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 March 31, 2015
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 |
65-0945967 |
incorporation or organization) |
(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
(Registrants 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 0
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 May 05, 2015, there
were 734,759,150 outstanding shares of the Registrants 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
MARCH 31,
2015
TABLE OF CONTENTS
|
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Page |
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Number |
PART I |
|
Financial Information |
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|
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Item 1. |
|
Financial Information |
|
3 |
|
|
|
|
|
|
|
Condensed
Balance Sheets March 31, 2015 (Unaudited) and December 31,
2014 |
|
4 |
|
|
|
|
|
|
|
Unaudited Condensed Statements of Operations (Unaudited) Three
Months Ended March 31, 2015 and 2014 |
|
5 |
|
|
|
|
|
|
|
Unaudited
Condensed Statements of Stockholders Deficit (Unaudited) Three Months
Ended March 31, 2015 |
|
6 |
|
|
|
|
|
|
|
Unaudited Condensed Statements of Cash Flows (Unaudited) Three
Months Ended March 31, 2015 and 2014 |
|
7 |
|
|
|
|
|
|
|
Notes to
Unaudited Condensed Financial Statements |
|
8 |
|
|
|
|
|
Item 2. |
|
Managements Discussion and Analysis of Financial Condition and
Results of Operations |
|
25 |
|
|
|
|
|
Item
3. |
|
Quantitative and Qualitative Disclosures About Market
Risk |
|
33 |
|
|
|
|
|
Item 4. |
|
Controls and Procedures |
|
33 |
|
|
|
|
|
PART II |
|
Other
Information |
|
|
|
|
|
|
|
Item 1. |
|
Legal Proceedings |
|
34 |
|
|
|
|
|
Item
1A. |
|
Risk
Factors |
|
34 |
|
|
|
|
|
Item 2. |
|
Unregistered Sales of Equity Securities and Use of
Proceeds |
|
34 |
|
|
|
|
|
Item
3. |
|
Defaults
Upon Senior Securities |
|
34 |
|
|
|
|
|
Item 4. |
|
Mine Safety Disclosures |
|
34 |
|
|
|
|
|
Item
5. |
|
Other
Information |
|
34 |
|
|
|
|
|
Item 6. |
|
Exhibits |
|
35 |
|
|
|
|
|
SIGNATURES |
|
|
|
40 |
|
|
|
|
|
EX-31.1 |
|
Management Certification |
|
|
|
|
|
|
|
EX-32.1 |
|
Sarbanes-Oxley Act |
|
|
2
PART I FINANCIAL
INFORMATION
Item 1.
Interim Condensed
Financial Statements and Notes to Interim Financial Statements
General
The accompanying reviewed
condensed 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 Companys
annual report on Form 10-K for the year ended December 31, 2014. 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 three
months ended March 31, 2015 are not necessarily indicative of the results that
can be expected for the year ending December 31, 2015.
3
BIOHEART,
INC.
CONDENSED BALANCE SHEETS
|
March 31, |
|
December 31, |
|
2015 |
|
2014 |
|
(unaudited) |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash and cash equivalents |
$
|
70,974 |
|
|
$
|
36,674 |
|
Accounts receivable, net |
|
78,489 |
|
|
|
95,409 |
|
Prepaid and other |
|
258 |
|
|
|
9,255 |
|
Total current assets |
|
149,721 |
|
|
|
141,338 |
|
|
Property and equipment, net |
|
12,279 |
|
|
|
12,686 |
|
|
Other assets |
|
|
|
|
|
|
|
Investments |
|
49,563 |
|
|
|
40,597 |
|
Deposits |
|
10,160 |
|
|
|
10,160 |
|
|
Total
assets |
$ |
221,723 |
|
|
$ |
204,781 |
|
|
LIABILITIES AND STOCKHOLDERS'
DEFICIT |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Accounts payable |
$ |
2,005,219 |
|
|
$ |
1,991,979 |
|
Accrued expenses |
|
2,460,913 |
|
|
|
2,373,615 |
|
Advances, related party |
|
148,759 |
|
|
|
148,759 |
|
Deferred revenue |
|
39,233 |
|
|
|
- |
|
Deposits |
|
478,286 |
|
|
|
478,286 |
|
Subordinated debt, related party |
|
1,500,000 |
|
|
|
1,500,000 |
|
Notes payable, related party |
|
2,277,656 |
|
|
|
2,333,059 |
|
Notes payable, net of debt
discount |
|
1,538,607 |
|
|
|
1,531,812 |
|
Derivative liabilities |
|
656,126 |
|
|
|
741,271 |
|
Total
current liabilities |
|
11,104,799 |
|
|
|
11,098,781 |
|
|
Commitments and contingencies |
|
- |
|
|
|
- |
|
|
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 shares authorized, |
|
|
|
|
|
|
|
670,534,992 and 581,433,153 shares issued
and outstanding as of March 31, |
|
|
|
|
|
|
|
2015 and December 31, 2014,
respectively |
|
670,535 |
|
|
|
581,433 |
|
Additional paid in capital |
|
109,909,100 |
|
|
|
108,939,061 |
|
Accumulated deficit |
|
(121,482,711 |
) |
|
|
(120,434,494 |
) |
Total
stockholders' deficit |
|
(10,883,076 |
) |
|
|
(10,894,000 |
) |
|
Total liabilities and stockholders'
deficit |
$ |
221,723 |
|
|
$ |
204,781 |
|
See the accompanying notes
to these financial statements
4
BIOHEART,
INC.
CONDENSED STATEMENTS
OF OPERATIONS
(unaudited)
|
|
Three months ended March 31, |
|
|
2015 |
|
2014 |
Revenue: |
|
|
|
|
|
|
|
|
Products |
|
$ |
285,349 |
|
|
$ |
233,636 |
|
Services |
|
|
204,208 |
|
|
|
158,538 |
|
Total revenue |
|
|
489,557 |
|
|
|
392,174 |
|
|
Cost and operating expenses: |
|
|
|
|
|
|
|
|
Cost
of sales |
|
|
247,624 |
|
|
|
164,048 |
|
Research and development |
|
|
50,145 |
|
|
|
9,857 |
|
Marketing, general and administrative |
|
|
998,133 |
|
|
|
838,329 |
|
Depreciation and amortization |
|
|
1,301 |
|
|
|
863 |
|
Total operating
expenses |
|
|
1,297,203 |
|
|
|
1,013,097 |
|
|
Net loss from operations |
|
|
(807,646 |
) |
|
|
(620,923 |
) |
|
Other (expenses) income: |
|
|
|
|
|
|
|
|
Gain on settlement of debt |
|
|
59,430 |
|
|
|
2,093,632 |
|
Gain
(loss) on change of fair value of derivative liability |
|
|
122,724 |
|
|
|
(489,371 |
) |
Income from equity investment |
|
|
3,966 |
|
|
|
- |
|
Other income |
|
|
3,151 |
|
|
|
- |
|
Interest expense |
|
|
(429,842 |
) |
|
|
(305,898 |
) |
Total
other (expenses) income |
|
|
(240,571 |
) |
|
|
1,298,363 |
|
|
Net (loss) income before income
taxes |
|
|
(1,048,217 |
) |
|
|
677,440 |
|
|
Income taxes (benefit) |
|
|
- |
|
|
|
- |
|
|
NET (LOSS) INCOME |
|
$ |
(1,048,217 |
) |
|
$ |
677,440 |
|
|
Net (loss) income per common share,
basic |
|
$ |
(0.002 |
) |
|
$ |
0.002 |
|
|
Net (loss) income per common share,
diluted |
|
$ |
(0.002 |
) |
|
$ |
0.001 |
|
|
Weighted average number of common shares
outstanding, basic |
|
|
626,644,025 |
|
|
|
401,553,577 |
|
|
Weighted average number of common shares
outstanding, diluted |
|
|
626,644,025 |
|
|
|
498,696,292 |
|
See the accompanying notes
to these financial statements
5
BIOHEART,
INC.
