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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended December 31, 2007
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 Commission File Number 001-33718
 BIOHEART, INC.
  Florida
    
    65-0945967(State or other jurisdiction of
    
    (I.R.S. Employer Identification No.)incorporation or organization)
 13794 NW 4thStreet, Suite 212, Sunrise, Florida
    
    33325(Address of principal executive offices)
    
    (Zip Code)
 (954) 835-1500
 None
 Common Stock, $0.001 Par Value
 o þ
 o þ
 þ o
 o
  Large accelerated filer o
    
    Accelerated filer
o
    
    Non-accelerated filer  
þ
    
    Smaller Reporting Company o
 o þ




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##### 



BIOHEART, INC. AND SUBSIDIARIES
 INDEX TO ANNUAL REPORT ON FORM 10-K
Fiscal Year Ended December 31, 2007
 PagePART IItem 1.
    
    Business
    
    
    2Item 1A.
    
    Risk Factors
    
    
    44Item 1B.
    
    Unresolved Staff Comments
    
    
    75Item 2.
    
    Properties
    
    
    75Item 3.
    
    Legal Proceedings
    
    
    75Item 4.
    
    Submission of Matters to a Vote of Security Holders
    
    
    76PART IIItem 5.
    
    Market for Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities
    
    
    77Item 6.
    
    Selected Financial Data
    
    
    79Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    80Item 7A.
    
    Quantitative and Qualitative Disclosures about Market Risk
    
    
    96Item 8.
    
    Financial Statements and Supplementary Data
    
    
    96Item 9.
    
    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
    
    
    96Item 9A(T).
    
    Controls and Procedures
    
    
    96Item 9B.
    
    Other Information
    
    
    96PART IIIItem 10.
    
    Directors, Executive Officers and Corporate Governance
    
    
    97Item 11.
    
    Executive Compensation
    
    
    97Item 12.
    
    Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
    
    
    97Item 13.
    
    Certain Relationships and Related Transactions, and Director Independence
    
    
    97Item 14.
    
    Principal Accounting Fees and Services
    
    
    97PART IVItem 15.
    
    Exhibits, Financial Statement Schedules
    
    
    98EX-31.1 Section 302 CEO CertificationEX-31.2 Section 302 CFO CertificationEX-32.1 Section 906 CEO CertificationEX-32.2 Section 906 CFO Certification
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PART I
 
 Item 1. Business
 Overview
    MyoCell
 ®
  2




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3




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Business Strategy
  
    
    Obtain initial regulatory approval of MyoCell by targeting patients with severe heart
damage.In July 2007, we treated the final patient in the SEISMIC Trial, which is comprised
of 40 patients, including 26 treated patients. If the final SEISMIC Trial data, expected to
be available at the end of March 2008, is generally consistent with the interim data, we
intend to seek, in the second quarter of 2008, approval from various European regulatory
bodies to market MyoCell to treat the Class III Subgroup. By targeting a class of patients
for whom existing therapies are very expensive, unavailable or not sufficiently effective,
we hope to expedite regulatory approval of MyoCell. Assuming our U.S. clinical trial
experience is comparable to our experience to date in European trials, we anticipate
utilizing a similar strategy in our efforts to secure U.S. regulatory approval of our lead
product candidate.
    
    Obtain regulatory approval of MyoCell to treat patients with less severe heart damage.
If we obtain initial regulatory approval of MyoCell for the Class III Subgroup, we intend
to continue to sponsor clinical trials in an effort to demonstrate that MyoCell should
receive regulatory approval to treat all patients in NYHA Class II or NYHA Class III heart
failure and, provided we believe we have a reasonable basis to support such an indication,
we intend to seek regulatory approval for these patients.
    
    Continue to develop our pipeline of cell-based therapies and related devices for the
treatment of chronic and acute heart damage.In parallel with our efforts to secure
regulatory approval of MyoCell, we intend to continue to develop and test other product
candidates for the treatment of chronic and acute heart damage. These efforts are expected
to initially focus on our Bioheart Acute Cell Therapy, TGI 1200, MyoCell SDF-1, MyoCath and
MyoCath II product candidates.
    
    Develop our sales and marketing capabilities.In advance of U.S. regulatory approval of
our lead product candidate, we intend to internally build a sales force which we anticipate
will market MyoCell primarily to interventional cardiologists.
    
    Continue to refine our MyoCell cell culturing processes.We are seeking to automate a
significant portion of our cell culturing processes in an effort to further reduce our
culturing costs and processing times. In addition, we are seeking to further optimize our
processing times by building our facilities, or contracting with a small number of cell
culturing facilities, in strategic regional locations.
    
    Expand and enhance our intellectual property rights.We intend to continue to expand and
enhance our intellectual property rights.
    
    License, acquire and/or develop complementary products and technologies.We intend to
strengthen and expand our product development efforts through the license, acquisition
and/or development of products and technologies that support our business strategy.
 Industry Background
 Myocardial Infarction (Heart Attack)
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Congestive Heart Failure (CHF)
  Classifying Heart Failure
    NYHAClass
    
    NYHA Functional Classification(1)
    
    Specific Activity Scale(2)(3)
    
    Current Standard of Treatment(4)I
    
    Symptoms only with above normal
physical activity
    
    Can perform more than 7 metabolic equivalents
    
    ACE Inhibitor, Beta-BlockerII
    
    Symptoms with normal physical activity
    
    Can perform more than 5 metabolic equivalents
    
    ACE Inhibitor, Beta-Blocker, DiureticsIII
    
    Symptoms with minimal physical activity
    
    Can perform more than 2 metabolic equivalents
    
    ACE Inhibitor, Beta-Blocker, Diuretics, Digoxin, Bi-ventricular pacersIV
    
    Symptoms at rest
    
    Cannot perform more than 2 metabolic equivalents
    
    ACE Inhibitor, Beta-Blocker, Diuretics, Digoxin, Hemodynamic Support, Mechanical Assist Devices, Bi-ventricular pacers, Transplant
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(1)
    
    Symptoms include fatigue, palpitations, shortness of breath and chest pain; normal activity
is equivalent to walking one flight of stairs or several blocks.(2)
    
    Based upon the Goldman Activity Classification of Heart Failure, which classifies severity of
heart failure based on estimated metabolic cost of
various activities; the four classes of the Goldman Activity Classification system correlate to
the NYHA Classes.(3)
    
    7 metabolic equivalents = shovel snow, carry 24 lbs. up 8 stairs, recreational sports; 5
metabolic equivalents = garden, rake, dance, walk 4 mph on level ground, have intercourse; 2
metabolic equivalents = shower without stopping, strip and make bed, dress without stopping.(4)
    
    Source: American College of Cardiology/ American Heart Association 2005 Guideline Update for
the Diagnosis and Management of Chronic Heart Failure in the Adult. Diagnosis and Management of Heart Failure
  Drug Therapies.
 Bi-ventricular Pacers.
 Implantable Cardioverter Defibrillators.
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Heart Transplantation and Other Surgical Procedures.
  Ventricular Assist Devices.
  7




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Our Proposed Solution
  MyoCell
   
    
    the engrafted muscle tissue can contract in unison with the other muscles in the heart
by stretching or by the channeling of electric currents;
    
    the myoblasts acquire certain characteristics of heart muscle or fuse with them; and/or
    
    the injected myoblasts release various proteins that indirectly result in a limit on
further scar tissue formation.
    
    
    transport muscle tissue and cultured cells;
    
    disassociate muscle tissue with manual and chemical processes;
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
    
    separate myoblasts from other muscle cells;
    
    culture and grow myoblasts;
    
    identify a cell population with the propensity to engraft, proliferate and adapt to the
cardiac environment, including areas of scar tissue; and
    
    maintain and test the cell quality and purity.
  
    
    package the cultured cells in a manner that facilitates shipping and use by the
physician administering MyoCell;
    
    methods of using MyoCath;
    
    the use of an injectate media that assists in the engraftment of myoblasts;
    
    cell injection techniques utilizing contrast media to assist in the cell injection
process; and
    
    cell injection protocols related to the number and location of injections.
   Clinical Trials and Planned Clinical Trials of MyoCell
  
 U.S. Focused Clinical Trials
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Number of
    
    Clinical TrialClinical Trial
    
    Patients
    
    Sites
    
    Objective
    
    StatusMARVEL
(Phase II/III 
Clinical Trial)
    
    330 
anticipated,
including
110
controls
    
    20 sites in the
United States and
Canada and up to
15 sites in Europe
anticipated
    
    Designed to be a
double-blind,
randomized,
placebo-controlled,
multicenter trial
to evaluate the
safety and efficacy
of MyoCell
delivered via
MyoStar
    
    MyoCell
implantation
procedure completed
on first patient in
October 2007;
six-month interim
data anticipated in
the second quarter
of 2009 and final
trial results
anticipated in the
fourth quarter of
2009MYOHEART
(Phase I Clinical 
Trial)
    
    
    20
    
    
    5 sites in the
United States
    
    Phase I dose
escalation study to
assess safety,
feasibility and
efficacy of MyoCell
delivered via
MyoCath
    
    Trial commenced in
2003; treatment of
all 20 patients
completed in
October 2006; final
twelve-month data
presented in
January 2008
 European Clinical Trials
 Number of
    
    Clinical TrialClinical Trial
    
    Patients
    
    Sites
    
    Objective
    
    StatusSEISMIC
(Phase II 
Clinical Trial)
    
    40, including
14
controls
    
    12 sites in the
Netherlands,
Germany, Belgium,
Spain, Poland and
the United Kingdom
    
    Phase II European
study to assess the
safety and efficacy
of MyoCell
delivered via
MyoCath
    
    Trial commenced in
November 2005;
treatment of all
patients completed
in July 2007; final
results anticipated
at the end of March
2008Phase I/ II 
Clinical Trial
    
    
    15
    
    
    3 sites in the
Netherlands,
Germany and Italy
    
    Phase I/II European
study to assess the
safety and efficacy
of MyoCell
    
    Trial commenced in
2002; twelve-month
follow-up completed
in June 2004Netherlands 
Pilot Trial
    
    
    5
    
    
    1 site in the
Netherlands
    
    Pilot study to
assess safety and
feasibility of
MyoCell
    
    Trial commenced in
2001; six-month
follow- up
completed in
October 20032002 Trial
    
    
    3
    
    
    1 site in the
Netherlands
    
    Designed to
evaluate the safety
and efficacy of
MyoCell delivered
via the TransAccess
catheter
    
    Trial commenced in
2002; discontinued
upon
Transvasculars
acquisition by
Medtronic
 Other Clinical Trials
 Number of
    
