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 4. 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 Index To Exhibits
EX-31.1 d28753_ex31-1.htm
EX-31.2 d28753_ex31-2.htm
EX-32.1 d28753_ex32-1.htm
EX-32.2 d28753_ex32-2.htm

Vycor Medical Earnings 2011-09-30

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 d28753.htm 10-Q 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, 2011                 

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.)  

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

Issuer's telephone number: (561) 558-2000
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 806,157,246 shares outstanding of registrant's common stock, par value $0.0001 per share, as of November 4, 2011.

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, 2011 (unaudited) and December 31, 2010     3  
        Unaudited Consolidated Statements of Operations for the three and nine months ended September 30, 2011 and September 30, 2010     4  
        Unaudited Consolidated Statements of Cash Flows for the nine months ended September 30, 2011
and 2010
    5  
        Notes to Unaudited Consolidated Financial Statements     6  
  Item 2.     Management's Discussion and Analysis of Financial Condition and Results of Operation     20  
  Item 3.     Quantitative and Qualitative Disclosures About Market Risk     29  
  Item 4.     Controls and Procedures           29  
  PART II  
  Item 1.     Legal Proceedings           30  
  Item 1A.     Risk Factors           30  
  Item 2.     Unregistered Sales of Equity Securities and Use of Proceeds     30  
  Item 3.     Defaults Upon Senior Securities           32  
  Item 4.     (Removed and Reserved)           32  
  Item 5.     Other Information           32  
  Item 6.     Exhibits           32  
                       
  SIGNATURES           32  

2


PART I

ITEM 1. FINANCIAL STATEMENTS

VYCOR MEDICAL, INC.
Consolidated Balance Sheets

                 
        September 30,
2011
(unaudited)
    December 31,
2010
(restated)
 
  ASSETS               
                 
  Current Assets               
  Cash   $ 1,833,831   $ 127,081  
  Accounts receivable, net     113,575     76,460  
  Inventory     118,157     52,360  
  Prepaid expenses and other current assets     1,176,941     645,302  
  Total Current Assets     3,242,504     901,203  
                 
  Fixed assets, net      671,607     773,188  
                 
  Intangible and Other assets:               
  Trademarks     130,000     130,000  
  Patents, net of accumulated amortization     343,622     333,072  
  Website, net of accumulated amortization     5,165     3,932  
  Security deposits     8,988     12,299  
        487,775     479,303  
                 
  TOTAL ASSETS    $ 4,401,886   $ 2,153,694  
                 
  LIABILITIES AND STOCKHOLDERS' EQUITY              
                 
  Current Liabilities               
  Accounts payable   $ 241,889   $ 114,447  
  Accrued interest     24,986     36,992  
  Accrued liabilities     658,098     406,998  
  Other current liabilities     101,179     90,881  
  Notes payable - current     1,634,689     1,415,662  
        2,660,841     2,064,980  
  Notes payable - long-term     -     -  
  TOTAL LIABILITIES      2,660,841     2,064,980  
                 
  STOCKHOLDERS' EQUITY              
  Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 63.8 and none issued and outstanding as at September 30, 2011 and December 31, 2010 respectively   $ 1   $ -  
  Common Stock, $0.0001 par value, 1,500,000,000 shares authorized, 806,157,246 and 724,488,929 shares issued and outstanding at September 30, 2011 and December 31, 2010 respectively     80,616     72,449  
  Additional Paid-in Capital     12,461,726     6,902,427  
  Accumulated Deficit     (10,803,211 )   (6,883,163 )
  Accumulated Other Comprehensive Income     1,913     (2,999 )
                 
        1,741,045     88,714  
  TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY   $ 4,401,886   $ 2,153,694  

See accompanying notes to financial statements

3


VYCOR MEDICAL, INC.
Consolidated Statement of Operations
(unaudited)

                                               
        For the three months ended
September 30,
          For the nine months ended
September 30,
 
        2011           2010           2011           2010  
                    (restated)                       (restated)  
                                               
  Revenue   $ 231,278         $ 71,205         $ 518,731         $ 210,308  
                                               
  Cost of Goods Sold     36,298           11,980           93,863           30,752  
                                               
  Gross Profit     194,980           59,225           424,868           179,556  
                                               
  Operating expenses:                                            
  Research and development     33,624           4,009           94,960           9,657  
  Depreciation and Amortization     53,628           10,753           155,381           30,577  
  General and administrative     1,218,140           392,099           4,002,430           1,222,280  
                                               
  Total Operating expenses     1,305,392           406,861           4,252,771           1,262,514  
                                               
  Operating loss     (1,110,412 )         (347,636 )         (3,827,903 )         (1,082,958 )
                                               
  Other income (expense)                                            
  Other income (expense)     (6,406 )         -           3,661           -  
  Interest expense     (32,276 )         (9,357 )         (95,810 )         (33,759 )
  Total Other expense     (38,682 )         (9,357 )         (92,149 )         (33,759 )
                                               
                                               
  Net Loss Before Taxes     (1,149,094 )         (356,993 )         (3,920,052 )         (1,116,717 )
                                               
  Taxes     -           -           -           2,078  
                                               
  Net Loss     (1,149,094 )       $ (356,993 )         (3,920,052 )       $ (1,118,795 )
                                               
  Loss Per Share                                            
  Basic and diluted   $ (0.001 )       $ (0.001 )       $ (0.005 )       $ (0.002 )
                                               
  Weighted Average Number of Shares Outstanding     802,577,945           683,067,846           770,330,972           650,384,814  

See accompanying notes to financial statements

4


VYCOR MEDICAL, INC.
Consolidated Statement of Cash Flows
(unaudited)

                       
        For the nine months ended September 30  
        2011           2010
(restated)
 
  Cash flows from operating activities:                    
  Net loss   $ (3,920,052 )       $ (1,118,795 )
  Adjustments to reconcile net loss to cash used in operating activities:                    
  Amortization of intangible assets     127,052           13,172  
  Depreciation of fixed assets     38,812           17,405  
  Share based compensation     1,576,176           203,278  
  Shares based interest expense     4,884           -  
  Foreign currency gain (loss)     12,359           -  
  Net loss as adjusted for non-cash items     (2,160,769 )         (884,940 )
                       
  Changes in assets and liabilities:                    
  Accounts receivable     (37,069 )         (45,868 )
  Inventory     (65,697 )         702  
  Prepaid expenses     (542,855 )         (54,553 )
  Security deposit     3,311           (1,283 )
  Accounts payable     126,932           (245,726 )
  Accrued interest     (10,816 )         29,512  
  Accrued liabilities     249,861           21,158  
  Other current liabilities     8,540           78,583  
                       
  Cash used in operating activities     (2,428,562 )         (1,102,415 )
  Cash flows used in investing activities:                    
  Purchase of fixed assets     (22,872 )         (1,931 )
  Purchase of website     (3,360 )         -  
  Acquisition of patents     (56,435 )         (3,783 )
  Cash used in investing activities     (82,667 )         (5,714 )
  Cash flows from financing activities:                    
  Net proceeds from issuance of Common stock     889,000           914,500  
  Net proceeds from issuance of Series B preferred stock     -           140,000  
  Net proceeds from issuance of Series C preferred stock     3,068,200           -  
  Net proceeds from issuance of Notes Payable     530,304           376,500  
  Repayment of Notes Payable     (272,400 )         (291,500 )
  Cash provided by financing activities     4,215,104           1,139,500  
  Effect of exchange rate changes on cash     2,875           -  
  Net increase in cash     1,706,750           31,371  
  Cash at beginning of period     127,081           12,771  
  Cash at end of period   $ 1,833,831         $ 44,142  
                       
  Supplemental Disclosures of Cash Flow information:                    
  Interest paid:   $ 1,550         $ -  
  Taxes paid   $ -         $ 2,078  
  Non-Cash Transactions:                    
  Warrants, options and common stock issued for debt financing   $ 41,190         $ 803,690  
                       
  See accompanying notes to financial statements  

5


VYCOR MEDICAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2011
(unaudited)

1.  BASIS OF PRESENTATION

The condensed consolidated balance sheet as of December 31, 2010, which has been derived from restated audited financial statements, and the accompanying unaudited condensed financial statements have been prepared by Vycor Medical, Inc. (together with its consolidated subsidiaries, the "Company" or "Vycor") in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to the quarterly report on Form 10-Q and Rule 8-03 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 three and nine months ended September 30, 2011 are not necessarily indicative of the results that may be expected for the year ending December 31, 2011. These financial statements should be read in conjunction with the financial statements and footnotes thereto included in the Company's annual report on Form 10-K/A for the year ended December 31, 2010, as amended and restated. Certain prior period amounts have been reclassified to conform to the current presentation. All financial information included in these Notes relating to the Company's financial position as of December 31, 2010 and results of operations for the interim period ended September 30, 2010 have been restated to give effect to the accounting corrections discussed in Note 5.

