##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
 (Mark One)x
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended June 30, 2008ORo
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from  to
 Commission File Number: 001-33718
 
 BIOHEART, INC.
  
 Florida
(State or other jurisdiction of 
incorporation or organization)
    
    65-0945967
(I.R.S. Employer Identification No.)
 13794
NW
4 th Street, Suite 212, Sunrise, Florida 33325
 (954) 835-1500
 
 þ o
   Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting
company þ(Do not check if a smaller reporting company)
 o þ




---



##### 



BIOHEART, INC.
 INDEX
 PART I  FINANCIAL INFORMATION
    
    
    2Item 1.
    
    Financial Statements
    
    
    21)
    
    Consolidated Balance Sheets as of June 30, 2008 (unaudited) and December 31, 2007
    
    
    22)
    
    Consolidated Statements of Operations for the three and six-month periods ended
June 30, 2008 and 2007 (unaudited)
    
    
    33)
    
    Consolidated Statement of Shareholders Deficit for the six-month period
ended June 30, 2008 (unaudited)
    
    
    44)
    
    Consolidated Statements of Cash Flows for the six-month periods ended June
30, 2008 and 2007 (unaudited)
    
    
    55)
    
    Notes to Consolidated Interim Financial Statements (unaudited)
    
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    
    36Item 4T.
    
    Controls and Procedures
    
    
    36PART II  OTHER INFORMATION
    
    
    37Item 1.
    
    Legal Proceedings
    
    
    37Item 1A.
    
    Risk Factors
    
    
    39Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    42Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    43Item 6.
    
    Exhibits
    
    
    44Signatures
    
    
    46Index to ExhibitsEX-10.27 Omnibus Equity Compensation PlanEX-31.1 Section 302 Certification of CEOEX-31.2 Section 302 Certification of CFOEX-32.1 Section 906 Certification of CEOEX-32.2 Section 906 Certification of CFO
   
 1




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 
 Consolidated Balance Sheets
 June 30,
    
    
    December 31,2008
    
    
    2007(Unaudited)ASSETSCurrent assetsCash and cash equivalents
    
    $
    1,879,995
    
    
    $
    5,492,157Receivables
    
    
    53,870
    
    
    
    52,642Inventory
    
    
    375,832
    
    
    
    372,054Prepaid expenses and other current assets
    
    
    2,328,441
    
    
    
    261,030Total current assets
    
    
    4,638,138
    
    
    
    6,177,883Property and equipment, net
    
    
    370,517
    
    
    
    444,506Deferred offering costs
    
    
    
    
    
    
    3,484,070Deferred loan costs, net
    
    
    662,928
    
    
    
    1,146,716Other assets
    
    
    68,854
    
    
    
    71,148Total assets
    
    $
    5,740,437
    
    
    $
    11,324,323LIABILITIES AND SHAREHOLDERS DEFICITCurrent liabilitiesAccounts payable
    
    $
    1,878,359
    
    
    $
    2,134,256Accrued expenses
    
    
    4,436,731
    
    
    
    4,511,775Deferred revenue
    
    
    485,786
    
    
    
    547,286Notes payable  current
    
    
    6,781,397
    
    
    
    6,671,112Total current liabilities
    
    
    13,582,273
    
    
    
    13,864,429Deferred rent
    
    
    16,284
    
    
    
    21,426Note payable  long term
    
    
    2,024,281
    
    
    
    2,943,432Total liabilities
    
    
    15,622,838
    
    
    
    16,829,287Commitments and contingenciesShareholders deficitPreferred stock ($0.001 par value) 5,000,000
shares authorized; none issued and outstanding
    
    
    
    
    
    
    Common stock ($0.001 par value) 50,000,000
shares authorized; 14,447,138 and 13,347,138
shares issued and outstanding as of June 30,
2008 and December 31, 2007, respectively
    
    
    14,447
    
    
    
    13,347Additional paid-in capital
    
    
    79,835,158
    
    
    
    77,061,296Deficit accumulated during the development stage
    
    
    (89,732,006
    )
    
    
    (82,579,607
    )Total shareholders deficit
    
    
    (9,882,401
    )
    
    
    (5,504,964
    )Total liabilities and shareholders deficit
    
    $
    5,740,437
    
    
    $
    11,324,323
  2




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Consolidated Statements of Operations
 CumulativePeriod fromAugust 12,1999 (date ofFor the Three-Month Period
    
    
    For the Six-Month Period
    
    
    inception) toEnded June 30,
    
    
    Ended June 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007
    
    
    2008(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Revenues
    
    $
    16,786
    
    
    $
    194,609
    
    
    $
    42,781
    
    
    $
    208,414
    
    
    $
    770,603Cost of sales
    
    
    4,521
    
    
    
