U.S. Stem Cell, Inc. - FORM 10-Q

Attached files

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EX-31.1 - U.S. Stem Cell, Inc.	d26681_ex31-1.htm
EX-32.2 - U.S. Stem Cell, Inc.	d26681_ex32-2.htm
EX-31.2 - U.S. Stem Cell, Inc.	d26681_ex31-2.htm
EX-32.1 - U.S. Stem Cell, Inc.	d26681_ex32-1.htm

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

FORM 10-Q

(Mark One)

[X]

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

For the quarterly period ended March 31, 2010

[ ]

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

For the transition period from ____________ to ____________

Commission File Number: 001-33718

BIOHEART, INC.

(Exact name of registrant as specified in its charter)

Florida				65-0945967
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

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

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

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 [ ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T(§232.045 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ]

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 definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [ ] (Do not check if a smaller reporting company)

Smaller reporting company [X]

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

As of March 31, 2010 there were 25,966,366 outstanding shares of the registrant’s common stock, par value $0.001 per share.

BIOHEART, INC.

INDEX

PART I — FINANCIAL INFORMATION

Item 1.				Financial Statements

				1) Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December 31, 2009

				2) Consolidated Statements of Operations for the three-month periods ended March 31, 2010 and 2009 (unaudited)

				3) Consolidated Statement of Shareholders’ Deficit for the three-month period ended March 31, 2010 (unaudited)

				4) Consolidated Statements of Cash Flows for the three-month periods ended March 31, 2010 and 2009 (unaudited)

				5) Notes to Consolidated Interim Financial Statements (unaudited)

Item 2.				Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3.				Quantitative and Qualitative Disclosures About Market Risk

Item 4T.				Controls and Procedures

PART II — OTHER INFORMATION

Item 1.				Legal Proceedings

Item 1A.				Risk Factors

Item 2.				Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.				Defaults Upon Senior Securities

Item 4.				Removed and Reserved

Item 5.				Other Information

Item 6.				Exhibits

Signatures

Index to Exhibits

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Consolidated Balance Sheets

	March 31, 2010			December 31, 2009
	(Unaudited)			(Audited)
ASSETS
Current assets
Cash and cash equivalents	$	49,312		$	75,031
Receivables		156,780			142,279
Inventory		168,851			199,914
Prepaid expenses and other current assets		6,786			25,729
Total current assets		381,729			442,953
Property and equipment, net		81,284			104,397
Deferred loan costs, net		1,556,525			1,250,106
Other assets		68,854			68,854
Total assets	$	2,088,392		$	1,866,310

LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities
Accounts payable	$	1,949,682		$	1,911,893
Accrued expenses and other current liabilities		2,976,344			3,530,246
Deferred revenue		507,281			507,281
Notes payable — current		3,735,032			4,051,861
Total current liabilities		9,168,339			10,001,281
Deferred rent		—			857
Subordinated related party loan		1,500,000			3,000,000
Note payable — long term		1,926,772			2,276,543
Total liabilities		12,595,111			15,278,681

Commitments and contingencies

Shareholders’ deficit
Preferred stock ($0.001 par value) 5,000,000 shares authorized; none issued and outstanding		—			—
Common stock ($0.001 par value) 75,000,000 shares authorized; 25,966,366 and 20,035,684 shares issued and outstanding as of March 31, 2010 and December 31, 2009, respectively		25,923			20,036
Additional paid-in capital		91,630,079			87,196,374
Deficit accumulated during the development stage		(102,162,721	)		(100,628,781	)
Total shareholders’ deficit		(10,506,719	)		(13,412,371	)
Total liabilities and shareholders’ deficit	$	2,088,392		$	1,866,310

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Consolidated Statements of Operations

	For the Three-Month Period Ended March 31,						Cumulative Period from August 12, 1999 (date of inception) to March 31,
	2010			2009			2010
	(Unaudited)						(Unaudited)
Revenues	$	29,794		$	109,090		$	1,174,467
Cost of sales		14,404			49,297			544,779
Gross profit		15,390			59,793			629,688
Development revenues		—			—			117,500
Expenses:
Research and development		415,856			626,363			65,774,429
Marketing, general and administrative		427,252			646,882			31,027,348
Depreciation and amortization		23,113			45,296			817,517
Total expenses		866,221			1,318,541			97,619,294
Loss from operations		(850,831	)		(1,258,748	)		(96,872,106	)
Interest income		1			10			762,275
Interest expense		(683,110	)		(557,682	)		(9,052,890	)
Reversal of Litigation Accrual		—			—			3,000,000
Net interest expense		(683,109	)		(557,672	)		(5,290,615	)
Loss before income taxes		(1,533,940	)		(1,816,420	)		(102,162,721	)
Income taxes		—			—			—
Net loss	$	(1,533,940	)	$	(1,816,420	)	$	(102,162,721	)
Loss per share — basic and diluted	$	(0.07	)	$	(0.11	)
Weighted average shares outstanding — basic and diluted		21,115,148			15,931,615

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Consolidated Statement of Shareholders’ Deficit
(Unaudited)

	Common Stock
	Shares		Amount		Additional Paid-in Capital		Subscription Receivable			Deficit Accumulated During the Development Stage			Total
Balance as of December 31, 2009		20,035,684	$	20,036	$	87,255,910		(59,536	)	$	(100,628,781	)	$	(13,412,371	)
Stock-based compensation		—		—		47,298		—			—			47,298
Common stock issued in settlement of accounts payable		52,302		16		34,031		—			—			34,047
Issuance of warrants in connection with notes payable		—		—		687,677		—			—			687,677
Issuance of common stock (net of issuance costs of $2,950)		769,240		769		437,370		59,536			—			497,675
Common stock issued in exchange for services		314,710		308		207,217		—			—			207,525
Common stock issued in connection with Bank of America loan guarantors payment		4,794,430		4,794		2,960,576		—			—			2,965,370
Net loss		—		—		—		—			(1,533,940	)		(1,533,940	)
Balance as of March 31, 2010		25,966,366	$	25,923	$	91,630,079		—		$	(102,162,721	)	$	(10,506,719	)

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Consolidated Statements of Cash Flows

