Company Quick10K Filing
Vycor Medical
Price0.14 EPS-0
Shares25 P/E-6
MCap3 P/FCF41
Net Debt-0 EBIT-1
TEV3 TEV/EBIT-6
TTM 2019-09-30, in MM, except price, ratios
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VYCO 10Q Quarterly Report

Part I
Item 1. Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4A(T). Controls and Procedures
Part II
Item 1. Legal Proceedings
Item 1A. Risk Factors.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. (Removed and Reserved)
Item 5. Other Information
Item 6. Exhibits
EX-31.1 d27254_ex31-1.htm
EX-31.2 d27254_ex31-2.htm
EX-32.1 d27254_ex32-1.htm
EX-32.2 d27254_ex32-2.htm

Vycor Medical Earnings 2010-09-30

Balance SheetIncome StatementCash Flow
4.93.21.6-0.1-1.7-3.42012201420172020
Assets, Equity
0.50.1-0.2-0.6-0.9-1.32012201420172020
Rev, G Profit, Net Income
3.92.91.90.8-0.2-1.22012201420172020
Ops, Inv, Fin

10-Q 1 d27254_10-q.htm HTML


U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

(Mark One)
x  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

      For the fiscal quarter ended                 September 30, 2010                 

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

               For the transition period from                              to

VYCOR MEDICAL, INC.

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

                             
  Delaware           333-149782           20-3369218  
  (State of Incorporation)           (Commission File Number)           (IRS Employer Identification No.)  

80 Orville Drive, Suite 100, Bohemia, New York 11716
(Address of principal executive offices) (Zip code)

Issuer's telephone number: (631) 244 1435
Securities registered under Section 12(g) of the Exchange Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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 o No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

           
  Large accelerated filer o     Accelerated filer o  
  Non-accelerated filer o (Do not check if a smaller reporting company)     Smaller reporting company x  

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

There were 696,554,718 shares outstanding of registrant's common stock, par value $.0001 per share, as of October 31, 2010.

Transitional Small Business Disclosure Format (check one): Yes o No x


TABLE OF CONTENTS

                       
  PART I  
  Item 1.     Financial Statements           3  
        Consolidated Balance Sheets as of September 30, 2010 (unaudited) and December 31, 2009     3  
        Unaudited Consolidated Statements of Operations for the three months ended September 30, 2010 and September 30, 2009     4  
        Unaudited Consolidated Statements of Operations for the nine months ended September 30, 2010 and September 30, 2009     5  
        Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2010 and 2009     6  
        Notes to Unaudited Consolidated Financial Statements     7  
  Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operation     21  
  Item 3     Quantitative and Qualitative Disclosures About Market Risk     34  
  Item 4A(T)     Controls and Procedures           34  
  PART II  
  Item 1     Legal Proceedings           34  
  Item 1A     Risk Factors           35  
                       
  Item 2     Unregistered Sales of Equity Securities and Use of Proceeds     35  
  Item 3     Defaults Upon Senior Securities           36  
  Item 4.     (Removed and Reserved)           36  
  Item 5.     Other Information           36  
  Item 6.     Exhibits           36  
                       
  SIGNATURES           36  

2


PART I

ITEM 1. FINANCIAL STATEMENTS

VYCOR MEDICAL, INC.

Balance Sheets

                       
        September 30,
2010
(unaudited)
          December 31,
2009
(audited)
 
  ASSETS                    
  Current Assets                    
  Cash   $ 44,142         $ 12,771  
  Accounts receivable     75,616           29,748  
  Inventory     41,265           41,967  
  Prepaid expenses     76,922           22,369  
        237,945           106,855  
                       
  Fixed assets, net     175,535           191,009  
                       
  Other assets:                    
  Patents, net of accumulated amortization     86,646           93,704  
  Website, net of accumulated amortization     4,710           7,042  
  Security deposits     3,633           2,350  
        94,989           103,096  
                       
  TOTAL ASSETS   $ 508,469         $ 400,960  
                       
  LIABILITIES AND STOCKHOLDERS' DEFICIT                    
  Current Liabilities                    
  Accounts payable   $ 77,191         $ 336,942  
  Accrued interest     25,314           2,904  
  Accrued liabilities     136,471           62,002  
  Other current liabilities     21,158           -  
  Notes payable     496,215           1,111,053  
  TOTAL LIABILITIES     756,349           1,512,901  
                       
  STOCKHOLDERS' DEFICIT                    
                       
  Preferred stock, $0.0001 par value, 10,000,000 shares authorized, none issued and outstanding     -           -  
  Common Stock, $0.0001 par value, 1,500,000,000 shares authorized, 696,554,718 and 557,798,599 shares issued and outstanding at September 30, 2010 and December 31, 2009, respectively     69,655           55,780  
  Additional Paid-in Capital     5,768,369           3,708,967  
  Accumulated Deficit     (6,085,904 )         (4,876,688 )
                       
        (247,880 )         (1.111,941 )
                       
  TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT   $ 508,469         $ 400,960  
  See accompanying notes to financial statements  

3


VYCOR MEDICAL, INC.

Statement of Operations

                       
        For the three months ended September 30,  
        2010
(unaudited)
          2009
(unaudited)
 
                       
  Revenue   $ 71,205         $ 44,198  
                       
  Cost of Goods Sold     11,859           4,584  
                       
  Gross Profit     59,346           39,614  
                       
  Operating expenses:                    
  Research and development     4,009           -  
  General and administrative     337,033           159,158  
                       
  Total Operating expenses     341,042           159,158  
                       
  Operating loss     (281,696 )         (119,544 )
                       
  Interest expense     90,440           33,477  
                       
  Net Loss   $ (372,136 )       $ (153,021 )
                       
  Loss Per Share                    
  Basic and diluted   $ (0.001 )       $ (0.006 )
                       
  Weighted Average Number of Shares Outstanding     683,067,846           26,411,189  
                       

See accompanying notes to financial statements

4


VYCOR MEDICAL, INC.

Statement of Operations

                       
        For the nine months ended September 30,  
        2010
(unaudited)
          2009
(unaudited)
 
                       
  Revenue   $ 210,308         $ 156,587  
                       
  Cost of Goods Sold     33,134           19,417  
                       
  Gross Profit     177,174           137,170  
                       
  Operating expenses:                    
  Research and development     9,657           -  
  General and administrative     1,190,109           735,171  
                       
  Total Operating expenses     1,199,766           735,171  
                       
  Operating loss     (1,022,592 )         (598,001 )
                       
  Interest expense     186,624           226,869  
                       
  Net Loss   $ (1,209,216 )       $ (824,870 )
                       
  Loss Per Share                    
  Basic and diluted   $ (0.002 )       $ (0.031 )
                       
  Weighted Average Number of Shares Outstanding     650,384,814           26,225,958  
                       

See accompanying notes to financial statements

5


VYCOR MEDICAL, INC.

Statement of Cash Flows

                       
        For the nine months ended September 30,  
        2010
(unaudited)
          2009
(unaudited)
 
  Cash flows from operating activities:                    
  Net loss   $ (1,209,216 )       $ (824,870 )
  Adjustments to reconcile net loss to cash used in operating activities:                    
  Amortization of intangible assets     13,172           9,729  
  Depreciation of fixed assets     17,405           17,212  
  Amortization of debt discount expense     152,864           145,303  
  Share based compensation     109,324           64,524  
  Shares issued for consulting services     35,625           17,437  
  Interest satisfied with stock conversion     7,102           6,625  
                       
  Changes in assets and liabilities:                    
  Accounts receivable     (45,868 )         64,726  
  Inventory     702           27,125  
  Prepaid expenses     (54,553 )         (10,471 )
  Security deposit     (1,283 )         -  
  Accounts payable     (259,751 )         27,671  
  Accounts payable satisfied with common stock     14,025           -  
  Accrued interest     22,410           73,733  
  Other current liabilities     21,158           -  
  Accrued liabilities     74,469           159,066  
                       
  Cash used in operating activities     (1,102,415 )         (222,190 )
  Cash flows provided by / (used in) investing activities:                    
  Purchase of fixed assets     (1,931 )         -  
  Reduction of / (Acquisition of) patents     (3,783 )         (64,432 )
  Cash provided by / (used in) investing activities     (5,714 )         (64,432 )
  Cash flows from financing activities:                    
  Proceeds from sale of equity - Common stock     914,500           -  
  Proceeds from sale of equity - Series B preferred     140,000           -  
  Proceeds from short term Notes Payable     376,500           120,000  
  Repayment of short term Notes Payable     (291,500 )         -  
  Cash provided by financing activities     1,139,500           120,000  
  Net increase (decrease) in cash     31,371           (166,622 )
                       
  Cash at beginning of period     12,771           196,138  
  Cash at end of period   $ 44,142         $ 29,516  
                       
  Supplemental Disclosures of Cash Flow information:                    
  Interest paid:   $ -         $ -  
                       
  Taxes paid   $ 2,078         $ -  
                       
  Non-Cash Transactions:                    
  Warrants, options and common stock issued for debt financing   $ 803,690         $ 100,000  
                       
  See accompanying notes to financial statements  

6


VYCOR MEDICAL, INC.
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 2010

1.  BASIS OF PRESENTATION

The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion of management, all adjustments, consisting of normal recurring accruals considered necessary for a fair presentation, have been included. Operating results for the nine months ended September 30, 2010 are not necessarily indicative of the results that may be expected for the year ending December 31, 2010. For further information, refer to the financial statements and footnotes thereto for the year ended December 31, 2009.