    26,661
    
    
    
    7,646
    
    
    
    34,021
    
    
    
    322,045Gross profit
    
    
    12,265
    
    
    
    167,948
    
    
    
    35,135
    
    
    
    174,393
    
    
    
    448,558Development revenues
    
    
    15,000
    
    
    
    
    
    
    
    76,500
    
    
    
    
    
    
    
    97,000Expenses:Research and development
    
    
    1,477,634
    
    
    
    1,785,661
    
    
    
    2,835,691
    
    
    
    3,186,251
    
    
    
    59,536,298Marketing, general and
administrative
    
    
    1,876,442
    
    
    
    873,300
    
    
    
    2,948,711
    
    
    
    1,750,676
    
    
    
    25,809,599Depreciation and amortization
    
    
    45,921
    
    
    
    45,780
    
    
    
    91,549
    
    
    
    92,226
    
    
    
    526,226Total expenses
    
    
    3,399,997
    
    
    
    2,704,741
    
    
    
    5,875,951
    
    
    
    5,029,153
    
    
    
    85,872,123Loss from operations
    
    
    (3,372,732
    )
    
    
    (2,536,793
    )
    
    
    (5,764,316
    )
    
    
    (4,854,760
    )
    
    
    (85,326,565
    )Interest income
    
    
    8,256
    
    
    
    75,157
    
    
    
    42,202
    
    
    
    115,781
    
    
    
    758,722Interest expense
    
    
    (496,875
    )
    
    
    (300,801
    )
    
    
    (1,430,285
    )
    
    
    (301,362
    )
    
    
    (5,164,163
    )Net interest expense
    
    
    (488,619
    )
    
    
    (225,644
    )
    
    
    (1,388,083
    )
    
    
    (185,581
    )
    
    
    (4,405,441
    )Loss before income taxes
    
    
    (3,861,351
    )
    
    
    (2,762,437
    )
    
    
    (7,152,399
    )
    
    
    (5,040,341
    )
    
    
    (89,732,006
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (3,861,351
    )
    
    $
    (2,762,437
    )
    
    $
    (7,152,399
    )
    
    $
    (5,040,341
    )
    
    $
    (89,732,006
    )Loss per share  basic and diluted
    
    $
    (0.27
    )
    
    $
    (0.21
    )
    
    $
    (0.51
    )
    
    $
    (0.39
    )Weighted average shares
outstanding  basic and diluted
    
    
    14,447,138
    
    
    
    13,235,738
    
    
    
    14,150,984
    
    
    
    13,012,328
  3




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Consolidated Statement of Shareholders Deficit
(Unaudited)
 DeficitAccumulatedAdditional
    
    
    During theCommon Stock
    
    
    Paid-in
    
    
    DevelopmentShares
    
    
    Amount
    
    
    Capital
    
    
    Stage
    
    
    TotalBalance as of December 31, 2007
    
    
    13,347,138
    
    
    $
    13,347
    
    
    $
    77,061,296
    
    
    $
    (82,579,607
    )
    
    $
    (5,504,964
    )Initial public offering of
common stock (net of
offering costs of
$4,327,171)
    
    
    1,100,000
    
    
    
    1,100
    
    
    
    1,446,729
    
    
    
    
    
    
    
    1,447,829Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,071,546
    
    
    
    
    
    
    
    1,071,546Warrants issued in
connection with notes
payable
    
    
    
    
    
    
    
    
    
    
    168,387
    
    
    
    
    
    
    
    168,387Warrant issued in
connection with settlement
agreement
    
    
    
    
    
    
    
    
    
    
    87,200
    
    
    
    
    
    
    
    87,200Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,152,399
    )
    
    
    (7,152,399
    )Balance as of June 30, 2008
    
    
    14,447,138
    
    
    $
    14,447
    
    
    $
    79,835,158
    
    
    $
    (89,732,006
    )
    
    $
    (9,882,401
    )
  4




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Consolidated Statements of Cash Flows
 CumulativePeriod fromAugust 12, 1999For the Six-Month Period Ended
    
    
    (date of inception)June 30,
    
    
    to June 30,2008
    
    
    2007
    
    
    2008(Unaudited)
    
    
    (Unaudited)Cash flows from operating activitiesNet loss
    
    $
    (7,152,399
    )
    
    $
    (5,040,341
    )
    
    $
    (89,732,006
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    91,549
    
    
    
    92,226
    
    
    
    526,226Bad debt expense
    
    
    
    
    
    
    
    
    
    
    165,000Amortization of warrants granted in exchange for
licenses and intellectual property
    
