms of Section 4(2) of that Act and Rule 506 of Regulation D.
 
ITEM 6. SELECTED FINANCIAL DATA
 
 
12/31/2015
 
 
12/31/2014
 
 
12/31/2013
 
Revenues
  $1,138,634 
  $1,250,292 
  $1,089,374 
Net loss
  $(2,082,643)
  $(4,049,712)
  $(2,444,491)
Net loss per share
  $(0.21)
  $(0.39)
  $(0.39)
Weighted average no. shares
    10,839,335 
    10,270,657 
    6,324,175 
Stockholders’ equity (deficit)
  $1,145,722 
  $2,888,902 
  $(3,315,243)
Total assets
  $2,030,231 
  $3,813,743 
  $2,115,250 
Total liabilities
  $884,509 
  $924,841 
  $5,430,493 
 
 
 
 
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
 
RESULTS OF OPERATIONS
Comparison of the Year Ended December 31, 2015 to the Year Ended December 31, 2014
Revenue and Gross Margin:
 
 
2015
 
 
2014
 
 
% Change
 
Revenue:
 
 
 
 
 
 
 
 
 
Vycor Medical
  $885,481 
  $893,028 
    -1%
NovaVision
  $253,153 
  $357,264 
    -29%
 
  $1,138,634 
  $1,250,292 
    -9%
Cost of Revenue: 
       
       
       
Vycor Medical 
  $(107,528)
  $(112,604)
    5%
NovaVision 
  $(56,590)
  $(43,696)
    -30%
 
  $(164,118)
  $(156,300)
    -5%
Gross Profit 
       
       
       
Vycor Medical 
  $777,953 
  $780,424 
    0%
NovaVision 
  $196,563 
  $313,568 
    -37%
 
  $974,516 
  $1,093,992 
    -11%
 
Vycor Medical recorded revenue of $885,481 from the sale of its products for the year ended December 31, 2015, a decrease of $7,547 from 2014. This reflected weak sales in particular in the US in July and August which recovered in September. Gross margin of 88% was achieved in 2015 versus 87% in 2014.
NovaVision recorded revenues of $253,153 for the year ended December 31, 2015, a decrease of $104,111 from 2014.  NovaVision's US revenues for the first six months of 2015 were impacted by the delayed launch of the new Internet-delivered therapy suite. Since the launch in the U.S. in late June, NovaVision has achieved a reduction in price to patients of 65%, from $2,500 for a six-month course of VRT alone to $900 for VRT and NeuroEyeCoach together. Given the price reduction, the company anticipated an initial decrease in revenues as volumes ramp up due to the new affordable and scalable therapy suite. New patient starts in the US for the second six months following the launch increased by 139% over the first six months of 2015 and by 57% over the second six months of 2014. Foreign exchange differences in Europe accounted for $25,939 of the revenue decrease, with the remainder mainly accounted for by lower license fees as NovaVision migrates to the new model, and lower sales of chinrests, an activity which is being phased out. The Internet-delivered therapy suite was launched in Europe in December 2015. Gross margin for NovaVision was 78% compared to 88% for 2014, which reflected a one-time write-off totalling $20,804 of inventory and components related to the old NovaVision hardware delivery model.
 
 
 
Research and Development Expense:
Research and development expenses were $71,512 in 2015 compared to $69,114 for 2014. Capitalized software development costs in NovaVision for the year ended December 31, 2015 and 2014 were $32,843 and $124,660, respectively. During the year ended December 31, 2015 the Company’s VRT 7.0 program was completed and is now being utilized by patients.
 General and Administrative Expenses:
General and administrative expenses decreased by $854,737 to $2,533,684 in 2015 from $3,388,421 in 2014. Included within 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 2015 was $274,502, a decrease of $102,160 from $376,662 in 2014. Also included within General and Administrative Expenses are Sales Commissions, which decreased by $46,771 to $167,546; which related to a change in Company policy in 2014. The remaining General and Administrative expenses decreased by $705,806 from $2,797,442 to $2,091,636. 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
 
2014 offering costs and expenses
    (589,208)
    - 
Payroll
    (1,629)
    25,011 
Investor relations and road show costs
    (17,004)
    (90,647)
Legal, professional and other consulting
    (70,384)
    - 
Sales, marketing and travel
    41,902 
    - 
Other
    (72,769)
    - 
Board, financial and scientific advisory
    3,286 
    (36,524)
Total change
  $(705,806)
  $(102,160)
 
Interest Expense:
Interest comprises expense on the Company’s debt and insurance policy financing. Related Party Interest expense for 2015 decreased following debt repayment or conversion to $0 from $80,093 in 2014. Other Interest expense for 2015 decreased following debt repayment or conversion by $2,917 to $47,710 from $50,627 for 2014.
Liquidity and Capital Resources
 
Liquidity
The following table shows cash flow and liquidity data for the periods ended December 31, 2015 and December 31, 2014:
 
 
 
 
 
31-Dec-15
 
 
31-Dec-14
 
 
$ Change
 
Cash
  $347,477 
  $1,891,658 
  $(1,544,181)
Accounts receivable, inventory and other current assets
  $511,216 
  $677,636 
  $(166,420)
Total current liabilities
  $(877,009)
  $(924,841)
  $47,832 
Working capital
  $(18,316)
  $1,644,453 
  $(1,662,769)
Cash provided by (used in) financing activities
  $(85,300)
  $4,725,630 
  $(4,810,930)
 
Going Concern
The Company’s financial statements have been presented on a basis that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and assumes the Company will continue as a going concern. The Company has incurred losses since its inception, including a net loss of $2,082,643 for the year ended December 31, 2015, and the Company expects to continue to incur additional losses in the future, including additional development costs, costs related to marketing and manufacturing expenses. The Company has incurred negative cash flows from operations since inception. As of December 31, 2015 the Company had a stockholders’ equity of $1,145,722 and cash and cash equivalents of $347,477. The Company believes it would not have enough cash to meet its various cash needs unless the Company is able to obtain additional cash from the issuance of debt or equity securities. There is no assurance that additional funds from the issuance of equity will be available for the Company to finance its operations on acceptable terms. If adequate funds are not available, the Company may have to delay development or commercialization of products or technologies that the Company would otherwise seek to commercialize, or cease some or all of its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
Off-Balance Sheet Arrangements
As of December 31, 2015, we had no off-balance sheet arrangements.
Seasonality
Our operating results are not affected by seasonality.
Inflation
Our business and operating results are not affected in any material way by inflation.
Critical Accounting Policies and Estimates
Uses of estimates in the preparation of financial statements
The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimated. To the extent management’s estimates prove to be incorrect, financial results for future periods may be adversely affected. Significant estimates and assumptions contained in the accompanying consolidated financial statements include management’s estimate of the allowance for uncollectible accounts receivable, amortization of intangible assets, and the fair values of options and warrant included in the determination of debt discounts and share based compensation.
 
 
 
 
Cash and cash equivalents
 
The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. Cash balances may at times exceed the FDIC insured limits. Cash also includes a US investment account in a money market backed by government securities up to 105% of the account balance. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Included within cash are deposits paid by patients, held by the Company until the patient returns the VRT device or chinrest at the end of therapy. At December 31, 2015 and 2014 patient deposits amounted to $27,183 and $32,869, respectively, and are included in other current liabilities.
 
Fixed assets
The Company records fixed assets at cost and calculates depreciation using the straight-line method over the estimated useful life of the assets, which is estimated to be between three and seven years. Maintenance, repairs and minor renewals are charged to expense when incurred. Replacements and major renewals are capitalized
 
Derivative Liability
 
The Company has accounted for the 34,723 Series A Warrants issued in connection with the 2014 Offering (all as defined in Note 10), the holders of which had not waived their anti-dilution rights (as detailed further in Note 10) in accordance with the guidance contained in ASC 815-40-15-7D, whereby under that provision, because they had anti-dilution rights, they did not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classified the warrant instrument as a liability at its fair value and adjusted the instrument to fair value at each reporting period. This liability was subject to re-measurement at each balance sheet date until exercised or until the anti-dilution provisions contained within the warrant agreements expired, and was classified in the balance sheet as a current liability. Any change in fair value of the warrant liability was recognized in the Company’s statement of operations as other income (loss). The anti-dilution provisions expired on June 11, 2015 and accordingly the liability has been extinguished.
Income taxes
We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
 
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.
 
Patents and Other Intangible Assets
The Company capitalizes legal and related costs associated with the establishment and enhancement of patents for its products once patents have been applied for. Costs associated with the development of the patented item or processes are charged to research and development costs as incurred. The capitalized costs are amortized over the life of the patent. The Company reviews intangible assets on an annual in accordance with the authoritative guidance. Trademarks have an indefinite life and are reviewed annually by management for impairment in accordance with the authoritative guidance.
 
Software Development Costs
 
The authoritative accounting guidance requires software development costs to be capitalized upon completion of the preliminary project stage. Accordingly, direct internal and external costs associated with the development of the features and functionality of the Company’s software, incurred during the application development stage, are capitalized and amortized using the straight-line method over the estimated life of five years.
 
 
 
 
Revenue Recognition
 
Vycor Medical generates revenue from the sale of its surgical access system to hospitals and other medical professionals. Vycor Medical records revenue when a completed contract for the sale exists, the product is invoiced and shipped to the customer. Vycor Medical does not provide for product returns or warranty costs.
 
NovaVision generates revenues from various programs, therapy services and other sources such as license sales. Therapy services revenues represent fees from NovaVision’s vision restoration therapy software, eye movement training software, diagnostic software, clinic set up and training fees, and the professional and support services associated with the therapy. NovaVision provides vision restoration therapy directly to patients. The typical vision restoration therapy consists of six modules, performed on average over 6 months in the U.S. and U.K. and 10 months in Germany. A patient contract comprises set-up fees and monthly therapy fees. Set-up fees are recognized at the outset of the contract and therapy revenue is recognized ratably over the therapy period. Patient therapy is restricted to being completed by a patient within a specified time frame. NovaVision’s saccadic training software is generally completed within 2-4 weeks and revenue is therefore recognized fully at commencement.
 
