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 OF1934
|                                                |                                                                                   
|For the fiscal quarter ended September 30, 2009
|                                                |                                                                                   
|o                                               | TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
  EXCHANGE ACT                 

For the transition period from             to

|                                                                   
|-------------------------------------------------------------------
|VYCOR MEDICAL, INC.                                                
|                                                                   
|(Exact name of small business issuer as specified in its
  charter)

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

|                                                                
|----------------------------------------------------------------
|80
  Orville Drive, Suite 100, Bohemia, New York 11716          
|                                                                
|(Address
  of principal executive offices) (Zip code)           
|                                                                
|Issuers
  telephone number: (631) 244 1435                     
|                                                                
|Securities
  registered under Section 12(g) of the Exchange Act:

Indicate by check mark
whether the registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes þ 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
    þ

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

There were 26,422,099 shares
outstanding of registrants common stock, par value $.001 per share, as of
November 10, 2009.

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

---



TABLE OF CONTENTS

|           |                                                                                                                                   |    |   
|---------- | --------------------------------------------------------------------------------------------------------------------------------- | -- | --
|PART I     |                                                                                                                                   |   
|           |                                                                                                                                   |    |   
|Item 1.    | Financial Statements                                                                                                              |    | 3 
|           |                                                                                                                                   |    |   
|           | Consolidated Balance
  Sheets as of September 30, 2009 (unaudited) and December 31, 2008                                          |    | 3 
|           |                                                                                                                                   |    |   
|           | Unaudited Consolidated
  Statements of Operations for the three and nine months ended September 30,
  2009 and September 30, 2008 |    | 4 
|           |                                                                                                                                   |    |   
|           | Unaudited Consolidated
  Statements of Cash Flows for the nine months ended September 30, 2009 and 2008                           |    | 6 
|           |                                                                                                                                   |    |   
|           | Notes to Unaudited
  Consolidated Financial Statements                                                                            |    | 7 
|           |                                                                                                                                   |    |   
|Item 2.    | Managements Discussion
  and Analysis of Financial Condition and Results of Operation                                            |    | 22
|           |                                                                                                                                   |    |   
|Item 3     | Quantitative and
  Qualitative Disclosures About Market Risk                                                                      |    | 32
|           |                                                                                                                                   |    |   
|Item 4A(T) | Controls and Procedures                                                                                                           |    | 32
|           |                                                                                                                                   |    |   
|PART II    |                                                                                                                                   |   
|Item 1     | Legal Proceedings                                                                                                                 |    | 32
|           |                                                                                                                                   |    |   
|Item 1A    | Risk Factors                                                                                                                      |    | 32
|           |                                                                                                                                   |    |   
|Item 2     | Unregistered Sales of
  Equity Securities and Use of Proceeds                                                                     |    | 32
|           |                                                                                                                                   |    |   
|Item 3     | Defaults Upon Senior
  Securities                                                                                                 |    | 32
|           |                                                                                                                                   |    |   
|Item 4.    | Submission of Matters to a
  Vote of Security Holders                                                                             |    | 33
|           |                                                                                                                                   |    |   
|Item 5.    | Other Information                                                                                                                 |    | 33
|           |                                                                                                                                   |    |   
|Item 6.    | Exhibits                                                                                                                          |    | 33
|           |                                                                                                                                   |    |   
|SIGNATURES |                                                                                                                                   | 34

2

---



PART I

ITEM 1. FINANCIAL STATEMENTS

VYCOR MEDICAL, INC.Balance
Sheet
September 30, 2009

|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------ | ---------- | --------------------------------- | - | ---------- | -
|                                                                                                                                                                                     |  | September
  30,
  2009
  (unaudited) |            | December
  31,
  2008
  (audited) |  
|                                                                                                                                                                                     |  |                                      |            |                                   |  
|ASSETS                                                                                                                                                                               |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|Current Assets                                                                                                                                                                       |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|Cash                                                                                                                                                                                 |  | $                                    | 29,516     |                                   | $ | 196,138    |  
|Accounts receivable                                                                                                                                                                  |  |                                      | 25,039     |                                   |   | 89,765     |  
|Inventory                                                                                                                                                                            |  |                                      | 44,402     |                                   |   | 71,527     |  
|Prepaid expenses                                                                                                                                                                     |  |                                      | 17,511     |                                   |   | 7,040      |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      | 116,468    |                                   |   | 364,470    |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|Fixed assets, net                                                                                                                                                                    |  |                                      | 196,746    |                                   |   | 213,958    |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|Other assets:                                                                                                                                                                        |  |                                      |            |                                   |   |            |  
|Patents, net of accumulated amortization                                                                                                                                             |  |                                      | 99,543     |                                   |   | 42,507     |  
|Website, net of accumulated amortization                                                                                                                                             |  |                                      | 7,819      |                                   |   | 10,152     |  
|Security deposits                                                                                                                                                                    |  |                                      | 2,350      |                                   |   | 2,350      |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      | 109,712    |                                   |   | 55,009     |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|TOTAL ASSETS                                                                                                                                                                         |  | $                                    | 422,926    |                                   | $ | 633,437    |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                                |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|Current Liabilities                                                                                                                                                                  |  |                                      |            |                                   |   |            |  
|Accounts payable                                                                                                                                                                     |  | $                                    | 341,282    |                                   | $ | 313,611    |  
|Accrued interest                                                                                                                                                                     |  |                                      | 162,321    |                                   |   | 88,588     |  
|Accrued liabilities                                                                                                                                                                  |  |                                      | 234,534    |                                   |   | 75,468     |  
|Notes payable                                                                                                                                                                        |  |                                      | 120,000    |                                   |   |           |  
|Current portion of long-term debt                                                                                                                                                    |  |                                      | 1,122,500  |                                   |   | 1,077,197  |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      | 1,980,637  |                                   |   | 1,554,864  |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|Long-term debt less current portion                                                                                                                                                  |  |                                      |           |                                   |   |           |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|TOTAL LIABILITIES                                                                                                                                                                    |  |                                      | 1,980,637  |                                   |   | 1,554,864  |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|STOCKHOLDERS DEFICIT                                                                                                                                                                |  |                                      |            |                                   |   |            |  
|Preferred stock, $1.00 par value, 10,000,000 shares
authorized, none
  issued and outstanding                                                                                        |  |                                      |           |                                   |   |           |  
|Common Stock, $0.001 par value, 100,000,000 shares
authorized,
  26,422,099 and 25,463,455 shares issued and outstanding at September 30, 2009
  and December 31, 2008, respectively |  |                                      | 26,422     |                                   |   | 25,463     |  
|Additional Paid-in Capital                                                                                                                                                           |  |                                      | 2,976,042  |                                   |   | 2,788,415  |  
|Accumulated Deficit                                                                                                                                                                  |  |                                      | (4,560,175 | )                                 |   | (3,735,305 | )
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      | (1,557,711 | )                                 |   | (921,427   | )
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  
|TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT                                                                                                                                          |  | $                                    | 422,926    |                                   | $ | 633,437    |  
|                                                                                                                                                                                     |  |                                      |            |                                   |   |            |  

See
accompanying notes to financial statements

3

---



VYCOR MEDICAL, INC.Statement
of Operations

|                                              |  |                                          |            |                    |   |            |  
|--------------------------------------------- |  | ---------------------------------------- | ---------- | ------------------ | - | ---------- | -
|                                              |  | For the three months ended September 30, |           
|                                              |  |                                          |           
|                                              |  | 2009
  (unaudited)                       |            | 2008
  (unaudited) |  
|                                              |  |                                          |            |                    |  
|Revenue                                       |  | $                                        | 44,198     |                    | $ | 3,342      |  
|                                              |  |                                          |            |                    |   |            |  
|                                              |  |                                          |            |                    |   |            |  
|Cost of Goods Sold                            |  |                                          |            |                    |   |            |  
|Beginning Inventory                           |  |                                          | 49,093     |                    |   |           |  
|Cost of goods purchased                       |  |                                          | 630        |                    |   | 26,681     |  
|                                              |  |                                          |            |                    |   |            |  
|                                              |  |                                          |            |                    |   |            |  
|Goods available for sale                      |  |                                          | 49,723     |                    |   | 26,681     |  
|Less: Clinical samples                        |  |                                          | (737       | )                  |   |           |  
|Less: Ending inventory                        |  |                                          | (44,402    | )                  |   | (26,351    | )
|                                              |  |                                          |            |                    |   |            |  
|                                              |  |                                          |            |                    |   |            |  
|Total Cost of Goods Sold                      |  |                                          | 4,584      |                    |   | 330        |  
|                                              |  |                                          |            |                    |   |            |  
|Gross Profit                                  |  |                                          | 39,614     |                    |   | 3,012      |  
|                                              |  |                                          |            |                    |   |            |  
|Operating expenses:                           |  |                                          |            |                    |   |            |  
|Research and development                      |  |                                          |           |                    |   | 6,345      |  
|General and administrative                    |  |                                          | 159,158    |                    |   | 318,770    |  
|                                              |  |                                          |            |                    |   |            |  
|                                              |  |                                          |            |                    |   |            |  
|Total Operating expenses                      |  |                                          | 159,158    |                    |   | 325,115    |  
|                                              |  |                                          |            |                    |   |            |  
|                                              |  |                                          |            |                    |   |            |  
|Operating loss                                |  |                                          | (119,544   | )                  |   | (322,103   | )
|                                              |  |                                          |            |                    |   |            |  
|Interest expense                              |  |                                          | 33,477     |                    |   | 441,540    |  
|                                              |  |                                          |            |                    |   |            |  
|                                              |  |                                          |            |                    |   |            |  
|Net Loss                                      |  | $                                        | (153,021   | )                  | $ | (763,643   | )
|                                              |  |                                          |            |                    |   |            |  
|                                              |  |                                          |            |                    |   |            |  
|Loss Per Share                                |  |                                          |            |                    |   |            |  
|Basic and diluted                             |  | $                                        | (0.01      | )                  | $ | (0.03      | )
|                                              |  |                                          |            |                    |   |            |  
|                                              |  |                                          |            |                    |   |            |  
|Weighted Average Number of Shares Outstanding |  |                                          | 26,411,189 |                    |   | 22,408,976 |  
|                                              |  |                                          |            |                    |   |            |  

