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

FORM 10-Q

        x    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2014

OR

        o    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission File Number: 001-33718
   

BIOHEART, INC.
(Exact name of registrant as specified in its charter)
   

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

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

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

Securities registered under Section 12(b) of the Exchange Act:
None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $0.001 par value per share
(Title of Class)
   

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

Indicate by check mark whether 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 x No o

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 o Accelerated filer o
Non-accelerated filer o
Smaller reporting company x
(Do not check if a smaller reporting company)
   

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

As of November 6, 2014, there were 558,942,523 outstanding shares of the Registrant’s common stock, par value $0.001 per share.

Transitional Small Business Disclosure Format Yes o No x



BIOHEART, INC.
INDEX TO FORM 10-Q FILING
SEPTEMBER 30, 2014

TABLE OF CONTENTS

PART I         Financial Information     Page
Number
 
           
 
              
Item 1.
           
Financial Information
         3    
 
           
 
              
 
           
Condensed Balance Sheets — September 30, 2014 (Unaudited) and December 31, 2013
         4    
 
           
 
              
 
           
Unaudited Condensed Statements of Operations (Unaudited) — Three and Nine Months Ended September 30, 2014 and 2013
         5    
 
           
 
              
 
           
Unaudited Condensed Statements of Stockholders Deficit (Unaudited) — Nine Months Ended September 30, 2014
         6    
 
           
 
              
 
           
Unaudited Condensed Statements of Cash Flows (Unaudited) — Nine Months Ended September 30, 2014 and 2013
         7    
 
           
 
              
 
           
Notes to Unaudited Condensed Financial Statements
         8    
 
           
 
              
Item 2.
           
Management’s Discussion and Analysis of Financial Condition and Results of Operations
         28    
 
           
 
              
Item 3.
           
Quantitative and Qualitative Disclosures About Market Risk
         37    
 
           
 
              
Item 4.
           
Controls and Procedures
         37    
 
           
 
              
PART II
           
Other Information
              
 
           
 
              
Item 1.
           
Legal Proceedings
         37    
 
           
 
              
Item 1A.
           
Risk Factors
         37    
 
           
 
              
Item 2.
           
Unregistered Sales of Equity Securities and Use of Proceeds
         37    
 
           
 
              
Item 3.
           
Defaults Upon Senior Securities
         38    
 
           
 
              
Item 4.
           
Mine Safety Disclosures
         38    
 
           
 
              
Item 5.
           
Other Information
         38    
 
           
 
              
Item 6.
           
Exhibits
         38    
 
           
 
              
SIGNATURES
           
 
         45    
 
           
 
              
EX-31.1
           
Management Certification
               
 
           
 
              
EX-32.1
           
Sarbanes-Oxley Act
               
 

2



PART I — FINANCIAL INFORMATION

Item 1.

Interim Financial Statements and Notes to Interim Financial Statements

General

The accompanying reviewed interim financial unaudited statements have been prepared in accordance with the instructions to Form 10-Q. Therefore, they do not include all information and footnotes necessary for a complete presentation of financial position, results of operations, cash flows, and stockholders’ equity in conformity with generally accepted accounting principles. Except as disclosed herein, there has been no material change in the information disclosed in the notes to the financial statements included in the Company’s annual report on Form 10-K for the year ended December 31, 2013. In the opinion of management, all adjustments considered necessary for a fair presentation of the results of operations and financial position have been included and all such adjustments are of a normal recurring nature. Operating results for the nine months ended September 30, 2014 are not necessarily indicative of the results that can be expected for the year ending December 31, 2014.

3



BIOHEART, INC.
CONDENSED BALANCE SHEETS

        September 30,
2014
    December 31,
2013
 
           
(unaudited)
              
ASSETS
                                     
Current assets:
                                     
Cash and cash equivalents
              $ 46,592          $ 46,227   
Accounts receivable, net
                 153,863             19,913   
Prepaid and other
                 26,164             784    
Total current assets
                 226,619             66,924   
 
                                     
Property and equipment, net
                 13,431             9,055   
 
                                     
Other assets
                 8,404             10,160   
 
                                     
Total assets
              $ 248,454          $ 86,139   
 
                                     
LIABILITIES AND STOCKHOLDERS’ DEFICIT
                                     
Current liabilities:
                                     
Accounts payable
              $ 2,068,256          $ 2,382,267   
Accrued expenses
                 2,291,809             4,480,335   
Advances, related party
                 141,759             416,198   
Deposits
                 478,286             478,286   
Subordinated debt, related party
                 1,500,000             1,500,000   
Notes payable, related party
                 2,377,271             2,241,477   
Notes payable, net of debt discount
                 1,478,934             1,930,841   
Total current liabilities
                 10,336,315             13,429,404   
 
                                     
Long term debt:
                                     
Derivative liability
                 725,122             403,811   
 
                                     
Stockholders’ deficit:
                                     
Preferred stock, par value $0.001; 20,000,000 shares authorized, 20,000,000 issued and outstanding
                 20,000             20,000   
Common stock, par value $0.001; 2,000,000,000 and 950,000,000 shares authorized, respectively, 533,694,420 and 379,787,745 shares issued and outstanding as of September 30, 2014 and December 31, 2013, respectively
                 533,694             379,788   
Additional paid in capital
                 107,851,505             103,819,119   
Common stock subscription
                 210,000             215,000   
Accumulated deficit
                 (119,428,182 )            (118,180,983 )  
Total stockholders’ deficit
                 (10,812,983 )            (13,747,076 )  
 
                                     
Total liabilities and stockholders’ deficit
              $ 248,454          $ 86,139   
 

See the accompanying notes to these financial statements

4



BIOHEART, INC.
CONDENSED STATEMENTS OF OPERATIONS
(unaudited)

        Three months ended September 30,     Nine months ended September 30,    
        2014
    2013
    2014
    2013
Revenue:
                                                                   
Products
              $ 281,752          $ 25,350          $ 869,012          $ 25,350   
Services
                 297,784             6,309             694,852             30,630   
Total revenue
                 579,536             31,659             1,563,864             55,980   
 
                                                                   
Cost and operating expenses:
                                                                   
Cost of sales
                 523,222                          889,509                
Research and development
                 8,581             158,381             33,916             494,762   
Marketing, general and administrative
                 1,512,706             940,354             3,182,397             1,750,276   
Depreciation and amortization
                 1,759             77              3,745             1,327   
Total operating expenses
                 2,046,268             1,098,812             4,109,567             2,246,365   
 
                                                                   
Net loss from operations
                 (1,466,732 )            (1,067,153 )            (2,545,703 )            (2,190,385 )  
 
                                                                   
Other income (expenses):
                                                                   
Gain on settlement of debt
                 85,229                          2,272,283             1,004,224   
Gain on change of fair value of derivative liability
                 239,296             129,298             61,339             39,885   
Other income
                                                        939    
Interest expense
                 (331,026 )            (208,914 )            (1,035,118 )            (1,270,663 )  
Total other income (expenses)
                 (6,501 )            (79,616 )            1,298,504             (225,615 )  
 
                                                                   
Net loss before income taxes
                 (1,473,233 )            (1,146,769 )            (1,247,199 )            (2,416,000 )  
 
                                                                   
Income taxes (benefit)
                                                           
 
                                                                   
NET LOSS
              $ (1,473,233 )         $ (1,146,769 )         $ (1,247,199 )         $ (2,416,000 )  
 
                                                                   
Net loss per common share, basic and diluted
              $ (0.003 )         $ (0.005 )         $ (0.003 )         $ (0.011 )  
 
                                                                   
Weighted average number of common shares outstanding, basic and diluted
                 519,135,426             246,229,899             464,607,869             217,392,664   
 

See the accompanying notes to these financial statements

5



BIOHEART, INC.
CONDENSED STATEMENT OF STOCKHOLDERS’ DEFICIT
NINE MONTHS ENDED SEPTEMBER 30, 2014
(unaudited)

        Preferred stock     Common stock     Additional
Paid in
    Subscription     Accumulated        
        Shares
    Amount
    Shares
    Amount
    Capital
    Receivable
    Deficit
    Total
Balance, December 31, 2013
                 20,000,000          $ 20,000             379,787,745          $ 379,788          $ 103,819,119          $ 215,000          $ (118,180,983 )         $ (13,747,076 )  
Common stock issued in settlement of accounts payable
                                           45,232,118             45,232             946,285                                       991,517   
Common stock issued in connection with settlement of other debt
                                           64,434,256             64,434             1,832,646                                       1,897,080   
Common stock issued for services
                                           3,839,832             3,840             180,151                                       183,991   
Common stock issued upon exercise of warrants
                                           11,918,181             11,918             124,082                                       136,000   
Proceeds from issuance of common stock
                                           28,482,288             28,482             404,769             (5,000 )                         428,251   
Fair value of vesting warrants issued in connection with revenue share arrangement
                                                                     136,837                                       136,837   
Stock based compensation
                                                                     407,616                                       407,616   
Net loss
                                                                                               (1,247,199 )            (1,247,199 )  
Balance, September 30, 2014
                 20,000,000          $ 20,000             533,694,420          $ 533,694          $ 107,851,505          $ 210,000          $ (119,428,182 )         $ (10,812,983 )  
 

See the accompanying notes to these financial statements

6



BIOHEART, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(unaudited)

        Nine months ended September 30,    
        2014
    2013
CASH FLOWS FROM OPERATING ACTIVITIES:
                                     
Net loss
              $ (1,247,199 )         $ (2,416,000 )  
Adjustments to reconcile net loss to net cash used in operating activities:
                                     
Depreciation and amortization
                 3,745             1,328   
Bad debt expense
                 28,732                
Amortized discount on convertible debt
                 343,592             295,750   
Gain on change in fair value of derivative liability
                 (61,339 )            (39,885 )  
Gain on settlement of debt
                 (2,272,283 )            (1,004,224 )  
Non-cash payment of interest
                 385,501             168,350   
Warrants issued in connection with revenue share arrangement
                 136,837                
Related party notes payable issued for services rendered
                 800,000             500,000   
Common stock issued in connection with accounts payable
                              2,500   
Common stock issued in exchange for services
                 38,750             40,519   
Preferred stock issued in settlement of debt and forbearance agreement
                              274,050   
Stock based compensation
                 407,616             102,674   
(Increase) decrease in:
                                     
Receivables
                 (162,682 )            (7,553 )  
Inventory
                              62,953   
Prepaid and other current assets
                 (23,624 )            41,533   
Increase (decrease) in:
                                     
Accounts payable
                 628,684             (76,240 )  
Accrued expenses
                 246,486             485,518   
Net cash used in operating activities
                 (747,184 )            (1,568,727 )  
 
                                     
CASH FLOWS FROM INVESTING ACTIVITIES:
                                     
Acquisitions of property and equipment
                 (8,121 )               
Net cash used by investing activities
                 (8,121 )               
 
                                     
CASH FLOWS FROM FINANCING ACTIVITIES:
                                     
Bank overdraft
                              (89 )  
Proceeds from issuance of common stock, net
                 428,251             1,100,000   
(Repayments (proceeds) from related party advances
                 26,759             180,500   
Proceeds from exercise of stock options and warrants
                 136,000                
Proceeds from notes payable
                 388,000             295,000   
Repayments of notes payable
                 (223,340 )               
Net cash provided in financing activities
                 755,670             1,575,411   
 
                                     
Net increase in cash and cash equivalents
                 365              6,684   
 
                                     
Cash and cash equivalents, beginning of period
                 46,227                
Cash and cash equivalents, end of period
              $ 46,592          $ 6,684   
 
                                     
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
                                     
Interest paid
              $ 161,532          $ 513,986   
Income taxes paid
              $           $    
 
                                     
Non-cash financing activities:
                                     
Common stock issued in settlement of notes payable
              $ 938,075          $ 345,000   
Common stock issued in settlement of accounts payable
              $ 857,445          $ 149,239   
Common stock issued in settlement of related party notes and advances payable
              $ 862,880          $    
Preferred stock issued in settlement of notes payable
              $           $ 70,000   
 

See the accompanying notes to these financial statements

7



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

NOTE 1 — SIGNIFICANT ACCOUNTING POLICIES

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

General

The accompanying unaudited condensed financial statements of Bioheart, Inc., (the “Company”), have been prepared in accordance with the rules and regulations (Regulation S-X) of the Securities and Exchange Commission (the “SEC”) and with the instructions to Form 10-Q. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results from operations for the nine month period ended September 30, 2014 are not necessarily indicative of the results that may be expected for the year ended December 31, 2014. The unaudited condensed financial statements should be read in conjunction with the December 31, 2013 financial statements and notes thereto included in the Company’s Annual Report on Form 10-K.

Basis and business presentation

Bioheart, Inc. (the “Company”) was incorporated under the laws of the State of Florida in August, 1999. The Company is in the cardiovascular sector of the cell technology industry delivering cell therapies and biologics that help address congestive heart failure, lower limb ischemia, chronic heart ischemia, acute myocardial infarctions and other issues. To date, the Company has not generated significant sales revenues, has incurred expenses, and has sustained losses. Consequently, its operations are subject to all the risks inherent in the establishment of a research and development business enterprise.

