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_________June 30,
2010_______________





 ̈
 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 oNon-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 675,357,950 shares outstanding of registrant’s common stock, par value
$.0001 per share, as of July 31, 2010.




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





TABLE
OF CONTENTS





PART
      IItem
      1.
                        Financial
      Statements
                        3Consolidated
      Balance Sheets as of June 30, 2010 (unaudited) and December 31,
      2009
                        3Unaudited
      Consolidated Statements of Operations for the three months ended June 30,
      2010 and June 30, 2009
                        4Unaudited
      Consolidated Statements of Operations for the six months ended June 30,
      2010 and June 30, 2009
                        5Unaudited
      Consolidated Statements of Cash Flows for the six months ended June 30,
      2010 and 2009
                        6Notes
      to Unaudited Consolidated Financial Statements
                        7Item
      2.
                        Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation
                        21Item
      3
                        Quantitative
      and Qualitative Disclosures About Market Risk
                        38Item
      4A(T)
                        Controls
      and Procedures
                        39PART
      IIItem
      1
                        Legal
      Proceedings
                        39Item
      1A
                        Risk
      Factors
                        39Item
      2
                        Unregistered
      Sales of Equity Securities and Use of Proceeds
                        39Item
      3
                        Defaults
      Upon Senior Securities
                        40Item
      4.
                        (Removed
      and Reserved)
                        41Item
      5.
                        Other
      Information
                        41Item
      6.
                        Exhibits
                        41SIGNATURES
                        42


2


PART
I





ITEM
1.  FINANCIAL STATEMENTS





VYCOR MEDICAL, INC.





Balance
Sheets





June 30,
                
                
                December 31,2010
                
                
                2009(unaudited)
                
                
                (audited)ASSETSCurrent
      AssetsCash
                
                $
                133,116
                
                
                $
                12,771Accounts
      receivable
                
                
                62,612
                
                
                
                29,748Inventory
                
                
                54,861
                
                
                
                41,967Prepaid
      expenses
                
                
                51,489
                
                
                
                22,369302,078
                
                
                
                106,855Fixed
      assets, net
                
                
                181,369
                
                
                
                191,009Other
      assets:Patents,
      net of accumulated amortization
                
                
                84,619
                
                
                
                93,704Website,
      net of accumulated amortization
                
                
                5,487
                
                
                
                7,042Security
      deposits
                
                
                3,633
                
                
                
                2,35093,739
                
                
                
                103,096TOTAL
      ASSETS
                
                $
                577,186
                
                
                $
                400,960LIABILITIES
      AND STOCKHOLDERS' DEFICITCurrent
      LiabilitiesAccounts
      payable
                
                $
                152,839
                
                
                $
                336,942Accrued
      interest
                
                
                23,647
                
                
                
                2,904Accrued
      liabilities
                
                
                113,499
                
                
                
                62,002Notes
      payable
                
                
                360,279
                
                
                
                1,111,053TOTAL
      LIABILITIES
                
                
                650,264
                
                
                
                1,512,901STOCKHOLDERS'
      DEFICITPreferred
      stock, $0.0001 par value, 10,000,000 shares authorized, 140,000 and 0
      shares issued and outstanding at June 30, 2010 and December 31, 2009,
      respectively
                
                
                14
                
                
                
                -Common
      Stock, $0.0001 par value, 1,000,000,000 shares authorized, 674,545,450 and
      557,798,599 shares issued and outstanding at June 30, 2010 and December
      31, 2009, respectively
                
                
                67,455
                
                
                
                55,780Additional Paid-in
      Capital
                
                
                5,573,221
                
                
                
                3,708,967Accumulated
      Deficit
                
                
                (5,713,768
                )
                
                
                (4,876,688
                )(73,078
                )
                
                
                (1.111,941
                )TOTAL
      LIABILITIES AND STOCKHOLDERS' DEFICIT
                
                $
                577,186 $
                
                
                
                400,960





See
accompanying notes to financial statements


3




YCOR
MEDICAL, INC.





Statement
of Operations




For the three months ended June 30,2010
                      
                      
                      2009(unaudited)
                      
                      
                      (unaudited)Revenue
                      
                      $
                      74,817
                      
                      
                      $
                      42,301Cost
      of Goods Sold
                      
                      
                      8,777
                      
                      
                      
                      5,331Gross
      Profit
                      
                      
                      66,040
                      
                      
                      
                      36,970Operating
      expenses:Research
      and development
                      
                      
                      762
                      
                      
                      
                      -General
      and administrative
                      
                      
                      499,309
                      
                      
                      
                      234,045Total
      Operating expenses
                      
                      
                      500,071
                      
                      
                      
                      234,045Operating
      loss
                      
                      
                      (434,031
                      )
                      
                      
                      (197,075
                      )Interest
      expense
                      
                      
                      27,047
                      
                      
                      
                      54,639Net
      Loss
                      
                      $
                      (461,078
                      )
                      
                      $
                      (251,714
                      )Loss
      Per ShareBasic
      and diluted
                      
                      $
                      (0.001
                      )
                      
                      $
                      (0.010
                      )Weighted
      Average Number of Shares Outstanding
                      
                      
                      649,281,287
                      
                      
                      
                      26,356,638





See
accompanying notes to financial statements


4




VYCOR
MEDICAL, INC.




Statement
of Operations




For the six months ended June 30,2010
                
                
                2009(unaudited)
                
                
                (unaudited)Revenue
                
                $
                139,103
                
                
                $
                112,389Cost
      of Goods Sold
                
                
                21,275
                
                
                
                14,834Gross
      Profit
                
                
                117,828
                
                
                
                97,555Operating
      expenses:Research
      and development
                
                
                5,648
                
                
                
                -General
      and administrative
                
                
                853,076
                
                
                
                576,011Total
      Operating expenses
                
                
                858,724
                
                
                
                576,011Operating
      loss
                
                
                (740,896
                )
                
                
                (478,456
                )Interest
      expense
                
                
                96,184
                
                
                
                193,393Net
      Loss
                
                $
                (837,080
                )
                
                $
                (671,849
                )Loss
      Per ShareBasic
      and diluted
                
                $
                (.001
                )
                
                $
                (0.026
                )Weighted
      Average Number of Shares Outstanding
                
                
                631,918,392
                
                
                
                26,207,774





See
accompanying notes to financial statements


5




VYCOR
MEDICAL, INC.