2.  FORMATION AND BUSINESS OF THE COMPANY

Business Description

Vycor Medical, LLC, (the "Company") was formed in September 17, 2005 under the laws of the State of New York. The Company converted its entity form on August 14, 2007 from a New York Limited Liability Company to a Delaware Corporation with 16,048 of common stock exchange for each partnership unit with 1122 units outstanding at date of conversion. The assets, liabilities and operations of the Company did not change pursuant to this reorganization, and the accompanying financial statements are presented as if the change occurred on the first day of the earliest period presented; thus all are references to number of shares prior to the date of conversion are based upon the common stock equivalent of the units. The Company's business plan is to develop and market a commercially feasible surgical access system for sale to hospitals and medical professionals.

3.  ACCOUNTING POLICIES

Research and Development

The Company expenses all research and development costs as incurred. For the nine months ended September 30, 2010 and 2009, the amounts charged to research and development expenses were $9,657 and $0, respectively.

Concentration of Credit Risk

The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. The Company's accounts at these institutions may, at times, exceed the federally insured limits. The Company has not experienced any losses in such accounts.

Fair Values of Financial Instruments

At September 30, 2010 and 2009, fair values of cash, accounts receivable, accounts payable, and accrued expenses short term promissory notes approximate their carrying amount due to the short period of time to maturity. The fair value of the Company's long term debt is based on the present value using a discount rate comparable with borrowing rates available to the Company along with various fair value model calculations used to value certain debt related securities.

Property and equipment

The Company records property and equipment at cost and calculates depreciation using the straight-line method over the estimated useful life of the assets, which is estimated to be between three and ten years.

Income taxes

Based upon relevant FASB standard, deferred tax assets and liability account balances are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company provides a valuation allowance, if necessary, to reduce deferred tax assets to their estimated realizable value. The Company has provided a full valuation allowance against the gross deferred tax asset as of September 30, 2010 as it is more likely that this deferred tax asset will not be realized.

7


Uses of estimates in the preparation of financial statements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Critical estimates include amortization of intangible assets, and the fair values of options and warrant included in the determination of debt discounts and share based compensation.

Patents

The Company capitalizes legal and related costs associated with the establishment of patents for its products. Costs associated with the development of the patented item or processes are charged to research and development costs as incurred. The costs associated with the establishment of the patents are amortized over the life of the patent.

The Company reviews existing patents as well as those in the approval process for impairment on an annual basis using a present value, cash flow method based upon relevant FASB standard. Since the Company's patents are either very new or still in the process of approval, the Company does not believe that any impairment of these amounts exists.

Revenue Recognition

The Company records revenue, based upon relevant FASB standard, when a completed contract for the sale exists, title transfers to the buyer and the product is invoiced and shipped to the customer. The Company sells a surgical access system which has already cleared the U.S. FDA 510(k) review process. It has been granted a 510(k) number for marketing the system to hospitals and other medical professionals. The Company does not expect the need to provide for product returns or warranty costs but will review such potential costs after the commencement of sales on an annual basis.

Educational and marketing expenses

The Company may incur costs for the education of customers on the uses and benefits of its products. The Company will expense such costs as a component of selling, general and administrative costs as such costs are incurred.

Website Costs

The Company capitalizes the costs associated with the acquisition of hardware and development tools as well as the creation of database tools in connection with the Company's website pursuant to the relevant FASB standard. Other costs including the development of functionality and identification of software tools are expensed as incurred.

Stock-Based Compensation

Prior to January 1, 2006, the Company accounted for stock-based compensation based upon the relevant FASB standards, under which compensation expense is based on the difference, if any, on the date of the grant, between the fair value of the Company's stock and the exercise price. Stock-based compensation determined under relevant FASB standards is recognized over the option vesting period.

Prior to the adoption of a stock option plan adopted on February 13, 2008, the Company only issued share based compensation to consultants for goods or services. The Company accounted for these transactions based upon the relevant FASB standards. Under these standards, options, warrants, and stock are recorded at their fair value on the measurement date. The Company remeasured the fair value of such instruments granted at each reporting period until performance under the consulting arrangements were completed and the measurement date was reached. The Company records the expense of such services on the estimate fair value of the equity instrument using the Black-Scholes pricing model. The initial expense is recognized over the term of the service agreement.

For future awards to employees, the Company will adopt the relevant FASB standard which requires the recognition of compensation expense for future stock-based compensation awards to employees. Using a fair-value-based method, for costs related to all share-based payments including stock options. These standards require companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. All option grants valued after January 1, 2006 are expensed on a straight-line basis over the vesting period.

8


Fair Values of Assets and Liabilities

Effective January 1, 2008, the relevant FASB standards define the 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. These standards require that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. These standards also established a fair value hierarchy, which prioritizes the valuation inputs into three broad levels.

There are three general valuation techniques that may be used to measure fair value, as described below:

a)  Market approach - Uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. Prices may be indicated by pricing guides, sale transactions, market trades, or other sources;

b)   Cost approach - Based on the amount that currently would be required to replace the service capacity of an asset (replacement cost); and

c)   Income approach - Uses valuation techniques to convert future amounts to a single present amount based on current market expectations about the future amounts (includes present value techniques and option-pricing models). Net present value is an income approach where a stream of expected cash flows is discounted at an appropriate market interest rate.

Financial assets and liabilities are valued using either level 1 inputs based on unadjusted quoted market prices within active markets or using level 2 inputs based primarily on quoted prices for similar assets or liabilities in active or inactive markets. For certain long-term debt, fair value is based on present value techniques using inputs derived principally or corroborated from market data. Using level 3 inputs using management's assumptions about the assumptions market participants would utilize in pricing the asset or liability. In the Company's case this entailed assumptions used in pricing models for attached warrant calculations. Valuation techniques utilized to determine fair value are consistently applied.

The Company's convertible debentures are the only items that are subject to these standards as of September 30, 2010 as follows:

           
  Unobservable inputs (level 3)     $   496,215  

Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is based on the weighted-average common shares outstanding during the period plus dilutive potential common shares calculated using the treasury stock method. Such potentially dilutive shares are excluded when the effect would be to reduce a net loss per share. The Company's potential dilutive shares, which include outstanding common stock options, convertible notes payable and warrants, have not been included in the computation of diluted net loss per share for all periods as the result would be anti-dilutive.

The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share because to do so would be anti-dilutive as of the end of each period presented:

                       
        September 30,
2010
          December 31,
2009
 
  Stock options outstanding     833,333           1,000,000  
                       
  Warrants to purchase common stock     116,766,670           35,493,172  

Recent Accounting Pronouncements

Effective July 1, 2009, the Company adopted the FASB ASC 105-10, Generally Accepted Accounting Principles - Overall ("ASC 105-10"). ASC 105-10 establishes the FASB Accounting Standards Codification (the "Codification") as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants. All guidance contained in the Codification carries an equal level of authority. The Codification superseded all existing non-SEC accounting and reporting standards. All other non-grandfathered, non-SEC accounting literature not included in the Codification is non-authoritative. The FASB will not issue new standards in the form of Statements, FASB Staff Positions or Emerging Issues Task Force Abstracts. Instead, it will issue Accounting Standards Updates ("ASUs"). The FASB will not consider ASUs as authoritative in their own right. ASUs will serve

9


only to update the Codification, provide background information about the guidance and provide the bases for conclusions on the change(s) in the Codification. References made to FASB guidance throughout this document have been updated for the Codification.

