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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10-K 2012-12-31 Filed 2013-04-01
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10-K 2011-12-31 Filed 2012-03-30
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-22
10-Q 2011-03-31 Filed 2011-05-13
10-K 2010-12-31 Filed 2011-03-31
10-Q 2010-09-30 Filed 2010-11-15
10-Q 2010-06-30 Filed 2010-08-16
10-Q 2010-03-31 Filed 2010-05-12
10-K 2009-12-31 Filed 2010-03-31
8-K 2020-06-30
8-K 2020-03-23
8-K 2019-03-29
8-K 2018-10-09
8-K 2018-03-30

VYCO 10K Annual Report

Part I
Item 1. Description of Business.
Item 1A. Risk Factors
Item 1B. Unresolved Staff Comments
Item 2. Properties
Item 3. Legal Proceedings
Item 4. [Removed and Reserved]
Part II
Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operation.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Item 8. Financial Statements and Supplementary Data.
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Item 9A. Controls and Procedures.
Item 9B. Other Information.
Part III
Item 10. Directors, Executive Officers and Corporate Governance
Item 11. Executive Compensation.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
Item 13. Certain Relationships and Related Transactions, and Director Independence
Item 14. Principal Accountant Fees and Services.
Part IV
Item 15. Exhibits, Financial Statement Schedules
EX-31.1 d28049_ex31-1.htm
EX-31.2 d28049_ex31-2.htm
EX-32.1 d28049_ex32-1.htm
EX-32.2 d28049_ex32-2.htm

Vycor Medical Earnings 2010-12-31

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-K 1 d28049_10-k.htm 10-K HTML



UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

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

For the fiscal year ended December 31, 2010

Or

o  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from  ___________ to ___________

Commission file number: 333-149782

 

VYCOR MEDICAL, INC.

(Exact name of registrant as specified in charter)

 

           
  Delaware     20-3369218  
  (State or other jurisdiction of     (I.R.S. Employer  
  incorporation or organization)     Identification No.)  

3651 FAU Boulevard, Suite 300, Boca Raton, FL 33434
(Address of principal executive offices) (Zip Code)

Registrant's telephone Number: (561) 558-2000

Securities registered pursuant to section 12(g) of the Act: NONE

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.     o   Yes     x   No

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.     o   Yes     x   No

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  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", "non-accelerated filer", and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

                 
  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).     o   Yes     x   No

State the aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter. $5,669,817 (assuming $0.03 per share)

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. 732,317,876 shares of common stock par value $0.0001 as of March 28, 2011.

DOCUMENTS INCORPORATED BY REFERENCE: NONE


 

TABLE OF CONTENTS

                 
              Page  
        PART I        
  Item 1.     Business        
  Item 1A     Rick Factors        
  Item 1B     Unresolved Staff Comments        
  Item 2.     Properties        
  Item 3.     Legal Proceedings        
  Item 4.     [Removed and Reserved]        
                 
        PART II        
  Item 5.     Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchase of Equity Securities        
  Item 6     Selected Financial Data        
  Item 7.     Management's Discussion and Analysis of Financial Condition and Results of Operation        
  Item 7A     Quantitative and Qualitative Disclosures About Market Risk        
  Item 8.     Financial Statements and Supplementary Data        
  Item 9.     Changes In and Disagreements with Accountants on Accounting and Financial Disclosure        
  Item 9A.     Controls and Procedures        
  Item 9B.     Other Information        
                 
        PART III        
  Item 10.     Directors, Executive Officers, Promoters and Corporate Governance        
  Item 11.     Executive Compensation        
  Item 12.     Security Ownership of Certain Beneficial Owners and Management        
        and Related Stockholder Matters        
  Item 13.     Certain Relationships and Related Transactions, and Director Independence        
  Item 14.     Principal Accountant Fees and Services        
                 
        PART IV        
  Item 15.     Exhibits, Financial Statement Schedules        
           
  SIGNATURES        


PART I

This Form 10-K contains some forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertainties. Forward-looking statements include statements regarding, among other things, (a) our projected sales, profitability, and cash flows, (b) our growth strategies, (c) anticipated trends in our industries, (d) our future financing plans and (e) our anticipated needs for working capital. They are generally identifiable by use of the words "may," "will," "should," "anticipate," "estimate," "plans," "potential," "projects," "continuing," "ongoing," "expects," "management believes," "we believe," "we intend" or the negative of these words or other variations on these words or comparable terminology. These statements may be found under "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," as well as in this Form 10-K generally. In particular, these include statements relating to future actions, prospective products or product approvals, future performance or results of current and anticipated products, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results.

 

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

 

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

ITEM 1. DESCRIPTION OF BUSINESS.

1. Organizational History

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." ("Vycor" or the "Company"). The Company's listing went effective on February 2009 and on November 29, 2010, Vycor completed an acquisition of substantially all of the assets 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 predominantly resulting from Stroke or Traumatic Brain Injury.

2. Overview of Business

Vycor operates two distinct business units--Vycor Medical Inc. ("Vycor Medical") and NovaVision, Inc ("NovaVision"). Vycor Medical is a medical device company that designs, develops and markets medical devices for use in neurosurgery. NovaVision develops non-invasive, computer-based visual neuro-stimulation therapy called VRT for those suffering from vision loss resulting from neurological trauma. In addition to our existing products and products in development, we actively seek acquisition, joint venture and in-licensing opportunities in the medical device field which we believe will add shareholder value.

 

Vycor Medical, Inc.

Introduction

Vycor Medical is a medical device company that designs, develops and markets medical devices for use in neurosurgery. Vycor Medical 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 access system. Vycor Medical first product, the ViewSite Brain Access System (VBAS), is a next generation access system which was commercially launched in November 2008. The VBAS addresses a market that has not changed materially in over 50 years in contrast to development in most other neuro-surgical technologies.

