UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10-K

(Mark One)

xANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31,
2010
OR

oTRANSITION 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.

|(Exact name of registrant as specified in its charter)        
|--------------------------------------------------------------
|                                                              
|Florida                                                       
|(State or other jurisdiction of incorporation or organization)



13794 NW 4th Street, Suite
212, Sunrise, Florida 33325(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including
area code(954) 835-1500

Securities registered pursuant to Section
12(b) of the Act:None

Securities registered pursuant to Section
12(g) of the Act:Common Stock, $0.001 Par Value

Indicate by check mark if the registrant is a well known seasoned
issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes x No o

Indicate by check mark whether registrant has submitted electronically
and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant
was required to submit and post such files. o Yes oNo

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge,
in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “large accelerated
filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

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|------------------------- | ------------------- | ----------------------- | ---------------------------
|Large accelerated filer o | Accelerated filer o | Non-accelerated filer o | Smaller reporting company x

Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Act). Yes o No x

As of June 30, 2010, the last day of registrant’s second
fiscal quarter, the aggregate market value of the registrant’s common stock, $0.001 par value, held by non-affiliates, computed
by reference to the closing sale price of the common stock reported on the OTCBB as of June 30, 2010, was approximately $8,312,699.
For purposes of the above statement only, all directors, executive officers and 10% shareholders are assumed to be affiliates.
This determination of affiliate status is not necessarily a conclusive determination for other purposes.

The number of shares outstanding of the registrant’s
Common Stock, $0.001 Par Value, as of May 10, 2011 was 42,600,569.

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BIOHEART, INC. AND SUBSIDIARIES

INDEX TO ANNUAL REPORT ON FORM 10-K
Fiscal Year Ended December 31, 2009

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|         |                                                                                                              | Page
|         |                                                                                                              |     
|         | PART I                                                                                                       |     
|Item 1.  | Business                                                                                                     | 2   
|Item 1A. | Risk Factors                                                                                                 | 25  
|Item 1B. | Unresolved Staff Comments                                                                                    | 34  
|Item 2.  | Properties                                                                                                   | 34  
|Item 3.  | Legal Proceedings                                                                                            | 34  
|Item 4.  | [Removed and Reserved]                                                                                       |     
|         |                                                                                                              |     
|         | PART II                                                                                                      |     
|         |                                                                                                              |     
|Item 5.  | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities | 35  
|Item 6.  | Selected Financial Data                                                                                      | 38  
|Item 7.  | Management’s Discussion and Analysis of Financial Condition and Results of Operations                        | 38  
|Item 7A. | Quantitative and Qualitative Disclosures about Market Risk                                                   | 45  
|Item 8.  | Financial Statements and Supplementary Data                                                                  | 45  
|Item 9.  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         | 45  
|Item 9A. | Controls and Procedures                                                                                      | 45  
|Item 9B. | Other Information                                                                                            | 46  
|         |                                                                                                              |     
|         | PART III                                                                                                     |     
|         |                                                                                                              |     
|Item 10. | Directors, Executive Officers and Corporate Governance                                                       | 49  
|Item 11. | Executive Compensation                                                                                       | 55  
|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related                                   |     
|         | Stockholder Matters                                                                                          | 62  
|Item 13. | Certain Relationships and Related Transactions, and Director Independence                                    | 66  
|Item 14. | Principal Accounting Fees and Services                                                                       | 71  
|         |                                                                                                              |     
|         | PART IV                                                                                                      |     
|         |                                                                                                              |     
|Item 15. | Exhibits, Financial Statement Schedules                                                                      | 73  
|         |                                                                                                              |     



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PART I



This report may contain
forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking
statements are based on our management’s beliefs and assumptions and on information currently available to our management.
Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and “Risk Factors.” Forward-looking statements include information concerning
our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment,
potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical
facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,”
“expects,” “hopes,” “intends,” “may,” “plans,” “potential,”
“predicts,” “projects,” “should,” “will,” “would” or similar expressions.



Forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
We discuss many of these risks in greater detail in “Risk Factors.” Given these uncertainties, you should not place
undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and
assumptions only as of the date of this report. You should read this report and the documents that we reference in this report
and have filed as exhibits to the report completely and with the understanding that our actual future results may be materially
different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly,
or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even
if new information becomes available in the future.



Item 1.	Business



Overview



We are committed to maintaining
our leading position within the cardiovascular sector of the cell technology industry delivering cell therapies and biologics that
help address congestive heart failure, lower limb ischemia, chronic heart ischemia, acute myocardial infarctions and other issues.
Our goals are to regenerate damaged tissue, if possible, improve a patient's quality of life, reduce hospitalizations and reduce
overall health care costs.



We were incorporated in
the state of Florida in August 1999. Our principal executive offices are located at 13794 NW 4th Street, Suite 212, Sunrise, Florida
33325 and our telephone number is (954) 835-1500. Information about us is available on our corporate web site at www.bioheartinc.com.
Information contained on the web site does not constitute part of, and is not incorporated by reference in, this report.



Biotechnology Product Candidates



Specific to biotechnology,
we are focused on the discovery, development and, subject to regulatory approval, commercialization of autologous cell therapies
for the treatment of chronic and acute heart damage and peripheral vascular disease. MyoCell is a clinical muscle-derived cell
therapy designed to populate regions of scar tissue within a patient's heart with new living cells for the purpose of improving
cardiac function in chronic heart failure patients. Our most recent clinical trials of MyoCell include the SEISMIC Trial, a completed
40-patient, randomized, multicenter, controlled, Phase II-a study conducted in Europe and the MYOHEART Trial, a completed 20-patient,
multicenter, Phase I dose-escalation trial conducted in the United States. We were approved by the U.S. Food and Drug Administration
(the “FDA”) to proceed with a 330-patient, multicenter Phase II/III trial of MyoCell in North America and Europe (the
“MARVEL Trial”). We completed the MyoCell implantation procedure on the first patient in the MARVEL Trial on October
24, 2007. Thus far, 20 patients, including 6 control patients, have been treated. Initial results for the 20 patients were released
at the Heart Failure Society of American meeting in September, 2009, showing a significant (35%) improvement in the 6 minute walk
for those patients who were treated, and no



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improvement for those who received a placebo.
We are planning, on the basis of these results, to ask the FDA to consider the MARVEL Trial a pivotal trial (pivotal from Phase
II to Phase III) and to reduce the number of patients in the trial to 150. The SEISMIC, MYOHEART and MARVEL Trials have been designed
to test the safety and efficacy of MyoCell in treating patients with severe, chronic damage to the heart. Upon regulatory approval
of MyoCell, we intend to generate revenue in the United States from the sale of MyoCell cell-culturing services for treatment of
patients by qualified physicians. Abroad, we are identifying centers where it is already acceptable to use the Myocell treatment
so that greater numbers of patients with this problem can have access to treatment.



We received approval from
the FDA in July of 2009 to conduct a Phase I safety study on 15 patients of a combined therapy (Myocell with SDF-1), which we believe
is the first approval of a study combining gene and cell therapies. We initially commenced work on this study, called the REGEN
trial, during the first quarter of 2010. The Company suspended activity on the trial in 2010 while seeking additional funding necessary
to conduct the trial. Work on the trial was reinitiated in 2011. Based on the results of the trial, we intend to either incorporate
the combined treatment into the Marvel Trial, or continue with the Marvel Trial based on the use of Myocell alone.



In our pipeline, we have
multiple product candidates for the treatment of heart damage, including autologous, adipose cell treatment for acute heart damage,
chronic ischemia and critical limb ischemia. We hope to demonstrate that our various product candidates are safe and effective
complements to existing therapies for chronic and acute heart damage as well as peripheral arterial disease.



MyoCell



MyoCell is a clinical
therapy intended to improve cardiac function for those with congestive heart failure and is designed to be utilized months or even
years after a patient has suffered severe heart damage due to a heart attack or other cause. We believe that MyoCell has the potential
to become a leading treatment for severe, chronic damage to the heart due to its perceived ability to satisfy, at least in part,
what we believe to be an unmet demand for more effective and/or more affordable therapies for chronic heart damage. MyoCell uses
myoblasts, cells that are precursors to muscle cells, from the patient's own body. The myoblasts are removed from a patient's thigh
muscle, isolated, grown through our proprietary cell culturing process, and injected directly in the scar tissue of a patient's
heart. A qualified physician performs this minimally invasive procedure using an endoventricular catheter. We entered into an agreement
with a Johnson & Johnson company to use its NOGA® Cardiac Navigation System along with its MyoStarTM injection catheter
for the delivery of MyoCell in the MARVEL Trial.



When injected into scar
tissue within the heart wall, myoblasts have been shown to be capable of engrafting in the damaged tissue and differentiating into
mature skeletal muscle cells. In a number of clinical and animal studies, the engrafted skeletal muscle cells have been shown to
express various proteins that are important components of contractile function. By using myoblasts obtained from a patient's own
body, we believe MyoCell is able to avoid certain challenges currently faced by other types of cell-based clinical therapies including
tissue rejection and instances of the cells differentiating into cells other than muscle. Although a number of therapies have proven
to improve the cardiac function of a damaged heart, no currently available treatment has demonstrated an ability to generate new
muscle tissue within the scarred regions of a heart.



We believe the market
for treating patients in NYHA Class II or NYHA Class III heart failure is significant. According to the AHA Statistics and the
European Society of Cardiology Task Force for the Treatment of Chronic Heart Failure, in the United States and Europe there are
approximately 5.2 million and 9.6 million, respectively, patients with heart failure. The AHA Statistics further indicate that,
after heart failure is diagnosed, the one-year mortality rate is high, with one in five dying and that 80% of men and 70% of women
under age 65 who have heart failure will die within eight years. We believe that approximately 60% of heart failure patients are
in either NYHA Class II or NYHA Class III heart failure based upon a 1999 study entitled “Congestive Heart Failure Due to
Diastolic or Systolic Dysfunction – Frequency and Patient Characteristics in an Ambulatory Setting” by Diller, PM,
et. al.



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Business Strategy



Our principal objective
is to become a leading regenerative medicine company that discovers, develops and commercializes novel, autologous cell therapies,
and related devices, for the treatment and improved care of patients suffering from chronic and acute heart damage as well as lower
limb ischemia. The number of heart failure patients is expected to increase from 25 million worldwide today to over 50 million
in five years. Our focus is on serving these patients. To achieve this objective, we plan to pursue the following key strategies:



·Obtain initial regulatory approval of MyoCell and/or MyoCell SDF-1 by targeting patients with severe heart damage.In
July 2007, we treated the final patient in the Phase II SEISMIC Trial, which was comprised of 40 patients, including 26 treated
patients. The SEISMIC study results demonstrated that 94% of MyoCell treated patients improved or did not worsen in heart failure
class while only 6% worsened, while in the control group receiving only drugs 42% worsened. 84% of MyoCell treated patients improved
or did not worsen in exercise capacity and only 16% worsened, while 69% of the control patients worsened. The average improvement
in 6 minute walk was 62 meters. This compares very favorably with the current gold standard in advanced heart failure treatment,
Bi-Ventricular pacing, where they achieved 16 to 20 meters improvement over control patients in the Phase II MIRACLE trial that
led to commercial approval of this product. 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 and/or MyoCell SDF-1. Obtain regulatory approval
of MyoCell and/or MyoCell SDF-1 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 and/or
MyoCell SDF-1 should receive regulatory approval to treat all patients in NYHA Class II, NYHA Class III and NYHA Class IV 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 existing studies with adipose derived stem cells and endothelial progenitor cells. We have initiated studies
for the applications of lower limb ischemia, acute myocardial infarction andchronic heart ischemia.

·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 MyoCell
SDF-1, MyoCath and MyoCath II product candidates.

·Develop our sales and marketing capabilities.In advance of U.S. regulatory approval of our MyoCell product candidate,
we intend to internally build a sales force to cover the U.S. market and to utilize dealers in foreign markets which we anticipate
will market MyoCell, MyoCell SDF-1 and our heart failure focused products primarily to interventional cardiologists and heart failure
specialists.

·Continue to refine our MyoCell and MyoCell SDF-1 cell culturing processes.

·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)



Myocardial infarction,
or MI, commonly known as a heart attack, occurs when a blockage in a coronary artery severely restricts or completely stops blood
flow to a portion of the heart. When blood supply is greatly reduced or blocked for more than a short period of time, heart muscle
cells die. If the healthy heart muscle cells do not replace the dead cells within approximately two months, the injured area of
the heart becomes unable to function properly. In the healing phase after a heart attack, white blood cells migrate into the affected
area and remove the dead heart muscle cells. Then, fibroblasts, the connective tissue cells of the human body, proliferate and
form a collagen scar in



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the affected region of the heart. Following
a heart attack, the heart's ability to maintain normal function will depend on the location and amount of damaged tissue. The remaining
initially undamaged heart muscle tissue must perform more work to adequately maintain cardiac output. Because the uninjured region
is then compelled to work harder than normal, the heart can progressively deteriorate until it is unable to pump adequate blood
to oxygenate the body properly leading to heart failure and ultimately death.



Congestive Heart Failure (CHF)



Congestive heart failure,
or CHF, is a debilitating condition that occurs as the heart becomes progressively less able to pump an adequate supply of blood
throughout the body resulting in fluid accumulation in the lungs, kidneys and other body tissues. Persons suffering from NYHA Class
II or worse heart failure experience high rates of mortality, frequent hospitalization and poor quality of life. CHF has many causes,
generally beginning in patients with a life-long history of high blood pressure or after a patient has suffered a major heart attack
or some other heart-damaging event. CHF itself may lead to other complicating factors such as pulmonary hypertension, edema, pulmonary
edema, liver dysfunction and kidney failure. Although medical therapy for CHF is improving, it remains a major debilitating condition.



Classifying Heart Failure



The NYHA heart failure
classification system provides a simple and widely recognized way of classifying the extent of heart failure. It places patients
in one of four categories based on how limited they are during physical activity. NYHA Class I heart failure patients have no limitation
of activities and suffer no symptoms from ordinary activities. NYHA Class II heart failure patients have a mild limitation of activity
and are generally comfortable at rest or with mild exertion. NYHA Class III heart failure patients suffer from a marked limitation
of activity and are generally comfortable only at rest. NYHA Class IV heart failure patients generally suffer discomfort and symptoms
at rest and should remain confined to a bed or chair.



The risk of hospitalization
and death increases as patients progress through the various stages of heart failure. The risk of hospitalization due to heart
failure for patients in NYHA Class II, NYHA Class III and NYHA Class IV is approximately 1.2, 2.3 and 3.7 times greater than for
patients in NYHA Class I heart failure according to a 2006 American Heart Journal article entitled “Higher New York Heart
Association Classes and Increased Mortality and Hospitalization in Patients with Heart Failure and Preserved Left Ventricular Function”'
by Ahmed, A et al. Similarly, according to this same article, the risk of death from all causes for patients in NYHA Class II,
NYHA Class III and NYHA Class IV is approximately 1.5, 2.6 and 8.5 times greater than for patients in NYHA Class I heart failure.



The following chart illustrates the various stages of heart failure, their NYHA classifications and the associated current standard
of treatment.



|      |  |                                                   |  |                                                  |  |                                                                                                                                   
|----- |  | ------------------------------------------------- |  | ------------------------------------------------ |  | ----------------------------------------------------------------------------------------------------------------------------------
|NYHA  |  |                                                   |  |                                                  |  |                                                                                                                                   
|Class |  | 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-Blocker                                                                                                       
|II    |  | Symptoms with normal physical activity            |  | Can perform more than 5 metabolic equivalents    |  | ACE Inhibitor, Beta-Blocker, Diuretics                                                                                            
|III   |  | Symptoms with minimal physical activity           |  | Can perform more than 2 metabolic equivalents    |  | ACE Inhibitor, Beta-Blocker, Diuretics, Digoxin, Bi-ventricular pacers                                                            
|IV    |  | 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



Heart
disease has been the leading cause of death from 1950 on within the United States, according to the U.S. Department of Health and
Human Services. In addition, heart failure is the single most frequent reason for hospitalization in the elderly according to a
2007 study entitled “Long-Term Costs and Resource Use in Elderly Participants with Congestive Heart Failure” by Liao,
L., et al. The American College of Cardiology/ American Heart Association 2005 Guideline Update for the Diagnosis and Management
of Chronic Heart Failure in the Adult, or the ACC/ AHA Guidelines, provides recommendations for the treatment of chronic heart
failure in adults with normal or low LVEF. The treatment escalates and becomes more invasive as the heart failure worsens. Current
treatment options for severe, chronic heart damage include, but are not limited to, heart transplantation and other surgical procedures,
bi-ventricular pacers, drug therapies, ICDs, and ventricular assist devices. Therapies utilizing drugs, ICDs and bi-ventricular
pacers are currently by far the most commonly prescribed treatments for patients suffering from NYHA Class II or NYHA Class III
heart failure. Since the therapies generally each address a particular feature of heart disease or a specific subgroup of heart
failure patients, the therapies are often complementary and used in combination.



Drug
Therapies.		The ACC/AHA Guidelines recommend that most patients with heart failure should be routinely managed with a
combination of ACE inhibitors, beta-blockers and diuretics. The value of these drugs has been established by the results of numerous
large-scale clinical trials and the evidence supporting a central role for their use is, according to the ACC/AHA Guidelines, compelling
and persuasive. ACE inhibitors and beta blockers have been shown to improve a patient’s clinical status and overall sense
of well being and reduce the risk of death and hospitalization. Side effects of ACE inhibitors include hypotension, worsening kidney
function, potassium retention, cough and angioedema. Side effects of beta-blockers include fluid retention, fatigue, bradycardia
and heart block and hypotension.



Bi-Ventricular
Pacers.		The ACC/AHA Guidelines recommend bi-ventricular pacers for persons who, in addition to suffering from heart
failure, have left and right ventricles that do not contract in sync, known as ventricular dyssynchrony and who have a LVEF less
than or equal to 35%, sinus rhythm and NYHA Class III or NYHA Class IV symptoms despite recommended optimal medical therapy.
Bi-ventricular pacers are surgically implanted electrical generators that function primarily by stimulating the un-damaged portion
of the heart to beat more strongly using controlled bursts of electrical currents in synchrony. Compared with optimal medical therapy
alone, bi-ventricular pacers have been shown in a number of clinical trials to significantly decrease the risk of all-cause hospitalization
and all-cause mortality as well as to improve LVEF, NYHA Class and Quality of Life. According to the ACC/AHA Guidelines, there
are certain risks associated with the bi-ventricular pacer including risks associated with implantation and device-related problems.



Implantable
Cardioverter Defibrillators.	ACC/AHA Guidelines recommend ICDs primarily for patients who have experienced a life-threatening
clinical event associated with a sustained irregular heartbeat and in patients who have had a prior heart attack and a reduced
LVEF. ICDs are surgically implanted devices that continually monitor patients at high risk of sudden heart attack. When an irregular
rhythm is detected, the device sends an electric shock



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to the heart to restore
normal rhythm. In 2001, ICDs were implanted in approximately 62,000 and 18,000 patients in the United States and Europe, respectively.
Although ICDs have not demonstrated an ability to improve cardiac function, according to the ACC/AHA Guidelines, ICDs are highly
effective in preventing sudden death due to irregular heartbeats. However, according to the ACC/AHA Guidelines, frequent shocks
from an ICD can lead to a reduced quality of life, whether triggered appropriately or inappropriately. In addition, according to
the ACC/AHA Guidelines, ICDs have the potential to aggravate heart failure and have been associated with an increase in heart failure
hospitalizations.



Heart
Transplantation and Other Surgical Procedures.		According to the ACC/AHA Guidelines, heart transplantation is currently
the only established surgical approach for the treatment of severe heart failure that is not responsive to other therapies. Heart
transplantation is a major surgical procedure in which the diseased heart is removed from a patient and replaced with a healthy
donor heart. Heart transplantation has proven to dramatically improve cardiac function in a majority of the patients treated and
most heart transplant recipients return to work, travel and normal activities within three to six months after the surgery. In
addition, the risk of hospitalization and mortality for transplant recipients is dramatically lower than the risk faced by patients
in NYHA Class III or NYHA Class IV heart failure. Heart transplants are not, for a variety of reasons, readily available
to all patients with severe heart damage. The availability of heart transplants is limited by, among other things, cost and donor
availability. In addition to the significant cost involved and the chronic shortage of donor hearts, one of the serious challenges
in heart transplantation is potential rejection of the donor heart. For many heart transplant recipients, chronic rejection significantly
shortens the length of time the donated heart can function effectively and such recipients are generally administered costly anti-rejection
drug regimens which can have adverse and potentially severe side effects.



There
are a number of alternate surgical approaches under development for the treatment of severe heart failure, including cardiomyoplasty,
a surgical procedure where the patient’s own body muscle is wrapped around the heart to provide support for the failing heart,
the Batista procedure, a surgical procedure that reduces the size of an enlarged heart muscle so that the heart can pump more efficiently
and vigorously, and the Dor procedure. According to the ACC/AHA Guidelines, both cardiomyoplasty and the Batista procedure have
failed to result in clinical improvement and are associated with a high risk of death. The Dor procedure involves surgically removing
scarred, dead tissue from the heart following a heart attack and returning the left ventricle to a more normal shape. While the
early published single-center experience with the Dor procedure demonstrated early and late improvement in NYHA Class and LVEF,
according to the ACC/AHA Guidelines, this procedure’s role in the management of heart failure remains to be defined.



Ventricular
Assist Devices.	Ventricular assist devices are mechanical heart pumps that replace or assist the pumping role of the left
ventricle of a damaged heart too weak to pump blood through the body. Ventricular assist devices are primarily used as a bridge
for patients on the waiting list for a heart transplant and have been shown in published studies to be effective at halting further
deterioration of the patient’s condition and decreasing the likelihood of death before transplantation. In addition, ventricular
assist devices are a destination therapy for patients who are in NYHA Class IV heart failure despite optimal medical therapy
and who are not eligible for heart transplant. According to the ACC/AHA Guidelines, device related adverse events are reported
to be numerous and include bleeding, infection, blood clots and device failure. In addition, ventricular assist devices are very
expensive, with the average first-year cost estimated at approximately $225,000.



We
believe the heart failure treatment industry generally has a history of adopting therapies that have proven to be safe and effective
complements to existing therapies and using them in combination with existing therapies. It is our understanding that there is
no one or two measurement criteria, either quantitative or qualitative, that define when a therapy for treating heart failure will
be deemed safe and effective by the FDA. We believe that the safety and efficacy of certain existing FDA approved therapies for
heart damage were demonstrated based upon a variety of endpoints, including certain endpoints (such as LVEF) that individually
did not demonstrate large numerical differences between the treated patients and untreated patients. For instance, the use of bi-ventricular
pacers with optimal drug therapy has proven to significantly decrease the risk of all-cause hospitalization and all-cause-mortality
as well as to improve LVEF, NYHA Class and quality of life as compared to the use of optimal drug therapy alone. In the Multicenter
InSync Randomized Clinical Evaluation (MIRACLE) trial, one of the first large studies to measure the therapeutic benefits
of bi-ventricular pacing, 69% of the patients in the treatment group experienced an



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improvement in NYHA
Class by one or more classes at six-month follow-up versus a 34% improvement in the control group. However, patients in the treatment
group experienced on average only a 2.1% improvement in LVEF as compared with a 1.7% improvement for patients in the control group.
Although a number of the therapies described above have proven to improve the cardiac function of a damaged heart, no currently
available heart failure treatment has demonstrated an ability to generate new muscle tissue within the scarred regions of a heart.



Our Proposed Solution



We
believe MyoCell has the potential to become a leading treatment for severe chronic damage to the heart due to its perceived ability
to satisfy, at least in part, what we believe to be a presently unmet demand for more effective and/or more affordable therapies
for chronic heart damage.



MyoCell



The
human heart does not have cells that naturally repair or replace damaged heart muscle. Accordingly, the human body cannot, without
medical assistance, repopulate regions of scar tissue within the heart with functioning muscle. MyoCell is a clinical therapy designed
to improve cardiac function by populating regions of scar tissue within a patient’s heart with myoblasts derived from a biopsy
of a patient’s thigh muscle. Myoblasts are precursors to muscle cells that have the capacity to fuse with other myoblasts
or with damaged muscle fibers to regenerate skeletal muscle. When injected into scar tissue within the heart wall, myoblasts have
been shown to be capable of engrafting in the damaged tissue and differentiating into mature skeletal muscle cells. In a number
of clinical and animal studies, the engrafted skeletal muscle cells have been shown to express various proteins that are important
components of contractile function. By using myoblasts obtained from a patient’s own body, we believe MyoCell is able to
avoid certain challenges currently faced by other cell-based clinical therapies intended to be used for the treatment of chronic
heart damage including tissue rejection and instances of the cells differentiating into cells other than muscle.



Our clinical research
to date suggests that MyoCell may improve the contractile function of the heart. However, we have not yet been able to demonstrate
a mechanism of action. The engrafted skeletal muscle tissues are not believed to be coupled with the surrounding heart muscle by
the same chemicals that allow heart muscle cells to contract simultaneously. The theories regarding why contractile function may
improve include:



·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.



As
part of the MyoCell therapy, a general surgeon removes approximately five to ten grams of thigh muscle tissue from the patient
utilizing local anesthesia, typically on an outpatient basis. The muscle tissue is then express-shipped to a cell culturing site.
At the cell culturing site, our proprietary techniques are used to isolate and remove myoblasts from the muscle tissue. We typically
produce enough cells to treat a patient within approximately 21 days of his or her biopsy. Such production time is expected
to continue to decrease as we continue to refine our cell culturing processes. After the cells are subjected to a variety of tests,
the cultured cells are packaged in injectate media and express shipped to the interventional cardiologist. Within four days of
packaging, the cultured myoblasts are injected via catheter directly into the scar tissue of the patient’s heart. The injection
process takes on average about one hour and can be performed with or without general anesthesia. Following treatment, patients
generally remain in the hospital for approximately 48-72 hours for monitoring.



The
MyoCell injection process is a minimally invasive procedure which presents less risk and considerably less trauma to a patient
than conventional (open) heart surgery. Patients are able to walk immediately following the injection process and require
significantly less time in the hospital compared with surgically treated patients. In the



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69 patients who have
received MyoCell injections delivered via percutaneous catheter, only two minor procedure-related events (2.9%) have been reported.
In both cases, however, no complications resulted from the event, with the patients in each case remaining asymptomatic at all
times during and after the procedure.



We
use a number of proprietary processes to create therapeutic quantities of myoblasts from a patient’s thigh muscle biopsy.
We have developed and/or licensed what we believe are proprietary or patented techniques to:



·transport muscle tissue and cultured cells;

·disassociate muscle tissue with manual and chemical processes;

·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.

We have also developed and/or licensed a number of proprietary and/or patented processes related to the injection of myoblasts
into damaged heart muscle, including the following:



·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.



Assuming
we secure regulatory approval of MyoCell for the treatment of all NYHA Class II and NYHA Class III patients, we believe
MyoCell will provide a treatment alternative for the millions of NYHA Class II and NYHA Class III patients in the United
States and Europe who either do not qualify for or do not have access to heart transplant therapy. Furthermore, we anticipate that
the time incurred and cost of identifying patients qualified to receive MyoCell as well as the cost of MyoCell, including any ICD,
drug and bi-ventricular pacer therapies that are simultaneously prescribed, if any, will be less expensive than the current cost
of heart transplant therapy. Moreover, MyoCell is less invasive than a heart transplant and is not subject to the tissue rejection
and immune system suppression issues associated with heart transplants.



We
believe there is still a large population of patients exhibiting symptoms consistent with NYHA Class II and NYHA Class III
heart failure that is seeking an effective or more effective therapy for chronic heart damage than ICDs, bi-ventricular pacers
and drug therapies. We hope to demonstrate that MyoCell is complementary to various therapies using ICDs, bi-ventricular pacers
and drugs. In the MYOHEART and SEISMIC Trials, enrolled patients are required to have an ICD and to be on optimal drug therapy
to be included in the study. While we do not require patients to have previously received a bi-ventricular pacer to participate
in our clinical trials, we plan to accept patients in our MARVEL Trial who have had prior placement of a bi-ventricular pacer.
We are hopeful that the results of our future clinical trials will demonstrate that MyoCell is complementary to existing therapies
for treating heart damage.



Metrics Used
to Evaluate Safety and Efficacy of Heart Failure Treatments



The
performance of therapies used to treat damage to the heart is assessed using a number of metrics, which compare data collected
at the time of initial treatment to data collected when a patient is re-assessed at follow-up. The time periods for follow-up are
usually three, six and twelve months. Statistical data is often accompanied by a p-



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value, which is the
mathematical probability that the data are the result of random chance. A result is considered statistically significant if the
p-value is less than or equal to 5%. The common metrics used to evaluate the efficacy of these therapies include:



|                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|----------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Metric                                                |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|                                                      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|NYHA Class                                            |  | The NYHA heart failure classification system is a functional and therapeutic classification system based on how much cardiac patients are limited during physical 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



The MARVEL Trial is designed
to be a double-blind, randomized, placebo-controlled multicenter trial to evaluate the safety and efficacy of MyoCell. In August
2007, we received clearance from the FDA to proceed with







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the trial. We completed
the MyoCell implantation procedure on the first patient in the MARVEL Trial on October 24, 2007.Thus far, 20 patients,
including 6 control patients, have been treated. Initial results for the 20 patients were released at the Heart Failure Society
of American meeting in September, 2009, showing a dramatic (35%) improvement in the 6 minute walk for those patients who were treated,
and no improvement for those who received a placebo. We are planning, on the basis of these results, to ask the FDA to consider
the MARVEL Trial a pivotal trial (pivotal from Phase II to Phase III) and to reduce the number of patients in the trial to 150.
The SEISMIC, MYOHEART and MARVEL Trials have been designed to test the safety and efficacy of MyoCell in treating patients with
severe, chronic damage to the heart. Upon regulatory approval of MyoCell, we intend to generate revenue in the United States from
the sale of MyoCell cell-culturing services for treatment of patients by qualified physicians. Abroad, we are identifying centers
where it is already acceptable to use the Myocell treatment so that greater numbers of patients with this problem can have access
to treatment.



We are currently in the
process of evaluating our development timeline for MyoCell and the MARVEL Trial. We received approval from the FDA in July of 2009
to conduct a Phase I safety study on 15 patients of a combined therapy (Myocell with SDF-1), the first approval of a study combining
gene and cell therapies. We initially commenced work on this study, called the REGEN trial, during the first quarter of 2010. The
Company suspended activity on the trial in 2010 while seeking additional funding necessary to conduct the trial. Work on the trial
was reinitiated in 2011. Based on the results of the trial, we intend to either incorporate the combined treatment into the Marvel
Trial, or continue with the Marvel Trial based on the use of Myocell alone.



All
of the patients selected for enrollment in the MARVEL Trial have (i) symptoms associated with NYHA Class II or NYHA Class III
heart failure, (ii) suffered a previous heart attack at least 90 days prior to the date of treatment, (iii) a LVEF
of less than or equal to 35%, (iv) been on optimal drug therapy for at least two months prior to enrollment and (v) had
prior placement of an ICD at least 60 days prior to enrollment. Patients were required to use Amiodarone, an anti-arrhythmic
drug therapy, at least 24 hours prior to MyoCell implantation. This prophylactic treatment successfully ameliorated the problem
with arrhythmias in patients treated with Myocell and the placebo, which, although never lead to any deterioration in the patients,
was considered a serious adverse event.



The
patients were divided into three groups. Patients in the first group underwent treatment consisting of 16 injections of an aggregate
dosage of approximately 800 million myoblast cells. Patients in the second group underwent treatment consisting of 16 injections
of an aggregate dosage of approximately 400 million myoblast cells. Patients in the third group received 16 placebo injections.



The
MARVEL Trial will measure the following safety and efficacy endpoints of the MyoCell treatment:





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|                                                                                 |  |                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|-------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Primary Safety                                                                   |  | Primary Efficacy                                                                                                                                                                                                                                 |  | Secondary Efficacy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  | Tertiary Efficacy                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|Endpoint                                                                         |  | Endpoints                                                                                                                                                                                                                                        |  | Endpoints                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  | Endpoints                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|                                                                                 |  |                                                                                                                                                                                                                                                  |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|                                                                                
|Number 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



Pipeline



We
are committed to delivering biologics that help treat heart failure and cardiovascular diseases. In
addition to MyoCell, we have multiple cell therapies and related devices for the treatment of
chronic and acute heart damage in various stages of development. We have also acquired the rights to use certain devices for the
treatment of heart damage. We intend to allocate our capital, material and personnel resources among MyoCell and the product candidates
described below, a number of which may have complementary therapeutic applications. For each product candidate, we have developed
or are in the process of developing a regulatory approval plan. Assuming such proposed plans are able to be followed, we do not
anticipate that the regulatory approval of MyoCell will be necessary for our further development of our other product candidates.



|                                          |  |                                                                                                                                                                             |  |                                                                                                                       |  |                                                                                          
|----------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------
|Candidate                                 |  | Proposed Use or Indication                                                                                                                                                  |  | Status/Phase                                                                                                          |  | Comments                                                                                 
|                                          |  |                                                                                                                                                                             |  |                                                                                                                       |  |                                                                                          
|TGI 1200 Adipose Tissue Processing System |  | Fully automated device for the rapid processing of patient derived fat tissue for use in Acute MI, Lower Limb Ischemia and Chronic Ischemia                                 |  | CE mark approved                                                                                                      |  | Distribution commenced in the 2009; We are not currently distributing additional devices.
|MyoCell 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. Additional animal studies complete.
Phase I trial approved by FDA in July of 2009. |  | Trial commenced in April 1, 2010. Anticipate enrolling patients in 2011.                 
|MyoCath                                   |  | 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;                     |  | Currently utilizing catheters in Center of Excellence trials in Mexico.                  
|MyoCath II                                |  | Second generation disposable endoventricular catheter modified to provide
multidirectional cell injection and used for the delivery of biologic solutions to the myocardium |  | Preclinical                                                                                                           |  |                                                                                          





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TGI 1200 Adipose
Tissue Processing System



The
TGI 1200 is a patient-derived cell therapy for the treatment of acute myocardial infarction, chronic heart ischemia, and lower
limb ischemia utilizing Bioheart’s TGI 1200 adipose tissue processing system. The TGI 1200 has received CE mark commercial
approval for marketing.



Unlike
MyoCell, which is intended to be used to treat severe heart damage months or even years after a heart attack, the TGI 1200 is being
designed to be used for the treatment of heart muscle damage immediately following a heart attack. We hope to demonstrate that
the injection of endothelial progenitor and stem cells derived from fat tissue by the TGI 1200 is a safe and effective means of
limiting or reversing some of the effects of acute myocardial infarction and preventing or slowing a patient’s progression
from initial heart attack to congestive heart failure. Similarly, we are working to introduce the system as a treatment for lower
limb ischemia, not only to reduce pain but to regenerate tissue and prevent amputations. Fat tissue is an abundant and readily
available source of endothelial progenitor and stem cells and is easily extractable from a patient using minimally invasive techniques.



MyoCell
SDF-1



Our
MyoCell SDF-1 product candidate, which has recently completed preclinical testing, is intended to be an improvement to MyoCell.
In February 2006, we signed a patent licensing agreement with the Cleveland Clinic of Cleveland, Ohio which gave us exclusive license
rights to pending patent applications in connection with MyoCell SDF-1. Dr. Marc Penn, the Medical Director of the Cardiac
Intensive Care Unit at the Cleveland Clinic and a staff cardiologist in the Departments of Cardiovascular Medicine and Cell Biology,
joined our Scientific Advisory Board. The license for SDF-1 was passed on to a Cleveland Clinic affiliate, Juventas, in July of
2009. Bioheart has an understanding with Juventas pursuant to which the license with Bioheart will be reinstated upon completion
of certain financial milestones.



We
anticipate that MyoCell SDF-1 will be similar to MyoCell, except that the myoblast cells to be injected will be modified prior
to injection by an adenovirus vector or non-viral vector so that they will release extra quantities of the SDF-1 protein, which
expresses angiogenic factors. Following injury which results in inadequate blood flow to the heart, such as a heart attack, the
human body naturally increases the level of SDF-1 protein in the heart. By modifying the myoblasts to express additional SDF-1
prior to injection, we are seeking to increase the SDF-1 protein levels present in the heart. We are seeking to demonstrate that
the presence of additional quantities of SDF-1 protein released by the myoblasts will stimulate the recruitment of the patient’s
existing stem cells to the cell transplanted area and, thereafter, the recruited stem cells will assist in the tissue repair and
blood vessel formation process. Preclinical animal studies showed a definite improvement of cardiac function when the myoblasts
were modified to express additional SDF-1 protein prior to injection as compared to when the myoblasts were injected without modification.



Our
Phase I safety study, the REGEN Trial, was approved by the FDA in July of 2009 and work commenced on the trial during the first
quarter of 2010.The Company suspended activity on the trial in 2010 while seeking additional funding necessary to conduct
the trial. Work on the trial was reinitiated in 2011.



MyoCath



The MyoCath was developed
by Bioheart co-founder Robert Lashinski specifically for delivering new cells to damaged tissue.  It is a deflecting tip needle
injection catheter that has a larger needle which is 25 gauge for better flow rates and less leakage than systems that are 27 gauge.
 This larger needle allows for thicker compositions to be injected which helps with cell retention in the heart.  Also,
the MyoCath needle has more fluoroscopic brightness than the normally used nitinol needle, enabling superior visualization during
the procedure.  Seeing the needle well



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during injections enables the physician who
is operating the catheter to pinpoint targeted areas more precisely, thus improving safety.  The MyoCath competes well with
other biological delivery systems on price and efficiency and allows the physician to utilize standard fluoroscopy and echo equipment
found in every cath lab. The MyoCath is used to inject cells into cardiac tissue in therapeutic procedures to treat chronic heart
ischemic and congestive heart failure. Inventory of MyoCath is limited as it is not currently in production. The Company is considering
several contract manufacturers to produce additional inventory.



Center of Excellence
Program



On March 23, 2010, the
Company announced plans for establishing five Centers of Excellence in Latin America to provide its cell therapy procedures to
patients suffering from congestive heart failure (CHF) and peripheral arterial disease (PAD).  Bioheart entered into its first
agreement with a leading treatment facilitator, Regenerative Medicine Institute of Tijuana, Mexico. Therapies for CHF and PAD patients
will be made available at the Hospital Angeles Tijuana, a fully equipped state-of–the-art private specialties hospital.



On April 14, 2010, the
Company announced that treatment with stem cell therapy on two congestive heart failure (CHF) patients was performed successfully
at the Hospital Angeles Tijuana, Mexico, through Bioheart's Center of Excellence program with Regenerative Medicine Institute.



The
center in Mexico has recently completed 6 months follow up on the first 4 heart failure patients.  These patients have demonstrated
on average, an absolute improvement of 13 percentage points in ejection fraction and an increase of 100 meters in their 6 minute
walk distance.



Bioheart
has also partnered with the University Hospital Ostrava which is currently enrolling and treating end stage critical limb patients
who have been listed on the amputation list. These patients are being treated with adipose derived stem cells in the Czech Republic
Center of Excellence.  Recently reported follow up showed that 75% of the patients demonstrated healing and pain reduction
while only 25% of the patients required amputation.



Research



We
supervise and perform experimental work in the areas of improving cell culturing, cell engraftment, and other advanced research
projects related to our product candidates from our cell culturing facility in Sunrise, Florida. The primary focus of a substantial
majority of our employees is advancing our clinical trials, preclinical studies, research and product development.



In
addition, we work with a number of third parties within and outside the United States on various research and product development
projects, including:



·preclinical small and large animal testing for product candidate enhancements and pipeline product candidate development;
and

·contract research for clinical and preclinical testing of our pipeline product candidates.



Cell Culturing



We
have an approximately 2,000 square foot cell culturing facility at our headquarters in Sunrise, Florida. We began culturing
cells at this facility for preclinical uses in the third quarter of 2006. Upon commencement of the MARVEL Trial in the fourth quarter
of 2007, we began culturing cells at this facility for clinical uses.



Over
the last three years, we have significantly improved our ability to:



·culture in excess of 800 million myoblast cells per biopsy; and

·produce cell cultures with a high percentage of viable myoblast cells.



14

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Accordingly,
we were able to increase the maximum dosage of myoblast cells injected as part of the MyoCell therapy to approximately 800 million
myoblast cells. We expect to further refine our MyoCell cell culturing processes.



We
have historically met and, with respect to the cell culturing of our product candidates in Europe, expect to meet, our cell culturing
needs internally.



Third Party Reimbursement



Government
and private insurance programs, such as Medicare, Medicaid, health maintenance organizations and private insurers, fund the cost
of a significant portion of medical care in the United States. As a result, government imposed limits on reimbursement of hospitals
and other healthcare providers have significantly impacted their spending budgets and buying decisions. Under certain government
insurance programs, a healthcare provider is reimbursed a fixed sum for services rendered in treating a patient, regardless of
the actual cost of such treatment incurred by the healthcare provider. Private third party reimbursement plans are also developing
increasingly sophisticated methods of controlling healthcare costs through redesign of benefits and exploration of more cost-effective
methods of delivering healthcare. In general, we believe that these government and private measures have caused healthcare providers
to be more selective in the purchase of medical products.



As
of the date of this report, CMS has agreed to reimburse some of the costs at the centers that are participating in the MARVEL Trial.
Specifically, CMS will reimburse costs deemed “routine” in nature for patients suffering from heart failure. Examples
of these reimbursable costs include, but are not limited to, costs associated with physical examination of the patients, x-rays,
holter monitoring, MUGA scan and echocardiography. However, at present, CMS reimbursement does not cover the cost of MyoCell implantation.



Reimbursement
for healthcare costs outside the United States varies from country to country. In European countries, the pricing of prescription
pharmaceutical products and services and the level of government reimbursement are subject to governmental control. In these countries,
pricing negotiations with governmental authorities can take six to twelve months or longer after the receipt of marketing approval
for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct one or more clinical
trials that compare the cost effectiveness of our product candidates to other available therapies. Conducting one or more clinical
trials would be expensive and result in delays in commercialization of our product candidates.



Research Grants



Historically,
part of our research and development efforts have been indirectly funded by research grants to various centers and/or physicians
that have participated in our MyoCell and MyoCath clinical trials. As part of our development strategy, we intend to continue to
seek to develop research partnerships with centers and/or physicians. On November 1, 2010, Bioheart, Inc. (the “Company”)
received written notice of approval of a grant in the approximate amount of $244,500 under the qualifying therapeutic discovery
project under section 48D of the Internal Revenue code.



Patents and Proprietary
Rights



We
own or hold licenses or sublicenses to an intellectual property portfolio consisting of numerous patents and  patent applications
in the United States, and in foreign countries, for use in the field of heart muscle regeneration. References in this report to
“our” patents and patent applications and other similar references include the patents and patent applications that
are owned by us, and references to patents and patent applications that are “licensed” to us and other similar references
refer to patents, patent applications and other intellectual property that are licensed or sublicensed to us.





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Patent
life determination depends on the date of filing of the application or the date of patent issuance and other factors as promulgated
under the patent laws. Under the U.S. Drug Price Competition and Patent Term Restoration Act of 1984, as amended, a patent
which claims a product, use or method of manufacture covering drugs and certain other products, including biologic products, may
be extended for up to five years to compensate the patent holder for a portion of the time required for research and FDA review
of the product. Only one patent applicable to an approved drug or biologic product is eligible for a patent term extension. This
law also establishes a period of time following approval of a drug or biologic product during which the FDA may not accept or approve
applications for certain similar or identical drugs or biologic products from other sponsors unless those sponsors provide their
own safety and efficacy data.