	For the Three-Month Period Ended March 31,						Cumulative Period from August 12, 1999 (date of inception) to March 31,
	2010			2009			2010
	(Unaudited)						(Unaudited)
Cash flows from operating activities
Net loss	$	(1,533,940	)	$	(1,816,420	)	$	(102,162,721	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		23,113			45,296			817,517
Bad debt expense		—			—			165,000
Discount on convertible debt					200,000			262,224
Amortization of warrants issued in exchange for licenses and intellectual property		—			—			5,413,156
Amortization of warrants issued in connection with notes payable		354,234			37,725			4,070,612
Amortization of loan costs		27,024			39,247			1,170,345
Warrants issued in exchange for services		—			—			285,659
Equity instruments issued in connection with settlement agreement					—			3,381,629
Equity instruments issued in connection with R & D agreement		203,077						203,077
Common stock issued in exchange for services					45,900			1,322,917
Common stock issued in connection with amounts due to Bank of America loan guarantors		69,159			—			69,159
Common stock issued in exchange for distribution rights and intellectual property		—			—			99,997
Common stock issued in connection with accounts payable		38,172			—			280,894
Warrants issued in connection with accounts payable					—			7,758
Stock-based compensation		47,298			(95,047	)		9,099,623
Changes in assets and liabilities
Receivables		(14,501	)		(5,234	)		(156,779	)
Inventory		31,063			57,447			(168,852	)
Prepaid expenses and other current assets		18,943			411,135			(6,786	)
Other assets					40,000			(28,854	)
Accounts payable		37,789			494,064			2,539,029
Accrued expenses and deferred rent		194,852			444,869			4,043,742
Deferred revenue								507,282
Net cash used in operating activities		(503,717	)		(101,018	)		(68,784,371	)
Cash flows from investing activities
Acquisitions of property and equipment		—			—			(898,800	)
Net cash used in investing activities		—			—			(898,800	)
Cash flows from financing activities
Proceeds from (payments for) initial public offering of common stock, net		—			—			1,447,829
Proceeds from private placements of common stock, net		497,999			—			59,970,374
Proceeds from exercise of stock options		—			32,000			292,116
Proceeds from notes payable		—			190,000			11,498,001
Proceeds from subordinated related party loan		—			3,000,000			3,000,000
Payment of notes payable					(3,000,000	)		(3,000,000	)
Prepayment of notes payable		—			—			(2,256,568	)
Payment of loan costs		(20,000	)		—			(1,219,268	)
Net cash provided by financing activities		477,999			222,000			69,732,484
Net increase (decrease) in cash and cash equivalents		(25,718	)		120,982			49,312
Cash and cash equivalents, beginning of period		75,031			50,091			—
Cash and cash equivalents, end of period	$	49,312		$	171,073		$	49,312

Disclosures of cash flow information:
Interest paid	$	96,653		$	3,429		$	1,341,307
Income taxes paid	$	—		$	—		$	—

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

Organization and Summary of Significant Accounting Policies

Organization and Business

Bioheart, Inc. (the “Company”) is 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 limb ischemia, chronic heart ischemia, acute myocardial infarctions and other issues. We work to prevent the worsening of any condition with devices that monitor and diagnose. 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.

The Company’s pipeline includes multiple product candidates for the treatment of heart damage, including Bioheart Acute Cell Therapy, an autologous, adipose tissue-derived cell treatment for acute heart damage, and MyoCell® SDF-1, a therapy utilizing autologous cells that are genetically modified to express additional potentially therapeutic growth proteins.

The Company was incorporated in Florida on August 12, 1999.

Development Stage

The Company has operated as a development stage enterprise since its inception by devoting substantially all of its effort to raising capital, research and development of products noted above, and developing markets for its products. Accordingly, the consolidated financial statements of the Company have been prepared in accordance with the accounting and reporting principles prescribed by Accounting Standards Codification (“ASC”) Topic 915, Development Stage Entities, issued by the Financial Accounting Standards Board (“FASB”).

Prior to marketing its products in the United States, the Company’s products must undergo rigorous preclinical and clinical testing and an extensive regulatory approval process implemented by the Food and Drug Administration (“FDA”) and other regulatory authorities. There can be no assurance that the Company will not encounter problems in clinical trials that will cause the Company or the FDA to delay or suspend clinical trials. The Company’s success will depend in part on its ability to successfully complete clinical trials, obtain necessary regulatory approvals, obtain patents and product license rights, maintain trade secrets, and operate without infringing on the proprietary rights of others, both in the United States and other countries. There can be no assurance that patents issued to or licensed by the Company will not be challenged, invalidated, or circumvented, or that the rights granted thereunder will provide proprietary protection or competitive advantages to the Company. The Company will require substantial future capital in order to meet its objectives. The Company currently has no committed sources of capital. The Company will need to seek substantial additional financing through public and/or private financing, and financing may not be available when the Company needs it or may not be available on acceptable terms.

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

Basis of Presentation

The accompanying unaudited consolidated interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting of interim financial information. Pursuant to such rules and regulations, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted.

In the opinion of management, the accompanying unaudited consolidated interim financial statements of the Company contain all adjustments (consisting of normal recurring adjustments) necessary to present fairly the financial position of the company as of March 31, 2010 and 2009 and its cash flows for the three month periods ended March 31, 2010 and 2009. The results of operations and cash flows for the three month period ended in March 31, 2010 are not necessarily indicative of the results of operations or cash flows which may be reported for future periods or for the year ending December 31, 2010.

The accompanying unaudited consolidated interim financial statements included the accounts of Bioheart, Inc. and its wholly-owned subsidiaries. All intercompany transactions are eliminated in consolidation.

The accompanying unaudited consolidated interim financial statements and notes thereto should be read in conjunction with Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this report and the audited financial statements for the year ended December 31, 2009 and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities as of the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Fair Value of Financial Instruments

Fair value of certain of the Company’s financial instruments including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, notes payables, and other accrued liabilities approximate cost because of their short maturities. The Company measures and reports fair value in accordance with ASC 820, “Fair Value Measurements and Disclosure” defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles and expands disclosures about fair value investments.

Fair value, as defined in ASC 820, is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value of an asset should reflect its highest and best use by market participants, principal (or most advantageous) markets, and an in-use or an in-exchange valuation premise. The fair value of a liability should reflect the risk of nonperformance, which includes, among other things, the Company’s credit risk.

Valuation techniques are generally classified into three categories: the market approach; the income approach; and the cost approach. The selection and application of one or more of the techniques may require significant

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

judgment and are primarily dependent upon the characteristics of the asset or liability, and the quality and availability of inputs. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs. ASC 820 also provides fair value hierarchy for inputs and resulting measurement as follows:

Level 1

Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities;

Level 2

Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3

Unobservable inputs for the asset or liability that are supported by little or no market activity and that are significant to the fair values.

Fair value measurements are required to be disclosed by the Level within the fair value hierarchy in which the fair value measurements in their entirety fall. Fair value measurements using significant unobservable inputs (in Level 3 measurements) are subject to expanded disclosure requirements including a reconciliation of the beginning and ending balances, separately presenting changes during the period attributable to the following: (i) total gains or losses for the period (realized and unrealized), segregating those gains or losses included in earnings, and a description of where those gains or losses included in earning are reported in the statement of income.

The Company has no fair value items required to be disclosed

Inventory

Inventory consists of raw materials and finished product. Finished product consists primarily of finished catheters. Cost of finished product, consisting of raw materials and contract manufacturing costs, is determined by the first-in, first-out (FIFO) method for valuing inventories. Costs of raw materials are determined using the FIFO method. Inventory is stated at the lower of costs or market (estimated net realizable value).

Inventory consisted of the following as of March 31, 2010 and December 31, 2009

	March 31,		December 31,
	2010		2009
Finished product	$	112,097	$	143,160
Raw materials		56,754		56,754
Total inventory	$	168,851	$	199,914

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets as of March 31, 2010 consisted principally of prepaid insurance.