    
    
    
    
    
    48,289
    
    
    
    5,413,156Amortization of warrants granted in connection with
notes payable
    
    
    561,757
    
    
    
    155,856
    
    
    
    2,969,434Amortization of loan costs
    
    
    257,919
    
    
    
    50,404
    
    
    
    744,458Amortization of warrants granted in exchange for services
    
    
    
    
    
    
    30,559
    
    
    
    30,559Equity instruments issued in connection with settlement
agreement
    
    
    87,200
    
    
    
    
    
    
    
    3,381,629Common stock issued in exchange for services
    
    
    
    
    
    
    
    
    
    
    1,277,017Common stock issued in exchange for distribution rights
and intellectual property
    
    
    
    
    
    
    
    
    
    
    99,997Stock-based compensation
    
    
    1,071,546
    
    
    
    460,023
    
    
    
    8,673,517Changes in assets and liabilitiesReceivables
    
    
    (1,228
    )
    
    
    18,965
    
    
    
    (53,870
    )Inventory
    
    
    (3,779
    )
    
    
    (32,319
    )
    
    
    (375,833
    )Prepaid expenses and other current assets
    
    
    (2,067,411
    )
    
    
    (154,429
    )
    
    
    (2,328,441
    )Other assets
    
    
    2,294
    
    
    
    
    
    
    
    (68,854
    )Accounts payable
    
    
    (22,932
    )
    
    
    212,650
    
    
    
    1,850,827Accrued expenses and deferred rent
    
    
    401,814
    
    
    
    125,906
    
    
    
    4,830,802Deferred revenue
    
    
    (61,500
    )
    
    
    (191,214
    )
    
    
    485,787Net cash used in operating activities
    
    
    (6,835,170
    )
    
    
    (4,223,425
    )
    
    
    (62,110,595
    )Cash flows from investing activitiesAcquisitions of property and equipment
    
    
    (17,560
    )
    
    
    (41,193
    )
    
    
    (896,742
    )Net cash used in investing activities
    
    
    (17,560
    )
    
    
    (41,193
    )
    
    
    (896,742
    )Cash flows from financing activitiesProceeds from (payments for) initial public offering
of common stock, net
    
    
    4,236,653
    
    
    
    (1,118,243
    )
    
    
    1,447,829Proceeds from private placements of common stock, net
    
    
    
    
    
    
    4,019,242
    
    
    
    55,675,088Proceeds from notes payable
    
    
    
    
    
    
    10,000,000
    
    
    
    10,200,000Repayment of notes payable
    
    
    (808,866
    )
    
    
    
    
    
    
    (1,394,322
    )Payment of loan costs
    
    
    (187,219
    )
    
    
    (745,470
    )
    
    
    (1,041,263
    )Net cash provided by financing activities
    
    
    3,240,568
    
    
    
    12,155,529
    
    
    
    64,887,332Net (decrease) increase in cash and cash
equivalents
    
    
    (3,612,162
    )
    
    
    7,890,911
    
    
    
    1,879,995Cash and cash equivalents, beginning of period
    
    
    5,492,157
    
    
    
    5,025,383
    
    
    
    Cash and cash equivalents, end of period
    
    $
    1,879,995
    
    
    $
    12,916,294
    
    
    $
    1,879,995Disclosures of cash flow information:Interest paid
    
    $
    282,799
    
    
    $
    54,477
    
    
    $
    628,594Income taxes paid
    
    $
    
    
    
    $
    
    
    
    $
    
  5




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements
(Unaudited)
 1.
    
    Organization and Summary of Significant Accounting Policies
 Organization and Business
 ® ®
 Development Stage
 Accounting and Reporting by Development Stage
Enterprises ,
  Interim Financial Statements
  6




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
  Basis of Presentation
   Reverse Stock Split
  Initial Public Offering
    7




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
  Use of Estimates
  Prepaid Expenses and Other Current Assets
  Deferred Loan Costs
  Stock Options and Warrants
 Share-Based Payment
 8




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
  Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling Goods or Services
 Loss Per Share
 Earnings per Share
 Recent Accounting Pronouncements
 Recently Adopted Accounting Standards
 Fair Value Measurements Effective Date of FASB Statement No. 157
  
    
    Level 1  Inputs are unadjusted quoted prices in active markets for identical assets or
liabilities that the Company has the ability to access at the measurement date.
 9




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
 
    
    Level 2  Inputs include quoted prices for similar assets and liabilities in active
markets, quoted prices for identical or similar assets or liabilities in markets that are
not active, inputs other than quoted prices that are observable for the asset or liability
and inputs that are derived principally from or corroborated by observable market data by
correlation or other means (market corroborated inputs).
    
