In September 2007, a member of the Company’s Board of Directors and two of the Company’s shareholders agreed to provide collateral valued at $750,000, $600,000 and $500,000, respectively, to secure the loan. The collateral provided by these new Guarantors fully replaced the collateral originally provided by one of the members of the Company’s Board of Directors and partially replaced the collateral originally provided by another member of the Company’s Board of Directors whose collateral now secures $400,000 of the loan. In consideration for providing the collateral, the Company issued to the new Guarantors warrants to purchase 3,250 shares of common stock at an exercise price of $7.69 per share for each $100,000 of principal amount of the loan guaranteed by such new Guarantor. The warrants have a ten-year term and became exercisable one year following the date the warrants were issued. Warrants to purchase an aggregate of 60,118 shares of the Company’s common stock were issued to the new Guarantors. These warrants had an aggregate fair value of $380,482, which was accounted for as additional paid in capital and reflected as a component of deferred loan costs and amortized as interest expense over the initial term of the loan using the effective interest method.
In accordance with the provisions of the warrants issued to the Guarantors, the aggregate number of shares of common stock underlying such warrants increased on September 30, 2007 as the Bank of America loan remained outstanding at that date. The additional 38,861 warrant shares had an aggregate fair value of $244,463. The portion of this amount attributed to the Guarantors that were replaced in September 2007 was accounted for as additional paid in capital and immediately recorded as interest expense with the remainder accounted for as additional paid in capital and reflected as a component of deferred loan costs and amortized as interest expense over the initial term of the loan using the effective interest method.
In October 2007, the Company’s Chief Technology Officer and his former spouse agreed to provide an additional $2.2 million limited personal guarantee of the loan and pledged securities accounts to backup this limited personal guarantee. The additional collateral provided by the Company’s Chief Technology Officer and his former spouse fully replaced the collateral provided by one of the original Guarantors. The Company’s Chief Technology Officer and his former spouse by then had personally guaranteed an aggregate of $3.3 million of the loan. The Company’s agreement with the Company’s Chief Technology Officer and his former spouse with respect to the additional collateral is substantially similar to the Company’s agreement with them in connection with the $1.1 million personal guarantee they originally provided in June 2007. In consideration for providing the collateral, the Company issued to the Company’s Chief Technology Officer and his former spouse, a warrant to purchase 81,547 shares of the Company’s common stock at an exercise price of $7.69 per share. The warrant has a ten-year term and became exercisable one year following the date the warrant was issued. The warrant had a fair value of $516,193, which was accounted for as additional paid in capital and reflected as a component of deferred loan costs and amortized as interest expense over the initial term of the loan using the effective interest method.
As a result of this replacement of the collateral originally provided by one of the original Guarantors in October 2007, the unamortized fair value of the warrant to purchase 81,548 shares of the Company’s common stock at an exercise price of $7.69 per share issued to that Guarantor was recorded as interest expense in October 2007. In October 2007, the Company cancelled the warrant previously issued to such original Guarantor, which warrant included the adjustment provisions discussed above, and, in exchange, issued to them a warrant to purchase 101,934 shares of the Company’s common stock at an exercise price of $7.69 per share, which new warrant does not contain the adjustment provisions discussed above. The additional 20,386 warrant shares had an aggregate fair value of $128,228, which was accounted for as additional paid in capital and immediately recorded as interest expense.
In accordance with the provisions of the warrants issued to the Guarantors, the aggregate number of shares of common stock underlying such warrants increased on June 1, 2008 as the Bank of America loan remained outstanding at that date. The additional 78,773 warrant shares had an aggregate fair value of $168,387. The portion of this amount attributed to the Guarantors that were replaced in September 2007 was accounted for as additional paid in capital and immediately recorded as interest expense with the remainder accounted for as
additional paid in capital and reflected as a component of deferred loan costs to be amortized as interest expense over the term of the loan using the effective interest method.
In accordance with the provisions of the warrants issued to the Guarantors, the aggregate number of shares of common stock underlying such warrants increased on June 1, 2009 as the Bank of America loan remained outstanding at that date and the Company had not reimbursed the Guarantors in full for payments made by them in connection with the loan. The additional 131,281 warrant shares had an aggregate fair value of $73,516.
In accordance with the provisions of the warrants issued to the Guarantors, the aggregate number of shares of common stock underlying such warrants increased on June 1, 2010 as the Bank of America loan remained outstanding at that date and the Company had not reimbursed the Guarantors in full for payments made by them in connection with the loan. The additional 239,392 warrant shares had an aggregate fair value of $111,790.
The amount of interest expense on the principal amount of the loan for the nine months ended September 30, 2010 and 2009 totaled approximately $56,600 and $103,000, respectively. Fees and interest earned by the Guarantors, which are recorded as interest expense, for the nine months ended September 30, 2010 and 2009 totaled approximately $184,801 and $379,000, respectively. Interest due on the principal amount of the loan has been paid by the Guarantors. As of September 30, 2010 and December 31, 2009, that amount totaled approximately $441,269 and $693,000, respectively, and was included in accrued expenses at those dates.
In March 2009, the Company’s Chief Technology Officer and his former spouse repaid $3.0 million of principal and a pro rata portion of accrued interest on behalf of the Company. The Company then owed this $3.0 million to the Company’s Chief Technology Officer and his former spouse. This liability was reflected on the Company’s consolidated balance sheet on a separate line titled “Subordinated related party loan.” This amount continued to accrue interest at an annual rate of 4.75%.
In February 2010 the Company’s Chief Technology Officer and his spouse filed for divorce papers. Pursuant to the divorce, their jointly owned shares and their ownership of the loan to Bioheart for which they hold as a result of their payment of $3 million of principal and related interest to Bank of America on behalf of Bioheart, would be divided equally between them. As a result, the Chief Technology Officer’s common shares were then reduced to 2,513,840 and his percentage shareholding of the Company to 13.8%, with his former spouse assuming ownership of the same number of common shares and percentage shareholding of the Company. Their commonly owned loan and related interest, as of March 29, 2010, of $4,140,201, was been equally split. The Chief Technology Officer on March 29, 2010, elected to convert his portion of the loan and related interest to restricted common stock and warrants. As a result, Howard Leonhardt, the Company’s Chief Technology Officer, as of September 30, 2010, owns approximately 18% of the Company.
In March of 2010, one of the Guarantors paid directly to Bank of America the $666,600 of principal that he had been guaranteeing, and a pro rata portion of accrued interest on behalf of the Company. That Guarantor agreed to accept from the Company the equivalent of his payment to Bank of America in restricted common stock and warrants. With his acceptance of the restricted common stock and warrants, the former Guarantor owned, at September 30, 2010, approximately 6% of the Company.
On July 16, 2010, the Company received a written notice of default under the Bank of America loan documents by reason of the Company’s failure to pay the loan in full at maturity on July 5, 2010 and failure to pay the extension fee of $30,000 by June 28, 2010, as required by the loan documents, as amended. The Company is engaged in discussions with the guarantors, who provided the loan collateral regarding a structuring of the indebtedness in the event Bank of America seeks recourse against the collateral and those guarantors, by reason of such action, become successors to Bank of America rights and interests under the Bank of America loan.
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As of September 30, 2010, the outstanding obligation to Bank of America was approximately $1.3 million plus interest.On October 25, 2010 the Company entered into a Loan Agreement with Seaside National Bank and Trust for a $980,000 loan that was used to refinance the Company’s loan with Bank of America. In addition, a member of the Company’s Board of Directors whom was also one of the guarantors of the Bank of America loan paid down the remaining debt of $367,244.
BlueCrest Capital Finance Note Payable
On June 1, 2007, the Company closed on a $5.0 million senior loan from BlueCrest Capital Finance, L.P. with a term of 36 months which bears interest at an annual rate of 12.85% (the “BlueCrest Loan”). The first three months required payment of interest only with equal principal and interest payments over the remaining 33 months. As consideration for the loan, the Company issued to BlueCrest Capital Finance, L.P. a warrant to purchase 65,030 shares of common stock at an exercise price of $7.69 per share. The warrant, which became exercisable one year following the date the warrant was issued, has a ten year term. This warrant had a fair value of $432,635, which was accounted for as additional paid in capital and reflected as a component of deferred loan costs and is being amortized as interest expense over the term of the loan using the effective interest method. The Company also paid the lender a fee of $100,000 to cover diligence and other costs and expenses incurred in connection with the loan. On August 31, 2007, BlueCrest Capital Finance, L.P. assigned its rights, liabilities, duties and obligations under the BlueCrest Loan and warrant to BlueCrest Venture Finance Master Fund Limited (“BlueCrest”).
The loan may be prepaid in whole but not in part. However, the Company is subject to a prepayment penalty equal to 3% of the outstanding principal if the BlueCrest Loan is prepaid during the first year of the loan, 2% of the outstanding principal if prepaid during the second year of the loan and 1% of the outstanding principal if prepaid during the third year of the loan. As collateral to secure its repayment obligations under the loan, the Company granted BlueCrest a first priority security interest in all of the Company’s assets, excluding intellectual property but including the proceeds from any sale of any of the Company’s intellectual property. The loan has certain restrictive terms and covenants including among others, restrictions on the Company’s ability to incur additional senior or pari-passu indebtedness or make interest or principal payments on other subordinate loans.
In the event of an uncured event of default under the loan, all amounts owed to BlueCrest are immediately due and payable and BlueCrest has the right to enforce its security interest in the assets securing the loan. During the continuance of an event of default, all outstanding amounts under the loan will bear interest (payable on demand) at an annual rate of the 14.85%. In addition, any unpaid amounts are subject, until paid, to a service charge in an amount equal to two percent (2%) of the unpaid amount. Events of default include, among others, the Company’s failure to timely make payments of principal when due, the Company’s uncured failure to timely pay any other amounts owing to BlueCrest under the loan, the Company’s material breach of the representations and warranties contained in the loan agreement and the Company’s default in the payment of any debt to any of its other lenders in excess of $100,000 or any other default or breach under any agreement relating to such debt, which gives the holders of such debt the right to accelerate the debt.