Deferred Loan Costs

Deferred loan costs consist principally of legal and loan origination fees incurred to obtain $10 million in loans in June 2007 and the fair value of warrants issued in connection with the loans. These deferred loan costs are being amortized to interest expense over the terms of the respective loans using the effective interest rate method. At March 31, 2010 and December 31, 2009 , the Company had net deferred loan costs of $1,556,525 and $1,250,106, respectively. For the three months ended March 31, 2010 and for the three months ended March 31, 2009, the Company recorded $381,259 and $276,973, respectively, of interest expense related to the amortization of deferred loan costs, which included $354,234 and $237,726, respectively, related to the fair value of warrants issued in connection with the loans.

Stock Options and Warrants

On January 1, 2006, the Company adopted the provisions of ASC Topic 718, formerly SFAS No. 123 (revised 2004), Share-Based Payment (“SFAS No. 123R”) using the modified prospective transition method. ASC Topic 718, formerly SFAS No. 123R, requires the Company to measure all share-based payment awards granted after January 1, 2006, including those with employees, at fair value. Under ASC Topic 718, formerly SFAS No. 123R, the fair value of stock options and other equity-based compensation must be recognized as expense in the statements of operations over the requisite service period of each award.

Share-based awards granted subsequent to January 1, 2006 are valued using the fair value method and compensation expense is recognized on a straight-line basis over the vesting period of the awards. Beginning January 1, 2006, the Company also began recognizing compensation expense under ASC Topic 718, formerly SFAS No. 123R for the unvested portions of outstanding share-based awards previously granted under its stock option plans, over the periods these awards continue to vest.

The Company accounts for certain share-based awards, including warrants, with non-employees in accordance with ASC Topic 718, formerly SFAS No. 123R and related guidance, including ASC Topic 505, formerly 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. The Company estimates the fair value of such awards using the Black-Scholes valuation model at each reporting period and expenses the fair value over the vesting period of the share-based award, which is generally the period in which services are provided.

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.

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

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, 61,778 expired in December 2009 without having been exercised and 334,891 expired in March 2010 without having been exercised.

On February 24, 2010, by way of a written consent, the Company’s Board of Directors amended the Directors and Consultants 1999 Stock Option Plan to extend the termination date of the Plan to December 1, 2011.

Loss Per Share

Loss per share has been computed based on the weighted average number of shares outstanding during each period, in accordance with ASC Topic 260, formerly SFAS No. 128, Earnings per Share. The effect of outstanding stock options and warrants, which could result in the issuance of 11,043,206 and 5,230,637 shares of common stock at March 31, 2010 and 2009 respectively, is antidilutive. As a result, diluted loss per share data does not include the assumed exercise of outstanding stock options and warrants and has been presented jointly with basic loss per share.

Recent Accounting Updates

Recent accounting pronouncements that the Company has adopted or that will be required to adopt in the future are summarized below.

On September 30, 2009, the Company adopted updates issued by the Financial Accounting Standards Board (FASB) to the authoritative hierarchy of GAAP. These changes establish the FASB Accounting Standards CodificationTM (ASC) as the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in conformity with GAAP. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. The FASB will no longer issue new standards in the form of Statements, FASB Staff Positions, or Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the Codification itself do not change GAAP. Other than the manner in which new accounting guidance is referenced, the adoption of these changes had no impact on the Consolidated Financial Statements.

In August 2009, the FASB issued ASU 2009-05, which amends ASC 820 to provide further guidance on measuring the fair value of a liability. It primarily does three things: 1) sets forth the types of valuation techniques to be used to value a liability when a quoted price in an active market for the identical liability is not available, 2) clarifies that when estimating the fair value of a liability, a reporting entity is not required to

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

include a separate input or adjustment to other inputs relating to the existence of a restriction that prevents the transfer of the liability, and 3) clarifies that both a quoted price in an active market for the identical liability at the measurement date and the quoted price for the identical liability when traded as an asset in an active market, when no adjustments to the quoted price of the asset are required, are Level 1 fair value measurements. This standard became effective for the Company beginning in the fourth quarter of 2009. The Company’s adoption of ASU 2009-05 did not have a material impact on its financial position, results of operations or liquidity.

In June 2009, the FASB issued guidance now codified as ASC Topic 105, “Generally Accepted Accounting Principles” (“ASC 105”), which establishes the FASB Accounting Standards Codification as the source of GAAP to be applied to nongovernmental agencies. ASC 105 explicitly recognizes rules and interpretive releases of the SEC under authority of federal securities laws as authoritative GAAP for SEC registrants. ASC 105 became effective for interim or annual periods ending after September 15, 2009. ASC 105 does not have a material impact on the Company’s consolidated financial statements presented hereby.

In May 2009, the FASB issued guidance now codified as ASC Topic 855, “Subsequent Events” (“ASC 855”). The pronouncement modifies the definition of what qualifies as a subsequent event—those events or transactions that occur following the balance sheet date, but before the financial statements are issued, or are available to be issued—and requires companies to disclose the date through which it has evaluated subsequent events and the basis for determining that date. The Company adopted the provisions of ASC 855 in the third quarter of 2009, in accordance with the effective date.

In January 2010, the FASB issued Update No. 2010-6, “Improving Disclosures About Fair Value Measurements” (“ASU 2010-6”), which requires reporting entities to make new disclosures about recurring or nonrecurring fair-value measurements including significant transfers into and out of Level 1 and Level 2 fair-value measurements and information on purchases, sales, issuances, and settlements on a gross basis in the reconciliation of Level 3 fair-value measurements. ASU 2010-6 is effective for annual reporting periods beginning after December 15, 2009, except for Level 3 reconciliation disclosures, which are effective for annual periods beginning after December 15, 2010. The Company is currently evaluating the effect of this update on its financial position, results of operations and liquidity.

In October 2009, the FASB issued authoritative guidance on revenue recognition that will become effective for the Company beginning July 1, 2010, with earlier adoption permitted. Under the new guidance on arrangements that include software elements, tangible products that have software components that are essential to the functionality of the tangible product will no longer be within the scope of the software revenue recognition guidance, and software-enabled products will now be subject to other relevant revenue recognition guidance. We believe adoption of this new guidance will not have a material impact on our financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the SEC did not or are not believed by management to have a material impact on the Company’s present or future financial statements

Going Concern

The accompanying consolidated financial statements have been prepared and are presented assuming the Company’s ability to continue as a going concern. The Company has incurred significant operating losses over the past several years and has a deficit accumulated during the development stage of $102.2 million as of

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

March 31, 2010 In addition, as of March 31, 2010, the Company’s current liabilities exceed current assets by $8.8 million. Current liabilities include notes payable of $3.7 million. While, subsequent to March 31, 2010, the Company received cash proceeds of approximately $217,387 in a series of private placements, this will not provide sufficient cash to support the Company’s operations through December 2011. The Company will need to secure additional sources of capital by the end of May 2010 to develop its business and product candidates as planned.