See
accompanying notes to financial statements

4

---



VYCOR MEDICAL, INC.Statement
of Operations

|                                              |  |                                         |            |                    |   |            |  
|--------------------------------------------- |  | --------------------------------------- | ---------- | ------------------ | - | ---------- | -
|                                              |  | For the nine months ended September 30, |           
|                                              |  |                                         |           
|                                              |  | 2009
  (unaudited)                      |            | 2008
  (unaudited) |  
|                                              |  |                                         |            |                    |  
|Revenue                                       |  | $                                       | 156,587    |                    | $ | 3,342      |  
|                                              |  |                                         |            |                    |   |            |  
|                                              |  |                                         |            |                    |   |            |  
|Cost of Goods Sold                            |  |                                         |            |                    |   |            |  
|Beginning Inventory                           |  |                                         | 71,527     |                    |   |           |  
|Cost of goods purchased                       |  |                                         | 630        |                    |   | 26,681     |  
|                                              |  |                                         |            |                    |   |            |  
|                                              |  |                                         |            |                    |   |            |  
|Goods available for sale                      |  |                                         | 72,157     |                    |   | 26,681     |  
|Less: Clinical samples                        |  |                                         | (8,338     | )                  |   |           |  
|Less: Ending inventory                        |  |                                         | (44,402    | )                  |   | (26,351    | )
|                                              |  |                                         |            |                    |   |            |  
|                                              |  |                                         |            |                    |   |            |  
|Total Cost of Goods Sold                      |  |                                         | 19,417     |                    |   | 330        |  
|                                              |  |                                         |            |                    |   |            |  
|Gross Profit                                  |  |                                         | 137,170    |                    |   | 3,012      |  
|                                              |  |                                         |            |                    |   |            |  
|Operating expenses:                           |  |                                         |            |                    |   |            |  
|Research and development                      |  |                                         |           |                    |   | 21,906     |  
|General and administrative                    |  |                                         | 735,171    |                    |   | 1,178,763  |  
|                                              |  |                                         |            |                    |   |            |  
|                                              |  |                                         |            |                    |   |            |  
|Total Operating expenses                      |  |                                         | 735,171    |                    |   | 1,200,669  |  
|                                              |  |                                         |            |                    |   |            |  
|                                              |  |                                         |            |                    |   |            |  
|Operating loss                                |  |                                         | (598,001   | )                  |   | (1,197,657 | )
|                                              |  |                                         |            |                    |   |            |  
|Interest expense                              |  |                                         | 226,869    |                    |   | 692,138    |  
|                                              |  |                                         |            |                    |   |            |  
|                                              |  |                                         |            |                    |   |            |  
|Net Loss                                      |  | $                                       | (824,870   | )                  | $ | (1,889,795 | )
|                                              |  |                                         |            |                    |   |            |  
|                                              |  |                                         |            |                    |   |            |  
|Loss Per Share                                |  |                                         |            |                    |   |            |  
|Basic and diluted                             |  | $                                       | (0.03      | )                  | $ | (0.09      | )
|                                              |  |                                         |            |                    |   |            |  
|                                              |  |                                         |            |                    |   |            |  
|Weighted Average Number of Shares Outstanding |  |                                         | 26,225,958 |                    |   | 21,526,747 |  
|                                              |  |                                         |            |                    |   |            |  

See
accompanying notes to financial statements

5

---



VYCOR MEDICAL, INC.Statement
of Cash Flows

|                                                                          |  |                                         |          |                    |   |            |  
|------------------------------------------------------------------------- |  | --------------------------------------- | -------- | ------------------ | - | ---------- | -
|                                                                          |  | For the nine months ended September 30, |         
|                                                                          |  |                                         |         
|                                                                          |  | 2009
  (unaudited)                      |          | 2008
  (unaudited) |  
|                                                                          |  |                                         |          |                    |  
|Cash flows from operating activities:                                     |  |                                         |          |                    |   |            |  
|                                                                          |  |                                         |          |                    |   |            |  
|Net loss                                                                  |  | $                                       | (824,870 | )                  | $ | (1,889,795 | )
|                                                                          |  |                                         |          |                    |   |            |  
|Adjustments to reconcile net loss to cash used in
operating
  activities: |  |                                         |          |                    |   |            |  
|Amortization of intangible assets                                         |  |                                         | 9,729    |                    |   | 8,451      |  
|Depreciation of fixed assets                                              |  |                                         | 17,212   |                    |   | 670        |  
|Amortization of debt discount expense                                     |  |                                         | 145,303  |                    |   | 453,088    |  
|Share based compensation                                                  |  |                                         | 64,524   |                    |   | 25,969     |  
|Shares issued for consulting services                                     |  |                                         | 17,437   |                    |   | 312,283    |  
|Interest satisifed with stock conversion                                  |  |                                         | 6,625    |                    |   | 173,111    |  
|                                                                          |  |                                         |          |                    |   |            |  
|Changes in assets and liabilities:                                        |  |                                         |          |                    |   |            |  
|Accounts receivable                                                       |  |                                         | 64,726   |                    |   | (757       | )
|Inventory                                                                 |  |                                         | 27,125   |                    |   | (26,351    | )
|Prepaid expenses                                                          |  |                                         | (10,471  | )                  |   | (134,226   | )
|Security deposit                                                          |  |                                         |         |                    |   | (2,350     | )
|Accounts payable                                                          |  |                                         | 27,671   |                    |   | (129,922   | )
|Accrued interest                                                          |  |                                         | 73,733   |                    |   | 65,260     |  
|Accrued liabilities                                                       |  |                                         | 159,066  |                    |   | 54,180     |  
|                                                                          |  |                                         |          |                    |   |            |  
|                                                                          |  |                                         |          |                    |   |            |  
|Cash used in operating activities                                         |  |                                         | (222,190 | )                  |   | (1,090,389 | )
|                                                                          |  |                                         |          |                    |   |            |  
|                                                                          |  |                                         |          |                    |   |            |  
|Cash flows used in investing activities:                                  |  |                                         |          |                    |   |            |  
|Purchase of fixed assets                                                  |  |                                         |         |                    |   | (27,175    | )
|Acquisition of website                                                    |  |                                         |         |                    |   | (26,198    | )
|Acquisition of patents                                                    |  |                                         | (64,432  | )                  |   | (6,499     | )
|                                                                          |  |                                         |          |                    |   |            |  
|Cash used in investing activities                                         |  |                                         | (64,432  | )                  |   | (59,872    | )
|                                                                          |  |                                         |          |                    |   |            |  
|                                                                          |  |                                         |          |                    |   |            |  
|Cash flows from financing activities:                                     |  |                                         |          |                    |   |            |  
|Proceeds from sale of equity                                              |  |                                         |         |                    |   | 265,000    |  
|Payment on Notes Payable-GC Advisors                                      |  |                                         |         |                    |   | (17,000    | )
|Proceeds from Notes Payable                                               |  |                                         | 120,000  |                    |   |            |  
|Proceeds from Fountainhead Convertible Note
Payable                       |  |                                         |         |                    |   | 300,000    |  
|Proceeds from Regent Convertible Note
Payable                             |  |                                         |         |                    |   | 1,000,000  |  
|Payment on Optimum Health Services Loan
Payable                           |  |                                         |         |                    |   | (100,000   | )
|                                                                          |  |                                         |          |                    |   |            |  
|Cash provided by financing activities                                     |  |                                         | 120,000  |                    |   | 1,448,000  |  
|                                                                          |  |                                         |          |                    |   |            |  
|                                                                          |  |                                         |          |                    |   |            |  
|Net increase (decrease) in cash                                           |  |                                         | (166,622 | )                  |   | 297,739    |  
|                                                                          |  |                                         |          |                    |   |            |  
|Cash at beginning of period                                               |  |                                         | 196,138  |                    |   | 15,739     |  
|                                                                          |  |                                         |          |                    |   |            |  
|                                                                          |  |                                         |          |                    |   |            |  
|Cash at end of period                                                     |  | $                                       | 29,516   |                    | $ | 313,478    |  
|                                                                          |  |                                         |          |                    |   |            |  
|                                                                          |  |                                         |          |                    |   |            |  
|Supplemental Disclosures of Cash Flow information:                        |  |                                         |          |                    |   |            |  
|Interest paid:                                                            |  | $                                       |         |                    | $ | 5,935      |  
|                                                                          |  |                                         |          |                    |   |            |  
|                                                                          |  |                                         |          |                    |   |            |  
|Taxes paid                                                                |  | $                                       |         |                    | $ |           |  
|                                                                          |  |                                         |          |                    |   |            |  
|                                                                          |  |                                         |          |                    |   |            |  
|Non-Cash Tranactions:                                                     |  |                                         |          |                    |   |            |  
|Warrants, options and stock issued for debt financing                     |  | $                                       | 100,000  |                    | $ |           |  
|                                                                          |  |                                         |          |                    |   |            |  

See
accompanying notes to financial statements

6

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

1. BASIS OF PRESENTATION

The accompanying unaudited
condensed financial statements have been prepared in accordance with accounting
principles generally accepted in the United States of America for interim
financial information and with Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by accounting
principles generally accepted in the United States of America for annual
financial statements. In the opinion of management, all adjustments, consisting
of normal recurring accruals considered necessary for a fair presentation, have
been included. Operating results for the nine months and three months ended
September 30, 2009 are not necessarily indicative of the results that may be
expected for the year ending December 31, 2009. For further information, refer
to the financial statements and footnotes thereto for the year ended December
31, 2008.

2. FORMATION
AND BUSINESS OF THE COMPANY

Business Description

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

3. ACCOUNTING
POLICIES

Research and Development

The Company expenses all
research and development costs as incurred. For the nine months ended September
30, 2009 and 2008, the amounts charged to research and development expenses
were $0 and $21,906, respectively.

Concentration of Credit Risk

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

Fair Values of Financial Instruments

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

Property and equipment

7

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

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

Income taxes

The Company accounts for
income taxes in accordance with SFAS 109, Accounting
for Income Taxes. This statement prescribes the use of the liability
method whereby deferred tax assets and liability account balances are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. The Company
provides a valuation allowance, if necessary, to reduce deferred tax assets to
their estimated realizable value. The Company has provided a full valuation
allowance against the gross deferred tax asset as of September 30, 2009 as it
is more likely than not that this deferred tax asset may not realized.