    Level 3  Unobservable inputs reflect the Companys judgments about the assumptions
market participants would use in pricing the asset or liability since limited market data
exists. The Company develops these inputs based on the best information available,
including the Companys own data.
  The Fair Value Option for Financial Assets and
Financial Liabilities
 Accounting for Nonrefundable Advance Payments for Goods or
Services Received for Use in Future Research and Development Activities
 Share-Based
Payment Share-Based Payment
 10




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
 Future Accounting Standards
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 Determination of the Useful Life of
Intangible Assets Goodwill and Other Intangible Assets Business Combinations,
  11




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
 Reclassifications
  2.
    
    Going Concern
    3.
    
    Collaborative License and Research/Development Agreements
   12




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
  
    
    The parties agreed that the Company would issue, and the Company did issue, to Cell
Transplants International a five-year warrant exercisable for 1.2 million shares of the
Companys common stock at an exercise price of $8.00 per share instead of, as originally
contemplated under the Original Law License Agreement, issuing to Cell Transplants
International or Dr. Law 600,000 shares of the Companys common stock and options to
purchase 600,000 shares of the Companys common stock at an exercise price of $1.80 per
share. These share amounts and exercise prices do not take into account any subsequent
recapitalizations or reverse stock splits.
    
    The parties agreed that the Companys obligation to pay Cell Transplants International a
$3 million milestone payment would be triggered upon the Companys commencement of a bona
fide U.S. Phase II human clinical trial that utilizes technology claimed under the Law IP
instead of, as originally contemplated under the Original Law License Agreement, upon
initiation of an FDA approved human clinical trial study of such technology in the United
States. This $3 million payment is included in accrued expenses as of June 30, 2008 and
December 31, 2007.
   ®
 13




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
  4.
    
    Notes Payable
  June 30,
    
    
    December 31,2008
    
    
    2007Bank of America note payable. Monthly
payments of principal and interest as
described below.
    
    $
    5,000,000
    
    
    $
    5,000,000BlueCrest Capital Finance note payable.
Monthly payments of principal and interest
as described below.
    
    
    3,805,678
    
    
    
    4,614,5448,805,678
    
    
    
    9,614,544Less current portion
    
    
    (6,781,397
    )
    
    
    (6,671,112
    )Notes payable  long term
    
    $
    2,024,281
    
    
    $
    2,943,432
 Bank of America note payable
   14




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
      15




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
     BlueCrest Capital Finance note payable
  16




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
    5.
    
    Related Party Transactions
   17




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
   6.
    
    Shareholders Equity
    7.
    
    Stock Options and Warrants
  18




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
  Weighted-Weighted-
    
    
    AverageAverage
    
    
    Remaining
    
    
    AggregateShares Under
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOption
    
    
    Price
    
    
    Term (in years)
    
    
    ValueOptions outstanding at January 1, 2008
    
    
    2,160,199
    
    
    $
    5.34Granted
    
    
    300,500
    
    
    $
    5.25Exercised
    
    
    
    
    
    
    Forfeited
    
    
    (1,776
    )
    
    $
    7.69Options outstanding at June 30, 2008
    
    
    2,458,923
    
    
    $
    5.33
    
    
    
    6.3
    
    
    $
    546,244Options exercisable at June 30, 2008
    
    
    2,000,720
    
    
    $
    4.92
    
    
    
    5.8
    
    
    $
    546,244Available for grant at June 30, 2008
    
    
    596,807
  Transition Election Related to Accounting for the
Tax Effects of Share-Based Payment Awards.
  Options Outstanding
    
    
    Options ExercisableWeighted-Average
    
    Weighted-
    
    
    
    
    
    
    Weighted-Remaining

    
    Average
    
    
    
    
    
    
    AverageContractual

    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Life

    
    Price
    
    
    Shares
    
    
    Price$1.28
    
    
    347,196
    
    
    
    1.5
    
    
    $
    1.28
    
    
    
    347,196
    
    
    $
    1.28$2.83
    
    
    41,701
    
    
    
    1.6
    
    
    $
    2.83
    
    
    
    41,701
    
    
    $
    2.83$5.25 - $5.67
    
    
    1,716,563
    
    
    
    6.9
    
    
    $
    5.59
    
    
    
    1,504,229
    
    
    $
    5.59$7.69
    
    
    72,889
    
    
    
    8.2
    
    
    $
    7.69
    
    
    
    56,290
    
    
    $
    7.69$8.47
    
    
    280,574
    
    
    
    8.8
    
    
    $
    8.47
    
    
    
    51,304
    
    
    $
    8.472,458,923
    
    
    