Statement
of Cash Flows




For the six months ended June 30,2010
                
                
                2009(unaudited)
                
                
                (unaudited)Cash
      flows from operating activities:Net
      loss
                
                $
                (837,080
                )
                
                $
                (671,849
                )Adjustments
      to reconcile net loss to cash used in operating
activities:Amortization
      of intangible assets
                
                
                8,253
                
                
                
                6,245Depreciation
      of fixed assets
                
                
                11,571
                
                
                
                11,474Amortization
      of debt discount expense
                
                
                71,781
                
                
                
                145,303Share
      based compensation
                
                
                130,488
                
                
                
                62,296Shares
      issued for consulting services
                
                
                19,375
                
                
                
                5,000Interest
      satisfied with stock conversion
                
                
                -
                
                
                
                6,625Changes
      in assets and liabilities:Accounts
      receivable
                
                
                (32,864
                )
                
                
                62,624Inventory
                
                
                (12,894
                )
                
                
                22,434Prepaid
      expenses
                
                
                (29,120
                )
                
                
                (10,850
                )Security
      deposit
                
                
                (1,283
                )
                
                
                -Accounts
      payable
                
                
                (184,103
                )
                
                
                31,578Accounts
      payable satisfied with common stock
                
                
                14,025
                
                
                
                -Accrued
      interest
                
                
                20,743
                
                
                
                40,501Accrued
      liabilities
                
                
                51,497
                
                
                
                107,558Cash
      used in operating activities
                
                
                (769,611
                )
                
                
                (181,061
                )Cash
      flows provided by / (used in) investing activities:Purchase
      of fixed assets
                
                
                (1,931
                )
                
                
                -Reduction
      of / (Acquisition of) patents
                
                
                2,387
                
                
                
                (150
                )Cash
      provided by / (used in) investing activities
                
                
                456
                
                
                
                (150
                )Cash
      flows from financing activities:Proceeds
      from sale of equity – Common stock
                
                
                749,500
                
                
                
                -Proceeds
      from sale of equity - Series B preferred
                
                
                140,000
                
                
                
                -Proceeds
      from short term Notes Payable
                
                
                291,500
                
                
                
                40,000Repayment
      of short term Notes Payable
                
                
                (291,500
                )
                
                
                -Cash
      provided by financing activities
                
                
                889,500
                
                
                
                40,000Net
      increase (decrease) in cash
                
                
                120,345
                
                
                
                (141,211
                )Cash
      at beginning of period
                
                
                12,771
                
                
                
                196,138Cash
      at end of period
                
                $
                133,116
                
                
                $
                54,927Supplemental
      Disclosures of Cash Flow information:Interest
      paid:
                
                $
                -
                
                
                $
                -Taxes
      paid
                
                $
                2,078
                
                
                $
                300Non-Cash
      Transactions:Warrants,
      options and common stock issued for debt financing
                
                $
                803,690
                
                
                $
                250,000




See
accompanying notes to financial statements


6




VYCOR
MEDICAL, INC.




NOTES
TO FINANCIAL STATEMENTS




JUNE
30, 2010




1.   BASIS
OF PRESENTATION




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




2.
            FORMATION AND
      BUSINESS OF THE COMPANY




Business
Description




Vycor
Medical, LLC, (the “Company”) was formed in 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 six
months ended June 30, 2010 and 2009, the amounts charged to research and
development expenses were $5,648 and $0, respectively.




Concentration of
Credit Risk




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




Fair
Values of Financial Instruments




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




Property
and equipment




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


7


Income
taxes




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




Patents




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




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




Revenue
Recognition




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




Educational
and marketing expenses




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




Website
Costs




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




Stock-Based
Compensation




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


8


Prior to
the adoption of a stock option plan adopted on February 13, 2008, the Company
only issued share based compensation to consultants for goods or services. The
Company accounted for these transactions based upon the relevant FASB
standards.  Under these standards, options, warrants, and stock are
recorded at their fair value on the measurement date. The Company remeasured the
fair value of such instruments granted at each reporting period until
performance under the consulting arrangements were completed and the measurement
date was reached. The Company records the expense of such services on the
estimate fair value of the equity instrument using the Black-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 relevant FASB standard
which requires the recognition of compensation expense for future stock-based
compensation awards to employees. Using a fair-value-based method, for costs
related to all share-based payments including stock options. These
standards require companies to estimate the fair value of share-based payment
awards on the date of grant using an option-pricing model. All option grants
valued after January 1, 2006 will be expensed on a straight-line basis over the
vesting period.




Fair
Values of Assets and Liabilities




Effective
January 1, 2008, the relevant FASB standards define the fair value as the
exchange price that would be received for an asset or paid to transfer a
liability (an exit price) in the principal or most advantageous market for the
asset or liability in an orderly transaction between market participants on the
measurement date. These standards require that valuation techniques maximize the
use of observable inputs and minimize the use of unobservable inputs. These
standards also established a fair value hierarchy, which prioritizes the
valuation inputs into three broad levels.




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




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




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




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




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




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




Unobservable
      inputs (level 3)
                    
                    $
                    360,279


9


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:




June 30,
                  
                  
                  December 31,2010
                  
                  
                  2009Stock
      options outstanding
                  
                  
                  833,333
                  
                  
                  
                  1,000,000Warrants
      to purchase common stock
                  
                  
                  66,139,264
                  
                  
                  
                  35,493,174




Recent
Accounting Pronouncements




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




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




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


10




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




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




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




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




Effective
July 1, 2009, the Company adopted FASB ASU No. 2009-05, Fair Value Measurements and
Disclosures (Topic 820) (“ASU 2009-05”). ASU 2009-05 provided amendments
to ASC 820-10, Fair Value
Measurements and Disclosures – Overall, for the fair value measurement of
liabilities. ASU 2009-05 provides clarification that in circumstances in which a
quoted price in an active market for the identical liability is not available, a
reporting entity is required to measure fair value using certain techniques. ASU
2009-05 also clarifies that when estimating the fair value of a liability, a
reporting entity is not required to include a separate input or adjustment to
other inputs relating to the existence of a restriction that prevents the
transfer of a liability. ASU 2009-05 also clarifies that both a quoted price in
an active market for the identical liability at the measurement date and the
quoted price for the identical liability when traded as an asset in an active
market when no adjustments to the quoted price of the asset are required are
Level 1 fair value measurements. Adoption of ASU 2009-05 did not have a material
impact on the Company’s results of operations, financial position or liquidity.