Uses of estimates in the preparation of
financial statements

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

Patents

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

The Company reviews existing
patents as well as those in the approval process for impairment on an annual
basis using a present value, cash flow method pursuant to Statement of
Financial Accounting Standards 142, Goodwill and Other Intangible Assets. Since
the Companys patents are either very new or still in the process of approval,
the Company does not believe that any impairment of these amounts exists.

Revenue Recognition

The Company records revenue,
pursuant to Staff Accounting Bulletin Topic 13(a) when a completed contract for
the sale exists, title transfers to the buyer and the product is invoiced and
shipped to the customer. The Company sells a surgical access system which has
already cleared the U.S. FDA 510(k) review process. It has been granted a
510(k) number for
marketing the system to hospitals and other medical professionals. The Company
does not expect the need to provide for product returns or warrantee costs but
will review such potential costs after the commencement of sales.

Educational and marketing expenses

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

Website Costs

The Company capitalizes the
costs associated with the acquisition of hardware and development tools as well
as the creation of database tools in connection with the Companys website
pursuant to Statement of Position 98-1 and

8

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

Emerging Issues Task Force
00-20. Other costs including the development of functionality and
identification of software tools are expensed as incurred.

Stock-Based Compensation

Prior to January 1, 2006,
the Company accounted for stock-based compensation arrangements in accordance
with the provisions of Accounting Principles Board Opinion No. 25 (APB 25), Accounting for Stock Issued to Employees,and
related interpretations, and followed the minimum value disclosure provisions
of Statement of Financial Accounting Standards NO. 123 (SFAS 123), Accounting for Stock-Based Compensation.
Under APB 25, compensation expense is based on the difference, if any, on the
date of the grant, between the fair value of the Companys stock and the
exercise price. Stock-based compensation determined under APB 25 is recognized
over the option vesting period.

Prior to the adoption of a
stock option plan adopted on February 13, 2008, the Company only issued share
based compensation to consultants for goods or services. The Company accounted
for these transactions under guidance for Emerging Issues Task Force Abstract
No. 96-18, Accounting for Equity Instruments
that are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling Goods or Services. Under EITF 96-18, options, warrants, and
stock are recorded at their fair value on the measurement date. The Company
remeasured the fair value of such instruments granted at each reporting period
until performance under the consulting arrangements were completed and the
measurement date was reached. The Company records the expense of such services
on the estimate fair value of the equity instrument using the Black-Sholes
pricing model. The initial expense is recognized over the term of the service
agreement.

For future awards to
employees, the Company will adopt the fair value provisions of the Statement of
Financial Accounting Standards No. 123(R) (SFAS 123R), Share-Based Payment,which supersedes its
previous accounting under APB 25. SFAS 123(R) requires the recognition of
compensation expense for future stock-based compensation awards to employees.
Using a fair-value-based method, for costs related to all share-based payments
including stock options. SFAS 123R requires companies to estimate the fair
value of share-based payment awards on the date of grant using an
option-pricing model. All option grants valued after January 1, 2006 will be
expensed on a straight-line basis over the vesting period.

Fair Values of Assets and Liabilities

Effective January 1, 2008,
the Company adopted Statement of Financial Accounting Standards No. 157, Fair Value Measurements (SFAS 157), which
provides a framework for measuring fair value under GAAP. SFAS 157 defines fair
value as the exchange price that would be received for an asset or paid to
transfer a liability (an exit price) in the principal or most advantageous
market for the asset or liability in an orderly transaction between market
participants on the measurement date. SFAS 157 requires that valuation
techniques maximize the use of observable inputs and minimize the use of
unobservable inputs. SFAS 157 also establishes a fair value hierarchy, which
prioritizes the valuation inputs into three broad levels.

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

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

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

9

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

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

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

The Companys long-term debt is the only item that is subject to
SFAS 157 as of September 30, 2009 as follows:

|                                    |  |   |         | 
|----------------------------------- |  | - | ------- | 
|Other observable inputs
  (level 2) |  | $ | 950,000 | 
|Unobservable inputs (level
  3)     |  | $ | 172,500 | 

Net Loss Per Share

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

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

|                                    |  |                      |           |                     |  |           | 
|----------------------------------- |  | -------------------- | --------- | ------------------- |  | --------- | 
|                                    |  | September 30,
  2009 |           | December 31,
  2008 | 
|                                    |  |                      |           |                     | 
|Stock options outstanding           |  |                      | 1,050,000 |                     |  | 1,707,894 | 
|                                    |  |                      |           |                     |  |           | 
|Warrants to purchase
  common stock |  |                      | 5,610,452 |                     |  | 6,460,920 | 
|                                    |  |                      |           |                     |  |           | 

Recently Issued Accounting Standards

In June 2009, the Financial Accounting Standards
Board (FASB) issued SFAS No. 168, The FASB Accounting Standards Codification and the
Hierarchy of Generally Accepted Accounting Principle  a replacement of FASB statement No. 162.  SFAS No.
168 replaces the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of
nongovernmental entities that are presented in conformity with generally accepted accounting principles as stated with FASB Accounting Standards
Codification becoming the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive
releases of the SEC under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. SFAS No. 168 is effective
for financial statements issued for fiscal years and interim periods beginning after 15 September 2009.  The Company does not expect this
adoption will have a material impact on the Companys interim condensed financial statements.

In December 2007, the
Financial Accounting Standards Board (FASB) issued SFAS No. 160, Interests in Consolidated Financial Statements - an
amendment of ARB No. 51,(SFAS 160), that establishes and expands
accounting and reporting standards for the non-controlling interest in a
subsidiary. SFAS 160 is effective for business combinations for which the
acquisition date is on or after the beginning of the first annual reporting
period beginning on or after December 15, 2008. This Statement is required to
be adopted by us in the first quarter of the Companys fiscal year 2009. The
effect the adoption of SFAS 160 will have on the Companys financial statements
will depend on the nature and size of any acquisitions the Company completes in
the future.

10

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

In December 2007, the FASB
issued SFAS No. 141R, Business Combinations,
(SFAS 141R), which impacts the accounting for business combinations. The
statement requires changes in the measurement of assets and liabilities
required in favor of a fair value method consistent with the guidance provided
in SFAS 157. Additionally, the statement requires a change in accounting for
certain acquisition related expenses and business adjustments which no longer
are considered part of the purchase price. Adoption of this standard is
required for fiscal years beginning after December 15, 2008. Early adoption of
this standard is not permitted. The statement requires prospective application
for all acquisitions after the date of adoption. The effect the adoption of
SFAS 141R will have on the Companys financial statements will depend on the
nature and size of any acquisitions the Company completes in the future.

In March 2008, the FASB
issued SFAS No. 161, Disclosures About
Derivative Instruments and Hedging Activities, (SFAS 161), which
requires enhanced disclosures about an entitys derivative and hedging activities
in order to improve the transparency of financial reporting. SFAS 161 is
effective for financial statements issued for fiscal years and interim periods
beginning after November 15, 2008, with early application encouraged. The
Company does not anticipate the adoption of this statement to have a material
effect on its consolidated financial position and results of operations.

In May 2008, the FASB issued
SFAS No. 162, The Hierarchy of Generally
Accepted Accounting Principles, (SFAS No. 162), which identifies
the sources of accounting principles and the framework for selecting the
principles used in the preparation of financial statements. SFAS No. 162 is
effective 60 days following the SECs approval of the Public Company Accounting
Oversight Board (PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity with
Generally Accepted Accounting Principles. The Company does not
anticipate the adoption of this statement to have a material effect on its
consolidated financial position and results of operations.

In May 2008, the FASB issued
FASB Staff Position (FSP) No. 14-1, Accounting
for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement), (FSP 14-1) which specifies
that issuers of these instruments should separately account for the liability
and equity components in a manner that reflects the entitys nonconvertible
debt borrowing rate when interest cost is recognized in subsequent periods. FSP
14-1 is effective for financial statements issued for fiscal years beginning
after December 15, 2008, and interim periods within those fiscal years. FSP
14-1 is also to be applied retrospectively to all periods presented except if
these instruments were not outstanding during any of the periods that are
presented in the annual financial statements for the period of adoption but
were outstanding during an earlier period. The Company does not anticipate the
adoption of this statement to have a material effect on its consolidated
financial position and results of operations.

In June 2008, the FASB
ratified EITF Issue 07-5, Determining
Whether an Instrument (or Embedded Feature) Is Indexed to an Entitys Own Stock,
(EITF 07-5). Paragraph 11(a) of SFAS No 133, Accounting
for Derivatives and Hedging Activities, (SFAS 133) specifies that
a contract that would otherwise meet the definition of a derivative but is both
(a) indexed to the Companys own stock and (b) classified in stockholders
equity in the statement of financial position would not be considered a
derivative financial instrument. EITF 07-5 provides a new two-step model to be
applied in determining whether a financial instrument or an embedded feature is
indexed to an issuers own stock and thus able to qualify for the SFAS 133 paragraph
11(a) scope exception. EITF 07-5 will be effective for the first annual
reporting period beginning after December 15, 2008, and early adoption is
prohibited. While the Company is currently still evaluating the effects of
adoption of EITF 07-5, it is expected that adoption may result in the
reclassification of the Companys warrants from equity to liabilities recorded
at fair value and additionally could result in bifurcation and fair value
accounting for the conversion rights embedded in the Companys Series A
preferred stock.

11

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

In June 2008, the FASB
issued FASB Staff Position Emerging Issues Task Force (EITF) No. 03-6-1, Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities (FSP
EITF No. 03-6-1). Under FSP EITF No. 03-6-1, unvested share-based payment
awards that contain rights to receive nonforfeitable dividends (paid or unpaid)
are participating securities, and should be included in the two-class method of
computing EPS. FSP EITF No. 03-6-1 is effective for fiscal years beginning
after December 15, 2008, and interim periods within those years, and is not
expected to have a significant impact on the Companys financial statements.

