REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To
the Stockholders and Board of Directors of
Vycor
Medical, Inc.
Opinion
on the Financial Statements
We
have audited the accompanying consolidated balance sheets of Vycor Medical, Inc. (“the Company”) as of December 31, 2020
and 2019, and the related consolidated statements of comprehensive loss, stockholders’ deficiency, and cash flows for the years
ended December 31, 2020 and 2019, and the related notes (collectively referred to as the financial statements). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the
results of its operations and its cash flows for the years ended December 31, 2020 and 2019, in conformity with accounting principles
generally accepted in the United States of America.
Going
Concern
The
accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note
1 to the financial statements, the Company has incurred net losses since inception, including a net loss of $822,482 and $796,202 for
the years ended December 31, 2020 and 2019 respectively, and has not generated cash flows from its operations. As of December 31, 2020,
the Company had working capital deficiency of $593,970, excluding related party liabilities of $1,682,956. These factors, among others,
raise substantial doubt regarding the Company’s ability to continue as a going concern. Management’s plans in regards to
these matters are described in Note 1 to the financial statements. The accompanying financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
Basis
for Opinion
These
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s
financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board
(United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company
is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits,
we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion
on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical
Audit Matters
The
critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated
or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial
statements and (2) involved our especially challenging, subjective or complex judgments. The communication of critical audit matters
does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the
critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they
relate.
Net
operating loss carryforward and valuation allowance for deferred tax assets
As
discussed in Note 12 to the consolidated financial statements, the company is subject to taxation and files income tax returns in the
U.S. and foreign jurisdictions. As of December 31, 2020, the total amount of net operating loss carryforward in the U.S. and foreign
jurisdictions was approximately $20.8 million. The company recorded a deferred tax asset from net operating loss carryforward of approximately
$4.5 million. Management determined that it is more likely than not that all of the deferred tax assets will not be realized and a full
valuation allowance of approximately $4.5 million was recorded on December 31, 2020.
Auditing
management’s evaluation of whether a deferred tax asset is more likely than not to be used and the measurement of the benefit of
various tax jurisdictions can be complex, involves significant judgment, and is based on interpretations of tax laws and legal rulings
in different jurisdictions.
Addressing
the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial
statements. These procedures included 1) testing the tax reconciliation to the annual corporate tax filings, 2) evaluating the appropriateness
and consistency of management’s methods and assumptions used in identification, recognition, measurement and disclosure of the
income tax, deferred asset and valuation allowance and 3) evaluating the reasonableness of management’s estimates by considering
how tax law, including statutes and regulations impacted management’s judgement.
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/s/
Prager Metis CPAs, LLC
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We
have served as the Company's auditor since 2018.
Hackensack,
New Jersey
March
31, 2021
Notes
to Consolidated Financial Statements
1.
BUSINESS OF THE COMPANY AND GOING CONCERN
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.
Ability
to continue as a Going Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company
has incurred losses since its inception, including a net loss of $822,482 and $796,202 for the years ending December 31, 2020 and 2019,
respectively, and has not generated sufficient cash flows from operations. As at December 31, 2020 the Company had a working capital
deficiency of $593,971, excluding related party liabilities of $1,682,956. These conditions, among others, raise substantial doubt regarding
our ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from
the outcome of this uncertainty.
The
Company is executing on a plan to achieve a reduction in cash operating losses for both the Vycor Medical and NovaVision divisions. Included
within the working capital deficiency above is a term note for $300,000 to EuroAmerican Investment Corp. (“EuroAmerican”),
together with accrued interest of $328,897, which has a maturity date of June 30, 2021, having been extended on a number of occasions
from its initial due date of June 11, 2011. At this time, it is not known whether any further extension of the note beyond June 30, 2021
will be available. However, the Company believes it may not have sufficient cash to meet its various cash needs through March 31, 2021
unless the Company is able to obtain additional cash from the issuance of debt or equity securities. Fountainhead, the Company’s
largest shareholder, has provided working capital funding to the Company on an as-needed basis, although there is no guarantee that this
will continue to be the case. The Company may consider seeking additional equity or debt funding, although there is no assurance that
this would be available on acceptable terms or at all. If adequate funds are not available, the Company may have to delay or curtail
development or commercialization of products, or cease some of its operations
2.