Deferred revenue results from patients paying for the therapy in advance of receiving the therapy.
 
Accounts Receivable
The Company’s accounts receivable are due from the hospitals and distributors in the case of Vycor Medical, and from patients directly for therapy or physicians for diagnostic products in the case of NovaVision. Accounts receivable are due once products have been delivered or at the time the therapy is initiated; however, for NovaVision therapy patients sometimes credit is extended through various payment plans based on individual financial conditions, generally not to exceed the 9 or 10 month therapy period. The outstanding balances are stated net of an allowance for doubtful accounts. The Company determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, and the customer’s ability to pay its obligations. The Company writes off accounts receivable when they become uncollectible.
 
Inventory
Inventories are stated at the weighted average cost method. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product. If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified. The provision for inventory for the years ended December 31, 2015 and 2014 was $29,923 and $17,200, respectively. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales.
 
Foreign Currency
The Euro is the local currency of the country in which NovaVision GmbH conducts its operations and is considered the functional currency of this entity; the GB Pound is the local currency of the country in which Sight Science Limited conducts its operations and is considered the functional currency of this entity. All balance sheet amounts are translated to U.S. dollars using the U.S. exchange rate at the balance sheet date except for the equity section which is translated at historical rates. Operating statement amounts are translated using an average exchange rate for the period of operations. Foreign currency translation effects are accumulated as part of the accumulated other comprehensive income (loss) and included in shareholders’ (deficit) in the accompanying Consolidated Balance Sheet.
 
Educational marketing and advertising expenses
The Company may incur costs for the education of customers on the uses and benefits of its products. The Company will include education, marketing and advertising expense as a component of selling, general and administrative costs as such costs are incurred.
 
Contractual Obligations
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
 
The financial information required by Item 8 begins on the following page.
 
 
 
 
 
 
Paritz & Company, P.A.
 
15 Warren Street, Suite 25
Hackensack, New Jersey 07601
(201)342-7753
Fax: (201) 342-7598
E-Mail: paritz @paritz.com
 
     Certified Public Accountants
 
 
To be
 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

To the Members of the Audit Committee and
Board of directors of Vycor Medical, Inc. and Subsidiaries
 
We have audited the accompanying balance sheets of Vycor Medical, Inc. and Subsidiaries (“the Company”) as of December 31, 2015 and 2014, and the related statements of comprehensive loss, stockholders’ equity (deficit), and cash flows for each of the years in the two year period ended December 31, 2015. The Company’s management is responsible for these financial statements. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Vycor Medical, Inc. and Subsidiaries as of December 31, 2015 and 2014, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2015, in conformity with accounting principles generally accepted in the United States of America.
The accompanying financial statements referred to above have been prepared assuming that the Company. will continue as a going concern. The ability of the Company to continue as a going concern is dependent upon, among other things, its successful execution of its plan of operations and ability to raise additional financing. There is no guarantee that the Company will be able to raise additional capital or sell any of its products or services at a profit. As discussed in note 2 to the financial statements, the Company has incurred a net loss since inception, including a net loss of $2,082,643 for the year ended December 31, 2015 and the Company expect to continue to incur additional losses in the future, including additional development cost, cost related to marketing and manufacturing expenses. The Company has incurred negative cash flows from operations since inception.  As of December 31, 2015, the Company has stockholders’ equity of $1,145,722 and cash and cash equivalents of $347,477. The Company believes it would not have enough cash to meet its needs unless the Company is able to obtain additional cash from the issuance of debt or equity securities. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty
 
 
/s/Paritz & Company, P.A.
 
Hackensack, New Jersey
March 29, 2016
 
 
 
 
VYCOR MEDICAL, INC.
Consolidated Balance Sheets
 
 
December 31,
 
 
December 31,
 
 
 
2015
 
 
2014
 
ASSETS 
 
 
 
 
 
 
Current Assets 
 
 
 
 
 
 
Cash
  $347,477 
  $1,891,658 
Trade accounts receivable, net of allowance for doubtful accounts of $2,711 and $2,721
    106,340 
    123,815 
Inventory
    292,538 
    336,021 
Prepaid expenses and other current assets
    112,338 
    217,800 
Total Current Assets
    858,693 
    2,569,294 
 
       
       
Fixed assets, net 
    521,105 
    582,434 
 
       
       
Intangible and Other assets: 
       
       
Trademarks
    251,157 
    251,157 
Patents, net of accumulated amortization
    323,138 
    345,113 
Website, net of accumulated amortization
    19,548 
    12,576 
Security deposits
    49,090 
    53,169 
Total Intangible and Other assets
    642,933 
    662,015 
TOTAL ASSETS 
  $2,022,731 
  $3,813,743 
 
       
       
LIABILITIES AND STOCKHOLDERS’ EQUITY
       
       
Current Liabilities 
       
       
Accounts payable
  $250,367 
  $221,703 
Accrued interest: Other
    88,634 
    40,634 
Accrued liabilities
    222,258 
    320,927 
Derivative liability
    - 
    19,792 
Notes payable: Other
    315,750 
    321,785 
Total Current Liabilities 
    877,009 
    924,841 
 
       
       
STOCKHOLDERS’ EQUITY
       
       
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 252,336 and 235,560 issued and outstanding as at December 31, 2015 and December 31, 2014 respectively
  $25 
  $24 
Common Stock, $0.0001 par value, 25,000,000 shares authorized at December 31, 2015 and 2014, 11,032,560 and 10,879,899 shares issued and 10,929,226 and 10,776,565 outstanding at December 31, 2015 and 2014 respectively
    1,103 
    1,088 
Additional Paid-in Capital
    24,346,057 
    23,903,793 
Treasury Stock (103,334 shares of Common Stock as at December 31, 2015 and 2014 respectively, at cost)
    (1,033 )
    (1,033 )
Accumulated Deficit
    (23,332,538)
    (21,082,118)
Accumulated Other Comprehensive Income
    132,108 
    67,148 
Total Stockholders’ Equity
    1,145,722 
    2,888,902 
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY
  $2,022,731 
  $3,813,743 
 
See accompanying notes to financial statements
 
 
 
VYCOR MEDICAL, INC.
Consolidated Statement of Comprehensive Loss
 
 
 
For the year ended December 31,
 
 
 
2015
 
 
2014
 
 
 
 
 
 
 
 
Revenue
  $1,138,634 
  $1,250,292 
Cost of Goods Sold
    164,118 
    156,300 
Gross Profit
    974,516 
    1,093,992 
 
       
       
Operating expenses:
       
       
Research and development
    71,512 
    69,114 
Depreciation and Amortization
    360,334 
    368,605 
General and administrative
    2,533,684 
    3,388,421 
Total Operating expenses
    2,965,530 
    3,826,140 
Operating loss
    (1,991,014)
    (2,732,148)
 
       
       
Other income (expense)
       
       
Interest expense: Related Party
    - 
    (80,093)
Interest expense: Other
    (47,710)
    (50,627)
Gain (loss) on foreign currency exchange
    (63,711)
    (105,685)
Loss on extinguishment of debt
    - 
    (682,039)
Loss on extension of warrants
    - 
    (146,488)
Change in fair value derivative liability
    19,792 
    (252,633)
Total Other Income (expense)
    (91,629)
    (1,317,565)
 
       
       
Loss Before Credit for Income Taxes
    (2,082,643)
    (4,049,713)
         Credit for income taxes
    - 
    - 
Net Loss
    (2,082,643)
    (4,049,713)
        Preferred stock dividends
    (167,777)
    - 
Net Loss available to common shareholders
    (2,250,420)
    (4,049,713)
Comprehensive Loss
       
       
 Foreign Currency Translation Adjustment
    (64,959)
    (112,318)
 Comprehensive Loss
    (2,315,379)
    (4,162,031)
 
       
       
Net Loss Per Share
       
       
Basic and diluted
  $(0.21)
  $(0.39)
 
       
       
Weighted Average Number of Shares Outstanding – Basic and Diluted
    10,839,335 
    10,270,657 
 
See accompanying notes to financial statements
 
 
 
VYCOR MEDICAL, INC.
Statement of Stockholders’ Equity (Deficiency)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Additional
 
 
 
 
 
 
 
 
 
 
 
 
Common Stock
 
 
Preferred Stock - Series C
 
 
Preferred Stock - Series D
 
 
Treasury Stock
 
 
Paid-in
 
 
Accumulated
 
 
Accum
 
 
Total
 
 
 
Number
 
 
Amount
 
 
Number
 
 
Amount
 
 
Number
 
 
Amount
 
 
Number
 
 
Amount
 
 
Capital
 
 
Deficit
 
 
OCI (Loss)
 
 
 
 
Balance at January 1, 2014
    6,757,225 
  $675 
    1 
  $1 
    0 
  $- 
    (103,334)
  $(1,033)
  $13,762,689 
  $(17,032,405)
  $(45,170)
  $(3,315,243)
 
       
       
       
       
       
       
       
       
       
       
       
       
Issuance of stock for board and consulting fees
    131,505 
    13 
    - 
    - 
    - 
    - 
    - 
    - 
    292,507 
    - 
    - 
    292,520 
 
       
       
       
       
       
       
       
       
       
       
       
       
Share-based compensation for consulting services
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    5,522 
    - 
    - 
    5,522 
 
       
       
       
       
       
       
       
       
       
       
       
       
Issuances of shares and warrants pursuant to offering
    2,777,808 
    278 
    - 
    - 
    - 
    - 
    - 
    - 
    3,387,446 
       
       
    3,387,724 
 
       
 
` 
 
       
       
       
       
       
       
       
       
       
       