CONDENSED
STATEMENT OF STOCKHOLDERS'
DEFICIT
THREE MONTHS
ENDED MARCH 31,
2015
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
|
|
|
|
|
Preferred stock |
|
Common stock |
|
Paid in |
|
Accumulated |
|
|
|
|
|
|
Shares |
|
Amount |
|
Shares |
|
Amount |
|
Capital |
|
Deficit |
|
Total |
Balance, December 31, 2014 |
|
20,000,000 |
|
$ |
20,000 |
|
581,433,153 |
|
$ |
581,433 |
|
$ |
108,939,061 |
|
$ |
(120,434,494 |
) |
|
$ |
(10,894,000 |
) |
Common stock issued in |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
settlement of accounts payable |
|
- |
|
|
- |
|
4,783,568 |
|
|
4,784 |
|
|
36,998 |
|
|
- |
|
|
|
41,782 |
|
Common stock issued in connection |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
with the conversion of debt |
|
- |
|
|
- |
|
40,704,366 |
|
|
40,704 |
|
|
422,021 |
|
|
- |
|
|
|
462,725 |
|
Proceeds from issuance of common stock |
|
- |
|
|
- |
|
36,963,905 |
|
|
36,964 |
|
|
262,884 |
|
|
- |
|
|
|
299,848 |
|
Common stock issued |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
in settlement of litigation |
|
- |
|
|
- |
|
6,650,000 |
|
|
6,650 |
|
|
53,200 |
|
|
- |
|
|
|
59,850 |
|
Stock based compensation |
|
- |
|
|
- |
|
- |
|
|
- |
|
|
194,936 |
|
|
- |
|
|
|
194,936 |
|
Net loss |
|
- |
|
|
- |
|
- |
|
|
- |
|
|
- |
|
|
(1,048,217 |
) |
|
|
(1,048,217 |
) |
Balance, March 31, 2015 |
|
20,000,000 |
|
$ |
20,000 |
|
670,534,992 |
|
$ |
670,535 |
|
$ |
109,909,100 |
|
$ |
(121,482,711 |
) |
|
$ |
(10,883,076 |
) |
See the accompanying notes to these financial statements
6
BIOHEART,
INC.
CONDENSED STATEMENTS
OF CASH FLOWS
(unaudited)
|
|
Three months ended March 31, |
|
|
2015 |
|
2014 |
CASH
FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net
(loss) income |
|
$
|
(1,048,217 |
) |
|
$
|
677,440 |
|
Adjustments to reconcile net loss to net cash
used in |
|
|
|
|
|
|
|
|
operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
|
1,301 |
|
|
|
863 |
|
Bad
debt expense |
|
|
- |
|
|
|
10,000 |
|
Discount on convertible debt |
|
|
231,795 |
|
|
|
93,604 |
|
Change in fair value of derivative
liability |
|
|
(122,724 |
) |
|
|
489,371 |
|
Gain
on settlement of debt |
|
|
(59,430 |
) |
|
|
(2,093,632 |
) |
Loss
on settlement of litigation |
|
|
59,850 |
|
|
|
- |
|
Non
cash payment of interest |
|
|
88,578 |
|
|
|
164,757 |
|
Warrants issued in connection with joint
venture agreement |
|
|
- |
|
|
|
22,546 |
|
Income on equity investments |
|
|
(3,966 |
) |
|
|
- |
|
Stock based compensation |
|
|
194,936 |
|
|
|
194,564 |
|
(Increase) decrease in: |
|
|
|
|
|
|
|
|
Receivables |
|
|
16,920 |
|
|
|
(38,841 |
) |
Prepaid and other current assets |
|
|
8,997 |
|
|
|
(742 |
) |
Increase (decrease) in: |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
114,452 |
|
|
|
172,786 |
|
Accrued expenses |
|
|
94,024 |
|
|
|
49,522 |
|
Deferred revenue |
|
|
39,233 |
|
|
|
- |
|
Net cash
used in operating activities |
|
|
(384,251 |
) |
|
|
(257,762 |
) |
|
CASH
FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Payments for investments |
|
|
(5,000 |
) |
|
|
- |
|
Acquisitions of property and
equipment |
|
|
(894 |
) |
|
|
- |
|
Net cash
used by investing activities |
|
|
(5,894 |
) |
|
|
- |
|
|
CASH
FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock,
net |
|
|
299,848 |
|
|
|
371,000 |
|
Repayments of related party advances |
|
|
- |
|
|
|
(10,241 |
) |
Proceeds from exercise of stock options and
warrants |
|
|
- |
|
|
|
6,000 |
|
Proceeds from notes payable |
|
|
180,000 |
|
|
|
127,500 |
|
Repayments of notes payable |
|
|
(55,403 |
) |
|
|
(63,740 |
) |
Net cash
provided in financing activities |
|
|
424,445 |
|
|
|
430,519 |
|
|
Net
increase in cash and cash equivalents |
|
|
34,300 |
|
|
|
172,757 |
|
|
Cash
and cash equivalents, beginning of period |
|
|
36,674 |
|
|
|
46,227 |
|
Cash
and cash equivalents, end of period |
|
$ |
70,974 |
|
|
$ |
218,984 |
|
|
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION |
|
|
|
|
|
|
Interest paid |
|
$ |
108,471 |
|
|
$ |
84,986 |
|
Income taxes paid |
|
$ |
- |
|
|
$ |
- |
|
|
Non
cash financing activities: |
|
|
|
|
|
|
|
|
Common stock issued in connection with the
conversion of debt |
|
$ |
231,727 |
|
|
$ |
194,044 |
|
Common stock issued in settlement of accounts
payable |
|
$ |
41,782 |
|
|
$ |
107,475 |
|
See the accompanying notes
to these financial statements
7
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
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 three month period ended March 31, 2015 are not necessarily
indicative of the results that may be expected for the year ended December 31,
2015. The unaudited condensed financial statements should be read in
conjunction with the December 31, 2014 financial statements and notes thereto
included in the Companys 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. Our business includes the development of
proprietary cell therapy products as well as revenue generating physician and
patient based regenerative medicine/cell therapy training services, cell
collection and cell storage services, the sale of cell collection and treatment
kits for humans and animals, and the operation of a cell therapy clinic. 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 managements 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. 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 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.
8
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
Patent treatments and
laboratory services revenue are recognized when those services have been
completed or satisfied.
Revenues for bank sales are
accounted for as Multiple-Element Arrangements under ASC 605-10 which
incorporates Accounting Standards Codification subtopic 605-25,
Multiple-Element Arrangements (ASC 605-25). ASC 605-25 addresses accounting
for arrangements that may involve the delivery or performance of multiple
products, services and/or rights to use assets.
At March 31, 2015 and
December 31, 2014, the Company had deferred revenues of $39,233 and $-0-,
respectively.
Accounts
Receivable
Trade receivables are
carried at their estimated collectible amounts. Trade credit is generally
extended on a short-term basis; thus trade receivables do not bear interest.
Trade accounts receivable are periodically evaluated for collectability based
on past credit history with customers and their current financial
condition.
Allowance for Doubtful
Accounts
Any changes to the
allowance for doubtful accounts on accounts receivable are changed to operations
in amounts sufficient to maintain the allowance for uncollectible accounts at a
level management believes is adequate to cover any probable losses. Management
determines the adequacy of the allowance based on historical write-off
percentages and the current status of accounts receivable. Accounts receivable
are charged off against the allowance when collectability is determined to be
permanently impaired. As of March 31, 2015 and 2014, allowance for doubtful
accounts was $-0-.
Investments
The Company has adopted
Accounting Standards Codification subtopic 323-10, Investments-Equity Methods
and Joint Ventures (ASC 323-10) which requires the accounting for investments
where the Company can exert significant influence, but not control of a joint
venture or equity investment. The Company accounted for its 33 percent ownership of U.S. Stem Cell Clinic, LLC utilizing the equity method of
accounting.
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. Shares issuable
upon conversion of convertible debt, stock options and warrants have been
excluded as common stock equivalents in the diluted loss per share for the
three months ended March 31, 2015 because their effect is anti-dilutive on the
computation. Fully diluted shares outstanding were 649,121,525 and 498,696,292
for the three months ended March 31, 2015 and 2014, respectively.
9
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
Stock based
compensation
The Company measures the
cost of services received in exchange for an award of equity instruments based
on the fair value of the award. For employees and directors, the fair value of
the award is measured on the grant date and for non-employees, the fair value of
the award is generally re-measured on vesting dates and interim financial
reporting dates until the service period is complete. The fair value amount is
then recognized over the period during which services are required to be
provided in exchange for the award, usually the vesting period. Stock-based
compensation expense is recorded by the Company in the same expense
classifications in the statements of operations, as if such amounts were paid
in cash. As of March 31, 2015, there were outstanding stock options to purchase
73,900,497 shares of common stock, 31,789,510 shares of which were
vested.
Concentrations of Credit
Risk
The Companys financial
instruments that are exposed to a concentration of credit risk are cash and
accounts receivable. Generally, the Companys cash and cash equivalents in
interest-bearing accounts does not exceed FDIC insurance limits. The financial
stability of these institutions is periodically reviewed by senior
management.
As of March 31, 2015, three
customers represented 16%, 16% and 23%, aggregate of 55% of the Companys accounts receivable. As of December 31, 2014, two customers represented 38% and 17%,
aggregate of 55%, of the Companys accounts receivable.
The Companys revenues
earned from sale of products and services for the three months ended March 31,
2015 did not include any concentrations. For the three months ended March 31,
2014, the Companys revenues earned from the sale of products and services were
$322,572, of which two customers represented 17% and 10% of the Companys
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
$50,145 and $9,857 for the three months ended March 31, 2015 and 2014,
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.
10
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
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 March 31, 2015
and December 31, 2014, the Company did not have any derivative instruments that
were designated as hedges.
At March 31, 2015, the
Company had outstanding convertible notes that contained embedded derivatives.
