##### Table of Contents



UNITED STATESSECURITIES AND EXCHANGE COMMISSION
 Washington, DC. 20549
 FORM 10-Q
  þ
    
    Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
 for the Quarterly Period ended
March 31, 2011
 or
 o
    
    Transition Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934
 for the Transition Period from  to
 Commission File Number 0-19437
 SAFESTITCH MEDICAL, INC.
  Delaware
    
    11-2962080(State or other jurisdiction of
    
    (I.R.S. employer identification no.)incorporation or organization)
 4400 Biscayne Blvd., Suite A-100, Miami, Florida
    
    33137(Address of principal executive offices)
    
    (Zip code)
 (305) 575-4600
 þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




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##### 



SAFESTITCH MEDICAL, INC.
(A Developmental Stage Company)
 TABLE OF CONTENTS FOR FORM 10-Q
 PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTS
    
    
    3Condensed Consolidated Balance Sheets as of March 31, 2011 (unaudited) and December 31, 2010
    
    
    3Unaudited Condensed Consolidated Statements of Operations for the Three Months ended March
31, 2011 and 2010, and for the period from September 15, 2005 (inception) to March 31, 2011
    
    
    4Condensed Consolidated Statements of Stockholders Equity (Deficit) for the period from
September 15, 2005 (inception) through March 31, 2011 (unaudited)
    
    
    5Unaudited Condensed Consolidated Statements of Cash Flows for the Three Months ended March
31, 2011 and 2010, and for the period from September 15, 2005 (inception) to March 31, 2011
    
    
    6Notes to unaudited condensed consolidated financial statements
    
    
    7ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    16ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    
    
    18ITEM 4. CONTROLS AND PROCEDURES
    
    
    18PART II. OTHER INFORMATIONITEM 1. LEGAL PROCEEDINGS
    
    
    19ITEM 1A. RISK FACTORS
    
    
    19ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
    
    
    19ITEM 3. DEFAULTS UPON SENIOR SECURITIES
    
    
    19ITEM 4. (REMOVED AND RESERVED)
    
    
    19ITEM 5. OTHER INFORMATION
    
    
    19ITEM 6. EXHIBITS
    
    
    19SIGNATURES
    
    
    20Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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##### Table of Contents



SAFESTITCH MEDICAL, INC.  (A Developmental Stage Company)
 
 CONDENSED CONSOLIDATED BALANCE SHEETS
  March 31,
    
    
    December 31,2011
    
    
    2010(Unaudited)ASSETSCURRENT ASSETSCash and cash equivalents
    
    $
    1,828
    
    
    $
    3,032Other receivable  related-party
    
    
    61
    
    
    
    64Prepaid expenses
    
    
    73
    
    
    
    117Inventory
    
    
    91
    
    
    
    91Total Current Assets
    
    
    2,053
    
    
    
    3,304FIXED ASSETSProperty and equipment, net
    
    
    310
    
    
    
    337OTHER ASSETSSecurity deposits
    
    
    2
    
    
    
    2Deferred financing costs, net
    
    
    26
    
    
    
    51Total Other Assets
    
    
    28
    
    
    
    53TOTAL ASSETS
    
    $
    2,391
    
    
    $
    3,694LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIESAccounts payable and accrued liabilities
    
    $
    229
    
    
    $
    221Notes payable
    
    
    28
    
    
    
    49Total Current Liabilities
    
    
    257
    
    
    
    270Stockholder loans (Note 5)
    
    
    
    
    
    
    Commitments and contingencies (Note 8)
    
    
    
    
    
    
    STOCKHOLDERS EQUITYPreferred stock, $0.01 par value per share, 25,000,000 shares authorized
10% Series A Cumulative Convertible Preferred Stock, 4,000,000 shares
authorized, no shares issued and outstanding, respectively; liquidation
preference $0
    
    
    
    
    
    
    Common stock, $0.001 par value per share, 225,000,000 shares authorized,
28,003,755 shares issued and outstanding
    