Effective January 1, 2008, the Company adopted FASB ASC 820-10, Fair Value Measurements and Disclosures - Overall ("ASC 820-10") with respect to its financial assets and liabilities. In February 2008, the FASB issued updated guidance related to fair value measurements, which is included in the Codification in ASC 820-10-55, Fair Value Measurements and Disclosures - Overall - Implementation Guidance and Illustrations. The updated guidance provided a one year deferral of the effective date of ASC 820-10 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at fair value at least annually. Therefore, the Company adopted the provisions of ASC 820-10 for non-financial assets and non-financial liabilities effective January 1, 2009, and such adoption did not have a material impact on the Company's consolidated results of operations, financial condition or liquidity.

Effective January 1, 2009, the Company adopted FASB ASC 805, Business Combinations ("ASC 805"). ASC 805 establishes principles and requirements for how the acquirer of a business recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree. ASC 805 changes the previous treatment of acquisition related costs, restructuring costs related to an acquisition that the acquirer expects but is not obligated to incur, contingent consideration associated with the purchase price and pre-acquisition contingencies associated with acquired assets and liabilities. Under ASC 805, acquisition costs associated with business combinations will be expensed as incurred, whereas, prior to the adoption of ASC 805, similar costs associated with a successful acquisition were capitalized. ASC 805 applies to business combinations for which the acquisition date is on or after the adoption date, thus the adoption of ASC 805 will have no effect on prior acquisitions. The effect of the adoption of ASC 805 will depend upon the nature of any future business combinations.

In April 2009, the FASB issued updated guidance relating to intangible asset valuation, which is included in the Codification in ASC 350-30-55, General Intangibles Other Than Goodwill - Implementation ("ASC 350-30-55"). ASC 350-30-55 amends ASC 350-30, Intangibles - Goodwill and Other, to identify the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset. ASC 350-30-55 is effective for fiscal years beginning after December 31, 2008. The Company adopted the amendment to ASC 350-30 effective January 1, 2009, and such amendment did not have a material effect on the Company's results of operations, financial position or liquidity.

Effective April 1, 2009, the Company adopted FASB ASC 825-10-65, Financial Instruments - Overall - Transition and Open Effective Date Information ("ASC 825-10-65"). ASC 825-10-65 amends ASC 825-10 to require disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements and also amends ASC 270-10, Presentation - Interim Reporting - Overall, to require those disclosures in all interim financial statements. The adoption of ASC 825-10-65 did not have a material impact on the Company's results of operations, financial position or liquidity.

Effective April 1, 2009, the Company adopted FASB ASC 320-10-65, Investments - Debt and Equity Securities - Overall -Transition and Open Effective Date Information ("ASC 320-10-65). ASC 320-10-65 amends the other-than-temporary impairment guidance in U.S. GAAP to make the guidance more operational and to improve the presentation of other-than-temporary impairments in the financial statements. The adoption ASC 320-10-65 did not have a material impact on the Company's results of operations, financial position or liquidity.

Effective April 1, 2009, the Company adopted FASB ASC 855-10, Subsequent Events - Overall ("ASC 855-10"). ASC 855-10 establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It required the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date - that is, whether that date represents the date the financial statements were issued or were available to be issued. This disclosure should alert all users of financial statements that an entity has not evaluated subsequent events after that date in the set of financial statements being presented. In February 2010, the FASB issued ASU 2010-09, Amendments to Certain Recognition and Disclosure Requirements ("ASU 2010-09"). ASU 2010-09 amended the guidance on subsequent events to remove the requirement for SEC filers to disclose the date through which an entity has evaluated subsequent events. Adoption of ASC 855-10, as amended, did not have a material impact on the Company's results of operations, financial position or liquidity.

Effective July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurements and Disclosures (Topic 820) ("ASU 2009-05"). ASU 2009-05 provided amendments to ASC 820-10, Fair Value Measurements and Disclosures -Overall, for the fair value measurement of liabilities. ASU 2009-05 provides clarification that in circumstances in which a quoted price in an active market for the identical liability is not available, a reporting entity is required to measure fair value using certain techniques. ASU 2009-05 also clarifies that when estimating the fair value of a liability, a reporting entity is not required to include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of a

10


liability. ASU 2009-05 also clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material impact on the Company's results of operations, financial position or liquidity.

The Company does not believe that any other recently issued, but not yet effective accounting standards will have a material effect on the Company's consolidated financial position, results of operations or cash flows.

Going Concern

The Company's financial statements have been presented on a basis that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and assumes the Company will continue as a going concern. The Company has incurred losses since its inception, including a net loss of $1,209,216 for the nine months ended September 30, 2010, and the Company expects to continue to incur substantial additional losses in the future, including additional development costs, costs related to marketing and manufacturing expenses. The Company has incurred negative cash flows from operations since inception. As of September 30, 2010 the Company had a stockholders' deficiency of $247,880 and cash and cash equivalents of $44,142. The Company believes it would not have enough cash to meet its various cash needs unless the Company is able to obtain additional cash from the issuance of debt or equity securities. There is no assurance that additional funds from the issuance of equity will be available for the Company to finance its operations on acceptable terms. If adequate funds are not available, the Company may have to delay development or commercialization of products or technologies that the Company would otherwise seek to commercialize, or cease operations. These conditions raise substantial doubt about the Company's ability to continue as a going concern. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

Under a previously disclosed agreement entered into with Fountainhead Capital Management Limited, Fountainhead agreed to fund or procure funding for Vycor Medical's monthly operating expenses through September 2010 subject to the Company meeting certain financial benchmarks. The Company entered into a new agreement on September 29, 2010 under which Fountainhead agreed to extend this commitment for Vycor Medical's operating expenses through August, 2011.

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4.   NOTES PAYABLE

As of September 30, 2010 and December 31, 2009, Notes Payable consists of:

                 
        September 30,
2010
    December 31,
2009
 
                 
  On December 29, 2009, in conjunction with a debt restructuring (see Note 5) the Company issued a convertible debenture in the amount of $70,000 payable to Fountainhead Capital Management Limited. This debenture accrues interest rate of 6% per annum, is due August 31, 2010, is secured by a first priority security interest in all of the assets of the Company, and is senior to or pari passu with, all other obligations of the Company, subject to certain conditions. The Holder is entitled to convert all or any amount of the principal face amount of the debenture into shares of common stock of the Company at the conversion price of $0.0125 per share, subject to adjustment and does not require bifurcation. The Company has computed a beneficial conversion feature debt discount of $21,427, which was being amortized over the expected life of the loan. As of December 31, 2009, the note reflects an unamortized discount of $21,252. On May 14, 2010, this loan was satisfied.     -     48,748  
                 
  On December 29, 2009, in conjunction with a debt restructuring (see Note 5), the Company issued a convertible debenture in the amount of $371,362 payable to Fountainhead Capital Management Limited. This debenture accrues interest rate of 6% per annum, is due August 31, 2010, is secured by a first priority security interest in all of the assets of the Company, and is senior to or pari passu with, all other obligations of the Company, subject to certain conditions. The Holder is entitled to convert all or any amount of the principal face amount of the debenture then outstanding into shares of common stock of the Company at the conversion price of $0.0125 per share, subject to adjustment and does not require bifurcation. The Company has computed a beneficial conversion feature debt discount of $113,675, which is being amortized over the expected life of the loan to original maturity. On May 14, 2010, the due date for satisfaction was extended to March 30, 2011. The note reflects an unamortized discount of $0 and $112,747 as of September 30, 2010 and December 31, 2009, respectively.     371,362     258,615  
                 
  On December 29, 2009, the Company issued a convertible debenture in the amount of $350,000 payable Regent Private Capital, LLC ("Regent"). This debenture accrues interest rate of 6% per annum, is due August 31, 2010, is secured by a first priority security interest in all of the assets of the Company, and is senior to or pari passu with, all other obligations of the Company, subject to certain conditions. The Holder is entitled to convert all or any amount of the principal face amount of the debenture then outstanding into shares of common stock of the Company at the conversion price of $0.0125 per share, subject to adjustment and does not require bifurcation. On December 29, 2009, this debenture was amended to provide for automatic conversion, subject to the Company authorizing sufficient shares to convert this, and other existing instruments, and transferred to three parties. On January 11, 2010 (see Note 10), these notes were satisfied in accordance with the automatic conversion clause.     -     350,000  
                 
