##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
   o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
 001-33718
 
 BIOHEART, INC.
  
 Florida
    
    65-0945967(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification No.)
 13794 NW 4 th
 (954) 835-1500
 
 o x
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer x
 o x




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##### 



BIOHEART, INC.
 INDEX
 PART I  FINANCIAL INFORMATIONItem 1.
    
    Financial Statements
    
    21)
    
    Consolidated Balance Sheets as of September 30, 2007 (unaudited) and December 31, 2006
    
    22)
    
    Consolidated Statements of Operations for the three and nine-month periods ended September 30, 2007 (unaudited) and 2006 (unaudited)
    
    33)
    
    Consolidated Statement of Shareholders Equity for the nine-month period ended September 30, 2007 (unaudited)
    
    44)
    
    Consolidated Statements of Cash Flows for the nine-month periods ended September 30, 2007 (unaudited) and 2006 (unaudited)
    
    55)
    
    Notes to Consolidated Interim Financial Statements (unaudited)
    
    6Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    20Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
    
    33Item 4T.
    
    Controls and Procedures
    
    34PART II  OTHER INFORMATIONItem 1.
    
    Legal Proceedings
    
    35Item 1A.
    
    Risk Factors
    
    36Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
    
    69Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    70Item 6.
    
    Exhibits
    
    71Signatures
    
    73Index to ExhibitsEX-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




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##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1. Financial Statements
 Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 
 Consolidated Balance Sheets
 September 30,
    
    
    December 31,2007
    
    
    2006(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    9,466,225
    
    
    $
    5,025,383Receivables
    
    
    63,806
    
    
    
    79,843Inventory
    
    
    396,774
    
    
    
    163,821Prepaid expenses
    
    
    414,368
    
    
    
    96,162Total current assets
    
    
    10,341,173
    
    
    
    5,365,209Property and equipment, net
    
    
    448,592
    
    
    
    526,901Deferred offering costs
    
    
    2,982,567
    
    
    
    547,016Deferred loan costs, net
    
    
    2,062,335
    
    
    
    Other assets
    
    
    68,854
    
    
    
    68,854$
    15,903,521
    
    
    $
    6,507,980LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilities:Accounts payable
    
    $
    1,759,498
    
    
    $
    803,625Accrued expenses
    
    
    1,190,351
    
    
    
    700,687Deferred revenue
    
    
    547,286
    
    
    
    656,500Notes payable  current
    
    
    6,618,557
    
    
    
    Total current liabilities
    
    
    10,115,692
    
    
    
    2,160,812Deferred rent
    
    
    27,653
    
    
    
    36,524Note payable  long term
    
    
    3,381,443
    
    
    
    Total liabilities
    
    
    13,524,788
    
    
    
    2,197,336Commitments and contingenciesShareholders equityPreferred stock ($0.001 par value) 5,000,000
and 3,088,898 shares authorized as of September
30, 2007 and December 31, 2006, respectively;
none issued and outstanding
    
    
    
    
    
    
    Common stock ($0.001 par value) 50,000,000 and
24,711,188 shares authorized as of September
30, 2007 and December 31, 2006, respectively;
13,333,345 and 12,785,472 shares issued and
outstanding as of September 30, 2007 and
December 31, 2006, respectively
    
    
    13,333
    
    
    
    12,785Additional paid-in capital
    
    
    76,082,924
    
    
    
    68,810,382Deficit accumulated during the development stage
    
    
    (73,717,524
    )
    
    
    (64,512,523
    )Total shareholders equity
    
    
    2,378,733
    
    
    
    4,310,644Total liabilities and shareholders equity
    
    $
    15,903,521
    
    
    $
    6,507,980
  2




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Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 
 Consolidated Statements of Operations
 Cumulative Periodfrom August 12,1999 (date ofFor the Three-Month Period
    
    
    For the Nine-Month Period
    
    
    inception) toEnded September 30,
    
    
    Ended September 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006
    
    
    2007(Unaudited)
    
    
    (Unaudited)
    
    
    (Unaudited)Revenues
    
    $
    67,050
    
    
    $
    31,501
    
    
    $
    275,464
    
    
    $
    106,488
    
    
    $
    710,977Cost of sales
    
    
    17,797
    
    
    
    19,682
    
    
    
    51,818
    
    
    
    63,240
    
    
    
    306,185Gross profit
    
    
    49,253
    
    
    
    11,819
    
    
    
    223,646
    
    
    
    43,248
    
    
    
    404,792Expenses:Research and development
    
    
    2,069,208
    
    
    
    2,670,445
    
    
    
    5,255,459
    
    
    
    5,339,463
    
    
    
    50,636,714Marketing, general and
administrative
    
    
    770,873
    
    
    
    4,354,232
    
    
    
    2,521,549
    
    
    
    5,679,787
    
    
    
    21,946,446Depreciation and amortization
    
    
    46,878
    
    
    
    16,376
    
    
    
    139,104
    
    
    
    45,961
    
    
    
    389,390Total expenses
    
    
    2,886,959
    
    
    
    7,041,053
    
    
    
    7,916,112
    
    
    
    11,065,211
    
    
    
    72,972,550Loss from operations
    
    
    (2,837,706
    )
    
    
    (7,029,234
    )
    
    
    (7,692,466
    )
    
    
    (11,021,963
    )
    
    
    (72,567,758
    )Interest income
    
    
    134,089
    
    
    
    20,629
    
    
    
    249,870
    
    
    
    78,164
    
    
    
    638,754Interest expense
    
    
    (1,461,043
    )
    
    
    
    
    
    
    (1,762,405
    )
    
    
    
    
    
    
    (1,788,520
    )Net interest (expense) income
    
    
    (1,326,954
    )
    
    
    20,629
    
    
    
    (1,512,535
    )
    
    
    78,164
    
    
    
    (1,149,766
    )Loss before income taxes
    
    
    (4,164,660
    )
    
    
    (7,008,605
    )
    
    
    (9,205,001
    )
    
    
    (10,943,799
    )
    
    
    (73,717,524
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (4,164,660
    )
    