    
    28
    
    
    
    28Additional paid-in capital
    
    
    20,471
    
    
    
    20,427Deficit accumulated during the development stage
    
    
    (18,365
    )
    
    
    (17,031
    )Total Stockholders Equity
    
    
    2,134
    
    
    
    3,424TOTAL LIABILITIES AND STOCKHOLDERS EQUITY
    
    $
    2,391
    
    
    $
    3,694
   3




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##### Table of Contents



SAFESTITCH MEDICAL, INC.  (A Developmental Stage Company)
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
  September 15,2005Three Months Ended
    
    
    (Inception) toMarch 31,
    
    
    March 31,2011
    
    
    2010
    
    
    2011Revenues
    
    $
    
    
    
    $
    
    
    
    $
    Costs and expensesResearch and development
    
    
    656
    
    
    
    350
    
    
    
    10,227Selling, general and administrative
    
    
    653
    
    
    
    428
    
    
    
    7,342Total costs and expenses
    
    
    1,309
    
    
    
    778
    
    
    
    17,569Loss from operations
    
    
    (1,309
    )
    
    
    (778
    )
    
    
    (17,569
    )Other income and expenseOther income
    
    
    
    
    
    
    
    
    
    
    1,147Interest income
    
    
    
    
    
    
    
    
    
    
    79Amortization of debt issuance expense
    
    
    (25
    )
    
    
    (127
    )
    
    
    (1,958
    )Interest expense
    
    
    
    
    
    
    
    
    
    
    (64
    )Total other income and expense
    
    
    (25
    )
    
    
    (127
    )
    
    
    (796
    )Loss before income tax
    
    
    (1,334
    )
    
    
    (905
    )
    
    
    (18,365
    )Provision for income tax
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (1,334
    )
    
    $
    (905
    )
    
    $
    (18,365
    )Loss attributable to common stockholders and loss per common
share:Net loss
    
    
    (1,334
    )
    
    
    (905
    )
    
    
    (18,365
    )Deemed dividend  Series A Preferred Stock
    
    
    
    
    
    
    (500
    )
    
    
    (700
    )Deemed dividend  Series A Preferred Conversion
    
    
    
    
    
    
    (96
    )
    
    
    (4,301
    )Dividends  Series A Preferred Stock
    
    
    
    
    
    
    
    
    
    
    (366
    )Net loss attributable to common stockholders
    
    
    (1,334
    )
    
    
    (1,501
    )
    
    $
    (23,732
    )Weighted average shares outstanding, basic and diluted
    
    
    28,004
    
    
    
    17,963Net loss per basic and diluted share
    
    $
    (0.05
    )
    
    $
    (0.08
    )
   4




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##### Table of Contents



SAFESTITCH MEDICAL, INC.  (A Developmental Stage Company)
 
 CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY (DEFICIT)
 FOR THE PERIOD SEPTEMBER 15, 2005 (INCEPTION) THROUGH MARCH 31, 2011
  DeficitAccumulatedAdditional
    
    
    During thePreferred Stock
    
    
    Common Stock
    
    
    Paid-in
    
    
    DevelopmentShares
    
    
    Amount
    
    
    Shares
    
    
    Amount
    
    
    Capital
    
    
    Stage
    
    
    TotalInception  September 15, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Capital contributed
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    
    
    
    
    1Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (76
    )
    
    
    (76
    )Balance at December 31, 2005
    
    
    
    
    
    $
    
    
    
    
    
    
    
    $
    
    
    
    $
    1
    
    
    $
    (76
    )
    
    $
    (75
    )Capital contributed
    
    
    
    
    
    
    
    
    
    
    11,256
    
    
    
    11
    
    
    
    1,493
    
    
    
    
    
    
    
    1,504Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,060
    )
    
    
    (1,060
    )Balance at December 31, 2006
    
    
    
    
    
    $
    
    
    
    
    11,256
    
    
    $
    11
    
    
    $
    1,494
    
    
    $
    (1,136
    )
    
