UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form
| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the fiscal year ended
Or
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from ___________ to ___________
Commission
file number:
(Exact name of registrant as specified in charter)
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| incorporation or organization) | Identification No.) |
(Address of principal executive offices) (Zip Code)
Registrant’s
telephone Number: (
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol | Name of each exchange on which registered | ||
| OTCQB |
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ☐ Yes ☒
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 ☒
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. ☒
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). ☐ Yes ☒
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 ☐ |
| Smaller
Reporting Company | |
| Emerging
Growth Company |
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒
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. $
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as of the latest practicable date shares of common stock par value $0.0001 as of April 13, 2022
DOCUMENTS
INCORPORATED BY REFERENCE:
TABLE OF CONTENTS
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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.” (“Vycor”). 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. The Company has 67 issued or allowed patents and a further 10 pending. The Company leverages joint resources across the divisions to operate in a cost-efficient manner.
The Company periodically engages in discussions with potential strategic partners for or purchasers of each or both of our operating divisions. In April 2020, the board of Vycor took the decision to close the German operations of NovaVision, including the German office and NovaVision GmbH, and instead migrate to a licensed business model; in June 2020 Vycor announced that it would be entering into a license agreement and transition agreement (the “Agreements”) with HelferApp GmbH, a cognitive therapy specialist. Under the Agreements, HelferApp is licensed to provide NovaVision’s products and therapies in Germany, Austria and Switzerland to patients and professionals. The NovaVision German office was closed effective June 30, 2020.
Vycor Medical
Vycor Medical designs, develops and markets medical devices for use in neurosurgery. Vycor Medical’s ViewSite Brain Access System (“VBAS”) is a next generation retraction and access system. Vycor Medical is ISO 13485:2016 and MDSAP (Medical Device Single Audit Program) certified, and VBAS has U.S. FDA 510(k) clearance and CE Marking for Europe (Class III) for brain and spine surgeries, and regulatory approvals in a number of other international markets. Vycor Medical has 29 granted and 10 pending patents.
NovaVision
NovaVision provides non-invasive, computer-based rehabilitation therapies targeted at people who have impaired vision as a result of stroke or other brain injury, and has 38 granted patents.
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Strategy
The Company is continuing to execute on a plan to achieve revenue growth and a reduction in annual cash operating losses1 and generated a small cash operating profit1 during the year ended December 31, 2021. For Vycor Medical this plan includes: increasing market penetration in the US; increasing international growth in territories where we are not represented or under-represented and continued new product development in response to market demands and demonstrating applicability in a broader range of pathologies. In the US the Company is focused on increasing market penetration through targeting neurosurgeons systematically, both through its distribution network and also directly by leveraging existing KOL neurosurgeon VBAS supporters to access new neurosurgeon users.
The Company continues to target key international territories including Europe where it intends to drive adoption of its VBAS product through selected key KOL neurosurgeon VBAS users in each territory to identify both new potential users and also high-quality distribution partners to bolster our existing network.
The Company has for some time been working to better integrate its VBAS with neuronavigation. The first phase of the modification of the existing VBAS product range was completed in September 2017 and has been well received by surgeons. The second phase involves the introduction of an optional Alignment Clip accessory that will snap onto the VBAS and allow for a neuronavigation pointer to be fully integrated into the body of the VBAS. This VBAS AC model range has received US FDA 510(k) clearance, EU clearance and is going through the regulatory process elsewhere internationally; it is envisaged that it will be available during 2022. The Company will continue to work with neuronavigation companies to seek ways to further integrate the VBAS with neuronavigation and with other companies with complementary technologies used in neurosurgery. We will also be exploring with neurosurgeons and focus groups additional selected development work targeted at increasing the ease and applicability of our products to additional common procedures.
For NovaVision, given the company’s resources, and the large size and diversity of its end markets, we believe that the most efficient way to tackle the distribution of its broad range of patient and professional products is by partnering with entities in selected geographies that have either direct access to the end users or a desire and financial wherewithal to leverage the NovaVision therapy platform, including into new areas. As a result, the Company closed the NovaVision German office and entered into a license agreement with HelferApp, a cognitive therapy specialist, for Germany, Austria and Switzerland, and is seeking similar partnerships in other territories with regional companies able to leverage NovaVision’s clinically supported vision therapies. Management is also open to a broad range of alternatives for NovaVision as a whole, which could comprise distribution and marketing partnerships, licensing, merger or sale.
1 Operating Income or Loss before Depreciation, Amortization and non-cash Stock Compensation
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3. Other Matters
Product Liability Insurance
We presently have Product Liability insurance for Vycor Medical and Professional Liability insurance 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 13485:2016 Medical Devices — Quality Management Systems
The certification of a quality management system to ISO 1348:2016, 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 13485:2016 and from January 1, 2019 also be certified to MDSAP. The certification is also required for placement of branded devices into the European Union.
Vycor Medical has the following certification/licensing:
| ● | ISO 13485.2016 | |
| ● | MDSAP (Medical Device Single Audit Program) | |
| ● | 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) |
Vycor Medical’s VBAS and VBAS AC 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.
Vycor Medical has CE marking approval to allow for distribution of its VBAS products in Europe as a Class III device and has a Health Canada Medical Device License (MDL) for distribution in Canada as a Class II device. VBAS also has regulatory approvals in a number of other international markets. NovaVison’s VRT, NeuroEyeCoach and Sight Science’s NeET have CE mark registrations as Class I devices in Europe.
Employees
We currently have 6 employees.
Website.
The Company operates websites at www.vycormedical.com, www.vycorvbas.com, www.novavision.com and www.sightscience.com. NovaVision’s German partner, HelferApp, maintains the www.novavision.de website
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ITEM 1A. RISK FACTORS
Smaller reporting companies are not required to provide the information required by this item. Notwithstanding, in addition to risk factors highlighted in previous reports, the Company adds the following additional risk factor:
We do not yet know the extent we could be affected by the continuing Coronavirus (COVID-19) pandemic
Vycor Medical experienced a significant reduction in demand during the twelve months ended December 31, 2020 in the US and Europe, particularly in the second quarter, with some recovery in the third and fourth quarters. This recovery continued at a stronger level during the year ended December 31, 2021 such that sales for the Vycor Medical division increased by 23% over the same period in 2020. Although neurosurgery is not considered an elective procedure, general hospital dislocation and diversion of resources away from non-emergency surgeries, or surgeries that can be postponed for a short period without harm, has impacted our revenues during the twelve months ended December 31, 2020 and although this has recovered during the year ended December 31, 2021, COVID-19 remains classified as a pandemic and this could impact future sales. In addition, sales and marketing efforts by Vycor’s representatives were disrupted or curtailed during periods of lockdown and social distancing, and this may continue to hinder the recovery of revenues, particularly in certain international territories where vaccination rates remain relatively low. While our operations are principally located in the United States, and our sub-contract manufacturers are located in the United States, we participate in a global supply chain, and COVID-19 may impact our ability to conduct normal business operations, which could adversely affect our results of operations and liquidity. Furthermore, our sub-contract manufacturers have experienced, and continue to experience, staffing and other shortages and this has significantly elongated our production lead times and this may impact on our revenues. Disruptions to our supply chain and business operations, or to our suppliers’ or customers’ supply chains and business operations, could include disruptions from supplier staff absences due to COVID-19 illness or isolation requirements, the closure of supplier and manufacturer facilities, interruptions in the supply of raw materials and components, or restrictions on the shipment of our or our suppliers’ or customers’ products, any of which could have adverse ripple effects on our manufacturing output and delivery schedule. Although we have implemented business continuity plans for our offices and personnel to enable continuity of service remotely if required, if a critical number of our employees become too ill to work, or we are not able to access a sufficient quantity of our inventory for shipment due to enforced office closures, our production ability could be materially adversely affected in a rapid manner. Similarly, if our customers experience adverse business consequences due to COVID-19, or any other, pandemic, demand for our products could also be materially adversely affected in a rapid manner. Global health concerns, such as COVID-19, could also result in social, economic, and labor instability in the countries and localities in which we or our suppliers and customers operate. Any of these uncertainties could have a material adverse effect on our business, financial condition or results of operations.