    $
    (7,008,605
    )
    
    $
    (9,205,001
    )
    
    $
    (10,943,799
    )
    
    $
    (73,717,524
    )Loss per share  basic and diluted
    
    $
    (0.31
    )
    
    $
    (0.60
    )
    
    $
    (0.70
    )
    
    $
    (0.93
    )Weighted average shares
outstanding  basic and diluted
    
    
    13,332,637
    
    
    
    12,007,086
    
    
    
    13,164,249
    
    
    
    11,773,097
  3




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Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 
 Consolidated Statement of Shareholders Equity
(Unaudited)
 DeficitAccumulatedAdditional
    
    
    During theCommon Stock
    
    
    Paid-in
    
    
    DevelopmentShares
    
    
    Amount
    
    
    Capital
    
    
    Stage
    
    
    TotalBalance as of December 31, 2006
    
    
    12,785,472
    
    
    $
    12,785
    
    
    $
    68,810,382
    
    
    $
    (64,512,523
    )
    
    $
    4,310,644Issuance of common stock
(net of issuance costs of
$150,000)
    
    
    529,432
    
    
    
    530
    
    
    
    3,920,186
    
    
    
    
    
    
    
    3,920,716Exercise of stock options
    
    
    18,441
    
    
    
    18
    
    
    
    93,523
    
    
    
    
    
    
    
    93,541Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    684,768
    
    
    
    
    
    
    
    684,768Amortization of fair value
of warrants granted in
exchange for services
    
    
    
    
    
    
    
    
    
    
    30,559
    
    
    
    
    
    
    
    30,559Amortization of fair value
of warrants granted in
exchange for licenses and
intellectual property
    
    
    
    
    
    
    
    
    
    
    48,289
    
    
    
    
    
    
    
    48,289Issuance of warrants in
connection with notes
payable
    
    
    
    
    
    
    
    
    
    
    2,495,217
    
    
    
    
    
    
    
    2,495,217Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,205,001
    )
    
    
    (9,205,001
    )Balance as of September 30, 2007
    
    
    13,333,345
    
    
    $
    13,333
    
    
    $
    76,082,924
    
    
    $
    (73,717,524
    )
    
    $
    2,378,733
  4




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Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 
 Consolidated Statements of Cash Flows
 CumulativePeriod fromAugust 12, 1999For the nine-month periods ended
    
    
    (date of inception)September 30,
    
    
    to September 30,2007
    
    
    2006
    
    
    2007(Unaudited)
    
    
    (Unaudited)Cash flows from operating activitiesNet loss
    
    $
    (9,205,001
    )
    
    $
    (10,943,799
    )
    
    $
    (73,717,524
    )Adjustments to reconcile net loss to net cash used in
operating activities:Depreciation and amortization
    
    
    139,104
    
    
    
    45,961
    
    
    
    389,390Bad debt expense
    
    
    
    
    
    
    
    
    
    
    165,000Amortization of warrants granted in exchange
for licenses and intellectual property
    
    
    48,289
    
    
    
    96,578
    
    
    
    5,413,156Amortization of warrants granted in connection
with notes payable
    
    
    1,063,655
    
    
    
    
    
    
    
    1,063,655Amortization of loan costs
    
    
    226,191
    
    
    
    
    
    
    
    226,191Amortization of warrants granted in exchange
for services
    
    
    30,559
    
    
    
    
    
    
    
    30,559Equity instruments issued in connection with
settlement agreement
    
    
    
    
    
    
    3,294,429
    
    
    
    3,294,429Common stock issued in exchange for services
    
    
    
    
    
    
    16,443
    
    
    
    1,277,017Common stock issued in exchange for
distribution rights and intellectual property
    
    
    
    
    
    
    
    
    
    
    99,997Stock-based compensation
    
    
    684,768
    
    
    
    968,166
    
    
    
    7,355,506Changes in assets and liabilitiesReceivables
    
    
    16,036
    
    
    
    (62,955
    )
    
    
    (63,806
    )Inventory
    
    
    (232,953
    )
    
    
    33,890
    
    
    
    (396,774
    )Prepaid expenses
    
    
    (318,206
    )
    
    
    (41,182
    )
    
    
    (414,368
    )Other assets
    
    
    
    
    
    
    (58,695
    )
    
    
    (68,854
    )Accounts payable
    
    
    547,469
    
    
    
    1,334,648
    
    
    
    1,129,930Accrued expenses and deferred rent
    
    
    251,903
    
    
    
    216,175
    
    
    
    1,265,466Deferred revenue
    
    
    (109,214
    )
    
    
    (22,500
    )
    
    
    547,286Net cash used in operating activities
    
    
    (6,857,400
    )
    
    
    (5,122,841
    )
    
    
    (52,403,744
    )Cash flows from investing activitiesAcquisitions of property and equipment
    
    
    (60,794
    )
    
    
    (154,789
    )
    
    
    (837,981
    )Net cash used in investing activities
    
    
    (60,794
    )
    
    
    (154,789
    )
    
    
    (837,981
    )Cash flows from financing activitiesProceeds from notes payable
    
    
    10,000,000
    
    
    
    
    
    
    
    10,200,000Repayment of note payable
    
    
    
    
    
    
    
    
    
    
    (200,000
    )Proceeds from issuance of common stock, net
    
    
    4,014,257
    
    
    
    5,398,153
    
    
    
    55,587,589Payment of offering costs
    
    
    (1,880,034
    )
    
    
    
    
    
    
    (2,104,452
    )Payment of loan costs
    
    
    (775,187
    )
    
    
    
    
    
    
    (775,187
    )Net cash provided by financing activities
    
    
    11,359,036
    
    
    
    5,398,153
    
    
    
    62,707,950Net increase in cash and cash equivalents
    
    
    4,440,842
    
    
    
    120,523
    
    
    
    9,466,225Cash and cash equivalents, beginning of period
    
    
    5,025,383
    
    
    
    5,157,872
    
    
    