MyoCell
is no longer protected by patents outside, which means that competitors will be free to sell products that incorporate the same
or similar technologies that are used in MyoCell without infringing our patent rights. As a result, MyoCell, if approved for use,
may be vulnerable to competition. In addition, many of the patent and patent applications that have been licensed to us that pertain
to our other product candidates do not cover certain countries within Europe.



Our
commercial success will depend to a significant degree on our ability to:





| | · | defend and enforce our patents and/or compel the owners of the patents licensed to us to defend and enforce such patents, to the extent such patents may be applicable to our products and material to their commercialization;
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                
| | · | 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 company trade secrets and other intellectual property rights relating to our product candidates; and                                                                                                                  
| |   |                                                                                                                                                                                                                                
| | · | operate without infringing the patents and proprietary rights of third parties.                                                                                                                                                







In
addition to patented intellectual property, we also rely on our own trade secrets and proprietary know-how to protect our technology
and maintain our competitive position, since patent protection may not be available or applicable to our technology. Our policy
is to require each of our employees, consultants and advisors to execute a confidentiality and inventions assignment agreement
before beginning their employment, consulting or advisory relationship with us. The agreements generally provide that the individual
must keep confidential and not disclose to other parties any confidential information developed or learned by the individual during
the course of the individual’s relationship with us except in limited circumstances. These agreements generally also provide
that we shall own all inventions conceived by the individual in the course of rendering services to us. Moreover, some of our academic
institution licensors, collaborators and scientific advisors have rights to publish data and information to which we have rights,
which may impair our ability to protect our proprietary information or obtain patent protection in the future.



We
work with others in our research and development activities and one of our strategies is to enter into collaborative agreements
with third parties to develop our proposed products. Disputes may arise about inventorship and corresponding rights in know-how
and inventions resulting from the joint creation or use of intellectual property by us and our licensors, collaborators, consultants
and others. In addition, other parties may circumvent any proprietary protection we do have. As a result, we may not be able to
maintain our proprietary position.



We
are not currently a party to any litigation or other adverse proceeding related to our patents, patent licenses or intellectual
property rights. However, if we become involved in litigation or any other adverse intellectual property proceeding, for example,
as a result of an alleged infringement, or a third party alleging an earlier date of invention, we may have to spend significant
amounts of money and time and, in the event of an adverse ruling, we could be subject to liability for damages, including treble
damages, invalidation of our intellectual property and injunctive relief that could prevent us from using technologies or developing
products, any of which could have a





16

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significant adverse
effect on our business, financial condition and results of operation. In addition, any claims relating to the infringement of third
party proprietary rights, or earlier date of invention, even if not meritorious, could result in costly litigation, lengthy governmental
proceedings, divert management’s attention and resources and require us to enter royalty or license agreements which are
not advantageous, if available at all.



See
Item 1A. “Risk Factors — Risks Related to Our Intellectual Property” for a discussion of additional risks
we face with respect to our intellectual property rights.



Primary
MyoCath Patent



The
Primary MyoCath Patent includes device claims that we believe covers, among other things, the structure of MyoCath. The Primary
MyoCath Patent expires in the United States in September 2017.



In
January 2000, we entered into a license agreement with Comedicus Incorporated pursuant to which Comedicus granted us a royalty-free,
fully paid-up, non-exclusive and irrevocable license to the Primary MyoCath Patent in exchange for a payment of $50,000. This agreement
was amended in August 2000 to provide us an exclusive license to the Primary MyoCath Patent in exchange for a payment of $100,000
and our loan of $250,000 to Comedicus. Pursuant to this amendment we also received the right, but not the obligation, with Comedicus’
consent, which consent is not to be unreasonably withheld, to defend the Primary MyoCath Patent against third party infringers.



In
June 2003, we entered into agreements withAdvanced Cardiovascular Systems, Inc., or ACS, originally a subsidiary of Guidant
Corporation and now d/b/a Abbott Vascular, a division of Abbott Laboratories,pursuant to which we assigned
our rights under the license agreement with Comedicus, as amended, and committed to deliver 160 units of MyoCath and sold
certain of our other catheter related intellectual property, or, collectively, with the Primary MyoCath Patent (the Catheter IP),
for aggregate consideration of $900,000. In connection with these agreements, ACS granted to us a co-exclusive, irrevocable, fully
paid-up license to the Catheter IP for the life of the patents related to the Catheter IP.



ACS
has the exclusive right, at its own expense, to file, prosecute, issue, maintain, license, and defend the Catheter IP, and the
primary right to enforce the Catheter IP against third party infringers. If ACS fails to enforce the Catheter IP against a third
party infringer within a specified period of time, we have the right to do so at our expense. The party enforcing the Catheter
IP is entitled to retain any recoveries resulting from such enforcement. The asset purchase agreement only pertains to the Catheter
IP developed or acquired by us prior to June 24, 2003. Our subsequent catheter related developments and/or acquisitions, such
as MyoCath II, were not sold or licensed to ACS.



MyoCell
SDF-1 Patents



To
develop our MyoCell SDF-1 product candidate, we rely primarily on patents. We had an agreement to license patents from Juventas.
These patents relate to methods of repairing damaged heart tissue by transplanting myoblasts that express SDF-1 and other therapeutic
proteins capable of recruiting other stem cells within a patient’s own body to the cell transplant area. We believe we will
also need to, among other things, license some additional intellectual property to commercialize MyoCell SDF-1 in the form we believe
may prove to be the most safe and/or effective.



In
February 2006, we signed a patent licensing agreement with the Cleveland Clinic which provided us with the worldwide, exclusive
rights to three pending U.S. patent applications and certain corresponding foreign filings in the following jurisdictions: Australia,
Brazil, Canada, China, Europe and Japan, or, collectively, the Cleveland Clinic IP, related to methods of repairing damaged heart
tissue by transplanting myoblasts that express SDF-1 and other therapeutic proteins capable of recruiting other stem cells within
a patient’s own body to the cell transplant area. The term of our agreement with the Cleveland Clinic expired in July of
2009, when the license to the patents was turned over to a Cleveland Clinic affiliate, Juventas. We have an understanding with
Juventas to restore the license to the patents once certain milestones have been achieved by Bioheart.



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In
2007, Bioheart signed a Letter of Intent with Ono Pharmaceutical which provided rights to conduct clinical development and testing
of SDF-1 to determine the effectiveness of SDF-1 for the treatment of damaged myocardium and tissues following acute myocardial
infarction, coronary arterial diseases or heart failure. If the results of this testing is deemed successful then the parties agree
to enter into good faith negotiations in an effort to reach a definitive license agreement that will allow Bioheart to commercialize
its SDF-1 product candidate in all territories of the world except Japan.



MyoCath II Patents



In
April 2006, we entered into an agreement with Tricardia, LLC pursuant to which Tricardia granted us a sublicenseable license to
certain patents and patent applications in the United States, Australia, Canada, Europe and Japan covering the modified injection
needle we intend to use as part of MyoCath II, or the MyoCath II Patents, in exchange for a one-time payment of $100,000.
Our license covers and is exclusive with respect to products developed under the MyoCath II Patents for the delivery of therapeutic
compositions to the heart. Unless earlier terminated by mutual consent of the parties, our agreement with Tricardia will terminate
upon the expiration date of the last MyoCath II Patent.



Tricardia
has the obligation to take all actions necessary to file, prosecute and maintain the MyoCath II Patents. We are required to
reimburse Tricardia, on a pro-rata basis with other licensees of Tricardia of the MyoCath II Patents, for all reasonable out-of-pocket
costs and expenses incurred by Tricardia in prosecuting and maintaining the MyoCath II Patents. To the extent we do not wish
to incur the cost of any undertaking or defense of any opposition, interference or similar proceeding involving the MyoCath II
Patents with respect to any jurisdiction, the license granted to us pursuant to agreement will be automatically amended to exclude
such jurisdiction.



Tricardia
also has the first right, but not the obligation, to take any actions necessary to prosecute or prevent any infringement or threatened
infringement of the MyoCath II Patents. To the extent Tricardia determines not to initiate suit against any infringer, we
have the right, but not the obligation, to commence litigation for such alleged infringement. Our share of any recovery will equal
50% in the event Tricardia commences litigation and 90% in the event we commence litigation.



TGI 1200 Patent



On
December 12, 2006, or the Effective Date, we entered into an agreement with Tissue Genesis, or the Tissue Genesis Agreement,
that provides us an exclusive, worldwide right to individually use or to sell or lease to medical practitioners and related healthcare
entities the following items, for the treatment of acute MI and heart failure, or the Field of Use:





| | · | 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.  





On October 26, 2010 we
received a written notice of termination of Customer Agreement and Distribution Agreement, dated as of March 15, 2007 and December
12, 2006 respectively between Tissue Genesis Incorporated and the Company. We intend to complete all scheduled trials and continue
to monitor patients already treated utilizing the TGI system in the Czech Republic, Venezuela and Mexico.



Other
License Agreements



In
June 2000, we entered into an agreement with William Beaumont Hospital, or WBH, pursuant to which WBH granted to us a worldwide,
exclusive, non-sublicenseable license to two U.S. method patents covering the inducement of human adult myocardial cell proliferation
in vitro, or the WBH IP. The term of the agreement is for



18

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the life of the patents,
which expire in 2015. We utilize the methods under these patents in connection with our BioPace and certain other product candidates
in development. We do not have rights to patents outside the United States relating to BioPace. In addition to a payment of $55,000
we made to acquire the license, we are required to pay WBH an annual license fee of $10,000 and royalties ranging from 2% to 4%
of net sales of products that are covered by the WBH IP. In order to maintain these exclusive license rights, our aggregate royalty
payments in any calendar year must exceed a minimum threshold as established by the agreement. The minimum threshold was $50,000
for 2005, $100,000 for 2006, $200,000 for 2007 and 2008. This minimum threshold will remain $200,000 for 2009 and thereafter. To
the extent that our annual net sales of products covered by the WBH IP do not exceed the minimum threshold for such year, we have
the option of paying any shortfall in cash to WBH by the end of the applicable year or having our license to the WBH IP become
non-exclusive. In addition to the patents licensed from WBH, we purchased a U.S. patent and its corresponding Japanese filing,
which are directed to biological pacemakers, by assignment from Angeion Corporation on September 1, 2000.



As
of the date of this report, we have not made any payments to WBH other than the initial payment to acquire the license. Accordingly,
WBH may terminate the license to the WBH IP at any time at their sole option. We are currently in negotiations with WBH to amend
the terms of the license agreement. Unless earlier terminated by WBH or by either party upon the other party’s breach of
the agreement, the agreement will terminate upon the expiration date of the last patent covered by the WBH Agreement.



Sales and Marketing



MyoCell
and MyoCell SDF-1



In
advance of any expected commercial approval of our MyoCell product candidate in the United States, we intend to internally develop
a direct sales and marketing force. We anticipate the team will comprise salespeople, clinical and reimbursement specialists and
product marketing managers.



We
intend to market MyoCell and/or MyoCell SDF-1 to interventional cardiologists and heart failure specialists. In the typical healthcare
system the interventional cardiologist functions as a “gatekeeper” for determining the course of appropriate medical
care for our target patient population.



We
anticipate our marketing efforts will be focused on informing interventional cardiologists of the availability of a our treatment
alternative through the following channels of communication: (i) articles published in medical journals by widely recognized
interventional cardiologists, including cardiologists that have participated in our clinical trials; (ii) seminars and speeches
featuring widely recognized interventional cardiologists; and (iii) advertisements in medical journals.





Collaborative Arrangements for Seeking
Regulatory Approvals and Distribution of Products Outside of the United States and Europe



Korea



On
February 1, 2005, we entered into a joint venture agreement with Bioheart Korea, Inc., the predecessor entity of BHK, Inc.,
or BHK, pursuant to which we and BHK agreed to create a joint venture company called Bioheart Manufacturing, Inc., located in Korea
to own and operate a cell culturing facility. The joint venture agreement contemplated that we would engage Bioheart Manufacturing
to provide all cell culturing processes for our products and processes sold in Asia including Korea for a period of no less than
ten years. Pursuant to the joint venture agreement, we agreed to contribute approximately $59,000cash and Myocell
manufacturing technology for an 18% equity interest in Bioheart Manufacturing, and BHK agreed to contribute approximately $9,592,032
for an 82% equity interest in Bioheart Manufacturing. On April 1, 2006, we entered into an in-kind investment agreement
with Bioheart Manufacturing pursuant to which we agreed to provide Bioheart Manufacturing with the technology to manufacture MyoCell
and MyoCath and, in exchange, received 25,890 common shares of Bioheart Manufacturing. In February 2009, our ownership interest
in Bioheart Manufacturing, Inc. was reduced to approximately 6% as a



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result of additional
investments in Bioheart Manufacturing, Inc. by third parties. Shares in Bioheart Manufacturing, Inc, owned by Bioheart
Inc. became 258,900 shares through a stock split. In May 2009, there was a corporate reorganization and AnC Bio Inc. was given
the business of Bioheart Manufacturing Inc.



Pursuant
to the joint venture agreement, we provided Bioheart Manufacturing with standard operating procedures, tests and testing protocols,
cell selection methods, cell characterization methods, and all materials necessary to carry out the activities of the cell culturing
facility in the manner required by us.



In
August 2007, we entered into a supply agreement with BHK pursuant to which we supplied MyoCell and MyoCaths to BHM for use in clinical
studies of MyoCell.



According
to the agreement, upon Bioheart Manufacturing’s inability to continue its operations by reason of law, governmental order
or regulation or Bioheart Manufacturing’s dissolution or liquidation for any reason, the agreement is null and void.



Government Regulation



The
research and development, preclinical studies and clinical trials, and ultimately, the culturing, manufacturing, marketing and
labeling of our product candidates are subject to extensive regulation by the FDA and other regulatory authorities in the United
States and other countries. We believe MyoCell and our medical device products are subject to regulation in the United States and
Europe as a biological product and a medical device, respectively.



Biological
products are subject to regulation under the Federal Food, Drug, and Cosmetic Act, or the FD&C Act, the Public Health Service
Act, or the PHS Act and their respective regulations as well as other federal, state, and local statutes and regulations. Medical
devices are subject to regulation under the FD&C Act and the regulations promulgated hereunder as well as other federal, state,
and local statutes and regulations. The FD&C Act and the PHS Act and the regulations promulgated hereunder govern, among other
things, the testing, cell culturing, manufacturing, safety, efficacy, labeling, storage, record keeping, approval, clearance, advertising
and promotion of our product candidates. Preclinical studies, clinical trials and the regulatory approval process typically take
years and require the expenditure of substantial resources. If regulatory approval or clearance of a product is granted, the approval
or clearance may include significant limitations on the indicated uses for which the product may be marketed.



FDA
Regulation — Approval of Biological Products



The
steps ordinarily required before a biological product may be marketed in the United States include:





| | · | 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.                     







Preclinical
tests include laboratory evaluation of the product candidate, its formulation and stability, as well as animal studies to assess
the potential safety and efficacy of the product candidate. The FDA requires that preclinical tests be conducted in compliance
with good laboratory practice regulations. The results of preclinical testing are



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submitted as part
of an IND application to the FDA together with manufacturing information for the clinical supply, analytical data, the protocol
for the initial clinical trials and any available clinical data or literature. A 30-day waiting period after the filing of each
IND application is required by the FDA prior to the commencement of clinical testing in humans. In addition, the FDA may, at any
time during this 30-day waiting period or any time thereafter, impose a clinical hold on proposed or ongoing clinical trials. If
the FDA imposes a clinical hold, clinical trials cannot commence or recommence without FDA authorization.



Clinical
trials to support BLAs involve the administration of the investigational product to human subjects under the supervision of qualified
investigators. Clinical trials are conducted under protocols detailing, among other things, the objectives of the study, the parameters
to be used in monitoring safety and the efficacy criteria to be evaluated.



Clinical
trials are typically conducted in three sequential phases, but the phases may overlap.



In
Phase I clinical trials, the initial introduction of the biological product candidate into human subjects or patients, the
product candidate is tested to assess safety, dosage tolerance, absorption, metabolism, distribution and excretion, including any
side effects associated with increasing doses.



Phase II
clinical trials usually involve studies in a limited patient population to identify possible adverse effects and safety risks,
preliminarily assess the efficacy of the product candidate in specific, targeted indications; and assess dosage tolerance and optimal
dosage.



If
a product candidate is found to be potentially effective and to have an acceptable safety profile in Phase II evaluations,
Phase III trials are undertaken within an expanded patient population at multiple study sites to further demonstrate clinical
efficacy and safety, further evaluate dosage and establish the risk-benefit ratio of the product and an adequate basis for product
labeling.



Phase IV,
or post-marketing, trials may be mandated by regulatory authorities or may be conducted voluntarily. Phase IV trials are typically
initiated to monitor the safety and efficacy of a biological product in its approved population and indication but over a longer
period of time, so that rare or long-term adverse effects can be detected over a much larger patient population and time than was
possible during prior clinical trials. Alternatively, Phase IV trials may be used to test a new method of product administration,
or to investigate a product’s use in other indications. Adverse effects detected by Phase IV trials may result in the
withdrawal or restriction of a drug.



If
the required Phase I, II and III clinical testing is completed successfully, the results of the required clinical trials,
the results of product development, preclinical studies and clinical trials, descriptions of the manufacturing process and other
relevant information concerning the safety and effectiveness of the biological product candidate are submitted to the FDA in the
form of a BLA. In most cases, the BLA must be accompanied by a substantial user fee. The FDA may deny a BLA if all applicable regulatory
criteria are not satisfied or may require additional data, including clinical, toxicology, safety or manufacturing data. It can
take several years for the FDA to approve a BLA once it is submitted, and the actual time required for any product candidate may
vary substantially, depending upon the nature, complexity and novelty of the product candidate.



Before
approving an application, the FDA will inspect the facility or facilities where the product is manufactured. The FDA will not approve
a BLA unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements.



If
the FDA evaluations of the BLA and the manufacturing facilities are favorable, the FDA may issue either an approval letter or an
approvable letter. The approvable letter usually contains a number of conditions that must be met to secure final FDA approval
of the BLA. When, and if, those conditions have been met to the FDA’s satisfaction, the FDA will issue an approval letter.
If the FDA’s evaluation of the BLA or manufacturing facility is not favorable, the FDA may refuse to approve the BLA or issue
a non-approvable letter that often requires additional testing or information.



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FDA
Regulation — Approval of Medical Devices



Medical
devices are also subject to extensive regulation by the FDA. To be commercially distributed in the United States, medical devices
must receive either 510(k) clearance or pre-market approval, or PMA, from the FDA prior to marketing. Devices deemed to pose relatively
low risk are placed in either Class I or II, which requires the manufacturer to submit a pre-market notification requesting
permission for commercial distribution, or 510(k) clearance. Devices deemed by the FDA to pose the greatest risk, such as life-sustaining,
life-supporting or implantable devices, devices deemed not substantially equivalent to a previously 510(k) cleared device and certain
other devices are placed in Class III which requires PMA. We anticipate that MyoCath will be classified as a Class III
device.



To
obtain 510(k) clearance, a manufacturer must submit a pre-market notification demonstrating that the proposed device is substantially
equivalent in intended use and in safety and efficacy to a previously 510(k) cleared device, a device that has received PMA or
a device that was in commercial distribution before May 28, 1976. The FDA’s 510(k) clearance pathway usually takes from
four to twelve months, but it can last longer.



After
a device receives 510(k) clearance, any modification that could significantly affect its safety or efficacy, or that would constitute
a major change in its intended use, requires a new 510(k) clearance or could require PMA. The FDA requires each manufacturer to
make this determination, but the FDA can review any such decision. If the FDA disagrees with a manufacturer’s decision not
to seek a new 510(k) clearance, the agency may retroactively require the manufacturer to seek 510(k) clearance or PMA. The FDA
also can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or PMA is obtained.



A
product not eligible for 510(k) clearance must follow the PMA pathway, which requires proof of the safety and efficacy of the device
to the FDA’s satisfaction. The PMA pathway is much more costly, lengthy and uncertain than the 510(k) approval pathway. A
PMA application must provide extensive preclinical and clinical trial data and also information about the device and its components
regarding, among other things, device design, manufacturing and labeling. As part of the PMA review, the FDA will typically inspect
the manufacturer’s facilities for compliance with quality system regulation requirements, which impose elaborate testing,
control, documentation and other quality assurance procedures. Upon acceptance by the FDA of what it considers a completed filing,
the FDA commences an in-depth review of the PMA application, which typically takes from one to two years, but may last longer.
The review time is often significantly extended as a result of the FDA asking for more information or clarification of information
already provided.



If
the FDA’s evaluation of the PMA application is favorable, and the applicant satisfies any specific conditions (e.g., changes
in labeling) and provides any specific additional information (e.g., submission of final labeling), the FDA will issue a PMA for
the approved indications, which can be more limited than those originally sought by the manufacturer. The PMA can include post-approval
conditions that the FDA believes necessary to ensure the safety and efficacy of the device including, among other things, restrictions
on labeling, promotion, sale and distribution. Failure to comply with the conditions of approval can result in an enforcement action,
which could have material adverse consequences, including the loss or withdrawal of the approval.



Even
after approval of a pre-market application, a new PMA or PMA supplement is required in the event of a modification to the device,
its labeling or its manufacturing process.



FDA
Regulation — Post-Approval Requirements



Even
if regulatory clearances or approvals for our product candidates are obtained, our products and the facilities manufacturing our
products will be subject to continued review and periodic inspections by the FDA. For example, as a condition of approval of a
new drug application, the FDA may require us to engage in post-marketing testing and surveillance and to monitor the safety and
efficacy of our products. Holders of an approved new BLA, PMA or 510(k) clearance product are subject to several post-market requirements,
including the reporting of certain adverse events involving their products to the FDA, provision of updated safety and efficacy
information, and compliance with requirements concerning the advertising and promotion of their products.





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In
addition, manufacturing facilities are subject to periodic inspections by the FDA to confirm the facilities comply with cGMP requirements.
In complying with cGMP, manufacturers must expend money, time and effort in the area of production and quality control to ensure
full compliance. For example, manufacturers of biologic products must establish validated systems to ensure that products meet
high standards of sterility, safety, purity, potency and identity. Manufacturers must report to the FDA any deviations from cGMP
or any unexpected or unforeseeable event that may affect the safety, quality, or potency of a product. The regulations also require
investigation and correction of any deviations from cGMP and impose documentation requirements.



In
addition to regulations enforced by the FDA, we are also subject to regulation under the Occupational Safety and Health Act, the
Environmental Protection Act, the Toxic Substances Control Act, the Resource Conservation and Recovery Act and other federal, state
and local regulations. Our research and development activities involve the controlled use of hazardous materials, chemicals, biological
materials and radioactive compounds.



International
Regulation



Our
product candidates are subject to regulation in every country where they will be tested or used. Whether or not we obtain FDA approval
for a product candidate, we must obtain the necessary approvals from the comparable regulatory authorities of foreign countries
before we can commence testing or marketing of a product candidate in those countries. The requirements governing the conduct of
clinical trials and the approval processes vary from country to country and the time required may be longer or shorter than that
associated with FDA approval.



The
European Economic Area requires that manufacturers of medical devices obtain the right to affix the CE mark to their products before
selling them in member countries. The CE mark is an international symbol of adherence to quality assurance standards and compliance
with applicable European medical device directives. In order to obtain the right to affix the CE mark to a medical device, the
medical device in question must meet the essential requirements defined under the Medical Device Directive (93/42/ EEC) relating
to safety and performance, and the manufacturer of the device must undergo verification of regulatory compliance by a third party
standards certification provider, known as a notified body. Provided that we enter into a long term manufacturing contract with
an entity that satisfies the requirements of the International Standards Organization, we anticipate that we will file an application
to obtain the right to affix the CE mark to MyoCath in 2010.



In
addition to regulatory clearance, the conduct of clinical trials in the European Union is governed by the European Clinical Trials
Directive (2001/20/ EC), which was implemented in May 2004. This directive governs how regulatory bodies in member states may control
clinical trials. No clinical trial may be started without authorization by the national competent authority and favorable ethics
approval.



Manufacturing
facilities are subject to the requirements of the International Standards Organization. In complying with these requirements, manufacturers
must expend money, time and effort in the area of production and quality control to ensure full compliance.



In
some cases, we plan to submit applications with different endpoints or other elements outside the United States due to differing
practices and requirements in particular jurisdictions. However, in cases where different endpoints will be used outside the United
States, we expect that such submissions will be discussed with the FDA to ensure that the FDA is comfortable with the nature of
human trials being conducted in any part of the world. As in the United States, post-approval regulatory requirements, such as
those regarding product manufacture, marketing, or distribution, would apply to any product that is approved in Europe.



Competition



Our
industry is subject to rapid and intense technological change. We face, and will continue to face, competition from pharmaceutical,
biopharmaceutical, medical device and biotechnology companies developing heart failure treatments both in the United States and
abroad, as well as numerous academic and research institutions, governmental agencies and private organizations engaged in drug
funding or discovery activities both in the United States and abroad. We also face competition from entities and healthcare providers
using more traditional methods,





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such as surgery and
pharmaceutical regimens, to treat heart failure. We believe there are a substantial number of heart failure products under development
by numerous pharmaceutical, biopharmaceutical, medical device and biotechnology companies, and it is likely that other competitors
will emerge.



Many
of our existing and potential competitors have substantially greater research and product development capabilities and financial,
scientific, marketing and human resources than we do. As a result, these competitors may succeed in developing competing therapies
earlier than we do; obtain patents that block or otherwise inhibit our ability to further develop and commercialize our product
candidates; obtain approvals from the FDA or other regulatory agencies for products more rapidly than we do; or develop treatments
or cures that are safer or more effective than those we propose to develop. These competitors may also devote greater resources
to marketing or selling their products and may be better able to withstand price competition. In addition, these competitors may
introduce or adapt more quickly to new technologies or scientific advances, which could render our technologies obsolete, and may
introduce products that make the continued development of our product candidates uneconomical. These competitors may also be more
successful in negotiating third party licensing or collaborative arrangements and may be able to take advantage of acquisitions
or other strategic opportunities more readily than we can.



Our
ability to compete successfully will depend on our continued ability to attract and retain skilled and experienced scientific,
clinical development and executive personnel, to identify and develop viable heart failure product candidates and to exploit these
products and compounds commercially before others are able to develop competitive products.



We
believe the principal competitive factors affecting our markets include, but are not limited to:





| | · | 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.                                                                                   







We
are still in the process of determining, among other things:



·if MyoCell and MyoCell SDF-1 are both safe and effective;

·the timing and scope of regulatory approvals; and

·the availability and scope of third party reimbursement programs.



Accordingly,
we have a limited ability to predict how competitive MyoCell will be relative to existing treatment alternatives and/or treatment
alternatives that are under development. See “Business — Diagnosis and Management of Heart Failure.”



If
approved, MyoCell will compete with surgical, pharmaceutical and mechanical based therapies. Surgical options include heart transplantation
and left ventricular reconstructive surgery. Although not readily accessible, heart transplantation has proven to be an effective
treatment for patients with severe damage to the heart who locate a donor match and are in sufficiently good health to undergo
major surgery. Mechanical therapies such as biventricular pacing, ventricular restraint devices and mitral valve therapies have
been developed by companies such as Medtronic, Inc., Acorn Cardiovascular, Inc., St. Jude Medical, Inc., World Heart Corporation,
Guidant Corporation, a part of Boston Scientific, and Edwards Lifesciences Corp. Pharmaceutical therapies include anti-thrombotics,
calcium channel blockers such as Pfizer’s Norvasc® and ACE inhibitors such as Sanofi’s Delix®.





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The
field of regenerative medicine is rapidly progressing, as many organizations are initiating or expanding their research efforts
in this area. We are also aware of several competitors seeking to develop cell-based therapies for the treatment of cardiovascular
disease, including Aldagen, Inc., Angioblast Systems, Inc., Athersys, Inc., Baxter International, Inc., Cytori Therapeutics, Inc.,
MG Biotherapeutics, LLC (a joint venture between Genzyme Corporation and Medtronic, Inc.), Mytogen, Inc. (a wholly-owned
subsidiary of Advanced Cell Technology, Inc.), Osiris Therapeutics, Inc., ViaCell, Inc. (a wholly-owned
subsidiary of PerkinElmer, Inc.), and potentially others.



It
is our understanding that some of our large competitors have devoted considerable resources to developing a myoblast-based cell
therapy for treating severe damage to the heart.



Some
organizations are involved in research using alternative cell sources, including bone marrow, embryonic and fetal tissue, umbilical
cord and peripheral blood, and adipose tissue.



Many
of our existing and potential competitors have substantially greater research and product development capabilities and financial,
scientific, marketing and human resources than we do. These competitors may also devote greater resources to marketing or selling
their products and may be better able to withstand price competition. In addition, these competitors may introduce or adapt more
quickly to new technologies or scientific advances, which could render our technologies obsolete, and may introduce products that
make the continued development of our product candidates uneconomical. These competitors may also be more successful in negotiating
third party licensing or collaborative arrangements and may be able to take advantage of acquisitions or other strategic opportunities
more readily than we can.

.

Item 1A.	Risk Factors



The risks and
uncertainties described below are not the only ones facing us. Other events that we do not currently anticipate or that
we currently deem immaterial also may affect our results of operations and financial condition. If any events described in the
risk factors actually occur, our business, operating results, prospects and financial condition could be materially harmed. In
connection with the forward looking statements that appear elsewhere in this quarterly report, you should also carefully review
the cautionary statement referred to under “Cautionary Statement Regarding Forward Looking Statements.”

********************************

Risks Related to Our Financial Position
and Need for Additional Financing



We will need
to secure additional financing in 2011 in order to continue to finance our operations. If we are unable to secure additional financing
on acceptable terms, we may be forced to curtail or cease our operations.



We
are seeking substantial additional financing through public and/or private financing, which may include equity and/or debt financings,
research grants and through other arrangements, including collaborative arrangements.As part of such efforts, we may seek
loans from certain of our executive officers, directors and/or current shareholders. We may also seek
to satisfy some of our obligations to the guarantors of our loan with Seaside National Bank & Trust (the “Guarantors”)
through the issuance of various forms of securities or debt on negotiated terms. However, financing and/or alternative arrangements
with the Guarantors may not be available when we need it, or may not be available on acceptable terms.



If we are unable to secure
additional financing in 2011, we may be forced to:



·curtail or abandon our existing business plan;

·reduce our headcount;

·default on our debt obligations under the BlueCrest Loan;



25

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·file for bankruptcy;

·seek to sell some or all of our assets; and/or

·cease our operations.



If we are forced to take any of these steps,
any investment in our common stock may be worthless.



BlueCrest Capital has
as part of the collateral for its loan to Bioheart the intellectual property of Bioheart. In the event of a default, all interest
and principal are immediately due and payable and that BlueCrest Capital has the right to enforce its security interest in the
assets securing the BlueCrest Loan. In such event, BlueCrest Capital could take possession of any or all of our assets in which
they hold a security interest, and dispose of those assets to the extent necessary to pay off our debts, which would materially
harm our business.



Our ability to obtain
additional debt financing and/or alternative arrangements with the Guarantors may be limited by the amount of, terms and restrictions
of our then current debt. For instance, we do not anticipate repaying the BlueCrest Loan until its scheduled maturity. Accordingly,
until such time, we will generally be restricted from, among other things, incurring additional indebtedness or liens, with limited
exceptions. See “We have a substantial amount of debt...” Additional debt financing, if available, may involve
restrictive covenants that limit or further limit our operating and financial flexibility and prohibit us from making distributions
to shareholders.



If we raise additional
capital and/or secure alternative arrangements with the guarantors by issuing equity, equity-related or convertible securities,
the economic, voting and other rights of our existing shareholders may be diluted, and those newly issued securities may be issued
at prices that are a significant discount to current and/or then prevailing market prices. In addition, any such newly issued securities
may have rights superior to those of our common stock. If we obtain additional capital through collaborative arrangements, we may
be required to relinquish greater rights to our technologies or product candidates than we might otherwise have or become subject
to restrictive covenants that may affect our business.



Our independent
registered public accounting firm has expressed substantial doubt about our ability to continue
as a going concern.



Our independent registered
public accounting firm issued its report dated May 10, 2011 in connection with the audit of our financial statements as of December
31, 2010, included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability
to continue as a going concern. If we are not able to continue as a going concern, it is likely that holders of our common stock
will lose all of their investment. Our financial statements do not include any adjustments that might result from the outcome of
this uncertainty.



Current Adverse Economic Conditions have
had a negative impact on our ability to obtain additional financing. Our inability to obtain additional
financing would have a significant adverse effect on our operations.



In early 2008, as the
United States economy began to weaken and there were increased doubts about the ability of borrowers to pay debts. Housing values
began to fall and marginal loans were first to default, triggering the sub-prime lending crisis. Financial institutions responded
by tightening their lending policies with respect to counterparties determined to have sub-prime mortgage risk. This tightening
of institutional lending policies led to the failure of major financial institutions late in the third quarter of 2008. Continued
failures, losses, and write-downs at major financial institutions through 2010 intensified concerns about credit and liquidity
risks and have resulted in a sharp reduction in overall market liquidity. The global credit crisis threatens the stability of the
global economy and has adversely impacted consumer confidence and spending. We believe this global credit crisis has also had a
negative impact on our ability to obtain additional financing. As discussed above, our inability to obtain
additional financing would have a significant adverse effect on our operations, results and financial condition.





26

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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.



We are a development stage
life sciences company and have a limited operating history, limited capital, limited sources of revenue and have incurred losses
since inception. Our operations to date have been limited to organizing our company, developing and engaging in clinical trials
of our MyoCell 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 recruiting management, research and clinical personnel. Consequently, it may be difficult to predict our future success or
viability due to our lack of operating history. As of December 31, 2010, we have accumulated a deficit during our development stage
of approximately $106.7 million. Our MyoCell product candidate has not received regulatory approval or generated any material revenues
and is not expected to generate any material revenues until commercialization of MyoCell, if ever. Since inception, we have generated
substantial net losses, including net losses of approximately $5.2 million, $4.4 million, $14.2 million and $18.1 million in 2010,
2009, 2008 and 2007, respectively and substantial negative cash flows from operations. We anticipate that we will continue to incur
significant and increasing net losses and negative cash flows from operations for the foreseeable future as we:



| | · | establish a distribution network for and commence distribution of certain products for which we have acquired distribution rights;                                      
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                         
| | · | 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 limited experience
in conducting and managing preclinical development activities, clinical trials and the application process necessary to obtain
regulatory approvals might prevent us from successfully designing or implementing a preclinical study or clinical trial. If we
do not succeed in conducting and managing our preclinical development activities or clinical trials, or in obtaining regulatory
approvals, we might not be able to commercialize our product candidates, or might be significantly delayed in doing so, which will
materially harm our business.



None of the biologic products
that we are currently developing has been approved by the FDA or any similar regulatory authority in any foreign country. Our ability
to generate revenues from any of our product candidates will depend on a number of factors, including our ability to successfully
complete clinical trials, obtain necessary regulatory approvals and implement our commercialization strategy. In addition, even
if we are successful in obtaining necessary regulatory approvals and bringing one or more product candidates to market, we will
be subject to the risk that the marketplace will not accept those products. We may, and anticipate that we will need to, transition
from a company with a research and development focus to a company capable of supporting commercial activities and we may not succeed
in such a transition.



Because of the numerous
risks and uncertainties associated with our product development and commercialization efforts, we are unable to predict the extent
of our future losses or when or if we will become



27

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profitable. Our failure to successfully commercialize
our product candidates or to become and remain profitable could impair our ability to raise capital, expand our business, diversify
our product offerings and continue our operations.



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.



As of December 31, 2010,
we had an aggregate of $6.3 million in principal amount of outstanding indebtedness, excluding accounts payable and accruals.



On May 31, 2007 we and
Bank of America agreed with BlueCrest Capital that the Company will not make any payments due under the Bank of America Loan while
the BlueCrest Loan is outstanding. Certain persons, including our former Chairman of the Board, two of our other directors and
two of our shareholders, or, collectively, the Guarantors, agreed to provide Bank of America in the aggregate up to $5.5 million
of funds and/or securities to make these payments. As of December 31, 2009, these individuals had paid an aggregate of $3.7 million
on the Bank of America Loan on our behalf, including $3.0 million of principal by our former Chairman of the Board. Upon our repayment
in full of the BlueCrest Loan, we are required to reimburse these persons with interest at an annual rate of the prime rate plus
5.0% for any and all payments made by them under the Bank of America Loan. We anticipate that the BlueCrest Loan will need to be
serviced and both the BlueCrest Loan and any amounts advanced by the Guarantors will need to be repaid with existing cash or cash
generated from security or loan placements, if any. If we are unable to generate cash through additional financings, we may have
to delay or curtail research, development and commercialization programs.



In March of 2009, the former Chairman of the
Board and his former spouse paid directly to Bank of America the $3 million that he had been guaranteeing, thus reducing Bioheart’s
obligation to Bank of America to $2 million plus interest. In March 2009, these individuals repaid $3.0 million of principal and
a pro rata portion of accrued interest on behalf of the Company. The Company in 2009 owed this $3.0 million to the Company's former
Chairman and his former spouse. This liability is reflected on the Company’s consolidated balance sheet on a separate line
titled “Subordinated related party loan.” This amount will also accrue interest at an annual rate of the prime rate
plus 5.0%. During the year ended December 31, 2010, $1,500,000 was converted to common stock, the remaining $1,500,000 is outstanding
as of December 31, 2010.



In March of 2010, one of
the Guarantors paid directly to Bank of America the $672,000 of the loan that he had been guaranteeing, and a pro rata portion
of accrued interest on behalf of the Company. That Guarantor agreed to accept from the Company the equivalent of his payment to
Bank of America in restricted common stock and warrants. With his acceptance of the restricted common stock and warrants, the former
Guarantor owns 8% of the Company. Thus, the outstanding obligation to Bank of America was reduced to $1.3 plus interest.



In October of 2010, the Chairman of the Board
paid directly to Bank of America the $350,000 that he had been guaranteeing, thus reducing Bioheart’s obligation to Bank
of America to $980,000 plus interest. That Guarantor agreed to accept from the Company the equivalent of his payment to Bank of
America in restricted common stock and warrants. With his acceptance of the restricted common stock and warrants, the former Guarantor
owns approximately 9% of the Company.



On October 25, 2010 we entered into a Loan Agreement
with Seaside National Bank and Trust for a $980,000 loan at 4.25% per annum interest that was used to refinance the Company’s
loan with Bank of America. In connection with the Loan Agreement with Seaside Bank and Trust Company, the Company made and delivered
a promissory note in the principal amount of the loan that matures in one year. In connection with the loan transaction with Seaside
Bank and Trust Company, the Company entered into an Amended and Restated Loan and Security Agreement with BlueCrest Venture Finance
Master Fund Limited.



28

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In addition to the limitations
imposed on our operational flexibility by the BlueCrest Loan as described above, the BlueCrest Loan, our obligations to the Guarantors,
and any other indebtedness incurred by us could have significant additional negative consequences, including, without limitation:





| | · | 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 biologic 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 MyoCell product candidate. 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.



| | · | We have invested a significant portion of our efforts and financial resources in our MyoCell product candidate and depend heavily on its success. MyoCell is currently being tested in clinical trials.                                                                
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                        
| | · | We need to devote significant additional research and development, financial resources and personnel to develop commercially viable products, obtain regulatory approvals and establish a sales and marketing infrastructure.                                          
| |   |                                                                                                                                                                                                                                                                        
| | · | We are likely to encounter hurdles and unexpected issues as we proceed in the development of MyoCell and our other product candidates. There are many reasons that we may not succeed in our efforts to develop our product candidates, including the possibility that:







| | · | 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.                                







Risks Related to Commercialization of our
Product Candidates



Our success will depend in part on establishing
and maintaining effective strategic partnerships, collaborations and licensing agreements.



Our strategy for the development,
testing, culturing and commercialization of our product candidates relies on establishing and maintaining numerous collaborations
with various corporate partners, consultants, scientists, researchers, licensors, licensees and others. While we are continually
in discussions with a number of companies, universities, research institutions, consultants, scientists, researchers, licensors,
licensees and others to establish additional relationships and collaborations, which are typically complex and time consuming to
negotiate, document and implement, we may not reach definitive agreements with any of them. Even if we enter into these arrangements,
we may not be able to maintain these relationships or establish new ones in the future on acceptable terms.



29

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Furthermore, any collaboration
that we enter into may not be successful. The success of our collaboration arrangements, if any, will depend heavily on the efforts
and activities of our collaborators. Possible future collaborations have risks, including the following:





| | · | our collaboration agreements are likely to be for fixed terms and subject to termination by our collaborators in the event of a material breach or lack of scientific progress by us;                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                           
| | · | our collaborators are likely to have the first right to maintain or defend our intellectual property rights and, although we would likely seek to secure the right to assume the maintenance and defense of our intellectual property rights if our collaborators do not, our ability to do so may be compromised by our collaborators' acts or omissions;
| |   |                                                                                                                                                                                                                                                                                                                                                           
| | · | our collaborators may utilize our intellectual property rights in such a way as to invite litigation that could jeopardize or invalidate our intellectual property rights or expose us to potential liability;                                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                           
| | · | our collaborators may underfund or not commit sufficient resources to the testing, marketing, distribution or development of our product candidates; and                                                                                                                                                                                                  
| |   |                                                                                                                                                                                                                                                                                                                                                           
| | · | our collaborators may develop alternative products either on their own or in collaboration with others, or encounter conflicts of interest or changes in business strategy or other business issues, which could adversely affect their willingness or ability to fulfill their obligations to us.                                                        





These arrangements also
may require us to grant certain rights to third parties, including exclusive marketing rights to one or more products, or may have
other terms that are burdensome to us, and may involve the issuance of our securities. If any of our partners terminates its relationship
with us or fails to perform its obligations in a timely manner, the development or commercialization of our technology and product
candidates may be substantially delayed. Further, disputes may arise with our collaborators about inventorship and corresponding
rights in know-how and inventions resulting from the joint creation or use of intellectual property by us and our collaborators.



We may not be able to obtain additional
inventory of our essential MyoCath Catheter.



Our current inventory
is limited and while the company endeavors to contract with a manufacturer for additional inventory there is no assurance that
it will be successful in identifying or contracting with a manufacturer on acceptable terms. Our inability to obtain additional
MyoCath inventory would have a material adverse affect on our business, financial condition and ability to continue as a going
concern.



Risks Related to Our Intellectual Property



We license substantially all of the intellectual
property that is critical to our business. Any events or circumstances that result in the termination or limitation of our rights
to such intellectual property could have a material adverse effect on our business.



Substantially all of the
intellectual property that is critical to our business has been licensed to us by various third parties. The operative terms of
some of our material license agreements are subject to risks of dispute with our licensors. Additionally, it is possible that the
patent protection for such intellectual property or the term of the license of such intellectual property to us may expire prior
to our commercialization of the products that rely on that intellectual property.



Under certain of our patent
license agreements, we are subject to development, payment, commercialization and other obligations and, if we fail to comply with
any of these requirements or otherwise breach those agreements, our licensors may have the right to terminate the license in whole
or in part, terminate the exclusive nature of the license to the extent such license is exclusive or otherwise limit our rights
thereunder, which could have a material adverse effect on our business.