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


11


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
$837,080 for the six months ended June 30, 2010, and the Company expects to
continue to incur substantial additional losses in the future, including
additional development costs, costs related to marketing and manufacturing
expenses. The Company has incurred negative cash flows from operations since
inception. As of June 30, 2010, the Company had a stockholders’ deficiency of
$73,078 and cash and cash equivalents of $133,116. The Company believes it would
not have enough cash to meet its various cash needs unless the Company is able
to obtain additional cash from the issuance of debt or equity securities.
 There is no assurance that additional funds from the issuance of equity
will be available for the Company to finance its operations on acceptable terms.
If adequate funds are not available, the Company may have to delay development
or commercialization of products or technologies that the Company would
otherwise seek to commercialize, or cease operations. These conditions raise
substantial doubt about the Company’s ability to continue as a going concern.
The financial statements do not include any adjustments to reflect the possible
future effects on the recoverability and classification of assets or the amounts
and classification of liabilities that may result from the outcome of this
uncertainty.




Under a
previously disclosed agreement entered into with Fountainhead Capital Management
Limited, Fountainhead agreed to fund or procure funding for the Company’s
monthly operating proceeds through August 2010 subject to the Company meeting
certain financial benchmarks.  Fountainhead has agreed to extend this
commitment through September 30, 2010 pending discussions with the Company
relative to the terms and conditions of a longer extension, including
finalization of a budget covering the extension period.




12




4.
            NOTES
      PAYABLE





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





June 30,
                  2010
                
                
                December 31,
                  2009On
      December 29, 2009, in conjunction with a debt restructuring (see Note 5)
      the Company issued a convertible debenture in the amount of $70,000
      payable to Fountainhead Capital Management Limited.  This
      debenture accrues interest rate of 6% per annum, is due August 31, 2010,
      is secured by a first priority security interest in all of the assets of
      the Company, and is senior to or pari passu with, all
      other obligations of the Company, subject to certain
      conditions.  The Holder is entitled to convert all or any amount
      of the principal face amount of the debenture into shares of common stock
      of the Company at the conversion price of $0.0125 per share, subject to
      adjustment and does not require bifurcation. The Company has computed a
      beneficial conversion feature debt discount of $21,427, which was being
      amortized over the expected life of the loan. As of December 31, 2009, the
      note reflects an unamortized discount of $21,252.  On May 14,
      2010, this loan was satisfied.
                
                
                -
                
                
                
                48,748On
      December 29, 2009, in conjunction with a debt restructuring (see Note 5),
      the Company issued a convertible debenture in the amount of $371,362
      payable to Fountainhead Capital Management Limited.  This
      debenture accrues interest rate of 6% per annum, is due August 31, 2010,
      is secured by a first priority security interest in all of the assets of
      the Company, and is senior to or pari passu with, all
      other obligations of the Company, subject to certain
      conditions.  The Holder is entitled to convert all or any amount
      of the principal face amount of the debenture then outstanding into shares
      of common stock of the Company at the conversion price of $0.0125 per
      share, subject to adjustment and does not require bifurcation. The Company
      has computed a beneficial conversion feature debt discount of $113,675,
      which is being amortized over the expected life of the loan. On May 14,
      2010, the due date for satisfaction was extended to June 30,
      2011.  The note reflects an unamortized discount of $68,155 and
      $112,747 as of June 30, 2010 and December 31, 2009,
      respectively.
                
                
                303,207
                
                
                
                258,615On
      December 29, 2009, the Company issued a convertible debenture in the
      amount of $350,000 payable Regent Private Capital, LLC
      (“Regent”).  This debenture accrues interest rate of 6% per
      annum, is due August 31, 2010, is secured by a first priority security
      interest in all of the assets of the Company, and is senior to or pari passu with, all
      other obligations of the Company, subject to certain
      conditions.  The Holder is entitled to convert all or any amount
      of the principal face amount of the debenture then outstanding into shares
      of common stock of the Company at the conversion price of $0.0125 per
      share, subject to adjustment and does not require bifurcation. On December
      29, 2009, this debenture was amended to provide for automatic conversion,
      subject to the Company authorizing sufficient shares to convert this, and
      other existing instruments, and transferred to three
      parties.  On January 11, 2010 (see Note 10), these notes were
      satisfied in accordance with the automatic conversion
    clause.
                
                
                -
                
                
                
                350,000On
      December 29, 2009, the Company issued a convertible debenture in the
      amount of $453,690 payable Regent Private Capital, LLC
      (“Regent”).  This debenture accrues interest rate of 6% per
      annum, is due August 31, 2010, is secured by a first priority security
      interest in all of the assets of the Company, and is senior to or pari passu with, all
      other obligations of the Company, subject to certain
      conditions.  The Holder is entitled to convert all or any amount
      of the principal face amount of the debenture then outstanding into shares
      of common stock of the Company at the conversion price of $0.0125 per
      share, subject to adjustment and does not require bifurcation. On December
      29, 2009, this debenture was amended to provide for automatic conversion,
      subject to the Company authorizing sufficient shares to convert this, and
      other existing instruments, and transferred to five parties.  On
      January 11, 2010 (see Note 10), these notes were satisfied in accordance
      with the automatic conversion clause.
                