  On December 29, 2009, the Company issued a convertible debenture in the amount of $453,690 payable Regent Private Capital, LLC ("Regent"). This debenture accrues interest rate of 6% per annum, is due August 31, 2010, is secured by a first priority security interest in all of the assets of the Company, and is senior to or pari passu with, all other obligations of the Company, subject to certain conditions. The Holder is entitled to convert all or any amount of the principal face amount of the debenture then outstanding into shares of common stock of the Company at the conversion price of $0.0125 per share, subject to adjustment and does not require bifurcation. On December 29, 2009, this debenture was amended to provide for automatic conversion, subject to the Company authorizing sufficient shares to convert this, and other existing instruments, and transferred to five parties. On January 11, 2010 (see Note 10), these notes were satisfied in accordance with the automatic conversion clause.     -     453,690  
                 

12


                 
        September 30,
2010
    December 31,
2009
 
  On February 3, 2010, the Company issued a convertible debenture in the amount of $70,000 payable to Fountainhead Capital Management Limited. This debenture accrues interest rate of 6% per annum, is due August 31, 2010, is secured by a first priority security interest in all of the assets of the Company, and is senior to or pari passu with, all other obligations of the Company, subject to certain conditions. The Holder is entitled to convert all or any amount of the principal face amount of the debenture then outstanding into shares of common stock of the Company at the conversion price of $0.0125 per share, subject to adjustment and does not require bifurcation. The Company has computed a beneficial conversion feature debt discount of $19,863, which is being amortized over the expected life of the loan to original maturity. On May 14, 2010, the due date for satisfaction was extended to March 30, 2011. The discount has been fully amortized as of September 30, 2010.     70,000     -  
                 
  On September 30, 2010, the Company issued a convertible debenture in the amount of $85,000 payable to Fountainhead Capital Management Limited. This debenture accrues interest rate of 6% per annum, is due August 31, 2011, is secured by a first priority security interest in all of the assets of the Company, and is senior to or pari passu with, all other obligations of the Company, subject to certain conditions. The Holder is entitled to convert all or any amount of the principal face amount of the debenture then outstanding into shares of common stock of the Company at the conversion price of $0.0175 per share, subject to adjustment and does not require bifurcation. The Company has computed a beneficial conversion feature debt discount of $30,147, which is being amortized over the expected life of the loan. The note reflects an unamortized discount of $30,147 as of September 30, 2010.     54,853     -  
                 
  Total Notes Payable:   $ 496,215   $ 1,111,053  

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The following is a schedule of future minimum loan payments:

                 
  Twelve months ending September 30,           Amount  
  2011         $ 526,362  
  2012           -  
  2013           -  
  2014           -  
  2015           -  
  Thereafter           -  
  Total         $ 526,362  
  Less debt discount           30,147  
            $ 496,215  

As of September 30, 2010, the Company's entire notes payable is secured by a first security interest in all of the assets of the Company.

5.   EQUITY

Certain Equity Transactions

As prescribed in a previous agreement, in consideration for services provided to the Board of Directors, the Company issued 800,000 shares of its common stock to Steven Girgenti on February 23, 2010.

On January 11, 2010, in accordance with the terms prescribed in debentures totaling $803,690, the Company issued 64,295,200 common shares to automatically convert said debentures at the rate of $0.0125 per share.

In accordance with the previously filed Certificate of Designation, the Company has sold 140,000 shares of Series B Preferred Stock during the current fiscal year for an aggregate amount of $140,000. These were converted on September 11 2010, along with accrued interest, into 11,768,197 shares of the Company's Common Stock at a multiple of 80 common shares per Series B share.

In accordance with an agreement with Joe Simone for consulting services relating to identifying sales and marketing opportunities, increasing investor awareness of the Company, identifying potential new investors who might have an interest in investing in the Company, and other activities in the furtherance of the above, the Company issued 750,000 shares of its Common Stock valued at $9,375.

On April 14, 2010, by action by written consent of the Board of Directors, the Company developed the 2010 Professional/Consultant Stock Compensation Plan. Further, a Form S-8 Registration Statement was filed with the Securities and Exchange Commission on April 16, 2010, registering 934,986 shares for the Plan's use. It was further resolved that these shares be issued to Gregory Sichenzia for services provided to the Company by Sichenzia Ross Friedman Ference LLP, valued at $14,025.

From April 13, 2010 through May 10, 2010, the Company accepted Subscription Agreements from eleven subscribers for the purchase of its Common Stock. In accordance with these Agreements, 49,966,665 shares were purchased at $0.015 per share, totaling $749,500. Approximately $72,500 of reimbursable out-of-pocket costs were incurred by consultants in furtherance of these transactions.

On August 11, 2010, in consideration for services provided to the Board of Directors (valued at $5,000), the Company issued 250,000 shares of its common stock to Steven Girgenti.

On August 11, 2010, in consideration for services provided to the Board of Directors (valued at $6,000), the Company issued 300,000 shares of its common stock to Ramin Rak, M.D., P.C.

On August 11, 2010, in consideration for services provided to the Board of Directors (valued at $5,250), the Company issued 262,500 shares of its common stock to Konstantin V. Slavin.

From July 20, 2010 through September, 2010, the Company accepted Subscription Agreements from six subscribers for the purchase of its Common Stock. In accordance with these Agreements, 9,428,571 shares were purchased at $0.0175 per share, totaling $165,000

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6. AMENDMENTS TO ARTICLES OF INCORPORATION OR BY-LAWS

Effective July 11, 2010, the Company amended its Certificate of Incorporation to increase the Company's authorized capital to 1,510,000,000 shares comprising 1,500,000,000 shares of Common Stock par value $.0001 per share and 10,000,000 shares of Preferred Stock par value $0.0001 per share.

7.   SHARE-BASED COMPENSATION

Under relevant FASB standard, options are recorded at their fair value on the measurement date. The Company remeasured the fair value of the options or warrants granted at each reporting period until performance under the consulting agreement was completed and the measurement date was reached. The Company expensed the fair value of the instrument granted over the requisite service period which was the term of the consulting agreement, or one year.

For employee based awards which consist only of awards made under the "Stock Option Plan" described below, the company follows relevant FASB standards which require companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. Under these standards, compensation 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. There were no employee stock options granted for the nine months ended September 30, 2010.

Stock Option Plan

The Company has adopted the Vycor Medical, Inc Employee, Director, and Consultant Stock Plan as of February 13, 2008, that includes both incentive stock options and nonqualified stock options to be granted to employees, officers, and consultants, independent contractors, directors and affiliates of the Company. The board of directors establishes the terms and conditions of all stock options grants, subject to the Plan and applicable provisions of the Internal Revenue Code. Incentive stock options must be granted at an exercise price not less than the fair market value of the common stock on the grant date. The options granted to participants owning more than 10% of the Company's outstanding voting stock must be granted at an exercise price not less than 110% of the fair market value of the common stock on the grant date. The options expire on the date determined by the board of directors, but may not extend mare than 10 years from the grant date, while incentive stock options granted to participants owning more than 10% of the Company's outstanding voting stock expire five years from the grant date. The vesting period for employees is generally over three years. The vesting Period for nonemployees is determined based on the services being provided.

Initial grants totaling 500,000 shares each were issued on February 13, 2008 to Kenneth T. Coviello, Chief Executive Officer and Heather N. Vinas, President at an exercise price of $.135 per share. The options vest 33 1/3 % on each of the first, second, and third anniversary of the grant and expire February 12, 2018. Accordingly, for the nine months ended September 30, 2010, the Company recognized share-based compensation amounts of $28,920 and $28,920, for each of the respective grants.

The maximum number of shares of stock which maybe delivered under the plan shall automatically increase by a number sufficient to cause the number of shares covered by the plan to equal 10% of the total number of shares of stock then outstanding on a fully diluted basis.

Stock appreciation rights may be granted either on a stand alone basis or in conjunction with all or part of any other stock options granted under the plan. As of September 30, 2010 there were no awards of any stock appreciation rights.