    6.3
    
    
    $
    5.33
    
    
    
    2,000,720
    
    
    $
    4.92
 19




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
   For the three-month periods ended
    
    
    For the six-month periods endedJune 30,
    
    
    June 30,2008
    
    
    2007
    
    
    2008
    
    
    2007Expected dividend yield
    
    
    00.0
    %
    
    
    00.0
    %
    
    
    00.0
    %
    
    
    00.0
    %Expected price volatility
    
    
    75.0
    %
    
    
    100.0
    %
    
    
    75.0
    %
    
    
    100.0
    %Risk free interest rate
    
    
    3.3
    %
    
    
    6.0
    %
    
    
    3.3
    %
    
    
    6.0
    %Expected life of options in years
    
    
    5.1
    
    
    
    5.0
    
    
    
    5.1
    
    
    
    5.0
  Warrants Outstanding
    
    
    Warrants ExercisableWeighted-Average
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Remaining
    
    
    Average
    
    
    
    
    
    
    AverageContractual
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Life
    
    
    Price
    
    
    Shares
    
    
    Price$5.67 - $6.56
    
    
    309,834
    
    
    
    6.7
    
    
    $
    5.93
    
    
    
    232,834
    
    
    $
    5.72$7.69
    
    
    2,137,775
    
    
    
    15.8
    
    
    $
    7.69
    
    
    
    385,283
    
    
    $
    7.692,447,609
    
    
    
    14.6
    
    
    $
    7.47
    
    
    
    618,117
    
    
    $
    6.95
 20




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
   For the three-month periods ended
    
    For the six-month periods endedJune 30,
    
    June 30,2008
    
    2007
    
    2008
    
    2007Expected dividend yield
    
    
    00.0
    %
    
    
    00.0
    %
    
    
    00.0
    %
    
    
    00.0
    %Expected price volatility
    
    
    75.0
    %
    
    
    100.0
    %
    
    
    75.0
    %
    
    
    100.0
    %Risk free interest rate
    
    
    3.7
    %
    
    
    6.0
    %
    
    
    3.7
    %
    
    
    6.0
    %Expected life of
warrants in years
    
    
    7.8
    
    
    
    5.0
    
    
    
    7.8
    
    
    
    5.0
   8.
    
    Legal Proceedings
   21




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
     Other
  22




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
 9.
    
    Contingency
  10.
    
    Supplemental Disclosure of Cash Flow Information
   11.
    
    Subsequent Event
  23




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 Unless otherwise indicated, references in this quarterly report to we, us and our are to
the Company. The following discussion and analysis by our management of our financial condition and
results of operations should be read in conjunction with our unaudited consolidated interim
financial statements and the accompanying related notes included in this quarterly report and our
audited consolidated financial statements and related notes and Managements Discussion and
Analysis of Financial Condition and Results of Operations included in our annual report on Form
10-K for the year ended December 31, 2007, as amended by Amendment No. 1 on Form 10-K/A filed with
the Securities and Exchange Commission.
 Cautionary Statement Regarding Forward-Looking Statements
   
    
    our ability to obtain additional financing;
    
    our ability to meet our obligations on our outstanding indebtedness, certain of which
indebtedness imposes restrictions on how we conduct our business and is secured by all of
our assets except our intellectual property;
    
    our ability to timely and successfully initiate and complete our clinical trials;
    
    the announcement of data concerning the results of clinical trials for MyoCell®;
    
    our estimates regarding future revenues and timing thereof, expenses, capital
requirements and needsfor additional financing;
    
    our ongoing and planned discovery programs, preclinical studies and additional clinical
trials;
    
    the timing of and our ability to obtain and maintain regulatory approvals for our
product candidates;
    
    the rate and degree of market acceptance and clinical utility of our products;
    
    our ability to quickly and efficiently identify and develop product candidates;
    
    our commercialization, marketing and manufacturing capabilities and strategy; and
    
    our intellectual property position.
  24




---



##### Table of Contents



Our Ability To Continue as a Going Concern
  Existing Capital
Resources and Future Capital Requirements Risk Factors  We will need to secure
additional financing by the end of August 2008...
 Overview
   25




---



##### Table of Contents



®
 ®
  Critical Accounting Policies
  Share-Based Compensation
 Share-Based Payment
  26




---



##### Table of Contents



Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling Goods or Services
 Revenue Recognition
 Revenue Recognition in Financial Statements Revenue Recognition
   Research and Development Activities
  Results of Operations
 Revenues
   27




---



##### Table of Contents



Development revenues
   Cost of Sales
  Research and Development
   Existing Capital Resources and Future Capital Requirements Risk Factors  We will
need to secure additional financing by the end of August 2008...
 28