Revenue Recognition

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

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

8



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

Revenues for test kits and equipment sold are not recorded until test kits are delivered. The Company has revenue sharing arrangements for the sale of goods whereby the Company is the primary obligor, sets pricing with the customers and bears all associated credit risks with the customers. Sales under revenue share arrangements are recorded as gross sales and any portion shared with third parties under such arrangements are classified as selling expense due to the nature of the marketing activities performed by the third party. Revenues from trainings are not recorded until the completion of the training. Any cash received as a deposit for trainings are recorded by the company as a liability.

Unbilled revenue is revenue that is recognized but is not currently billable to the customer pursuant to contractual terms. In general, such amounts become billable in accordance with predetermined payment schedules, but recognized as revenue as services are performed. Amounts included in unbilled revenue are expected to be collected within one year and are included within current assets. As of December 31, 2013 and September 30, 2014 there was no unbilled revenue.

Comprehensive Income

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

Net loss per Common Share, basic and diluted

The Company has adopted Accounting Standards Codification subtopic 260-10, Earnings Per Share (“ASC 260-10”) specifying the computation, presentation and disclosure requirements of earnings per share information. Basic loss per share has been calculated based upon the weighted average number of common shares outstanding. Stock options, warrants and shares issuable upon conversion of notes payable have been excluded as common stock equivalents in the diluted loss per share because their effect is anti-dilutive on the computation for the three and nine months ended September 30, 2014 and 2013, respectively. Fully diluted shares outstanding were 659,543,477 and 323,296,916 for the three months ended September 30, 2014 and 2013, respectively and 605,015,919 and 336,682,241 for the nine months ended September 30, 2014 and 2013, respectively.

Stock Based Compensation

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

As of September 30, 2014, there were outstanding stock options to purchase 63,486,987 shares of common stock, 24,576,000 shares of which were vested.

Concentrations of Credit Risk

The Company’s financial instruments that are exposed to a concentration of credit risk are cash and accounts receivable. The financial stability of these institutions is periodically reviewed by senior management.

As of September 30, 2014, two customers represented 24% and 18% of the Company’s accounts receivable.

As of December 31, 2013, three customers represented 20%, 20% and 36% (total 76%) of the Company’s accounts receivable.

For the three months ended September 30, 2014, the Company’s revenues earned from the sale of products and services were $579,536, of which no customer represented 10% or more of the Company’s revenues. For the three months ended September 30, 2013, the Company’s revenues earned from the sale of products and services were $31,659, of which two customers represented 18% and 80% of the Company’s revenues.

9



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

For the nine months ended September 30, 2014, the Company’s revenues earned from the sale of products and services were $1,563,864, of which one customer represented 11% of the Company’s revenues. For the nine months ended September 30, 2013, the Company’s revenues earned from the sale of products and services were $55,980, of which three customers represented 18%, 23% and 44% of the Company’s revenues.

Research and Development

The Company accounts for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred. The Company incurred research and development expenses of $8,581 and $33,916 for the three and nine months ended September 30, 2014, respectively; and $158,381 and $494,762 for the three and nine months ended September 30, 2013, respectively.

Fair Value

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

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

Reliance on Key Personnel and Consultants

The Company has 4 full-time employees and 1 part-time employee. The Company is heavily dependent on the continued active participation of these current executive officers, employees and key consultants. The loss of any of the senior management or key consultants could significantly and negatively impact the business until adequate replacements can be identified and put in place.

10



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

Derivative Instrument Liability

The Company accounts for derivative instruments in accordance with ASC 815, which establishes accounting and reporting standards for derivative instruments and hedging activities, including certain derivative instruments embedded in other financial instruments or contracts and requires recognition of all derivatives on the balance sheet at fair value, regardless of hedging relationship designation. Accounting for changes in fair value of the derivative instruments depends on whether the derivatives qualify as hedge relationships and the types of relationships designated are based on the exposures hedged. At September 30, 2014 and December 31, 2013, the Company did not have any derivative instruments that were designated as hedges.

Recent Accounting Pronouncements

The Company has adopted Accounting Standards Update (ASU) No. 2014-10, Development Stage Entities (Topic 915): Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation. The amendments in this ASU remove all incremental financial reporting requirements from U.S. GAAP for development stage entities, including the removal of Topic 915, Development Stage Entities, from the FASB Accounting Standards CodificationTM. A development stage entity is one that devotes substantially all of its efforts to establishing a new business and for which: (a) planned principal operations have not commenced; or (b) planned principal operations have commenced, but have produced no significant revenue. For example, many start-ups or even long-lived organizations that have not yet begun their principal operations or do not have significant revenue would be identified as development stage entities. For public business entities, the presentation and disclosure requirements in Topic 915 will no longer be required for the first annual period beginning after December 15, 2014. The revised consolidation standards are effective one year later, in annual periods beginning after December 15, 2015. Early adoption is permitted. The Company has early adopted the standards under ASV No. 2014-10.

The FASB has issued ASU No. 2014-12, Compensation — Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period. This ASU requires that a performance target that affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. The amendments in this ASU are effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Earlier adoption is permitted. The Company has not yet determined the effect of the adoption of this standard and it is expected to have a material impact on the Company’s condensed financial position and results of operations.

The FASB has issued ASU No. 2014-09, Revenue from Contracts with Customers. This ASU supersedes the revenue recognition requirements in Accounting Standards Codification 605 — Revenue Recognition and most industry-specific guidance throughout the Codification. The standard requires that an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services. This ASU is effective on January 1, 2017 and should be applied retrospectively to each prior reporting period presented or retrospectively with the cumulative effect of initially applying the ASU recognized at the date of initial application. The Company has not yet determined the effect of the adoption of this standard and it is expected to have a material impact on the Company’s consolidated financial position and results of operations.

11



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

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

Reclassification

Certain reclassifications have been made to prior periods’ data to conform with the current year’s presentation. More specifically, product and service revenue has been separately disclosed on the face of the statement of operations. These reclassifications had no effect on reported income or losses.

NOTE 2 — GOING CONCERN MATTERS

The accompanying unaudited condensed financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying unaudited condensed financial statements, during nine months ended September 30, 2014, the Company incurred an operating loss of $1,247,199 and used $747,184 in cash for operating activities. As of September 30, 2014, the Company had a working capital deficit (current liabilities in excess of current assets) of approximately $10.0 million. These factors among others may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.

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

NOTE 3 — PROPERTY AND EQUIPMENT

Property and equipment as of September 30, 2014 and December 31, 2013 is summarized as follows:




  
September 30,
2014
  
December 31,
2013
Laboratory and medical equipment
              $ 352,358          $ 352,358   
Furniture, fixtures and equipment
                 125,634             125,634   
Computer equipment
                 47,646             39,525   
Leasehold improvements
                 362,046             362,046   
 
                 887,684             879,563   
Less accumulated depreciation and amortization
                 (874,253 )            (870,508 )  
 
              $ 13,431          $ 9,055   
 

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

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

12



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

NOTE 4 — ACCRUED EXPENSES

Accrued expenses consisted of the following as of September 30, 2014 and December 31, 2013:




  
September 30,
2014
  
December 31,
2013
License and royalty fees
              $           $ 2,122,130   
Amounts payable to the Guarantors of the Company’s loan agreement with Bank of America and Seaside Bank, including fees and interest
                 1,493,961             1,373,775   
Interest payable on notes payable
                 666,370             714,180   
Vendor accruals and other
                 114,259             120,692   
Employee commissions, compensation, etc.
                 17,219             149,558   
 
              $ 2,291,809          $ 4,480,335   
 

In June 2000, the Company had entered into an agreement with William Beaumont Hospital, or WBH, pursuant to which WBH granted the Company a worldwide, exclusive, non-sublicenseable license to two U.S. method patents covering the inducement of human adult myocardial cell proliferation in vitro, or the WBH IP. The term of the agreement was for the life of the patents, which expire in 2015. The Company did not use this license in any of their technologies or made any payments to WBH other than the initial payment to acquire the license. On April 2, 2014, the Company received confirmation from WBH that it has no obligation under the patent license agreement and WBH agreed to terminate the patent license agreement pursuant to a termination letter dated March 3, 2014.

Accordingly, the Company recognized approximately $2,122,130 in settlement of debt which represents the accumulative accrual and related interest from past years under the 2000 patent license agreement.

During the nine months ended September 30, 2014, the Company issued an aggregate of 45,232,118 shares of its common stock in settlement of outstanding accounts payable and accrued expenses. In connection with the issuance, the Company incurred $105,737 loss in settlement of debt.

NOTE 5 — STANDBY EQUITY DISTRIBUTION AGREEMENT

On November 2, 2011, the Company and Greystone Capital Partners (“Greystone”) had entered into a Standby Equity Distribution Agreement (the “Agreement”). Pursuant to the Agreement, Greystone had agreed to provide the Company with up to $1.0 million of funding for the 24-month period following the date a registration statement of the Company’s common stock is declared effective by the SEC (the “Equity Line”). The registration statement went effective on February 10, 2012. The Agreement automatically terminated on the first of April, 2014 (the first day of the month next following the second (2nd) anniversary of the Effective Date).

NOTE 6 — NOTES PAYABLE

Notes payable were comprised of the following as of September 30, 2014 and December 31, 2013:

13



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014




  
September 30,
2014
  
December 31,
2013
Seaside Bank note payable.
              $ 980,000          $ 980,000   
August 2008 Unsecured Promissory Note
                              500,000   
Hunton & Williams notes payable
                 384,972             384,972   
Asher notes payable
                 175,500             143,000   
Daniel James Management note payable
                 50,000                
Fourth Man, LLC note payable
                 75,000             35,000   
Total notes payable
                 1,665,472             2,042,972   
Less unamortized debt discount
                 (186,538 )            (112,131 )  
Total notes payable net of unamortized debt discount
              $ 1,478,934          $ 1,930,841   
 

Seaside Bank

On October 25, 2010, the Company entered into a Loan Agreement with Seaside National Bank and Trust for a $980,000 loan at 4.25% per annum interest that was used to refinance the Company’s loan with Bank of America. The obligation is guaranteed by certain shareholders of the Company. The Company renewed the loan with Seaside National Bank and Trust during the first quarter of 2014 to extend the maturity date to December 23, 2015.

August 2008 Unsecured Promissory Note

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, would be payable in one balloon payment upon the Company’s repayment of the BlueCrest Loan, which was scheduled to mature in May 2010, however the Company was not obligated to make payments until BlueCrest Loan is paid off. In the event the Company completes a private placement of its common stock and/or securities exercisable for or convertible into its common stock which generates at least $19.0 million of gross proceeds, the Company may prepay, without penalty, all outstanding principal and interest due under the loan using the same type of securities issued in the subject private placement. Because repayment of the loan could occur within 12 months from the date of the balance sheet, the Company has classified this loan as short term.

Subject to certain conditions, at the end of each calendar quarter during the time the loan is outstanding, the Company may, but is not required to, pay all or any portion of the interest accrued but unpaid as of such date with shares of its common stock. In April 2009, as consideration for the authorization to amend certain documents related to the Note, the Company issued to the Note holder a warrant to purchase 451,053 shares of common stock at an exercise price of $0.5321 per share.

The warrant, which became exercisable immediately upon issuance, has a ten year term. This warrant had a fair value of $195,694, which was accounted for as additional paid in capital and reflected as a component of debt discount and has been fully amortized as interest expense ratably over the term of the loan.

In 2013, 1,000,000 shares of common stock were issued to the debt holder, in exchange for $500,000 in principal and $598,125 of accrued interest relating to a previously issued note resulting in a gain of $1,078,625. A gain of $1,078,625 was included in the net gain on settlement of debt and trade payables on the statement of operations for the year ended December 31, 2013.

14



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

On June 16, 2014, 14,539,191 shares of common stock were issued to the debt holder, in exchange for the remaining $500,000 principal and $81,568 of accrued interest resulting in a gain of $255,890. A gain of $255,890 was included in the net gain on settlement of debt and trade payable on the statement of operations for the nine months ended September 30, 2014.

Hunton & Williams Notes

At September 30, 2014 and December 31, 2013, the Company has two outstanding notes payable with interest at 8% per annum due at maturity. The two notes, $61,150 and $323,822 , are payable in one balloon payment upon the date the Noteholder provides written demand, however the Company is not obligated to make payments until the Northstar (or successor) Loan is paid off.

Asher Notes (During this year)

During the nine months ended September 30, 2014, the Company entered into a Securities Purchase Agreements with Asher Enterprises, Inc. (“Asher”) or affiliates, for the sale of 8% convertible notes in aggregate principal amount of $258,000 (the “Asher Notes”).

The Asher Notes bear interest at the rate of 8% per annum. As of the quarter ended September 30, 2014, all interest and principal must be repaid nine months from the issuance date, with the last note being due May 12, 2015. The Notes are convertible into common stock, at Asher’s option, at a 45% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. The Company has identified the embedded derivatives related to the Asher Notes.

These embedded derivatives included certain conversion features and reset provision. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of Asher Notes and to fair value as of each subsequent reporting date, which at September 30, 2014 was $201,607. At the inception of the Asher Notes, the Company determined the aggregate fair value of $480,669 of the embedded derivatives.

The remaining unconverted principle balance as of September 30, 2014 was $175,500.

Daniel James Management

During the nine months ended September 30, 2014, the Company entered into Securities Purchase Agreements with Daniel James Management (“Daniel”) for the sale of 8% to 9.5% convertible notes in aggregate principal amount of $85,000 (the “Daniel Notes”).