On January 2, 2009, the Company failed to make the monthly payment of principal and interest of approximately $181,000 due on such date. On January 28, 2009, the Company received from BlueCrest notice of this event of default (the “Default Notice”) under the BlueCrest Loan. By reason of the stated event, BlueCrest demanded payment of a 2% late fee of approximately $3,600, together with the principal and interest payment of approximately $181,000. On February 2, 2009, the Company received from BlueCrest notice of acceleration of the outstanding principal amount of the BlueCrest Loan and demanded repayment in full of all outstanding principal and accrued interest on the loan, including late fees, in the aggregate amount of $2,947,045. (The acceleration notice, together with the Default Notice, are referred to as the “Notices”).
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The Company and BlueCrest entered into an amendment to the BlueCrest Loan as of April 2, 2009 (the “ BlueCrest Loan Amendment”), that, among other things, includes BlueCrest’s agreement to forbear from exercising any of its rights or remedies regarding the defaults described in Notices (the “Forbearance”) as long as there are no new defaults under the BlueCrest Loan, as amended.
The BlueCrest Loan Amendment, (a) increases the amount of permitted unsecured indebtedness of the Company, (b) amended the amortization schedule for the Loan to provide for interest-only payments until July 1, 2009, at which time monthly principal and interest payments of $262,692 will commence, and (c) prohibits the Company from granting any lien against its intellectual property and grants to BlueCrest a lien against the Company’s intellectual property that will become effective in the event of a default. In addition, the Company issued BlueCrest a warrant to purchase 1,315,542 shares of the Company’s common stock at $0.53 per share.
In connection with the BlueCrest Loan Amendment the Company paid BlueCrest accrued interest in the aggregate amount of $126,077. The Company also paid BlueCrest a fee of $15,000.
Effective July 1, 2009, the Company and BlueCrest agreed to enter into an amendment to the BlueCrest Loan to amend the amortization schedule for the Loan to provide for interest-only payments until January 1, 2010, at which time monthly principal and interest payments of $139,728 will commence.
In connection with that Amendment the Company issued BlueCrest a warrant to purchase $600,000 of the Company’s common shares and paid a fee of $29,435.
Effective December 31, 2009, the Company and BlueCrest entered into an amendment to the BlueCrest Loan to amend the amortization schedule for the Loan to provide for interest-only payments until July 1, 2010, at which time monthly principal and interest payments of $139,728.82 will commence.
In connection with that Amendment, the Company issued BlueCrest a warrant to purchase $600,000 of the Company’s common shares and paid a fee of $20,000. The Company also provided BlueCrest with a lien on its intellectual property.
The amount of interest expense on the principal amount of the BlueCrest Loan for the nine months ended September 30, 2010 totaled approximately $276,671 and for the year ended December 31, 2009 the interest totaled approximately $378,231.
Short-term Note Payable
On August 20, 2008, the Company borrowed $1.0 million from a third party pursuant to the terms of an unsecured Promissory Note and Agreement. Outstanding principal and interest on the loan, which accrues at the rate of 13.5% per annum, is payable in one balloon payment upon the Company’s repayment of the BlueCrest Loan. In the event the Company completes a private placement of its common stock and/or securities exercisable for or convertible into its common stock which generates at least $19.0 million of gross proceeds, the Company may prepay, without penalty, all outstanding principal and interest due under the loan using the same type of securities issued in the subject private placement. Because repayment of the loan could occur within 12 months from the date of the balance sheet, the Company has classified this loan as short term. Subject to certain conditions, at the end of each calendar quarter during the time the loan is outstanding, the Company may, but is not required to, pay all or any portion of the interest accrued but unpaid as of such date with shares of its common stock.
The amount of interest expense on the principal amount of the loan accrued as of September 30, 2010 is $289,500. The Company has not paid any of the interest accrued to date under the Promissory Note and Agreement.
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6. | | Related Party Transactions |
The Company’s Chief Technology Officer has personally guaranteed the Company’s obligations under its lease for its facilities in Sunrise, Florida and has provided a personal guarantee for the Company credit card, which is for his use only.
In 2010, the Company entered into a research agreement with an entity controlled as of September 30, 2010 by a current director and a former director of the Company, with funding for the project emanating from venture capital funds controlled by the same two people. The director has since resigned from the Company’s Board of Directors. In connection with its funding of the REGEN trial, Ascent Medical Technology Fund II, LP, the Ascent Medical Technology Fund, LP, and Ascent Medical Product Development Centre Inc. are being issued a total of 1,044,451 shares of the Company’s common stock, and warrants to purchase 90,861 shares at exercise prices 20% above the price at which the related common will be issued.
In February 2010, the Company sold to four members of the Board of Directors, in a private placement, an aggregate of 121,450 shares of the Company’s common stock and warrants to purchase 36,435 shares of the Company’s common stock for aggregate gross cash proceeds of $70,441.
In February 2010 the Company’s Chief Technology Officer and his spouse filed for divorce. Pursuant to the divorce, their jointly owned shares and their ownership of the loan to Bioheart which they hold as a result of their payment of $3 million of principal and related interest to Bank of America on behalf of Bioheart, would be divided equally between them. As a result, the Chief Technology Officer’s common shares were then reduced to 2,513,840 and his percentage shareholding of the Company to 13.8%, with his former spouse assuming ownership of the same number of common shares and percentage shareholding of the Company. Their commonly owned loan and related interest, as of March 29, 2010, $4,140,201, was been equally split. The Chief Technology Officer on March 29, 2010, elected to convert his portion of the loan and related interest to restricted common stock and warrants. As a result, Howard Leonhardt, the Company’s Chief Technology Officer, owns approximately 18% of the Company as of September 30, 2010.
During the nine month period through September 2010 three Board Members and two Shareholders advanced the Company an aggregate of $776,246. As of October 22, 2010 the Company has received notice that three of the individuals which to convert an aggregate of $426,246 to equity in the Company. The Company has executed Promissory Notes for the remaining $350,000.
In September 2007, by way of a written consent, the Company’s shareholders holding a majority of its outstanding shares of common stock, the Company’s shareholders approved an amendment to Bioheart’s Articles of Incorporation, increasing the number of authorized shares of capital stock so that, following the reverse stock split that was effectuated on September 27, 2007, the Company had 50 million shares of common stock authorized with a par value of $0.001 per share and five million shares of preferred stock authorized with a par value of $0.001 per share.
As further discussed in Note 1, on February 22, 2008 the Company completed its IPO pursuant to which it sold 1,100,000 shares of common stock at a price per share of $5.25 for net proceeds of approximately $1.45 million after deducting underwriter discounts of approximately $400,000 and offering costs of approximately $3.92 million. The Consolidated Statement of Cash Flows for the year ended December 31, 2008 reflects the Company’s receipt of approximately $4.24 million of “Proceeds from (payments for) initial public offering of common stock, net”. The $4.24 million cash proceeds figure is approximately $2.79 million higher than the $1.45 million net proceeds figure identified above due to payment of $2.79 million of various offering expenses prior to January 1, 2008.
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On August 6, 2008, the Company amended its Articles of Incorporation to increase the number of authorized shares of its common stock from 50 million to 75 million shares. This amendment was approved by the Company’s shareholders at the Annual Meeting of Shareholders held on July 30, 2008.
In the nine month period ended September 30, 2010, the Company sold in a private placement to accredited investors an aggregate of 8,731,085 shares of its common stock and warrants to purchase 2,221,232 shares of its common stock for aggregate gross cash proceeds of approximately $1,143,065. The warrants are (i) exercisable solely for cash at a weighted average exercise price of $ 0.69 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time and from time to time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance.
In December 2009, the Company also sold in a private placement to accredited investors an aggregate of 255,830 shares of its common stock and warrants (the “Warrants”) to purchase 76,749 shares of its common stock for aggregate gross cash proceeds of approximately $188,996. The Warrants are (i) exercisable solely for cash at a weighted average exercise price of $0.89 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time and from time to time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance.
In 2009, the Company also sold in a private placement to accredited investors, initiated in 2008, an aggregate of 2,509,480 shares of its common stock and warrants (the “Warrants”) to purchase 752,844 shares of its common stock for aggregate gross cash proceeds of approximately $1,74 million. The Warrants are (i) exercisable solely for cash at a weighted average exercise price of $0.83 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time and from time to time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance. In connection with the private placement, the Company paid to a finder who introduced certain investors to the Company aggregate cash fees of $17,856 and warrants to purchase 26,592 shares of common stock at a weighted average exercise price of $0.89 per share. The warrants issued to the finder have the same terms and conditions as the Warrants issued in the private placement. The 2008 PIPE was closed on October 31, 2009, with total capital raised of $3,887,032.
In 2008, the Company also sold, in a private placement to accredited investors, an aggregate of 1,230,280 shares of its common stock and warrants (the “Warrants”) to purchase 369,084 shares of its common stock for aggregate gross cash proceeds of approximately $2.14 million. The Warrants are (i) exercisable solely for cash at a weighted average exercise price of $2.09 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time and from time to time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance. In connection with the private placement, the Company paid to a finder who introduced certain investors to the Company aggregate cash fees of $24,325 and warrants to purchase 24,325 shares of common stock at a weighted average exercise price of $1.95 per share. The warrants issued to the finder have the same terms and conditions as the Warrants issued in the private placement.
In 2007, the Company sold 529,432 shares of common stock at a price of $7.69 per share to various investors for net proceeds of approximately $3.9 million.
In 2006, the Company sold 1,069,699 shares of common stock at a price of $7.69 per share to accredited investors. The Company also issued 63,566 shares in exchange for services at a price ranging from $5.67 to $7.69 per share.