15


Outstanding Rights, Options, and Warrants

The details of the outstanding rights, options and warrants and value of such rights, options and warrants are as follows:

STOCK WARRANTS:

                       
        Number of
shares
          Weighted Average
Exercise price
per share
 
                       
  Outstanding at January 1, 2007     4,144,300           0.43  
                       
  Granted     1,143,408           0.32  
  Exercised                    
  Cancelled or expired                    
  Outstanding at December 31, 2007     5,287,708           0.41  
                       
  Granted     1,365,788           0.31  
  Exercised                    
  Cancelled or expired     (192,576 )         0.24  
  Outstanding at December 31, 2008     6,460,920         $ 0.39  
                       
  Granted     32,900,132           0.007  
  Exercised                    
  Cancelled or expired     (3,867,880 )         0.399  
  Outstanding at December 31, 2009     35,493,172         $ 0.031  
                       
  Granted     89,691,077           0.015  
  Exercised                    
  Cancelled or expired     (8,417,579 )         0.007  
  Outstanding at September 30, 2010     116,766,670         $ 0.020  

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STOCK OPTIONS:

                       
        Number of
shares
          Weighted
Average
Exercise
price per
share
 
                       
  Outstanding at January 1, 2007     -           -  
                       
  Granted                    
  Exercised                    
  Cancelled or expired                    
  Outstanding at December 31, 2007     -           -  
                       
  Granted     1,050,000           0.14  
  Exercised                    
  Cancelled or expired                    
  Outstanding at December 31, 2008     1,050,000         $ 0.14  
                       
  Granted                    
  Exercised                    
  Cancelled or expired     (50,000 )         0.14  
  Outstanding at December 31, 2009     1,000,000         $ 0.14  
                       
  Granted                    
  Exercised                    
  Cancelled or expired     (166,667 )         0.14  
  Outstanding at September 30, 2010     833,333         $ 0.14  

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In consideration for being the Company's strategic business advisor, in 2007 the Company issued a warrant to Martin Magida to purchase up to 160,480 shares of the Company's common stock at $.24 per share. The warrant is valid from September 1, 2007 for a period of five years. This warrant was fair valued under the Black-Scholes Model and amortized over the life of the warrant agreement. For the nine months ended September 30, 2010, $3,342 was recognized as share-based compensation in connection with this agreement.

In consideration for providing advisory services in 2007, the Company issued a warrant to Robert Guinta to purchase up to 160,480 shares of the Company's common stock at $.24 per share. The warrant is valid from September 1, 2007 for a period of five years. This warrant was fair valued under the Black-Scholes Model and amortized over the life of the warrant agreement. For the year ended September 30, 2010, $3,342 was recognized as share-based compensation in connection with this agreement.

Under the terms of a consulting agreement dated February 2010, the Company issued warrants to Fountainhead Capital Management to purchase up to 39,063,670 shares of the Company's common stock at $.0125 per share. The warrants are valid from February 10, 2010 for a period of five years. This warrant was fair valued under the Black-Scholes Model and amortized over the life of the warrant agreement. For the nine months ended September 30, 2010, $44,800 was recognized as share-based compensation in connection with this agreement.

Under the terms of an Extension of Funding Commitment agreement dated September 2010, the Company issued warrants to Fountainhead Capital Management to purchase up to 50,627,407 shares of the Company's common stock at $.0175 per share. The warrants are valid from September 29, 2010 for a period of five years. This warrant was fair valued under the Black-Scholes Model and amortized over the life of the warrant agreement. For the nine months ended September 30, 2010, $0 was recognized as share-based compensation in connection with this agreement.

Stock-based compensation expense charged to operations on options and warrants granted to the above non-employees for the nine months ended September 30, 2010 is $51,484. As of September 30, 2010, there was approximately $807,000 of total unrecognized compensation costs related to non-vested stock options awards, which are expected to be recognized over a weighted average period of approximately 4.5 years.

Stock-based compensation expenses related to stock options granted to non-employees is recognized as the stock options are earned. The Company believes that the fair value of the stock options is more reliably measured than the fair value of the services received. The fair value of the stock options granted is calculated at each reporting date, using the Black-Scholes option-pricing model, until the award vests or there is substantial disincentive for the non-employee not to perform the required services. The following assumptions were used in calculations of the Black Scholes option pricing model:

                 
  Risk-free interest rates     4 - 5%        
  Expected life     3 years        
  Expected dividends     0%        
  Expected volatility     99%        

Expected Life. The expected life is based on the "simplified" method described in the SEC Staff Accounting Bulletin, Topic 14: Share-Based Payment.

Volatility. Since the Company was a private entity for most of 2007 with no historical data regarding the volatility of its common stock, the expected volatility used for 2006 and 2007 is based on volatility of similar entities, referred to as "guideline" companies. In evaluation similarity, the Company considered factors such as industry, stage of life cycle and size.

Risk-Free Interest Rate. The risk-free rate is based on rates approximating U.S. Treasury zero-coupon issues with remaining terms similar to the expected term on the options.

Dividend Yield. The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future, and therefore, used an expected dividend yield of zero in the valuation method.

Forfeitures. The relevant FASB standards require the Company to estimate forfeitures at the time of grant, and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data, however limited to date, to estimate pre-vesting options forfeitures and record stock-based compensation expense only for those awards that are expected to vest. All stock-based payment awards are amortized on a straight-line basis over the requisite service periods of awards, which are generally the vesting periods. If the Company's actual forfeiture rate is materially different from its estimate, the stock-based compensation expense could be significantly different from what the Company has recorded in the current period.

The weighted-average remaining contractual life of outstanding warrants and options is 4.71 and 7.88 years, respectively.

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8.  INCOME TAXES

The Company has incurred net operating losses since inception. The Company has not reflected any benefit of such net operating loss carry forward in the financial statements. Prior to August 15, 2007 the Company was a limited liability company and losses were flowed through to the individual members, therefore the Company only has potential tax benefits from the date it became a 'C' corporation.

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.

Based on the level of historical taxable losses and projections of future taxable income (losses) over the periods in which the deferred tax assets can be realized, management currently believes that it is more likely than not that the Company will not realize the benefits of these deductible differences. Accordingly, the Company has provided a valuation allowance against the gross deferred tax assets as follows:

                       
        September 30, 2010           December 31, 2009  
                       
  Gross deferred tax assets     1,417,500           1,032,500  
  Valuation allowance     (1,417,500 )         (1,032,500 )
  Net deferred tax asset                

As of September 30, 2010 and December 31, 2009, the Company has U.S. federal net operating loss carryforwards of approximately $4,050,000 and $2,950,000, respectively. The federal net operating loss carryforwards expire in the tax years 2027 through 2030.

Federal tax laws impose significant restrictions on the utilization of net operating loss carryforwards and research and development credits 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 carryforwards and research and development credits may be subject to the above limitations.

The relevant FASB standard resulted in no adjustments to the Company's liability for unrecognized tax benefits. As of both the date of adoption and as of September 30, 2010 there were no unrecognizable tax benefits. Accordingly, a tabular reconciliation from beginning to ending periods is not provided. The Company will classify any future interest and penalties as a component of income tax expense if incurred. To date, there have been no interest or penalties charged or accrued in relation to unrecognized tax benefits. The Company is subject to federal and state examinations for the year 2006 forward. There are no tax examinations currently in progress.

9.  COMMITMENTS AND CONTINGENCIES

Lease

The Company executed a lease agreement for administrative office space at its current location at 80 Orville Drive, Bohemia, New York. The lease term is four months ending February, 28 2011. Payments under this lease include fixed amounts for occupancy, plus additional charges for common area, phone equipment, phone usage, secure inventory storage area, office services, and other consumables. Rental expense for the nine months ended September 30, 2010 and 2009 were $26,465 and $16,905, respectively.

10.  SUBSEQUENT EVENTS

Common Stock Subscriptions

In October the Company received a subscription agreement from one investor to purchase 2,285,714 shares of Company common stock at a price of $0.0175 per share for gross proceeds of $40,000.

In November 2010, the Company received subscription agreements from three investors to purchase an aggregate of 6,666,666 shares of Company common stock at a price of $0.0225 per share for aggregate gross proceeds of $150,000.