    Cash and cash equivalents, end of period
    
    $
    9,466,225
    
    
    $
    5,278,395
    
    
    $
    9,466,225Disclosures of cash flow information:Interest paid
    
    $
    161,959
    
    
    $
    187
    
    
    $
    188,074Income taxes paid
    
    $
    
    
    
    $
    
    
    
    $
    
  5




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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




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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




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Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
 Use of Estimates
  Stock Options and Warrants
 Share-Based Payment
  Accounting for
Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with
Selling Goods or Services
 Income Taxes
 Accounting for Uncertainty
in Income Taxes, Accounting for
Contingencies. Accounting for Income
Taxes,
  8




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
    Loss Per Share
 Earnings per Share
 Recent Accounting Pronouncements
 Fair Value Measurements
 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
  9




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
 2. Collaborative License and Research/Development Agreements
      10




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
 3. Debt
 Eight-month note payable
       11




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Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
   12




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
  Three-year note payable
    13




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
 4. Related Party Transactions
      5. Shareholders Equity
  14




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Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
  6. Stock Options and Warrants
   Weighted-
    
    
    Weighted-AverageAverage
    
    
    Remaining
    
    
    AggregateShares Under
    
    
    Exercise
    
    
    Contractual
    
    
    IntrinsicOption
    
    
    Price
    
    
    Term (in years)
    
    
    Value (1)Options outstanding at January 1, 2007
    
    
    1,938,047
    
    
    $
    4.90Granted
    
    
    295,088
    
    
    $
    8.47Exercised
    
    
    (18,441
    )
    
    $
    5.67Forfeited
    
    
    (44,614
    )
    
    $
    7.18Options outstanding at September 30, 2007
    
    
    2,170,080
    
    
    $
    5.33
    
    
    
    6.5
    
    
    $
    4,070,586Options exercisable at September 30, 2007
    
    
    1,636,979
    
    
    $
    4.73
    
    
    
    5.8
    
    
    $
    3,757,965Available for grant at September 30, 2007
    
    
    901,096
 
 (1)
    
    The aggregate intrinsic value computation was based on an estimated fair market value
of the Companys common stock at September 30, 2007 of $7.00 per share.  15




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
 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
    
    
    
    2.3
    
    
    $
    1.28
    
    
    
    347,196
    
    
    $
    1.28$2.83
    
    
    41,701
    
    
    
    2.4
    
    
    $
    2.83
    
    
    
    41,701
    
    
    $
    2.83$5.67
    
    
    1,431,508
    
    
    
    7.0
    
    
    $
    5.67
    
    
    
    1,197,256
    
    
    $
    5.67$7.69
    
    
    74,665
    
    
    
    8.9
    
    
    $
    7.69
    
    
    
    50,826
    
    
    $
    7.69$8.47
    
    
    275,010
    
    
    
    9.5
    
    
    $
    8.47
    
    
    
    
    
    
    
    2,170,080
    
    
    
    6.5
    
    
    $
    5.33
    
    
    
    1,636,979
    
    
    $
    4.73
  16




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
  For the three month
    
    
    For the nine monthperiods ended
    
    
    periods endedSeptember 30,
    
    
    September 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Expected dividend yield
    
    
    00.0
    %
    
    
    00.0
    %
    
    
    00.0
    %
    
    
    00.0
    %Expected price volatility
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %
    
    
    100.0
    %Risk free interest rate
    
    
    6.0
    %
    
    
    6.0
    %
    
    
    6.0
    %
    
    
    6.0
    %Expected life of options in years
    
    
    5.0
    
    
    
    5.0
    
    
    
    5.0
    
    
    
    5.0
   Warrants Outstanding
    
    
    Warrants ExercisableWeighted-Average
    
    
    Weighted-
    
    
    
    
    
    
    Weighted-Remaining
    
    
    Average
    
    
    
    
    
    
    AverageContractual
    
    
    Exercise
    
    
    
    
    
    
    ExerciseShares
    
    
    Life
    
    
    Price
    
    
    Shares
    
    
    Price$5.67
    
    
    192,834
    
    
    
    8.9
    
    
    $
    5.67
    
    
    
    192,834
    
    
    $
    5.67$7.69
    
    
    1,957,069
    
    
    
    17.2
    
    
    $
    7.69
    
    
    
    32,515
    
    
    $
    7.692,149,903
    
    
    
    16.5
    
    
    $
    7.51
    
    
    
    225,349
    
    
    $
    5.96
 17




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
 7. Legal Proceedings
      18




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Interim Financial Statements  (Continued)
(Unaudited)
 8. Contingency
  9. Supplemental Disclosure of Cash Flow Information
   10. Subsequent Event
  19




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##### 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 registration statement on
Form S-1(File No. 333-140672) filed with the Securities and Exchange Commission, as amended to
date.
 Cautionary Statement Regarding Forward-Looking Statements
   
    
    our ability to complete an initial public offering of our common stock;
    
    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.
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Overview
    Recent Developments
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Critical Accounting Policies
  Stock-Based Compensation
 Accounting for
Stock-Based Compensation, Accounting for Stock-Based Compensation Ì
Transition and Disclosure,
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Revenue Recognition
    Research and Development Activities
  Results of Operations
 Revenues
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Cost of Sales
  Research and Development
   Marketing, General and Administrative
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Interest Income
  Interest Expense
    Liquidity and Capital Resources
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Existing Capital Resources and Future Capital Requirements
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
    
    costs related to our continuation of clinical trials with respect to MyoCell;
    
    costs related to our continued research and development and new clinical trials with
respect to our pipeline product candidates;
    
    costs of applying for regulatory approvals;
    
    capital expenditures to increase our research and development and cell culturing
capabilities;
    
    costs associated with our addition of operational, financial and management information
systems and personnel and development and protection of our intellectual property; and
    
    our obligations to make payments pursuant to license agreements upon achievement of
certain milestones, including a $3 million payment to Dr. Law.
  