Any termination or limitation
of, or loss of exclusivity under, our exclusive or conditionally exclusive license



30

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agreements would have a material adverse effect
on us and could delay or completely terminate our product development efforts.



Risks Related to Our Common Stock



An active, liquid and orderly trading
market for our common stock may not develop or continue.



Prior to our initial public
offering, there was no public market for our common stock. Our common stock commenced trading on the NASDAQ Global Market on February
19, 2008 and transferred to the NASDAQ Capital Market in June 2008. On October 15, 2008, we received notification from The NASDAQ
Stock Market indicating that we were not in compliance with certain of the NASDAQ Capital Market continued listing requirements,
including a minimum $35 million market value of our listed securities. We were permitted until November 14, 2008, to
regain compliance with the minimum market value of listed securities requirement. On November 17, 2008, we received a NASDAQ
Staff Determination indicating that we had failed to regain compliance with the $35 million minimum market value of listed securities
requirement, and that our securities were, therefore, subject to delisting from The NASDAQ Capital Market. We appealed the Staff
Determination and requested a hearing before a NASDAQ Listing Qualifications Panel (the “Panel”) to review the Staff
Determination. This stayed the delisting of our securities pending the Panel’s decision.



On February 25, 2009,
we received notification from The NASDAQ Stock Market of its determination to discontinue our NASDAQ listing effective February
27, 2009. We filed for quotation of our common stock on the Over-The-Counter Bulletin Board and that application was approved by
FINRA on May 13, 2009. On February 23, 2011 we received notice of FINRA’s determination of our ineligibility for continued
quotation of our shares on the OTCBB due to quoting inactivity under SEC Rule 15c2-11.On March 9, 2011 we again filed for quotation
of our common stock on the Over-The-Counter Bulletin Board and that application was approved by FINRA on March 29, 2011.



We cannot offer any assurance
that an active trading market for our common stock will continue or how liquid that market may be. As a result, relatively small
trades may have a disproportionate impact on the price of our common stock, which may contribute to the price volatility of our
common stock and could limit your ability to sell your shares.



The market price of our
common stock could also be subject to wide fluctuations in response to many risk factors described in this section and other matters,
including:





| | · | 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.                                                                              







31

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Furthermore, the stock
markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity
securities of many companies, especially life sciences and pharmaceutical companies. These fluctuations often have been unrelated
or disproportionate to the operating performance of those companies. These broad market and industry fluctuations, as well as general
economic, political and market conditions, may negatively affect the market price of our common stock. As a result, the market
price of our common stock is likely to be similarly volatile and investors in our common stock may experience a decrease, which
could be substantial, in the value of their stock. In the past, many companies that have experienced volatility in the market price
of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the
future. Securities litigation against us could result in substantial costs and divert our management's attention from other business
concerns, which could have a material adverse effect on our business.



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.



Our articles of incorporation
and bylaws contain provisions, such as the right of our directors to issue preferred stock from time to time with voting, economic
and other rights superior to those of our common stock without the consent of our shareholders, all of which could make it more
difficult for a third party to acquire us without the consent of our board of directors. In addition, our bylaws impose restrictions
on the persons who may call special shareholder meetings. Furthermore, the Florida Business Corporation Act contains an “affiliated
transaction” provision that prohibits a publicly-held Florida corporation from engaging in a broad range of business combinations
or other extraordinary corporate transactions with an “interested shareholder” unless, among others, (i) the transaction
is approved by a majority of disinterested directors before the person becomes an interested shareholder; (ii) the interested shareholder
has owned at least 80% of the corporation's outstanding voting shares for at least five years; or (iii) the transaction is approved
by the holders of two-thirds of the corporation's voting shares other than those owned by the interested shareholder. An interested
shareholder is defined as a person who together with affiliates and associates beneficially owns more than 10% of the corporation's
outstanding voting shares. The Florida Business Corporation Act also prohibits the voting of shares in a publicly-held Florida
corporation that are acquired in a “control share acquisition” unless the holders of a majority of the corporation's
voting shares (exclusive of shares held by officers of the corporation, inside directors or the acquiring party) approve the granting
of voting rights as to the shares acquired in the control share acquisition or unless the acquisition is approved by the corporation's
Board of Directors. These provisions may have the effect of delaying or preventing a change of control of our company even if this
change of control would benefit our shareholders.



We do not intend to pay cash dividends
on our common stock in the foreseeable future and, accordingly, capital appreciation of our common stock, if any, will be a shareholder's
sole source of gain from an investment in our common stock.



Our policy is to retain
earnings to provide funds for the operation and expansion of our business and, accordingly, we have never declared or paid any
cash dividends on our common stock or other securities and do not currently anticipate paying any cash dividends in the foreseeable
future. Consequently, shareholders will need to sell shares of our common stock to realize a return on their investments, if any
and this capital appreciation, if any, will be a shareholder's sole source of gain from an investment in the common stock. The
declaration and payment of dividends by us are subject to the discretion of our Board of Directors and the restrictions specified
in our articles of incorporation and by applicable law. In addition, under the terms of the BlueCrest Loan, we are restricted from
paying cash dividends to our shareholders while this loan is outstanding. Any future determination to pay cash dividends will depend
on our results of operations, financial condition, capital requirements, contractual restrictions and other factors deemed relevant
by our Board of Directors.





32

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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.



Our common stock is considered
to be a “penny stock.” It does not qualify for one of the exemptions from the definition of “penny stock”
under Section 3a51-1 of the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our common stock is a “penny
stock” because it meets one or more of the following conditions (i) the stock trades at a price less than $5.00 per share;
(ii) it is not traded on a “recognized” national exchange or (iii) it is not quoted on the NASDAQ Global Market, or
has a price less than $5.00 per share. The principal result or effect of being designated a “penny stock” is that securities
broker-dealers participating in sales of our common stock are subject to the “penny stock” regulations set forth in
Rules 15-2 through 15g-9 promulgated under the Securities Exchange Act. For example, Rule 15g-2 requires broker-dealers dealing
in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed
and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the
investor's account. Moreover, Rule 15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions
in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the
investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably
determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has
sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide
the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above;
and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's
financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult
and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the
market or otherwise.



Potential Dilution - Increase to Authorized Common Stock



As of December 31, 2010, our Articles of Incorporation
authorized us to issue up to 75,000,000 shares of common stock, par value $0.001 per share. The Board of Directors proposed, and
on January 13, 2011 (the “Record Date”) the holders of a majority of the Company’s issued and outstanding voting
common shares as of the Record Date approved, an increase in the number of authorized shares of the common stock from 75,000,000
shares to 195,000,000 shares.  On January 21, 2011 the Company filed a 14C Information Statement with the Securities and Exchange
Commission.  Following approval by the Securities and Exchange Commission and upon the filing of the Certificate of Amendment
to the Articles of Incorporation, the Company’s will be authorized to issue a total of 195,000,000 shares of common stock,
par value of $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share.







33

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Item 1B.	Unresolved Staff Comments



Not applicable.



Item 2.	Properties



Our headquarters are located in Sunrise, Florida
and consists of 6,091 square feet of space, which we lease at a current rent of approximately $82,000 per year. The lease is scheduled
to expire in January 2013. In addition to our corporate offices, at this location, we maintain:





| | · | 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.









We believe the space available at our headquarters
will be sufficient to meet the needs of our operations for the foreseeable future.



Item 3.	Legal Proceedings



We are not presently engaged
in any material litigation and are unaware of any threatened material litigation. However, the biotechnology and medical device
industries have been characterized by extensive litigation regarding patents and other intellectual property rights. In addition,
from time to time, we may become involved in litigation relating to claims arising from the ordinary course of our business.



34

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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



Our common stock, par
value $0.001 per share, commenced trading on February 19, 2008, on the NASDAQ Global Market under the symbol “BHRT”.
Effective June 11, 2008, we transferred the listing of our common stock to the NASDAQ Capital Market and then, during the course
of 2009 our stock was delisted from NASDAQ and commenced quotation on the Over the Counter Bulletin Board. The following table
sets forth the range of high and low sales prices as reported for the periods indicated.



|                                 | Sales Price
|-------------------------------- | -----------
|Period                           | High       
|quarter ended December 31, 2010  | $0.51      
|quarter ended September 30, 2010 | $0.43      
|quarter ended June 30, 2010      | $0.94      
|quarter ended March 31, 2010     | $0.84      
|quarter ended December 31, 2009  | $1.85      
|quarter ended September 30, 2009 | $2.50      
|quarter ended June 30, 2009      | $0.90      
|quarter ended March 31, 2009     | $1.30      





On February 23, 2011
we received notice of FINRA’s determination of our ineligibility for continued quotation of our shares on the OTCBB due to
quoting inactivity under SEC Rule 15c2-11. On March 9, 2011 we again filed for quotation of our common stock on the Over-The-Counter
Bulletin Board and that application was approved by FINRA on March 29, 2011.



Holders



As of May 4, 2011
there were approximately 410 shareholders of record of our common stock and approximately 1,500 beneficial owners of our common
stock.



Dividends



We have never declared
or paid any cash dividends on our common stock or other securities and do not currently anticipate paying any cash dividends in
the foreseeable future. The declaration and payment of dividends by us are subject to the discretion
of our Board of Directors and the restrictions specified in our articles of incorporation and by applicable law. In addition, under
the terms of the BlueCrest Loan, we are restricted from paying cash dividends to our shareholders while this loan is outstanding.
Any future determination to pay cash dividends will depend on our results of operations, financial condition, capital requirements,
contractual restrictions and other factors deemed relevant by our Board of Directors.



Securities Authorized For Issuance Under
Equity Compensation Plans



The following table
provides certain information regarding our existing equity compensation plans as of December 31, 2010:





35

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|                                                               |  | Number of securities to be issued upon exercise of outstanding options |  | Weighted- average exercise price of outstanding options |  | Number of securities remaining available for issuance under equity compensation plans
|-------------------------------------------------------------- |  | ---------------------------------------------------------------------- |  | ------------------------------------------------------- |  | -------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders (1)     |  | 2,025,544                                                              |  | $2.79                                                   |  | 5,059,835                                                                            
|Equity compensation plans not approved by security holders (2) |  | 13,920,729                                                             |  | $1.98                                                   |  | 0                                                                                    



(1)	Consists of our 1999 Officers
and Employees Stock Option Plan, 1999 Directors and Consultants Stock Option Plan and Omnibus Equity Compensation 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 764,519 shares of our common stock at $7.69 per share, which expire at various dates from May 2017 through October 2017 (See Note 6 “Notes Payable – Bank of America 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;                                                                                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                        
| | · | warrants issued to BlueCrest Capital in connection with the BlueCrest Loan to purchase an aggregate of 3,137,838 shares of our common stock at prices ranging from $7.69 to $0.53 per share, which expire at various dates April 2019 through December 2019 (See Note 6“Notes Payable – BlueCrest Capital Finance 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;                                                                                                                                                                                                                                              
| |   |                                                                                                                                                                                                                                                                                                                                                                                        
| | · | warrants issued to consultants to purchase an aggregate of 154,411 shares of our common stock at prices ranging from $1.09 to $6.00 per share, which expire at various dates from April 2013 through September 2017;                                                                                                                                                                   
| |   |                                                                                                                                                                                                                                                                                                                                                                                        
| | · | warrants issued to the underwriters of our initial public offering in February 2008 to purchase an aggregate of 77,000 shares of our common stock at $6.56 per share, which expire in February 2013; and                                                                                                                                                                               
| |   |                                                                                                                                                                                                                                                                                                                                                                                        
| | · | warrants issued in connection with our private placement in October 2008 to purchase an aggregate of 1,172,845 shares of our common stock at prices ranging from $0.59 to $2.60 per share, which expire at various dates October 2011 through October 2012;                                                                                                                            
| |   |                                                                                                                                                                                                                                                                                                                                                                                        
| | · | warrants issued in connection with our private placement in December 2009 to purchase an aggregate of 2,127,786 shares of our common stock at prices ranging from $0.54 to $0.95 per share, which expire at various dates December 2012 through June 2013;                                                                                                                             
| |   |                                                                                                                                                                                                                                                                                                                                                                                        
| | · | warrants issued in connection with our private placement initiated in September 2010 to purchase an aggregate of 170,180 shares of our common stock at price of $0.18  per share, which expire in September 2013;                                                                                                                                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                        
| | · | warrants issued in connection with Short Term Payables to purchase an aggregate of 475,043 shares of our common stock at prices ranging from $0.61 to $0.5321 per share, which expire at various dates April 2019 through September 2019 (See Note 6“Notes Payable – Short-term Note Payable” of the Notes to the Consolidated Financial Statements);                                  











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Recent Sales of Unregistered Securities



During 2010,
we issued the following unregistered securities, not previously disclosed in our Quarterly Reports on Form 10-Q for the quarters
ended March 31, 2010, June 30, 2010 and September 30, 2010, in transactions pursuant to Section 4(2) of the Securities Act.





| | · | In October 2010 we issued aggregate of 259,995 shares of our common stock and warrants for the purchase of our common stock at an exercise price of $0.18, for aggregate gross proceeds of $26,000.                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                     
| | · | In November 2010 we issued aggregate of 255,690 shares of our common stock and warrants for the purchase of our common stock at exercise price ranging from $0.20 to $0.23, for aggregate gross proceeds of $30,030.
| |   |                                                                                                                                                                                                                     
| | · | In December 2010 we issued aggregate of 216,090 shares of our common stock and warrants for the purchase of our common stock at exercise price ranging from $0.23 to $0.25, for aggregate gross proceeds of $28,800.
| |   |                                                                                                                                                                                                                     
| | · | On November 30, 2010, we issued an aggregate of 10,176,210 shares of our common stock and warrants for the purchase of our common stock at an exercise price of $0.18, for aggregate gross proceeds of $1,017,620.  
| |   |                                                                                                                                                                                                                     
| | · | On December 13, 2010 we issued an aggregate of 1,013,370 shares of our common stock and warrants for the purchase of our common stock at an exercise price of $0.18, for gross proceeds of $101,337.                



During 2011, we issued
the following unregistered securities, not previously disclosed in our Quarterly Reports on Form 10-Q for the quarters ended March
31, 2010, June 30, 2010 and September 30, 2010, in transactions pursuant to Section 4(2) of the Securities Act. ---





| | · | In January 2011 we issued aggregate of 632,295 shares of our common stock and warrants for the purchase of our common stock at an exercise price ranging from $0.19 to $0.22, for aggregate gross proceeds of $69,500.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                       
| | · | In January 2011 we issued an aggregate of 538,542 shares of our common stock for aggregate gross proceeds of $87,728.82 subject to conversion of a promissory note.                                                   
| |   |                                                                                                                                                                                                                       
| | · | In February 2011 we issued an aggregate of 421,392 shares of our common stock for aggregate gross proceeds of $52,000 subject to conversion of a promissory note.                                                     
| |   |                                                                                                                                                                                                                       
| | · | In January 2011 we issued an aggregate of 3,750,000 shares of our common stock and warrants for the purchase of our common stock at an exercise price of $0.19, for aggregate gross proceeds of $400,000.             



Each
of the listed sales was exempt from registration in reliance upon Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”), for transactions by an issuer not involving a public offering. The offer and sale of such securities was made without
general solicitation or advertising to “accredited investors” as defined in Rule 501(a) of Regulation D promulgated
by the Securities Act.



Issuer Purchases of Equity Securities



None.



Use of Proceeds



During 2010, we raised $2,399,800 of cash proceeds
from the sales of unregistered securities as listed above, all of



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which was used for
working capital and general corporate purposes, including $1,018,764 for the payment of fees, principal and interest on the BlueCrest
Loan.



During the first quarter of 2011, we raised
$554,500, of cash proceeds from the sales of unregistered securities.



Item 6.	Selected Financial Data



Not applicable



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 on Form 10-K.



Cautionary Statement Regarding Forward-Looking Statements



This report may contain
forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities
Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking
statements are based on our management’s beliefs and assumptions and on information currently available to our management.
Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and “Risk Factors.” Forward-looking statements include information concerning
our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment,
potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical
facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,”
“expects,” “hopes,” “intends,” “may,” “plans,” “potential,”
“predicts,” “projects,” “should,” “will,” “would” or similar expressions.



Forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements
to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
We discuss many of these risks in greater detail in “Risk Factors.” Given these uncertainties, you should not place
undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and
assumptions only as of the date of this report. You should read this report and the documents that we reference in this report
and have filed as exhibits to the report completely and with the understanding that our actual future results may be materially
different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly,
or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even
if new information becomes available in the future.



Our Ability To Continue as a Going Concern



Our independent registered
public accounting firm has issued its report dated, May 10, 2011in connection with the audit of our financial statements
as of December 31, 2010 that included an explanatory paragraph describing the existence of conditions that raise substantial doubt
about our ability to continue as a going concern. Our consolidated financial statements as of December 31, 2010 have been prepared
under the assumption that we will continue as a going concern. If we are not able to continue as a going concern, it is likely
that holders of our common stock will lose all of their investment. Our financial statements do not include any adjustments that
might result from the outcome of this uncertainty.



Overview



We are committed to maintaining
our leading position within the cardiovascular sector of the cell technology industry, delivering cell therapies, intelligent devices
and biologics that help address congestive heart failure, lower



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limb ischemia, chronic heart ischemia, acute
myocardial infarctions and other issues. Our goals are to cause damaged tissue to be regenerated, if possible, and to improve a
patient's quality of life and reduce health care costs and hospitalizations.



Biotechnology Product Candidates



Specific to biotechnology,
we are focused on the discovery, development and, subject to regulatory approval, commercialization of autologous cell therapies
for the treatment of chronic and acute heart damage and peripheral vascular disease. MyoCell is a clinical muscle-derived cell
therapy designed to populate regions of scar tissue within a patient's heart with new living cells for the purpose of improving
cardiac function in chronic heart failure patients. Our most recent clinical trials of MyoCell include the SEISMIC Trial, a completed
40-patient, randomized, multicenter, controlled, Phase II-a study conducted in Europe and the MYOHEART Trial, a completed 20-patient,
multicenter, Phase I dose-escalation trial conducted in the United States. We were approved by the U.S. Food and Drug Administration
(the “FDA”) to proceed with a 330-patient, multicenter Phase II/III trial of MyoCell in North America and Europe (the
“MARVEL Trial”). We completed the MyoCell implantation procedure on the first patient in the MARVEL Trial on October
24, 2007. Thus far, 20 patients, including 6 control patients, have been treated. Initial results for the 20 patients were released
at the Heart Failure Society of American meeting in October, 2009, showing a dramatic (35%) improvement in the 6 minute walk for
those patients who were treated, and no improvement for those who received a placebo. We are planning, on the basis of these results,
to ask the FDA to consider the MARVEL Trial a pivotal trial (pivotal from Phase II to Phase III) and to reduce the number of patients
in the trial to 150.. The SEISMIC, MYOHEART and MARVEL Trials have been designed to test the safety and efficacy of MyoCell in
treating patients with severe, chronic damage to the heart. Upon regulatory approval of MyoCell, we intend to generate revenue
in the United States from the sale of MyoCell cell-culturing services for treatment of patients by qualified physicians. Abroad,
we are identifying centers where it is acceptable to use the Myocell treatment so that patients with this problem can have access
to treatment.



We received approval from
the FDA in July of 2009 to conduct a Phase I safety study on 15 patients of a combined therapy (Myocell with SDF-1), the first
approval of a study combining gene and cell therapies. Work commenced on this study, called the REGEN trial, during the first quarter
of 2010. The Company suspended activity on the trial in 2010 while seeking additional funding necessary to conduct the trial. Work
on the trial was reinitiated in 2011. Based on the results of the trial, we intend to either incorporate the combined treatment
into the Marvel Trial, or continue with the Marvel Trial based on the use of Myocell alone.



In our pipeline, we have
multiple product candidates for the treatment of heart damage, including an autologous, adipose cell treatment for acute heart
damage, chronic heart ischemia and critical limb ischemia. We hope to demonstrate that our various product candidates are safe
and effective complements to existing therapies for chronic and acute heart damage.



We conduct operations
in one business segment. We may organize our business into more discrete business units when and if we generate significant revenue
from the sale of our product candidates. Our revenue since inception has been generated inside and outside the United States, and
the majority of our long-lived assets are located in the United States.



Results of Operations Overview



Revenues



We have not generated
any material revenues from our MyoCell product candidate. The revenues we have recognized to date are related to (i) sales of MyoCath
to ACS and other parties, (ii) fees associated with our assignment to ACS of our rights relating to the primary patent covering
MyoCath, or the Primary MyoCath Patent, (iii) revenues generated from paid registry trials, (iv) revenues from the sale of the
TGI system (v) revenues generated for providing cell culturing services under exclusive supply agreements.



39

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We did not in 2010, and
in 2011 do not expect to, generate significant revenue..Our revenue may vary substantially from quarter to quarter and from year
to year. We believe that period-to-period comparisons of our results of operations are not meaningful and should not be relied
upon as indicative of our future performance.



Cost of Sales



Cost of sales consists
of the costs associated with the production of MyoCath, the purchase of heart monitoring system components, and the purchase of
TGI system components.



Cost of sales was $19,765
in the twelve-month period ended December 31, 2010 compared to $205,014 in the twelve-months ended December 31, 2009. The cost
per catheter sold in the twelve-month periods ended December 31, 2010 and 2009 were approximately the same.



Research and Development



Our research and development
expenses consist of costs incurred in identifying, developing and testing our product candidates. These expenses consist primarily
of costs related to our clinical trials, the acquisition of intellectual property licenses and preclinical studies. We expense
research and development costs as incurred.



Clinical trial expenses
include costs related to the culture and preparation of cells in connection with our clinical trials, costs of contract research,
costs of clinical trial facilities, costs of delivery systems, salaries and related expenses for clinical personnel and insurance
costs. Preclinical study expenses include costs of contract research, salaries and related expenses for personnel, costs of development
biopsies, costs of delivery systems and costs of lab supplies.



We are focused on the
development of a number of autologous cell-based therapies, and related devices, for the treatment of heart damage. Accordingly,
many of our costs are not attributable to a specifically identified product candidate. We use our employee and infrastructure resources
across several projects, and we do not account for internal research and development costs on a product candidate by product candidate
basis. From inception through December 31, 2010, we incurred aggregate research and development costs of approximately $63.8 million
related to our product candidates. We estimate that at least $12.6 million and $32.8 million of these expenses relate to our preclinical
and clinical development of MyoCell, respectively, and at least $1.8 million and $3.4 million of these expenses relate to our preclinical
and clinical development of MyoCath, respectively.



During the third quarter 2009, the Company
received notification that approximately $630,000 in pending projects (Indiana University, University of Florida, Northwestern
University, and other sites) were completed, however, the invoicing had not been received as of September 30, 2009. As of December
31, 2010 of the $630,000 the Company still has an accrual of $510,000 for the completed contracts.



Clinical trials and preclinical
studies are time-consuming and expensive. Our expenditures on current and future preclinical and clinical development programs
are subject to many uncertainties. We generally test our products in several preclinical studies and then conduct clinical trials
for those product candidates that we determine to be the most promising. As we obtain results from clinical trials, we may elect
to discontinue or delay trials for some product candidates in order to focus our resources on more promising product candidates.
Completion of clinical trials may take several years or more, but the length of time generally varies substantially according to
the type, size of trial and intended use of the product candidate.



Due to the risks inherent
in the clinical trial process, development completion dates and costs vary significantly for each product candidate, are difficult
to estimate and are likely to change as clinical trials progress.



The cost of clinical trials
may vary significantly over the life of a project as a result of a variety of factors, including the number of patients who participate
in the clinical trials, the number of sites included in the clinical trials, the length of time required to enroll trial participants,
the efficacy and safety profile of our product candidates and the costs and timing of and our ability to secure regulatory approvals.



40

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Marketing, General and Administrative



Our marketing, general
and administrative expenses primarily consist of the costs associated with our general management and clinical marketing and trade
programs, including, but not limited to, salaries and related expenses for executive, administrative and marketing personnel, rent,
insurance, legal and accounting fees, consulting fees, travel and entertainment expenses, conference costs and other clinical marketing
and trade program expenses.



Stock-Based Compensation



Stock-based compensation
reflects our recognition as an expense of the value of stock options and other equity instruments issued to our employees and non-employees
over the vesting period of the options and other equity instruments. We have granted to our employees options to purchase shares
of common stock at exercise prices equal to the fair market value of the underlying shares of common stock at the time of each
grant, as determined by our Board of Directors, with input from management.



In valuing our common
stock, our Board of Directors considered a number of factors, including, but not limited to:



·our financial position and historical financial performance;

·the illiquidity of our capital stock as a private company prior to our IPO;

·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 our initial public offering in February 2008.

During 2010 and 2009,
we recognized stock-based compensation expense of $248,457 and $296,838, respectively. The increase in stock based compensation
from 2009 to 2010 was primarily due to stock options granted to Ascent Medical to oversee the conduct of the REGEN Clinical Trial
in Jordan. We intend to grant stock options and other stock-based compensation in the future and we may therefore recognize additional
stock-based compensation in connection with these future grants.



On January 1, 2006, we
adopted the provisions of ASC 718 Compensation-Stock Compensation, Share-Based Payment(“ASC 718”)
using the modified prospective transition method. ASC 718 requires us to measure all share-based payment awards granted after
January 1, 2006, including those with employees, at fair value. Under ASC 718, the fair value of stock options and other
share-based compensation must be recognized as expense in the statements of operations over the requisite service period of each
award.



The fair value of share-based
awards granted subsequent to January 1, 2006 is determined using the Black-Scholes valuation model and compensation expense is
recognized on a straight-line basis over the vesting period of the awards. Beginning January 1, 2006, we also began recognizing
compensation expense under ASC 718 for the unvested portions of outstanding share-based awards previously granted under our
stock option plans, over the periods these awards continue to vest. Our future share-based compensation expense will depend on
the number of equity instruments granted and the estimated value of the underlying common stock at the date of grant.



We account for certain
share-based awards, including warrants, with non-employees in accordance with ASC 718 and related guidance, including EITF
Issue No. 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction
with Selling Goods or Services. We estimate the fair value of





41

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such awards using the Black-Scholes valuation
model at each reporting period and expense the fair value over the vesting period of the share-based award, which is generally
the period in which services are provided.





Interest Expense



On June 1, 2007, we entered
into the BlueCrest Loan and the Bank of America Loan, both in the principal amount of $5.0 million, with current interest rates
of 12.85% and 4.75%, respectively. Interest expense in 2010 and 2009 primarily consists of interest incurred on the principal amount
of the BlueCrest Loan and the Bank of America Loan, accrued fees and interest payable to the Guarantors, the amortization of related
deferred loan costs and the amortization of the fair value of warrants issued in connection with the loans. The deferred loan costs
and fair value of warrants issued in connection with the loans are being amortized to interest expense over the terms of the respective
loans using the effective interest method.



Critical Accounting Policies



Our discussion and analysis
of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared
in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements
requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We
base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances,
the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our
critical accounting policies are described in Note 1 to our consolidated financial statements appearing elsewhere in this report,
we believe the following policies are important to understanding and evaluating our reported financial results:



Revenue Recognition



Since inception, we have
not generated any material revenues from our MyoCell product candidate. In accordance with Staff Accounting Bulletin No. 101, Revenue
Recognition in Financial Statements, as amended by SEC Staff Accounting Bulletin No. 104, Revenue Recognition, our revenue
policy is to recognize revenues from product sales and service transactions generally when persuasive evidence of an arrangement
exists, the price is fixed or determined, collection is reasonably assured and delivery of product or service has occurred.



We initially recorded
payments received by us pursuant to our agreements with ACS as deferred revenue. Revenues are recognized on a pro rata basis as
the catheters are delivered pursuant to those agreements.



Research and Development Activities



Research and development
expenditures, including payments to collaborative research partners, are charged to expense as incurred. We expense amounts paid
to obtain patents or acquire licenses as the ultimate recoverability of the amounts paid is uncertain.



Results of Operations



We are a development stage
company and our MyoCell product candidate has not received regulatory approval or generated any material revenues and is not expected
to until 2012 if ever. We have generated substantial net losses and negative cash flow from operations since inception and anticipate
incurring significant net losses and negative cash flows from operations for the foreseeable future as we continue clinical trials,
undertake new clinical trials, apply for regulatory approvals, make capital expenditures, add information systems and personnel,
make payments pursuant to our license agreements upon our achievement of certain milestones, continue development of additional
product candidates using our technology, establish sales and marketing capabilities and incur the additional cost of operating
as a public company.



42

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Comparison of Years Ended December 31,
2010 and December 31, 2009



Revenues



We recognized revenues
of $46,383 in 2010 compared to revenues of $359,800 in 2009. Our revenue in 2010 and in 2009 was generated from the sale of MyoCath
catheters, sales of the TGI system and TGI supplies, and Cardio Devices. Decrease in revenues during 2010 was attributable to a
decrease in our MyoCath catheters sales of $190,500 and a decrease in TGI systems sales of $129,600.



Cost of Sales



Cost of sales was $19,765
in 2010 compared to $205,014 in 2009. The manufacturing cost per catheter sold in the twelve month period ended December 31, 2010
and 2009 were approximately the same. The decrease in cost of sales is due primarily to the decrease in sales in 2010.



Research and Development



Research and development
expenses were $1.5 million in 2010, an increase of $2.0 million from research and development expenses of ($0.5) million in 2009.
The increase was primarily attributable to a reduction in the amount of funds allocated to our MARVEL Trial, funds allocated to
Sponsored Research, and funds allocated to Advanced R&D, offset by an increase in stock-based compensation expense, related
to the Regen Clinical Trial in Jordan and gain on litigation settlement of $3.0 million in year 2009.



The timing and amount
of our planned research and development expenditures is dependent on our ability to obtain additional financing. See “- Existing
Capital Resources and Future Capital Requirements”and Item 1A.“Risk Factors - We will need to secure additional
financing ...”



Marketing, General and Administrative



Marketing, general and
administrative expenses were $1.8 million in 2010, a decrease of $0.49 million from marketing, general and administrative expenses
of $2.2 million in 2009. The decrease in marketing, general and administrative expenses is attributable, in part, to a decrease
in legal fees, rent, and sales & marketing expenses.



Interest Income



Interest income consists
of interest earned on our cash and cash equivalents. Interest income was $2 in 2010 compared to interest income of $21 in 2009.The
decrease in interest income was primarily attributable to lower cash balances and lower interest rates earned in 2010 compared
to 2009.



Interest Expense



On June 1, 2007, we entered
into the BlueCrest Loan and the Bank of America Loan, both in the principal amount of $5.0 million, with interest rates of 12.85%
and 4.75% (prime plus 1.5%), respectively, at December 31, 2008. On August 20, 2008, we borrowed $1.0
million from a third party at an interest rate of 13.5% per annum. Interest expense primarily consists of interest incurred
on the principal amount of these loans, accrued fees and interest earned by the guarantors of the Bank of America Loan, the amortization
of related deferred loan costs and the amortization of the fair value of warrants issued in connection with the BlueCrest and Bank
of America Loans. The fair value of the warrants originally issued in connection with the Bank of America Loan was amortized by
the end of January 2008.



Interest expense was $2.1
million in 2010 compared to interest expense of $2.6 million in 2009. Interest incurred on the principal amount of our outstanding
loans and interest and fees earned by the guarantors totaled approximately $900,000 in 2010 and $1.2 million in 2009. Amortization
of deferred loan costs and amortization of



43

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the fair value of warrants issued in connection
with the BlueCrest and Bank of America Loans totaled approximately $0.96 million in 2010 compared to $0.97 million in 2009.



Inflation



Our opinion is that inflation has not had, and
is not expected to have, a material effect on our operations.



Climate Change



Our opinion is that neither climate change, nor governmental
regulations related to climate change, have had, or are expected to have, any material effect on our operations.



Liquidity and Capital Resources



In 2010, we continued
to finance our considerable operational cash needs with cash generated from financing activities.



Operating Activities



Net cash used in operating
activities was $1.9 million in 2010 as compared to $2.0 million of cash used in 2009.



Our use of cash for
operations in 2010 reflected a net loss generated during the period of $5.2 million, adjusted for non-cash items such as
stock-based compensation of $248,457, amortization of the fair value of warrants granted in connection with the BlueCrest
Loan and Bank of America Loan of $975,969, amortization of loan costs incurred in connection with the BlueCrest Loan and Bank
of America Loan of $72,262 and equity instruments issued in connection with an R&D agreement of $360,032, common stock
issued in connection with accounts payable of $412,660, common stock issued to the guarantors of the Bank of America Loan of
$69,159, and depreciation expense of $56,958. An increase in prepaid and other current assets of $8,592, an increase
in accounts payable of $133,038, a decrease in inventory of $46,297, a decrease in receivables of $141,013, an increase in
accrued expenses and deferred rent of $799,952, and a decrease in deferred revenues of $41,995, contributed to our use of
operating cash in 2010.



Investing Activities



Net cash used in investing
activities was $0 in 2010 as compared to $688 in 2009. All of the cash utilized in investing activities in 2009 was related to
our acquisition of property and equipment.



Financing Activities



Net cash provided by financing
activities was $1.8 million in 2010 as compared to $2.1 million in 2009.



In 2010 we
sold, in a private placement,shares of common stock and warrants for aggregate net cash proceeds of approximately $2.4
million.



Existing Capital Resources and Future
Capital Requirements



Our MyoCell product candidate
has not received regulatory approval or generated any material revenues. We do not expect to generate any material revenues or
cash from sales of our MyoCell product candidate until commercialization of MyoCell, if ever. We have generated substantial net
losses and negative cash flow from operations since inception and anticipate incurring significant net losses and negative cash
flows from operations for the foreseeable future. Historically, we have relied on proceeds from the sale of our common stock and
our incurrence of debt to provide the funds necessary to conduct our research and development activities and to meet our other
cash needs.





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At December 31, 2010 we
had cash and cash equivalents totaling $3,298 however, our working capital deficit as of such date was
$11.1 million.Our independent registered public accounting firm has issued its report dated May 6, 2011 in connection with
the audit of our financial statements as of December 31, 2010 that included an explanatory paragraph describing the existence of
conditions that raise substantial doubt about our ability to continue as a going concern.



Off-Balance Sheet Arrangements



We do not have any off-balance
sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are
material to investors.



Recent Accounting Pronouncements



Refer to Note 1. Organization
and Summary of Significant Accounting Policies in the notes to our consolidated financial statements for a discussion of recent
accounting pronouncements.



Item 7A.	Quantitative and Qualitative
Disclosures About Market Risk



Not applicable.



Item 8.		Financial Statements and
Supplementary Data



Our Financial Statements
begin on page F-1 of this Annual Report on Form 10-K and are incorporated herein by reference.



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



None.



Item 9A.    Controls and Procedures.



Evaluation of Disclosure Controls and Procedures



We maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in our
periodic reports filed under the Securities Exchange Act of 1934, as amended, or 1934 Act, is recorded, processed, summarized, and reported within the time
periods specified in the SECs rules and forms and to ensure that such information is accumulated and communicated to our management, including our chief
executive officer and chief financial officer (principal financial officer) as appropriate, to allow timely decisions regarding required disclosure. During the
quarter ended December 31, 2010 we carried out an evaluation, under the supervision and with the participation of our management, including the principal
executive officer and the principal financial officer (principal financial officer), of the effectiveness of the design and operation of our disclosure controls
and procedures, as defined in Rule 13(a)-15(e) under the 1934 Act. Based on this evaluation, because of the Companys limited resources and limited
number of employees, management concluded that our disclosure controls and procedures were ineffective as of December 31, 2010.



Managements Report on Internal Control over Financial Reporting



Our management is responsible for establishing and maintaining adequate internal control over financial reporting. The Companys
internal control over financial reporting is designed to provide reasonable assurances regarding the reliability of financial reporting and the preparation of
the financial statements of the Company in accordance with U.S. generally accepted accounting principles, or GAAP. Because of its inherent limitations, internal
control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to
the risk that controls may become inadequate because of changes in conditions, or that the degree or compliance with the policies or procedures may deteriorate.



With the participation of our  Chief Executive Officer and Chief Financial Officer, our management conducted an evaluation of the
effectiveness of our internal control over financial reporting as of December 31, 2010 based on the framework in Internal ControlIntegrated Framework
issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"). Based on our evaluation and the material weaknesses
described below, management concluded that the Company did not maintain effective internal control over financial reporting as of December 31, 2010 based
on the COSO framework criteria. Management has identified control deficiencies regarding the lack of segregation of duties and the need for a stronger
internal control environment. Management of the Company believes that these material weaknesses are due to the small size of the Companys accounting
staff.  The small size of the Companys accounting staff may prevent adequate controls in the future, such as segregation of duties, due to the
cost/benefit of such remediation.



To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along
with the use of external legal and accounting professionals. As we grow, we expect to increase our number of employees, which will enable us to implement
adequate segregation of duties within the internal control framework.



These control deficiencies could result in a misstatement of account balances that would result in a reasonable possibility that a
material misstatement to our consolidated financial statements may not be prevented or detected on a timely basis. Accordingly, we have determined that these
control deficiencies as described above together constitute a material weakness.



In light of this material weakness, we performed additional analyses and procedures in order to conclude that our consolidated financial
statements for the year ended December 31, 2010 included in this Annual Report on Form 10-K were fairly stated in accordance with US GAAP. Accordingly,
management believes that despite our material weaknesses, our consolidated financial statements for the year ended December 31, 2010 are fairly stated, in all
material respects, in accordance with US GAAP.





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This annual report does not include an attestation report of our registered public accounting firm regarding internal control over
financial reporting. Managements report was not subject to attestation by our registered public accounting firm.



Limitations on Effectiveness of Controls and Procedures



Our management, including our Chief Executive Officer, does not expect that our disclosure controls and procedures or our internal
controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute,
assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints
and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls
can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations
include, but are not limited to, the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake.
Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system,
misstatements due to error or fraud may occur and not be detected.



Changes in Internal Controls



During the fiscal quarter ended December 31, 2010, there have been no changes in our internal control over financial reporting that have
materially affected or are reasonably likely to materially affect our internal controls over financial reporting



Item 9B.	Other Information



Magna Group, LLC Financing



On January 7, 2011, BlueCrest Venture Finance
Master Fund Limited agreed with the Company and Magna Group, LLC to split the Blue Crest note evidencing its outstanding loan with
the Company into two notes aggregating the outstanding principal balance of $2,276,543, with the new note being in the principal
amount of $139,729 . The New Note was assigned to Magna in consideration for a payment by them to BlueCrest of $139,729, and modified.
Additionally, Magna purchased a $25,000 convertible note from the Company.



The loans evidenced by the New Note and Convertible
Note are in the nature of convertible debt evidenced by two unsecured convertible promissory notes, each bearing interest at the
rate of 8% per annum, payable at maturity and each convertible into common stock of the Company at a price that is 50% less than
the average of the closing prices for the Company’s shares for the five (5) days prior to the Lenders’ election to
exercise its conversion right.



The offer and sale of the securities was made
only to accredited investors and, accordingly, is exempt from registration under Section 4(2) of the Securities Act of 1933, as
amended (the “Act”). The Company will have no





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obligation to file any registration statement with respect to the
shares, except that Magna has customary “piggyback” registration rights.



As of February 16,
2011 Magna had delivered to the Company, notices electing to convert $139,728 of the New Note intoshares of the Company’s
common stock. The price per share for each of the conversion ranged from $0.12 to $0.177. This required
the issuance to the Magna of 959,934 unregistered sharesof the Company’s common stock.



Korea Group Financing



On January 23, 2011, the Company announced that
it has entered into a subscription agreement with Anc Bio Holdings, Inc., a South Korean biomedical company, and a subscription
agreement with one of its U.S. agents, Bioheart Florida, LLC for a $4 million equity investment, in the aggregate. Funding of the
investment will be made ratably by them in installments with 10% immediately, followed by 40% within 45 days and the remaining
50% subject to certain conditions which the Company expects to satisfy in the next 90 days.



The aggregate number of shares of common stock
anticipated to be issued in connection with the investment is 25,000,000 shares. The Company will also issue to the purchasers
of common stock, warrants to purchase, in the aggregate, up to 12,500,000 shares of common stock. In connection with the common
stock issuance, the subscribers received “piggyback” registration rights exercisable under certain circumstances more
particularly set forth in the Registration Rights Agreement entered into with each investor.



Under the terms of
the subscription agreements, the Company has agreed, among other things, that:



(a)
	Until April 20, 2011, the Company shall not initiate or support any action to increase the number of directors serving on the
Company’s Board of Directors and, subject to unforeseen circumstances outside of the Company’s control (i.e., the death
or disability of a board member), the Company will not initiate or support any change to the composition of the Board of Directors’
Committees without the investors’ prior consent;



(b)	The Company will provide the Investors with an estimated
use of proceeds prior to the first installment payment date and the Company will utilize not less than sixty percent (60%) of such
proceeds for research and development costs and clinical trial costs;



(c)	The proceeds may be used to attract and hire a new Company
Chief Financial Officer and the Investors, or their designee(s) will have the right to participate in the interviewing of, and
the selection of, that new Chief Financial Officer; and



(d)	Until April 20, 2011, the Company shall not issue more
than Two Hundred, Fifty Thousand (250,000) shares of the Company’s Common Stock in connection with any single transaction
(other than shares that may be issued in connection with the conversion of the existing convertible promissory note into such shares
of common stock by Magna Group, LLC).



Funding of the investment was to be made ratably by them in installments
with 10% immediately, followed by 40% within 45 days and the remaining 50% subject to certain conditions which the Company expected
to satisfy within 90 days. The first installment of $400,000 was received upon execution of the agreement. On March 11th
the Company announced that was engaged in discussions with ANC and BF to determine new timing for the funding of the remaining
installments. As of April 18, 2011, the second installment had not been received from either ANC or BF. Accordingly, on April 18,
2011 the Company delivered a written notice of default and termination to each of ANC and BF, in respect of the subscription agreements.
The notice states that it is being given as a result of the breach by each of ANC and BF of their respective payment obligations
under the Agreements. As a result of these breaches, we have decided to immediately cause the removal of Mr. Quiros from our Board
of Directors and take such other action as may be necessary to enforce our rights and remedies under the subscription agreements,
including the termination of all rights of AnC Bio and BHFL under the subscription agreements.



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Increase to Authorized Common Stock



As of December 31, 2010, our Articles of Incorporation
authorized us to issue up to 75,000,000 shares of common stock, par value $0.001 per share. The Board of Directors proposed, and
on January 13, 2011 (the “Record Date”) the holders of a majority of the Company’s issued and outstanding voting
common shares as of the Record Date approved, an increase in the number of authorized shares of the common stock from 75,000,000
shares to 195,000,000 shares. On January 21, 2011 the Company filed a 14C Information Statement with the Securities and Exchange
Commission.  Following approval by the Securities and Exchange Commission and upon the filing of the Certificate of Amendment
to the Articles of Incorporation, the Company’s will be authorized to issue a total of 195,000,000 shares of common stock,
par value of $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share.