These embedded derivatives include certain conversion features and reset
provisions. (See Note 7 and Note 9)
Reliance on Key
Personnel and Consultants
The Company has four
full-time employees and one part-time employees. The Company is heavily
dependent on the continued active participation of its two current executive
officers, one employee 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.
Reclassification
Certain reclassifications
have been made to prior periods data to conform with the current years
presentation. These reclassifications had no effect on reported income or
losses.
Recent Accounting
Pronouncements
There were various 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 Companys financial position,
results of operations or cash flows.
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 three months ended March 31,
2015, the Company incurred an operating loss of $1,048,217 and used $384,251 in
cash for operating activities. As of March 31, 2015, the Company had a working
capital deficit (current liabilities in excess of current assets) of
approximately $11.0 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 Companys existence is
dependent upon managements ability to develop profitable operations and to
obtain additional funding sources. There can be no assurance that the Companys
financing efforts will result in profitable operations or the resolution of the
Companys liquidity problems. The accompanying statements do not include any adjustments that might result should the Company be unable to continue as a going
concern.
11
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
NOTE 3
INVESTMENTS
Investment is comprised of a
33% ownership of U.S. Stem Cell Clinic, LLC, accounted for using the equity
method of accounting. The initial investment in 2014 and 2015 of cash and
expenses paid on U.S. Stem Cell Clinic, LLCs behalf was in aggregate of
$54,714. The Companys 33% income earned by U.S. Stem Cell Clinic, LLC of $3,966
for the three months ended March 31, 2015 (inception to date loss of $5,151) was
recorded as other income/expense in the Companys Statement of Operations in the
appropriate periods and increased the carrying value of the investment to
$49,563.
NOTE 4 PROPERTY AND
EQUIPMENT
Property and equipment as of
March 31, 2015 and December 31, 2014 summarized as follows:
|
March 31, |
|
December 31, |
|
2015 |
|
2014 |
Laboratory and medical equipment |
$ |
353,252 |
|
|
$ |
352,358 |
|
Furniture, fixtures and equipment |
|
125,634 |
|
|
|
125,634 |
|
Computer equipment |
|
47,647 |
|
|
|
47,647 |
|
Leasehold improvements |
|
362,046 |
|
|
|
362,046 |
|
|
|
888,579 |
|
|
|
887,685 |
|
Less accumulated depreciation and
amortization |
|
(876,300 |
) |
|
|
(874,999 |
) |
|
$ |
12,279 |
|
|
$ |
12,686 |
|
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.
NOTE 5 ACCRUED
EXPENSES
Accrued expenses consisted of
the following as of March 31, 2015 and December 31, 2014:
|
March 31, |
|
December 31, |
|
2015 |
|
2014 |
Amounts payable to the Guarantors of the Companys loan
agreement with Bank of America |
|
|
|
|
|
and Seaside Bank, including fees and interest |
|
1,571,863 |
|
|
1,533,217 |
Interest payable on notes payable |
|
747,141 |
|
|
685,575 |
Vendor accruals and other |
|
127,114 |
|
|
120,836 |
Employee commissions,
compensation, etc. |
|
14,795 |
|
|
33,987 |
|
$ |
2,460,913 |
|
$ |
2,373,615 |
During the three months ended
March 31, 2014, the Company issued an aggregate of 6,750,781 shares of its common stock in settlement of outstanding accounts payable. In connection with the
issuance, the Company incurred $65,548 loss in settlement of debt.
For the three months ended
March 31, 2015 the Company recognized a gain of $59,430 related to the
settlement or write off of accounts payable and accrued expenses.
12
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
NOTE 6 STOCK PURCHASE
AGREEMENT
On October 23, 2014, the Company, 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 the Companys common stock, $0.001 par value (the Shares), over the
24-month term of the Purchase Agreement.
From time to time over the
term of the Purchase Agreement, commencing on the trading day immediately
following the date on which the initial registration statement is declared
effective by the Securities and Exchange Commission (the Commission), the
Company may provide the Investor with a draw down notice to purchase a specified
dollar amount of Shares, with each draw down subject to certain limitations. The
Company may not deliver any Draw Down Notice to the Investor if the Initial
Purchase Price with respect to the Shares subject to such Draw Down Notice is
less than $0.0025 as of the date the applicable Draw Down Notice is received by
the Investor (the Draw Down Exercise Date).
The applicable Initial
Purchase Price, the Initial Purchase Price, is defined as a price equal to 93%
of the lowest of (i) the arithmetic average of the three lowest daily volume
weighted average prices for the Companys common stock (the VWAP) during the 10 consecutive trading days ending on the trading day
immediately preceding the applicable Draw Down Exercise Date, (ii) the
arithmetic average of the three lowest closing sale prices for the Companys
common stock during the 10 consecutive trading days ending on the trading day
immediately preceding the applicable Draw Down Exercise Date and (iii) the
closing sale price for the Companys common stock on the trading day immediately preceding the applicable Draw Down Exercise Date.
In 2014, the Company paid to
the Investor as a commitment fee for entering into the Purchase Agreement equal
an aggregate of to 12,000,000 shares of the Companys common stock.
During the three months ended
March 31, 2015, the Company issued an aggregate of 35,520,249 shares of its common stock in exchange for $283,578 under the stock purchase agreement.
NOTE 7 NOTES
PAYABLE
Notes payable were comprised
of the following as of March 31, 2015 and December 31, 2014:
|
March 31, |
|
December 31, |
|
2015 |
|
2014 |
Seaside Bank note payable. |
$ |
980,000 |
|
|
$ |
980,000 |
|
Hunton & Williams notes payable |
|
384,972 |
|
|
|
384,972 |
|
Asher notes payable |
|
190,000 |
|
|
|
151,000 |
|
Daniel James Management note payable |
|
75,000 |
|
|
|
75,000 |
|
Fourth Man, LLC note payable |
|
75,000 |
|
|
|
75,000 |
|
Magna Group |
|
130,000 |
|
|
|
205,000 |
|
Total notes payable |
|
1,834,972 |
|
|
|
1,870,972 |
|
Less
unamortized debt discount |
|
(296,365 |
) |
|
|
(339,160 |
) |
Total notes payable net of unamortized debt
discount |
$ |
1,538,607 |
|
|
$ |
1,531,812 |
|
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
Companys 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.
13
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
Hunton & Williams
Notes
At March 31, 2015 and December 31, 2014, 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
period)
During the three months ended
March 31, 2015, 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 $114,000 (the Asher Notes). The
Company incurred legal fees in the amount of $9,000 which were deducted from the proceeds of the notes.
The Asher Notes bear interest
at the rate of 8% per annum. As of the quarter ended March 31, 2015, all
interest and principal must be repaid nine months from the issuance date, with
the last note being due December 26, 2015. The Notes are convertible into
common stock, at Ashers 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 March 31, 2015 was
$124,260. At the inception of the Asher Notes, the Company determined the
aggregate fair value of $137,764 of the embedded derivatives.
During the three months ended
March 31, 2015, $75,000 of notes that were outstanding at December 31, 2014,
plus accrued interest were converted into shares of the Companys common stock
(see Note 10).
The remaining aggregate Asher
Notes unconverted principle balance as of March 31, 2015 was
$190,000.
Daniel James Management
(During this period)
During the three months ended
March 31, 2015, the Company entered into a Securities Purchase Agreement with
Daniel James Management (Daniel) for the sale of 9.5% convertible note in
aggregate principal amount of $25,000 (the Daniel Note).
The Daniel Note bears interest
at the rate of 9.5% per annum. As of the quarter ended March 31, 2015, all
interest and principal must be repaid one year from the issuance date, March
30, 2015. The Daniel Note is convertible into common stock, at holders 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 Note and to fair value as of
each subsequent reporting date which at March 31, 2015 was $32,972. At the
inception of the Daniel Note, the Company determined the aggregate fair value of
$35,551 of the embedded derivatives.
During the three months ended
March 31, 2015, $25,000 of notes that were outstanding at December 31, 2014,
plus accrued interest were converted into shares of the Companys common stock
(see Note 10).
14
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
The remaining aggregate Daniel
James Management Notes unconverted principle balance as of March 31, 2015 was
$75,000.
Fourth Man, LLC (During
this period)
During the three months ended
March 31, 2015, the Company entered into Securities Purchase Agreements with Fourth Man, LLC. (Fourth Man), for the sale of a 9.5% convertible notes in the
aggregate principal amount of $50,000 (the Note).
The Notes bears interest at
the rate of 8% to 9.5% per annum. As of the quarter ended March 31, 2015, 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 Mans 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 March 31, 2015 was $65,705. At the
inception of the Fourth Man Notes, the Company determined the aggregate fair
value of $95,263 of the embedded derivatives.
During the three months ended
March 31, 2015, $50,000 of notes that were outstanding at December 31, 2014,
plus accrued interest, were converted into shares of the Companys common stock
(see Note 10).
The remaining aggregate Fourth
Man, LLC Notes unconverted principle balance as of March 31, 2015 was
$75,000.