    
    whether or not the Guarantors exercise the Repayment Election right;
    
    whether or not we are required to pay $3 million to Dr. Law pursuant to the Law License
Agreement;
    
    the scope, rate of scientific progress, results and cost of our clinical trials and
other research and development activities;
    
    the costs and timing of seeking FDA and other regulatory approvals;
    
    our ability to obtain sufficient third-party insurance coverage or reimbursement for our
product candidates;
    
    the effectiveness of commercialization activities (including the volume and
profitability of any sales achieved);
    
    our ability to establish additional strategic, collaborative and licensing relationships
with third parties with respect to the sales, marketing and distribution of our products,
research and development and other matters and the economic and other terms and timing of
any such relationships;
    
    the ongoing availability of funds from foreign governments to build new manufacturing
facilities;
    
    the costs involved in any potential litigation that may occur;
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
    
    decisions by us to pursue the development of new product candidates or technologies or
to make acquisitions or investments; and
    
    the effect of competing products, technologies and market developments.
  BlueCrest Loan
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
    
    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 Bankof 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. However, in the event that our initial public offering closed
before January 31, 2008 and the net proceeds from the offering exceeded $30 million, we
were permitted to prepay our debt to Bank of America;
    
    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 or our intellectual property related to product candidates other than
MyoCell or MyoCell II with 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.
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Bank of America Loan
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
    
    In exchange for the $1.1 million limited personal guarantee, we issued to Mr. and Mrs.
Leonhardt a warrant to purchase an aggregate of 35,745 Subject Shares (subject to
adjustment as set forth above).
    
    In exchange for the pledge of collateral valued at $1.5 million, we issued to Mr.
Spencer a warrant to purchase an aggregate of 48,743 Subject Shares (subject to adjustment
as set forth above).
    
    In exchange for the pledge of collateral valued at $750,000, we issued to Dr. Murphy a
warrant to purchase an aggregate of 24,372 Subject Shares (subject to adjustment as set
forth above).
    
    In exchange for the pledge of collateral valued at $2.2 million, we issued to the
Shareholder Guarantor warrants to purchase an aggregate of 71,490 Subject Shares (subject
to adjustment as set forth above).
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Off-Balance Sheet Arrangements
  
    
    Any obligation under certain guarantee contracts;
    
    Any retained or contingent interest in assets transferred to an unconsolidated entity or
similar arrangement that serves as credit, liquidity or market risk support to that entity
for such assets;
    
    Any obligation under a contract that would be accounted for as a derivative instrument,
except that it is both indexed to our stock and classified in stockholders equity in our
statement of financial position; and
    
    Any obligation arising out of a material variable interest held by us in an
unconsolidated entity that provides financing, liquidity, market risk or credit risk
support to us, or engages in leasing, hedging or research and development services with us.
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Recent Accounting Pronouncements
 Fair Value Measurements
 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
  
 Item 3. Quantitative and Qualitative Disclosures About Market Risk
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Item 4T. Controls and Procedures
 Disclosure Controls and Procedures
  Changes In Internal Control Over Financial Reporting
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PART II  OTHER INFORMATION
 
 Item 1. Legal Proceedings
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Item 1A. Risk Factors
 s
  Risks Related to Our Financial Position and Potential Need for Additional Financing
 We are a development stage life sciences company with a limited operating history and a history of
net losses and negative cash flows from operations. We may never be profitable, and if we incur
operating losses and generate negative cash flows from operations for longer than expected, we may
be unable to continue operations.
  
    
    continue the SEISMIC Trial and the MYOHEART Trial and commence the MARVEL Trial;
    
    continue research and development and undertake new clinical trials with respect to our
pipeline product candidates, including clinical trials related to MyoCell II with SDF-1;
    
    apply for regulatory approvals;
    
    make capital expenditures to increase our research and development and cell culturing
capabilities;
    
    add operational, financial and management information systems and personnel and develop
and protect our intellectual property;
    
    make payments pursuant to license agreements upon achievement of certain milestones; and
    
    establish sales and marketing capabilities to commercialize products for which we obtain
regulatory approval, if any.
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Our outstanding indebtedness to BlueCrest Capital Finance, L.P. imposes certain restrictions on how
we conduct our business. In addition, all of our assets, except our intellectual property, are
pledged to secure this indebtedness. If we fail to meet our obligations to BlueCrest Capital, our
payment obligations may be accelerated and the collateral securing the debt may be sold to satisfy
these obligations.
    
    
    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 Capital that is subordinated to the rights
of BlueCrest Capital pursuant to a subordination agreement satisfactory to BlueCrest
Capital 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;
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
    
    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
or our intellectual property related to product candidates other than MyoCell or MyoCell II
with 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.
  We have a substantial amount of debt and may incur substantial additional debt, which could
adversely affect our ability to pursue certain business objectives, obtain financing in the future
and/or react to changes in our business.
   
    
    requiring the dedication of a portion of our available cash to service our indebtedness,
thereby reducing the amount of our cash available for other purposes, including funding our
research and development programs and other capital expenditures;
    
    increasing our vulnerability to general adverse economic and industry conditions;
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
    
    limiting our ability to obtain additional financing;
    
    limiting our ability to react to changes in technology or our business; and
    
    placing us at a possible competitive disadvantage to less leveraged competitors.
 We need immediate and substantial additional funding and may be unable to secure additional
capital. An inability to obtain additional financing on acceptable terms could adversely affect our
business, financial condition, results of operations, and could even prevent us from continuing our
business.
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
    
    whether or not the Guarantors exercise the Repayment Election right;
    
    whether or not we are required to pay $3 million to Dr. Law pursuant to the Law License
Agreement;
    
    the scope, rate of scientific progress, results and cost of our clinical trials and
other research and development activities;
    
    the costs and timing of seeking FDA and other regulatory approvals;
    
    our ability to obtain sufficient third-party insurance coverage or reimbursement for our
product candidates;
    
    our ability to obtain sufficient third-party insurance coverage or reimbursement for our
product candidates;
    
    our ability to establish additional strategic, collaborative and licensing relationships
with third parties with respect to the sales, marketing and distribution of our products,
research and development and other matters and the economic and other terms and timing of
any such relationships;
    
    the ongoing availability of funds from foreign governments to build new manufacturing
facilities;
    
    the costs involved in any potential litigation that may occur;
    
    decisions by us to pursue the development of new product candidates or technologies or
to make acquisitions or investments; and
    
    the effect of competing products, technologies and market developments.
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Risks Related to Product Development
 All of our product candidates are in an early stage of development and we may never succeed in
developing and/or commercializing them. We depend heavily on the success of our lead product
candidate, MyoCell.
If we are unable to commercialize MyoCell or any of our other product candidates or experience
significant delays in doing so, our business may fail.
   