ITEM 1B. UNRESOLVED STAFF COMMENTS
N/A
ITEM 2. PROPERTIES
The Company leases office space located at 951 Broken Sound Parkway, Suite 320, Boca Raton, FL 33487 from WPT Land 2 L.P., for a gross rent of approximately $4,000 per month, plus other charges of approximately $2,500 per month. The lease terminated September 30, 2020 and was extended for a further three years to August 31, 2023. The Company’s subsidiary in Germany occupied premises on a rolling 12-month lease agreement with a 3 month notice period of EUR1,650 per month (approximately $1,815), which was terminated effective June 30, 2020.
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
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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 market price of our common stock, like that of other early stage medical device companies, is highly volatile and is subject illiquidity and 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 April 12, 2022 and April 12, 2021 there were 31,455,744 and 28,001,534 shares of common stock issued and outstanding, respectively, and approximately 129 stockholders of record.
Transfer Agent and Registrar
Our transfer agent is EQ by Equiniti, 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 12% 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, 2021 through April 12, 2022 which were not registered under the Securities Act
Common Stock:
| Issuance Type | Security | Security | ||||
| FHC Management Fees (1) | Common | 2,678,570 | ||||
| Steve Girgenti (2) | Common | 575,649 | ||||
| Lowell Rush (2) | Common | 566,793 | ||||
| Ricardo Komotar (3) | Common | 203,326 | ||||
1) Per Agreement between the Company and Fountainhead Capital Management Limited
2) Issuance of Common Shares pursuant to the Company’s Director Deferred Compensation Plan
3) Consulting fees paid in connection with a Consulting Agreement between the Company and the holder
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.
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ITEM 6. SELECTED FINANCIAL DATA
Not applicable
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION.
RESULTS OF OPERATIONS
Comparison of the Year Ended December 31,2021 to the Year Ended December 31, 2020
Revenue and Gross Margin:
Vycor Medical recorded revenue of $1,273,602 from the sale of its products for the year ended December 31,2021, an increase of $234,040 (or 23%) over 2020. This reflected continued recovery in the US and certain international markets following the easing of COVID-19 related issues as well as positive results from Vycor’s strategy to increase penetration described under “Strategy” above. Gross margin of 90% was recorded for the year ended December 31,2021 compared to 88% in 2020.
NovaVision recorded revenues of $119,385 for the year ended December 31, 2021, an increase of $16,902 from 2020, and gross margin of 93%, compared to 94% for 2020.
Research & Development:
Research & Development expenses were $15,159 for the year ended December 31, 2021compared to $0 in 2020, reflecting early-stage product development for the Vycor division.
Selling, General and Administrative Expenses:
Selling, General and Administrative expenses decreased by $67,463 to $1,612,984 in 2020 from $1,680,447 in 2020. Included within Selling, General and Administrative Expenses are non-cash charges for share-based compensation as the result of amortizing employee and non-employee shares and options which have been issued by the Company over various periods. The charge for 2021 was $341,098, a decrease of $178,902 from $520,000 in 2020, following an amendment to the Fountainhead Consulting Agreement and the departure from the Board of Steven Girgenti and Lowell Rush. Also included within Selling, General and Administrative Expenses are Sales Commissions, which increased by $56,801 to $260,508 reflecting increased level of sales in the US.
The remaining Selling, General and Administrative expenses increased by $54,638 from $956,740 to $1,011,378. Patent costs increased by $61,396 due to Vycor division patent activity during the period and higher costs of NovaVision patents; software development and associated scientific and clinical costs related to additional development in NovaVision increased by $48,254; regulatory costs decreased by $11,407 due to the costs of international regulatory costs during the 2020 period and there was also a reduction in professional costs related to the closure of NovaVision Germany during 2020 of $19,558.
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 | |||||||
| Commissions | 56,801 | - | ||||||
| Scientific, clinical and software development | 48,254 | - | ||||||
| Legal, patent, audit/accounting | 46,137 | - | ||||||
| Other (travel/regulatory/premises) | 1,892 | |||||||
| Board and financial | - | (178,902 | ) | |||||
| Regulatory | (11,407 | ) | - | |||||
| Payroll | (15,078 | ) | - | |||||
| Total change | 126,599 | (178,902 | ) | |||||
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Interest Expense:
Interest comprises expense on the Company’s debt and insurance policy financing. Related Party Interest expense for 2021 increased $2,159 following the issuance of related party notes during 2021 and 2020 to $31,841 from $29,682 for 2020. Other Interest expense for 2020 increased by $7,838 to $55,970 from $48,132 for 2020.
Other Income:
Other Income of $117,200 was recorded during the year ended December 31, 2021 from the forgiveness of Paycheck Protection Program loans
Operating loss from Discontinued Operations:
Operating loss from Discontinued Operations increased by $5,241 to $27,413 in 2021 from $22,172 in 2020; this reflected some continued costs during the first half of 2021 which, although were at a much lower level than in 2020, were not offset by revenues as they were in 2020.
Liquidity and Capital Resources
Liquidity
The following table shows cash flow and liquidity data for the years ended December 31, 2021 and December 31, 2020:
| December 31, 2021 | December 31, 2020 | $ Change | ||||||||||
| Cash | $ | 90,941 | $ | 46,002 | $ | 44,939 | ||||||
| Accounts receivable, inventory and other current assets | $ | 396,470 | $ | 417,899 | $ | (21,429 | ) | |||||
| Total current liabilities | $ | (3,149,997 | ) | $ | (2,740,828 | ) | $ | (409,169 | ) | |||
| Working capital | $ | (2,662,586 | ) | $ | (2,276,927 | ) | $ | (385,659 | ) | |||
| Cash provided by financing activities | $ | 61,945 | $ | 286,552 | $ | (224,607 | ) | |||||
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.
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The following table shows the principal components of cash used in operating activities during the years ended December 31, 2021 and 2020, with a commentary of changes during the years and known or anticipated changes:
| December 31, 2021 | December 31, 2020 | $ Change | ||||||||||
| Net loss | $ | (435,662 | ) | $ | (822,482 | ) | $ | 386,820 | ||||
| Adjustments to reconcile net loss to cash used in operating activities: | ||||||||||||
| Amortization and depreciation of assets | $ | 68,418 | $ | 57,895 | $ | 10,523 | ||||||
| Share based compensation | $ | 341,098 | $ | 520,000 | $ | (178,902 | ) | |||||
| Forgiveness of PPP loan | $ | (117,200 | ) | $ | - | $ | (117,200 | ) | ||||
| Other | $ | 12,360 | $ | 12,558 | $ | (198 | ) | |||||
| $ | 304,676 | $ | 590,453 | $ | (285,777 | ) | ||||||
| Net loss adjusted for non-cash items | $ | (130,986 | ) | $ | (232,029 | ) | $ | 101,043 | ||||
| Changes in working capital | ||||||||||||
| Accounts receivable | $ | 33,142 | $ | 115,313 | $ | (82,171 | ) | |||||
| Accounts payable and accrued liabilities | $ | 58,521 | $ | (182,319 | ) | $ | 240,840 | |||||
| Inventory | $ | (38,785 | ) | $ | 14,699 | $ | (53,484 | ) | ||||
| Prepaid expenses and net insurance financing repayments | $ | 13,379 | $ | 14,754 | $ | (1,375 | ) | |||||
| Accrued interest (not paid in cash) | $ | 83,423 | $ | 77,814 | $ | 5,609 | ||||||
| Changes in discontinued operations, net | $ | (3,980 | ) | $ | (59,071 | ) | $ | 55,091 | ||||
| $ | 145,700 | $ | (18,810 | ) | $ | 164,510 | ||||||
| Cash provided by (used in) operating activities, adjusted for net insurance repayments | $ | 14,714 | $ | (250,839 | ) | $ | 265,753 | |||||
The adjustments to reconcile net loss to cash of $304,676 in the period have no impact on liquidity. The positive change in net loss adjusted for non-cash items of $101,043 was primarily due to the increase in sales as a result of recovery from the impact of COVID-19 on the Vycor division and results from the Company’s strategic initiatives. At December 31, 2019 there had been an increase in accounts payable and accrued liabilities mainly due to expenditure on regulatory for the transition to a new EU Notified Body, and regulatory and testing for the VBAS development which occurred during the fourth quarter of 2019. The change in accounts payable and accrued liabilities of $240,840 between the 2021 and 2020 periods was mainly due to the settlement of these accounts during the first few months of 2021.
