10-K 1 form10-k.htm

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2016

[ ] 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 [X]

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. $3,820,606 (assuming $0.59 per share)

Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date. 17,415,800 shares of common stock par value $0.0001 as of March 27, 2017

DOCUMENTS INCORPORATED BY REFERENCE: NONE

TABLE OF CONTENTS

		Page
	PART I
Item 1.	Business	3
Item 1A	Risk Factors	6
Item 1B	Unresolved Staff Comments	6
Item 2.	Properties	6
Item 3.	Legal Proceedings	6
Item 4.	Mine Safety Disclosures	6

	PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities	7
Item 6	Selected Financial Data	7
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	8
Item 7A	Quantitative and Qualitative Disclosures About Market Risk	12
Item 8.	Financial Statements and Supplementary Data	12
Item 9.	Changes In and Disagreements with Accountants on Accounting and Financial Disclosure	28
Item 9A.	Controls and Procedures	28
Item 9B.	Other Information	29

	PART III
Item 10.	Directors, Executive Officers, Promoters and Corporate Governance	29
Item 11.	Executive Compensation	31
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	32
Item 13.	Certain Relationships and Related Transactions, and Director Independence	32
Item 14.	Principal Accountant Fees and Services	33

	PART IV
Item 15.	Exhibits, Financial Statement Schedules	33

SIGNATURES		34

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 device industry. Vycor Medical designs, develops and markets medical devices for use in neurosurgery. NovaVision provides non-invasive rehabilitation therapies for those who have vision disorders resulting from neurological brain damage such as that caused by a stroke. Both businesses adopt a minimally or non-invasive approach. Both technologies have strong sales growth potential, address large potential markets and have the requisite regulatory approvals. The Company has 57 issued or allowed patents and a further 17 pending. The Company leverages joint resources across the divisions to operate in a cost-efficient manner.

The Company periodically engages in discussions with potential strategic partners for or purchasers of each or both of our operating divisions.

Vycor Medical

Vycor Medical designs, develops and markets medical devices for use in neurosurgery. Vycor Medical’s ViewSite Brain Access System (“VBAS”) is a next generation retraction and access system that was fully commercialized in early 2010 and is the first significant technological change to brain tissue retraction in over 50 years in contrast to significant development in most other neuro-surgical technologies. Vycor Medical is ISO 13485:2003 compliant, and VBAS has U.S. FDA 510(k) clearance and CE Marking for Europe (Class III) for brain and spine surgeries, and regulatory approvals in Australia, Brazil, Canada, China, Korea, Japan, Russia and Taiwan.

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

NovaVision

NovaVision provides non-invasive, computer-based rehabilitation targeted at a substantial and largely un-addressed market of people who have lost their sight as a result of stroke or other brain injury. NovaVision addresses a significant target market, estimated at approximately $2 billion in each of the U.S. and the EU and over $13 billion globally.

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

	●	Restoration of vision: NovaVision’s VRT and Sight Science’s Neuro-Eye Therapy (NeET), aim to improve visual sensitivity in a person’s 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 a large number of 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.

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

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

NovaVision’s VRT is the only medical device aimed at the restoration of vision lost as a result of neurological damage which has FDA 510(k) clearance to be marketed in the U.S; and NeuroEyeCoach is registered in the US as a Class I 510(k) exempt device. VRT, NEC and NeET have CE Marking for the EU. NovaVision has 41 granted and 2 pending patents worldwide.

Competition

The VBAS device is both a brain access system and a retractor and is therefore unique with no direct competitors. Competitive manufacturers of brain retractors include Cardinal Health (V. Mueller line), Aesculap, Integra Life Science and Codman (Division of Johnson & Johnson). Nico Corporation has a brain access device specifically designed to work with its Myriad resection and suction product.

NovaVision provides restoration therapies (VRT and NeET) and compensation or saccadic therapies (NeuroEyeCoach) for those suffering vision loss as a result of neurological trauma. The other therapy type for this condition is substitution (optical aids such as prisms) and is not considered by NovaVision as competition.

In restoration, competition has been reduced through NovaVision’s acquisition of Sight Science and there are a few very small companies or entities offering some form of vision rehabilitation product in Germany. Within compensation there are no real direct competitors. Other companies in the general rehabilitation space include RevitalVision, PositScience and Dynavision. In the professional market, NovaVision competes with aggregator products or those that provide a range of non-specific therapies, such a Rehacom, Sanet Vision Integrator and Bioness BITS. NovaVision’s products are dedicated to vision.

The Market For the Company’s Products And Therapies

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

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

Our Growth Strategy

Vycor Medical

Vycor Medical’s growth strategy includes:

1. Increasing U.S. market penetration through broader hospital coverage and targeted direct physician marketing. Vycor Medical’s sales and marketing strategy is to penetrate a well-defined target market of 4,500 neurosurgeons. Vycor markets direct to surgeons as well as marketing and distributing through independent distributors, with a focus both on adding new hospitals and expanding to additional surgeons in hospitals where VBAS is already approved, and to expand usage to a broader range of procedures. In order to expand its direct marketing and deepening its penetration, Vycor is exploring the creation of a Centers of Excellence medical education campaign and to that end has developed new surgeon education and training materials including detailed videos produced with surgeons at Weill Cornell. Vycor is pursuing a policy of continually evaluating and upgrading its distributors as well as adding additional distributors in regions where it has little to no presence.