    
    our product candidates will be deemed ineffective, unsafe or will not receive regulatory
approvals;
    
    our product candidates will be too expensive to manufacture or market or will not
achieve broad market acceptance;
    
    others will hold proprietary rights that will prevent us from marketing our product
candidates; or
    
    our competitors will market products that are perceived as equivalent or superior.
 Our approach of using cell-based therapy for the treatment of heart damage is risky and unproven
and no products using this approach have received regulatory approval in the United States or
Europe.
  If our clinical trials are unsuccessful or significantly delayed, or if we do not complete our
clinical trials, we will not receive regulatory approval for or be able to commercialize our
product candidates.
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
    
    the FDA or similar foreign regulatory authorities may find that our product candidates
are not sufficiently safe or effective or may find our cell culturing processes or
facilities unsatisfactory;
    
    officials at the FDA or similar foreign regulatory authorities may interpret data from
preclinical studies and clinical trials differently than we do;
    
    our clinical trials may produce negative or inconclusive results or may not meet the
level of statistical significance required by the FDA or other regulatory authorities, and
we may decide, or regulators may require us, to conduct additional preclinical studies
and/or clinical trials or to abandon one or more of our development programs;
    
    the FDA or similar foreign regulatory authorities may change their approval policies or
adopt new regulations;
    
    there may be delays or failure in obtaining approval of our clinical trial protocols
from the FDA or other regulatory authorities or obtaining institutional review board
approvals or government approvals to conduct clinical trials at prospective sites;
    
    we, or regulators, may suspend or terminate our clinical trials because the
participating patients are being exposed to unacceptable health risks or undesirable side
effects;
    
    we may experience difficulties in managing multiple clinical sites;
    
    enrollment in our clinical trials for our product candidates may occur more slowly than
we anticipate, or we may experience high drop-out rates of subjects in our clinical trials,
resulting in significant delays;
    
    we may be unable to manufacture or obtain from third party manufacturers sufficient
quantities of our product candidates for use in clinical trials; and
    
    our product candidates may be deemed unsafe or ineffective, or may be perceived as being
unsafe or ineffective, by healthcare providers for a particular indication.
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Our product candidates may never be commercialized due to unacceptable side effects and increased
mortality that may be associated with such product candidates.
  We depend on third parties to assist us in the conduct of our preclinical studies and clinical
trials, and any failure of those parties to fulfill their obligations could result in costs and
delays and prevent us from obtaining regulatory approval or successfully commercializing our
product candidates on a timely basis, if at all.
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Risks Related to Government Regulation and Regulatory Approvals
 Our cell-based product candidates are based on novel technologies and the FDA and regulatory
agencies in other countries have limited experience reviewing product candidates using these
technologies.
  
    
    the scientific basis of our technology could be determined to be less sound than we
believe;
    
    the time and effort required to solve novel technical problems could delay the
development of our product candidates;
    
    the FDA and regulatory agencies in other countries have relatively limited experience
with therapies based upon cellular medicine generally and, as a result, the pathway to
regulatory approval for our cellbased product candidates may be more complex and lengthy;
and
    
    the healthcare community has relatively little experience with therapies based upon
cellular medicine and, accordingly, following regulatory approval, if any, our product
candidates may not become widely accepted by physicians, patients, third party payors or
the healthcare community.
  We are subject to numerous risks associated with seeking regulatory approval of MyoCell pursuant to
a protocol that requires the use of a catheter system which is still subject to FDA approval. The
catheter system we intend to use in connection with our MARVEL Trial is owned by an unaffiliated
third party. Although we have entered into a two-year supply agreement for delivery of the catheter
system for use in the MARVEL Trial, we are subject to a number of risks not addressed by the
parties in the supply agreement.
 ® ® 2
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
    
    the terms and conditions under which MyoStar will be made available for use to trial
investigators, if at all, after the term of the supply agreement;
    
    the terms and conditions under which the diagnostic consoles that are part of the NOGA®2
Cardiac Navigation System will be made available for use to trial investigators, if at all;
    
    the modification or not of the MyoStar System or any of its components and its protocol
for use as a result of information obtained during trials;
    
    the license or sale of the MyoStar System related intellectual property to a third
party, potentially including our competitors;
    
    the use of the MyoStar System or any of its components in myoblast-based clinical
therapies other than ours; and
    
    the suspension or abandonment of other clinical trials involving MyoStar.
  We must comply with extensive government regulations in order to obtain and maintain marketing
approval for our products in the United States and abroad. If we do not obtain regulatory approval
for our product candidates, we may be forced to cease our operations.
  
    
    product design, development, manufacture and testing;
    
    product safety and efficacy;
    
    product labeling;
    
    product storage and shipping;
    
    record keeping;
    
    pre-market clearance or approval;
    
    advertising and promotion; and
    
    product sales and distribution.
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Even if some of our product candidates receive regulatory approval, these approvals may be subject
to conditions, and we and our third party manufacturers will in any event be subject to significant
ongoing regulatory obligations and oversight.
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We must comply with federal, state and foreign laws, regulations and other rules relating to the
healthcare business, and, if we do not fully comply with such laws, regulations and other rules, we
could face substantial penalties.
  