Additional inventory of $141,512 was purchased during the year ended December 31, 2021 as part of normal production and for marketing inventory for the VBAS AC, and the Company anticipates purchasing additional new inventory of approximately $100,000 during the next twelve months for VBAS and VBAS AC.
Investing Activities. Cash used in investing activities of continuing operations for the year ended December 31, 2021 was $38,375 compared to $62,052 in 2020, which primarily reflected completion of expenditure on the VBAS AC.
Financing Activities. During the year ended December 31, 2021 the Company received funds of $10,000 in respect of loans from Fountainhead. The Company also received a second loan of $58,600 during the period pursuant to the Paycheck Protection Program (the “PPP”) under Division A, Title I of the CARES Act. Both loans received under the Paycheck Protection Program were forgiven in August 2021 and have resulted in an extinguishment of debt for $117,200, which is included in the adjustment to reconcile net loss to cash used in operating activities section on the cash flow statement.
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Liquidity and Plan of Operations, Ability to Continue as a Going Concern
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has incurred losses since its inception, including a net loss of $435,662 and $822,482 for the years ending December 31, 2021 and 2020 respectively and has not generated sufficient cash flows from operations. As at December 31, 2021 the Company had a working capital deficiency of $613,419, excluding related party liabilities of $2,049,167. As a result these conditions, among others, raise substantial doubt regarding our ability to continue as a going concern. The consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty
As described earlier in this ITEM 1 “Strategy”, the Company is continuing to execute on a plan to achieve revenue growth and a reduction in cash operating losses2. For Vycor Medical this plan includes: increasing market penetration in the US; increasing international growth in territories where we are not represented or under represented and continued new product development and demonstrating applicability in a broader range of pathologies. In the US the Company is focused on increasing market penetration through targeting neurosurgeons systematically, both through its distribution network and also directly by leveraging existing KOL neurosurgeon VBAS supporters to access new neurosurgeon users. The Company continues to target key international territories including Europe where it intends to drive adoption of its VBAS product through selected key KOL neurosurgeon VBAS users to identify both new potential users and also high-quality distribution partners to bolster our existing network. The Company has for some time been working to better integrate its VBAS with neuronavigation. The first phase of the modification of the existing VBAS product range was completed in September 2017 and has been well received by surgeons. The second phase involves the introduction of an optional Alignment Clip accessory that will snap onto the VBAS and allow for a neuronavigation pointer to be fully integrated with the VBAS. This VBAS AC model range has received US FDA 510(k) clearance, EU clearance and is going through the regulatory process elsewhere internationally; it is envisaged that it will be available during 2022. The Company will continue to work with neuronavigation companies to seek ways to further integrate the VBAS with neuronavigation and with other companies with complementary technologies used in neurosurgery. We will also be exploring with surgeons and focus groups additional selected development work targeted at increasing the ease and applicability of our products to additional common procedures. For NovaVision, given the company’s resources, and the large size and diversity of its end markets, we believe that the most efficient way to tackle the distribution of its broad range of patient and professional products is by partnering with entities in selected geographies that have either direct access to the end users or a desire and financial wherewithal to leverage the NovaVision therapy platform, including into new areas. As a result, the Company has now closed the NovaVision German office and entered into a license agreement with HelferApp, a cognitive therapy specialist, for Germany, Austria and Switzerland, and is seeking similar partnerships in other territories with regional companies able to leverage NovaVision’s clinically supported vision therapies. Management is also open to a broad range of alternatives for NovaVision as a whole, which could comprise distribution and marketing partnerships, licensing, merger or sale.
However, the Company believes it may not have sufficient cash to meet its various cash needs through March 31, 2023 unless the Company is able to obtain additional cash from the issuance of debt or equity securities. Included within the working capital deficiency above is a term note for $300,000 to EuroAmerican Investment Corp. (“EuroAmerican”), together with accrued interest of $376,897, which has a maturity date of March 31, 2023, having been extended on a number of occasions from its initial due date of June 11, 2011. At this time it is not known whether any further extension of the note beyond March 31, 2023 will be available. Fountainhead, the Company’s largest shareholder, has provided working capital funding to the Company on an as-needed basis, although there is no guarantee that this will continue to be the case. The Company may consider seeking additional equity or debt funding, although there is no assurance that this would be available on acceptable terms or at all. If adequate funds are not available, the Company may have to delay or curtail development or commercialization of products, or cease some of its operations.
2 Operating Loss or Profit before Depreciation, Amortization and non-cash Stock Compensation
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Off-Balance Sheet Arrangements
As of December 31, 2021, 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, provision for inventory obsolescence, useful life of intangible assets, and the fair values of options and warrant included in the determination of debt discounts and stock based compensation.
Revenue Recognition
On January 1, 2018, the Company adopted the new accounting standard, ASC 606, Revenue from Contracts with Customers and all the related amendments (new revenue standard) to all contracts. The adoption of the new accounting standard had no impact on company’s consolidated financial statements.
Vycor Medical generates revenue from the sale of its surgical access system to hospitals and other medical professionals. Vycor Medical records revenue from product sales when obligations under the terms of a contract with customers are satisfied. Generally, this occurs with the transfer of control of the goods to customers. Vycor Medical does not provide for product returns or warranty costs.
Vycor determines revenue recognition through the following steps:
| ● | Identification of the contract, or contracts, with a customer | |
| ● | Identification of the performance obligations in the contract | |
| ● | Determination of the transaction price | |
| ● | Allocation of the transaction price to the performance obligations in the contract | |
| ● | Recognition of revenue when Vycor satisfy a performance obligation |
NovaVision generates revenues from various programs, therapy services and other sources such as software license sales. Therapy services revenues represent fees from NovaVision’s vision restoration therapy software, eye movement training software, diagnostic software, clinic set up and training fees, and the professional and support services associated with the therapy. NovaVision provides vision restoration therapy directly to patients. The typical therapy program consists of NeuroEyeCoach, performed over 2-4 weeks, and six modules of Vision Restoration Therapy, performed over 6 months. A patient contract comprises set-up fees and monthly therapy fees. Set-up fees are recognized at the outset of the contract and therapy revenue is recognized ratably over the therapy period. Patient therapy is restricted to being completed by a patient within a specified time frame.
Deferred revenue results from patients paying for the therapy in advance of receiving the therapy.
| 12 |
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, 2021 and 2020 was $12,360 and $12,558, respectively. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of sales.
Discontinued Operations
In accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations (which we presented as operations to be disposed and operations disposed), less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.
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.
Set
forth below are the audited financial statements for the Company for the fiscal years ended December 31, 2021 and 2020 and the report
thereon of Prager Metis CPAs, LLC (PCAOB ID No.
| 13 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of
Vycor Medical, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Vycor Medical, Inc. (“the Company”) as of December 31, 2021 and 2020, and the related consolidated statements of comprehensive loss, stockholders’ deficiency, and cash flows for the years ended December 31, 2021 and 2020, and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for the years ended December 31, 2021 and 2020, in conformity with accounting principles generally accepted in the United States of America.
Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred net losses since inception, including a net loss of $435,662 and $822,482 for the years ended December 31, 2021 and 2020 respectively, and has not generated sufficient cash flows from its operations. As of December 31, 2021, the Company had working capital deficiency of $613,419, excluding related party liabilities of $2,049,167. These factors, among others, raise substantial doubt regarding the Company’s ability to continue as a going concern. Management’s plans in regards to these matters are described in Note 1 to the financial statements. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. We determined that there is no critical audit matters for the current audit period.
| /s/
|
|
| We have served as the Company’s auditor since 2018. | |
| April 13, 2022 |
| 14 |
VYCOR MEDICAL, INC.