The Company currently has no commitments or arrangements from third parties for any additional financing to fund research and development and/or other operations, except for its REGEN trial, discussed below. That trial is being funded by the Ascent Medical Technology Fund II, LP, and the Ascent Medical Product Development Centre Inc., with which two of the Company’s Directors are affiliated. In addition, the Ascent Medical Technology Fund II, LP is funding, on a project basis, some of the activities of the Company’s Centers of Excellence, discussed below. The Company is 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, the Company may seek loans from certain of our executive officers, directors and/or current shareholders. However, financing may not be available to the Company or on terms acceptable to the Company. The Company’s inability to obtain additional financing would have a material adverse effect on its financial condition and ability to continue operations. Accordingly, the Company could be forced to significantly curtail or suspend operations, default on its debt obligations, file for bankruptcy or seek to sell some or all of its assets. As such, the Company’s continuation as a going concern is uncertain.

Due to the Company’s financial condition, the report of the Company’s independent registered public accounting firm on the Company’s March 31, 2010 consolidated financial statements includes an explanatory paragraph indicating that these conditions raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Collaborative License and Research/Development Agreements

The Company has entered into a number of contractual relationships for technology licenses and research and development projects. The following provides a summary of the Company’s significant contractual relationships:

In February 2000, the Company entered into a license agreement (the “Original License Agreement”) with Cell Transplants International, LLC (“CTI”). Pursuant to the Original 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, the Company and CTI, together with Dr. Peter K. Law, executed an addendum to the Original License Agreement, which amended or superseded a number of terms of the Original License Agreement (the “License Addendum”).

More specifically, the License Addendum provided, among other things:

•

The parties agreed that the Company would issue, and the Company did issue, to CTI a five-year warrant exercisable for 1.2 million shares of the Company’s common stock at an exercise price of $8.00 per share instead of, as originally contemplated under the Original License Agreement, issuing to CTI or Dr. Law 600,000 shares of the Company’s common stock and options to purchase 600,000

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

shares of the Company’s common stock at an exercise price of $1.80 per share. These share amounts and exercise prices do not take into account any subsequent recapitalizations or reverse stock splits.

•

The parties agreed that the Company’s obligation to pay CTI a $3.0 million milestone payment would be triggered upon the Company’s commencement of a bona fide U.S. Phase II human clinical trial study that utilizes technology claimed under U.S. Patent No. 5,130,141 with FDA approval in the United States, instead of, as originally contemplated under the Original License Agreement, upon initiation of an FDA approved human clinical trial study of such technology in the United States.

In addition, if the Company obtains FDA approval of a method of heart muscle regeneration utilizing the patented technology licensed under the Original License Agreement, the Company will be required to pay CTI $5 million. Further, the Company would be obligated to pay CTI a royalty of 5% of gross sales of products and services that directly read upon the claims of the licensed patents. During the course of certain litigation initiated by Dr. Law against the Company, see Note 8, the Company learned that CTI, a Tennessee limited liability company, was administratively dissolved by the Secretary of State of Tennessee in 2004.

In February 2006, the Company entered into an exclusive license agreement with The Cleveland Clinic Foundation for various pending patents to be used in connection with the MyoCell SDF-1 product candidate. Our MyoCell SDF-1 product candidate, which has recently completed preclinical testing, is intended to be an improvement to MyoCell. 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 entered into a memorandum of understanding with Juventas pursuant to which the license with Bioheart would be reinstated upon completion by Bioheart of certain financial milestones by February, 2010. In October of 2009, Cleveland Clinic’s patent applications were denied by the United States Patent Office. Although Cleveland Clinic filed an appeal, Bioheart allowed the memorandum of understanding with Juventas to lapse, believing that the current climate concerning the patenting of genetic properties would not permit the patents to be issued, even in a revised form.

In April 2006, the Company entered into an agreement to license from TriCardia, LLC various patents to be used in connection with the MyoCath® II product candidate. In exchange for the license, the Company agreed to do the following: 1) pay $100,000 upon the closing of the agreement; and 2) issue a warrant exercisable for 32,515 shares of the Company’s common stock at an exercise price of $7.69 per share. The warrant vested on a straight line basis over a 12 month period and expires on February 28, 2016. The fair value of this warrant of approximately $193,000, as determined using the Black-Scholes valuation model, was amortized to research and development expense on a straight line basis over the twelve month vesting period. The Company recorded $144,867 of expense in 2006 and the remaining $48,289 of expense in 2007.

In December 2006, the Company entered into an agreement with Tissue Genesis, Inc. (“Tissue Genesis”) for exclusive distribution rights to Tissue Genesis’ products and a license for various patents to be used in connection with the Bioheart Acute Cell Therapy and TGI 1200^TM product candidates. In exchange for the license, the Company agreed to do the following: 1) issue 13,006 shares of the Company’s common stock at a price of $7.69 per share; and 2) issue a warrant exercisable for 1,544,450 shares of the Company’s common stock to Tissue Genesis at an exercise price of $7.69 per share, which warrant expires on December 31, 2026. This warrant shall vest in three parts as follows: i) 617,780 shares vesting only upon the Company’s successful completion of human safety testing of the licensed technology, ii) 463,335 shares vesting only upon the Company exceeding net sales of $10 million or net profit of $2 million from the licensed technology, and iii) 463,335 shares vesting only upon the Company exceeding net sales of $100 million or net profit of $20 million

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

from the licensed technology. Since the vesting of this warrant is contingent upon the achievement of the specific milestones, the fair value of this warrant at the time the milestones are met will be expensed to research and development. In the event of an acquisition (or merger) of the Company by a third party, all unvested shares of common stock subject to the warrant shall immediately vest prior to such event. In addition, the Company will pay a 2% royalty of net sales of licensed products.

On April 13, 2007 Bioheart signed a Research Agreement with Indiana University to sponsor pre-IND large animal research related to the use of adipose tissue derived stem cells for use in treating acute myocardial infarction. The data from research will be used to file an IND related to this product platform. The total budget for this study is $726,584.06.

Bioheart originally entered into a Research Agreement with the University of Florida on July 1, 2004. The original purpose of this Research Agreement was to conduct small animal research related to Bioheart’s SDF-1 gene modified cell therapy. The research continued into large animals and the contract has been amended six times. The most recent budget amendment was to sponsor an additional $305,855.00 for large animal research which was signed on November 18, 2008.

There are currently 11 executed clinical site contracts and one open Academic Research Organization contract (ARO) associated with the ongoing Marvel Clinical Trial. Clinical site contracts include Minneapolis Heart Institute, Scripps Hospital, Florida Hospital, Jim Moran Heart Institute, Mayo Clinic, The Lindner Center, Swedish Medical Center, Newark Beth Israel, Arizona Heart Institute, Cardiology P. C. and Mercy Gilbert Medical Center. Bioheart is obligated for payments in the aggregate amount of $375,772.72 for clinical site contracts. Bioheart also entered into a contract in support of the Marvel trial with Duke Clinical Research Institute, an Academic Research Organization (ARO) on March 9, 2007. The total obligation for this contract is $469,843.99. In addition, there are various consultants and core laboratories which provide support for Marvel. Bioheart’s total commitment towards contracts for all consultants and Core Laboratories is $301,650.99.