    
    the federal Medicare and Medicaid Anti-Kickback law, which prohibits persons from
knowingly and willfully soliciting, offering, receiving or providing remuneration, directly
or indirectly, in cash or in kind, to induce either the referral of an individual or
furnishing or arranging for a good or service, for which payment may be made under federal
healthcare programs such as Medicare and Medicaid;
    
    other Medicare laws, regulations, rules, manual provisions and policies that prescribe
the requirements for coverage and payment for services performed by our customers,
including the amount of such payment;
    
    the Federal False Claims Act, which imposes civil and criminal liability on individuals
and entities who submit, or cause to be submitted, false or fraudulent claims for payment
to the government;
    
    the Federal False Statements Act, which prohibits knowingly and willfully falsifying,
concealing or covering up a material fact or making any materially false statement in
connection with delivery of or payment for healthcare benefits, items or services; and
    
    state and foreign law equivalents of the foregoing.
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Our business involves the use of hazardous materials that could expose us to environmental and
other liability.
  Risks Related to Commercialization of our Product Candidates
 If we are successful in securing regulatory approval of MyoCell utilizing a protocol that requires
the use of
MyoStar, we will be subject to numerous risks associated with commercializing a therapy that
requires the use of a product that we do not control.
  
    
    the temporary or permanent suspension of production, marketing or distribution of the
MyoStar System;
    
    the terms and conditions under which the MyoStar System will be made available to
customers, if at all;
    
    the modification or refinement of the MyoStar System and its protocols for use as a
result of information obtained from patients; and
    
    the branding and/or use of the MyoStar System in conjunction with myoblast-based
clinical therapies other than ours.
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The healthcare community has relatively little experience with therapies based on cellular medicine
and, accordingly, if our product candidates do not become widely accepted by physicians, patients,
third party payors or the healthcare community, we may be unable to generate significant revenue,
if any.
   
    
    our ability to provide acceptable evidence and the perception of patients and the
healthcare community, including third party payors, of the positive characteristics of our
product candidates relative to existing treatment methods, including their safety,
efficacy, cost effectiveness and/or other potential advantages;
    
    the incidence and severity of any adverse side effects of our product candidates;
    
    the availability of alternative treatments;
    
    the labeling requirements imposed by the FDA and foreign regulatory agencies, including
the scope of approved indications and any safety warnings;
    
    our ability to obtain sufficient third party insurance coverage or reimbursement for our
products candidates;
    
    the inclusion of our products on insurance company coverage policies;
    
    the willingness and ability of patients and the healthcare community to adopt new
technologies;
    
    the procedure time associated with the use of our product candidates;
    
    our ability to manufacture or obtain from third party manufacturers sufficient
quantities of our product candidates with acceptable quality and at an acceptable cost to
meet demand; and
    
    marketing and distribution support for our products.
  There is substantial uncertainty as to the coverage that may be available and the reimbursement
rates that may be established for our product candidates. Any failure to obtain third party
coverage or an adequate level of reimbursement for our product candidates will likely have a
material adverse effect on our business.
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We have only limited experience culturing our cell-based product candidates, and we may not be able
to culture our product candidates in quantities sufficient for clinical studies or for commercial
sale. We also face certain risks in connection with our use of third party manufacturers and cell
culturing service providers.
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If we are unable to establish sales and marketing capabilities or enter into agreements with third
parties to market and sell our product candidates, we may be unable to generate product revenues.
  Product liability and other claims against us may reduce demand for our products or result in
substantial damages. We anticipate that we will need to obtain and maintain additional or increased
insurance coverage, and we may not be able to obtain or maintain such coverage on commercially
reasonable terms, if at all.
  
    
    liabilities that substantially exceed our existing clinical trial liability insurance,
or any clinical trial liability or product liability insurance that we may obtain in the
future, which we would then be required to pay from other sources, if available;
    
    an increase in the premiums we pay for our clinical trial liability insurance and any
clinical trial liability or product liability insurance we may obtain in the future or the
inability to renew or obtain clinical trial liability or product liability insurance
coverage in the future on acceptable terms, or at all;
    
    withdrawal of clinical trial volunteers or patients;
    
    damage to our reputation and the reputation of our products, including loss of market
share;
    
    regulatory investigations that could require costly recalls or product modifications;
    
    litigation costs; and
    
    diversion of managements attention from managing our business.
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Our success will depend in part on establishing and maintaining effective strategic partnerships,
collaborations and licensing agreements.
   
    
    our collaboration agreements are likely to be for fixed terms and subject to termination
by our collaborators in the event of a material breach or lack of scientific progress by
us;
    
    our collaborators are likely to have the first right to maintain or defend our
intellectual property rights and, although we would likely seek to secure the right to
assume the maintenance and defense of our intellectual property rights if our collaborators
do not, our ability to do so may be compromised by our collaborators acts or omissions;
    
    our collaborators may utilize our intellectual property rights in such a way as to
invite litigation that could jeopardize or invalidate our intellectual property rights or
expose us to potential liability;
    
    our collaborators may underfund or not commit sufficient resources to the testing,
marketing, distribution or development of our product candidates; and
    
    our collaborators may develop alternative products either on their own or in
collaboration with others, or encounter conflicts of interest or changes in business
strategy or other business issues, which could adversely affect their willingness or
ability to fulfill their obligations to us.
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We have provided a non-affiliated Korean entity certain technology to manufacture MyoCell and
MyoCath and face the risk that such action and/or the actions of the Korean entity may materially
damage our business, expose us to liability and/or result in the termination of various
intellectual property licenses that are important to us.
   Risks Related to Our Intellectual Property
 We have licensed and therefore do not own the intellectual property that is critical to our
business. Any events or circumstances that result in the termination or limitation of our rights
under any of the agreements between us and the licensors of our intellectual property could have a
material adverse effect on our business.
  