Consolidated Balance Sheets
December 31, 2021 | December 31, 2020 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Trade accounts receivable | ||||||||
| Inventory | ||||||||
| Prepaid expenses and other current assets | ||||||||
| Current assets of discontinued operations | ||||||||
| Total Current Assets | ||||||||
| Fixed assets, net | ||||||||
| Intangible and Other assets: | ||||||||
| Patents, net of accumulated amortization | - | |||||||
| Security deposits | ||||||||
| Operating lease - right of use assets | ||||||||
| Total Intangible and Other assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued interest: Other | ||||||||
| Accrued interest: Related party | ||||||||
| Accrued liabilities - Other | ||||||||
| Accrued liabilities - Related Party | ||||||||
| Notes payable: Other | ||||||||
| Notes payable: Related Party | ||||||||
| Current operating lease liabilities | ||||||||
| Current liabilities of discontinued operations | ( | ) | ||||||
| Total Current Liabilities | ||||||||
| Loan Payable - SBA EIDL | ||||||||
| Operating lease liability - Long term | ||||||||
| Total Long-term Liabilities | ||||||||
| Total Liabilities | ||||||||
| STOCKHOLDERS’ DEFICIENCY | ||||||||
| Preferred stock, $ par value, shares authorized, and issued and outstanding as at December 31, 2021 and December 31, 2020 respectively | ||||||||
| Common Stock, $ par value, shares authorized at December 31, 2021 and December 31, 2020, and shares issued and and outstanding at December. 31, 2021 and December 31, 2020 respectively | ||||||||
| Additional Paid-in Capital | ||||||||
| Treasury Stock ( shares of Common Stock as at December 31, 2021 and December 31, 2020 respectively, at cost) | ( | ) | ( | ) | ||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Accumulated Other Comprehensive Income (Loss) | ||||||||
| Total Stockholders’ Deficiency | ( | ) | ( | ) | ||||
| TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIENCY | $ | $ | ||||||
See accompanying notes to consolidated financial statements
| 15 |
VYCOR MEDICAL, INC.
Consolidated Statements of Comprehensive Loss
| For the year ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenue | $ | $ | ||||||
| Cost of Goods Sold | ||||||||
| Gross Profit | ||||||||
| Operating Expenses: | ||||||||
| Research and development | - | |||||||
| Depreciation and amortization ### | ||||||||
| Selling, general and administrative ### | ||||||||
| Total Operating Expenses | ||||||||
| Operating loss | ( | ) | ( | ) | ||||
| Other Income (Expense) | ||||||||
| Interest expense: Related Party | ( | ) | ( | ) | ||||
| Interest expense: Other | ( | ) | ( | ) | ||||
| Loss on foreign currency exchange | ( | ) | ( | ) | ||||
| Grant Income - SBA | - | |||||||
| Forgiveness of debt: Paycheck Protection Program | - | |||||||
| Total Other Income (Expense) | ( | ) | ||||||
| Loss Before Credit for Income Taxes | ( | ) | ( | ) | ||||
| Credit for income taxes | - | - | ||||||
| Net loss from continuing operations | ( | ) | ( | ) | ||||
| Loss from discontinued operations | ( | ) | ( | ) | ||||
| Net loss | ( | ) | ( | ) | ||||
| Preferred stock dividends | ( | ) | ( | ) | ||||
| Net Loss Available to Common Stockholders | ( | ) | ( | ) | ||||
| Other Comprehensive Income (Loss) | ||||||||
| Foreign currency translation adjustment | ( | ) | ||||||
| Comprehensive Loss | $ | ( | ) | $ | ( | ) | ||
| Net Loss Per Share – basic and diluted | ||||||||
| Loss from continuing operations | $ | ( | ) | $ | ( | ) | ||
| Loss from discontinued operations | $ | ( | ) | $ | ( | ) | ||
| Net Loss available to common stockholders | $ | ( | ) | $ | ( | ) | ||
| Weighted Average Number of Shares Outstanding | ||||||||
See accompanying notes to consolidated financial statements
| 16 |
VYCOR MEDICAL, INC.
Consolidated Statement of Stockholders’ Deficiency
| Additional | Accum | |||||||||||||||||||||||||||||||||||||||||||||||
| Common Stock | Preferred C | Preferred D | Treasury Stock | Paid-in | Accumulated | OCI | ||||||||||||||||||||||||||||||||||||||||||
| Number | Amount | Number | Amount | Number | Amount | Number | Amount |
Capital |
Deficit | (Loss) | Total | |||||||||||||||||||||||||||||||||||||
| Accumulated Comprehensive Loss | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||||
| Issuance of stock for board and consulting fees | ||||||||||||||||||||||||||||||||||||||||||||||||
| Directors deferred compensation granted | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Comprehensive Loss | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Net loss for period ended December 31, 2020 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2020 | - | - | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||
| Issuance of stock for board and consulting fees | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
| Directors deferred compensation granted | - | |||||||||||||||||||||||||||||||||||||||||||||||
| Accumulated Comprehensive Loss | ||||||||||||||||||||||||||||||||||||||||||||||||
| Net loss for period ended December 31, 2021 | ( | ) | ( | ) | ||||||||||||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | $ | $ | | $ | | ( | ) | $ | ( | ) | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||||||||||||||||||||||||
See accompanying notes to consolidated financial statements
| 17 |
VYCOR MEDICAL, INC.
Consolidated Statements of Cash Flows
| For the twelve months ended | ||||||||
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Cash flows from operating activities: | ||||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Adjustments to reconcile net loss to cash provided by (used in) operating activities: | ||||||||
| Amortization of intangible assets | ||||||||
| Depreciation of fixed assets | ||||||||
| Inventory provision | ||||||||
| Stock based compensation | ||||||||
| Forgiveness of debt Paycheck Protection Program | ( | ) | - | |||||
| Changes in assets and liabilities: | ||||||||
| Accounts receivable | ||||||||
| Inventory | ( | ) | ||||||
| Prepaid expenses | ||||||||
| Accrued interest - Related Party | ||||||||
| Accrued interest - Other | ||||||||
| Accounts payable | ( | ) | ||||||
| Accrued liabilities - Other | ( | ) | ||||||
| Changes in discontinued operations, net | ( | ) | ( | ) | ||||
| Cash provided by (used in) operating activities | ( | ) | ||||||
| Cash flows from investing activities: | ||||||||
| Purchase of fixed assets | ( | ) | ( | ) | ||||
| Changes in investing activities of discontinued operations, net | - | |||||||
| Cash used in investing activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from Notes Payable - Related Party | ||||||||
| Proceeds from Paycheck Protection Program and EIDL | ||||||||
| Proceeds net of repayments Notes Payable - Other | ( | ) | ( | ) | ||||
| Cash provided by financing activities | ||||||||
| Effect of exchange rate changes on cash | - | |||||||
| Net increase (decrease) in cash | ( | ) | ||||||
| Cash at beginning of year | ||||||||
| Cash at end of year | $ | $ | ||||||
| Supplemental Disclosures of Cash Flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for income tax | $ | $ | ||||||
| Non-cash Activities: | ||||||||
| Unamortized stock compensation recorded as prepaid expenses | $ | $ | ||||||
See accompanying notes to consolidated financial statements
| 18 |
VYCOR MEDICAL, INC.
Notes to Consolidated Financial Statements
1. BUSINESS OF THE COMPANY AND GOING CONCERN
Business Description
Vycor Medical, Inc. (the “Company”) designs, develops and markets neurological medical devices and therapies through two operating divisions: Vycor Medical and NovaVision. Vycor Medical focuses on brain and cervical surgical access systems for sale to hospitals and medical professionals; NovaVision focuses on neuro-stimulation therapies and diagnostic devices for the treatment and screening of vision field loss resulting from neurological damage.
Ability to continue as a Going Concern
The
accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company
has incurred losses since its inception, including a net loss of $
The
Company is executing on a plan to achieve a reduction in cash operating losses for both the Vycor Medical and NovaVision divisions. Included
within the working capital deficiency above is a term note for $
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts of Vycor Medical, Inc., and its wholly-owned subsidiaries, NovaVision, Inc. (a Delaware corporation), NovaVision GmbH (a German corporation) and Sight Science Limited (a UK corporation), both wholly owned subsidiaries of NovaVision, Inc. The Company is headquartered in Boca Raton, FL. All material inter-company accounts, transactions, and balances have been eliminated in consolidation. Following the decision in April 2020 to close the German office of NovaVision, the activities of NovaVision GmbH have been accounted for as discontinued operations.