2. Provision of more Clinical and Scientific Data supporting the products superiority over the current standard-of-care blade retractors and to demonstrate VBAS’ potential for cost savings. Clinical and scientific data (in the form of peer reviewed articles, clinical studies and other reports and case studies) are critical in driving adoption, and in turn revenues, further and faster by demonstrating VBAS’ superiority as a minimally invasive access system that helps VBAS move further up the hospital cost/benefit curve. To date the Company has already had 10 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 market presence.

4. New Product Development

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

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

NovaVision

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

Our strategic vision for NovaVision has been to develop and provide a clinically supported, affordable and scalable visual therapy solution offering that provides broad benefits to those suffering visual impairment following neurological brain damage; and to offer solutions for both patients and medical professionals alike. Following a prolonged development program, aimed at broadening patient benefits, significantly reducing cost and making our therapies affordable and scalable, NovaVision was able to launch its Internet-delivered therapy suite in the US in June 2015 and in Europe in December 2015.

NovaVision has four routes-to-market aimed at patients and professionals, comprising: direct-to-patient; rehabilitation centers and clinics; stroke associations and support groups; and physicians. Given the company’s limited resources NovaVision is initially focusing on direct-to-patient, with a website lead-driven inbound and outbound marketing strategy targeted at prospective patients and relatives. Website metrics – particularly for the US and more recently Germany – are positive, although below management’s expectations, showing good growth in traffic and rankings, and have been effective in generating leads. Our analysis of the campaign metrics in the US (including Google Ads) during 2016 highlighted some key improvements that needed to be implemented which we are carrying out and which we believe could have a material impact on our lead generation.

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

Manufacturing

Vycor Medical uses a sub-contract manufacturer to manufacture, package, label and sterilize its VBAS products. The Company has migrated all its VBAS manufacturing to Life Science Outsourcing, Inc. in Brea, California that is FDA-registered and meets ISO standards and certifications.

Intellectual Property

Patents

Vycor Medical maintains a portfolio of patent protection on its methods and apparatus for its Brain and Spine products and technology in the form of issued patents and applications, both domestically and internationally, with a total of 16 granted/allowed and 15 pending patents.

NovaVision maintains a portfolio of patent protection on its methods and apparatus in the form of issued patents and applications, both domestically and internationally, with a total of 41 granted and 2 pending patents (including Sight Science).

Trademarks

VYCOR MEDICAL is a registered trademark and VIEWSITE is a common law trademark.

NovaVision maintains a portfolio of registered trademarks for NOVAVISION, NOVAVISION VRT, VRT VISION RESTORATION THERAPY and NEUROEYECOACH, amongst others, along with relevant logos, both in the US and internationally.

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. 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 11 employees.

Website.

The Company operates websites at www.vycormedical.com, www.novavision.com, www.novavision.de and www.sightscience.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 2015 and 2016. 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, 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
January 1, 2016-March 31, 2016	$	0.94	$	0.53
April 1, 2016-June 30, 2016	$	0.70	$	0.36
July 1, 2016-September 30, 2016	$	0.59	$	0.26
October 1, 2016-December 31, 2016	$	0.45	$	0.24

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 27, 2017 there were 17,415,800 shares of common stock outstanding and approximately 157 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, 2016 through March 27, 2017 which were not registered under the Securities Act

Common Stock:

Issuance Type	Security	Shares
Fountainhead Consulting Fees	Common		212,478
Advisory Board Fees	Common		78,915
Preferred Stock Dividends	Series D. Preferred		18,420
Consulting Fees	Common		115,404
Private Placement: Fountainhead	Common		2,275,901
Private Placement: Others	Common		3,794,178

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

	12/31/2016			12/31/2015			12/31/2014
Revenues	$	1,452,714		$	1,138,634		$	1,250,292
Net loss	$	(1,652,280	)	$	(2,082,643	)	$	(4,049,712	)
Net loss per share	$	(0.15	)	$	(0.20	)	$	(0.39	)
Weighted average no. shares		11,066,217			10,839,335			10,270,657
Stockholders’ equity (deficit)	$	(26,438	)	$	1,145,722		$	2,888,902
Total assets	$	1,485,250		$	2,022,731		$	3,813,743
Total liabilities	$	1,511,688		$	877,009		$	924,841

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.

RESULTS OF OPERATIONS

Comparison of the Year Ended December 31, 2016 to the Year Ended December 31, 2015

Revenue and Gross Margin:

	Segment Information
	(unaudited)
	Twelve months ended
	December 31,
	2016			2015			% Change
Revenue:
Vycor Medical	$	1,260,949		$	885,481			42	%
NovaVision	$	191,765		$	253,153			-24	%
	$	1,452,714		$	1,138,634			28	%
Cost of Revenue:
Vycor Medical	$	(167,894	)	$	(107,528	)		-56	%
NovaVision	$	(16,791	)	$	(56,590	)		70	%
	$	(184,685	)	$	(164,118	)		-13	%
Gross Profit
Vycor Medical	$	1,093,055		$	777,953			41	%
NovaVision	$	174,974		$	196,563			-11	%
	$	1,268,029		$	974,516			30	%

Vycor Medical recorded revenue of $1,260,949 from the sale of its products for the year ended December 31, 2016, an increase of $375,468 or 42% over 2015. This reflected increased sales in the US and internationally. Gross margin of 87% was recorded for the year ended December 31, 2016 compared to 88% in 2015.