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In 2005, the Company sold 1,994,556 shares of common stock at a price of $5.67 per share to accredited investors. The Company also issued 1,210 shares in exchange for services and issued 95,807 shares in exchange for debt at a price of $5.67 per share.
In 2004, the Company sold 808,570 shares of common stock at a price of $5.67 per share to accredited investors. The Company also issued 1,854 shares to various vendors in exchange for services valued at $10,500. The Company also issued 15,150 shares to the Company’s Chief Science and Technology Officer as compensation for services valued at $85,830.
In March 2003, the Company effected a recapitalization. The recapitalization provided two shares of common stock for every one share issued as of that date. The Company’s Chief Technology Officer and founding shareholder, who owned 4,405,541 shares of common stock, did not participate in the recapitalization. The number of shares and prices per share in the accompanying financial statements has been retroactively adjusted to reflect the effect of the recapitalization.
After the 2003 recapitalization, the Company sold 561,701 shares of common stock at a price of $5.67 per share to accredited investors. The Company issued 72,980 shares valued at $416,383 to employees as compensation for services related to the closing of various locations. The Company also issued 4,248 shares to various vendors in exchange for services valued at $24,066 and issued 67,073 shares to the Company’s Chief Technology Officer as compensation for services provided to the Company during 2003 and 2002.
In 2002, the Company sold 1,092,883 shares of common stock at a price of $6.47 per share to accredited investors. The Company also issued 35,137 shares to various vendors in exchange for services valued at $227,503.
In 2001, the Company sold 985,668 shares of common stock at a price of $6.47 per share to accredited investors. The Company also issued 8,291 shares to various vendors in exchange for services valued at $54,001 and issued 81,084 shares to the Company’s Chief Technology Officer as compensation for services provided to the Company during 2001.
In 2000, the Company sold 1,493,575 shares of common stock at a price of $6.47 per share to accredited investors. Of the 1,493,575 shares sold in 2000, payment on 77,222 of these shares was not received until January 2001. The Company also issued 7,964 shares to various vendors in exchange for services valued at $52,001.
In 1999, the Company’s Chief Technology Officer purchased 4,324,458 shares of common stock from the company for $400,000.
8. | | Stock Options and Warrants |
Stock Options
In July 2008, the Board of Directors approved, subject to shareholder approval, the establishment of the Bioheart Omnibus Equity Compensation Plan (the “Omnibus Plan”). The establishment of the Omnibus Plan was approved by the Company’s shareholders at the Annual Meeting of Shareholders held on July 30, 2008. Pursuant to the Omnibus Plan, the Company may grant restricted stock, incentive stock options, non-statutory stock options, stock appreciation rights, deferred stock, stock awards, performance shares, and other stock-based awards consisting of cash, restricted stock or unrestricted stock in various combinations to the Company’s employees, directors and consultants. 5,000,000 shares of common stock have been reserved for issuance under the Omnibus Plan. As of December 31, 2008, no instruments had been issued under the Omnibus Plan.
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In December 1999, the Company adopted two stock option plans; an employee stock option plan and a directors and consultants stock option plan (collectively referred to as the “Stock Option Plans”), under which a total of 1,235,559 shares of common stock were reserved for issuance upon exercise of options granted by the Company. In 2001, the Company amended the Stock Option Plans to increase the total shares of common stock reserved for issuance to 1,698,894. In 2003, the Company approved an increase of 308,890 shares, making the total 2,007,784 shares available for issuance under the Stock Option Plans. In 2006, the Company approved an increase of 1,081,114 shares, making the total 3,088,898 shares available for issuance under the Stock Option Plans. The Stock Option Plans provide for the granting of incentive and non-qualified options. The terms of stock options granted under the Stock Option Plans are determined by the Compensation Committee of the Board of Directors at the time of grant, including the exercise price, vesting provisions and contractual term of such options. The exercise price of incentive stock options must equal at least the fair value of the common stock on the date of grant, and the exercise price of non-qualified stock options may be no less than the per share par value. The options have terms of up to ten years after the date of grant and become exercisable as determined upon grant, typically over either three or four year periods from the date of grant. Certain outstanding options vested over a one-year period and some vested immediately. On February 24, 2010, by way of a written consent, the Company’s Board of Directors amended the Directors and Consultants 1999 Stock Option Plan to extend the termination date of the Plan to December 1, 2011.
A summary of options at September 30, 2010 and activity during the nine-month period then ended is presented below:
| | | | Shares
| | Weighted-
Average
Exercise
Price
| | Weighted-
Average
Remaining
Contractual
Term (in years)
| | Aggregate
Intrinsic
Value
|
|---|
| Options outstanding at January 1, 2010 | | | | | 2,119,431 | | | $ | 3.28 | | | | | | | | | |
| Granted | | | | | 1,533,630 | | | $ | 0.36 | | | | | | | | | |
| Exercised | | | | | 600,216 | | | $ | 0.001 | | | | | | | | | |
| Forfeited | | | | | 753,532 | | | $ | 2.41 | | | | | | | | | |
| Options outstanding at September 30, 2010 | | | | | 2,299,313 | | | $ | 2.84 | | | | 6.6 | | | | 0 | |
| Options exercisable at September 30, 2010 | | | | | 1,547,990 | | | $ | 3.89 | | | | 5.3 | | | | 0 | |
| Available for grant at September 30, 2010 | | | | | 517,376 | | | | | | | | | | | | | |
The aggregate intrinsic value represents the amount by which the fair market value of the Company’s common stock exceeds the exercise price of options at September 30, 2010. The weighted average fair value of options granted in the nine-month periods ended September 30, 2010 and 2009 was $0.46 and $0.55 per share, respectively. The total intrinsic value of options exercised in the nine month periods ended September 30, 2010 was $382,588.
For the nine month period ended September 30, 2010, the Company recognized $141,894 in stock based compensation expense. This amount consisted of $79,965 in stock-based compensation that was included in research and development expenses and $61,929 that was included in marketing, general and administrative expenses.
For the three month period ended September 30, 2010, the Company recognized $47,298 in stock based compensation expense. This amount consisted of $26,655 in stock-based compensation that was included in research and development expenses and $20,643 that was included in marketing, general and administrative expenses. No tax benefits were attributed to the stock-based compensation expense because a valuation allowance was maintained for all net deferred tax assets. The Company elected to adopt the alternative method
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of calculating the historical pool of windfall tax benefits as permitted by ASC Topic 718, formerly FSP No. SFAS 123R-c,Transition Election Related to Accounting for the Tax Effects of Share-Based Payment Awards. This is a simplified method to determine the pool of windfall tax benefits that is used in determining the tax effects of stock compensation in the results of operations and cash flow reporting for awards that were outstanding as of the adoption of ASC Topic 718, formerly SFAS No. 123R.
The following information applies to options outstanding and exercisable at September 30, 2010:
| | | | Options Outstanding
| | Options Exercisable
| |
|---|
| | | | Shares
| | Weighted-
Average
Remaining
Contractual
Term
| | Weighted-
Average
Exercise
Price
| | Shares
| | Weighted-
Average
Exercise
Price
|
|---|
| $0.001–$0.70 | | | | | 829,398 | | | | 9.5 | | | $ | 0.57 | | | | 250,000 | | | $ | 0.68 | |
| $0.71–$1.28 | | | | | 474,666 | | | | 6.6 | | | $ | 0.83 | | | | 316,991 | | | $ | 0.83 | |
| $5.25–$5.67 | | | | | 948,881 | | | | 4.1 | | | $ | 5.58 | | | | 934,631 | | | $ | 5.59 | |
| $7.69 | | | | | 39,572 | | | | 5.9 | | | $ | 7.69 | | | | 39,572 | | | $ | 7.69 | |
| $8.47 | | | | | 6,796 | | | | 6.5 | | | $ | 8.47 | | | | 6,796 | | | $ | 8.47 | |
| | | | | | 2,299,313 | | | | 6.6 | | | $ | 2.84 | | | | 1,547,990 | | | $ | 3.89 | |
The Company uses the Black-Scholes valuation model to determine the fair value of options on the date of grant. This model derives the fair value of options based on certain assumptions related to expected stock price volatility, expected option life, risk-free interest rates and dividend yield. The Company’s expected volatility is based on the historical volatility of other publicly traded development stage companies in the same industry. Prior to January 1, 2008, the Company estimated the expected term for stock option grants by review of similar data from a peer group of companies. The Company adopted SAB 110 effective January 1, 2008 and will apply the simplified method in SAB 107 until enough historical experience is readily available to provide a reasonable estimate of the expected term for stock option grants. The risk-free interest rate assumption is based upon the U.S. Treasury yield curve appropriate for the term of the expected life of the options.
For the nine-month periods ended September 30, 2010 and 2009, the fair value of each option grant was estimated on the date of grant using the following weighted-average assumptions.
| | | | For the Nine Months ended
September 30,
| |
|---|
| | | | 2010
| | 2009
|
|---|
| Expected dividend yield | | | | | 0.0 | % | | | 0.0 | % |
| Expected price volatility | | | | | 187 | % | | | 104 | % |
| Risk free interest rate | | | | | 2.75 | % | | | 2.43 | % |
| Expected life of options in years | | | | | 4 | | | | 6.8 | |
During the nine-month period ended September 30, 2010, the Company issued options to purchase an aggregate of 1,533,630 shares of its common stock at a weighted average exercise price of $0.36 per share. These options consisted of the following:
| • | | stock options to purchase an aggregate of 307,692 shares of common stock at an exercise price of $0.001 per share issued to a related party as discussed in Note 6. The options vested immediately upon issuance and will expire on the tenth anniversary of the issuance date. |
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| • | | stock options to purchase an aggregate of 292,524 shares of common stock at an exercise price of $0.001 per share issued to Consultants. The options vested immediately upon issuance and will expire on the tenth anniversary of the issuance date. |
| • | | stock options to purchase an aggregate of 250,000 shares of common stock at an exercise price of $0.68 per share issued to certain members of the Company’s Board of Directors. The options vested immediately upon issuance and will expire on the tenth anniversary of the issuance date. |
| • | | stock option to purchase 50,000 shares of common stock at an exercise price of $0.92 per share issued to certain members of the Company’s Board of Directors. The options vested immediately upon issuance and will expire on the tenth anniversary of the issuance date. |
| • | | stock options to purchase an aggregate of 133,414 shares of common stock at an exercise price of $0.68 per share issued to employees. The options vest in 4 equal annual installments, commencing one month after the date of grant, and will expire on the tenth anniversary of the issuance date. |
| • | | stock options to purchase 500,000 shares of common stock at an exercise price of $0.50 per share issued to an employee. The options vest in 4 equal annual installments, commencing one year after the date of grant, and will expire on the tenth anniversary of the issuance date. |
In its meeting of August 17, 2009, the Board of Directors approved the repricing of current employees’ stock options (other than Executive Officers). In accordance with regulations concerning such a repricing and in conformance with generally accepted procedures, all options granted before August 12, 2008, were repriced on the basis of the 5-day average closing price of BHRT, during the period of August 11 through August 17, 2009.