  
    
    pay fees of $3 million and $5 million to Cell Transplants International, LLC, or Cell
Transplants International, upon commencement of a U.S. Phase II human clinical trial of
MyoCell and upon FDA approval of patented technology for heart muscle regeneration,
respectively;
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
    
    make certain payments to the Cleveland Clinic in the aggregate amount of $2.25 million
upon our achievement of certain development and commercialization objectives in connection
with the development of MyoCell II with SDF-1; and
 
    
    deliver 160 units of MyoCath to a corporation that is now a division of Abbott
Laboratories.
    We generally do not have the right under our material license agreements to control the protection
of the patents licensed thereunder and, as a result, our licensors may take actions and make
decisions that could materially adversely affect our business.
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We do not have patent protection for MyoCell outside of the United States and we may not be able to
effectively enforce our intellectual property rights in certain countries, which could have a
material adverse effect on our business.
  Our success depends on the protection of our intellectual property rights, particularly the patents
that have been licensed to us, and our failure to secure and maintain these rights would materially
harm our business.
  
    
    obtain and/or maintain protection for our product candidates under the patent laws of
the United States and other countries;
    
    defend and enforce our patents once obtained;
    
    obtain and/or maintain appropriate licenses to patents, patent applications or other
proprietary rights held by others with respect to our technology, both in the United States
and other countries;
    
    maintain trade secrets and other intellectual property rights relating to our product
candidates; and
    
    operate without infringing upon the patents and proprietary rights of third parties.
   
    
    we or the owners or other inventors of the patents that we own or that have been
licensed to us or that may be issued or licensed to us in the future were the first to file
patent applications or to invent the subject matter claimed in patent applications relating
to the technologies upon which we rely;
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
    
    others will not independently develop similar or alternative technologies or duplicate
any of our technologies;
    
    any of our patent applications will result in issued patents;
    
    the patents and the patent applications that we own or that have been licensed to us or
that may be issued or licensed to us in the future will provide a basis for commercially
viable products or will provide us with any competitive advantages, or will not be
challenged by third parties;
    
    the patents and the patent applications that have been licensed to us are valid and
enforceable;
    
    we will develop additional proprietary technologies that are patentable;
    
    we will be successful in enforcing the patents that we own or that have been licensed to
us and any patents that may be issued or licensed to us in the future against third
parties; or
    
    the patents of third parties will not have an adverse effect on our ability to do
business.
  The patent we believe is the primary basis for the protection of MyoCell is scheduled to expire in
the United States in July 2009 and if we are unable to secure a patent term extension, we will have
to seek to protect MyoCell through a combination of patents on other aspects of our technology and
trade secrets, which may not prove to be effective.
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Our most important license agreement with respect to MyoCath is co-exclusive and the co-licensor of
the intellectual property, a division of Abbott Laboratories, may also seek to commercialize
MyoCath.
  Our proposed pathway for securing regulatory approval of Bioheart Acute Cell Therapy is dependent
on Tissue Genesis timely and successful completion of a Device Master File for the TGI 1200.
  We have limited recourse available in the event that patents necessary for the use by our customers
of the TGI 1200 product candidate, certain disposable products used in conjunction with this
product candidate or processes or cells derived from this product candidate directly or indirectly
infringe any patent rights of a third party.
   
    
    substitute a substantially equivalent non-infringing product for the infringing product;
    
    modify the infringing product so that it no longer infringes but remains functionally
equivalent; or
    
    obtain for us the right to continue using such item.
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Patent applications owned by or licensed to us may not result in issued patents, and our
competitors may commercialize the discoveries we attempt to patent.
  Our patents may not be valid or enforceable, and may be challenged by third parties.
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Issued patents and patent licenses may not provide us with any competitive advantage or provide
meaningful protection against competitors.
     Litigation or other proceedings relating to patent and other intellectual property rights could
result in substantial costs and liabilities and prevent us from commercializing our product
candidates.
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If we are not able to protect and control unpatented trade secrets, know-how and other
technological innovation, we may suffer competitive harm.
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Other Risks Related to Our Business
 Our operations are consolidated primarily in one facility. A disaster at this facility is possible
and could result in a prolonged interruption of our business.
  We depend on attracting and retaining key management and scientific personnel and the loss of these
personnel could impair the development of our products candidates.
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If we acquire other businesses and technologies our performance may suffer.
  We may not be able to effectively manage our future growth.
  
    
    we may be unable to effectively manage our personnel and financial operations;
    
    we may be unable to hire or retain key management and staff; and
    
    commercial success may stimulate competitive challenges that we may be unable to meet,
resulting in declining market share and sales of our products.
  Expansion into international markets is important to our long-term success, and our inexperience in
operations outside the United States increases the risk that our international operations may not
be successful.
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
    
    whether the foreign regulatory authorities will require, among other things, additional
testing and different clinical designs than the FDA;
    
    the amount, type and relative statistical significance of the safety and efficacy data
that the foreign regulatory authorities will require prior to granting regulatory approval
of our product candidates;
    
    which countries will adopt reimbursement policies that are favorable to us;
    
    the number of patients that will be eligible to use MyoCell if it ever receives
regulatory approval; and
    
    subject to regulatory approval of our product candidates, whether the international
marketplace will accept our product candidates.
  
    
    unusual or burdensome foreign laws or regulations and unexpected changes in regulatory
requirements, including potential restrictions on the transfer of funds;
    
    no or less effective protection of our intellectual property;
    
    foreign currency risks;
    
    political instability, including adverse changes in trade policies between countries in
which we may maintain operations; and
    
    longer accounts receivable payment cycles and difficulties in collecting payments.
  Because we have operated as a private company, we have no experience complying with public company
obligations. Compliance with these requirements will increase our costs and require additional
management resources, and we may still fail to comply.
  Our internal control over financial reporting may be insufficient to detect in a timely manner
misstatements that could occur in our financial statements in amounts that may be material.
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Failure to achieve and maintain effective internal control over financial reporting in accordance
with
Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business.
  We face intense competition in the biotechnology and healthcare industries.
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Our industry is subject to rapid technological change.
  We have a contingent liability under California law due to our issuances of some securities that
may have violated California securities laws.
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Risks Related to Our Common Stock
 There is no trading market for our stock, and no assurance such a market will develop in the
future.
  Our Executive Chairman has significant control of our management and affairs, which he could
exercise against your best interests.
   
    
    providing a $3.3 million limited personal guarantee of the Bank of America Loan and
pledging securities accounts with Bank of America to back-up this limited personal
guarantee;
    
    providing a personal guarantee of our obligations under the lease for our facilities in
Sunrise, Florida; and
    
    providing a personal guarantee of our corporate credit cards.
   