    $
    369Capital contributed
    
    
    
    
    
    
    
    
    
    
    4,837
    
    
    
    5
    
    
    
    5,088
    
    
    
    
    
    
    
    5,093Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (3,041
    )
    
    
    (3,041
    )Balance at December 31, 2007
    
    
    
    
    
    $
    
    
    
    
    16,093
    
    
    $
    16
    
    
    $
    6,582
    
    
    $
    (4,177
    )
    
    $
    2,421Issuance of common shares in private
offering  May 2008 at $2.15 per
share, net of offering costs
    
    
    
    
    
    
    
    
    
    
    1,862
    
    
    
    2
    
    
    
    3,986
    
    
    
    
    
    
    
    3,988Issuance of common shares as
repayment of stockholder
noteDecember 30, 2008 at $1.22 per
share
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    
    
    
    
    10
    
    
    
    
    
    
    
    10Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    239
    
    
    
    
    
    
    
    239Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,185
    )
    
    
    (5,185
    )Balance at December 31, 2008
    
    
    
    
    
    $
    
    
    
    
    17,963
    
    
    $
    18
    
    
    $
    10,817
    
    
    $
    (9,362
    )
    
    $
    1,473Issuance of Series A Preferred Stock
in July 2009 at $1.00 per share
    
    
    2,000
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    1,962
    
    
    
    
    
    
    
    1,982Fair value of beneficial conversion
feature of Series A Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    200
    
    
    
    
    
    
    
    200Deemed dividend to Series A
Preferred Stockholders, charged to
additional paid-in capital in the
absence of retained earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (200
    )
    
    
    
    
    
    
    (200
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    195
    
    
    
    
    
    
    
    195Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,366
    )
    
    
    (2,366
    )Balance at December 31, 2009
    
    
    2,000
    
    
    $
    20
    
    
    
    17,963
    
    
    $
    18
    
    
    $
    12,974
    
    
    $
    (11,728
    )
    
    $
    1,284Issuance of Series A Preferred Stock
in January 2010 at $1.00 per share
    
    
    2,000
    
    
    
    20
    
    
    
    
    
    
    
    
    
    
    
    1,978
    
    
    
    
    
    
    
    1,998Fair value of beneficial conversion
feature of Series A Preferred Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    500
    
    
    
    
    
    
    
    500Deemed dividend to Series A
Preferred Stockholders, charged to
additional paid-in capital in the
absence of retained earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (500
    )
    
    
    
    
    
    
    (500
    )Issuance of common shares in private
offering  June 2010 at $1.00 per
share, net of offering costs
    
    
    
    
    
    
    
    
    
    
    4,978
    
    
    
    5
    
    
    
    4,969
    
    
    
    
    
    
    
    4,974Conversion of 4,000 shares of Series
A Preferred Stock and accumulated
dividends into 4,366 shares of
Common Stock in September 2010
    
    
    (4,000
    )
    
    
    (40
    )
    
    
    4,366
    
    
    
    4
    
    
    
    36
    
    
    
    
    
    
    
    Issuance of 697 shares of Common
Stock as Consideration Shares in
September 2010
    
    
    
    
    
    
    
    
    
    
    697
    
    
    
    1
    
    
    
    (1
    )
    
    
    
    
    
    
    Intrinsic value of 5,063 aggregate
shares of Common Stock issued on
conversion of Series A Preferred
Stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,301
    
    
    
    
    
    
    
    4,301Dividend paid to Series A Preferred
Stockholders on conversion, charged
to additional paid-in capital in the
absence of retained earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (4,301
    )
    
    
    
    
    
    
    (4,301
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    471
    
    
    
    
    
    
    
    471Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,303
    )
    
    
    (5,303
    )Balance at December 31, 2010
    
    
    
    
    
    $
    
    
    
    
    28,004
    
    
    $
    28
    
    
    $
    20,427
    
    
    $
    (17,031
    )
    
    $
    3,424Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    44
    
    
    
    
    