Magna Group (During this
period)
During the three
months ended March 31, 2015, $75,000 of notes that were outstanding at December
31, 2014, plus accrued interest, were converted into shares of the Companys
common stock (see Note 10). The remaining aggregate Magna notes unconverted
principle balance as of March 31, 2015 was $130,000.
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 112.86% to 116.65%, (3) weighted average
risk-free interest rate of 0.17% to 0.27%, (4) expected lives of 0.75 to 1.00
years, and (5) estimated fair value of the Companys common stock from $0.0089
to $0.0127 per share. The initial fair value of the embedded debt derivative of
$268,578 was allocated as a debt discount up to the proceeds of the notes
($180,000) with the remainder ($88,578) charged to current period operations as
interest expense. For the three months ended March 31, 2015 and 2014, the
Company amortized an aggregate of $231,795 and $93,604 of debt discounts to
current period operations as interest expense, respectively.
NOTE 8 RELATED PARTY
TRANSACTIONS
Advances
As of March 31, 2015 and
December 31, 2014, the Companys officers and directors have provided advances
in the aggregate of $148,759 for working capital purposes. The advances are
unsecured, due on demand and non-interest bearing.
15
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
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.
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. The Company did not make the
required payment, and as a result, was in default of the revised agreement The
Company renegotiated the terms of the Note and Northstar 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.
As described above, during the
year ended December 31, 2013, the Company issued the 5,000,000 shares of Series
A Convertible Preferred Stock and the 10,000,000 of common stock described above
in exchange for the $210,000 as payment towards outstanding principle of the
debt. In addition, the Company issued 15,000,000 shares of Series A Convertible
Preferred Stock as a penalty in settlement of the terms of the forbearance
agreement. The fair value of the Preferred Stock of $274,050 was included in
interest expense for the year ended December 31, 2013.
16
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
On September 30, 2013, the
Company issued 8,771,929 shares of its common stock as payment of $100,000
towards cash advances.
On December 24, 2013, the Company issued 3,915,662 shares of its
common stock as payment of accrued interest through June 30, 2013 of $85,447.
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 entered into on October 1, 2012 to provide that
the perpetual license on products as described for resale, relicensing and
commercialization outside the United States was amended as such to condition
upon NorthStar providing certain financing, which financing the Company, in its
sole discretion, could decline and retain the license.
On October 3, 2014, the
Company issued 514,886 shares of its common stock in lieu of payment in cash of
accrued and unpaid interest of $12,705 due October 1, 2014 per the forbearance
agreement.
As of March 31, 2015 and
December 31, 2014, the principle of this note was $362,000.
Officer and Director
Notes
|
March 31, |
|
December 31, |
|
2015 |
|
2014 |
Notes payable, Dr Murphy |
$ |
465,240 |
|
$ |
465,240 |
Note
payable, Mr. Tomas |
|
280,143 |
|
|
331,354 |
Note
payable, Mr. Tomas |
|
375,000 |
|
|
375,000 |
Note
payable, Mr. Tomas |
|
500,000 |
|
|
500,000 |
Note
payable, Ms. Comella |
|
295,273 |
|
|
299,465 |
Total |
$ |
1,915,656 |
|
$ |
1,971,059 |
Notes payable, Dr.
Murphy
At March 31, 2015 and December
31, 2014, the Company has outstanding notes payable to Dr. Murphy with interest
at 8% per annum due at maturity in aggregate $465,240. Of the outstanding
balance, certain 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.
Notes payable, Mr.
Tomas
In 2013, the Company issued a
promissory note payable for previous advances and accrued compensation. The promissory note bear interest of 5% per annum and due on demand. During the three
months ended March 31, 2015, the Company paid off $51,211 of the outstanding
promissory note. The principle outstanding balance of these notes as of March
31, 2015 is $280,143.
On August 1, 2013, the Company
issued a $375,000 promissory notes due on demand in settlement of accrued compensation. The promissory note bear interest of 5% per annum and due on demand.
The principle outstanding balance of these notes as of March 31, 2015 is
$375,000.
On July 1, 2014, the Company
issued a $500,000 promissory note in settlement of accrued compensation. The
promissory notes bear interest of 5% per annum and due on January 1, 2015. The
principle outstanding balance of these notes as of March 31, 2015 is $500,000.
17
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
Notes payable, Ms.
Comella
On July 1, 2014, the Company issued a $300,000 promissory note in
settlement of accrued compensation. The promissory notes bear interest of 5%
per annum and due on January 1, 2015. During the three months ended March 31, 2015, the Company paid off $4,192 of the outstanding promissory note. The
principle outstanding balance of these notes as of March 31, 2015 is $295,273.
Subordinated debt,
related party
As of March 31, 2015 and
December 31, 2014, the Companys officers and directors have provided notes in
aggregate of $1,500,000. The notes range from 4.75% to 8% per annum and are due
upon payoff of the Northstar note payable described above.
NOTE 9 DERIVATIVE
LIABILITIES
Reset warrants
On October 1, 2012, in
connection with the forbearance agreement with Northstar as discussed in Note 8
above, the Company issued an aggregate of 15,000,000 common stock purchase
warrants to purchase the Companys 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 March 31, 2015, the fair
value of the reset provision related to the embedded derivative liability of
$114,349 was determined using the Binomial Option Pricing model with the
following assumptions: dividend yield: 0%; volatility: 112.86%; risk free rate:
1.71%; and expected life: 7.50 years. The Company recorded a gain on change in
derivative liabilities of $35,571 during the three months ended March 31, 2015.
Convertible
notes
In 2014 and the three months
ended March 31, 2015, the Company issued convertible notes (see Note 7 above).
These notes are convertible
into common stock, at holders option, at a discount to the market price of the
Companys 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 these notes and to
fair value as of each subsequent reporting date.
The fair value of the embedded
derivatives at March 31, 2015, in the amount of $541,777, was determined using
the Binomial Option Pricing Model based on the following assumptions: (1)
dividend yield of 0%; (2) expected volatility of 112.86%, (3) weighted average
risk-free interest rate of 0.03 to 0.26%, (4) expected lives of 0.27 to 1.00
years, and (5) estimated fair value of the Companys common stock of $0.089 per
share. The Company recorded a gain on change in derivative liabilities of
$87,153 during the three months ended March 31, 2015.
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.
18
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
NOTE 10 STOCKHOLDERS
EQUITY
During the three months ended March 31, 2015, the Company issued
an aggregate of 4,783,568 shares of its common stock in the amount of $41,782
for the settlement of outstanding accounts payable and accrued expenses. In
connection with the issuance of the shares the Company recognized a gain on
settlement of accounts payable and accrued expenses in the amount of $41,507
(see Note 5).
During the three months ended
March 31, 2015, the Company issued 6,650,000 shares of common stock in settlement of litigation. In connection with the issuances, the Company recognized a
loss in the amount of $59,850, which is included in the marketing, general and
administration expense in the Statement of Operations (see Note 12).
During the three months ended
March 31, 2015, the Company issued an aggregate of 40,704,366 shares of its common stock for the conversion of $231,727 of notes payable and related accrued
interest. Upon conversion of the notes, the Company recorded an adjustment to
the derivative liability in the amount of $230,999 (see Note 13).
During the three months ended
March 31, 2015, the Company issued an aggregate of 35,520,249 shares of common
stock in exchange for $283,578 under the stock purchase agreement with Magna
Equities II, LLC (see Note 6), and issued an aggregate of 1,443,656 shares of
common stock in exchange for $16,270. In connection with the stock sale, the
Company issued an aggregate of 1,443,656 warrants to purchase the Companys
common stock (see Note 11).
NOTE 11 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. On August 4, 2014, the Board of Directors approved to set the reserve
to one hundred million shares of common stock for issuance and to close the 1999
Officers and Employees Stock Option Plan.