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

Going Concern

The Companys financial
statements have been presented on a basis that contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business and
assumes the Company will continue as a going concern. The Company has incurred
losses since its inception, including a net loss of $824,870 for the nine
months ended September 30, 2009, and the Company expects to continue to incur
substantial additional losses in the future, including additional development
costs, costs related to marketing and manufacturing expenses. The Company has
incurred negative cash flows from operations since inception. As of September
30, 2009, the Company had a stockholders deficiency of $1,557,711 and cash and
cash equivalents balance of $29,516. The Company also has certain debt
obligations that were not paid by their respective due dates. In these
circumstances the Company believes it may not have enough cash to meet its
various cash needs through November 2009 unless the Company is able to obtain
additional cash from the issuance of debt or equity securities. There is no
assurance that additional funds from the issuance of equity will be available
for the Company to finance its operations on acceptable terms. If adequate
funds are not available, the Company may have to delay development or
commercialization of products or technologies that the Company would otherwise
seek to commercialize, or cease operations. These conditions raise substantial
doubt about the Companys ability to continue as a going concern. The financial
statements do not include any adjustments to reflect the possible future
effects on the recoverability and classification of assets or the amounts and
classification of liabilities that may result from the outcome of this
uncertainty.

4.  LONG-TERM DEBT

As of September 30, 2009 and
December 31, 2008, long-term debt consists of:

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                      |  |                     |  |  | 
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------- |  | ------------------- |  |  | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | September
  30, 2009 |  | December
  31, 2008 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  |                      |  |                     | 
|On December 15, 2006 the
  Company entered into a Convertible debenture, in the amount of $172,500
  payable to Fountainhead Capital Partners Limited (FCPL), with interest at the
  Applicable Federal Rate as defined in sec. 1274 (d) of the Internal Revenue
  Code, initially due June 21, 2007. The Debenture may be transferred or
  exchanged only in compliance with the Security Act of 1933, as amended and
  applicable state securities laws. The Holder is entitled at its option to
  convert debenture into a number of shares of common stock calculated to be
  equal to be ten percent of the issued and outstanding aggregate shares of the
  Company on the date of issuance of the Debenture. The following discloses the
  calculation the conversion price and the 1,979,456 conversion shares: |  |                      |  |                     |  |  | 

12

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

|                                                           |  |  |           |  |  |        | 
|---------------------------------------------------------- |  |  | --------- |  |  | ------ | 
|Number of membership units
  outstanding at 12/21/2006     |  |  | 1,110.11  |  |  | Units  | 
|                                                           |  |  |           |  |  |        | 
|The note was for 10% of
  Units post-money (1,110.11/90%): |  |  | 1233.46   |  |  | Units  | 
|                                                           |  |  |           |  |  |        | 
|FCPL is entitled to 10% of
  the units equal to            |  |  | 123.346   |  |  | Units  | 
|                                                           |  |  |           |  |  |        | 
|Each unit converted into
  16,048 shares                   |  |  | 1,979,456 |  |  | Shares | 

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |  |         |  |  |         | 
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------- |  |  | ------- | 
|The Company has computed a
  beneficial conversion feature of $111,099 which resulted in a debt discount
  of such amount which is being amortized over the life of the loan to interest
  expense. The Company had used $0.19 per share in the computation of the
  beneficial conversion feature as it represents sales of private placements of
  the Companys securities at the time of entering into the debenture. The
  Holder has the sole option to extend the due date of this debenture and has
  extended principal and interest payments until February 15, 2009. On April 1,
  2009, FCPL agreed to extend the maturity date of the debenture to August 15,
  2009. In consideration for the extension, the Company agreed to modify the
  effective conversion price from $0.08715 to $0.07545 per share, and other
  additional anti-dilution provisions in favor of FCPL. In conjunction with the
  convertible debenture the Company issued a warrant to Fountainhead Capital
  Partners Limited to purchase 50.22 Membership Units of the Company (805,931
  shares of common stock) at $.50 per share for five years. The warrants fair
  value of $0.13 per share was calculated using the Black-Scholes Valuation
  Model, using the following assumptions: volatility of 99%, dividend rate of 0%,
  approximate risk free interest rate of 4.5% and a five year warrant life. The
  warrant resulted in an additional debt discount of $61,401 which is being
  amortized over the term of the debt. In conjunction with this debt the
  Company also entered into an agreement with Fountain Capital Partners Limited
  (FCPL) which granted to FCPL an option to invest up to $1,850,000 for three
  years in exchange for issuing new convertible debentures due two years from
  the issuance of these new notes and included with the exercise of this option
  would be a warrant to purchase up to 3,017,409 shares at a price of $0.44 per
  share. The debenture is convertible into up to 5,652,954 shares of common
  stock. No value was assigned to the options as there was no acquired
  beneficial conversion feature or acquisition of the warrants. The note
  reflects an unamortized discount of $0 and $3,450 as of September 30, 2009
  and December 31, 2008, respectively. |  |  | 172,500 |  |  | 169,050 | 

13

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |  |         |  |  |         | 
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  |  | ------- |  |  | ------- | 
|On February 15, 2008 the
  Company entered into a $150,000 Convertible Debenture payable to Fountainhead
  Capital Partners Limited, with interest at 6% per annum, due but not paid, on
  or before February 15, 2009. In addition, the debenture accrues interest at
  the rate of 12% per annum while the Maker is in default of the stated
  repayment terms. 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 $0.1230 per share, subject to
  adjustment and does not require bifurcation. The Company has computed a
  beneficial conversion feature debt discount of $81,707, which is being
  amortized over the life of the loan. The note reflects an unamortized
  discount of $0 and $10,213 as of September 30, 2009 and December 31, 2008,
  respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |  | 150,000 |  |  | 139,787 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |  |         |  |  |         | 
|On February 15, 2008 the
  Company entered into a $500,000 Convertible Debenture, payable to Regent
  Private Capital, LLC, with interest at 6% per annum, due but not paid, on or
  before February 15, 2009. In addition, the debenture accrues interest at the
  rate of 12% per annum while the Maker is in default of the stated repayment
  terms. 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 $0.1230 per share, subject to
  adjustment and does not require bifurcation. The Company has computed a beneficial
  conversion feature debt discount of $272,358, which is being amortized over
  the life of the loan. Subsequently, Regent assigned the principal amount of
  each note to Altcar Investments and Derek Johansen. On December 15, 2008,
  Johansen converted $250,000 of the debenture into 2,032,520 shares of common
  stock. This resulted in the recognition of unamortized beneficial conversion
  feature debt discount attributable to the debenture of $17,023. Further, on
  March 23, 2009, Altcar Investments converted $100,000 of the debenture plus
  accrued interest into 866,867 shares of common stock. The unamortized
  discount on the $150,000 debt as of September 30, 2009 and $250,000 debt as
  of December 31, 2008 is $0 and $17,023, respectively. |  |  | 150,000 |  |  | 232,977 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |  |         |  |  |         | 
|On April 15, 2008 the
  Company entered into a $150,000 Convertible Debenture payable to Fountainhead
  Capital Partners Limited, with interest at 6% per annum, due but not paid, on
  or before April 15, 2009. In addition, the debenture accrues interest at the rate
  of 12% per annum while the Maker is in default of the stated repayment terms.
  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 $0.1230 per share, subject to adjustment
  and does not require bifurcation. The Company has computed a beneficial
  conversion feature debt discount of $81,707 which is being amortized over the
  life of the loan. The unamortized discount as of September 30, 2009 and
  December 31, 2008 is $0 and $23,831, respectively.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |  | 150,000 |  |  | 126,169 | 

14

---



VYCOR MEDICAL, INC.NOTES TO FINANCIAL STATEMENTSSEPTEMBER
30, 2009

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   |           |  |   |           | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | - | --------- |  | - | --------- | 
|On April 22, 2008 the
  Company entered into a $500,000 Convertible Debenture, payable to Regent
  Private Capital, LLC, with interest at 6% per annum, due on or before April
  22, 2009. In addition, the debenture accrues interest at the rate of 12% per
  annum while the Maker is in default of the stated repayment terms. 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 $0.1230 per share, subject to adjustment and does not
  require bifurcation. The Company has computed a beneficial conversion feature
  debt discount of $272,358, which is being amortized over the life of the
  loan. The unamortized discount as of September 30, 2009 and December 31, 2008
  is $0 and $90,786, respectively. |  |   | 500,000   |  |   | 409,214   | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   |           |  |   |           | 
|All discounts are being
  amortized on a straight line basis that approximates effective yield method
  under EITF 98-5.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |   |           |  |   |           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   |           |  |   |           | 
|Total long-term debt:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |  |   | 1,122,500 |  |   | 1,077,197 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   |           |  |   |           | 
|Less current portion of
  debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |   | 1,122,500 |  |   | 1,077,197 | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   |           |  |   |           | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   |           |  |   |           | 
|Long-term portion of debt                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  | $ |          |  | $ |          | 
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |  |   |           |  |   |           | 

The following is a schedule of future minimum
loan payments:

|                                     |  |        |           | 
|------------------------------------ |  | ------ | --------- | 
|Twelve
  months ending September 30, |  | Amount |          
|                                     |  |        |          
|2010                                 |  | $      | 1,122,500 | 
|2011                                 |  |        |          | 
|2012                                 |  |        |          | 
|2013                                 |  |        |          | 
|2014                                 |  |        |          | 
|Thereafter                           |  |        |          | 
|                                     |  |        |           | 
|Total                                |  | $      | 1,122,500 | 
|Less                                 |  |        |           | 
|debt
  discount                      |  |        |          | 
|                                     |  |        |           | 
|                                     |  | $      | 1,122,500 | 
|                                     |  |        |           | 

The Companys entire
long-term debt is secured by a first security interest in all of the assets of
the Company.

15

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

5. EQUITY

Certain
Equity Transactions

As prescribed
in a previous agreement, in consideration for services provided to the Board of
Directors, the Company issued 26,318 shares of its common stock to Steven
Girgenti on July 28, 2009.

In accordance
with an existing consulting agreement, in consideration for services provided,
the Company issued 39,145 shares of its common stock to Dr. Konstantin Slavin
on July 28, 2009.

6. SHARE-BASED COMPENSATION

The Company
accounts for the following transactions under the guidance of Emerging Issues
Task Force Abstract No. 96-18, Accounting
for Equity Instruments That Are Issued to Other Than Employees for Acquiring,
or in Conjunction with Selling Goods or Services.Under EIFT
96-18, options are recorded at their fair value on the measurement date. The
Company remeasured the fair value of the options or warrants granted at each
reporting period until performance under the consulting agreement was completed
 and the
measurement date was reached. The Company expensed the fair value of the
instrument granted over the requisite service period which was the term of the
consulting agreement, or one year.