The second product in Vycor Medical's pipeline is the Cervical Access System (VCAS), which requires further prototyping and successful market testing prior to commercialization launch. Like the VBAS, this product is designed to assist the surgeon in cervical surgeries, allowing the surgeon to gain access to the anterior cervical surgery site.

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Vycor Medical has received FDA 510(k) clearance for its products, with which we are authorized to take market our products in the U.S. without further approvals.

Vycor Medical's Products

Viewsite Brain Access System (VBAS)

To access a surgical site in the brain, the surgeon needs to remove part of the skull (crainiotomy) and then part (retract) the soft brain tissue to access the target site. The current standard of care utilizes a metal bladeretractor to force the tissue apart; to maintain the opening the blades are attached to a head frame and tension is applied to the tissue

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. 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. 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 could 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  

VBAS products have the potential to significantly reduce brain tissue trauma resulting from the currently used retractors when accessing deep brain targets. First, the unique design of the product can minimize 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 VBAS 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 to the end user.

IGS Opportunity for the Brain Access System

The VBAS product has the potential to improve accuracy in targeting the surgical site when used with of Image Guidance Systems( IGS), by addressing two substantial IGS-related problems of target shifting and the lack of real-time retractor positioning data during procedures:

•     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

4


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) does not integrate well with IGS systems. During insertion and retraction, 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.

Vycor Medical Product Pipeline

Brain Access and Related Products

The Company's future plans include developing additional Brain Access Systems that are designed for the requirements of specific surgical applications like aneurisms, tumors and endoscopic work and identifying other products that can be used in conjunction with our VBAS product.

Cervical Access Products

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.

Sales and Marketing

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.

We are currently using independent distributors who have existing relationships with neurosurgeons and target hospitals to drive our sales. The Company's distributors have approximately 50 sales representatives who cover approximately 75% of the U.S. population.

International Sales

The Company utilizes select medical device distributors with experience in neurosurgical devices in select countries. In Europe, the company has agreements with exclusive distributors for Spain, Italy, Belgium, Scandanavia, Switzerland and the U.K. who are all focused in neurosurgery. In China, Vycor Medical 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 China.

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.

VBAS Market and the Hospital Adoption Process

The market for VBAS in the US is relatively concentrated, with approximately 1,500 neurosurgeons focusing on the relevant procedures in 750-1,100 hospitals. 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. Vycor has found that the learning curve is only 1-2 cases for surgeons, who like the simplicity of design and ease of use after trialing the product. Hospital Administration is required to approve the purchase of a new product and sometimes even a trial or evaluation product. The focus for Hospital Administration is the potential hard and soft cost savings

5


and benefits of VBAS versus the cost compared to existing practice. We use clinical studies, papers and other peer reviews evidencing the clinical benefits of the products as well as surgery time in the operating room.

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. Management is assembling a body of clinical evidence to speed up the adoption process.

Manufacturing

Vycor Medical has 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 Medical and have made production runs of all 12 sizes.

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 Medical 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

Vycor Medical sells to stocking regional distributors and direct to hospitals through independent representatives. The Company believes that its products currently are being evaluated or utilized in approximately 80 hospitals in the United States. In addition, in year ended December 31, 2010 international sales accounted for approximately 20% of revenues.

Intellectual Property

Patent Applications

Vycor Medical has the following granted, but not yet issued, patents:

           
      Russia (2009124446) – Surgical Access Instruments for use with Delicate Tissues (Brain)  
      China (200680056889.9) – Surgical Access Instruments for use with Delicate Tissues (Brain)  

Additionally, Vycor has 13 patents pending for its technology and products in: the U.S., Canada, Europe, India, Japan, and Hong Kong

Trademarks

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

6


NovaVision, Inc.

Introduction

NovaVision develops non-invasive, computer-based visual neuro-stimulation therapy called VRT for those suffering from vision loss resulting from neurological trauma. VRT is a patient-specific diagnostic and therapeutic platform that improves patient's vision and enables them to experience significant functional improvements. VRT is currently focused on visual deficits resulting from stroke, traumatic brain injury, or other acquired brain injuries. NovaVision operates in the US and in Germany through a wholly-owned subsidiary.

VRT is successful in treating vision loss because people look with their eyes and see with their brain. VRT is based on NovaVision's platform technology which management believes induces neuroplasticity, the brain's natural ability to repair or remap broken neural connections that cause vision loss. Before VRT, such patients were informed that their vision loss would likely be permanent and they were prescribed therapy or aids to merely compensate for their lost vision.

VRT is a patient-specific diagnostic and therapeutic platform. The VRT diagnostic program maps the area of lost visual field. Proprietary algorithms help generate a customized therapy which delivers light-based stimuli to neurologically stimulate the visual cortex of the brain and restore the lost visual field. VRT is generally performed over a six month period, twice a day for an hour total, six days a week. The Company maintains broad IP protection NovaVision has collected significant amounts of data from clinical studies and peer reviewed papers that support the Company's claims about the benefits of its platform technology for vision restoration and other indications. NovaVision has received 510(k) clearance and CE Marking for VRT.

Platform Technology

The management of NovaVision believes that the underlying basis for the visual field recovery it has witnessed, and the functional outcome improvements it has noted with its patients is largely due to neuroplasticity of the visual field which is the brain's ability to remap or repair itself in response to a pre-programmed and deliberate stimulation. Neuroplasticity has been discussed over the last 20 years or so and as far back as 1990 Gilbert & Weisel talked about the cortex not having a fixed functional architecture.. The platform technology is comprised of proprietary algorithms that generate patient-specific therapies which enable NovaVision's products to be used as both diagnostic and therapeutic tools. The platform technology generates light-based, or photic, stimulus programs consisting of a fixation point on a display screen. As the patient focuses on this fixation point, a series of photic stimuli are delivered on the screen that are specific to the patient's neurological requirements, and relayed directly to the brain using the eye as a conduit.