The following information applies to the repricing which occurred as of October 8, 2009.
Original Exercise
Price | | | | New Exercise
Price | | Number of shares
underlying
Options |
|---|
| $1.28 | | | | $0.71 | | | 61,778 | |
| $4.11 | | | | $0.71 | | | 10,000 | |
| $5.67 | | | | $0.71 | | | 409,144 | |
| $7.69 | | | | $0.71 | | | 12,851 | |
| $8.47 | | | | $0.71 | | | 38,163 | |
| | | | | | | | 531,936 | |
Of those options listed above, 61,778 expired in December 2009 without having been exercised, 308,891 expired in March 2010 without having been exercised, 959 expired in August 2010 without having been exercised and 18,844 expired in September 2010 without having been exercised.
Warrants to Purchase Common Stock
The Company does not have a formal plan in place for the issuance of common stock purchase warrants. However, at times, the Company will issue warrants to non-employees or in connection with financing transactions. The exercise price, vesting period, and term of these warrants is determined by the Company’s Board of Directors at the time of issuance. A summary of warrants at September 30, 2010 and activity during the nine-month period then ended is presented below:
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| | | | Shares
| | Weighted-
Average
Exercise
Price
| | Weighted-
Average
Remaining
Contractual
Term (in
years)
| | Aggregate
Intrinsic
Value
|
|---|
| Outstanding at January 1, 2010 | | | | | 7,355,057 | | | $ | 3.06 | | | | | | | | | |
| Issued | | | | | 2,719,927 | | | $ | 1.65 | | | | | | | | | |
| Exercised | | | | | 0 | | | $ | 0.00 | | | | | | | | | |
| Forfeited | | | | | 128,040 | | | $ | 0.74 | | | | | | | | | |
| Outstanding at September 30, 2010 | | | | | 9,946,944 | | | $ | 2.70 | | | | 7.2 | | | | 11,913 | |
| Exercisable at September 30, 2010 | | | | | 7,008,715 | | | $ | 2.01 | | | | 5.4 | | | | 0 | |
The Company uses the Black-Scholes valuation model to determine the fair value of warrants on the date of issuance. The Company’s expected volatility is based on the historical volatility of other publicly traded development stage companies in the same industry. The expected life of the warrants is based primarily on the contractual life of the warrants. The risk-free interest rate assumption is based upon the U.S. Treasury yield curve appropriate for the term of the expected life of the warrants.
The Company did not issue any warrants that require Fair Value Calculation during the quarter ended September 30, 2010. For the period ended September 30, 2009, the fair value of warrants issued in transactions that resulted in the recognition of expense, was estimated on the date of issuance using the following weighted-average assumptions.
| | | | For the Nine Month Period
ended September 30,
| |
|---|
| | | | 2010
| | 2009
|
|---|
| Expected dividend yield | | | | | n/a | | | | 00.0 | % |
| Expected price volatility | | | | | n/a | | | | 75 | % |
| Risk free interest rate | | | | | n/a | | | | 3.3 | % |
| Expected life of options in years | | | | | n/a | | | | 5.1 | |
The following information applies to warrants outstanding and exercisable at September 30, 2010:
| | | | Warrants Outstanding
| | Warrants Exercisable
| |
|---|
| | | | Shares
| | Weighted-
Average
Remaining
Contractual
Term
| | Weighted-
Average
Exercise
Price
| | Shares
| | Weighted-
Average
Exercise
Price
|
|---|
| $0.01–$0.50 | | | | | 170,180 | | | | 3.0 | | | $ | 0.18 | | | | — | | | | — | |
| $0.52–$0.68 | | | | | 3,776,909 | | | | 6.8 | | | $ | 0.59 | | | | 3,668,111 | | | $ | 0.59 | |
| $0.70–$1.62 | | | | | 2,649,454 | | | | 4.5 | | | $ | 0.79 | | | | 1,534,653 | | | $ | 0.83 | |
| $1.81–$2.61 | | | | | 427,119 | | | | 1.1 | | | $ | 2.07 | | | | 427,119 | | | $ | 2.07 | |
| $3.60–$4.93 | | | | | 105,000 | | | | 2.9 | | | $ | 4.87 | | | | 105,000 | | | $ | 4.87 | |
| $5.67–$7.69 | | | | | 2,818,282 | | | | 11.7 | | | $ | 7.50 | | | | 1,273,832 | | | $ | 7.26 | |
| | | | | | 9,946,944 | | | | 7.2 | | | $ | 2.70 | | | | 7,008,715 | | | $ | 2.01 | |
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| • | | During the nine month period ended September 30, 2010, the Company issued warrants to purchase an aggregate of 2,349,254 shares of its common stock at a weighted average exercise price of $0.69 per share. These warrants were issued in connection with a private placement. The warrant vests six months following issuance and expires on the third year anniversary of the date of issuance. |
| • | | During the nine month period ended September 30, 2010 the Company recognized issuance of warrants to purchase an aggregate of 370,673 shares of its common stock at a weighted average exercise price of $7.69 per share. These warrants were issued in connection with the guarantee of the Bank of America Loan — See,Bank of America Note Payable, in Note 5, Notes Payable, Notes to Consolidated Interim Financial Statements |
The Company is not subject to any legal proceedings.
The Company believes that it may have issued options to purchase common stock to certain of its employees, directors and consultants in California in violation of the registration or qualification provisions of applicable California securities laws. As a result, the Company intends to make a rescission offer to these persons. The Company will make this offer to all persons who have a continuing right to rescission, which it believes to include two persons. In the rescission offer, in accordance with California law, the Company will offer to repurchase all unexercised options issued to these persons at 77% of the option exercise price multiplied by the number of option shares, plus interest at the rate of 7% from the date the options were granted. Based upon the number of options that were subject to rescission as of December 31, 2009, assuming that all such options are tendered in the rescission offer, the Company estimated that its total rescission liability would be up to approximately $371,000. However, as the Company believes there is only a remote likelihood the rescission offer will be accepted by any of these persons in an amount that would result in a material expenditure by the Company, no liability was recorded as of September 30, 2010 or December 31, 2009.
11. | | Supplemental Disclosure of Cash Flow Information |
During the nine months ended September 30, 2010 and December 31, 2009, the Company issued warrants in connection with the renewal of the BlueCrest loan with an aggregate fair value of $687,677 and $1,580,575, respectively.
During the nine month period ended September 30, 2010 the Company recognized issuance of warrants in connection with the guarantee of the Bank of America Loan with an aggregate fair value of $185,306.
For the nine months ended September 30, 2010 the Company issued Common Stock in connection with the settlement of Accounts Payable with an aggregate value of $133,594.
For the nine months ended September 30, 2010 the Company issued Common Stock in connection with amount due to loan guarantor for payment of $666,600 to Bank of America.
For the nine months ended September 30, 2010 the Company issued Common Stock in connection with payment of the subordinated related party loan for $1,500,000.
For the nine months ended September 30, 2010 the Company issued Common Stock in connection with the payment of accrued interest and loans fees due to Bank of America loan guarantors for $798,770.
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12. Subsequent Events
Private Placement — Common Stock and Warrants
During the nine month period ended September 30, 2010, the Company sold, an aggregate of 8,731,085 shares of the Company’s common stock and warrants to purchase 2,221,232 shares of the Company’s common stock for aggregate gross cash proceeds of $1,199,651. The warrants are (i) exercisable solely for cash at an exercise price of $0.18 to $0.84 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance.
During October 2010, the Company sold, an aggregate of 520,620 shares of the Company’s common stock and warrants to purchase 260,310 shares of the Company’s common stock for aggregate gross cash proceeds of $78,093. The warrants are (i) exercisable solely for cash at an exercise price of $0.18 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance.
Defaults Upon Senior Securities
On July 16, 2010, the Company received a written notice of default under the Bank of America loan documents by reason of the Company’s failure to pay the loan in full at maturity on July 5, 2010 and failure to pay the extension fee of $30,000 by June 28, 2010, as required by the loan documents, as amended. On October 25, 2010 the Company entered into a Loan Agreement with Seaside National Bank and Trust for a $980,000 loan that was used to refinance the Company’s loan with Bank of America. In addition, a member of the Company’s Board of Directors whom was also one of the guarantors of the Bank of America loan paid down the remaining debt of $367,244. See,Bank of America Note Payable, in Note 5, Notes Payable, Notes to Consolidated Interim Financial Statements.
Other Information
On October 26, 2010, Bioheart, Inc. (the “Company”) received a written notice of termination of Customer Agreement and Distribution Agreement, dated as of March 15, 2007 and December 12, 2006 respectively (as amended from time to time, the “TGI Agreements”), between Tissue Genesis Incorporated and the Company. The notice stated that it is being given as a result of breach of the payment obligations under the agreement. The letter also indicated that Tissue Genesis Incorporated was open to discussing collaborations with the Company in the future.