Preferred shares issued in exchange for debt
    - 
    - 
       
       
    235,559 
    24 
       
       
    3,037,602 
    - 
    - 
    3,037,626 
 
       
       
       
       
       
       
       
       
       
       
       
       
Revaluation of warrants on extension
       
       
       
       
       
       
       
       
    146,488 
    - 
    - 
    146,488 
 
       
       
       
       
       
       
       
       
       
       
       
       
Common stock issuance for conversion of preferred shares
    420,838 
    42 
    - 
    (1)
       
       
    - 
    - 
    (162,059)
       
       
    (162,017)
Common stock issuance for accrued consulting fees
    792,523 
    79 
    - 
    - 
    - 
    - 
    - 
    - 
    1,097,566 
       
       
    1,097,645 
Reclassification of derivative liability to equity
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    2,336,032 
       
       
    2,336,032 
Accumulated Comprehensive Loss
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    112,318 
    112,318 
 
       
       
       
       
       
       
       
       
       
       
       
       
Net loss for year ended December 31, 2014
       
       
       
       
       
       
       
       
       
    (4,049,713)
       
    (4,049,713)
Balance at December 31, 2014
    10,879,899 
  $1,088 
    1 
  $- 
    235,559 
  $24 
    (103,334)
  $(1,033)
  $23,903,793 
  $(21,082,118)
  $67,148 
  $2,888,902 
Issuance of stock for board and consulting fees
    152,661 
    15 
    - 
    - 
    - 
    - 
    - 
    - 
    244,985 
    - 
    - 
    245,000 
 
 
 
 
Share-based compensation for consulting service
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    4,492 
    - 
    - 
    4,492 
Share based compensation issued to employees
       
       
    - 
    - 
    - 
    - 
    - 
    - 
    25,011 
    - 
    - 
    25,011 
 
       
       
       
       
       
       
       
       
       
       
       
       
Preferred stock dividends
    - 
    - 
       
       
    16,777 
    1 
       
       
    167,776 
    - 
    - 
    167,777 
Accumulated Comprehensive Loss
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    - 
    64,960 
    64,960 
 
       
       
       
       
       
       
       
       
       
       
       
       
Net loss for year ended December 31, 2015
       
       
       
       
       
       
       
       
       
    (2,250,420)
       
    (2,250,420)
 
       
       
       
       
       
       
       
       
       
       
       
       
Balance at December 31, 2015
    11,032,560 
  $1,103 
    1 
  $- 
    252,336 
  $25 
    (103,334)
  $(1,033)
  $24,346,057 
  $(23,332,538)
  $132,108 
  $1,145,722 
 
       
       
       
       
       
       
       
       
       
       
       
       
 
See accompanying notes to financial statements
 
 
 
VYCOR MEDICAL, INC.
Statement of Cash Flows
 
For the year ended
 
 
 
December 31,
 
 
 
2015
 
 
2014
 
Cash flows from operating activities:
 
 
 
 
 
 
Net loss
    (2,082,643)
    (4,049,713)
Adjustments to reconcile net loss to cash used in operating activities:
       
       
Amortization of intangible assets
    99,291 
    128,381 
Depreciation of fixed assets
    269,672 
    254,608 
Change in inventory provision
    12,633   
    2,567 
Inventory write-off
    20,804   
       
Share based compensation
    274,502 
    376,662 
(Gain) loss on foreign exchange
    63,711 
    105,685 
Unrealized gain on change in fair value of derivative liability
    (19,792)
    252,633 
Loss on extinguishment of debt
    - 
    682,039 
Loss on extension of warrants
    - 
    146,488 
 
       
       
Changes in assets and liabilities:
       
       
Accounts receivable
    17,475 
    88,845 
Inventory
    10,046 
    (131,663)
Prepaid expenses
    184,726 
    (88,356)
Accrued interest to related party
    - 
    (255,034)
Accrued interest other
    48,000 
    (90,617)
Accounts payable
    28,665 
    (32,321)
Accrued liabilities
    (98,669)
    (90,973)
Security Deposit
    4,079 
    - 
 
       
       
Cash used in operating activities
    (1,167,500)
    (2,700,769)
Cash flows from investing activities:
       
       
Purchase of fixed assets
    (210,023)
    (130,845)
Purchase of website
    (18,010)
    (13,842)
Acquisition of patents
    (66,276)
    (26,455)
Cash used in investing activities
    (294,309)
    (171,142)
Cash flows from financing activities:
       
       
Proceeds from issuance of Common stock and Warrants
    - 
    5,000,000 
Proceeds from issuance of Notes Payable: Other
    - 
    83,486 
Repayment of Notes Payable to Related Party
    - 
    (126,519)
Repayment of Notes Payable - Other
    (85,300)
    (231,337)
Cash provided by (used in) financing activities
    (85,300)
    4,725,630 
Effect of exchange rate changes on cash
    2,928 
    6,636 
Net increase (decrease) in cash
    (1,544,181)
    1,860,355 
Cash at beginning of year
    1,891,658 
    31,303 
Cash at end of year
    347,477 
    1,891,658 
 
       
       
Supplemental Disclosures of Cash Flow information:
       
       
Interest paid:
    0 
    462,194 
Non-Cash Transactions:
       
       
Preferred stock dividends satisfied in new preferred stock
  $167,777 
  $- 
 
See accompanying notes to financial statements
 
 
 
1.
FORMATION AND BUSINESS OF THE COMPANY
Business Description
 
Vycor Medical, Inc. (the “Company”) designs, develops and markets neurological medical devices and therapies through two operating divisions: Vycor Medical and NovaVision. Vycor Medical focuses on brain and cervical surgical access systems for sale to hospitals and medical professionals; NovaVision focuses on neuro-stimulation therapies and diagnostic devices for the treatment and screening of vision field loss resulting from neurological damage.
 
2.
GOING CONCERN
The Company’s financial statements have been presented on a basis that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and assumes the Company will continue as a going concern. The Company has incurred losses since its inception, including a net loss of $2,082,643 for the year ended December 31, 2015, and the Company expects to continue to incur additional losses in the future, including additional development costs, costs related to marketing and manufacturing expenses. The Company has incurred negative cash flows from operations since inception. As of December 31, 2015 the Company had a stockholders’ equity of $1,145,722 and cash and cash equivalents of $347,477. The Company believes it would not have enough cash to meet its various cash needs unless the Company is able to obtain additional cash from the issuance of debt or equity securities. There is no assurance that additional funds from the issuance of equity will be available for the Company to finance its operations on acceptable terms. If adequate funds are not available, the Company may have to delay development or commercialization of products or technologies that the Company would otherwise seek to commercialize, or cease some or all of its operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
3.
SIGNIFICANT ACCOUNTING POLICIES
 
Principles of Consolidation and Basis of Presentation
The 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 balances have been eliminated in consolidation. Certain reclassifications and format changes have been made to prior year amounts to conform to the current year presentation.
 
Revenue Recognition
Vycor Medical generates revenue from the sale of its surgical access system to hospitals and other medical professionals. Vycor Medical records revenue when a completed contract for the sale exists, the product is invoiced and shipped to the customer. Vycor Medical does not provide for product returns or warranty costs.
 
NovaVision generates revenues from various programs, therapy services and other sources such as license sales. Therapy services revenues represent fees from NovaVision’s vision restoration therapy software, eye movement training software, diagnostic software, clinic set up and training fees, and the professional and support services associated with the therapy. NovaVision provides vision restoration therapy directly to patients. The typical vision restoration therapy consists of six modules, performed on average over 6 months in the U.S. and U.K. and 10 months in Germany. A patient contract comprises set-up fees and monthly therapy fees. Set-up fees are recognized at the outset of the contract and therapy revenue is recognized ratably over the therapy period. Patient therapy is restricted to being completed by a patient within a specified time frame. NovaVision’s saccadic training software is generally completed within 2-4 weeks and revenue is therefore recognized fully at commencement.
 
Deferred revenue results from patients paying for the therapy in advance of receiving the therapy.
 
Cash and cash equivalents
The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. Cash balances may at times exceed the FDIC insured limits. Cash also includes a US investment account in a money market backed by government securities up to 105% of the account balance. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Included within cash are deposits paid by patients, held by the Company until the patient returns the VRT device or chinrest at the end of therapy. At December 31, 2015 and 2014 patient deposits amounted to $27,183 and $32,869, respectively, and are included in Other Current Liabilities.
 
 
 
 
Accounts Receivable and Allowance for Doubtful Accounts Receivable
We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We extend credit to our customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and maintain an allowance for potential bad debts if required.  We determine whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also record a general allowance as necessary.  Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate that we should abandon such efforts.
 
Inventories
Inventories are stated at the lower of cost determined using the weighted average cost method or market. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose of the product. If the Company identifies excess, obsolete or unsalable items, its inventories are written down to their realizable value in the period in which the impairment is first identified. The provision for inventory obsolescence for the years ended December 31, 2015 and 2014 was $29,923 and $17,200, respectively. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales in the Company's consolidated statements of operations.
 
Foreign Currency
The Euro is the local currency of the country in which NovaVision GmbH conducts its operations and is considered the functional currency of this entity; the GB Pound is the local currency of the country in which Sight Science Limited conducts its operations and is considered the functional currency of this entity. All balance sheet amounts are translated to U.S. dollars using the U.S. exchange rate at the balance sheet date except for the equity section which is translated at historical rates. Operating statement amounts are translated using an average exchange rate for the period of operations. Foreign currency translation effects are accumulated as part of the accumulated other comprehensive income (loss) and included in stockholders’ equity in the accompanying Consolidated Balance Sheet.
 
Educational marketing and advertising expenses
The Company may incur costs for the education of customers on the uses and benefits of its products. The Company will include education, marketing and advertising expense as a component of selling, general and administrative costs as such costs are incurred.
 
Income taxes
We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
 
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.
 