Management believes that it is this programmed light sequences that stimulate the border zone between the "seeing" and "blind" visual fields and which induces neuroplasticity. The diagnostic algorithm in the VRT product first maps the visual field and defines the areas of defect in patients suffering vision loss. The therapeutic algorithm in the VRT product is then specifically designed for each patient based upon the results of the diagnostic program and it repetitively challenges the visual cortex with thousands of stimuli over the course of time. While neuroplasticity for explaining VRT has never been conclusively demonstrated, Randy Mashall's study using MRI did demonstrate that VRT results in increased neural activity in the visual cortex. Management is also aware of other studies which should be published during the course of 2011 which will shed further light on this. Irrespective of mechanism patient studies point to significantly improved functional outcomes for patients who have done VRT treatment. This improvement manifests itself in greater confidence to move around and an average shift of 4.9 degrees in the border between seeing and blind visual fields. The visual field is the portion of space surrounding an individual which is visible at any given time by that individual while their gaze is held stationary. To humans, the central 10º of visual field holds the greatest functional importance for focal and cognitive tasks.

Clinical Data Relating to VRT

NovaVision has accumulated significant amounts of clinical data as a result of company-sponsored trials as well as studies conducted by independent third parties.

A large retrospective VRT study indicated that 88% of patients experience an improvement in at least one of their daily life activities

75% of patients experience and improvement in their mobility which is regarded as the most important functional task

Time since injury does not seem to matter so historical backlog of patients can be treated

Results do not appear to be not age or gender dependent

7


Pipeline Products Utilizing NovaVision's Platform Technology

Management is looking to further develop its product range leveraging its existing technology platform. To this end it is in the process of launching a new portable visual field screening device called head mounted perimeter (HMP). The Company has registered to sell the HMP as a Class 1 device as a screening tool for physicians. Physicians would use this novel portable HMP as a low-cost screening tool providing automated perimetry for visual field screenings performed more efficiently in the clinician's office, waiting room, nursing homes or within the hospital setting by Ophthalmologists, Optometrists and even the Primary Care Physician. The visual field test qualifies for reimbursement under CPT code 92082 (ranging from $60 - $70). While entirely focused on just screening and as such not as complex as an Oculus or Humphreys its screening ability is actually more resolute as it tests every 4 degrees compared to every 6 degrees. Its greatest advantage is its portability which enables it to be utilized in a number of situations where patients with a Visual Field Deficit may otherwise not be able to take a table mounted test.

Regulatory Matters

In the U.S., NovaVision's products are regulated by the Food and Drug Administration ("FDA") as Class U medical devices subject to 510(k) clearances, and in Europe NovaVision has CE Marking for VRT as a Class I device. NovaVision received its 510(k) clearance for VRT specific to Stroke and TBI indications in 2003.

Intellectual Property

Patents

NovaVision maintains a portfolio of patent protection on its methods and apparatus in the form of issued patents and applications, both domestically and internationally, with a total of 14 granted and 24 pending patents.

In the U.S., the Company has a total of 8 issued patents and 7 pending applications. The international patent portfolio includes 6 issued patent and 17 pending applications, in Canada, Europe, China, Hong Kong, India, Japan and Australia.

Trademarks

NovaVision maintains a portfolio of registered trademarks for NovaVision, NovaVision VRT and Vision Restoration Therapy amongst others, both in the US and internationally.

Manufacturing and Operations

NovaVision is based a the Vycor Medical, Inc. group headquarters at a 1,000 square foot leased facility in Boca Raton, Florida. NovaVision purchases electronics and custom fabricated hardware from third party vendors and assembles and tests all of its medical devices within the facility. NovaVision has an FDA Establishment Registration and the Company does not have any long-term contractual obligations with its vendors to purchase products from them, nor are suppliers contractually obligated to sell products to NovaVision.

3. Other Matters

Product Liability Insurance

We presently have Product Liability insurance for both Vycor Medical and NovaVision.

Government Regulations

We are committed to an integrated total quality management system. We believe that we have completed the necessary procedures and 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.

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Vycor Medical has the following certification/licensing:

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

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

ISO 13485.2003

HPB Licensing for Canada

Employees

 

We currently have 14 full-time employees.

ITEM 1A. RISK FACTORS

Smaller reporting companies are not required to provide the information required by this item.

ITEM 1B. UNRESOLVED STAFF COMMENTS

N/A

ITEM 2. PROPERTIES

The Company leases approximately 14,000 sq. ft located at 3651 FAU Boulevard, Suite 300, Boca Raton, FL 33431 from Boca R & D Project 7, LLC for a basic rent of $8,500 plus sales taxper month. The term of the lease is twelve (12) months terminating November 30, 2011.

ITEM 3. LEGAL PROCEEDINGS

We know of no material, active, pending or threatened proceeding against us or our subsidiaries, nor are we, or any subsidiary, involved as a plaintiff or defendant in any material proceeding or pending litigation.

ITEM 4. [REMOVED AND RESERVED]

 

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

MARKET INFORMATION

Beginning on July 20, 2009, our Common Stock was quoted on the OTC Bulletin Board under the symbol "VYCO".

The following table shows the high and low prices of our common shares on the OTC Bulletin Board for each quarter since our common stock began to trade on the OTC Bulletin Board in July 2009. The following quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions:

                 
  Period     High     Low  
  July 20, 2009-September 30, 2009     $0.04     $0.02  
  October 1, 2009-December 31, 2009     $0.07     $0.01  
  January 1, 2010-March 31, 2010     $0.15     $0.04  
  April 1, 2010-June 30, 2010     $0.06     $0.01  
  July 1, 2010-September 30, 2010     $0.03     $0.01  
  October 1, 2010-December 31, 2010     $0.04     $0.01  

The market price of our common stock, like that of other technology companies, is highly volatile and is subject to fluctuations in response to variations in operating results, announcements of technological innovations or new products, or other events or factors. Our stock price may also be affected by broader market trends unrelated to our performance.