On October 28, 2010, the Company received a letter from Karl E. Groth, Ph.D. resigning as a Director and as the Chairman of the Board of Directors. His resignation did not indicate as a reason any dispute with the Board of Directors, or the management of the Company and a copy of this current report on Form 8-K was furnished to the director for review prior to its filing.
On November 2, 2010, the Board of Directors of Bioheart, Inc. (the “Company”) appointed William P. Murphy, Jr., M.D. as the Company’s Chairman of the Board. Dr. Murphy has served as a member of the Company’s Board of Directors since June 2003. Dr. Murphy’s experience in the healthcare industry and medical background together with his experience serving on the Company’s Board of Directors makes him well-qualified to serve as Chairman of the Board of Directors.
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Item 2. | | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Unless otherwise indicated, references in this Quarterly Report on Form 10-Q to “we,” “us,” and “our” are to the Company. The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our unaudited consolidated interim financial statements and the accompanying related notes included in this quarterly report and our audited consolidated financial statements and related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K and on Form 10-K/A for the year ended December 31, 2009 filed with the Securities and Exchange Commission.
Cautionary Statement Regarding Forward-Looking Statements
This report may contain forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act, and we intend that such forward-looking statements be subject to the safe harbors created thereby. These forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. Any such forward-looking statements would be contained principally in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors.” Forward-looking statements include information concerning our possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities and the effects of regulation. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “hopes,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “will,” “would” or similar expressions.
Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss many of these risks in greater detail in “Risk Factors.” Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits to the report completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.
Additional information concerning these and other risks and uncertainties is contained in our filings with the Securities and Exchange Commission, including the section entitled “Risk Factors” in our Annual Report on Form 10-K and on Form 10-K/A for the year ended December 31, 2009.
Our Ability To Continue as a Going Concern
Our independent registered public accounting firm has issued its report dated, March 31, 2010, in connection with the audit of our financial statements as of December 31, 2009, that included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern. Our consolidated financial statements as of September 30, 2010 have been prepared under the assumption that we will continue as a going concern. If we are not able to continue as a going concern, it is likely that holders of our common stock will lose all of their investment. Our financial statements do not include any adjustments that might result from the outcome of this uncertainty.
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Overview
We are committed to maintaining a leading position within the cardiovascular sector of the cell technology industry, delivering cell therapies, intelligent devices and biologics that help address congestive heart failure, lower limb ischemia, chronic heart ischemia, acute myocardial infarctions and other issues. We work to prevent the worsening of heart failure conditions with devices that monitor and diagnose. Our goals are to cause damaged tissue to be regenerated, if possible, and to improve a patient’s quality of life and reduce health care costs and hospitalizations.
Biotechnology Product Candidates
Specific to biotechnology, we are focused on the discovery, development and, subject to regulatory approval, commercialization of autologous cell therapies for the treatment of chronic and acute heart damage and peripheral vascular disease. MyoCell is a clinical muscle-derived cell therapy designed to populate regions of scar tissue within a patient’s heart with new living cells for the purpose of improving cardiac function in chronic heart failure patients. Our most recent clinical trials of MyoCell include the MARVEL trial, a phase II/III US trial, the SEISMIC Trial, a completed 40-patient, randomized, multicenter, controlled, Phase II-a study conducted in Europe and the MYOHEART Trial, a completed 20-patient, multicenter, Phase I dose-escalation trial conducted in the United States. We were approved by the U.S. Food and Drug Administration (the “FDA”) to proceed with a 330 patient, multicenter Phase II/III trial of MyoCell in North America and Europe (the “MARVEL Trial”). We completed the MyoCell implantation procedure on the first patient in the MARVEL Trial on October 24, 2007. Thus far, 20 patients, including 6 control patients, have been treated. Initial results for the 20 patients were released at the Heart Failure Society of American meeting in October, 2009, showing a dramatic (35%) improvement in 6 minute walk distance for those patients who were treated, and less distance from baseline for those who received a placebo. We are planning, on the basis of these results, to ask the FDA to consider the MARVEL Trial a pivotal trial (pivotal from Phase II to Phase III) and to reduce the number of patients in the trial to 150 from 330. The SEISMIC, MYOHEART and MARVEL Trials have been designed to test the safety and efficacy of MyoCell in treating patients with severe, chronic damage to the heart. Upon regulatory approval of MyoCell or MyoCell SDF-1, our second generation therapy, discussed below, we intend to generate revenue in the United States from the sale of cell-culturing services for treatment of patients by qualified physicians. Abroad, we are identifying centers where it is acceptable to use the MyoCell and MyoCell SDF-1 treatments so that patients with this problem can have access to treatment.
We received approval from the FDA in July of 2009 to conduct a Phase I safety study on 15 patients of a combined therapy (Myocell with SDF-1), the first approval of a study combining gene and cell therapies. Work commenced on this study, called the REGEN trial, during the first quarter of 2010. Based on the results of the trial, we intend to either incorporate the combination treatment into the MARVEL trial, or continue with the MARVEL trial based on the use of MyoCell alone.
In our pipeline, we have multiple product candidates for the treatment of heart damage, including an autologous, adipose cell treatment for heart damage and MyoCell® SDF-1. Tissue Genesis, Inc., the entity from whom we have obtained the worldwide right to sell or lease the TGI 1200TM adipose tissue processing system announced on November 13, 2008 that the TGI 1200TM had been certified with a CE Marking, thus making the system available throughout the European marketplace. We understand that Tissue Genesis is in the process of evaluating the regulatory pathway that should be pursued for the TGI 1200TM device. We hope to demonstrate that our various product candidates are safe and effective complements to existing therapies for chronic and acute heart damage as well as peripheral arterial disease.
MyoCath
The MyoCath was developed by Bioheart co-founder Robert Lashinski specifically for delivering new cells to damaged tissue. It is a deflecting tip needle injection catheter that has a larger needle which is 25
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gauge for better flow rates and less leakage than systems that are 27 gauge. This larger needle allows for thicker compositions to be injected which helps with cell retention in the heart. Also, the MyoCath needle has more fluoroscopic brightness than the normally used nitinol needle, enabling superior visualization during the procedure. Seeing the needle well during injections enables the physician who is operating the catheter to pinpoint targeted areas more precisely, thus improving safety. The MyoCath competes well with other biological delivery systems on price and efficiency and allows the physician to utilize standard fluoroscopy and echo equipment found in every cath lab. The MyoCath is used to inject cells into cardiac tissue in therapeutic procedures to treat chronic heart ischemic and congestive heart failure. As of September 30, 2010 all finished goods inventory of MyoCath had expired. The Company is considering several contract manufacturers to produce additional inventory.
Center of Excellence Program
On March 23, 2010, the Company announced plans for establishing five Centers of Excellence in Latin America to provide its cell therapy procedures to patients suffering from congestive heart failure (CHF) and peripheral arterial disease (PAD). Bioheart entered into its first agreement with a leading treatment facilitator, Regenerative Medicine Institute of Tijuana, Mexico. Therapies for CHF and PAD patients will be made available at the Hospital Angeles Tijuana, a fully equipped state-of-the-art private specialties hospital. This is the first of five Centers of Excellence with four additional Centers to be announced in the coming months
On April 14, 2010, the Company announced that treatment with stem cell therapy on two congestive heart failure (CHF) patients was performed successfully at the Hospital Angeles Tijuana, Mexico, through Bioheart’s Center of Excellence program with Regenerative Medicine Institute.
In August of 2010, the Company announced that stem cell treatments and 3 month follow up on the first two congestive heart failure patients have been performed successfully. To date, four patients have been treated utilizing an autologous, adipose tissue-derived cell treatment. Two of the patients have completed the 3-month follow-up testing. Significant improvements were seen in both the 6-minute walk as well as the left ventricular ejection fraction (LVEF). The first patient improved his walking distance from 315 to 420 meters and LVEF from 32% to 38%. The second patient improved his walking distance from 450 to 492 meters and LVEF from 40% to 55%.
Intelligent Devices — Distribution Agreements
Effective as of April 3, 2008, we entered into a distribution agreement with RTX Healthcare A/S (Denmark) (“RTX”) pursuant to which we secured worldwide, non-exclusive distribution rights to the Bioheart 3370 Heart Failure Monitor, an interactive and simple-to-use at-home intelligent device designed specifically to improve available healthcare to patients outside hospitals who are suffering from heart failure. The device, manufactured by RTX, has 510(k) market clearance from the U.S. Food and Drug Administration for marketing in the United States and CE mark approval for marketing in Europe and other countries that follow this mark. The compact Bioheart 3370 Heart Failure Monitor engages patients through personalized daily interactions and questions, while collecting vital signs and transmitting the information directly into a database. The data are regularly monitored by a remotely located medical professional, who watches for any abnormal readings that may signal a change in the patient’s health status. These changes are reported back to the treating physician. We do not have any minimum purchase commitment under the agreement. However, the per unit purchase price payable by us is inversely related to the number of units we purchase per annum. The distribution agreement has an initial term of two years and is subject to automatic renewal for additional one-year periods unless either party indicates an intent to terminate the agreement prior to the end of the then current term. The distribution agreement may be terminated by either party upon the other party’s default.
The company has signed distribution agreements with Restoration Medical, McRay Medical, Alamo Scientific and Morey Medical. These distributors will assist Bioheart with introducing its Home Heart Failure
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Monitoring Systems to physicians, home healthcare agencies and hospitals throughout the United States. McRay Medical will distribute the systems in Northern California; Alamo Scientific will distribute in Texas, Louisiana and Arkansas; Morey Medical will distribute in Okalahoma and parts of Kansas; Restoration Medical will distribute the monitoring systems in the rest of the country.