2.  FORMATION AND BUSINESS OF THE COMPANY

Business Description

Vycor Medical, LLC was formed on June 17, 2005 as a New York Limited Liability Company. The Company changed its name to Vycor Medical, Inc. and converted to a Delaware Corporation on August 14, 2007 and issued 16,048 shares of common stock in exchange for each of the 1,122 partnership 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. Accordingly, all references to number of shares prior to the date of conversion are based upon the common stock equivalent of the partnership units outstanding on such dates.

The Company designs, develops and markets neurological medical devices and therapies through two operating divisions: Vycor Medical and NovaVision. Vycor Medical focuses on brain and cervical surgical access systems for sale to hospitals and medical professionals; NovaVision focuses on neuro-stimulation therapies and diagnostic devices for the treatment and screening of vision field loss.

3.   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 $3,920,052 for the nine months ended September 30, 2011, and the Company expects to continue to incur substantial additional losses in the future, including significant development, marketing, manufacturing and distribution costs. The Company has generated negative cash flows from operations since inception. As of September 30, 2011 the Company had a stockholders' equity of $1,741,045 and cash and cash equivalents of $1,833,831. The Company believes it will 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, or at all. 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.

6


4.   ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of Vycor Medical, Inc., and its wholly-owned subsidiaries, NovaVision, Inc. (a Delaware corporation) and NovaVision AG (a German corporation), a wholly owned subsidiary of NovaVision, Inc. The Company is headquartered in Boca Raton, FL. The operations of NovaVision, Inc. have been consolidated from November 30, 2010, the date of the acquisition of substantially all the assets of the former NovaVision, Inc. All material inter-company accounts, transactions, and profits have been eliminated in consolidation.

Research and Development

The Company expenses all research and development costs as incurred. For the nine months ended September 30, 2011 and 2010 the amounts charged to research and development expenses were $94,960 and $9,657, respectively.

Software Development Costs

The authoritative accounting guidance requires software development costs to be capitalized upon completion of the preliminary project stage. Accordingly, direct internal and external costs associated with the development of the features and functionality of the Company's software, incurred during the application development stage, are capitalized and amortized using the straight-line method of the estimated life of three years. The Company acquired internally developed software valued at $540,000 as part of the acquisition of the assets of NovaVision, Inc. on November 30, 2010. For the nine months ended September 30, 2011 and 2010 there was no capitalization of software development costs.

Uses of estimates in the preparation of financial statements

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

Fair Values of Assets and Liabilities

We value financial instruments using a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices for similar assets or liabilities in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs in which little or no market data exists, therefore requiring an entity to develop its own assumptions.

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 principally derived or corroborated from market data. Using level 3 inputs uses management's assessment 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 has no items that are subject to these standards as of September 30, 2011.

7


Net Loss Per Share

Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed giving effect to all dilutive potential common shares that were outstanding during the period. Dilutive potential common shares consist of incremental shares issuable upon exercise of stock options and warrants and conversion of preferred stock and convertible debt.  Such potentially dilutive shares are excluded when the effect would be to reduce a net loss per share. No dilution adjustment has been made to the weighted average outstanding common shares in the periods presented because the assumed exercise of outstanding options and warrants and the conversion of preferred stock and debt would be anti-dilutive.

The following table sets forth the potential shares of common stock that are not included in the calculation of diluted net loss per share:

                             
        September 30,           September 30,        
        2011           2010        
  Stock options outstanding     833,333           833,333        
  Warrants to purchase common stock     264,564,530           116,766,670        
  Debentures convertible into common stock     55,308,960           40,166,103        
  Preferred shares convertible into common stock     141,777,768           -        
  Total     462,484,591           102,281,557        

Recent Accounting Pronouncements

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

5.   NOTES PAYABLE

As of September 30, 2011 and December 31, 2010 Notes Payable consists of:

 

                       
              September 30, 2011     December 31, 2010  
  On December 29, 2009 and February 3, 2010, the Company issued convertible debentures in the amount of $371,362 and $70,000, respectively, payable to Fountainhead Capital Management ("Fountainhead"), the beneficial owner of more than 50% of the Company's common stock. These debentures accrue interest at a rate of 6% per annum, are secured by a first priority security interest in all of the assets of the Company, and are 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 debentures 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. These debentures were originally due August 31, 2010. On May 14, 2010, the due date for satisfaction was extended to March 30, 2011, on March 28, 2011 the due date was further extended to August 31, 2011 and on June 6, 2011 the due date was further extended to December 31, 2012.           441,362     441,362  
                       
  On September 30, 2010 and October 14, 2010, the Company issued convertible debentures payable to Fountainhead in the amount of $85,000 and $90,000, respectively. These debentures accrue interest at a rate of 6% per annum, are secured by a first priority security interest in all of the assets of the Company, and are 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 debentures 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 debentures were originally due August 31, 2011, however the due date for satisfaction was extended on June 6, 2011 to December 31, 2012.           175,000     175,000  

8


                       
              September 30, 2011     December 31, 2010  
                       
  On October 26, 2010 and November 15, 2010, the Company issued debentures payable to Fountainhead in the amount of $77,500 and $322,500, respectively. These debentures accrue interest at a rate of 6% per annum, are secured by a first priority security interest in all of the assets of the Company, and are senior to or pari passu with, all other obligations of the Company, subject to certain conditions. The debentures were originally due August 31, 2011, however the due date for satisfaction was extended on June 6, 2011 to December 31, 2012.           400,000     400,000  
                       
  On November 15, 2010, the Company issued a convertible debenture in the amount of $350,000 payable to Peter Zachariou, a Director of the Company. This debenture accrues interest rate of 6% per annum, is due on December 31, 2012, 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 $0.019 per share, subject to adjustment and does not require bifurcation. On December 20, 2010, the Company repaid $50,000 of this debenture and removed the convertible rights. On June 6, 2011 the due date for satisfaction was extended to December 31, 2012.           300,000     300,000  
                       
  On December 3, 2010, the Company issued a debenture in the amount of $40,000 payable to Berardino Investment Group. This debenture accrued interest at a rate of 6% per annum, was due June 30, 2011, was secured by a first priority security interest in all of the assets of the Company, and was senior to or pari passu with, all other obligations of the Company, subject to certain conditions. The Holder was 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 $0.019 per share, subject to adjustment and did not require bifurcation. On June 30, 2011, the entire principal and unpaid interest on this debenture was converted into 2,167,902 shares of the Company's Common Stock at the conversion price of $0.019 per share.           -     40,000  
                       
                       
  On March 25, 2011 the Company issued a term note for $300,000 to EuroAmerican Investment Corp. ("EuroAmerican"). The term note bears interest at 16% per annum and was due June 25, 2011. In connection with the loan the Company also issued EuroAmerican warrants to purchase 400,000 shares of the Company's common stock at an exercise price of $0.03 per share for a period of three (3) years. On June 25, 2011 the due date for this note was extended to September 25, 2011 and the Holder was granted the right to convert all or any amount of the principal face amount of the debenture then outstanding and accrued interest into shares of common stock of the Company at the conversion price of $0.03 per share, subject to adjustment and does not require bifurcation. On October 25, 2011 the due date for this note was further extended to December 10, 2011           300,000     -  
                       
  Unsecured, non-interest bearing loan from the chief executive of NovaVision AG, advanced a total of to NovaVision AG, which is being repaid in monthly installments to December 31, 2011. As of September 30, and December 31, 2010 the remaining balance is €11,000 and €33,000, respectively.           14,957     44,019  
                       
  Insurance policy finance agreements           3,370     15,281  
                       
  Total Notes Payable:         $ 1,634,689   $ 1,415,662  

9


The following is a schedule of future minimum loan payments:

                       
  Twelve months ending December 30,           Amount        
  2011         $ 318,327        
  2012           1,316,362        
  2013           -        
  2014           -        
  2015           -        
  Thereafter           -        
  Total         $ 1,634,689        

As of September 30, 2011, $1,316,362 of Company's notes payable are secured by a first security interest in all of the assets of the Company. The company assesses the value of the beneficial conversion feature of its convertible debt by determining the intrinsic value of such conversion, under ASC 470, at the time of issuance. At the time of issuance of each of the convertible debt instruments set out above, the fair value of the stock was either the same or less than the conversion price, and so there was no value attributable to any beneficial conversion feature.