On November 12, 2010, in consideration for services provided to the Board of Directors (valued at $5,000), the Company issued 250,000 shares of its common stock to Steven Girgenti.

19


Fountainhead Capital Management Limited advances

Under the terms of the Extension of Funding Commitment agreement dated September 2010, Fountainhead advanced the Company $90,000 in operating funds during October 2010, and the Company has issued a convertible debenture for a like amount. This debenture bears an interest rate of 6% per annum, is due August 31, 2011, and is convertible into shares of the Company's Common Stock at the rate of $0.0175 per share at Fountainhead's option.

Entry into purchase agreement for the acquisition of the assets of NovaVision, Inc.

On November 5, 2010, the Company entered into an asset purchase agreement (the "Purchase Agreement") with Michael R. Bakst, the Chapter 7 trustee (the "Trustee") of NovaVision, Inc., a company that had been in the business of researching, developing and providing medical technologies to restore the vision of patients with neurological visual loss ("NovaVision"). The Purchase Agreement provides for the purchase by Vycor of the assets, including all intellectual property, of NovaVision, (the "Acquisition"). A term sheet and escrow agreement for the Acquisition had been entered into by Fountainhead Capital Management Limited on October 14, 2010 under which $77,500 had been paid by Fountainhead as a due diligence and standstill deposit. This term sheet and escrow agreement were assigned to Vycor on October 26, 2010, in return for a debenture for $77,500. The purchase price for the Acquisition is $900,000 in cash, including the $77,500 already paid formerly as a due diligence and standstill deposit. Immediately upon the execution of the Purchase Agreement, an additional $622,500 was placed into escrow by Vycor. The remaining $200,000 will be added to escrow on November 16, 2010. The closing of the Acquisition will occur on the business day following the bankruptcy court's approval of the Acquisition, but no earlier than November 16, 2010 and no later than December 8, 2010.

In connection with the Acquisition, the Company received $750,000 in funding from Fountainhead and parties affiliated to Fountainhead. The Company received an aggregate $400,000 from Fountainhead and issued debentures for a like amount, which bear an interest rate of 6% per annum and are due August 31, 2011. The Company received $350,000 from Peter Zachariou, who is a Director and Officer of Vycor, and issued a convertible debenture for a like amount. This debenture bears an interest rate of 6% per annum, is due August 31, 2011, and is convertible into shares of the Company's Common Stock at the rate of $0.0225 per share at Peter Zachariou's option.

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

This Form 10-Q 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 "Description of Business," as well as in this Form 10-Q generally. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results.

Any or all of our forward-looking statements in this report may turn out to be inaccurate. They can be affected by inaccurate assumptions we might make or by known or unknown risks or uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially as a result of various factors, including, without limitation, the risks outlined under "Risk Factors" and matters described in this Form 10-Q generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur. You should not place undue reliance on these forward-looking statements.

The forward-looking statements speak only as of the date on which they are made, and, except to the extent required by federal securities laws, we undertake no obligation to publicly update any forward-looking statements, whether as the result of new information, future events, or otherwise.

Organizational History

We were 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." ("Delaware Corporation"). Our sole reason for conversion to the Delaware Corporation was to facilitate the raising of additional capital, as prospective investors had expressed resistance to investing in the Company as the NY LLC. At August 14, 2007, we had approximately 1,122 membership units of the NY LLC issued and outstanding. The managing members of the NY LLC determined, in their reasonable business judgment, that such units, in the aggregate, should convert to an aggregate of 17,999,999 shares of common stock of the Delaware Corporation. On this basis, we adopted a conversion ratio of 16,048 shares of common stock of the Delaware Corporation for each former unit of the NY LLC. Likewise, all conversion rights, options, warrants and any other rights to acquire units of the NY LLC (including but not limited to units issuable pursuant to the terms of the Fountainhead Bridge Loan Debenture, Fountainhead Warrant to purchase 50.22 units of the NY LLC, the Company's Option Agreement with Fountainhead dated December 14, 2006), were converted to conversion rights, options, warrants and rights to acquire common shares of the Delaware Corporation, based on the same conversion ratio. The action authorizing the conversion was adopted by the unanimous consent of the Managing Members of the NY LLC pursuant to the terms of the NY LLC Operating Agreement.

Overview of Business

Vycor Medical Inc. is a medical device company headquartered in Bohemia, NY that designs, develops and markets medical devices for use in neurosurgery. The company is ISO 13485:2003 compliant, has U.S. FDA 510(k) clearance for brain and spine surgeries, CE Marking for Europe and Canadian HPB licensing for sale in Canada of its brain retractors. The Company has developed its first product, the ViewSite Brain Access System (VBAS), a next generation brain retractor system. This is now commercialized and revenue generating. The VBAS addresses a market that has not changed materially in over 50 years in contrast to development in surgical technologies.

The second product in our pipeline is the Cervical Access System, which requires further prototyping and successful market testing and commercialization launch. Like the Brain Access System, this product is designed to assist the surgeon in cervical surgeries, allowing the surgeon to gain access to the anterior cervical surgery site.

We have received FDA 510(k) clearance for our products. Section 510(k) of the United States Food, Drug and Cosmetic Act requires medical device manufacturers to register with the U.S. Food and Drug Administration of their intent to market

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a medical device at least 90 days in advance. The 510(k) submission allows the U.S. Food and Drug Administration to determine whether a device is generally equivalent to similar one already on the market. With the FDA 510(k) clearance, we are authorized to take our products to market in the U.S. without further approvals.

In addition to our existing products and products in development, we actively seek acquisition, joint venture and in-licensing opportunities which we believe will add shareholder value.

Our Products
Viewsite Brain Access System (VBAS)

The VBAS series is used by neurosurgeons to access the surgical site in the brain. This is done by inserting the VBAS into the brain tissue and then removing the VBAS introducer, leaving the remaining hollow working channel in place to provide the surgeon with access to the precise location desired for surgery.

The VBAS is available in multiple sizes and is a single-use product. We intend to add additional models in the future.

We believe our Brain Access System offers several advantages over the brain retractor systems, commonly known as ribbon or blade retractors that are metallic. When designing the products, we felt that if we can incorporate certain features into our products, the surgeon reaction and acceptance would be favorable. We attempted to incorporate the following features:

           
      Gently separate delicate tissue by utilizing a tapered forward edge;  
      Minimize venous pressure caused by pulling tissue in one direction in the brain;  
      To allow direct surgical visualization of the brain tissue via optically transparent construction;  
      Reduce "target shift" to allow the surgeon to reach the site accurately;  
      Minimize healthy tissue damage while reaching the target site;  
      Allow for accurate neuronavigational image guidance systems ("IGS") performance;  
      Integrate in due course with the leading surgical IGS systems such as Medtronic® and BrainLab®, Stryker and GE;  
      Improve surgical outcomes (reducing potential surgeon and hospital liability), for example, decreased insertion tissue trauma, less need for readjustment during surgery and minimum interface surface pressures;  
      Reduce damage to healthy brain tissue potentially leading to shorter post-op recovery and reduced hospital stay  

The extent to which we are successful in achieving the above objectives will be judged by the acceptance of the devices in the market.

The Brain Access System products have the potential to significantly reduce brain tissue trauma resulting from the currently used retractors and standard access procedures. First, the unique design of the product minimizes the size of the brain entry access necessary for surgical procedures, and in turn the amount of brain tissue exposed. For instance, a brain procedure involving the removal of a 7cm cystic astrocyctoma would result in an access site (corticotomy) of approximately 20mm. However, the same procedure that was performed utilizing the Company's Brain Access System product required a corticotomy of only 2mm.

Because our products are relatively new to the market, there is no guarantee that any of the above mentioned features would prove effective and be useful by the end user.

Product shortcomings

Our products have a few shortcomings:

           
      As compared to existing blade retractors our device diameter is fixed as opposed to variable which might give the surgeon less flexibility once he is at the desired location.  
      The diameters and lengths of our devices are set to specific measurements, which may limit the surgeon to these specific sizes.  
      Depending on the case, usage of a disposable product may be viewed as more costly and may not be accepted by our potential end users.  