Revenue Recognition
On January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers and all the related amendments (new revenue standard) to all contracts. The adoption of the new accounting standard had no impact on company’s consolidated financial statements.
Vycor Medical generates revenue from the sale of its surgical access system to hospitals and other medical professionals. Vycor Medical records revenue from product sales when obligations under the terms of a contract with customers are satisfied. Generally, this occurs with the transfer of control of the goods to customers. Vycor Medical does not provide for product returns or warranty costs.
| 19 |
Vycor determines revenue recognition through the following steps:
| ● | Identification of the contract, or contracts, with a customer | |
| ● | Identification of the performance obligations in the contract | |
| ● | Determination of the transaction price | |
| ● | Allocation of the transaction price to the performance obligations in the contract | |
| ● | Recognition of revenue when Vycor satisfy a performance obligation |
NovaVision generates revenues from various programs, therapy services and other sources such as software license sales. Therapy services revenues represent fees from NovaVision’s vision restoration therapy software, eye movement training software, diagnostic software, clinic set up and training fees, and the professional and support services associated with the therapy. NovaVision provides vision restoration therapy directly to patients. The typical therapy program consists of NeuroEyeCoach, performed over 2-4 weeks, and six modules of Vision Restoration Therapy, performed over 6 months. A patient contract comprises set-up fees and monthly therapy fees. Set-up fees are recognized at the outset of the contract and therapy revenue is recognized ratably over the therapy period. Patient therapy is restricted to being completed by a patient within a specified time frame.
Deferred revenue results from patients paying for the therapy in advance of receiving the therapy.
As part of the adoption of ASC 606, see Note 7 to the Consolidated Financial Statements for further disaggregation of revenue.
Cash and cash equivalents
The
Company maintains cash balances at various financial institutions. Accounts at each institution in the U.S. are insured by the Federal
Deposit Insurance Corporation up to $
Accounts Receivable and Allowance for Doubtful Accounts Receivable
The Company’s accounts receivable are due from the hospitals and distributors in the case of Vycor Medical, and from patients directly for therapy or physicians for diagnostic products in the case of NovaVision. Accounts receivable are due once products have been delivered or at the time the therapy is initiated; however, for NovaVision therapy patients sometimes credit is extended through various payment plans based on individual financial conditions, generally not to exceed the therapy period. The outstanding balances are stated net of an allowance for doubtful accounts.
We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We extend credit to our customers based on an evaluation of their financial condition and other factors. We generally do not require collateral or other security to support accounts receivable. We perform ongoing credit evaluations of our customers and maintain an allowance for potential bad debts if required. We determine whether an allowance for doubtful accounts is required by evaluating specific accounts where information indicates the customers may have an inability to meet financial obligations. In these cases, we use assumptions and judgment, based on the best available facts and circumstances, to record a specific allowance for those customers against amounts due to reduce the receivable to the amount expected to be collected. These specific allowances are re-evaluated and adjusted as additional information is received. The amounts calculated are analyzed to determine the total amount of the allowance. We may also record a general allowance as necessary. Direct write-offs are taken in the period when we have exhausted our efforts to collect overdue and unpaid receivables or otherwise evaluate other circumstances that indicate that we should abandon such efforts.
| 20 |
Inventories
Inventories
consist of raw materials, work in process and finished goods that are stated at the lower of cost determined using the weighted average
cost method, or net realizable value. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated
costs to complete and dispose of the product. If the Company identifies excess, obsolete or unsalable items, its inventories are written
down to their realizable value in the period in which the impairment is first identified. The provision for inventory obsolescence for
the years ended December 31,2021 and 2020 was $
Leases
The Company has one leased building in Boca Raton, Florida that is classified as operating lease right-of use (“ROU”) assets and operating lease liabilities in the Company’s consolidated balance sheet as per ASC 842. ROU assets and lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date for leases exceeding 12 months. Minimum lease payments include only the fixed lease component of the agreement. Operating lease expense is recognized on a straight-line basis over the lease term and is included in cost of Selling, General and Administrative expenses.
The standard was effective for us beginning January 1, 2019. The Company elected the available practical expedients on adoption. The adoption had a material impact on our consolidated balance sheets, but did not have a material impact on our consolidated statements of comprehensive loss. The most significant impact was the recognition of ROU assets and lease liabilities for operating leases.
Discontinued Operations
In accordance with ASU No. 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, a disposal of a component of an entity or a group of components of an entity is required to be reported as discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results when the components of an entity meets the criteria in paragraph 205-20-45-1E to be classified as held for sale. When all of the criteria to be classified as held for sale are met, including management, having the authority to approve the action, commits to a plan to sell the entity, the major current assets, other assets, current liabilities, and noncurrent liabilities shall be reported as components of total assets and liabilities separate from those balances of the continuing operations. At the same time, the results of all discontinued operations (which we presented as operations to be disposed and operations disposed), less applicable income taxes (benefit), shall be reported as components of net income (loss) separate from the net income (loss) of continuing operations in accordance with ASC 205-20-45.
Foreign Currency
The Euro is the local currency of the country in which the discontinued operations of NovaVision GmbH conducts its operations and is considered the functional currency of this entity; the GB Pound is the local currency of the country in which Sight Science Limited conducts its operations and is considered the functional currency of this entity. All balance sheet amounts are translated to U.S. dollars using the U.S. exchange rate at the balance sheet date except for the equity section which is translated at historical rates. Operating statement amounts are translated using an average exchange rate for the period of operations. Foreign currency translation effects are accumulated as part of the accumulated other comprehensive income (loss) and included in stockholders’ deficiency in the accompanying Consolidated Balance Sheets.
Educational marketing and advertising expenses
The Company may incur costs for the education of customers on the uses and benefits of its products. The Company will include education, marketing and advertising expense as a component of selling, general and administrative costs as such costs are incurred.
| 21 |
Income taxes
We use the asset and liability method of accounting for income taxes in accordance with ASC Topic 740, “Income Taxes.” Under this method, income tax expense is recognized for the amount of: (i) taxes payable or refundable for the current year and (ii) deferred tax consequences of temporary differences resulting from matters that have been recognized in an entity’s financial statements or tax returns. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the results of operations in the period that includes the enactment date. A valuation allowance is provided to reduce the deferred tax assets reported if based on the weight of the available positive and negative evidence, it is more likely than not some portion or all of the deferred tax assets will not be realized.
ASC Topic 740.10.30 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC Topic 740.10.40 provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have no material uncertain tax positions for any of the reporting periods presented.
Accounting for forgivable loan received under the Small Business Administration Paycheck Protection Program
During
the year ended December 31, 2020 the Company received a loan of $
The Company accounted for the loans as a financial liability in accordance with FASB ASC 470 and accrued interest in accordance with the interest method under FASB ASC 835-30. For purposes of derecognition of the liability, FASB ASC 470-50-15-4 refers to guidance in FASB ASC 405-20. Based on this guidance, the proceeds of the loans were recorded as a liability until either (1) the loans are, in part or wholly, forgiven and the Company has been “legally released”, or (2) the Company pays off the loans. The Company has accordingly reduced the liability by the amount forgiven and recorded a gain on the extinguishment.
Fixed assets
Fixed assets are stated at cost less accumulated depreciation. Depreciation is provided for on a straight-line basis over the useful lives of the assets. Expenditures for additions and improvements are capitalized; repairs and maintenance are expensed as incurred.
Patents and Other Intangible Assets
The Company capitalizes legal and related costs associated with the establishment and enhancement of patents for its products once patents have been applied for. Costs associated with the development of the patented item or processes are charged to research and development costs as incurred. The capitalized costs are amortized over the life of the patent. The Company reviews intangible assets on an annual in accordance with the authoritative guidance. Trademarks have an indefinite life and are reviewed annually by management for impairment in accordance with the authoritative guidance.
Impairment of long-lived assets
Long-lived assets are reviewed for impairment when circumstances indicate the carrying value of an asset may not be recoverable. For assets that are to be held and used, impairment is recognized when the estimated undiscounted cash flows associated with the asset or group of assets is less than their carrying value. If impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. Fair values are determined based on quoted market values, discounted cash flows or internal and external appraisals, as applicable. Assets to be disposed of are carried at the lower of carrying value or estimated net realizable value.