6.   SEGMENT REPORTING, GEOGRAPHICAL INFORMATION

(a) Business segments

The Company operates in two business segments: Vycor Medical, which focuses on devices for neurosurgery; and NovaVision, which focuses on neuro stimulation therapies and diagnostic devices for the treatment and screening of vision field loss. Set out below are the revenues, gross profits and total assets for each segment.

                             
        Three Months Ended September 30,     Nine Months Ended September 30,  
        2011     2010     2011     2010  
  Revenue:                          
  Vycor Medical   $ 66,510   $ 71,205   $ 248,591   $ 210,308  
  NovaVision     164,768     -     270,140     -  
  Total Revenue   $ 231,278   $ 71,205   $ 518,731   $ 210,308  
  Gross Profit:                          
  Vycor Medical   $ 49,010   $ 59,225   $ 202,624   $ 179,556  
  NovaVision     145,970     -     222,244     -  
  Total Gross Profit   $ 194,980   $ 59,225   $ 424,868   $ 179,556  

                 
        September 30,
2011
    December 31,
2010 (restated)
 
  Total Assets:              
  Vycor Medical   $ 2,846,528   $ 1,085,680  
  NovaVision     1,555,358     1,068,014  
  Total Assets   $ 4,401,886   $ 2,153,694  

(b) Geographic information

The Company operates in two geographic segments, the United States and Germany. Set out below are the revenues, gross profits and total assets for each segment.

                             
        Three Months Ended September 30,     Nine Months Ended September 30,  
        2011     2010     2011     2010  
  Revenue:                          
  United States   $ 181,137   $ 71,205   $ 390,339   $ 210,308  
  Germany     50,141     -     128,392     -  
  Total Revenue   $ 231,278   $ 71,205   $ 518,731   $ 210,308  

10


                             
        Three Months Ended September 30,     Nine Months Ended September 30,  
        2011     2010     2011     2010  
  Gross Profit:                          
  United States   $ 155,277   $ 59,225   $ 328,934   $ 179,556  
  Germany     39,703     -     95,934     -  
  Total Gross Profit   $ 194,980   $ 59,225   $ 424,868   $ 179,556  

                             
                    September 30,
2011
    December 31,
2010 (restated)
 
  Total Assets:                          
  United States               $ 4,307,783   $ 2,084,029  
  Germany                 94,103     69,665  
  Total Assets               $ 4,401,886   $ 2,153,694  

7.  PROPERTY AND EQUIPMENT

As of September 30, 2011 and December 31, 2010, Property and Equipment and the estimated lives used in the computation of depreciation is as follows:

                 
        June 30,     December 31,  
        2011     2010  
                 
  Machinery and equipment   $ 99,076   $ 93,764  
  Purchased Software     15,608     10,000  
  Molds and Tooling     230,830     230,830  
  Furniture and fixtures     18,642     18,288  
  Therapy Devices     58,995     44,412  
  Internally Developed Software     540,000     540,000  
        963,151     937,294  
                 
  Less: Accumulated depreciation and amortization     (291,544 )   (164,106 )
                 
  Property and Equipment, net   $ 671,607   $ 773,188  

Estimated useful lives of property and equipment are as follows:

                       
        Therapy devices     3 years        
        Computer equipment and software     3 years        
        Furniture and fixtures     7 years        
        Machinery and office equipment     5 years        
        Internally Developed Software     5 years        

8.   INTANGIBLE ASSETS

As of September 30, 2011 and December 31, 2010, Intangible Assets consists of:

                 
        September 30,     December 31,  
        2011     2010  
  Amortized intangible assets: Patent (8 years useful life)              
  Gross carrying Amount   $ 438,175   $ 381,740  
  Accumulated Amortization     (94,553 )   (48,668 )
      $ 343,622   $ 333,072  
                 
  Intangible assets not subject to amortization              
  Trademarks   $ 130,000   $ 130,000  

Amortization expense for the nine-month periods ended September 30, 2011 and 2010 was $46,052 and $13,172, respectively.

11


9.   EQUITY 

Certain Equity Transactions

In January and February 2011, the Company issued an aggregate of 7,578,947 shares of common stock to three investors at a price of $0.019 per share for aggregate gross proceeds of $144,000.

In February 2011, the Company issued 250,000 shares of its common stock (valued at $5,000) to Steven Girgenti in consideration for services provided to the Board of Directors. In May 2011, the Company issued an additional 222,222 shares of its common stock (valued at $5,000) to Mr. Girgenti.

On March 2, 2011, the Company issued warrants to seven parties to purchase 14,710,530 shares of the Company's common stock at a price of $0.03 per share. The warrants are exercisable over a period of three years from the date of issuance.

On March 25, 2011, in connection with the issuance by the Company of a term note for $300,000 to EuroAmerican Investment Corp, the Company issued warrants to purchase 400,000 shares of Company common stock at an exercise price of $0.03 per share for a period of three years from the date of issuance. The estimated fair value of this warrant was recorded as a debt discount at issuance and was amortized over the three-month term of the loan as interest expense.

In April 2011, the Company issued 24,444,442 shares of common stock together with Warrants to purchase 12,222,221 shares of common stock at an exercise price of $0.03 per share for a period of three years for aggregate gross proceeds of $550,000.

In April 2011, in connection with a consultancy agreement, the Company issued 18,000,000 shares of common stock (valued at $360,000) to Jerrald Ginder. On June 25, 2011, pursuant to an amendment to this consultancy agreement, the Company issued an additional 2,666,667 shares of common stock to Mr. Ginder in lieu of aggregate monthly cash payments due under the agreement totaling $60,000.

In May 2011, the Company issued 8,666,666 shares of common stock together with Warrants to purchase 4,333,334 shares of Company common stock at an exercise price of $0.03 per share for a period of three years for aggregate gross proceeds of $195,000.

On June 7, 2011, the Company completed the sale of 31.4 Units comprising Series C Convertible Preferred Shares and Warrants (the "Units") to accredited investors (the "Investors") (the "Preferred Offering") for aggregate proceeds of $1,570,000. The Units were issued pursuant to separate Series C Convertible Preferred Stock Purchase Agreements (the "Agreements") between the Company and each of the Investors.  This sale was an initial closing (the "Initial Closing") under the Agreements which allows for maximum proceeds of $3,000,000. Each Unit was priced at $50,000 and comprised one share of Series C Preferred Convertible Stock convertible (at the Holder's option or mandatorily upon the occurrence of certain events) into 2,222,222 shares of the Company's Common Stock ($0.0225 per share) and a Warrant to purchase 1,111,111 shares of the Company's Common Stock at $0.03 per share (subject to adjustments) for a period of three years (the "Warrant" or "Warrants").  A total of 31.4 shares of Series C Convertible Preferred Stock convertible into 69,777,773 shares of the Company's Common Stock and Warrants to purchase 34,888,890 shares of the Company's Common Stock were issued.  On June 28, 2011, the Company completed a second closing of the Preferred Offering (the "Second Closing") with the sale of an additional 15.40 Units to Investors for aggregate proceeds of $770,000. An additional 15.40 shares of Series C Convertible Preferred Stock convertible into 34,222,220 shares of the common stock and Warrants to purchase 17,111,111 shares of the Company's common stock were issued in connection with the Second Closing.  The Company entered into a Registration Rights Agreement with the Investors with respect to the Warrants.