19
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
A summary of options at March
31, 2015 and activity during the three months then ended is presented below:
|
|
|
|
|
|
|
Weighted- |
|
|
|
|
|
|
|
Average |
|
|
|
|
Weighted- |
|
Remaining |
|
|
|
|
Average |
|
Contractual |
|
Shares |
|
Exercise
Price |
|
Term (in years) |
Options outstanding at January 1,
2014 |
23,912,943 |
|
|
$ |
0.15 |
|
9.0 |
Granted |
43,148,487 |
|
|
$ |
0.023 |
|
10.0 |
Exercised |
|
|
|
$ |
|
|
|
Forfeited/Expired |
(136,221 |
) |
|
$ |
5.2 |
|
|
Options outstanding at December 31,
2014 |
66,925,209 |
|
|
$ |
0.056 |
|
8.9 |
Granted |
7,000,000 |
|
|
$ |
0.01116 |
|
10.0 |
Exercised |
|
|
|
|
|
|
|
Forfeited/Expired |
(24,712 |
) |
|
$ |
0.71 |
|
|
Options outstanding at March 31, 2015 |
73,900,497 |
|
|
$ |
0.05147 |
|
8.8 |
Options exercisable at March 31, 2015 |
31,789,510 |
|
|
$ |
0.09176 |
|
8.8 |
Available for grant at March 31,
2015 |
89,500,000 |
|
|
|
|
|
|
The following information
applies to options outstanding and exercisable at March 31, 2015:
|
Options Outstanding |
|
Options Exercisable |
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
Average |
|
Weighted- |
|
|
|
Weighted- |
|
|
|
Remaining |
|
Average |
|
|
|
Average |
|
|
|
Contractual |
|
Exercise |
|
|
|
Exercise |
|
Shares |
|
Term |
|
Price |
|
Shares |
|
Price |
$0.00 $0.70 |
73,438,487 |
|
8.8 |
|
$ |
0.024 |
|
31,327,500 |
|
$ |
0.03 |
$0.71 $1.28 |
125,218 |
|
4.2 |
|
$ |
0.828 |
|
125,218 |
|
$ |
0.83 |
$5.25 $5.67 |
312,080 |
|
1.3 |
|
$ |
5.53 |
|
312,080 |
|
$ |
5.53 |
$7.69 |
24,712 |
|
1.3 |
|
$ |
7.69 |
|
24,712 |
|
$ |
7.69 |
|
73,900,497 |
|
8.8 |
|
$ |
0.05147 |
|
31,789,510 |
|
$ |
0.09176 |
On February 2, 2015, the
Company issued an aggregate 7,000,000 options to purchase the Companys common
stock at $0.01116 per share to board of directors, vesting immediately and
exercisable over 10 years. The aggregate fair value of $121,735, determined
using the Black Scholes option pricing model with the following assumptions:
Dividend yield: 0%; Volatility: 142.65% and Risk free rate: 1.68%.
The fair value of all options
vesting during the three months ended March 31, 2015 and 2014 of $196,966 and
$194,564, respectively, was charged to current period operations.
20
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
Warrants
A summary of common stock
purchase warrants at March 31, 2015 and activity during the period then ended is
presented below:
|
|
|
|
|
|
Weighted- |
|
|
|
|
Weighted- |
|
Average |
|
|
|
|
Average |
|
Remaining |
|
|
|
|
Exercise |
|
Contractual |
|
Shares |
|
Price |
|
Term (in years) |
Outstanding at January 1, 2014 |
118,078,856 |
|
|
$ |
0.22 |
|
6.3 |
Issued |
57,582,469 |
|
|
$ |
0.02 |
|
8.2 |
Exercised |
(11,918,181 |
) |
|
$ |
0.01 |
|
|
Expired |
(13,178,145 |
) |
|
$ |
0.08 |
|
|
Outstanding at December 31, 2014 |
150,564,999 |
|
|
$ |
0.17 |
|
6.6 |
Issued |
1,443,656 |
|
|
$ |
0.01127 |
|
10.0 |
Exercised |
|
|
|
$ |
|
|
|
Expired |
(1,233,334 |
) |
|
$ |
0.0316 |
|
|
Outstanding at March 31, 2015 |
150,775,321 |
|
|
$ |
0.1690 |
|
6.5 |
Exercisable at March 31, 2015 |
135,855,019 |
|
|
$ |
0.10 |
|
6.5 |
The following information
applies to common stock purchase warrants outstanding and exercisable at March
31, 2015:
|
Warrants Outstanding |
|
Warrants Exercisable |
|
|
|
Weighted- |
|
|
|
|
|
|
|
|
|
|
|
Average |
|
Weighted- |
|
|
|
Weighted- |
|
|
|
Remaining |
|
Average |
|
|
|
Average |
|
|
|
Contractual |
|
Exercise |
|
|
|
Exercise |
|
Shares |
|
Term |
|
Price |
|
Shares |
|
Price |
$0.01 $0.50 |
144,526,188 |
|
6.5 |
|
$ |
0.02 |
|
131,150,336 |
|
$ |
0.02 |
$0.52 $0.68 |
2,699,675 |
|
4.1 |
|
$ |
0.58 |
|
2,699,675 |
|
$ |
0.58 |
$0.70 $1.62 |
848,176 |
|
4.8 |
|
$ |
0.71 |
|
848,176 |
|
$ |
0.71 |
$5.67 $7.69 |
2,701,282 |
|
7.6 |
|
$ |
7.55 |
|
1,156,832 |
|
$ |
7.35 |
|
150,775,321 |
|
6.5 |
|
$ |
0.1690 |
|
135,855,019 |
|
$ |
0.10 |
In conjunction with the
authorized issuance of common stock, the Company granted 1,443,656 common stock
purchase warrants during the three months ended March 31, 2015.
NOTE 12 COMMITMENTS AND
CONTINGENCIES
Litigation
On March 19 2015, the Company
settled a prospective dispute with a third party over the use of proprietary
information through the issuance of 6,650,000 shares of common stock.
On November 10, 2014, the
Company was served with a lawsuit by an alleged assignee and a guarantor to a
Loan Guarantee, Payment and Security Agreement. These parties claim breach of
that Agreement and damages of approximately $2.3 Million plus interest. The
assignor and assignee also sued the Companys directors and two past directors
and an affiliate shareholder for breach of fiduciary duty, claiming damages as
alleged creditors arising out of these parties alleged participation in
Northstar Biotech Group, LLC, a secured creditor of the Company. Management recognizes that this lawsuit can
divert managerial and financial
resources, and, if there is an adverse outcome, unfavorably affect our
financial condition, results of operations and stock price, but management
believes the lawsuit is without merit
and will defend the lawsuit vigorously.
21
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
The Company is subject to
other legal proceedings that arise in the ordinary course of business. In the
opinion of management, as of March 31, 2015, 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 Companys 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.
NOTE 13 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.
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
Companys 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 March 31, 2015 or
December 31, 2014, 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.
22
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
As of March 31, 2015 and
December 31, 2014, the Company did not have any derivative instruments that were
designated as hedges.
The derivative liability as
of March 31, 2015, in the amount of $656,126 has a level 3 classification.
The following table
provides a summary of changes in fair value of the Companys Level 3 financial
liabilities as of March 31, 2015:
|
|
Warrant |
|
Debt |
|
|
Liability |
|
Derivative |
Balance, December 31, 2013 |
|
|
146,855 |
|
|
$ |
256,956 |
|
Total (gains) losses |
|
|
|
|
|
|
|
|
Initial fair value of debt derivative at note
issuance |
|
|
|
|
|
|
1,443,708 |
|
Initial fair value of derivative relating to
reset warrants |
|
|
|
|
|
|
|
|
Mark-to-market at December 31, 2014: |
|
|
3,065 |
|
|
|
(429,018 |
) |
Transfers out of Level 3 upon increase in
authorized shares |
|
|
|
|
|
|
|
|
Transfers out of Level 3 upon conversion and
settlement of notes |
|
|
|
|
|
|
(680,295 |
) |
Balance, December 31, 2014 |
|
$ |
149,920 |
|
|
$ |
591,351 |
|
Total (gains) losses |
|
|
|
|
|
|
|
|
Initial fair value of debt derivative at note
issuance |
|
|
|
|
|
|
268,578 |
|
Mark-to-market at March 31, 2015: |
|
|
(35,571 |
) |
|
|
(87,153 |
) |
Transfers out of Level 3 upon conversion or
payoff of notes payable |
|
|
|
|
|
|
(230,999 |
) |
Balance, March 31, 2015 |
|
$ |
114,349 |
|
|
$ |
541,777 |
|
Net
Gain for the period included in earnings relating to the |
|
|
|
|
|
|
|
|
liabilities held at March 31, 2015 |
|
$ |
35,571 |
|
|
$ |
87,153 |
|
Fluctuations in the
Companys stock price are a primary driver for the changes in the derivative
valuations during each reporting period. The Companys stock price decreased
approximately 15% from December 31, 2014 to March 31, 2015. As the stock price
decreases for each of the related derivative instruments, the value to the
holder of the instrument generally decreases, therefore decreasing the liability
on the Companys balance sheet. Additionally, stock price volatility is one of
the significant unobservable inputs used in the fair value measurement of each
of the Companys derivative instruments.
The estimated fair value of
these liabilities is sensitive to changes in the Companys expected volatility.
Increases in expected volatility would generally result in a higher fair value
measurement.
NOTE 14 SUBSEQUENT
EVENTS
Subsequent stock
issuances
On April 2, 2015, the
Company issued 11,508,100 shares of common stock in settlement of $213,904 of
accrued payables to Guarantor of the Companys loan agreement with Bank of
America and Seaside Bank. (See Note 5).
23
BIOHEART, INC.