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”), which will provide funding for the study. 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 are, respectively, the Chief Executive Officer and the Chief Operating Officer of the Company.

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. This is the first of five Centers of Excellence with four additional Centers to be announced in the coming months.

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following, as of March 31, 2010 and December 31, 2009.

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

	March 31,		December 31,
	2010		2009
License and royalty fees	$	932,500	$	880,000
Amounts payable to the Guarantors of the Company’s loan agreement with Bank of America, including fees and interest		1,110,187		1,745,745
Interest payable on notes payable		290,571		248,586
Other		643,086		655,915
	$	2,976,344	$	3,530,246

Notes Payable

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

	March 31,			December 31,
	2010			2009
Bank of America note payable. Terms described below.	$	1,333,400		$	2,000,000
BlueCrest Capital Finance note payable. Monthly payments of principal and interest as described below.		2,943,432			2,943,432
Short-term note payable. Terms described below.		2,284,972			4,384,972
		6,561,804			9,328,404
Less current portion.		(4,635,032	)		(4,051,861	)
Notes payable — long term.	$	1,926,772		$	5,276,543

Notes payable at March 31, 2010 mature as follows:

2010	$	666,889
2011		1,468,716
2012		7,192,799
	$	9,328,404

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

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

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 former 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.

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

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

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.

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.

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

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 then 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%.

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.

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 $432,635, which was accounted for as additional paid in capital and reflected as a component of deferred loan costs and is being amortized as interest expense over the term of the loan using the effective interest method. 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

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

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, 2009 and 2008 totaled approximately $378,000 and $479,000, 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 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.

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 accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

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.

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. 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 date with shares of its common stock.

The amount of interest expense on the principal amount of the loan accrued as of March 31, 2010 is $220,875. The Company has not paid any of the interest accrued to date under the Promissory Note and Agreement.

Related Party Transactions

The Company’s Chief Science and Technology Officer has personally 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.

A cousin of the Company’s former Chairman Chief Science and Technology Officer was an officer of the Company from August 12, 1999 until December 11, 2009.

On August 24, 2006, the Company entered into a Settlement Agreement, with the cousin of the Company’s Chief Science and 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.

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

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

within 90 days of the termination of his position on December 11, 2009. The officer did not exercise his remaining options by March 11, the 90^th day.

In 2010, the Company entered into a 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. are being 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.

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 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, owns as of March 31, 2010 approximately 22 % of the Company.

Shareholders’ 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.

As further discussed in Note 1, on February 22, 2008 the Company completed its 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.

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

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 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 PIPE 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.

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

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.

In 2002, the Company sold 1,092,883 shares of common stock at a price of $6.47 per share to various investors. The 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 Chief Science and Technology Officer contributed $400,000 to the Company in exchange for 4,324,458 shares of common stock.

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, 2008, no instruments had been issued 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 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,

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

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 amended the Directors and Consultants 1999 Stock Option Plan to extend the termination date of the Plan to December 1, 2011.

A summary of options at March 31, 2010 and activity during the three-month period then ended is presented below:

			Weighted- Average Exercise Price			Aggregate Intrinsic Value (1)
Options outstanding at January 1, 2010	2,119,431		$	3.28
Granted	750,426		$	0.35
Exercised	(367,012	)	$	0.001
Forfeited	(490,307	)	$	2.80
Options outstanding at March 31, 2010	2,012,538		$	3.31	6.3	$	33,497
Options exercisable at March 31, 2010	1,605,652		$	3.90	5.6	$	22,335
Available for grant at March 31, 2010	6,158,692

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 March 31, 2010. The weighted average fair value of options granted in the three month periods ended March 31, 2010 and 2009 was $0.48 and $0.46 per share, respectively. The total intrinsic value of options exercised in the three month period ended March 31, 2010 was $247,547.

For the three month period ended March 31, 2010, the Company recognized a net $47,298 in stock based compensation expense. This amount consisted of $26,655 in stock-based compensation that was included in research and development expenses and $20,643 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.

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

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

	Options Outstanding						Options Exercisable
	Shares		Weighted- Average Remaining Contractual Term		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
$0.001 — $0.70		383,414		9.7	$	0.68		250,000	$	0.68
$0.71 — $1.28		590,008		7.1	$	0.85		333,411	$	0.84
$5.25 — $5.67		992748		4.4	$	5.58		975,873	$	5.59
$7.69		39,572		6.4	$	7.69		39,572	$	7.69
$8.47		6,796		7.0	$	8.47		6,796	$	8.47
		2,012,538		6.3	$	3.31		1,605,652	$	3.90

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. Prior to January 1, 2008, the Company estimated the expected term for stock option grants by review of similar data from a peer group of companies. The Company adopted SAB 110 effective January 1, 2008 and will apply the simplified method in SAB 107 until enough historical experience is readily available to provide a reasonable estimate of the expected term for stock option grants. 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 three-month periods ended March 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 Three Months ended March 31,
	2010			2009
Expected dividend yield		0.0	%		00.0	%
Expected price volatility		110	%		139	%
Risk free interest rate		3.72	%		2.44	%
Expected life of options in years		10			5.8

During the three month period ended March 31, 2010, the Company issued options to purchase an aggregate of 750,426 shares of its common stock at a weighted average exercise price of $0.35 per share. These options consisted of the following:

•

stock options to purchase an aggregate of 307,692 shares of common stock at an exercise price of $0.001 per share issued to a related party as discussed in Note 9. The options vested immediately upon issuance and will expire on the tenth anniversary of the issuance date.

•

stock options to purchase an aggregate of 59,320 shares of common stock at an exercise price of $0.001 per share issued to Consultants. The options vested immediately upon issuance and will

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

expire on the tenth anniversary of the issuance date.

•

stock options to purchase an aggregate of 250,000 shares of common stock at an exercise price of $0.68 per share issued to certain members of the Company’s Board of Directors. The options vested immediately upon issuance and will expire on the tenth anniversary of the issuance date.

•

Stock options to purchase an aggregate of 133,414 shares of common stock at an exercise price of $0.68 per share issued to employees. The options vest in 4 equal annual installments, commencing one month after the date of grant, and will expire on the tenth anniversary of the issuance date.

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, 61,778 expired in December 2009 without having been exercised and 334,891 expired in March 2010 without having been exercised. .

Stock 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 March 31, 2010 and activity during the three-month period then ended is presented below:

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

		Weighted- Average Exercise Price			Aggregate Intrinsic Value
Outstanding at January 1, 2010	7,355,057	$	3.06
Issued	1,784,577	$	0.73
Exercised	0	$	0.00
Forfeited	116,763	$	0.66
Outstanding at March 31, 2010	9,030,668	$	2.63	8.0	$	6,785,212
Exercisable at March 31, 2010	4,818,248	$	2.04	6.8	$	4,014,314

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.

The Company did not issue any warrants that require Fair Value Calculation during the Quarter ending March 31, 2010. For the period ended March 31, 2009, the fair value of warrants issued in transactions that resulted in the recognition of expense, was estimated on the date of issuance using the following weighted-average assumptions.