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. Following the decision in April 2020 to close the German office of NovaVision, the activities of NovaVision
GmbH have been accounted for as discontinued operations.
Revenue
Recognition
On
January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers and all the related amendments (new revenue standard)
to all contracts. The adoption of the new accounting standard had no impact on company’s consolidated financial statements.
Vycor
Medical generates revenue from the sale of its surgical access system to hospitals and other medical professionals. Vycor Medical records
revenue from product sales when obligations under the terms of a contract with customers are satisfied. Generally, this occurs with the
transfer of control of the goods to customers. Vycor Medical does not provide for product returns or warranty costs.
Vycor
determines revenue recognition through the following steps:
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Identification
of the contract, or contracts, with a customer
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Identification
of the performance obligations in the contract
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Determination
of the transaction price
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Allocation
of the transaction price to the performance obligations in the contract
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Recognition
of revenue when Vycor satisfy a performance obligation
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NovaVision
generates revenues from various programs, therapy services and other sources such as software 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 therapy program consists of NeuroEyeCoach, performed over 2-4 weeks, and six modules of Vision
Restoration Therapy, performed over 6 months. A patient contract comprises set-up fees and monthly therapy fees. Set-up fees are recognized
at the outset of the contract and therapy revenue is recognized ratably over the therapy period. Patient therapy is restricted to being
completed by a patient within a specified time frame.
Deferred
revenue results from patients paying for the therapy in advance of receiving the therapy.
As
part of the adoption of ASC 606, see Note 7 to the Consolidated Financial Statements for further disaggregation of revenue.
Cash
and cash equivalents
The
Company maintains cash balances at various financial institutions. Accounts at each institution in the U.S. 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, 2020 and 2019
patient deposits amounted to $28,704 and $24,601, respectively, and are included in Accrued Liabilities.
Accounts
Receivable and Allowance for Doubtful Accounts Receivable
The
Company’s accounts receivable are due from the hospitals and distributors in the case of Vycor Medical, and from patients directly
for therapy or physicians for diagnostic products in the case of NovaVision. Accounts receivable are due once products have been delivered
or at the time the therapy is initiated; however, for NovaVision therapy patients sometimes credit is extended through various payment
plans based on individual financial conditions, generally not to exceed the therapy period. The outstanding balances are stated net of
an allowance for doubtful accounts.
We
have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing
accounts receivable. We extend credit to our customers based on an evaluation of their financial condition and other factors. We generally
do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and
maintain an allowance for potential bad debts if required. We determine whether an allowance for doubtful accounts is required by evaluating
specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use
assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against
amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted
as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also
record a general allowance as necessary. Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue
and unpaid receivables or otherwise evaluate other circumstances that indicate that we should abandon such efforts.
Inventories
Inventories
consist of raw materials, work in process and finished goods that are stated at the lower of cost determined using the weighted average
cost method, or net realizable value. 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, 2020 and 2019 was $12,558, 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 comprehensive loss.
Leases
The
Company has one leased building in Boca Raton, Florida that is classified as operating lease right-of use (“ROU”) assets
and operating lease liabilities in the Company’s consolidated balance sheet as per ASC 842. ROU assets and lease liabilities are
recognized based on the present value of the future minimum lease payments over the lease term at the commencement date for leases exceeding
12 months. Minimum lease payments include only the fixed lease component of the agreement. Operating lease expense is recognized on a
straight-line basis over the lease term and is included in cost of Selling, General and Administrative expenses.
The
standard was effective for us beginning January 1, 2019. The Company elected the available practical expedients on adoption. The adoption
had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated statements of comprehensive
loss. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases.