    Clinical TrialClinical Trial
    
    Patients
    
    Sites
    
    Objective
    
    StatusPartial 
Reimbursement 
Registry Studies
    
    Up to 10
in the next
two years
    
    6 sites in Korea,
Mexico,
Switzerland, The
Bahamas, Singapore
and South Africa
anticipated
    
    Designed to
generate additional
safety and efficacy
data and revenues
    
    Requisite
regulatory approval
to conduct trials
received at all
sites; contracts in
place with an
institution in each
of Mexico, the
Bahamas,
Switzerland and
Korea; MyoCell
implantation
procedure completed
for four patients
in Korea and one
patient in Mexico
 Metrics Used to Evaluate Safety and Efficacy of Heart Failure Treatments
  Metric
    
    DescriptionNYHA Class
    
    The NYHA heart failure classification system is a
functional and therapeutic classification system
based on how much cardiac patients are limited
during
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Metric
    
    Descriptionphysical activity.Six-Minute Walk Distance
    
    Six-Minute Walk Distance is an objective
evaluation of functional exercise capacity which
measures the distance a patient can walk in six
minutes. The distance walked during this test has
been shown to correlate with the severity of
heart failure.LVEF
    
    LVEF is a measure of the hearts efficiency and
can be used to estimate the function of the left
ventricle, which pumps blood to the rest of the
body. The LVEF is the amount of blood pumped
divided by the amount of blood the ventricle
contains. A normal LVEF is more than 55% of the
blood volume. Damage to the heart impairs the
hearts ability to efficiently pump and therefore
reduces LVEF.Quality of Life
    
    Quality of Life is evaluated by patient
questionnaire, which measures subjective aspects
of health status in heart failure patients.Number of Hospital
Admissions and Mean
Length of Stay
    
    The Number of Hospital Admissions and Mean Length
of Stay measure the aggregate number of times
that a patient is admitted to the hospital during
a defined period and the number of days a patient
remains in the hospital during each such
admission.Total Days Hospitalized
    
    The Total Days Hospitalized measures the
aggregate number of days a patient is admitted to
the hospital during a defined period.End-Systolic Volume
    
    End-Systolic Volume is a measurement of the
adequacy of cardiac emptying, related to the
function of the heart during contraction.End-Diastolic Volume
    
    End-Diastolic Volume is the amount of blood in
the ventricle immediately before a cardiac
contraction begins and is used as a measurement
of the function of the heart at rest.LV Volume
    
    Left Ventricular Volume, or LV Volume, is
measured in terms of left ventricular
End-Diastolic Volume and left ventricular
End-Systolic Volume. Both measure the reduction
in volume of blood in the left ventricle of the
heart following expansion and contraction,
respectively. Reduction in volume generally is
reflective of positive ventricular remodeling and
improvement in the hearts ability to circulate
oxygenated blood through the arteries.Wall Motion
    
    Wall Motion is a test designed to show whether
the heart is receiving adequate quantities of
oxygen-rich blood. Wall motion is generally
measured by a stress echocardiography test.Cardiac Output
    
    Cardiac Output is a measure of the amount of
blood that is pumped by the heart per unit time,
measured in liters per minute.BNP Level
    
    B-Type Natriuretic Peptide, or BNP, is a
substance secreted from the ventricles or lower
chambers of the heart in response to changes in
pressure that occur when heart failure develops
and worsens. The level of BNP in the blood
increases when heart failure symptoms worsen and
decreases when the heart failure condition is
stable.
 MARVEL Phase II/III Clinical Trial in the United States, Canada and certain countries in
Europe
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Primary Safety
    
    Primary Efficacy
    
    Secondary Efficacy
    
    Tertiary EfficacyEndpoint
    
    Endpoints
    
    Endpoints
    
    EndpointsNumber of serious
adverse events in
treatment group as
compared to control
group
    
    Change in
Six-Minute Walk
Distance from
baseline to six
months as compared
to control group,
or 
Quality of Life
scores assessed
using Minnesota
Living with Heart
Failure
questionnaire from
baseline to six
months as compared
to control group
    
    Total Days
Hospitalized in
treatment group as
compared to control
group 
Cause-specific
hospitalizations in
treatment group as
compared to control
group 
Proportion of
patients with an
improved NYHA Class
from baseline to
six months as
compared to control
group 
Total days alive
out of hospital
over the six-month
study period
Change in LVEF from
baseline to six
months as compared
to control group 
Change in LV Volume
and wall motion
from baseline to
six months as
compared to control
group 
Change in BNP Level
from baseline to
six months as
compared to control
group
    
    Total cost and
healthcare
utilization within
six months
Time to death or
CHF hospitalization
Change in degree of
mitral
regurgitation from
baseline to six
months
Change in
Six-Minute Walk
Distance from
baseline to three
months as compared
to control group
Quality of Life
scores assessed
using Minnesota
Living with Heart
Failure
questionnaire from
baseline to three
months as compared
to control group
Proportion of
patients with
improved NYHA Class
from baseline to
three months as
compared to control
group
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MYOHEART Phase I Dose Escalation Clinical Trial in the United States
     Six-Minute Walk Distance:
 
    
    for the 18 surviving patients able to complete the test at three months, patients
treated in the first, second, third and fourth cohorts demonstrated a 6%, 10%, 22% and 13%
respective improvement relative to their cohort baseline in their mean Six-Minute Walk
Distance at three months as depicted in the chart below; and
 
 
    
    for the 15 surviving patients able to complete the test at six months, patients treated
in the first, second, third and fourth cohorts demonstrated a 5%, 23%, 7% and 10%
respective improvement relative to their cohort baseline in their mean Six-Minute Walk
Distance at six months as depicted in the chart below.
 
 
    
    for the 17 surviving patients able to complete the test at twelve months, patients
treated in the first, second, third and fourth cohorts demonstrated a 11%, 4%, -3% and 36%
respective improvement relative to their cohort baseline in their mean Six-Minute Walk
Distance at twelve months as depicted in the chart below.
 
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Quality of Life
  
 
 LVEF
  
 
  Six Minute Walk Distance
    
    Quality of Life
    
    LVEFBaseline to 3
    
    Baseline to
    
    Baseline to
    
    Baseline to 6
    
    Baseline to 3
    
    Baseline to 6Months
    
    6 Months
    
    3 Months
    
    Months
    
    Months
    
    MonthsImproved
    
    
    83
    %
    
    
    67
    %
    
    
    84
    %
    
    
    83
    %
    
    
    63
    %
    
    
    61
    %No Change
    
    
    0
    %
    
    
    7
    %
    
    
    5
    %
    
    
    0
    %
    
    
    5
    %
    
    
    11
    %Worsened
    
    
    17
    %
    
    
    26
    %
    
    
    11
    %
    
    
    17
    %
    
    
    32
    %
    
    
    28
    %
   SEISMIC Phase II clinical trial in Europe
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Six-Minute Walk Distance
  15




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Six-Minute Walk Distance Data (Meters)Treatment Group
    
    Treatment Group
    
    Control Group Subset
    
    Control GroupSubset Baseline
    
    Follow-Up Data
    
    Baseline
    
    Follow-Up DataThree-Month Data# of Follow-Up Patients
    
    
    17
    
    
    
    17
    
    
    
    9
    
    
    
    9Mean
    
    
    414 ± 84.7
    
    
    
    470 ± 70.7
    
    
    
    397 ± 132.7
    
    
    
    448 ± 99.3Median
    
    
    437 ± 84.7
    
    
    
    471 ± 70.7
    
    
    
    430 ± 191
    
    
    
    446 ± 99.3Six-Month Data# of Follow-Up Patients
    
    
    13
    
    
    
    13
    
    
    
    7
    
    
    
    7Mean
    
    
    419 ± 90.4
    
    
    
    461 ± 89.6
    
    
    
    446 ± 88.6
    
    
    
    484 ± 226.0Median
    
    
    437 ± 90.4
    
    
    
    477 ± 89.6
    
    
    
    430 ± 88.6
    
    
    
    432 ± 226.0
 NYHA Class
  NYHA Class DataTreatment Group
    
    Treatment Group
    
    Control Group
    
    Control GroupSubset Baseline
    
    Follow-Up Data
    
    Subset Baseline
    
    Follow-Up DataThree-Month Data# of Follow-Up Patients
    
    
    17
    
    
    
    17
    
    
    
    10
    
    
    
    10Mean
    
    
    2.4 ± 0.51
    
    
    
    2.2 ± 0.53
    
    
    
    2.2 ± 0.42
    
    
    
    2.4 ± 0.52Median
    
    
    2.0 ± 0.51
    
    
    
    2.0 ± 0.53
    
    
    
    2.0 ± 0.42
    
    
    
    2.0 ± 0.52Six-Month Data# of Follow-Up Patients
    
    
    13
    
    
    
    13
    
    
    
    7
    
    
    
    7Mean
    
    
    2.5 ± 0.52
    
    
    
    2.2 ± 0.69
    
    
    
    2.3 ± 0.46
    
    
    
    2.5 ± 0.53Median
    
    
    3.0 ± 0.52
    
    
    
    2.0 ± 0.69
    
    
    
    2.0 ± 0.38
    
    
    
    2.0 ± 0.53
  LVEF
  LVEF DataTreatment Group
    
    Treatment Group
    
    Control Group Subset
    
    Control GroupSubset Baseline
    
    Follow-Up Data
    
    Baseline
    
    Follow-Up DataThree-Month Data# of Follow-Up Patients
    
    
    13
    
    
    
    13
    
    
    
    8
    
    
    
    8Mean
    
    
    31.1 ± 10.1
    
    
    
    29.3 ± 8.0
    
    
    
    32.8 ± 11.1
    
    
    
    35.8 ± 12.5Median
    
    
    28.0 ± 10.1
    
    
    
    27.0 ± 8.0
    
    
    
    32.5 ± 11.1
    
    
    
    38.0 ± 12.5Six-Month Data# of Follow-Up Patients
    
    
    7
    
    
    
    7
    
    
    
    6
    
    
    
    6Mean
    
    
    31.7 ± 11.5
    
    
    
    28.0 ± 14.7
    
    
    
    33.8 ± 12.5
    
    
    
    32.7 ± 9.3Median
    
    
    28.0 ± 11.5
    
    
    
    25.0 ± 14.7
    
    
    
    34.0 ± 12.5
    
    
    
    31.0 ± 9.3
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Full Population Baseline DataTreatment Group
    
    Control Group# of Patients
    
    
    22
    
    
    
    13Six Minute Walk (Meters)Mean
    
    
    414 ± 98.5
    
    
    
    430 ± 191Median
    
    
    437 ± 98.5
    
    
    
    430 ± 191NYHA ClassMean
    
    
    2.4 ± 0.49
    
    
    
    2.2 ± 0.44Median
    
    
    2.0 ± 0.49
    
    
    
    2.0 ± 0.44LVEFMean
    
    
    30.0 ± 9.3
    
    
    