                
                -
                
                
                
                453,690On
      February 3, 2010, the Company issued a convertible debenture in the amount
      of $70,000 payable to Fountainhead Capital Management
      Limited.  This debenture accrues interest rate of 6% per annum,
      is due August 31, 2010, is secured by a first priority security interest
      in all of the assets of the Company, and is senior to or pari passu with, all
      other obligations of the Company, subject to certain
      conditions.  The Holder is entitled to convert all or any amount
      of the principal face amount of the debenture then outstanding into shares
      of common stock of the Company at the conversion price of $0.0125 per
      share, subject to adjustment and does not require bifurcation. The Company
      has computed a beneficial conversion feature debt discount of $19,863,
      which is being amortized over the expected life of the loan. On May 14,
      2010, the due date for satisfaction was extended to June 30,
      2011.  The note reflects an unamortized discount of $12,928 as
      of June 30, 2010.
                
                
                57,072
                
                
                
                -Total
      Notes Payable:
                
                $
                360,279
                
                
                $
                1,111,053




13




The
following is a schedule of future minimum loan payments:




Twelve
      months ending June 30,
                    
                    
                    Amount2011
                    
                    
                    $
                    441,3622012
                    
                    
                    
                    -2013
                    
                    
                    
                    -2014
                    
                    
                    
                    -2015
                    
                    
                    
                    -Thereafter
                    
                    
                    
                    -Total
                    
                    
                    $
                    441,362Less
      debt discount
                    
                    
                    
                    81,083$
                    360,279




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




5.
            EQUITY




Certain
Equity Transactions




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




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




In
accordance with the previously filed Certificate of Designation, the Company has
sold 140,000 shares of Series B Preferred Stock during the current fiscal year
for an aggregate amount of $140,000.  These shares yield dividends of
8% per annum, payable in cash or stock at the Company’s sole
discretion.  Series B Preferred Stock can be converted into the
Company’s Common Stock at a multiple of 80 common shares per Series B share at
the holder’s discretion, or can be redeemed by the Company using the equivalent
multiple after the issue’s one year anniversary.




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


14


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




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





6.
            SHARE-BASED
      COMPENSATION





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




For
employee based awards which consist only of awards made under the “Stock Option
Plan” described below, the company follows relevant FASB standards which require
companies to estimate the fair value of share-based payment awards on the date
of grant using an option-pricing model. Under these standards, compensation cost
for employee 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 six months ended June 30, 2010.




Stock
Option Plan




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




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




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


15


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 June 30, 2010 there were no awards of any stock
appreciation rights.




Consulting
Agreement




Heather
N. Vinas Consulting Agreement




On May
14, 2010, upon the resignation and foregoing of the existing employment
agreement, Heather N. Vinas ("Vinas") entered into a Consulting Agreement to
provide transition services to the Company to assist in a seamless and smooth
transition from her position with the Company. In this regard, Vinas will make
herself available for up to five hours per month to provide services to the
Company and will communicate with the Company's customers, related physicians,
vendors and other persons or entities who do business with the Company to advise
them of the new capacity under which she shall operate in support of the
Company's good and continued relationships with such persons and entities. In
consideration of these services, beginning in July, 2010 the Company will pay
Vinas $6,250 per month over the 12 month term of the Consulting
Agreement.




Outstanding
Rights, Options, and Warrants




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




STOCK WARRANTS:Number of
                                    shares
                                  
                                  
                                  Weighted
                                    average
                                    exercise
                                    price per
                                    shareOutstanding
      at January 1, 2007
                                  
                                  
                                  4,144,300
                                  
                                  
                                  
                                  0.43Granted
                                  
                                  
                                  1,143,408
                                  
                                  
                                  
                                  0.32ExercisedCancelled
      or expiredOutstanding
      at December 31, 2007
                                  
                                  
                                  5,287,708
                                  
                                  
                                  
                                  0.41Granted
                                  
                                  
                                  1,365,788
                                  
                                  
                                  
                                  0.31ExercisedCancelled
      or expired
                                  
                                  
                                  (192,576
                                  )
                                  
                                  
                                  0.24Outstanding
      at December 31, 2008
                                  
                                  
                                  6,460,920
                                  
                                  
                                  $
                                  0.39Granted
                                  
                                  
                                  32,900,132
                                  
                                  
                                  
                                  0.01ExercisedCancelled
      or expired
                                  
                                  
                                  (3,867,878
                                  )
                                  
                                  
                                  0.40Outstanding at
      December 31, 2009
                                  
                                  
                                  35,493,174
                                  
                                  
                                  $
                                  0.03Granted
                                  
                                  
                                  39,063,670
                                  
                                  
                                  
                                  0.01ExercisedCancelled
      or expired
                                  
                                  
                                  (8,417,579
                                  )
                                  
                                  
                                  0.01Outstanding at
      June 30, 2010
                                  
                                  
                                  66,139,265
                                  
                                  
                                  $
                                  0.02


16




STOCK OPTIONS:Weighted
                                  averageNumber of
                                  shares
                                
                                
                                exercise
                                  price per
                                  shareOutstanding
      at January 1, 2007
                                
                                
                                -
                                
                                
                                
                                -GrantedExercisedCancelled
      or expiredOutstanding
      at December 31, 2007
                                
                                
                                -
                                
                                
                                
                                -Granted
                                
                                
                                1,050,000
                                
                                
                                
                                0.14ExercisedCancelled
      or expiredOutstanding
      at December 31, 2008
                                
                                
                                1,050,000
                                
                                
                                $
                                0.14GrantedExercisedCancelled
      or expired
                                
                                
                                (50,000
                                )
                                
                                
                                0.14Outstanding
      at December 31, 2009
                                
                                
                                1,000,000
                                
                                
                                $
                                0.14GrantedExercisedCancelled
      or expired
                                
                                
                                (166,667
                                )
                                
                                
                                0.14Outstanding
      at June 30, 2010
                                
                                
                                833,333
                                
                                
                                $
                                0.14


17





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 six months ended June 30, 2010, $2,228 was recognized as
share-based compensation in connection with this agreement.




Under the
terms of a consulting agreement dated February 2010, the Company issued warrants
to Fountainhead Capital Management to purchase up to 39,063,670 shares of the
Company's common stock at $.0125 per share. The warrants are valid from February
10, 2010 for a period of five years. This warrant was fair valued under the
Black-Scholes Model and amortized over the life of the agreement. For the six
months ended June 30, 2010, $68,193 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 year ended June 30,
2010, $2,228 was recognized as share-based compensation in connection with this
agreement.




As of
June 30, 2010, there was approximately $49,000 of total unrecognized
compensation costs related to non-vested stock options awards, which are
expected to be recognized over a weighted average period of approximately 1.3
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
      yearsExpected
      dividends
                    
                    
                    0
                    %Expected
      volatility
                    
                    
                    99
                    %





Stock-based
compensation expense charged to operations on options and warrants granted to
the above non-employees for the six months ended June 30, 2010 is
$72,649.




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.


18


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




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





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




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:




June 30, 2010
                  
                  
                  December 31, 2009Gross
      deferred tax assets
                  
                  
                  1,288,000
                  
                  
                  
                  1,032,500Valuation
      allowance
                  
                  
                  (1,288,000
                  )
                  
                  
                  (1,032,500
                  )Net
      deferred tax asset
                  
                  
                  —
                  
                  
                  
                  —




As of
June 30, 2010 and December 31, 2009, the Company has U.S. federal net operating
loss carryforwards of approximately $3,680,000 and $2,950,000,
respectively.  The federal net operating loss carryforwards expire in
the tax years 2027 through 2030.




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




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


19





8. COMMITMENTS AND
CONTINGENCIES





Lease




The
Company executed a lease agreement for administrative office space at its
current location at 80 Orville Drive, Bohemia, New York.  The lease
term is nine months ending October 31, 2010.  Payments under this
lease include fixed amounts for occupancy, plus additional charges for common
area, phone equipment, phone usage, secure inventory storage area, office
services, and other consumables.  Rental expense for the six months
ended June 30, 2010 and 2009 were $17,108 and $11,708,
respectively.





9.  SUBSEQUENT
EVENTS




Common
Stock Subscriptions




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




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




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




In August
2010, the Company received subscription agreements from four investors to
purchase an aggregate of 6,571,429 shares of Company common stock at a price of
$0.0175 per share for aggregate gross proceeds of $115,000.




Amendment to Certificate of
Incorporation




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


20


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




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


21


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




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




Our
Products




Viewsite
Brain Access System (VBAS)




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




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




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





•
              Gently
      separate delicate tissue by utilizing a tapered forward
    edge;





•
              Minimize
      venous pressure caused by in the
brain;





•
              Reduce
      “target shift” to allow the surgeon to reach the site
      accurately;





•
              Minimize
      healthy tissue damage while reaching the target
  site;





•
              Allow
      for accurate neuronavigational image guidance systems (“IGS”)
      performance;


22





•
              Integrate
      in due course with the leading surgical IGS systems such as Medtronic® and
      BrainLab®;Stryker and GE





•
              Improve
      surgical outcomes (reducing potential surgeon and hospital liability), for
      example, decreased insertion tissue trauma, less need for readjustment
      during surgery and minimum interface surface
  pressures;





•
              Reduce
      damage to healthy brain tissue potentially leading to shorter post-op
      recovery and reduced hospital
stay





•
              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 brain procedure involving the removal of a
7cm cystic astrocyctoma would result in an access site (corticotomy) of
approximately 20mm. However, the same procedure that was performed utilizing the
Company’s Brain Access System product required a corticotomy of only
2mm.




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




Product
shortcomings




Our
products have a few shortcomings:





•
              As
      compared to existing blade retractors our device diameter is fixed as
      opposed to variable which might give the surgeon less flexibility once he
      is at the desired location.





•
              The
      diameters and lengths of our devices are set to specific measurements,
      which may limit the surgeon to these specific
  sizes.





•
              Depending
      on the case, usage of a disposable product may be viewed as more costly
      and may not be accepted by our potential end
  users.


23




IGS Opportunity for the Brain Access
System




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







•
              Target
      Shifting





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





•
              Real-Time
      Retractor Positioning
Data





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




Brain
Access System Product Models





•
              TC-VBAS





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




Cervical
Access Products




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




We
plan to design the Cervical Access System to:





•
                reducethe
      possibility of surrounding anatomic tissue damage, which include the
      trachea, esophagus, carotid artery, recurrent laryngeal and sympathetic
      nerve;


24





•
            minimize
      skin disruption with the utilization of tapered outward
    edges;





•
            eliminate
      retractor induced electrocautery burn injuries because it is made with
      surgical grade plastic materials;





•
            enable
      stable fixation (directly to the spinal column) in order to avoid
      accidental displacement and surrounding “tissue creep”;
  and





•
            allows
      for direct visualization of underlying anatomic structures using optically
      clear plastic.




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




New
Products




Brain
Retractors




Subject
to the availability of additional financing, the Company’s future plans include
developing additional Brain Access System retractors. Our goals would be to
eventually include retractor lines that are designed for the requirements of
specific surgical applications like aneurisms, tumors and endoscopic
work.




Additional Applications of Brain
Access System and Cervical Access System
Technology




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




•
            Promotes
      minimally invasive procedures from smallest possible entry
      incision





•
            Uniform
      pressure distribution minimizes collateral tissue damage due to stress
      points


25


•
            Eliminates
      “tissue creep” into the surgical
field





•
            Reduces
      the number of materials in the surgical
field




Sales
and Marketing




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




Domestic
Sales Strategy




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




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




International
Sales




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




Reference
Hospitals Program




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




Manufacturing




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




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




Market




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


26


Competition


Competitive
      manufacturers of brain retractors include:•
      Cardinal Health (V. Mueller line)•
      Aesculap•
      Integra Life Science•
      Codman (Division of Johnson &
Johnson)




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




Customers




The
Company sells to regional distributors and hospitals. The Company believes that
its products currently are being evaluated or utilized in approximately 80
hospitals in the United States. In addition, in 2009 (and in the six months
ended June 30, 2010) international sales accounted for approximately 25% of
revenues.


27


Intellectual
Property




Patent
Applications




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




Filing
      date
              
              Application
      No.
              
              Country
              
              Title
              
              Status22-Jun-2005
              
              60/692,959
              
              US
      – PROV
              
              Surgical
      Access Instruments For Use With Spinal Or Orthopedic Surgery
      (Cervical)
              
              Converted22-Jun-2006
              
              PCT/US06/24243
              
              PCT
              
              Surgical
      Access Instruments For Use With Spinal Or Orthopedic Surgery
      (Cervical)
              
              National
      Phase Completed27-Nov-2006
              
              PCT/US06/61246
              
              PCT
              
              Surgical
      Access Instruments for use with Delicate Tissues (Brain)
              
              National
      Phase Completed22-Jun-2006
              
              2613323
              
              Canada
              
              Surgical
      Access Instruments for use with spinal or orthopedic
    surgery
              
              Pending
      – annuity due 6/22/11; Deferred exam due 06/22/1122-Jun-2006
              
              06785312.7
              
              Europe
              
              Surgical
      Access Instruments for use with spinal or orthopedic
    surgery
              
              Pending
      – annuity due 6/22/1122-Jun-2006
              
              299/KOLNP/2008
              
              India
              
              Surgical
      Access Instruments for use with spinal or orthopedic
    surgery
              
              Pending22-Jun-2006
              
              2008-518369
              
              Japan
              
              Surgical
      Access Instruments for use with spinal or orthopedic
    surgery
              
              Published20-Dec-2007
              
              11/993,280
              
              US
      – UTIL
              
              Surgical
      Access Instruments for use with spinal or orthopedic
    surgery
              
              Published25-Jun-2008
              
              08107050.4
              
              Hong
      Kong
              
              Surgical
      Access Instruments for use with spinal or orthopedic
    surgery
              
              Pending18-Sep-2008
              
              61/098041
              
              US
      – PROV
              
              Surgical
      Access Instruments for use with Delicate Tissues (Brain)
              
              Converted25-May-2009
              
              2670631
              
              Canada
              
              Surgical
      Access Instruments for use with Delicate Tissues (Brain)
              
              Pending
      – annuity due 11/27/10; Request exam due
  11/27/11


28




27-Nov-2006
                
                06840022.5
                
                Europe
                
                Surgical
      Access Instruments for use with Delicate Tissues (Brain)
                
                Published
      – annuity due 11/30/1027-Nov-2006
                
                1977/KOLNP/2009
                
                India
                
                Surgical
      Access Instruments for use with Delicate Tissues (Brain)
                
                Pending
      – Request exam due 11/27/1027-Nov-2006
                
                2009-539227
                
                Japan
                
                Surgical
      Access Instruments for use with Delicate Tissues (Brain)
                
                Published27-Nov-2006
                
                2009124446
                
                Russia
                
                Surgical
      Access Instruments for use with Delicate Tissues (Brain)
                
                Pending
      – Response due 08/16/1027-Nov-2006
                
                200680056889.9
                
                China
                
                Surgical
      Access Instruments for use with Delicate Tissues (Brain)
                
                Published
      – Response due 11/02/1021-Aug-2009
                
                12/545686
                
                US
      – CON
                
                Surgical
      Access Instruments for use with Delicate Tissues (Brain)
                
                Published21-Aug-2009
                
                12/545719
                
                US
      – CON
                
                Surgical
      Access Instruments for use with Delicate Tissues (Brain) (apparatus
      claims)
                
                Published20-Jun-2010
                
                10106385.8
                
                Hong
      Kong
                
                Surgical
      Access Instruments for use with Delicate Tissues (Brain)
                
                Pending




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




Trademarks




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


29


Insurance




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




Government
Regulations




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




ISO
13485:2003 Medical Devices — Quality Management Systems




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




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




We have
the following certification/licensing.




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




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




— ISO
13485.2003




— HPB
Licensing for Canada




Continuing
Regulatory Requirements




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




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


30


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




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




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





•
            quality
      system regulation, which requires manufacturers to follow design, testing,
      control, documentation and other quality assurance procedures during the
      manufacturing process;





•
            labeling
      regulations, which prohibit the promotion of products for unapproved or
      “off-label” uses and impose other restrictions on labeling;
      and





•
            medical
      device reporting regulations, which require that manufacturers report to
      the FDA if their device may have caused or contributed to a death or
      serious injury or malfunctioned in a way that would likely cause or
      contribute to a death or serious injury if it were to
    recur.





Failure
to comply with applicable regulatory requirements can result in enforcement
action by the FDA, which may include any of the following
sanctions:





•
            fines,
      injunctions, and civil penalties;





•
            recall
      or seizure of our products;





•
            operating
      restrictions, partial suspension or total shutdown of
      production;


31





•
            refusing
      a request for 510(k) clearance or premarket approval of new
      products;





•
            withdrawing
      510(k) clearance or premarket approvals that are already granted;
      and





•
            criminal
      prosecution.





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




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




Health
Care Regulatory Issues




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




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




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


32


Results
of Operations




Comparison
of the Three Months Ended June 30, 2010 to the Three Months June 30,
2009




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




Three months ended:
                  
                  2010
                  
                  
                  2009
                  
                  
                  Increase/
                    (Decrease)Revenue:Sales
                  
                  $
                  74,817
                  
                  
                  $
                  42,301
                  
                  
                  $
                  32,516Cost
      of Goods Sold
                  
                  
                  8,777
                  
                  
                  
                  5,331
                  
                  
                  
                  3,446Gross
      Profit
                  
                  
                  66,040
                  
                  
                  
                  36,970
                  
                  
                  
                  29,070Operating
      expenses:Research
      and Development
                  
                  
                  762
                  
                  
                  
                  -
                  
                  
                  
                  762General
      and administrative
                  
                  
                  499,309
                  
                  
                  
                  234,045
                  
                  
                  
                  265,264Operating
      loss
                  
                  
                  (434,031
                  )
                  
                  
                  (197,075
                  )
                  
                  
                  236,956Interest
      Expense
                  
                  
                  27,047
                  
                  
                  
                  54,639
                  
                  
                  
                  (27,592
                  )Net
      Loss
                  
                  $
                  (461,078
                  )
                  
                  $
                  (251,714
                  )
                  
                  $
                  209,364




Revenue:




The
company recorded revenue of $74,817 from the sale of our products in the three
months ended June 30, 2010, an increase of 77% for the same period in 2009. The
increase in sales was attributable to greater penetration and usage of our
product in hospitals in the United States both direct and through distributors,
and increased sales internationally. Gross margin of 88% was achieved in the
three months ended June 30, 2010 compared to 87% for the same period in 2009,
however gross margin is mostly a product of sale mix between US sales through
distributors, US sales direct and international sales which vary quarter by
quarter.




Research
and Development Expense:




Research
and development expenses were $762 compared $0 for the three months ended June
30, 2009.




General
and Administrative Expenses:




General
and administrative expenses increased by $265,264 to $499,309 for the three
months ended June 30, 2010 from $234,045 for the three months ended June
2009.




Following
the recapitalization transaction that closed on December 29, 2009 board Vycor
has embarked on a period of heightened sales and marketing activity and
engagement with distributors and hospital customers following a prolonged period
of reduced activity in 2009 as a result of capital constraints. This has lead to
an increase in the marketing-related costs of the Company. Vycor has also
carried out a series of fundraisings since the closing of the recapitalization,
which has resulted in additional cash and non-cash expenses.




The
increases for the three months ended June 30, 2010 over the three months ended
June 30, 2009 are attributable to an increased level of sales and marketing
activity, fundraising fees and related costs, offset by a reduction in corporate
activity, as follows:


33




Total
      G&A expenses for the three months ended June 30, 2010
                    
                    $
                    234,045Increase
      in marketing expenditure and travel costs
                    
                    
                    117,457Decrease
      in sales commissions from sales mix change
                    
                    
                    (7,051
                    )Increase
      in personnel costs
                    
                    
                    22,709Fundraising
      costs
                    
                    
                    72,500Increase
      in non-cash consulting fees
                    
                    
                    9,659Increase
      non-cash warrant/option recognition expense
                    
                    
                    68,192Reduction
      in professional fees from reduced corporate activity
                    
                    
                    (32,325
                    )Increase
      in other operating expenses
                    
                    
                    14,123Total
      G&A expenses f or the three months ended June 30, 2010
                    
                    $
                    499,309




Warrant
and Option Recognition Expense




Included
within General and Administrative expenses above is a non-cash charge for share
based compensation as the result of amortizing warrants and options which have
been issued by the Company over various periods. The charge for the three months
ended June 30, 2010 was $70,420, an increase of $68,193 over the three months
ended June 30, 2009.




Interest
Expense:




Interest
expense for the three months ended June 30, 2010 was reduced by $27,592 to
$27,047 from $54,639 for the three months ended June 30, 2009, as a result of
debt reduction.




Comparison
of the Six Months Ended June 30, 2010 to the Six Months Ended June 30,
2009




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




Six months ended:
                  
                  2010
                  
                  
                  2009
                  
                  
                  Increase/
                    (Decrease)Revenue:Sales
                  
                  $
                  139,103
                  
                  
                  $
                  112,389
                  
                  
                  $
                  26,714Cost
      of Goods Sold
                  
                  
                  21,275
                  
                  
                  
                  14,834
                  
                  
                  
                  6,441Gross
      Profit
                  
                  
                  117,828
                  
                  
                  
                  97,555
                  
                  
                  
                  20,273Operating
      expenses:Research
      and Development
                  
                  
                  5,648
                  
                  
                  
                  -
                  
                  
                  
                  5,648General
      and administrative
                  
                  
                  853,076
                  
                  
                  
                  576,011
                  
                  
                  
                  277,065Operating
      loss
                  
                  
                  (740,896
                  )
                  
                  
                  (478,456
                  )
                  
                  
                  262,440Interest
      Expense
                  
                  
                  96,184
                  
                  
                  
                  193,393
                  
                  
                  
                  (97,209
                  )Net
      Loss
                  
                  $
                  (837,080
                  )
                  
                  $
                  (671,849
                  )
                  
                  $
                  165,231


34




Revenue:




The
company recorded revenue of $139,103 from the sale of our products in the six
months ended June 30, 2010, an increase of 19% for the same period in 2009 and.
The increase in sales was attributable to greater penetration and usage of our
product in hospitals in the United States both direct and through distributors,
and increased sales internationally. Gross margin of 85% was achieved in the six
months ended June 30, 2010 compared to 87% for the same period in 2009. Gross
margin is mostly a product of sale mix between US sales through distributors, US
sales direct and international sales which vary quarter by quarter.




Research
and Development Expense:




Research
and development expenses were $5,648 compared to $0 for the six months ended
June 30, 2009.




General
and Administrative Expenses:




General
and administrative expenses increased by $277,065 to $853,076 for the six months
ended June 30, 2010 from $576,011 for the six months ended June
2009.




Following
the recapitalization transaction that closed on December 29, 2009 board Vycor
has embarked on a period of heightened sales and marketing activity and
engagement with distributors and hospital customers following a prolonged period
of reduced activity in 2009 as a result of capital constraints. This has lead to
an increase in the marketing-related costs of the Company. Vycor has also
carried out a series of fundraisings since the closing of the recapitalization,
which has resulted in additional cash and non-cash expenses.




The
increases for the six months ended June 30, 2010 over the six months ended June
30, 2009 are attributable to an increased level of sales and marketing activity,
fundraising fees and related costs, offset by a reduction in corporate activity
and a reduction in personnel costs, as follows:




Total
      G&A expenses for the six months ended June 30, 2009
                  
                  $
                  576,011Increase
      in marketing expenditure and travel costs
                  
                  
                  150,849Decrease
      in sales commissions from sales mix change
                  
                  
                  (5,118
                  )Decrease
      in personnel costs
                  
                  
                  (29,567
                  )Fundraising
      costs
                  
                  
                  72,500Increase
      in non-cash consulting fees
                  
                  
                  33,752Increase
      non-cash warrant/option recognition expense
                  
                  
                  68,192Reduction
      in professional fees from reduced corporate activity
                  
                  
                  (27,077
                  )Increase
      in other operating expenses
                  
                  
                  13,534Total
      G&A expenses for the six months ended June 30, 2010
                  
                  $
                  853,076


35




Warrant
and Option Recognition Expense




Included
within General and Administrative expenses above is a non-cash charge for share
based compensation as the result of amortizing warrants and options which have
been issued by the Company over various periods. The charge for the six months
ended June 30, 2010 was $130,487, an increase of $68,193 over the six months
ended June 30, 2009.