For employee
based awards which consist only of awards made under the Stock Option Plan
described below, the company follows the provisions of Statement of Financial
Accounting Standards No. 123R (SFAS 123 R), Share
Based Payment which requires companies to estimate the fair value
of share-based payment awards on the date of grant using an option-pricing
model. Under SFAS 123 R, 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. There were no employee stock options granted for the nine months ended
September 30, 2009.

Stock Option Plan

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

Initial grants
totaling 500,000 shares each were issued on February 13, 2008 to Kenneth T.
Coviello, Chief Executive Officer and Heather N. Vinas, President at an
exercise price of $.135 per share. The options vest 33 1/3 % on each of the
first, second, and third anniversary of the grant and expire February 12, 2018.
Accordingly, for the

16

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

nine months
ended September 30, 2009, the Company recognized share-based compensation
amounts of $28,920 and $28,920, for each of the respective grants.

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

Stock
appreciation rights may be granted either on a stand alone basis or in
conjunction with all or part of any other stock options granted under the plan.
As of September 30, 2009 there were no awards of any stock appreciation rights.

Consulting Agreements

The Company
entered into no new consulting agreements during the nine months ended
September 30, 2009.

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 |  
|                                    |  |                  |           |                                           |  
|                                    |  |                  |           |                                           |   |      | 
|Balance,
  January 1, 2006          |  |                  |           |                                           |   |      | 
|Granted                             |  |                  | 4,144,300 |                                           | $ | 0.43 | 
|Exercised                           |  |                  |           |                                           |   |      | 
|Cancelled or
  expired              |  |                  |           |                                           |   |      | 
|                                    |  |                  |           |                                           |   |      | 
|Outstanding
  at December 31, 2006  |  |                  | 4,144,300 |                                           |   | 0.43 | 
|                                    |  |                  |           |                                           |   |      | 
|Granted                             |  |                  | 1,143,408 |                                           |   | 0.32 | 
|Exercised                           |  |                  |           |                                           |   |      | 
|Cancelled or
  expired              |  |                  |           |                                           |   |      | 
|                                    |  |                  |           |                                           |   |      | 
|Outstanding
  at December 31, 2007  |  |                  | 5,287,708 |                                           |   | 0.41 | 
|                                    |  |                  |           |                                           |   |      | 
|Granted                             |  |                  | 1,365,788 |                                           |   | 0.31 | 
|Exercised                           |  |                  |           |                                           |   |      | 
|Cancelled or
  expired              |  |                  | (192,576  | )                                         |   | 0.24 | 
|                                    |  |                  |           |                                           |   |      | 
|Outstanding
  at December 31, 2008  |  |                  | 6,460,920 |                                           | $ | 0.39 | 
|                                    |  |                  |           |                                           |   |      | 
|                                    |  |                  |           |                                           |   |      | 
|Exercised                           |  |                  |           |                                           |   |      | 
|Cancelled or
  expired              |  |                  | (850,468  | )                                         |   | 0.26 | 
|                                    |  |                  |           |                                           |   |      | 
|Outstanding at
  September 30, 2009 |  |                  | 5,610,452 |                                           | $ | 0.39 | 
|                                    |  |                  |           |                                           |   |      | 

17

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

|                                    |  |                  |           |                                           |   |      | 
|----------------------------------- |  | ---------------- | --------- | ----------------------------------------- | - | ---- | 
|STOCK OPTIONS:                      |  |                  |           |                                           |   |      | 
|                                    |  |                  |           |                                           |   |      | 
|                                    |  | Number of shares |           | Weighted average exercise price per share |  
|                                    |  |                  |           |                                           |  
|                                    |  |                  |           |                                           |   |      | 
|Balance,
  January 1, 2006          |  |                  |           |                                           |   |      | 
|Granted                             |  |                  |          |                                           | $ |     | 
|Exercised                           |  |                  |           |                                           |   |      | 
|Cancelled or
  expired              |  |                  |           |                                           |   |      | 
|                                    |  |                  |           |                                           |   |      | 
|Outstanding
  at December 31, 2006  |  |                  |          |                                           |   |     | 
|                                    |  |                  |           |                                           |   |      | 
|Granted                             |  |                  |           |                                           |   |      | 
|Exercised                           |  |                  |           |                                           |   |      | 
|Cancelled or
  expired              |  |                  |           |                                           |   |      | 
|Outstanding
  at December 31, 2007  |  |                  |          |                                           |   |     | 
|                                    |  |                  |           |                                           |   |      | 
|Granted                             |  |                  | 1,050,000 |                                           |   | 0.14 | 
|Exercised                           |  |                  |           |                                           |   |      | 
|Cancelled or
  expired              |  |                  |           |                                           |   |      | 
|                                    |  |                  |           |                                           |   |      | 
|Outstanding
  at December 31, 2008  |  |                  | 1,050,000 |                                           | $ | 0.14 | 
|                                    |  |                  |           |                                           |   |      | 
|Granted                             |  |                  |           |                                           |   |      | 
|Exercised                           |  |                  |           |                                           |   |      | 
|                                    |  |                  |           |                                           |   |      | 
|Cancelled or
  expired              |  |                  |           |                                           |   |      | 
|                                    |  |                  |           |                                           |   |      | 
|Outstanding
  at September 30, 2009 |  |                  | 1,050,000 |                                           | $ | 0.14 | 
|                                    |  |                  |           |                                           |   |      | 

18

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

In
consideration for providing consulting services, the Company granted
to GC Advisors LLC three warrants, each to purchase of 192,576 shares of the
Companys common stock for a purchase price of $.24, .389, and .549 per
share, respectively. The warrants expire on January 9, 2008, 2009, and 2010,
respectively and were fair valued under the Black-Scholes Model.

In
consideration for being the Companys strategic business advisor, in 2007
the Company issued a warrant to Martin Magida to purchase up to 160,480 shares
of the Companys common stock at $.24 per share. The warrant is valid from
September 1, 2007 for a period of five years. This warrant was fair valued
under the Black-Scholes Model and amortized over the life of the agreement. For
the nine months ended September 30, 2009, $3,342 was recognized as share-based
compensation in connection with this agreement.

In
consideration for providing advisory services in 2007, the Company issued a
warrant to Robert Guinta to purchase up to 160,480 shares of the Companys
common stock at $.24 per share. The warrant is valid from September 1, 2007 for
a period of five years. This warrant was fair valued under the Black-Scholes
Model and amortized over the life of the agreement. For the nine months ended
September 30, 2009, $3,342 was recognized as share-based compensation in
connection with this agreement.

As of
September 30, 2009, there was approximately $143,000 of total unrecognized
compensation costs related to non-vested stock options awards, which are
expected to be recognized over a weighted average period of 2 years.

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

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

Stock-based
compensation expense charged to operations on options and warrants granted to
the above non-employees for the nine months ended September 30, 2009 is $6,684.

19

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

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

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

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

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

Forfeitures.SFAS No. 123R also requires the Company to estimate
forfeitures at the time of grant, and revise those estimates in subsequent
periods if actual forfeitures differ from those estimates. The Company uses
historical data, however limited to date, to estimate pre-vesting options
forfeitures and record stock-based compensation expense only for those awards
that are expected to vest. All stock-based payment awards are amortized on a
straight-line basis over the requisite service periods of awards, which are
generally the vesting periods. If the Companys actual forfeiture rate is
materially different from its estimate, the stock-based compensation expense
could be significantly different from what the Company has recorded in the
current period.

The
weighted-average remaining contractual life of outstanding warrants and options
is two and two years, respectively. All of the warrants outstanding are
currently exercisable.

7. INCOME TAXES

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

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

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

|                            |  |                    |            |                   |  |          |  
|--------------------------- |  | ------------------ | ---------- | ----------------- |  | -------- | -
|                            |  | September 30, 2009 |            | December 31, 2008 | 
|                            |  |                    |            |                   |  |          |  
|Gross
  deferred tax assets |  |                    | 1,193,500  |                   |  | 904,750  |  
|Valuation
  allowance       |  |                    | (1,193,500 | )                 |  | (904,750 | )
|                            |  |                    |            |                   |  |          |  
|Net deferred
  tax asset    |  |                    |           |                   |  |         |  
|                            |  |                    |            |                   |  |          |  

As of
September 30, 2009 and December 31, 2008, the Company has estimated U.S.
federal net operating loss carryforwards of approximately $3,410,000 and
$2,585,000, respectively. The federal net operating loss carryforwards expire
in the years 2027 through 2029.

20

---



VYCOR MEDICAL, INC.

NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2009

Federal tax
laws impose significant restrictions on the utilization of net operating loss
carryforwards and research and development credits in the event of a change in
ownership of the Company, as defined by the Internal Revenue Code Section 382.
The Companys net operating loss carryforwards and research and development
credits may be subject to the above limitations.

The
Company adopted the provisions of FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes,on
January 1, 2007. Implementation of FIN 48 resulted in no adjustments to the
Companys liability for unrecognized tax benefits. As of both the date of
adoption and as of December 31, 2008 there were no unrecognizable tax benefits.
Accordingly, a tabular reconciliation from beginning to ending periods is not
provided. The Company will classify any future interest and penalties as a
component of income tax expense if incurred. To date, there have been no
interest or penalties charged or accrued in relation to unrecognized tax
benefits.

The Company is
subject to federal and state examinations for the year 2006 forward. There are
no tax examinations currently in progress.

8. COMMITMENTS AND
CONTINGENCIES

Employment
and Consulting Agreements

There were no
new employment or consulting agreements executed during the nine months ended
September 30, 2009.

Lease

The Company
leases its office space on a month to month basis. Rental expense for the nine
months ended September 30, 2009 and 2008 were $16,904 and $20,173,
respectively.

SUBSEQUENT EVENTS

The maturity
dates have passed with respect to all of the Companys Debenture obligations to
Fountainhead Capital Management Limited and Regent Private Capital, LLC. The
parties are engaged in ongoing negotiations with respect to such matters,
however, the Company cannot predict the final outcome of such negotiations. If
a restructuring of these obligations is ultimately achieved, the terms of such
restructuring may result in significant dilution to current equity holders.

On November 6,
2009, Fountainhead Capital Partners Limited and Regent Private Capital, LLC
advanced an aggregate of $64,000 as a bridge loan due and payable on November
30, 2009. The terms of this bridge loan are detailed in a Senior Debenture
between the parties.