IGS Opportunity for the Brain Access System

The VBAS product has the potential to improve surgical use of IGS (Image Guidance Systems) employed in many surgeries, by addressing two substantial IGS-related problems of target shifting and the lack of real-time retractor positioning data during procedures:

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•     Target Shifting

The normal surgical procedure utilizing standard retractors in brain surgery require pulling away the healthy tissue to expose the targeted region of the brain located underneath. However, in many cases, the amount of pulling required causes the targeted area to shift away from what is shown on the IGS system. This target shifting then requires the surgeon to cause possible additional trauma to healthy tissue and spend additional time as the shifted target area is located and the retractor is repositioned. The VBAS system is designed to minimize or eliminate target shift, as the elliptical shape of the product distributes relatively uniform pressure on the surrounding brain tissue.

•     Real-Time Retractor Positioning Data

Current retractor technology (commonly known as ribbon or blade retractors) is not well integrated with IGS systems. During insertion, the surgeon typically does not have real-time data to allow visualization of retractor insertion on the IGS monitor. The VBAS product line has the potential to adapt to IGS systems, such that the use of a Brain Access System unit will allow the surgeon to see on the surgical monitor, in real-time, exactly where the retractor is in relation to critical brain structures and underlying pathologies. With the IGS enabled unit, the tip of the introducer is literally the "pointer" on the IGS system.

Brain Access System Product Models

•     TC-VBAS

The series consists of twelve disposable products, offered in four different port diameters of 17mm and 21mm, 12mm and 28 mm and a choice of three lengths for each of 3, 5, and 7cm.

Cervical Access Products

Subject to the raising of additional capital (which cannot be guaranteed), the Company will continue its preliminary work to design Cervical Access System products which would be used by the surgeon to access the anterior cervical surgical site (the uppermost vertebrae located in the neck). While the Company has filed certain intellectual property applications with respect to this technology, such development is in an early stage.

We plan to design the Cervical Access System to:

           
      reduce the possibility of surrounding anatomic tissue damage, which include the trachea, esophagus, carotid artery, recurrent laryngeal and sympathetic nerve;  
      minimize skin disruption with the utilization of tapered outward edges;  
      eliminate retractor induced electrocautery burn injuries because it is made with surgical grade plastic materials;  
      enable stable fixation (directly to the spinal column) in order to avoid accidental displacement and surrounding "tissue creep"; and  
      allows for direct visualization of underlying anatomic structures using optically clear plastic.  

Because the Cervical Access System products have not yet been brought to market, there is no guarantee that any of the abovementioned features would prove effective and even so, be welcomed by the end user. Further research and development is needed for a market-ready product.

New Products

Brain Retractors

Subject to the availability of additional financing, the Company's future plans include developing additional Brain Access System retractors that are designed for the requirements of specific surgical applications like aneurisms, tumors and endoscopic work.

Other

In addition to our existing products and products in development, we actively seek acquisition, joint venture and in-licensing opportunities which we believe will add shareholder value.

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Additional Applications of Brain Access System and Cervical Access System Technology

We believe that our Brain Access System and Cervical Access System technology can be adapted to advance retractor systems for use in other areas of the body. We believe that the key cross-applicable benefits of our technology are:

           
      Promotes minimally invasive procedures from smallest possible entry incision  
      Uniform pressure distribution minimizes collateral tissue damage due to stress points  
      Eliminates "tissue creep" into the surgical field  
      Reduces the number of materials in the surgical field  

Sales and Marketing

We are implementing an educational and marketing strategy to promote product and brand awareness in our target markets including clinical papers and attending trade shows.

Domestic Sales Strategy

VBAS was launched in November 2008 with a strategy of driving sales through leading neurosurgeons. In this regard, the Company has adopted a dual strategy of targeting both the leading neurosurgeons and the leading neurosurgery hospitals. The Company believes that out of the 4,500 neurosurgeons in the US approximately 1,500 focus predominantly on craniotomies or cranial procedures that could potentially benefit from the VBAS product. Management believes that there are approximately 750-1,000 hospitals that represent the majority of its target market.

Teaching hospitals not only carry out more relevant procedures but also provide a natural way to drive adoption through the conversion of new surgeons. We focus our efforts initially on surgeons as the principle proponent within the hospital, and Vycor has found that the learning curve is only 1-2 cases for surgeons, who like the simplicity of design and ease of use. However, Hospital Administration is required to approve the purchase of a new product and in many cases even the provision of trial samples once a surgeon has expressed an interest in using the product. The focus for Hospital Administration is:

  • Clinical studies, papers and other peer reviews evidencing the clinical benefits of the product
  • Leading hospital adoption, leading surgeon adoption
  • Cost/benefit analysis
  • Product simplicity of use, need for training

Experience has been that approval process can take up to six months for each hospital, and in some cases may even be longer. However, this time reduces as more leading hospitals become approved and as more clinical paper/studies and other peer reviews are published.

We are currently using independent distributors who have existing relationships with neurosurgeons and target hospitals.

International Sales

In Canada, the company has an exclusive agreement with a distributor focused in neurosurgery. In Europe, the company has agreements with five exclusive distributors who are also focused in neurosurgery. In China, Vycor has entered into a distribution agreement, for its VBAS. The Company has filed for but not yet received SFDA approval, which is required to sell and market products in this country.

Reference Hospitals Program

The Company has developed a Reference Hospital Program to identify centers of excellence and to provide neurosurgeons with evidence of support for our products.

Manufacturing

We have executed agreements with Lacey Manufacturing Company of Bridgeport, Connecticut ("Lacey") and C&J Industries, Meadville PA ("C&J") to provide a full range of engineering, contract manufacturing and logistical support for our products.

Lacey and C&J are recognized leaders in the medical contract manufacturing sector, providing vertically integrated full services. They are U.S. Food and Drug Administration registered and meet ISO standards and certifications. Lacey and C&J have shipped orders to Vycor and have made production runs of all 12 sizes.

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Market

The market for our Brain Access System product lines is the neurosurgical community. The Company has analyzed and estimated the market for its products from an analysis of available statistics, discussion with surgeons, distributors and other market participants. Vycor is currently focusing its attention for VBAS on the US, China and Europe.

Competition

Competitive manufacturers of brain retractors include:

           
      Cardinal Health (V. Mueller line)  
      Aesculap  
      Integra Life Science  
      Codman (Division of Johnson & Johnson)  

Cervical Access System competitors include Medtronic, Asculap/B. Braun, Cardinal and Nuvasive, Cloward Instruments, among others. In addition to the standard "blade retractors" distributed by the aforementioned companies. In addition companies such as Endius and EBI have announced cervical retractor systems.

Customers

The Company sells to regional distributors and hospitals. The Company believes that its products currently are being evaluated or utilized in approximately 80 hospitals in the United States. In addition, in the nine months ended September 30, 2010 international sales accounted for approximately 17% of revenues.

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Intellectual Property

Patent Applications

Below is a table setting out the status and particulars of our patent applications:

                             
                             
  Filing date     Application No.     Country     Title     Status  
                             
  22-Jun-2005     60/692,959     US - PROV     Surgical Access Instruments For Use With Spinal Or Orthopedic Surgery (Cervical)     Converted  
                             
                             
  22-Jun-2006     PCT/US06/24243     PCT     Surgical Access Instruments For Use With Spinal Or Orthopedic Surgery (Cervical)     National Phase
Completed
 
                             
                             
  27-Nov-2006     PCT/US06/61246     PCT     Surgical Access Instruments for use with Delicate Tissues (Brain)     National Phase
Completed
 
                             
                             
  22-Jun-2006     2613323     Canada     Surgical Access Instruments for use with spinal or orthopedic surgery     Pending - annuity due 6/22/11; Deferred exam due 06/22/11  
                             
  22-Jun-2006     06785312.7     Europe     Surgical Access Instruments for use with spinal or orthopedic surgery     Pending - annuity due 6/22/11  
                             
  22-Jun-2006     299/KOLNP/2008     India     Surgical Access Instruments for use with spinal or orthopedic surgery     Pending  
                             
  22-Jun-2006     2008-518369     Japan     Surgical Access Instruments for use with spinal or orthopedic surgery     Published  
                             
  20-Dec-2007     11/993,280     US - UTIL     Surgical Access Instruments for use with spinal or orthopedic surgery     Published  
                             
  25-Jun-2008     08107050.4     Hong Kong     Surgical Access Instruments for use with spinal or orthopedic surgery     Pending  
                             
  18-Sep-2008     61/098041     US - PROV     Surgical Access Instruments for use with Delicate Tissues (Brain)     Converted  
                             
  25-May-2009     2670631     Canada     Surgical Access Instruments for use with Delicate Tissues (Brain)     Pending - annuity due 11/27/11; Request exam due 11/27/11  
                             
  27-Nov-2006     06840022.5     Europe     Surgical Access Instruments for use with Delicate Tissues (Brain)     Published - annuity due 11/30/11  
                             
  27-Nov-2006     1977/KOLNP/2009     India     Surgical Access Instruments for use with Delicate Tissues (Brain)     Pending  
                             
                             

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  Filing date     Application No.     Country     Title     Status  
                             
  27-Nov-2006     2009-539227     Japan     Surgical Access Instruments for use with Delicate Tissues (Brain)     Published  
                             
                             
  27-Nov-2006     2009124446     Russia     Surgical Access Instruments for use with Delicate Tissues (Brain)     Pending  
                             
  27-Nov-2006     200680056889.9     China     Surgical Access Instruments for use with Delicate Tissues (Brain)     Published - Response due 12/02/10  
                             
  21-Aug-2009     12/545686     US - CON     Surgical Access Instruments for use with Delicate Tissues (Brain)     Published  
                             
  21-Aug-2009     12/545719     US - CON     Surgical Access Instruments for use with Delicate Tissues (Brain) (apparatus claims)     Published  
                             
  20-Jun-2010     10106385.8     Hong Kong     Surgical Access Instruments for use with Delicate Tissues (Brain)     Pending  
                             

The inventor on the above-indicated patent applications was Dr. John Mangiardi, who assigned the rights to the Sawmill Trust on September 17, 2005 under the terms of an assignment agreement between the parties. The Sawmill Trust then, in turn, assigned the same rights to the Company on September 17, 2005 pursuant to an assignment agreement between the Sawmill Trust and the Company dated the same date.

Trademarks

VYCOR MEDICAL is a registered trademark and VIEWSITE is pending registration as a trademark with the United States Patent and Trademark Office.

Insurance

We presently have Directors' and Officers' Liability Insurance and Product Liability insurance.

Government Regulations

We are committed to an integrated total quality management system. We have completed the necessary procedures and are certified to the ISO standards expected of medical device manufacturers as follows:

ISO 13485:2003 Medical Devices — Quality Management Systems

The certification of a quality management system to ISO 13485, specifically for medical devices, is advantageous and often essential for medical companies to export their products to the global market, as well as maintain and enter into certain agreements and business growth opportunities within the U.S. For example, Canada requires that medical device manufacturers marketing their products in Canada must have a quality system certified to ISO 13485:2003. The certification is also required for placement of branded devices into the European Union.

In November 2009, we successfully passed our re-certification audit through Intertek. Recertification audits are required every 3 years while surveillance audits occur annually in between.

We have the following certification/licensing.

– Fully Quality Assurance System Directive 93/42/EEC for Medical Devices, Annex II (3)

– EC Design-Examination Certificate Directive 93/42/EEC for Medical Devices, Annex II (4)

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– ISO 13485.2003

– HPB Licensing for Canada

Continuing Regulatory Requirements

Governmental regulation in the United States and other countries is a significant factor affecting the research and development, manufacture and marketing of medical devices, including our products. In the United States, the FDA has broad authority under the Federal Food, Drug and Cosmetic Act (the FD&C Act) to regulate the development, distribution, manufacture, marketing and sale of medical devices. Foreign sales of medical devices are subject to foreign governmental regulation and restrictions that vary from country to country.

Medical devices intended for human use in the United States are classified into one of three categories, depending upon the degree of regulatory control to which they will be subject. Such devices are classified by regulation into either Class I general controls, Class II special standards or Class III pre-market approval (PMA), depending upon the level of regulatory control required to provide reasonable assurance of the safety and effectiveness of the device.

Most Class I devices are exempt from pre-market notification (510(k)) or PMA. However Class I devices are subject to "general controls," including compliance with FDA manufacturing requirements (Quality System Regulation (QSR), sometimes referred to as current good manufacturing practices or CGMPs), adverse event reporting, labeling and other requirements. Class II devices are subject to general controls and to the pre-market notification requirements under Section 510(k) of the FD&C Act. For a 510(k) to be cleared by the FDA, the manufacturer must demonstrate to the FDA that a device is substantially equivalent to another legally marketed device that was either cleared through the 510(k) process or on the market prior to 1976. It generally takes four to twelve months from the date of submission to obtain 510(k) clearance although it may take longer. Class III is the most stringent regulatory category for devices. Class III devices are those for which insufficient information exists to assure safety and effectiveness solely through general or special controls. Class III devices are usually those that support or sustain human life, are of substantial importance in preventing impairment of human health, or which present a potential, unreasonable risk of illness or injury. Class III devices also include devices that are not substantially equivalent to other legally marketed devices. To obtain approval to market a Class III device, a manufacturer must obtain FDA approval of a PMA application. The PMA process requires more data, including ordinarily data from clinical studies testing the device in humans, takes longer and is typically a significantly more complex and expensive process than the 510(k) procedure. Clinical studies of devices in humans is also subject to regulation by the FDA. Testing must be conducted in compliance with the investigational device exemption (IDE) regulations.

According to the US FDA, our products have been classified as Class II products and cleared for marketing through the 510(k) process.

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We can provide no assurance that we will be able to maintain and obtain clearances or approvals needed to introduce new products and technologies. After a device is placed on the market, numerous regulatory requirements apply. These include:

           
      quality system regulation, which requires manufacturers to follow design, testing, control, documentation and other quality assurance procedures during the manufacturing process;  
      labeling regulations, which prohibit the promotion of products for unapproved or "off-label" uses and impose other restrictions on labeling; and  
      medical device reporting regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if it were to recur.  
     
         Failure to comply with applicable regulatory requirements can result in enforcement action by the FDA, which may include any of the following sanctions:  
           
      fines, injunctions, and civil penalties;  
      recall or seizure of our products;  
      operating restrictions, partial suspension or total shutdown of production;  
      Refusing a request for 510(k) clearance or premarket approval of new products;  
      withdrawing 510(k) clearance or premarket approvals that are already granted; and criminal prosecution.  

Medical device laws are also in effect in many of the countries outside of the United States in which we will do business. These laws range from comprehensive device approval and quality system requirements for some or all of our medical device products to simple requests for product data or certifications. The number and scope of these requirements are increasing. In June 1998, the European Union Medical Device Directive became effective, and all medical devices must meet the Medical Device Directive standards and receive CE mark certification. CE mark certification involves a comprehensive Quality System program, and submission of data on a product to the Notified Body in Europe.

We have obtained the CE marking approval to allow for distribution of our VBAS products in Europe and have received our HPB licensing approval for distribution in Canada.

Health Care Regulatory Issues

The health care industry is highly regulated and the regulatory environment in which we operate may change significantly in the future. In general, regulation of health care-related companies is increasing. We anticipate that Congress and state legislatures will continue to review and assess alternative health care delivery and payment systems. We cannot predict what impact the adoption of any federal or state health care reform measures may have on our business.

We regularly monitor developments in statutes and regulations relating to our business. We may be required to modify our agreements, operations, marketing and expansion strategies from time to time in response to changes in the statutory and regulatory environment. We plan to structure all of our agreements, operations, marketing and strategies in accordance with applicable law, although we can provide no assurance that our arrangements will not be challenged successfully or that required changes may not have a material adverse effect on our business, financial condition, results of operations and cash flows.

We believe that the discussion above summarizes all of the material health care regulatory requirements to which we currently are subject. Complying with these regulatory requirements may involve expense to us, delay in our operations and/or restructuring of our business relationships. Violations could potentially result in the imposition of civil and/or criminal penalties.

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Results of Operations
Comparison of the Three Months Ended September 30, 2010 to the Three Months September 30, 2009

The following table presents the dollar amount changes from period to period of the line-items included in our Statements of Operations for the three months ended September 30, 2010 and September 30, 2009

                                   
  Three months ended September 30:     2010           2009           Increase/
(Decrease)
 
                                   
  Revenue:                                
  Sales   $ 71,205         $ 44,198         $ 27,007  
  Cost of Goods Sold     11,859           4,584           7,275  
  Gross Profit     59,346           39,614           19,732  
  Operating expenses:                                
  Research and Development     4,009           -           4,009  
  General and administrative     337,033