Interest
Expense:




Interest
expense for the six months ended June 30, 2010 was reduced by $97,209 to $96,184
from $193,393 for the six months ended June 30, 2009, as a result of debt
reduction.




Balance
Sheet, Liquidity and Capital Resources




As of
June 30, 2010 we had $133,116 cash, a working capital deficit of $348,186 and an
accumulated deficit of $5,713,768 through June 30, 2010. The Stockholders’
deficit at June 30, 2010 was $73,078, an improvement from $1,111,941 at December
31, 2009.  Debt at June 30, 2010 was $360,279 a reduction from
$1,111,053 in December 2009.




Our
operating activities used $769,611 in cash for the six months ended June 30,
2010.  Aside from the increased operating expenses discussed above,
the Company has significantly reduced historic payables, from $336,942 in
December 2009 to $152,839 in June 2010, and increased operating assets. This is
accounted for as follows:




Net
      cash loss adjusted for change in accrued interest
                  
                  $
                  574,869Reduction
      in accounts payable
                  
                  
                  170,078Increase
      in accounts receivable and inventory
                  
                  
                  45,758Purchase
      of new molds not yet delivered
                  
                  
                  18,380Net
      Change in other assets and liabilities
                  
                  
                  (39,474
                  )$
                  769,611


36




Under a
previously disclosed agreement entered into with Fountainhead Capital Management
Limited, Fountainhead agreed to fund or procure funding for the Company’s
monthly operating proceeds through August 2010 subject to the Company meeting
certain financial benchmarks.  Fountainhead has agreed to extend this
commitment through September 30, 2010 pending discussions with the Company
relative to the terms and conditions of a longer extension, including
finalization of a budget covering the extension period.





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,
2009, 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 $1,141,383 for the year ended December 31, 2009 and $837,080 for the six
months ended June 30, 2010, 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 June 30, 2010 and December 31, 2009, the
company had an accumulated deficit of $5,713,768 and $4,876,688, respectively,
and cash and cash equivalents balance of $133,116 and $12,771 at June 30, 2010
and December 31, 2009, respectively. 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. 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.





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.





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 three
months ended June 30, 2010 and 2009, the amounts charged to research and
development expenses were $762 and $0, respectively.


37


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 June
30, 2010 and 2009, 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.





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


38


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 June 30, 2010
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 June 30, 2010, we were not a party to any
material litigation, claim or suit 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





On
January 11, 2010, the Company issued 531,376,500 shares of common stock to
Fountainhead Capital Management Limited in accordance with the terms of a
Debenture Exchange Agreement dated as of December 29, 2009 (see Exhibit 4.1 to
the Company’s Form 8-K Current Report filed with the SEC on January 6,
2010).




On
January 11, 2010, the Company issued 4,000,000 shares of common stock to Jodi
Yeager on the conversion of $50,000 face value of the Company’s convertible
debenture.




On
January 11, 2010, the Company issued 8,787,600 shares of common stock to
Panamerica Capital Group, Inc. on the conversion of $109,845 face value of the
Company’s convertible debenture.




On
January 11, 2010, the Company issued 9,187,600 shares of common stock to
Hyperlink Media, LLC on the conversion of $114,845 face value of the Company’s
convertible debenture.




On
January 11, 2010, the Company issued 10,320,000 shares of common stock to Karen
Ginder on the conversion of $129,000 face value of the Company’s convertible
debenture.




On
January 11, 2010, the Company issued 4,000,000 shares of common stock to
Accessible Development Corp. on the conversion of $50,000 face value of the
Company’s convertible debenture.




On
January 11, 2010, the Company issued 16,000,000 shares of common stock to
Altitude Group, LLC on the conversion of $200,000 face value of the Company’s
convertible debenture.


39


On
January 11, 2010, the Company issued 6,000,000 shares of common stock to Mario
Zachariou on the conversion of $75,000 face value of the Company’s convertible
debenture.




On
January 11, 2010, the Company issued 6,000,000 shares of common stock to Anthony
Cantor on the conversion of $75,000 face value of the Company’s convertible
debenture.




On
February 23, 2010, in consideration for services provided to the Board of
Directors (valued at $10,000), the Company issued 800,000 shares of its common
stock to Steven Girgenti.




In
accordance with the previously filed Certificate of Designation, during the
period January 2010 through March 2010, the Company sold 140,000 shares of
Series B Preferred Stock during the current fiscal year for an aggregate amount
of $140,000.  These shares yield dividends of 8% per annum, payable in
cash or stock at the Company’s sole discretion.  Series B Preferred
Stock can be converted into the Company’s Common Stock at a multiple of 80
common shares per Series B share at the holder’s discretion, or can be redeemed
by the Company using the equivalent multiple after the issue’s one year
anniversary.




In
accordance with an agreement with Joe Simone for consulting services relating to
identifying sales and marketing opportunities, increase investor awareness of
the Company, identify potential new investors who might have an interest in
investing in the Company, and other activities in the furtherance of the above,
in April 2010, the Company issued 750,000 shares of its Common Stock valued at
$9,375.





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




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




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




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




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




In August
2010, the Company received subscription agreements from four investors to
purchase an aggregate of 6,571,429 shares of Company common stock at a price of
$0.0175 per share for aggregate gross proceeds of $115,000.




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




ITEM
3. DEFAULTS UPON SENIOR SECURITIES




None.


40


ITEM
4. (REMOVED AND RESERVED)




None.





ITEM 5. OTHER INFORMATION




Amendment to Certificate of
Incorporation




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




ITEM 6.
EXHIBITS





Index to Exhibits





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


41


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 August 13, 2010.




VYCOR
      MEDICAL, INC.By:
            /s/ Kenneth T.
    CovielloKenneth
      T. CovielloChief
      Executive Officer and
              Director (Principal
      Executive Officer and
              Principal
      Financial Officer)


42