21

---



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

Forward Looking Statements

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

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

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

Organizational History

We
were formed as a limited liability company under the laws of the State of New
York on June 17, 2005 as Vycor Medical LLC. On November 14, 2007, we
converted into a Delaware corporation and changed our name to Vycor Medical,
Inc. (Delaware Corporation). Our sole reason for conversion to the Delaware
Corporation was to facilitate the raising of additional capital, as prospective
investors had expressed resistance to investing in the Company as the NY LLC.
At November 14, 2007, we had approximately 1,122 membership units of the NY LLC
issued and outstanding. The managing members of the NY LLC determined, in their
reasonable business judgment, that such units, in the aggregate, should convert
to an aggregate of 17,999,999 shares of common stock of the Delaware
Corporation. On this basis, we adopted a conversion ratio of 16,048 shares of
common stock of the Delaware Corporation for each former unit of the NY LLC.
Likewise, all conversion rights, options, warrants and any other rights to
acquire units of the NY LLC (including but not limited to units issuable
pursuant to the terms of the Fountainhead Bridge Loan Debenture, Fountainhead
Warrant to purchase 50.22 units of the NY LLC, the Companys Option Agreement
with Fountainhead dated December 14, 2006), were converted to conversion rights,
options, warrants and rights to acquire common shares of the Delaware
Corporation, based on the same conversion ratio. The action authorizing the
conversion was adopted by the unanimous consent of the Managing Members of the
NY LLC pursuant to the terms of the NY LLC Operating Agreement.

Overview of Business

We
are a developer of neurosurgical medical devices. We have been conducting
research, developing, prototyping, and producing mold development work for the
Brain Access System. This product is designed to assist the neurosurgeon with
brain surgery. It allows the surgeon to gain access to various regions in the
brain through a working channel.

We
are in the process of marketing our first series of products to the
marketplace. Our first product line that we introduced to the market is a new
type of self retaining brain retractor called the ViewSite Brain Access

22

---



System. We started marketing the Brain Access
System in September 2008 and started shipping all sizes in November 2008. The
product line consists of various port sizes and lengths to allow the surgeon to
use the device for various regions of the brain and different procedures.

The
second product in our pipeline is the Cervical Access System, which, pending
receipt of additional funding and successful market testing, is planned for
launch during 2010 pending funding. Like the Brain Access System, this product
is designed to assist the surgeon in cervical surgeries, allowing the surgeon
to gain access to the anterior cervical surgery site.

We
have received FDA 510(k) clearance for both our Brain Access System and
Cervical Access System products. Section 510(k) of the United States Food, Drug
and Cosmetic Act requires medical device manufacturers to register with the
U.S. Food and Drug Administration of their intent to market a medical device at
least 90 days in advance. The 510(k) submission allows the U.S. Food and Drug
Administration to determine whether a device is generally equivalent to any
similar product already on the market. With the FDA 510(k) clearance, we are
authorized to take our products to market in the U.S. without further
approvals.

We
have also received CE Marking for our products in September 2006 and are able
to sell them in member countries of the European Union. The European Medical
Device Directive makes it mandatory to fulfill CE certification requirements in
order to export medical devices of Class I, IIa, IIb, and III to any country
within the European community.

We
believe that our Brain Access System and Cervical Access System products will
replace standard retraction devices to establish a new standard of care in
neurosurgery, leading to a broad and rapid adoption of our products.

Our Products

Our
initial product applications for the retractor technology will be in
neurological surgeries involving brain and spinal access.

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

|  |                                                                                                                                                                                                                        
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | gently separate delicate tissue;                                                                                                                                                                                       
|  |                                                                                                                                                                                                                        
| | improve surgical outcomes (reducing
  potential surgeon and hospital liability), for example, decreased insertion
  tissue trauma, less need for readjustment during surgery and minimum
  interface surface pressures;
|  |                                                                                                                                                                                                                        
| | increase surgical site access;                                                                                                                                                                                         
|  |                                                                                                                                                                                                                        
| | provide superior field of vision and
  lighting;                                                                                                                                                                       
|  |                                                                                                                                                                                                                        
| | minimal invasive surgery;                                                                                                                                                                                              

The
Brain Access System and Cervical Access System were invented by Dr. John
Mangiardi. Dr. Mangiardi assigned the rights to the Brain Access System and
Cervical Access System to Sawmill Trust on September 17, 2005 pursuant to an
assignment agreement on the same date. Sawmill Trust then, in turn, assigned
the same rights to us on September 17, 2005 pursuant to another assignment
agreement dated the same date.

Brain Access System Products

The
Brain Access System series of disposable products are used by the neurosurgeon
to access the surgical site. This is done by inserting the Brain Access System
through the brain tissue and then removing the Brain Access System introducer,
leaving the remaining hollow working channel in place to provide the surgeon
with access to the precise location desired for surgery.

The
Brain Access System is available in multiple sizes and is a single-use product.
We have designed multiple sizes and intend to add additional sizes in the
future. During our design process we listed what product

23

---



benefits would be of value to the
neurosurgeons when using a retractor system. We then designed our product with
the following intent:

|  |                                                                                                              
|- | -------------------------------------------------------------------------------------------------------------
| | To minimize brain disruption during surgery
  by utilizing a tapered forward edge;                           
|  |                                                                                                              
| | To minimize venous pressure in the brain;                                                                    
|  |                                                                                                              
| | To reduce target shift to
  allow the surgeon to reach the site accurately;                                
|  |                                                                                                              
| | To minimize off site healthy tissue damage;                                                                  
|  |                                                                                                              
| | To allow for accurate neuronavigational
  image guidance systems (IGS) performance;                        
|  |                                                                                                              
| | To integrate with the leading surgical IGS
  systems such as Medtronics® and BrainLab®;                      
|  |                                                                                                              
| | To allow for easier positioning during
  surgery;                                                            
|  |                                                                                                              
| | To reduce damage to healthy brain tissue
  leading to shorter post-op recovery and reduced hospital stay; and
|  |                                                                                                              
| | To allow direct surgical visualization of
  brain tissue via optically transparent construction;             

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

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

Furthermore,
retractors that are currently in use are metallic and non-transparent. This
requires the surgical team to maintain the retracted surface, typically by
packing gauze around the access edges increasing movement and pressures over a
greater portion of the brain and extending overall elapsed surgery times. We
believe that the Brain Access System product eliminates this process, while
providing better visibility for the surgeon and lower pressures on the
retracted brain tissue.

Product shortcomings

Our products have a few shortcomings:

|  |                                                                                                                                                                                                                                                                                
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | One of the shortcomings of our products as
  compared to existing blade retractors is that our device diameter is fixed as
  opposed to variable. This gives the surgeon less flexibility once he is at
  the location unless he knows where he needs to go in the brain first.
|  |                                                                                                                                                                                                                                                                                
| | Another shortcoming is that the diameters
  and lengths of our devices are set to specific measurements, which limits the
  surgeon to these specific sizes.                                                                                                                   
|  |                                                                                                                                                                                                                                                                                
| | Depending on the case, usage of a
  disposable product may be viewed as costing more over time and may not be
  accepted by our potential customers.                                                                                                                           

IGS Opportunity for theBrain Access System

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

|  |                  
|- | -----------------
| | Target
  Shifting

The
normal surgical procedure utilizing standard retractors in brain surgery
require pulling away the healthy tissue to expose the targeted region of the
brain located underneath. However, in many cases, the amount of pulling
required causes the targeted area to shift away from what is shown on the IGS
system. This target shifting then requires the surgeon to cause additional
trauma to healthy tissue and spend additional time as the shifted target

24

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area is located and the retractor is
repositioned. The VBAS system is designed to minimize or eliminate target
shift, as the elliptical shape of the product distributes relatively uniform
pressure on the surrounding brain tissue.

|  |                                       
|- | --------------------------------------
| | Real-Time
  Retractor Positioning Data

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

We
plan on offering a version of all Brain Access System models that are
IGS-friendly.

Brain Access System Product Models

The
Brain Access System products consists of two models initially, namely, TC-VBAS
and EC-VBAS and any additional models in the future, each designed to allow the
surgeon the choice for specific brain surgeries for various procedures. Each of
these models will be manufactured in various lengths to accommodate different
depths for surgical access.

|  |        
|- | -------
| | TC-VBAS

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

|  |        
|- | -------
| | EC-VBAS

At
present, this is available only in one size  34mm x 5cm.

Cervical Access Products

The
Cervical Access System products are to be used by the neurological surgeon to
access the anterior cervical surgical site (the uppermost vertebrae located in
the neck). This type of surgery is near very critical and delicate structures
such as the larynx, esophagus and carotid artery. The shape of the Cervical
Access System with the introducer lets the surgeon carefully place the device
and the unique anchor screws then safely hold the access channel in place
during the procedure. The clear body of the retractor allows the surgeon to see
the entire field both during the insertion process as well as throughout the
surgical procedure.

We
have designed the Cervical Access System to:

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

Because
our products have not been brought to market yet, there is no guarantee that
any of the abovementioned features would prove effective and even so, be
welcomed by the consumer.

Cervical Access System Product Models

25

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The
plan for the Cervical Access System series will consist of disposable products.
The widths are able to accommodate from one to three levels of the cervical
spine, from 26mm to 54mm. We are also evaluating a telescoping design that
would reduce the number of sizes necessary and a version that incorporates a
distractor. Further research and development is needed for a market-ready
product.

Brain Retractors

Future
plans include developing additional Brain Access System retractors to allow for
access to various regions of the brain. This allows us to target more diverse
neurosurgical specialties. We anticipate research and developing work starting
in 2009 and estimate a research and development budget of $500,000 for 2009
and 2010, pending future funding.

Our
plans are to eventually include retractor lines that are designed for the
requirements of specific surgical applications like aneurisms, tumors and
endoscopic work.