	For the Three Month Period ended March 31,
	2010		2009
Expected dividend yield		n/a		00.0	%
Expected price volatility		n/a		75	%
Risk free interest rate		n/a		2.0	%
Expected life of options in years		n/a		10.0

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

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

	Warrants Outstanding						Warrants Exercisable
	Shares		Weighted- Average Remaining Contractual Term		Weighted- Average Exercise Price		Shares		Weighted- Average Exercise Price
$0.53 — $0.68		3,668,111		7.4	$	0.59		3,018,626	$	0.58
$0.70 — $1.89		2,396,262		1.8	$	0.79		396,224	$	0.88
$1.90 — $2.60		413,686		1.6	$	2.08		395,239	$	2.08
$3.60 — $4.93		105,000		3.4	$	4.87		105,000	$	4.87
$5.67 — $7.69		2,447,609		13.0	$	7.47		903,159	$	7.09
		9,030,668		7.1	$	2.63		4,818,248	$	2.04

•

During the three month period ended March 31, 2010, the Company issued warrants to purchase an aggregate of 1,675,614 shares of its common stock at a weighted average exercise price of $0.73 per share. These warrants were issued in connection with a private placement. The warrant vests six months following issuance and expires on the third year anniversary of the date of issuance.

•

During the three month period ended March 31, 2010 the Company canceled and reissued warrants to purchase 108,963 shares of its common stock that had previously been issued in a private placement.

Legal Proceedings

The Company is not subject to any legal proceedings.

10. Contingency

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, 2009 or 2008.

11. Supplemental Disclosure of Cash Flow Information

During the three months ended March 31, 2010 and December 31, 2009, the Company issued warrants in connection with the renewal of the BlueCrest Loan with an aggregate fair value of $687,677 and $1,580,575, respectively.

For the quarter ended March 31, 2010 the Company issued Common Stock in connection with the settlement of Accounts Payable with an aggregate value of $17,000.

For the Quarter ended March 31, 2010 the Company issued Common Stock in connection with amount due to loan guarantor for payment of $666,600 to Bank of America.

For the Quarter ended March 31, 2010 the Company issued Common Stock in connection with payment of the subordinated related party loan for $1,500,000.

For the Quarter ended March 31, 2010 the Company issued Common Stock in connection with the payment of accrued interest and loans fees due to Bank of America loan guarantors for $798,770.

The accompanying notes are an integral part of these consolidated financial statements.

Bioheart, Inc. and Subsidiaries
(A development stage enterprise)

Notes to Consolidated Interim Financial Statements — (Continued)
(Unaudited)

12. Subsequent Events

Private Placement — Common Stock and Warrants

In April 2010, the Company sold, an aggregate of 849,690 shares of the Company’s common stock and warrants to purchase 254,907 shares of the Company’s common stock for aggregate gross cash proceeds of $213,500. The warrants are (i) exercisable solely for cash at an exercise price of $0.65 to $0.84 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.

Patient Treatment at Center of Excellence

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 accompanying notes are an integral part of these consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Unless otherwise indicated, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” are to the Company. The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited consolidated interim financial statements and the accompanying related notes included in this quarterly report and our audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2009 filed with the Securities and Exchange Commission.

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.

Additional information concerning these and other risks and uncertainties is contained in our filings with the Securities and Exchange Commission, including the section entitled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2009.

Our Ability To Continue as a Going Concern

Our independent registered public accounting firm has issued its report dated, March 31, 2010, in connection with the audit of our financial statements as of December 31, 2009, 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 March 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 limb ischemia, chronic heart ischemia, acute myocardial infarctions and other issues. We work to prevent the worsening of any condition with devices that monitor and diagnose. 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 6 minute walk distance for those patients who were treated, and less distance from baseline 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 from 390. 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 or MyCell SDF-1, our second generation therapy, discussed below, we intend to generate revenue in the United States from the sale of cell-culturing services for treatment of patients by qualified physicians. Abroad, we are identifying centers where it is acceptable to use the MyoCell and MyoCell SDF-1 treatments 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. Based on the results of the trial, we intend to either incorporate the combination 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 Bioheart Acute Cell Therapy, an autologous, adipose cell treatment for acute heart damage designed to be used in connection with the TGI 1200^TM tissue processing system, and MyoCell® SDF-1. Tissue Genesis, Inc., the entity from whom we have obtained the worldwide right to sell or lease the TGI 1200^TM announced on November 13, 2008 that the TGI 1200^TM had been certified with a CE Marking, thus making the system available throughout the European marketplace. We understand that Tissue Genesis is in the process of evaluating the regulatory pathway that should be pursued for the TGI 1200^TM device. 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.

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 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 being used to inject cells into cardiac tissue in therapeutic procedures to treat chronic heart ischemic and congestive heart failure.

Center of Excellence Program

Intelligent Devices — Distribution Agreements

Effective as of April 3, 2008, we entered into a distribution agreement with RTX Healthcare A/S (Denmark) (“RTX”) pursuant to which we secured worldwide, non-exclusive distribution rights to the Bioheart 3370 Heart Failure Monitor, an interactive and simple-to-use at-home intelligent device designed specifically to improve available healthcare to patients outside hospitals who are suffering from heart failure. The device, manufactured by RTX, has 510(k) market clearance from the U.S. Food and Drug Administration for marketing in the United States and CE mark approval for marketing in Europe and other countries that follow this mark. The compact Bioheart 3370 Heart Failure Monitor engages patients through personalized daily interactions and questions, while collecting vital signs and transmitting the information directly into a database. The data are regularly monitored by a remotely located medical professional, who watches for any abnormal readings that may signal a change in the patient’s health status. These changes are reported back to the treating physician. We do not have any minimum purchase commitment under the agreement. However, the per unit purchase price payable by us is inversely related to the number of units we purchase per annum. The distribution agreement has an initial term of two years and is subject to automatic renewal for additional one-year periods unless either party indicates an intent to terminate the agreement prior to the end of the then current term. The distribution agreement may be terminated by either party upon the other party’s default.

The company has signed distribution agreements with Restoration Medical, McRay Medical, Alamo Scientific and Morey Medical. These distributors will assist Bioheart with introducing its Home Heart Failure Monitoring Systems to physicians and hospitals throughout the United States. McRay Medical will distribute the systems in Northern California; Alamo Scientific will distribute in Texas, Louisiana and Arkansas; Morey

Medical will distribute in Okalahoma and parts of Kansas; Restoration Medical will distribute the monitoring systems in the rest of the country.

Effective as of October 22, 2009, the Company entered into a distribution agreement with Morey Medical Inc. pursuant to which Morey was granted exclusive rights to market and promote the Bioheart 3370-1 Heart Failure Monitor throughout a specific territory. In consideration for identifying purchasers who purchase or rent the Bioheart 3370-1 Heart Failure Monitor from the Company, the Company will pay to Morey a set fee. Morey is required to meet certain quarterly minimum purchase commitments under the agreement. The agreement has an initial term of one year and is subject to automatic renewal for additional one-year periods unless either party indicates intent to terminate the agreement no less than 60 days prior to the end of the then current term.