Discontinued
Operations
In
accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal
of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal
represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components
of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified
as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the
major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and
liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations (which
we presented as operations to be disposed and operations disposed), less applicable income taxes (benefit), shall be reported as components
of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.
Foreign
Currency
The
Euro is the local currency of the country in which the discontinued operations of 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’ deficiency in the accompanying Consolidated
Balance Sheets.
Educational
marketing and advertising expenses
The
Company may incur costs for the education of customers on the uses and benefits of its products. The Company will include education,
marketing and advertising expense as a component of selling, general and administrative costs as such costs are incurred.
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.
Accounting
for forgivable loan received under the Small Business Administration Paycheck Protection Program
During
the year ended December 31, 2020 the Company received a loan of $58,600 during the year, pursuant to the Paycheck Protection Program
(the “PPP”) under Division A, Title I of the CARES Act. Under the terms of the PPP, the Loan may be forgiven if they are
used for qualifying expenses as described in the CARES Act. The Company’s use of the Loan qualifies and the Company intends to
apply during 2021.
The
Company accounts for the loan as a financial liability in accordance with FASB ASC 470 and accrues interest in accordance with the interest
method under FASB ASC 835-30. For purposes of derecognition of the liability, FASB ASC 470-50-15-4 refers to guidance in FASB ASC 405-20.
Based on this guidance, the proceeds of the loan will remain recorded as a liability until either (1) the loan is, in part or wholly,
forgiven and the Company has been “legally released”, or (2) the Company pays off the loan. Once the loan is, in part or
wholly, forgiven and legal release is received, the Company will reduce the liability by the amount forgiven and record a gain on the
extinguishment.
The
Company received an additional PPP loan of $58,600 in January 2021.
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.
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.
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, 2020 and 2019, the amounts charged
to research and development expenses were $0 for both years, 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. There was no capitalized
for software development during the years ended December 31, 2020 and 2019.
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, provision for inventory obsolescence, useful life of intangible assets, and the fair
values of options and warrants included in the determination of debt discounts and stock-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.
Stock
Compensation
The
Company recognizes the cost of all stock -based payments under the relevant authoritative accounting guidance. Stock-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 stock-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”. Stock-based payments to consultants, service providers and other non-employees are accounted for
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)
The
Company has no Financial instruments measured at Fair value on a recurring basis.
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:
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December
31, 2020
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December
31, 2019
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Stock options outstanding
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680,000
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700,000
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Warrants to purchase common stock
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-
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3,717,826
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Debentures convertible into common stock
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2,994,746
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2,765,548
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Preferred shares convertible into common stock
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1,272,052
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1,272,052
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Directors Deferred Compensation
Plan
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1,509,237
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1,175,907
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Total
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6,456,035
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9,631,333
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Recent
Accounting Pronouncements
From
time to time new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that
may have an impact on the Company’s accounting and reporting. The Company believes that other 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.
3.
DISCONTINUED OPERATIONS
In
April 2020, the board of Vycor took the decision to close the German operations of NovaVision, including the German office and NovaVision
GmbH, and instead migrate to a licensed business model; in June 2020 Vycor announced that it would be entering into a license agreement
and transition agreement (the “Agreements”) with HelferApp GmbH, a cognitive therapy specialist. Under the Agreements, HelferApp
is licensed to provide NovaVision’s products and therapies in Germany, Austria and Switzerland to patients and professionals; and
has assumed responsibility for the current patients of NovaVision in the territory. The NovaVision German office was closed effective
June 30, 2020. The Company will continue to fund the remaining expenses of the German operations, which are non-material, until such
a time as NovaVision GmbH will be formally wound up.