    
    Mr. Leonhardt could purchase additional shares of our common stock pursuant to the
exercise of outstanding warrants and options;
    
    Mr. Leonhardt could purchase additional shares of our common stock in the secondary
market;
    
    Mr. Leonhardt could receive additional options to purchase shares of our common stock in
his capacity as a director, our Executive Chairman and/or Chief Technology Officer; and
    
    upon our request, Mr. Leonhardt could agree to accept shares of common stock and/or
other securities, rights or privileges as payment in kind for obligations we owe to him
under various existing and/or future obligations.
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Anti-takeover provisions of Florida law, our articles of incorporation and our bylaws may prevent
or delay an acquisition of us that shareholders may consider favorable or attempts to replace or
remove our management that could be beneficial to our shareholders.
  We do not intend to pay cash dividends on our common stock in the foreseeable future and,
accordingly, capital appreciation of our common stock, if any, will be a shareholders sole source
of gain from an investment in our common stock.
  Our common stock may be considered a penny stock, and thereby be subject to additional sale and
trading regulations that may make it more difficult to sell.
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  Rule 701
   Rule 506 of Regulation D and Section 4(2)
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Item 4. Submission of Matters to a Vote of Security Holders
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Item 6. Exhibits
 ExhibitNo.
    
    Exhibit Description3.1
    (6)
    
    Amended and Restated Articles of Incorporation of the registrant, as amended.3.3
    (1)
    
    Amended and Restated Bylaws4.1
    
    
    Reference is made to exhibits 3.1 through 3.34.2
    (6)
    
    Form of Common Stock Certificate4.3
    (5)
    
    Loan and Security Agreement, dated as of May 31, 2007 by and between BlueCrest
Capital Finance, L.P. and the registrant10.1**
    (1)
    
    1999 Officers and Employees Stock Option Plan10.2**
    (1)
    
    1999 Directors and Consultants Stock Option Plan10.3
    (1)
    
    Form of Option Agreement under Officers and Employees Stock Option Plan10.4
    (3)
    
    Form of Option Agreement under Directors and Consultants Stock Option Plan10.5
    (4)
    
    Consulting Agreement between the registrant and Richard Spencer III, dated March
18, 2004.10.6**
    (4)
    
    Employment Letter Agreement between the registrant and Scott Bromley, dated
August 24, 2006.10.7
    (1)
    
    Lease Agreement between the registrant and Sawgrass Business Plaza, LLC, as
amended, dated November 14, 2006.10.8
    (1)
    
    Asset Purchase Agreement between the registrant and Advanced Cardiovascular
Systems, Inc., dated June 24, 2003.10.9
    (4)
    
    Conditionally Exclusive License Agreement between the registrant, Dr. Peter Law
and Cell Transplants International, LLC, dated February 7, 2000, as amended.10.10
    (1)
    
    Intentionally omitted10.11
    (4)
    
    Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by and
between the registrant, Howard J. Leonhardt and Brenda Leonhardt10.12
    (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.10.13
    (4)
    
    Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by and
between the registrant and the R&A Spencer Family Limited Partnership10.14
    (4)
    
    Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by and
between the registrant and Magellan Group Investments, LLC10.15
    (4)
    
    Loan Agreement, dated as of June 1, 2007, by and between the registrant and Bank
of America, N.A.10.16
    (4)
    
    Warrant to purchase shares of the registrants common stock issued to Howard J.
Leonhardt and Brenda Leonhardt10.17
    (4)
    
    Warrant to purchase shares of the registrants common stock issued to Howard J.
Leonhardt and Brenda Leonhardt10.18
    (4)
    
    Warrant to purchase shares of the registrants common stock issued to William P.
Murphy Jr., M.D.10.19
    (4)
    
    Warrant to purchase shares of the registrants common stock issued to the R&A
Spencer Family Limited Partnership10.20
    (4)
    
    Material Supply Agreement, dated May 10, 2007, by and between the registrant and
Biosense Webster10.21
    (4)
    
    Supply and License Agreement, dated June 7, 2007, by and between the registrant
and BioLife Solutions, Inc.***10.22
    (5)
    
    Warrant to purchase shares of the registrants common stock issued to BlueCrest
Capital Finance, L.P.
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ExhibitNo.
    
    Exhibit Description10.23
    (6)
    
    Loan Guarantee, Payment and Security Agreement, dated as of September 12, 2007,
by and between the registrant and Samuel S. Ahn, M.D.10.24
    (6)
    
    Loan Guarantee, Payment and Security Agreement, dated as of September 12, 2007,
by and between the registrant and Dan Marino10.25
    (6)
    
    Warrant to purchase shares of the registrants common stock issued to Samuel S.
Ahn, M.D.10.26
    (6)
    
    Warrant to purchase shares of the registrants common stock issued to Dan Marino10.27
    (6)
    
    Loan Guarantee, Payment and Security Agreement, dated as of September 19, 2007,
by and between the registrant and Jason Taylor10.28
    (6)
    
    Warrant to purchase shares of the registrants common stock issued to Jason Taylor10.29
    (7)
    
    Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by
and between the registrant and Howard and Brenda Leonhardt10.30
    (7)
    
    Warrant to purchase shares of the registrants common stock issued to Howard and
Brenda Leonhardt10.31
    (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 Leonhardt10.32
    (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.31.1
    (8)
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 200231.2
    (8)
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section
302 of the Sarbanes-Oxley Act of 200232.1
    (8)
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 200232.2
    (8)
    
    Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section
906 of the Sarbanes-Oxley Act of 2002
 
 **
    
    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)
    
    Filed herewith 72




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SIGNATURES
  Bioheart, Inc.Date: November 15, 2007
    By:
    /s/ William H. KlineWilliam H. KlineChief Financial Officer and
Principal Financial Officer 73




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INDEX OF EXHIBITS
 ExhibitNo.
    
    Exhibit Description31.1
    
    
    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