Research and Development
The
Company expenses all research and development costs as incurred. For the years ended December 31,2021 and 2020, the amounts charged to
research and development expenses were $
| 22 |
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
Uses of estimates in the preparation of financial statements
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimated. To the extent management’s estimates prove to be incorrect, financial results for future periods may be adversely affected. Significant estimates and assumptions contained in the accompanying consolidated financial statements include management’s estimate of the allowance for uncollectible accounts receivable, provision for inventory obsolescence, useful life of intangible assets, and the fair values of options and warrants included in the determination of debt discounts and stock-based compensation.
Stock Option Plan
Under ASC Topic 718, the Company estimates the fair value of option awards on the date of grant using an option-pricing model. The grant date fair value is recognized over the option-vesting period, the period during which an employee is required to provide service in exchange for the award. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. Under these standards, compensation cost for employee cost for employee stock-based awards is based on the estimated grant-date fair value and recognized over the vesting period of the applicable award on a straight-line basis.
Stock Compensation
The Company recognizes the cost of all stock -based payments under the relevant authoritative accounting guidance. Stock-based payments include any remuneration paid by the Company in shares of the Company’s common stock or financial instruments that grant the recipient the right to acquire shares of the Company’s common stock. For stock-based payments to employees, which consist only of awards made under the stock option plan described below, the Company accounts for the payments in accordance with the provisions of ASC Topic 718, “Stock Compensation”. Stock-based payments to consultants, service providers and other non-employees are accounted for in accordance with ASC Topic 718, ASC Topic 505, “Equity Payments to Non-Employees” or other applicable authoritative guidance.
Convertible Instruments
We evaluate and account for conversion options embedded in convertible instruments in accordance with ASC 815 “Derivatives and Hedging Activities”.
Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free-standing derivative financial instruments according to certain criteria. The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not re-measured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.
| 23 |
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.
| 24 |
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.
| December 31, 2021 | December 31, 2020 | |||||||
| Stock options outstanding | - | |||||||
| Debentures convertible into common stock | ||||||||
| Preferred shares convertible into common stock | ||||||||
| Directors Deferred Compensation Plan | - | |||||||
| Total | ||||||||
Recent Accounting Pronouncements
From time to time new accounting pronouncements are issued by the Financial Accounting Standards Board or other standard setting bodies that may have an impact on the Company’s accounting and reporting. The Company believes that other recently issued accounting pronouncements and other authoritative guidance for which the effective date is in the future will not have an impact on its accounting or reporting or that such impact will not be material to its financial position, results of operations and cash flows when implemented.
3. DISCONTINUED OPERATIONS
In April 2020, the board of Vycor took the decision to close the German operations of NovaVision, including the German office and NovaVision GmbH, and instead migrate to a licensed business model; effective July 1, 2020 Vycor entered into a license agreement and transition agreement (the “Agreements”) with HelferApp GmbH, a cognitive therapy specialist. Under the Agreements, HelferApp is licensed to provide NovaVision’s products and therapies in Germany, Austria and Switzerland to patients and professionals; and assumed responsibility for the current patients of NovaVision in the territory. The NovaVision German office was closed effective June 30, 2020. The Company will continue to fund the remaining expenses of the German operations, which are non-material, until such a time as NovaVision GmbH will be formally wound up.
Reconciliation of the major line items from discontinued operations that are presented in the consolidated balance sheets and consolidated statements of comprehensive loss are as follows:
Major line items constituting assets and liabilities in the consolidated balance sheets
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash | $ | $ | ||||||
| Total Current Assets | ||||||||
| TOTAL ASSETS | $ | $ | ||||||
| LIABILITIES | ||||||||
| Current Liabilities | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued liabilities - Other | - | |||||||
| Current liabilities | ( | ) | ||||||
| Total Current Liabilities | $ | ( | ) | $ | ||||
| 25 |
Major line items constituting loss from discontinued operations
| For the twelve months ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenue | $ | $ | ||||||
| Cost of Goods Sold | - | |||||||
| Gross Profit | - | |||||||
| Operating Expenses: | ||||||||
| Selling, general and administrative | ||||||||
| Total Operating Expenses | ||||||||
| Operating Loss | ( | ) | ( | ) | ||||
| Other Income (expense) | ||||||||
| Loss on foreign currency exchange | ( | ) | ( | ) | ||||
| Other income (loss) | - | |||||||
| Total Other Income (Expense) | ( | ) | ||||||
| Loss Before Credit for Income Taxes | ( | ) | ( | ) | ||||
| Credit for income taxes | - | - | ||||||
| Loss from discontinued operations, net of tax | $ | ( | ) | $ | ( | ) | ||
Other
income in the year ended December 31, 2020 comprised the net of non-cash adjustments made in connection with the Agreements with HelferApp
and the closure of the German operation: adjustments for assets and liabilities transferred to HelferApp or NovaVision, Inc. or otherwise
written off - $
4. INVENTORY
| December 31, 2021 | December 31, 2020 | |||||||
| Raw materials and work in process | $ | $ | ||||||
| Finished goods | ||||||||
| Total Inventory | $ | $ | ||||||
| 26 |
5. LEASE
The Company recognized the following related to a lease in its consolidated balance sheets:
| Year Ended December 31, | ||||||||
| 2020 | 2020 | |||||||
| Operating Lease ROU Assets | $ | $ | ||||||
| Operating Lease Liabilities | ||||||||
| Current portion | $ | $ | ||||||
| Long-term portion | ||||||||
| $ | $ | |||||||
6. NOTES PAYABLE
Related Party Notes Payable consists of:
| December 31, 2021 | December 31, 2020 | |||||||
| On June 25, 2018 the Company issued promissory notes to Peter Zachariou for $ | $ | $ | ||||||
| Between March 26, 2018 and March 12, 2021 the Company issued eleven promissory notes to Fountainhead Capital Management Limited for $ | ||||||||
| Total Related Party Notes Payable | $ | $ | ||||||
| 27 |
Other Notes Payable consists of:
| December 31, 2021 | December 31, 2020 | |||||||
| On March 25, 2011 the Company issued a term note for $ | $ | $ | ||||||
| On May 16, 2020, the Company was granted a loan from Citizens Bank N.A. in the amount of $ | ||||||||
| On January 1, 2021, the Company was granted a second PPP loan from Citizens Bank N.A. in the amount of $ | ||||||||
| Insurance policy finance agreements. | ||||||||
| Total Notes Payable: | $ | $ | ||||||
Long-Term Notes Payable consists of:
| December 31, 2021 | December 31, 2020 | |||||||
| On July 7, 2020, the Company was granted a $ | $ | $ | ||||||
| Total Long-term Notes Payable: | $ | $ | ||||||
On
January 24, 2018 the Company entered into an amendment agreement (the “Amendment”) with EuroAmerican Investments (“EuroAmerican”)
regarding its $
| 28 |
The Company routinely finances all their insurance policies through a third party finance company which requires a down payment and subsequent monthly payments, the time periods vary from 10 months to 12 equal monthly payments.