Reconciliation
of the major line items from discontinued operations that are presented in the consolidated balance sheets and consolidated statements
of comprehensive loss are as follows:
Major
line items constituting assets and liabilities in the consolidated balance sheets
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December 31,
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December 31,
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2020
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2019
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ASSETS
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Current Assets
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Cash
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$
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577
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$
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11,521
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Trade accounts receivable
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-
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3,470
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Inventory
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-
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2,175
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Prepaid
expenses and other current assets
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-
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2,951
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Total
Current Assets
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577
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20,117
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Fixed assets, net
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-
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9,574
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|
|
TOTAL ASSETS
|
|
$
|
577
|
|
|
$
|
29,691
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
|
|
|
|
|
Current Liabilities
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
422
|
|
|
$
|
6,515
|
|
|
Accrued liabilities - Other
|
|
|
3,168
|
|
|
|
44,792
|
|
|
Other
current liabilities
|
|
|
15
|
|
|
|
30,909
|
|
|
Total Current Liabilities
|
|
$
|
3,605
|
|
|
$
|
82,216
|
|
Major
line items constituting loss from discontinued operations
|
|
|
For
the years ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
41,527
|
|
|
$
|
88,851
|
|
|
Cost
of Goods Sold
|
|
|
4,986
|
|
|
|
11,886
|
|
|
Gross Profit
|
|
|
36,541
|
|
|
|
76,965
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Expenses:
|
|
|
|
|
|
|
|
|
|
Depreciation and Amortization
|
|
|
-
|
|
|
|
157
|
|
|
Selling,
general and administrative
|
|
|
88,711
|
|
|
|
200,544
|
|
|
Total
Operating Expenses
|
|
|
88,711
|
|
|
|
200,701
|
|
|
Operating Loss
|
|
|
(52,170
|
)
|
|
|
(123,736
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Other Income (Expense)
|
|
|
|
|
|
|
|
|
|
Loss on foreign currency
exchange
|
|
|
(3,209
|
)
|
|
|
(2,280
|
)
|
|
Other
income (loss)
|
|
|
33,207
|
|
|
|
|
|
|
Total
Other Income (Expense)
|
|
|
29,998
|
|
|
|
(2,280
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Loss Before Credit for Income
Taxes
|
|
|
(22,172
|
)
|
|
|
(126,016
|
)
|
|
Credit
for income taxes
|
|
|
-
|
|
|
|
-
|
|
|
Loss
from discontinued operations, net of tax
|
|
$
|
(22,172
|
)
|
|
$
|
(126,016
|
)
|
Other
income comprises the net of non-cash adjustments made in connection with the Agreements with HelferApp and the closure of the German
operation: adjustments for assets and liabilities transferred to HelferApp or NovaVision Inc. or otherwise written off - $10,907; elimination
of historic balance for NovaVision GmbH legal expenses funded by NovaVision Inc. - $34,727; and certain accruals for employee costs –
($12,427).
4.
INVENTORY
|
|
|
December
31, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
|
|
Raw materials and work in process
|
|
$
|
65,192
|
|
|
$
|
82,142
|
|
|
Finished goods
|
|
|
115,904
|
|
|
|
126,211
|
|
|
Total
Inventory
|
|
$
|
181,096
|
|
|
$
|
208,353
|
|
5.
LEASE
The
Company recognized the following related to a lease in its consolidated balance sheets:
|
|
|
Year
Ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Operating
Lease ROU Assets
|
|
$
|
124,183
|
|
|
$
|
31,658
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating Lease Liabilities
|
|
|
|
|
|
|
|
|
|
Current portion
|
|
$
|
44,623
|
|
|
$
|
28,010
|
|
|
Long-term
portion
|
|
|
77,008
|
|
|
|
-
|
|
|
|
|
$
|
121,631
|
|
|
$
|
28,010
|
|
6.