    33.8 ± 12.9Median
    
    
    28.5 ± 9.3
    
    
    
    32.5 ± 12.9
      17




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Phase I/II Clinical Trials in Europe
 Netherlands Pilot Trial
    
    
    100% and 60% of the patients improved one NYHA Class at three months and six months
following therapy, respectively;
    
    40% of the patients improved two NYHA Classes at both three months and six months
following therapy;
    
    100% of the patients LVEF improved by at least 4% at three months following therapy;
and
    
    60% of the patients LVEF improved by at least 20% at six months following therapy.
   Phase I/II Clinical Trial
   18




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Endpoints
    
    Baseline
    
    3-month
    
    p-value
    
    6-month
    
    p-value
    
    12-month
    
    p-valueNYHA Class(1)
    
    
    2.8
    
    
    
    2.1
    
    
    
    
    
    
    
    1.6
    
    
    
    
    
    
    
    1.9LVEF(2)
    
    
    36.3 ± 8.0
    
    
    
    34.3 ± 9.1
    
    
    
    0.3
    
    
    
    34 ± 7.8
    
    
    
    0.3
    
    
    
    38.7 ± 9.4
    
    
    
    0.4End-Diastolic Volume(2)
    
    
    225 ± 83
    
    
    
    186 ± 59
    
    
    
    0.03
    
    
    
    214 ± 37
    
    
    
    0.7
    
    
    
    197 ± 30
    
    
    
    0.4End-Systolic Volume(2)
    
    
    145 ± 64
    
    
    
    124 ± 49
    
    
    
    0.05
    
    
    
    143 ± 37
    
    
    
    0.9
    
    
    
    122 ± 29
    
    
    
    0.2Cardiac output(3)
    
    
    4.6 ± 0.91
    
    
    
    N/A
    
    
    
    N/A
    
    
    
    5.6 ± 1.6
    
    
    
    0.06
    
    
    
    5.4 ± 1.5
    
    
    
    0.05Wall motion as measured by stress
echocardiography at
rest(1)
    
    
    3.0 ± 0.5
    
    
    
    2.9 ± 0.6
    
    
    
    0.65
    
    
    
    2.8 ± 0.6
    
    
    
    0.95
    
    
    
    2.8 ± 0.7
    
    
    
    0.70Wall motion as measured by stress
echocardiography at low
dose(3)
    
    
    2.8 ± 0.4
    
    
    
    2.6 ± 0.5
    
    
    
    0.65
    
    
    
    2.5 ± 0.5
    
    
    
    0.95
    
    
    
    2.5 ± 0.6
    
    
    
    0.70
 
 (1)
    
    Matched data provided for 13 of the 15 patients.(2)
    
    Matched data provided for eight of the 15 patients.(3)
    
    Matched data provided for five of the 15 patients.   
    
    85% and 62% of the 13 surviving patients improved one NYHA Class at six months and
twelve months following therapy, respectively;
    
    31% and 23% of the 13 surviving patients improved two NYHA Classes at six months and
twelve months following therapy, respectively;
    
    of the eleven patients for which we have six-month data regarding LVEF, 36% of such
patients LVEF improved by at least 4% and 9% of such patients LVEF improved by at least
20% at six months following therapy; and
    
    of the twelve patients for which we have twelve-month data regarding LVEF, 50% of such
patients LVEF improved by at least 4% and 17% of such patients LVEF improved by at least
20% at twelve months following therapy.
   19




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2002 Trial
  Paid Registry Studies
   Other Trials of Myoblast Implantation in the Heart
   MG Therapeutics Myoblast Autologous Grafting in Ischemic Cardiomyopathy (MAGIC) Trial
   20




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Pipeline
  Candidate
    
    Proposed Use or Indication
    
    Status/Phase
    
    CommentsBioheart Acute Cell 
Therapy
    
    Acute, autologous cell
therapy treatment for
acute MI
    
    Preclinical
    
    Animal studies
completed in the
fourth quarter of
2007; subject to
favorable test
results and
completion by
Tissue Genesis of
the Device Master
File for TGI 1200
in the second
quarter of 2008,
anticipate filing
IND application in
the third quarter
of
 21




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Candidate
    
    Proposed Use or Indication
    
    Status/Phase
    
    Comments2008TGI 1200 Adipose 
Tissue Processing 
System
    
    Fully automated device
for the rapid processing
of patient derived fat
tissue
    
    Tissue Genesis
performing
validation studies
and preparing
Device Master File
    
    Upon approval of
IND application for
Bioheart Acute Cell
Therapy, anticipate
seeking cost
reimbursement for
supplying TGI 1200
and related
disposable kits for
use in connection
with Bioheart Acute
Cell Therapy
clinical trials,
Tissue Genesis
expects to file for
510(k) approval in
the third quarter
of 2008MyoCell SDF-1
    
    Autologous cell therapy
treatment for severe
chronic damage to the
heart; cells modified to
express angiogenic
factors
    
    IND application
filed in May 2007
    
    Assuming approval
of IND application
and receipt of
grant proceeds,
anticipate
commencing Phase I
clinical trials
during the second
quarter of 2008MyoCath
    
    Disposable
endoventricular catheter
used for the delivery of
biologic solutions to the
myocardium
    
    Used in European
Phase II clinical
trials of MyoCell;
used in Phase I
clinical trials of
MyoCell
    
    Anticipate seeking
certification to
apply the CE Mark
for commercial sale
and distribution
within the European
Union in 2008
provided we enter
into a long term
manufacturing
contract with an
entity that
satisfies the
requirements of the
International
Standards
OrganizationMyoCath II
    
    Second generation
disposable
endoventricular catheter
modified to provide
multidirectional cell
injection and used for
the delivery of biologic
solutions to the
myocardium
    
    Preclinical
    
    Laboratory studies
currently being
conducted;
commenced animal
studies in the
third quarter of
2007BioPace
    
    Treatment of chronic
abnormal heart rhythm due
to electrical
disturbances in the upper
chambers of the heart
    
    Preclinical
    
    Preclinical
development by
BioheartAlloCell
    
    Allogenic cell-therapy
treatment for severe
chronic damage to the
heart
    
    Preclinical
    
    Preclinical
development by
Bioheart
 Bioheart Acute Cell Therapy and TGI 1200 Adipose Tissue Processing System
   
    
    the TGI 1200 and certain disposable products used in conjunction with the TGI 1200, or
the TGI Licensed Products;
    
    the processes that use the TGI Licensed Products, or the TGI Licensed Processes; and
    
    the cells derived using the TGI Licensed Products and/or TGI Licensed Processes.
 22




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MyoCell SDF-1
    MyoCath and MyoCath II
 23




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BioPace
  Allocell
    Collaboration with Biosense Webster involving MyoStar and the MyoStar System
  24




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
    
    deliver MyoStar to us at an agreed upon price as and when required for the MARVEL Trial;
    
    facilitate our purchasing access to its FDA approved mapping and reference catheters,
Nogastar and Reference Patch, respectively by setting us up as an approved purchaser; and
    
    providing technical training on the MyoStar System.
   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
 Research
   
    
    preclinical small and large animal testing for lead product candidate enhancements and
pipeline product candidate development; and
    
    contract research for clinical and preclinical testing of our pipeline product
candidates.
 Cell Culturing
   
    
    culture in excess of 800 million myoblast cells per biopsy; and
 25




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
    
    produce cell cultures with a high percentage of viable myoblast cells.
      Supply Agreements
  Third Party Reimbursement
  26




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Research Grants
  Patents and Proprietary Rights
    Expiration Date AssumingPatent
    
    Subject Matter
    
    Related Product(s)
    
    No Patent ExtensionUS5,130,141
    
    Compositions for
and methods of
treating muscle
degeneration and
weakness
    
    MyoCell; MyoCell
SDF-1
    
    July 14, 2009US5,972,013
    
    Direct Pericardial
Access Device with
Deflecting
Mechanism and
Method
    
    MyoCath; MyoCath II
    
    Sep. 19, 2017US6,241,710
    
    Hypodermic Needle
with Weeping Tip
and Method of Use
    
    MyoCath II
    
    Dec. 20, 2019
 27




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Expiration Date AssumingPatent
    
    Subject Matter
    
    Related Product(s)
    
    No Patent ExtensionUS6,547,769
    
    Catheter Apparatus
with Weeping Tip
and Method of Use
    
    MyoCath II
    
    Dec. 20, 2019US6,855,132
    
    Apparatus with
Weeping Tip and Method of Use
    
    MyoCath II
    
    Dec. 20, 2019 (with
101 day adjustment: Mar. 30, 2020)US6,949,087
    
    Apparatus with
Weeping Tip and
Method of Use
    
    MyoCath II
    
    Dec. 20, 2019
 Patent Application
    
    Subject Matter
    
    Related Product(s)WO 04/056186
(US03/34411)(PCT)
    
    Cell-Based VEGF Delivery
    
    MyoCell SDF-1US2004/0037811
    
    Stromal Cell-Derived Factor-1 Mediates Stem
Cell Homing and Tissue Regeneration in Ischemic
Cardiomyopathy
    
    MyoCell SDF-1WO 04/017978
(US03/26013) (PCT)
    
    Stromal Cell-Derived Factor-1
Mediates Stem Cell
Homing and Tissue Regeneration in Ischemic
Cardiomyopathy
    
    MyoCell SDF-1
     
    
    defend and enforce our patents and/or compel the owners of the patents licensed to us to
defend and enforce such
patents;
    
    obtain additional patent and other proprietary protection for MyoCell and our other
product candidates;
    
    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;
    
    preserve trade secrets and other intellectual property rights relating to our product
candidates; and
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
    
    operate without infringing the patents and proprietary rights of third parties.
     Technology In-Licenses and Other Agreements
 Primary MyoCell Patent
   29




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We have licensed and therefore do not own the intellectual property that is critical to
our business...
   Primary MyoCath Patent
     30




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MyoCell SDF-1 Patents
     MilestoneMilestone Activity
    
    Payment
    
    Target Completion DateFDA or foreign equivalent
approval of an IND
application covering
product candidates derived
from the Cleveland Clinic
IP
    
    $
    200,000
    
    
    60 days following completion
of FDA required safety study,
or IND Target Completion DateFull enrollment of an FDA
approved Phase I clinical
trial for the first product
candidate derived from the
Cleveland Clinic IP
    
    $
    300,000
    
    
    One year following IND Target
Completion DateFull enrollment of the last
clinical trial needed prior
to a Biologic License
Application submission to
the FDA or foreign
equivalent related to the
first product candidate
derived from the Cleveland
Clinic IP
    
    $
    750,000
    
    
    Two years following IND
Target Completion DateFirst commercial sale of an
FDA approved product
derived from the Cleveland
Clinic IP
    
    $
    1,000,000
    
    
    Four years following IND
Target Completion Date
   31




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MyoCath II Patents
    TGI 1200 Patent
  32




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
    
    the TGI 1200 and certain disposable products used in conjunction with the devices, or,
the TGI Licensed Product Candidates;
    
    processes that use the TGI Licensed Product Candidates, or the TGI Licensed Processes;
and
    
    the cells derived using the TGI Licensed Product Candidates and/or the TGI Licensed
Processes, or the TGI Licensed Cells.
      