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PART III





Item 10. Directors, Executive Officers and Corporate
Governance

Executive Officers and Directors



Set forth below is information regarding our executive officers
and directors as of May 4 2011



|Mike Tomas                   | 45 | Director, President and Chief Executive Officer
|---------------------------- | -- | -----------------------------------------------
|Howard J. Leonhardt          | 49 | Director, Chief Technology Officer             
|William P. Murphy, Jr., M.D. | 87 | Director, Chairman of the Board                
|Bruce C. Carson              | 48 | Director                                       
|Richard T. Spencer III       | 75 | Director                                       
|Mark P. Borman               | 56 | Director                                       
|Charles A. Hart              | 50 | Director                                       
|Sam Ahn                      | 57 | Director                                       
|Ariel Quiros                 | 54 | Director                                       
|Catherine Sulawske-Guck      | 42 | Chief Operating Officer                        
|Kristin Comella              | 34 | Chief Scientific Officer                       



Executive Officers and Directors



Mike Tomas.Mr. Mike Tomas was appointed President
and Chief Executive Officer and a member of our Board of Directors on June 19, 2010. Mike Tomas was appointed as the Company’s
President and Chief Executive Officer, and as a director on June 19, 2010. Mr. Tomas has been President for the past nine years
of The ASTRI Group, an early stage private equity investment company in Florida with an investment in Bioheart since 2001. In 2003,
he joined Bioheart’s board as the independent representative of The ASTRI Group. ASTRI provides capital, business development
and strategic marketing support to emerging private companies. Mr. Tomas will continue to serve as President of The ASTRI Group.
Previously from 1983 to 2001, Mr. Tomas held ascending executive positions including Chief Marketing Officer at Avantel, a $1 billion
dollar joint venture with MCI. Upon retiring from MCI and WorldCom, Tomas joined other ex-MCI executives and helped raise $40M
in venture capital to form Ineto, an integrated customer communications software solution that was successfully sold in 2001. Today
Mr. Tomas sits on the boards of Perimeter Internetworking (SaaS providing secure transfer of information for medical and financial
institutions), Avisena (revenue cycle management for medical practices) and Total Home Health (Medicare-certified home care provider).
 Mr. Tomas is also the current chairman of the Global Entrepreneurship Center at Florida International University and a founding
coach/mentor at the University of Miami’s Launch Pad at the Toppel Center.  Mr. Tomas holds a Masters of Business Administration
from the University of Miami and a Bachelors degree from Florida International University. This experience, together with his other
board experience and his extensive experience in strategic development, makes him well-qualified to serve on, and a valuable member
of, our Board of Directors.



Howard J. Leonhardt. Mr. Leonhardt is the co-founder,
and Chief Technology Officer of Bioheart. He has served as our Chairman of the Board since our incorporation in August 1999,
until March 2007. He resumed his position as Chief Executive Officer in July 2008, and served until August, 2009. He has served
as our Chief Technology Officer since March 2007. Mr. Leonhardt also served as our Executive Chairman from March 2007
until March 2008. In 1986, Mr. Leonhardt founded World Medical Manufacturing Corporation, or World Medical, and served
as its Chief Executive Officer from 1986 until December 1998 when World Medical was acquired by Arterial Vascular Engineering,
Inc., or AVE. AVE was acquired by Medtronic, Inc. in January 1999. Mr. Leonhardt was the co-inventor of World Medical’s
primary product, the TALENT (Taheri-Leonhardt) stent graft system. From December 1998 until June 1999, Mr. Leonhardt
served as President of World Medical Manufacturing Corporation, a subsidiary of Medtronic. Scientific articles written by Mr. Leonhardt
have been published in a number of publications including Techniques in Vascular and Endovascular Surgery and the Journal of Cardiovascular
Surgery. Mr. Leonhardt received a diploma in International Trade from the Anoka-Hennepin Technical College, attended the



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University of Minnesota and Anoka-Ramsey Community College and holds
an honorary Doctorate Degree in Biomedical Engineering from the University of Northern California. Mr. Leonhardt rejoined the Board
of Directors in June 2010. Mr. Leonhardt’s experience with us, and in the medical device industry, together with his other
board experience; make him well-qualified to serve on, and a valuable member of, our management team and Board of Directors.



William P. Murphy, Jr., M.D.Dr. Murphy has served as
a member of our Board of Directors since June 2003. Dr. Murphy founded Small Parts, Inc., a supplier of high quality
mechanical components for design engineers, in 1964 and served as its Chairman until his retirement in April 2005. Small Parts,
Inc. was acquired by Amazon.com, Inc. in March 2005. From October 1999 until October 2004, Dr. Murphy served
as the Chairman and Chief Executive Officer of Hyperion, Inc., a medical diagnosis company which had an involuntary bankruptcy
filed against it in December 2003. Dr. Murphy is the founder of Cordis Corporation (now Cordis Johnson & Johnson)
which he led as President, Chairman and Chief Executive Officer at various times during his 28 years at Cordis until his retirement
in October 1985. Cordis Johnson & Johnson is a leading firm in cardiovascular instrumentation. Dr. Murphy received
an M.D. in 1947 from the University of Illinois and a B.S in pre-medicine from Harvard College in 1946. He also studied physiologic
instrumentation at Massachusetts Institute of Technology, or MIT. After a two year rotating internship at St. Francis Hospital
in Honolulu, he became a Research Fellow in Medicine at the Peter Bent Brigham Hospital in Boston where he was the dialysis engineer
on the first clinical dialysis team in the United States. He continued as an Instructor in Medicine and then a research associate
in Medicine at Harvard Medical School. Dr. Murphy is the author of numerous papers and owns 17 patents. He is the recipient
of a number of honors, including the prestigious Lemelson-MIT Lifetime Achievement Award, the MIT Corporate Leadership Award, the
Distinguished Service Award from North American Society of Pacing and Electrophysiology, and the Jay Malina Award from the Beacon
Council of Miami, Florida. Dr. Murphy’s healthcare industry related experience, together with his experience with us, makes
him well-qualified to serve on, and a valuable member of, our Board of Directors.



Bruce C. Carson.Mr. Carson has served as a member of our
Board of Directors since January 2001. From May 2001 until January 2010, Mr. Carson served as the Vice President of Sales of FinishMaster,
Inc., a privately held company specializing in the distribution of paints and products to the automotive and industrial refinishing
industries. From 1987 until May 2001, Mr. Carson was President of Badger Paint Plus, Inc., a privately held distributor of paints
and products, until Badger Paint Plus’ merger with FinishMaster, Inc. Mr. Carson was co-founder of the Southern Minnesota
Express Hockey Club, a member of the North American Hockey League. Mr. Carson was also the founder and President of the Athletic
Performance Academy in Eden Prairie, Minnesota, a privately held athletic training facility that specialized in sports specific
training for elite athletes. Mr. Carson’s experience with us, together with his other board experience; make him well-qualified
to serve on, and a valuable member of, our Board of Directors.



Richard T. Spencer, III.Mr. Spencer has served as a
member of our Board of Directors since December 2001. From April 1982 until July 1987, Mr. Spencer was President
of the Marketing Division of Cordis Corporation (now Cordis Johnson & Johnson) and a member of its executive committee and
a Vice President of Cordis Dow Corporation, a joint venture of the Dow Chemical Company and Cordis to manufacture hollow fiber
dialysers and machinery for dialysis. Mr. Spencer was Chief Operating Officer and held other executive positions with World
Medical from 1993 to January 1999. Mr. Spencer received a B.A. in Economics in 1959 from the University of Michigan. He has
studied business theory, case studies and financial management while attending executive programs at the Stanford University School
of Business, the University of Pennsylvania’s Wharton School of Business and the Clemson University School of Business. Between
his University of Michigan studies and embarking on a career in healthcare, Mr. Spencer served in Europe with the U.S. Army
Counter Intelligence Corps as a military intelligence analyst with top secret security clearance. Mr. Spencer is also the founder
and a member of the board of directors of Viacor, Inc., a private company that is developing techniques for the percutaneous repair
of heart mitral valves. Mr. Spencer’s healthcare industry related experience, together with his other board experience, makes
him well-qualified to serve on, and a valuable member of, our Board of Directors.



Mark P. Borman. Mr. Borman has served as a member of the
Company’s Board of Directors since May 2009. He is a seasoned financial officer with more than 30 years of broad-based financial
and investor relations experience. Mr.



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Borman brings small-company entrepreneurial passion and larger-company
disciplines. In addition to the valuable experience he gained working with entrepreneurs and their startups from 2009 to present,
Mr. Borman has experience with global, NASDAQ- and NYSE-listed companies in various executive and financial roles. He most recently
served as Corporate Officer, Treasurer and Vice President of Investor Relations with ADC Telecommunications. During his career,
Mr. Borman has held positions with General Instrument Corporation, First Chicago Corporation, FMC Corporation, Price Waterhouse,
and KPMG. Mr. Borman received his B.A. in Accounting from Michigan State University and his M.B.A. from the University of Chicago
Graduate School of Business.  He is a Certified Public Accountant and Chartered Financial Analyst and has experience as an
advisor, board member, faculty, speaker, and mentor. Mr. Borman’s accounting and audit experience, his other board experience,
and his transactional and capital markets experience, make him well-qualified to serve on, and a valuable member of, our Board
of Directors.



Charles A. Hart. Mr. Hart has served as a member of our Board
of Directors since May 2009. Mr. Hart has more than 20 years of entrepreneurial experience. Mr. Hart founded Hart Masonry, Inc.
in 1986 and has served as its President since then. He is also the Founder and President of Wildridge Enterprises. Mr. Hart is
a member of the Board of Directors for Eagle Street Properties LLP. Mr. Hart’s operations experience, together with his other
board experience, makes him well-qualified to serve on, and a valuable member of, our Board of Directors.



Sam Ahn.Dr. Ahn previously served as a member of the Company's
Board of Directors from January 2001 thru September 2008. Dr Ahn was one of the early pioneers in developing the field of endovascular
surgery by coordinating and leading the first endovascular training courses in the US and Europe as well as developing some
of the endovascular devices and techniques currently in clinical use today. He is a former Professor of Surgery in the Division
of Vascular Surgery at UCLA, where he was also the Director of the Endovascular Surgery Program. In 2006 Dr. Ahn founded Vascular
Management Associates, Inc., a consulting and management firm that sets up outpatient endovascular centers across the US. VMA
has set up 8 such sites to date and is on track to set up two more this year. In 2008, he co-founded Wright-Ahn Technology, LLC, to
develop and commercialize endovascular devices. In 2009, he co-founded MediBank International, LLC, a global healthcare IT Company.
Dr. Ahn graduated from the University of Texas, Southwestern Medical School in Dallas, and received his general and vascular surgical
residency training at UCLA. He also earned his MBA from the UCLA Anderson School of Management in August, 2004. Dr. Ahn sits on
five vascular journal editorial boards, and has published over 120 peer-reviewed manuscripts, 50 book chapters, and five textbooks,
including the first and definitive textbook on Endovascular Surgery. During the past eighteen years he has consulted for over 50
biomedical companies, both new and established, and has authored over 15 patents. Dr. Ahn's experience as a medical professional,
together with his experience with us, makes him well-qualified to serve on, and a valuable member of, the Company's Board of Directors.



Ariel Quiros.Mr. Quiros has served as a member of the Company’s
Board of Directors since February 2011. Mr. Quiros is the President of US operations of AnC Bio Holdings, Inc, a publicly listed
company on the Korea Stock Exchange (KS039670) founded in 1999. AnC Bio owns a state of the art cGMP cell culturing facility for
stem cell therapies including research, development, and manufacturing of biomedical devices and therapies.  Mr. Quiros is
also a director and principal of GSI Group, a raw materials procurement company for the South Korean manufacturing community with
offices in Seoul, Beijing, Sydney, Hong Kong and Miami. Mr. Quiros’ was appointed to the Board
in connection with the recent financing with AnC Bio. On April 18, 2011 the Company delivered a notice of default to AnC Bio arising
out of its failure to satisfy its funding obligations in connection with the financing and advising AnC Bio that it would seek
removal of Mr. Quiros from the Board of Directors.



Catherine Sulawske-Guck.Ms. Catherine Sulawske-Guck was
appointed Chief Operating Officer in July 2010. From January 2007 to June 2010, Ms. Sulawske-Guck served as our Vice President
of Administration and Human Resources. Ms. Sulawske-Guck joined Bioheart in the full-time capacity as Director of Administration
and Human Resources in January 2004 after having served us in a consulting capacity since December 2001. Prior to joining Bioheart,
from May 1989 until November 2001, Ms. Sulawske-Guck served as Director of Operations and Customer Service for World Medical Manufacturing
Corporation, a subsidiary of Medtronic. Ms. Sulawske-Guck’s operations experience in the biotechnology and medical device
industry make Ms. Sulawske-Guck well-qualified to be a part of, and a valued member of, our management team.



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Kristin Comella.
Ms. Comella was appointed Chief Scientific Officer in September
2010. Ms. Comella has served as our Vice President of R&D and Corporate Development since December 2008 and has played a major
role in managing our product development, manufacturing and quality systems since joining Bioheart in 2004. Ms. Comella has 12
years of industry experience with expertise in regenerative medicine, training and education, research and product development,
and currently serves on multiple advisory boards in the stem cell arena. Ms. Comella has over ten years of cell culturing experience
including building and managing the stem cell laboratory at Tulane University's Center for Gene Therapy and developing stem cell
therapies for osteoarthritis at Osiris Therapeutics. Ms. Comella holds an M.S. in Chemical Engineering from The Ohio State University
and a B.S. in Chemical Engineering from the University of South Florida. Ms. Comella’ s stem cell therapy expertise and management
experience make Ms. Comella well qualified to be a part of, and valued member of, our management team.



Family Relationships



There are no family relationships among our executive officers and
directors, except that Mr. Leonhardt is the former brother-in-law of Catherine Sulawske-Guck.



Shareholder Recommendations for Board Nominees



Our Governance & Nominating Committee is tasked with, among
other things, assisting the Board by identifying individuals qualified to become Board members and recommending to the Board the
director nominees for the next Annual Meeting of Shareholders. Directors currently serving on our Governance & Nominating Committee
are: Richard T. Spencer III, whom serves as Chairperson of the Governance and Nominating Committee, Mr. Borman and Dr. Ahn. Our
Board of Directors has determined that Mr. Borman is an independent director under the NASDAQ Marketplace Rules and Rule 10A-3
under the Exchange Act.



The Governance & Nominating Committee’s Charter provides
that shareholder nominees to the Board of Directors will be evaluated using the same guidelines and procedures used in evaluating
nominees nominated by other persons. In evaluating director nominees, the Governance & Nominating Committee will consider the
following factors:



| | · |  | the appropriate size and the diversity of our Board;                                                                                                                                                                                                                           
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |  |                                                                                                                                                                                                                                                                                
| | · |  | our needs with respect to the particular talents and experience of our directors;                                                                                                                                                                                              
| |   |  |                                                                                                                                                                                                                                                                                
| | · |  | the knowledge, skills and experience of nominees, including experience in technology, business, finance, administration or public service, in light of prevailing business conditions and the knowledge, skills and experience already possessed by other members of the Board;
| |   |  |                                                                                                                                                                                                                                                                                
| | · |  | familiarity with national and international business matters;                                                                                                                                                                                                                  
| |   |  |                                                                                                                                                                                                                                                                                
| | · |  | experience in political affairs;                                                                                                                                                                                                                                               
| |   |  |                                                                                                                                                                                                                                                                                
| | · |  | experience with accounting rules and practices;                                                                                                                                                                                                                                
| |   |  |                                                                                                                                                                                                                                                                                
| | · |  | whether such person qualifies as an “audit committee financial expert” pursuant to the SEC Rules;                                                                                                                                                                              
| |   |  |                                                                                                                                                                                                                                                                                
| | · |  | appreciation of the relationship of our business to the changing needs of society; and                                                                                                                                                                                         
| |   |  |                                                                                                                                                                                                                                                                                
| | · |  | the desire to balance the considerable benefit of continuity with the periodic injection of the fresh perspective provided by new members.                                                                                                                                     



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In identifying director nominees, the Governance & Nominating
Committee will first evaluate the current members of the Board of Directors willing to continue in service. Current members of
the Board with skills and experience that are relevant to our business and who are willing to continue in service shall be considered
for re-nomination, balancing the value of continuity of service by existing members of the Board with that of obtaining a new perspective.
Generally, the Governance & Nominating Committee strives to assemble a Board of Directors that brings to us a variety of perspectives
and skills derived from business and professional experience. In doing so, the Governance & Nominating Committee will also
consider candidates with appropriate non-business backgrounds. If any member of the Board does not wish to continue in service
or if the Governance & Nominating Committee or the Board decides not to re-nominate a member for re-election, the Governance
& Nominating Committee will identify the desired skills and experience of a new nominee in light of the criteria above. Other
than the foregoing, there are no specific, minimum qualifications that the Governance & Nominating Committee believes that
a Committee-recommended nominee to the Board of Directors must possess, although the Governance & Nominating Committee may
also consider such other factors as it may deem are in our and our shareholders’ best interests.



The Governance & Nominating Committee and Board of Directors
are polled for suggestions as to individuals meeting the criteria of the Governance & Nominating Committee. Research may also
be performed to identify qualified individuals.



Our bylaws contain advance notice procedures with respect to shareholder
proposals and the nomination of candidates for election as directors, other than nominations made by or at the direction of the
Board of Directors or a committee thereof. Our bylaws also specify certain requirements as to the form and content of a shareholder’s
notice. These provisions may preclude our shareholders from bringing matters before our annual meeting of shareholders or from
making nominations for directors at our annual meeting or a special meeting of shareholders.



Independence of Directors



Our Board of Directors has determined that Mr. Borman, Mr. Hart,
and Mr. Carson, are independent under the NASDAQ Marketplace Rules and Rule 10A-3 under the Exchange Act. Mr. Quiros is the
director nominated by the investors in the financing transaction completed in January 2011, pursuant to a director nomination right
afforded the investors.



Audit Committee



The Board of Directors has a standing Audit Committee. The members
of our Audit Committee are Mr. Borman, who serves as Chairperson of the Audit Committee, Dr. Murphy and Mr. Hart. Our
Board of Directors has determined that Mr. Borman and Mr. Hart are independent under the NASDAQ Marketplace Rules and Rule 10A-3
under the Exchange Act and that Mr. Borman qualifies as a “financial expert” as that term is defined in rules
of the SEC implementing requirements of the Sarbanes-Oxley Act of 2002.



The Board of Directors intends to on a periodic basis evaluate the
Audit Committee and examine the independence of each of the members of the Board and their qualifications as a financial expert
for purposes of considering their service on the Audit Committee.



Compensation Committee



The Board of Directors has a standing Compensation Committee. The
members of our Compensation Committee are: Bruce Carson, who serves as Chairperson of the Compensation Committee, Mr. Spencer,
Mr. Hart and Mr. Quiros. Our Board of Directors has determined that Mr. Carson and Mr. Hart are independent under the NASDAQ Marketplace
Rules and Rule 10A-3 under the Exchange Act.



The Compensation Committee continues to examine whether to adopt
a more formal process for discretionary annual bonuses. If adopted, the Board of Directors expects to utilize annual incentive
bonuses to compensate officers for achieving financial and operational goals and for achieving individual annual performance objectives.
These



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objectives will likely vary depending on the individual executive,
but will relate generally to strategic factors such as establishment and maintenance of key strategic relationships, development
of our product candidates, identification and advancement of additional product candidates, and to financial factors such as improving
our results of operations and increasing the price per share of our common stock.



Communications with the Board of Directors



In January 2007, our Board of Directors adopted a Shareholder
Communication Policy for shareholders wishing to communicate with various Board committees and individual members of the Board
of Directors. Shareholders wishing to communicate with the Board of Directors, the Governance & Nominating Committee and specified
individual members of the Board of Directors can send communications to the Board of Directors and, if applicable, to the Governance
& Nominating Committee or to specified individual directors in writing c/o Catherine Sulawske-Guck, Bioheart, Inc., 13794 NW
4th Street, Suite 212, Sunrise, FL 33325. We do not screen such mail and all such letters will be forwarded to the intended
recipient.



Code of Ethics



As part of our system of corporate governance, our Board of Directors
has adopted a code of ethics that is specifically applicable to our Chief Executive Officer and senior financial officers. This
Code of Ethics for Senior Financial Officers, as well as our Code of Business Conduct and Ethics, applicable to all directors,
officers and employees, are available on our web site at http://www.bioheartinc.com/investorrelations.html



If we make substantive amendments to the Code of Ethics for Senior
Financial Officers or the Code of Business Conduct and Ethics or grant any waiver, including any implicit waiver, we will disclose
the nature of such amendment or waiver on our website or in a report on Form 8-K within four days of such amendment or waiver.



Whistleblower Policy



In January 2007, the Board of Directors adopted Procedures
for the Submission, Receipt and Handling of Concerns and Complaints Regarding Internal Controls and Auditing Matters, or a whistleblower
policy. This policy outlines the process for the submission, receipt, retention and treatment of concerns and complaints received
by us regarding our and our affiliates’ respective accounting, auditing and internal controls practices and procedures, including
the process for the confidential, anonymous submission by our directors, officers and employees of concerns regarding questionable
accounting or auditing matters.



Board Meetings; Committee Meetings; and Annual Meeting Attendance



During 2010, the Board of Directors held 4 regular
meetings in person and 8 special telephonic meetings.  Each regular meeting was attended by all of the members of the
Board, except one meeting missed by one Board Member.



During 2010, the Audit Committee held 4 meetings.  These
meetings were attended by all members of the Audit Committee.



During 2010, the Compensation Committee held
3 meetings.  These meetings were attended by all members of the Compensation Committee.



During 2010, the Nominating Committee held 4
meeting.  The meeting was attended by all members of the Nominating Committee.



All of our directors attend at least 75% of
the regular meetings and 75% of the meetings of the Board committees upon which each served as a member.  The Board does
not have a policy regarding director attendance at annual meetings. We did not have an in person annual meeting of shareholders
in 2010.



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Limitation on Liability and Indemnification of Directors and
Officers



Our certificate of incorporation provides that
no director or officer shall have any liability to the company if that person acted in good faith and with the same degree of care
and skill as a prudent person in similar circumstances.



Our certificate of incorporation and bylaws
provide that we will indemnify our directors and officers and may indemnify our employees or agents to the fullest extent permitted
by law against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices
or positions with us.  However, nothing in our certificate of incorporation or bylaws protects or indemnifies a director,
officer, employee or agent against any liability to which that person would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the conduct of that person’s office or position.  To
the extent that a director has been successful in defending any proceeding brought against him, the Delaware General Corporation
Law provides that the director shall be indemnified against reasonable expenses incurred by him in connection with the proceeding.



Section 16(a) Beneficial Ownership Reporting Compliance



Section 16(a) of the Exchange Act requires our directors and
executive officers, and persons who own more than ten percent (10%) of our outstanding Common Stock, to file with the SEC initial
reports of ownership on Form 3 and reports of changes in ownership of Common Stock on Forms 4 or 5. Such persons are required
by SEC regulation to furnish us with copies of all such reports they file.



Based solely on our review of the copies of such reports furnished
to us or written representations that no other reports were required, we believe that all Section 16(a) filing requirements applicable
to our officers, directors and greater than ten (10%) percent beneficial owners have been complied with during the year ended December 31,
2010 and through the date hereof except for one late Form 4 filed by Mr. Hart, one late Form 4 filed by Mr. Leonhardt,
one late Form 3 filed by Dr. Ahn. As of the date hereof, however, all late filings have been filed.



Item 11. Executive Compensation

Compensation Discussion and Analysis



The primary goals of our Compensation Committee with respect to
executive compensation are to attract and retain the most talented and dedicated executives possible, to assure that our executives
are compensated effectively in a manner consistent with our strategy and competitive practice and to align executives’ incentives
with shareholder value creation. To achieve these goals, our Compensation Committee, with management’s input, recommends
executive compensation packages to our Board of Directors that are generally based on a mix of salary, discretionary bonus and
equity awards. Although our Compensation Committee has not adopted any formal guidelines for allocating total compensation between
equity compensation and cash compensation, we believe it is important for these executives to have equity ownership in our company
to provide them with long-term incentives to build value for our shareholders. Accordingly, we generally award our executive officers,
other than Mr. Leonhardt, initial option grants upon the commencement of their employment with us and ongoing option grants
as circumstances warrant. Mr. Leonhardt beneficially owns a significant percentage of our outstanding common stock and, accordingly,
we believe his interests are strongly aligned with the interests of our shareholders. We intend to implement and maintain compensation
plans that tie a substantial portion of our executives’ overall compensation to achievement of corporate goals and value-creating
milestones. We believe that performance and equity-based compensation are important components of the total executive compensation
package for maximizing shareholder value while, at the same time, attracting, motivating and retaining high-quality executives.



We have not retained a compensation consultant to review our policies
and procedures with respect to executive compensation. We conduct an annual review of the aggregate level of our executive compensation,
as well as the mix of elements used to compensate our executive officers. The Compensation Committee develops our compensation



55

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plans by utilizing publicly available compensation data for national
and regional companies in the biopharmaceutical industry and/or the South Florida market. We believe that the practices of this
group of companies provide us with appropriate compensation benchmarks, because these companies have similar organizational structures
and tend to compete with us for executives and other employees. For benchmarking executive compensation, we typically review the
compensation data we have collected from the complete group of companies, as well as a subset of the data from those companies
that have a similar number of employees as our company.



Our Compensation Committee may retain the services of third-party
executive compensation specialists from time to time, as it sees fit, in connection with the establishment of cash and equity compensation
and related policies.



Elements of Compensation



Our Compensation Committee evaluates individual executive performance
with a goal of setting compensation at levels the Compensation Committee believes are comparable with executives in other companies
of similar size and stage of development operating in the biopharmaceutical industry and/or the South Florida market. The compensation
received by our executive officers consists of the following elements:



Base Salary.Base salaries for our executives are established
based on the scope of their responsibilities and individual experience, taking into account competitive market compensation paid
by other companies for similar positions within our industry and geographic market. Base salaries are reviewed at least annually,
and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance
and experience. The base salaries of our named executive officers were adjusted in 2009.



Discretionary Annual Bonus.In addition to base salaries,
our Board of Directors has the authority to award discretionary annual bonuses to our executive officers. In 2010, the Board of
Directors did not award any cash bonuses. The annual incentive bonuses are intended to compensate officers for achieving corporate
goals and for achieving what the Board of Directors believes to be value-creating milestones. Our annual bonus, if any, is paid
in cash in an amount reviewed and approved by our Board of Directors. Each executive officer is eligible for a discretionary annual
bonus up to an amount equal to 50% of such executive officer’s salary.



The Compensation Committee continues to examine whether to adopt
a more formal process for discretionary annual bonuses. If adopted, the Board of Directors expects to utilize annual incentive
bonuses to compensate officers for achieving financial and operational goals and for achieving individual annual performance objectives.
These objectives will likely vary depending on the individual executive, but will relate generally to strategic factors such as
establishment and maintenance of key strategic relationships, development of our product candidates, identification and advancement
of additional product candidates, and to financial factors such as improving our results of operations and increasing the price
per share of our common stock.



Long-Term Incentive Program.At present, our long-term compensation
consists primarily of stock options. Our option grants are designed to align management’s performance objectives with the
interests of our shareholders. Our Board of Directors grants options to key executives in order to enable them to participate in
the long-term appreciation of our shareholder value, while personally feeling the impact of any business setbacks, whether Company-specific
or industry based. We have not adopted stock ownership guidelines, and, other than for Mr. Leonhardt, our equity benefit plans
have provided the principal method for our executive officers to acquire equity or equity-linked interests in our company.



Since inception, we have granted equity awards to our executive
officers through our Officers and Employees Stock Option Plan, which was adopted by our Board of Directors and shareholders to
permit the grant of stock options to our officers and employees. The initial option grant made to each executive upon joining us
is primarily based on competitive conditions applicable to the executive’s specific position. In addition, the Compensation
Committee considers the number of options owned by other executives in comparable positions within our company and has established
stock option targets for specified categories of executives. We believe this strategy is consistent with the approach of other
development stage companies in our industry and, in our Compensation Committee’s view, is appropriate for aligning the interests
of our executives with those of our shareholders over the long term.



56

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We do not have any program, plan or obligation that requires us
to grant equity compensation on specified dates and we have not made equity grants in connection with the release or withholding
of material non-public information. Authority to make equity grants to executive officers rests with our Board of Directors, although
our Board of Directors does consider the recommendations of our Compensation Committee and Chief Executive Officer for officers
other than himself.



In 2010, we made stock option grants to two of our named executive
officers. In 2009, we did not make any stock option grants to our named executive officers.

Other Compensation.We maintain broad-based benefits
that are provided to full-time employees, including health insurance, life and disability insurance, dental insurance and vision
insurance



Compensation Committee Report



The Compensation Committee has reviewed and discussed the Compensation
Discussion & Analysis set forth above with management and, based upon such review and discussion, the Compensation Committee
has recommended to the Board of Directors that the Compensation Discussion & Analysis be included in this report.



Summary Compensation Table



The following table sets forth, for the fiscal years ended December 31,
2010, December 31, 2009, and 2008, the aggregate compensation awarded to, earned by or paid to our Chief Executive Officer,
our Chief Financial Officer, and the Named Executive Officers.





57

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|                                                            |  |                                | Annual Compensation | Long-Term Compensation Awards           |  |                       |  |                                 
|----------------------------------------------------------- |  | ------------------------------ | ------------------- | --------------------------------------- |  | --------------------- |  | --------------------------------
|Name and Principal Position                                 |  | Year                           |                     | Salary
    ($)                          |  | Bonus
        ($)     |  | Stock
        Awards
        ($)
|                                                            |  |                                |                     |                                         |  |                       |  |                                 
|Mike Tomas (2)
        President, Chief Executive Officer   |  | 2010                           |                     | 151,666                                 |  | —                     |  | —                               
|                                                            |  |                                |                     |                                         |  |                       |  |                                 
|Howard J. Leonhardt (4)
        Chief Technology Officer    |  | 2010
        2009
        2008 |                     | 104,278
        129,831
        150,000 |  | —
        —
        — |  | —
        —
        —           
|                                                            |  |                                |                     |                                         |  |                       |  |                                 
|William H. Kline (5)                                        |  | 2009                           |                     | 5,000                                   |  | —                     |  | —                               
|Former Chief Financial                                      |  | 2008                           |                     | 130,000                                 |  | —                     |  | —                               
|Officer                                                     |  |                                |                     |                                         |  |                       |  |                                 
|                                                            |  |                                |                     |                                         |  |                       |  |                                 
|Karl E. Groth Ph.D. (7)                                     |  | 2010                           |                     | —                                       |  | —                     |  | —                               
|Former Chairman & Chief Executive Officer                   |  | 2009
        2008              |                     | —
        —                             |  | —
        —           |  | —
        —                     
|                                                            |  |                                |                     |                                         |  |                       |  |                                 
|Peggy A. Farley (8)                                         |  | 2010                           |                     | —                                       |  | —                     |  | —                               
|Former Chief Operating & Financial Officer                  |  | 2009
        2008              |                     | —
        —                             |  | —
        —           |  | —
        —                     
|                                                            |  |                                |                     |                                         |  |                       |  |                                 
|Catherine Sulawske-Guck (9)
        Chief Operating Officer |  | 2010                           |                     | 106,000                                 |  | —                     |  | —                               
|                                                            |  |                                |                     |                                         |  |                       |  |                                 
|Kristen Comella (11)
        Chief Scientific Officer       |  | 2010                           |                     | 105,000                                 |  | —                     |  | —                               
|                                                            |  |                                |                     |                                         |  |                       |  |                                 



58

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|(1)  | Amount reflects the expensed fair value of stock options in 2009, 2008 and 2007, calculated in accordance with SFAS No. 123(R).                                                                                                                                                                                                                                                                                                                   
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(2)  | Mr. Tomas was appointed Chief Executive Officer & President on June 18, 2010.                                                                                                                                                                                                                                                                                                                                                                     
|(3)  | Represents 2010 expensed fair value of options to purchase 500,000 shares of our common stock granted September 18, 2010, with an exercise price of $0.50 per share, vesting in four equal installments on each of June 18, 2011, June 18, 2012, June 18, 2013 and June 18, 2014.                                                                                                                                                                 
|(4)  | Mr. Leonhardt also served as our Chief Executive Officer from July 2008 through August 2009.                                                                                                                                                                                                                                                                                                                                                      
|(5)  | Mr. Kline commenced his employment with us in August 2006 and resigned effective January 2009.                                                                                                                                                                                                                                                                                                                                                    
|(6)  | Represents the 2008 expensed fair value of options to purchase 154,445 shares of our common stock granted August 7, 2006, with an exercise price of $5.67 per share, vesting in four equal installments on each of August 7, 2007, August 7, 2008, August 7, 2009 and August 7, 2010. Vested options expired 90 days subsequent to the date of termination of employment. All unvested options expired upon the date of termination of employment.
|(7)  | Dr. Groth served as Chief Executive Officer from August 2009 until June 2010 without compensation.                                                                                                                                                                                                                                                                                                                                                
|(8)  | Ms. Farley served as Chief Operating and Financial Officer from August 2009 until July 1, 2010 without compensation.                                                                                                                                                                                                                                                                                                                              
|(9)  | Ms. Sulawske-Guck was appointed Chief Operating Officer on July 1, 2010.                                                                                                                                                                                                                                                                                                                                                                          
|(10) | Represents 2010 expensed fair value of options to purchase 22,584 shares of our common stock granted February 10, 2010, with an exercise price of $0.68 per share, vesting in four equal installments on each of February 10, 2011, February 10, 2012, February 10, 2013 and February 10, 2014.                                                                                                                                                   
|(11) | Ms. Comella was appointed Chief Scientific Officer on September 24, 2010.                                                                                                                                                                                                                                                                                                                                                                         



Our Stock Option Plans



1999 Officers and Employees Stock Option Plan and the 1999 Directors
and Consultants Stock Option Plan



In December 1999, our Board of Directors and shareholders adopted
our 1999 Officers and Employees Stock Option Plan, or the Employee Plan, and the 1999 Directors and Consultants Stock Option Plan,
or the Director Plan. The Employee Plan and the Director Plan are collectively referred to herein as the Plans. The Plans are administered
by the Board of Directors and the Compensation Committee. The objectives of the Plans include attracting and retaining key personnel
by encouraging stock ownership in the Company by such persons. In February 2010 the Directors & Consultants Plan was amended
to extend the termination date of the Plan to December 1, 2011.



Options Available for Issuance



There are an aggregate of 3,088,898 shares of common stock
authorized for options grants under the Plans. As of December 31, 2010, an aggregate of 559,835 shares of common stock were available
for grant under the Plans. The options to be delivered under the Plans will be made available, at the discretion of the Board of
Directors, from authorized but unissued shares or outstanding options that expire or are cancelled. If shares covered by an option
cease to be issuable for any reason such number of shares will no longer count against the shares authorized under the Plans and
may again be granted under the Plans.



59

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Material Terms of the Plans



The Employee Plan provides for the grant of options to employees
and officers, and the Director Plan provides for the grant of options to directors, consultants and certain other non-employees.
Only the Employee Plan permits the granting of “incentive stock options” within the meaning of Section 422 of
the Internal Revenue Code of 1986, as amended from time to time, or the Code, and both Plans permit grants of “non-qualified”
options (options that are not incentive stock options). As of the date of this report, all options granted to employees under the
Plans are incentive stock options and all options granted to persons other than employees are “non-qualified” options.



The Compensation Committee recommends and the Board of Directors
determines those individuals who shall receive options, the time period during which the options may be partially or fully exercised,
the number of shares that may be purchased under each option and the option price, as well as other terms in their discretion.
However, in no event shall an option be exercisable after the expiration of 10 years from the date of the grant of the option.
In addition, no person is entitled to be granted options to purchase more than an aggregate of 370,668 shares of our common stock
pursuant to the Plans. Unless otherwise provided in any option agreement, each outstanding option shall become fully exercisable
in the event of a “change in control” (as such term is defined in the Plans). In connection with a liquidation of the
company or any merger, reorganization or similar corporate transaction in which we are not the surviving corporation and the successor
corporation does not assume our outstanding options, the Compensation Committee or Board of Directors may cancel any options that
remain unexercised effective as of the closing of such transaction.



Each option is evidenced by an option agreement. In recommending
the granting of options, the Compensation Committee takes into consideration the contribution the person has made to our success
and such other factors as the Compensation Committee shall determine. The Plans provide for circumstances under which the options
shall terminate.



The option price per share of any option shall be any price determined
by the Board of Directors but shall not be less than the par value per share; provided, that in no event shall the option price
per share of any incentive stock option be less than the “Fair Market Value” (as determined under the Plans) of the
shares underlying such option on the date the option is granted.



Bioheart Omnibus Equity Compensation PlanIn July 2008,
the Board of Directors approved, subject to shareholder approval, the establishment of the Bioheart Omnibus Equity Compensation
Plan (the “Omnibus Plan”). The establishment of the Omnibus Plan was approved by the Company’s shareholders at
the Annual Meeting of Shareholders held on July 30, 2008. Pursuant to the Omnibus Plan, the Company may grant restricted stock,
incentive stock options, non-statutory stock options, stock appreciation rights, deferred stock, stock awards, performance shares,
and other stock-based awards consisting of cash, restricted stock or unrestricted stock in various combinations to the Company’s
employees, directors and consultants. 5,000,000 shares of common stock have been reserved for issuance under the Omnibus Plan.
As of December 31, 2010, an option to purchase 500,000 shares of our common stock has been issued under the Omnibus Plan.



Outstanding Equity Awards at Fiscal Year End



The following table sets forth outstanding equity awards held by
our Named Executive Officers as of December 31, 2010.

|                        |                                  |  |                   |  |                   |  |           
|----------------------- | -------------------------------- |  | ----------------- |  | ----------------- |  | ----------
|                        | Number of Securities Underlying  |  | Option            |  |                  
|                        | Unexercised Options and Warrants |  | Exercise Price    |  | Option Expiration
|Name                    | Exercisable (#)                  |  | Unexercisable (#) |  | ($/per share)     |  | Date      
|Howard J. Leonhardt     | 23,167                           |  | —                 |  | 5.67              |  | 12/31/2011
|                        | 3,212                            |  | —                 |  | 5.67              |  | 12/31/2015
|Mike Tomas              | —                                |  | 500,000           |  | 0.50              |  | 06/18/2020
|                        |                                  |  |                   |  |                   |  |           
|Catherine Sulawske-Guck | 15,444                           |  | —                 |  | 0.71              |  | 01/10/2014
|                        | 309                              |  | —                 |  | 0.71              |  | 12/30/2015
|                        | 9,267                            |  | —                 |  | 0.71              |  | 01/01/2017
|                        | 17,228                           |  | —                 |  | 0.71              |  | 01/08/2019
|                        | 1,292                            |  | 3,876             |  | 0.74              |  | 03/13/2019
|                        | 10,000                           |  | 30,000            |  | 0.85              |  | 05/28/2019
|                        | 5,646                            |  | 16,938            |  | 0.68              |  | 02/10/2020
|                        |                                  |  |                   |  |                   |  |           
|Kristin Comella         | 12,356                           |  | —                 |  | 0.71              |  | 08/31/2014
|                        | 24,712                           |  | —                 |  | 0.71              |  | 02/19/2005
|                        | 618                              |  | —                 |  | 0.71              |  | 12/30/2015
|                        | 9,267                            |  | —                 |  | 0.71              |  | 04/18/2016
|                        | 6,178                            |  | —                 |  | 0.71              |  | 01/01/2017
|                        | 4,875                            |  | 1,625             |  | 0.71              |  | 10/16/2017
|                        | 19,700                           |  | —                 |  | 0.71              |  | 01/09/2019
|                        | 739                              |  | 2,216             |  | 0.74              |  | 03/13/2019
|                        | 7,500                            |  | 22,500            |  | 0.85              |  | 05/28/2019



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Option Exercises



In March 2009, one of our Named Executive Officers exercised an
option to purchase 40,000 shares of our common stock at an exercise price of $0.80.



In 2010, 2008 and 2007, none of our Named Executive Officers exercised
any options to purchase shares of our common stock.



Pension Benefits



We do not have any plan that provides for payments or other benefits
at, following, or in connection with the retirement of any of our employees.



Nonqualified Defined Contribution and Other Nonqualified Deferred
Compensation Plans



We do not have any defined contribution or other plan that provides
for the deferral of compensation on a basis that is not tax-qualified.



Potential Payments upon Termination or Change in Control



We do not have any contract, agreement, plan or arrangement that
provides for any payment to any of our Named Executive Officers at, following, or in connection with a termination of the employment
of such Named Executive Officer, a change in control of the Company or a change in such Named Executive Officer’s responsibilities.



Director Compensation



As of December 31, 2010 we had six non-employee directors that qualified
for compensation. Our non-employee directors do not receive cash compensation for their services as directors. However, it is generally
our policy to annually grant each non-employee director options to purchase shares of our common stock provided that he or she
has served as a member of our Board of Directors for at least six months and one day of the twelve month period



61

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immediately preceding the date of grant. In addition, we reimburse
non-employee directors for actual out-of-pocket expenses incurred. In consideration of the extraordinary time and effort dedicated
to the Company by the members of the Board of Directors throughout the IPO process and in consideration of the lack of stock option
grants to directors in the fiscal year ended December 31, 2007 (notwithstanding the Company’s policy of providing grants
each September), the Company, effective as of the close of business immediately after the Company’s Form S-8 Registration
Statement became effective in 2008, granted to each director an option to purchase 35,000 shares of common stock. We did not grant
any stock options to our non-employee directors in 2009. Accordingly, in the fiscal year ended December 31, 2009, no compensation
was awarded to our non-employee directors. In 2010, we granted to each non-employee director an option to purchase 10,000 shares
of common stock for each quarter served during the 2009 fiscal year.



Compensation Committee Interlocks and Insider Participation



None of our executive officers serves, nor served in 2010, 2009
or 2008, on the board of directors or compensation committee of a company with an executive officer serving on our Board of Directors
or Compensation Committee.



In August 2007, we entered into a research agreement with an
affiliate of Ms. Farley and Dr. Groth, both former directors of the Company, pursuant to which we agreed to pay an aggregate
fee of $150,000 for the research services contracted for. We paid $75,000 of this fee in 2007, $10,000 in 2008, and the balancewas paid in 2009.



On February 2, 2010, Bioheart, Inc. (the “Company”)
and the Ascent Medical Product Development Centre Inc. (“Ascent”) entered into an agreement whereby Ascent would oversee
the conduct of a Phase I Clinical Trial for the Company, namely the REGEN Trial. Ascent is owned by the Ascent Medical Technology
Fund II, LP, (the “Fund”). The Fund’s General Partner is Ascent Private Equity II, LLC, which is controlled by
Karl E. Groth, Ph.D. and Peggy A. Farley, who were, respectively, the then current Chief Executive Officer and the Chief Operating
Officer of the Company. As of December 31, 2010 a total of 837,212 shares of the Company’s common stock and warrants to purchase
158,856 were issued. Approvals for the REGEN Trial were not provided to the Company by Ascent and patient enrollment in the never
began. The Company has suspended, indefinitely, all activity with Ascent Medical respective to the REGEN Trial. On December 16,
2010, the Company received a written notice from Ascent terminating the Master Services Agreement. The Company disputes that Ascent
has grounds for terminating the Master Services Agreement or is entitled to further compensation thereunder. However, as the REGEN
Trial approvals were not provided to the Company and all activity with Ascent Medical respective to the trial has been suspended
indefinitely, the termination of the Master Services Agreement is not material to the Company.