Fixed assets
Fixed assets are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.
 
 
 
 
Derivative Liability
The Company has accounted for the 34,723 Series A Warrants issued in connection with the 2014 Offering (all as defined in Note 10), the holders of which had not waived their anti-dilution rights (as detailed further in Note 10) in accordance with the guidance contained in ASC 815-40-15-7D, whereby under that provision, because they had anti-dilution rights, they did not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classified the warrant instrument as a liability at its fair value and adjusted the instrument to fair value at each reporting period. This liability was subject to re-measurement at each balance sheet date until exercised or until the anti-dilution provisions contained within the warrant agreements expired, and was classified in the balance sheet as a current liability. Any change in fair value of the warrant liability was recognized in the Company’s statement of operations as other income (loss). The anti-dilution provisions expired on June 11, 2015 and accordingly the liability has been extinguished.
Impairment of long-lived assets
Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, impairment is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.
 
Research and Development
The Company expenses all research and development costs as incurred. For the years ended December 31, 2015 and 2014, the amounts charged to research and development expenses were $71,512 and $69,114, respectively.
 
Software Development Costs
The Company accounts for software development costs in accordance with ASC 350-40, whereby all costs incurred during the preliminary stage of a development project should be charged to expense as incurred. Capitalization of costs begins after the preliminary stage has been completed, management commits to funding the project, it is probable that the project will be completed, and the software will be used for its intended function. All post-implementation costs are charged to expense as incurred. Accordingly, direct internal and external costs associated with the development of the features and functionality of the Company’s software, incurred during the application development stage, are capitalized and amortized using the straight-line method of the estimated life of five years. The Company acquired internally developed software valued at $540,000 as part of the acquisition of the assets of NovaVision, Inc. on November 30, 2010 and $363,472 as part of the acquisition of the assets of Sight Science Limited on January 4, 2012. For the years ended December 31, 2015 and 2014, the amounts capitalized for software development were $32,843 and $124,660 respectively, for the Company’s VRT 7.0 and NeuroEyeCoach programs.
 
Uses of estimates in the preparation of financial statements
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimated. To the extent management’s estimates prove to be incorrect, financial results for future periods may be adversely affected. Significant estimates and assumptions contained in the accompanying consolidated financial statements include management’s estimate of the allowance for uncollectible accounts receivable, amortization of intangible assets, and the fair values of options and warrants included in the determination of debt discounts and share based compensation.
 
Stock Compensation
The Company recognizes the cost of all share-based payments under the relevant authoritative accounting guidance. Share-based payments include any remuneration paid by the Company in shares of the Company’s common stock or financial instruments that grant the recipient the right to acquire shares of the Company’s common stock. For share-based payments to employees, which consist only of awards made under the stock option plan described below, the Company accounts for the payments in accordance with the provisions of ASC Topic 718, “Stock Compensation”. Share-based payments to consultants, service providers and other non-employees are accounted for under in accordance with ASC Topic 718, ASC Topic 505, “Equity Payments to Non-Employees” or other applicable authoritative guidance.
 
Convertible Instruments
We evaluate and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.
 
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not
 
 
 
 
re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
 
We account for convertible instruments (when we have determined that the embedded conversion options should not be bifurcated from their host instruments) as follows: We record when necessary, discounts to convertible notes for the intrinsic value of conversion options embedded in debt instruments based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt to their stated date of redemption. The embedded conversion option in connection with our convertible debt could not be exercised unless and until we completed a Qualifying Financing transaction. Accordingly, we determined based on authoritative guidance that the embedded conversion option is deemed to be a contingent conversion rather than active conversion option that did not require accounting recognition at the commitment dates of the issuances of the Notes.
 
Common Stock Purchase Warrants and Other Derivative Financial Instruments
We classify as equity any contracts that require physical settlement or net-share settlement or provide us a choice of net-cash settlement or settlement in our own shares (physical settlement or net-share settlement) provided that such contracts are indexed to our own stock as defined in ASC 815-40 ("Contracts in Entity's Own Equity"). We classify as assets or liabilities any contracts that require net-cash settlement (including a requirement to net cash settle the contract if an event occurs and if that event is outside our control) or give the counterparty a choice of net-cash settlement or settlement in shares (physical settlement or net-share settlement). We assess classification of our common stock purchase warrants and other free standing derivatives at each reporting date to determine whether a change in classification between assets and liabilities is required.
 
Fair Value Measurements
We adopted the provisions of ASC Topic 820, “Fair Value Measurements and Disclosures”, which defines fair value as used in numerous accounting pronouncements, establishes a framework for measuring fair value and expands disclosure of fair value measurements.
 
The estimated fair value of certain financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued expenses are carried at historical cost basis, which approximates their fair values because of the short-term nature of these instruments. The carrying amounts of our short and long term credit obligations approximate fair value because the effective yields on these obligations, which include contractual interest rates taken together with other features such as concurrent issuances of warrants and/or embedded conversion options, are comparable to rates of returns for instruments of similar credit risk.
 
ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes three levels of inputs that may be used to measure fair value:
 
Level 1 — quoted prices in active markets for identical assets or liabilities
Level 2 — quoted prices for similar assets and liabilities in active markets or inputs that are observable
Level 3 — inputs that are unobservable (for example cash flow modeling inputs based on assumptions)
 
Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental shares issuable upon exercise of stock options and warrants and conversion of preferred stock and convertible debt.  Such potentially dilutive shares are excluded when the effect would be to reduce a net loss per share. No dilution adjustment has been made to the weighted average outstanding common shares in the periods presented because the assumed exercise of outstanding options and warrants and the conversion of preferred stock and debt would be anti-dilutive.
 
 
 
 
The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share:
 
 
 
December 31,
 
 
December 31,
 
 
 
2015
 
 
2014
 
Stock options outstanding
    25,557 
    25,557 
Warrants to purchase common stock
    6,007,048 
    5,911,715 
Debentures convertible into common stock
    215,908 
    171,138 
Preferred shares convertible into common stock
    1,188,471 
    1,110,438 
Total
    7,436,984 
    7,218,848 
 
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 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.
 
4.
NOTES PAYABLE
 
Other Notes Payable
 
As of December 31, 2015 and 2014 Other Notes Payable consists of:
 
 
 
 
December 31, 2015
 
 
December 31, 2014
 
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. In connection with the loan the Company also issued EuroAmerican warrants to purchase 400,000 shares of the Company’s common stock at an exercise price of $4.50 per share for a period of three (3) years. On June 25, 2011 the due date for this note was extended to September 25, 2011 and the Holder was granted the right to convert all or any amount of the principal face amount of the debenture then outstanding and accrued interest into shares of common stock of the Company an adjusted conversion price of $1.80 per share, subject to adjustment and does not require bifurcation. The due date for this note has been extended to December 31, 2016.
    300,000 
    300,000 
 
       
       
 
       
       
Insurance policy finance agreements. During the year ended December 31, 2015 the Company made monthly repayments totaling $85,800. The notes are due over the next twelve months.
    15,750 
    21,786 
 
       
       
Total Other Notes Payable:
  $315,750 
  $321,786 
 
 
 
 
 
5.
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. Set out below are the revenues, gross profits and total assets for each segment.
 

 
 
 
 
December 31,
 
 
 
2015
 
 
2014
 
Revenue:
 
 
 
 
 
 
Vycor Medical
  $885,481 
  $893,028 
NovaVision
    253,153 
    357,264 
Total Revenue
  $1,138,634 
  $1,250,292 
Gross Profit:
       
       
Vycor Medical
    777,953 
    780,424 
NovaVision
    196,563 
    313.568 
Total Gross Profit
  $974,516 
  $1,093,992 
Total Assets:
       
       
Vycor Medical
  $1,157,790 
  $2,644,513 
NovaVision
    872,441 
    1,169,230 
Total Assets
  $2,030,231 
  $3,813,743 
 
(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.
 
 
December 31,
 
 
 
2015
 
 
2014
 
Revenue:
 
 
 
 
 
 
United States
  $985,868 
  $1,034,034 
Europe
    152,766 
    216,258 
Total Revenue
  $1,138,634 
  $1,250,292 
Gross Profit:
       
       
United States
  $844,298 
  $901,503 
Europe
    132,218 
    192,489 
Total Gross Profit
  $974,516 
  $1,093,992 
Total Assets:
       
       
United States
  $1,707,089 
  $3,367,679 
Europe
    323,142 
    446,064 
Total Assets
  $2,030,231 
  $3,813,743 
 
 
 
 
6.
FIXED ASSETS
As of December 31, 2015 and 2014, Fixed Assets and the estimated lives used in the computation of depreciation are as follows:
 
 
 
 
December 31,
 
 
December 31,
 
 
Estimated Useful Lives
 
2015
 
 
2014
 
 
 
 
 
 
 
 
 
Machinery and equipment
3 years
  $132,452 
  $136,356 
Leasehold Improvements
5 years
    6,206 
    6,206 
Purchased Software
3 years
    27,706 
    24,993 
Molds and Tooling
5 years
    381,397 
    234,230 
Furniture and fixtures
7 years
    26,028 
    20,079 
Therapy Devices
3 years
    99,324 
    86,286 
Internally Developed Software
5 years
    1,174,912 
    1,143,918 
 
    1,848,025 
    1,652,068 
Less: Accumulated depreciation and amortization
 
    (1,326,920)
    (1,069,634)
Property and Equipment, net
 
  $521,105 
  $582,434 
 
Depreciation expense for the years ended December 31, 2015 and 2014 was $269,672 and $254,608 respectively, including $8,629 and $14,383 respectively for Therapy Devices which is allocated to Cost of Sales.
 