---



##### Table of Contents



Marketing, General and Administrative
   Interest Income
  Interest Expense
     29




---



##### Table of Contents



Liquidity and Capital Resources
         30




---



##### Table of Contents



Existing Capital Resources and Future Capital Requirements
      
    
    curtail or abandon our existing business plan,
    
    reduce our headcount;
    
    default on our debt obligations under the BlueCrest Loan;
    
    file for bankruptcy;
    
    seek to sell some or all of our assets; and/or
    
    cease our operations.
  31




---



##### Table of Contents



BlueCrest Loan
  32




---



##### Table of Contents




    
    incur additional indebtedness, except for certain permitted indebtedness. Permitted
indebtedness is defined to include accounts payable incurred in the ordinary course of
business, leases of equipment or property incurred in the ordinary course of business not
to exceed, in the aggregate, $250,000, any unsecured debt less than $20,000 or any debt not
secured by the collateral pledged to BlueCrest that is subordinated to the rights of
BlueCrest pursuant to a subordination agreement satisfactory to BlueCrest in its sole
discretion;
    
    make any principal, interest or other payments arising under or in connection with our
loan from Bank of America or any other debt subordinate to the BlueCrest Loan;
    
    incur additional liens on any of our assets, including any liens on our intellectual
property, except for certain permitted liens including but not limited to non-exclusive
licenses or sub-licenses of our intellectual property in the ordinary course of business
and licenses or sub-licenses of intellectual property in connection with joint ventures and
corporate collaborations (provided that any proceeds from such licenses be used to pay down
the BlueCrest Loan);
    
    voluntarily prepay any debt prior to maturity, except for accounts payable incurred in
the ordinary course of business, leases of equipment or property incurred in the ordinary
course of business not to exceed, in the aggregate, $250,000 and any unsecured debt less
than $20,000;
    
    convey, sell, transfer or otherwise dispose of property, except for sales of inventory
in the ordinary course of business, sales of obsolete or unneeded equipment and transfers
of our intellectual property related to product candidates other than MyoCell or MyoCell
SDF-1 to a currently operating or newly formed wholly owned subsidiary;
    
    merge with or acquire any other entity if we would not be the surviving person following
such transaction;
    
    pay dividends (other than stock dividends) to our shareholders;
    
    redeem any outstanding shares of our common stock or any outstanding options or warrants
to purchase shares of our common stock except in connection with a share repurchase
pursuant to which we offer to pay our then existing shareholders not more than $250,000;
    
    enter into transactions with affiliates other than on arms-length terms; and
    
    make any change in any of our business objectives, purposes and operations which has or
could be reasonably expected to have a material adverse effect on our business.
  33




---



##### Table of Contents



Bank of America Loan
   
    
    a $3.3 million limited personal guarantee provided by Mr. Howard J. Leonhardt, our
Chairman, Chief Executive Officer and Chief Technology Officer, and his spouse, which guarantee is secured by
the Leonhardts pledge of securities accounts with Bank of America;
    
    $750,000 of collateral provided by Dr. Samuel S. Ahn, who is a member of our Board
of Directors;
    
    $400,000 of collateral provided by Dr. William Murphy, who is a member of our Board
of Directors; and
    
    an aggregate of $1.1 million of collateral provided by two of our current
shareholders.
   34




---



##### Table of Contents



Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
 Organization and Summary of Significant Accounting Policies
 35




---



##### Table of Contents



Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
   
 Item 4T.
    
    Controls and Procedures
 Disclosure Controls and Procedures
   Changes In Internal Control Over Financial Reporting
  36




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
   
    
    The parties agreed that we would issue, and we did issue, to Cell Transplants
International a five-year warrant exercisable for 1.2 million shares of our common stock at
an exercise price of $8.00 per share instead of, as originally contemplated under the
Original Law License Agreement, issuing to Cell Transplants International or Dr. Law
600,000 shares of our common stock and options to purchase 600,000 shares of our common
stock at an exercise price of $1.80 per share. These share amounts and exercise prices do
not take into account any subsequent recapitalizations or reverse stock splits.
    
    The parties agreed that our obligation to pay Cell Transplants International a $3
million milestone payment would be triggered upon our commencement of a bona fide U.S.
Phase II human clinical trial that utilizes technology claimed under the Law IP instead of,
as originally contemplated under the Original Law License Agreement, upon initiation of an
FDA approved human clinical study of such technology in the United States. This $3 million
payment is included in accrued expenses as of June 30, 2008 and December 31, 2007.
    37




---



##### Table of Contents



Our current cash reserves are not sufficient to satisfy a $3 million
judgment; there is a risk that a court could award such a judgment.
  38




---



##### Table of Contents



Item 1A.
    