No person who served on our Compensation Committee in 2010 had any
relationship requiring disclosure under Item 404 of Regulation S-K.

|         |  |                                                                                               
|-------- |  | ----------------------------------------------------------------------------------------------
|Item 12. |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters



The following table sets forth the beneficial ownership(1)
of our common stock as of March 15, 2011, for each of our greater than 5% shareholders, directors, named executive officers that
continue to serve as executive officers of Bioheart and by all of our directors and named executive officers as a group. Unless
otherwise indicated, the address of each of the individuals and entities named below is: c/o Bioheart, Inc., 13794 NW 4th Street,
Suite 212, Sunrise, Florida 33325.



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|Name and Address of Beneficial Owner                 |  | Amount and Nature of Beneficial Ownership |  | Percent of Class
|---------------------------------------------------- |  | ----------------------------------------- |  | ----------------
|                                                     |  |                                           |  |                 
|Mike Tomas, President, CEO and Director              |  | 44,738(3)                                 |  | *               
|                                                     |  |                                           |  |                 
|Howard Leonhardt, Chief Technology Officer, Director |  | 9,343,009(4)                              |  | 13.2            
|                                                     |  |                                           |  |                 
|Catherine Sulawske-Guck, Chief Operating Officer     |  | 99,763 (5)                                |  | *               
|                                                     |  |                                           |  |                 
|Kristin Comella, Chief Scientific Officer            |  | 86,684 (6)                                |  | *               
|                                                     |  |                                           |  |                 
|William P. Murphy, Director                          |  | 6,696,356(7)                              |  | 9.5             
|                                                     |  |                                           |  |                 
|Bruce Carson, Director                               |  | 419,413(8)                                |  | *               
|                                                     |  |                                           |  |                 
|Richard T. Spencer, III, Director                    |  | 306,673(9)                                |  | *               
|                                                     |  |                                           |  |                 
|Charles A. Hart, Director                            |  | 1,811,340(10)                             |  | 2.6             
|                                                     |  |                                           |  |                 
|Sam Ahn, Director                                    |  | 2,468,701(11)                             |  | 3.5             
|                                                     |  |                                           |  |                 
|Mark P. Borman, Director                             |  | 50,485(12)                                |  | *               
|                                                     |  |                                           |  |                 
|BlueCrest Venture Finance Master Fund Ltd.           |  | 3,137,838(13)                             |  | 4.4             
|                                                     |  |                                           |  |                 
|William P. Murphy Jr. 2000 Revocable Trust           |  | 3,266,653 (14)                            |  | 4.6             
|                                                     |  |                                           |  |                 
|Beverly P. Murphy 2000 Revocable Trust               |  | 3,266,666(15)                             |  | 4.6             
|                                                     |  |                                           |  |                 
|Beverly P. Murphy                                    |  | 6,533,319(16)                             |  | 9.2             
|                                                     |  |                                           |  |                 
|Brenda Leonhardt                                     |  | 4,991,311(17)                             |  | 7.0             
|                                                     |  |                                           |  |                 
|Ariel Quiros, Director                               |  | 25,200,917(18)                            |  | 35.6            
|                                                     |  |                                           |  |                 
|AncBio Holdings, Inc.                                |  | 13,333,330(19)                            |  | 18.8            
|                                                     |  |                                           |  |                 
|Bioheart Florida, LLC                                |  | 11,853,337(20)                            |  | 16.7            
|                                                     |  |                                           |  |                 
|All officers and directors as a group (10 persons)   |  | 43,087,885                                |  | 65.7            





*   Less than 1%



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|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | A person is deemed to be the beneficial owner of securities that can be acquired by such person within 60 days from March 1, 2011 upon exercise of options, warrants and convertible securities. Each beneficial owner’s percentage ownership is determined by assuming that options, warrants and convertible securities that are held by such person (but not those held by any other person) and that are exercisable within 60 days from March 1, 2011 have been exercised.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(2) | Applicable percentage ownership is based on 64,239,496 shares of common stock outstanding (or entitled to be acquired) as of March 1, 2011.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(3) | Shares are held by The Astri Group over which Mr. Tomas has shared voting and investment power.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(4) | Shares are directly and jointly held by Mr. Leonhardt and his former spouse. Includes (i) 26,379 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $5.67 per share, (ii) 407,738 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $7.69 per share and (iii) an aggregate of 1,030,989 shares issuable upon the exercise of presently exercisable warrants at an average exercise price of $0.85.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(5) | Shares are jointly owned by Ms. Sulawske-Guck and her spouse. Includes (i) 42,248 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $0.71 per share (ii) 1,292 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $0.74 per share, (iii) 10,000 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $0.85 per share (iv) 5,646 shares issuable within 60 days upon the exercise of presently exercisable stock options at an exercise price of $0.68 per share and (v) 1,292 shares issuable within 60 days upon the exercise of presently exercisable stock options at an exercise price of $0.74 per share.                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(6) | Includes (i) 77,706 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $0.71 per share (ii) 739 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $0.74 per share (iii) 7,500 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $0.85 per share and (iv) 739 shares issuable within 60 days upon the exercise of presently exercisable stock options at an exercise price of $0.74 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(7) | Shares are directly owned by trusts controlled by Dr. Murphy and his spouse. Includes (i) 12,356 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $5.67 per share, (ii) 6,178 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $7.69 per share, (iii) 35,000 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $5.25 per share, (iv) 40,000 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $0.68 per share and (iv) 69,503 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $7.69 per share, (v) 42,255 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.85 per share, and (vi) 27,000 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.70 per share.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(8) | Consists of (i) 129,734 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $5.67 per share, (ii) 6,178 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $7.69 per share, (iii) 35,000 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $5.25 per share and (iv) 40,000 shares issuable upon exercise of presently exercisable stock options at an exercise price of $0.68.                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|(9) | Includes (i) 67,957 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $5.67 per share, (ii) 6,178 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $7.69 per share, (iii) 35,000 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $5.25 per share, (iv) 40,000 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $0.68 per share and (v) 139,003 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $7.69 per share.                                                                                                                                                                                                                                                                                                                                  



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|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|---- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(10) | Includes (i) 20,000 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $0.68 per share, (ii) 50,000 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $0.92 per share, (iii) 17,280 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $2.60 per share, (iv) 183,672 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.59 per share, (vi) 26,316 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.68 per share, (vii) 22,059 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.82 per share, and (ix) 108,963 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.64 per share.
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(11) | Includes (i) 67,956 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $5.67 per share, (ii) 6,178 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $7.69 per share, (iii) 35,000 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $5.25 per share, (iv) 34,752 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $7.69 per share and (v) 497,373 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.65 per share.                                                                                                                                                                                                                                                  
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(12) | Includes (i) 20,000 shares issuable upon the exercise of presently exercisable stock options at an exercise price of $0.68 per share and (ii) 7,035 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.70 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(13) | Consists of (i) 65,030 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $7.69 per share, (ii) 1,315,542 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.53 per share, (iii) 909,090 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.66 per share and (iv) 848,176 shares issuable upon exercise of presently exercisable warrants at an exercise price of $0.7074. The natural persons who have voting or investment control over the shares is actually held by BlueCrest Capital Management Guernsey LP, as sub-advisor to BlueCrest Capital Management LLP, which is investment manager of BlueCrest Venture Finance Master Fund Limited.                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(14) | Shares are held by William P Murphy Jr. 2000 Revocable Trust over which Dr. Murphy has shared voting and investment power. Includes (i) 21,126 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.85 per share, (ii) 13,500 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.70 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(15) | Shares are held by Beverly P Murphy 2000 Revocable Trust over which Dr. Murphy has shared voting and investment power. Includes (i) 21,129 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.85 per share, (ii) 13,500 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.70 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(16) | Shares are held by the Beverly P Murphy 2000 Revocable Trust & the William P Murphy Jr. 2000 Revocable Trust over which Mrs. Murphy has shared voting and investment power. Includes (i) 42,255 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.85 per share, (ii) 27,000 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $0.70 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(17) | Shares are jointly held by Mrs. Leonhardt and her former spouse. Includes 407,738 shares issuable upon the exercise of presently exercisable warrants at an exercise price of $7.69 per share.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|(18) | Shares are held or entitled to be acquired by AnCBio Holdings, Inc. and Bioheart Florida, LLC over which Mr. Quiros has shared voting or investment power.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



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|     |                                                                                                                                 
|---- | --------------------------------------------------------------------------------------------------------------------------------
|(19) | Shares are held or entitled to be acquired by AnCBio Holdings, Inc. over which Mr. Quiros has shared voting or investment power.
|     |                                                                                                                                 
|(20) | Shares are held or entitled to be acquired by Bioheart Florida, LLC over which Mr. Quiros has shared voting or investment power.



Item 13. Certain Relationships and Related Transactions
and Director Independence

Certain Relationships and Related Party Transactions



Bank of America Note Payable



On June 1,
2007, the Company entered into a loan agreement with Bank of America, N.A. for an eight month, $5.0 million term loan, to
be used for working capital purposes. The loan bears interest at the annual rate of the prime rate plus 1.5%. The prime rate was
3.25% and 7.25% at December 31, 2008 and 2007, respectively. As consideration for the loan, the Company paid Bank of America a
fee of $100,000. Effective as of January 31, 2008, the maturity date of the loan was extended until June 1, 2008. As consideration
for this extension of the maturity date of the loan, the Company paid Bank of America a fee of $50,000. Effective as of June 1,
2008, Bank of America agreed to extend the maturity date of the loan until January 5, 2009. As consideration for this extension
of the maturity date of the loan, the Company paid Bank of America a fee of $75,000. Effective January 5, 2009, Bank of America
agreed to extend the maturity date of the loan until July 6, 2009. As consideration for this extension of the maturity date of
the loan, the Company paid Bank of America a fee of $50,000. Effective July 6, 2009, Bank of America agreed to extend the maturity
of the loan until January 5, 2010. As consideration for this extension of the maturity date of the loan, the Company paid Bank
of America a fee of $25,000. Effective January 5, 2010, Bank of America agreed to extend the maturity of the loan until July 6,
2010. As consideration for this extension of the maturity date of the loan, the Company paid Bank of America a fee of $25,000.
Under the terms of the loan, Bank of America is entitled to receive a semi-annual payment of interest and all outstanding principal
and accrued interest by the maturity date.

The Company has
provided no collateral for the loan. On June 1, 2007, for the Company’s benefit, the Company’s Chief Science and Technology
Officer and his former spouse, certain other members of the Company’s Board of Directors and one of the Company’s shareholders
(the “Guarantors”) provided collateral to guarantee the loan. Except for a $1.1 million personal guaranty (backed
by collateral) provided by the Company’s Chief Science and Technology Officer and his former spouse, these guarantees are
limited to the collateral each provided to the lender.

The Company and
Bank of America have agreed with BlueCrest Capital Finance, L.P., the lender of the BlueCrest Loan (defined below), that the Company
will not individually make any payments due under the Bank of America loan while the BlueCrest Loan is outstanding. For the Company’s
benefit, the Guarantors agreed to provide Bank of America in the aggregate up to $5.5 million of funds and/or securities to make
these payments.

The Company has
agreed to reimburse the Guarantors with interest at an annual rate of the prime rate plus 5.0% for any and all payments made by
them under the Bank of America loan as well as to pay them certain cash fees in connection with their provision of collateral to
guarantee the loan. Upon entering into the loan agreement, the Company issued to each Guarantor warrants to purchase 3,250 shares
of common stock at an exercise price of $7.69 per share for each $100,000 of principal
amount of the loan guaranteed by such Guarantor. The warrants have a ten-year term and became exercisable one year following the
date the warrants were issued. Warrants to purchase an aggregate of 216,095 shares of common stock were issued to the Guarantors.
These warrants had an aggregate fair value of $1,437,638, which amount was accounted for as additional paid in capital and reflected
as a component of deferred loan costs and amortized as interest expense over the initial term of the loan using the effective interest
method. As discussed below, certain of these Guarantors were replaced in September 2007. The unamortized fair value of the warrants
issued to the Guarantors that were replaced, which was previously reflected as a component of deferred loan costs, was recorded
as interest expense in September 2007.

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In September 2007,
a member of the Company’s Board of Directors and two of the Company’s shareholders agreed to provide collateral valued
at $750,000, $600,000 and $500,000, respectively, to secure the loan. The collateral provided by these new Guarantors fully replaced
the collateral originally provided by one of the members of the Company’s Board of Directors and partially replaced the collateral
originally provided by another member of the Company’s Board of Directors whose collateral now secures $400,000 of the loan.
In consideration for providing the collateral, the Company issued to the new Guarantors warrants to purchase 3,250 shares of common
stock at an exercise price of $7.69 per share for each $100,000 of principal amount of the loan guaranteed by such new Guarantor.
The warrants have a ten-year term and became exercisable one year following the date the warrants were issued. Warrants to purchase
an aggregate of 60,118 shares of the Company’s common stock were issued to the new Guarantors. These warrants had an aggregate
fair value of $380,482, which was accounted for as additional paid in capital and reflected as a component of deferred loan costs
and amortized as interest expense over the initial term of the loan using the effective interest method.

In accordance with
the provisions of the warrants issued to the Guarantors, the aggregate number of shares of common stock underlying such warrants
increased on September 30, 2007 as the Bank of America loan remained outstanding at that date. The additional 38,861 warrant shares
had an aggregate fair value of $244,463. The portion of this amount attributed to the Guarantors that were replaced in September
2007 was accounted for as additional paid in capital and immediately recorded as interest expense with the remainder accounted
for as additional paid in capital and reflected as a component of deferred loan costs and amortized as interest expense over the
initial term of the loan using the effective interest method.

In October 2007,
the Company's Chief Science and Technology Officer and his former spouse agreed to provide an additional $2.2 million limited personal
guarantee of the loan and pledged securities accounts to backup this limited personal guarantee. The additional collateral provided
by the Company's Chief Science and Technology Officer and his former spouse fully replaced the collateral provided by one of the
original Guarantors. The Company's Chief Science and Technology Officer and his former spouse by then had personally guaranteed
an aggregate of $3.3 million of the loan. The Company's agreement with the Company's Chief Science and Technology Officer and his
former spouse with respect to the additional collateral is substantially similar to the Company's agreement with them in connection
with the $1.1 million personal guarantee they originally provided in June 2007. In consideration for providing the collateral,
the Company issued to the Company's Chief Science and Technology Officer and his former spouse, a warrant to purchase 81,547 shares
of the Company's common stock at an exercise price of $7.69 per share. The warrant has a ten-year term and became exercisable one
year following the date the warrant was issued. The warrant had a fair value of $516,193, which was accounted for as additional
paid in capital and reflected as a component of deferred loan costs and amortized as interest expense over the initial term of
the loan using the effective interest method.

As a result of
this replacement of the collateral originally provided by one of the original Guarantors in October 2007, the unamortized fair
value of the warrant to purchase 81,548 shares of the Company's common stock at an exercise price of $7.69 per share issued to
that Guarantor was recorded as interest expense in October 2007. In October 2007, the Company cancelled the warrant previously
issued to such original Guarantor, which warrant included the adjustment provisions discussed above, and, in exchange, issued to
them a warrant to purchase 101,934 shares of the Company's common stock at an exercise price of $7.69 per share, which new warrant
does not contain the adjustment provisions discussed above. The additional 20,386 warrant shares had an aggregate fair value of
$128,228, which was accounted for as additional paid in capital and immediately recorded as interest expense.

In accordance with
the provisions of the warrants issued to the Guarantors, the aggregate number of shares of common stock underlying such warrants
increased on June 1, 2008 as the Bank of America loan remained outstanding at that date. The additional 78,773 warrant shares had
an aggregate fair value of $168,387. The portion of this amount attributed to the Guarantors that were replaced in September 2007
was accounted for as additional paid in capital and immediately recorded as interest expense with the remainder accounted for as
additional paid in capital and reflected as a component of deferred loan costs to be amortized as interest expense over the term
of the loan using the effective interest method. In the event that as of the second anniversary and third anniversary of the closing
date of the loan, the Company has not reimbursed the Guarantors in full for payments made by them in connection with the loan,
the number of shares subject to the warrants will further increase.

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The amount of interest
expense on the principal amount of the loan for the three months ended March 31, 2010 and 2008 totaled approximately $23,700 and
$68,000, respectively. Fees and interest earned by the Guarantors, which are recorded as interest expense, for the three months
ended March 31, 2010 and 2008 totaled approximately $140,000 and $88,000, respectively. Interest due on the principal amount of
the loan has been paid by the Guarantors. As of March 31, 2010 and December 31, 2009, that amount totaled approximately $445,000
and $692,000, respectively, and was included in accrued expenses at those dates.

In March 2009, the Company’s Chief Science
and Technology Officer and his former spouse repaid $3.0 million of principal and a pro rata portion of accrued interest on behalf
of the Company. The Company in 2009 owed this $3.0 million to the Company's Chief Science and Technology Officer and his former
spouse. This liability was reflected on the Company’s consolidated balance sheet on a separate line titled “Subordinated
related party loan.” This amount continued to accrue interest at an annual rate of the prime rate plus 5.0%. During the year
ended December 31, 2010, $1,500,000 was converted to common stock, the remaining $1,500,000 is outstanding as of December 31, 2010.



In February 2010 the Company’s
Chief Science and Technology Officer and his spouse filed divorce papers. Pursuant to the divorce, their jointly owned shares and
their ownership of the loan to Bioheart which they hold as a result of their payment of $3 million of principal and related interest
to Bank of America on behalf of Bioheart, would be divided equally between them. As a result, the Chief Science and Technology
Officer’s common shares were then reduced to 2,513,840 and his percentage shareholding of the Company to 13.8%, with his
former spouse assuming ownership of the same number of common shares and percentage shareholding of the Company. Their commonly
owned loan and related interest, as of March 29, 2010, $4,140,201, was been equally split. The Chief Science and Technology Officer
on March 29, 2010, elected to convert his portion of the loan and related interest to restricted common stock and warrants. As
a result, Howard Leonhardt, the Company’s Chief Science and Technology Officer, as of March 31, 2010, owns approximately
22 % of the Company.

In March of 2010,
one of the Guarantors paid directly to Bank of America the $666,600 of principal that he had been guaranteeing, and a pro rata
portion of accrued interest on behalf of the Company. That Guarantor agreed to accept from the Company the equivalent of his payment
to Bank of America in restricted common stock and warrants. With his acceptance of the restricted common stock and warrants, the
former Guarantor owned, at March 31, 2010, approximately 8% of the Company. Thus, the outstanding obligation to Bank of America
was reduced to $1.3 million plus interest.

On July 16, 2010,
the Company received a written notice of an event of default under the Bank of America Loan, by reason of the Company’s failure
to pay the loan in full at maturity on July 5, 2010 and failure to pay the extension fee of $30,000 by June 28, 2010, as required
by the loan documents, as amended. The Company is engaged in discussions with the 3rd parties who have provided the
loan collateral regarding a restructuring of the indebtedness in the event Bank of America seeks recourse against the collateral
and those 3rd parties, by reason of such action, become the successors to Bank of Americas rights and interests under
the Bank of America Loan.

As of September 30, 2010,
the outstanding obligation to Bank of America was approximately $1.3 million plus interest. On October 25, 2010 the Company entered
into a Loan Agreement with Seaside National Bank and Trust for a $980,000 loan at 4.25% that was used to refinance the Company’s
loan with Bank of America. In addition,a member of the Company’s Board of Directorswhom
was also one of the guarantors of the Bank of America loan paid down the remaining
debt of $367,244.



Other



In 2010, the Company entered into a research
agreement with an entity controlled by Ms. Farley and Dr. Groth, both former directors of the Company, with funding for
the project emanating from venture capital funds controlled by the same two people. In connection with its funding of the REGEN
trial, Ascent Medical Technology Fund II, LP, the Ascent Medical Technology Fund, LP, and Ascent Medical Product Development Centre
Inc. were to be issued a total of 1,044,451 shares of the Company’s common stock, and warrants to purchase 90,861 shares
at exercise prices





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20% above the price at which the related common was to be issued. As of December 31, 2010 a total of 837,212
shares of the Company’s common stock and warrants to purchase 158,856 were issued. Approvals for the REGEN Trial were not
provided to the Company by Ascent and patient enrollment in the REGEN Trial never began. The Company has suspended, indefinitely,
all activity with Ascent Medical respective to the REGEN trial. On December 16, 2010, the Company received a written notice from
Ascent terminating the Master Services Agreement. The Company disputes that Ascent has grounds for terminating the Master Services
Agreement or is entitled to further compensation thereunder. However, as the REGEN Trial approvals were not provided to the Company
and all activity with Ascent Medical respective to the REGEN Trial has been suspended indefinitely, the termination of the Master
Services Agreement is not material to the Company.



In
February 2010, the Company sold to four members of the Board of Directors, in a private placement, an aggregate of 121,450
shares of the Company’s common stock and warrants to purchase 36,435 shares of the Company’s common stock for aggregate
gross cash proceeds of $70,441.



In
February 2010 the Company’s Chief Technology Officer and his spouse filed for divorce. Pursuant to the divorce, their jointly
owned shares and their ownership of the loan to Bioheart which they hold as a result of their payment of $3 million of principal
and related interest to Bank of America on behalf of Bioheart, would be divided equally between them. As a result, the Chief Technology
Officer’s common shares were then reduced to 2,513,840 and his percentage shareholding of the Company to 13.8%, with his
former spouse assuming ownership of the same number of common shares and percentage shareholding of the Company. Their commonly
owned loan and related interest, as of March 29, 2010, $4,140,201, has been equally split. The Chief Technology Officer on March
29, 2010, elected to convert his portion of the loan and related interest to restricted common stock and warrants. As a result,
Howard Leonhardt, the Company’s Chief Technology Officer, beneficially owns approximately 13% of the Company as of
March 15, 2011.



During the twelve month period through December
2010 three Board Members and two shareholders advanced the Company an aggregate of $1,541,957. As of December 31, 2010 the Company
has converted an aggregate of $1,118,957 to the Company’s common stock. The Company has executed promissory notes for the
remaining $423,000.



Guarantees Provided By Mr. Leonhardt



In addition to the guarantee arrangement described
above, from time to time, Mr. Leonhardt has, without compensation, personally guaranteed certain of our financial obligations.
As of the date of this report, he is the guarantor of our obligations under the lease for our facilities in Sunrise, Florida. He
is also the guarantor of our obligations under corporate credit cards issued by Bank of America. Mr. Leonhardt does not receive
any compensation for providing these guarantee services.



Mr. Leonhardt has guaranteed Dr. Murphy,
a director, the repayment of his initial $200,000 investment in the Company.



Placement Fee



None.



Research Fee



In August 2007, we also entered into a
research agreement with Ascent Medical Product Development Centre, Inc., an affiliate of Ms. Farley and Dr. Groth, pursuant
to which we agreed to pay an aggregate fee of $150,000 for the research services contracted for. We paid $75,000 of this fee in
2007, $10,000 in 2008, and the balance was paid in 2009. {credit for $10k in expenses & balance of $65k was credited for issuance
of shares}.



On February 2, 2010, Bioheart, Inc. (the “Company”)
and the Ascent Medical Product Development Centre Inc. (“Ascent”) entered into an agreement whereby Ascent would oversee
the conduct of a Phase I Clinical Trial for the

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Company, namely the REGEN trial. Ascent is owned by the Ascent Medical Technology
Fund II, LP, (the “Fund”). The Fund’s General Partner is Ascent Private Equity II, LLC, which is controlled by
Karl E. Groth, Ph.D. and Peggy A. Farley, who were, respectively, the Chief Executive Officer and the Chief Operating Officer of
the Company. Dr. Groth and Ms. Farley have since resigned as Officers and Directors of the Company. Approvals for the REGEN Trial
were not provided to the Company by Ascent and patient enrollment in the REGEN Trial never began. The Company has suspended, indefinitely,
all activity with Ascent Medical respective to the REGEN trial. On December 16, 2010, the Company received a written notice from
Ascent terminating the Master Services Agreement. The Company disputes that Ascent has grounds for terminating the Master Services
Agreement or is entitled to further compensation thereunder. However, as the REGEN Trial approvals were not provided to the Company
and all activity with Ascent Medical respective to the REGEN Trial has been suspended indefinitely, the termination of the Master
Services Agreement is not material to the Company.



Review of Related Party Transactions



The Board of Directors has delegated to the
Audit Committee the responsibility to review and approve all transactions or series of transactions in which we or a subsidiary
is a participant, the amount involved exceeds $120,000 and a “Related Person” (as defined in Item 404 of Regulation
S-K”) has a direct or indirect material interest. Transactions that fall within this definition will be referred to the Audit
Committee for approval, ratification or other action. Based on its consideration of all of the relevant facts and circumstances,
the Audit Committee will decide whether or not to approve such transaction and will approve only those transactions that are in
the best interests of the Company.



Board Committee Independence



Our Board of Directors has three committees:
the Audit Committee, the Compensation Committee and the Governance & Nominating Committee.



Audit Committee



The members of our Audit Committee from January 1,
2010 through February 20, 2010 included Ms. Farley, who served as Chairperson of the Audit Committee, Dr. Groth and Mr. Borman.
On February 10, 2010 Mr. Borman replaced Ms. Farley Chairperson of the Committee. Dr. Murphy and Ms. Jones were both appointed
to the Audit Committee to replace Dr. Groth and Ms. Farley. On June 18, 2010 Ms. Jones resigned from the Board of Directors and
the Audit Committee. On November 16, 2010 Mr. Hart was appointed to the Committee. As of December 31, 2010 our Audit Committee
consists of Mr. Borman as Chairperson of the Audit Committee, Dr. Murphy and Mr. Hart. The Board of Directors has determined
that Mr. Borman and Mr. Hart are independent pursuant to the NASDAQ Rules and Rule 10A-3 under the Exchange Act.



Compensation Committee



The members of our Compensation Committee from
January 1, 2010 through February 10, 2010 included Bruce Carson who served as Chairperson of the Compensation Committee, Dr.
Groth and Mr. Hart. On February 10, 2010 Ms. Farley replaced Dr. Groth. On August 13, 2010 Ms. Farley resigned from the Board
of Directors and the Compensation Committee. .On November 16, 2010 Mr. Spencer was appointed to the Compensation Committee. As
of December 31, 2010 the members of our Compensation Committee include Mr. Carson, who serves as Chairperson



of the Compensation Committee, Mr. Spencer, and Mr. Hart. The Board
of Directors has determined that Mr. Carson and Mr. Hart are independent pursuant to the NASDAQ Rules and Rule 10A-3 under
the Exchange Act.



Governance & Nominating Committee



The members of our Governance & Nominating
Committee from January 1, 2010 through February 10, 2010 included Dr. Groth who served as Chairperson, Mr. Carson and Ms.
Farley.. On February 10, 2010 Ms. Jones replaced Dr. Groth as Chairperson of the Governance & Nominating Committee and Mr.
Spencer and Mr. Borman replaced Mr. Carson and Ms. Farley. On June 18, 2010 Ms. Jones resigned from th Board of Directors and the
Audit



70

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Committee. On November 16, 2010 Mr. Spencer was appointed as Chairperson of the Governance & Nominating Committee and
Dr. Ahn was appointed to the Committee. As of December 31, 2010 the members of our Governance and Nominating Committee include
Mr. Spencer, Mr. Borman and Dr. Ahn. The Board of Directors has determined that Mr. Borman is independent pursuant to the NASDAQ
Marketplace Rules.



Item 14. Principal Accounting Fees and Services

Independent Registered Public Accounting Firm Fees



On January 13, 2009, the Chairman of the Audit Committee
received a letter from Grant Thornton LLP (“Grant Thornton”) notifying the Company of Grant Thornton’s resignation
as the Company’s independent registered public accounting firm. On February 12, 2009, the Company engaged Jewett Schwartz
Wolfe & Associates to serve as the Company’s independent registered public accounting firm. Aggregate fees billed to
us for the fiscal years ended December 31, 2010 and 2009 by our independent registered public accounting firms are as follows:



|Types of Fees      |  | 2010 |        | 2009
|------------------ |  | ---- | ------ | ----
|Audit Fees (1)     |  | $    | 73,000 |     
|Audit Related Fees |  |      | —      |     
|Tax Fees           |  |      | —      |     
|All Other Fees     |  |      | —      |     



|(1) |  | This category also includes advice on audit and accounting matters that arose during, or as a result of, the audit of the annual consolidated financial statements or the reviews of the interim financial statements.
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  |                                                                                                                                                                                                                       

See Item 9 “Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure” contained in our Annual Report on Form 10-K for the fiscal year ended December 31,
2008, filed with the SEC on April 15, 2009, for further discussion.



Audit Committee Pre-Approval Policy



Consistent with policies of the SEC regarding auditor independence,
the Audit Committee has responsibility for the appointment, compensation and oversight of the work of the independent auditor.
As part of this responsibility, the Audit Committee has adopted, and our Board has ratified, an Audit and Non-Audit Services Pre-Approval
Policy pursuant to which the Audit Committee is required to pre-approve the audit and non-audit services performed by our independent
registered public accounting firm in order to assure that these services do not impair the auditor’s independence from us.



Prior to engagement of the independent auditor for the next year’s
audit, the independent auditor and the Audit Committee will review a list of services and related fees expected to be rendered
during that year within each of four categories of services to the Audit Committee for approval:



(i) Audit Services: Audit services include
the annual financial statement audit (including required quarterly reviews), subsidiary audits, equity investment audits and other
procedures required to be performed by the independent auditor to be able to form an opinion on our consolidated financial statements.
Audit Services also include information systems and procedural reviews and testing performed in order to understand and place reliance on the systems of internal control, and consultations relating to
the audit or quarterly review as well as the attestation engagement for the independent auditor’s report on management’s
report on internal controls for financial reporting.



(ii) Audit-Related Services: Audit-related
services are assurance and related services that are reasonably related to the performance of the audit or review of our financial
statements, including due diligence related to potential business acquisitions/dispositions, accounting consultations related to
accounting, financial reporting or disclosure matters not classified as “Audit Services,” assistance with understanding
and implementing new accounting and financial reporting guidance from rulemaking authorities, financial audits of employee benefit
plans, agreed-upon or expanded audit procedures related to accounting and/or billing records required to respond to or







71

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comply with
financial, accounting or regulatory reporting matters and assistance with internal control reporting requirements.



(iii) Tax Services: Tax services include
services such as tax compliance, tax planning and tax advice; however, the Audit Committee will not permit the retention of the
independent registered public accounting firm in connection with a transaction initially recommended by the independent registered
public accounting firm, the sole business purpose of which may be tax avoidance and treatment which may not be supported in the
Internal Revenue Code and related regulations.



(iv) All Other Services: All other services
are those permissible non-audit services that the Audit Committee believes are routine and recurring and would not impair the independence
of the auditor and are consistent with the SEC’s rules on auditor independence.



Prior to engagement, the Audit Committee pre-approves the services
and fees of the independent auditor within each of the above categories. During the year, it may become necessary to engage the
independent auditor for additional services not previously contemplated as part of the engagement. In those instances, the Audit
and Non-Audit Services Pre-Approval Policy requires that the Audit Committee specifically approve the services prior to the independent
auditor’s commencement of those additional services. Under the Audit and Non-Audit Services Pre-Approval Policy, the Audit
Committee may delegate the ability to pre-approve audit and non-audit services to one or more of its members provided the delegate
reports any pre-approval decision to the Audit Committee at its next scheduled meeting. As of the date hereof, the Audit Committee
has not delegated its ability to pre-approve audit services.



All of the 2010 and 2009 fees paid to Jewett Schwartz Wolfe &
Associates described above were pre-approved by the Audit Committee in accordance with the Audit and Non-Audit Services Pre-Approval
Policy.



72

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PART IV



Item 15.	Exhibits, Financial Statement
Schedules



(a)(1) Financial Statements



See Item 8. “Financial
Statements and Supplementary Data” for Financial Statements included with this Annual Report on Form 10-K.



(a)(2) Financial Statement
Schedules



All schedules have been
omitted because the required information is not applicable or the information is included in the consolidated financial statements
or the notes thereto.



(a)(3) Exhibits



|Exhibit No. |  | Exhibit Description                                                                                                                                   
|----------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                                                       
|3.1(6)      |  | Amended and Restated Articles of Incorporation of the registrant, as amended                                                                          
|3.2(9)      |  | Articles of Amendment to the Articles of Incorporation of the registrant                                                                              
|3.3(8)      |  | Amended and Restated Bylaws                                                                                                                           
|4.1(5)      |  | Loan and Security Agreement, dated as of May 31, 2007 by and between BlueCrest Capital Finance, L.P. and the registrant                               
|4.2(12)     |  | Notice of Event of Default, from BlueCrest Venture Finance Master Fund Limited to the Company, dated January 28, 2009                                 
|4.3(12)     |  | Notice of Acceleration, from BlueCrest Venture Finance Master Fund Limited to the Company, dated February 2, 2009                                     
|4.4(13)     |  | Amendment to Loan and Security Agreement, between the Company and BlueCrest Venture Finance Master Fund Limited, dated as of April 2, 2009            
|4.5(13)     |  | Grant of Security Interest (Patents), between the Company and BlueCrest Venture Finance Master Fund Limited, dated as of April 2, 2009                
|4.6(13)     |  | Security Agreement (Intellectual Property), between the Company and BlueCrest Venture Finance Master Fund Limited, dated as of April 2, 2009          
|4.7(13)     |  | Subordination Agreement, by Hunton & Williams, LLP in favor of BlueCrest Venture Finance Master Fund Limited, entered into and effective April 2, 2009
|4.8(13)     |  | Amended and Restated Promissory Note, dated April 2, 2009, by the Company to BlueCrest Venture Finance Master Fund Limited                            
|4.9(13)     |  | Warrant to purchase 1,315,542 shares of the registrant’s common stock, dated April 2, 2009, issued to BlueCrest Venture Finance Master Fund Limited   
|4.10(14)    |  | Warrant to purchase 451,043 shares of the registrant’s common stock, dated April 2, 2009, issued to Rogers Telecommunications Limited                 
|4.11(14)    |  | Warrant to purchase 173,638 shares of the registrant’s common stock, dated April 2, 2009, issued to Hunton & Williams, LLP                            
|4.12(19)    |  | 10% Convertible Promissory Note Due July 23, 2010, in the amount of $20,000, payable to Dana Smith                                                    
|4.13(19)    |  | 10% Convertible Promissory Note Due July 23, 2010, in the amount of $100,000, payable to Bruce Meyers                                                 
|4.14(19)    |  | Registration Rights Agreement, dated July 23, 2009                                                                                                    
|4.15(19)    |  | Subordination Agreement, dated July 23, 2009                                                                                                          
|4.16(19)    |  | Note Purchase Agreement, dated July 23, 2009                                                                                                          
|4.17(19)    |  | Closing Confirmation of Conversion Election, dated July 23, 2009                                                                                      
|10.1**(1)   |  | 1999 Officers and Employees Stock Option Plan                                                                                                         
|10.2**(1)   |  | 1999 Directors and Consultants Stock Option Plan                                                                                                      
|10.3(1)     |  | Form of Option Agreement under 1999 Officers and Employees Stock Option Plan                                                                          





73

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|10.4(3)                                        |  | Form of Option Agreement under 1999 Directors and Consultants Stock Option Plan                                                                                                                                                                                                                  
|---------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.5**(4)                                      |  | Employment Letter Agreement between the registrant and Scott Bromley, dated August 24, 2006.                                                                                                                                                                                                     
|10.6(1)                                        |  | Lease Agreement between the registrant and Sawgrass Business Plaza, LLC, as amended, dated November 14, 2006.                                                                                                                                                                                    
|10.7(1)                                        |  | Asset Purchase Agreement between the registrant and Advanced Cardiovascular Systems, Inc., dated June 24, 2003.                                                                                                                                                                                  
|10.8(4)                                        |  | Conditionally Exclusive License Agreement between the registrant, Dr. Peter Law and Cell Transplants International, LLC, dated February 7, 2000, as amended.                                                                                                                                     
|10.9(4)                                        |  | Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by and between the registrant, Howard J. Leonhardt and Brenda Leonhardt                                                                                                                                                
|10.10(4)                                       |  | Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by and between the registrant and William P. Murphy Jr., M.D.                                                                                                                                                          
|10.11(4)                                       |  | Loan Agreement, dated as of June 1, 2007, by and between the registrant and Bank of America, N.A.                                                                                                                                                                                                
|10.12(4)                                       |  | Warrant to purchase shares of the registrant's common stock issued to Howard J. Leonhardt and Brenda Leonhardt                                                                                                                                                                                   
|10.13(4)                                       |  | Warrant to purchase shares of the registrant's common stock issued to Howard J. Leonhardt and Brenda Leonhardt                                                                                                                                                                                   
|10.14(4)                                       |  | Warrant to purchase shares of the registrant's common stock issued to William P. Murphy, Jr., M.D.                                                                                                                                                                                               
|10.15(4)                                       |  | Warrant to purchase shares of the registrant's common stock issued to the R&A Spencer Family Limited Partnership                                                                                                                                                                                 
|10.16(4)                                       |  | Material Supply Agreement, dated May 10, 2007, by and between the registrant and Biosense Webster                                                                                                                                                                                                
|10.17(5)                                       |  | Warrant to purchase shares of the registrant's common stock issued to BlueCrest Capital Finance, L.P.                                                                                                                                                                                            
|10.18(6)                                       |  | Loan Guarantee, Payment and Security Agreement, dated as of September 12, 2007, by and between the registrant and Samuel S. Ahn, M.D.                                                                                                                                                            
|10.19(6)                                       |  | Loan Guarantee, Payment and Security Agreement, dated as of September 12, 2007, by and between the registrant and Dan Marino                                                                                                                                                                     
|10.20(6)                                       |  | Warrant to purchase shares of the registrant's common stock issued to Samuel S. Ahn, M.D.                                                                                                                                                                                                        
|10.21(6)                                       |  | Loan Guarantee, Payment and Security Agreement, dated as of September 19, 2007, by and between the registrant and Jason Taylor                                                                                                                                                                   
|10.22(7)                                       |  | Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by and between the registrant and Howard and Brenda Leonhardt                                                                                                                                                      
|10.23(7)                                       |  | Warrant to purchase shares of the registrant's common stock issued to Howard and Brenda Leonhardt                                                                                                                                                                                                
|10.24(7)                                       |  | Second Amendment to Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by and between the registrant and Howard and Brenda Leonhardt                                                                                                                                  
|10.25(7)                                       |  | Second Amendment to Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by and between the registrant and William P. Murphy, Jr., M.D.                                                                                                                                 
|10.26**(10)                                    |  | Bioheart, Inc. Omnibus Equity Compensation Plan                                                                                                                                                                                                                                                  
|10.27(11)                                      |  | Form of Warrant Agreement for October 2008 Private Placement                                                                                                                                                                                                                                     
|10.28(11)
        10.29 (19)
        10.29(19) |  | Form of Registration Rights Agreement for
        October 2008 Private Placement
        Master Services Agreement with Ascent Medical Product Development
        Centre Inc.
        10% Convertible Promissory Note Due July 23, 2010, in the amount
        of $20,000, payable to Dana Smith
|10.30(19)                                      |  | 10% Convertible Promissory Note Due July 23, 2010, in the amount of $100,000, payable to Bruce Meyers                                                                                                                                                                                            
|10.31(19)                                      |  | Registration Rights Agreement, dated July 23, 2009                                                                                                                                                                                                                                               
|10.32(19)                                      |  | Subordination Agreement, dated July 23, 2009                                                                                                                                                                                                                                                     
|10.33(19)                                      |  | Note Purchase Agreement, dated July 23, 2009                                                                                                                                                                                                                                                     
|10.34(19)
        10.35**(20)                  |  | Closing Confirmation of Conversion
        Election, dated July 23, 2009
        Amended and Restated 1999 Directors
        and Consultants Stock Option Plan                                                                                                                                   
|10.36(21)                                      |  | Letter of Intent with Seaside National Bank and Trust, dated September 30, 2010.                                                                                                                                                                                                                 
|10.37(22)                                      |  | Loan Agreement with Seaside National Bank and Trust, dated October 25, 2010.                                                                                                                                                                                                                     
|10.38(22)                                      |  | Promissory Note with Seaside National Bank and Trust, dated October 25, 2010.                                                                                                                                                                                                                    
|10.39(22)                                      |  | Amended and Restated Loan and Security Agreement with BlueCrest Venture Finance Master Fund Limited, dated October 25, 2010.                                                                                                                                                                     



74

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|10.40(23) |  | Form of Subscription Agreement, executed November 30, 2010.                                                                           
|--------- |  | --------------------------------------------------------------------------------------------------------------------------------------
|10.41(23) |  | Form of Common Stock Purchase Warrant, issued November 30, 2010.                                                                      
|10.42(23) |  | Form of Registration Rights Agreement, dated November 30, 2010.                                                                       
|10.43(24) |  | Unsecured Convertible Promissory Note for $25,000, with Magna Group, LLC, dated January 3, 2011.                                      
|10.44(24) |  | Promissory Note for $139,728.82 with Magna Group, LLC, dated January 3, 2011.                                                         
|10.45(24) |  | Securities Purchase Agreement with Magna Group, LLC, dated January 3, 2011.                                                           
|10.46(24) |  | Subordination Agreement, dated January 3, 2011.                                                                                       
|10.47(24) |  | Notice of Conversion Election, dated January 3, 2011.                                                                                 
|          |  |                                                                                                                                       
|14.1(2)   |  | Code of Ethics for Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and persons performing similar functions
|14.2(2)   |  | Code of Business Conduct and Ethics                                                                                                   
|23.1*     |  | Consent of RBSM LLP                                                                                                                   
|31.1*     |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                
|32.1*     |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                

*	Filed herewith

**	Indicates management contract or compensatory
plan.



(1)Incorporated by reference to the Company’sForm S-1 filed
with the Securities and Exchange Commission (the “SEC”) on February 13, 2007

(2)Incorporated by reference to Amendment No. 1 to the Company’sForm S-1 filed with the SEC on June 5, 2007

(3)Incorporated by reference to Amendment No. 2 to the Company’sForm S-1 filed with the SEC on July 12, 2007

(4)Incorporated by reference to Amendment No. 3 to the Company’sForm S-1 filed with the SEC on August 9, 2007

(5)Incorporated by reference to Amendment No. 4 to the Company’sForm S-1 filed with the SEC on September 6, 2007

(6)Incorporated by reference to Amendment No. 5 to the Company’sForm S-1 filed with the SEC on October 1, 2007

(7)Incorporated by reference to Post-effective Amendment No. 1 to the Company’sForm S-1 filed with the SEC on October 11, 2007

(8)Incorporated by reference to the Company’s Current Report on Form 8-Kfiled with the SEC on July 3, 2008

(9)Incorporated by reference to the Company’s Current Report on Form 8-Kfiled with the SEC on August 8, 2008

(10)Incorporated by reference to the Company’s Quarterly Report on Form 10-Qfiled with the SEC on August 14, 2008

(11)Incorporated by reference to the Company’s Quarterly Report on Form 10-Qfiled with the SEC on November 14, 2008

(12)Incorporated by reference to the Company’s Current Report on Form 8-Kfiled with the SEC on February 3, 2009

(13)Incorporated by reference to the Company’s Current Report on Form 8-Kfiled with the SEC on April 8, 2009

(14)Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the
SEC on April 15, 2009

(15)Incorporated by reference to the Company’s Annual Report on Form 10-K/A filed with the
SEC on April 30, 2009

(16)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the
SEC on May 18, 2009



75

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(17)Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with
the SEC on May 20, 2009

(18)Incorporated by reference to the Company’s Current Report on Form 8-K filed with the
SEC on July 9, 2009

(19) Incorporated by
reference to the Company’s Current Report on Form 8-K filed with the SEC on August 3, 2009

(20) Incorporated
by reference to Exhibit 4.6 to the Company’s Post Effective Amendment to Registration Statement on Form S-8/A, filed with
the SEC on June 2, 2010

.

