1. Organization and Summary of Significant Accounting Policies

CytoCore, Inc. is a Delaware Corporation engaged in the business of cancer diagnosis and prevention, particularly within histology (processing of tissue samples) and cytology (processing of cellular material). The Company is active in the development, manufacture and marketing of a wide product range within the histology market.

These statements include the accounts of CytoCore, Inc. (the “Company”, “we” and “us”) and its wholly owned subsidiaries, which consists of Medite Enterprise, Inc., Medite GmbH, Burgdorf, Germany, Medite GmbH, Salzburg, Austria, Medite Lab Solutions Inc. (formerly Medite Inc.), Orlando, USA, and CytoGlobe, GmbH, Burgdorf, Germany

In April 2014, in a transaction more fully described in Footnote 2, the shareholders of the Company consummated a transaction in which 100% of the issued and outstanding shares of Medite Enterprise, Inc. were acquired by CytoCore, Inc. in exchange for the issuance by CytoCore, Inc. of 1,468,750,000 shares of its common stock to the shareholders of the Company. The result of this transaction was for the Company and its wholly owned subsidiaries to become wholly owned subsidiaries of CytoCore, Inc., a US public company. In addition, the shareholders of the Company became the majority owners of CytoCore, Inc., which resulted in the transaction being accounted for as a reverse merger, in which the financial statements of Medite Enterprise, Inc. and its subsidiaries became those of CytoCore, Inc.

The consolidated financial statements for the periods ended June 30, 2014 and 2013 included herein are unaudited. Such consolidated financial statements reflect, in the opinion of management, all adjustments necessary to present fairly the financial position and results of operations as of and for the periods indicated. All such adjustments are of a normal recurring nature. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending December 31, 2014 or for any other period. Certain information and footnote disclosures normally included in the consolidated financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. The Company believes that the disclosures are adequate to make the interim information presented not misleading. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto included in in an 8-K/A filing dated June 17, 2014.

Consolidation, Basis of Presentation and Significant Estimates

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. Intercompany accounts and transactions are eliminated. In preparing the accompanying financial statements, management has made certain estimates and assumptions that affect reported amounts in the financial statements and disclosures of contingencies. Significant assumptions are required in the valuation of the allowance for doubtful accounts and inventory overhead allocations. Significant assumptions also are required in the Company’s estimation of warranty reserves. Changes in facts and circumstances may result in revised estimates and actual results may differ from these estimates.

Revenue Recognition

The Company derives its revenue primarily from the sale of medical products and supplies for the diagnosis and prevention of cancer. Product revenue is recognized when all four of the following criteria are met: (1) persuasive evidence that an arrangement exists; (2) delivery of the products has occurred; (3) the selling price of the product is fixed or determinable; and (4) collectability is reasonably assured. The Company generates the majority of its revenue from the sale of inventory. The Company recognizes revenue when title and risk of loss transfer to the customer and all other revenue recognition criteria have been met. For a small subset of sales in Germany, the Company and its customers agree in the sales contract that risk of loss and title transfer upon the Company packing the items for shipment and notifying the Customer that their items are ready for pickup. The Company records such sales at time of completed packaging and segregation of the items from general inventory and notification has been confirmed by the customer.

Cash and Cash Equivalents

The Company considers all cash on deposit and highly-liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents.

Accounts Receivable

The Company generates accounts receivable from the sale of its products. The Company provides for a reserve against receivables for estimated losses that may result from a customer's inability or unwillingness to pay. The allowance for doubtful accounts is estimated primarily based upon historical write-off percentages, known problem accounts, and current economic conditions. Accounts are written off against the allowance for doubtful accounts when the Company determines that amounts are not collectable. Recoveries of previously written-off accounts are recorded when collected.

Inventories

Inventories are stated at the lower of cost or market. Market, which represents selling price less cost to sell, considers general market and economic conditions, periodic reviews of current profitability and product warranty costs. Work in process and supplies of consumables are reviewed to determine if inventory quantities are in excess of forecasted usage or if they have become obsolete.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation and amortization. Property and equipment are depreciated using the straight-line method over the estimated useful lives of the assets as follows:

Buildings	33 yrs
Machinery and equipment	3-10yrs
Office furniture and equipment	2-10 yrs
Vehicles	5 yrs
Computer equipment	3-5 yrs

Normal maintenance and repairs for equipment are charged to expense as incurred, while significant improvements are capitalized.

Research and Development

All research and development costs are expensed as incurred. Research and development costs consist of engineering, product development, testing, developing and validating the manufacturing process, and regulatory related costs.

Pro Forma Financial Information

As discussed in Note 1, in April 2014, the Company was acquired by CytoCore, Inc., a US public company. Upon closing of the Merger, the financial statements Medite Enterprise, Inc. became those of CytoCore, Inc. Pursuant to Securities and Exchange Commission Staff Accounting Bulletin Number 1B.2 "Pro Forma Financial Statements and Earnings per Share" ("SAB 1B.2"), pro forma earnings per share information on the face of the statement of operations has been presented which reflects the impact of the Company's change in capital structure as if it had occurred at the commencement of operations on January 1, 2013.