    
    $500,000 within two years of the Effective Date;
    
    $1,250,000 within three years of the Effective Date;
    
    $2,000,000 within four years of the Effective Date; and
    
    an additional $100,000 each year after four years of the Effective Date.
  33




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
    
    617,780 shares will vest upon our successful completion of any internationally
recognized Phase I clinical trial of a TGI Licensed Product Candidate;
    
    463,335 shares will vest upon the earlier of our net sales of $10 million of TGI
Licensed Product Candidates or our receipt of $2 million of net profits from the sale of
TGI Licensed Product Candidates; and
    
    463,335 shares will vest upon the earlier of our net sales of $100 million of TGI
Licensed Product Candidates or our receipt of $20 million of net profits from the sale of
TGI Licensed Product Candidates.
    
    
    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
    
    obtains for us the right to continue using such item.
  Other License Agreements
  34




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Sales and Marketing
    Collaborative Arrangements for Seeking Regulatory Approvals and Distribution of Products Outside of
the United States and Europe
 Japan
    35




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Korea
      Government Regulation
   36




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FDA Regulation  Approval of Biological Products
  
    
    completion of preclinical studies according to good laboratory practice regulations;
    
    the submission of an IND application to the FDA, which must become effective before
human clinical trials may commence;
    
    performance of adequate and well-controlled human clinical trials according to good
clinical practices to establish the safety and efficacy of the proposed biological product
for its intended use;
    
    satisfactory completion of an FDA pre-approval inspection of the manufacturing facility
or facilities at which the product is manufactured, processes, packaged or held to assess
compliance cGMP; and
    
    the submission to, and review and approval by, the FDA of a biologics license
application, or BLA, that includes satisfactory results of preclinical testing and clinical
trials.
        37




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FDA Regulation  Approval of Medical Devices
      38




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FDA Regulation  Post-Approval Requirements
    International Regulation
    39




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Competition
   40




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
    
    the safety and efficacy of our product candidates;
    
    the freedom to develop and commercialize cell-based therapies, including appropriate
patent and proprietary rights protection;
    
    the timing and scope of regulatory approvals;
    
    the cost and availability of our products;
    
    the availability and scope of third party reimbursement programs; and
    
    the availability of alternative treatments.
  
    
    if MyoCell is safe and effective;
    
    the timing and scope of regulatory approvals; and
    
    the availability and scope of third party reimbursement programs.
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We face
intense competition in the biotechnology and healthcare industries
 Our Executive Officers
  Name
    
    Age
    
    Position with the CompanyWilliam M. Pinon
    
    
    44
    
    
    President Chief Executive Officer and DirectorWilliam H. Kline
    
    
    63
    
    
    Chief Financial OfficerHoward J. Leonhardt
    
    
    46
    
    
    Chairman of the Board and Chief Technology OfficerRichard T. Spencer IV
    
    
    35
    
    
    Vice President of Clinical Affairs and Physician
RelationsNicholas M. Burke
    
    
    36
    
    
    Vice President of Financial OperationsCatherine Sulawske-Guck
    
    
    39
    
    
    Vice President of Administration and Human Resources
 William M. Pinon. tm
 William H. Kline.
 42




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Howard J. Leonhardt.
 Richard T. Spencer IV.
 Nicholas M. Burke, C.P.A.
 Catherine Sulawske-Guck.
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Item 1A. Risk Factors
 s
 Risks Related to Our Financial Position and Potential Need for Additional Financing
 We will need to secure additional financing within the next five months in order to continue to
finance our operations and will need substantial additional capital to develop our business and
product candidates as otherwise planned. We may be unable to secure additional capital when
needed. 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.
 We have licensed and
therefore do not own the intellectual property that is critical to our business
   
    
    resolution, whether by mutual agreement or court order, of our payment obligations under
the Law License Agreement and the timing of such payments;
    
    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;
    
    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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We have a
substantial amount of debt Our outstanding indebtedness to BlueCrest Capital Finance,
L.P. imposes certain restrictions
  Our independent registered public accounting firm has expressed substantial doubt about our ability
to continue as a going concern.
  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.
  45




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
    
    commence full scale enrollment of 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 SDF-1;
    
    seek to raise additional capital;
    
    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.
    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.
  46




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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 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;
    
    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
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.
  47




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
    
    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;
    
    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.
 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.
 48




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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.
     
    
    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;
 49




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
    
    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.
   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.
  50




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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 cell-based 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.
 ® ®
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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®
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.
   52




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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.
  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.
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
    
    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;
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
    
    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.
  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.
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
    
    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;
    
    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 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.
  62




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
    
    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;
    
    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.
   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.
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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 the processes 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.
  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.
 64




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Our patents may not be valid or enforceable, and may be challenged by third parties.
   Issued patents and patent licenses may not provide us with any competitive advantage or provide
meaningful protection against competitors.
  65




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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.
    66




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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.
   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.
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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.
   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.
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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.
  
    
    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 operated as a private company until October 2007, we have limited 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.
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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.
  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.
  Risks Related to Our Common Stock
 An active, liquid and orderly trading market for our common stock may not develop.
  71




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
    
    publications of clinical trial results by clinical investigators or others about our
products and competitors products and/or our industry;
    
    changes by securities analysts in financial estimates of our operating results and the
operating results of our competitors;
    
    publications of research reports by securities analysts about us, our competitors or our
industry;
    
    fluctuations in the valuation of companies perceived by investors to be comparable to
us;
    
    actual or anticipated fluctuations in our quarterly or annual operating results;
    
    retention and departures of key personnel;
    
    our failure or the failure of our competitors to meet analysts projections or guidance
that we or our competitors may give to the market;
    
    strategic decisions by us or our competitors, such as acquisitions, divestitures,
spin-offs, joint ventures, strategic investments or changes in business strategy;
    
    the passage of legislation or other regulatory developments affecting us or our
industry;
    
    speculation in the press or investment community; and
    
    natural disasters, terrorist acts, acts of war or periods of widespread civil unrest.
  If a substantial number of shares become available for sale and are sold in a short period of time,
the market price of our common stock could decline.
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Our Chairman of the Board 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 Chairman of the Board and/or Chief Technology Officer; and
    
    upon our request, Mr. Leonhardt could agree to accept shares of our 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.
  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.
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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 1B. Unresolved Staff Comments
  
 Item 2. Properties
  
    
    our MyoCell cell culturing facility for supply within the United States; and
    
    a fully equipped cell culturing laboratory where we perform experimental work in the
areas of cell culturing, cell engraftment, and other advanced research projects related to
our core business.
  
 Item 3. 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. The 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.
   75




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Item 4. Submission of Matters to a Vote of Security Holders
  76




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PART II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
 Market Information
   Sales PricePeriod
    
    High
    
    LowFebruary 19, 2008 through March 20, 2008
    
    $
    5.25
    
    
    $
    3.61
 Holders
  Dividends
  Securities Authorized For Issuance Under Equity Compensation Plans
  Weighted-
    
    Number of securitiesNumber of securities
    
    average exercise
    
    remaining availableto be issued upon
    
    price of
    
    for issuance underexercise of
    
    outstanding
    
    equity compensationoutstanding options
    
    options
    
    plansEquity compensation
plans approved by
security holders
(1)
    
    
    2,160,199
    
    
    $
    5.34
    
    
    
    895,532Equity compensation
plans not approved
by security holders
(2)
    
    
    2,251,836
    
    
    $
    7.52
    
    
    
    0
 
 (1)
    
    Consists of our 1999 Officers and Employees Stock Option Plan and our 1999 Directors and
Consultants Stock Option Plan(2)
    
    Includes: 
    
    a warrant issued to Tissue Genesis, Inc. to purchase 1,544,450 shares of our common
stock at $7.69 per share, which expires in December 2026 (See Note 3 Collaborative License
and Research/Development Agreementsof the Notes to the Consolidated Financial
Statements);
    
    warrants issued to the Guarantors in connection with the Bank of America Loan to
purchase an aggregate of 417,007 shares of our common stock at $7.69 per share, which
expire at various dates from May 2017 through
 77




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September 2017 (See Note 6 Notes Payable  Eight-Month Note Payable of the Notes to the
Consolidated Financial Statements);
 
    
    a warrant issued to one of our officers to purchase 188,423 shares of our common stock
at $5.67 per share, which expires in August 2016;
    
    a warrants issued to BlueCrest Capital in connection with the BlueCrest Loan to purchase
an aggregate of 65,030 shares of our common stock at $7.69 per share, which expire in May
2017 (See Note 6 Notes Payable  Three-Year Note Payable of the Notes to the Consolidated
Financial Statements);
    
    a warrant issued to a strategic partner to purchase 32,515 shares of our common stock at
$7.69 per share, which expires in February 2016; and
    
    a warrant issued to a consultant to purchase 4,411 shares of our common stock at $7.69
per share, which expires in March 2017.
 Recent Sales of Unregistered Securities
  Rule 701
   Issuer Purchases of Equity Securities
  Use of Proceeds
   
    
    we raised approximately $1.5 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 $4.3 million; and
    
    we generated approximately $4.6 million of cash proceeds from the offering, which is
approximately $3.1 million greater than the net proceeds of this offering due to our
payment of $3.1 million of various offering expenses prior the completion of the offering.
  78




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Item 6. Selected Financial Data
  Year Ended December 31,2003
    
    
    2004
    
    
    2005
    
    
    2006
    
    
    2007(In thousands, except per share data)Consolidated Statement of Operations
Data:Revenues
    
    $
    46
    
    
    $
    86
    
    
    $
    135
    
    
    $
    106
    
    
    $
    313Cost of sales
    
    
    30
    
    
    
    46
    
    
    
    87
    
    
    
    73
    
    
    
    66Gross profit
    
    
    16
    
    
    
    40
    
    
    
    48
    
    
    
    33
    
    
    
    247Expenses:Research and development
    
    
    3,502
    
    
    
    3,787
    
    
    
    4,534
    
    
    
    6,878
    
    
    
    11,314Marketing, general and administrative
    
    
    2,523
    
    
    
    1,731
    
    
    
    2,831
    
    
    
    6,372
    
    
    
    3,436Depreciation and amortization
    
    
    31
    
    
    
    34
    
    
    
    46
    
    
    
    91
    
    
    