The Daniel Notes bear interest at the rate of 8% to 9.5% per annum. As of the quarter ended September 30, 2014, all interest and principal must be repaid one year from the issuance date, with the last note being due July 29, 2015. The Daniel Notes are convertible into common stock, at holder’s option, at a 47% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. The Company has identified the embedded derivatives related to the Daniel Note. These embedded derivatives included certain conversion features and reset provision.

The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of Daniel Notes and to fair value as of each subsequent reporting date which at September 30, 2014 was $66,630. At the inception of the Daniel Note, the Company determined the aggregate fair value of $170,270 of the embedded derivatives.

15



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

The remaining unconverted principle balance as of September 30, 2014 was $50,000.

Fourth Man, LLC

During the nine months ended September 30, 2014, the Company entered into Securities Purchase Agreements with Fourth Man, LLC. (“Fourth Man”), for the sale of an 8% to 9.5% convertible note in the aggregate principal amount of $75,000 (the “Note”).

The Notes bears interest at the rate of 8% to 9.5% per annum. As of the quarter ended September 30, 2014, all interest and principal must be repaid one year from the issuance date, with the last note being due August 28, 2015. The Notes are convertible into common stock, at Fourth Man’s option, at a 47% discount to the average of the three lowest closing bid prices of the common stock during the 10 trading day period prior to conversion. The Company has identified the embedded derivatives related to the Fourth Man Notes. These embedded derivatives included certain conversion features and reset provision.

The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of Fourth Man Notes and to fair value as of each subsequent reporting date which at September 30, 2014 was $91,319. At the inception of the Fourth Man Notes, the Company determined the aggregate fair value of $122,561 of the embedded derivatives.

The fair value of the embedded derivatives of the Asher, Daniel and Fourth Man Notes, was determined using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 166.07% to 171.91%, (3) weighted average risk-free interest rate of 0.10% to 0.13%, (4) expected lives of 0.76 to 1.00 years, and (5) estimated fair value of the Company’s common stock from $0.0231 to $0.0486 per share. The initial fair value of the embedded debt derivative of $773,501 was allocated as a debt discount up to the proceeds of the notes ($418,000) with the remainder ($355,501) charged to current period operations as interest expense. For the three and nine months ended September 30, 2014, the Company amortized an aggregate of $141,977 and $343,592 of debt discounts to current period operations as interest expense, respectively. For the three and nine months ended September 30, 2013 , the Company amortized $53,115 and $295,750 of debt discount to operations as interest expense, respectively.

NOTE 7 — RELATED PARTY TRANSACTIONS

Advances

As of September 30, 2014 and December 31, 2013, the Company officers and directors have provided advances in the aggregate of $141,759 and $416,198 respectively, for working capital purposes. The advances are unsecured, due on demand and non-interest bearing.

During the nine months ended September 30, 2014, the Company issued an aggregate of 10,232,286 shares of common stock in settlement of $298,759 of related party advances and outstanding accounts payable.

Notes payable-related party

Northstar Biotechnology Group, LLC

On February 29, 2012, a note issued to BlueCrest Master Fund Limited was assigned to Northstar Biotechnology Group, LLC (“Northstar”), owned partly by certain directors and existing shareholders of the Company, including Dr. William P. Murphy Jr., Dr. Samuel Ahn and Charles Hart. At the date of the assignment, the principal amount of the BlueCrest note was $544,267.

16



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

On March 30, 2012, the Company and Northstar agreed to extend until May 1, 2012 the initial payment date for any and all required monthly under the Note, such that the first of the four monthly payments required under the Note will be due and payable on May, 2012 and all subsequent payments will be due on a monthly basis thereafter commencing on June 1, 2012, and to waive any and all defaults and/or events of default under the Note with respect to such payments. As of September 30, 2012, the Company was in default, however, subsequent to September 30, 2012, the Company renegotiated the terms of the Note, Northstar has agreed to suspend the requirement of principal payments by the Company and allow payment of interest-only in common stock.

On September 21, 2012, the Company issued 5,000,000 common stock purchase warrants to Northstar that was treated as additional interest expense upon issuance.

On October 1, 2012, the Company and Northstar entered into a limited waiver and forbearance agreement providing a recapitalized new note balance comprised of all sums due Northstar with a maturity date extended perpetually. The Company agreed to issue 5,000,000 shares of Series A Convertible Preferred Stock and 10,000,000 of common stock in exchange for $210,000 as payment towards outstanding debt, default interest, penalties, professional fees outstanding and due Northstar. In addition, the Company executed a security agreement granting Northstar a lien on all patents, patent applications, trademarks, service marks, copyrights and intellectual property rights of any nature, as well as the results of all clinical trials, know-how for preparing Myoblasts, old and new clinical data, existing approved trials, all right and title to Myoblasts, clinical trial protocols and other property rights.

In addition, the Company granted Northstar a perpetual license on products as described for resale, relicensing and commercialization outside the United States. In connection with the granted license, Northstar shall pay the Company a royalty of up to 8% on revenues generated.

Effective October 1, 2012, the effective interest rate was 12.85% per annum. The parties agreed, as of February 28, 2013, to reduce the interest rate to 7% per annum.

In connection with the consideration paid, Northstar waived, from the effective date through the earlier of termination or expiration of the agreement, satisfaction of the obligations as described in the forbearance agreement. In 2012, 5,000,000 shares of Series A Convertible Preferred Stock were approved to be issued, which was subsequently increased to 20,000,000 shares of preferred stock as Series A Convertible Preferred Stock. In addition, the Company is obligated to issue additional preferred stock equal in lieu of payment of cash of accrued and unpaid interest on each six month anniversary of the effective date (October 1, 2012). In lieu of the initial two payments in preferred stock, the parties have determined to modify the voting rights of the Series A Convertible Preferred Stock from 20 votes per share on matters to be voted on by the common stock holders to 25 votes per share on matters to be voted on by the common stock holders and all prior and subsequent payments of interest will be in common stock. The Company is required to issue additional shares of its common stock (as amended), in lieu of cash, each six month anniversary of the effective date for any accrued and unpaid interest.

On April 2, 2014, the Company issued 274,681 shares of its common stock in lieu of payment in cash of accrued and unpaid interest of $12,635 due April 1, 2014 per the forbearance agreement.

On September 17, 2014, limited waiver and forbearance agreement was amended to provide that the perpetual license on products as described for resale, relicensing and commercialization outside the United States was conditioned upon NorthStar providing certain financing, which financing the Company, in its sole discretion, could decline and retain the license.

As of September 30, 2014 and December 31, 2013, the principle of this note was $362,000.

17



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

Officer and Director Notes

At September 30, 2014 and December 31, 2013, the Company has outstanding notes payable to officers and directors with interest at 8% per annum due at maturity in aggregate $240,000 and $365,000, respectively. The remaining subordinated notes $100,000 and $140,000 were previously due on November 30, 2012 and June 4, 2011 respectively, and are unsecured. The Company is not obligated to make payment until Northstar loan is paid off.

On September 30, 2013, the Company issued an aggregate of 15,350,876 shares of its common stock in settlement of $175,000 of these related party notes payable.

On June 20, 2014, the Company issued 4,045,796 shares of its common stock in settlement of $125,000 of related party note payable and accrued interest of $36,832.

On August 1, 2013, the Company issued an aggregate of $500,000 promissory notes due on demand to officers and employee in settlement of accrued compensation. The promissory notes bear interest of 5% per annum and due at various maturity dates. During the nine months ended September 30, 2014, the Company paid off $240,821 of the outstanding promissory notes. The principle outstanding balance of these notes as of September 30, 2014 is $189,813.

On July 1, 2014, the Company issued an aggregate of $800,000 promissory notes to officers and employee in settlement of accrued compensation. The promissory notes bear interest of 5% per annum and due on January 1, 2015.

As of September 30, 2014 and December 31, 2013, the Company officers and directors have outstanding notes in aggregate of $785,458 and $1,014,477, respectively. The notes are at from 4.75% to 8% per annum and are due upon payoff of the Northstar note payable described above.

On June 20, 2014, the Company issued 10,333,475 shares of its common stock in settlement of $300,385 of related party note payable and accrued interest of $112,954.

NOTE 8 — DERIVATIVE LIABILITIES

Reset warrants

On October 1, 2012, in connection with the forbearance agreement with Northstar as discussed in Note 7 above, the Company issued an aggregate of 15,000,000 common stock purchase warrants to purchase the Company’s common stock with an exercise price of $0.014 per share for ten years with anti-dilutive (reset) provisions.

The Company has identified embedded derivatives related to the issued warrants. These embedded derivatives included certain and anti-dilutive (reset) provisions. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date and to fair value as of each subsequent reporting date.

At September 30, 2014, the fair value of the reset provision of $365,566 was determined using the Binomial Option Pricing model with the following assumptions: dividend yield: 0%; volatility: 153.88%; risk free rate: 2.22%; and expected life: 8.00 years. The Company recorded a gain (loss) on change in derivative liabilities of $35,263 and $(218,711) during the three and nine months ended September 30, 2014, respectively.

18



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

Convertible notes

In 2013 and the nine months ended September 30, 2014, the Company issued convertible notes (see Note 6 above).

These notes are convertible into common stock, at holders’ option, at a discount to the market price of the Company’s common stock. The Company has identified the embedded derivatives related to these notes relating to certain anti-dilutive (reset) provisions. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of Asher Note and to fair value as of each subsequent reporting date.

The fair value of the embedded derivatives at September 30, 2014, in the amount of $359,556, was determined using the Binomial Option Pricing Model based on the following assumptions: (1) dividend yield of 0%, (2) expected volatility of 153.88%, (3) weighted average risk-free interest rate of 0.02 to 0.13%, (4) expected lives of 0.24 to 0.91 years, and (5) estimated fair value of the Company’s common stock of $0.0249 per share. The Company recorded a gain on change in derivative liabilities of $204,033 and $280,050 during the three and nine months ended September 30, 2014, respectively.

Based upon ASC 840-15-25 (EITF Issue 00-19, paragraph 11) the Company has adopted a sequencing approach regarding the application of ASC 815-40 to its outstanding convertible notes. Pursuant to the sequencing approach, the Company evaluates its contracts based upon earliest issuance date.

At September 30, 2014, the aggregate derivative liabilities was valued at $725,122. The Company believes an event under the contract that would create an obligation to settle in cash or other current assets is remote and has classified the obligation as a long term liability.

NOTE 9 — STOCKHOLDERS’ EQUITY

Preferred stock

On August 17, 2012, the board of directors designated 5,000,000 shares of preferred stock as Series A Convertible Preferred Stock which was increased to 20,000,000 shares of preferred stock as Series A Convertible Preferred Stock (currently held by Northstar Biotechnology Group, LLC). Each share of preferred stock is convertible into equal number of common shares at the option of the holder; entitled to 20 votes on all matters presented to be voted by the holders of common stock; upon event of liquidation, entitled to amount equal to stated value plus any accrued and unpaid dividends or other fees before distribution to junior securities. In lieu of the initial two payments due to Northstar on April 1, 2013 and October 1, 2013, the parties have determined to modify the voting rights of the Series A Convertible Preferred Stock from 20 votes per share on matters to be voted on by the common stock holders to 25 votes per share on matters to be voted on by the common stock holders (see Note 7 above).

Common stock

Effective May 19, 2014, the Company amended its articles of incorporation to increase the authorized shares of capital stock of the Company from nine hundred and fifty million (950,000,000) shares of common stock and twenty million (20,000,000) shares of preferred stock, both $.001 par value respectively, to two billion (2,000,000,000) shares of shares of common stock and twenty million (20,000,000) shares of preferred stock, both $.001 par value respectively.

During the nine months ended September 30, 2014, the Company issued an aggregate of 45,232,118 shares of its common stock in settlement of outstanding accounts payable and accrued expenses. In connection with the issuance, the Company incurred $105,737 loss in settlement of debt.

19



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

During the nine months ended September 30, 2014, the Company issued an aggregate of 64,434,256 shares of its common stock for the conversion of $1,897,080 of notes payable and related accrued interest. In connection with the issuance, the Company incurred $255,890 gain in settlement of debt.

During the nine months ended September 30, 2014, the Company issued an aggregate of 3,839,832 shares of its common stock for services provided to the Company.

NOTE 10 — STOCK OPTIONS AND WARRANTS

Stock Options

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

On April 1, 2013, the Board of Directors approved, subject to shareholder approval, the establishment of the Bioheart 2013 Omnibus Equity Compensation Plan, or the “2013 Omnibus Plan”. The 2013 Omnibus Plan reserves up to fifty million shares of common stock for issuance.