(21) Incorporated
by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on October 6, 2010.

(22) Incorporated
by referent to the Company’s Current Report on Form 8-K filed with the SEC on October 26, 2010.

(23) Incorporated
by referent to the Company’s Current Report on Form 8-K filed with the SEC on December 6, 2010.

(24) Incorporated
by referent to the Company’s Current Report on Form 8-K filed with the SEC on January 12, 2011.





76

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SIGNATURES



Pursuant to the requirements
of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



|                    |                                                        |               
|------------------- | ------------------------------------------------------ | --------------
|                    | BIOHEART, INC.                                        
|                    |                                                        |               
|                    | By:                                                    | /s/ Mike Tomas
|                    | Mike Tomas
        Chief Executive Officer & President
|Dated: May 10, 2011 |                                                       



Pursuant to the requirements
of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.



Each person whose signature appears below,
hereby authorizes Catherine Sulawske-Guck and Mike Tomas, or either of them, as attorneys in fact to sign on his or her behalf,
individually, in each capacity stated below, and to file all amendments or supplements to this annual report on Form 10-K.





|SIGNATURE                        |  | TITLE                              |  | DATE        
|-------------------------------- |  | ---------------------------------- |  | ------------
|/s/ William P. Murphy, Jr., M.D. |  | Chairman of the Board              |  | May 10, 2011
|William P. Murphy, Jr., M.D.     |  |                                    |  |             
|                                 |  |                                    |  |             
|/s/ Mike Tomas                   |  | Chief Executive Officer & Director |  | May 10, 2011
|Mike Tomas                       |  |                                    |  |             
|                                 |  |                                    |  |             
|/s/ Mark P. Borman               |  | Director                           |  | May 10, 2011
|Mark Borman                      |  |                                    |  |             
|                                 |  |                                    |  |             
|/s/ Bruce C. Carson              |  | Director                           |  | May 10, 2011
|Bruce C. Carson                  |  |                                    |  |             
|                                 |  |                                    |  |             
|/s/Howard Leonhardt              |  | Director                           |  | May 10, 2011
|Howard Leonhardt                 |  |                                    |  |             
|                                 |  |                                    |  |             
|/s/ Richard T. Spencer III       |  | Director                           |  | May 10, 2011
|Richard T. Spencer III           |  |                                    |  |             
|                                 |  |                                    |  |             
|/s/ Charles A. Hart              |  | Director                           |  | May 10, 2011
|Charles A. Hart                  |  |                                    |  |             
|                                 |  |                                    |  |             
|/s/ Samuel S. Ahn, MD, MBA       |  | Director                           |  | May 10, 2011
|Samuel S. Ahn, MD, MBA           |  |                                    |  |             
|                                 |  |                                    |  |             



77

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FORM 10-K -- ITEM 8

BIOHEART, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

|                                                                                                                                                                             |     
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ----
|Reports of Independent Registered Public Accounting Firm                                                                                                                     | F-2 
|                                                                                                                                                                             |     
|Consolidated Balance Sheets as of December 31, 2010 and 2009                                                                                                                 | F-3 
|                                                                                                                                                                             |     
|Consolidated Statements of Operations for the years ended December 31, 2010 and 2009 and the cumulative period from August 12, 1999 (date of inception) to December 31, 2010 | F-4 
|                                                                                                                                                                             |     
|Consolidated Statement of Shareholders’ (Deficit) Equity for the period from August 12, 1999 (date of inception) through December 31, 2010                                   | F-5 
|                                                                                                                                                                             |     
|Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009 and the cumulative period from August 12, 1999 (date of inception) to December 31, 2010 | F-10
|                                                                                                                                                                             |     
|Notes to Consolidated Financial Statements                                                                                                                                   | F-11

F-1    REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Bioheart, Inc.13794 NW 4th Street, Suite 212,Sunrise, Florida  33325

We have audited the accompanying consolidated balance sheet of Bioheart, Inc. and its wholly owned subsidiaries
(the "Company") (a development stage company) as of December 31, 2010, and the related consolidated statements of operations, shareholders' equity (deficit) and cash flows for the year ended December 31,
2010 and for the period from August 12, 1999 (date of inception) through December 31, 2010. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. The consolidated financial statements of the Company for the period
from August 12, 1999 (date of inception) to December 31, 2009 were not audited by us. Those statements were audited by other auditors whose report, dated March 31, 2010, except for Note 2, as to which the date
is May 10, 2011, expressed an unqualified opinion on those statements and included an explanatory paragraph regarding the Company's ability to continue as a going concern. The consolidated financial statements
for the period from August 12, 1999 (date of inception) to December 31, 2009 reflect a net loss after restatement of $ 101,164,765. Our opinion, insofar as it relates to the amounts included
for such prior periods as indicated in the accompanying financial statements for such periods from August 12, 1999 (date of inception) through December  31, 2009, is based solely on the report of such other auditors.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board
(United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is
not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for
designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, based on our audit, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of  Bioheart, Inc. and its wholly owned subsidiaries (a development stage enterprise) as of  December  31, 2010, and the results of their
operations and their cash flows for the year ended December  31, 2010, and for the period from August 12, 1999 (date of inception)
to December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming that the Company
will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company is in the development stage, and has incurred net losses of $ 106,324,220 since inception.
In addition, as of December 31, 2010 the Companys current liabilities exceed its current assets by $11,099,660. These conditions raise substantial doubt about the Company's ability to continue as
a going concern. Management's plans in regard to these matters are also described in Note 3. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ RBSM LLP

New York, New York
May 10, 2011


REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of
Bioheart, Inc.13794 NW 4th Street, Suite 212,Sunrise, Florida  33325

We have audited the accompanying consolidated balance sheet of Bioheart, Inc. and its wholly owned subsidiaries (the Company), a development stage company as of December 31, 2009, and the related consolidated statements of operations, stockholders equity (deficit) and cash flows for the year ended December 31, 2009 and for the period from  August 12, 1999 (date of inception) through December 31, 2009. These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.
We have conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Bioheart, Inc. as of December 31, 2009, and the consolidated results of its operations and its cash flows for the year ended December 31, 2009 and for the period August 12, 1999 (date of inception) through December 31, 2009 in conformity with accounting principles generally accepted in the United States of America.
As described in Note 2 to the financial statements, the Company restated its financial statements for the above periods primarily for correcting the application of accounting principles in the recognition of debt discounts as a result of share based consideration given to certain debt holders.

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern.
As discussed in Note 1 to the accompanying consolidated financial statements, the Company has suffered recurring losses and is experiencing difficulty in generating sufficient cash flow to meet its obligations and sustain
its operations, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are described in Note 3. The consolidated financial statements do not include any
adjustments that might result from the outcome of this uncertainty.

/s/ Jewett, Schwartz, Wolfe & Associates
Jewett, Schwartz, Wolfe & AssociatesHollywood, FloridaMarch 31, 2010, except for Note 2 as of May 10, 2011



F-2

BIOHEART, INC. AND SUBSIDIARIES

(a development stage company)

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2010 AND 2009





2010
    (Restated)2009ASSETSCurrent assets:Cash and cash equivalents
    $3,298
    $75,031Accounts receivable, net
    1,266
    142,279Inventory
    153,617
    199,914Prepaid and other
    34,322
    25,729Total current assets
    192,503
    442,953Property and equipment, net
    47,439
    104,397Other assets
    68,854
    68,854Total assets
    $308,796
    $616,204LIABILITIES AND STOCKHOLDERS' DEFICITCurrent liabilities:Accounts payable
    $2,050,161
    $1,911,893Accrued expenses
    3,581,445
    3,530,246Advances, related party
    238,000
    —Deferred revenue
    465,286
    507,281Subordinated debt, related party
    1,500,000
    —Notes payable, related party
    225,000
    —Notes payable, net of debt discount
    3,232,271
    2,817,748Total current liabilities
    11,292,163
    8,767,168Long term debt:Deferred rent
    —
    857Subordinated debt, related party
    —
    3,000,000Note payable, long term
    1,032,827
    2,276,543Total long term debt
    1,032,827
    5,277,400Total liabilities
    12,324,990
    14,044,568Commitments and contingenciesStockholders'   deficit:Preferred stock, par value $0.001; 5,000,000 shares authorized, none issued and outstanding as of December 31, 2010 and 2009
    —
    —Common stock, par value $0.001; 75,000,000 shares authorized, 37,545,865 and 20,035,684 shares issued and outstanding as or December 31, 2010 and 2009
    37,545
    20,036Additional paid in capital
    94,274,281
    87,775,900Subscriptions receivable
    (3,800)
    (59,536)Deficit accumulated during development stage
    (106,324,220)
    (101,164,764)Total stockholders' deficit
    (12,016,194)
    (13,428,364)Total liabilities and stockholders' deficit
    $308,796
    $616,204

See the accompanying notes to these consolidated financial
statements


F-3

---





BIOHEART, INC. AND SUBSIDIARIES

(a development stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS





|                                                                        |  |                         |            |               |  | (Restated)From August 12,
|----------------------------------------------------------------------- |  | ----------------------- | ---------- | ------------- |  | -------------------------
|                                                                        |  | Year ended December 31, |            | 1999 (date of
|                                                                        |  |                         |            | (Restated)    |  | Inception) to            
|                                                                        |  | 2010                    |            | 2009          |  | December 31, 2010        
|Revenue                                                                 |  | $                       | 46,383     |               |  | $                        
|Cost of sales                                                           |  |                         | 19,765     |               |  |                          
|Gross profit                                                            |  |                         | 26,618     |               |  |                          
|                                                                        |  |                         |            |               |  |                          
|Operating expenses:                                                     |  |                         |            |               |  |                          
|Research and development                                                |  |                         | 1,467,078  |               |  |                          
|Marketing, general and administrative                                   |  |                         | 1,768,612  |               |  |                          
|Depreciation and amortization                                           |  |                         | 56,958     |               |  |                          
|Total operating expenses                                                |  |                         | 3,292,648  |               |  |                          
|                                                                        |  |                         |            |               |  |                          
|Net loss from operations                                                |  |                         | (3,266,030 | )             |  |                          
|                                                                        |  |                         |            |               |  |                          
|Other income (expenses):                                                |  |                         |            |               |  |                          
|Development revenues                                                    |  |                         | —          |               |  |                          
|Interest income                                                         |  |                         | 2          |               |  |                          
|Other income                                                            |  |                         | 245,554    |               |  |                          
|Interest expense                                                        |  |                         | (2,138,982 | )             |  |                          
|Total other income (expenses)                                           |  |                         | (1,893,426 | )             |  |                          
|                                                                        |  |                         |            |               |  |                          
|Net loss before income taxes                                            |  |                         | (5,159,456 | )             |  |                          
|                                                                        |  |                         |            |               |  |                          
|Income taxes (benefit)                                                  |  |                         | —          |               |  |                          
|                                                                        |  |                         |            |               |  |                          
|NET LOSS                                                                |  | $                       | (5,159,456 | )             |  | $                        
|                                                                        |  |                         |            |               |  |                          
|Net loss per common share, basic and diluted                            |  | $                       | (0.19      | )             |  | $                        
|                                                                        |  |                         |            |               |  |                          
|Weighted average number of common shares outstanding, basic and diluted |  |                         | 27,167,539 |               |  |                          



See the accompanying notes to these consolidated financial
statements





F-4

---



BIOHEART, INC. AND SUBSIDIARIES

(a development stage company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS'
DEFICIT

FROM AUGUST 12, 1999 (DATE OF INCEPTION)
TO DECEMBER 31, 2010



|                                                                                 |  |                 |        |              |  |                    |        |          |  |              |           |                    |  |   |        | Deficit     |  |  
|-------------------------------------------------------------------------------- |  | --------------- | ------ | ------------ |  | ------------------ | ------ | -------- |  | ------------ | --------- | ------------------ |  | - | ------ | ----------- |  | -
|                                                                                 |  |                 |        |              |  |                    |        |          |  |              |           |                    |  |   |        | Accumulated |  |  
|                                                                                 |  | Preferred stock |        | Common stock |  | Additional Paid in |        | Deferred |  | Subscription |           | During Development |  |  
|                                                                                 |  |                 | Shares |              |  |                    | Amount |          |  |              | Shares    |                    |  |   | Amount |             |  |  
|Balance, August 12, 1999 (date of inception)                                     |  |                 | —      |              |  | $                  | —      |          |  |              | —         |                    |  | $ | —      |             |  | $
|Issuance of common stock                                                         |  |                 | —      |              |  |                    | —      |          |  |              | 4,324,458 |                    |  |   | 4,324  |             |  |  
|Stock based compensation                                                         |  |                 | —      |              |  |                    | —      |          |  |              | —         |                    |  |   | —      |             |  |  
|Amortization of stock based compensation                                         |  |                 | —      |              |  |                    | —      |          |  |              | —         |                    |  |   | —      |             |  |  
|Net loss                                                                         |  |                 | —      |              |  |                    | —      |          |  |              | —         |                    |  |   | —      |             |  |  
|Balance, December 31, 1999                                                       |  |                 | —      |              |  |                    | —      |          |  |              | 4,324,458 |                    |  |   | 4,324  |             |  |  
|Issuance of common stock, net of issuance costs of $61,905                       |  |                 | —      |              |  |                    | —      |          |  |              | 1,493,575 |                    |  |   | 1,494  |             |  |  
|Stock based compensation                                                         |  |                 | —      |              |  |                    | —      |          |  |              | —         |                    |  |   | —      |             |  |  
|Fair value of warrants issued in exchange for licenses and intellectual property |  |                 | —      |              |  |                    | —      |          |  |              | —         |                    |  |   | —      |             |  |  
|Amortization of stock based compensation                                         |  |                 | —      |              |  |                    | —      |          |  |              | —         |                    |  |   | —      |             |  |  
|Contributed capital                                                              |  |                 | —      |              |  |                    | —      |          |  |              | —         |                    |  |   | —      |             |  |  
|Common stock issued in exchange for services                                     |  |                 | —      |              |  |                    | —      |          |  |              | 7,964     |                    |  |   | 8      |             |  |  
|Net loss                                                                         |  |                 | —      |              |  |                    | —      |          |  |              | —         |                    |  |   | —      |             |  |  
|Balance, December 31, 2000                                                       |  |                 | —      |              |  |                    | —      |          |  |              | 5,825,997 |                    |  |   | 5,826  |             |  |  
|Issuance of common stock, net of issuance costs of $98,996                       |  |                 | —      |              |  |                    | —      |          |  |              | 985,667   |                    |  |   | 986    |             |  |  
|Stock based compensation                                                         |  |                 | —      |              |  |                    | —      |          |  |              | —         |                    |  |   | —      |             |  |  
|Amortization of stock based compensation                                         |  |                 | —      |              |  |                    | —      |          |  |              | —         |                    |  |   | —      |             |  |  
|Conversion of contributed capital to common stock                                |  |                 | —      |              |  |                    | —      |          |  |              | 81,084    |                    |  |   | 81     |             |  |  
|Common stock issued in exchange for services                                     |  |                 | —      |              |  |                    | —      |          |  |              | 8,291     |                    |  |   | 8      |             |  |  
|Net loss                                                                         |  |                 | —      |              |  |                    | —      |          |  |              | —         |                    |  |   | —      |             |  |  
|Balance, December 31, 2001                                                       |  |                 | —      |              |  | $                  | —      |          |  |              | 6,901,039 |                    |  | $ | 6,901  |             |  | $



See the accompany notes to these consolidated
financial statements





F-5

---





BIOHEART, INC. AND SUBSIDIARIES

(a development stage company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS'
DEFICIT

FROM AUGUST 12, 1999 (DATE OF INCEPTION)
TO DECEMBER 31, 2010



|                                                                        |  |                 |        |              |  |                    |        |          |  |              |            |                    |  |   |        | Deficit     |  |  
|----------------------------------------------------------------------- |  | --------------- | ------ | ------------ |  | ------------------ | ------ | -------- |  | ------------ | ---------- | ------------------ |  | - | ------ | ----------- |  | -
|                                                                        |  |                 |        |              |  |                    |        |          |  |              |            |                    |  |   |        | Accumulated |  |  
|                                                                        |  | Preferred stock |        | Common stock |  | Additional Paid in |        | Deferred |  | Subscription |            | During Development |  |  
|                                                                        |  |                 | Shares |              |  |                    | Amount |          |  |              | Shares     |                    |  |   | Amount |             |  |  
|Balance, December 31, 2001                                              |  |                 | —      |              |  | $                  | —      |          |  |              | 6,901,039  |                    |  | $ | 6,901  |             |  | $
|Issuance of common stock                                                |  |                 | —      |              |  |                    | —      |          |  |              | 1,092,883  |                    |  |   | 1,093  |             |  |  
|Stock based compensation                                                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Amortization of stock based compensation                                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Common stock issued in exchange for services                            |  |                 | —      |              |  |                    | —      |          |  |              | 35,137     |                    |  |   | 35     |             |  |  
|Net loss                                                                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Balance, December 31, 2002                                              |  |                 | —      |              |  |                    | —      |          |  |              | 8,029,059  |                    |  |   | 8,029  |             |  |  
|Issuance of common stock                                                |  |                 | —      |              |  |                    | —      |          |  |              | 561,701    |                    |  |   | 562    |             |  |  
|Stock based compensation                                                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Amortization of stock based compensation                                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Common stock issued in exchange for services                            |  |                 | —      |              |  |                    | —      |          |  |              | 144,300    |                    |  |   | 144    |             |  |  
|Net loss                                                                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Balance, December 31, 2003                                              |  |                 | —      |              |  |                    | —      |          |  |              | 8,735,060  |                    |  |   | 8,735  |             |  |  
|Issuance of common stock                                                |  |                 | —      |              |  |                    | —      |          |  |              | 808,570    |                    |  |   | 809    |             |  |  
|Stock based compensation                                                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Amortization of stock based compensation                                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Common stock issued in exchange for services                            |  |                 | —      |              |  |                    | —      |          |  |              | 17,004     |                    |  |   | 17     |             |  |  
|Net loss                                                                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Balance, December 31, 2004                                              |  |                 | —      |              |  |                    | —      |          |  |              | 9,560,634  |                    |  |   | 9,561  |             |  |  
|Issuance of common stock, net of issuance costs of $32,507              |  |                 | —      |              |  |                    | —      |          |  |              | 1,994,556  |                    |  |   | 1,994  |             |  |  
|Issuance of common stock in lieu of cash compensation                   |  |                 | —      |              |  |                    | —      |          |  |              | 1,210      |                    |  |   | 1      |             |  |  
|Stock based compensation                                                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Amortization of stock based compensation                                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Issuance of common stock in exchange for release of accrued liabilities |  |                 | —      |              |  |                    | —      |          |  |              | 95,807     |                    |  |   | 96     |             |  |  
|Net loss                                                                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Balance, December 31, 2005                                              |  |                 | —      |              |  | $                  | —      |          |  |              | 11,652,207 |                    |  | $ | 11,652 |             |  | $



See the accompany notes to these consolidated
financial statements



F-6

---





BIOHEART, INC. AND SUBSIDIARIES

(a development stage company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS'
DEFICIT

FROM AUGUST 12, 1999 (DATE OF INCEPTION)
TO DECEMBER 31, 2010



|                                                                                  |  |                 |        |              |  |                    |        |          |  |              |            |                    |  |   |        | Deficit     |  |  
|--------------------------------------------------------------------------------- |  | --------------- | ------ | ------------ |  | ------------------ | ------ | -------- |  | ------------ | ---------- | ------------------ |  | - | ------ | ----------- |  | -
|                                                                                  |  |                 |        |              |  |                    |        |          |  |              |            |                    |  |   |        | Accumulated |  |  
|                                                                                  |  | Preferred stock |        | Common stock |  | Additional Paid in |        | Deferred |  | Subscription |            | During Development |  |  
|                                                                                  |  |                 | Shares |              |  |                    | Amount |          |  |              | Shares     |                    |  |   | Amount |             |  |  
|Balance, December 31, 2005                                                        |  |                 | —      |              |  | $                  | —      |          |  |              | 11,652,207 |                    |  | $ | 11,652 |             |  | $
|Reclassification of deferred compensation due to adoption of SFAS No. 123 ( R )   |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Issuance of common stock, net of issuance costs of $100,038                       |  |                 | —      |              |  |                    | —      |          |  |              | 1,069,699  |                    |  |   | 1,069  |             |  |  
|Equity instruments issued in connection with settlement agreement                 |  |                 | —      |              |  |                    | —      |          |  |              | 47,657     |                    |  |   | 48     |             |  |  
|Common stock issued in exchange for services                                      |  |                 | —      |              |  |                    | —      |          |  |              | 2,903      |                    |  |   | 3      |             |  |  
|Common stock issued in exchange for distribution rights and intellectual property |  |                 | —      |              |  |                    | —      |          |  |              | 13,006     |                    |  |   | 13     |             |  |  
|Warrants issued in exchange for licenses and intellectual property                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Stock based compensation                                                          |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Net loss                                                                          |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Balance, December 31, 2006                                                        |  |                 | —      |              |  |                    | —      |          |  |              | 12,785,472 |                    |  |   | 12,785 |             |  |  
|Issuance of common stock, net of issuance costs of $150,000                       |  |                 | —      |              |  |                    | —      |          |  |              | 529,432    |                    |  |   | 530    |             |  |  
|Exercise of stock options                                                         |  |                 | —      |              |  |                    | —      |          |  |              | 31,955     |                    |  |   | 32     |             |  |  
|Warrants issued in connection with notes payable                                  |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Warrants issued in exchange for services                                          |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Warrants issued in exchange for licenses and intellectual property                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Shares issued in connection with reverse stock split                              |  |                 | —      |              |  |                    | —      |          |  |              | 279        |                    |  |   | —      |             |  |  
|Stock based compensation                                                          |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Net loss                                                                          |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Balance, December 31, 2007                                                        |  |                 | —      |              |  | $                  | —      |          |  |              | 13,347,138 |                    |  | $ | 13,347 |             |  | $
|                                                                                  |  |                 |        |              |  |                    |        |          |  |              |            |                    |  |   |        |             |  |  

See the accompany notes to these consolidated
financial statements



F-7

---







BIOHEART, INC. AND SUBSIDIARIES

(a development stage company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS'
DEFICIT

FROM AUGUST 12, 1999 (DATE OF INCEPTION)
TO DECEMBER 31, 2010



|                                                                             |  |                 |        |              |  |                    |        |          |  |              |            |                    |  |   |        | Deficit     |  |  
|---------------------------------------------------------------------------- |  | --------------- | ------ | ------------ |  | ------------------ | ------ | -------- |  | ------------ | ---------- | ------------------ |  | - | ------ | ----------- |  | -
|                                                                             |  |                 |        |              |  |                    |        |          |  |              |            |                    |  |   |        | Accumulated |  |  
|                                                                             |  | Preferred stock |        | Common stock |  | Additional Paid in |        | Deferred |  | Subscription |            | During Development |  |  
|                                                                             |  |                 | Shares |              |  |                    | Amount |          |  |              | Shares     |                    |  |   | Amount |             |  |  
|Balance, December 31, 2007                                                   |  |                 | —      |              |  | $                  | —      |          |  |              | 13,347,138 |                    |  | $ | 13,347 |             |  | $
|Initial public offering of common stock, net of offering costs of $4,327,171 |  |                 | —      |              |  |                    | —      |          |  |              | 1,100,000  |                    |  |   | 1,100  |             |  |  
|Issuance of common stock, net of issuance costs of $24,325                   |  |                 | —      |              |  |                    | —      |          |  |              | 1,230,280  |                    |  |   | 1,230  |             |  |  
|Stock based compensation                                                     |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Warrants issued in exchange for services                                     |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Warrants issued in exchange for notes payable                                |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Warrants issued in connection with settlement agreement                      |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Exercise of stock options                                                    |  |                 | —      |              |  |                    | —      |          |  |              | 61,778     |                    |  |   | 62     |             |  |  
|Net loss                                                                     |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Balance, December 31, 2008                                                   |  |                 | —      |              |  |                    | —      |          |  |              | 15,739,196 |                    |  |   | 15,739 |             |  |  
|Issuance of common stock, net of issuance costs of $13,664                   |  |                 | —      |              |  |                    | —      |          |  |              | 2,680,230  |                    |  |   | 2,682  |             |  |  
|Subscription receivable                                                      |  |                 | —      |              |  |                    | —      |          |  |              | 85,090     |                    |  |   | 85     |             |  |  
|Stock based compensation                                                     |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Common stock in exchange for services                                        |  |                 | —      |              |  |                    | —      |          |  |              | 45,000     |                    |  |   | 45     |             |  |  
|Common stock issued in connection with the settlement of accounts payable    |  |                 | —      |              |  |                    | —      |          |  |              | 519,460    |                    |  |   | 519    |             |  |  
|Common stock issued in connection with issuance of note payable              |  |                 | —      |              |  |                    | —      |          |  |              | 320,000    |                    |  |   | 320    |             |  |  
|Common stock issued upon conversion of notes payable                         |  |                 | —      |              |  |                    | —      |          |  |              | 606,708    |                    |  |   | 606    |             |  |  
|Warrants issued in connection with notes payable                             |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Exercise of stock options                                                    |  |                 | —      |              |  |                    | —      |          |  |              | 40,000     |                    |  |   | 40     |             |  |  
|Net loss                                                                     |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Balance, December 31, 2009                                                   |  |                 | —      |              |  | $                  | —      |          |  |              | 20,035,684 |                    |  | $ | 20,036 |             |  | $



See the accompany notes to these consolidated
financial statements



F-8

---







BIOHEART, INC. AND SUBSIDIARIES

(a development stage company)

CONSOLIDATED STATEMENT OF STOCKHOLDERS'
DEFICIT

FROM AUGUST 12, 1999 (DATE OF INCEPTION)
TO DECEMBER 31, 2010





|                                                                  |  |                 |        |              |  |                    |        |          |  |              |            |                    |  |   |        | Deficit     |  |  
|----------------------------------------------------------------- |  | --------------- | ------ | ------------ |  | ------------------ | ------ | -------- |  | ------------ | ---------- | ------------------ |  | - | ------ | ----------- |  | -
|                                                                  |  |                 |        |              |  |                    |        |          |  |              |            |                    |  |   |        | Accumulated |  |  
|                                                                  |  | Preferred stock |        | Common stock |  | Additional Paid in |        | Deferred |  | Subscription |            | During Development |  |  
|                                                                  |  |                 | Shares |              |  |                    | Amount |          |  |              | Shares     |                    |  |   | Amount |             |  |  
|Balance, December 31, 2009                                        |  |                 | —      |              |  | $                  | —      |          |  |              | 20,035,684 |                    |  | $ | 20,036 |             |  | $
|Issuance of common stock, net of issuance costs of $2,950         |  |                 | —      |              |  |                    | —      |          |  |              | 11,334,705 |                    |  |   | 11,335 |             |  |  
|Subscription receivable                                           |  |                 | —      |              |  |                    | —      |          |  |              | 20,000     |                    |  |   | 20     |             |  |  
|Stock based compensation                                          |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Common stock in exchange for services                             |  |                 | —      |              |  |                    | —      |          |  |              | 529,520    |                    |  |   | 529    |             |  |  
|Option exercised for accounts payable                             |  |                 | —      |              |  |                    | —      |          |  |              | 831,526    |                    |  |   | 831    |             |  |  
|Common stock issued in connection with bank guarantor liabilities |  |                 | —      |              |  |                    | —      |          |  |              | 4,794,430  |                    |  |   | 4,794  |             |  |  
|Warrants issued in connection with notes payable                  |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Net loss                                                          |  |                 | —      |              |  |                    | —      |          |  |              | —          |                    |  |   | —      |             |  |  
|Balance, December 31, 2010                                        |  |                 | —      |              |  | $                  | —      |          |  |              | 37,545,865 |                    |  | $ | 37,545 |             |  | $





See the accompany notes to these consolidated
financial statements





F-9

---



BIOHEART, INC. AND SUBSIDIARIES

(a development stage
company)

CONSOLIDATED STATEMENTS
OF CASH FLOWS





|                                                                                         |  |                         |            |               |  | From August 12,  
|---------------------------------------------------------------------------------------- |  | ----------------------- | ---------- | ------------- |  | -----------------
|                                                                                         |  |                         |            |               |  | 1999 (date of    
|                                                                                         |  | Year ended December 31, |            | Inception) to
|                                                                                         |  | 2010                    |            | 2009          |  | December 31, 2010
|CASH FLOWS FROM OPERATING ACTIVITIES:                                                    |  |                         |            |               |  |                  
|Net loss                                                                                 |  | $                       | (5,159,456 | )             |  | $                
|Adjustments to reconcile net loss to net cash used in operating activities:              |  |                         |            |               |  |                  
|Depreciation and amortization                                                            |  |                         | 56,958     |               |  |                  
|Bad debt expense                                                                         |  |                         | —          |               |  |                  
|Discount on convertible debt                                                             |  |                         | —          |               |  |                  
|Amortization of warrants issued in exchange for licenses and intellectual property       |  |                         | —          |               |  |                  
|Amortization of warrants issued in connection with notes payable                         |  |                         | 975,969    |               |  |                  
|Amortization of loan costs                                                               |  |                         | 72,262     |               |  |                  
|Warrants issued in exchange for services                                                 |  |                         | —          |               |  |                  
|Equity instruments issued in connection with R&D agreement                               |  |                         | 360,032    |               |  |                  
|Equity instruments issued in connection with settlement agreement                        |  |                         | —          |               |  |                  
|Common stock issued in connection with accounts payable                                  |  |                         | 412,660    |               |  |                  
|Common stock issued in exchange for services                                             |  |                         | —          |               |  |                  
|Common stock issued in connection with amounts due to guarantors of Bank of America loan |  |                         | 69,159     |               |  |                  
|Common stock issued in exchange for distribution rights and intellectual property        |  |                         | —          |               |  |                  
|Warrants issued in connection with accounts payable                                      |  |                         | —          |               |  |                  
|Stock based compensation                                                                 |  |                         | 248,457    |               |  |                  
|(Increase) decrease in:                                                                  |  |                         |            |               |  |                  
|Receivables                                                                              |  |                         | 141,013    |               |  |                  
|Inventory                                                                                |  |                         | 46,297     |               |  |                  
|Prepaid and other current assets                                                         |  |                         | (8,592     | )             |  |                  
|Other assets                                                                             |  |                         | —          |               |  |                  
|Increase (decrease) in:                                                                  |  |                         |            |               |  |                  
|Accounts payable                                                                         |  |                         | 133,038    |               |  |                  
|Accrued expenses and deferred rent                                                       |  |                         | 799,952    |               |  |                  
|Deferred revenue                                                                         |  |                         | (41,995    | )             |  |                  
|Net cash used in operating activities                                                    |  |                         | (1,894,245 | )             |  |                  
|                                                                                         |  |                         |            |               |  |                  
|CASH FLOWS FROM INVESTING ACTIVITIES:                                                    |  |                         |            |               |  |                  
|Acquisitions of property and equipment                                                   |  |                         | —          |               |  |                  
|Net cash used in investing activities                                                    |  |                         | —          |               |  |                  
|                                                                                         |  |                         |            |               |  |                  
|CASH FLOWS FROM FINANCING ACTIVITES:                                                     |  |                         |            |               |  |                  
|Proceeds from issuance of common stock, net                                              |  |                         | 2,399,800  |               |  |                  
|Proceeds from (payments for) initial public offering of common stock, net                |  |                         | —          |               |  |                  
|Proceeds from subordinated related party note                                            |  |                         | —          |               |  |                  
|Payment of note payable                                                                  |  |                         | —          |               |  |                  
|Proceeds from note payable, related party                                                |  |                         | 463,000    |               |  |                  
|Proceeds from exercise of stock options                                                  |  |                         | —          |               |  |                  
|Proceeds from notes payable                                                              |  |                         | —          |               |  |                  
|Repayaments of notes payable                                                             |  |                         | (1,020,289 | )             |  |                  
|Payment of loan costs                                                                    |  |                         | (20,000    | )             |  |                  
|Net cash provided in financing activities                                                |  |                         | 1,822,511  |               |  |                  
|                                                                                         |  |                         |            |               |  |                  
|Net (decrease) increase in cash and cash equivalents                                     |  |                         | (71,733    | )             |  |                  
|                                                                                         |  |                         |            |               |  |                  
|Cash and cash equivalents, beginning of period                                           |  | $                       | 75,031     |               |  | $                
|Cash and cash equivalents, end of period                                                 |  | $                       | 3,298      |               |  | $                
|                                                                                         |  |                         |            |               |  |                  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                                        |  |                         |            |               |  |                  
|Interest paid                                                                            |  | $                       | 361,947    |               |  | $                
|Income taxes paid                                                                        |  | $                       | —          |               |  | $                
|                                                                                         |  |                         |            |               |  |                  
|Non cash financing activities:                                                           |  |                         |            |               |  |                  
|Common stock issued in settlement of notes payable                                       |  | $                       | 2,172,000  |               |  | $                
|                                                                                         |  |                         |            |               |  |                  
|See the accompanying notes to these consolidated financial statements                   





F-10

---



BIOHEART, INC. AND SUBSIDIARIES

(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2010



NOTE 1 – SIGNIFICANT ACCOUNTING POLICIES



A summary of the significant accounting policies
applied in the presentation of the accompanying consolidated financial statements follows:



Basis and business presentation



Bioheart, Inc (the “Company”) was
incorporated under the laws of the State of Florida in August 1999.  The Company is in the development stage, as defined
by Accounting Standards Codification subtopic 915-10, Development Stage Entities ("ASC 915-10") and is the cardiovascular
sector of the cell technology industry delivering cell therapies and biologics that help address congestive heart failure, lower
limb ischemia, chronic heart ischemia, acute myocardial infarctions and other issues. To date, the Company has not generated significant
sales revenues, has incurred expenses and has sustained losses.  Consequently, its operations are subject to all the
risks inherent in the establishment of a new business enterprise.  For the period from inception through December 31,
2010, the Company has accumulated a deficit through its development stage of $106,324,220.



The consolidated financial statements include
the accounts of the Company, and its wholly-owned subsidiaries.  All significant intercompany balances and transactions
have been eliminated in consolidation.



Estimates



The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures.  The most significant estimates are those used in determination of derivative
liabilities and stock compensation. Accordingly, actual results could differ from those estimates.



Revenue Recognition



The Company recognizes revenue in accordance
with Accounting Standards Codification subtopic 605-10, Revenue Recognition (“ASC 605-10”) which requires that four
basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has
occurred; (3) the selling price is fixed and determinable; and (4) collectability is reasonably assured. Determination of criteria
(3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and
the collectability of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other
adjustments are provided for in the same period the related sales are recorded.



At the time of each transaction, management
assesses whether the fee associated with the transaction is fixed or determinable and whether or not collection is reasonably assured.
The assessment of whether the fee is fixed or determinable is based upon the payment terms of the transaction. If a significant
portion of a fee is due after our normal payment terms or upon implementation or client acceptance, the fee is accounted for as
not being fixed or determinable and revenue is recognized as the fees become due or after implementation or client acceptance has
occurred. Collectability is assessed based on a number of factors, including past transaction history with the client and the creditworthiness
of the client.



The Company accounts for Multiple-Element Arrangements
under ASC 605-10 which incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element Arrangements (“ASC
605-25”). ASC 605-25 addresses accounting for arrangements that may involve the delivery or performance of multiple products,
services and/or rights to use assets.





F-11

---





Unbilled revenue is revenue that is recognized
but is not currently billable to the customer pursuant to contractual terms. In general, such amounts become billable in accordance
with predetermined payment schedules, but recognized as revenue as services are performed. Amounts included in unbilled revenue
are expected to be collected within one year and are included within current assets.



Cash



The Company considers cash to consist of cash
on hand and temporary investments having an original maturity of 90 days or less that are readily convertible into cash.



Accounts Receivable



Trade receivables are carried at their estimated
collectible amounts. Trade credit is generally extended on a short-term basis; thus trade receivables do not bear interest. Trade
accounts receivable are periodically evaluated for collectability based on past credit history with customers and their current
financial condition.



Allowance for Doubtful Accounts



Any changes to the allowance for doubtful accounts
on accounts receivable are charged to operations in amounts sufficient to maintain the allowance for uncollectible accounts at
a level management believes is adequate to cover any probable losses. Management determines the adequacy of the allowance based
on historical write-off percentages and the current status of accounts receivable. Accounts receivable are charged off against
the allowance when collectability is determined to be permanently impaired. As of December 31, 2010 and 2009, allowance for
doubtful accounts was $7,485 and -0-, respectively.



Property and Equipment



Property and equipment are stated at cost.
When retired or otherwise disposed, the related carrying value and accumulated depreciation are removed from the respective accounts
and the net difference less any amount realized from disposition, is reflected in earnings. For financial statement purposes, property
and equipment are recorded at cost and depreciated using the straight-line method over their estimated useful lives of 3 to 15
years.



Long-Lived Assets



The Company follows FASB ASC 360-10-15-3, “Impairment
or Disposal of Long-lived Assets,” which established a “primary asset” approach to determine the cash flow estimation
period for a group of assets and liabilities that represents the unit of accounting for a long-lived asset to be held and used.
 Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of an asset may not be recoverable.  The carrying amount of a long-lived asset is not recoverable if it
exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.  Long-lived
assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.



Income Taxes



The Company has adopted Accounting Standards
Codification subtopic 740-10, Income Taxes (“ASC 740-10”) which requires the recognition of deferred tax liabilities
and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns.
Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and
tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Temporary
differences between taxable income reported for financial reporting purposes and income tax purposes consist primarily of derivative
liability and stock compensation accounting versus tax differences.



F-12

---



Comprehensive Income



The Company does not have any items of comprehensive income in any
of the periods presented.



Net Loss per Common Share, basic and diluted



The Company has adopted Accounting Standards
Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”) specifying the computation, presentation and disclosure
requirements of earnings per share information. Basic loss per share has been calculated based upon the weighted average number
of common shares outstanding. Stock options and warrants have been excluded as common stock equivalents in the diluted loss per
share because their effect is anti-dilutive on the computation. Fully diluted shares outstanding were 27,167,539 and 17,647,210
for the years ended December 31, 2010 and 2009, respectively.



Stock based compensation



The Company follows Accounting Standards Codification subtopic 718-10,
Compensation (“ASC 718-10”) which requires that all share-based payments to both employees and non employees be recognized
in the income statement based on their fair values.  (See note 11)



As of December 31, 2010, there were outstanding
stock options to purchase 2,025,544 shares of common stock, 1,538,995 shares of which were vested.



Concentrations of Credit Risk



The Company’s financial instrument that
is exposed to a concentration of credit risk is cash and accounts receivable.  Effective December 31, 2010 and extending
through December 31, 2012, all non-interest-bearing transaction accounts are fully insured by the Federal Deposit Insurance Corporation
(FDIC), regardless of the balance of the account. Generally, the Company’s cash and cash equivalents in interest-bearing
accounts does not exceed FDIC insurance limits. The financial stability of these institutions is periodically reviewed by senior
management.



As of December 31, 2010, one customer represented
53% of the Company’s accounts receivable. As of December 31, 2009, one customer represented 65% of the Company’s accounts
receivable



The Company’s revenues earned from sale
of products and services for the year ended December 31, 2010 included 48% and 32% of the Company’s total revenues from two
customers. For the year ended December 31, 2009, Company’s revenues earned from sale of products and services included 57%
and 33% of the Company’s total revenues from two customers



Reliance on Key Personnel and Consultants



The Company has 7 full-time employees and no
part-time employees.   The Company is heavily dependent on the continued active participation of these current executive
officers, employees and key consultants. The loss of any of the senior management or key consultants could significantly and negatively
impact the business until adequate replacements can be identified and put in place.



Research and Development



The Company accounts for research and development
costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”).
Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and
development costs are expensed as incurred.  Third-party research and development costs are expensed when the contracted
work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored
research and development costs related to both present and future products are expensed in the period incurred. The Company
incurred research and development expenses of $1,467,078, $(508,811) and $63,825,651 for the years ended December 31, 2010 and
2009, and from August 12, 1999 (date of inception) to December 31, 2010, respectively. During the year ended December 31,
2009, the Company reversed a previous accrual for possible



F-13

---



litigation to research and development expenses
for $3,000,000.



Research Grants



On November 1, 2010,
Bioheart, Inc. (the “Company”) received written notice of approval of a grant in the approximate amount of $244,500
under the qualifying therapeutic discovery project under section 48D of the Internal Revenue code. This is being shown as Other
income.



Fair Value



Accounting Standards Codification subtopic
825-10, Financial Instruments (“ASC 825-10”) requires disclosure of the fair value of certain financial instruments.
The carrying value of cash and cash equivalents, accounts payable and accrued liabilities, and short-term borrowings, as reflected
in the balance sheets, approximate fair value because of the short-term maturity of these instruments.  All other significant
financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the financial
statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk
and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed;
otherwise only available information pertinent to fair value has been disclosed.



The company follows Accounting Standards Codification
subtopic 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) and Accounting Standards Codification subtopic
825-10, Financial Instruments (“ASC 825-10”), which permits entities to choose to measure many financial instruments
and certain other items at fair value. Neither of these statements had an impact on the Company’s financial position, results
of operations nor cash flows.



Reclassification



Certain reclassifications have been made to
prior periods’ data to conform with the current year’s presentation. These reclassifications had no effect on reported
income or losses.



Recent Accounting Pronouncements



There were various other updates recently issued,
most of which represented technical corrections to the accounting literature or application to specific industries and are not
expected to a have a material impact on the Company's consolidated financial position, results of operations or cash flows.



NOTE 2 – RESTATEMENT

The accompanying consolidated
Balance Sheet, Statement of Operations and Statement of Cash Flows for the year ended December 31, 2009 have been restated to correct
the accounting treatment of Company issuances of warrants in connection with notes payable in the from 2007 through 2009. These
changes correct the allocated fair value assigned to the issued warrants and the a change in the treatment from a recorded asset
(deferred financing costs) to a debt discount shown net with the related notes payable.