    
    
    44Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,334
    )
    
    
    (1,334
    )Balance at March 31, 2011 (unaudited)
    
    
    
    
    
    $
    
    
    
    
    28,004
    
    
    $
    28
    
    
    $
    20,471
    
    
    $
    (18,365
    )
    
    $
    2,134
   5




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##### Table of Contents



SAFESTITCH MEDICAL, INC.  (A Developmental Stage Company)
 
 UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
  September 15,Three Months Ended
    
    
    2005 (Inception)March 31,
    
    
    to March 31,2011
    
    
    2010
    
    
    2011OPERATING ACTIVITIESNet loss
    
    $
    (1,334
    )
    
    $
    (905
    )
    
    $
    (18,365
    )Adjustments to reconcile net loss to net cash used in operating activities:Amortization of deferred finance costs
    
    
    25
    
    
    
    127
    
    
    
    1,958Stock-based compensation expense
    
    
    44
    
    
    
    126
    
    
    
    1,014Stock-based compensation expense related to Share Exchange
    
    
    
    
    
    
    
    
    
    
    77Depreciation and amortization
    
    
    27
    
    
    
    11
    
    
    
    229Inventory Adjustments
    
    
    
    
    
    
    
    
    
    
    53Gain on sale of TruePosition investment
    
    
    
    
    
    
    
    
    
    
    (903
    )Changes in operating assets and liabilitiesInventory
    
    
    
    
    
    
    
    
    
    
    (144
    )Other current assets
    
    
    47
    
    
    
    (40
    )
    
    
    (114
    )Other assets
    
    
    
    
    
    
    
    
    
    
    (2
    )Accounts payable and accrued liabilities
    
    
    8
    
    
    
    126
    
    
    
    (55
    )NET CASH USED IN OPERATING ACTIVITIES
    
    
    (1,183
    )
    
    
    (555
    )
    
    
    (16,252
    )INVESTING ACTIVITIESPurchase of equipment
    
    
    
    
    
    
    (99
    )
    
    
    (539
    )Proceeds from sale of True Position investment
    
    
    
    
    
    
    
    
    
    
    903Payment received under Rule 16b
    
    
    
    
    
    
    
    
    
    
    4NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES
    
    
    
    
    
    
    (99
    )
    
    
    368FINANCING ACTIVITIESNet cash provided in connection with the acquisition of SafeStitch LLC
    
    
    
    
    
    
    
    
    
    
    3,192Issuance of Common Stock, net of offering costs
    
    
    
    
    
    
    
    
    
    
    8,962Issuance of Preferred Stock, net of offering costs
    
    
    
    
    
    
    1,998
    
    
    
    3,980Capital contributions
    
    
    
    
    
    
    
    
    
    
    1,431Proceeds from notes payable
    
    
    
    
    
    
    
    
    
    
    141Repayment of notes payable
    
    
    (21
    )
    
    
    (22
    )
    
    
    (113
    )Proceeds from stockholder loans
    
    
    
    
    
    
    
    
    
    
    2,860Repayment of stockholder loans
    
    
    
    
    
    
    
    
    
    
    (2,776
    )Exercise of options
    
    
    
    
    
    
    
    
    
    
    35NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES
    
    
    (21
    )
    
    
    1,976
    
    
    
    17,712NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    (1,204
    )
    
    
    1,322
    
    
    
    1,828CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
    
    
    3,032
    
    
    
    871
    
    
    
    CASH AND CASH EQUIVALENTS AT END OF PERIOD
    
    $
    1,828
    
    
    $
    2,193
    
    
    $
    1,828Supplemental disclosures:Cash paid for interest
    
    $
    
    
    
    $
    
    
    
    $
    64Non cash activities:Non-cash dividend upon issuance & conversion of Preferred
    
    
    
    
    
    
    
    
    
    $
    5,001Stock dividends
    
    
    
    
    
    
    
    
    
    $
    366Stockholder loans contributed to capital
    
    $
    
    
    