On June 3, 2011, in connection with a consultancy agreement, the Company issued 15,500,000 shares of common stock (valued at $348,750) to GreenBridge Capital Partners IV, LLC.

On June 6, 2011, in connection with a consultancy agreement, the Company issued 1,000,000 shares of common stock (valued at $22,500) to Burnham Hill Advisors, LLC.

Burnham Hill Partners LLC ("BHP") served as placement agent in connection with the sale of 24.8 Units in the Preferred Offering. Pursuant to a placement agent agreement with BHP, the Company paid BHP a cash placement fee equal to seven percent (7%) of the gross proceeds received by the Company from Units placed by BHP. Also pursuant to the placement agent agreement, the Company issued BHP Warrants (the "Placement Agent Warrants") to purchase a number of shares equal to seven percent (7%) of the number of shares of common stock issuable upon conversion of the 24.8 Units placed by BHP (3,857,778 shares) in the Preferred Offering. The Placement Agent Warrants are exercisable for three years from the date of issuance at an exercise price of $0.0225 per share.

12


On June 30, 2011, the entire principal and unpaid interest on a Debenture dated December 3, 2010 payable to Berardino Investment Group in the original principal amount of $40,000 was converted into 2,167,902 shares of common stock at a conversion price of $0.019 per share.

Under the terms of a Consulting Agreement dated February 10, 2010 with Fountainhead, the Company was required to issue to Fountainhead fully vested warrants to purchase 39,063,670 shares of the Company's common stock should certain conditions be met during the term of the Consulting Agreement. These warrants are exercisable at $0.0125 per share for a period of five years from February 2010. These warrants became issuable upon completion of the Preferred Offering and were issued in June 2011.

In July 2011 the Company issued Warrants to purchase 2,300,000 shares of Company common stock at an exercise price of $0.03 per share for a period of three years to Millenium Capital Corporation in respect of consulting and advisory services.

On August 4, 2011, the Company completed a final closing of the Preferred Offering (the "Final Closing") with the sale of an additional 13.2 Units to Investors for aggregate proceeds of $660,000. An additional 13.2 shares of Series C Convertible Preferred Stock convertible into 29,333,330 shares of the Company's Common Stock and Warrants to purchase 14,666,665 shares of the Company's Common Stock were issued in connection with the Final Closing. An aggregate of 60 Units were sold to Investors in the First Closing, Second Closing and Final Closing of the Preferred Offering for total proceeds of $3,000,000. A total of 60 shares of Series C Convertible Preferred Stock, convertible into an aggregate of 133,333,324 shares of Common Stock, and Warrants to purchase 66,666,666 shares of the Company's Common Stock.

In August 2011 the Company issued 154,600 shares of Common Stock (valued at $5,000) to Steven Girgenti, 78,300 shares of Common Stock to Alvaro Pascale-Leone (valued at $3,125) and 428,571 shares of Common Stock (valued at $10,000) to McCombie Group, LLC in respect of consulting agreements.

On August 26, 2011, the Company completed a new sale of 3.8 Units comprising Series C Convertible Preferred Shares and Warrants (the "Units") to an accredited investor (the "Investor") (the " New Preferred Offering") for aggregate proceeds of $190,000. Each Unit was priced at $50,000 and comprised one share of Series C Preferred Convertible Stock convertible (at the Holder's option or mandatorily upon the occurrence of certain events) into 2,222,222 shares of the Company's Common Stock ($0.0225 per share) and a Warrant to purchase 1,111,111 shares of the Company's Common Stock at $0.03 per share (subject to adjustments) for a period of three years (the "Warrant" or "Warrants").

In September 2011 the Company entered into a Consulting Agreement with Dr Oscar Bronsther with regard to certain potential clinical studies utilizing Vycor's VBAS product. Under the terms of the agreement, Dr Bronsther received warrants to purchase up to 400,000 of the Company's Common Stock for a period of three years from September 30, 2011 at a price of $0.03 per share.

On September 30, 2011 the Company issued 510,000 shares of Company common stock to Joe Simone in respect of an amendment to a previously disclosed consulting agreement.

During the nine months ended September 30, 2011, the Company received $889,000 in net cash proceeds from the sale of Common Shares and $3,068,200 in net proceeds from the sale of Preferred Stock, as detailed above.

10.   SHARE-BASED COMPENSATION

The Company recognizes the cost of all share-based payments under the relevant authoritative accounting guidance. Share-based payments include any remuneration paid by the Company in shares of the Company's common stock or financial instruments that grant the recipient the right to acquire shares of the Company's common stock. For share-based payments to employees, which consist only of awards made under the stock option plan described below, the Company accounts for the payments in accordance with the provisions of ASC Topic 718, "Stock Compensation" (formerly referred to as SFAS No. 123(R)). Share-based payments to consultants, service providers and other non-employees are accounted for under in accordance with ASC Topic 718, ASC Topic 505, "Equity Payments to Non-Employees" or other applicable authoritative guidance.

Stock Option Plan

The Company adopted the Vycor Medical, Inc Employee, Director, and Consultant Stock Plan (the "Plan") as of February 13, 2008. The Plan provides for both incentive stock options and nonqualified stock options to be granted to employees, officers, consultants, independent contractors, directors and affiliates of the Company.   The board of directors establishes the terms and conditions of all stock option 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 non-employees

13


is determined based on the services being provided. The maximum number of shares of stock which may be 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.

Under ASC Topic 718, the Company estimates the fair value of option awards on the date of grant using an option pricing model. The grant date fair value is recognized over the option vesting period, the period during which an employee is required to provide service in exchange for the award. No compensation cost is recognized for equity instruments for which employees do not render the requisite service. Under these standards, compensation cost for employee cost for employee stock-based awards is based on the estimated grant-date fair value and recognized over the vesting period of the applicable award on a straight-line basis.  No employee stock options were granted for the six month periods ended June 30, 2011 and 2010.

Initial grants of options to purchase 500,000 shares were issued under the Plan on February 13, 2008 to each of Kenneth T. Coviello, the Company's Chief Executive Officer and Heather N. Vinas, the Company's President at an exercise price of $0.135 per share.  The options vested 33-1/3% on each of the first, second, and third anniversary of the grant and expire February 12, 2018. Following Heather Vinas' resignation as President of the Company in May 2010, 166,667 unvested options were cancelled. Accordingly, for the nine months ended September 30, 2011, the Company recognized share-based compensation only for the grant to Mr. Coviello, totaling $29,796.

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, 2011 there were no awards of any stock appreciation rights.

The Company from time to time issues common stock, stock options or common stock warrants to acquire services or goods from non-employees. Common stock, stock options and common stock warrants issued to other than employees or directors are recorded on the basis of their fair value, which is measured as of the "measurement date" using an option pricing model. The "measurement date" for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the life of the option or warrant.

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 December 31, 2009     35,493,172         $ 0.030  
  Granted     90,191,077           0.015  
  Exercised                    
  Cancelled or expired     (9,079,473 )         0.015  
  Outstanding at December 31, 2010     116,604,776         $ 0.019  
  Granted     148,176,421           0.025  
  Exercised     -           -  
  Cancelled or expired     (50,000 )         0.500  
  Outstanding at September 30, 2011     264,731,197         $ 0.022  
                       
  STOCK OPTIONS:       Number of shares            Weighted average exercise price
per share
 
  Outstanding at December 31, 2009     1,000,000         $ 0.14  
  Granted                    
  Exercised                    
  Cancelled or expired     (166,667 )         0.14  
  Outstanding at December 31, 2010     833,333         $ 0.14  
  Granted     -           -  
  Exercised     -           -  
  Cancelled or expired     -           -  
  Outstanding at September 30, 2011     833,333         $ 0.14  

As of September 30, 2011, the weighted-average remaining contractual life of outstanding warrants and options is 3.17 and 7.88 years, respectively. 