F-14

---



Consolidated Balance Sheet
December 31, 2009





|                                             |  |                        |              |            |   |            |   |             |              |  |   |              |  
|-------------------------------------------- |  | ---------------------- | ------------ | ---------- | - | ---------- | - | ----------- | ------------ |  | - | ------------ | -
|                                             |  | As Previously Reported |              | Adjustment |   | Reference  |   | As Restated |             
|ASSETS:                                      |  |                        |              |            |   |            |   |             |             
|Total current assets                         |  | $                      | 299,793      |            | $ | 143,130    |   |             | (6)          |  | $ | 442,953      |  
|                                             |  |                        |              |            |   |            |   |             |              |  |   |              |  
|Plant and equipment, net                     |  |                        | 104,397      |            |   | -          |   |             |              |  |   | 104,397      |  
|                                             |  |                        |              |            |   |            |   |             |              |  |   |              |  
|Deferred loan costs, net                     |  |                        | 1,250,106    |            |   | (1,250,106 | ) |             | (1)          |  |   | -            |  
|Other assets                                 |  |                        | 212,014      |            |   | (143,130   | ) |             | (6)          |  |   | 68,854       |  
|                                             |  |                        |              |            |   |            |   |             |              |  |   |              |  
|Total assets                                 |  | $                      | 1,866,310    |            |   | (1,250,106 | ) |             |              |  | $ | 616,204      |  
|                                             |  |                        |              |            |   |            |   |             |              |  |   |              |  
|LIABILITIES AND STOCKHOLDERS' DEFICIT        |  |                        |              |            |   |            |   |             |              |  |   |              |  
|Current liabilities:                         |  |                        |              |            |   |            |   |             |              |  |   |              |  
|Accounts payable and accrued expenses        |  | $                      | 5,442,139    |            |   | -          |   |             |              |  | $ | 5,442,139    |  
|Customer deposits                            |  |                        | 507,281      |            |   | -          |   |             |              |  |   | 507,281      |  
|Notes payable                                |  |                        | 4,051,861    |            |   | (1,234,113 | ) |             | (1), (2)     |  |   | 2,817,748    |  
|Total current liabilities                    |  |                        | 10,001,281   |            |   | (1,234,113 | ) |             |              |  |   | 8,767,168    |  
|                                             |  |                        |              |            |   |            |   |             |              |  |   |              |  
|Long term debt                               |  |                        | 5,277,400    |            |   | -          |   |             |              |  |   | 5,277,400    |  
|                                             |  |                        |              |            |   |            |   |             |              |  |   |              |  
|Total liabilities                            |  |                        | 15,278,681   |            |   | (1,234,113 | ) |             |              |  |   | 14,044,568   |  
|                                             |  |                        |              |            |   |            |   |             |              |  |   |              |  
|Shareholders' deficit                        |  |                        |              |            |   |            |   |             |              |  |   |              |  
|Common stock                                 |  |                        | 20,036       |            |   | -          |   |             |              |  |   | 20,036       |  
|Additional paid in capital                   |  |                        | 87,196,374   |            |   | 579,526    |   |             | (2), (3),(4) |  |   | 87,775,900   |  
|Subscription receivable                      |  |                        |              |            |   | (59,536    | ) |             |              |  |   | (59,536      | )
|Deficit accumulated during development stage |  |                        | (100,628,781 | )          |   | (535,983   | ) |             | (2), (3) (4) |  |   | (101,164,764 | )
|Total shareholders' deficit                  |  |                        | (13,412,371  | )          |   | (15,993    | ) |             |              |  |   | (13,428,364  | )
|                                             |  |                        |              |            |   |            |   |             |              |  |   |              |  
|Total liabilities and stockholders' deficit  |  | $                      | 1,866,310    |            | $ | (1,250,106 | ) |             |              |  | $ | 616,204      |  



F-15

---



Consolidated Statement
of Operations
For the Year Ended December 31, 2009

|                                                                       |  |                        |            |            |   |            |   |             |         |  |   |            |  
|---------------------------------------------------------------------- |  | ---------------------- | ---------- | ---------- | - | ---------- | - | ----------- | ------- |  | - | ---------- | -
|                                                                       |  | As Previously Reported |            | Adjustment |   | Reference  |   | As Restated |        
|Revenue                                                                |  | $                      | 359,800    |            | $ | -          |   |             |         |  | $ | 359,800    |  
|Cost of sales                                                          |  |                        | 205,014    |            |   | -          |   |             |         |  |   | 205,014    |  
|Gross profit                                                           |  |                        | 154,786    |            |   |            |   |             |         |  |   | 154,786    |  
|                                                                       |  |                        |            |            |   |            |   |             |         |  |   |            |  
|Operating expenses                                                     |  |                        | 4,763,879  |            |   | (2,835,771 | ) |             | (4),(5) |  |   | 1,928,108  |  
|                                                                       |  |                        |            |            |   |            |   |             |         |  |   |            |  
|Loss from operations                                                   |  |                        | (4,609,093 | )          |   | (2,835,771 | ) |             |         |  |   | (1,773,322 | )
|                                                                       |  |                        |            |            |   |            |   |             |         |  |   |            |  
|Other income (expense):                                                |  |                        |            |            |   |            |   |             |         |  |   |            |  
|Interest income                                                        |  |                        | 21         |            |   | -          |   |             |         |  |   | 21         |  
|Litigation accrual reversal                                            |  |                        | 3,000,000  |            |   | (3,000,000 | ) |             | (5)     |  |   | -          |  
|Interest expense                                                       |  |                        | (2,235,177 | )          |   | (427,278   | ) |             | (2)     |  |   | (2,662,455 | )
|                                                                       |  |                        |            |            |   |            |   |             |         |  |   |            |  
|Net loss before income taxes                                           |  |                        | (3,844,249 | )          |   | (591,507   | ) |             |         |  |   | (4,435,756 | )
|                                                                       |  |                        |            |            |   |            |   |             |         |  |   |            |  
|Income taxes (benefit)                                                 |  |                        | -          |            |   | -          |   |             |         |  |   | -          |  
|                                                                       |  |                        |            |            |   |            |   |             |         |  |   |            |  
|NET LOSS                                                               |  | $                      | (3.844.249 | )          | $ | (591,507   | ) |             |         |  | $ | (4,435,756 | )
|                                                                       |  |                        |            |            |   |            |   |             |         |  |   |            |  
|Loss per common share, basic and fully diluted                         |  |                        | (0.21      | )          |   | (0.04      | ) |             |         |  |   | (0.25      | )
|                                                                       |  |                        |            |            |   |            |   |             |         |  |   |            |  
|Weighted average number of shares outstanding, basic and fully diluted |  |                        | 17,647,210 |            |   |            |   |             |         |  |   | 17,647,210 |  



F-16

---





Consolidated Statement
of Cash Flows
For the Year Ended December 31, 2009

|                                                                            |  |                        |            |            |   |           |   |             |     |  |   |            |  
|--------------------------------------------------------------------------- |  | ---------------------- | ---------- | ---------- | - | --------- | - | ----------- | --- |  | - | ---------- | -
|                                                                            |  | As Previously Reported |            | Adjustment |   | Reference |   | As Restated |    
|Cash flows from operating activities:                                       |  |                        |            |            |   |           |   |             |     |  |   |            |  
|Net loss                                                                    |  | $                      | (3,844,249 | )          | $ | (591,507  | ) |             | (2) |  | $ | (4,435,756 | )
|Adjustments to reconcile net loss to net cash used in operating activities: |  |                        |            |            |   |           |   |             |     |  |   |            |  
|Stock based compensation                                                    |  |                        | 132,609    |            |   | 164,229   |   |             | (4) |  |   | 296,838    |  
|Amortization of warrants issued in connection with notes payable            |  |                        | 545,070    |            |   | 427,278   |   |             | (2) |  |   | 972,348    |  
|All other operating activities (unchanged)                                  |  |                        | 1,140,370  |            |   |           |   |             |     |  |   | 1,140,370  |  
|Net cash used in operations                                                 |  |                        | (2.026,200 | )          |   | -         |   |             |     |  |   | (2,026,200 | )
|                                                                            |  |                        |            |            |   |           |   |             |     |  |   |            |  
|Cash flows from investing activities (unchanged)                            |  |                        | (688       | )          |   | -         |   |             |     |  |   | (688       | )
|                                                                            |  |                        |            |            |   |           |   |             |     |  |   |            |  
|Cash flows from financing activities (unchanged)                            |  |                        | 2,051,828  |            |   | -         |   |             |     |  |   | 2,051,828  |  
|                                                                            |  |                        |            |            |   |           |   |             |     |  |   |            |  
|Net increase in cash and cash equivalents                                   |  |                        | 24,940     |            |   | -         |   |             |     |  |   | 24,940     |  
|Cash and cash equivalents, beginning of period                              |  |                        | 50,091     |            |   | -         |   |             |     |  |   | 50,091     |  
|Cash and cash equivalents, end of period                                    |  | $                      | 75,031     |            |   | -         |   |             |     |  | $ | 75,031     |  



(1) Reclassify determined allocated fair value of warrants from
asset to debt discount reflected net of notes payable





F-17

---



on balance sheet

(2) Correction of the determined fair value of warrants and related
amortization

(3) Correction of amortization of determined debt discount for current
and (Balance sheet) prior years

(4) Correction of fair value of vested employee options

(5) Reclassify gain on litigation accrual to operating expenses

(6) Reclassify inventory from other to current assets

Consolidated Statement of Operations
From August 12, 1999 (date of Inception) to December 31, 2009

|                                     |  |                           |  |                           |  |           |  |                                  
|------------------------------------ |  | ------------------------- |  | ------------------------- |  | --------- |  | ---------------------------------
|                                     |  | As previously reported    |  | Adjustment                |  | Reference |  | As restated                      
|                                     |  |                           |  |                           |  |           |  |                                  
|Revenue                              |  | $             1,144,673   |  | $                       - |  |           |  | $                       1,144,673
|Cost of sales                        |  | 530,375                   |  | -                         |  |           |  | 530,375                          
|Gross profit                         |  | 614,298                   |  |                           |  |           |  | 614,298                          
|                                     |  |                           |  |                           |  |           |  |                                  
|Operating expenses:                  |  |                           |  |                           |  |           |  |                                  
|Research and development             |  | 65,358,573                |  | (3,000,000)               |  | 1         |  | 62,358,573                       
|Marketing, general and adminstrative |  | 30,600,096                |  | 164,229                   |  | 2         |  | 30,764,325                       
|Depreciation and amortization        |  | 794,404                   |  | -                         |  |           |  | 794,404                          
|Total operating expenses             |  | 96,753,073                |  | (2,835,771)               |  |           |  | 93,917,302                       
|                                     |  |                           |  |                           |  |           |  |                                  
|Net loss from operations             |  | (96,138,775)              |  | (164,229)                 |  |           |  | (93,303,004)                     
|                                     |  |                           |  |                           |  |           |  |                                  
|Other income (expenses):             |  |                           |  |                           |  |           |  |                                  
|Development revenues                 |  | 117,500                   |  | -                         |  |           |  | 117,500                          
|Interest income                      |  | 762,275                   |  | -                         |  |           |  | 762,275                          
|Reversal of Litigation Accrual       |  | 3,000,000                 |  | (3,000,000)               |  | 1         |  | -                                
|Interest expense                     |  | (8,369,782)               |  | (371,754)                 |  | 3         |  | (8,741,536)                      
|Total other income (expenses)        |  | (4,490,007)               |  | (3,371,754)               |  |           |  | (7,861,761)                      
|                                     |  |                           |  |                           |  |           |  |                                  
|Net loss before income taxes         |  | (100,628,782)             |  | (3,535,983)               |  |           |  | (101,164,765)                    
|                                     |  |                           |  |                           |  |           |  |                                  
|Income taxes (benefit)               |  | -                         |  |                           |  |           |  | -                                
|                                     |  |                           |  |                           |  |           |  |                                  
|NET LOSS                             |  | $           (100,628,782) |  | $       (535,983)         |  |           |  | $           (101,164,765)        
|                                     |  |                           |  |                           |  |           |  |                                  
|                                     |  |                           |  |                           |  |           |  |                                  

Consolidated Statement of Cash flow
From August 12, 1999 (date of Inception) to December 31, 2009

|                                                                            |  |                        |  |             |  |           |   |               
|--------------------------------------------------------------------------- |  | ---------------------- |  | ----------- |  | --------- | - | --------------
|                                                                            |  |                        |  |             |  |           |   |               
|CASH FLOWS FROM OPERATING ACTIVITIES:                                       |  | As previously reported |  | Adjustment  |  | Reference |   | As restated   
|Net loss                                                                    |  | $  (100,628,781)       |  | $(535,982)  |  | 4         |   | $(101,164,763)
|Adjustments to reconcile net loss to net cash
used in operating activities: |  | -                      |  |             |  |           |   | -             
|Litigation settlement                                                       |  | (3,000,000)            |  | 3,000,000   |  | 1         |   | -             
|Amortization of warrants issued in connection with notes payable            |  | 3,716,378              |  | 371,753     |  | 3         |   | 4,088,131     
|Stock based compensation                                                    |  | 9,052,328              |  | 164,229     |  | 2         |   | 9,216,557     
|All other operating activities                                              |  | 15,730,534             |  | -           |  |           |   | 15,730,534    
|Accrued expenses and deferred rent                                          |  | 6,848,888              |  | (3,000,000) |  |           |   | 3,848,888     
|Net cash used in operating
activities                                       |  | (68,280,653)           |  | -           |  | -         |   | (68,280,653)  
|                                                                            |  |                        |  |             |  |           |   |               
|CASH FLOWS FROM INVESTING
ACTIVITIES:                                       |  |                        |  |             |  |           |  
|Net cash used in investing activities unchanged                             |  | (898,800)              |  |             |  |           |   | (898,800)     
|Net cash used in investing
activities                                       |  | (898,800)              |  | -           |  | -         |   | (898,800)     
|                                                                            |  |                        |  |             |  |           |   |               
|CASH FLOWS FROM FINANCING
ACTIVITES:                                        |  |                        |  |             |  |          
|Net cash provided in financing activities unchanged                         |  | 69,254,485             |  |             |  |           |   | 69,254,485    
|Net cash provided in financing
activities                                   |  | 69,254,485             |  | -           |  | -         |   | 69,254,485    
|Net increase in cash and cash equivalents                                   |  | 75,032                 |  | -           |  | -         |   | 75,032        
|Cash and cash equivalents,
beginning of period                              |  |                        |  |             |  |           | - |               
|Cash and cash equivalents, end of period                                    |  | 75,032                 |  | -           |  | -         |   | 75,032        
|                                                                            |  |                        |  |             |  |           |   |               
|                                                                            |  |                        |  |             |  |           |   |               

(1)  Reclassify gain on litigation accrual to operating expenses

(2) Correction of fair value of vested employee options

(3) Correction of the determined fair value of warrants and related
amortization and out of this $55,524 income relates for year prior to 2009

(4)  Correction of amortization of determined debt discount for prior
years





NOTE 3 – GOING CONCERN MATTERS



The accompanying consolidated financial statements
have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business. As shown in the accompanying consolidated financial statements during year ended December 31, 2010,
the Company incurred net losses attributable to common shareholders of $5,159,456 and used $1,894,245 in cash for operating activities during
year ended December 31, 2010. These factors among others may indicate that the Company will be unable to continue as a going concern
for a reasonable period of time.



The Company’s existence is dependent
upon management’s ability to develop profitable operations and to obtain additional funding sources. There can be no assurance
that the Company’s financing efforts will result in profitable operations or the resolution of the Company’s liquidity
problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue
as a going concern.



NOTE 4 – INVENTORY



Inventory consists
of raw materials. Costs of raw materials are determined using the FIFO method. Inventory is stated at the lower of costs
or market(estimated net realizable value).



NOTE 5 – PREPAID AND OTHER CURRENT ASSETS



Prepaid expenses and other current assets as of December 31, 2010
and December 31, 2009 primarily consisted of payments on corporate insurance policies.



NOTE 6 – PROPERTY AND EQUIPMENT



Property and equipment as of December 31, 2010 and 2009 is
summarized as follows:



|                                               |  | 2010 |          | 2009
|---------------------------------------------- |  | ---- | -------- | ----
|Laboratory and medical equipment               |  | $    | 352,358  |     
|Furniture, fixtures and equipment              |  |      | 130,916  |     
|Computer equipment                             |  |      | 53,481   |     
|Leasehold improvements                         |  |      | 362,046  |     
|                                               |  |      | 898,801  |     
|Less accumulated depreciation and amortization |  |      | (851,362 | )   
|                                               |  | $    | 47,439   |     



The Company incurred depreciation and amortization
expenses of $56,958, $177,398 and $851,362 for the years ended December 31, 2010 and 2009, and from August 12, 1999 (date of inception)
to December 31, 2010, respectively.



Property and equipment are recorded on the
basis of cost. For financial statement purposes, property, plant and equipment are depreciated using the straight-line method over
their estimated useful lives.



Expenditures for repair and maintenance which
do not materially extend the useful lives of property and equipment are charged to operations. When property or equipment is sold
or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts with the resulting
gain or loss reflected in operations. Management periodically reviews the carrying value of its property and equipment for impairment.



F-18



---







NOTE 7 – ACCRUED EXPENSES



Accrued expenses consisted of the following as of December 31,
2010 and 2009:



|                                                                                                                                      |  | 2010 |           | 2009
|------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | --------- | ----
|License and royalty fees                                                                                                              |  | $    | 1,090,000 |     
|Amounts payable to the Guarantors of the Company’s loan agreement with Bank of America and Seaside Bank,, including fees and interest |  |      | 1,102,941 |     
|Interest payable on notes payable                                                                                                     |  |      | 595,342   |     
|Vendor accruals                                                                                                                       |  |      | 582,403   |     
|Employee commissions, compensation, etc                                                                                               |  |      | 208,239   |     
|Other                                                                                                                                 |  |      | 2,520     |     
|                                                                                                                                      |  | $    | 3,581,445 |     





NOTE 9 – NOTES PAYABLE



Notes payable were comprised of the following
as of December 31, 2010 and 2009:



|                                                                                                                                                                                 |  | 2010 |            | 2009
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ----
|Bank of America note payable. Terms described below                                                                                                                              |  | $    | —          |     
|Seaside Bank note payable.  Terms described below                                                                                                                                |  |      | 980,000    |     
|BlueCrest Capital Finance note payable. Monthly payments of principal and interest as described below., net of unamortized debt discount of $317,709 and $1,097,126 respectively |  |      | 1,958,834  |     
|Short-term note payable, net of unamortized debt discount of  $58,708 and $136,986 respectively.  Terms described below                                                          |  |      | 1,326,264  |     
|                                                                                                                                                                                 |  |      | 4,265,098  |     
|Less current portion                                                                                                                                                             |  |      | (3,232,271 | )   
|Notes payable  – long term                                                                                                                                                       |  | $    | 1,032,827  |     



Notes payable at December
31, 2010 mature as follows:



|2011 |  | $ | 3,232,271 | 
|---- |  | - | --------- | 
|2012 |  |   | 1,032,827 | 
|     |  |   |           | 
|     |  | $ | 4,265,098 | 



Bank of America Note Payable



On June 1, 2007, the Company entered into
a loan agreement with Bank of America, N.A. for an eight month, $5.0 million term loan, to be used for working capital purposes.
The loan bears interest at the annual rate of the Bank of America prime rate plus 1.5%. As consideration for the loan, the Company
paid Bank of America a fee of $100,000. Effective as of January 31, 2008, the maturity date of the loan was extended until June
1, 2008. As consideration for this extension of the maturity date of the loan, the Company paid Bank of America a fee of $50,000.
Effective as of June 1, 2008, Bank of America agreed to extend the maturity date of the loan until January 5, 2009. As consideration
for this extension of the maturity date of the loan, the Company paid Bank of America a fee of $75,000. Effective January 5, 2009,
Bank of America agreed to extend the maturity date of the loan until July 6, 2009. As consideration
for this extension of the maturity date of the loan, the Company paid Bank of America a fee of $50,000. Effective July 6, 2009,
Bank of America agreed to extend the maturity of the loan until January 5, 2010. As consideration for this extension of the maturity
date of the loan, the Company paid Bank of America a fee



F-19

---



of $25,000 and was recorded as loan discount.
Effective January 5, 2010, Bank of America agreed to extend the maturity of the loan until July 6, 2010. As consideration for this
extension of the maturity date of the loan, the Company paid Bank of America a fee of $25,000. Under the terms of the loan, Bank
of America is entitled to receive a semi-annual payment of interest and all outstanding principal and accrued interest by the maturity
date. The interest rate at December 31, 2010 was 4.5% per annum.



The Company has provided no collateral for
the loan. On June 1, 2007, for the Company’s benefit, the Company’s former Chairman
of the Board, Chief Executive Officer and Chief Technology Officer and his spouse, certain other members of the Company’s
Board of Directors and one of the Company’s shareholders (the “Guarantors”) provided collateral to guarantee
the loan. Except for a $1.1 million personal guaranty (backed by collateral) provided by the Company’s former Chairman
of the Board, Chief Executive Officer and Chief Technology Officerand his spouse, these guarantees are limited to the collateral
each provided to the lender.



The Company and Bank of America agreed with
BlueCrest Capital Finance, L.P., the lender of the BlueCrest Loan (described below), that the Company will not individually make
any payments due under the Bank of America loan while the BlueCrest Loan is outstanding. For the Company’s benefit, the Guarantors
agreed to provide Bank of America in the aggregate up to $5.5 million of funds and/or securities to make these payments.



The Company agreed to reimburse the Guarantors
with interest at an annual rate of the prime rate plus 5.0% for any and all payments made by them under the Bank of America loan
as well as to pay them certain cash fees in connection with their provision of collateral to guarantee the loan. Upon entering
into the loan agreement in 2007, the Company issued to each Guarantor warrants to purchase 3,250 shares of common stock at an exercise
price of $7.69 per share for each $100,000 of principal amount of the loan guaranteed by such Guarantor. The warrants have a ten-year
term and became exercisable one year following the date the warrants were issued. Warrants to purchase an aggregate of 216,095
shares of common stock were issued to the Guarantors in 2007. These warrants had an aggregate fair value of $1,437,638, which amount
was accounted for as additional paid in capital and reflected as a component of deferred loan costs and amortized as interest expense
over the initial term of the loan using the effective interest method. As discussed below, certain of these Guarantors were replaced
in September 2007. The unamortized fair value of the warrants issued to the Guarantors that were replaced, which was previously
reflected as a component of deferred loan costs, was recorded as interest expense in September 2007.



In September 2007, a member of the Company’s
Board of Directors and two of the Company’s shareholders agreed to provide collateral valued at $750,000, $600,000 and $500,000,
respectively, to secure the loan. The collateral provided by these new Guarantors fully replaced the collateral originally provided
by one of the members of the Company’s Board of Directors and partially replaced the collateral originally provided by another
member of the Company’s Board of Directors whose collateral now secures $400,000 of the loan. In consideration for providing
the collateral, the Company issued to the new Guarantors warrants to purchase 3,250 shares of common stock at an exercise price
of $7.69 per share for each $100,000 of principal amount of the loan guaranteed by such new Guarantor. The warrants have a ten-year
term and became exercisable one year following the date the warrants were issued. Warrants to purchase an aggregate of 60,118 shares
of the Company’s common stock were issued to the new Guarantors. These warrants had an aggregate fair value of $380,482,
which was accounted for as additional paid in capital and reflected as a component of deferred loan costs and amortized as interest
expense ratably over the initial term of the loan.



In accordance with the provisions of the warrants
issued to the Guarantors, the aggregate number of shares of common stock underlying such warrants increased on September 30, 2007
as the Bank of America loan remained outstanding at that date. The additional 38,861 warrant shares had an aggregate fair value
of $244,463. The portion of this amount attributed to the Guarantors that were replaced in September 2007 was accounted for as
additional paid in capital and immediately recorded as interest expense with the remainder accounted for as additional paid in
capital and reflected as a component of deferred loan costs and amortized as interest expense ratably over the initial term of
the loan.



In October 2007, the Company's former Chairman,
Chief Executive Officer and Chief Technology Officer and his spouse agreed to provide an additional $2.2 million limited personal
guarantee of the loan and pledged securities





F-20

---



accounts to backup this limited personal guarantee.
The additional collateral provided by the former Company's Chairman, Chief Executive Officer and Chief Technology Officer and his
spouse fully replaced the collateral provided by one of the original Guarantors. The Company's former Chairman, Chief Executive
Officer and Chief Technology Officer and his spouse have now personally guaranteed an aggregate of $3.3 million of the loan. The
Company's agreement with the Company's former Chairman, Chief Executive Officer and Chief Technology Officer and his spouse with
respect to the additional collateral is substantially similar to the Company's agreement with them in connection with the $1.1
million personal guarantee they originally provided in June 2007. In consideration for providing the collateral, the Company issued
to the Company's former Chairman, Chief Executive Officer and Chief Technology Officer and his spouse, a warrant to purchase 81,547
shares of the Company's common stock at an exercise price of $7.69 per share. The warrant has a ten-year term and became exercisable
one year following the date the warrant was issued. The warrant had a fair value of $516,193, which was accounted for as additional
paid in capital and reflected as a component of deferred loan costs and amortized as interest expense ratibly over the initial
term of the loan.



As a result of this replacement of the collateral
originally provided by one of the original Guarantors in October 2007, the unamortized fair value of the warrant to purchase 81,548
shares of the Company's common stock at an exercise price of $7.69 per share issued to that Guarantor was recorded as interest
expense in October 2007. In October 2007, the Company cancelled the warrant previously issued to such original Guarantor, which
warrant included the adjustment provisions discussed above, and, in exchange, issued to them a warrant to purchase 101,934 shares
of the Company's common stock at an exercise price of $7.69 per share, which new warrant does not contain the adjustment provisions
discussed above. The additional 20,386 warrant shares had an aggregate fair value of $128,228, which was accounted for as additional
paid in capital and immediately recorded as interest expense.



In accordance with the provisions of the warrants
issued to the Guarantors, the aggregate number of shares of common stock underlying such warrants increased on June 1, 2008 as
the Bank of America loan remained outstanding at that date. The additional 78,773 warrant shares had an aggregate fair value of
$168,387. The portion of this amount attributed to the Guarantors that were replaced in September 2007 was accounted for as additional
paid in capital and immediately recorded as interest expense with the remainder accounted for as additional paid in capital and
reflected as a component of deferred loan costs to be amortized as interest expense ratably over the term of the loan. In the event
that as of the second anniversary and third anniversary of the closing date of the loan, the Company has not reimbursed the Guarantors
in full for payments made by them in connection with the loan, the number of shares subject to the warrants will further increase.



The amount of interest expense on the principal
amount of the loan for the years ended December 31, 2010 and 2009 totaled approximately $93,000 and $127,000, respectively. Fees
and interest earned by the Guarantors, which are recorded as interest expense, for the years ended December 31, 2010 and 2009 totaled
approximately $262,000 and $524,000, respectively. Interest due on the principal amount of the loan has been paid by the Guarantors.
As of December 31, 2010 and 2009, that amount totaled approximately $744,000 and $692,000, respectively, and was included in accrued
expenses at those dates.



In March 2009, the Company’s former Chairman
and his former spouse repaid $3.0 million of principal and a pro rata portion of accrued interest on behalf of the Company. The
Company now owes this $3.0 million to the Company's former Chairman and his former spouse. This liability is reflected on the Company’s
consolidated balance sheet on a separate line titled “Subordinated related party loan.” This amount will also accrue
interest at an annual rate of the prime rate plus 5.0%.



During the year ended December 31, 2010,
$1,500,000, along with accrued expenses, was converted to 3,136,520  shares of restricted common stock and 940,956 warrants. The
remaining $1,500,000 is outstanding as of December 31, 2010. The issued shares have been included under common stock issued
under bank guarantor obligation liabilities in the stockholders’ equity statement.



In March of 2010, one of the Guarantors paid
directly to Bank of America the $672,000 of the loan that he had been guaranteeing, and a pro rata portion of accrued interest
on behalf of the Company. That Guarantor agreed to accept from the Company the equivalent of his payment to Bank of America as
1,657,910 shares of restricted common stock and 497,373 warrants along with his accrued expenses. The issued shares have been included
under common stock issued under bank guarantor obligation liabilities in the stockholders’ equity statement. With his acceptance of the restricted
common stock and



F-21

---



warrants, the former Guarantor owns 8% of the
Company. Thus, the outstanding obligation to Bank of America was reduced to $1.3 million plus interest.



The outstanding obligation
to Bank of America of $1.3 million plus interest was repaid in October 2010. On October 25, 2010 we
entered into a Loan Agreement with Seaside National Bank and Trust for a $980,000 loan at 4.25% per annum interest that was be
used to refinance the Company’s loan with Bank of America. The obligation was guaranteed by shareholders of the Company.
In addition,a member of the Company’s Board of Directorswhom was also one of the guarantors
of the Bank of America loan paid down the remaining debt of $367,244.



In connection with the Loan Agreement with Seaside Bank and Trust
Company, the Company made and delivered a promissory note in the principal amount of the loan that matures in one year. In connection
with the loan transaction with Seaside Bank and Trust Company, the Company entered into an Amended and Restated Loan and Security
Agreement with BlueCrest Venture Finance Master Fund Limited.



BlueCrest Capital Finance Note Payable



On June 1, 2007, the Company closed on
a $5.0 million senior loan from BlueCrest Capital Finance, L.P. with a term of 36 months which bears interest at an annual
rate of 12.85% (the “BlueCrest Loan”). The first three months required payment of interest only with equal principal
and interest payments over the remaining 33 months. As consideration for the loan, the Company issued to BlueCrest Capital
Finance, L.P. a warrant to purchase 65,030 shares of common stock at an exercise price of $7.69 per share. The warrant, which became
exercisable one year following the date the warrant was issued, has a ten year term. This warrant had a fair value of $455,483,
which was accounted for as additional paid in capital and reflected as a component of debt discount and is being amortized as interest
expense ratably over the term of the loan. The Company also paid the lender a fee of $100,000 to cover diligence and other costs
and expenses incurred in connection with the loan. On August 31, 2007, BlueCrest Capital Finance, L.P. assigned its rights, liabilities,
duties and obligations under the BlueCrest Loan and warrant to BlueCrest Venture Finance Master Fund Limited (“BlueCrest”).



The loan may be prepaid in whole but not in
part. However, the Company is subject to a prepayment penalty equal to 3% of the outstanding principal if the BlueCrest Loan is
prepaid during the first year of the loan, 2% of the outstanding principal if prepaid during the second year of the loan and 1%
of the outstanding principal if prepaid during the third year of the loan. As collateral to secure its repayment obligations under
the loan, the Company granted BlueCrest a first priority security interest in all of the Company’s assets, excluding intellectual
property but including the proceeds from any sale of any of the Company’s intellectual property. The loan has certain restrictive
terms and covenants including among others, restrictions on the Company’s ability to incur additional senior or pari-passu
indebtedness or make interest or principal payments on other subordinate loans.



In the event of an uncured event of default
under the loan, all amounts owed to BlueCrest are immediately due and payable and BlueCrest has the right to enforce its security
interest in the assets securing the loan. During the continuance of an event of default, all outstanding amounts under the loan
will bear interest (payable on demand) at an annual rate of the 14.85%. In addition, any unpaid amounts are subject, until paid,
to a service charge in an amount equal to two percent (2%) of the unpaid amount. Events of default include, among others, the Company’s
failure to timely make payments of principal when due, the Company’s uncured failure to timely pay any other amounts owing
to BlueCrest under the loan, the Company’s material breach of the representations and warranties contained in the loan agreement
and the Company’s default in the payment of any debt to any of its other lenders in excess of $100,000 or any other default
or breach under any agreement relating to such debt, which gives the holders of such debt the right to accelerate the debt.



The amount of interest expense on the principal
amount of the BlueCrest Loan for the years ended December 31, 2010 and 2009 totaled approximately $353,000 and $378,000, respectively.



On January 2, 2009, the Company failed to make
the monthly payment of principal and interest of approximately $181,000 due on such date. On January 28, 2009, the Company received
from BlueCrest notice of this event of



F-22

---



default (the “Default Notice”)
under the BlueCrest Loan. By reason of the stated event, BlueCrest demanded payment of a 2% late fee of approximately $3,600, together
with the principal and interest payment of approximately $181,000. On February 2, 2009, the Company received from BlueCrest notice
of acceleration of the outstanding principal amount of the BlueCrest Loan and demanded repayment in full of all outstanding principal
and accrued interest on the loan, including late fees, in the aggregate amount of $2,947,045. (The acceleration notice, together
with the Default Notice, are referred to as the “Notices”).



The Company and BlueCrest entered into an amendment
to the BlueCrest Loan as of April 2, 2009 (the “ BlueCrest Loan Amendment”), that, among other things, includes BlueCrest’s
agreement to forbear from exercising any of its rights or remedies regarding the defaults described in Notices (the “Forbearance”)
as long as there are no new defaults under the BlueCrest Loan, as amended.



The BlueCrest Loan Amendment, (a) increases
the amount of permitted unsecured indebtedness of the Company, (b) amended the amortization schedule for the Loan to provide for
interest-only payments until July 1, 2009, at which time monthly principal and interest payments of $262,692 will commence, and
(c) prohibits the Company from granting any lien against its intellectual property and grants to BlueCrest a lien against the Company’s
intellectual property that will become effective in the event of a default. In addition, the Company issued BlueCrest a warrant
to purchase 1,315,542 shares of the Company’s common stock at $0.53 per share. The fair value of the issued warrants of $539,676
was determined using the Black Scholes Option Pricing Model and was recorded as a debt discount and amortized ratably over the
term of the loan. In connection with the BlueCrest Loan Amendment the Company paid BlueCrest accrued interest in the aggregate
amount of $126,077. The Company also paid BlueCrest a fee of $15,000. Effective July 1, 2009, the Company and BlueCrest agreed
to enter into an amendment to the BlueCrest Loan to amend the amortization schedule for the Loan to provide for interest-only payments
until January 1, 2010, at which time monthly principal and interest payments of $139,728 will commence. In connection with that
Amendment the Company issued BlueCrest a warrant to purchase $600,000 of the Company’s common shares and paid a fee of $29,435.
The fair value of the issued warrants of $575,529 was determined using the Black Scholes Option Pricing Model and was recorded
as a debt discount and amortized ratably over the term of the loan.



Effective December 31, 2009, the Company and
BlueCrest entered into an amendment to the BlueCrest Loan to amend the amortization schedule for the Loan to provide for interest-only
payments until July 1, 2010, at which time monthly principal and interest payments of $139,728.82 will commence. In connection
with that Amendment, the Company issued BlueCrest a warrant to purchase $600,000 of the Company’s common shares and paid
a fee of $20,000. The Company also provided BlueCrest with a lien on its Intellectual Property. The fair value of the issued warrants
of $507,606 was determined using the Black Scholes Option Pricing Model and was recorded as a debt discount and amortized ratably
over the term of the loan.



Short-term Note Payable



On August 20, 2008, the Company borrowed $1.0
million from a third party pursuant to the terms of an unsecured Promissory Note and Agreement. Outstanding principal and interest
on the loan, which accrues at the rate of 13.5% per annum, is payable in one balloon payment upon the Company’s repayment
of the BlueCrest Loan, which is scheduled to mature in May 2010, however the Company is not obligated to make payments until BlueCrest
Loan is paid off. In the event the Company completes a private placement of its common stock and/or securities exercisable for
or convertible into its common stock which generates at least $19.0 million of gross proceeds, the Company may prepay, without
penalty, all outstanding principal and interest due under the loan using the same type of securities issued in the subject private
placement. Because repayment of the loan could occur within 12 months from the date of the balance sheet, the Company has classified
this loan as short term. Subject to certain conditions,at the end of each calendar quarter during the time the loan is
outstanding, the Company may, but is not required to, pay all or any portion of the interest accrued but unpaid as of such datewith shares of its common stock. In April 2009, as consideration for the authorization to amend certain documents related to the Note, the Company issued
to the Noteholder a warrant to purchase 451,053 shares of common stock at an exercise price of $0.5321 per share. The warrant, which became exercisable
immediately upon issuance, has a ten year term. This warrant had a fair value of $195,694, which was accounted for as additional paid in capital and reflected
as a component of debt discount and is being amortized as interest expense ratably over the term of the loan.



The amount of interest expense on the principal
amount of the loan for the year ended December 31, 2009 was approximately $187,000. The Company has not paid any of the interest
accrued to date under the Promissory Note and Agreement.



F-23

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In July 2009, Bruce Meyers and Dana Smith (jointly,
the “Lenders”) funded a total $120,000 loan to the Company. The Loan was in the nature of convertible debt and was
evidenced by an unsecured promissory note (the “Note”), that was convertible into common stock of the Company at a
price that was 22.5% less than the average of the closing bid prices for the Company’s shares for the five (5) days prior
to the Lenders’ election to exercise their conversion right under the Note. The Note was to bear interest at the rate of
10% per annum, with interest payable due at maturity. The terms sheet provides that all unpaid interest (and principal) will be
due and payable on the date that is the earlier to occur of the first anniversary of the closing date of the Loan or the closing
of a financing in an amount that is equal to or greater than $3.0 million that will satisfy the Company’s obligation under
its loan with BlueCrest. However, during the year ended December 31, 2009, the Lenders elected to convert the entire amount of
the Loan to shares of the Company’s common stock. Accordingly, the aggregate number of unregistered
and restricted sharesof the Company’s common stock issued in connection with, and as a
result of the conversion of, the Loan was 355,294 shares.The Company will have no obligation to file any registration statement
with respect to the shares, except that the Lenders will have customary “piggyback” registration rights.



In February 2009, Bruce Meyers and Robert Seguso
(jointly, the “Lenders”) funded the remaining $100,000 of a total $200,000 loan to the Company. The funds were delivered,
net of original issue discount in the amount of $10,000, pursuant to a terms sheet provided by Bruce Meyers, for a convertible
debt financing to be provided to the Company (the “Loan”). Although the terms sheet provided that the Lenders would
be provided a complete set of loan documentation, the Lenders delivered to the Company the entire net proceeds of the Loan, in
the amount of $190,000, in advance of receiving any documentation. The initial funding of $100,000 was made to the Company on January
21, 2009. However, the Company determined that it would not proceed with the Loan unless and until the Lenders funded the balance
of the net proceeds which was completed on February 3, 2009 and provided that the Board of Directors of the Company approved the
Loan, which approval was obtained on February 11, 2009.



The above Loan was in the nature of convertible
debt and was evidenced by an unsecured promissory note (the “Note”), that was convertible into common stock of the
Company at a price that was 22.5% less than the average of the closing bid prices for the Company’s shares for the five (5)
days prior to the Lenders’ election to exercise their conversion right under the Note. The Note was to bear interest at the
rate of 10% per annum, with interest payable due at maturity. The terms sheet provides that all unpaid interest (and principal)
will be due and payable on the date that is the earlier to occur of the first anniversary of the closing date of the Loan or the
closing of a financing in an amount that is equal to or greater than $3 million that will satisfy the Company’s obligation
under its loan with BlueCrest. However, during the year ended December 31, 2009, the Lenders elected to convert the entire amount
of the Loan to shares of the Company’s common stock.



In addition to the Note, the Company issued
to the Lenders 200,000 unregistered and restricted shares of the Company’s common stock. We believe that the offer and sale
of the securities is made only to accredited investors and, accordingly, is exempt from registration under Section 4(2) of the
Securities Act of 1933, as amended. The fair value of the issued shares were recorded as a debt discount and amortized ratably
over the term of the loan.



Prior to funding
the balance of the Loan, the Lenders delivered to the Company, on January 26, 2009, a notice electing to convert $100,000 of the
Loan intoshares of the Company’s common stock. The price per share for such election was
$0.50995. This required the issuance to the Lenders of 196,098 unregistered and restricted sharesof the Company’s
common stock.



On February 3, 2009,
contemporaneously with the funding of the remainder of the Loan, the Lenders delivered to the Company notice of their election
to convert the remainder of the Loan intoshares of the Company’s common stockat a price
per share of $0.5704. This required the issuance to the Lenders of 175,316 unregistered and restricted shares of the Company’s
common stock.



Accordingly, the
aggregate number of unregistered and restricted sharesof the Company’s common stock issued
in connection with, and as a result of the conversion of, the Loan was 571,414 shares.The Company will have no obligation
to file any registration statement with respect to the shares, except that the Lenders will have customary “piggyback”
registration rights.



F-24

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At December 31, 2010, the Company has outstanding
two notes payable with interest at 8% per annum due at maturity. The two notes, $61,150 and $323,822 are payable
in one balloon payment upon the date the Noteholder provides written demand, however the Company is not obligated to make payments
until the BlueCrest Loan is paid off.



Notes payable, related party



At December 31, 2010, the Company has outstanding
two related party notes payable with interest at 8% per annum due at maturity. The two notes, $125,000 and $100,000 are due on
October 22, 2012 and November 30, 2012, respectively, and are unsecured.



NOTE 10 -STOCKHOLDERS' EQUITY



On August 6, 2008, the Company amended its
Articles of Incorporation to increase the number of authorized shares of its common stock from 50 million to 75 million shares.
This amendment was approved by the Company’s shareholders at the Annual Meeting of Shareholders held on July 30, 2008.



In September 2007, by way of a written consent,
the Company’s shareholders holding a majority of its outstanding shares of common stock, the Company’s shareholders
approved an amendment to Bioheart’s Articles of Incorporation, increasing the number of authorized shares of capital stock
so that, following the reverse stock split that was effectuated on September 27, 2007, the Company had 50 million shares of common
stock authorized with a par value of $0.001 per share and five million shares of preferred stock authorized with a par value of
$0.001 per share.



On February 22, 2008 the Company completed
its initial public offering ("IPO") pursuant to which it sold 1,100,000 shares of common stock at a price per share of
$5.25 for net proceeds of approximately $1.45 million after deducting underwriter discounts of approximately $400,000 and offering
costs of approximately $3.92 million. The Consolidated Statement of Cash Flows for the year ended December 31, 2008 reflects the
Company’s receipt of approximately $4.24 million of “Proceeds from (payments for) initial public offering of common
stock, net”. The $4.24 million cash proceeds figure is approximately $2.79 million higher than the $1.45 million net proceeds
figure identified above due to payment of $2.79 million of various offering expenses prior to January 1, 2008.



In 2010, the Company also sold, in a private placement initiated in 2009, an aggregate of 1,512,890 shares of its common stock and warrants (the “Warrants”) to purchase 453,867 shares of its common stock for aggregate gross cash proceeds of approximately $852,964.  The Warrants are (i) exercisable solely for cash at a weighted average exercise price of $0.68 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time and from time to time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance.



In 2010, the Company issued, in connection with the conversion of $1,121,195 of debt an aggregate of 7,459,720 shares of its common stock and warrants (the “Warrants”) to purchase 3,729,860 shares of its common stock. The Warrants are (i) exercisable solely for cash at an exercise price of $0.15 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time and from time to time
during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance. The shares were issued under the same terms as the above mentioned private placement and therefore are included in issuance of common stock in the consolidated statement of shareholders deficit.



In 2010, the Company also sold, in a private placement, an aggregate of 1,553,885 shares of its common stock for aggregate gross cash proceeds of approximately $234,020.



In 2010, the Company also sold, in a private placement, an aggregate of 808,210 shares of its common stock and warrants (the “Warrants”) to purchase 404,105 shares of its common stock for aggregate gross cash proceeds of approximately $135,885.  The Warrants are (i) exercisable solely for cash at a weighted average exercise price of $0.20 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time and from time to time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance.



As of December 31, 2010 the Company recorded a Subscription Receivable, under the above mentioned private placement, of 20,000 shares of its common stock and warrants (the “Warrants”) to purchase 10,000 shares of its common stock for aggregate gross cash proceeds of approximately $3,800. The Warrants are (i) exercisable solely for cash at a weighted average exercise price of $0.23 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time and from time to time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance.



In 2010, the Company issued, in connection with services, an aggregate of 529,520 shares of its common stock and warrants (the “Warrants”) to purchase 158,856 shares of its common stock. The Warrants are (i) exercisable solely for cash at a weighted average exercise price of $0.78 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time and from time to time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance.



In 2010, the Company issued, in connection with the exercise of Stock Options, issued for Accounts Payables, an aggregate of 831,526 shares of its common stock.



In 2010, the Company issued, in connection with the Bank of America guarantor’s liability of $2,172,000 principal along with accrued expenses, an aggregate of 4,794,430 shares of its common stock and warrants (the “Warrants”) to purchase 1,438,329 shares of its common stock. The Warrants are (i) exercisable solely for cash at an weighted average exercise price of $0.74 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time and from time to time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance.