9


Holders

As of March 28, 2011 there were 732,317,876 shares of common stock outstanding and approximately 83 stockholders of record.

Transfer Agent and Registrar

Our transfer agent is Corporate Stock Transfer, Inc., 3200 Cherry Creek Dr. South, Suite 430, Denver, CO 80209, tel. (303) 282-4800.

Dividend Policy

We have never paid any cash dividends on our Common Stock and do not anticipate paying any cash dividends on our Common Stock in the foreseeable future. We intend to retain future earnings to fund ongoing operations and future capital requirements of our business. Any future determination to pay cash dividends will be at the discretion of the Board of Directors and will be dependent upon our financial condition, results of operations, capital requirements and such other factors as the Board of Directors deems relevant.

RECENT SALES OF UNREGISTERED SECURITIES

Below is a list of securities sold by us within during 2010 which were not registered under the Securities Act.

                                   
  Name of Purchaser     Date of Sale     Title of
Security
    Amount of Securities
Sold
    Consideration  
  Fountainhead Capital Management Limited     January 11, 2010     Common Stock     531,376,500           Debenture Exchange  
  Jodi Yeager     January 11, 2010     Common Stock     4,000,000           Debenture Conv.  
  Panamerica Capital Group, Inc.     January 11, 2010     Common Stock     8,787,600           Debenture Conv.  
  Hyperlink Media, LLC     January 11, 2010     Common Stock     9,187,600           Debenture Conv.  
  Karen Ginder     January 11, 2010     Common Stock     10,320,000           Debenture Conv.  
  Accessible Development Corp.     January 11, 2010     Common Stock     4,000,000           Debenture Conv.  
  Altitude Group, LLC     January 11, 2010     Common Stock     16,000,000           Debenture Conv.  
  Mario Zachariou     January 11, 2010     Common Stock     6,000,000           Debenture Conv.  
  Anthony Cantor     January 11, 2010     Common Stock     6,000,000           Debenture Conv.  
  SLJ Consulting Corp     January 12, 2010     Series B. Pref.     80,000     $     80,000  
  Joseph Simone     January 12, 2010     Series B. Pref.     80,000     $     35,000  
  Steven Girgenti     February 23, 2010     Common Stock     800,000           Professional services  
  Kenneth D. Watkins     March 11, 2010     Series B. Pref.     25,000     $     25,000  
  Jane G. Ellis     April, 2010     Common Stock     6,666,667     $     100,000  
  Gregory Sichenzia     April 2010     Common Stock     934,986           Professional Services  
  Joe Simone     April 2010     Common Stock     750,000           Professional services  
  Myles F. Wittenstein     May 2010     Common Stock     3,300,000     $     49,500  
  Guri Dauti     May 2010     Common Stock     2,333,333     $     35,000  
  Stanley Katz     May 2010     Common Stock     3,000,000     $     45,000  
  Stanley Katz     May 2010     Common Stock     3,000,000     $     45,000  
  Duane John Renfro     May 2010     Common Stock     3,333,333     $     50,000  
  Glenn Fleischacker     May 2010     Common Stock     3,333,333     $     50,000  
  Datavision Computer Video, Inc.     May 2010     Common Stock     1,666,667     $     25,000  
  Thomas Ambrose     May 2010     Common Stock     3,333,333     $     50,000  
  Jack Lens     May 2010     Common Stock     3,333,333     $     50,000  
  IRA Services Trust Company     May 2010     Common Stock     13,333,333     $     200,000  
  Falcon Partners BVBA     May 2010     Common Stock     3,333,333     $     50,000  
  Konstantin Slavini     July 2010     Common Stock     262,500           Professional services  
  Ramon Rak     July 2010     Common Stock     300,000           Professional Services  
  Steven Girgenti     July 2010     Common Stock     250,000           Professional services  
  Sal & Kathryn DeMarco     July 2010     Common Stock     4,241,072     $     76,250  
  Jarvis D & Molly Littlefield     August 2010     Common Stock     2,857,143     $     50,000  
  Berardino Investment Group     August 2010     Common Stock     1,428,571     $     25,000  
  Panayiotis Panayiotou     August 2010     Common Stock     571,429     $     10,000  

10


                                   
  Name of Purchaser     Date of Sale     Title of
Security
    Amount of Securities
Sold
    Consideration  
  Simon Becker     August 2010     Common Stock     6,285,714     $     110,000  
  Richard H. Lawson     September 2010     Common Stock     1,428,571     $     25,000  
  SLJ Consulting     September 2010     Common Stock     6,548,515           Preferred Conversion  
  Joe Simone     September 2010     Common Stock     3,139,463           Preferred Conversion  
  Kenny Watkins     September 2010     Common Stock     2,080,219           Preferred Conversion  
  Sal & Kathryn DeMarco     October 2010     Common Stock     2,285,714     $     40,000  
  Sal & Kathryn DeMarco     November 2010     Common Stock     1,714,286     $     30,000  
  Steven Girgenti     November 2010     Common Stock     250,000           Professional services  
  Myles F. Wittenstein     November 2010     Common Stock     2,631,579     $     50,000  
  Brunella Jacs LLC     November 2010     Common Stock     2,631,579     $     50,000  
  Dr. Sam Fox     November 2010     Common Stock     2,631,579     $     50,000  
  Neil A. Weiss     December 2010     Common Stock     5,263,158     $     100,000  
  Stephen Nicholas Bunzl     December 2010     Common Stock     7,894,737     $     150,000  
  Peter Lawrence     December 2010     Common Stock     2,631,579     $     50,000  
  Stephen Rathkopf     January 2011     Common Stock     1,000,000     $     19,000  
  Steven Girgenti     January 2011     Common Stock     250,000           Professional services  
  Datavision Computer Video, Inc.     February 2011     Common Stock     1,315,789     $     25,000  
  Dr. Wayne Fleischacker     February 2011     Common Stock     5,263,158     $     100,000  

The securities issued in the abovementioned transactions were issued in connection with private placements exempt from the registration requirements of Section 5 of the Securities Act of 1933, as amended, pursuant to the terms of Section 4(2) of that Act and Rule 506 of Regulation D.