NovaVision recorded revenues of $191,765 for the year ended December 31, 2016, a decrease of $61,388 from 2015, and gross margin of 91%, compared to 78% for 2015. The decrease was mainly accounted for by Europe, where the Internet-delivered model was launched 6 months later than the U.S. Since the launch in the U.S., 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, and revenue for the therapies is recognized over a 7-month period, which leads to a further lag in book revenues. New VRT/NeuroEyeCoach therapy suite patient starts in the U.S. for 2016 increased by 23% over 2015, which included six months of the Internet-delivered model. The Internet-delivered therapy suite was launched in Europe in December 2015, where similar price reductions have been achieved. New VRT/NeuroEyeCoach therapy suite patient starts in Europe 2016 increased by 39% over 2015

Research and Development Expense:

Research and development expenses were $4,739 in 2016 compared to $71,512 for 2015. Capitalized software development costs in NovaVision for the year ended December 31, 2016 and 2015 were $12,679 and $32,843, respectively. During the year ended December 31, 2016 the Company’s NeET and Center Model were completed.

General and Administrative Expenses:

General and administrative expenses increased by $63,402 to $2,597,086 in 2016 from $2,533,684 in 2015. 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 2016 was $729,609, an increase of $455,107 from $274,502 in 2015. Also included within General and Administrative Expenses are Sales Commissions, which increased by $27,893 to $195,440; which related to the increase in sales in 2016. The remaining General and Administrative expenses decreased by $419,598 from $2,091,636 to $1,672,038. 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
Investor relations and road show costs		(125,366	)		(23,794	)
Other (travel/regulatory/premises)		(103,322	)		-
Payroll		(102,917	)		(20,114	)
Board, financial and scientific advisory		(86,387	)		499,015
Sales, marketing and travel		(19,581	)		-
Legal, professional and other consulting		17,975			-
Total change		(419,598	)		455,107

Interest Expense:

Interest comprises expense on the Company’s debt and insurance policy financing. Related Party Interest expense for 2016 increased following the issuance of new debt to $12,161 from $0 in 2015. Other Interest expense for 2016 increased by $1,175 to $48,885 from $47,710 for 2015.

Liquidity and Capital Resources

Liquidity

The following table shows cash flow and liquidity data for the periods ended December 31, 2016 and December 31, 2015:

	31-Dec-16			31-Dec-15			$ Change
Cash	$	56,859		$	347,477		$	(290,618	)
Accounts receivable, inventory and other current assets	$	480,230		$	511,216		$	(30,986	)
Total current liabilities	$	(1,511,688	)	$	(877,009	)	$	(634,679	)
Working capital	$	(974,599	)	$	(18,316	)	$	(956,283	)
Cash provided by (used in) financing activities	$	266,710		$	(85,300	)	$	352,010

Private Placement.

On January 11, and February 23, 2017 (the “Closings”) the Company completed the sale of $1,274,717 in shares of Common Stock and Warrants to accredited investors. Included in these gross proceeds is the conversion of $248,000 of debt on the balance sheet at December 31, 2016, so that proceeds net of debt conversion were $1,026,717. The Closings raised net cash proceeds, after debt conversion and expenses, of $941,889.

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

The following table shows the principle components of cash used in operating activities during the nine months ended December 31, 2016 and 2015, with a commentary of changes during the periods and known or anticipated changes:

	December 31, 2016			December 31, 2015			$ Change

Net loss	$	(1,652,280	)	$	(2,082,643	)	$	430,363

Adjustments to reconcile net loss to cash used in operating activities:
Amortization and depreciation of assets	$	267,496		$	368,963		$	(101,467	)
Share based compensation	$	482,110		$	274,502		$	207,608
Accrued share based compensation	$	247,500			-		$	247,500
Changes in value of derivative liability and gain or loss on foreign exchange	$	144		$	43,919		$	43,775
Other	$	10,174		$	33,437		$	(23,263	)
	$	1,007,924		$	720,821		$	286,603

Net loss adjusted for non-cash items	$	(644,856	)	$	(1,361,822	)	$	716,966

Changes in working capital
Accounts receivable, accounts payable and accrued liabilities (adjusted for accrued share based compensation)	$	(65,664	)	$	(52,529	)	$	(13,135	)
Inventory	$	78,292		$	10,046		$	68,246
Prepaid expenses and net insurance financing repayments	$	(13,939	)	$	99,426		$	(113,365	)
Accrued interest (not paid in cash)	$	60,293		$	48,000		$	12,293
Other	$	6,666		$	4,079		$	2,587
	$	65,648		$	109,022		$	(43,374	)

Cash used in operating activities, adjusted for net insurance repayments	$	(579,208	)	$	(1,252,800	)	$	673,592

The adjustments to reconcile net loss to cash of $1,007,924 in the period have no impact on Liquidity. The net change in accounts receivable, accounts payable and accrued liabilities reflect the normal course of business and change between periods mainly as a result of larger than normal orders from customers or larger than normal expenditures. The net reduction in use of cash in operating activities in 2016 over 2015 of $673,592 was primarily a result of the reduction in net loss (as adjusted for non-cash items), of $716,966. The net increase in use of cash in working capital in 2016 over 2015 largely reflects changes in inventory and the impact on prepaid expenses of Vycor’s manufacturing program, as well as the deferral of certain accounts payable at December 31, 2016. Vycor’s normal inventory manufacturing purchasing cycle is to build up inventory in the fourth and first quarters. During 2016 the sale of purchased inventory was a net source of cash; inventory purchases were deferred in the fourth quarter of 2016 and this will reverse in the first three quarters of 2017 with inventory being purchased. The impact on cash flow during 2015 was impacted by the booking of molds and other manufacturing costs related to the migration process to prepaids in 2014, and then bringing the molds into service during 2015. The reversal of the deferred accounts payable will have an impact on net cash flows in the first quarter of 2017.