NOTES TO UNAUDITED
CONDENSED FINANCIAL STATEMENTS
MARCH 31, 2015
In April 2015, the Company
sold 540,736 shares of its common stock for net proceeds of $5,000. In
connection with the stock sale, the Company issued 540,736 warrants to purchase
the Companys common stock for five years at $0.009247 per share. In In
addition, the Company issued 6,869,151 shares of its common stock in settlement
for services, provided, 22,053,009 shares of its common stock in settlement of
$79,000 of outstanding convertible notes payable, and $2,739 accrued interest,
1,363,031 shares of its common stock in settlement of $12,635.29 related party
interest on Northstar debt (see Note 8), 14,917,086 shares of our common stock
in exchange of $79,075 draw down on the Magna equity line and on April 9, 2015,
the Company issued 413,289 shares of its common stock in settlement as true up
shares pursuant to the draw down on the equity line.
Subsequent
financing
On April 13, 2015, the
Company entered into a Securities Purchase Agreement with Vis Vires Group, Inc.
(Vis), for the sale of an 8% convertible note in the principal amount of
$33,000 (the Note).
The Note bears interest at
the rate of 8% per annum. All interest and principal must be repaid on January
16, 2016. The Note is convertible into common stock, at Viss 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. In the event the
Company prepays the Note in full, the Company is required to pay off all
principal, interest and any other amounts owed multiplied by (i) 140% if
prepaid during the period commencing on the closing date through 179 days
thereafter. After the expiration of 180 days following the date of the Note,
the Company has no right of prepayment.
On April 27, 2015, the
Company entered into a Securities Purchase Agreement with Daniel James
Management, Inc., for the sale of an 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 April
26, 2016. The Note is convertible into common stock, at Ashers option, at a
47% discount to the lowest daily closing 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 at
150%, interest and any other amounts.
24
Item 2. Managements
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
Managements 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, 2014 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 managements beliefs and assumptions
and on information currently available to our management. Any such
forward-looking statements would be contained principally in Managements
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 managements 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,
2014.
Unless otherwise indicated
or the context otherwise requires, all references in this Form 10-Q to we,
us, our, our company, Bioheart or the Company refer to Bioheart, Inc.
and its subsidiaries.
Our Ability to Continue
as a Going Concern
Our independent registered
public accounting firm has issued its report dated March 16, 2015, in connection
with the audit of our financial statements as of December 31, 2014, 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 March 31, 2015
also describes the existence of conditions that raise substantial doubt about
our ability to continue as a going concern.
25
Overview
We are an emerging
enterprise in the regenerative medicine / cellular therapy industry. We are
focused on the discovery, development and commercialization of cell based
therapeutics that prevent, treat or cure disease by repairing and replacing
damaged or aged tissue, cells and organs and restoring their normal function.
Our business includes the development of proprietary cell therapy products as
well as revenue generating physician and patient based regenerative medicine /
cell therapy training services, cell collection and cell storage services, the sale of
cell collection and treatment kits for humans and animals, and the operation of
a cell therapy clinic.
US Stem Cell Training,
(SCT), an operating division of our company, is a content developer of
regenerative medicine / cell therapy informational and training materials for
physicians and patients. SCT also provides in-person and online training courses
which are delivered through in-person presentations at SCTs state of the art
facilities and globally at university, hospital and physicians office locations
as well as through online webinars. Additionally, SCT provides hands-on clinical
application training for physicians and health care professionals interested in
providing regenerative medicine / cell therapy procedures.
Vetbiologics, (VBI), an
operating division of our company, is a veterinary regenerative medicine company
committed to providing veterinarians with the ability to deliver the highest
quality regenerative medicine therapies to dogs, cats and horses. VBI provides
veterinarians with extensive regenerative medicine capabilities including the ability to
isolate regenerative stem cells from a patients own adipose (fat) tissue
directly on-site within their own clinic or stall-side
US Stem Cell Clinic, LLC,
(SCC), a partially owned investment of our company, is a physician run
regenerative medicine / cell therapy clinic providing cellular treatments for
patients afflicted with neurological, autoimmune, orthopedic and degenerative
diseases. SCC is operating in compliance with the FDA 1271s which allow for same
day medical procedures to be considered the practice of medicine. We isolate
stem cells from bone marrow and adipose tissue and also utilize platelet rich
plasma.
Biohearts comprehensive
map of products and services:
Regenerative medicine is
defined as the process of replacing or regenerating human cells, tissues or
organs to restore normal function. Among the categories of therapeutic
technology platforms within this field are cell therapy; tissue engineering;
tools, devices and diagnostics; and aesthetic medicine. Bioheart's business
model is focused on two of these areas. First, cell therapy, in which we
introduce cells (adult, donor or patient, stem cell or differentiated) into the
body to prevent and treat disease; and second, we are a provider of services and
products to physicians and veterinaries who provide or seek to provide cellular
therapies and direct patient care for individuals and animals who may benefit from
cellular therapy.
26
All living complex
organisms start as a single cell that replicates, differentiates (matures) and
perpetuates in an adult organism through its lifetime. Cellular therapy is the
process that uses cells to prevent, treat or cure disease, or regenerate damaged
or aged tissue. To date, the most common type of cell therapy has been the
replacement of mature, functioning cells such as through blood and platelet
transfusions. Since the 1970s, first bone marrow and then blood and umbilical
cord-derived stem cells have been used to restore bone marrow, as well as blood
and immune system cells damaged by the chemotherapy and radiation that are used
to treat many cancers. These types of cell therapies are standard of practice
world-wide and are typically reimbursed by insurance.
Within the field of cell
therapy, research and development using stem cells to treat a host of diseases
and conditions has greatly expanded. Stem cells (in either embryonic or adult
forms) are primitive and undifferentiated cells that have the unique ability to
transform into or otherwise affect many different cells, such as white blood
cells, nerve cells or heart muscle cells. Our cell therapy development efforts
are focused on the use of adult stem cells; those cells which are found in the
muscle, fat tissue and peripheral blood.
There are two general
classes of cell therapies: Patient Specific Cell Therapies ("PSCTs") and
Off-the-Shelf Cell Therapies ("OSCTs"). In PSCTs, cells collected from a person
(donor) are transplanted, with or without modification, to a patient
(recipient). In cases where the donor and the recipient are the same
individual, these procedures are referred to as autologous. In cases in which
the donor and the recipient are not the same individual, these procedures are
referred to as allogeneic. Autologous cells offer a low likelihood of
rejection by the patient and we believe the long-term benefits of these PSCTs
can best be achieved with an autologous product. In the case of OSCT, donor
cells are expanded many fold in tissue culture, and large banks of cells are
frozen in individual aliquots that may result in treatments for as many as
10,000 people from a single donor tissue. By definition, OSCTs are always
allogeneic in nature.
Various adult stem cell
therapies are in clinical development for an array of human diseases, including
autoimmune, oncologic, neurologic and orthopedic, among other indications. While
no assurances can be given regarding future medical developments, we believe
that the field of cell therapy holds the promise to better the human experience
and minimize or ameliorate the pain and suffering from many common diseases
and/or from the process of aging.
According to Robin R.
Youngs Stem Cell Summit Executive Summary-Analysis and Market Forecasts 2014-2024, the United States stem cell therapy market is estimated to grow from an
estimated $237 million in 2013 to more than $5.7 billion in 2020.
Specific to cellular
therapy, we are focused on the discovery, development and commercialization of
autologous cellular therapies for the treatment of chronic and acute heart
damage as well as vascular and autoimmune diseases.
In our pipeline, we have
multiple product candidates for the treatment of heart damage, including MyoCell
and Myocell SDF-1. MyoCell and MyoCell SDF-1 are autologous muscle-derived
cellular therapies designed to populate regions of scar tissue within a
patients 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 but the
myoblast cells to be injected for use in MyoCell SDF-1 are 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 lower limb ischemia
and potentially, among other autoimmune diseases, rheumatoid arthritis. We hope
to demonstrate that these product candidates are safe and effective complements
to existing therapies for chronic and acute heart damage.
27
Our Clinical Development
Pipeline Chart:
Our mission is to advance
to market novel regenerative medicine and cellular therapy products that
substantially benefit humankind. Our business strategy is, to the extent
possible, finance our clinical development pipeline through revenue (cash
in-flows) generated through the marketing and sales of unique educational and
training services, animal health products and personalized cellular therapeutic
treatments.
A fundamental shift in
venture capital investment strategies where, management believes, financial
sponsorship is now directed toward commercial or near commercial enterprises
has required Bioheart to adapt its mission combining immediate revenue
generating opportunities with longer-term development programs. Accordingly, we
have developed a multifaceted portfolio of revenue generating products and
services in our US Stem Cell Training, Vetbiologics, and US Stem Cell Clinic,
operating divisions that will, if successful, financially support its clinical
development programs. Our goal is to maximize shareholder value through the
generation of short-term profits that increase cash in-flows and decrease the
need for venture financings a modern biotechnology company development
strategy.