14


Non-Employee Stock Compensation

Under the terms of a consulting agreement dated February 2010, the Company issued fully vested warrants to Fountainhead to purchase up to 39,063,670 shares of the Company's common stock at $0.0125 per share. The warrants are valid from February 10, 2010 for a period of five years. The fair value of these warrants was estimated using the Black-Scholes option pricing model and is being amortized over the two-year life of the consultancy agreement. For the nine months ended September 30, 2011, $134,322 was recognized as share-based compensation in connection with this agreement. Under the same agreement, the Company was also required to issue fully vested warrants to purchase an additional 39,063,670 shares of the Company's common stock, at a price of $0.0125 per share should new funding totaling $3 million in aggregate in Common Stock of Vycor or in securities convertible into Common Stock of Vycor at a price of no less than $0.0125 per share of Common Stock be closed during the term of the Consulting Agreement. These warrants became issuable upon completion of the Preferred Offering and were issued in June 2011. The fair value of these warrants was estimated at $658,651 using the Black-Scholes model and, because the performance criteria of the warrants had been satisfied on the date of issuance the full value was expensed immediately.

During the nine months ended September 30, 2011, the Company issued an aggregate of 626,822 shares of common stock to Steven Girgenti for services rendered to the board of directors. For the nine months ended September 30, 2011, $15,000 was recognized as share-based compensation for the issuance of these shares.

Under the terms of a twelve-month sales and marketing consulting agreement dated March 2010, the Company issued 750,000 shares of its Common Stock to Joe Simone, valued at $9,375. As an amendment to this agreement in September 2011, 510,000 shares of Common Stock were issued, valued at $15,300. For the nine months ended September 30, 2011, $17,071 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 to purchase up to 50,627,407 shares of the Company's common stock at $0.0175 per share. The warrants are valid from September 29, 2010 for a period of five years. The fair value of these warrants was estimated using the Black-Scholes model and is being amortized over the life of the agreement to August 30, 2011. For the nine months ended September 30, 2011, $336,114 was recognized as share-based compensation in connection with this agreement.

Under the terms of a one-year consulting agreement dated December 6, 2010, the Company issued warrants to Market Media Connect, LLC to purchase up to 500,000 shares of the Company's common stock at $0.07 per share. The warrants are valid from December 1, 2010 for a period of three years. The fair value of these warrants was estimated using the Black-Scholes model and is being amortized over the life of the consulting agreement. For the nine months ended September 30, 2011, $2,506 was recognized as share-based compensation in connection with this agreement.

In March 2011 the Company entered into a one-year consultancy agreement with Mr Jerrald Ginder, effective April 1, 2011. Mr Ginder has extensive experience in sales and marketing and the development of medical device products, and has contacts which will be of use to the Company. Under the terms of the agreement, which the Company has the right to terminate with 30 days notice, Mr. Ginder was to receive $60,000 cash, payable monthly, and 18,000,000 restricted shares of common stock of the Company. The stock has been valued by the Company at $360,000 and is being amortized over the life of the agreement as share-based compensation expense. On June 22, 2011, the Company and Mr. Ginder entered into an Amendment to the Consulting Agreement. Pursuant to this amendment, the Company issued to Mr. Ginder an additional 2,666,667 shares of the Company's common stock in lieu of the $60,000 cash due under the Consulting Agreement. The $60,000 value of the additional shares is also being amortized as share-based compensation over the life of the agreement. For the nine months ended September 30, 2011, aggregate compensation recognized in respect of the Consulting Agreement, as amended, was $201,075.

In June 2011, the Company entered into a one-year Consulting Agreement with GreenBridge Capital Partners, IV, LLC, to provide consulting and advisory services to the Company. Under the terms of this agreement, GreenBridge is to receive up to 15,500,000 shares of the Company's common stock. The stock has been valued by the Company at $348,750 and is being amortized over the life of the agreement as share-based compensation expense. For the nine months ended September 30, 2011, $113,344 was recognized as share-based compensation in connection with this agreement.

In June 2011 the Company entered into a Consulting Agreement with Burnham Hill Advisors LLC ("BHA") under which BHA shall provide, for a period of six months, financial and strategic advice to the Company. BHA received 1,000,000 restricted shares of the Company's common stock. The stock has been valued by the Company at $22,500 and is being amortized over the life of the agreement as share-based compensation expense. For the nine months ended September 30, 2011, $14,250 was recognized as share-based compensation in connection with this agreement.

In July 2011 the Company issued Warrants to purchase 2,300,000 shares of Company common stock at an exercise price of $0.03 per share for a period of three years to Millenium Capital Corporation in respect of consulting and advisory services.

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The fair value of these warrants was estimated at $28,735 using the Black-Scholes model and, because because the performance criteria of the warrants had been satisfied on the date of issuance, the full value was recognized immediately.

In relation to his appointment as a member of the Strategic Advisory Board of NovaVision, the Company issued 78,300 shares of the Company's Common Stock to Alvaro Pascale-Leone, valued at $3,125, which was recognized as share-based compensation in the nine months ended September 30, 2011.

In July 2011 the Company entered into a Consulting Agreement with McCombie Group LLC with regard to certain business and strategic planning services. Under the terms of the agreement McCombie Group received 428,571 shares of Common Stock valued at $15,000, which was recognized as share-based compensation in the nine months ended September 30, 2011.

In September 2011 the Company entered into a Consulting Agreement with Dr Oscar Bronsther with regard to certain potential clinical studies utilizing Vycor's VBAS product. Under the terms of the agreement, Dr Bronsther received warrants to purchase up to 400,000 of the Company's Common Stock for a period of three years from September 30, 2011 at a price of $0.03 per share. The fair value of these warrants was estimated at $7,351 using the Black-Scholes model and, because the time period for the agreement is indeterminable, the full value was recognized immediately.

Aggregate stock-based compensation expense charged to operations on employee options and on stock and warrants granted to the above non-employees for the nine months ended September 30, 2011 is $1,576,325. As of September 30, 2011, there was approximately $528,309 of total unrecognized compensation costs related to warrant and stock awards and non-vested options, which are expected to be recognized over a weighted average period of approximately 0.56 years.

Stock-based compensation expenses related to employee options and warrants granted to non-employees are recognized as the stock options and warrants are earned. The fair value of the stock options or warrants granted is estimated at the grant date, using the Black-Scholes option pricing model, and the expense is recognized on a straight-line basis over the shorter of the period over which services are to be received or the life of the option or warrant.  The grant date fair value of employee share options and similar instruments is estimated using the Black-Scholes option pricing model on the basis of the fair value of the underlying common stock on the measurement date, adjusted for the unique characteristics of those equity instruments, using the assumptions noted in the table below. The fair value of the common stock is determined by the then-prevailing private placement purchase price. Expected volatility was based on the historical volatility of a peer group of publicly traded companies. The expected term of options and warrants was based upon the life of the option, and the risk-free rate used was based on the U.S. Treasury Constant Maturity rate.

The following assumptions were used in calculations of the Black-Scholes option pricing model in the nine month periods ended September 30, 2011 and 2010:

                 
        Nine months ended September 30,  
        2011     2010  
  Risk-free interest rates      0.42-1.60 %     1.91-2.39 %  
  Expected life      3 years     3 years  
  Expected dividends     0%     0%  
  Expected volatility      96-99%     96%  
  Vycor Common Stock fair value     $0.02-$0.03     $0.0125-$0.0175  

  

11. INCOME TAXES  

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

In assessing the realization of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income.

The authoritative guidance requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Based on the level of historical taxable losses and projections of future taxable income (losses) over the periods in which the deferred tax assets can be realized, management currently believes that it is more likely than not that the Company will not realize the benefits

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of these deductible differences. Accordingly, management has determined that a 100% valuation allowance is appropriate at September 30, 2011 and December 31, 2010. The Company's gross deferred tax assets and valuation allowance at September 30, 2011 and December 31, 2010 are as follows:

                       
        September 30, 2011           December 31, 2010  
  Gross deferred tax assets     1,925,000           1,286,000  
  Valuation allowance     (1,925,000 )         (1,286,000 )
  Net deferred tax asset                

As of September 30, 2011 and December 31, 2010, the Company has U.S. federal net operating loss carryforwards of approximately $5,500,000 and $3,675,000, respectively.  The federal net operating loss carryforwards expire in the tax years 2027 through 2031.

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.