A summary of options at September 30, 2014 and activity during the nine months then ended is presented below:




  
Shares
  
Weighted-
Average
Exercise Price
  
Weighted-
Average
Remaining
Contractual
Term (in years)
Options outstanding at January 1, 2013
                 7,853,376          $ 0.67             8.2   
Granted
                 17,400,000          $ 0.016             9.9   
Exercised
                           $                   
Forfeited/Expired
                 (1,340,433 )         $ 1.08                  
Options outstanding at December 31, 2013
                 23,912,943          $ 0.15             9.0   
Granted
                 39,648,487          $ 0.023             10.0   
Exercised
                                                  
Forfeited/Expired
                 (74,443 )         $ 4.8                  
Options outstanding at September 30, 2014
                 63,486,987          $ 0.063             9.1   
Options exercisable at September 30, 2014
                 24,576,000          $ 0.13             8.7   
Available for grant at September 30, 2014
                42,951,513                                  
 

20



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

The following information applies to options outstanding and exercisable at September 30, 2014:

        Options Outstanding
    Options Exercisable



  
Shares
  
Weighted-
Average
Remaining
Contractual
Term
  
Weighted-
Average
Exercise
Price
  
Shares
  
Weighted-
Average
Exercise
Price
$0.00 — $0.70
                 62,938,487             9.2          $ 0.03             24,027,500          $
0.03
   
$0.71 — $1.28
                 149,930             4.0          $ 0.81             149,930          $
0.81
   
$5.25 — $5.67
                 373,858             1.6          $ 5.55             373,858          $
5.55
   
$7.69
                 24,712             1.8          $ 7.69             24,712          $
7.69
   
 
                 63,486,987             9.1          $ 0.063             24,576,000          $
0.13
   
 

On February 24, 2014, the Company issued an aggregate 15,000,000 options to purchase the Company’s common stock at $0.019 per share to officers, vesting at 25% immediately and the remainder over approximately 42 months, exercisable over 10 years. The aggregate fair value of $282,597, determined using the Black Scholes option pricing model with the following assumptions: Dividend yield: 0%; Volatility: 163.63% and Risk free rate: 2.75%.

On February 24, 2014, the Company issued an aggregate 4,800,000 options to purchase the Company’s common stock at $0.019 per share to officers, vesting immediately and exercisable over 10 years. The aggregate fair value of $90,431, determined using the Black Scholes option pricing model with the following assumptions: Dividend yield: 0%; Volatility: 163.63% and Risk free rate: 2.75%.

On May 12, 2014, the Company issued an aggregate 4,848,487 options to purchase the Company’s common stock at $0.0272 per share to officers and employees, vesting over four years at anniversary and exercisable over 10 years. The aggregate fair value of $130,135, determined using the Black Scholes option pricing model with the following assumptions: Dividend yield: 0%; Volatility: 161.36% and Risk free rate: 2.66%.

On August 1, 2014, the Company issued an aggregate 15,000,000 options to purchase the Company’s common stock at $0.02694 per share to officers and employees, vesting at 25% immediately and 75% over three years at anniversary and exercisable over 10 years. The aggregate fair value of $391,798, determined using the Black Scholes option pricing model with the following assumptions: Dividend yield: 0%; Volatility: 168.62% and Risk free rate: 2.52%.

The fair value of all options vesting during the three and nine months ended September 30, 2014 of $164,247 and $407,616, respectively, was charged to current period operations.

Warrants

A summary of common stock purchase warrants at September 30, 2014 and activity during the three months then ended is presented below:

21



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014




  
Shares
  
Weighted-
Average
Exercise
Price
  
Weighted-
Average
Remaining
Contractual
Term (in
years)
Outstanding at January 1, 2013
                 74,073,322          $ 0.37             4.5   
Issued
                 50,350,536          $ 0.16             9.2   
Exercised
                           $ 0.00                  
 
                                                    
Forfeited
                 (6,345,002 )         $ 0.38                  
Outstanding at December 31, 2013
                 118,078,856          $ 0.22             6.3   
Issued
                 36,556,846          $ 0.02             7.4   
 
                                                    
Exercised
                 (11,918,181 )         $ 0.01                  
Expired
                 (6,765,430 )         $ 0.11                  
Outstanding at September 30, 2014
                 135,952,091          $ 0.19             6.1   
Exercisable at September 30, 2014
                 126,143,578          $ 0.11             6.2   
 

The following information applies to common stock purchase warrants outstanding and exercisable at September 30, 2014:

        Warrants Outstanding
    Warrants Exercisable



  
Shares
  
Weighted-
Average
Remaining
Contractual
Term
  
Weighted-
Average
Exercise
Price
  
Shares
  
Weighted-
Average
Exercise
Price
$0.01 — $0.50
                 129,702,958             6.1          $ 0.02             121,438,895          $
0.02
$0.52 — $0.68
                 2,699,675             4.6          $ 0.58             2,699,675          $
0.58
$0.70 — $1.62
                 848,176             5.3          $ 0.71             848,176          $
0.71
$5.67 — $7.69
                 2,701,282             8.1          $ 7.55             1,156,832          $
7.35
 
                 135,952,091             6.1          $ 0.19             126,143,578          $
0.11
 

In conjunction with the authorized issuance of common stock, the Company granted 24,556,846 common stock purchase warrants during the nine months ended September 30, 2014.

During the nine months ended September 30, 2014, the Company issued an aggregate of 8,000,000 warrants in connection with a joint venture agreement dated March 10, 2014. The warrants are exercisable at $0.0217 for four years vesting from June 8, 2014 through March 10, 2016. During the three and nine months ended September 30, 2014, the Company charged $15,762 and $95,018 to current period operations for the vesting portion.

During the nine months ended September 30, 2014, the Company issued an aggregate of 4,000,000 warrants in connection with use of certain intellectual property. The warrants are exercisable at $0.0481 for four years vesting from July 6, 2014 through April 6, 2017. During the three and nine months ended September 30, 2014, the Company charged $9,005 and $41,819 to current period operations for the vesting portion.

22



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

NOTE 11 — COMMITMENTS AND CONTINGENCIES

Revenue Share Arrangement

On March 10, 2014, the Company entered into a revenue sharing (the Agreement) with Global Stem Cells, Group, LLC and its subsidiaries whereby both parties will participate in marketing for obtaining patients and provide physician training for stem cell treatments under the names of “Regenestem” and “Stem Cell Training”, respectively. In addition, each party will be responsible for selling equipment and kits to existing and previous customers. A fee will be paid to Global Stem Cells Group based on revenue less certain costs of the accounting for patients and physician training and 30 day with sales of equipment and kits.

As part of the consideration of Global Stem Cell Group, LLC’s participation, the Company issued an aggregate of 8,000,000 warrants to purchase the Company’s common stock for four years at $0.0217 per share with 2,000,000 warrants vesting 90 days from the effective date, 2,000,000 vesting on each anniversary date for three years. During the three and nine months ended September 30, 2014, the Company charged $15,762 and $95,018 to current period operations for the vesting portion.

Joint Venture

We announced a joint venture in South Africa and the facilities called “South African Stem Cell Institute” were successfully opened in September, 2014 with the intention to retain a 49% ownership of the new entity. As of September 31, 2014, however, there was no formal legal entity established and no formal operating agreement for this joint venture. In additional the Company has not yet incurred any material expenses associated with this venture. Management has concluded that as of September 31, 2014 this announcement is not material to the Company’s financial statements.

William Beaumont Hospital

In June 2000, the Company entered into an agreement with William Beaumont Hospital, or WBH, pursuant to which WBH granted to the Company worldwide, exclusive, non-sublicenseable license to two U.S. method patents covering the inducement of human adult myocardial cell proliferation in vitro, or the WBH IP. The term of the agreement is for the life of the patents, which expire in 2015. The Company did not use this license in any of our technologies. The Company had not made any payments to WBH other than the initial payment to acquire the license. The Company has received confirmation from WBH that it has no obligation under the patent license agreement and WBH agreed to terminate the patent license agreement. (See Note 4)

Accordingly, the Company has recognized approximately $2,122,130 in settlement of debt which represents the accumulative accrual and related interest from past years under the 2000 patent license agreement.

Employment agreements

On July 28, 2014, the Company’s Board of Directors approved the 2014/2015 salary for Mike Tomas, Chief Executive Officer, at $525,000 per year, beginning July 1, 2014 with an incentive bonus ranging from $150,000 to $500,000. In addition, the Board of Directors will grant Mr. Tomas options to be determined on or before June 30, 2015. The Company’s Board of Directors approved a bonus of $500,000 and options to acquire 10,000,000 shares of the Company’s common stock for ten years with four year vesting and a cashless exercise provision at an exercise price equal to the five day average closing price of the Company’s common stock as of August 1, 2014. The cash bonus may be paid in the form of a six month promissory note.

On July 28, 2014, the Company’s Board of Directors approved the 2014/2015 salary for Kristin Comella, Chief Scientific Officer, at $250,000 per year, beginning July 1, 2014 with an incentive bonus ranging from $100,000 to $300,000. In addition, the Board of Directors will grant Ms. Comella options to be determined on or before June 30, 2015. The Company’s Board of Directors approved a bonus of $300,000 and options to acquire 5,000,000 shares of the Company’s common stock for ten years with four year vesting and a cashless exercise provision at an exercise price equal to the five day average closing price of the Company’s common stock as of August 1, 2014. The cash bonus may be paid in the form of a six month promissory note.

23



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

Litigation

The Company is subject to other legal proceedings that arise in the ordinary course of business. In the opinion of management, as of September 30, 2014, the amount of ultimate liability with respect to such matters, if any, in excess of applicable insurance coverage, is not likely to have a material impact on the Company’s business, financial position, results of operations or liquidity. However, as the outcome of litigation and other claims is difficult to predict significant changes in the estimated exposures could exist.

Consulting agreements

On November 20, 2013, the Company entered into an investment banking agreement with Cassel Salpeter & Co. (“CSC”), who will act as exclusive third party financial advisor in connection with investment banking matters. The term of the Investment Banking Agreement shall be for a period of twenty four months unless terminated or extended in accordance with its terms. For these services, CSC will receive a one-time $25,000 fee, $5,000 monthly fees and 5,207,630 ten year common stock purchase warrants, exercisable at $.0113 and applicable consideration in the event the closing of a Mezzanine Financing consisting of non-convertible subordinated debt and/or sale of equity securities. The Company will also reimburse CSC for its reasonable out-of-pocket expenses associated with the services provided pursuant to the Investment Banking Agreement. As of September 30, 2014 and December 31, 2013, the Company accrued $49,234 and $32,424 under the agreement, respectively.

NOTE 12 — FAIR VALUE MEASUREMENT

The Company adopted the provisions of Accounting Standards Codification subtopic 825-10, Financial Instruments (“ASC 825-10”) on January 1, 2008. ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 825-10 establishes three levels of inputs that may be used to measure fair value:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 — Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

All items required to be recorded or measured on a recurring basis are based upon level 3 inputs.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

24



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

Upon adoption of ASC 825-10, there was no cumulative effect adjustment to beginning retained earnings and no impact on the financial statements.

The carrying value of the Company’s cash and cash equivalents, accounts receivable, accounts payable, short-term borrowings (including convertible notes payable), and other current assets and liabilities approximate fair value because of their short-term maturity.

As of September 30, 2014 or December 31, 2013, the Company did not have any items that would be classified as level 1 or 2 disclosures.

The Company recognizes its derivative liabilities as level 3 and values its derivatives using the methods discussed in notes 7 and 9. While the Company believes that its valuation methods are appropriate and consistent with other market participants, it recognizes that the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different estimate of fair value at the reporting date. The primary assumptions that would significantly affect the fair values using the methods discussed in Notes 7 and 9 are that of volatility and market price of the underlying common stock of the Company.

As of September 30, 2013 and December 31, 2013, the Company did not have any derivative instruments that were designated as hedges.

The derivative liability as of September 30, 2014, in the amount of $725,122 has a level 3 classification.

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of September 30, 2014:

        Excess
Share
Derivative
    Warrant
Liability
    Debt
Derivative
Balance, December 31, 2012
              $ 390,048             221,179          $    
Total (gains) losses
                                                    
Initial fair value of debt derivative at note issuance
                                             673,219   
Initial fair value of derivative relating to reset warrants
                                              
Mark-to-market at December 31, 2013:
                 84,906             (74,324 )            (39,761 )  
Transfers out of Level 3 upon increase in authorized shares
                 (474,954 )                            
Transfers out of Level 3 upon conversion and settlement of notes
                                               (376,502 )  
Balance, December 31, 2013
              $           $ 146,855          $ 256,956   
Total (gains) losses
                                                    
Initial fair value of debt derivative at note issuance
                                           773,500   
Mark-to-market at September 30, 2014:
                              218,711             (280,050 )  
Transfers out of Level 3 upon conversion of notes payable
                                           (390,850 )  
Balance, September 30, 2014
              $           $ 365,566          $ 359,556   
Net (loss) gain for the period included in earnings relating to the liabilities held at September 30, 2014
              $           $ (218,711 )         $ 280,050   
 

Fluctuations in the Company’s stock price are a primary driver for the changes in the derivative valuations during each reporting period. The Company’s stock price increased approximately 149% from December 31, 2013 to September 30, 2014. As the stock price increases for each of the related derivative instruments, the value to the holder of the instrument generally increases, therefore increasing the liability on the Company’s balance sheet. Additionally, stock price volatility is one of the significant unobservable inputs used in the fair value measurement of each of the Company’s derivative instruments.

25



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

The simulated fair value of these liabilities is sensitive to changes in the Company’s expected volatility. Increases in expected volatility would generally result in a higher fair value measurement.

NOTE 13 — SUBSEQUENT EVENTS

Subsequent financing

KBM Worldwide

On October 6, 2014, the Company entered into a Securities Purchase Agreement with KBM Worldwide, Inc., for the sale of an 8% convertible note in the principal amount of $38,000 (the “Note”).

The Note bears interest at the rate of 8% per annum. All interest and principal must be repaid on July 8, 2015,. The Note is convertible into common stock, at holder’s option, at a 45% discount to the lowest daily trading price of the common stock during the 10 trading day period prior to conversion. In the event the Company prepays the Note in full, the Company is required to pay off all principal and accrued interest at 150%, and any other amounts.

Daniel James Management

On October 3, 2014, the Company entered into a Securities Purchase Agreement with Daniel James Management, Inc., for the sale of a 9.5% convertible note in the principal amount of $25,000 (the “Note”).

The Note bears interest at the rate of 9.5% per annum. All interest and principal must be repaid on October 2, 2015. The Note is convertible into common stock, at holder’s option, at a 47% discount to the lowest daily trading price of the common stock during the 10 trading day period prior to conversion. In the event the Company prepays the Note in full, the Company is required to pay off all principal and accrued interest at 150%, and any other amounts.

Magna Equities, LLC

On October 7, 2014, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Magna Equities II, LLC, a New York limited liability company (“Magna”). The Purchase Agreement provides that, upon the terms and subject to the conditions set forth therein, Magna shall purchase from the Company, a senior convertible note with an initial principal amount of $307,500 (the “Convertible Note”) for a purchase price of $205,000 (an approximately 33.33% original issue discount). Pursuant to the Purchase Agreement, the Company issued the Convertible Note to Magna. The Convertible Note matures on August 7, 2015 and, in addition to the approximately 33.33% original issue discount, accrues interest at the rate of 12% per annum.

The Convertible Note is convertible at any time, in whole or in part, at Magna’s option into shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), at a fixed conversion price of $0.01035 per share. $40,000 of the outstanding principal amount of the Convertible Note (together with any accrued and unpaid interest with respect to such portion of the principal amount) shall be automatically extinguished (without any cash payment by the Company) under certain conditions described in the Purchase Agreement. In connection with the execution of the Purchase Agreement, the Company and Magna also entered into a registration rights agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, the Company has agreed to file an initial registration statement with the SEC to register the resale of the Common Stock into which the Convertible Note may be converted,

On October 23, 2014, the Company entered into a common stock purchase agreement (the “Purchase Agreement”) with Magna Equities II, LLC, (the “Investor”). The Purchase Agreement provides that, upon the terms and subject to certain conditions, the Investor is committed to purchase up to $3,000,000 (the “Total Commitment”) worth of the Company’s common stock, $0.001 par value (the “Shares”), over the 24-month term of the Purchase Agreement. In connection with the execution of the Purchase Agreement, on the Closing Date, the Company and the Investor also entered into a registration rights agreement. (see above)

26



BIOHEART, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 2014

The Company paid to the Investor a commitment fee for entering into the Purchase Agreement equal to $150,000 (or 5.0% of the Total Commitment under the Purchase Agreement) in the form of 9,109,128 restricted shares of the Company’s common stock, calculated using a per share price of $0.016467.

Subsequent issuances

On October 3, 2014, the Company issued 514,886 shares of its common stock as payment of $70,521 interest on its Northstar (related party) debt.

In October 2014, the Company issued 1,818,182 shares of its common stock in settlement of $20,000 of convertible debt.

In October 2014, the Company issued 1,293,103 shares of its common stock in settlement of $15,000 of convertible debt.

In October 2014, the Company issued 2,260,764 shares of its common stock in settlement of $18,000 of convertible debt and accrued interest of $2,120.

In October 2014, the Company issued 552,846 shares of its common stock in settlement of $5,500 of convertible debt and accrued interest of $1,300.

In October 2014, the Company issued an aggregate 2,773,549 shares of common stock for consulting services.

In October 2014, the Company issued 538,875 shares of common stock in settlement of accounts payable.

27



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, unless the context requires otherwise. The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited condensed interim financial statements and the accompanying related notes included in this quarterly report and our audited 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, 2013 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, 2013.

Our Ability to Continue as a Going Concern

Our independent registered public accounting firm has issued its report dated March 24, 2014, in connection with the audit of our financial statements as of December 31, 2013, that included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern and Note 2 to the unaudited financial statements for the period ended September 30, 2014 also describes the existence of conditions that raise substantial doubt about our ability to continue as a going concern.

28



Overview

We are a biotechnology company focused on the discovery, development and, subject to regulatory approval, commercialization of autologous cell therapies for the treatment of chronic and acute heart damage. Our lead product candidate is MyoCell, an innovative clinical therapy designed to populate regions of scar tissue within a patient’s heart with autologous muscle cells, or cells from a patient’s body, for the purpose of improving cardiac function in chronic heart failure patients.

Biotechnology Product Candidates

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. In our pipeline, we have multiple product candidates for the treatment of heart damage, including MyoCell, Myocell SDF-1 and AdipoCell. MyoCell and MyoCell SDF-1 are clinical muscle-derived cell therapies 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.

MyoCell SDF-1 is intended to be an improvement to MyoCell. MyoCell SDF-1 is similar to MyoCell except that the myoblast cells to be injected for use in MyoCell SDF-1 will be modified prior to injection by an adenovirus vector or non-viral vector so that they will release extra quantities of the SDF-1 protein, which expresses angiogenic factors. AdipoCell is a patient-derived cell therapy proposed for the treatment of acute myocardial infarction, chronic heart ischemia, and lower limb ischemia. We hope to demonstrate that these product candidates are safe and effective complements to existing therapies for chronic and acute heart damage.

Our most recent completed clinical trials of MyoCell are the SEISMIC Trial, a 40-patient, randomized, multicenter, controlled, Phase II-a study conducted in Europe and the MYOHEART Trial, a 20-patient, multicenter, Phase I dose-escalation trial conducted in the United States. We were approved by the FDA, to proceed with a 330-patient, multicenter Phase II/III trial of MyoCell in North America and Europe, or the MARVEL Trial. We completed the MyoCell implantation procedure on the first patient in the MARVEL Trial on October 24, 2007. Thus far, 20 patients, including 6 control patients, have been treated. Initial results for the 20 patients were released at the Heart Failure Society of American meeting in September, 2009, showing a significant (35%) improvement in the 6 minute walk for those patients who were treated, and no improvement for those who received a placebo. On the basis of these results, we have applied for and received approval from the FDA to reduce the number of additional patients in the trial to 134, for a total of 154 patients. The SEISMIC, MYOHEART and MARVEL Trials have been designed to test the safety and efficacy of MyoCell in treating patients with severe, chronic damage to the heart. Upon regulatory approval of MyoCell, we intend to generate revenue in the United States from the sale of MyoCell cell-culturing services for treatment of patients by qualified physicians.

We received approval from the FDA in July of 2009 to conduct a Phase I safety study on 15 patients of a combined therapy (Myocell with SDF-1), which we believe was the first approval of a study combining gene and cell therapies. We initially commenced work on this study, called the REGEN Trial, during the first quarter of 2010. We suspended activity on the trial in 2010 while seeking additional funding necessary to conduct the trial.

We are seeking to secure sufficient funds to reinitiate enrollment in the MARVEL and REGEN trials. If we successfully secure such funds, we intend to re-engage a contract research organization, or CRO, investigators and certain suppliers to advance such trials. We have initiated and enrolled our first patient in the MIRROR trial in 2013. The trial is very similar to the MARVEL trial but focusses on sites outside the US. We will continue enrollment in the MIRROR trial once we have secured sufficient funds.

We have completed the Phase 1 Angel Trial for AdipoCell (adipose derived stem cells). Five patients were enrolled and treated in the second quarter of 2013. At the twelve (12) month time point, patients demonstrated a statistically significant average improvement in ejection fraction (EF) by echocardiogram.

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At the three (3) month time point, 100% of the patients demonstrated either improvement or stayed the same. After three (3) months, patients showed an average absolute improvement of 3 percentage points in EF. The patients continued to improve from 3 months to 6 months with a statistically significant average absolute improvement of 10 percentage points (p=0.01) and at the 12 month follow up patients showed this same level of improvement (p=0.01).

We have also initiated several Institutional Review Board studies in 2013 using adipose derived stem cells for various indications including dry macular degeneration, degenerative disc disease, erectile dysfunction and chronic obstructive pulmonary disease.

In the second quarter of 2014, we announced the treatment of a patient in Honduras with congestive heart failure using AdipoCell and MyoCell. This was the first patient treated in the world using a combination of stem cells.

We have begun two clinical trials in India. The first cardiac patient has successfully been enrolled and treated in India using AdipoCell or adipose derived stem cells. The second trial will involve the combination of AdipoCellTM and MyoCell® or muscle derived stem cells for congestive heart failure patients. These trials are active and ongoing

MyoCath Product Candidate

The MyoCath is a deflecting tip needle injection catheter that has a larger (25 gauge) needle to allow 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. The MyoCath is used to inject cells into cardiac tissue in therapeutic procedures to treat chronic heart ischemia and congestive heart failure. Investigators in our MARVEL Trial may use either our MyoCath catheters or Biosense Webster’s (a Johnson & Johnson company) NOGA® Cardiac Navigation System along with the MyoStarTM injection catheter for the delivery of MyoCell to patients enrolled in the trial. We are currently producing Myocath catheters with a contract manufacturer on an as needed basis.

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

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SUBSEQUENT EVENTS

On October 7, 2014, the we entered into a securities purchase agreement (the “Purchase Agreement”) with Magna Equities II, LLC, a New York limited liability company (“Magna”). The Purchase Agreement provides that, upon the terms and subject to the conditions set forth therein, Magna shall purchase from us, a senior convertible note with an initial principal amount of $307,500 (the “Convertible Note”) for a purchase price of $205,000 (an approximately 33.33% original issue discount). Pursuant to the Purchase Agreement, we issued the Convertible Note to Magna. The Convertible Note matures on August 7, 2015 and, in addition to the approximately 33.33% original issue discount, accrues interest at the rate of 12% per annum. The Convertible Note is convertible at any time, in whole or in part, at Magna’s option into shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), at a fixed conversion price of $0.01035 per share. $40,000 of the outstanding principal amount of the Convertible Note (together with any accrued and unpaid interest with respect to such portion of the principal amount) shall be automatically extinguished (without any cash payment by us) under certain conditions described in the Purchase Agreement. In connection with the execution of the Purchase Agreement, our company and Magna also entered into a registration rights agreement (the “Registration Rights Agreement”). Pursuant to the Registration Rights Agreement, we agreed to file an initial registration statement with the SEC to register the resale of the Common Stock into which the Convertible Note may be converted,

On October 23, 2014, we entered into a common stock purchase agreement (the “Purchase Agreement”) with Magna Equities II, LLC, a New York limited liability company (the “Investor”). The Purchase Agreement provides that, upon the terms and subject to the conditions set forth therein, the Investor is committed to purchase up to $3,000,000 (the “Total Commitment”) worth of our common stock, $0.001 par value (the “Shares”), over the 24-month term of the Purchase Agreement. In connection with the execution of the Purchase Agreement, on the Closing Date, our company and the Investor also entered into a registration rights agreement. We paid to the Investor a commitment fee for entering into the Purchase Agreement equal to $150,000 (or 5.0% of the Total Commitment under the Purchase Agreement) in the form of 9,109,128 restricted shares of our common stock, calculated using a per share price of $0.016467.

Results of Operations Overview

Three and Nine Months Ended September 30, 2014 as compared to the Three and Nine Months Ended September 30, 2014

Revenues

We have not generated any material revenues from our MyoCell product candidate. The revenues we have recognized to date are related to (i) sales of MyoCath, (iii) revenues generated from patient paid studies, (iv) revenues from the sale of our AdipoCell system and related supplies and (v) revenues generated for providing cell culturing and banking services. We did not generate significant revenues in 2013. Our revenue may vary substantially from quarter to quarter and from year to year. We expect to have steady growth of revenue as the above programs grow and expand.

We recognized revenues of $579,536 and $1,563,864 for the three and nine months ended September 30, 2014, respectively, compared to revenues of $31,659 and $55,980 for the three and nine months ended September 30, 2013, respectively. Our revenue in 2014 was generated from the sale of MyoCath catheters, AdipoCell, physician training, patient studies and laboratory services. Our revenues for 2013 were generated from the sale of MyoCath Catheters and laboratory services.

Cost of Sales

Cost of sales consists of the costs associated with the production of MyoCath, laboratory supplies necessary for laboratory services, production of AdipoCell systems and materials, physician course materials and clinic supplies required for patient studies.

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Cost of sales was $523,222 and $889,509 in the three and nine month periods ended September 30, 2014, respectively, compared to $-0- in the three and nine months periods ended September 30, 2013.

Research and Development

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

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

We are focused on the development of a number of autologous cell-based therapies, and related devices, for the treatment of heart damage. Accordingly, many of our costs are not attributable to a specifically identified product candidate. We use our employee and infrastructure resources across several projects, and we do not account for internal research and development costs on a product candidate by product candidate basis.

During the third quarter 2009, we received notification that approximately $630,000 in pending projects (Indiana University, University of Florida, Northwestern University, and other sites) was completed. As of September 30, 2014 and December 31, 2013, of the $630,000, we still have an accrual of $219,000 for the completed contracts.

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

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

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

Research and development expenses were $8,581 in the three month period ended in September 30, 2014, a decrease of $149,800 from the research and development expenses of $158,381 in the three month period ended in September 30, 2013. The decrease was primarily attributable to a decrease in the amount of funds allocated to our clinical trials.

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Research and development expenses were $33,916 in the nine month period ended in September 30, 2014, a decrease of $460,846 from the research and development expenses of $494,762 in the nine month period ended in September 30, 2013. The decrease was primarily attributable to a decrease 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.

Marketing, General and Administrative

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

Stock-Based Compensation

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

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

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

•   
  our financial position and historical financial performance;
•   
  arm’s length sales of our common stock;
•   
  the development status of our product candidates;
•   
  the business risks we face;
•   
  vesting restrictions imposed upon the equity awards; and
•   
  an evaluation and benchmark of our competitors; and
•   
  prospects of a liquidity event.

In April 1, 2013, the Board of Directors approved, subject to shareholder approval, the establishment of the Bioheart 2013 Omnibus Equity Compensation Plan, or the “2013 Omnibus Plan”. The 2013 Omnibus Plan reserves up to fifty million shares of common stock for issuance.

Marketing, general and administrative expenses were approximately $1,512,706 in the three month period ended September 30, 2014, an increase of $572,352 from marketing, general and administrative expenses of approximately $940,354 in the three month period ended in September 30, 2013. The increase in marketing, general and administrative expenses is attributable, in part, to stock based compensation paid in the current period of $164,247 for services and increase in employee compensation and service providers.

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Marketing, general and administrative expenses were approximately $3,182,397 in the nine month period ended September 30, 2014, an increase of $1,432,121 from marketing, general and administrative expenses of approximately $1,750,276 in the nine month period ended in September 30, 2013. The increase in marketing, general and administrative expenses is attributable, in part, to stock based compensation paid in the current period of $293,342 for services and increase in employee compensation and service providers.

Interest Expense

Interest expense during the three and nine months ended September 30, 2014 and 2013 primarily consists of interest incurred on the principal amount of the Northstar loan, our former Bank of America loan, the Seaside National Bank loan, accrued fees and interest payable to the Guarantors, the amortization of debt discounts and non-cash incurred relating to our issued convertible notes payable. The debt discounts are being amortized to interest expense over the terms of the respective loans using the effective interest method.

Critical Accounting Policies

Our discussion and analysis of our financial condition and results of operations is based upon our 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 financial statements appearing elsewhere in this report, we believe the following policies are important to understanding and evaluating our reported financial results:

Revenue Recognition

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

Revenues for test kits and equipment sold are not recorded until test kits are delivered. The Company has revenue sharing arrangements for the sale of goods whereby the Company is the primary obligor, sets pricing with the customers and bears all associated credit risks with the customers. Sales under revenue share arrangements are recorded as gross sales and any portion shared with third parties under such arrangements are recorded as cost of sales. Revenues from trainings are not recorded until the completion of the training. Any cash received as a deposit for trainings are recorded by the company as a liability.

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

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Research and Development Activities

We account for research and development costs in accordance with Accounting Standards Codification subtopic 730-10, Research and Development (“ASC 730-10”). Under ASC 730-10, all research and development costs must be charged to expense as incurred. Accordingly, internal research and development costs are expensed as incurred. Third-party research and development costs are expensed when the contracted work has been performed or as milestone results have been achieved as defined under the applicable agreement. Company-sponsored research and development costs related to both present and future products are expensed in the period incurred.

Derivative financial instruments

Accounting Standards Codification subtopic 815-40, Derivatives and Hedging, Contracts in Entity’s own Equity (“ASC 815-40”) became effective for the Company on October 1, 2009. The Company has identified the embedded derivatives related to the issued Notes and anti-dilutive warrants. These embedded derivatives included in our debt contain certain conversion features and reset provision. The accounting treatment of derivative financial instruments requires that the Company record fair value of the derivatives as of the inception date of Asher Notes and to fair value as of each subsequent reporting date.

Inflation

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

Climate Change

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

Concentrations of Credit Risk

As of September 30, 2014, two customers represented 24% and 18% of the Company’s accounts receivable.

As of December 31, 2013, three customers represented 20%, 20% and 36% (total 76%) of the Company’s accounts receivable.

Liquidity and Capital Resources

In the three months ended September 30, 2014, we continued to finance our considerable operational cash needs with cash generated from financing activities.

Operating Activities

Net cash used in operating activities was $747,184 in the nine month period ended September 30, 2014 as compared to $1,568,727 of cash used in the nine month period ended in September 30, 2013.

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Our use of cash for operations in the nine months ended September 30, 2014 reflected a net loss generated during the period of $1,247,199, adjusted for non-cash items such as stock-based compensation of $407,616, fair value of warrants issued of $136,837, depreciation of $3,745, amortization of debt discounts of $343,592, related party notes payable issued for services of $800,000 and non-cash interest paid of $385,501, loss on change in fair value of derivative liabilities of $61,339, net gain on settlement of debt of $2,272,283. In addition we had a net increase in operating assets of $186,306 and an increase in accrued expenses of $246,486 and in accounts payable of $628,684.

Our use of cash for operations in the nine months ended September 30, 2013 reflected a net loss generated during the period of approximately $2.4 million, adjusted for non-cash items such as stock-based compensation of $102,674, depreciation of $1,328, amortization of debt discounts of $295,750 and non-cash interest paid of $168,350, net with gain on settlement of debt of $1,004,224 and gain on change in fair value of derivative liabilities of $39,885. In addition we had a net decrease in operating assets of $96,933 and an increase in accrued expenses of $485,518 and a decrease in accounts payable of $76,240.

Investing Activities

Net cash used in investing activities was $8,121 for the nine months ended September 30, 2014 were to acquire office equipment as compared to nil cash used for the same period of 2013.

Financing Activities

Net cash provided by financing activities was an aggregate of $755,670 in the nine month period ended September 30, 2014 as compared to $1,575,411 in the nine month period ended in September 30, 2013. In the nine month period ended September 30, 2014 we sold, in private placements, shares of common stock and common stock purchase warrants for aggregate net cash proceeds of $428,251, received proceeds from issuance of note payable of $388,000, and proceeds from warrant exercise of $136,000, net related party advances of $26,759, net with repayments of related party notes payable of $223,340.

Existing Capital Resources and Future Capital Requirements

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

At September 30, 2014, we had cash and cash equivalents totaling $46,592. However our working capital deficit as of such date was approximately $10 million. Our independent registered public accounting firm has issued its report dated March 24, 2014 in connection with the audit of our financial statements as of December 31, 2013 that included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern and Note 2 of our unaudited financial statement for the quarter ended September 30, 2014 addresses the issue of 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.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not required under Regulation S-K for “smaller reporting companies.”

Item 4. Controls and Procedures

Disclosure Controls and Procedures

We maintain disclosure controls and procedures, which are designed to ensure that information required to be disclosed in the reports we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our CEO and Chief Accounting Officer, as appropriate, to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our management, including our CEO and Principal Financial and Accounting Officer, an evaluation was performed on the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that evaluation, our management, including our CEO and Principal Financial and Accounting Officer, concluded that our disclosure controls and procedures were ineffective as of the end of the period covered by this report due to the Company’s limited resources and limited number of employees. To mitigate the current limited resources and limited employees, we rely heavily on direct management oversight of transactions, along with the use of legal and outsourced accounting professionals. As we grow, we expect to increase our number of employees, which, we believe, will enable us to implement adequate segregation of duties within the internal control framework.

Changes In Internal Control Over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting during the most recently completed fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Our Company is not involved in any material litigation pursuant to Item 103 of Regulation S-K. 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

Not required under Regulation S-K for “smaller reporting companies.”

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

During the nine months ended September 30, 2014, the Company sold an aggregate of 24,556,846 shares of the Company’s common stock and common stock purchase warrants to purchase 24,556,846 shares of the Company’s common stock for aggregate gross cash proceeds of $371,000. The warrants are (i) exercisable solely for cash at an exercise price of $0.011 to $0.0275 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 tenth year anniversary of the date of issuance.

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The issuance of such shares of our common stock was effected in reliance on the exemptions for sales of securities not involving a public offering, as set forth in Rule 506 promulgated under the Securities Act of 1933, as mended (the “Securities Act”) and in Section 4(2) of the Securities Act, based on the following: the investors confirmed to us that they were “accredited investors,” as defined in Rule 501 of Regulation D promulgated under the Securities Act and had such background, education and experience in financial and business matters as to be able to evaluate the merits and risks of an investment in the securities; (b) there was no public offering or general solicitation with respect to the offering; (c) the investors were provided with certain disclosure materials and all other information requested with respect to our company; (d) the investors acknowledged that all securities being purchased were “restricted securities” for purposes of the Securities Act, and agreed to transfer such securities only in a transaction registered under the Securities Act or exempt from registration under the Securities Act; and (e) a legend was placed on the certificates representing each such security stating that it was restricted and could only be transferred if subsequent registered under the Securities Act or transferred in a transaction exempt from registration under the Securities Act.

Item 3. Defaults Upon Senior Securities

There were no defaults upon senior securities during the period ended September 30, 2014.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Effective May 19, 2014, the Company increased the authorized shares of capital stock of the Company from nine hundred and fifty million (950,000,000) shares of common stock and twenty million (20,000,000) shares of preferred stock, both $.001 par value respectively, to two billion (2,000,000,000) shares of shares of common stock and twenty million (20,000,000) shares of preferred stock, both $.001 par value respectively.

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
3.2(a)(36)
           
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

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Exhibit No.
        Exhibit Description
4.6(13)
           
Security Agreement (Intellectual Property), between the Company and BlueCrest Venture Finance Master Fund Limited, dated as of April 2, 2009
4.7(13)
           
Subordination Agreement, by Hunton & Williams, LLP in favor of BlueCrest Venture Finance Master Fund Limited, entered into and effective April 2, 2009
4.8(13)
           
Amended and Restated Promissory Note, dated April 2, 2009, by the Company to BlueCrest Venture Finance Master Fund Limited
4.9(13)
           
Warrant to purchase 1,315,542 shares of the registrant’s common stock, dated April 2, 2009, issued to BlueCrest Venture Finance Master Fund Limited
4.10(14)
           
Warrant to purchase 451,043 shares of the registrant’s common stock, dated April 2, 2009, issued to Rogers Telecommunications Limited
4.11(14)
           
Warrant to purchase 173,638 shares of the registrant’s common stock, dated April 2, 2009, issued to Hunton & Williams, LLP
4.12(4)
           
Warrant to purchase shares of the registrant’s common stock issued to Howard J. Leonhardt and Brenda Leonhardt
4.12(19)
           
10% Convertible Promissory Note Due July 23, 2010, in the amount of $20,000, payable to Dana Smith
4.13(19)
           
10% Convertible Promissory Note Due July 23, 2010, in the amount of $100,000, payable to Bruce Meyers
4.14(19)
           
Registration Rights Agreement, dated July 23, 2009
4.15(4)
           
Warrant to purchase shares of the registrant’s common stock issued to the R&A Spencer Family Limited Partnership
4.15(19)
           
Subordination Agreement, dated July 23, 2009
4.16(19)
           
Note Purchase Agreement, dated July 23, 2009
4.17(19)
           
Closing Confirmation of Conversion Election, dated July 23, 2009
4.20(6)
           
Warrant to purchase shares of the registrant’s common stock issued to Samuel S. Ahn, M.D.
4.23(7)
           
Warrant to purchase shares of the registrant’s common stock issued to Howard and Brenda Leonhardt
4.27(11)
           
Form of Warrant Agreement for October 2008 Private Placement
4.30(19)
           
10% Convertible Promissory Note Due July 23, 2010, in the amount of $100,000, payable to Bruce Meyers
4.31 (34)
           
Series A Convertible Preferred Stock
4.32 (35)
           
Amendment to the Series A Convertible Preferred Stock
4.33 (37)
           
Senior Convertible Note dated October 7, 2014.
10.1(1)
           
1999 Officers and Employees Stock Option Plan
10.2(1)
           
1999 Directors and Consultants Stock Option Plan
10.3(1)
           
Form of Option Agreement under 1999 Officers and Employees Stock Option Plan
10.4(3)
           
Form of Option Agreement under 1999 Directors and Consultants Stock Option Plan
10.5**(4)
           
Employment Letter Agreement between the registrant and Scott Bromley, dated August 24, 2006.
10.6(1)
           
Lease Agreement between the registrant and Sawgrass Business Plaza, LLC, as amended, dated November 14, 2006.
10.7(1)
           
Asset Purchase Agreement between the registrant and Advanced Cardiovascular Systems, Inc., dated June 24, 2003.
10.8(4)
           
Conditionally Exclusive License Agreement between the registrant, Dr. Peter Law and Cell Transplants International, LLC, dated February 7, 2000, as amended.