Effective as of December 10, 2009, the Company entered into a distribution agreement with McRay Medical, LLC, pursuant to which McRay was granted exclusive rights to market and promote the Bioheart 3370-1 Heart Failure Monitor throughout a specific territory. In consideration for identifying purchasers who purchase or rent the Bioheart 3370-1 Heart Failure Monitor from the Company the Company will pay to McRay a set fee. McRay is required to meet certain quarterly minimum purchase commitments under the agreement. The agreement has an initial term of one year and is subject to automatic renewal for additional one-year periods unless either party indicates intent to terminate the agreement no less than 60 days prior to the end of the then current term.

Effective as of October 22, 2009, the Company entered into a distribution agreement with Alamo Scientific, Inc. pursuant to which Alamo was granted exclusive rights to market and promote the Bioheart 3370-1 Heart Failure Monitor throughout a specific territory. In consideration for identifying purchasers who purchase or rent the Bioheart 3370-1 Heart Failure Monitor from the Company the Company will pay to Alamo a set fee. Alamo is required to meet certain quarterly minimum purchase commitments under the agreement. The agreement has an initial term of one year and is subject to automatic renewal for additional one-year periods unless either party indicates intent to terminate the agreement no less than 60 days prior to the end of the then current term.

Effective as of December 18, 2009, the Company entered into a distribution agreement with Restoration Medical Inc. pursuant to which Restoration was granted exclusive rights to market the Bioheart 3370-1 Heart Failure Monitoring System throughout those territories not covered by Morey Medical, McRay Medical and Alamo Scientific. In consideration for identifying purchasers who purchase or lease the Bioheart 3370-1 Heart Failure Monitoring System from the Company, the Company will pay to Restoration a set fee. Restoration is required to meet certain quarterly minimum purchase commitments under the agreement. The agreement has an initial term of one year and is subject to automatic renewal for additional one-year periods unless either party indicates intent to terminate the agreement no less than 60 days prior to the end of the then current term.

The heart failure monitors are reimbursed by Medicare to the home health companies. In 2009, reimbursement was added to the National Episode Rate for cardiac patients. The monitors in conjunction with the nurse’s visit are essential to the well being of chronic heart failure patients. Care Plan Oversight (CPO) reimbursement also allows physicians to bill Medicare for their time overseeing the care of home care or hospice patients.

Operations

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. Substantially all of our revenue since inception has been generated in the United States, and the majority of our long-lived assets are located in the United States.

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:

Stock-Based Compensation

On January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards No. 123R, Share-Based Payment (“SFAS No. 123R”) using the modified prospective transition method. SFAS No. 123R requires us to measure all share-based payment awards granted after January 1, 2006, including those with employees, at fair value. Under SFAS No. 123R, 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 SFAS No. 123R 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 SFAS No. 123R 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 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.

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 neither our MyoCell product candidate nor our other product candidates has received regulatory approval or generated any material revenues and is not expected to until 2011, 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.

Comparison of the three months Ended March 31, 2010 and 2009

Revenues

We recognized revenues of $29,800 in the three month period ended March 31, 2010 compared to revenues of $109,000 in the three month period ended March 31, 2009.. Our revenue in the three month period ended March 31, 2010 was generated mainly from the sale of Cardio Devices and the revenue in the three month period ended March 31, 2009 was generated mainly from the sale of MyoCath catheters.

Cost of Sales

Cost of sales was $14,404 in the three month period ended March 31, 2010 compared to $49,296 in the three month period ended March 31, 2009.

Research and Development

Research and development expenses were approximately $415,900 in the three month period ended in March 31, 2010, a decrease of approximately $210,500 from research and development expenses of $626,400 in 2009. The decrease was primarily attributable to a reduction in the amount of funds allocated to our clinical trials.

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 approximately $427,000 in the three month period ended March 31 2010, a decrease of $220,000 from marketing, general and administrative expenses of approximately $647,000 in 2009. The decrease in marketing, general and administrative expenses is attributable, in part, to a decrease in insurance, legal and rent expenses.

Interest Income

Interest income consists of interest earned on our cash and cash equivalents. Interest income was $0.83 in the three month period ended March 31, 2010 compared to interest income of $10.32 in 2009..The decrease in interest income was primarily attributable to lower cash balances in the three month period ended March 31, 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 $683,110 in the three month period ended March 31, 2010 compared to interest expense of $557,682 in 2009. Interest incurred on the principal amount of our outstanding loans and interest and fees earned by the guarantors totaled $299,755 in the three month period ended March 31, 2010 and $277,280 in 2009. Amortization of deferred loan costs and amortization of the fair value of warrants issued in connection with the BlueCrest and Bank of America Loans totaled $381,300 in the three month period ended March 31, 2010 compared to $277,000 in 2009.

Liquidity and Capital Resources

In the three month period ended March 31, 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 $504,000 in the three month period ended March 31, 2010 as compared to $101,018 of cash used in 2009.

Our use of cash for operations in the three months ended March 31, 2010 reflected a net loss generated during the period of $1.5 million, adjusted for non-cash items such as stock-based compensation of $47,298, amortization of the fair value of warrants granted in connection with the BlueCrest Loan and Bank of America Loan of $354,234, amortization of loan costs incurred in connection with the BlueCrest Loan and Bank of America Loan of $27,024.. A decrease in prepaid and other current assets of $19,000 and an increase in accounts payable of $37,800 contributed to our use of operating cash in 2009. The decrease in prepaid expenses and other current assets was due mainly to the decrease in prepaid insurance. Partially offsetting these uses of cash were decreases in accrued expenses of $553,902..

Our use of cash for operations in the three month period ended March 31, 2009 reflected a net loss generated during the period of $1.8 million. However, our net loss was significantly offset by a decrease in prepaid expenses and other current assets of $441,000, an increase in accounts payable of $494,000 and an increase in accrued expenses of $445,000. The decrease in prepaid expenses was due to the refund of upfront payments under an agreement with the contract research organization that we were utilizing for the MARVEL trial. Accounts payable increased as we have sought to conserve cash until significant additional financing was obtained.

Investing Activities

Net cash used in investing activities was $688.00 in 2009 as compared to $19,000 in 2008. All of the cash utilized in investing activities for 2009 and 2008 related to our acquisition of property and equipment.

Financing Activities

Net cash provided by financing activities was $498,000 in the three month period ended March 31, 2010 as compared to $222,000 in 2009.

In the three month period ended March 31, 2010 we sold, in a private placement, shares of common stock for aggregate net cash proceeds of approximately $438,463.

Existing Capital Resources and Future Capital Requirements

Neither our MyoCell product candidate nor our other product candidates has received regulatory approval or generated any material revenues. We do not expect to generate any material revenues or cash from sales of our MyoCell and other product candidates until 2011 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 additional debt to provide the funds necessary to conduct our research and development activities and to meet our other cash needs.

At March 31, 2010 we had cash and cash equivalents totaling $49,312 however, our working capital deficit as of such date was $8.8 million. Our independent registered public accounting firm has issued its report dated March 31, 2010 in connection with the audit of our financial statements as of December 31, 2009 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 3.