    Risk Factors
    Risks Related to Our Financial Position and Potential Need for Additional Financing
 We will need to secure additional financing by the end of August 2008 in order to continue to
finance our operations. If we are unable to obtain additional financing on acceptable terms, we may
be forced to curtail or cease our operations.
     
    
    curtail or abandon our existing business plan,
    
    reduce our headcount;
    
    default on our debt obligations under the BlueCrest Loan;
    
    file for bankruptcy;
 
    
    seek to sell some or all of our assets; and/or
    
    cease our operations.
  39




---



##### Table of Contents



We have a
substantial amount of debt Our outstanding indebtedness to BlueCrest Capital Finance,
L.P. imposes certain restrictions
   40




---



##### Table of Contents



Our current cash reserves are not sufficient to satisfy a $3 million judgment; there is a risk that
a court could award such a judgment.
    41




---



##### Table of Contents



Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  Use of Proceeds
   
    
    we raised approximately $1.45 million in net proceeds from the sale of shares of our
common stock in the offering, after deducting underwriting discounts and commissions and
offering costs of approximately $4.32 million; and
    
    we generated approximately $4.56 million of cash proceeds from the offering, which was
approximately $3.11 million greater than the net proceeds of this offering due to our
payment of $3.11 million of various offering expenses prior the completion of the offering.
  42




---



##### Table of Contents



Item 4.
    
    Submission of Matters to a Vote of Security Holders
  
    
    To elect eight members to our Board of Directors to hold office until
the next Annual Meeting of Shareholders or until their successors are duly
elected and qualified;
    
    To consider and vote upon a proposal to approve of and ratify the
selection of Grant Thornton LLP as our independent registered public
accounting firm for the fiscal year ending December 31, 2008;
    
    To approve of an amendment to Article II of our Amended and Restated
Articles of Incorporation, as amended, to increase the number of
authorized shares of our common stock from 50,000,000 to 75,000,000 shares; and
    
    To approve of the establishment of the Bioheart, Inc. Omnibus Equity
Compensation Plan.
     VotesVotes Cast
    
    CastDirector Nominee
    
    For
    
    Against
    
    Votes WithheldHoward J. Leonhardt
    
    
    7,889,292
    
    
    
    
    
    34,204Samuel S. Ahn, M.D., MBA
    
    
    7,889,092
    
    
    
    
    
    34,404Bruce C. Carson
    
    
    7,889,292
    
    
    
    
    
    34,204Peggy A. Farley
    
    
    7,889,042
    
    
    
    
    
    34,454David J. Gury
    
    
    7,889,292
    
    
    
    
    
    34,204William P. Murphy, Jr.,
M.D.
    
    
    7,881,569
    
    
    
    
    
    41,927Richard T. Spencer III
    
    
    7,889,292
    
    
    
    
    
    34,204
  43




---



##### Table of Contents



Item 6.
    
    Exhibits
 ExhibitNo.
    
    Exhibit Description3.1
    (6)
    
    Amended and Restated Articles of Incorporation of the registrant, as amended.3.2
    (9)
    

Articles of Amendment to the Articles of Incorporation of the registrant.3.3
    (8)
    

Amended and Restated Bylaws.4.1
    (5)
    
    Loan and Security Agreement, dated as of May 31, 2007 by and between BlueCrest
Capital Finance, L.P. and the registrant.10.1**
    (1)
    

1999 Officers and Employees Stock Option Plan.10.2**
    (1)
    

1999 Directors and Consultants Stock Option Plan.10.3
    (1)
    

Form of Option Agreement under 1999 Officers and Employees Stock Option Plan.10.4
    (3)
    

Form of Option Agreement under 1999 Directors and Consultants Stock Option Plan.10.5**
    (4)
    
    Employment Letter Agreement between the registrant and Scott Bromley, dated
August 24, 2006.10.6
    (1)
    
    Lease Agreement between the registrant and Sawgrass Business Plaza, LLC, as
amended, dated November 14, 2006.10.7
    (1)
    
    Asset Purchase Agreement between the registrant and Advanced Cardiovascular
Systems, Inc., dated June 24, 2003.10.8
    (4)
    
    Conditionally Exclusive License Agreement between the registrant, Dr. Peter
Law and Cell Transplants International, LLC, dated February 7, 2000, as
amended.10.9
    (4)
    
    Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by
and between the registrant, Howard J. Leonhardt and Brenda Leonhardt.10.10
    (4)
    
    Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by
and between the registrant and William P. Murphy Jr., M.D.10.11
    (4)
    