At September 30, 2011 and December 31, 2010 the Company has available for carryforward German net operating losses of approximately $350,000 and $125,000 respectively, to be applied against future German taxable income which may be subject to certain restrictions and limitations. Such carryforwards are subject to certain restrictions and limitations in the event of changes in the NovaVision AG's ownership.

12.   COMMITMENTS AND CONTINGENCIES

Lease

The Company executed a lease agreement for administrative office space at its current location of 3651 FAU Boulevard, Boca Raton, Florida. The lease term is 12 months from December 1, 2010. The Company vacated its premises at 80 Orville Drive, Bohemia, NY in February, 2011. Rental expense for the Company for the nine months ended September 30, 2011 and 2010 was $83,640 and $17,108, respectively.

The Company has entered into a lease for new premises in Boca Raton. The lease term is 66 months and the rental cost for fiscal 2012, taking into account certain rebates under the lease, is approximately $142,000.

Kenneth Coviello retention bonus

Under the terms of the 2009 Recapitalization Agreement, certain accrued salaries totaling $70,643 were converted into a contingent retention bonus payable either on the closing of a Company fundraising of more than $1.5 million or on the sale of the Company (or substantially all of its assets) at a value above $3 million. The Company and Mr. Coviello are in discussions with regard to this agreement and potential eventual payment.

13. CONSULTING AND OTHER AGREEMENTS

The Company has entered into the following consulting and other agreements during the nine months ended September 30, 2011:

Consulting Agreement with Jerrald Ginder

In March 2011 the Company entered into a one-year consultancy agreement with Mr. Jerrald Ginder, a sales executive of Stryker Corporation, effective April 1, 2011. Mr. Ginder has extensive experience in sales and marketing and the development of medical device products, and has contacts which will be of use to the Company. Under the terms of the agreement, which the Company has the right to terminate with 30 days notice, Mr. Ginder was to receive $60,000 cash, payable monthly, and 18,000,000 restricted shares of common stock of the Company. The stock has been valued by the Company at $360,000 and is being amortized over the life of the agreement as share-based compensation expense. On June 22, 2011, the Company and Mr. Ginder entered into an Amendment to the Consulting Agreement. Pursuant to this amendment, the Company issued to Mr. Ginder an additional 2,666,667 shares of the Company's common stock in lieu of the $60,000 cash due under the Consulting Agreement. The $60,000 value of the additional shares is also being amortized as share-based compensation over the life of the agreement. For the six months ended June 30, 2011, aggregate compensation recognized in respect of the Consulting Agreement, as amended, was $91,720.

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Supplement to Consulting Agreement with Fountainhead Capital Management Limited

On May 12, 2011, the Company entered into a Supplement to a prior Consulting Agreement with Fountainhead entered into on February 10, 2010 (amended September 29, 2010) to recognize Fountainhead's expanded responsibilities as a result of the acquisition by the Company of the assets of NovaVision, Inc. Under the terms of the Supplement, commencing January 1, 2011 the Company will pay to Fountainhead an additional monthly retainer of $29,000. This additional monthly retainer shall be accrued and paid out to Fountainhead at the option of Fountainhead as follows: (i) in Vycor stock at any time at $0.0225 per share; or (ii) in cash following the closing of a fundraising of no less than $2.5 million or on the sale of the Company or a substantial part of the assets thereof at any time after June 30, 2011. Notwithstanding, Fountainhead shall have the option to receive up to $5,000 of the additional monthly retainer in cash each month, commencing April 1, 2011. In addition, the term of the Consulting Agreement was extended to May 5, 2013. Other than as supplemented, the Consulting Agreement remains in full force and effect according to its terms.

Consulting Agreement with GreenBridge Capital Partners, IV, LLC

On June 3, 2011,the Company entered into a Consulting Agreement ("Consulting Agreement") with GreenBridge Capital Partners, IV, LLC, a Delaware limited liability company ("GreenBridge"), to provide consulting and advisory services to the Company. Under the terms of this agreement GreenBridge is to receive up to 15,500,000 shares of the Company's Common Stock.  Said shares are subject to a Company repurchase option, which may be exercised within specified time periods at the Company's sole discretion.

On August 18, 2011, the Company agreed with GreenBridge to amend the Consulting Agreement to modify the dates for exercise of the Company's repurchase option related to the shares delivered to Greenbridge pursuant to the terms of the Agreement.  Specifically, the parties agreed that, of the 15,500,000 shares delivered to GreenBridge, the Company would have the option to repurchase 5,166,666 of the shares prior to November 30, 2011 and an additional 5,166,667 shares prior to February 28, 2012.  The remaining 5,000,000 shares are not subject to a repurchase option. The shares which are the subject of the repurchase option are to be held in escrow by a third party.  In all other respects, the original Consulting Agreement remains in full force and effect as written.

Consulting Agreement with Burnham Hill Advisors LLC

The Company entered into a Consulting Agreement dated June 6, 2011 with Burnham Hill Advisors LLC ("BHA") under which BHA shall provide, for a period of six months, financial and strategic advice to the Company. BHA shall receive fees of $10,000 per month and received 1,000,000 restricted shares of the Company's Common Stock.

Agreement with Partizipant, LLC

On July 31, 2011, the Company entered into an Agreement (the "Agreement") with Partizipant, LLC, a Delaware limited liability company ("Partizipant"), to provide a broad range of investor relations and public relations services as more particularly described in the Agreement, a copy of which is attached as Exhibit 10.1 to the Company's Current report on Form 8-K filed on August 4, 2011. Pursuant to the Agreement, the Company agreed to pay Partizipant a one-time payment of $300,000.

14. RELATED PARTY TRANSACTIONS

In January, February and March 2011 the Company issued unsecured, subordinated loan notes to Fountainhead for a total of $99,000. The loan notes are subordinated to the Company's secured debentures, bear interest at a rate of 6% and are due May 30, 2011.

In January and February 2011 the Company issued unsecured, subordinated loan notes to Peter Zachariou, a director of the Company for a total of $55,000. The loan notes are subordinated to the Company's secured debentures, bear interest at a rate of 6% and are due on demand.

In February 2011 the Company issued an unsecured, subordinated loan note to David Cantor, a director of the Company for $10,000. The loan notes are subordinated to the Company's secured debentures, bear interest at a rate of 6% and are due on demand.

On May 6, 2011, the Company entered into a Supplement to a prior Consulting Agreement with Fountainhead entered into on February 10, 2010 (amended September 29, 2010) to recognize Fountainhead's expanded responsibilities as a result of the acquisition by the Company of the assets of NovaVision, Inc. Under the terms of the Supplement, commencing January 1, 2011 the Company will pay to FCM an additional monthly retainer of $29,000. This additional monthly retainer shall be accrued and paid out to Fountainhead at the option of Fountainhead as follows: (i) in Vycor stock at any time at $0.0225 per share; or (ii) in cash following the closing of a fundraising of no less than $2.5 million or on the sale of the Company or a substantial

18


part of the assets thereof at any time after June 30, 2011. Notwithstanding, Fountainhead shall have the option to receive up to $5,000 of the additional monthly retainer in cash each month, commencing April 1, 2011. In addition, the term of the Consulting Agreement was extended to May 5, 2013. Other than as supplemented, the Consulting Agreement remains in full force and effect according to its terms.

Under the terms of a Consulting Agreement dated February 10, 2010 with Fountainhead, the Company was required to issue to Fountainhead fully vested warrants to purchase an additional 39,063,670 shares of the Company's Common Stock, at a price of $0.0125 per share should new funding totaling $3 million in aggregate in Common Stock of Vycor or in securities convertible into Common Stock of Vycor at a price of no less than $0.0125 per share of Common Stock be closed during the term of the Consulting Agreement. These warrants became issuable upon completion of the Preferred Offering and were issued in June 2011.

On June 6, 2011, in connection the Preferred Offering, Fountainhead agreed to extend to maturity of debentures totaling $931,362 to December 31, 2012. At the same time, Peter Zachariou, a director of the Company, agreed to extend the maturity of debentures totaling $300,000 to the same date.