Today, our company is a
combination of opportunistic business enterprises. We estimate that the products
and services we offer through US Stem Cell Training, Vetbiologics, and US Stem
Cell Clinics has the potential, although we cannot provide assurances as to if
and when it will be accomplished, to drive up to $100 million dollars in
cumulative peak annual revenues. What we are establishing is a foundation of
value in the products and services we are and plan to sell from US Stem Cell
Training, Vetbiologics, and US Stem Cell clinics. Our strategy is to expand the
revenues generated from each of these operating divisions and to reinvest the
profits we generate into our clinical development pipeline.
On January 29th,
2015 we announced an update and diversification of our clinical development
pipeline. Our cardiovascular and vascular product candidates have been
streamlined, putting, we believe, our best opportunities at the forefront of
our efforts. The MYOCELL and MYOCELL SDF-1 candidates will, in our opinion,
advance forward in the treatment of chronic heart failure (CHF). We are in
active prospective partnering discussion for the MYOCELL SDF-1 program.
Partnering, we contend, will enhance our capabilities, reduce our development
cost through cost sharing and potentially accelerate our time to approval and
commercialization. We will apply our ADIPOCELL technology to the treatment of
critical limb ischemia. Additionally, we have expanded and diversified our
clinical development pipeline to include autoimmune disease, specifically
applying ADIPOCELL to the treatment of Rheumatoid Arthritis (RA). We
believe that updating and diversifying our clinical development programs
increases the probability of our success, brings operational and fiscal clarity
to our company, and will ultimately enhance shareholder value.
28
We will continue to
evaluate and act upon opportunities to increase our top line revenue position
and that correspondingly increase cash in-flows. These opportunities include but
are not limited to the development and marketing of new products and services,
mergers and acquisitions, joint ventures, licensing deals and more.
Further, if the opportunity
presents itself whereby we can raise additional capital at a reasonable fair
market value, our management will do so. Accordingly, we plan to continue in our
efforts to restructure, equitize or eliminate legacy balance sheet issues that
are obstacles to market capitalization appreciation and capital fund
raising.
Results of Operations
Overview
We are a research and
development company and our MyoCell product candidate has not received
regulatory approval or generated any material revenues and is not expected to
until 2016, if ever. We have generated substantial net losses and negative cash
flow from operations since inception and anticipate incurring significant net
losses and negative cash flows from operations for the foreseeable future as we
continue clinical trials, undertake new clinical trials, apply for regulatory
approvals, make capital expenditures, add information systems and personnel,
make payments pursuant to our license agreements upon our achievement of certain
milestones, continue development of additional product candidates using our
technology, establish sales and marketing capabilities and incur the additional
cost of operating as a public company.
Three Months Ended March
31, 2015 as compared to the Three Months Ended March 31, 2014
Revenues
We recognized revenues of
$489,557 for the three months ended March 31, 2015, generated from the sales of
kits and equipment, services, MyoCath Catheters, AdipoCell, and laboratory
services. We recognize revenues of $392,174 for the three months ended March 31,
2014 from the sale of MyoCath catheters, AdipoCell, physician training, patient
studies and laboratory services. The increase in revenue resulted from the
growth of the sale of our products and 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.
Cost of sales was $247,624
and $164,048 in the three month periods ended March 31, 2015 and 2014,
respectively. Associated gross margins were $241, 933 (49.4%) and $228,126
(58.2%) for the three months periods ended March 31, 2015 and 2014,
respectively. The decrease in gross margin, quarter over quarter is attributed
to the mix of product sales and the testing of lower pricing models to attempt
to increase the volume of certain product and service sales.
Research and
Development
Our research and
development expenses consist of costs incurred in identifying, developing and
testing our products and services. Research and development expenses were
$50,145 in the three month period ended in March 31, 2015, an increase of
$40,288 from the research and development expenses of $9,857 in the three month
period ended in March 31, 2014. Our increase is proportionate to our increase
in management focus on research and development and its corresponding ongoing
costs. The timing and amount of our planned research and development
expenditures is dependent on our ability to obtain additional
financing.
29
Marketing, General
and Administrative
Our marketing, general and
administrative costs were $998,133 for the period ended March 31, 2015 compared
to $ 833,329 for the period ended March 31, 2014, an increase of $164,804. The
increase in costs primarily due to increases in salaries from $112,500 for the
three months ended March 31, 2014 to $177,376 for the current period, an
increase of $64,876, and our legal and consulting fees increased by $51,895 and
$45,880, respectively, due to additional services provided.
Our marketing, general and
administrative expenses primarily consist of the costs associated with our
general management and product and service marketing 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 awarding our common
stock, our Board of Directors considered a number of factors, including, but not
limited to:
● |
our financial position and historical financial
performance; |
● |
arms 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 by our shareholders on February 2, 2015, 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, subsequently increased to 100,000,000 on November 3,
2014. We currently have
89,500,000 available to future issuances.
Interest
Expense
Interest expense during the
three months ended March 31, 2015 was $429,842 compared to $305,898 three months
ended March 31, 2014. Interest expense 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 interest incurred
relating to our issued convertible notes payable. The debt discounts
amortization and non-cash interest incurred during the three months ended March
31, 2015 and 2014 was $320,373 and $258,361, respectively.
30
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
We recognize 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 managements 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. 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. We have 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.
Patent treatments and
laboratory services revenue are recognized when those services have been
completed or satisfied.
Revenues for bank sales are
accounted for as Multiple-Element Arrangements under ASC 605-10 which
incorporates Accounting Standards Codification subtopic 605-25, Multiple-Element
Arrangements (ASC 605-25). ASC 605-25 addresses accounting for arrangements
that may involve the delivery or performance of multiple products, services
and/or rights to use assets.
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.
31
Derivative financial
instruments
Accounting Standards
Codification subtopic 815-40, Derivatives and Hedging, Contracts in Entitys 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 March 31, 2015, three
customers represented 16%, 16% and 23%, aggregate of 55% of the Companys accounts receivable. As of December 31, 2014, two customers represented 38% and 17%,
aggregate of 55%, of the Companys accounts receivable.
Liquidity and Capital
Resources
In the three months ended
March 31, 2015, we continued to finance our considerable operational cash needs
with cash generated from financing activities.
Operating
Activities
Net cash used in operating
activities was $384,251 in the three month period ended March 31, 2015 as
compared to $257,762 of cash used in the three month period ended in March 31,
2014.
Our use of cash for
operations in the three months ended March 31, 2015 reflected a net loss
generated during the period of $1,048,217, adjusted for non-cash items such as
stock-based compensation of $194,936, depreciation of $1,301, amortization of
debt discounts of $231,795, and non-cash interest paid of $88,578, net with gain
on change in fair value of derivative liabilities of $122,724, net gain on
settlement of debt of $59,530 and income from investments of $3,966. In addition
we had a net increase in operating assets of $25,917 and an increase in accrued
expenses of $94,024,in accounts payable of $174,402 and deferred revenue of
$39,233.
Investing
Activities
Net cash used in investing
activities was $5,894 for the three months ended March 31, 2015 were to acquire
office equipment of $894 and additional investment of $5,000 as compared to nil
cash used for the same period of 2014.
Financing
Activities
Net cash provided by
financing activities was an aggregate of $424,445 in the three month period
ended March 31, 2015 as compared to $430,519 in the three month period ended in
March 31, 2014. In the three month period ended March 31, 2015 we sold, in
private placements, shares of common stock and common stock purchase warrants
for aggregate net cash proceeds of $299,848 and received proceeds from issuance
of note payable of $180,000 net with repayments of related party notes payable
of $55,403.
32
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 March 31, 2015, we had
cash and cash equivalents totaling $70,974. However our working capital deficit
as of such date was approximately $11 million. Our independent registered
public accounting firm has issued its report dated March 16, 2015 in connection
with the audit of our financial statements as of December 31, 2014 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 March 31, 2015
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.
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 Commissions 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.
Based on their evaluation,
as of March 31, 2015, our management has concluded that our disclosure controls
and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Securities
Exchange Act of 1934, as amended) are effective to provide reasonable assurance
that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded,
summarized, processed and reported within the time periods specified in the
SECs rules and forms and to provide reasonable assurance that such information
is accumulated and communicated to our management as appropriate to allow timely
decisions regarding required disclosure.
Changes In Internal
Control Over Financial Reporting
There were no changes in
the Companys internal controls over financial reporting during the most
recently completed fiscal quarter that have materially affected or are
reasonably likely to materially affect the Companys internal control over
financial reporting.
33
PART II OTHER
INFORMATION
Item 1. Legal
Proceedings
On November 10, 2014, the
Company was served with a lawsuit by an alleged assignee and a guarantor to a
Loan Guarantee, Payment and Security Agreement. These parties claim breach of
that Agreement and damages of approximately $2.3 Million plus interest. The
assignor and assignee also sued the Companys directors and two past directors
and an affiliate shareholder for breach of fiduciary duty, claiming damages as
alleged creditors arising out of these parties alleged participation in
Northstar Biotech Group, LLC, a secured creditor of the Company. Management recognizes that this lawsuit can divert managerial and financial resources, and, if
there is an adverse outcome, unfavorably affect our financial condition,
results of operations and stock price, but management believes the lawsuit is
without merit and will defend the lawsuit vigorously.