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Exhibit No.
        Exhibit Description
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.
10.13(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.
10.16(4)
           
Material Supply Agreement, dated May 10, 2007, by and between the registrant and Biosense Webster
10.17(5)
           
Warrant to purchase shares of the registrant’s common stock issued to BlueCrest Capital Finance, L.P.
10.18(6)
           
Loan Guarantee, Payment and Security Agreement, dated as of September 12, 2007, by and between the registrant and Samuel S. Ahn, M.D.
10.19(6)
           
Loan Guarantee, Payment and Security Agreement, dated as of September 12, 2007, by and between the registrant and Dan Marino
10.21(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
10.24(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
10.28(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
10.31(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
10.35**(20)
           
Amended and Restated 1999 Directors and Consultants Stock Option Plan
10.36(21)
           
Preliminary Commitment Letter with Seaside National Bank and Trust, dated September 30, 2010.
10.37(22)
           
Loan Agreement with Seaside National Bank and Trust, dated October 25, 2010.
10.38(22)
           
Promissory Note with Seaside National Bank and Trust, dated October 25, 2010.
10.39(22)
           
Amended and Restated Loan and Security Agreement with BlueCrest Venture Finance Master Fund Limited, dated October 25, 2010.
10.40(23)
           
Form of Subscription Agreement, executed November 30, 2010.
10.41(23)
           
Form of Common Stock Purchase Warrant, issued November 30, 2010.
10.42(23)
           
Form of Registration Rights Agreement, dated November 30, 2010.
10.43(24)
           
Unsecured Convertible Promissory Note for $25,000, with Magna Group, LLC, dated January 3, 2011.
10.44(24)
           
Promissory Note for $139,728.82 with Magna Group, LLC, dated January 3, 2011.
10.45(24)
           
Securities Purchase Agreement with Magna Group, LLC, dated January 3, 2011.
10.46(24)
           
Subordination Agreement, dated January 3, 2011.

40



Exhibit No.
        Exhibit Description
10.47(24)
           
Notice of Conversion Election, dated January 3, 2011.
10.48(25)
           
Unsecured Convertible Promissory Note for $34,750, with Magna Group, LLC, dated May 16, 2011.
10.49(25)
           
Promissory Note for $139,728.82 with Magna Group, LLC, dated May 16, 2011.
10.50(25)
           
Securities Purchase Agreement with Magna Group, LLC, dated May 16, 2011.
10.51(25)
           
Subordination Agreement, dated May 16, 2011.
10.52(26)
           
Promissory Note for $139,728.82 with Lotus Funding Group, LLC, dated June 15, 2011.
10.53(26)
           
Partial Assignment and Modification Agreement, dated June 15, 2011.
10.54(26)
           
Subordination Agreement, dated June 15, 2011.
10.55(27)
           
Promissory Note for $140,380.21 with Greystone Capital Partners, dated July 8, 2011.
10.56(27)
           
Partial Assignment and Modification Agreement, dated July 8, 2011.
10.57 (28)
           
Subordination Agreement, dated July 8, 2011.
10.58 (29)
           
Promissory Note for $139,728.82 with Greystone Capital Partners, dated August 1, 2011.
10.59 (29)
           
Partial Assignment and Modification Agreement, dated August 1, 2011.
10.60 (29)
           
Subordination Agreement, dated August 1, 2011.
10.61 (30)
           
Promissory Note for $139,728.82 with Greystone Capital Partners, dated September 1, 2011.
10.62 (30)
           
Partial Assignment and Modification Agreement, dated September 1, 2011.
10.63 (30)
           
Subordination Agreement, dated September 1, 2011.
10.64 (31)
           
Standby Equity Distribution Agreement dated as of November 2, 2011.
10.65 (31)
           
Registration Rights Agreement dated as of November 2, 2011.
10.66(32)
           
Promissory Note for $139,728.82 with Greystone Capital Partners, dated January 3, 2012
10.67(32)
           
Term Note B Promissory Note for $139,728.82 with Greystone Capital Partners, dated January 3, 2012
10.68(32)
           
Unsecured Convertible Promissory Note for $63,000, with Asher Enterprises, Inc. dated April 2, 2012
10.69(32)
           
Unsecured Convertible Promissory Note for $125,000, with IBC Funds LLC., dated January 9, 2013
10.70(32)
           
Unsecured Convertible Promissory Note for $37,500, with Asher Enterprises, Inc. dated February 20, 2013
10.71(32)
           
Unsecured Convertible Promissory Note for $42,500, with Asher Enterprises, Inc. dated January 9, 2013
10.80(33)
           
2013 Bioheart, Inc. Omnibus Equity Compensation Plan

41



Exhibit No.
        Exhibit Description
10.81*
           
Limited Waiver and Forbearance Agreement and Amendment to Limited Waiver and Forbearance Agreement dated October 1, 2012 and September 17, 2014, respectively.
10.82(37)
           
Securities Purchase Agreement, dated as of October 7, 2014, by and between Magna Holdings I, LLC and Bioheart, Inc.
10.83(37)
           
Registration Rights Agreement, dated as of October 7, 2014, by and between Magna Holdings I, LLC and Bioheart, Inc.
10.84(38)
           
Common Stock Purchase Agreement, dated as of October 23, 2014, by and between Magna Equities II, LLC and Bioheart, Inc.
10.85 (38)
           
Registration Rights Agreement, dated as of October 23, 2014, by and between Magna Equities II, LLC and Bioheart, Inc.
14.1(2)
           
Code of Ethics for Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer and persons performing similar functions
14.2(2)
           
Code of Business Conduct and Ethics
31.1*
           
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
           
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 


*
  Filed herewith

101.INS
           
XBRL Instance Document
101.SCH
           
XBRL Taxonomy Extension Schema Document
101.CAL
           
XBRL Taxonomy Calculation Linkbase Document
101.LAB
           
XBRL Taxonomy Labels Linkbase Document
101.PRE
           
XBRL Taxonomy Presentation Linkbase Document
101.DEF
           
XBRL Definition Linkbase Document
 
(1)   
  Incorporated by reference to the Company’s Form S-1 filed with the Securities and Exchange Commission (the “SEC”) on February 13, 2007.

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

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

42



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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(22)   
  Incorporated by reference to the Company’s Current Report on Form 8-K filed with the SEC on October 29, 2010.

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

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

(25)   
  Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on May 25, 2011

(26)   
  Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on June 21, 2011

(27)   
  Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 15. 2011

43



(28)   
  Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2011

(29)   
  Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on January 13, 2012

(30)   
  Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on January 30, 2012

(31)   
  Incorporated by reference to the Company Registration Statement on Form S-1/A filed with the SEC on February 8, 2012

(32)   
  Incorporated by reference to the Company Annual Report on Form 10-K filed with the SEC on March 29, 2013

(33)   
  Incorporated by reference to the Company Quarterly Report on Form 10-Q filed with the SEC on May 9, 2013

(34)   
  Incorporated by reference to the Company Current Report on Form Pre-14C filed with the SEC on December 18, 2012

(35)   
  Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on December 31, 2013

(36)   
  Incorporated by reference to the Company Information Statement on Form 14C filed with the SEC on October 10, 2014.

(37)   
  Incorporated by reference to the Company Current Report on Form 8-K filed with the SEC on October 24, 2014

Exhibit No.
        Exhibit Description
31.1*
           
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
           
Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
           
XBRL Instance Document
101.SCH
           
XBRL Taxonomy Extension Schema Document
101.CAL
           
XBRL Taxonomy Calculation Linkbase Document
101.LAB
           
XBRL Taxonomy Labels Linkbase Document
101.PRE
           
XBRL Taxonomy Presentation Linkbase Document
101.DEF
           
XBRL Definition Linkbase Document
 

44



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: November 06, 2014
           
By:
   
/s/Mike Tomas
 
           
 
   
Mike Tomas
Chief Executive Officer &
President and Principal Financial
and Accounting Officer
 

45





Exhibit 10.81

LIMITED WAIVER AND FORBEARANCE AGREEMENT

THIS LIMITED WAIVER AND FORBEARANCE AGREEMENT (the Agreement”), is dated as of October 1, 2012 (the “Effective Date”), by and between BioHeart, Inc., a corporation organized under the laws of Florida (the “BioHeart”), and NorthStar Biotech Group, LLC, a Florida limited liability company (“NorthStar”).

WHEREAS, BioHeart is indebted to NorthStar, as successor to Blue Crest Capital Finance, L.P. (“Blue Crest”) under a Loan and Security Agreement dated May 30, 2007(the “Loan Agreement”), which is evidenced by a promissory note dated June 1, 2007 from BioHeart to Blue Crest in the original principal amount of $5,000,000 (the “Note”); and

WHEREAS, the obligations evidenced by the Note are secured by, among other things, a lien in favor of Blue Crest on the “Collateral” as defined in Paragraph 5.1 of the Loan Agreement(hereinafter, the Loan Agreement, Note and the Security Interest shall collectively be referred to herein as the “Loan Documents ”); and

WHEREAS, the Note requires that BioHeart make payments of principal and interest to Blue Crest on or before the first (1st) day of each calendar month beginning on first day of the first month following execution of the Loan Documents and ending on thirty—six month anniversary thereof (the “Maturity Date ”); and

WHEREAS, commencing on or about February 1, 2012, BioHeart failed to make required monthly payments of principal and interest to Blue Crest under the Note, and instead made payments of interest only to Blue Crest from and after such date; and

WHEREAS, on or about February 29, 2012, Blue Crest sold, assigned and transferred to NorthStar its right, title and interest under the Loan Documents (the “Loan Transfer Date ”), whereby NorthStar became the payee and holder of Blue Crest's right, title and interest in the Loan Documents and successor to Blue Crest's interests thereunder; and

WHEREAS, following transfer of the Loan Documents, BioHeart and NorthStar have agreed to a restructuring of BioHeart's obligations to NorthStar thereunder on the terms set-forth herein under which, among other things, NorthStar will forebear from exercising its rights and remedies under the Loan Documents, and will agree to receive certain shares of stock in BioHeart in lieu of cash payments under the Loan Documents.

NOW, THEREFORE, in consideration of the promises and the representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, BioHeart and NorthStar agree as follows:




1







ARTICLE I.
RECAPITALIZATION/FOREBEARANCE CONSIDERATION

Section 1.1    Recapitalization of Defaulted Payments. On the Effective Date, all sums owed by BioHeart to NorthStar under the Loan Documents for, among other things, principal, interest, late charges, default interest, penalties, professional fees, shall be added to the principal balance of the Note and shall be recapitalized as the new principal balance owed thereunder (the “New Loan Balance ”). The maturity date of the Note shall be extended perpetually, and the obligations evidenced by the Note shall be deemed to have been paid in full when the value of the consideration provided to NorthStar by BioHeart equals or exceeds the New Loan Balance and all accrued and unpaid interest, costs and expenses (including, among others, legal fees) of any sort owed at the requested pay-off date (the “Accrued Expenses ”). For purposes of clarity, the New Loan Balance may be retired and paid in full when requested by BioHeart in writing, provided that the value of all consideration paid or provided by BioHeart to NorthStar in cash or stock, shall equal or exceed the New Loan Balance and all Accrued Expenses. If a dispute exists as to the value of consideration provided by BioHeart to NorthStar (for purposes of retirement of the New Loan Balance and the Accrued Expenses), the dispute shall be resolved with the assistance of an investment banking firm or appraiser agreed to by and among the parties. If an agreement on the name/identity of an investment banker/appraiser cannot be reached, one shall be appointed by the American Arbitration Association (see “Dispute” section below).

Section 1.2    Consideration in Lieu of Payments. Commencing on the Effective Date, the Loan Documents shall be modified to reflect that BioHeart is relieved of making further payments of cash or cash equivalents to NorthStar thereunder. Instead, NorthStar shall receive the following consideration in lieu of repayment of the obligations evidenced by the Loan Documents:

(a)

Unrestricted Common and Preferred Stock. On the Effective Date, BioHeart shall convert the sum of two hundred and ten thousand dollars ($210,000) from the Loan Documents, without any additional consideration, in exchange for the issuance to NorthStar of of 10,000,000 shares of common stock, and 5,000,000 shares of preferred stock, at a price of $0.014 per share, such stock, based on the age of the debt and other factors pursuant to Rule 144, shall be issued without the restrictive legend. Consequently, following this securities exchange, the New Loan Balance shall be reduced by two hundred and ten thousand dollars ($210,000) . Such shares shall not be subject to dilution.

(b)

Unrestricted Preferred Stock. NorthStar shall receive a distribution of additional, preferred shares in BioHeart equal in lieu of payment in cash of accrued and unpaid interest on the New Loan Balance on each six (6) month anniversary of the Effective Date, which shall be payable in shares of preferred stock in BioHeart. Such shares shall be issued without the restrictive legend provided that all factors underlying Rule 144 are satisfied. As specified in Paragraph 1.4, interest shall accrue at the rate of twelve and eight-five hundreds of one percent (12.85%) per year on the principal balance owed hereunder. Such shares shall not be subject to dilution.





2






(c)

New Lien on Assets. On the Effective Date, BioHeart shall execute in favor of NorthStar a revised security agreement granting NorthStar a lien on the following assets of BioHeart, which do not presently serve as security under the Loan Agreements: all patents, patent applications, trademarks, service marks, copyrights and intellectual property rights of any nature, as well as the results of all clinical trials, know-how for preparing Myoblasts, old and new clinical data, existing approved trials, all right and title to Myoblasts, clinical trial protocols and other rights and property interests as may be agreed to by the parties.

(d)

License Rights. On the Effective Date, BioHeart shall provide NorthStar with a perpetual, license on products set-forth in Exhibit A for resale, relicensing and commercialization outside of the United States. The license shall be set-forth in a written agreement between NorthStar and BioHeart, the terms of which shall be subject to negotiations (the “NorthStar License Agreement ”). The license shall include, without limitation, the products in Exhibit A and all intellectual property rights owned by BioHeart including, without limitation, patents, copyrights, trademarks, service marks and all other forms of intellectual property, and subject to industry standard terms and conditions. Once BioHeart raises sufficient monies to conduct the BioHeart Phase II/III FDA-Approved Trials for “MARVEL,” NorthStar shall receive a perpetual, license on products set-forth in Exhibit A for resale, relicensing and commercialization within the United States; and

(e)

Unrestricted Warrants for Additional Shares. On the Effective Date, BioHeart shall issue NorthStar the right to receive 15,000,000 warrants for unrestricted common stock in BioHeart at a price of $0.014 per share. Such new shares shall not be subject to dilution.

Section 1.3      Royalty. In connection with the transactions described in Paragraphs 1.1 and 1.2 above, and under the terms of the NorthStar License Agreement, NorthStar shall pay BioHeart a royalty of up to eight (8%) percent on the revenues generated from the resale, relicensing and/or commercialization of the Products identified in Exhibit A to the NorthStar License Agreement. After the New Loan Balance is paid in full, NorthStar shall pay BioHeart the following royalties:

GROSS REVENUES PER YEAR

ROYALTY

Up to $1,000,000

8%

Between

$1,000,001

and

$2,000,000

7%

Between

$2,000,001

and

$3,000,000

6%

Between

$3,000,001

and

$4,000,000

5%

In excess of $4,000,000

4%




3







Section 1.4      Interest Accrual.  Commencing on the Effective Date, interest on the New Loan Balance shall accrue at the rate of twelve and eighty-five hundreds of one percent (12.85%) per year on the principal balance owed hereunder.

ARTICLE II.
AGREEMENT TO WAIVE AND FORBEAR

Section 2.1      Waiver.

(a)

In connection with the consideration provided by BioHeart to NorthStar hereunder, NorthStar shall waive, from the Effective Date through to the earlier of termination or expiration of the Agreement, or satisfaction of the obligations evidenced thereunder (the “Agreement End Date ”), any “Default” or “Event of Default” that has arisen under the Loan Documents prior to the Effective Date hereof (the “Waived Matters ”). >Notwithstanding the foregoing, Waived Matters shall not include “Defaults” or “Events of Default” that occur subsequent to the Effective Date.

Section 2.2      Forbearance.

(a)

In exchange for the payments made, and consideration provided under this Agreement, NorthStar shall forbear from taking or exercising any Enforcement Action in connection with the Waived Matters (the “Forbearance ”). For purposes of this Agreement, the term “Enforcement Action” means any and all action in a court of competent jurisdiction or otherwise to enforce NorthStar's rights under the Loan Documents, Florida law or otherwise against BioHeart, and that may be subject of attachment, garnishment or seizure or other remedy by NorthStar under the Loan Documents.

(b)

BioHeart agrees that all consideration to be provided by it under Article I must be provided by it and received by NorthStar on a timely basis. Failure to timely provide any such consideration on a timely basis shall constitute a breach of this Agreement. In such event, upon thirty (30) days' written notice to BioHeart, NorthStar may terminate the Agreement and the waivers and forbearances hereunder, unless BioHeart cures the breach within such thirty (30) day period.

(c)

In the event that this Agreement is breached, NorthStar reserves the exclusive right to accept or reject, in its sole discretion, any tendered cure of such breach if the cure is less than the full amount owed to it under the terms of this Agreement, without prejudice of its rights.

(d)

BioHeart and NorthStar agree that each and every payment, transfer, grant, pledge or other tender of consideration hereunder shall be applied as stated, and shall not be returned by NorthStar in the event of BioHeart's breach of this Agreement.




4







(e)

Acceptance of funds under this Agreement by NorthStar shall not constitute a waiver of any rights or defaults under the Loan Documents. BioHeart agrees that, in the event of a breach of this Agreement, the debt owed to NorthStar under the Loan Documents has been properly accelerated, and is due and owing in full in the amount stated herein.

Section 2.3      Further Action by BioHeart. As soon as practicable after the Effective Date, BioHeart shall take all such further action, to facilitate or further effectuate the waiver of the Waived Matters and the Forbearance as requested by NorthStar and as required to fulfill its obligations hereunder.

ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF BIOHEART

BioHeart represents and warrants to NorthStar as follows:

Section 3.1      Due Authorization and Enforceability. This Agreement has been duly executed and delivered by BioHeart and, assuming due authorization, execution and delivery by NorthStar, is a valid and binding obligation of BioHeart, enforceable against BioHeart in accordance with its terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium and other similar laws affecting the enforcement of creditors' rights generally.

Section 3.2      Non-Contravention. The execution and delivery by BioHeart of this Agreement does not and will not, with or without the giving of notice or the lapse of time, or both (i) result in any violation of any terms of agreements to which BioHeart is bound; (ii) conflict with or result in a breach by BioHeart of the terms or provisions of, or constitute a default under, any mortgage, deed of trust or other agreement or instrument to which he is a party or by which he or any of its properties or assets is or are bound or affected; or (iii) violate or contravene any applicable law, rule or regulation or any decree, judgment or order of any court or Governmental Body having jurisdiction over BioHeart or any of its properties or assets, except for such conflicts, breaches, defaults or violations as would not have a material adverse effect on the financial condition of BioHeart, taken as a whole and, if anything, improves the financial condition of BioHeart. For purposes of this Agreement, the term “Governmental Body” means any government or political subdivision thereof, whether federal, state, local or foreign, or any agency or instrumentality of any such government or political subdivision thereof, or any federal or state court or arbitrator.

Section 3.3      Non-Assignment. BioHeart has not assigned its rights, or delegated its duties, under the Loan Documents to any other person or entity.




5







ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF NORTHSTAR

NorthStar, solely on its own behalf, represents and warrants to BioHeart as follows:

Section 4.1      Ownership. NorthStar is the beneficial owner and holder of the Loan Documents, >and has not assigned its right, title or interest therein to another person or entity.

Section 4.2      Terms of Agreement. The terms of this Agreement were the result of negotiations between NorthStar and BioHeart, and each was given the opportunity to review and comment upon the proposed terms of this Agreement with sophisticated counsel of its own choosing.

ARTICLE V.
CONDITIONS PRECEDENT TO EFFECTIVENESS

Section 5.1      This Agreement shall become effective on the date on which the following conditions precedent shall have been satisfied or waived, as determined by NorthStar:

(a)

NorthStar shall have received this Agreement, duly executed and delivered by BioHeart.

(b)

BioHeart shall have (i) made the transfers and grants required of it to NorthStar on or prior to the Effective Date as specified in Article 1.

ARTICLE VI.
MISCELLANEOUS

Section 6.1      Costs, Expenses and Taxes. BioHeart shall pay NorthStar's fees, costs and expenses (including, among others, legal fees) incurred in connection with the preparation, execution and delivery of this Agreement. BioHeart shall also pay any and all stamp and other taxes payable or determined to be payable in connection with the execution and delivery of this Agreement.

Section 6.2      Survival of Representations. The representations, warranties, covenants and agreements of BioHeart and NorthStar contained in this Agreement shall survive the consummation and termination of this Agreement.

Section 6.3      Prior Agreements. This Agreement and the other agreements contemplated hereby constitute the entire agreement between the parties concerning the subject matter hereof, and supersedes any prior representations, understandings or agreements. There are no representations, warranties, agreements, conditions or covenants, of any nature whatsoever (whether express or implied, written or oral) between the parties hereto with respect to such subject matter except as expressly set forth herein.




6







Section 6.4      Severability. The invalidity or unenforceability of any provision hereof shall in no >way affect the validity or enforceability of any other provision or the validity and enforceability of this Agreement in any other jurisdiction.

Section 6.5      Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Florida, without giving effect to applicable choice of law principles to the extent that the application of the laws of another jurisdiction would result thereby. Lxclusive venue for any dispute resolution proceeding shall be Broward County, Florida.

Section 6.6      Waiver of Jury Trial. Each of the parties hereto irrevocably and unconditionally waives trial by jury in any legal action or proceeding relating to this Agreement or the transactions contemplated hereby and for any counterclaim therein.

Section 6.7      Headings. Section headings in this Agreement are included herein for convenience of reference only and shall not constitute a part of, or affect the interpretation of, this Agreement.

Section 6.8      Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and each of the parties hereto may execute this Agreement by signing any such counterpart. A facsimile or electronic mail transmission of this Agreement bearing a signature on behalf of a party hereto shall be legal and binding on such party.

Section 6.9      Assignment; Binding Effect. BioHeart shall not convey, assign or otherwise transfer any of its rights or obligations under this Agreement without the express written consent of NorthStar. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Nothing in this Agreement will limit or otherwise restrict the ability of NorthStar to transfer the Loan Documents to another party.

Section 6.10    Waiver; Remedies. No delay on the part of NorthStar in exercising any right, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any waiver on the part of NorthStar of any right, power or privilege under this Agreement, operate as a waiver of any other right, power or privilege of such party under this Agreement, nor shall any single or partial exercise of any right, power or privilege under this Agreement preclude any other or further exercise thereof or the exercise of any other right, power or privilege under this Agreement.




7







Section 6.11    Atnendment. This Agreement may be modified or amended, and any termhereof waived, only by written agreement of all of the parties to this Agreement,

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby, havecaused this Agreement to be executed by their respective duly authorized officers, as of the datefirst above written.

 



NORTHSTAR BIOTECH GROUP, LLC

 
 

By:  

 

 

Name:
Title: Managing Partner

 
 
 

BIOHEART, INC.

 
 


By:  


 

 

Name:
Title:




8




AMENDMENT TO
LIMITED WAIVER AND FORBEARANCE AGREEMENT


This amendment to the Limited Waiver And Forbearance Agreement, as amended, (“Amendment ”) is made by and between NorthStar Biotech Group, LLC (“NorthStar ”) and Bioheart, Inc. (“BioHeart” and collectively with Northstar, the “Parties ”).


WHEREAS, the NorthStar and BioHeart entered into a Limited Waiver and Forbearance Agreement, on October 1, 2012, as subsequently modified (the “Agreement ”); and


WHEREAS, Northstar and Bioheart now desire to further amend the Agreement.


NOW, THEREFORE, in consideration of the mutual promises, covenants and conditions hereinafter set forth, the Parties hereto hereby agree as follows:


1.

Section 1.2(d) of the Agreement is modified to read as follows:


License Rights.

On the Effective Date, BioHeart shall provide NorthStar with a

perpetual license on products set-forth in Exhibit A for resale, relicensing and commercialization outside the United States. The license shall be set-forth in a written agreement between NorthStar and BioHeart, the terms of which shall be subject to negotiations (the “NorthStar license Agreement ”). The license shall include, without limitation, the products in Exhibit A and all intellectual property rights owned by BioHeart including, without limitation, patents, copyrights, trademarks, service marks and all other forms of intellectual property, and subject to industry standard terms and conditions. Once NorthStar provides a direct investment in the equity securities of Bioheart such that the aggregate capital in such investment provides sufficient capital for the benefit of BioHeart in order to permit BioHeart to satisfy the costs associated with conducting the BioHeart Phase II/III FDA- Approved Trials for “MARVEL”: NorthStar shall receive a perpetual license on products set-forth in Exhibit A for resale, relicensing and commercialization within the United States; provided, however, that BioHeart may, in its sole discretion, choose to decline such investment and retain the license. Bioheart agrees and acknowledges that if BioHeart chooses to decline the investment, and a vote of the shareholders and/or the Board of Directors of Bioheart is required, the affiliates of NorthStar shall recuse themselves from any vote.


2.

Miscellaneous. All capitalized terms used herein and not otherwise defined shall have the meanings assigned in the Agreement as amended. Except as modified herein, all covenants, terms and conditions of the Agreement as amended shall remain in full force and effect, which covenants, terms and conditions the parties hereby ratify and affirm. This Amendment may be executed in several counterparts, each one of which shall constitute an original and all collectively shall constitute but one instrument.


SIGNATURES ON FOLLOWING PAGE

1 | Page

Amendment To
Limited Waiver And Forbearance Agreement
by and between
NortbStar and BioHeart





IN WITNESS WHEREOF, the parties here cause this Amendment to be duly executed as of the date first above written.

Bioheart, Inc.

By:

                                    

Name: Mike Tomas

Title: Chief Executive Officer

Date:    09/17/14   

NorthStar Biotech Group, LLC:

By:    

                                    

Name: Charles A. Hart
Title: Managing Member

Date:    09/18/14   

2 | Page

Amendment To
Limited Waiver And Forbearance Agreement
by and between
NortbStar and BioHeart






Exhibit 31.1

Certification of Chief Executive Officer and Principal Accounting Officer

I, Mike Tomas, certify that:

1.
  I have reviewed this report on Form 10-Q of Bioheart, Inc.;

2.
  Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.
  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.
  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a.
  designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b.
  designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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;

c.
  evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d.
  disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.
  The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a.
  all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b.
  any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 06, 2014
           
 
   
/s/Mike Tomas
 
           
Name:
   
Mike Tomas
President and Chief Executive Officer
Chief Financial Officer and Principal
Accounting Officer
 




Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Mike Tomas, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge, Bioheart, Inc.’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 2014 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that

(1)   
  The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

(2)   
  The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company.

Date: November 06, 2014
           
 
   
/s/Mike Tomas
 
           
Name:
   
Mike Tomas
President and Chief Executive Officer Chief
Financial Officer and Principal Accounting
Officer
 


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