    184Total expenses
    
    
    6,056
    
    
    
    5,552
    
    
    
    7,411
    
    
    
    13,341
    
    
    
    14,934Loss from operations
    
    
    (6,040
    )
    
    
    (5,512
    )
    
    
    (7,363
    )
    
    
    (13,308
    )
    
    
    (14,687
    )Net interest income (expense)
    
    
    2
    
    
    
    (7
    )
    
    
    36
    
    
    
    127
    
    
    
    (3,380
    )Loss before income taxes
    
    
    (6,038
    )
    
    
    (5,519
    )
    
    
    (7,327
    )
    
    
    (13,181
    )
    
    
    (18,067
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (6,038
    )
    
    $
    (5,519
    )
    
    $
    (7,327
    )
    
    $
    (13,181
    )
    
    $
    (18,067
    )Basic and diluted net loss per share
    
    $
    (0.75
    )
    
    $
    (0.60
    )
    
    $
    (0.69
    )
    
    $
    (1.10
    )
    
    $
    (1.37
    )Weighted average shares outstanding
- basic and diluted
    
    
    8,022
    
    
    
    9,189
    
    
    
    10,653
    
    
    
    12,015
    
    
    
    13,210
 As of December 31,2003
    
    2004
    
    2005
    
    2006
    
    2007(In thousands)Consolidated Balance Sheet Data:Cash and cash equivalents
    
    $
    635
    
    
    $
    182
    
    
    $
    5,158
    
    
    $
    5,025
    
    
    $
    5,492Working capital (deficit)
    
    
    (784
    )
    
    
    (2,000
    )
    
    
    4,210
    
    
    
    3,204
    
    
    
    (7,687
    )Total assets
    
    
    921
    
    
    
    729
    
    
    
    5,869
    
    
    
    6,508
    
    
    
    11,324Notes payable  current (a)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,671Note payable  long-term
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,943Deficit accumulated during the
development stage
    
    
    (37,877
    )
    
    
    (44,005
    )
    
    
    (51,332
    )
    
    
    (64,513
    )
    
    
    (82,580
    )Total shareholders equity (deficit)
    
    
    (554
    )
    
    
    (1,857
    )
    
    
    4,586
    
    
    
    4,311
    
    
    
    (5,505
    )
 
 (a)
    
    Subsequent to December 31, 2007, we entered into agreements to extend the maturity date of
the Bank of America Loan from January 31, 2008 to June 1, 2008. 79




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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis by our management of our financial condition and results
of operations should be read in conjunction with our consolidated financial statements and the
accompanying notes included in this annual report.
 Cautionary Statement Regarding Forward-Looking Statements
   Our Ability To Continue as a Going Concern
  Overview
  
    
    developing and engaging in clinical trials of our lead product candidate, MyoCell, and
our MyoCath product candidate;
    
    expanding our pipeline of complementary product candidates through internal development
and third party licenses;
    
    expanding and strengthening our intellectual property position through internal programs
and third party licenses; and
 80




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
    
    recruiting management, research and clinical personnel.
  
    
    obtain initial regulatory approval of MyoCell by targeting patients with severe heart
damage;
    
    obtain regulatory approval of MyoCell to treat patients with less severe heart damage;
    
    continue to develop our pipeline of cell-based therapies and related devices for the
treatment of chronic and acute heart damage;
    
    develop our sales and marketing capabilities in advance of regulatory approval, if any;
    
    continue to refine our MyoCell cell culturing processes to further reduce our costs and
processing times;
    
    expand and enhance our intellectual property rights; and
    
    license, acquire and/or develop complementary products and technologies.
     Financial Operations Overview
 Revenues
 81




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Cost of Sales
  Research and Development
     82




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Marketing, General and Administrative
  Stock-Based Compensation
    
    
    our financial position and historical financial performance;
    
    the illiquidity of our capital stock as a private company;
    
    arms length sales of our common stock;
    
    the development status of our product candidates;
    
    the business risks we face;
    
    vesting restrictions imposed upon the equity awards;
    
    an evaluation and benchmark of our competitors; and
    
    the prospects of a liquidity event, such as a public offering.
  Interest Expense
  83




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Critical Accounting Policies
  Stock-Based Compensation
 Accounting for Stock-Based
Compensation Accounting for Stock-Based Compensation
 Transition and Disclosure,
 Share-Based Payment
 Revenue Recognition
   84




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Research and Development Activities
  Results of Operations
  Comparison of Years Ended December 31, 2007 and December 31, 2006
 Revenues
  Cost of Sales
  Research and Development
  Marketing, General and Administrative
 85




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Interest Income
  Interest Expense
    Comparison of Years Ended December 31, 2006 and December 31, 2005
 Revenues
  Cost of Sales
  Research and Development
   86




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Marketing, General and Administrative
  Interest Income
  Liquidity and Capital Resources
   
    
    an increase in accrued expenses and deferred rent of $3.4 million; and
    
    an increase in accounts payable of $1.3 million.
     Existing Capital Resources and Future Capital Requirements
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We have licensed and therefore do
not own the intellectual property that is critical to our business
   
    
    costs related to our commencement of full scale enrollment of the MARVEL Trial;
    
    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;
    
    our obligations to make payments pursuant to license agreements upon achievement of
certain milestones, including a $3 million payment to Dr. Law; and
    
    costs associated with our establishment of sales and marketing capabilities to
commercialize products for which we obtain regulatory approval, if any.
  
    
    resolution, whether by mutual agreement or court order, of our payment obligations under
the Law License Agreement and the timing of such payments;
    
    the scope, rate of scientific progress, results and cost of our clinical trials and
other research and development activities;
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
    
    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;
    
    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.
 We have a substantial amount of debt Our outstanding indebtedness to BlueCrest Capital Finance, L.P. imposes certain
restrictions
 BlueCrest Loan
   89




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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 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.
   90




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##### Table of Contents



Bank of America Loan
      
    
    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).
 91




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##### Table of Contents




    
    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).
      92




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##### Table of Contents



Effects of Being a Public Company
    Contractual Obligations
  Payments due by periodLess Than
    
    
    1-3
    
    
    3-5
    
    
    More ThanContractual obligations
    
    Total
    
    
    1 Year
    
    
    Years
    
    
    Years
    
    
    5 YearsNotes payable, including interest (1)
    
    $
    10,862,000
    
    
    $
    7,610,000
    
    
    $
    2,168,000
    
    
    $
    1,084,000
    
    
    $
    Operating leases (2)
    
    
    270,000
    
    
    
    126,000
    
    
    
    144,000
    
    
    
    
    
    
    
    License and royalty fees (3)
    
    
    4,930,000
    
    
    
    3,460,000
    
    
    
    420,000
    
    
    
    1,050,000
    
    
    
    Total contractual obligations
    
    $
    16,062,000
    
    
    $
    11,196,000
    
    
    $
    2,732,000
    
    
    $
    2,134,000
    
    
    $
    
 
 (1)
    
    Includes principal and interest payments on the BlueCrest Loan and Bank of America Loan. The
BlueCrest Loan bears interest at an annual rate of 12.85%. At December 31, 2007 the BlueCrest
Loan had 30 remaining equal monthly principal and interest payments of $181,000. The Bank of
America Loan bears interest at an annual rate of prime plus 1.5%. Interest is payable by the
Guarantors six months following the date of the loan with the remainder payable upon maturity.
The Bank of America Loan is scheduled to mature on June 1, 2008. Total interest payable over
the term of this loan is estimated to be $440,000. We will be required to repay the Guarantors
with interest at an annual rate of prime plus 5.0% for payments made by them under the Bank of
America Loan once we have satisfied our obligations under the BlueCrest Loan.(2)
    
    Operating leases consist of facility and equipment lease agreements.(3)
    
    Includes amounts due under agreements with (i) Dr. Law and Cell Transplants International
and (ii) William Beaumont Hospital, which are described below.   93




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##### Table of Contents



We have licensed and therefore do not own the
intellectual property that is critical to our business
   Off-Balance Sheet Arrangements
  Recent Accounting Pronouncements
 Fair Value Measurements Effective Date of FASB Statement No. 157
 The Fair Value Option for Financial Assets and
Financial Liabilities
 94




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##### Table of Contents



Accounting for Nonrefundable Advance Payments for Goods or
Services Received for Use in Future Research and Development Activities
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 Share-Based
Payment Share-Based Payment
  95




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##### Table of Contents



Item 7A. Quantitative and Qualitative Disclosures About Market Risk
 Interest Rate Risk
   
 Item 8. Financial Statements and Supplementary Data
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
  
 Item 9A(T). Controls and Procedures
 Disclosure Controls and Procedures
  Changes In Internal Control Over Financial Reporting
   
 Item 9B. Other Information
  96




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##### Table of Contents



PART III
 
 Item 10. Directors, Executive Officers and Corporate Governance
  
 Item 11. Executive Compensation
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
  
 Item 13. Certain Relationships and Related Transactions, and Director Independence
  
 Item 14. Principal Accounting Fees and Services
  97




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##### Table of Contents



PART IV
 
 Item 15. Exhibits, Financial Statement Schedules
      ExhibitNo.
    
    Exhibit Description3.1(6)
    
    Amended and Restated Articles of Incorporation of the registrant, as amended.3.2(1)
    
    Amended and Restated Bylaws4.1(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)
    
    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 Leonhardt10.10(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 Leonhardt10.13(4)
    
    Warrant to purchase shares of the registrants common stock issued to Howard J. Leonhardt and
Brenda Leonhardt10.14(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 Partnership10.16(4)
    
    Material Supply Agreement, dated May 10, 2007, by and between the registrant and Biosense Webster10.17(4)
    
    Supply and License Agreement, dated June 7, 2007, by and between the registrant and BioLife
Solutions, Inc.***10.18(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 Marino10.21(6)
    
    Warrant to purchase shares of the registrants common stock issued to Samuel S. Ahn, M.D.
 98




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##### Table of Contents



ExhibitNo.
    
    Exhibit Description10.22(6)
    
    Loan Guarantee, Payment and Security Agreement, dated as of September 19, 2007, by and between
the registrant and Jason Taylor10.23(7)
    
    Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by and between the
registrant and Howard and Brenda Leonhardt10.24(7)
    
    Warrant to purchase shares of the registrants common stock issued to Howard and Brenda Leonhardt10.25(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 Leonhardt10.26(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.14.1(2)
    
    Code of Ethics for Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer
and persons performing similar functions14.2(2)
    
    Code of Business Conduct and Ethics31.1*
    
    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
 
 *
    
    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 99




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##### Table of Contents



SIGNATURES
  BIOHEART, INC.By:
    
    /s/ William M. PinonWilliam M. PinonPresident and Chief Executive OfficerDated: March 27, 2008
  SIGNATURE
    
    TITLE
    
    DATE/s/ William M. Pinon
    
    President, Chief Executive Officer and Director
    
    March 27, 2008William M. Pinon/s/ William H. Kline
    
    Chief Financial Officer
    
    March 27, 2008William H. Kline/s/ Howard J. Leonhardt
    
    Chairman of the Board and Chief Technology Officer
    
    March 27, 2008Howard J. Leonhardt/s/ David J. Gury
    
    Director
    
    March 27, 2008David J. Gury/s/ William P. Murphy, Jr.,
M.D.
    