Apart from the above, 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 three months
ended March 31, 2015, the Company sold an aggregate of 1,443,656 shares of the
Companys common stock and common stock purchase warrants to purchase 1,443,656
shares of the Companys common stock for aggregate gross cash proceeds of
$16,270. The warrants are (i) exercisable solely for cash at an exercise price
of $0.01127 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.
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 March 31, 2015.
Item 4. Mine Safety
Disclosures
Not applicable.
Item 5. Other
Information
None
34
Item 6. Exhibits |
|
|
|
Exhibit No. |
|
Exhibit
Description |
3.1(6) |
|
Amended and Restated Articles of Incorporation
of the registrant, as amended |
3.2(9) |
|
Articles of Amendment to the Articles of
Incorporation of the registrant |
3.3(8) |
|
Amended and Restated Bylaws |
4.1(5) |
|
Loan
and Security Agreement, dated as of May 31, 2007 by and between BlueCrest
Capital Finance, L.P. and the registrant |
4.2(12) |
|
Notice of Event of Default, from BlueCrest
Venture Finance Master Fund Limited to the Company, dated January 28,
2009 |
4.3(12) |
|
Notice of Acceleration, from BlueCrest Venture
Finance Master Fund Limited to the Company, dated February 2,
2009 |
4.4(13) |
|
Amendment to Loan and Security Agreement,
between the Company and BlueCrest Venture Finance Master Fund Limited,
dated as of April 2, 2009 |
4.5(13) |
|
Grant of Security Interest (Patents), between
the Company and BlueCrest Venture Finance Master Fund Limited, dated as of
April 2, 2009 |
4.6(13) |
|
Security Agreement (Intellectual Property),
between the Company and BlueCrest Venture Finance Master Fund Limited,
dated as of April 2, 2009 |
4.7(13) |
|
Subordination Agreement, by Hunton &
Williams, LLP in favor of BlueCrest Venture Finance Master Fund Limited,
entered into and effective April 2, 2009 |
4.8(13) |
|
Amended and Restated Promissory Note, dated
April 2, 2009, by the Company to BlueCrest Venture Finance Master Fund
Limited |
4.9(13) |
|
Warrant to purchase 1,315,542 shares of the
registrants 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
registrants common stock, dated April 2, 2009, issued to Rogers
Telecommunications Limited |
4.11(14) |
|
Warrant to purchase 173,638 shares of the
registrants common stock, dated April 2, 2009, issued to Hunton &
Williams, LLP |
4.12(4) |
|
Warrant to purchase shares of the registrants
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 registrants
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 registrants
common stock issued to Samuel S. Ahn, M.D. |
4.23(7) |
|
Warrant to purchase shares of the registrants
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 |
35
4.32(35) |
|
Amendment to the Series A Convertible Preferred
Stock |
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. |
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 registrants common stock
issued to Howard J. Leonhardt and Brenda Leonhardt |
10.14(4) |
|
Warrant to purchase shares of the registrants 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 registrants 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. |
36
10.40(23) |
|
Form
of Subscription Agreement, executed November 30, 2010. |
10.41(23) |
|
Form
of Common Stock Purchase Warrant, issued November 30, 2010. |
10.42(23) |
|
Form
of Registration Rights Agreement, dated November 30, 2010. |
10.43(24) |
|
Unsecured Convertible Promissory Note for
$25,000, with Magna Group, LLC, dated January 3, 2011. |
10.44(24) |
|
Promissory Note for $139,728.82 with Magna
Group, LLC, dated January 3, 2011. |
10.45(24) |
|
Securities Purchase Agreement with Magna Group,
LLC, dated January 3, 2011. |
10.46(24) |
|
Subordination Agreement, dated January 3,
2011. |
10.47(24) |
|
Notice of Conversion Election, dated January 3,
2011. |
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 |
10.81(34) |
|
Securities Purchase Agreement, dated as of
October 7, 2014, by and between Magna Holdings I, LLC and Bioheart,
Inc. |
10.82(34) |
|
Registration Rights Agreement, dated as of
October 7, 2014, by and between Magna Holdings I, LLC and Bioheart,
Inc. |
10.83(34) |
|
Common Stock Purchase Agreement, dated as of
October 23, 2014, by and between Magna Equities II, LLC and Bioheart,
Inc. |
10.84(34) |
|
Registration Rights Agreement, dated as of
October 23, 2014, by and between Magna Equities II, LLC and Bioheart,
Inc. |
10.85**(35) |
|
2013
Omnibus Equity Compensation Plan Amendment One. |
21 |
|
Subsidiaries. |
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 |
37
* |
|
Filed herewith |
** |
|
Indicates management contract or compensatory
plan. |
(1) |
|
Incorporated by reference to the Companys 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 Companys Form S-1 filed with the SEC on June 5, 2007. |
(3) |
|
Incorporated by reference to Amendment No. 2 to
the Companys Form S-1 filed with the SEC on July 12, 2007. |
(4) |
|
Incorporated by reference to Amendment No. 3 to
the Companys Form S-1 filed with the SEC on August 9, 2007. |
(5) |
|
Incorporated by reference to Amendment No. 4 to
the Companys Form S-1 filed with the SEC on September 6,
2007. |
(6) |
|
Incorporated by reference to Amendment No. 5 to
the Companys Form S-1 filed with the SEC on October 1, 2007.
|
(7) |
|
Incorporated by reference to Post-effective
Amendment No. 1 to the Companys Form S-1 filed with the SEC on October
11, 2007. |
(8) |
|
Incorporated by reference to the Companys
Current Report on Form 8-K filed with the SEC on July 3,
2008. |
(9) |
|
Incorporated by reference to the Companys
Current Report on Form 8-K filed with the SEC on August 8, 2008.
|
(10) |
|
Incorporated by reference to the Companys
Quarterly Report on Form 10-Q filed with the SEC on August 14,
2008. |
(11) |
|
Incorporated by reference to the Companys
Quarterly Report on Form 10-Q filed with the SEC on November 14,
2008. |
(12) |
|
Incorporated by reference to the Companys
Current Report on Form 8-K filed with the SEC on February 3, 2009.
|
(13) |
|
Incorporated by reference to the Companys
Current Report on Form 8-K filed with the SEC on April 8,
2009. |
(14) |
|
Incorporated by reference to the Companys
Annual Report on Form 10-K filed with the SEC on April 15,
2009. |
(15) |
|
Incorporated by reference to the Companys
Annual Report on Form 10-K/A filed with the SEC on April 30,
2009. |
(16) |
|
Incorporated by reference to the Companys
Current Report on Form 8-K filed with the SEC on May 18,
2009. |
(17) |
|
Incorporated by reference to the Companys
Quarterly Report on Form 10-Q filed with the SEC on May 20,
2009. |
(18) |
|
Incorporated by reference to the Companys
Current Report on Form 8-K filed with the SEC on July 9,
2009. |
38
(19) |
|
Incorporated by reference to the Companys
Current Report on Form 8-K filed with the SEC on August 3,
2009. |
(20) |
|
Incorporated by reference to Exhibit 4.6 to the
Companys 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 Companys Current Report on Form 8-K filed with the SEC on October 6,
2010. |
(22) |
|
Incorporated by reference to the Companys
Current Report on Form 8-K filed with the SEC on October 29,
2010. |
(23) |
|
Incorporated by reference to the Companys
Current Report on Form 8-K filed with the SEC on December 6,
2010. |
(24) |
|
Incorporated by reference to the Companys
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 Companys
Quarterly Report on Form 10-Q filed with the Securities and Exchange
Commission on August 15. 2011 |
(28) |
|
Incorporated by reference to the Companys
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 Companys
Registration Statement on Form S-1/A filed with the SEC on December 12,
2014. |
(35) |
|
Incorporated by reference to the Companys
Definitive Proxy Statement on Schedule 14A filed with the SEC on December
19, 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 |
39
Pursuant to the requirements
of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
Bioheart, Inc. |
|
Date: May 05, 2015 |
By: |
/s/Mike Tomas |
|
|
Mike
Tomas |
|
|
Chief Executive Officer & |
|
|
President and Principal Financial |
|
|
and
Accounting Officer |
40
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
registrants 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 registrants 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 registrants internal control over financial
reporting that occurred during the registrants most recent fiscal
quarter (the registrants fourth fiscal quarter in the case of an annual
report) that has materially affected, or is reasonably likely to
materially affect, the registrants internal control over financial
reporting; and |
|
|
|
|
|
5. |
|
The
registrants other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrants auditors and the audit committee of the registrants
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 registrants 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 registrants internal control over financial
reporting. |
Date: May 05, 2015 |
|
|
|
|
/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 March 31, 2015 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: May 05, 2015 |
|
|
|
|
/s/ Mike Tomas |
|
Name: |
Mike Tomas |
|
|
President and Chief Executive
Officer Chief |
|
|
Financial Officer and Principal
Accounting |
|
|
Officer |
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