On September 30, 2011, short-term loans including accrued interest of $102,450 and accrued interest on the loans extended on June 6, 2011 of $76,658, were repaid to Fountainhead. At the same time, short-term loans including accrued interest of $57,004 and accrued interest on the loans extended on June 6, 2011 of $14,992 were repaid to Peter Zachariou, a director of the Company; and short-term loans including accrued interest of $10,352 were repaid to David Cantor, a director of the Company.

15. SUBSEQUENT EVENTS

The Company evaluated subsequent events through the date the financial statements were issued and filed with this Form 10Q.

New Lease

On November 8, 2011 the Company entered into a lease for new premises in Boca Raton. The lease term is 66 months and the rental cost for fiscal 2012, taking into account certain rebates under the lease, is approximately $142,000.

Share Issuance

On November 6, 2011 the Company issued 166,667 shares of Common Stock (valued at $5,000) to Steven Girgenti and 104,167 shares of Common Stock to Alvaro Pascale-Leone (valued at $3,125) in respect of consulting agreements.

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

Forward Looking Statements

This Interim Report on Form 10-Q contains, in addition to historical information, certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 ("PLSRA"), Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act") regarding Vycor Medical, Inc. (the "Company" or "Vycor," also referred to as "us", "we" or "our"). 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. We intend that all forward-looking statements be subject to the safe harbor provisions of the PSLRA.

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"). On November 29, 2010, Vycor, through its wholly-owned subsidiary NovaVision Acquisition, Inc., completed the acquisition of substantially all of the assets of the former 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. Subsequent to the purchase, NovaVision Acquisition, Inc. changed its name to NovaVision, Inc. ("NovaVision").

2. Overview of Business

Vycor operates two distinct business units within the medical device industry: Vycor Medical (which operates as a division of the Company) and 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 for patients suffering from vision field deficits resulting from neurological trauma such as stroke and traumatic brain injuries, as well as screening and diagnostic products. In addition to our existing products and products in development, we actively seek acquisition, joint ventures and in-licensing opportunities in the medical device and therapy fields which we believe are complementary and will add shareholder value.

Vycor Medical

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. Food and Drug Administration ("FDA") 510(k) clearance for brain and spine self-retaining retractors used during surgeries, CE Marking for Europe and Canadian HPB licensing for sale in Canada of its brain access system.

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Vycor Medical's ViewSite Brain Access System ("VBAS"), is a neurosurgical 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 the numerous developments in most other neurosurgical technologies. VBAS has the potential to reduce brain tissue trauma when accessing deep brain targets.

In early stages of development is the Cervical Access System ("VCAS"), which requires further prototyping and successful market testing prior to commercialization. Like the VBAS, this product is also designed to allow the surgeon easy access to a desired target; in this case the VCAS allows the surgeon to gain access to the anterior cervical surgery site.

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

Viewsite Brain Access System (VBAS)

To access most surgical sites in the brain, surgeons usually need to remove part of the skull (craniotomy) and then separate (retract) the soft brain tissue to access the target site. The current standard of care utilizes a metal blade retractor (also known as a ribbon or blade retractor) to separate the tissue, and the retractor blades are attached to a head frame in order to apply tension to the tissue and maintain the opening.

With the VBAS system, the surgeon makes an incision, inserts the clear, elliptical-shaped VBAS introducer through the brain tissue, and then removes the introducer and uses the clear hollow working channel to provide access to the precise location desired for surgery.

VBAS was designed to be used to access surgical sites in the brain in a minimally-invasive manner. VBAS provides a minimally traumatic surgical corridor to most areas of the brain for the surgeon. With various sizes ranging from 12mm to 28mm, VBAS can be used for many types of procedures from "key hole" endoscopic surgery to removal of large tumors using standard instruments. VBAS is compatible with Image Guidance Systems ("IGS") and can be used with these neuro-navigation systems to accurately reach the target in the brain. This allows the surgeon real-time visualization of retractor positioning.

The VBAS is a single-use product and is available in multiple sizes. The series consists of twelve disposable products, offered in four different port diameters of 12mm, 17mm, 21mm 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.

Product Advantages

Management believes that VBAS has a number of advantages over standard blade or ribbon retractors:

Less Invasive Procedure: The VBAS' shape and minimal footprint enables the surgeon to access a specific target with a smaller incision, resulting in a smaller corticotomy and less disruption to surrounding tissues.

Reduction of Venous Pressure: Normal surgical procedures utilizing standard retractors require the pulling away of tissue to expose the target site. Current retractors have low surface areas and edges that in turn may lead to focal pressure on the delicate tissue of the brain. The lack of edges on the VBAS device, and the way in which the elliptical introducer retracts the tissue reduces pressure on the tissue.

Superior Field of View: Made of polished transparent polycarbonate, the VBAS increases a surgeon's field of vision through a clear, visible and stable channel, allowing for continual monitoring of surrounding tissue and structures during surgery.

More Accurate Navigation: The VBAS device when inserted into the brain retracts tissue as the surgeon navigates to the surgical site; standard retractors do not. The VBAS product when used with a navigational pointer allows 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. This helps the surgeon to accurately reach the target site with minimum healthy tissue trauma.

Minimizes target shift: When standard retractors are utilized to access the target site, they pull on the brain's soft tissue. This may cause the target area to shift from the location shown on the navigational system. This shifting of the target requires the surgeon to spend time repositioning the retractors as they work towards re-locating the target, exposing the delicate tissue to additional potential pressure. As a result of the VBAS' elliptical shape there is even distribution of pressure and therefore less pulling of the tissue in one direction.

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Potential ability to address previously difficult or inoperable procedures: Through its design, VBAS potentially allows the surgeon to address previously difficult or inoperable conditions, such as tumors seated too deeply or very close to critical structures

Product shortcomings

Our products have a few shortcomings:

As compared to existing blade retractors diameter of our device 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.

Our device uses an elliptical channel which potentially limits the working area compared to a round channel.

Certain procedures such as aneurysms require greater site access and therefore are less appropriate for VBAS' minimal approach.

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, and the extent to which we are successful in achieving our objectives will be judged by the acceptance of the devices in the market.

Vycor Medical Product Pipeline

Brain Access and Related Products

We plan to develop additional Brain Access Systems shapes and sizes and we are also identifying other products that may be used in conjunction with our VBAS product.

We are developing an extension arm as a re-usable accessory that attaches to the VBAS device; this will enable easier connection to halo systems and other retractor systems on the market.

Cervical Access Products

We will continue our preliminary development of 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 early stage.

Market

We believe that approximately 30% of the 4,500 US neurosurgeons focus predominantly on craniotomies or cranial procedures that could potentially benefit from the VBAS product. Management believes that there are approximately 1,500 hospitals that represent the majority of its US target market.

Competition

Competing manufacturers of brain retractors include, among others, Cardinal Health, Aesculap, Integra Life Sciences, Codman (Division of Johnson & Johnson), Medtronic, Stryker and others.

Sales, Marketing and Customers

Vycor Medical is currently focusing its marketing efforts for VBAS on the US and Canada, China and Europe. Vycor Medical markets VBAS products to leading neurosurgeons and neurosurgery hospitals. Our domestic distribution partners are independent distributors that have existing relationships with neurosurgeons and target hospitals serving approximately 75% of the U.S. population.

Our European distribution partners focus on the neurosurgery markets in Spain, Italy, Belgium, Scandinavia, Switzerland and the U.K. We have also entered into a distribution agreement for VBAS with a Chinese distributor, however we must receive

22


SFDA clearance before commencing sales in China. Vycor Medical has filed for, but not yet received such SFDA approval. We are also undertaking the regulatory approval process in Australia and Japan.

In the US Vycor Medical sells to stocking regional distributors and direct to hospitals through independent representatives. Management believes that its products currently are being utilized in approximately 80 hospitals in the United States and currently being evaluated in a further 40 hospitals.

Manufacturing

Vycor Medical has executed agreements with Lacey Manufacturing Company of Bridgeport, CT ("Lacey") and C&J Industries of Meadville, PA ("C&J") to provide a full range of vertically integrated services for our products, including engineering, contract manufacturing and logistical support. Lacey and C&J are U.S. FDA-registered and meet ISO standards and certifications.