7.
INTANGIBLE ASSETS
 As of December 31, 2015 and 2014, Intangible Assets consists of:
 
 
December 31,
 
 
 
2015
 
 
2014
 
Amortized intangible assets: Patent (8 years useful life)
 
 
 
 
 
 
    Gross carrying Amount
  $865,639 
  $799,362 
    Accumulated Amortization
    (542,501) 
    (454,249) 
 
  $323,138 
  $345,113 
Amortized intangible assets: Website (5 years useful life)
       
       
    Gross carrying Amount
  $50,760 
  $32,750 
    Accumulated Amortization
  $(31,212)
  $(20,174)
 
  $19,548 
  $12,576 
Intangible assets not subject to amortization
       
       
    Trademarks
  $251,157 
  $251,157 
 
Intangible asset amortization expense for the periods ended December 31, 2015 and 2014 was $99,291and $128,381, respectively.
 
 
 
 
8.
EQUITY 
Equity Transactions
During January to December 2015, the Company issued: 12,180 shares of Common Stock (valued at $20,000) to Steven Girgenti, 15,145 shares of Common Stock (valued at $20,000) to Oscar Bronsther and 15,145 shares of Common Stock (valued at $20,000) to Lowell Rush in consideration for services provided to the Board of Directors; and 5,023 shares of Common Stock (valued at $7,500) to Alvaro Pasual-Leone, 8,270 shares of Common Stock (valued at $12,500) to Josef Zihl and 6,153 shares of Common Stock (valued at $7,500) to each of Jason Barton and Jose Romano in respect of their roles as members of the NovaVision, Inc. Scientific Advisory Board.
During January to December 2015, in accordance with the terms the Consulting Agreement, the Company issued 49,819 shares of Common Stock (valued at $90,000) to Fountainhead.
During 2015, in accordance with the terms of investor relations advisory agreements, the Company issued 27,779 shares of Common Stock (valued at $50,000) to Acorn Partners, LLC and 6,994 shares of Common Stock (valued at $10,000) to Liolios Group Inc.
During 2015 Series D Preferred Stock, convertible into shares of Common Stock at $2.15, was issued in respect of Preferred Dividends as follows: 11,691 shares of Series D Preferred Stock (valued at $116,915), convertible into 54,377 shares of Common Stock to Fountainhead; 4,313 shares of Series D Preferred Stock (valued at $43,130), convertible into 20,060 shares of Common Stock to Peter Zachariou; and 773 shares of Series D Preferred Stock (valued at $7,731), convertible into 3,595 shares of Common Stock to Craig Kirsch.
Outstanding Warrants and Options
The details of the outstanding rights, options and warrants and value of such rights, options and warrants are as follows: 
 
STOCK WARRANTS:
 
 
 
 
Weighted average
 
 
 
Number of shares
 
 
exercise price
 
 
 
 
 
 
per share
 
Outstanding at December 31, 2013 
    1,404,599   
  $  3.39  
Granted
    5,226,120 
  $2.61 
Exercised
    - 
    - 
Cancelled or expired
    (719,004) 
  $4.46 
Outstanding at December 31, 2014
    5,911,715 
  $2.57 
Granted
    100,000 
  $2.56 
Exercised
    - 
    - 
Cancelled or expired
    (4,667) 
    - 
Outstanding at December 31, 2015
    6,007,048 
  $2.57 
 
       
       
STOCK OPTIONS:
       
 
Weighted average
 
 
   Number of shares           
 
  
 
 
       
 
per share
 
Outstanding at December 31, 2013
    5,557 
  $20.25 
Granted
    20,000 
  $2.00 
Exercised
    - 
    - 
Cancelled or expired
    - 
    - 
Outstanding at December 31, 2014
    5,557 
  $20.25 
Granted
    - 
    - 
Exercised
    - 
    - 
Cancelled or expired
    - 
    - 
Outstanding at December 31, 2015
    25,557 
  $5.97 
 
 
 
 
As of December 31, 2015, the weighted-average remaining contractual life of outstanding warrants and options is 1.25 and 2.18 years, respectively. 
 
9.
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 the years ended December 31, 2015 and 2014, the Company recognized share-based compensation of $25,011 and $0, respectively for the issuance of 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 December 31, 2015 there were no awards of any stock appreciation rights.
 
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.
 
Non-Employee Stock Compensation
Aggregate stock-based compensation expense charged to operations for stock and warrants granted to the above non-employees for the year ended December 31, 2015 was $249,492. As of December 31, 2015, 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. The fair value of the common stock is determined by the then-prevailing private placement purchase price. Expected volatility was based on the historical volatility of a peer group of publicly traded companies. The expected term of options and warrants was based upon the life of the option, and the risk-free rate used was based on the U.S. Treasury Constant Maturity rate.
 
The stock compensation expensed during the year ended December 31, 2015 resulted only from the issuance of Common Stock valued on the date of issuance. The following assumptions were used in calculations of the Black-Scholes option pricing model for warrant-based stock compensation in year ended December 31, 2015:
 
 
 
Year ended December 31,
 
 
 
2015
 
 
2014
 
Risk-free interest rates 
    1.07%
    0.78%
Expected life 
 
3 years
 
3 years
 
Expected dividends
    0%
    0%
Expected volatility 
    101%
    75%
Vycor Common Stock fair value
  $2.00 
  $2.05 
 
10.
FAIR VALUE MEASUREMENTS
The Company has adopted ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period. The adoption of ASC 820 did not have an impact on the Company’s financial position or results of operations.
Under the terms of the Offering, during the period January 2 to April 25, 2014, in five separate closings, a total of 2,397,631 Series A Warrants and Placement Agent Warrants were issued as part of the Offering, which carried anti-dilution rights. Effective May 15, 2014 these anti-dilution rights were waived for all but 34,723 of the Series A Warrants and for all of the Placement Agent Warrants. The Company accounts for the Series A Warrants in accordance with the guidance contained in ASC 815-40-15-7D, whereby under that provision, because they have anti-dilution rights, they do not meet the criteria for equity treatment and must be recorded as a liability. Accordingly, the Company classifies the warrant instrument as a liability at its fair value and adjusts the instrument to fair value at each reporting period. The anti-dilution provisions expired on June 11, 2015 and accordingly the liability has been extinguished.
The following table presents information about the Company’s liabilities that are measured at fair value on a recurring basis (the Series A Warrants described above) as of September 30, 2014 and indicates the fair value hierarchy of the valuation inputs the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize quoted prices (unadjusted) in active markets for identical liabilities. Fair values determined by Level 2 inputs utilize data points that are observable such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs are unobservable data points for the liability, and includes situations where there is little, if any, market activity for the liability:
 
 
 
Description
 
 
 
December 31, 2015
 
 
 
 
 
Level 1
 
 
 
 
 
Level 2
 
 
 
 
 
Level 3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrant Liability
  $- 
  $- 
  $- 
  $- 
 
Description
 
 
 
December 31, 2014
 
 
 
 
 
Level 1
 
 
 
 
 
Level 2
 
 
 
 
 
Level 3
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Warrant Liability
  $19,792 
  $- 
  $- 
  $19,792 
 
The table below provides a reconciliation of the beginning and ending balances for the liabilities measured using fair significant unobservable inputs (Level 3):
Balance at January 1, 2014
  $- 
Issuance of Series A Warrants and Placement Agent Warrants as part of Offering Units on January 2, January 31, February 24, February 28 and March 31, April 25, 2014
    2,103,195 
Change in fair value during period
    252,633 
Reclassification to equity from waiver of anti-dilution on May 15, 2014
    (2,336,036)
Balance at December 31, 2014
  $19,792 
Change in fair value during period
    (19,792)
Balance at December 31, 2015
  $- 
 
The following assumptions were used in calculations of the Monte Carlo Simulation model for the year ended December 31, 2015 and 2014:
 
 
 
 
Year ended December 31,
 
 
 
 
 
 
2015
 
 
 
 
 
2014
 
 
 
       
       
Risk-free interest rates 
    0.56-.73%
    0.58-0.93%
Expected life 
 
1.65 years
 

 
2.09 – 3.00 years
 
 
Expected dividends
    0%
    0%
Expected volatility 
    90-93%
    71-97%
Vycor Common Stock fair value
  $1.59-1.84 
  $1.79-$2.70 
 
 
 
 
11.
INCOME TAXES  
Loss Before Taxes
 
 
 
December 31, 2015
 
 
December 31, 2014
 
Domestic
  $1,706,722 
  $3,646,424 
Foreign
    375,921 
    403,289 
 
  $2,082,643 
  $4,049,713 
 
The reconciliation of income tax expense at the U.S. statutory rate of 35% in 2015 and 2014, to the Company's effective tax rate is as follows:
 
 
 
 Year Ended December 31,
 
 
 
2015
 
 
2014
 
 
 
 
 
 
 
 
US statutory rate
  $(728,925)
  $(1,417,399)
Tax difference between foreign and U.S.
    28,528 
    28,909 
Change in Valuation Allowance
    (700,397)
    (1,388,490)
Tax Provision
  $- 
  $- 
 
 
 
Deferred Income Taxes
The Company has incurred net operating losses since inception. The Company has not reflected any tax benefit related to such net operating losses in the financial statements.  Prior to August 15, 2007 the Company was a limited liability company and losses were passed through to the individual members, therefore the Company only has potential tax benefits from the date it became a ‘C’ corporation.
 
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company and its subsidiaries’ deferred tax assets at December 31, 2015 and December 31, 2014 are as follows:
 
 
 
December 31, 2015
 
 
December 31, 2014
 
Operating loss carry-forward
  $5,600,000 
  $4,800,000 
Deferred tax asset before Valuation allowance
    5,600,000 
    4,800,000 
Valuation allowance 
    (5,600,000)
    (4,800,000)
Net deferred tax asset 
  $— 
  $— 
 
In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income.
 
The authoritative guidance requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based on the level of historical taxable losses and projections of future taxable income (losses) over the periods in which the deferred tax assets can be realized, management currently believes that it is more likely than not that the Company will not realize the benefits of these deductible differences. Accordingly, management has determined that a 100% valuation allowance is appropriate at December 31, 2015 and December 31, 2014.
 