    $
    
    
    
    $
    84Warrants issued in connection with credit facility
    
    $
    
    
    
    $
    
    
    
    $
    1,985
   6




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##### Table of Contents



SAFESTITCH MEDICAL, INC.  (A Developmental Stage Company)
 
 NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 1  BASIS OF PRESENTATION AND LIQUIDITY
      7




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##### Table of Contents



SAFESTITCH MEDICAL, INC.  (A Developmental Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Consolidation.
 Use of estimates. (
 Cash and cash equivalents.
 Allowances for Doubtful Accounts.
 Inventories.
 Property and equipment.
 Revenue Recognition.
 Advertising Costs.
 Research and development.
 Patent costs.
 Stock-based compensation.
  8




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##### Table of Contents



SAFESTITCH MEDICAL, INC.  (A Developmental Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 Therapeutic discovery project tax credit.
 Fair value of financial instruments.
 Long-lived assets.
 Income taxes.
 Comprehensive income (loss).
 NOTE 3  PROPERTY AND EQUIPMENT
  Estimated Useful Lives
    
    March 31, 2011
    
    
    December 31, 2010Machinery and equipment
    
    5 years
    
    $
    452,000
    
    
    $
    452,000Furniture and fixtures
    
    3-5 years
    
    
    50,000
    
    
    
    50,000Software
    
    3-5 years
    
    
    37,000
    
    
    
    37,000539,000
    
    
    
    539,000Accumulated depreciation and
amortization
    
    
    
    
    (229,000
    )
    
    
    (202,000
    )Property and equipment, net
    
    
    
    $
    310,000
    
    
    $
    337,000
  NOTE 4  STOCK-BASED COMPENSATION
   9




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##### Table of Contents



SAFESTITCH MEDICAL, INC.  (A Developmental Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
   Three months ended
    
    Three months endedMarch 31, 2011
    
    March 31, 2010Expected volatility
    
    76.91% - 102.63%
    
    87.09% - 105.31%Expected dividend yield
    
    0.00%
    
    0.00%Risk-free interest rate
    
    2.25% - 3.25%
    
    1.89% - 3.11%Expected life
    
    5.5 - 10.0 years
    
    4.0 - 7.0 yearsForfeiture rate
    
    0% - 5%
    
    0% - 2.50%
  WeightedWeighted
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateExercise
    
    
    Contractual
    
    
    IntrinsicShares
    
    
    Price
    
    
    Term (Years)
    
    
    ValueOutstanding at December 31, 2010
    
    
    1,334,667
    
    
    $
    1.41
    
    
    
    5.74Granted
    
    
    562,500
    
    
    $
    1.12
    
    
    
    9.95Exercised
    
    
    
    
    
    
    Canceled or expired
    
    
    (267,500
    )
    
    $
    1.19Outstanding at March 31, 2011
    
    
    1,629,667
    
    
    $
    1.34
    
    
    
    7.01
    
    
    $
    95,120Exercisable at March 31, 2011
    
    
    844,167
    
    
    $
    1.50
    
    
    
    5.72
    
    
    $
    73,760Vested and expected to vest at
March 31, 2011
    
    
    1,585,322
    
    
    $
    1.35
    
    
    
    6.99
    
    
    $
    93,319
    10




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##### Table of Contents



SAFESTITCH MEDICAL, INC.  (A Developmental Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  NOTE 5  DEBT
  Credit Facility
  NOTE 6  CAPITAL TRANSACTIONS
 2010 Private Placement of Common Stock.
 10.0% Series A Cumulative Convertible Preferred Stock. pari passu pari passu
  11




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##### Table of Contents



SAFESTITCH MEDICAL, INC.  (A Developmental Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
  2009 Issuance of Series A Preferred Stock.
 2010 Issuance of Series A Preferred Stock.
   12




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##### Table of Contents



SAFESTITCH MEDICAL, INC.  (A Developmental Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 2010 Conversion of Series A Preferred Stock.
   NOTE 7  BASIC AND DILUTED NET LOSS PER SHARE
   March 31, 2011
    