Investing Activities. Cash used in investing activities for the year ended December 31, 2016 was $57,451, which reflected additional expenditure on molds for Vycor Medical and IT infrastructure. Vycor Medical is engaged in the final stage of migrating and consolidating its manufacturing and also making certain improvements to the molds for its VBAS product. This will entail significantly increased expenditure during the first half of 2017, which will have an impact on liquidity and cash flow, in particular in the first quarter of 2017.

Financing Activities.

Shareholder Loans.

During the period Vycor’s largest shareholder, Fountainhead, had provided $248,000 of funding in the form of notes payable. Fountainhead also advanced $101,000 during the period in respect of the Private Placement referred to above. This amount was held in escrow at December 31, 2016 and represented part of the Private Placement Initial Closing.

Liquidity and Plan of Operations

During the year ended December 31, 2016 we reduced our Cash used in operations, adjusted for net insurance repayments, to $579,209 from $1,252,800 for year ended December 31, 2015. Cash flows from operating activities and investing activities, taken together, were $636,660. Average monthly operating and investing cash usage was therefore approximately $55,000.

The balance of cash at December 31, 2016, adjusted for the net proceeds of the Private Placement detailed above received after December 31, 2016, is $904,798. Management has evaluated the effects of the Private Placement on the Company’s financial condition, as well as the continued revenue growth coupled with improved margins and control of expenses. Management is of the opinion that any potential going concern uncertainty that previously existed has been remediated, and that its existing cash and cash equivalents following the Private Placement, together with the continued reduction in losses as a result of initiatives outlined below, will be sufficient to meet its anticipated cash requirements through at least March 31, 2018.

As described earlier in this ITEM 2 “Our Growth Strategy”, the Company is executing on a plan to achieve a growth in revenues for both the Vycor Medical and NovaVision divisions, and thereby further reduce its cash operating usage. For Vycor Medical this includes in particular: increasing penetration in the US market through targeted marketing and a potential new medical education program; increased international market growth; and new product development centered around the modification of its VBAS product range to make it more easy to integrate with IGS systems. For NovaVision, after a prolonged and now complete period of re-development, the Company is focusing its resources on direct-to-patient marketing through a website lead-driven inbound and outbound marketing strategy. In addition, the Company is now starting to market its NovaVision Center Model to medical professionals, with a broad and flexible range of delivery and licensing options.

Off-Balance Sheet Arrangements

As of December 31, 2016, 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, 2016 and 2015 patient deposits amounted to $33,351 and $27,183, 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, 2016 and 2015 was $10,174 and $29,923, 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.

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, 2016 and 2015, and the related statements of comprehensive loss, stockholders’ (deficit) equity, and cash flows for each of the years in the two year period ended December 31, 2016. 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, 2016 and 2015, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

/s/ Paritz & Company, P.A.
Hackensack, New Jersey
March 30, 2017

VYCOR MEDICAL, INC.

Consolidated Balance Sheets

	December 31, 2016			December 31, 2015

ASSETS
Current Assets
Cash	$	56,859		$	347,477
Trade accounts receivable, net of allowance for doubtful accounts of $0 and $2,711		148,784			106,340
Inventory		204,071			292,538
Prepaid expenses and other current assets		127,375			112,338
Total Current Assets		537,089			858,693

Fixed assets, net		401,051			521,105

Intangible and Other assets:
Trademarks		251,157			251,157
Patents, net of accumulated amortization		238,571			323,138
Website, net of accumulated amortization		14,958			19,548
Security deposits		42,424			49,090
Total Intangible and Other assets		546,110			642,933
TOTAL ASSETS	$	1,485,250		$	2,022,731

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
Current Liabilities
Accounts payable	$	249,949		$	250,367
Accrued interest: Other		136,765			88,634
Accrued interest: Related party		12,161			-
Accrued liabilities		446,957			222,258
Monies in Escrow for Private Placement: Related Party		101,000			-
Notes payable: Related Party		248,000			-
Notes payable: Other		316,856			315,750
Total Current Liabilities		1,511,688			877,009

STOCKHOLDERS’ EQUITY (DEFICIT)
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 270,306 and 252,336 issued and outstanding as at December 31, 2016 and December 31, 2015 respectively	$	27		$	25
Common Stock, $0.0001 par value, 25,000,000 shares authorized at December 31, 2016 and 2015, 11,439,357 and 11,032,560 shares issued and 11,336,023 and 10,929,226 outstanding at December 31, 2016 and 2015 respectively		1,144			1,103
Additional Paid-in Capital		25,007,850			24,346,057
Treasury Stock (103,334 shares of Common Stock as at December 31, 2016 and 2015 respectively, at cost)		(1,033	)		(1,033	)
Accumulated Deficit		(25,164,545	)		(23,332,538	)
Accumulated Other Comprehensive Income (Loss)		130,119			132,108
Total Stockholders’ Equity (Deficit)		(26,438	)		1,145,722
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)	$	1,485,250		$	2,022,731

See accompanying notes to financial statements

VYCOR MEDICAL, INC.

Consolidated Statement of Comprehensive Loss

	For the year ended December 31,
	2016			2015

Revenue	$	1,452,714		$	1,138,634
Cost of Goods Sold		184,685			164,118
Gross Profit		1,268,029			974,516

Operating expenses:
Research and development		4,739			71,512
Depreciation and Amortization		257,582			360,334
General and administrative		2,597,086			2,533,684
Total Operating expenses		2,859,407			2,965,530
Operating loss		(1,591,378	)		(1,991,014	)

Other income (expense)
Interest expense: Other		(48,885	)		(47,710	)
Interest expense: Related Party		(12,161	)		-
Gain (loss) on foreign currency exchange		144			(63,711	)
Change in fair value derivative liability		-			19,792
Total Other Income (expense)		(60,902	)		(91,629	)

Loss Before Credit for Income Taxes		(1,652,280	)		(2,082,643	)
Credit for income taxes		-			-
Net Loss		(1,652,280	)		(2,082,643	)
Preferred stock dividends		(179,727	)		(167,777	)
Net Loss available to common shareholders		(1,832,007	)		(2,250,420	)
Comprehensive Loss
Foreign Currency Translation Adjustment		1,989			(64,959	)
Comprehensive Loss		(1,650,290	)		(2,147,602	)

Net Loss Per Share
Basic and diluted	$	(0.15	)	$	(0.20	)

Weighted Average Number of Shares Outstanding – Basic and Diluted		11,066,217			10,839,335

See accompanying notes to financial statements

VYCOR MEDICAL, INC.

Statement of Stockholders’ Equity (Deficiency)

	Common Stock				Preferred Stock - Series C				Preferred Stock - Series D				Treasury Stock					Additional Paid-in		Accumulated			Accum			Total
	Number		Amount		Number		Amount		Number		Amount		Number		Amount			Capital		Deficit			OCI (Loss)
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
Issuance of stock for board and consulting fees		291,393		29		-		-		-		-		-		-			156,847		-			-			156,876
Share-based compensation for consulting service		115,404		12		-		-		-		-		-		-			49,022		-			-			49,034
Deferred compensation for board																			78,000								78,000
Share based compensation issued to management/employees						-		-		-		-		-		-			198,200		-			-			198,200
Preferred stock dividends		-		-						17,970		2							179,724		-			-			179,726
Accumulated Comprehensive Loss		-		-		-		-		-		-		-		-			-		-			(1,989	)		(1,989	)
Net loss for year ended December 31, 2016																					(1,832,007	)					(1,832,007	)

Balance at December 31, 2016		11,439,357	$	1,144		1	$	-		270,306	$	27		-103,334	($	1,033	)	$	25,007,850	($	25,164,545	)	$	130,119		($	26,438	)

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		(1,652,280	)		(2,082,643	)
Adjustments to reconcile net loss to cash used in operating activities:
Amortization of intangible assets		89,157			99,291
Depreciation of fixed assets		178,339			269,672
Inventory provision		10,174			12,633
Inventory write-off		-			20,804
Share based compensation		482,110			274,502
Loss on foreign exchange		144			63,711
Unrealized gain on change in fair value of derivative liability		-			(19,792	)

Changes in assets and liabilities:
Accounts receivable		(42,445	)		17,475
Inventory		78,292			10,046
Prepaid expenses		68,351			184,726
Accrued interest to related party		12,161			-
Accrued interest other		48,132			48,000
Accounts payable		(418	)		28,665
Accrued liabilities		224,699			(98,669	)
Security Deposit		6,666			4,079
Cash used in operating activities		(496,918	)		(1,167,500	)
Cash flows from investing activities:
Purchase of fixed assets		(57,451	)		(210,023	)
Purchase of website		-			(18,010	)
Acquisition of patents		-			(66,276	)
Cash used in investing activities		(57,451	)		(294,309	)
Cash flows from financing activities:
Proceeds from issuance of Notes Payable: Related Party		248,000			-
Monies in Escrow Related Party – Private Placement		101,000
Repayment of Notes Payable - Other		(82,290	)		(85,300	)
Cash provided by (used in) financing activities		266,710			(85,300	)
Effect of exchange rate changes on cash		(2,959	)		2,928
Net decrease in cash		(290,618	)		(1,544,181	)
Cash at beginning of year		347,477			1,891,658
Cash at end of year		56,859			347,477

Supplemental Disclosures of Cash Flow information:
Non-Cash Transactions:
Preferred stock dividends satisfied in new preferred stock	$	179,727		$	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.

Ability to continue as a Going Concern

The Company has incurred losses since its inception, including a net loss of $1,652,280 and $2,082,643 for the years ending December 31, 2016 and 2015 respectively. As at December 31, 2016 the Company had stockholder’s deficiency of $26,483 and cash of $56,859. As a result, these conditions had raised substantial doubt regarding our ability to continue as a going concern.

However, On January 11, and February 23, 2017 the Company completed the sale of $1,274,717 in shares of Common Stock and Warrants to accredited investors. Included in these gross proceeds is the conversion of $248,000 of debt on the balance sheet at December 31, 2016, so that proceeds net of debt conversion were $1,026,717. The Private Placement raised net cash proceeds, after debt conversion and expenses, of $941,889. Management has evaluated the effects of the Private Placement on the Company’s financial condition, as well as the continued revenue growth coupled with improved margins and control of expenses. Management is of the opinion that any potential going concern uncertainty that previously existed has been remediated, and that its existing cash and cash equivalents following the Private Placement, together with the continued reduction in losses as a result of initiatives outlined in “Liquidity and Plan of Operations” in Item 7. will be sufficient to meet its anticipated cash requirements through at least March 31, 2018.

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. Certain reclassifications and format changes have been made to prior year amounts to conform to the current year presentation.

Revenue Recognition

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

Cash and cash equivalents

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, 2016 and 2015 was $10,174 and $29,923, 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

Income taxes

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

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, 2016 and 2015, the amounts charged to research and development expenses were $4,739 and $71,512, 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. For the years ended December 31, 2016 and 2015, the amounts capitalized for software development were $12,679 and $32,843 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)

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:

	December 31, 2016		December 31, 2015
Stock options outstanding		705,557		25,557
Warrants to purchase common stock		6,007,048		6,007,048
Debentures convertible into common stock		242,647		215,908
Preferred shares convertible into common stock		1,272,052		1,188,471
Directors Deferred Compensation Plan		176,479		-
Total		8,403,783		7,436,984

Recent Accounting Pronouncements

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

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

3. NOTES PAYABLE

Other Notes Payable

As of December 31, 2016 and 2015 Other Notes Payable consists of:

	December 31, 2016		December 31, 2015
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 May 31, 2017.		300,000		300,000
Insurance policy finance agreements. During the period ended December 31, 2016 the Company made payments of $82,290. The notes are due over the next twelve months.		16,856		15,750
Total Other Notes Payable		316,856		315,750

	December 31, 2016		December 31, 2015
The Company issued promissory notes to Fountainhead Capital Management Limited for $248,000. 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.		248,000		-

Total Related Party Notes Payable		248,000		-

4. 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.

	Twelve Months Ended December 31,
	2016		2015
Revenue:
Vycor Medical	$	1,260,949	$	885,481
NovaVision	$	191,765	$	253,153
	$	1,452,714	$	1,138,634
Gross Profit
Vycor Medical	$	1,093,055	$	777,953
NovaVision	$	174,974	$	196,563
	$	1,268,029	$	974,516

	December 31, 2016		December 31, 2015
Total Assets:
Vycor Medical	$	805,716	$	1,150,291
NovaVision		679,534		872,440
Total Assets	$	1,485,250	$	2,022,731

(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.

	Twelve Months Ended December 31,
	2016		2015
Revenue:
United States	$	1,355,439	$	985,868
Europe	$	97,275	$	152,766
	$	1,452,714	$	1,138,634
Gross Profit
United States	$	1,176,448	$	844,297
Europe	$	91,581	$	130,219
	$	1,268,029	$	974,516

	December 31, 2016		December 31, 2015
Total Assets:
United States	$	1,258,624	$	1,699,589
Europe		226,626		323,142
Total Assets	$	1,485,250	$	2,022,731

5. FIXED ASSETS

As of December 31, 2016 and 2015, Fixed Assets and the estimated lives used in the computation of depreciation are as follows:

	Estimated Useful Lives	December 31, 2016			December 31,2015

Machinery and equipment	3 years	$	137,453		$	132,452
Leasehold Improvements	5 years		6,206			6,206
Purchased Software	3 years		27,706			27,706
Molds and Tooling	5 years		409,784			381,397
Furniture and fixtures	7 years		25,844			26,028
Therapy Devices	3 years		112,857			99,324
Internally Developed Software	5 years		1,187,591			1,174,912
			1,907,441			1,652,068
Less: Accumulated depreciation and amortization			(1,506,390	)		(1,326,920	)
Property and Equipment, net		$	401,051		$	521,105

Depreciation expense for the years ended December 31, 2016 and 2015 was $178,339 and $269,672 respectively, including $9,914 and $8,629 respectively for Therapy Devices which is allocated to Cost of Sales.

6. INTANGIBLE ASSETS

As of December 31, 2016 and 2015, Intangible Assets consists of:

	December 31,
	2016			2015
Amortized intangible assets: Patent (8 years useful life)
Gross carrying Amount	$	865,639		$	865,639
Accumulated Amortization		(627,068	)		(542,501	)
	$	238,571		$	323,138
Amortized intangible assets: Website (5 years useful life)
Gross carrying Amount	$	50,760		$	50,760
Accumulated Amortization	$	(35,802	)	$	(31,212	)
	$	14,958		$	19,548
Intangible assets not subject to amortization
Trademarks	$	251,157		$	251,157

Intangible asset amortization expense for the periods ended December 31, 2016 and 2015 was $89,157 and $99,291, respectively.

7. EQUITY

Equity Transactions

During January to December 2016, the Company granted 176,479 shares of Common Stock (valued at $78,000) to non-employee Directors. Under the terms of the Directors Deferred Compensation Plan, the receipt of these shares is deferred until the January 15^th following the termination of their services as a director. As of December 30, 2016 these shares have yet to be issued.

During January to December 2016, the Company issued 78,915 shares of Common Stock (valued at $36,875) to members of the NovaVision, Inc. Scientific Advisory Board in respect of their services.

During January to December 2016, the Company issued 212,478 shares of Common Stock (valued at $120,000) to Fountainhead in accordance with the terms of a Consulting Agreement.

During April to December 2016, the Company issued 15,404 shares of Common Stock (valued at $8,334) to Techmed, Inc. in accordance with the terms of a consulting agreement.

During May to December 2016, the Company issued 100,000 share of Common Stock (valued at $40,700) to Valeo Consulting in accordance with the terms of a consulting agreement.

During January to December 31, 2016, the Company paid an aggregate of 17,971 shares of Preferred D Stock, valued at $179,727, representing preferred stock dividends. The Preferred D shares are convertible on their terms at $2.15 per share of Common Stock into 83,586 shares. An aggregate of 17,142 shares of Preferred D Stock dividends were in respect of related parties.

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
				exercise price
	Number of shares			per share
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
Granted		-		$	2.56
Exercised		-			-
Cancelled or expired		-			-
Outstanding at December 31, 2016		6,007,048		$	2.57

STOCK OPTIONS:

			Weighted average
			exercise price
	Number of shares		per share
Outstanding at December 31, 2014		5,557	$	20.25
Granted		-		-
Exercised		-		-
Cancelled or expired		-		-
Outstanding at December 31, 2015		25,557	$	5.97
Granted		680,000	$	0.79
Exercised		-		-
Cancelled or expired		-		-
Outstanding at December 31, 2016		705,557	$	0.97

As of December 31, 2016, the weighted-average remaining contractual life of outstanding warrants and options is 0.25 and 2.96 years, respectively.

8. SHARE-BASED COMPENSATION

Stock Option Plan

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

For the years ended December 31, 2016 and 2015, the Company recognized share-based compensation of $198,200 and $25,011, 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, 2016 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, 2016 was $283,910. In addition, the Company accrued $247,500 in non-employee stock compensation to be paid in common shares. As of December 31, 2016, 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, 2016 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, 2016:

	Year ended December 31,
	2016			2015
Risk-free interest rates		0.91	%		1.07	%
Expected life		1.5 years			3 years
Expected dividends		0	%		0	%
Expected volatility		95	%		101	%
Vycor Common Stock fair value	$	0.71		$	2.00

9. 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:

10. INCOME TAXES

Loss Before Taxes

	December 31, 2016		December 31, 2015
Domestic	$	1,351,693	$	1,706,722
Foreign		300,587		375,921
	$	1,652,280	$	2,082,643

The reconciliation of income tax expense at the U.S. statutory rate of 35% in 2016 and 2015, to the Company’s effective tax rate is as follows:

	Year Ended December 31,
	2016			2015

US statutory rate	$	(578,298	)	$	(728,925	)
Tax difference between foreign and U.S.		25,275			28,528
Change in Valuation Allowance		(552,293	)		(700,397	)
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, 2016 and December 31, 2015 are as follows:

	December 31, 2016			December 31, 2015
Operating loss carry-forward	$	6,090,000		$	5,600,000
Deferred tax asset before Valuation allowance		6,090,000			5,600,000
Valuation allowance		(6,090,000	)		(5,600,000	)
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, 2016 and 2015, the Company had U.S. accumulated losses for tax purposes of approximately $17,400,000 and $16,000,000 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, 2016 and 2015, the Company had German accumulated losses for tax purposes of approximately $1,012,000 and $837,000 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, 2016 and 2015, the Company had UK accumulated losses for tax purposes of approximately $198,000 and $199,000 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, 2016 and 2015 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, 2016 and 2015 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.

11. COMMITMENTS AND CONTINGENCIES

Lease

The Company leases approximately 10,000 sq. ft. located at 6401 Congress Ave., Suite 140, Boca Raton, FL 33487 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, 2016 and 2015 was $212,054 and $204,445 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 agreed to suspend the assessment pending the outcome of certain court hearings and proposed legal amendments, and the Company agreed to make limited monthly payments on account. Accordingly, the Company has made no provision for this liability years ended December 31 2016 and 2015 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.

12. CONSULTING AND OTHER AGREEMENTS

The following agreements were entered into or remained in force during the year ended December 31, 2016:

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.

In March 2017, as part of a streamlining of compensation arrangements with executive management, the Company amended the Consulting Agreement (“the Amendment”) to increase the annual fees by $330,000 to a total of $37,500 per month; at the same time, annual compensation payable to executive management was reduced by $330,000 to $0. These changes therefore have no financial impact on the Company. The other terms of the Consulting Agreement remain the same, including the ability of Fountainhead at its option to receive $5,000 per month in cash and the remainder payable in Company Common Stock issued at the recent Private Placement price and deliverable at the end of each fiscal quarter. The Consulting Agreement also contains provisions for Fountainhead to receive a higher proportion of fees in cash subject to certain future liquidity events, and subject to Board approval. Under the Amendment, Fountainhead was granted options pursuant to the Vycor Medical, Inc. 2008 Stock Option Plan, to purchase 660,000 shares of Company Common Stock at the same exercise price as that of the warrants issued in the Private Placement. Vesting of these options is subject to the achievement of certain milestones by March 31, 2018. These options are equivalent to a grant options to executive management in March 2016, the change being made as part of the same streamlining.

13. RELATED PARTY TRANSACTIONS

Peter Zachariou, CEO and director and David Cantor, President and director are investment managers of Fountainhead Capital Management which is a related party due to the size of its shareholding. Adrian Liddell, Chairman and CFO is a consultant for Fountainhead Capital Management.

During the year ended December 31, 2016, in accordance with the terms of the Consulting Agreement, the Company issued 212,478 shares of Common Stock (valued at $120,000) to Fountainhead.

During the year ended December 31, 2016, the Company paid an aggregate of 17,971 shares of Preferred D Stock, valued at $179,727, representing preferred stock dividends. The Preferred D shares are convertible on their terms at $2.15 per share of Common Stock into 83,586 shares. An aggregate of 17,142 shares of Preferred D Stock dividends were in respect of related parties.

During the year ended December 31, 2016, 2016, the Company issued unsecured loan notes to Fountainhead for a total of $248,000. The loan notes bear interest at a rate of 10% and are due on demand or by their one-year anniversary.

At December 31, 2016 the Company was holding $101,000 cash in escrow from Fountainhead in respect of the Private Placement Initial Closing that occurred on January 11, 2017.

There were no other related party transactions during the year ended December 31, 2016.

14. SUBSEQUENT EVENTS

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

The Securities comprised one Share at a purchase price $0.21 per share and a Warrant to purchase one Share at an exercise price of $0.27, exercisable over a period of three (3) years. A total of 6,070,079 Shares and Warrants to purchase 6,070,079 Shares were issued in the Private Placement. Fountainhead subscribed $477,939 of shares in the Private Placement of which approximately $248,000 represented amounts that Fountainhead had already advanced to the Company as detailed above Under the terms of a prior placement agent agreement (as amended) with Garden State Capital, Inc. (“GSS”) for the Company’s previous 2014 Offering, GSS received Warrants to purchase 202,691 Shares in respect of investment in the Private Placement by investors introduced to Vycor by GSS in connection with the 2014 Offering. GSS did not act as placement agent for the Company in the Private Placement.

The Private Placement was undertaken as a private placement offering under Section 4(a)(2) of the Securities Act of 1933, as amended (the “Act”) and Rule 506(b) of Regulation D promulgated under the Act since, among other things, the transaction did not involve a public offering and the securities were acquired for investment purposes only and not with a view to or for sale in connection with any distribution thereof. The net proceeds will be used for the further development of both the Vycor VBAS and NovaVision divisions, as well as for general working capital.

There were no other 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, 2016 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 assessment, 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 internal controls over financial reporting, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of December 31, 2016. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control — Integrated Framework (2013). Based on that assessment and on those criteria, our CEO and CFO concluded that our internal control over financial reporting was effective as of December 31, 2016.

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.

c) 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	55
David Marc Cantor	President and a Director	50
Adrian Christopher Liddell	Chairman of the Board, Chief Financial Officer and a Director	58
Steven Girgenti	Director	71
Oscar Bronsther, M.D.	Director	64
Lowell Rush	Director	60

Peter C. Zachariou, 55, 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, 50, 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, 55, 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, 71, 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, 64, 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, 60, 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 Paybox Corp. (OTCQB:PBOX), 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.

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 Board has determined that Lowell Rush qualifies as an Audit Committee financial expert, as that term is defined in applicable regulations of the SEC. 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, 2016 and 2015, respectively (i) to the persons who acted as our principal executive officer during our fiscal year ended December 31, 2016 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($)	All other Compensation($)	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 securities to be issued upon exercise of outstanding options, warrants and rights(a)		Weighted- average exercise price of outstanding options,warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected 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, 2016

Warrants Issued to Management

Name

Grant Date

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 2017 the Company amended the employment agreement such that no compensation will be payable under the agreements. The same level of compensation will instead be payable to Fountainhead under an amended consulting agreement. These changes have no financial impact on the Company but streamlines the shareholding structure.

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, The options are exercisable for a period of three years from issuance at an exercise price of $0.78.

Compensation of Directors

During the period January 1, 2016 through March 25 2017, we granted Steven Girgenti, Oscar Bronsther, M.D. and Lowell Rush a total of 71,801, 62,945 and 62,945 shares of the Company’s Common Stock respectively for their service to the Board of Directors under the Company’s Deferred Compensation Plan. Under this Plan, the directors may defer their director’s compensation to the January 15th following the termination of their service as a director. All of the above mentioned Stock was granted under the Plan. Each of Mr. Girgenti, Dr. Bronsther and Mr. Rush are entitled to receive $7,000 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.

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		121,601		*
Common Stock	Oscar Bronsther, M.D		103,100		*
Common Stock	Lowell Rush		91,137		*
Common Stock	Adrian Christopher Liddell		220,000-		1.25	%
Common Stock	Marc David Cantor		220,000-		1.25	%
Common Stock	Peter C. Zachariou		431,239		2.42	%
Series D Preferred Stock	Peter C. Zachariou		69,487		25.71	%
Common Stock	All executive officers and directors as a group		1,187,077		6.43	%
Series D Preferred Stock	All executive officers and directors as a group		69,487		25.71	%
Common Stock	Fountainhead Capital Management Limited Portman House Hue Street, St. Helier, Jersey JB4 5RP		6,905,042		49.85	%
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 27, 2017, (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 27, 2017 (17,415,800 shares of Common Stock and 270,307 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, 2017, of our six (6) directors, Steven Girgenti, Oscar Bronsther and Lowell Rush are considered “independent” in accordance with Rule 4200(a)(15) of the NASDAQ Marketplace Rules. The remaining three (3) directors are not considered “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, 2016 and December 31, 2015, respectively, were approximately $48,500 and $46,500.

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, 2016 and 2015 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 2016 or 2015.

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, 2016 and 2015 (audited)

	●	Consolidated Statements of Comprehensive Loss for the years ended December 31, 2016 and 2015 (audited)

	●	Statements of Stockholders’ Deficit from January 1, 2015 to December 31, 2016 (audited)

	●	Statement of Cash Flows for the years ended December 31, 2016 and 2015 (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

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

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

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

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

SIGNATURES

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 31, 2017

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

	Date	March 31, 2017

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 31, 2017

	By:	/s/ David Marc Cantor
		David Marc Cantor
		President and Director (Principal Executive Officer)

	Date	March 31, 2017

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

	Date	March 31, 2017

	By:	/s/ Steven Girgenti
		Steven Girgenti
		Director

	Date	March 31, 2017

	By:	/s/ Oscar Bronsther, M.D.
		Oscar Bronsther, M.D.
		Director

	Date	March 31, 2017

	By:	/s/ Lowell Rush
		Lowell Rush
		Director

	Date	March 31, 2017