In December 2009,
the Company also sold, in a private placement an aggregate of 255,830 shares of its common stock and warrants (the “Warrants”)
to purchase 76,749 shares of its common stock for aggregate gross cash proceeds of approximately $188,996. The Warrants are (i)
exercisable solely for cash at a weighted average exercise price of $0.89 per share, (ii) non-transferable for six months following
issuance and (iii) exercisable, in whole or in part, at any time and from time to time during the period commencing on the date
that is six months and one day



F-25

---



following the date of issuance and ending on
the third year anniversary of the date of issuance.



In 2009, the Company
also sold, in a private placement initiated in 2008, an aggregate of 2,509,480 shares of its common stock and warrants (the
“Warrants”) to purchase 752,844 shares of its common stock for aggregate gross cash proceeds of approximately $1.74
million. The Warrants are (i) exercisable solely for cash at a weighted average exercise price of $0.83 per share, (ii) non-transferable
for six months following issuance and (iii) exercisable, in whole or in part, at any time and from time to time during the period
commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of
the date of issuance.In connection with the private placement, the Company paid to a finder who introduced certain investors
to the Company aggregate cash fees of $17,856 and warrants to purchase 26,592 shares of common stock at a weighted average exercise
price of $0.89 per share. The warrants issued to the finder have the same terms and conditions as the Warrants issued in the private
placement. The 2008 private placment was closed on October 31, 2009, with total capital raised of $3,887,032.



In 2008, the Company
also sold, in a private placement, an aggregate of 1,230,280 shares of its common stock and warrants (the “Warrants”)
to purchase 369,084 shares of its common stock for aggregate gross cash proceeds of approximately $2.14 million. The Warrants are
(i) exercisable solely for cash at a weighted average exercise price of $2.09 per share, (ii) non-transferable for six months following
issuance and (iii) exercisable, in whole or in part, at any time and from time to time during the period commencing on the date
that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance.In connection with the private placement, the Company paid to a finder who introduced certain investors to the Company aggregate
cash fees of $24,325 and warrants to purchase 24,325 shares of common stock at a weighted average exercise price of $1.95 per share.
The warrants issued to the finder have the same terms and conditions as the Warrants issued in the private placement.



In 2007, the Company sold 529,432 shares
of common stock at a price of $7.69 per share to various investors for net proceeds of approximately $3.9 million.



In 2006, the Company sold 1,069,699 shares
of common stock at a price of $7.69 per share to various investors. The Company also issued 63,566 shares in exchange for services
at a price ranging from $5.67 to $7.69 per share.



In 2005, the Company sold 1,994,556 shares
of common stock at a price of $5.67 per share to various investors. The Company also issued 1,210 shares in exchange for services
and issued 95,807 shares in exchange for debt at a price of $5.67 per share.



In 2004, the Company sold 808,570 shares of
common stock at a price of $5.67 per share to various investors. The Company also issued 1,854 shares to various vendors in exchange
for services valued at $10,500. The Company also issued 15,150 shares to the Company's Chairman of the Board as compensation for
services valued at $85,830.



In March 2003, the Company effected a recapitalization.
The recapitalization provided two shares of common stock for every one share issued as of that date. The Company's former Chairman
of the Board and founding shareholder, who owned 4,405,541 shares of common stock, did not participate in the recapitalization.
The number of shares and prices per share in the accompanying financial statements has been retroactively adjusted to reflect the
effect of the recapitalization.



After the 2003 recapitalization, the Company
sold 561,701 shares of common stock at a price of $5.67 per share to various investors. The Company issued 72,980 shares valued
at $416,383 to employees as compensation for services related to the closing of various locations. The Company also issued 4,248
shares to various vendors in exchange for services valued at $24,066 and issued 67,073 shares to the Company's former Chairman
of the Board as compensation for services provided to the Company during 2003 and 2002. The shares were valued based on the underlying
market price of the common stock and did not differ materially from the fair value of the common stock issued.



In 2002, the Company sold 1,092,883 shares
of common stock at a price of $6.47 per share to various investors. The



F-26

---



Company also issued 35,137 shares to various
vendors in exchange for services valued at $227,503.



In 2001, the Company sold 985,668 shares of
common stock at a price of $6.47 per share to various investors. The Company also issued 8,291 shares to various vendors in exchange
for services valued at $54,001 and issued 81,084 shares to the Company's Chairman of the Board as compensation for services provided
to the Company during 2001.



In 2000, the Company sold 1,493,575 shares
of common stock at a price of $6.47 per share to various investors. Of the 1,493,575 shares sold in 2000, payment on 77,222 of
these shares was not received until January 2001. The Company also issued 7,964 shares to various vendors in exchange for services
valued at $52,001.



In 1999, the Company's former Chairman of the
Board and founding shareholder contributed $400,000 to the Company in exchange for 4,324,458 shares of common stock.



Former Chairman of the Board Paid in
and Contributed Capital



In 2006, the Company's former Chairman of the
Board was issued 2,903 shares of the Company's common stock at a price of $5.67 per share in exchange for $16,443 of services provided
during the year.



In 2005, the Company's former Chairman of the
Board was issued 95,807 shares of the Company's common stock at a price of $5.67 per share in exchange for $542,787 of debt due
to travel and other related expenses advanced by the Company's Chairman of the Board during the previous three years.



The Company's former Chairman of the Board
elected not to receive salary payments of $85,830, $130,000 and $250,000 for services provided to the Company during 2004, 2003
and 2002, respectively. Such amounts were converted into 15,150, 22,946 and 44,127 shares of the Company's common stock at a price
of $5.67 per share on December 31, 2004 and 2003, respectively, where the 2003 and 2002 shares were both issued in 2003. The shares
were valued based on the underlying market price of the common stock and did not differ materially from the fair value of the common
stock issued.



In 2001, the Company's former Chairman of the
Board also elected not to receive a salary payment or a stock conversion of $250,000 for services provided during 2001.



In 2000, the Company's former Chairman of the
Board contributed $800,000 to the Company and elected not to receive payment for $250,000 of salary related to services provided
to the Company during 2000. Such amounts were recorded as contributed capital during 2000. On June 28, 2001, the Company's Board
of Directors approved the conversion of this contributed capital and salary deferral into 81,084 shares of the Company's common
stock at a price of $12.94 per share.



NOTE 11 - STOCK OPTIONS AND WARRANTS



Stock Options



In July 2008, the Board
of Directors approved, subject to shareholder approval, the establishment of the Bioheart Omnibus Equity Compensation Plan (the
“Omnibus Plan”). The establishment of the Omnibus Plan was approved by the Company’s shareholders at the Annual
Meeting of Shareholders held on July 30, 2008. Pursuant to the Omnibus Plan, the Company may grant restricted stock, incentive
stock options, non-statutory stock options, stock appreciation rights, deferred stock, stock awards, performance shares, and other
stock-based awards consisting of cash, restricted stock or unrestricted stock in various combinations to the Company’s employees,
directors and consultants. 5,000,000 shares of common stock have been reserved for issuance under the Omnibus Plan. As of December
31, 2010, 4,500,000 shares remain available for issuance under the Omnibus Plan.



In December 1999, the
Company adopted two stock option plans; an employee stock option plan and a directors and consultants stock option plan (collectively
referred to as the “Stock Option Plans”), under which a total of 1,235,559 shares of common stock were reserved for
issuance upon exercise of options granted by the Company. In



F-27



---



2001, the Company
amended the Stock Option Plans to increase the total shares of common stock reserved for issuance to 1,698,894. In 2003, the Company
approved an increase of 308,890 shares, making the total 2,007,784 shares available for issuance under the Stock Option Plans.
In 2006, the Company approved an increase of 1,081,114 shares, making the total 3,088,898 shares available for issuance under the
Stock Option Plans. The Stock Option Plans provide for the granting of incentive and non-qualified options. The terms of stock
options granted under the Stock Option Plans are determined by the Compensation Committee of the Board of Directors at the time
of grant, including the exercise price, vesting provisions and contractual term of such options. The exercise price of incentive
stock options must equal at least the fair value of the common stock on the date of grant, and the exercise price of non-qualified
stock options may be no less than the per share par value. The options have terms of up to ten years after the date of grant and
become exercisable as determined upon grant, typically over either three or four year periods from the date of grant. Certain outstanding
options vested over a one-year period and some vested immediately. On February 24, 2010, by way of a written consent, the Company’s
Board of Directors amendedthe Directors and Consultants 1999 Stock Option Plan to extend the termination date of the Plan
to December 1, 2011. As of December 31, 2010, 559,835 shares remain available for issuance under the
Stock Option Plans.



A summary of options at
December 31, 2010 and activity during the year then ended is presented below:



|                                         |  |  | Shares     |   |  |   | Weighted-Average Exercise Price |  |  |  | Weighted-Average Remaining Contractual Term (in years) |  |  |  | Aggregate Intrinsic Value (1) | 
|---------------------------------------- |  |  | ---------- | - |  | - | ------------------------------- |  |  |  | ------------------------------------------------------ |  |  |  | ----------------------------- | 
|Options outstanding at January 1, 2010   |  |  | 2,119,431  |   |  | $ | 3.28                            |  |  |  | 5.4                                                    |  |  |  |                               | 
|Granted                                  |  |  | 1,764,940  |   |  | $ | 0.32                            |  |  |  |                                                        |  |  |  |                               | 
|Exercised                                |  |  | (831,526   | ) |  | $ | 0.001                           |  |  |  |                                                        |  |  |  |                               | 
|Forfeited/Expired                        |  |  | (1,027,301 | ) |  | $ | 2.62                            |  |  |  |                                                        |  |  |  |                               | 
|Options outstanding at December 31, 2010 |  |  | 2,025,544  |   |  | $ | 2.79                            |  |  |  | 6.8                                                    |  |  |  | 0                             | 
|Options exercisable at December 31, 2010 |  |  | 1,538,995  |   |  | $ | 3.48                            |  |  |  | 5.9                                                    |  |  |  | 0                             | 
|Available for grant at December 31, 2010 |  |  | 5,059,835  |   |  |   |                                 |  |  |  |                                                        |  |  |  |                               | 



(1)The aggregate intrinsic value represents the amount by which the fair market value of the
Company’s common stock exceeds the exercise price of options at December 31, 2010.



The weighted average fair
value of options granted in 2010 and 2009 was $0.46 and $0.66 per share, respectively. The total intrinsic value of options exercised
in 2010 and 2009 was $502,865 and $5,845, respectively.



For the twelve month period
ended December 31, 2010, the Company recognized a net $248,457 in expense. This amount consisted of $123,377 in stock-based compensation
that was included in research and development expenses, and $125,080 that was included in marketing, general and administrative
expenses. For the year ended December 31, 2009, the Company recognized $296,838 in stock-based compensation
costs which was offset by a net reversal of $21,079 of previously recognized stock-based compensation that was included
in marketing, general and administrative expenses. No tax benefits were attributed to the stock-based
compensation expense because a valuation allowance was maintained for all net deferred tax assets. The Company elected to adopt
the alternative method of calculating the historical pool of windfall tax benefits as permitted by ASC Topic 718, formerly FSP
No. SFAS 123R-c, Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards. This is a
simplified method to determine the pool of windfall tax benefits that is used in determining the tax effects of stock compensation
in the results of operations and cash flow reporting for awards that were outstanding as of the adoption of ASC Topic 718, formerly
SFAS No. 123R. At December 31, 2010, the Company had approximately $270,272 of unrecognized compensation costs related to non-vested
options that is expected to be recognized over the next three years.



The following information
applies to options outstanding and exercisable at December 31, 2010:





F-28

---





|              | Options Outstanding | Options Exercisable                                
|------------- | ------------------- | ---------------------------------------------------
|              | Shares              | Weighted-Average Remaining Contractual
        Term
|$0.00 – $0.70 | 775,227             | 9.3                                                
|$0.71 – $1.28 | 389,943             | 7.1                                                
|$5.25 – $5.67 | 820,184             | 4.2                                                
|$7.69         | 39,572              | 5.7                                                
|$8.47         | 618                 | 2.6                                                
|              | 2,025,544           | 6.8                                                



The Company uses the Black-Scholes
valuation model to determine the fair value of options on the date of grant. This model derives the fair value of options based
on certain assumptions related to expected stock price volatility, expected option life, risk-free interest rates and dividend
yield. The Company’s expected volatility is based on the historical volatility of other publicly traded development stage
companies in the same industry. The risk-free interest rate assumption is based upon the U.S. Treasury yield curve appropriate
for the term of the expected life of the options.



For the years ended December
31, 2010 and 2009, the fair value of each option grant was estimated on the date of grant using the following weighted-average
assumptions.



|                                  |  |                                
|--------------------------------- |  | -------------------------------
|                                  |  | For the year ended December 31,
|                                  |  | 2010                           
|Expected dividend yield           |  |                                
|Expected price volatility         |  |                                
|Risk free interest rate           |  |                                
|Expected life of options in years |  |                                



In its meeting of August
12, 2009, the Board of Directors approved the repricing of current employees’ stock options (other than Executive Officers).
In accordance with regulations concerning such a repricing and in conformance with generally accepted procedures, all options granted
before August 12, 2008, were repriced on the basis of the 5-day average closing price of BHRT, during the period of August 11 through
August 17, 2009.



The following information
applies to the repricing which occurred as of October 8, 2009.

|Original Exercise Price |  |   | New Exercise Price |  |  |  | Number of shares underlying Options | 
|----------------------- |  | - | ------------------ |  |  |  | ----------------------------------- | 
|                        |  |   |                    |  |  |  |                                     | 
|$1.28                   |  | $ | 0.71               |  |  |  | 61,778                              | 
|$4.11                   |  | $ | 0.71               |  |  |  | 10,000                              | 
|$5.67                   |  | $ | 0.71               |  |  |  | 409,144                             | 
|$7.69                   |  | $ | 0.71               |  |  |  | 12,851                              | 
|$8.47                   |  | $ | 0.71               |  |  |  | 38,163                              | 
|                        |  |   |                    |  |  |  | 531,936                             | 





Of those options listed
above, 400,472 expired as of December 31, 2010 without having been exercised.





F-29

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Warrants



The Company does not have
a formal plan in place for the issuance of stock warrants. However, at times, the Company will issue warrants to non-employees
or in connection with financing transactions. The exercise price, vesting period, and term of these warrants is determined by the
Company’s Board of Directors at the time of issuance. A summary of warrants at December 31, 2010 and activity during the
year then ended is presented below:



|                                 |  | Shares |            | Weighted-Average Exercise Price |  | Weighted-Average Remaining Contractual Term (in years) |      | Aggregate Intrinsic Value
|-------------------------------- |  | ------ | ---------- | ------------------------------- |  | ------------------------------------------------------ | ---- | -------------------------
|Outstanding at January 1, 2010   |  |        | 7,355,057  |                                 |  | $                                                      | 3.06 |                          
|Issued                           |  |        | 6,693,712  |                                 |  | $                                                      | 0.78 |                          
|Exercised                        |  |        | 0          |                                 |  | $                                                      | 0.00 |                          
|Forfeited                        |  |        | 128,040    |                                 |  | $                                                      | 0.74 |                          
|Outstanding at December 31, 2010 |  |        | 13,920,729 |                                 |  | $                                                      | 1.98 |                          
|Exercisable at December 31, 2010 |  |        | 8,232,314  |                                 |  | $                                                      | 1.82 |                          



In 2010, the Company issued warrants
in a private placement to purchase an aggregate of 6,323,039 shares of its common stock. Excluding the aforementioned warrants,
the weighted average fair value of warrants recognized in 2010 was $7.69 per share. The weighted average fair value of warrants
issued in 2009 was $0.60 per share.



The Company uses the Black-Scholes
valuation model to determine the fair value of warrants on the date of issuance. The Company’s expected volatility is based
on the historical volatility of other publicly traded development stage companies in the same industry. The expected life of the
warrants is based primarily on the contractual life of the warrants. The risk-free interest rate assumption is based upon the U.S.
Treasury yield curve appropriate for the term of the expected life of the warrants.



For the years ended December
31, 2010 and 2009, the fair value of warrants issued in transaction was $185,307 and $1,913,487, respectively which, was estimated
on the date of issuance using the following weighted-average assumptions.



|                                  |  | For the year ended December 31,
|--------------------------------- |  | -------------------------------
|                                  |  | 2010                           
|Expected dividend yield           |  |                                
|Expected price volatility         |  |                                
|Risk free interest rate           |  |                                
|Expected life of options in years |  |                                



The following information
applies to warrants outstanding and exercisable at December 31, 2010:





F-30

---





|              | Warrants Outstanding | Warrants Exercisable                               
|------------- | -------------------- | ---------------------------------------------------
|              | Shares               | Weighted-Average Remaining Contractual
        Term
|$0.01 - $0.50 | 4,143,965            | 2.9                                                
|$0.52 - $0.68 | 3,776,909            | 6.5                                                
|$0.70 - $1.62 | 2,649,454            | 4.3                                                
|$1.81 – $2.61 | 427,119              | 0.9                                                
|$3.60 – $4.93 | 105,000              | 2.7                                                
|$5.67 – $7.69 | 2,818,282            | 11.5                                               
|              | 13,920,729           | 5.8                                                



NOTE 12-RELATED PARTY TRANSACTIONS



Lease Guarantee



The
Company’s former Chairman of the Board, Chief Executive Officer and Chief Technology Officer haspersonally guaranteed
the Company’s obligations under its lease for its facilities in Sunrise, Florida and has provided a personal guarantee for
the Company credit card, which is for his own use only.



Cousin of former Chairman of the Board



A cousin of the Company’s former Chairman
of the Board, Chief Executive Officer and Chief Technology Officer was an officer of the Company from August 12, 1999 until December
11, 2009. The amounts paid to this individual as salary and bonus in 2009, 2008, 2007 and for the period from August 12, 1999 (date
of inception) to December 31, 2008 was $11,000, $130,000, $130,000 and $1,007,752, respectively. In addition, the Company utilized
a printing entity controlled by this individual and paid this entity $23,335, $18,230, $10,769 and $457,967, respectively, in 2009,
2008, 2007 and for the period from August 12, 1999 (date of inception) to December 31, 2009. The position occupied by this individual
was terminated.



On August 24, 2006, the Company entered
into an agreement, or the Settlement Agreement, with the same officer of the Company that is the cousin of the Company’s
former Chairman of the Board, Chief Executive Officer and Chief Technology Officer. Prior to entering into the Settlement Agreement,
certain disputes had arisen between the officer and the Company as to the number of stock options awarded to the officer and the
amount of unpaid salary and other compensation owed to the officer since he commenced his employment with the Company in December
1999. The shares, options and warrants granted to the officer pursuant to the Settlement Agreement were issued to settle the disputed
items and in consideration for the officer’s release of any claims he may have against the Company related to or arising
from his employment or any compensation owed to him.



Pursuant to the Settlement Agreement:





| | · | 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.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | · | 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 issuance. The approximate fair value of this warrant of $1,200,000 was recorded as compensation expense in August 2006.                                                                                                                                                                                   



F-31



---





| | · | 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 was eligible to  receive an annual salary of $130,000 per year while employed by the Company.                                                                                                                                                                                         





As indicated above, the Company recognized
various expenses upon the execution of the Settlement Agreement when the expense amounts were first known and quantifiable.



The fair value of the warrant and the stock
options was estimated at the date of grant by using the Black-Scholes valuation model with the following assumptions: risk-free
rate of 6%; volatility of 100%; and an expected holding period of 5 years.



Upon termination of his position, the officer
requested and received permission to sell the 47,658 shares of the company’s stock that had been awarded to him. On December
8, 2009, the company was informed by the officer that all of these shares had been sold. In addition, the officer elected not to
exercise certain of his options that expired on December 24, 2009. The officer, in accordance with Company policy, was required
to exercise his remaining options within 90 days of the termination of his position on December 11, 2009. The officer did not exercise
his remaining options by March 11, 2010 the 90th day.



Sister-in-Law of former Chairman of the
Board



The former sister-in-law of the Company’s
former Chairman is an officer of the Company. The amount paid to this individual as salary and bonus in 2010, 2009, 2008, 2007
and for the period from August 12, 1999 (date of inception) to December 31, 2010 was $106,000, $77,165, $86,209, $87,664 and $537,380,
respectively.



Research Agreement



In 2007, the Company entered into a
research agreement with an affiliate of two members of the Company’s Board of Directors., pursuant to which the Company agreed
to pay an aggregate fee of $150,000 for the research services contracted for. The Company paid $75,000 of this fee in
2007, $10,000 of this fee in 2008, and the balance was paid with options in 2009. In 2010, the Company entered into another
research agreement with this affiliate, with funding for the project emanating from venture capital funds controlled by the same
two board members. In connection with its funding of the REGEN trial, Ascent Medical Technology Fund II, LP, the Ascent Medical
Technology Fund, LP, and Ascent Medical Product Development Centre Inc. were to be issued a total of 1,044, 451 shares of the Company’s
common stock, and warrants to purchase 90,861 shares at exercise prices 20% above the price at which the related common will be
issued. As of December 31, 2010 a total of 837,212 shares of the Company’s common stock and warrants to purchase 158,856
were issued. Approvals for the REGEN Trial were not provided to the Company by Ascent and patient enrollment in the REGEN Trial
never began. The Company has suspended, indefinitely, all activity with Ascent Medical respective to the REGEN trial. On December
16, 2010, the Company received a written notice from Ascent terminating the Master Services Agreement. The Company disputes that
Ascent has grounds for terminating the Master Services Agreement or is entitled to further compensation thereunder. However, as
the REGEN Trial approvals were not provided to the Company and all activity with Ascent Medical respective to the trial has been
suspended indefinitely, the termination of the Master Services Agreement is not material to the Company

In
April and May 2009, the Company sold to two members of the Board of Directors, in a private placement, an aggregate of 965,570
shares of the Company’s common stock and warrants to purchase 289,671 shares of the Company’s common stock for aggregate
gross cash proceeds of $535,000.





F-32

---





In
July 2009, the Company sold to a member of the Board of Directors, in a private placement 140,850 shares of the Company’s
common stock and warrants to purchase 42,255 shares of the Company’s common stock for gross cash proceeds of $100,000 or
$2.36 per share.



NOTE 13-COMMITMENTS AND CONTINGENCIES



Leases



The Company entered into
several operating lease agreements for facilities and equipment. Terms of certain lease arrangements include renewal options, escalation
clauses, payment of executory costs such as real estate taxes, insurance and common area maintenance.



In November 2006, the
Company amended its facility lease to include additional space through 2010. The amendment for the additional space contains terms
similar to the terms of the existing facility lease, including escalation clauses.



In November 2009, the
Company amended its facility lease to eliminate excess space. The amendment for the additional space contains terms similar to
the terms of the existing facility lease, including escalation clauses.



In February 2010, the
Company amended its facility lease to extend the term of the lease until January 2013.



Approximate annual future
minimum lease obligations under noncancelable operating lease agreements as of December 31, 2010 are as follows:



|Year ending December 31, |               
|------------------------ | --------------
|2011                     | $    81,416   
|2012                     | 83,853        
|2013                     | 7,005         
|Total                    | $      172,274



Rent expense was $139,160
and $178,487 for the years ended December 31, 2010 and 2009, respectively and $1,762,510 for the cumulative period from August 12,
1999 (date of inception) to December 31, 2010.



During 2005, the Company
was provided with a tenant improvement allowance of $60,150 towards its improvements. The Company has recorded the tenant-funded
improvements and the related deferred rent in its consolidated balance sheets. The deferred rent is being amortized as a reduction
to rent expense over the remaining life of the original lease.



Royalty Payments



The Company is obligated
to pay royalties on commercial sales of certain products that may be developed and sold under various licenses and agreements that
have been obtained by the Company.



The Company has entered
into various licensing agreements, which include the potential for royalty payments, as follows:



William Beaumont Hospital



In June 2000, the Company
entered into an exclusive license agreement to use certain patents for the life of the patents in future projects. The patents
expire in 2015. In addition to a payment of $55,000 the Company made to acquire the license,
the Company is required to pay an annual license fee of $10,000 and royalties rangingfrom 2% to 4% of net sales of products
that are covered by the patents. In order to maintain the exclusive license rights, the
agreement also calls for a minimum annual royalty threshold. The minimum royalty threshold
was $200,000 for



F-33

---



2010
and $200,000 for 2009. This minimum royalty threshold will remain $200,000 for 2011 and thereafter.As of December 31, 2010,
the Company has not made any payments other than the initial payment to acquire the license. AtDecember 31, 2010 and
2009, the Company’s liability under this agreement was $1,090,000 and $880,000, respectively, which is reflected as a component
of accrued expenses on the consolidated balance sheets. In 2010, 2009 and for the cumulative period from August 12, 1999 (date
of inception) to December 31, 2010, the Company incurred expenses of $210,000, $210,000 and $1,090,000, respectively. The Company has accrued interest for the past due
commitment at 2% over the prime rate per the terms of the agreement. The Company has included $175,875 in accrued expenses as of December 31, 2010.



Approximate annual future
minimum obligations under this agreement as of December 31, 2010 are as follows:



|Year Ending December 31, |  |  
|------------------------ |  | -
|                         |  |  
|2011                     |  | $
|2012                     |  |  
|2013                     |  |  
|2014  — 2015             |  |  
|Total                    |  | $



Contingency for Registration of the Company's
common stock



The Company believes that
it may have issued options to purchase common stock to certain of its employees, directors and consultants in California in violation
of the registration or qualification provisions of applicable California securities laws. As a result, the Company intends to make
a rescission offer to these persons. The Company will make this offer to all persons who have a continuing right to rescission,
which it believes to include two persons. In the rescission offer, in accordance with California law, the Company will offer to
repurchase all unexercised options issued to these persons at 77% of the option exercise price multiplied by the number of option
shares, plus interest at the rate of 7% from the date the options were granted. Based upon the number of options that were subject
to rescission as of December 31, 2009, assuming that all such options are tendered in the rescission offer, the Company estimated
that its total rescission liability would be up to approximately $371,000. However, as the Company believes there is only a remote
likelihood the rescission offer will be accepted by any of these persons in an amount that would result in a material expenditure
by the Company, no liability was recorded as of December 31, 2010 or 2009.



Litigation



On March 13, 2009, Judge
Bernice Bouie Donald of the United States District Court for the Western District of Tennessee issued a Memorandum Opinion and
Order in litigation brought against the Company by Dr. Peter K. Law and Cell Transplants Asia Limited (“CTAL”) (collectively,
the “Plaintiffs”), captioned Peter K. Law, et al. v. Bioheart, Inc., No. 2:07-cv-2177 (the “Action”). The
Action, which has been the subject of previous disclosures by the Company, was commenced on March 9, 2007, and asserted claims
against the Company and Howard J. Leonhardt, individually, with respect to a license agreement entered into between Bioheart, Inc.
and Cell Transplants International, LLC (“CTI”) on February 7, 2000 (the “Original License Agreement”).
Pursuant to the License Agreement, among other things, CTI granted the Company a license to certain patents “related to heart
muscle regeneration and angiogenesis for the life of the patents.” In July 2000, Bioheart and CTI, together with Dr. Law,
executed an addendum to the License Agreement, which amended or superseded a number of the terms of the License Agreement (the
“License Addendum”).



In their amended complaint,
Dr. Law and CTAL asserted 14 breach of contract and related claims pertaining to the Original License Agreement and License Addendum,
including, among others, claims that the Company had breached obligations to provide shares of Bioheart common stock to Dr. Law,
pay royalties on “gross sales” of MyoCell, pay a $3 million milestone payment due upon Bioheart’s “commencement
of a bona fide Phase II human clinical trial study that utilizes technology claimed under U.S. Patent No. 5,130,141 with F.D.A.
approval in the United States,” and to refrain from sublicensing Plaintiffs’ patents. Plaintiffs also sought a declaratory
judgment that the License Addendum was unenforceable due to a lack of consideration and/or economic duress. At the outset of the
Action, the individual claim against Mr. Leonhardt was dismissed along with Plaintiffs’ claim for civil conspiracy, leaving
12 claims to be adjudicated.



F-34

---





The Company denied the
material allegations of the amended complaint, denied it had any liability to Plaintiffs, and asserted a number of defenses to
Plaintiffs’ claims, as well as counterclaims seeking a declaration that the License Addendum was a legally valid and binding
agreement and asserting that Dr. Law and/or CTI had breached various obligations in the parties’ agreements.



Following the completion
of discovery, the Action was tried to the Court, without a jury, from September 22-25, 2008.



On March 13, 2009, the
Court rendered its decision in the Action, dismissing the amended complaint after finding that Plaintiffs had failed to establish
any of their 12 remaining claims. With respect to Plaintiffs’ claim for the $3 million milestone payment, the Court found
that the payment was “payable only to CTI,” not the Plaintiffs, and that CTI, a dissolved Tennessee limited liability
company, had never been made a party to the Action and therefore was “not properly before the Court.” The Court also
found that, even assuming Plaintiffs could assert a claim for the milestone payment on behalf of CTI, the payment was not due because
“Bioheart’s MyoCell process does not utilize technology claimed under the ‘141 patent.” In addition, the
Court found that Bioheart owed no royalties because it has not yet made any “gross sales” of MyoCell.



The Court found in Bioheart’s
favor on its counterclaim seeking a declaration that the License Addendum was a valid and enforceable agreement and its counterclaim
that Dr. Law breached his obligation under the License Addendum to provide Bioheart with “all pertinent and critical information”
related to Bioheart’s filing of an IND application with the FDA. The Court awarded Bioheart nominal damages of $1.00 on the
latter counterclaim, and dismissed Bioheart’s other counterclaims. Judgment upon the Memorandum Opinion and Order was entered
on March 18, 2009.



Subsequent
to the Court rendering its decision in the Action, thePlaintiffs filed a motion with the Court seeking reconsideration
of its decision. The Company’s response was filed on April 20, 2009,
and the Court’s response was received on October 15, 2009. The Plaintiffs’ motion to alter or amend was granted
in partto clarify that Plaintiff failed to prove that the MyoCath catheter reads upon the claims of a patent other than
the Schmidt catheter patent. Plaintiffs’ motion was otherwise denied.



A notice of appeal was
to have been filed by November 16, 2009, by Dr. Law. The appeal was not filed. The accrual made prior to November 16, 2009, to
accommodate a judgment in favor of Dr. Law has been reversed.



The Company is subject
to other legal proceedings that arise in the ordinary course of business. In the opinion of management, as of December 31, 2010,
the amount of ultimate liability with respect to such matters, if any, in excess of applicable insurance coverage, is not likely
to have a material impact on the Company's business, financial position, consolidated results of operations or liquidity. However,
as the outcome of litigation and other claims is difficult to predict significant changes in the estimated exposures could exist.



NOTE 14 -INCOME TAXES



The Company follows Accounting Standards Codification
subtopic 740-10, Income Taxes (“ASC 740-10”) which requires the recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this
method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of
assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Temporary
differences between taxable income reported for financial reporting purposes and income tax purposes include, but not limited to,
accounting for intangibles, debt discounts associated with convertible debt, equity based compensation and depreciation and amortization.



At December 31, 2010, the Company has available
for federal income tax purposes a net operating loss carryforward of approximately $93,295,351 which expires in the year 2030,
that may be used to offset future taxable income. The Company has provided a valuation reserve against the full amount of the net
operating loss benefit, since in the



F-35

---



opinion of management based upon the earnings
history of the Company; it is more likely than not that the benefits will not be realized. Based upon the change in ownership rules
under section 382 of the Internal Revenue Code of 1986, if in the future the Company issues common stock or additional equity instruments
convertible in common shares which result in an ownership change exceeding the 50% limitation threshold imposed by that section,
all of the Company’s net operating losses carryforwards may be significantly limited as to the amount of use in a particular
years. Components of deferred tax assets as of December 31, 2010 are as follows. All or portion of the remaining valuation allowance
may be reduced in future years based on an assessment of earnings sufficient to fully utilize these potential tax benefits.



At December 31, 2010, the significant
components of the deferred tax assets (liabilities) are summarized below:



|Net operating loss carry forwards expiring through 2030 |  | $ | 93,295,351  |  
|------------------------------------------------------- |  | - | ----------- | -
|                                                        |  |   |             |  
|Tax Asset                                               |  |   | 39,888,456  |  
|Less valuation allowance                                |  |   | (39,888,456 | )
|Balance                                                 |  | $ | —           |  



The Company recognizes interest and penalties
related to uncertain tax positions in general and administrative expenses. As of December 31, 2010 and 2009, the Company has no
unrecognized tax benefit from uncertain tax positions, including interest and penalties.



The difference between income tax expense computed by applying the
federal statutory corporate tax rate and actual income tax expense is as follows:



|                                  |  | December 31,
|--------------------------------- |  | ------------
|                                  |  | 2010        
|Statutory federal income tax rate |  |             
|State income taxes and other      |  |             
|                                  |  |             
|Effective tax rate                |  |             



Deferred income taxes result from temporary differences in the recognition
of income and expenses for the financial reporting purposes and for tax purposes. The tax effect of these temporary differences
representing deferred tax asset and liabilities result principally from the following:



|                                    |  | December 31, |           
|----------------------------------- |  | ------------ | ----------
|                                    |  | 2010         |           
|Deferred Tax Asset: (Liability)     |  |              |           
|                                    |  |              |           
|Net operating loss carry forward    |  | $            | 35,107,040
|Stock based compensation and others |  |              | 4,781,416 
|Subtotal                            |  |              | 39,888,456
|Valuation allowance                 |  |              | 39,888,456
|                                    |  |              |           
|Net Deferred Tax Asset (Liability)  |  | $            | —         



Deferred income taxes
reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income taxes
are as follows:





F-36

---



NOTE 15- SUPPLEMENTAL DISCLOSURES OF CASH
FLOW STATEMENTS



During the years ended December 31, 2010 and
2009, the Company issued warrants in connection with notes payable with an aggregate fair value of $185,306 and $1,913,487, respectively.







NOTE 16 -SUBSEQUENT EVENTS



Loan agreement amendment



On December 31, 2009, the
Company and BlueCrest Venture Finance Master Fund Limited (“BlueCrest”) entered into an Amendment to Loan and Security
Agreement, amending that certain loan from BlueCrest to the Company originated as of May 31, 2007 (the “Loan”). The
outstanding principal amount of the Loan as of December 31, 2010 was $2,276,543.03. On January 7, 2011, BlueCrest agreed with the
Company and Magna Group, LLC (“Magna”) to split the note evidencing the Loan into two notes aggregating the outstanding
principal balance, with the new note being in the principal amount of $139,729.82 (the “New Note”). The New Note was
assigned to Magna in consideration for a payment by them to BlueCrest of $139,729.82, and modified. Additionally, Magna purchased
a $25,000 convertible note from the Company (the “Convertible Note”).



The loans evidenced by
the New Note and Convertible Note are in the nature of convertible debt evidenced by two unsecured convertible promissory notes,
each bearing interest at the rate of 8% per annum, payable at maturity and each convertible into common stock of the Company at
a price that is 50% less than the average of the closing prices for the Company’s shares for the five (5) days prior to the
Lenders’ election to exercise its conversion right.



- In January 2011, we issued an aggregate of 538,542
shares of our common stock in connection with the conversion of $87,729 of the convertible note.
- In February 2011, we issued an aggregate of 421,392
shares of our common stock in connection with the conversion of the remaining balance of $52,000 of the convertible note.



Private Placement – Common Stock and
Warrants



In
January 2011, the Company sold, in a private placement, an aggregate of 102,780 shares of the Company’s common stock
and warrants to purchase 51,390 shares of the Company’s common stock for aggregate gross cash proceeds of $18,500. The warrants
are (i) exercisable solely for cash at an exercise price of $0.22 per share, (ii) non-transferable for six months following issuance
and (iii) exercisable, in whole or in part, at any time during the period commencing on the date that is six months and one day
following the date of issuance and ending on the third year anniversary of the date of issuance.



In
January 2011, the Company sold an aggregate of 318,750 shares of the Company’s common stock and warrants to purchase
159,375 shares of the Company’s common stock for aggregate gross cash proceeds of $51,000. The warrants are (i) exercisable
solely for cash at an exercise price of $0.19 per share, (ii) non-transferable for six months following issuance and (iii) exercisable,
in whole or in part, at any time during the period commencing on the date that is six months and one day following the date of
issuance and ending on the third year anniversary of the date of issuance.



In
March 2011, the Company sold an aggregate of 577,670 shares of the Company’s common stock and warrants to purchase
491,020 shares of the Company’s common stock for aggregate gross cash proceeds of $85,000. The warrants are (i) exercisable
solely for cash at an exercise price of $0.14 to $0.15 per share, (ii) non-transferable for six months following issuance and (iii)
exercisable, in whole or in part, at any time during the period commencing on the date that is six months and one day following
the date of issuance and ending on the third year anniversary of the date of issuance.



In
April 2011, the Company sold an aggregate of 97,400 shares of the Company’s common stock and warrants





F-37



---



to purchase 82,790 shares
of the Company’s common stock for aggregate gross cash proceeds of $15,000. The warrants are (i) exercisable solely for cash
at an exercise price of $0.15 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole
or in part, at any time during the period commencing on the date that is six months and one day following the date of issuance
and ending on the third year anniversary of the date of issuance.





Subscription agreement



On January 23, 2011, Bioheart,
Inc. (the “Company”) announced that it has entered into a subscription agreement with Anc Bio Holdings, Inc., a South
Korean biomedical company, and a subscription agreement with one of its U.S. agents, Bioheart Florida, LLC for a $4 million equity
investment, in the aggregate. Funding of the investment will be made ratably by them in installments with 10% immediately, followed
by 40% within 45 days and the remaining 50% subject to certain conditions which the Company expects to satisfy in the next 90 days.



The aggregate number of
shares of common stock anticipated to be issued in connection with the investment is 25,000,000 shares. The Company will also issue
to the purchasers of common stock, warrants to purchase, in the aggregate, up to 12,500,000 shares of common stock. In connection
with the common stock issuance, the subscribers received “piggyback” registration rights exercisable under certain
circumstances more particularly set forth in the Registration Rights Agreement entered into with each investor.



Under
the terms of the subscription agreements, the Company has agreed, among other things, that:



(a)
	Until April 20, 2011, the Company shall not initiate or support any action to increase the number of directors serving on the
Company’s Board of Directors and, subject to unforeseen circumstances outside of the Company’s control (i.e., the death
or disability of a board member), the Company will not initiate or support any change to the composition of the Board of Directors’
Committees without the investors’ prior consent;



(b)	The Company will provide the Investors
with an estimated use of proceeds prior to the first installment payment date and the Company will utilize not less than sixty
percent (60%) of such proceeds for research and development costs and clinical trial costs;



(c)	The proceeds may be used to attract
and hire a new Company Chief Financial Officer and the Investors, or their designee(s) will have the right to participate in the
interviewing of, and the selection of, that new Chief Financial Officer; and



(d)	Until
April 20, 2011, the Company shall not issue more than Two Hundred, Fifty Thousand (250,000) shares of the Company’s Common
Stock in connection with any single transaction (other than shares that may be issued in connection with the conversion of the
existing convertible promissory note into such shares of common stock by Magna Group, LLC).



(e)
the Company has agreed that, following its receipt of the first installment payment, the Company will cause a vacancy on
the Company’s Board of Directors to be filled by one person designated by ABH. Additionally, the Company agreed with ABH
that it shall not call a meeting nor schedule a meeting of its shareholders to be held prior to April 20, 2011.



On January 23, 2011 the Company issued an aggregate of 2,500,000 shares of the
Companys common stock and warrants to purchase 1,250,000 shares of the Companys common stock for aggregate gross cash proceeds of $400,000. The warrants are (i)
exercisable solely for cash at an exercise price of $0.19 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part,
at any time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of
issuance.



Following receipt of the initial 10% the Company engaged in
discussions with the investors to determine new timing for the funding of the remaining installments. As of April 18, 2011, the second installment had not been received from
either ABH or BF.



Accordingly,on
April 18, 2011 the Company delivered a written notice of default and termination to each of ABH and BF, in respect of the Agreements.
The notice stated that it was being given as a result of the breach by each of ABH and BF of their respective payment obligations
under the Agreements. A copy of the notice of default was filed with the Company’s Current Report on Form 8-Kfiled with the SEC on April 22, 2011.



F-38

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Increase to Authorized Common Stock



As of December 31, 2010, our Articles of Incorporation
authorized us to issue up to 75,000,000 shares of common stock, par value $0.001 per share. The Board of Directors proposed, and
on January 13, 2011 (the “Record Date”) the holders of a majority of the Company’s issued and outstanding voting
common shares as of the Record Date approved, an increase in the number of authorized shares of the common stock from 75,000,000
shares to 195,000,000 shares. On January 21, 2011 the Company filed a 14C Information Statement with the Securities and Exchange
Commission. Following approval by the Securities and Exchange Commission and upon the filing of the Certificate of Amendment to
the Articles of Incorporation, the Company’s will be authorized to issue a total of 195,000,000 shares of common stock, par
value of $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share.



Issuance of Options and Warrants



Between January 1, 2011
and May 4, 2011, the Company issued options to purchase an aggregate of 372,167 shares of its common stock at a weighted average
exercise price of $0.001 per share. These options consisted of the following:





| | · | stock options to purchase an aggregate of 372,167 shares of common stock at an exercise price of $0.001 per share.
The options vested immediately upon issuance and will expire on the tenth anniversary of the issuance date. As of May 4, 2011 an aggregate of 372,167 shares of common stock have been issued
upon the exercise of the aforementioned options.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Between January 1, 2011
and May 4, 2011, the Company issued warrants to purchase an aggregate of 3,314,575 shares of its common stock at a weighted average
exercise price of $0.18 per share. These warrants consisted of the following:





| | · | Warrants to purchase 210,765 shares of common stock at an exercise price of $0.19 to $0.22. These warrants were issued in connection with private placement discussed above.  The warrant vests six months following issuance and expires on the third year anniversary of the date of issuance.     
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                      
| | · | Warrants to purchase 1,250,000 shares of common stock at an exercise price of $0.19. These warrants were issued in connection with Subscription agreement discussed above.  The warrant vests six months following issuance and expires on the third year anniversary of the date of issuance.       
| |   |                                                                                                                                                                                                                                                                                                      
| | · | Warrants to purchase 280,000 shares of common stock at an exercise price of $0.19 issued to Consultants.  The warrant vests six months following issuance and expires on the fifth year anniversary of the date of issuance.                                                                         
| |   |                                                                                                                                                                                                                                                                                                      
| | · | Warrants to purchase 573,810 shares of common stock at an exercise price of $0.14 to $0.15. These warrants were issued in connection with Subscription agreement discussed above.  The warrant vests six months following issuance and expires on the third year anniversary of the date of issuance.





Approval of Option Issuance



In February 2011, the Board of Directors approved the issuance of
stock options to purchase an aggregate of 210,000 shares of common stock at an exercise price of $0.21 per share issued to certain
members of the Company’s Board of Directors. The options will vest immediately upon issuance and will expire on the tenth
anniversary of the issuance date.



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INDEX OF EXHIBITS



As required under Item 15. Exhibits, Financial
Statement Schedules, the exhibits filed as part of this report are provided in this separate section. The exhibits included in
this section are as follows:



|Exhibit No. |  | Description                                                                                                           
|----------- |  | ----------------------------------------------------------------------------------------------------------------------
|            |  |                                                                                                                       
|23.1        |  | Consent of RBSM, LLP                                                                                                  
|23.2        |  | Consent of Jewett, Schwartz, Wolfe & Associates                                                                       
|31.1        |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
|32.1        |  | Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002





F-40

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