ITEM 6. SELECTED FINANCIAL DATA

                       
        12/31/10     12/31/09     12/31/08  
  Revenues   $ 316,450   $ 199,046   $ 129,947  
  Net loss   $ (1,961,662 ) $ (1,141,383 ) $ (2,381,295 )
  Net loss per share   $ (0.003 ) $ (0.04 ) $ (0.11 )
  Weighted average no. shares     663,168,900     29,183,482     21,977,954  
  Stockholders' deficit   $ (393,725 ) $ (1,111,941 ) $ (921,427 )
  Total assets   $ 1,615,174   $ 400,960   $ 633,437  
  Total liabilities   $ 2,008,899   $ 1,512,901   $ 1,554,864  

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

Critical Accounting Policies and Estimates

Uses of estimates in the preparation of financial statements

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimated. To the extent management's estimates prove to be incorrect, financial results for future periods may be adversely affected. Significant estimates and assumptions contained in the accompanying consolidated financial statements include management's estimate of the allowance for uncollectible accounts receivable, amortization of intangible assets, and the fair values of options and warrant included in the determination of debt discounts and share based compensation.

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 $1,961,662 for the year ended December 31, 2010, and the Company expects to continue to incur substantial additional losses in the future, including additional development costs,

11


costs related to marketing and manufacturing expenses. The Company has incurred negative cash flows from operations since inception. As of December 31, 2010 the Company had a stockholders' deficiency of $393,725 and cash and cash equivalents of $127,081. 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.

Research and Development

The Company expenses all research and development costs as incurred. For the years ended December 31, 2010 and 2009, the amounts charged to research and development expenses were $15,208 and $4,761, respectively.

Cash and cash equivalents

The Company maintains cash balances at various financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. Cash balances may at times exceed the FDIC insured limits. Cash also includes a US investment account in a money market backed by government securities up to 105% of the account balance. The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash balances in Germany held at NovaVision AG at December 31, 2010 and 2009 includes $1,233 and $0, respectively.

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 seven years. Maintenance, repairs and minor renewals are charged to expense when incurred. Replacements and major renewals are capitalized

Income taxes

The Company accounts for income taxes in accordance with the current authoritative guidance. Deferred income tax assets and liabilities are determined based upon differences between financial reporting and tax basis 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. Valuation allowances are established, when it is more likely than not that such benefit will not be realized.

Patents and Other Intangible Assets

The Company capitalizes legal and related costs associated with the establishment and enhancement of patents for its products once patents have been applied for. Costs associated with the development of the patented item or processes are charged to research and development costs as incurred. The capitalized costs are amortized over the life of the patent. The Company reviews intangible assets on an annual basis using a present value, cash flow method based upon the authoritative guidance. Trademarks have an indefinite life and are reviewed annually by management for impairment in accordance with the authoritative guidance.

Revenue Recognition

Vycor Medical generates revenue from the sale of its surgical access system to hospitals and other medical professionals. Vycor Medical records revenue when a completed contract for the sale exists, the product is invoiced and shipped to the customer. Vycor Medical does provide for product returns or warranty costs.

NovaVision generates revenues from various programs, therapy services and other sources such as government grants. Therapy services revenues represent fees from NovaVision's vision restoration therapy software, diagnostic software, medical devices, clinic set up and training fees, and the professional and support services associated with the therapy. NovaVision

12


recognizes revenue for providing the vision restoration therapy as the Company's work effort is expended. NovaVision provides vision restoration therapy directly to patients. The typical vision restoration therapy consists of six modules, performed on average over 6 months in the U.S. and 10 months in Germany. A patient contract comprise set-up fees and monthly therapy fees. Set-up fees are recognized at the outset of the contract and therapy revenue is recognized ratably over the therapy period. Patient therapy is restricted to being completed by a patient within a specified time frame.

Research grants and other subsidies represent revenue from certain German government agencies to cover certain patients within an insurance group and also to reimburse NovaVision AG for certain payroll and other costs. The Company recognizes grant revenue when services or costs have been incurred which would entitle the Company to use the German government funds, and the grant requirements have been satisfied.

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

Accounts Receivable

The Company's accounts receivable are due from the hospitals and distributors in the case of Vycor Medical, and from patients directly therapy or physicians for diagnostic products in the case of NovaVision. Accounts receivable are due once products have been delivered or at the time the therapy is initiated; however, for NovaVision therapy patients sometimes credit is extended through various payment plans based on individual financial conditions, generally not to exceed the 9 or 10 month therapy period. The outstanding balances are stated net of an allowance for doubtful accounts. The Company determines its allowance by considering a number of factors, including the length of time accounts receivable are past due, and the customer's ability to pay its obligations. The Company writes off accounts receivable when they become uncollectible.

Inventory

Inventories are comprised of Vycor Medical VBAS devices, components ancillary to NovaVision's medical device provided to patients and centers and diagnostic products, and are stated at the lower of cost or market, determined under the first-in, first-out method. The inventory is charged to cost of revenue at the time that a device is shipped to a customer or patient.