    Director
    
    March 27, 2008William P. Murphy, Jr., M.D./s/ Richard T. Spencer III
    
    Director
    
    March 27, 2008Richard T. Spencer III/s/ Linda Tufts
    
    Director
    
    March 27, 2008Linda Tufts/s/ Mike Tomas
    
    Director
    
    March 28, 2008Mike Tomas/s/ Peggy A. Farley
    
    Director
    
    March 27, 2008Peggy A. FarleyDirector
    
    March
, 2008Bruce CarsonDirector
    
    March , 2008Samuel S. Ahn, M.D.
 100




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##### Table of Contents



FORM 10-K  ITEM 8
 BIOHEART, INC. AND SUBSIDIARIES
 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
 Report of Independent Registered Public Accounting Firm
    
    
    F-2Consolidated Balance Sheets as of December 31, 2007 and 2006
    
    
    F-3Consolidated Statements of Operations for the years ended December 31,
2007, 2006 and 2005 and the cumulative period from August 12, 1999
(date of inception) to December 31, 2007
    
    
    F-4Consolidated Statement of Shareholders (Deficit) Equity for the period
from August 12, 1999 (date of inception) through December 31, 2007
    
    
    F-5Consolidated Statements of Cash Flows for the years ended December 31,
2007, 2006 and 2005 and the cumulative period from August 12, 1999
(date of inception) to December 31, 2007
    
    
    F-7Notes to Consolidated Financial Statements
    
    
    F-8
  F-1




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##### Table of Contents



Report of Independent Registered Public Accounting Firm
 
       
 F-2




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 
 Consolidated Balance Sheets
 As of December 31,2007
    
    
    2006ASSETSCurrent assetsCash and cash equivalents
    
    $
    5,492,157
    
    
    $
    5,025,383Receivables
    
    
    52,642
    
    
    
    79,843Inventory
    
    
    372,054
    
    
    
    163,821Prepaid expenses
    
    
    261,030
    
    
    
    96,162Total current assets
    
    
    6,177,883
    
    
    
    5,365,209Property and equipment, net
    
    
    444,506
    
    
    
    526,901Deferred offering costs
    
    
    3,484,070
    
    
    
    547,016Deferred loan costs, net
    
    
    1,146,716
    
    
    
    Other assets
    
    
    71,148
    
    
    
    68,854Total assets
    
    $
    11,324,323
    
    
    $
    6,507,980LIABILITIES AND SHAREHOLDERS (DEFICIT) EQUITYCurrent liabilitiesAccounts payable
    
    $
    2,134,256
    
    
    $
    803,625Accrued expenses
    
    
    4,511,775
    
    
    
    700,687Deferred revenue
    
    
    547,286
    
    
    
    656,500Notes payable  current
    
    
    6,671,112
    
    
    
    Total current liabilities
    
    
    13,864,429
    
    
    
    2,160,812Deferred rent
    
    
    21,426
    
    
    
    36,524Note payable  long term
    
    
    2,943,432
    
    
    
    Total liabilities
    
    
    16,829,287
    
    
    
    2,197,336Commitments and contingenciesShareholders (deficit) equityPreferred stock ($0.001 par value) 5,000,000 and
3,088,898 shares authorized as of December 31, 2007
and 2006, respectively; none issued and outstanding
    
    
    
    
    
    
    Common stock ($0.001 par value) 50,000,000 and
24,711,188 shares authorized as of December 31, 2007
and 2006, respectively; 13,347,138 and
12,785,472 shares issued and outstanding as of
December 31, 2007 and December 31, 2006, respectively
    
    
    13,347
    
    
    
    12,785Additional paid-in capital
    
    
    77,061,296
    
    
    
    68,810,382Deficit accumulated during the development stage
    
    
    (82,579,607
    )
    
    
    (64,512,523
    )Total shareholders (deficit) equity
    
    
    (5,504,964
    )
    
    
    4,310,644Total liabilities and shareholders (deficit) equity
    
    $
    11,324,323
    
    
    $
    6,507,980
  F-3




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 
 Consolidated Statements of Operations
 CumulativePeriod fromAugust 12,1999 (date ofinception) toYears Ended December 31,
    
    
    December 31,2007
    
    
    2006
    
    
    2005
    
    
    2007Revenues
    
    $
    312,809
    
    
    $
    105,503
    
    
    $
    135,350
    
    
    $
    748,322Cost of sales
    
    
    65,830
    
    
    
    72,510
    
    
    
    87,427
    
    
    
    320,197Gross profit
    
    
    246,979
    
    
    
    32,993
    
    
    
    47,923
    
    
    
    428,125Expenses:Research and development
    
    
    11,313,554
    
    
    
    6,878,225
    
    
    
    4,533,820
    
    
    
    56,694,809Marketing, general and administrative
    
    
    3,435,991
    
    
    
    6,372,098
    
    
    
    2,830,926
    
    
    
    22,860,888Depreciation and amortization
    
    
    184,391
    
    
    
    90,713
    
    
    
    46,320
    
    
    
    434,677Total expenses
    
    
    14,933,936
    
    
    
    13,341,036
    
    
    
    7,411,066
    
    
    
    79,990,374Loss from operations
    
    
    (14,686,957
    )
    
    
    (13,308,043
    )
    
    
    (7,363,143
    )
    
    
    (79,562,249
    )Interest income
    
    
    327,636
    
    
    
    128,145
    
    
    
    45,122
    
    
    
    716,520Interest expense
    
    
    (3,707,763
    )
    
    
    (748
    )
    
    
    (8,536
    )
    
    
    (3,733,878
    )Net interest (expense) income
    
    
    (3,380,127
    )
    
    
    127,397
    
    
    
    36,586
    
    
    
    (3,017,358
    )Loss before income taxes
    
    
    (18,067,084
    )
    
    
    (13,180,646
    )
    
    
    (7,326,557
    )
    
    
    (82,579,607
    )Income taxes
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net loss
    
    $
    (18,067,084
    )
    
    $
    (13,180,646
    )
    
    $
    (7,326,557
    )
    
    $
    (82,579,607
    )Loss per share  basic and diluted
    
    $
    (1.37
    )
    
    $
    (1.10
    )
    
    $
    (0.69
    )Weighted average shares outstanding 
basic and diluted
    
    
    13,210,347
    
    
    
    12,015,090
    
    
    
    10,652,727
  F-4




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 
 Consolidated Statement of Shareholders (Deficit) Equity
 DeficitAccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    During theCommon Stock
    
    
    Paid-In
    
    
    Deferred
    
    
    Contributed
    
    
    DevelopmentShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Capital
    
    
    Stage
    
    
    TotalBalance as of August 12,
1999 (date of inception)
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    Issuance of common stock
    
    
    4,324,458
    
    
    
    4,324
    
    
    
    395,676
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    400,000Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    98,000
    
    
    
    (98,000
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of
stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    49,000
    
    
    
    
    
    
    
    
    
    
    
    49,000Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (903,290
    )
    
    
    (903,290
    )Balance as of
December 31, 1999
    
    
    4,324,458
    
    
    $
    4,324
    
    
    $
    493,676
    
    
    $
    (49,000
    )
    
    $
    
    
    
    $
    (903,290
    )
    
    $
    (454,290
    )Issuance of common
stock (net of issuance
costs of $61,905)
    
    
    1,493,575
    
    
    
    1,494
    
    
    
    9,607,201
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    9,608,695Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    2,559,000
    
    
    
    (2,559,000
    )
    
    
    
    
    
    
    
    
    
    
    Fair value of warrants
granted in exchange for
licenses and
intellectual property
    
    
    
    
    
    
    
    
    
    
    5,220,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,220,000Amortization of
stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,080,692
    
    
    
    
    
    
    
    
    
    
    
    1,080,692Contributed capital
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,050,000
    
    
    
    
    
    
    
    1,050,000Common stock issued in
exchange for services
    
    
    7,964
    
    
    
    8
    
    
    
    51,993
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,001Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (14,113,933
    )
    
    
    (14,113,933
    )Balance as of
December 31, 2000
    
    
    5,825,997
    
    
    $
    5,826
    
    
    $
    17,931,870
    
    
    $
    (1,527,308
    )
    
    $
    1,050,000
    
    
    $
    (15,017,223
    )
    
    $
    2,443,165Issuance of common
stock (net of issuance
costs of $98,996)
    
    
    985,667
    
    
    
    986
    
    
    
    6,282,018
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,283,004Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    779,000
    
    
    
    (779,000
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of
stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,523,000
    
    
    
    
    
    
    
    
    
    
    
    1,523,000Conversion of
contributed capital to
common stock
    
    
    81,084
    
    
    
    81
    
    
    
    1,049,919
    
    
    
    
    
    
    
    (1,050,000
    )
    
    
    
    
    
    
    Common stock issued in
exchange for services
    
    
    8,291
    
    
    
    8
    
    
    
    53,993
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    54,001Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (8,173,464
    )
    
    
    (8,173,464
    )Balance as of
December 31, 2001
    
    
    6,901,039
    
    
    $
    6,901
    
    
    $
    26,096,800
    
    
    $
    (783,308
    )
    
    $
    
    
    
    $
    (23,190,687
    )
    
    $
    2,129,706Issuance of common stock
    
    
    1,092,883
    
    
    
    1,093
    
    
    
    7,075,105
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    7,076,198Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    143,521
    
    
    
    (143,521
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of
stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    613,083
    
    
    
    
    
    
    
    
    
    
    
    613,083Common stock issued in
exchange for services
    
    
    35,137
    
    
    
    35
    
    
    
    227,468
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227,503Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (9,257,954
    )
    
    
    (9,257,954
    )Balance as of
December 31, 2002
    
    
    8,029,059
    
    
    $
    8,029
    
    
    $
    33,542,894
    
    
    $
    (313,746
    )
    
    $
    
    
    
    $
    (32,448,641
    )
    
    $
    788,536Issuance of common stock
    
    
    561,701
    
    
    
    562
    
    
    
    3,181,712
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,182,274Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    (155,893
    )
    
    
    155,893
    
    
    
    
    
    
    
    
    
    
    
    Amortization of
stock-based
compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,371
    
    
    
    
    
    
    
    
    
    
    
    79,371Common stock issued in
exchange for services
    
    
    144,300
    
    
    