Intellectual Property

Patent Applications

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

|                    |  |  |                 |  |  |                  |  |  |                                                                                    |  |  |                           
|------------------- |  |  | --------------- |  |  | ---------------- |  |  | ---------------------------------------------------------------------------------- |  |  | --------------------------
|Filing Date         |  |  | Application No. |  |  | Country          |  |  | Title                                                                              |  |  | Status                    
|June 22, 2005       |  |  | 60/692,959      |  |  | US  provisional |  |  | Surgical
  Access Instruments for Use with Spinal or Orthopedic Surgery (Cervical) |  |  | Converted to
  PCT        
|June 22,
  2006     |  |  | PCT/US06/24243  |  |  | PCT              |  |  | Surgical
  Access Instruments for Use with Spinal or Orthopedic Surgery (Cervical) |  |  | National
  Phase Completed
|June 22,
  2005     |  |  | 11/155,175      |  |  | US  utility     |  |  | Surgical
  Access Instruments for Use with Delicate Tissues (Brain)                |  |  | Abandoned                 
|November 27,
  2006 |  |  | PCT/US06/61246  |  |  | PCT              |  |  | Surgical
  Access Instruments for Use with Delicate Tissues (Brain)                |  |  | National
  Phase Completed
|June 22,
  2006     |  |  | 2613323         |  |  | Canada           |  |  | Surgical
  Access Instruments for Use with Spinal or Orthopedic Surgery            |  |  | Pending                   
|June 22,
  2006     |  |  | 06785312.7      |  |  | Europe           |  |  | Surgical
  Access Instruments for Use with Spinal or Orthopedic Surgery            |  |  | Pending                   

26

---



|                     |  |  |                 |  |  |                    |  |  |                                                                                        |  |  |                                                                    
|-------------------- |  |  | --------------- |  |  | ------------------ |  |  | -------------------------------------------------------------------------------------- |  |  | -------------------------------------------------------------------
|June 22,
  2006      |  |  | 299/KOLNP/2008  |  |  | India              |  |  | Surgical
  Access Instruments for Use with Spinal or Orthopedic Surgery                |  |  | Pending                                                            
|June 22,
  2006      |  |  | 188321          |  |  | Israel             |  |  | Surgical Access
  Instruments for Use with Spinal or Orthopedic Surgery                |  |  | Response to
  Official Action due 12/2/09 (extendable for 4 months)
|June 22,
  2006      |  |  | 2008-518369     |  |  | Japan              |  |  | Surgical
  Access Instruments for Use with Spinal or Orthopedic Surgery                |  |  | Published                                                          
|December 20,
  2007  |  |  | 11/993,280      |  |  | US  utility       |  |  | Surgical
  Access Instruments for use with spinal or orthopedic surgery                |  |  | Pending                                                            
|June 25,
  2008      |  |  | 08107050.4      |  |  | Hong Kong          |  |  | Surgical
  Access Instruments for use with spinal or orthopedic surgery                |  |  | Pending                                                            
|September 18,
  2008 |  |  | 61/098041       |  |  | US 
  provisional |  |  | Surgical
  Access Instruments for use with Delicate Tissues (Brain)                    |  |  | Converted                                                          
|May 25, 2009         |  |  |                 |  |  | Canada             |  |  | Surgical
  Access Instruments for use with Delicate Tissues (Brain)                    |  |  | Pending                                                            
|May 26, 2009         |  |  | 06840022.5      |  |  | Europe             |  |  | Surgical
  Access Instruments for use with Delicate Tissues (Brain)                    |  |  | Hong Kong
  due 2/10/09 - final                                    
|May 26, 2009         |  |  | 1977/KOLNP/2009 |  |  | India              |  |  | Surgical
  Access Instruments for use with Delicate Tissues (Brain)                    |  |  | Pending                                                            
|May 27, 2009         |  |  |                 |  |  | Japan              |  |  | Surgical
  Access Instruments for use with Delicate Tissues (Brain)                    |  |  | Examination
  due November 27, 2009 - final                        
|June 26,
  2009      |  |  | 2009124446      |  |  | Russia             |  |  | Surgical
  Access Instruments for use with Delicate Tissues (Brain)                    |  |  | Examination
  due November 27, 2009 - final                        
|July 27,
  2009      |  |  |                 |  |  | China              |  |  | Surgical
  Access Instruments for use with Delicate Tissues (Brain)                    |  |  | Examination
  due November 27, 2009 - final                        
|August 21,
  2009    |  |  | 12/545686       |  |  | US  CON           |  |  | Surgical
  Access Instruments for use with Delicate Tissues (Brain)                    |  |  | Pending                                                            
|August 21,
  2009    |  |  | 12/545719       |  |  | US  CON           |  |  | Surgical
  Access Instruments for use with Delicate Tissues (Brain) (apparatus claims) |  |  | Pending                                                            
|September
  17, 2009 |  |  | PCT/US09/57322  |  |  | PCT                |  |  | Surgical
  Access Instruments for use with Delicate Tissues (Brain)                    |  |  | Abandoned                                                          

27

---



The
above-indicated patent applications were invented by Dr. John Mangiardi, who
assigned the rights to the Sawmill Trust on September 17, 2005 under the terms
of an assignment agreement between the parties. The Sawmill Trust then, in
turn, assigned the same rights to us on September 17, 2005 pursuant to an
assignment agreement between the Sawmill Trust and the Company dated the same
date. The consideration for such assignment was the issuance of one-third of
the initial equity of our predecessor (Vycor Medical, LLC) and the inclusion of
certain rights in favor or the Sawmill Trust, including but not limited to
certain supermajority voting rights and the right to appoint members of the
board of managers, which were incorporated in the Operating Agreement of such
entity. Dr. Mangiardis wife, Pascale Mangiardi, who is a director of the
Company, was the Settlor of the Sawmill Trust and Dr and Mrs. Mangiardi are
both beneficiaries of the Sawmilll Trust. The Sawmill Trust is an irrevocable
trust and A. Mitchell Green is the sole Trustee and has sole voting power and
investment power with respect to the assets of the trust.

Trademarks

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

Results of Operations

Comparison of the Three Months Ended
September 30, 2009 to the Three Months Ended September 30, 2008

The
following table presents the dollar amount changes from period to period of the
line-items included in our Statements of Operations for the three months ended
September 30, 2009 and 2008:

|                           |  |      |          |      |   |                        |   |   |          |  
|-------------------------- |  | ---- | -------- | ---- | - | ---------------------- | - | - | -------- | -
|Three months ended:        |  | 2009 |          | 2008 |   | Increase/
  (Decrease) |  
|                           |  |      |          |      |   |                        |  
|                           |  |      |          |      |   |                        |   |   |          |  
|Revenue:                   |  |      |          |      |   |                        |   |   |          |  
|Sales                      |  | $    | 44,198   |      | $ | 3,342                  |   | $ | 40,856   |  
|Cost of Goods Sold         |  |      | 4,584    |      |   | 330                    |   |   | 4,254    |  
|                           |  |      |          |      |   |                        |   |   |          |  
|Gross Profit               |  |      | 39,614   |      |   | 3,012                  |   |   | 36,602   |  
|Operating expenses:        |  |      |          |      |   |                        |   |   |          |  
|Research and development   |  |      |         |      |   | 6,345                  |   |   | (6,345   | )
|General and administrative |  |      | 159,158  |      |   | 318,770                |   |   | (159,612 | )
|                           |  |      |          |      |   |                        |   |   |          |  
|Operating loss             |  |      | (119,544 | )    |   | (322,103               | ) |   | 202,559  |  
|Interest Expense           |  |      | 33,477   |      |   | 441,540                |   |   | (408,063 | )
|                           |  |      |          |      |   |                        |   |   |          |  
|Net loss                   |  | $    | (153,021 | )    | $ | (763,643               | ) | $ | 610,622  |  
|                           |  |      |          |      |   |                        |   |   |          |  

Revenue:

The company recorded revenue of $44,198 from
the sale of our products in the three months ended September 30, 2009 compared
to $3,342 in the three months ended September 30, 2008. This included sales of
various quantities of each of the twelve sizes of its Brain Access System
product to both domestic and international customers.

Research
and Development Expenses:

Research and development expenses decreased
from $6,345 to $0 for the three months ended September 30, 2009. This decrease
can be attributed to the ceasing of research and development activities on the
existing product line.

General
and Administrative Expenses:

28

---



General and administrative expenses decreased
by $159,612 from $318,770 for the three months ended September 30, 2008 to
$159,158 for the three months ended September 30, 2009. The decrease was
attributable to the elimination of certain nonrecurring legal and consulting
costs related to the companys capital transactions in 2008.

Interest
Expense (Income):

The company recorded interest expense of
$33,477 and $441,540 for the three months ended September 30, 2009 and 2008,
respectively. This decrease occurred since the debt discount attributable to
the companys existing convertible debt was fully recognized prior to the three
months ended September 30, 2009. For the three months ended September 30, 2009 and
2008, interest expense was offset with interest income of $10 and $1,777,
respectively.

Comparison of the Nine Months Ended September
30, 2009 to the Nine Months Ended September 30, 2008

The
following table presents the dollar amount changes from period to period of the
line-items included in our Statements of Operations for the six months ended
September 30, 2009 and 2008:

|                           |  |      |          |      |   |                        |   |   |           |  
|-------------------------- |  | ---- | -------- | ---- | - | ---------------------- | - | - | --------- | -
|Nine months ended:         |  | 2009 |          | 2008 |   | Increase/
  (Decrease) |  
|                           |  |      |          |      |   |                        |  
|                           |  |      |          |      |   |                        |   |   |           |  
|Revenue:                   |  |      |          |      |   |                        |   |   |           |  
|Sales                      |  | $    | 156,587  |      | $ | 3,342                  |   | $ | 153,245   |  
|Cost of Goods Sold         |  |      | 19,417   |      |   | 330                    |   |   | 19,087    |  
|                           |  |      |          |      |   |                        |   |   |           |  
|Gross Profit               |  |      | 137,170  |      |   | 3,012                  |   |   | 134,158   |  
|Operating expenses:        |  |      |          |      |   |                        |   |   |           |  
|Research and development   |  |      |         |      |   | 21,906                 |   |   | (21,906   | )
|General and administrative |  |      | 735,171  |      |   | 1,178,763              |   |   | (443,592  | )
|                           |  |      |          |      |   |                        |   |   |           |  
|Operating loss             |  |      | (598,001 | )    |   | (1,197,657             | ) |   | 599,656   |  
|Interest Expense           |  |      | 226,869  |      |   | 692,138                |   |   | (465,269  | )
|                           |  |      |          |      |   |                        |   |   |           |  
|Net loss                   |  | $    | (824,870 | )    | $ | (1,889,795             | ) | $ | 1,064,925 |  
|                           |  |      |          |      |   |                        |   |   |           |  

Revenue:

The company recorded revenue of $156,587 from
the sale of our products in the nine months ended September 30, 2009 compared
to $3,342 in the same period the prior year.