NOTES PAYABLE
Related
Party Notes Payable consists of:
|
|
|
December
31, 2020
|
|
|
December
31, 2019
|
|
|
|
|
|
|
|
|
|
|
On June 25, 2018 the Company issued
promissory notes to Peter Zachariou for $30,000. The notes bear interest at 10% per annum and are payable on the earlier of one year
or five days following the delivery of written demand for payment by the Payee. The note was extended for another twelve months on
its due date to June 25, 2021 or on demand by the Payee.
|
|
$
|
30,000
|
|
|
$
|
30,000
|
|
|
Between March 26, 2018
and April 24, 2020 the Company issued ten promissory notes to Fountainhead Capital Management Limited for $280,873. The notes bear
interest at 10% per annum and are payable on the earlier of one year or five days following the delivery of written demand for payment
by the Payee. Nine notes were extended on their due dates for another twelve months. The Notes will be due between April 2021 and
March 2022 or on demand by the Payee.
|
|
|
280,873
|
|
|
|
200,873
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Related Party
Notes Payable
|
|
$
|
310,873
|
|
|
$
|
230,873
|
|
Other
Notes Payable consists of:
|
|
|
December
31, 2020
|
|
|
December
31, 2019
|
|
|
On March 25, 2011 the Company issued
a term note for $300,000 to EuroAmerican Investment Corp. (“EuroAmerican”). The term note bears interest at 16% per annum
and was due June 25, 2011, and has been extended on a number of occasions. On the note’s most recent due date, the note was
amended and extended to June 30, 2021. See further note below.
|
|
$
|
300,000
|
|
|
$
|
300,000
|
|
|
On May 16, 2020, the Company was granted a
loan from Citizens Bank N.A. in the aggregate amount of $58,600, pursuant to the Paycheck Protection Program (the “PPP”)
under Division A, Title I of the CARES Act, which was enacted March 27, 2020. The Loan, which was in the form of a Note dated May
16, 2020 issued by the Borrower, matures on May 16, 2022 and bears interest at a rate of 1% per annum, payable monthly commencing
on November 16, 2020. The Note may be prepaid by the Borrower at any time prior to maturity with no prepayment penalties. Under the
terms of the PPP, the Loan may be forgiven if they are used for qualifying expenses as described in the CARES Act. The Company’s
use of the Loan qualifies and the Company intends to apply during 2021.
|
|
|
58,600
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Insurance policy
finance agreements.
|
|
|
25,987
|
|
|
|
28,032
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Notes Payable:
|
|
$
|
384,587
|
|
|
$
|
328,032
|
|
Long-Term
Notes Payable consists of:
|
|
|
December
31, 2020
|
|
|
December
31, 2019
|
|
|
On July
7, 2020, the Company was granted a $150,000 loan under the Economic Injury Disaster Loan Program pursuant to the Coronavirus Aid,
Relief and Economic Security (CARES) Act by the Small Business Administration (SBA) (“SBA Loan”) . The SBA Loan, evidenced
by a promissory note dated July 7, 2020, has a term of thirty (30) years, bears interest at a fixed rate of three and three-quarters
percent (3.75%) per annum, with monthly payments in the amount of $731.00 per month commencing twelve (12) months from the date of
the note and is secured by essentially all of the assets of the Company. The proceeds of the SBA Loan will be used for general working
capital purposes to alleviate economic injury caused by disaster occurring in the month of January 2020 and continuing thereafter.
|
|
$
|
150,000
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Long-term Notes
Payable:
|
|
$
|
150,000
|
|
|
$
|
-
|
|
On
January 24, 2018 the Company entered into an amendment agreement (the “Amendment”) with EuroAmerican Investments (“EuroAmerican”)
regarding its $300,000 loan note (the “Note”). Under the Amendment, the Note was extended and the conversion terms of the
Note reduced to $0.21, the same as the offering price of the 2018 Offering. Conversion of the Note and accrued interest would result
in the issuance of 2,994,746 shares of Common Stock. Notwithstanding, EuroAmerican agreed that the Note could not be converted without
first offering the Company the right to redeem the Note at principal and accrued interest, and secondly Fountainhead the right to purchase
the Note, which cannot be converted prior to such offer and the failure of the Company and Fountainhead to exercise such option in accordance
with the amendment terms. The amendment was recognized as a modification, based on the guidance in ASC 470-50.
The
Company routinely finances all their insurance policies through a third party finance company which requires a down payment and subsequent
monthly payments, the time periods vary from 10 months to 12 equal monthly payments.
7.
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. Discontinued operations were
part of NovaVision and revenues and assets were in Europe; see Note 3. Set out below are the revenues, gross profits and total assets
for each segment.
|
|
|
Years
Ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Revenue:
|
|
|
|
|
|
|
|
Vycor Medical
|
|
$
|
1,039,562
|
|
|
$
|
1,299,830
|
|
|
NovaVision
|
|
$
|
102,483
|
|
|
$
|
93,070
|
|
|
|
|
$
|
1,142,045
|
|
|
$
|
1,392,900
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
|
Vycor Medical
|
|
$
|
913,245
|
|
|
$
|
1,171,149
|
|
|
NovaVision
|
|
$
|
96,337
|
|
|
$
|
86,981
|
|
|
|
|
$
|
1,009,582
|
|
|
$
|
1,258,130
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Total Assets:
|
|
|
|
|
|
|
|
|
|
Vycor Medical
|
|
$
|
953,730
|
|
|
$
|
1,036,857
|
|
|
NovaVision
|
|
|
32,213
|
|
|
|
25,395
|
|
|
Discontinued operations
|
|
|
577
|
|
|
|
29,691
|
|
|
Total Assets
|
|
$
|
986,520
|
|
|
$
|
1,091,943
|
|
(b)
Geographic information. The Company operates in two geographic segments, the United States and Europe. Discontinued operations were part
of NovaVision and revenues and assets were in Europe; see Note 3. Set out below are the revenues, gross profits and total assets for
each segment.
|
|
|
Years
Ended December 31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Revenue:
|
|
|
|
|
|
|
|
United States
|
|
$
|
1,125,226
|
|
|
$
|
1,380,209
|
|
|
Europe
|
|
$
|
16,819
|
|
|
$
|
12,691
|
|
|
|
|
$
|
1,142,045
|
|
|
$
|
1,392,900
|
|
|
Gross Profit
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
992,785
|
|
|
$
|
1,246,464
|
|
|
Europe
|
|
$
|
16,797
|
|
|
$
|
11,666
|
|
|
|
|
$
|
1,009,582
|
|
|
$
|
1,258,130
|
|
|
|
|
December
31, 2020
|
|
|
December
31, 2019
|
|
|
Total Assets:
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
980,239
|
|
|
$
|
1,055,312
|
|
|
Europe
|
|
|
5,704
|
|
|
|
6,940
|
|
|
Discontinued operations
|
|
|
577
|
|
|
|
29,691
|
|
|
Total Assets
|
|
$
|
986,520
|
|
|
$
|
1,091,943
|
|
8.
FIXED ASSETS
Fixed
Assets and the estimated lives used in the computation of depreciation are as follows:
|
|
|
Estimated
|
|
December 31,
|
|
|
December 31,
|
|
|
|
|
Useful
Lives
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Machinery and equipment
|
|
3 years
|
|
$
|
64,762
|
|
|
$
|
64,762
|
|
|
Leasehold Improvements
|
|
3 years
|
|
|
8,881
|
|
|
|
8881
|
|
|
Purchased Software
|
|
3 years
|
|
|
27,706
|
|
|
|
27,706
|
|
|
Molds and Tooling
|
|
5 years
|
|
|
775,090
|
|
|
|
715,463
|
|
|
Furniture and fixtures
|
|
7 years
|
|
|
11,152
|
|
|
|
11,152
|
|
|
Therapy Devices
|
|
3 years
|
|
|
96,993
|
|
|
|
94,568
|
|
|
Internally Developed
Software
|
|
5 years
|
|
|
363,472
|
|
|
|
363,472
|
|
|
|
|
|
|
|
1,348,056
|
|
|
|
1,286,004
|
|
|
Less: Accumulated depreciation
and amortization
|
|
|
|
|
(966,969
|
)
|
|
|
(921,051
|
)
|
|
Property and Equipment,
net
|
|
|
|
$
|
381,087
|
|
|
$
|
364,953
|
|
Depreciation
expense for the years ended December 31, 2020 and 2019 was $45,918 and $49,661 respectively, including $1,366 and $1,762 respectively
for Therapy Devices which is allocated to Cost of Sales.
9.
INTANGIBLE ASSETS
Intangible
Assets consists of:
|
|
|
December
31,
|
|
|
|
|
2020
|
|
|
2019
|
|
|
Amortized intangible assets: Patent (8 years
useful life)
|
|
|
|
|
|
|
|
|
|
Gross carrying
Amount
|
|
$
|
865,639
|
|
|
$
|
865,639
|
|
|
Accumulated
Amortization
|
|
|
(854,290
|
)
|
|
|
(842,313
|
)
|
|
|
|
$
|
11,349
|
|
|
$
|
23,326
|
|
|
Amortized intangible assets: Website (5 years
useful life)
|
|
|
|
|
|
|
|
|
|
Gross carrying Amount
|
|
$
|
20,382
|
|
|
$
|
20,382
|
|
|
Accumulated
Amortization
|
|
|
(20,382
|
)
|
|
|
(20,382
|
)
|
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Intangible
asset amortization expense for the periods ended December 31, 2020 and 2019 was $11,977 and $12,164, respectively.
10.
EQUITY
Equity
Transactions
During
the years ended December 2020 and 2019, the Company granted 333,330 and 399,996 shares, respectively of Common Stock (valued at $70,000
and $84,000 respectively) to non-employee Directors. Under the terms of the Directors Deferred Compensation Plan, the receipt of these
shares is deferred until January 15th of the year following termination of their services as a director. As of December 31, 2020 these
shares have yet to be issued.
During
each of the years ended December 31, 2020 and 2019, under the terms of the Consultancy Agreement referred to in Note 14, the Company
issued 2,142,856 shares of Common Stock to Fountainhead for fees of $450,000.
On
April 4, 2019 the Company issued 5,000 shares of Common Stock to Robert Anderson, a consultant, in accordance with the terms of a consulting
agreement.
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
|
|
|
|
|
|
|
|
exercise
price
|
|
|
|
|
Number
of shares
|
|
|
per
share
|
|
|
Outstanding
at December 31, 2018
|
|
|
3,717,826
|
|
|
$
|
0.27
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Cancelled
or expired
|
|
|
-
|
|
|
|
-
|
|
|
Outstanding
at December 31, 2019
|
|
|
3,717,826
|
|
|
$
|
0.27
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Cancelled
or expired
|
|
|
(3,717,826)
|
|
|
|
0.27
|
|
|
Outstanding
at December 31, 2020
|
|
|
-
|
|
|
$
|
-
|
|
STOCK
OPTIONS:
|
|
|
|
|
|
Weighted
average
|
|
|
|
|
|
|
|
exercise
price
|
|
|
|
|
Number
of shares
|
|
|
per
share
|
|
|
Outstanding
at December 31, 2018
|
|
|
1,380,000
|
|
|
$
|
0.53
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Cancelled
or expired
|
|
|
(680,000
|
)
|
|
|
0.79
|
|
|
Outstanding
at December 31, 2019
|
|
|
700,000
|
|
|
$
|
0.28
|
|
|
Granted
|
|
|
-
|
|
|
|
-
|
|
|
Exercised
|
|
|
-
|
|
|
|
-
|
|
|
Cancelled
or expired
|
|
|
(20,000
|
)
|
|
|
0.27
|
|
|
Outstanding
at December 31, 2020
|
|
|
680,000
|
|
|
$
|
0.28
|
|
As
of December 31, 2020, the weighted-average remaining contractual life of outstanding warrants and options is 0 and .49 years, respectively.