Foreign Currency

The Euro is the local currency of the country in which NovaVision AG conducts its operations and is considered the functional currency of this entity. All balance sheet amounts are translated to U.S. dollars using the U.S. exchange rate at the balance sheet date except for the equity section which is translated at historical rates. Operating statement amounts are translated using an average exchange rate for the period of operations. Foreign currency translation effects are accumulated as part of the accumulated other comprehensive income (loss) and included in shareholders' (deficit) in the accompanying Consolidated Balance Sheet.

Educational marketing and advertising expenses

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

RESULTS OF OPERATIONS

Comparison of the Year Ended December 31, 2010 to the Year Ended December 31, 2009

Revenue and Gross Margin:

                       
        2010     2009     % Change  
  Revenue:                    
  Vycor Medical   $ 307,582   $ 199,046     55 %
  NovaVision   $ 8,868   $ -     NM  
      $ 316,450   $ 199,046     59 %
  Cost of Revenue:                     
  Vycor Medical    $ (47,607 ) $ (22,482 )   114 %
  NovaVision    $ (1,130 ) $ -     NM  

13


                       
        2010     2009     % Change  
      $ (48,737 ) $ (22,482 )   100 %
  Gross Profit                     
  Vycor Medical    $ 259,975   $ 176,564     49 %
  NovaVision    $ 7,738   $ -     NM  
      $ 267,713   $ 176,564     54 %

Vycor Medical recorded revenue of $307,582 from the sale of its products in 2010, an increase of 55% over 2009. The increase in sales was attributable to greater penetration and usage of our product in hospitals in the United States both direct and through distributors, and increased sales internationally. Gross margin of 85% was achieved in 2010 compared to 89% for 2009. Gross margin is mostly a product of sale mix between US sales through distributors, US sales direct and international sales.

NovaVision recorded revenues of $8,868 for the period from November 30, 2010, the date of the acquisition of NovaVision, and gross margin of 87%. These revenues were all attributable to Germany.

Research and Development Expense:
Research and development expenses were $15,208 in 2010 compared to $0 for 2009.

Stock Compensation Expense:

Stock Compensation expense is a non-cash charge for share based compensation as the result of amortizing shares, warrants and options which have been issued by the Company over various periods. The charge 2010 was $152,069, a decrease of $239,635 over $391,704 in 2009.

General and Administrative Expenses:

General and administrative expenses increased by $890,452 to $1,576,158 for 2010 from $685,706 for 2009. Following the recapitalization transaction that closed on December 29, 2009 the board and management of Vycor has embarked on a period of heightened sales and marketing activity and engagement with distributors and hospital customers following a prolonged period of reduced activity in 2009 as a result of capital constraints. This has lead to an increase in the marketing-related costs of the Company. Vycor has also carried out a series of fundraisings since the closing of the recapitalization, which has resulted in additional cash and non-cash expenses.

The increases for 2010 over 2009 are attributable to an increased level of: sales and marketing activity; personnel costs; fundraising fees and related costs and higher levels of professional and regulatory cost, as follows:

                 
  Total G&A expenses for the year ended December 31, 2009         $ 685,706  
  Increase in marketing expenditure and travel costs           249,182  
  Increase in personnel costs           228,599  
  Increase in fundraising costs           72,500  
  Increase in non-cash consulting fees           90,768  
  Increase in professional and regulatory costs           127,910  
  Increase in other operating expenses           121,493  
                 
  Total G&A expenses year ended December 31, 2010         $ 1,576,158  
                 

Interest Expense:

Interest expense comprises: interest expense on the Company's debt; and the amortization of the Beneficial Conversion Feature (BCF) in the Company's convertible debt. Interest expense for 2010 was reduced by $57,473 to $45,884 from $103,356 for 2009, as a result of debt reduction. The amortization of the BCF was $168,784 compared to $146,406.

Costs Associated with the Acquisition of NovaVision:

On November 30, 2010 Vycor acquired substantially all the assets of the former NovaVision, Inc., including the shares of NovaVision AG, out of bankruptcy, for total proceeds of $900,000. As required under ASC 805 the Company commissioned an independent appraisal of the assets acquired and has entered the assets into its consolidated accounts on the basis of this valuation. As a result, the Company generated goodwill on acquisition of $58,027 which has been written off as incurred.

14


The expenses of the transaction, which primarily comprised legal fees and audit fees in connection with the Form 8-K/A filed on February 14, 2010 amounted to $154,203.

Liquidity and Capital Resources

Liquidity

The following table shows cash flow and liquidity data for the periods ended December 31, 2010 and December 31, 2009:

                       
        December 31, 2010     December 31, 2009     $ Change  
  Cash   $ 127,081   $ 12,771   $ 114,310  
  Accounts receivable, inventory and other current assets     235,601     94,084     141,517  
  Total current liabilities     (2,008,899 )   (1,512,901 )   (495,998 )
  Working capital (deficit)   $ (1,646,217 ) $ (1,406,046 ) $ (240,170 )
  Cash provided by financing activities   $ 2,489,500   $ 422,552   $ 2,066,948  

As of December 31, 2010 we had $127,081 cash, a working capital deficit of $1,646,217 and an accumulated deficit of $6,838,350. The Stockholders' deficit at December 31, 2010 was $393,725, an improvement from $1,111,941 at December 31, 2009. Debt at December 31, 2010 was $1.344, 300, a change from $1,111,053 at December 31, 2009. Of this change, $794,019 was debt to finance the acquisition of NovaVision, resulting in a net debt reduction excluding the NovaVision acquisition of $560,772.

Our operating activities used $1,450,270 in cash for the year ended December 31, 2010. Aside from the increased operating expenses discussed above, the Company has significantly reduced Vycor Medical's accounts payable, from $336,942 in December 2009 to $80,906 in December 2010, acquired NovaVision for $900,000 and increased operating assets. This is accounted for as follows:

                 
  Net cash loss adjusted for change in accrued interest         $ (1,444,166 )
  Reduction in Vycor Medical accounts payable           (242,011 )
  Increase in accounts receivable and inventory           (36,124 )
  Increase in accrued liabilities           292,385  
  Net Change in other assets and liabilities           (20,354 )
            $ (1,450,270 )

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.