7. SEGMENT REPORTING, GEOGRAPHICAL INFORMATION
(a) Business segments
The
Company operates in
| Year Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenue: | ||||||||
| Vycor Medical | $ | $ | ||||||
| NovaVision | $ | $ | ||||||
| $ | $ | |||||||
| Gross Profit | ||||||||
| Vycor Medical | $ | $ | ||||||
| NovaVision | $ | $ | ||||||
| $ | $ | |||||||
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Total Assets: | ||||||||
| Vycor Medical | $ | $ | ||||||
| NovaVision | ||||||||
| Discontinued operations | ||||||||
| Total Assets | $ | $ | ||||||
(b)
Geographic information. The Company operates in
| Year Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| Revenue: | ||||||||
| United States | $ | $ | ||||||
| Europe | $ | $ | ||||||
| $ | $ | |||||||
| Gross Profit | ||||||||
| United States | $ | $ | ||||||
| Europe | $ | $ | ||||||
| $ | $ | |||||||
| 29 |
| December 31, | December 31, | |||||||
| 2021 | 2020 | |||||||
| Total Assets: | ||||||||
| United States | $ | $ | ||||||
| Europe | ||||||||
| Discontinued operations | ||||||||
| Total Assets | $ | $ | ||||||
8. FIXED ASSETS
Fixed Assets and the estimated lives used in the computation of depreciation are as follows:
| Estimated | December 31, | December 31, | ||||||||
| Useful Lives | 2021 | 2020 | ||||||||
| Machinery and equipment | $ | $ | ||||||||
| Leasehold Improvements | ||||||||||
| Purchased Software | ||||||||||
| Molds and Tooling | ||||||||||
| Furniture and fixtures | ||||||||||
| Therapy Devices | ||||||||||
| Internally Developed Software | ||||||||||
| Less: Accumulated depreciation and amortization | ( | ) | ( | ) | ||||||
| Property and Equipment, net | $ | $ | ||||||||
Depreciation
expense for the years ended December 31, 2021 and 2020 was $
9. INTANGIBLE ASSETS
Intangible Assets consists of:
| December 31, | ||||||||
| 2021 | 2020 | |||||||
| Amortized intangible assets: Patent ( | ||||||||
| Gross carrying Amount | $ | $ | ||||||
| Accumulated Amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
| Amortized intangible assets: Website ( | ||||||||
| Gross carrying Amount | $ | $ | ||||||
| Accumulated Amortization | ( | ) | ( | ) | ||||
| $ | $ | |||||||
Intangible
asset amortization expense for the periods ended December 31,2021 and 2020 was $
| 30 |
10. EQUITY
Equity Transactions
During each of the years ended December 31, 2021 and 2020, the Company granted shares of Common Stock (valued at $) and shares of Common Stock (valued at $), respectively, to non-employee Directors. Under the terms of the Directors Deferred Compensation Plan, the receipt of these shares is deferred until the January 15th following the termination of their services as a director, or following the termination of the Plan. The Plan was terminated on April 1, 2021 and the Company issued and shares of common stock to Steve Girgenti and Lowell Rush, respectively, in respect of their Deferred Compensation shares following their resignations from the board.
On April 1, 2021 the Company issued shares of Common Stock to Ricardo Komotar (RJK Consulting), a consultant, in accordance with the terms of a consulting agreement (see Note 14).
During
each of the years ended December 31, 2021 and 2020, under the terms of the Consultancy Agreement referred to in Note 14, the Company
issued shares of Common Stock to Fountainhead for fees of $
Preferred Stock
During each of the years ended December 31,
2021 and 2020, the Company accrued an aggregate of $
Stock Options
| Weighted average | ||||||||
| exercise price | ||||||||
| Number of shares | per share | |||||||
| Outstanding at December 31, 2019 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Cancelled or expired | ( | ) | ||||||
| Outstanding at December 31, 2020 | $ | |||||||
| Granted | ||||||||
| Exercised | ||||||||
| Cancelled or expired | ( | ) | ||||||
| Outstanding at December 31, 2021 | $ | |||||||
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, or their contractual value if different in the case of common stock. 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 for shares of common stock granted to non-employees for the years ended December 31, 2021 and 2020 was $
and $. $
| 31 |
12. INCOME TAXES
Loss Before Taxes
| December 31, 2021 | December 31, 2020 | |||||||
| Domestic | $ | $ | ||||||
| Foreign | ||||||||
| $ | $ | |||||||
The reconciliation of income tax expense (credit) at the U.S. statutory rate of 21%, to the Company’s effective tax rate is as follows:
| Year Ended December 31, | ||||||||
| 2021 | 2020 | |||||||
| US statutory rate | $ | ( |
) | $ | ( |
) | ||
| Tax difference between foreign and U.S. | ( |
) | ( |
) | ||||
| Change in Valuation Allowance | ( |
) | ( |
) | ||||
| Tax Provision | $ | $ | ||||||
Deferred Income Taxes
The Company has operations in the US, Germany and the UK and 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’s US operating entity 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, 2021 and December 31, 2020 are as follows:
| December 31, 2021 | December 31, 2020 | |||||||
| Operating loss carry-forward - US | $ | $ | ||||||
| Operating loss carry-forward - Foreign | $ | $ | ||||||
| Deferred tax asset before Valuation allowance - US | ||||||||
| Deferred tax asset before Valuation allowance - Foreign | ||||||||
| Valuation allowance | ( | ) | ( | ) | ||||
| 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 recorded 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. Furthermore, in circumstances in
which management has determined that existing conditions or events raise substantial doubt about its ability to continue as a going concern
the authoritative guidance requires that a valuation allowance should be recorded for all deferred tax assets. Accordingly, management
has determined that a
| 32 |
Net Operating Loss Carry-Forwards
Under the Tax Act, net operating loss carryforwards generated for tax years beginning after December 31, 2018, will have an indefinite carryforward period.
As
of December 31, 2021 and 2020, the Company had U.S. accumulated losses for tax purposes of approximately $
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, 2021 and 2020, the Company had German accumulated losses for tax purposes of approximately $
As
of December 31, 2021 and 2020, the Company had UK accumulated losses for tax purposes of approximately $
Tax Rates
The
applicable US income tax rate for the Company for both of the years ended December 31, 2021 and 2020 was
If any 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
| 33 |
13. COMMITMENTS AND CONTINGENCIES
Lease
Effective
August 1, 2017 the Company leased office space located at 951 Broken Sound Parkway, Suite 320, Boca Raton, FL 33487 from WPT Land 2L.P.,
for a rent of approximately $
The table below provides the future lease payments each year until the lease expiration date:
Future Lease Payments
| Year | Liability | |||||
| 2022 | $ | |||||
| 2023 | $ | |||||
Potential German tax liability
In
June 2012 the Company’s NovaVision German subsidiary received a preliminary assessment for Magdeburg City trade tax of €
14. CONSULTING AND OTHER AGREEMENTS
The following agreements remained in force during the years ended December 31, 2021 and 2020:
Consulting Agreement with Fountainhead
In March 2017 and effective
April 1, 2017, the Company amended the Fountainhead Consulting Agreement. Under the Amended Agreement, fees of $
Effective
January 1, 2021, the Company made a slight amendment to the Fountainhead Consulting Agreement (“the Amended Agreement”).
Under the Amended Agreement, fees are payable to Fountainhead, with an option to receive $ per month in cash, and the remainder
payable in Company Common Stock (“Shares”) as follows: 1) Shares on the last day of each quarter; to the extent there
are cash retainer payments during the quarter, the Shares shall be reduced by a number calculated by dividing the cash amount by the
average closing price of the Shares for the 30 trading days prior to issuance; or 2) if the average closing price of the Shares for the
30 trading days prior to issuance is above $, a number of Shares calculated by dividing $
During
each of the years ended December 31, 2021 and 2020 the Company issued shares of Common Stock to Fountainhead for fees of $
| 34 |
Other Agreements
On
March 30, 2021, Vycor entered into a Consulting Agreement with Ricardo J. Komotar, M.D. (the “Agreement”) to provide certain
specified services over the three-year term of the Agreement. Under the Agreement, Dr. Komotar will provide general scientific advisory
consultancy services, and will also provide scientific advisory services based around certain specific pre-determined milestones. In
consideration of the Consultant’s services, the Company agreed to deliver to the Consultant over the course of the three-year term,
a total of shares of Company Common Stock in respect of the general consultancy, and up to shares of Company Common
Stock in respect of the milestones, the actual number of shares to be delivered being determined by the achievement of the pre-determined
milestones. On April 1, 2021 shares of Company Common Stock (valued at market price totaling $
15. RELATED PARTY TRANSACTIONS AND BALANCES
Peter
Zachariou and David Cantor, directors of the Company, are investment managers of Fountainhead which owned, at December 31, 2021,
During
each of the years ended December 31, 2021 and 2020, under the terms of the Consultancy Agreement referred to in Note 14, the Company
issued shares of Common Stock to Fountainhead for fees of $
During
the years ended December 31, 2021 and 2020, respectively, the Company issued an unsecured loan note to Fountainhead for a total of $
During
each of the years ended December 31, 2021 and 2020, the Company accrued an aggregate of $
There
were
16. CONCENTRATION
Vycor Medical sells its neurosurgical devices in the US primarily direct to hospitals, and internationally through distributors who in turn sell to hospitals.
| Sales Concentration | Year ended December 31, | |||||||
| 2021 | 2020 | |||||||
| Number of customers over 10% | ||||||||
| Percentage of sales | % | % | ||||||
Accounts Receivable Concentration
| At December 31, | ||||||||
| 2021 | 2020 | |||||||
| Number of customers over 10% | ||||||||
| Percentage of accounts receivable | % | % | ||||||
We
have three sub-contract manufacturers who each represent over
17. SUBSEQUENT EVENTS
During March 2022 the Company issued an unsecured
loan note to Fountainhead for a total $
On March 31, 2022 the Company issued shares of Common Stock to Fountainhead for fees of $
On April 1, 2022 the Company issued shares of Common Stock to Ricardo Komotar (RJK Consulting), a consultant, in accordance with the terms of a consulting agreement (see Note 14).