    Loan Agreement, dated as of June 1, 2007, by and between the registrant and
Bank of America, N.A.10.12
    (4)
    
    Warrant to purchase shares of the registrants common stock issued to Howard
J. Leonhardt and Brenda Leonhardt.10.13
    (4)
    
    Warrant to purchase shares of the registrants common stock issued to Howard
J. Leonhardt and Brenda Leonhardt.10.14
    (4)
    
    Warrant to purchase shares of the registrants common stock issued to William
P. Murphy Jr., M.D.10.15
    (4)
    
    Warrant to purchase shares of the registrants common stock issued to the R&A
Spencer Family Limited Partnership.10.16
    (4)
    
    Material Supply Agreement, dated May 10, 2007, by and between the registrant
and Biosense Webster.10.17
    (4)
    
    Supply and License Agreement, dated June 7, 2007, by and between the
registrant and BioLife Solutions, Inc.***
 44




---



##### Table of Contents



ExhibitNo.
    
    Exhibit Description10.18
    (5)
    
    Warrant to purchase shares of the registrants common stock issued to
BlueCrest Capital Finance, L.P.10.19
    (6)
    
    Loan Guarantee, Payment and Security Agreement, dated as of September 12,
2007, by and between the registrant and Samuel S. Ahn, M.D.10.20
    (6)
    
    Loan Guarantee, Payment and Security Agreement, dated as of September 12,
2007, by and between the registrant and Dan Marino.10.21
    (6)
    
    Warrant to purchase shares of the registrants common stock issued to Samuel
S. Ahn, M.D.10.22
    (6)
    
    Loan Guarantee, Payment and Security Agreement, dated as of September 19,
2007, by and between the registrant and Jason Taylor.10.23
    (7)
    
    Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007,
by and between the registrant and Howard and Brenda Leonhardt.10.24
    (7)
    
    Warrant to purchase shares of the registrants common stock issued to Howard
and Brenda Leonhardt.10.25
    (7)
    
    Second Amendment to Loan Guarantee, Payment and Security Agreement, dated as
of October 10, 2007, by and between the registrant and Howard and Brenda
Leonhardt.10.26
    (7)
    
    Second Amendment to Loan Guarantee, Payment and Security Agreement, dated as
of October 10, 2007, by and between the registrant and William P. Murphy, Jr.,
M.D.10.27*,**
    
    

Bioheart, Inc. Omnibus Equity Compensation Plan.31.1*
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.31.2*
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.32.1*
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.32.2*
    
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
 
 *
    
    Filed herewith.**
    
    Indicates management contract or compensatory plan.***
    
    Portions of this document have been omitted and were filed separately with the SEC on August
9, 2007 pursuant to a request for confidential treatment.(1)
    
    Incorporated by reference to the Companys Form S-1 filed with the Securities and Exchange
Commission on February 13, 2007.(2)
    
    Incorporated by reference to Amendment No. 1 to the Companys Form S-1 filed with the
Securities and Exchange Commission on June 5, 2007.(3)
    
    Incorporated by reference to Amendment No. 2 to the Companys Form S-1 filed with the
Securities and Exchange Commission on July 12, 2007.(4)
    
    Incorporated by reference to Amendment No. 3 to the Companys Form S-1 filed with the
Securities and Exchange Commission on August 9, 2007.(5)
    
    Incorporated by reference to Amendment No. 4 to the Companys Form S-1 filed with the
Securities and Exchange Commission on September 6, 2007.(6)
    
    Incorporated by reference to Amendment No. 5 to the Companys Form S-1 filed with the
Securities and Exchange Commission on October 1, 2007.(7)
    
    Incorporated by reference to Post-effective Amendment No. 1 to the Companys Form S-1 filed
with the Securities and Exchange Commission on October 11, 2007.(8)
    
    Incorporated by reference to the Company Current Report on Form 8-K filed with the Securities
and Exchange Commission on July 3, 2008.(9)
    
    Incorporated by reference to the Company Current Report on Form 8-K filed with the Securities
and Exchange Commission on August 8, 2008. 45




---



##### Table of Contents



SIGNATURES
  Bioheart, Inc.Date: August 14, 2008
    By:
    /s/ William H. KlineWilliam H. KlineChief Financial Officer and
Principal Financial Officer 46




---



##### Table of Contents



INDEX OF EXHIBITS
 Exhibit No.
    
    Exhibit Description10.27
    
    
    Bioheart, Inc. Omnibus Equity Compensation Plan31.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 200231.2
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 302 of the Sarbanes-Oxley Act of 200232.1
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 200232.2
    
    
    Certification pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 47