Net Operating Loss Carry-Forwards
As of December 31, 2015 and 2014, the Company had U.S. accumulated losses for tax purposes of approximately $16,000,000 and $13,800,000 respectively, which may be carried forward and offset against U.S. taxable income, and which expire during the tax years 2027 through 2032.
 
Federal tax laws impose significant restrictions on the utilization of net operating loss carry-forwards and in the event of a change in ownership of the Company, as defined by the Internal Revenue Code Section 382. The Company’s net operating loss carry-forwards may be subject to the above limitations.
 
 
 
 
As of December 31, 2015 and 2014, the Company had German accumulated losses for tax purposes of approximately $688,000 and $740,000 respectively, which may be carried forward and offset against German taxable income subject to certain restrictions and limitations. Such carry-forwards are subject to certain restrictions and limitations in the event of changes in the NovaVision GmbH’s ownership.
 
As of December 31, 2015 and 2014, the Company had UK accumulated losses for tax purposes of approximately $199,000 and $180,000 respectively, which may be carried forward and offset against UK taxable income subject to certain restrictions and limitations.
 
Tax Rates
The applicable US income tax rate for the Company for both of the years ended December 31, 2015 and 2014 was 35%. Non-US subsidiaries are taxed according to the tax laws in their respective country of residence. The German applicable rate for both of the years ended December 31, 2015 and 2014 was 31.58%; the UK applicable rate for both the years ended December 31, 2015 and 2014 was 20%.
 
US income taxes and foreign withholding taxes were not provided for on undistributed earnings of the Company’s foreign subsidiaries. The Company intends to reinvest these earnings indefinitely in its foreign subsidiaries. If these earnings were distributed to US in the form of dividends or otherwise, after the repayment of intercompany debt, the Company would be subject to additional US income taxes (subject to an adjustment for foreign tax credits) and foreign withholding taxes.
 
Uncertain Tax Position
The Company has recorded no liability for income taxes associated with unrecognized tax benefits at the date of adoption and has not recorded any liability associated with unrecognized tax benefits during 2015 and 2014. Accordingly, the Company has not recorded any interest or penalty in regard to any unrecognized benefit.
 
 
12.
COMMITMENTS AND CONTINGENCIES
Lease
The Company leases approximately 10,000 sq. ft. located at 6401 Congress Ave., Suite 140, Boca Raton, FL 33487 from Catexor Limited Partnership for a gross rent of $14,260 plus sales tax per month. The term of the lease is 5 years and 6 months terminating July, 2017. The Company’s subsidiaries in Germany and the UK occupy properties on short term lease agreements. Rent expense for the year ended December 31, 2015 and 2014 was $204,445 and $202,083 respectively
 
Potential German tax liability
In June 2012 the Company's German subsidiary received a preliminary assessment for Magdeburg City trade tax of approximately €75,000 (approximately $94,000). This assessment is for the 2010 fiscal year and relates to the Company's acquisition of the assets of the former NovaVision, Inc. An initial assessment for corporate tax for the same period has been preliminarily reduced to zero. The Company has not accepted this trade tax assessment and is in discussion with the relevant tax authorities with a view to its reduction. The tax authorities have agreed to suspend the assessment pending the outcome of certain court hearings, and the Company has agreed to make limited monthly payments on account. To the extent that this assessment (either a higher or a reduced amount) is ultimately confirmed by the tax authorities, the Company believes it has a very strong claim against certain professional advisors which would offset the liability in full. Accordingly, the Company has made no provision for this liability years ended December 31 2015 and 2014 respectively, other than recording the monthly payments as an expense.
 
Potential China Patent Infringement
The Company was made aware in 2012 that a competitor 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. 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 Company has contested the appeal.  A final decision on the appeal is pending. The Company has, in the interim, also prepared to enforce its own patent against this competitor, however this competitor appears to have abandoned its product offering, making an enforcement action moot for the time being.  The Company has also been made aware that a second competitor has filed a patent application for related technology and also may be producing a product that potentially infringes the Company’s patent, and has filed documents with the State Intellectual Property Office opposing grant of the patent application. As a general rule the Company intends to take all necessary action to protect its patent portfolio. 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.
 
 
 
 
13.
CONSULTING AND OTHER AGREEMENTS
 
The following agreements were entered into or remained in force during the year ended December 31, 2015:
 
Consulting Agreement with Fountainhead
 
Effective as of January 2, 2014, the Company and Fountainhead amended their Consulting Agreement to extend the term of the Consulting Agreement to January 2, 2015, such Agreement being automatically extended on the same terms unless terminated by either party. During fiscal year 2015, a monthly fee was payable to Fountainhead in the amount of $10,000 per month, payable $5,000 in cash and the remainder payable in Company Common Stock deliverable at the end of each fiscal quarter. Effective September 2015, Fountainhead agreed to receive all of the fees in Common Stock.
 
Investor Relations Agreements
 
In January 2015, as amended in May 2015, the Company entered into a twelve month agreement, subject to early termination, to provide financial advisory, strategic business planning and professional relations services, with Acorn Management Partners (“Acorn”). Under the terms of the Agreement, as amended in May and July 2015, Acorn received a total of $53,000 in cash and $50,000 in shares of Restricted Common Stock during the period. The Acorn Agreement was terminated in October 2015.
In August 2015, the Company entered into a three month agreement to provide investor relations advisory and consulting services, with Liolios Group, Inc. (“Liolios”). Under the terms of the Liolios Agreement, Liolios received $15,000 in cash and $10,000 in Restricted Common Stock. The Liolios agreement was terminated at the end of the three month period.
 
14.
RELATED PARTY TRANSACTIONS
Peter Zachariou, director and David Cantor, director are investment managers of Fountainhead Capital Management which is a related party due to the size of its shareholding. Adrian Liddell, Chairman is a consultant for Fountainhead Capital Management.
During 2015, in accordance with the terms the Consulting Agreement, the Company issued 49,819 shares of Common Stock (valued at $90,000) to Fountainhead.
During 2015 Preferred D Stock, convertible into shares of Common Stock, was issued in respect of Preferred Dividends as follows: 11,691 shares of Preferred D Stock (valued at $116,915), convertible into 54,377 shares of Common Stock to Fountainhead; and 4,313 shares of Preferred D Stock (valued at $43,130), convertible into 20,060 shares of Common Stock to Peter Zachariou.
There were no other related party transactions during the year ended December 31, 2015.
 
15.
SUBSEQUENT EVENTS
There are no material subsequent events.
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
 
None
 
ITEM 9A. 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.
 
Pursuant to Rule 13a-15(b) under the Securities Exchange Act of 1934 (“Exchange Act”), the Company’s management, including the Company’s Chief Executive Officer (“CEO”) (the Company’s principal executive officer) and Chief Financial Officer (“CFO”) (the Company’s principal financial and accounting officer), has evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined under Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this report.  Based upon that evaluation the Company’s CEO and CFO concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2015 to ensure that information required to be disclosed by the Company in the reports that the Company files or submits under the Exchange Act, is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including the Company’s CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
 
b)           Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting.  Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America and includes those policies and procedures that:
●
Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
●
Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
●
Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  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 of compliance with the policies or procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  Because of the inherent limitations of internal control, there is a risk that material misstatements may not be prevented or detected on a timely basis by internal control over financial reporting. However, these inherent limitations are known features of the financial reporting process.  Therefore, it is possible to design into the process safeguards to reduce, though not eliminate, this risk.
 
 
We carried out an evaluation, under the supervision and with the participation of our management, including our CEO and CFO, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of December 31, 2015. Based on that evaluation, our CEO and CFO concluded that our disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized, and reported as and when required and is accumulated and communicated to management, including the CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting.  Management's report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only the management's report in this annual report.
(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.
 
ITEM 9B. OTHER INFORMATION.
None.

 
 
 
 
 
PART III
 
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
 
Our Directors and Executive Officers
 
Set forth below is certain biographical information concerning our current executive officers and directors. We currently have two executive officers as described below.
 
 
 
Directors and Executive Officers
 
 
 
Position/Title
 
 
 
Age
 
Peter C. Zachariou
Chief Executive Officer and a Director
54
David Marc Cantor
President and a Director
49
Adrian Christopher Liddell
Chairman of the Board, Chief Financial Officer and a Director
57
Steven Girgenti
Director
70
Oscar Bronsther, M.D.
Director
63
Lowell Rush
Director
59
Pascale Mangiardi
Director
43
 
 
 
Peter C. Zachariou, 54, was appointed a Director of the Company in May 2010, Executive Vice President in September 2010 and Chief Executive Officer on January 2, 2014. He is an investment manager for Fountainhead Capital Management Limited, an investment company based in Jersey, Channel Islands, which invests in, raises capital for and provides strategic advice to growth companies in healthcare and other sectors. For the past 20 years, Mr. Zachariou has been an active investor in a variety of companies and industries, both public and private, specializing in workouts and capital formation.  Mr. Zachariou's investments and activities have predominantly been in U.S. emerging and growth companies across a broad range of industry sectors.  He has also been proprietor and operator of several businesses in the U.K. and U.S. in the manufacturing, retail and leisure industries.
 
David Marc Cantor, 49, has been President of the Company since September 2010 and a Director since January 2010. He is an investment manager of Fountainhead Capital Management Limited, an investment company based in Jersey, Channel Islands, which invests in, raises capital for and provides strategic advice to growth companies across a broad range of sectors.  Mr. Cantor has over 22 years experience in Investment Banking with a focus on Mergers and Acquisitions and Equity Capital Raisings. Prior to Fountainhead from 2001 – 2005 he was at Citigroup Capital Markets where he was Co-head of its European Business Development Group and subsequently European Head of its Diversified Industrials and Aerospace activities. Prior to Citigroup he was a Managing Director in M&A at Donaldson Lufkin & Jenrette and worked at Lehman Brothers both in New York and London in both the Equity Capital and M&A groups. Mr. Cantor has a BSc with Honours from City Business School, London. 
 