Effective as of October 22, 2009, the Company entered into a distribution agreement with Morey Medical Inc. pursuant to which Morey was granted exclusive rights to market and promote the Bioheart 3370-1 Heart Failure Monitor throughout a specific territory. In consideration for identifying purchasers who purchase or rent the Bioheart 3370-1 Heart Failure Monitor from the Company, the Company will pay to Morey a set fee. Morey is required to meet certain quarterly minimum purchase commitments under the agreement. The agreement has an initial term of one year and is subject to automatic renewal for additional one-year periods unless either party indicates intent to terminate the agreement no less than 60 days prior to the end of the then current term.
Effective as of December 10, 2009, the Company entered into a distribution agreement with McRay Medical, LLC, pursuant to which McRay was granted exclusive rights to market and promote the Bioheart 3370-1 Heart Failure Monitor throughout a specific territory. In consideration for identifying purchasers who purchase or rent the Bioheart 3370-1 Heart Failure Monitor from the Company the Company will pay to McRay a set fee. McRay is required to meet certain quarterly minimum purchase commitments under the agreement. The agreement has an initial term of one year and is subject to automatic renewal for additional one-year periods unless either party indicates intent to terminate the agreement no less than 60 days prior to the end of the then current term.
Effective as of October 22, 2009, the Company entered into a distribution agreement with Alamo Scientific, Inc. pursuant to which Alamo was granted exclusive rights to market and promote the Bioheart 3370-1 Heart Failure Monitor throughout a specific territory. In consideration for identifying purchasers who purchase or rent the Bioheart 3370-1 Heart Failure Monitor from the Company the Company will pay to Alamo a set fee. Alamo is required to meet certain quarterly minimum purchase commitments under the agreement. The agreement has an initial term of one year and is subject to automatic renewal for additional one-year periods unless either party indicates intent to terminate the agreement no less than 60 days prior to the end of the then current term.
Effective as of December 18, 2009, the Company entered into a distribution agreement with Restoration Medical Inc. pursuant to which Restoration was granted exclusive rights to market the Bioheart 3370-1 Heart Failure Monitoring System throughout those territories not covered by Morey Medical, McRay Medical and Alamo Scientific. In consideration for identifying purchasers who purchase or lease the Bioheart 3370-1 Heart Failure Monitoring System from the Company, the Company will pay to Restoration a set fee. Restoration is required to meet certain quarterly minimum purchase commitments under the agreement. The agreement has an initial term of one year and is subject to automatic renewal for additional one-year periods unless either party indicates intent to terminate the agreement no less than 60 days prior to the end of the then current term.
The heart failure monitors are reimbursed by Medicare to home health companies. In 2009, reimbursement was added to the National Episode Rate for cardiac patients. The monitors in conjunction with the nurse’s visit are essential to the well being of chronic heart failure patients. Care Plan Oversight (CPO) reimbursement also allows physicians to bill Medicare for their time overseeing the care of home care or hospice patients.
The Company has placed the program on hold as it seeks to secure the additional funding necessary to further develop our device related software.
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Operations
We conduct operations in one business segment. We may organize our business into more discrete business units when and if we generate significant revenue from the sale of our product candidates. Substantially all of our revenue since inception has been generated in the United States, and the majority of our long-lived assets are located in the United States.
Critical Accounting Policies
Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our critical accounting policies are described in Note 1 to our consolidated financial statements appearing elsewhere in this report, we believe the following policies are important to understanding and evaluating our reported financial results:
Stock-Based Compensation
On January 1, 2006, we adopted the provisions of Statement of Financial Accounting Standards No. 123R,Share-Based Payment (“SFAS No. 123R”) using the modified prospective transition method. SFAS No. 123R requires us to measure all share-based payment awards granted after January 1, 2006, including those with employees, at fair value. Under SFAS No. 123R, the fair value of stock options and other share-based compensation must be recognized as expense in the statements of operations over the requisite service period of each award.
The fair value of share-based awards granted subsequent to January 1, 2006 is determined using the Black-Scholes valuation model and compensation expense is recognized on a straight-line basis over the vesting period of the awards. Beginning January 1, 2006, we also began recognizing compensation expense under SFAS No. 123R for the unvested portions of outstanding share-based awards previously granted under our stock option plans, over the periods these awards continue to vest. Our future share-based compensation expense will depend on the number of equity instruments granted and the estimated value of the underlying common stock at the date of grant.
We account for certain share-based awards, including warrants, with non-employees in accordance with SFAS No. 123R and related guidance, including EITF Issue No. 96-18,Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling Goods or Services. We estimate the fair value of such awards using the Black-Scholes valuation model at each reporting period and expense the fair value over the vesting period of the share-based award, which is generally the period in which services are provided.
Revenue Recognition
Since inception, we have not generated any material revenues from our MyoCell product candidate. In accordance with Staff Accounting Bulletin No. 101,Revenue Recognition in Financial Statements, as amended by SEC Staff Accounting Bulletin No. 104,Revenue Recognition, our revenue policy is to recognize revenues from product sales and service transactions generally when persuasive evidence of an arrangement exists, the price is fixed or determined, collection is reasonably assured and delivery of product or service has occurred.
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We initially recorded payments received by us pursuant to our agreements with ACS as deferred revenue. Revenues are recognized on a pro rata basis as the catheters are delivered pursuant to those agreements.
Research and Development Activities
Research and development expenditures, including payments to collaborative research partners, are charged to expense as incurred. We expense amounts paid to obtain patents or acquire licenses as the ultimate recoverability of the amounts paid is uncertain.
Results of Operations
We are a development stage company and neither our MyoCell product candidate nor our other product candidates has received regulatory approval or generated any material revenues and neither is expected to in the near future, if ever. We have generated substantial net losses and negative cash flow from operations since inception and anticipate incurring significant net losses and negative cash flows from operations for the foreseeable future as we continue clinical trials, undertake new clinical trials, apply for regulatory approvals, make capital expenditures, add information systems and personnel, make payments pursuant to our license agreements upon our achievement of certain milestones, continue development of additional product candidates using our technology, establish sales and marketing capabilities and incur the additional cost of operating as a public company.
Comparison of the three and nine months ended September 30, 2010 and 2009
Revenues
We recognized revenues of $6,422 in the three month period ended September 30, 2010 compared to revenues of $17,250 in the three month period ended September 30, 2009. Our revenue in the three month period ended September 30, 2010 was generated mainly from the sale of Cardio Devices and TGI Products and the revenue in the three month period ended September 30, 2009 was also generated from the sale of MyoCath catheters and TGI Products.
We recognized revenues of $42,888 in the nine month period ended September 30, 2010 compared to revenues of $224,135 in the nine month period ended September 30, 2009. Our revenue in the nine month period ended September 30, 2010 was generated mainly from the sale of Cardio Devices and Myocath catheters, and the revenue in the nine month period ended September 30, 2009 was generated mainly from the sale of MyoCath catheters.
Cost of Sales
Cost of sales was $2,827 in the three month period ended September 30, 2010 compared to $10,933 in the three month period ended September 30, 2009.
Cost of sales was $19,626 in the nine month period ended September 30, 2010 compared to $123,714 in the nine month period ended September 30, 2009.
Research and Development
Research and development expenses were approximately $173,800 in the three month period ended in September 30, 2010, an decrease of approximately $1,050,200 from research and development expenses of $1,224,000 in same three month period in 2009. The decrease was primarily attributable to the reduction in the amount of funds allocated to our clinical trials.
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Research and development expenses were approximately $1,267,400 in the nine month period ended in September 30, 2010, an decrease of approximately $998,300 from research and development expenses of $2,265,700 in same nine month period in 2009. The decrease was primarily attributable to the reduction in the amount of funds allocated to our clinical trials.
The timing and amount of our planned research and development expenditures is dependent on our ability to obtain additional financing. See “—Existing Capital Resources and Future Capital Requirements” and Item 1A.“Risk Factors — We will need to secure additional financing ....”
Marketing, General and Administrative
Marketing, general and administrative expenses were approximately $430,900 in the three month period ended September 30 2010, a decrease of $116,500 from marketing, general and administrative expenses of approximately $547,400 in the same three month period in 2009. The decrease in marketing, general and administrative expenses is attributable, in part, to a decrease in legal fees.
Marketing, general and administrative expenses were approximately $1,244,950 in the nine month period ended September 30 2010, a decrease of approximately $422,000 from marketing, general and administrative expenses of approximately $1,666,500 in the same nine month period in 2009. The decrease in marketing, general and administrative expenses is attributable, in part, to a decrease in insurance, legal and rent expenses.
Interest Income
Interest income consists of interest earned on our cash and cash equivalents. Interest income was $.43 in the three months ended September 30. 2010 compared to interest income of $2 in the same three month period ended September 30, 2009. Interest income was $2 in the nine month period ended September 30, 2010 compared to interest income of $18 in the same nine month period in 2009. The decrease in interest income was primarily attributable to lower cash balances in the three and nine month period ended September 30, 2010 and 2009.
Interest Expense
On June 1, 2007, we entered into the BlueCrest Loan and the Bank of America Loan, both in the principal amount of $5.0 million, with interest rates of 12.85% and 4.75% (prime plus 1.5%), respectively, at December 31, 2008. On August 20, 2008, we borrowed $1.0 million from a third party at an interest rate of 13.5% per annum. Interest expense primarily consists of interest incurred on the principal amount of these loans, accrued fees and interest earned by the guarantors of the Bank of America Loan, the amortization of related deferred loan costs and the amortization of the fair value of warrants issued in connection with the BlueCrest and Bank of America Loans. The fair value of the warrants originally issued in connection with the Bank of America Loan was amortized by the end of January 2008.
Interest expense was $567,348 in the three month period ended September 30, 2010 compared to interest expense of $428,796 in the same three month period in 2009. Interest incurred on the principal amount of our outstanding loans and interest and fees earned by the guarantors totaled $190,423 in the three month period ended September 30, 2010 and $310,834 in the same three month period in 2009. Amortization of deferred loan costs and amortization of the fair value of warrants issued in connection with the BlueCrest and Bank of America loans totaled $376,925 in the three month period ended September 30, 2010 compared to $117,962 in the same three month period in 2009.