Quantitative and Qualitative Disclosures About Market Risk

Not Applicable.

Item 4.

Controls and Procedures

Disclosure Controls and Procedures

We have established disclosure controls and procedures to ensure that material information relating to us is made known to the officers who certify our financial reports, as well as to other members of senior management and the Board of Directors.

We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer, as well as our Principal Financial and Accounting Officer of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this quarterly report on Form 10-Q. Based on such evaluation, our Principal Executive Officer, as well as our Principal Financial and Accounting Officer concluded that, as of March 31, 2010, our disclosure controls and procedures were effective. In making this assessment, we used the criteria set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The controls that management sought to identify and evaluate were those processes designed by, or under the supervision of, the Company’s principal financial officer, or persons performing similar functions, and implemented by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

(1) pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the Company;

(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the issuer are being made only in accordance with authorizations of management and directors of the Company; and

(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the issuer’s assets that could have a material effect on the financial statements.

A deficiency in the design of internal control over financial reporting exists when (a) necessary controls are missing or (b) existing controls are not properly designed so that, even if the control operates as designed, the financial reporting risks would not be addressed.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company’s annual or interim financial statements will not be prevented or detected on a timely basis. Management has determined that, as of March 31, 2010, the Company did not have a deficiency or material weakness in our internal control over financial reporting.

This Quarterly Report on Form 10-Q does not, and is not required to; include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.

Changes In Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended March 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

Our company is not involved in any material litigation and we 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.

Item 1A.

Risk Factors

There have been no material changes in our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2009.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Private Placement — Common Stock and Warrants

In January 2010, the Company sold, in a private placement, an aggregate of 162,460 shares of the Company’s common stock and warrants to purchase 48,738 shares of the Company’s common stock for aggregate gross cash proceeds of $105,964. The warrants are (i) exercisable solely for cash at an exercise price of $0.71 to $0.79 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 February 2010, the Company sold, in a private placement, an aggregate of 260,050 shares of the Company’s common stock and warrants to purchase 78,015 shares of the Company’s common stock for aggregate gross cash proceeds of $149,441.The warrants are (i) exercisable solely for cash at an exercise price of $0.68 to $0.70 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 2010, the Company sold, in a private placement, an aggregate of 368,440 shares of the Company’s common stock and warrants to purchase 110,532 shares of the Company’s common stock for aggregate gross cash proceeds of $197,263. The warrants are (i) exercisable solely for cash at an exercise price of $0.64 to $0.68 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 of 2010 Howard Leonhardt, the Chief Science and Technology Officer elected to convert his portion of a $4,140,201 Note Receivable to restricted common stock and warrants. Upon conversion he was issued 3,136,520 shares and warrants to purchase 940,956 shares of the Company’s common stock. The warrants are (i) exercisable solely for cash at an exercise price of $0.79 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 As a result, 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 $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. Upon conversion the former Guarantor was issued 1,657,910 shares and warrants to purchase 497,373 shares of the Company’s common stock. The warrants are (i) exercisable solely for cash at an exercise price of $0.65 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

With his acceptance of the restricted common stock and warrants, the former Guarantor owns approximately 8% of the Company.

Each of the listed sales was exempt from registration in reliance upon Section 4(s) 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.

Item 3.

Defaults Upon Senior Securities

Not Applicable

Item 4.

Removed and Reserved

Item 5.

Other Information

On February 10, 2010, the Board of Directors asked Peggy A. Farley to serve as Chief Financial Officer in addition to serving as Chief Operating Officer and asked Mark P. Borman to serve as Chairman of the Audit Committee. Both agreed. The change enabled increased autonomy between executive management and the Audit Committee.

Item 6.

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
10.1	**(1)	1999 Officers and Employees Stock Option Plan
10.2	**(1)	1999 Directors and Consultants Stock Option Plan
10.2	(a)
10.3	(1)	Form of Option Agreement under 1999 Officers and Employees Stock Option Plan
10.4	(3)	Form of Option Agreement under 1999 Directors and Consultants Stock Option Plan
10.5	**(4)	Employment Letter Agreement between the registrant and Scott Bromley, dated August 24, 2006.
10.6	(1)	Lease Agreement between the registrant and Sawgrass Business Plaza, LLC, as amended, dated November 14, 2006.
10.7	(1)	Asset Purchase Agreement between the registrant and Advanced Cardiovascular Systems, Inc., dated June 24, 2003.
10.8	(4)	Conditionally Exclusive License Agreement between the registrant, Dr. Peter Law and Cell Transplants International, LLC, dated February 7, 2000, as amended.
10.9	(4)	Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by and between the registrant, Howard J. Leonhardt and Brenda Leonhardt
10.10	(4)	Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by and between the registrant and William P. Murphy Jr., M.D.
10.11	(4)	Loan Agreement, dated as of June 1, 2007, by and between the registrant and Bank of America, N.A.
10.12	(4)	Warrant to purchase shares of the registrant’s common stock issued to Howard J. Leonhardt and Brenda Leonhardt

Exhibit No.		Exhibit Description
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)	Supply and License Agreement, dated June 7, 2007, by and between the registrant and BioLife Solutions, Inc.***
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)	Form of Registration Rights Agreement for October 2008 Private Placement
10.29	(19)	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)	Closing Confirmation of Conversion Election, dated July 23, 2009
31.1	*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2	*	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Filed herewith

Indicates management contract or compensatory plan.

(1)

Incorporated by reference to the Company’s Form S-1 filed with the Securities and Exchange Commission on February 13, 2007

(2)

Reserved

(3)

Incorporated by reference to Amendment No. 2 to the Company’s Form S-1 filed with the Securities and Exchange Commission on July 12, 2007

(4)

Incorporated by reference to Amendment No. 3 to the Company’s Form S-1 filed with the Securities and Exchange Commission on August 9, 2007

(5)

Incorporated by reference to Amendment No. 4 to the Company’s Form S-1 filed with the Securities and Exchange Commission on September 6, 2007

(6)

Incorporated by reference to Amendment No. 5 to the Company’s Form S-1 filed with the Securities and Exchange Commission on October 1, 2007

(7)

Incorporated by reference to Post-effective Amendment No. 1 to the Company’s Form S-1 filed with the Securities and Exchange Commission on October 11, 2007

(8)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 3, 2008

(9)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 8, 2008

(10)

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2008

(11)

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2008

(12)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 3, 2009

(13)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 8, 2009

(14)

Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2009

(15)

Incorporated by reference to the Company’s Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on April 30, 2009

(16)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 18, 2009

(17)

Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 20, 2009

(18)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 9, 2009

(19)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2009

(20)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 3, 2009

(21)

Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 18, 2009

(22)

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 Securities and Exchange Commission on April 28, 2010

SIGNATURES

Pursuant to the requirements 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.

Date: May 14, 2010				By: /s/ Karl E. Groth, Ph.D.
				Karl E. Groth, Ph.D.Chairman of the Board and Chief Executive Officer

Attached files

U.S. Stem Cell, Inc. Reports

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