The Company has evaluated the existence of events and transactions subsequent to the balance sheet date through the date the consolidated financial statements were issued and has determined that, other than that disclosed above, there were no significant subsequent events or transactions that would require recognition or disclosure in the financial statements.
| 35 |
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 on such evaluation, our CEO and our CFO have concluded that a material weakness occurred as of April 1, 2021 with the resignation of the independent members of the Company’s Audit Committee as of that date. Effective that date, our disclosure and controls were no longer effective to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its CEO and its CFO, as appropriate, to allow timely decisions regarding required disclosure.
The matter involving internal controls and procedures that our management considered to be a material weakness under the standards of the Public Company Accounting Oversight Board was a lack of a functioning audit committee with independent members, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. This weakness occurred as of April 1, 2021 due to the resignation of the independent members of the Audit Committee from the Board of Directors effective as of April 1, 2021.
Management believes that the material weakness set forth did not have an effect on our financial results. However, management believes that the lack of a functioning audit committee and the lack of a majority of outside directors on our board of directors, results in ineffective oversight in the establishment and monitoring of required internal controls and procedures, which could result in a material misstatement in our financial statements in future periods.
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 |
| 36 |
| ● | 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, 2021. 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 not effective as of December 31, 2021 due to the a lack of a functioning audit committee with independent members, resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures.
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
Effective April 1, 2021, the independent members of the Audit Committee resigned from the Board of Directors. There have been no other 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, do 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 | 60 | ||
| David Marc Cantor | President and a Director | 55 | ||
| Adrian Christopher Liddell | Chairman of the Board, Chief Financial Officer and a Director | 63 |
Peter C. Zachariou 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 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 has been Chairman of the Board and a Director of the Company since January 2010, and serves as the Company’s CFO. He is also 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 35 years of strategic, corporate and financial advisory and company investment experience. From 2003 to 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 in corporate finance and mergers & acquisitions at Lehman Brothers and Samuel Montagu & Co, in London. Mr. Liddell qualified as a Chartered Accountant in 1984 and holds an MA, Hons. from Christ’s College, University of Cambridge.
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; |
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| ● | 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. |
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 31,2021 and 2020, respectively (i) to the persons who acted as our principal executive officer during our fiscal year ended December 31,2021 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($) | Bonus($) | Stock Awards($) | Option Awards($) | Non- Equity Incentive Plan Compensation | Non- Qualified Deferred Compensation Earnings ($) | All other Compensation($) | Total($) | |||||||||||||||||||||||||||
| Peter Zachariou | 2021 | $ | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
| CEO | 2020 | $ | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
| David Cantor | 2021 | $ | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
| President | 2020 | $ | — | — | — | — | — | — | — | — |
OUTSTANDING EQUITY AWARDS
Grants of Plan-Based Awards
| Equity Compensation Plan Information | ||||||||||||
| Plan category | Number of securities to be issued upon exercise of outstanding options, warrants and rights (1) | 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 (1) | |||||||||
| Equity compensation plans approved by security holders | 3,210,000 | $ | - | 3,210,000 | ||||||||
| Equity compensation plans not approved by security holders | - | - | - | |||||||||
| Total | 3,210,000 | $ | - | 3,210,000 | ||||||||
| (1) | As of December 31,2021. |
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Warrants Issued to Management
| Name | Grant Date | Number of Securities Underlying Unexercised Exercisable Warrants | Number of Securities Underlying Unexercised Exercisable Warrants | Warrant Exercise Price($) | Warrant Expiration Date | ||||||||||||||||
| None | |||||||||||||||||||||
| Total | - | ||||||||||||||||||||
Employment 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 and is then automatically extended unless terminated by either party. The agreements provided 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 was 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 would be payable under the agreements. The same level of compensation would instead be payable to Fountainhead under an amended consulting agreement. These changes had no financial impact on the Company but streamlines the shareholding structure.
Compensation of Directors
Not applicable
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 March 20, 2020. Unless noted, the address for the following beneficial owners and management is 951 Broken Sound Parkway, Suite 320, 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 | Peter C. Zachariou | 48,856 | 0.16 | % | ||||||
| Series D Preferred Stock | Peter C. Zachariou | 69,487 | 25.71 | % | ||||||
| Common Stock | All executive officers and directors as a group | 48,856 | 0.16 | % | ||||||
| Series D Preferred Stock | All executive officers and directors as a group | 69,487 | 25.71 | % | ||||||
| Common Stock | Fountainhead Capital Management Limited 13 Castle Street, St. Helier, Jersey JE2 3BT | 18,733,378 | 60.79 | % | ||||||
| Series D Preferred Stock | Fountainhead Capital Management Limited 13 Castle Street, St. Helier, Jersey JE2 3BT | 188,363 | 69.69 | % | ||||||
(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 30, 2021, (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 30, 2021 (30,818,367 shares of Common Stock and 270,306 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
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.
Related Party Transactions
During each of the years ended December, 31 2021 and 2020, under the terms of the Consultancy Agreement referred to in Note 14, the Company issued 2,142,856 shares of Common Stock to Fountainhead for fees of $305,001 and $450,000, respectively.
During the years ended December 31, 2021 and 2020, respectively, the Company issued an unsecured loan note to Fountainhead for a total of $10,000 and $80,000, respectively. The loan notes bear interest at a rate of 10% and are due on demand or by their one-year anniversary (see Note 6).
During each of the years ended December 31, 2021 and 2020, the Company accrued an aggregate of $324,370 of Preferred D Stock dividends, of which $226,037 was in respect of Fountainhead and $83,386 was in respect of Peter Zachariou
There were no other related party transactions during the years ended December 31, 2021 and 2020.
Director Independence
As of April 12, 2022, our 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, 2021 and December 31, 2020, respectively, were approximately $59,000 and $56,250.
Tax Fees
The fees billed for professional services rendered by our principal accountant for tax compliance, tax advice and tax planning for the fiscal years ended December 31, 2021 and 2020 were $3,500 and $3,000 respectively.
All Other Fees
There were no fees billed for other products or services provided by our principal accountant for 2021 or 2020.
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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:
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.
| 101.INS# | Inline XBRL Instance Document. | |
| 101.SCH# | Inline XBRL Taxonomy Extension Schema Document. | |
| 101.CAL# | Inline XBRL Taxonomy Extension Calculation Linkbase Document. | |
| 101.DEF# | Inline XBRL Taxonomy Extension Definition Linkbase Document. | |
| 101.LAB# | Inline XBRL Taxonomy Extension Label Linkbase Document. | |
| 101.PRE# | Inline XBRL Taxonomy Extension Presentation Linkbase Document. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
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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 | April 13, 2022 | |
| By: | /s/ Adrian Liddell | |
| Adrian Liddell | ||
| Chairman of the Board and Director | ||
| (Principal Financial and Accounting Officer) | ||
| Date | April 13, 2022 | |
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 | April 13, 2022 | |
| By: | /s/ David Marc Cantor | |
| David Marc Cantor | ||
| President and Director (Principal Executive Officer) | ||
| Date | April 13, 2022 |
| By: | /s/ Adrian Christopher Liddell | |
| Adrian Christopher Liddell | ||
| Chairman of the Board and Director (Principal Financial and Accounting Officer) | ||
| Date | April 13, 2022 |
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