Interest expense was $1,705,762 in the nine month period ended September 30, 2010 compared to interest expense of $1,764,604 in the same nine month period in 2009. Interest incurred on the principal amount of our outstanding loans and interest and fees earned by the guarantors totaled $719,755 in the nine month period
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ended September 30, 2010 and $896,839 in the same nine month period in 2009. Amortization of deferred loan costs and amortization of the fair value of warrants issued in connection with the BlueCrest and Bank of America loans totaled $986,006 in the nine month period ended September 30, 2010 compared to $867,765 in the same nine month period in 2009.
Liquidity and Capital Resources
In the nine month period ended September 30, 2010, we continued to finance our considerable operational cash needs with cash generated from financing activities.
Operating Activities
Net cash used in operating activities was $1,109,386 in the nine month period ended September 30, 2010 as compared to $1,477,979 of cash used in the same nine month period in 2009.
Our use of cash for operations in the nine months ended September 30, 2010 reflected a net loss generated during the period of $4.1 million, adjusted for non-cash items such as stock-based compensation of $141,894, amortization of the fair value of warrants granted in connection with the BlueCrest Loan and Bank of America loan of $731,491, amortization of loan costs incurred in connection with the BlueCrest Loan and Bank of America Loan of $69,208. An increase in prepaid and other current assets of $32,159 and an increase in accounts payable of $135,063 contributed to our use of operating cash in 2010. The increase in prepaid expenses and other current assets was due mainly to the increase in prepaid insurance. Partially offsetting these uses of cash were in increase in accrued expenses of $962,215.
Investing Activities
Net cash used in investing activities was $0.00 for the nine month period ended September 30, 2010, compared to $2,019 for the same nine month period in 2009. There were none investing activities for the nine month periods ended September 30, 2010.
Financing Activities
Net cash provided by financing activities was $1,179,651 in the nine month period ended September 30, 2010 as compared to $1,517,425 for the same nine month period in 2009.
Existing Capital Resources and Future Capital Requirements
Neither our MyoCell product candidate nor our other product candidates has received regulatory approval or generated any material revenues. We do not expect to generate any material revenues or cash from sales of our MyoCell and other product candidates in the near future, if ever. We have generated substantial net losses and negative cash flow from operations since inception and anticipate incurring significant net losses and negative cash flows from operations for the foreseeable future. Historically, we have relied on proceeds from the sale of our common stock and our additional debt to provide the funds necessary to conduct our research and development activities and to meet our other cash needs.
At September 30, 2010 we had cash and cash equivalents totaling $145,296. However, our working capital deficit as of such date was $11.8 million. Our independent registered public accounting firm has issued its report dated March 31, 2010 in connection with the audit of our financial statements as of December 31, 2009 that included an explanatory paragraph describing the existence of conditions that raise substantial doubt about our ability to continue as a going concern.
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Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Recent Accounting Pronouncements
Refer to Note 1.Organization and Summary of Significant Accounting Policies in the notes to our consolidated financial statements for a discussion of recent accounting pronouncements.
Item 3. | | Quantitative and Qualitative Disclosures About Market Risk |
Not Applicable.
Item 4. | | Controls and Procedures |
Disclosure Controls and Procedures
We have established disclosure controls and procedures to ensure that material information relating to us is made known to the officers who certify our financial reports, as well as to other members of senior management and the Board of Directors.
We carried out an evaluation, under the supervision and with the participation of our management, including our Principal Executive Officer, as well as our Principal Financial and Accounting Officer of the effectiveness of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act as of the end of the period covered by this quarterly report on Form 10-Q. Based on such evaluation, our Principal Executive Officer, as well as our Principal Financial and Accounting Officer concluded that, as of September 30, 2010, our disclosure controls and procedures were effective. In making this assessment, we used the criteria set forth inInternal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
This Quarterly Report on Form 10-Q does not, and is not required to, include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.
Changes In Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. | | Legal Proceedings |
Our company is not involved in any material litigation and we are unaware of any threatened material litigation. However, the biotechnology and medical device industries have been characterized by extensive litigation regarding patents and other intellectual property rights. In addition, from time to time, we may become involved in litigation relating to claims arising from the ordinary course of our business.
In addition to the risk factors disclosed in our Annual Report on Form 10K and 10K/A for the fiscal year ended December 31, 2009 the Company believes there are the additional risk factors related to our products, business, and financial condition;
We may not be able to obtain additional inventory of our essential MyoCath Catheter.
Our current inventory has been exhausted and while the company endeavors to contract with a manufacturer for additional inventory there is no assurance that it will be successful in identifying or contracting with a manufacturer on acceptable terms. Our inability to obtain additional MyoCath inventory would have a material adverse affect on our business, financial condition and ability to continue as a going concern.
Our Software based devices may develop software errors.
The software that enables some of our devices is early stage and when tested in the field may develop or reveal software errors requiring further software development. There can be no assurance that we will have sufficient funds to adequately test, develop, or where appropriate fix our device related software which could have a material adverse effect on our business, financial condition and ability to continue as a going concern.
The management of the REGEN Trial is within the control of persons whom are no longer affiliates of the Company.
The company with whom we contracted to manage our REGEN Trial at the time was managed by two persons who were members of our Board of Directors. These persons since have resigned as Officers and Directors of the Company. Although at this time we believe that this former related party intends to perform its REGEN Trial related obligations under its agreement with us, a default in the performance of those obligations could have a material adverse effect on our business and financial condition.
Item 2. | | Unregistered Sales of Equity Securities and Use of Proceeds |
Private Placement — Common Stock and Warrants
From January 2010 thru June 2010, the Company sold, in a private placement, an aggregate of 1,512,890 shares of the Company’s common stock and warrants to purchase 2,051,052 shares of the Company’s common stock for aggregate gross cash proceeds of $858,041.00. The warrants are (i) exercisable solely for cash at an exercise price of $0.54 to $0.84 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance.
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In July 2010, the Company sold, in a private placement, an aggregate of 1,460,135 shares of the Company’s common stock for aggregate gross cash proceeds of $219,020.
In August 2010, the Company sold, in a private placement, an aggregate of 93,750 shares of the Company’s common stock for aggregate gross cash proceeds of $15,000.
In September 2010, the Company sold, in a private placement, an aggregate of 340,360 shares of the Company’s common stock and warrants to purchase 170,180 shares of the Company’s common stock for aggregate gross cash proceeds of $51,054. The warrants are (i) exercisable solely for cash at an exercise price of $0.18 per share, (ii) non-transferable for six months following issuance and (iii) exercisable, in whole or in part, at any time during the period commencing on the date that is six months and one day following the date of issuance and ending on the third year anniversary of the date of issuance.
Each of the listed sales was exempt from registration in reliance upon Section 4(s) of the Securities Act of 1933, as amended (the “Securities Act”), for transactions by an issuer not involving a public offering. The offer and sale of such securities was made without general solicitation or advertising to “accredited investors” as defined in Rule 501(a) of Regulation D promulgated by the Securities Act.
Item 3. | | Defaults Upon Senior Securities |
On July 16, 2010, the Company received a written notice of default under the Bank of America loan documents by reason of the Company’s failure to pay the loan in full at maturity on July 5, 2010 and failure to pay the extension fee of $30,000 by June 28, 2010, as required by the loan documents, as amended. The Company is engaged in discussions with the guarantors, who have provided the loan collateral, regarding a restructuring of the indebtedness in the event Bank of America seeks recourse against the collateral and those guarantors, by reason of such action, become successors to the Bank of America rights and interests under the Bank of America Loan. On October 25, 2010 the Company entered into a Loan Agreement with Seaside National Bank and Trust for a $980,000 loan that was used to refinance the Company’s loan with Bank of America. In addition, a member of the Company’s Board of Directors whom was also one of the guarantors of the Bank of America loan paid down the remaining debt of $367,244. See,Bank of America Note Payable, in Note 5, Notes Payable, Notes to Consolidated Interim Financial Statements.
Item 4. | | Removed and Reserved |
Item 5. | | Other Information |
As reported in the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on July 9, 2010, the Board of Directors of the Company appointed Catherine Sulawske-Guck as Chief Operating Officer. Ms. Sulawske-Guck has served as the Vice President of Administration and Human Resources since January 2007. She joined Bioheart in the full-time capacity as Director of Administration and Human Resources in January 2004 after having served in a consulting capacity since December 2001.
On July 20, 2010, the Company announced that it closed its offering under Regulation D (the “Offering”). The Company received total gross cash proceeds in the amount of $1,046,986 from the placement of restricted common stock and warrants under the Offering. The number of shares of common stock issued in connection with the Offering was 1,768,720 shares. The Company also issued to the purchasers of those shares of common stock, warrants to purchase an additional 530,616 shares of common stock. Total compensation paid to third parties consisted of $4,350 in cash and warrants to purchase 2,456 shares of common stock. In addition, the Company issued 5,323,950 shares of common stock in consideration for $3,207,075 of outstanding nonconvertible debt, and issued to the holders of that debt warrants to purchase an additional 1,597,185 shares of common stock.
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On August 13, 2010 Peggy A. Farley resigned as a director of the Company.
As reported in the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on September 28, 2010, the Board of Directors of the Company appointed Kristin Comella as Chief Science Officer. Ms. Comella joined Bioheart in September 2004 and has served as the Vice President of Research and Corporate Development since December 2008. Ms. Comella holds an M.S. in Chemical Engineering from The Ohio State University. Howard Leonhardt will continue to serve as Founder and Chief Technology Officer and Chairman of the Scientific Advisory Board.
On September 29, 2010 the Company announced that it closed its offering under Regulation D (the “Offering”). The Company received total gross cash proceeds in the amount of $234,020 from the placement of restricted common stock under the Offering. The number of shares of common stock issued in connection with the Offering was 1,553,885 shares.