Adrian Christopher Liddell, 57, has been Chairman of the Board and a Director of the Company since January 2010, and serves as the Company’s CFO. He is an advisor to Fountainhead Capital Management Limited, an investment company based in Jersey, Channel Islands, which invests in, raises capital for and provides strategic advice to growth companies in healthcare and other sectors. Mr. Liddell has over 30 years of strategic, corporate and financial advisory and company investment experience. From 2003-2006, Mr. Liddell was an investment advisor at Phoenix Equity Partners, a European private equity fund. From 1998 to 2003, Mr. Liddell served as Managing Director, Mergers & Acquisitions at Donaldson Lufkin & Jenrette and then Citigroup in London. From 1984 to 1998, Mr. Liddell held various positions at Samuel Montagu & Co, and Lehman Brothers in London. Mr. Liddell qualified as a Chartered Accountant in 1984 and holds an MA from Christ’s College, University of Cambridge.
 
 
 
 
Steven Girgenti, 70, has been a director since November 2008 and is Chairman of the Nominating and Governance Committee and of the Compensation Committee.  He is presently the Managing Partner of Medi-Pharm Consulting, LLC providing strategic services to a number of medical device, pharmaceutical and diagnostic businesses.  Steve was formerly President, CEO, Director and Co-Founder of DermWorx, a specialty pharmaceutical company dedicated to solutions for dermatological conditions. Steve was also the Worldwide Chairman of Ogilvy Healthworld, a leading global healthcare communications network with 55 offices in 36 countries.  The network has more than 1,000 brand assignments from nearly 200 clients worldwide, providing strategic marketing and communications services to many of the world's leading healthcare companies.  Mr. Girgenti founded Healthworld in 1986 and, under his leadership, the company made numerous acquisitions to expand and diversify the business.  Healthworld went public in 1997.  In 1998, and again in 1999, Business Week named Healthworld one of the "Best Small Corporations in America".  In 1999, Forbes listed Healthworld as one of the "200 Best Small Companies".  Mr. Girgenti was recognized as "Entrepreneur of the Year" by NASDAQ in 1999, and was named Med Ad News' first "Medical Advertising Man of the Year" in 2000.  In 2010 he was inducted into the Medical Advertising Hall of Fame. In addition to Vycor Medical, Mr. Girgenti is a presently Executive Chairman of BioAffinity Technologies, Inc. (formerly known as Biomoda, Inc.) and has served as a Director of Burren Pharmaceuticals and Pharmacon International.  He is also Vice Chairman of the Board of Governors for the Mt. Sinai Hospital Prostate Disease and Research Center in New York City, and is on the Board of Directors for Jack Martin Fund, a Mt. Sinai Hospital affiliated charitable organization devoted to pediatric oncology research.  He graduated from Columbia University and has worked in the pharmaceutical industry since 1968 for companies such as Bristol-Myers Squibb, Carter Wallace and DuPont, as well as advertising agencies that specialize in healthcare. During his career, Steve has held positions in marketing research, product management, new product planning and commercial development.
 
Oscar Bronsther, M.D., F.A.C.S, 63, has been a director since November 2011. Dr. Bronsther is Chief Executive Officer of MetaStat, Inc. (OTCBB: MTST), a development stage life sciences company that develops and commercializes diagnostic products for the early and reliable prediction and treatment of systemic metastasisis. Dr Bronsther is also currently Clinical Professor at George Washington University, Washington, DC and has served in that capacity since 2002.  He had previously served as an Associate Professor at the University of Rochester, Rochester, NY (1994-2001), University of Pittsburgh, Pittsburgh, PA (1989-1994) and University of California San Diego (1984), and Chairman, Section of General Surgery at Inova Fairfax Hospital.  Since 2002, he has served as a Board Member, National Board Member and Director of Transplant Services of Kaiser Permanente Medical Group.  Dr. Bronsther is a graduate of the University of Rochester (B.A. 1973) and Downstate Medical Center, Brooklyn, N.Y. (M.D. 1978).  He did post-graduate work at Downstate Medical Center (Research Assistant 1975; Kidney Transplant Fellowship 1983-1984), Mount Sinai Medical Center, New York, N.Y (Residency 1978-1983) and Children’s Hospital Medical Center, Boston, MA (Research Fellowship 1980-1981). He resides in Potomac, MD.
 
 
Lowell Rush, 59, was appointed a Director in April 2013 and is Chairman of the Audit Committee. Mr. Rush has extensive experience in financial management and operational development, and since December 2013 has been Chief Financial Officer of Ft. Lauderdale-based Direct Insite Corp. (OTCQB:DIRI), a leading provider of cloud-based e-invoicing solutions. Previously, he was Chief Operating Officer of Miami-based Cosmetic Dermatology, Inc., and held positions as: CFO of Bijoux Terner, LLC (2008-2010); CFO of Little Switzerland, Inc. (2006-2008); and VP Sales Operations of Rewards Network, Inc. He is a CPA with an MBA in International Business, who has also held financial management roles at multi-national companies Sunglass Hut International, Burger King Corporation and Knight-Ridder, Inc. He began his career with the accounting firms Ernst & Young and Deloitte & Touche.
 
Pascale Mangiardi, 43, has been our director since October 2007. She is presently the founder and President of Rougemont Management Services LLC. From 2002-2006, she was a financial officer for John R. Mangiardi, MD, PC and from 2001 - 2002, she was the Assistant CEO at Hirslanden-Group Management AG, Zurich. Ms. Mangiardi holds a Diploma from the Swiss Business Administration School.
 
All of our directors hold office until the next annual meeting of stockholders and until their respective successors have been elected or qualified. Officers serve at the discretion of the board of directors. There are no family relationships among our directors or executive officers. There is no arrangement or understanding between or among our officers and directors pursuant to which any director or officer was or is to be selected as a director or officer, and there is no arrangement, plan or understanding as to whether non-management stockholders will exercise their voting rights to continue to elect the current board of directors.
 
None of our directors and executive officers have during the past five years:
●
had any bankruptcy petition filed by or against any business of which he was a general partner or executive officer, either at the time of the bankruptcy or within two years prior to that time;
●
been convicted in a criminal proceeding and is not subject to a pending criminal proceeding;
●
been subject to any order, judgment or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities, futures, commodities or banking activities;
●
or been found by a court of competent jurisdiction (in a civil action), the Securities Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.
 
 
 
 
Committees of the Board of Directors
 
Our Company has three committees of its Board of Directors—(a) a Nominating and Governance Committee (b) a Management Compensation Committee and (c) an Audit Committee. The Board of Directors has approved charters for each committee. Steven Girgenti is Chairman of the Nominating and Governance Committee and the Management Compensation Committee, and Lowell Rush is a member. Lowell Rush is Chairman of the Audit Committee and Steven Girgenti and Adrian Liddell are members. The Committees are intended to operate consistent with applicable NASDAQ governance requirements.
 
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves as a member of the Board of Directors or compensation committee of any other entity that has one or more of its executive officers serving as a member of our Board of Directors.
 
Section 16(a) Beneficial Ownership Reporting Compliance
Pursuant to Section 16(a) of the Exchange Act and the rules thereunder, the Company’s executive officers and directors and persons who own more than 10% of a registered class of the Company’s equity securities are required to file with the SEC reports of their ownership of, and transactions in, the Company's common stock.  
 
ITEM 11. EXECUTIVE COMPENSATION.
The following is a summary of the compensation we paid for each of the last two years ended December 31, 2015 and 2014, respectively (i) to the persons who acted as our principal executive officer during our fiscal year ended December 31, 2015 and (ii) to the person who acted as our next most highly compensated executive officer other than our principal executive officer who was serving as an executive officer as of the end of our last fiscal year. 
 
Name and Principal Position
 
Year
 
 
Salary($)
 
 
 
Bonus($)
 
 
 
StockAwards($)
 
 
 
OptionAwards($)
 
 
 
Non-EquityIncentive PlanCompensation
 
 
 
Non-Qualified DeferredCompensation Earnings($)
 
 
 
All otherCompensation($)
 
 
 
Total($)
 
 
Peter Zachariou
 
2014
  $— 
    — 
    — 
    — 
    — 
    — 
    — 
    — 
CEO
 
2015
  $— 
    — 
    — 
    — 
    — 
    — 
    — 
    — 
David Cantor
 
2014
  $— 
    — 
    — 
    — 
    — 
    — 
    — 
    — 
President
 
2015
  $— 
    — 
    — 
    — 
    — 
    — 
    — 
    — 
 
 
 
OUTSTANDING EQUITY AWARDS
 
Grants of Plan-Based Awards
 
 
 
 
Option Awards
 
 
Name
 
Grant Date Number
of Securities Underlying
Unexercised Options (#) Exercisable
 
Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
 
 
 
Number of Securities Underlying Unexercised Options (#) Unexercisable (1)
 
 
 
OptionExercise Price($)
 
 
OptionExpiration Date
 
Kenneth T. Coviello
2/15/2008
    - 
    3,334 
  $20.25 
2/12/2018
 
       
       
       
 
Heather N. Vinas
2/15/2008
    - 
    2,223 
  $20.25 
2/12/2018
 
 
 
 
 
Equity Compensation Plan Information
 
 
Plan category
 
 
Number of securitiesto be issued uponexercise of outstandingoptions, warrants and rights(a)
 
 
 
Weighted-averageexercise price ofoutstanding options,warrants and rights
 
 
 
Number of securitiesremaining available forfuture issuance underequity compensationplans (excluding securitiesreflected in column (a)
 
 
Equity compensation plans approved by security holders
    6,667 
  $20.25 
    17,676 
Equity compensation plans not approved by security holders
    3,333 
    28.50 
    – 
Total
    7,000 
  $20.70 
    17,676 
 
(1) As of December 31, 2015
 
 
 
Warrants Issued to Management
 
Name
 
 
Grant Date
 
 
Number of Securities Underlying Unexercised ExercisableWarrants
 
 
Number of Securities Underlying Unexercised ExercisableWarrants
 
 
WarrantExercise Price($)
 
 
WarrantExpiration Date
 
None
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
 
 
 
 
-
 
 
 
 
 
 
 
 
 
Employment Agreements
Effective September 30, 2010, the Company entered into virtually identical employment agreements with David Cantor to serve as the Company’s Interim President and Peter C. Zachariou to serve as the Company’s Interim Chief Executive Officer. Each employment agreement continued until August 30, 2011 and was then automatically extended unless terminated by either party, and provided that the executives receive no compensation for services rendered under the agreements.
 
Effective January 2, 2014, the Company entered into: amended employment agreements with Peter Zachariou and David Cantor to serve as the Company’s Chief Executive Officer and President respectively; and an employment agreement with Adrian Liddell to serve as the Company’s Chief Financial Officer. Each agreement continues for a period of twelve months from the date of the Initial Closing and is then automatically extended unless terminated by either party. The agreements provide for no monthly compensation to be payable, but a deferred compensation payable of $110,000 for each individual, subject to certain conditions and milestones being met. The compensation will be payable in cash or Restricted Shares of the Company’s Common Stock.
 
In March 2016 the Board of Directors approved the issuance of options to purchase 220,000 shares of Company Common Stock pursuant to the Vycor Medical, Inc. 2008 Stock Option Plan to each of Peter C. Zachariou, David Cantor and Adrian Liddell, such options to vest immediately upon issuance. The exercise price of the options is based upon 110% of the closing price of the Company’s Common Stock the day prior to issuance, and the options are exercisable for a period of three years from issuance.
 
Compensation of Directors
During the period January 1, 2015 through March 25 2016, we granted Steven Girgenti, Oscar Bronsther, M.D. and Lowell Rush a total of 17,862, 15,145 and 15,145 shares of the Company’s Common Stock respectively for their service to the Board of Directors. Each of Mr. Girgenti, Dr. Bronsther and Mr. Rush are entitled to receive $5,000 in cash or stock at the option of the company per quarter. No other directors of the Company receive compensation for their service to the Company other than as disclosed under Employment Agreements above.
 
During 2015 the Company adopted a Deferred Compensation Plan for directors whereby the directors may defer their director's compensation to the January 15th following the termination of their service as a director. The Deferred Compensation Plan came into effect on January 1, 2016. Of the shares listed above, 5,682 shares granted to Steven Girgenti in January 2016 are deferred under the Plan.
 
 
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.
   
The following table sets forth certain information with respect to the beneficial ownership of our voting securities by (i) any person or group owning more than 5% of any class of voting securities, (ii) each director, (iii) our chief executive officer and president and (iv) all executive officers and directors as a group as of April 4, 2014.  Unless noted, the address for the following beneficial owners and management is 6401 Congress Ave., Suite 140, Boca Raton, FL 33487.
 
Title of Class
 
 
Name and Address of Beneficial Owner
 
 
Amount and Nature of Beneficial Owner (1)
 
 
Percent of Class (2)
 
Common Stock  
 
Steven Girgenti
 
 
55,475
 
 
  *  
 
Common Stock
 
Oscar Bronsther, M.D
 
 
40,155
 
 
  *   
 
Common Stock
 
Lowell Rush
 
 
28,192
 
 
  *   
 
Common Stock  
 
Pascale Mangiardi
 
 
--
 
 
  0.00%
 
Common Stock
 
Adrian Christopher Liddell
 
 
--
 
 
0.00%
 
Common Stock
 
Marc David Cantor
 
 
--
 
 
0.00%
 
Common Stock
 
 
Peter C. Zachariou
 
 
211,239
 
 
1.89%
 
Series D Preferred Stock
 
 
Peter C. Zachariou
 
 
67,138
 
 
 25.71% 
 
Common Stock  
 
All executive officers and directors as a group
 
 
335,061
 
 
3.00%
 
Series D Preferred Stock
 
 
All executive officers and directors as a group
 
 
67,138
 
 
 25.71% 
 
Common Stock  
 
Fountainhead Capital Management Limited Portman House Hue Street, St. Helier, Jersey JB4 5RP
 
 
4,416,663
 
 
 
49.78%
 
Series D Preferred Stock
 
 
Fountainhead Capital Management Limited Portman House Hue Street, St. Helier, Jersey JB4 5RP
 
 
181,994
 
 
 
69.68%
 
*            Less than 1% 
(1)         In determining beneficial ownership of our Common Stock and Series D Preferred Stock, the number of shares shown includes shares which the beneficial owner may acquire upon exercise of debentures, warrants and options which may be acquired within 60 days. In the case of directors, the number of shares includes shares granted but not issued under the director's Deferred Compensation Plan. In determining the percent of Common Stock or Series D Preferred Stock owned by a person or entity on March 25, 2016, (a) the numerator is the number of shares of the class beneficially owned by such person or entity, including shares which the beneficial ownership may acquire within 60 days of exercise of debentures, warrants and options, and the issuance of shares granted but not issued under the director's Deferred Compensation Plan; and (b) the denominator is the sum of (i) the total shares of that class outstanding on March 25, 2016 (10,937,250 shares of Common Stock and 261,167 shares of Series D Preferred Stock) and (ii) the total number of shares that the beneficial owner may acquire upon exercise of the debentures, warrants and options or that can be issued under the director's Deferred Compensation Plan. Unless otherwise stated, each beneficial owner has sole power to vote and dispose of its shares
 
 
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Related Party Transactions
Please refer to Financial Statement, Note 14, which is incorporated in its entirety by this reference
 
Director Independence
As of March 25, 2016, of our seven (7) directors, Steven Girgenti, Oscar Bronsther, Lowell Rush and Pascale Mangiardi are considered "independent" in accordance with Rule 4200(a)(15) of the NASDAQ Marketplace Rules. The remaining three (3) directors are not considered “independent”.  Therefore a majority of the board is independent.
 
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Audit Fees
The aggregate fees billed by our principal accountant for the audit of our annual financial statements, review of financial statements included in the quarterly reports and other fees that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ended December 31, 2015 and December 31, 2014, respectively, were approximately $46,500 and $43,250.
 
Tax Fees
The fees billed for professional services rendered by our principal accountant for tax compliance, tax advice and tax planning for the fiscal years ended December 31, 2015 and 2014 were $2,000 and $2,000 respectively.
 
 
All Other Fees
 There were no fees billed for other products or services provided by our principal accountant for 2015 or 2014.
 
PART IV
ITEM 15.                       EXHIBITS, FINANCIAL STATEMENT SCHEDULES
The following documents are filed as part of this 10-K:
1.
FINANCIAL STATEMENTS
The following documents are filed in Part II, Item 8 of this annual report on Form 10-K:
●
Report of Paritz & Co., P.C., Independent Registered Certified Public Accounting Firm
●
Balance Sheets as of December 31, 2015 and 2014 (audited)
●
Consolidated Statements of Comprehensive Loss for the years ended December 31, 2015 and 2014 (audited)
●
Statements of Stockholders’ Deficit from January 1, 2014 to December 31, 2015 (audited)
●
Statement of Cash Flows for the years ended December 31, 2015 and 2014 (audited)
●
Notes to Financial Statements (audited)
 
2.       FINANCIAL STATEMENT SCHEDULES
All financial statement schedules have been omitted as they are not required, not applicable, or the required information is otherwise included.
 
 
 
 
3.       EXHIBITS
The exhibits listed below are filed as part of or incorporated by reference in this report.
 
 
Exhibit No.
 
 
 
Identification of Exhibit
 
 
 
 
 
 
Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
Certification of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
 
 
 
 
 
 
 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.
 
 
 
 
 
 
 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
 
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
Vycor Medical, Inc.
 
 
 
(Registrant)
 
 
 
 
 
By:
 
/s/ Peter C. Zachariou
 
 
 
Peter C. Zacharion
 
 
 
Chief Executive Officer and Director (Principal Executive Officer)
 
 
Date
 
March 30, 2016
 
 
 
 
 
By:
 
/s/ Adrian Liddell
 
 
 
Adrian Liddell
 
 
 
Chairman of the Board and Director
 
 
 
(Principal Financial and Accounting Officer)
 
 
Date
 
March 30, 2016
 
 
 
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the registrant and in the capacity and on the date indicated.
 
 
By:
 
/s/ Peter C. Zachariou
 
 
 
Peter C. Zachariou
 
 
 
Chief Executive Officer and Director
 
 
Date
 
March 30, 2016
 
 
 
 
 
By:
 
/s/ David Marc Cantor
 
 
 
David Marc Cantor
 
 
 
President and Director (Principal Executive Officer)
 
 
Date
 
March 30, 2016
 
 
 
 
 
 
By:
 
/s/ Adrian Christopher Liddell
 
 
 
Adrian Christopher Liddell
 
 
 
Chairman of the Board and Director (Principal Financial and Accounting Officer)
 
 
 
 
 
Date
 
March 30, 2016
 
 
By:
 
/s/ Steven Girgenti
 
 
 
Steven Girgenti
 
 
 
Director
 
 
Date
 
March 30, 2016
 
 
 
 
 
By:
 
/s/ Oscar Bronsther, M.D.
 
 
 
Oscar Bronsther, M.D.
 
 
 
Director
 
 
Date
 
March 30, 2016
 
 
 
 
 
By:
 
/s/ Lowell Rush
 
 
 
Lowell Rush
 
 
 
Director
 
 
Date
 
March 30, 2016
 
 
 
 
 
By:
 
 
 
 
 
Pascale Mangiardi
 
 
 
Director
 
 
Date
 
March 30, 2016