Off-Balance Sheet Arrangements

As of December 31, 2010, we had no off-balance sheet arrangements.

Seasonality

Our operating results are not affected by seasonality.

Inflation

Our business and operating results are not affected in any material way by inflation.

Critical Accounting Policies

The Securities and Exchange Commission issued Financial Reporting Release No. 60, "Cautionary Advice Regarding Disclosure About Critical Accounting Policies" suggesting that companies provide additional disclosure and commentary on their most critical accounting policies. In Financial Reporting Release No. 60, the Securities and Exchange Commission has defined the most critical accounting policies as the ones that are most important to the portrayal of a company's financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. See "Uses of estimates in the preparation of financial statements" above.

15


Contractual Obligations

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As a "smaller reporting company" as defined by Item 10 of Regulation S-K, the Company is not required to provide this information.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The financial information required by Item 8 begins on the following page.

16


           
  Paritz & Company, P.A.     15 Warren Street, Suite 25
Hackensack, New Jersey 07601
(201)342-7753
Fax: (201) 342-7598
E-Mail: paritz @paritz.com
 
 

Certified Public Accountants

       

REPORT OF INDEPENDENT REGISTERED ACCOUNTING FIRM

Board of Directors

Vycor Medical Inc. and Subsidiaries

Boca Raton, Florida

We have audited the accompanying consolidated balance sheets of Vycor Medical Inc. and Subsidiaries as of December 31, 2010 and 2009 and the related consolidated statements of operations, changes in stockholders' deficit and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Vycor Medical Inc. and Subsidiaries as of December 31, 2010 and 2009 and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has incurred a loss since inception, has a net accumulated deficit and may be unable to raise further equity. These factors raise substantial doubt about its ability to continue as a going concern. Management's plans regarding those matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Paritz & Company, P.A.

Hackensack, New Jersey

March 22, 2011

F-1


VYCOR MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010

VYCOR MEDICAL, INC.
Consolidated Balance Sheets

                 
        December 31,
2010
(audited)
    December 31,
2009
(audited)
 
  ASSETS               
                 
  Current Assets               
                 
  Cash   $ 127,081   $ 12,771  
  Accounts receivable     76,460     29,748  
  Inventory     52,360     41,967  
  Prepaid expenses     106,782     22,369  
  Total Current Assets     362,683     106,855  
                 
  Fixed assets, net      773,188     191,009  
                 
  Intangible and Other assets:               
  Trademarks     130,000     -  
  Patents, net of accumulated amortization     333,072     93,704  
  Website, net of accumulated amortization     3,932     7,042  
  Security deposits     12,299     2,350  
        479,303     103,096  
                 
  TOTAL ASSETS    $ 1,615,174   $ 400,960  
                 
  LIABILITIES AND STOCKHOLDERS' DEFICIT               
                 
  Current Liabilities               
  Accounts payable   $ 114,447   $ 336,942  
  Accrued interest     36,992     2,904  
  Accrued liabilities     406,998     62,002  
  Other current liabilities     106,162     -  
  Notes payable     1,344,300     1,111,053  
  TOTAL LIABILITIES      2,008,899     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, 724,488,929 and 557,798,599 shares issued and outstanding at December31,2010 and 2009,respectively     72,449     55,780  
  Additional Paid-in Capital     6,375,175     3,708,967  
  Accumulated Deficit     (6,838,350 )   (4,876,688 )
  Accumulated Other Comprehensive Income     (2,999 )   -  
                 
        (393,725 )   (1,111,941 )
                 
  TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT    $ 1,615,174   $ 400,960  

See accompanying notes to financial statements

F-2


VYCOR MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010

VYCOR MEDICAL, INC.
Consolidated Statement of Operations

                       
        For the year ended December 31,  
        2010           2009  
        (audited)           (audited)  
                       
  Revenue   $ 316,450         $ 199,046  
                       
  Cost of Goods Sold     48,737           22,482  
                       
  Gross Profit     267,713           176,564  
                       
  Operating expenses:                    
  Research and development     15,208           4,761  
  Depreciation and Amortization     56,801           36,995  
  Stock Compensation     152,069           391,704  
  General and administrative     1,576,158           685,707  
                       
  Total Operating expenses     1,800,236           1,119,167  
                       
  Operating loss     (1,532,523 )         (942,603 )
                       
  Other income (expense)                    
  Interest income     7           257  
  Interest expense     (214,668 )         (249,762 )
  Forgiveness of previously accrued salaries     -           50,725  
  Goodwill on Acquisition of Subsidiary     (58,027 )         -  
  Costs related to Acquisition of Subsidiary     (154,203 )            
  Total Other Income (expense)     (426,891 )         (198,780 )
                       
                       
  Net Loss Before Taxes     (1,959,414 )         (1,141,383 )
                       
  Taxes     (2,248 )         -  
                       
  Net Loss   $ (1,961,662 )       $ 0  
                       
  Loss Per Share                    
  Basic and diluted   $ (0.003 )       $ (0.039 )
                       
  Weighted Average Number of Shares Outstanding     663,168,900           29,183,482  