As reported in the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 1, 2010 Bioheart, Inc. (the “Company”) received a written notice of termination of Customer Agreement and Distribution Agreement, dated as of March 15, 2007 and December 12, 2006 respectively (as amended from time to time, the “TGI Agreements”), between Tissue Genesis Incorporated and the Company on October 26, 2010. The notice stated that it is being given as a result of breach of the payment obligations under the agreement. The letter also indicated that Tissue Genesis Incorporated was open to discussing collaborations with the Company in the future.
As reported in the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 3, 2010, the Company received a letter from Karl E. Groth, Ph.D. on October 28, 2010 resigning as a Director and as the Chairman of the Board of Directors. His resignation did not indicate as a reason any dispute with the Board of Directors, or the management of the Company and a copy of this current report on Form 8-K was furnished to the director for review prior to its filing.
As reported in the Company’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on November 3, 2010, the Board of Directors of Bioheart, Inc. (the “Company”) appointed William P. Murphy, Jr., M.D. as the Company’s Chairman of the Board on November 2, 2010. Dr. Murphy has served as a member of the Company’s Board of Directors since June 2003. Dr. Murphy’s experience in the healthcare industry and medical background together with his experience serving on the Company’s Board of Directors makes him well-qualified to serve as Chairman of the Board of Directors.
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Exhibit No.
| | | | Exhibit Description
|
|---|
| 3.1(6) | | | | Amended and Restated Articles of Incorporation of the registrant, as amended |
| 3.2(9) | | | | Articles of Amendment to the Articles of Incorporation of the registrant |
| 3.3(8) | | | | Amended and Restated Bylaws |
| 4.1(5) | | | | Loan and Security Agreement, dated as of May 31, 2007 by and between BlueCrest Capital Finance, L.P. and the registrant |
| 4.2(12) | | | | Notice of Event of Default, from BlueCrest Venture Finance Master Fund Limited to the Company, dated January 28, 2009 |
| 4.3(12) | | | | Notice of Acceleration, from BlueCrest Venture Finance Master Fund Limited to the Company, dated February 2, 2009 |
| 4.4(13) | | | | Amendment to Loan and Security Agreement, between the Company and BlueCrest Venture Finance Master Fund Limited, dated as of April 2, 2009 |
| 4.5(13) | | | | Grant of Security Interest (Patents), between the Company and BlueCrest Venture Finance Master Fund Limited, dated as of April 2, 2009 |
| 4.6(13) | | | | Security Agreement (Intellectual Property), between the Company and BlueCrest Venture Finance Master Fund Limited, dated as of April 2, 2009 |
| 4.7(13) | | | | Subordination Agreement, by Hunton & Williams, LLP in favor of BlueCrest Venture Finance Master Fund Limited, entered into and effective April 2, 2009 |
| 4.8(13) | | | | Amended and Restated Promissory Note, dated April 2, 2009, by the Company to BlueCrest Venture Finance Master Fund Limited |
| 4.9(13) | | | | Warrant to purchase 1,315,542 shares of the registrant’s common stock, dated April 2, 2009, issued to BlueCrest Venture Finance Master Fund Limited |
| 4.10(14) | | | | Warrant to purchase 451,043 shares of the registrant’s common stock, dated April 2, 2009, issued to Rogers Telecommunications Limited |
| 4.11(14) | | | | Warrant to purchase 173,638 shares of the registrant’s common stock, dated April 2, 2009, issued to Hunton & Williams, LLP |
| 10.1**(1) | | | | 1999 Officers and Employees Stock Option Plan |
| 10.2**(1) | | | | 1999 Directors and Consultants Stock Option Plan |
| 10.2(a) | | | | | | |
| 10.3(1) | | | | Form of Option Agreement under 1999 Officers and Employees Stock Option Plan |
| 10.4(3) | | | | Form of Option Agreement under 1999 Directors and Consultants Stock Option Plan |
| 10.5**(4) | | | | Employment Letter Agreement between the registrant and Scott Bromley, dated August 24, 2006. |
| 10.6(1) | | | | Lease Agreement between the registrant and Sawgrass Business Plaza, LLC, as amended, dated November 14, 2006. |
| 10.7(1) | | | | Asset Purchase Agreement between the registrant and Advanced Cardiovascular Systems, Inc., dated June 24, 2003. |
| 10.8(4) | | | | Conditionally Exclusive License Agreement between the registrant, Dr. Peter Law and Cell Transplants International, LLC, dated February 7, 2000, as amended. |
| 10.9(4) | | | | Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by and between the registrant, Howard J. Leonhardt and Brenda Leonhardt |
| 10.10(4) | | | | Loan Guarantee, Payment and Security Agreement, dated as of June 1, 2007, by and between the registrant and William P. Murphy Jr., M.D. |
| 10.11(4) | | | | Loan Agreement, dated as of June 1, 2007, by and between the registrant and Bank of America, N.A. |
| 10.12(4) | | | | Warrant to purchase shares of the registrant’s common stock issued to Howard J. Leonhardt and Brenda Leonhardt |
| 10.13(4) | | | | Warrant to purchase shares of the registrant’s common stock issued to Howard J. Leonhardt and Brenda Leonhardt |
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Exhibit No.
| | | | Exhibit Description
|
|---|
| 10.14(4) | | | | Warrant to purchase shares of the registrant’s common stock issued to William P. Murphy Jr., M.D. |
| 10.15(4) | | | | Warrant to purchase shares of the registrant’s common stock issued to the R&A Spencer Family Limited Partnership |
| 10.16(4) | | | | Supply and License Agreement, dated June 7, 2007, by and between the registrant and BioLife Solutions, Inc.*** |
| 10.17(5) | | | | Warrant to purchase shares of the registrant’s common stock issued to BlueCrest Capital Finance, L.P. |
| 10.18(6) | | | | Loan Guarantee, Payment and Security Agreement, dated as of September 12, 2007, by and between the registrant and Samuel S. Ahn, M.D. |
| 10.19(6) | | | | Loan Guarantee, Payment and Security Agreement, dated as of September 12, 2007, by and between the registrant and Dan Marino |
| 10.20(6) | | | | Warrant to purchase shares of the registrant’s common stock issued to Samuel S. Ahn, M.D. |
| 10.21(6) | | | | Loan Guarantee, Payment and Security Agreement, dated as of September 19, 2007, by and between the registrant and Jason Taylor |
| 10.22(7) | | | | Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by and between the registrant and Howard and Brenda Leonhardt |
| 10.23(7) | | | | Warrant to purchase shares of the registrant’s common stock issued to Howard and Brenda Leonhardt |
| 10.24(7) | | | | Second Amendment to Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by and between the registrant and Howard and Brenda Leonhardt |
| 10.25(7) | | | | Second Amendment to Loan Guarantee, Payment and Security Agreement, dated as of October 10, 2007, by and between the registrant and William P. Murphy, Jr., M.D. |
| 10.26**(10) | | | | Bioheart, Inc. Omnibus Equity Compensation Plan |
| 10.27(11) | | | | Form of Warrant Agreement for October 2008 Private Placement |
| 10.28(11) | | | | Form of Registration Rights Agreement for October 2008 Private Placement |
| 10.29(19) | | | | 10% Convertible Promissory Note Due July 23, 2010, in the amount of $20,000, payable to Dana Smith |
| 10.30(19) | | | | 10% Convertible Promissory Note Due July 23, 2010, in the amount of $100,000, payable to Bruce Meyers |
| 10.31(19) | | | | Registration Rights Agreement, dated July 23, 2009 |
| 10.32(19) | | | | Subordination Agreement, dated July 23, 2009 |
| 10.33(19) | | | | Note Purchase Agreement, dated July 23, 2009 |
| 10.34(19) | | | | Closing Confirmation of Conversion Election, dated July 23, 2009 |
| |
| 31.1* | | | | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| 31.2* | | | | Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 |
| ** | | Indicates management contract or compensatory plan. |
| (1) | | Incorporated by reference to the Company’s Form S-1 filed with the Securities and Exchange Commission on February 13, 2007 |
| (3) | | Incorporated by reference to Amendment No. 2 to the Company’s Form S-1 filed with the Securities and Exchange Commission on July 12, 2007 |
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| (4) | | Incorporated by reference to Amendment No. 3 to the Company’s Form S-1 filed with the Securities and Exchange Commission on August 9, 2007 |
| (5) | | Incorporated by reference to Amendment No. 4 to the Company’s Form S-1 filed with the Securities and Exchange Commission on September 6, 2007 |
| (6) | | Incorporated by reference to Amendment No. 5 to the Company’s Form S-1 filed with the Securities and Exchange Commission on October 1, 2007 |
| (7) | | Incorporated by reference to Post-effective Amendment No. 1 to the Company’s Form S-1 filed with the Securities and Exchange Commission on October 11, 2007 |
| (8) | | Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 3, 2008 |
| (9) | | Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 8, 2008 |
| (10) | | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 14, 2008 |
| (11) | | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on November 14, 2008 |
| (12) | | Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on February 3, 2009 |
| (13) | | Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 8, 2009 |
| (14) | | Incorporated by reference to the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on April 15, 2009 |
| (15) | | Incorporated by reference to the Company’s Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on April 30, 2009 |
| (16) | | Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on May 18, 2009 |
| (17) | | Incorporated by reference to the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 20, 2009 |
| (18) | | Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 9, 2009 |
| (19) | | Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on July 23, 2009 |
| (20) | | Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 3, 2009 |
| (21) | | Incorporated by reference to the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on August 18, 2009 |
| (22) | | Incorporated by reference to Exhibit 4.6 to the Company’s Post Effective Amendment to Registration Statement on Form S-8/A, filed with the Securities and Exchange Commission on April 28, 2010 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| | | | | Bioheart, Inc. |
| |
| Date: November 15, 2010 | | | | By:/s/ Mike Tomas
Mike Tomas
Chief Executive Officer and President |
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