    144
    
    
    
    823,743
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    823,887Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,037,528
    )
    
    
    (6,037,528
    )Balance as of
December 31, 2003
    
    
    8,735,060
    
    
    $
    8,735
    
    
    $
    37,392,456
    
    
    $
    (78,482
    )
    
    $
    
    
    
    $
    (38,486,169
    )
    
    $
    (1,163,460
    )
  F-5




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Consolidated Statement of Shareholders (Deficit) Equity  (Continued)
 DeficitAccumulatedAdditional
    
    
    
    
    
    
    
    
    
    
    During theCommon Stock
    
    
    Paid-In
    
    
    Deferred
    
    
    Contributed
    
    
    DevelopmentShares
    
    
    Amount
    
    
    Capital
    
    
    Compensation
    
    
    Capital
    
    
    Stage
    
    
    TotalBalance as of
December 31, 2003
    
    
    8,735,060
    
    
    $
    8,735
    
    
    $
    37,392,456
    
    
    $
    (78,482
    )
    
    $
    
    
    
    $
    (38,486,169
    )
    
    $
    (1,163,460
    )Issuance of common stock
    
    
    808,570
    
    
    
    809
    
    
    
    4,580,104
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,580,913Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    637,858
    
    
    
    (637,858
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of
stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    148,812
    
    
    
    
    
    
    
    
    
    
    
    148,812Common stock issued in
exchange for services
    
    
    17,004
    
    
    
    17
    
    
    
    96,314
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96,331Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (5,519,151
    )
    
    
    (5,519,151
    )Balance as of
December 31, 2004
    
    
    9,560,634
    
    
    $
    9,561
    
    
    $
    42,706,732
    
    
    $
    (567,528
    )
    
    $
    
    
    
    $
    (44,005,320
    )
    
    $
    (1,856,555
    )Issuance of common stock
(net of issuance costs
of $32,507)
    
    
    1,994,556
    
    
    
    1,994
    
    
    
    11,265,560
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,267,554Issuance of common stock
in lieu of cash
compensation
    
    
    1,210
    
    
    
    1
    
    
    
    6,852
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    6,853Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,566,147
    
    
    
    (1,566,147
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of
stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,952,350
    
    
    
    
    
    
    
    
    
    
    
    1,952,350Issuance of common stock
in exchange for release
of accrued liabilities
    
    
    95,807
    
    
    
    96
    
    
    
    542,691
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    542,787Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (7,326,557
    )
    
    
    (7,326,557
    )Balance as of
December 31, 2005
    
    
    11,652,207
    
    
    $
    11,652
    
    
    $
    56,087,982
    
    
    $
    (181,325
    )
    
    $
    
    
    
    $
    (51,331,877
    )
    
    $
    4,586,432Reclassification of
deferred compensation
due to adoption of SFAS
 No. 123(R)
    
    
    
    
    
    
    
    
    
    
    (181,325
    )
    
    
    181,325
    
    
    
    
    
    
    
    
    
    
    
    Issuance of common stock
(net of issuance costs
of $100,038)
    
    
    1,069,699
    
    
    
    1,069
    
    
    
    8,123,623
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,124,692Equity instruments
issued in connection
with settlement
agreement
    
    
    47,657
    
    
    
    48
    
    
    
    3,294,381
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,294,429Common stock issued in
exchange for services
    
    
    2,903
    
    
    
    3
    
    
    
    16,440
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,443Common stock issued in
exchange for
distribution rights and
intellectual property
    
    
    13,006
    
    
    
    13
    
    
    
    99,984
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    99,997Fair value of warrants
granted in exchange for
licenses and
intellectual property
    
    
    
    
    
    
    
    
    
    
    144,867
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    144,867Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    1,224,430
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,224,430Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (13,180,646
    )
    
    
    (13,180,646
    )Balance 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
    
    
    31,955
    
    
    
    32
    
    
    
    181,008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    181,040Issuance of warrants in
connection with notes
payable
    
    
    
    
    
    
    
    
    
    
    3,139,639
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,139,639Amortization 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
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,289Shares issued in
connection with reverse
stock split
    
    
    279
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    931,233
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    931,233Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (18,067,084
    )
    
    
    (18,067,084
    )Balance as of
December 31, 2007
    
    
    13,347,138
    
    
    $
    13,347
    
    
    $
    77,061,296
    
    
    $
    
    
    
    $
    
    
    
    $
    (82,579,607
    )
    
    $
    (5,504,964
    )
  F-6




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 
 Consolidated Statements of Cash Flows
 CumulativePeriod fromAugust 12, 1999(date of inception)Years Ended December 31,
    
    
    to December 31,2007
    
    
    2006
    
    
    2005
    
    
    2007Cash flows from operating activitiesNet loss
    
    $
    (18,067,084
    )
    
    $
    (13,180,646
    )
    
    $
    (7,326,557
    )
    
    $
    (82,579,607
    )Adjustments to reconcile net loss to net cash
used in operating activitiesDepreciation and amortization
    
    
    184,391
    
    
    
    90,713
    
    
    
    46,320
    
    
    
    434,677Write off of note receivable
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    165,000Amortization of warrants granted in exchange
of licenses and intellectual property
    
    
    48,289
    
    
    
    144,867
    
    
    
    
    
    
    
    5,413,156Amortization of warrants granted in
connection with notes payable
    
    
    2,407,677
    
    
    
    
    
    
    
    
    
    
    
    2,407,677Amortization of loan costs
    
    
    486,539
    
    
    
    
    
    
    
    
    
    
    
    486,539Amortization 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
    
    
    
    6,853
    
    
    
    1,277,017Common stock issued in exchange for
distribution rights and intellectual
property
    
    
    
    
    
    
    99,997
    
    
    
    
    
    
    
    99,997Stock-based compensation
    
    
    931,233
    
    
    
    1,224,430
    
    
    
    1,952,350
    
    
    
    7,601,971Change in assets and liabilitiesReceivables
    
    
    27,201
    
    
    
    (7,806
    )
    
    
    (72,037
    )
    
    
    (52,642
    )Inventory
    
    
    (208,233
    )
    
    
    (3,469
    )
    
    
    182,148
    
    
    
    (372,054
    )Prepaid expenses
    
    
    (164,868
    )
    
    
    (41,860
    )
    
    
    6,044
    
    
    
    (261,030
    )Other assets
    
    
    (2,294
    )
    
    
    (58,695
    )
    
    
    (815
    )
    
    
    (71,148
    )Accounts payable
    
    
    1,291,297
    
    
    
    357,403
    
    
    
    (399,063
    )
    
    
    1,873,759Accrued expenses and deferred rent
    
    
    3,415,425
    
    
    
    234,697
    
    
    
    (40,698
    )
    
    
    4,428,988Deferred revenue
    
    
    (109,213
    )
    
    
    
    
    
    
    (120,000
    )
    
    
    547,287Net cash used in operating activities
    
    
    (9,729,081
    )
    
    
    (7,829,497
    )
    
    
    (5,765,455
    )
    
    
    (55,275,425
    )Cash flows from investing activitiesAcquisition of property and equipment
    
    
    (101,995
    )
    
    
    (203,266
    )
    
    
    (326,211
    )
    
    
    (879,182
    )Net cash used in investing activities
    
    
    (101,995
    )
    
    
    (203,266
    )
    
    
    (326,211
    )
    
    
    (879,182
    )Cash flows from financing activitiesProceeds from notes payable
    
    
    10,000,000
    
    
    
    
    
    
    
    
    
    
    
    10,200,000Repayment of note payable
    
    
    (385,456
    )
    
    
    
    
    
    
    (200,000
    )
    
    
    (585,456
    )Proceeds from issuance of common stock, net
    
    
    4,101,756
    
    
    
    8,124,692
    
    
    
    11,267,554
    
    
    
    55,675,088Payment of offering costs
    
    
    (2,564,405
    )
    
    
    (224,418
    )
    
    
    
    
    
    
    (2,788,823
    )Payment of loan costs
    
    
    (854,045
    )
    
    
    
    
    
    
    
    
    
    
    (854,045
    )Net cash provided by financing activities
    
    
    10,297,850
    
    
    
    7,900,274
    
    
    
    11,067,554
    
    
    
    61,646,764Net increase (decrease) in cash and cash
equivalents
    
    
    466,774
    
    
    
    (132,489
    )
    
    
    4,975,888
    
    
    
    5,492,157Cash and cash equivalents, beginning of period
    
    
    5,025,383
    
    
    
    5,157,872
    
    
    
    181,984
    
    
    
    Cash and cash equivalents, end of period
    
    $
    5,492,157
    
    
    $
    5,025,383
    
    
    $
    5,157,872
    
    
    $
    5,492,157Disclosure of cash flow informationInterest paid
    
    $
    319,680
    
    
    $
    748
    
    
    $
    8,536
    
    
    $
    345,795Income taxes paid
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
  F-7




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 
 Notes to Consolidated Financial Statements  (Continued)
 1. Organization and Summary of Significant Accounting Policies
 Organization and Business
  Development Stage
 Accounting and Reporting by Development Stage
Enterprises ,
  Basis of Presentation
  Reverse Stock Split
  Initial Public Offering
  F-8




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
  Use of Estimates
  Fair Value of Financial Instruments
 Disclosures about Fair Value of Financial Instruments
 Cash and Cash Equivalents
  Accounts Receivable
  F-9




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
 Inventory
   December 31,2007
    
    
    2006Finished product
    
    $
    315,300
    
    
    $
    163,821Raw materials
    
    
    56,754
    
    
    
    Total inventory
    
    $
    372,054
    
    
    $
    163,821
 Impairment of Long-Lived Assets
 Accounting for the Impairment or Disposal of Long-Lived
Assets,
 Deferred Offering Costs
  Deferred Loan Costs
  Revenue Recognition
 Revenue Recognition in Financial
Statements Revenue Recognition
 F-10




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
   Research and Development Expenses
 Accounting for Research and
Development Costs.
 Marketing Expense
  Income Taxes
 Accounting for Income Taxes, Accounting for Uncertainty in Income Taxes,
 Accounting for Contingencies.
 F-11




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
     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
 Accounting for Stock-Based Compensation, Accounting
for Stock-Based Compensation  Transition and Disclosure Accounting for Stock Issued to
Employees
 Accounting for
Stock Issued to Employees, Accounting for Certain Transactions Involving Stock Compensation-An Interpretation of APB Opinion
No. 25.
  F-12




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
 Accounting for Stock-Based
Compensation Transition and Disclosure,
   Net loss  as reported
    
    $
    (7,326,557
    )Deduct: Stock compensation expense determined under fair value method
    
    
    (466,944
    )Adjusted pro forma net loss
    
    $
    (7,793,501
    )Loss per share  basic and diluted:Loss per share  as reported
    