See accompanying notes to financial statements

F-3


VYCOR MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010

VYCOR MEDICAL, INC.
Statement of Stockholders' Deficiency

                                         
              Common     Preferred
Stock -
    Additional
Paid-in
    Accumulated        
        Shares     Stock     Series B     Capital     Deficit     Total  
  Balance at January 1, 2009     25,463,455   $ 25,463   $ -   $ 2,788,415   $ (3,735,305 ) $ (921,427  
  Common stock issued in conjunction with Altcar Investments note payable     866,867   $ 867         $ 105,758         $ 106,625  
  Issuance of stock for consulting fees     91,777     92           17,345           17,437  
  Share-based compensation for consulting services                       8,911           8,911  
  Share-based compensation - employee options vesting                       57,840           57,840  
  Share-based compensation - Coviello and Vinas, in accordance with FHC recapitalization transaction                       324,954           324,954  
  Beneficial conversion feature on Fountainhead debt                       135,102           135,102  
  Retroactive change to par value (see Note 10)           (23,780 )         23,780           -  
  Retroactive reflection of conversion of Series A Preferred Shares in accordance with FHC recapitalization transaction (see Note 9)     531,376,500     53,138           246,862           300,000  
  Net loss for twelve months ended December 31, 2009                           $ (1,141,383 )   (1,141,383  
  Balance at December 31, 2009     557,798,599   $ 55,780   $ -   $ 3,708,967   $ (4,876,688 ) $ (1,111,941 )
  Issuance of stock for consulting fees     2,612,500     261           40,364           40,625  
  Share-based compensation for consulting services                       94,229           94,229  
  Share-based compensation - employee options vesting                       57,840           57,840  
  Purchases of equity - Series B preferred                 14     139,986           140,000  
  Common stock issuance for conversion of Series B preferred and interest     11,768,197     1,177     (14 )   5,939           7,102  
  Common stock issuance for conversion of debt     64,295,200     6,430           797,260           803,690  
  Beneficial conversion feature on convertible debt                       90,866           90,866  
  Purchases of equity - Common stock     87,079,447     8,708           1,425,792           1,434,500  
  Common stock issuance for satisfaction of accounts payable     934,986     93           13,932           14,025  
  Net loss for twelve months ended December 31, 2010                           $ (1,961,662 )   (1,961,662 )
  Accumulated Comprehensive Loss                                 $ (2,999 )
  Balance at December 31, 2010     724,488,929   $ 72,449   $ -   $ 6,375,175   $ (6,838,350 ) $ (393,725 )

See accompanying notes to financial statements

F-4


VYCOR MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010

VYCOR MEDICAL, INC.

Consolidated Statement of Cash Flows

                       
        For the twelve months ended December 31  
        2010           2009  
  Cash flows from operating activities:                    
  Net loss   $ (1,961,662 )       $ (1,141,383 )
  Adjustments to reconcile net loss to cash used in operating activities:                    
  Amortization of intangible assets     21,539           14,046  
  Depreciation of fixed assets     35,262           22,949  
  Amortization of debt discount expense     168,785           146,405  
  Share based compensation     152,069           391,706  
  Shares issued for consulting services     40,625           17,437  
  Interest satisfied with stock conversion     7,102           6,625  
  Goodwill written off on acquisition of subsidiary     58,027           -  
  Changes in assets and liabilities:                    
  Accounts receivable     (40,032 )         60,017  
  Inventory     3,908           29,560  
  Prepaid expenses     (39,262 )         (15,329 )
  Security deposit     (9,949 )         -  
  Accounts payable     (247,164 )         23,331  
  Accounts payable satisfied with common stock     14,025           -  
  Accrued interest     34,088           (85,684 )
  Accrued liabilities     292,385           (13,466 )
  Other current liabilities     19,983           -  
                       
  Cash used in operating activities     (1,450,270 )         (543,786 )
  Cash flows provided by / (used in) investing activities:                    
  Acquisition of subsidiary, net of cash acquired     (898,017 )         -  
  Purchase of fixed assets     (21,521 )         -  
  Acquisition of patents     (8,575 )         (62,133 )
  Cash provided by / (used in) investing activities     (928,113 )         (62,133  
  Cash flows from financing activities:                    
  Proceeds from sale of equity - Common stock     1,434,500           300,000  
  Proceeds from sale of equity - Series B preferred     140,000           -  
  Proceeds from short term Notes Payable     1,276,500           1,449,052  
  Repayment of short term Notes Payable     (361,500 )         (1,326,500 )
  Cash provided by financing activities     2,489,500           422,552  
  Foreign currency translation adjustment     3,193           -  
  Net increase (decrease) in cash     114,310           (183,367 )
  Cash at beginning of period     12,771           196,138  
  Cash at end of period   $ 127,081         $ 12,771  
  Supplemental Disclosures of Cash Flow information:                    
  Interest paid:   $ -         $ -  
  Taxes paid   $ 2,248         $ -  
  Non-Cash Transactions:                    
  Warrants, options and common stock issued for debt financing   $ 803,690         $ 400,000  
                       
  See accompanying notes to financial statements  

F-5


VYCOR MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2010

1.   FORMATION AND BUSINESS OF THE COMPANY

Business Description

Vycor Medical, LLC, (the "Company") was formed in June 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 designs, develops and markets neurological medical devices and therapies and operates through two divisions: Vycor Medical - brain surgical access system for sale to hospitals and medical professionals; and NovaVision - neuro stimulation therapies and diagnostic devices for the treatment and screening of vision field loss.

2.   GOING CONCERN

The Company's financial statements have been presented on a basis that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business and assumes the Company will continue as a going concern. The Company has incurred losses since its inception, including a net loss of $1,961,662 for the year ended December 31, 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 December 31, 2010 the Company had a stockholders' deficiency of $393,725 and cash and cash equivalents of $127,081. 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.

3. BUSINESS ACQUISITION

On November 29, 2010, the Company completed its acquisition (the "Acquisition") of substantially all of the assets 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 price for the Acquisition was $900,000 in cash.

As required under ASC 805 the Company commissioned an independent appraisal of the assets acquired which was finalized in March 2011 and the assets entered into the Company's consolidated accounts on the basis of this valuation. As a result, the Company generated goodwill on acquisition of $58,027 which has been written off as incurred.

The expenses of the transaction, which primarily