    
    March 31, 2010Stock options
    
    
    1,629,667
    
    
    
    1,157,167Stock warrants
    
    
    805,521
    
    
    
    805,521Series A Preferred Stock
    
    
    
    
    
    
    4,183,875Total
    
    
    2,435,188
    
    
    
    6,146,563
 NOTE 8  COMMITMENTS AND CONTINGENCIES
   13




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##### Table of Contents



SAFESTITCH MEDICAL, INC.  (A Developmental Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 TM
  NOTE 9  AGREEMENT WITH CREIGHTON UNIVERSITY
   NOTE 10  INCOME TAXES
     14




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SAFESTITCH MEDICAL, INC.  (A Developmental Stage Company)
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 NOTE 11  CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
     NOTE 12  EMPLOYEE BENEFIT PLANS
   15




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##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations.
 This Quarterly Report on Form 10-Q contains certain forward-looking statements about our
expectations, beliefs or intentions regarding our product development and commercialization
efforts, business, financial condition, results of operations, strategies or prospects. You can
identify forward-looking statements by the fact that these statements do not relate strictly to
historical or current matters. Rather, forward-looking statements relate to anticipated or
expected events, activities, trends or results as of the date they are made. Because
forward-looking statements relate to matters that have not yet occurred, these statements are
inherently subject to risks and uncertainties that could cause our actual results to differ
materially from any future results expressed or implied by the forward-looking statements. Many
factors could cause our actual operations or results to differ materially from the operations and
results anticipated in forward-looking statements. These factors include, but are not limited to:
our ability to obtain additional funding to continue our operations; our ability to successfully
commercialize our existing products; our ability to successfully develop, clinically test and
commercialize our product candidates; the timing and outcome of the regulatory review process for
our product candidates; changes in the health care and regulatory environments of the United States
and other countries in which we intend to operate; our ability to attract and retain key
management, marketing and scientific personnel; competition; our ability to successfully prepare
file, prosecute, maintain, defend and enforce patent claims and other intellectual property rights;
our ability to successfully transition from a research and development company to a marketing,
sales and distribution concern, and our ability to identify and pursue development of additional
product candidates, as well as the factors contained in Item 1A  Risk Factors of our Annual
Report on Form 10-K . We do not undertake any obligation to update forward-looking statements,
except as required by applicable law. These forward-looking statements are only predictions and
reflect our views as of the date they are made with respect to future events and financial
performance.
 Overview
  in
vivo ex vivo ex vivo in
vivo ® TM
 Products and Product Candidates
 TM ® ® ® ® ®
 in vivo
  16




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TM
 Critical Accounting Policies and Estimates
  Results of Operations
  Three Months ended March 31, 2011 Compared to Three Months Ended March 31, 2010
 ®
 ®
  17




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##### Table of Contents



Liquidity and Capital Resources
   
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk.
  
 Item 4.
    
    Controls and Procedures.
    18




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##### Table of Contents



PART II. OTHER INFORMATION
 
 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.
 Exhibits:31.1
    
    
    Certification of Chief Executive Officer pursuant to Rule 13a-14(a)/15d-14(a)31.2
    
    
    Certification of Chief Financial Officer pursuant to Rule 13a-14(a)/15d-14(a)32.1
    
    
    Certification of Chief Executive Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*32.2
    
    
    Certification of Chief Financial Officer pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*
 *
    
    Pursuant to Item 601(b)(32) of Regulation S-K, this exhibit is
furnished, rather than filed, with this Quarterly Report on Form
10-Q.  19




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##### Table of Contents



SIGNATURES
  SAFESTITCH MEDICAL, INC.Date:  May 16, 2011
    By:
    /s/ Jeffrey G. SpragensJeffrey G. SpragensPresident and Chief Executive OfficerDate: May 16, 2011
    By:
    /s/ James J. MartinJames J. MartinChief Financial Officer  20