Research
and Development Expenses:

Research and development expenses decreased
from $21,906 to $0 for the nine months ended September 30, 2009. This decrease
can be attributed to the ceasing of research and development activities on the
existing product line.

General
and Administrative Expenses:

General and administrative expenses decreased
by $443,592 from $1,178,763 for the nine months ended September 30, 2008 to
$735,171 for the nine months ended September 30, 2009. The decrease was
attributable to the elimination of certain nonrecurring legal and consulting
costs related to the companys capital transactions in 2008.

Interest
Expense (Income):

The company recorded interest expense of
$226,869 and $692,138 for the nine months ended September 30, 2009 and 2008,
respectively. The decrease occurred since the majority of debt discount attributable to the
Companys existing convertible debt was recognized prior to the nine months ended
September 30, 2009.  For the nine months ended September 30, 2009 and 2008,
interest expense was offset with interest income of $257 and $6,009,
respectively.

Liquidity and Capital Resources

29

---



As
of September 30, 2009, the Company had $29,516 cash, a working capital deficit
of $1,864,169 and an accumulated
deficit of $4,560,175 on September 30, 2009. The Companys operating activities
used $222,190 in cash for the quarter period ended September 30, 2009.

The
Companys existing cash, cash equivalents and available borrowings will not be
sufficient to meet its anticipated cash needs for working capital and capital
expenditures for current and future periods. No assurances can be made that
additional capital will be available or that assumptions regarding sales and
expenses will ever be achieved. While the company intends to seek additional
funding through public or private financings or other arrangements, adequate
funds may not be available when needed or may not be available on terms
favorable to us. If additional funds are raised by issuing equity securities,
dilution to existing stockholders may result. If the company raises additional
funds by obtaining loans from third parties, the terms of those financing
arrangements may include negative covenants or other restrictions on our
business that could impair our operational flexibility, and would also require
us to fund additional interest expense. If funding is insufficient at any time
in the future, the company may be unable to develop or enhance our products,
take advantage of business opportunities or respond to competitive pressures,
any of which could have a material adverse effect on our business, financial
condition and results of operations.

Going Concern

Our
independent auditors have added an explanatory paragraph to their audit issued
in connection with the financial statements for the period ended December 31,
2008, relative to our ability to continue as a going concern. This means that
there is substantial doubt that the company can continue as an ongoing business
for the next 12 months. The financial statements do not include any adjustments
that might result from the uncertainty about our ability to continue our
business. The company has incurred losses since inception, including net losses
of $2,381,295 for the year ended December 31, 2008 and $598,001 for the nine
months ended September 30, 2009, and expects to incur substantial additional
losses, including additional development costs, costs related to clinical
trials and manufacturing expenses. The company has incurred negative cash flows
from operations since inception. As of September 30, 2009 and December 31,
2008, the company had stockholders deficiencies of $1,557,711 and $921,427,
respectively, and cash and cash equivalents balance of $29,516 and $196,138 at
September 30, 2009 and December 31, 2008, respectively. The Company also has
certain debt obligations that were not paid by their respective due dates.
Since there is no record of profitable operations, there is high a possibility
that you may suffer a complete loss of your investment. Because our auditors
have issued a going concern opinion, there is substantial uncertainty we will
continue operations in which case you could lose your investment. In these
circumstances the Company believes it may not have enough cash to meet ongoing
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. 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.

Recently Issued Accounting Pronouncements

The Company has adopted all recently issued
accounting pronouncements. The adoption of the accounting pronouncements,
including those not yet effective, is not anticipated to have a material effect
on the financial position or results of operations of the Company.

Critical Accounting Policies and Estimates

Uses of estimates in the preparation of
financial statements

The preparation of financial statements in
conformity with accounting principles generally accepted in the United States
(GAAP) requires management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying notes. Currently,
the Company estimates depreciation, amortization of intangible assets, and the
fair values of options and warrants.

30

---



The most critical estimates that impact the
financial position and results of operation of the company have to do with the
methodologies and assumptions used in determining the fair value of various
debt estimates. These include assumptions associated with warrants, options and
stock issued in conjunction with such debt. Additionally, the Black-Scholes
option pricing model and its related assumptions of volatility, risk free
interest, stock price also significantly impacted share based compensation and
the results of operations.

Research and Development

The Company expenses all research and
development costs as incurred. For the nine months ended September 30, 2009 and
2008, the amounts charged to research and development expenses were $ 0 and
$21,906, respectively.

Cash and cash equivalents

The Company considers all highly liquid debt
investments with original maturities of six months or less when purchased to be
cash equivalents. The carrying amounts approximate fair market value because of
the short maturity. The Company maintains cash balances at various financial
institutions. Accounts at each institution are insured by the Federal Deposit
Insurance Corporation up to $250,000. The Companys accounts at these
institutions may, at times, exceed the federally insured limits. The Company
has not experienced any losses in such accounts.

Fair Values of Financial Instruments

At September 30, 2009 and 2008, fair values
of cash and cash equivalents, accounts payable, convertible promissory notes,
and options and warrants approximate their carrying amount due to the short
period of time to maturity and various fair value model calculations.

Property and equipment

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

Income taxes

The Company accounts for income taxes in
accordance with SFAS 109, Accounting for
Income Taxes. This statement prescribes the use of the liability
method whereby deferred tax assets and liability account balances are
determined based on differences between financial reporting and tax bases of
assets and liabilities and are measured using the enacted tax rates and laws
that will be in effect when the differences are expected to reverse. The
Company provides a valuation allowance, if necessary, to reduce deferred tax
assets to their estimated realizable value.

Patents

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

The Company reviews existing patents as well
as those in the approval process for impairment on an annual basis using a
present value, cash flow method pursuant to Statement of Financial Accounting
Standards 142, Goodwill and Other Intangible Assets. Since the Companys
patents are either very new or still in the process of approval, the Company
does not believe that any impairment of these amounts exists.

Revenue Recognition

The Company records revenue at the time,
pursuant to Staff Accounting Bulletin Topic 13(a), that a completed contract
for the sale exists, title transfers to the buyer and the product is invoiced
and shipped to the customer. The Company intends to sell a surgical access
system which has already cleared the U.S. FDA 510(k) review process. It has
been granted a 510(k) number to market to hospitals and other medical
professionals. The Company does not expect the need to provide for product
returns or warrantee costs but will review such potential costs after the
commencement of sales.

31

---



Educational and marketing expenses

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

ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURES ABOUT MARKET RISK

Not applicable

ITEM 4A(T). CONTROLS AND PROCEDURES

(a) Disclosure Controls and Procedures

The Companys management, with the
participation of its principal executive officer and principal financial
officer, has evaluated the effectiveness of the Companys disclosure controls
and procedures (as defined in Rules 13a-15(e) or 15d-15(e) under
the Securities Exchange Act of 1934, as amended (the Exchange Act)) as of the
end of the period covered by this Quarterly Report on Form 10-Q. Based on
such evaluation, the Companys principal executive officer and principal
financial officer have concluded that, as of the end of such period, the
Companys disclosure controls and procedures were adequate and effective.

(b) Changes in Internal Controls

There have not been any changes in the
Companys internal control over financial reporting (as such term is defined in
Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the
quarter ended September 30, 2009 that have materially affected, or are
reasonably likely to materially affect, the Companys internal control over
financial reporting.

PART II

ITEM 1. LEGAL PROCEEDINGS

We are subject from time to time to
litigation, claims and suits arising in the ordinary course of business. As of
September 30, 2009, to the best knowledge of the Companys management, the Company is not
party to any material litigation
whose outcome could have a material effect on our financial statements.

ITEM 1A. RISK
FACTORS.

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

ITEM 2 UNREGISTERED SALES OF EQUITY
SECURITIES AND USE OF PROCEEDS

As prescribed
in a previous agreement, in consideration for services provided to the Board of
Directors, the Company issued 26,318 shares of its common stock to Steven
Girgenti on July 28, 2009.

In accordance
with an existing consulting agreement, in consideration for services provided,
the Company issued 39,145 shares of its common stock to Dr. Konstantin Slavin
on July 28, 2009.

ITEM 3 DEFAULTS UPON SENIOR SECURITIES

The maturity
dates have passed with respect to all of the Companys Debenture obligations to
Fountainhead Capital Management Limited and Regent Private Capital, LLC. The
parties are engaged in ongoing negotiations with respect to such matters,
however, the Company cannot predict the final outcome of such negotiations. If
a

32

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restructuring
of these obligations is ultimately achieved, the terms of such restructuring
may result in significant dilution to current equity holders.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

On November 6,
2009, Fountainhead Capital Partners Limited and Regent Private Capital, LLC
advanced an aggregate of $64,000 as a bridge loan due and payable on November
30, 2009. The terms of this bridge loan are detailed in a Senior Debenture
between the parties.

ITEM 6. EXHIBITS

Index to Exhibits

|     |                                                                                         
|---- | ----------------------------------------------------------------------------------------
|31.1 | Certification of Chief Executive Officer
  under Rule 13(a) - 14(a) of the Exchange Act.
|     |                                                                                         
|31.2 | Certification of Chief Financial Officer
  under Rule 13(a) - 14(a) of the Exchange Act.
|     |                                                                                         
|32   | Certification of CEO and CFO under 18
  U.S.C. Section 1350                             

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SIGNATURES

In accordance with Section 13 or 15(d) of the
Exchange Act, the registrant caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized, on November 16, 2009.

| |                       |                                                                       | 
| | --------------------- | --------------------------------------------------------------------- | 
| | VYCOR
  MEDICAL, INC.
| |                       |                                                                       | 
| | By:                   | /s/ Kenneth T. Coviello                                               | 
| |                       |                                                                       | 
| |                       | Kenneth T. Coviello                                                   | 
| |                       | Chief Executive Officer and 
  Director (Principal Financial Officer) | 
| |                       |                                                                       | 
| | By:                   | /s/ Heather N. Vinas                                                  | 
| |                       |                                                                       | 
| |                       | Heather N. Vinas                                                      | 
| |                       | President, Founder and Director (Principal 
  Executive Officer)      | 

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