    $
    (0.69
    )Loss per share  pro forma
    
    $
    (0.73
    )
 Loss Per Share
 Earnings per Share
 Recent Accounting Pronouncements
 Fair Value Measurements Effective Date of FASB Statement No. 157
 The Fair Value Option for Financial Assets and
Financial Liabilities
  F-13




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
 Accounting for Nonrefundable Advance Payments for Goods or
Services Received for Use in Future Research and Development Activities
 Business Combinations
 Noncontrolling Interests in Consolidated
Financial Statements  an amendment of ARB No. 51
 Share-Based
Payment Share-Based Payment
 F-14




---



##### Table of Contents



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




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
 2. Going Concern
  3. Collaborative License and Research/Development Agreements
    
    
    The parties agreed that the Company would issue, and the Company did issue, to the
collaborative research partner 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 Agreement, issuing 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. The 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 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 patents instead of, as originally
contemplated under the Agreement, upon initiation of a FDA approved human clinical trial
study of such technology in the United States. This $3 million payment is included in
accrued expenses as of December 31, 2007.
  F-16




---



##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
     4. Property and Equipment
  2007
    
    
    2006Laboratory and medical equipment
    
    $
    335,428
    
    
    $
    267,835Furniture, fixtures and equipment
    
    
    130,916
    
    
    
    124,689Computer equipment
    
    
    50,793
    
    
    
    27,657Leasehold improvements
    
    
    362,046
    
    
    
    357,006879,183
    
    
    
    777,187Less accumulated depreciation and amortization
    
    
    (434,677
    )
    
    
    (250,286
    )$
    444,506
    
    
    $
    526,901
 F-17




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
  5.  Accrued Expenses
  2007
    
    
    2006License and royalty fees
    
    $
    3,460,000
    
    
    $
    250,000Expenses incurred in connection with the initial public offering
    
    
    482,000
    
    
    
    101,434Interest on notes payable, including debt guarantor fees
    
    
    496,194
    
    
    
    Payroll, employee benefits and payroll taxes
    
    
    50,303
    
    
    
    193,036Contract research and development
    
    
    16,306
    
    
    
    140,457Other
    
    
    6,972
    
    
    
    15,760$
    4,511,775
    
    
    $
    700,687
 6. Notes Payable
  December 31,2007
    
    
    2006Eight-month note payable. Monthly
payments of principal and interest as
described below
    
    $
    5,000,000
    
    
    $
    Three-year note payable. Monthly
payments of principal and interest as
described below
    
    
    4,614,544
    
    
    
    9,614,544
    
    
    
    Less current portion
    
    
    (6,671,112
    )
    
    
    Notes payable  long term
    
    $
    2,943,432
    
    
    $
    
  2008
    
    $
    6,671,1122009
    
    
    1,898,9602010
    
    
    1,044,472$
    9,614,544
 Eight-month Note Payable
  F-18




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
       F-19




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
    Three-year Note Payable
   F-20




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
   Note Payable
  Line of Credit
  7. Commitments and Contingencies
 Leases
    Year ending December 31,2008
    
    $
    126,0002009
    
    
    133,0002010
    
    
    11,000Total
    
    $
    270,000
  F-21




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
 Accounting for Leases, Issues Related to Accounting for Leases,
 Royalty Payments
   William Beaumont Hospital
   Year Ending December 31,2008
    
    $
    210,0002009
    
    
    210,0002010
    
    
    210,0002011
    
    
    210,0002012
    
    
    210,0002013  2015
    
    
    630,000Total
    
    $
    1,680,000
 Contingency
  F-22




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
  8. Legal Proceedings
       Other
 F-23




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
  9. Related Party Transactions
        
    
    The Company issued to the officer 47,658 shares of its common stock and agreed to pay
the officers income taxes related to the receipt of the shares of common stock, estimated
to be approximately $153,000. The fair value of the shares of common stock was determined
to be $7.69 per share, which was based on a current valuation of the Company. The aggregate
fair value of the shares of common stock issued and the $153,000 in cash was approximately
$500,000, which was recorded as compensation expense in August 2006.
 F-24




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
 
    
    The Company issued to the officer a warrant to purchase 188,423 shares of the Companys
common stock at an exercise price of $5.67 per share. This warrant is exercisable
immediately and expires 10 years from the date of grant. The approximate fair value of this
warrant of $1,200,000 was recorded as compensation expense in August 2006.
    
    The Company issued to the officer stock options to purchase up to 282,635 shares of the
Companys common stock at an exercise price of $5.67 per share. These stock options are
exercisable immediately and expire 10 years from the date of grant. The fair value of these
stock options of approximately $1,800,000 was recorded as compensation expense in August
2006.
    
    As consideration for continued employment as an officer of the Company, the officer will
receive an annual salary of $130,000 per year.
    10. Shareholders Equity
      F-25




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
       Chairman of the Board Paid in and Contributed Capital
      11. Stock Options and Warrants
 F-26




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
   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
    
    
    301,888
    
    
    
    $ 8.47Exercised
    
    
    (31,955
    )
    
    
    $ 5.67Forfeited
    
    
    (47,781
    )
    
    
    $ 7.21Options outstanding at December 31, 2007
    
    
    2,160,199
    
    
    
    $ 5.34
    
    
    
    6.3
    
    
    
    $ 1,479,597Options exercisable at December 31, 2007
    
    
    1,639,288
    
    
    
    $ 4.73
    
    
    
    5.6
    
    
    
    $ 1,479,597Available for grant at December 31, 2007
    
    
    895,532
 
 (1)
    
    The aggregate intrinsic value computation was based on an estimated fair market value
of the Companys common stock at December 31, 2007 of $5.25 per share and includes only
those options whose exercise price was less than $5.25.  Transition Election Related to Accounting for the Tax
Effects of Share-Based Payment Awards.
 F-27




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
   Options Outstanding
    
    Options ExercisableWeighted-Average
    
    Weighted-
    
    
    
    
    
    Weighted-Remaining
    
    Average
    
    
    
    
    
    AverageContractual
    
    Exercise
    
    
    
    
    
    ExerciseShares
    
    Life
    
    Price
    
    Shares
    
    Price$1.28
    
    
    347,196
    
    
    
    2.0
    
    
    $
    1.28
    
    
    
    347,196
    
    
    $
    1.28$2.83
    
    
    41,701
    
    
    
    2.1
    
    
    $
    2.83
    
    
    
    41,701
    
    
    $
    2.83$5.67
    
    
    1,416,063
    
    
    
    6.8
    
    
    $
    5.67
    
    
    
    1,198,049
    
    
    $
    5.67$7.69
    
    
    74,665
    
    
    
    8.7
    
    
    $
    7.69
    
    
    
    52,342
    
    
    $
    7.69$8.47
    
    
    280,574
    
    
    
    9.3
    
    
    $
    8.47
    
    
    
    
    
    
    
    2,160,199
    
    
    
    6.3
    
    
    $
    5.34
    
    
    
    1,639,288
    
    
    $
    4.73
   For the year ended December 31,2007
    
    2006Expected dividend yield
    
    
    00.0
    %
    
    
    00.0
    %Expected price volatility
    
    
    100.0
    %
    
    
    100.0
    %Risk free interest rate
    
    
    5.9
    %
    
    
    6.0
    %Expected life of options in years
    
    
    5.0
    
    
    
    5.0
  F-28




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
 Warrants Outstanding
    
    Warrants ExercisableWeighted-Average
    
    Weighted-
    
    
    
    
    
    Weighted-Remaining
    
    Average
    
    
    
    
    
    AverageContractual
    
    Exercise
    
    
    
    
    
    ExerciseShares
    
    Life
    
    Price
    
    Shares
    
    Price$5.67
    
    
    192,834
    
    
    
    8.6
    
    
    $
    5.67
    
    
    
    192,834
    
    
    $
    5.67$7.69
    
    
    2,059,002
    
    
    
    16.6
    
    
    $
    7.69
    
    
    
    134,448
    
    
    $
    7.692,251,836
    
    
    
    15.9
    
    
    $
    7.52
    
    
    
    327,282
    
    
    $
    6.50
  12. Deferred Compensation
  13. Income Taxes
  December 31,2007
    
    
    2006
    
    
    2005Deferred tax assets:Stock-based compensation and others
    
    $
    4,557,000
    
    
    $
    3,298,000
    
    
    $
    2,165,000Net operating loss carryforward
    
    
    26,475,000
    
    
    
    20,928,000
    
    
    
    17,102,000Total deferred tax assets
    
    
    31,032,000
    
    
    
    24,226,000
    
    
    
    19,267,000Valuation allowance for deferred tax assets
    
    
    (31,032,000
    )
    
    
    (24,226,000
    )
    
    
    (19,267,000
    )Net deferred tax assets
    
    $
    
    
    
    $
    
    
    
    $
    
   F-29




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##### Table of Contents



Bioheart, Inc. and Subsidiaries
(A development stage enterprise)
 Notes to Consolidated Financial Statements  (Continued)
  14. Supplemental Disclosure of Cash Flow Information
   15. Unaudited Quarterly Financial Information
  Three Months EndedMarch 31
    
    June 30
    
    September 30
    
    December 312007Revenues
    
    $
    13,805
    
    
    $
    194,609
    
    
    $
    67,050
    
    
    $
    37,345Gross profit
    
    
    6,446
    
    
    
    167,947
    
    
    
    49,253
    
    
    
    23,333Net loss
    
    
    (2,277,904
    )
    
    
    (2,762,437
    )
    
    
    (4,164,660
    )
    
    
    (8,862,083
    )Loss per share  basic and diluted
    
    $
    (0.18
    )
    
    $
    (0.21
    )
    
    $
    (0.31
    )
    
    $
    (0.66
    )Weighted average shares
outstanding  basic and diluted
    
    
    12,919,835
    
    
    
    13,235,738
    
    
    
    13,332,637
    
    
    
    13,347,1382006Revenues
    
    $
    58,870
    
    
    $
    16,117
    
    
    $
    31,501
    
    
    $
    (985
    )Gross profit
    
    
    20,910
    
    
    
    10,519
    
    
    
    11,819
    
    
    
    (10,255
    )Net loss
    
    
    (2,180,943
    )
    
    
    (1,754,251
    )
    
    
    (7,008,605
    )
    
    
    (2,236,847
    )Loss per share  basic and diluted
    
    $
    (0.19
    )
    
    $
    ( 0.15
    )
    
    $
    (0.58
    )
    
    $
    (0.18
    )Weighted average shares
outstanding  basic and diluted
    
    
    11,653,207
    
    
    
    11,655,109
    
    
    
    12,007,086
    
    
    
    12,731,319
   F-30




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##### Table of Contents



INDEX OF EXHIBITS
  Exhibit No.
    
    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