Intellectual Property

Patent Applications

Vycor Medical has an issued patent in China and a patent approved for grant in Russia, as well as 13 patent applications pending in the U.S. and internationally with respect to its technology.

Trademarks

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

NovaVision, Inc.

Introduction

NovaVision provides a non-invasive, computer-based visual neuro-stimulation rehabilitation therapy called Vision Restoration Therapy ("VRT") for those patients suffering from visual field deficits as a result of neurological trauma. The Company also has some screening and diagnostic products. VRT is a patient-specific diagnostic and therapeutic platform that can potentially increase a patient's visual field and enable them to experience significant functional improvements. VRT is currently focused on visual deficits resulting from stroke and traumatic brain injuries. It is estimated that 15 to 20% of these patients experience a visual field deficit (VFD), reducing mobility and other activities of daily living (ADL). Patients with VFD often experience difficulties walking, are prone to bumping into foreign objects and may be unable to read or even see different foods on their plates. The result is a loss of self-confidence, decreased mobility, ADL difficulties and a lower quality of life. It is this sub-set of patients that is NovaVision's target market. In the US alone this target audience is estimated to be in excess of 800,000 treatable patient population. Management believes that VRT could ultimately be applied to other neurological causes of VFD.

Management believes that NovaVision is a leader in the field of neurologically-caused VFD rehabilitation in the U.S. and Europe with over 2,000 patients having been treated with VRT. The Company's therapy can be delivered to market through a variety of different channels - physicians, rehabilitation centers, therapy centers and direct-to-patient. NovaVision has a strong IP portfolio with 19 allowed, issued or granted patents and 17 pending patents.

NovaVision operates in the US and in Germany through NovaVision AG, its wholly-owned subsidiary and has received 510(k) clearance and CE Marking for VRT.

VRT Platform Technology

The platform technology is comprised of proprietary algorithms that generate patient-specific therapies enabling NovaVision's products to be used as both diagnostic and therapeutic tools. The platform technology generates light-based stimulus programs, beginning with a fixation point on a display screen. As the patient focuses on this fixation point, a series of light stimuli are delivered on the screen that are specific to the patient's visual field loss. Most stimuli are presented along the border of the patient's visual field loss and relayed directly to the brain using the optic nerve as a conduit.

For ophthalmic indications, the platform technology is incorporated into NovaVision's VRT product and the programmed light sequences stimulate the border zone between the "seeing" and "blind" visual fields. 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

23


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 multiple stimuli over the course of time.

VRT is performed over a six-month period twice a day for an hour total, six days a week. Most patients do not necessarily experience material benefits until the third month of treatment, although there have been a number of cases of faster improvement. During the initial months, patients may need ongoing encouragement so that they remain motivated to continue with the treatment regimen.

NovaVision currently delivers its program in the US through an integrated hardware/software package. The VRT device has a monitor and chinrest, along with a computer preloaded with the VRT software application, to ensure that the patient is optimally positioned to ensure maximum consistency and effectiveness of treatment.

The therapy requires a prescription by a licensed physician in the US. NovaVision markets VRT technology to active physicians; to date, approximately 500 prescribing physicians in the U.S. have registered with NovaVision.

Product shortcomings

VRT has a few shortcomings:

           
      There are certain conditions for which VRT may not be suitable, including: those with a light sensitive seizure disorder such as epilepsy; those with acute central nervous system or eye disease; those with significant cognitive difficulties that would preclude understanding the instructions or maintaining attention for the daily therapy sessions; and those with best corrected visual acuity worse than 20/200, and therefore with an inability to detect the stimuli reliably.  
      Results can vary significantly, and some patients who have been treated have had little to no improvement in their vision field.  
      There may be side effects. The majority of patients who undergo VRT do not experience any noticeable side effects, though a small number of patients have reported infrequent headaches.  

Marketing

NovaVision markets its therapy through physicians and directly to patients, whom it refers to physicians for consultation, prescription and diagnosis prior to undergoing therapy. Its screening and diagnostic products are marketed to physicians, medical and rehabilitation centers as well as academic institutions. NovaVision is in the process of finalizing a significantly enhanced marketing strategy which will entail increased sales and marketing expenditure.

Market

NovaVision's core VRT product addresses a currently largely unmet and substantial market. In the US alone management believes there are over 7 million stroke sufferers and 2.8 million TBI patients. It is estimated that this equates to a treatable patient population of approximately 800,000, increasing each year.

NovaVision Product Pipeline

Utilizing VRT's underlying technology, NovaVision has developed and commercialized related visual products for physicians. Management is in the advanced stages of development of a Class 1 screening device with an integrated head-mounted perimetry "HMP". Management believes its greatest advantage is its portability which enables it to be utilized in a number of situations where patients with a VFD may otherwise not be able to take a table mounted test.

Regulatory Matters

NovaVision's products are regulated in the U.S. by the 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 FDA 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. NovaVision has 19 allowed, issued or granted patents and 17 pending applications.

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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 assembles and tests all of its medical devices within the Company's headquarters 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.

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.

Comparison of the Three Months Ended September 30, 2011 to the Three Months Ended September 30, 2010

Results for the three months ended September 30, 2010 include adjustments to reflect of the effects of the restated financial statements included in the Company's Quarterly Report on Form 10-Q/A for the quarterly period ending September 30, 2010.

Revenue and Gross Margin:

                       
        2011     2010     % Change  
  Revenue:                    
  Vycor Medical   $ 66,510   $ 71,205     (7 )%
  NovaVision     164,768     -     NM  
  Total Revenue   $ 231,278   $ 71,205     225 %
  Cost of Revenue:                     
  Vycor Medical   $ (17,500 ) $ (11,980 )   46 %
  NovaVision     (18,798 )   -     NM  
  Total Cost of Revenue   $ (36,298 ) $ (11,980 )   203 %
                       

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        2011     2010     % Change  
  Gross Profit                     
  Vycor Medical    $ 49,010   $ 59,225     (17 )%
  NovaVision      145,970     -     NM  
  Total Gross Profit   $ 194,980   $ 59,225     229 %

Vycor Medical recorded revenue of $66,510 from the sale of its products for the three months ended September 30, 2011, a decrease of 7% over the same period in 2010. Gross margin of 74% was achieved compared to 82% for the same period in 2010. Gross margin is mostly a product of sales mix between US and International sales through different sales channels. Gross margin also reflects non-recurring inventory regulatory costs in the three months ended September 30, 2011.

NovaVision recorded revenues of $164,768 for the three months ended September 30, 2011 and gross margin of 89%.

Research and Development Expense:

Research and development ("R&D") expenses were $33,624 for the three months ended September 30, 2011, as compared to $4,009 for the same period in 2010. The increase in R&D expense relates primarily to the inclusion of NovaVision in the 2011 period.

General and Administrative Expenses:

General and Administrative expenses increased by $826,041 to $1,218,140 for the three months ended September 30, 2011 from $392,099 for the same period in 2010. Of this increase, $367,001 was from non-cash charges representing the value of existing and newly-issued share based payments to non-employee consultants attributable to the period. The increase was primarily related to the recognition of common stock issued to Jerrald Ginder and GreenBridge Capital Partners. The remaining General and Administrative increase of $459,040 reflects approximately $275,000 of additional expenses related to the inclusion of NovaVision as well as increased professional and consulting fees, including increased consulting fees with Fountainhead following the NovaVision acquisition.

Interest Expense:

Interest expense includes interest expense on the Company's debt and insurance policy financing. Interest expense in the three months ended September 30, 2011 increased by $22,919 to $32,276 from $9,357 for the same period in 2010, reflecting increased debt levels.

Comparison of the Nine Months Ended September 30, 2011 to the Nine Months Ended September 30, 2010

Results for the nine months ended September 30, 2010 include adjustments to reflect of the effects of the restated financial statements included in the Company's Quarterly Report on Form 10-Q/A for the quarterly period ending September 30, 2010.

Revenue and Gross Margin:

                       
        2011     2010     % Change  
  Revenue:                    
  Vycor Medical   $ 248,591   $ 210,308     18 %
  NovaVision     270,140     -     NM  
      $ 518,731   $ 210,308     147 %
  Cost of Revenue: