As filed with the Securities and Exchange Commission on October 11, 2007

Registration No.  333-140672

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

Post-effective Amendment No. 1

to

Form S-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

13794 NW 4th Street, Suite 212

Sunrise, Florida 33325

(954) 835-1500

(Address, including zip code, and telephone number,

including area code, of registrant’s principal executive offices)

William M. Pinon

President and Chief Executive Officer

Bioheart, Inc.

13794 NW 4th Street, Suite 212

Sunrise, Florida 33325

(954) 835-1500

(Name, address, including zip code, and telephone number,

including area code, of Agent for Service)

      Approximate Date of Commencement of Proposed Sale to the Public: As soon as practicable after the effective date of this Registration Statement.

      If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

      If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

      If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

      If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

      The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

Prospectus

Subject to Completion, Dated October 11, 2007

4,166,667 Shares

Common Stock

This is our initial public offering of shares of our common stock. We are offering 4,166,667 shares. We expect the initial public offering price to be between $6.00 and $8.00 per share.

Currently no public market exists for shares of our common stock. We have been approved for listing of our common stock on the NASDAQ Global Market under the symbol “BHRT.”

Investing in our common stock involves risks.

See “Risk Factors” beginning on page 8 of this prospectus.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.

Bioheart, Inc. has granted the underwriters a 30-day option to purchase up to an additional 625,000 shares of common stock to cover over-allotments.

Merriman Curhan Ford & Co.

The date of this Prospectus is           , 2007

TABLE OF CONTENTS

      Through and including                     , 2007 (the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.

      You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. In this prospectus, unless otherwise stated or the context otherwise requires, references to “Bioheart,” “we,” “us,” “our company,” and similar references refer to the consolidated operations of Bioheart, Inc. and its subsidiaries.

      For investors outside of the United States: Neither we nor any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside of the United States.

	•	seek to successfully commercialize our lead product candidate, MyoCell;
	•	develop our sales and marketing capabilities in advance of regulatory approval, if any;
	•	continue to develop and seek to successfully commercialize our pipeline of cell-based therapy and related device candidates;
	•	continue to refine our MyoCell cell culturing processes to further reduce our costs and processing times;
	•	expand and enhance our intellectual property rights; and
	•	license, acquire and/or develop complementary products and technologies.

	•	the timely success and completion of our clinical trials;
	•	the occurrence of any unacceptable side effects during or after preclinical and clinical testing of our product candidates, including patient deaths in addition to the six that have previously occurred during our clinical trials of MyoCell;
	•	regulatory approval of our product candidates;
	•	our ability to secure additional financing to meet future capital requirements;
	•	our dependence on the success of our lead product candidate;
	•	our inability to predict the extent of our future losses or if or when we will become profitable;
	•	our ability to protect our intellectual property rights;
	•	our ability to meet our obligations on our outstanding indebtedness to BlueCrest Capital Finance, L.P., which indebtedness imposes certain restrictions on how we conduct our business and is secured by all of our assets except our intellectual property; and
	•	intense competition.

	•	Bioheart Acute Cell Therapy (commenced animal studies in first quarter of 2007 and anticipate filing Investigational New Drug, or IND, application in fourth quarter of 2007)  — Autologous cell therapy for the treatment of acute myocardial infarction, or MI, using cells processed by the TGI 1200.

	•	TGI 1200 Adipose Tissue Processing System (upon approval of IND application for Bioheart Acute Cell Therapy, anticipate seeking cost reimbursement for use in connection with clinical trials of Bioheart Acute Cell Therapy)  — Fully automated device for the rapid processing of patient derived fat tissue. We have licensed the rights to use for the treatment of acute MI and heart failure.
	•	MyoCell II with SDF-1 (IND application filed in May 2007)  — Cell therapy treatment for chronic heart damage; autologous myoblasts are modified to express SDF-1 protein in an effort to stimulate angiogenesis and/or recruitment of stem cells.
	•	MyoCath (Phase II clinical trials)  — Disposable endoventricular catheter used for the delivery of biologic solutions to the myocardium.
	•	MyoCath II (commenced animal studies in the third quarter of 2007)  — Second generation disposable endoventricular catheter modified to provide multidirectional cell injection and used for the delivery of biologic solutions to the myocardium.
	•	BioPace (preclinical)  — Cell-therapy treatment for chronic abnormal heart rhythm due to electrical disturbances in the upper chambers of the heart.
	•	Allocell (preclinical)  — Cell-therapy treatment for chronic heart damage using myoblasts obtained from third person donors, or allogenic myoblasts.

THE OFFERING

Issuer		Bioheart, Inc.
Common stock offered by us		4,166,667 shares
Common stock to be outstanding after this offering		17,500,012 shares
Over-allotment option		625,000 shares
Use of proceeds		We expect to use the net proceeds from this offering:
		• to fund the MARVEL Trial through enrollment and the MyoCell or placebo treatment of all enrollees;
		• for projected payments pursuant to our license agreements and to further develop and protect our intellectual property portfolio;
		• to repay principal and accrued interest on certain debt obligations;
		• to fund the development of a sales and marketing force;
		• to fund an initial Phase I clinical trial of MyoCell II with SDF-1;
		• to fund the further development, preclinical testing and/or Phase I clinical testing of our pipeline product candidates; and
		• for other general corporate purposes.
		See “Use of Proceeds.”
Dividend policy		We have not declared or paid any cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future. See “Dividend Policy” and “Description of Capital Stock.”
NASDAQ Global Market symbol		BHRT
Risk factors		You should carefully read and consider the information set forth under “Risk Factors” and all other information set forth in this prospectus before investing in our common stock.

      Except as otherwise noted, the number of shares of our common stock to be outstanding after this offering excludes 901,251 shares reserved for future issuance under our Officers and Employees Stock Option Plan and our Directors and Consultants Stock Option Plan.

      Unless otherwise indicated, all information contained in this prospectus assumes that the underwriters do not exercise their option to purchase up to 625,000 additional shares of our common stock to cover over-allotments, if any.

																								Six Months Ended
				Year Ended December 31,																				June 30,
				2002				2003				2004				2005				2006				2006				2007
																								(Unaudited)
				(In thousands, except per share data)
Statement of Operations Data:
Revenues				$	2			$	46			$	86			$	135			$	106			$	75			$	208
Cost of sales					—				30				46				87				73				44				34
	Gross profit				2				16				40				48				33				31				174
Expenses:
	Research and development				7,361				3,502				3,787				4,534				6,878				2,669				3,186
	Marketing, general and administrative				1,946				2,523				1,731				2,831				6,372				1,325				1,751
	Depreciation and amortization				—				31				34				46				91				30				92
		Total expenses			9,307				6,056				5,552				7,411				13,341				4,024				5,029
	Loss from operations				(9,305	)			(6,040	)			(5,512	)			(7,363	)			(13,308	)			(3,993	)			(4,855	)
	Net interest income (expense)				47				2				(7	)			36				127				58				(186	)
	Loss before income taxes				(9,258	)			(6,038	)			(5,519	)			(7,327	)			(13,181	)			(3,935	)			(5,040	)
Income taxes					—				—				—				—				—				—				—
	Net loss			$	(9,258	)		$	(6,038	)		$	(5,519	)		$	(7,327	)		$	(13,181	)		$	(3,935	)		$	(5,040	)
Basic and diluted net loss per share				$	(1.54	)		$	(0.75	)		$	(0.60	)		$	(0.69	)		$	(1.10	)		$	(0.34	)		$	(0.39	)
Weighted average shares outstanding  — basic and diluted					6,007				8,022				9,189				10,653				12,015				11,654				13,012

	•	on an actual basis; and
	•	on a pro forma basis to give effect to the sale by us of shares of our common stock at an assumed initial public offering price of $7.00 per share, the mid-point of the range set forth on the cover page of this prospectus, and the receipt of net proceeds of this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. Each $1.00 increase (decrease) in the assumed initial public offering price of $7.00 per share would increase (decrease) each of cash and cash equivalents, working capital, total assets and total shareholders’ equity by approximately $3.9 million, assuming that the number of shares offered by us, as set forth on the cover page of this

		prospectus, remains the same, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

		As of June 30, 2007
		Actual				Pro Forma
		(Unaudited)
		(in thousands)
Consolidated Balance Sheet Data:
Cash and cash equivalents		$	12,916			$	37,884
Working capital			5,054				30,196
Total assets			17,905				41,355
Notes payable — current			6,194				6,194
Note payable — long term			3,806				3,806
Deficit accumulated during the development stage			(69,553	)			(69,553	)
Total shareholders’ equity			5,699				29,324

RISK FACTORS

      Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information included in this prospectus, including the financial statements and related notes appearing at the end of this prospectus before deciding to invest in our common stock. If any of the following risks actually occur they would harm our business, prospects, financial condition and results of operations, possibly materially. In this event, the market price of our common stock could decline and you could lose part or all of your investment. Please read “Special Note Regarding Forward-Looking Statements.”

Risks Related to Our Financial Position and Potential Need for Additional Financing

We are a development stage life sciences company with a limited operating history and a history of net losses and negative cash flows from operations. We may never be profitable, and if we incur operating losses and generate negative cash flows from operations for longer than expected, we may be unable to continue operations.

      We are a development stage life sciences company and have a limited operating history, limited capital, limited sources of revenue and have incurred losses since inception. Our operations to date have been limited to organizing our company, developing and engaging in clinical trials of our lead product candidate, MyoCell, expanding our pipeline of complementary product candidates through internal development and third party licenses, expanding and strengthening our intellectual property position through internal programs and third party licenses and recruiting management, research and clinical personnel. Consequently, you may have difficulty in predicting our future success or viability due to our lack of operating history. As of June 30, 2007, we have accumulated a deficit during our development stage of approximately $69.6 million. Our lead product candidate has not received regulatory approval or generated any material revenues and is not expected to generate any material revenues until early 2009, if ever. Since inception, we have generated substantial net losses, including net losses of approximately $13.2 million, $7.3 million and $5.5 million in 2006, 2005 and 2004, respectively and substantial negative cash flows from operations. We anticipate that we will continue to incur significant and increasing net losses and negative cash flows from operations for the foreseeable future as we:

      Our limited experience in conducting and managing preclinical development activities, clinical trials and the application process necessary to obtain regulatory approvals might prevent us from successfully designing or implementing a preclinical study or clinical trial. If we do not succeed in conducting and managing our preclinical development activities or clinical trials, or in obtaining regulatory approvals, we might not be able to commercialize our product candidates, or might be significantly delayed in doing so, which will materially harm our business.

      None of the products that we are currently developing has been approved by the FDA or any similar regulatory authority in any foreign country. Our ability to generate revenues from any of our product candidates will depend on a number of factors, including our ability to successfully complete clinical trials,

obtain necessary regulatory approvals and implement our commercialization strategy. In addition, even if we are successful in obtaining necessary regulatory approvals and bringing one or more product candidates to market, we will be subject to the risk that the marketplace will not accept those products. We may, and anticipate that we will need to, transition from a company with a research and development focus to a company capable of supporting commercial activities and we may not succeed in such a transition.

      Because of the numerous risks and uncertainties associated with our product development and commercialization efforts, we are unable to predict the extent of our future losses or when or if we will become profitable. Our failure to successfully commercialize our product candidates or to become and remain profitable could depress the market price of our common stock and impair our ability to raise capital, expand our business, diversify our product offerings and continue our operations.

Our outstanding indebtedness to BlueCrest Capital Finance, L.P. imposes certain restrictions on how we conduct our business. In addition, all of our assets, except our intellectual property, are pledged to secure this indebtedness. If we fail to meet our obligations to BlueCrest Capital, our payment obligations may be accelerated and the collateral securing the debt may be sold to satisfy these obligations.

      Pursuant to a Loan and Security Agreement, dated May 31, 2007, BlueCrest Capital Finance, L.P., or BlueCrest Capital, agreed to provide us a three-year, $5.0 million term loan, or the BlueCrest Loan. For the first three months of the BlueCrest Loan, we are only required to make payments of interest. Commencing in October 2007, we are required to make 33 equal monthly payments of principal and interest. Interest accrues at an annual rate of 12.85%. In the event we seek to repay the BlueCrest Loan prior to maturity, we are subject to a prepayment penalty equal to 3% of the outstanding principal if paid during the first year of the BlueCrest Loan, 2% of the outstanding principal if paid during the second year of the BlueCrest Loan and 1% of the outstanding principal if paid during the third year of the BlueCrest Loan. As collateral to secure our repayment obligations to BlueCrest Capital, we have granted it a first priority security interest in all of our assets, excluding our intellectual property but including the proceeds from any sale of any of our intellectual property.

      The Loan and Security Agreement contains various provisions that restrict our operating flexibility. Pursuant to the agreement, we may not, among other things:

      These provisions could have important consequences for us, including (i) making it more difficult for us to obtain additional debt financing from another lender, or obtain new debt financing on terms favorable to us, because such new lender will have to be willing to be subordinate to BlueCrest Capital, (ii) causing us to use a portion of our available cash for debt repayment and service rather than other perceived needs and/or (iii) impacting our ability to take advantage of significant, perceived business opportunities. Our failure to timely repay our obligations under the BlueCrest Loan or meet the covenants set forth in the Loan and Security Agreement could give rise to a default under the agreement. In the event of an uncured default, the agreement provides that all amounts owed to BlueCrest Capital are immediately due and payable and that BlueCrest Capital has the right to enforce its security interest in the assets securing the BlueCrest Loan. In such event, BlueCrest Capital could take possession of any or all of our assets in which they hold a security interest, and dispose of those assets to the extent necessary to pay off our debts, which would materially harm our business.

We have a substantial amount of debt and may incur substantial additional debt, which could adversely affect our ability to pursue certain business objectives, obtain financing in the future and/or react to changes in our business.

      In addition to the BlueCrest Loan, on June 1, 2007, we borrowed $5.0 million from Bank of America, N.A., or the Bank of America Loan. Accordingly, as of the date of this prospectus, we have an aggregate of $10.0 million in principal amount of outstanding indebtedness. We and Bank of America have agreed with BlueCrest Capital that we will not individually make any payments due under the Bank of America Loan while the BlueCrest Loan is outstanding. Certain persons, including our Executive Chairman and two of our other directors, have agreed to provide Bank of America in the aggregate up to $5.5 million of funds and/or securities to make these payments. We are required to reimburse these persons with interest at an annual rate of 13.25% for any and all payments made by them under the Bank of America Loan upon our repayment in full of the BlueCrest Loan. We anticipate that the BlueCrest Loan will need to be serviced and both the BlueCrest Loan and any amounts advanced by the guarantors will need to be repaid with existing cash, cash generated by this offering or cash generated from other security or loan placements, if any. If we are unable to generate cash through additional financings, we may have to delay or curtail research, development and commercialization programs.

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

We will need substantial additional funding and may be unable to raise capital when needed. An inability to obtain additional financing on acceptable terms could adversely affect our business, financial condition, results of operations, and could even prevent us from continuing our business.

      Based upon an assumed initial public offering price of $7.00 per share (the mid-point of the range set forth on the cover page of this prospectus), we expect to raise net proceeds of $23.6 million in this offering. Even if we secure approximately $23.6 million of proceeds in connection with this offering, we believe, that after 15 months, we will require substantial future capital in order to continue the research and development, preclinical and clinical programs, and regulatory activities necessary to obtain regulatory approval of our product candidates. For instance, we anticipate that we will need to raise or generate an additional $2.6 million of funds to finance the completion of the MARVEL Trial. In addition, subject to obtaining regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses for product sales and marketing, manufacturing the product and/or securing commercial quantities of product from manufacturers and product distribution.

      The extent of our need for additional capital will depend on numerous factors, including, but not limited to:

      We have no commitments or arrangements from third parties for any additional financing to fund the research and development and commercialization of any of our product candidates. We may need to seek substantial additional financing through public and/or private financing, which may include equity and/or debt financings, and through other arrangements, including collaborative arrangements. However, financing may not be available when we need it, or may not be available on acceptable terms. Our ability to obtain additional debt financing may be limited by the amount of, terms and restrictions of our then current debt. For instance, we do not anticipate repaying the BlueCrest Loan until its scheduled maturity in May 2010. Accordingly, until such time, we will generally be restricted from, among other things, incurring additional indebtedness or liens, with limited exceptions. See “— We have a substantial amount of debt...” and “— Our outstanding indebtedness to BlueCrest Capital Finance, L.P. imposes certain restrictions...” Additional debt financing, if available, may involve restrictive covenants that limit or further limit our operating and financial flexibility and prohibit us from making distributions to shareholders. If we raise additional funds by issuing equity, equity-related or convertible securities, the economic, voting and other rights of our existing shareholders, including investors who purchase shares in this offering, may be diluted, and those securities may have rights superior to those of our common stock. If we obtain additional capital through collaborative

arrangements, we may be required to relinquish greater rights to our technologies or product candidates than we might otherwise have or become subject to restrictive covenants that may affect our business. If we are unable to raise additional funds when we need them, we may be required to delay, scale back or eliminate expenditures for our development programs, curtail efforts to commercialize our product candidates or reduce the scale of our operations, any of which could adversely affect our business, financial condition, results of operations, and could even prevent us from continuing our business at all.

Risks Related to Product Development

All of our product candidates are in an early stage of development and we may never succeed in developing and/or commercializing them. We depend heavily on the success of our lead product candidate, MyoCell. If we are unable to commercialize MyoCell or any of our other product candidates or experience significant delays in doing so, our business may fail.

      We have invested a significant portion of our efforts and financial resources in our lead product candidate, MyoCell, and depend heavily on its success. MyoCell is currently being tested in clinical trials. Even if MyoCell progresses through clinical trials as we anticipate, we do not expect MyoCell to be commercially available until, at the soonest, the second quarter of 2008. We need to devote significant additional research and development, financial resources and personnel to develop commercially viable products, obtain regulatory approvals and establish a sales and marketing infrastructure.

      We are likely to encounter hurdles and unexpected issues as we proceed in the development of MyoCell and our other product candidates. There are many reasons that we may not succeed in our efforts to develop our product candidates, including the possibility that:

Our approach of using cell-based therapy for the treatment of heart damage is risky and unproven and no products using this approach have received regulatory approval in the United States or Europe.

      No company has yet been successful in its efforts to obtain regulatory approval in the United States or Europe of a cell-based therapy product for the treatment of heart damage. Cell-based therapy products, in general, may be susceptible to various risks, including undesirable and unintended side effects, unintended immune system responses, inadequate therapeutic efficacy or other characteristics that may prevent or limit their approval by regulators or commercial use. Many companies in the industry have suffered significant setbacks in advanced clinical trials, despite promising results in earlier trials. One of our competitors exploring the use of skeletal myoblasts has announced its intent to cease to enroll new patients in its European Phase II clinical trial based on the determination of its monitoring committee that there was a low likelihood that the trial would result in the hypothesized improvement in heart function. Although our clinical research to date suggests that MyoCell may improve the contractile function of the heart, we have not yet been able to demonstrate a mechanism of action and additional research is needed to precisely identify such mechanism.

If our clinical trials are unsuccessful or significantly delayed, or if we do not complete our clinical trials, we will not receive regulatory approval for or be able to commercialize our product candidates.

      Our lead product candidate, MyoCell, is still in clinical testing and has not yet received approval from the FDA or any similar foreign regulatory authority for any indication. MyoCell may never receive regulatory approval or be commercialized in the United States or other countries. Although we intend to seek regulatory approval of MyoCell in the United States based upon the results of the Phase II/III MARVEL Trial, there

can be no assurances that the FDA will consider the MARVEL Trial pivotal. Accordingly, we may be required to conduct additional trials prior to obtaining commercial approval, if ever, in the United States.

      We cannot market any product candidate until regulatory agencies grant approval or licensure. In order to obtain regulatory approval for the sale of any product candidate, we must, among other requirements, provide the FDA and similar foreign regulatory authorities with preclinical and clinical data that demonstrate to the satisfaction of regulatory authorities that our product candidates are safe and effective for each indication under the applicable standards relating to such product candidate. The preclinical studies and clinical trials of any product candidates must comply with the regulations of the FDA and other governmental authorities in the United States and similar agencies in other countries.

      Even if we achieve positive interim results in clinical trials, these results do not necessarily predict final results, and positive results in early trials may not be indicative of success in later trials. For example, MyoCell has been studied in a limited number of patients to date. Even though our early data has been promising, we have not yet completed any large-scale pivotal trials to establish the safety and efficacy of MyoCell. A number of participants in our clinical trials have experienced serious adverse events adjudicated or determined by trial investigators to be potentially attributable to MyoCell. See “Risk Factors — Our product candidates may never be commercialized due to unacceptable side effects and increased mortality that may be associated with such product candidates.” There is a risk that safety concerns relating to our product candidates or cell-based therapies in general will result in the suspension or termination of our clinical trials.

      We may experience numerous unforeseen events during, or as a result of, the clinical trial process that could delay or prevent regulatory approval and/or commercialization of our product candidates, including the following:

      In the SEISMIC Trial, we have continued to experience delays attributable to slower than anticipated enrollment of patients. We may continue to experience difficulties in enrolling patients in our clinical trials,

which could increase the costs or affect the timing or outcome of these trials and could prevent us from completing these trials.

      Failures or perceived failures in our clinical trials would delay and may prevent our product development and regulatory approval process, make it difficult for us to establish collaborations, negatively affect our reputation and competitive position and otherwise have a material adverse effect on our business.

Our product candidates may never be commercialized due to unacceptable side effects and increased mortality that may be associated with such product candidates.

      Possible side effects of our product candidates may be serious and life-threatening. A number of participants in our clinical trials of MyoCell have experienced serious adverse events potentially attributable to MyoCell, including six patient deaths and 18 patients experiencing irregular heartbeats. A serious adverse event is generally an event that results in significant medical consequences, such as hospitalization, disability or death, and must be reported to the FDA. The occurrence of any unacceptable serious adverse events during or after preclinical and clinical testing of our product candidates could temporarily delay or negate the possibility of regulatory approval of our product candidates and adversely affect our business. Both our trials and independent trials have reported the occurrence of irregular heartbeats in treated patients, a significant risk to patient safety. We and our competitors have also, at times, suspended trials studying the effects of myoblasts, at least temporarily, to assess the risk of irregular heartbeats and it has been reported that one of our competitors studying the effect of myoblast implantation prematurely discontinued a study because of the high incidence of irregular heartbeats. While we believe irregular heartbeats may be manageable with the use of certain prophylactic measures including an implantable cardioverter defibrillator, or ICD, and anti-arrhythmic drug therapy, these risk management techniques may not prove to sufficiently reduce the risk of unacceptable side effects. Although our early results suggest that patients treated with MyoCell do not face materially different health risks than heart failure patients with similar levels of damage to the heart who have not been treated with MyoCell, we are still in the process of seeking to demonstrate that our product candidates do not pose unacceptable health risks. We have not yet treated a sufficient number of patients to allow us to make a determination that serious unintended consequences will not occur.

We depend on third parties to assist us in the conduct of our preclinical studies and clinical trials, and any failure of those parties to fulfill their obligations could result in costs and delays and prevent us from obtaining regulatory approval or successfully commercializing our product candidates on a timely basis, if at all.

      We engage consultants and contract research organizations to help design, and to assist us in conducting, our preclinical studies and clinical trials and to collect and analyze data from those studies and trials. The consultants and contract research organizations we engage interact with clinical investigators to enroll patients in our clinical trials. As a result, we depend on these consultants and contract research organizations to perform the studies and trials in accordance with the investigational plan and protocol for each product candidate and in compliance with regulations and standards, commonly referred to as “good clinical practice”, for conducting, recording and reporting results of clinical trials to assure that the data and results are credible and accurate and the trial participants are adequately protected, as required by the FDA and foreign regulatory agencies. We may face delays in our regulatory approval process if these parties do not perform their obligations in a timely or competent fashion or if we are forced to change service providers. We were recently informed by our contract research organization for the MYOHEART Trial that it is going out of business. Although we do not intend to engage a replacement full service contract research organization, we are seeking to engage alternate service providers to assist us to complete the data management and verification processes. To the extent we are unable to timely engage sufficient alternative service providers, we may experience delays in our projected timeline for receiving final results from the MYOHEART Trial. The risk of delays is heightened for our clinical trials conducted outside of the United States, where it may be more difficult for us to ensure that studies are conducted in compliance with foreign regulatory requirements. Any third parties that we hire to conduct clinical trials may also provide services to our competitors, which could compromise the performance of their obligations to us. If these third parties do not successfully carry out their

duties or meet expected deadlines, or if the quality, completeness or accuracy of the data they obtain is compromised due to their failure to adhere to our clinical trial protocols or for other reasons, our clinical trials may be extended, delayed or terminated or may otherwise prove to be unsuccessful. If there are delays or failures in clinical trials or regulatory approvals as a result of the failure to perform by third parties, our development costs will increase, and we may not be able to obtain regulatory approval for our product candidates. In addition, we may not be able to establish or maintain relationships with these third parties on favorable terms, if at all. If we need to enter into replacement arrangements because a third party is not performing in accordance with our expectations, we may not be able to do so without undue delays or considerable expenditures or at all.

Risks Related to Government Regulation and Regulatory Approvals

Our cell-based product candidates are based on novel technologies and the FDA and regulatory agencies in other countries have limited experience reviewing product candidates using these technologies.

      We are subject to the risks of failure inherent in the development of product candidates based on new technologies. The novel nature of our product candidates creates significant challenges in regards to product development and optimization, government regulation, third party reimbursement and market acceptance. These include:

      As a result, the development and commercialization pathway for our cell-based therapies may be subject to increased uncertainty, as compared to the pathway for new conventional drugs.

We are subject to numerous risks associated with seeking regulatory approval of MyoCell pursuant to a protocol that requires the use of a catheter system which is still subject to FDA approval. The catheter system we intend to use in connection with our MARVEL Trial is owned by an unaffiliated third party. Although we have entered into a two-year supply agreement for delivery of the catheter system for use in the MARVEL Trial, we are subject to a number of risks not addressed by the parties in the supply agreement.

      We have been cleared by the FDA to proceed under the protocol for our MARVEL Trial, which protocol requires participating trial investigators to use Biosense Webster’s, a Johnson & Johnson company, NOGA ^® Cardiac Navigation System along with the MyoStar ^tm injection catheter, or MyoStar, or collectively with the NOGA ^® Cardiac Navigation System, the MyoStar System, for the delivery of MyoCell to patients enrolled in the trial. We further anticipate that if MyoCell receives regulatory approval, such approval will require MyoCell to be injected with a catheter system that has also secured regulatory approval. Accordingly, the commercial deployment of MyoCell is dependent upon MyoStar, MyoCath or some other catheter system securing regulatory approval for use with MyoCell. Although MyoStar has received CE mark approval in Europe, neither MyoStar, MyoCath nor any other catheter system is commercially available in the United States and they may only be used pursuant to FDA approved investigational protocols. Notwithstanding the devotion of considerable resources to the development and testing of MyoStar and MyoCath, they may never receive additional or any, respectively, regulatory approval that will allow for their commercial use with MyoCell.

      We are not affiliated with Biosense Webster, the Cordis Corporation or any other Johnson & Johnson company. Although we entered into a supply agreement with Biosense Webster on May 10, 2007 pursuant to which it has agreed to deliver MyoStar to us for a two year period at an agreed upon price as and when required by the MARVEL Trial, we currently have no right to control the further development, clinical testing and/or refinement of MyoStar. Biosense Webster currently has the right to make the following types of decisions without consulting with or even considering our views, which decisions could directly or indirectly negatively impact our efforts and/or ability to secure regulatory approval of MyoCell:

The unavailability of the MyoStar System, for any reason, would have a material adverse effect on our product development and commercialization efforts as we will be unable to recover the time and money expended on the MARVEL Trial prior to such determination of unavailability.

We must comply with extensive government regulations in order to obtain and maintain marketing approval for our products in the United States and abroad. If we do not obtain regulatory approval for our product candidates, we may be forced to cease our operations.

      Our product candidates are subject to extensive regulation in the United States and in every other country where they will be tested or used. These regulations are wide-ranging and govern, among other things:

      We cannot market our product candidates until we receive regulatory approval. The process of obtaining regulatory approval is lengthy, expensive and uncertain. Any difficulties that we encounter in obtaining regulatory approval may have a substantial adverse impact on our business and cause our stock price to decline significantly.

      In the United States, the FDA imposes substantial requirements on the introduction of biological products and many medical devices through lengthy and detailed laboratory and clinical testing procedures, sampling activities and other costly and time-consuming procedures. Satisfaction of these requirements typically takes several years and the time required to do so may vary substantially based upon the type and complexity of the biological product or medical device.

      In addition, product candidates that we believe should be classified as medical devices for purposes of the FDA regulatory pathway may be determined by the FDA to be biologic products subject to the satisfaction of significantly more stringent requirements for FDA approval.

      The requirements governing the conduct of clinical trials and cell culturing and marketing of our product candidates outside the United States vary widely from country to country. Foreign approvals may take longer to obtain than FDA approvals and can require, among other things, additional testing and different clinical trial designs. Foreign regulatory approval processes generally include all of the risks associated with the FDA approval processes. Some foreign regulatory agencies also must approve prices of the products. Regulatory approval in one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others. We may not be able to file for regulatory approvals and may not receive necessary approvals to market our product candidates in any foreign country. If we fail to comply with these regulatory requirements or fail to obtain and maintain required approvals in any foreign country, we will not be able to sell our product candidates in that country and our ability to generate revenue will be adversely affected.

      We cannot assure you that we will obtain FDA or foreign regulatory approval to market any of our product candidates for any indication in a timely manner or at all. If we fail to obtain regulatory approval of any of our product candidates for at least one indication, we will not be permitted to market our product candidates and may be forced to cease our operations.

Even if some of our product candidates receive regulatory approval, these approvals may be subject to conditions, and we and our third party manufacturers will in any event be subject to significant ongoing regulatory obligations and oversight.

      Even if any of our product candidates receives regulatory approval, the manufacturing, marketing and sale of our product candidates will be subject to stringent and ongoing government regulation. Conditions of approval, such as limiting the category of patients who can use the product, may significantly impact our ability to commercialize the product and may make it difficult or impossible for us to market a product profitably. Changes we may desire to make to an approved product, such as cell culturing changes or revised labeling, may require further regulatory review and approval, which could prevent us from updating or otherwise changing an approved product. If our product candidates are approved by the FDA or other regulatory authorities for the treatment of any indications, regulatory labeling may specify that our product candidates be used in conjunction with other therapies. For instance, we currently anticipate that prior implantation of an ICD and treatment with optimal drug therapy will be required at least initially as a condition to treatment with MyoCell.

      Once obtained, regulatory approvals may be withdrawn for a number of reasons, including the later discovery of previously unknown problems with the product. Regulatory approval may also require costly post-marketing follow-up studies, and failure of our product candidates to demonstrate sufficient efficacy and safety in these studies may result in either withdrawal of marketing approval or severe limitations on permitted product usage. In addition, numerous additional regulatory requirements relating to, among other processes, the labeling, packaging, adverse event reporting, storage, advertising, promotion and record-keeping will also apply. Furthermore, regulatory agencies subject a marketed product, its manufacturer and the manufacturer’s facilities to continual review and periodic inspections. Compliance with these regulatory requirements are time consuming and require the expenditure of substantial resources.

      If any of our product candidates is approved, we will be required to report certain adverse events involving our products to the FDA, to provide updated safety and efficacy information and to comply with requirements concerning the advertisement and promotional labeling of our products. As a result, even if we obtain necessary regulatory approvals to market our product candidates for any indication, any adverse results, circumstances or events that are subsequently discovered, could require that we cease marketing the product for that indication or expend money, time and effort to ensure full compliance, which could have a material adverse effect on our business.

      In response to recent events regarding questions about the safety of certain approved prescription products, including the lack of adequate warnings, the FDA and the U.S. Congress are currently considering new regulatory and legislative approaches to advertising, monitoring and assessing the safety of marketed drugs, including legislation authorizing the FDA to mandate labeling changes for approved products, particularly those related to safety. It is possible that congressional and FDA initiatives pertaining to ensuring the safety of marketed biologics and similar initiatives in other countries, or other developments pertaining to the pharmaceutical industry, could require us to expend additional resources to comply with such initiatives and could adversely affect our operations.

      In addition, the FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of any failure to comply with applicable laws and regulations or defects in design or manufacture. In the event any of our product candidates receives approval and is commercialized, a government-mandated or voluntary product recall by us could occur as a result of component failures, device malfunctions, or other negative events such as serious injuries or deaths, or quality-related issues such as cell culturing errors or design or labeling defects. Recalls of any of our potential products could divert managerial and financial resources, harm our reputation and adversely affect our financial condition, results of operations and stock price.

      Any failure by us, or by any third parties that may manufacture or market our products, to comply with the law, including statutes and regulations administered by the FDA or other U.S. or foreign regulatory authorities, could result in, among other things, warning letters, fines and other civil penalties, suspension of regulatory approvals and the resulting requirement that we suspend sales of our products, refusal to approve pending applications or supplements to approved applications, export or import restrictions, interruption of production, operating restrictions, closure of the facilities used by us or third parties to manufacture our product candidates, injunctions or criminal prosecution. Any of the foregoing actions could have a material adverse effect on our business.

We must comply with federal, state and foreign laws, regulations and other rules relating to the healthcare business, and, if we do not fully comply with such laws, regulations and other rules, we could face substantial penalties.

      We are, or will be directly or indirectly through our customers, subject to extensive regulation by the federal government, the states and foreign countries in which we may conduct our business. The laws that directly or indirectly affect our ability to operate our business include the following:

      If our operations are found to be in violation of any of the laws, regulations, rules or policies described above or any other law or governmental regulation to which we or our customers are or will be subject, or if the interpretation of the foregoing changes, we may be subject to civil and criminal penalties, damages, fines, exclusion from the Medicare and Medicaid programs and the curtailment or restructuring of our operations.

Similarly, if our customers are found non-compliant with applicable laws, they may be subject to sanctions, which could also have a negative impact on us. Any penalties, damages, fines, curtailment or restructuring of our operations would adversely affect our ability to operate our business and our financial results. The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations, and additional legal or regulatory change. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses, divert our management’s attention from the operation of our business and damage our reputation.

Our business involves the use of hazardous materials that could expose us to environmental and other liability.

      Our facility in Sunrise, Florida is subject to various local, state and federal laws and regulations relating to the use and disposal of hazardous or potentially hazardous substances, including chemicals and micro-organisms used in connection with our research and development activities. In the United States, these laws include the Occupational Safety and Health Act, the Toxic Test Substances Control Act and the Resource Conservation and Recovery Act. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards prescribed by these regulations, we cannot assure you that accidental contamination or injury to employees and third parties from these materials will not occur. Although we have insurance coverage of up to $250,000 to cover claims arising from our use and disposal of these hazardous substances, the insurance that we currently hold may not be adequate to cover all liabilities relating to our use and disposal of hazardous substances.

Risks Related to Commercialization of our Product Candidates

If we are successful in securing regulatory approval of MyoCell utilizing a protocol that requires the use of MyoStar, we will be subject to numerous risks associated with commercializing a therapy that requires the use of a product that we do not control.

      Except for the agreement pursuant to which Biosense Webster has agreed to deliver MyoStar to us in connection with the MARVEL Trial, we have no agreement in place with Biosense Webster that defines our relationship with them and our prospective customers. Accordingly, Biosense Webster currently has the right to make the following types of decisions without consulting with or even considering our views, which decisions could directly or indirectly negatively impact our efforts and/or ability to commercialize MyoCell:

      Similarly, we have no control over the intellectual property rights underlying MyoStar or the MyoStar System, no ability to protect or defend any such intellectual property rights and no ability to prevent Biosense Webster from licensing or selling these intellectual property rights to one of our competitors.

The healthcare community has relatively little experience with therapies based on cellular medicine and, accordingly, if our product candidates do not become widely accepted by physicians, patients, third party payors or the healthcare community, we may be unable to generate significant revenue, if any.

      We are developing cell-based therapy product candidates for the treatment of heart damage that represent novel and unproven treatments and, if approved, will compete with a number of more conventional

products and therapies manufactured and marketed by others, including major pharmaceutical companies. We cannot predict or guarantee that physicians, patients, healthcare insurers, third party payors or health maintenance organizations, or the healthcare community in general, will accept or utilize any of our product candidates. We anticipate that, if approved, we will market MyoCell primarily to interventional cardiologists, who are generally not the primary care physicians for patients who may be eligible for treatment with MyoCell. Accordingly, our commercial success may be dependent on third party physicians referring their patients to interventional cardiologists for MyoCell treatment.

      If we are successful in obtaining regulatory approval for any of our product candidates, the degree of market acceptance of those products will depend on many factors, including:

      Failure to achieve market acceptance would limit our ability to generate revenue and would have a material adverse effect on our business. In addition, if any of our product candidates achieve market acceptance, we may not be able to maintain that market acceptance over time if competing products or technologies are introduced that are received more favorably or are more cost-effective.

There is substantial uncertainty as to the coverage that may be available and the reimbursement rates that may be established for our product candidates. Any failure to obtain third party coverage or an adequate level of reimbursement for our product candidates will likely have a material adverse effect on our business.

      If we successfully develop, and obtain necessary regulatory approvals for, our product candidates we intend to sell them initially in Europe and the United States. We have not yet submitted any of our product candidates to the Center for Medicare and Medicaid Services, or CMS, or any private or governmental third party payor in the United States to determine whether or not our product candidates will be covered under private or public health insurance plans or, if they are covered, what coverage or reimbursement rates may be available. Although we believe hospitals may be entitled to some procedure reimbursement for MyoCell, we cannot assure you that such reimbursement will be adequate or available at all.

      In Europe, the pricing of prescription pharmaceutical products and services and the level of government reimbursement generally are subject to governmental control. Reimbursement and healthcare payment systems in European markets vary significantly by country, and may include both government-sponsored healthcare and private insurance. In these countries, pricing negotiations with governmental authorities can take six to twelve months or longer after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct one or more clinical

trials that compare the cost effectiveness of our product candidates to other available therapies. Conducting one or more clinical trials for this purpose would be expensive and result in delays in commercialization of our product candidates. We may not obtain coverage or reimbursement or pricing approvals from countries in Europe in a timely manner, or at all. Any failure to receive coverage or reimbursement or pricing approvals from one or more European countries could effectively prevent us from selling our product candidates in those countries, which could materially adversely affect our business.

      In the United States, our revenues will depend upon the coverage and reimbursement rates and policies established for our product candidates by third party payors, including governmental authorities, managed-care providers, public health insurers, private health insurers and other organizations. These third party payors are increasingly attempting to contain healthcare costs by limiting both coverage and the level of reimbursement for new healthcare products approved for marketing by the FDA or regulatory agencies in other countries. As a result, significant uncertainty exists as to whether newly approved medical products will be eligible for coverage by third party payors or, if eligible for coverage, what the reimbursement rates will be for those products. Furthermore, cell-based therapies like MyoCell may be more expensive than pharmaceuticals, due to, among other things, the higher cost and complexity associated with the research, development and production of these therapies. This, in turn, may make it more difficult for us to obtain adequate reimbursement from third party payors, particularly if we cannot demonstrate a favorable cost-benefit relationship. Third party payors may also deny coverage or offer inadequate levels of reimbursement for our potential products if they determine that the product has not received appropriate clearances from the FDA or other government regulators or is experimental, unnecessary or inappropriate. Accordingly, we cannot assure you that adequate third party coverage or reimbursement will be available for any of our product candidates to allow us to successfully commercialize these product candidates.

      Coverage and reimbursement rates for our product candidates may be subject to increased restrictions both in the United States and in other countries in the future. Coverage policies and reimbursement rates are subject to change and we cannot guarantee that current coverage policies and reimbursement rates will be applicable to our product candidates in the future. U.S. federal, state and foreign agencies and legislatures from time to time may seek to impose restrictions on coverage, pricing, and reimbursement level of drugs, devices and healthcare services in order to contain healthcare costs.

We have only limited experience culturing our cell-based product candidates, and we may not be able to culture our product candidates in quantities sufficient for clinical studies or for commercial sale. We also face certain risks in connection with our use of third party manufacturers and cell culturing service providers.

      We may encounter difficulties in the production of our cell-based product candidates, including MyoCell, due to our limited experience internally culturing our product candidates. We have a cell culturing facility in Sunrise, Florida, which we believe has the capacity to meet substantially all of our projected demand for MyoCell in the United States for the balance of 2007. We began culturing cells at this facility for preclinical uses in the third quarter of 2006. Prior to such date, we outsourced our various cell culturing needs. We anticipate that we will begin culturing cells at this facility for clinical uses upon commencement of the MARVEL Trial. We have no experience in culturing our product candidates for the number of patients that will be required for later stage clinical studies or commercialization and may be unable to culture sufficient quantities of our product candidates for our clinical trials or our commercial needs on a timely and cost-effective basis. Difficulties arising from our limited cell culturing experience could reduce sales of our products, increase our costs or cause production delays, any of which could adversely affect our results of operations.

      We intend to further optimize our processing times by building our facilities or contracting with a small number of cell culturing facilities in strategic regional locations. We anticipate that a portion of the funds necessary to construct new manufacturing facilities may be made available to us by the governments of the countries where we seek to build such facilities. To the extent these funds are not available to us, we may be unable to construct these facilities or may need to seek additional capital.

      We anticipate that we will continue to use third party cell culturing service providers, including Pharmacell and Cambrex Bioscience, to supply a portion of our cell-based product candidates, including MyoCell, for clinical trials and commercial sales outside of the United States. We may not be able to, and in our Phase I/ II clinical trial experienced delays because we were not at times able to, obtain sufficient quantities of MyoCell from third party cell culturing service providers. In addition, our third party cell culturing providers may be unable to culture commercial quantities of our product candidates on a timely and cost-effective basis. The term of our supply agreement with Pharmacell expires six months following the end of completion of the SEISMIC and MARVEL Trials unless terminated earlier. We cannot be certain that we will be able to maintain our relationships with our third party cell culturing service providers, including Pharmacell, or establish relationships with other cell culturing service providers on commercially acceptable terms.

      We currently use and expect to continue to use third party manufacturers to supply our device product candidates, including MyoCath. Our contract with our only MyoCath manufacturer terminated in September 2007. We anticipate negotiating a new agreement with another manufacturer. The transition to a replacement contract manufacturer has additional risks, including those risks associated with the development by the replacement contract manufacturer of sufficient levels of expertise in the manufacturing process. If we are unable to enter into a replacement agreement with another contract manufacturer on reasonable terms and in a timely manner, or if any replacement contract manufacturer is unable to develop sufficient manufacturing expertise in a timely manner, we could experience shortages of clinical trial materials, which could adversely affect our business.

      Our cell culturing facility and those of our contract manufacturers and other cell culturing service providers will be subject to ongoing, periodic inspection by the FDA to confirm that the facilities comply with the FDA’s current Good Manufacturing Practices, or cGMP, if the facility manufactures biologics, and quality system regulations if the facility manufactures devices. Foreign regulatory agencies, for example, the International Standards Organization and the European authorities related to obtaining a “CE mark” on a device in Europe, may also impose similar requirements on us and conduct similar inspections of the facilities that manufacture our product candidates. Failure to follow and document adherence to such cGMP regulations or other regulatory requirements by us or our contract manufacturers or third party cell culturing service providers may lead to significant delays in the availability of our product candidates for commercial use or clinical study, may result in the delay or termination of a clinical trial, or may delay or prevent filing of applications for or our receipt of regulatory approval of our product candidates. If we or such third parties fail to comply with applicable regulations, the FDA or other regulatory authorities could impose sanctions on us, including fines, injunctions, civil penalties, denial of marketing approval of our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of our product candidates, operating restrictions and criminal prosecutions. Any of these events could adversely affect our financial condition, profitability and ability to develop and commercialize products on a timely and competitive basis.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell our product candidates, we may be unable to generate product revenues.

      We do not have a sales and marketing force and related infrastructure and have limited experience in the sales, marketing and distribution of our product candidates. To achieve commercial success for any approved product, we must either develop a sales and marketing force or outsource these functions to third parties. Currently, we intend to internally develop a direct sales and marketing force in both Europe and the United States as we approach commercial approval of our product candidates. The development of our own sales and marketing force will result in us incurring significant costs before the time that we may generate revenues. We may not be able to attract, hire, train and retain qualified sales and marketing personnel to build a significant or effective marketing and sales force for sales of our product candidates.

Product liability and other claims against us may reduce demand for our products or result in substantial damages. We anticipate that we will need to obtain and maintain additional or increased insurance coverage, and we may not be able to obtain or maintain such coverage on commercially reasonable terms, if at all.

      A product liability claim, a clinical trial liability claim or other claim with respect to uninsured liabilities or for amounts in excess of insured liabilities could have a material adverse effect on our business. Our business exposes us to potential liability risks that may arise from the clinical testing of our product candidates in human clinical trials and the manufacture and sale of any approved products. Any clinical trial liability or product liability claim or series of claims or class actions brought against us, with or without merit, could result in:

      Although we have clinical trial liability insurance, our current clinical trial liability insurance is subject to deductibles and coverage limitations. This insurance currently covers claims of up to $5 million each and up to $10 million in the aggregate each year. Our current clinical trial liability insurance may not continue to be available to us on acceptable terms, if at all, and, if available, the coverage may not be adequate to protect us against future clinical trial liability claims. We are currently seeking to increase our clinical trial liability insurance coverage.

      We do not currently have product liability insurance because none of our product candidates has yet been approved for commercialization. While we plan to seek product liability insurance coverage if any of our product candidates are sold commercially, we cannot assure you that we will be able to obtain product liability insurance on commercially acceptable terms, if at all, or that we will be able to maintain such insurance at a reasonable cost or in sufficient amounts to protect against potential losses.

      Claims may be made by consumers, healthcare providers, third party strategic collaborators or others selling our products if one of our products or product candidates causes, or appears to have caused, an injury. We may be subject to claims against us even if an alleged injury is due to the actions of others. For example, we rely on the expertise of physicians, nurses and other associated medical personnel to perform the medical procedures and processes related to our product candidates. If these medical personnel are not properly trained or are negligent in using our product candidates, the therapeutic effect of our product candidates may be diminished or the patient may suffer injury, which may subject us to liability. In addition, an injury resulting from the activities of our suppliers may serve as a basis for a claim against us.

      We do not intend to promote, or to in any way support or encourage the promotion of, our product candidates for off-label or otherwise unapproved uses. However, if our product candidates are approved by the FDA or similar foreign regulatory authorities, we cannot prevent a physician from using them for any off-label applications. If injury to a patient results from such an inappropriate use, we may become involved in a product liability suit, which will likely be expensive to defend.

      These liabilities could prevent or interfere with our clinical efforts, product development efforts and any subsequent product commercialization efforts, all of which could have a material adverse effect on our business.

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

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

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

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

We have provided a non-affiliated Korean entity certain technology to manufacture MyoCell and MyoCath and face the risk that such action and/or the actions of the Korean entity may materially damage our business, expose us to liability and/or result in the termination of various intellectual property licenses that are important to us.

      On February 1, 2005, we entered into a joint venture agreement with Bioheart Korea, Inc., pursuant to which we and Bioheart Korea agreed to create a joint venture company called Bioheart Manufacturing which intends to provide cell culturing services in Korea. We do not have operating control over Bioheart Manufacturing. In addition, our minority interest in Bioheart Manufacturing and our agreements to provide Bioheart Korea certain technologies are governed, in part, by South Korean laws and do not define in a comprehensive manner our various contractual and legal rights. As a result, at times our various rights have been subject to varying interpretations, and we may encounter comparable challenges in the future. We have also had limited operational experience with Bioheart Manufacturing and Bioheart Korea and are still in the process of defining our relationship with them and how we will work together.

      Our agreements to provide Bioheart Manufacturing with the technology to manufacture MyoCell and MyoCath are subject to varying interpretations that may increase our risk of disputes with Bioheart Manufacturing, Bioheart Korea and certain parties that licensed to us certain technology related to MyoCell and/or MyoCath. We also face the risk that Bioheart Manufacturing may not utilize or may not be perceived as utilizing our intellectual property rights in accordance with the terms of our agreements with them and/or our agreements with various third parties that have licensed technology to us. For instance, a complaint filed against us by Peter K. Law, Ph.D. and Cell Transplants Asia appears to question our rights to provide certain intellectual property to Bioheart Manufacturing and/or Bioheart Manufacturing’s right to use certain intellectual property. See “Legal Proceedings” below for a description of the complaint and the reasons we believe the complaint should be dismissed. If Bioheart Manufacturing were to misuse our intellectual property rights, such misuse could, among other things, materially damage our business, expose us to potential liability and/or result in the termination of various intellectual property licenses that are important to us.

Risks Related to Our Intellectual Property

We have licensed and therefore do not own the intellectual property that is critical to our business. Any events or circumstances that result in the termination or limitation of our rights under any of the agreements between us and the licensors of our intellectual property could have a material adverse effect on our business.

      The intellectual property that is critical to our business has been licensed to us by various third parties. The operative terms of some of our material license agreements are vague or subject to interpretations which may increase the risks of dispute with our licensors.

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

      On March 9, 2007, Peter K. Law, Ph.D. and Cell Transplants Asia, Limited, an entity wholly owned by Dr. Law, filed a complaint against us and Howard J. Leonhardt, individually, in the United States District Court for the Western District of Tennessee alleging, among other things, certain breaches of our licensing agreement with them. On July 26, 2007, the court granted the motion to dismiss Mr. Leonhardt in his individual capacity but denied the motion to dismiss the claims against us. Dr. Law and Cell Transplants International are the licensors of the primary patent protecting MyoCell. Please see “Legal Proceedings” below for a description of the allegations made in the complaint. While the complaint does not appear to challenge our rights to license this patent and we believe this lawsuit is without merit, this litigation, if not resolved to the satisfaction of both parties, may adversely impact our relationship with Dr. Law and could, if resolved unfavorably to us, adversely affect our MyoCell commercialization efforts and have a significant impact on our results of operations and financial condition.

      Any termination or limitation of, or loss of exclusivity under, our exclusive or conditionally exclusive license agreements would have a material adverse effect on us and could delay or completely terminate our product development efforts.

We generally do not have the right under our material license agreements to control the protection of the patents licensed thereunder and, as a result, our licensors may take actions and make decisions that could materially adversely affect our business.

      Under our material license agreements, including, but not limited to, our license agreement for the primary patent for MyoCell, our licensors generally have the right to control the filing, prosecution, maintenance and defense of all licensed patents and patent applications and, if a third party infringes on any of those licensed patents, to control any legal or other proceedings instituted against that third party for infringement. As a result, our licensors may take actions or make decisions relating to these matters with which we do not agree or which could have a material adverse effect on our business. Likewise, our licensors may in the future grant licenses outside the field of heart damage treatment to third parties to use the patents and other intellectual property to which we have rights under our exclusive or conditionally exclusive license agreements. Should our licensors elect not to pursue the filing, prosecution or maintenance of a licensed patent application or patent or institute legal or other proceedings against a third party for infringements of those patents, then we may be required to undertake these proceedings alone or jointly with others, who may have interests that are different from ours. Under certain of our license agreements, we have no right to undertake these proceedings even if our licensors refuse to do so. As a result, we may have no control or only limited control over the prosecution, maintenance, defense and enforcement of patent applications and patents that are critical to our business. In that regard, certain of our license agreements require that we contribute to the costs of filing, prosecuting, maintaining, defending and enforcing the licensed patent applications, patents and other intellectual property, whether or not we agree with those actions. Further, such actions typically require the expenditure of considerable time and money. See “Business — Technology In-Licenses and Other Agreements” for further information regarding our rights to control the protection of our patents under our material license agreements.

We do not have patent protection for MyoCell outside of the United States and we may not be able to effectively enforce our intellectual property rights in certain countries, which could have a material adverse effect on our business.

      We are seeking or intend to seek regulatory approval to market our product candidates in a number of foreign countries, including various countries in Europe. MyoCell, however, is not protected by patents outside of the United States, which means that competitors will be free to sell products that incorporate the same technologies that are used in MyoCell in those countries, including in European countries, which we believe may be one of the largest potential markets for these product candidates. In addition, the laws and practices in some of those countries, or others in which we may seek to market our other product candidates in the future, may not protect intellectual property rights to the same extent as in the United States. We or our licensors may not be able to effectively obtain, maintain or enforce rights with respect to the intellectual property relating to our product candidates in those countries. Our lack of patent protection in one or more countries, or the inability to obtain, maintain or enforce intellectual property rights in one or more countries, could adversely affect our ability to commercialize our products in those countries and otherwise have a material adverse effect on our business.

Our success depends on the protection of our intellectual property rights, particularly the patents that have been licensed to us, and our failure to secure and maintain these rights would materially harm our business.

      Our commercial success depends to a significant degree on our ability to:

      The degree of intellectual property protection for our technology is uncertain, and only limited intellectual property protection may be available for our product candidates, which may prevent us from gaining or keeping any competitive advantage against our competitors. Although we believe the patents that have been licensed or sublicensed to us, and the patent applications that we own or that have been licensed to us, generally provide us a competitive advantage, the patent positions of biotechnology, biopharmaceutical and medical device companies are generally highly uncertain, involve complex legal and factual questions and have been the subject of much litigation. Neither the U.S. Patent and Trademark Office nor the courts have a consistent policy regarding the breadth of claims allowed or the degree of protection afforded under many biotechnology patents. Even if issued, patents may be challenged, narrowed, invalidated or circumvented, which could limit our ability to stop competitors from marketing similar products or limit the length of term of patent protection we may have for our products. Further, a court or other government agency could interpret our patents in a way such that the patents do not adequately cover our current or future product candidates. Changes in either patent laws or in interpretations of patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection.

      In particular, we cannot assure you that:

      Accordingly, we may fail to secure meaningful patent protection relating to any of our existing or future product candidates or discoveries despite the expenditure of considerable resources. Further, there may be widespread patent infringement in countries in which we may seek patent protection, including countries in Europe, which may instigate expensive and time consuming litigation which could adversely affect the scope of our patent protection. In addition, others may attempt to commercialize products similar to our product candidates in countries where we do not have adequate patent protection. Failure to obtain adequate patent protection for our product candidates, or the failure by particular countries to enforce patent laws or allow prosecution for alleged patent infringement, may impair our ability to be competitive. The availability of infringing products in markets where we have patent protection, or the availability of competing products in markets where we do not have adequate patent protection, could erode the market for our product candidates, negatively impact the prices we can charge for our product candidates, and harm our reputation if infringing or competing products are manufactured to inferior standards.

The patent we believe is the primary basis for the protection of MyoCell is scheduled to expire in the United States in July 2009 and if we are unable to secure a patent term extension, we will have to seek to protect MyoCell through a combination of patents on other aspects of our technology and trade secrets, which may not prove to be effective.

      We anticipate that we will seek to collaborate with the owners of the patent, Dr. Peter Law and Cell Transplants International, to extend the term of this patent. In the event MyoCell is approved by the FDA prior to the patent expiration date and certain other material conditions are satisfied, we believe that this patent will be eligible for a five-year extension of its term until July 2014. It is likely, however, that the FDA will not complete review of and grant approval for MyoCell before this patent expires. In such event, a regular patent term extension will not be available, but Dr. Law and Cell Transplants International could request a one-year interim extension of the patent term during the period beginning six months before and ending fifteen days before the patent expiration. The request for interim extension must satisfy a number of material conditions including those conditions necessary to receive a regular patent term extension. Under certain circumstances the patent owner can request up to four additional one-year interim extensions. However, we cannot assure you that Dr. Law and Cell Transplants International will seek to obtain, or will be successful in obtaining, any regular or interim patent term extension.

      Once this patent expires, competitors will not be prevented from developing or marketing their own similar or identical compositions for the treatment of muscle degeneration, assuming they receive the requisite regulatory approval.

Our most important license agreement with respect to MyoCath is co-exclusive and the co-licensor of the intellectual property, a division of Abbott Laboratories, may also seek to commercialize MyoCath.

      In June 2003, we assigned our exclusive license to the primary patent protecting MyoCath to Advanced Cardiovascular Systems, Inc., or ACS, originally a subsidiary of Guidant Corporation and now d/b/a Abbott Vascular, a division of Abbott Laboratories. In connection with this agreement, ACS granted to us a co-exclusive, irrevocable, fully paid-up license to this patent for the life of the patent. Because our license is co-exclusive with ACS, ACS may, parallel to our efforts, seek to commercialize MyoCath if MyoCath secures regulatory approval. Accordingly, even if ACS does nothing to assist us to secure regulatory approval of MyoCath, ACS may become a direct competitor in the MyoCath manufacturing and supply business. In addition, pursuant to our agreement with ACS, we are prohibited from contracting with third parties for the distribution of MyoCath.

Our proposed pathway for securing regulatory approval of Bioheart Acute Cell Therapy is dependent on Tissue Genesis’ timely and successful completion of a Device Master File for the TGI 1200.

      We have developed a proposed pathway for seeking regulatory approval of Bioheart Acute Cell Therapy, which pathway depends on Tissue Genesis timely completing its Device Master File for the TGI 1200. A Device Master File is a voluntary submission to the FDA to provide confidential detailed information on a specific manufacturing facility, process, methodology, or component used in the manufacture, processing, or packaging of a medical device. Based upon our discussions with Tissue Genesis, we anticipate that the detailed information to be contained in the Device Master File to be filed by Tissue Genesis will be used in support of our IND application for Bioheart Acute Cell Therapy which, assuming favorable preclinical test results, we hope to file in the fourth quarter of 2007. We have no control over the content of the Device Master File and limited influence on the timing of its submission to the FDA. Our dependence upon Tissue Genesis to timely complete the Device Master File places us in a position where we cannot reliably predict our ability to meet our projected development timeline for Bioheart Acute Cell Therapy.

We have limited recourse available in the event that patents necessary for the use by our customers of the TGI 1200 product candidate, certain disposable products used in conjunction with this product candidate or processes or cells derived from this product candidate directly or indirectly infringe any patent rights of a third party.

      Our customers’ use of the TGI 1200 product candidate, certain disposable products used in conjunction with this product candidate and processes or cells derived from this product candidate may be determined to directly or indirectly infringe on patent rights held by third parties, including Thomas Jefferson University, or Third Party Patent Rights.

      The recourse available to us in the event that these patents are determined to directly or indirectly infringe any of the Third Party Patent Rights is limited by the terms of our exclusive license and distribution agreement with Tissue Genesis. Pursuant to this agreement, Tissue Genesis has agreed that we and our customers will not be liable for damages for directly or indirectly infringing any Third Party Patent Rights for the treatment of acute heart attacks. Tissue Genesis has, subject to certain conditions, also agreed to indemnify and hold harmless us and our customers from all claims that the products infringe any patents, copyrights or trade secret rights of a third party. However, if our use of the products is enjoined or if Tissue Genesis wishes to minimize its liability, Tissue Genesis may, at its option and expense, either:

      If none of the foregoing is feasible, Tissue Genesis is required to accept a return of the infringing product and refund to us the amount paid for such product. Any termination of our right to use, lease or sell the TGI 1200, certain disposable products used in conjunction with this product candidate and/or the processes or cells derived from this product candidate or any inability by Tissue Genesis to refund to us the amounts we paid for such products could have a material adverse effect on us.

Patent applications owned by or licensed to us may not result in issued patents, and our competitors may commercialize the discoveries we attempt to patent.

      The patent applications that we own and that have been licensed to us, and any future patent applications that we may own or that may be licensed to us, may not result in the issuance of any patents. The standards that the U.S. Patent and Trademark Office and foreign patent offices use to grant patents are not always applied predictably or uniformly and can change. Consequently, we cannot be certain as to the type and scope of patent claims to which we may in the future be entitled under our license agreements or that may be issued to us in the future. These applications may not be sufficient to meet the statutory requirements for patentability and therefore may not result in enforceable patents covering the product candidates we want to commercialize. Further, patent applications in the United States that are not filed in other countries generally are not published until at least 18 months after they are first filed and patent applications in certain foreign countries generally are not published until many months after they are filed. Scientific and patent publication often occurs long after the date of the scientific developments disclosed in those publications. As a result, we cannot be certain that we or any of our licensors was or will be the first creator of inventions covered by our (or their) patents or applications or the first to file such patent applications. As a result, our issued patents and patent applications could become subject to challenge by third parties that created such inventions or filed patent applications before us or our licensors, resulting in, among other things, interference proceedings in the U.S. Patent and Trademark Office to determine priority of discovery or invention. Interference proceedings, if resolved adversely to us or our licensors, could result in the loss of or significant limitations on patent protection for our products or technologies. Even in the absence of interference proceedings, patent applications now pending or in the future filed by third parties may prevail over the patent applications that have been or may be owned by or licensed to us or that we or our licensors may file in the future or may result in patents that issue alongside patents issued to us or our licensors or that may be issued or licensed to us in

the future, leading to uncertainty over the scope of the patents owned by or licensed to us or that may in the future be owned by us or our freedom to practice the claimed inventions.

Our patents may not be valid or enforceable, and may be challenged by third parties.

      We cannot assure you that the patents that have been issued or licensed to us would be held valid by a court or administrative body or that we would be able to successfully enforce our patents against infringers, including our competitors. The issuance of a patent is not conclusive as to its validity or enforceability, and the validity and enforceability of a patent is susceptible to challenge on numerous legal grounds. Challenges raised in patent infringement litigation brought by or against us may result in determinations that patents that have been issued or licensed to us or any patents that may be issued to us or our licensors in the future are invalid, unenforceable or otherwise subject to limitations. In the event of any such determinations, third parties may be able to use the discoveries or technologies claimed in these patents without paying licensing fees or royalties to us, which could significantly diminish the value of our intellectual property and our competitive advantage. Even if our patents are held to be enforceable, others may be able to design around our patents or develop products similar to our products that are not within the scope of any of our patents.

      In addition, enforcing the patents that have been licensed to us and any patents that may be issued to us in the future against third parties may require significant expenditures regardless of the outcome of such efforts. Our inability to enforce our patents against infringers and competitors may impair our ability to be competitive and could have a material adverse effect on our business.

Issued patents and patent licenses may not provide us with any competitive advantage or provide meaningful protection against competitors.

      We own, hold licenses or hold sublicenses to an intellectual property portfolio consisting of approximately 19 patents and 19 patent applications in the United States, and approximately twelve patents and 51 patent applications in foreign countries, for use in the field of heart muscle regeneration. However, the discoveries or technologies covered by these patents and patent licenses may not have any value or provide us with a competitive advantage and many of these discoveries or technologies may not be applicable to our product candidates at all. With the exception of the technology related to MyoCell, we have devoted limited resources to identifying competing technologies that may have a competitive advantage relative to ours, especially those competing technologies that are not perceived as infringing on our intellectual property rights. In addition, the standards that courts use to interpret and enforce patent rights are not always applied predictably or uniformly and can change, particularly as new technologies develop. Consequently, we cannot be certain as to how much protection, if any, will be afforded by these patents with respect to our products if we or our licensors attempt to enforce these patent rights and those rights are challenged in court.

      The existence of third party patent applications and patents could significantly limit our ability to obtain meaningful patent protection. If patents containing competitive or conflicting claims are issued to third parties, we may be enjoined from pursuing research, development or commercialization of product candidates or may be required to obtain licenses, if available, to these patents or to develop or obtain alternative technology. If another party controls patents or patent applications covering our product candidates, we may not be able to obtain the rights we need to those patents or patent applications in order to commercialize our product candidates or we may be required to pay royalties, which could be substantial, to obtain licenses to use those patents or patent applications. We believe we will need to, among other things, license additional intellectual property to commercialize a number of our product candidates, including MyoCell II with SDF-1, in the form we believe may prove to be the most safe and/or effective.

      In addition, issued patents may not provide commercially meaningful protection against competitors. Other parties may seek and/or be able to duplicate, design around or independently develop products having effects similar or identical to our patented product candidates that are not within the scope of our patents. For example, we believe that a number of our competitors have proposed catheter designs that are apparently intended to avoid infringing upon our catheter related technology.

      Limitations on patent protection in some countries outside the United States, and the differences in what constitutes patentable subject matter in these countries, may limit the protection we have under patents issued outside of the United States. We do not have patent protection for our product candidates in a number of our target markets and, under our license agreements, we may not have the right to initiate proceedings to obtain patents in those countries. The failure to obtain adequate patent protection for our product candidates in any country would impair our ability to be commercially competitive in that country.

Litigation or other proceedings relating to patent and other intellectual property rights could result in substantial costs and liabilities and prevent us from commercializing our product candidates.

      Our commercial success depends significantly on our ability to operate in a way that does not infringe or violate the intellectual property rights of third parties in the United States and in foreign countries. Except for the complaint filed against us by Dr. Law and Cell Transplants Asia, we are not currently a party to any litigation or other adverse proceeding with regard to our patents or intellectual property rights. However, the biotechnology, biopharmaceutical and medical device industries are characterized by a large number of patents and patent filings and frequent litigation based on allegations of patent infringement. Competitors may have filed patent applications or have been issued patents and may obtain additional patents and proprietary rights related to products or processes that compete with or are similar to ours. We may not be aware of all of the patents potentially adverse to our interests that may have been issued to others. Because patent applications can take many years to issue, there may be currently pending applications, unknown to us, which may later result in issued patents that our product candidates or proprietary technologies may infringe. Third parties may claim that our products or related technologies infringe their patents. Further, we, or our licensors, may need to participate in interference, opposition, protest, reexamination or other potentially adverse proceedings in the U.S. Patent and Trademark Office or in similar agencies of foreign governments with regards to our patents and intellectual property rights. In addition, we or our licensors may need to initiate suits to protect our intellectual property rights.

      Certain of our competitors in the field have acquired patents which might be used to attempt to prevent commercialization of MyoCell. We are aware of at least three such patent families. We believe the patents in these three families are narrow, and that we do not infringe any valid claims of these patents in our current practice. The U.S. Patent and Trademark Office has commenced a re-examination relating to one of these patent families. There is no assurance that we will receive a favorable ruling in this proceeding. In the event that the proceeding fails to result in limitation of the claims of the subject patent, such outcome may have a material adverse effect on our business, financial condition and results of operation.

      Litigation or any other proceeding relating to intellectual property rights, even if resolved in our favor, may cause us to incur significant expenses, divert the attention of our management and key personnel from other business concerns and, in certain cases, result in substantial additional expenses to license technologies from third parties. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. An unfavorable outcome in any patent infringement suit or other adverse intellectual property proceeding could require us to pay substantial damages, including possible treble damages and attorneys’ fees, cease using our technology or developing or marketing our products, or require us to seek licenses, if available, of the disputed rights from other parties and potentially make significant payments to those parties. There is no guarantee that any prevailing party would offer us a license or that we could acquire any license made available to us on commercially acceptable terms. Even if we are able to obtain rights to a third party’s patented intellectual property, those rights may be non-exclusive and therefore our competitors may obtain access to the same intellectual property. Ultimately, we may be unable to commercialize our product candidates or may have to cease some of our business operations as a result of patent infringement claims, which could materially harm our business. We cannot guarantee that our products or technologies will not conflict with the intellectual property rights of others.

      If we need to redesign our products to avoid third party patents, we may suffer significant regulatory delays associated with conducting additional studies or submitting technical, cell culturing, manufacturing or other information related to any redesigned product and, ultimately, in obtaining regulatory approval. Further,

any such redesigns may result in less effective and/or less commercially desirable products if the redesigns are possible at all.

      Additionally, any involvement of us in litigation in which we or our licensors are accused of infringement may result in negative publicity about us or our products, injure our relations with any then-current or prospective customers and marketing partners and cause delays in the commercialization of our products.

If we are not able to protect and control unpatented trade secrets, know-how and other technological innovation, we may suffer competitive harm.

      In addition to patented intellectual property, we also rely on unpatented technology, trade secrets, confidential information and proprietary know-how to protect our technology and maintain our competitive position, especially when we do not believe that patent protection is appropriate or can be obtained. Trade secrets are difficult to protect. In order to protect proprietary technology and processes, we rely in part on confidentiality and intellectual property assignment agreements with our employees, consultants and others. These agreements generally provide that the individual must keep confidential and not disclose to other parties any confidential information developed or learned by the individual during the course of the individual’s relationship with us except in limited circumstances. These agreements generally also provide that we shall own all inventions conceived by the individual in the course of rendering services to us. These agreements may not effectively prevent disclosure of confidential information or result in the effective assignment to us of intellectual property, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information or other breaches of the agreements. In addition, others may independently discover trade secrets and proprietary information that have been licensed to us or that we own, and in such case we could not assert any trade secret rights against such party. Enforcing a claim that a party illegally obtained and is using trade secrets that have been licensed to us or that we own is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the United States may be less willing to protect trade secrets. Costly and time-consuming litigation could be necessary to seek to enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret protection could have a material adverse effect on our business. Moreover, some of our academic institution licensors, collaborators and scientific advisors have rights to publish data and information to which we have rights. If we cannot maintain the confidentiality of our technologies and other confidential information in connection with our collaborations, our ability to protect our proprietary information or obtain patent protection in the future may be impaired, which could have a material adverse effect on our business.

Other Risks Related to Our Business

Our operations are consolidated primarily in one facility. A disaster at this facility is possible and could result in a prolonged interruption of our business.

      All of our administrative operations and substantially all of our U.S. cell culturing operations are located at our facilities in Sunrise, Florida. Our business is and will continue to be influenced by local economic, financial and other conditions affecting the South Florida area. This may include prolonged or severe inclement weather in the South Florida area or a catastrophic event such as a hurricane, tropical storm or tornado, all of which are common events in Florida. In 2005, two named storms made landfall in the South Florida area. Hurricane and tropical storm damage could adversely affect our financial condition in a number of ways. Although we have a back-up generator and fuel tank capable of powering our offices for an estimated five to seven days in the event of a power outage, damage to our offices, road inaccessibility, flooding and employee dislocation could result in our inability to advance our research efforts or provide cell culturing services, temporary closure and the inability of our employees to report for work.

We depend on attracting and retaining key management and scientific personnel and the loss of these personnel could impair the development of our products candidates.

      Our success depends on our continued ability to attract, retain and motivate highly qualified management, clinical and scientific personnel and on our ability to develop and maintain important relationships with

academic institutions, clinicians and scientists. In March 2007, we hired Mr. William M. Pinon to serve as our President and Chief Executive Officer and appointed Mr. Howard J. Leonhardt, who served as our Chief Executive Officer from inception until March 2007, as our Executive Chairman and Chief Technology Officer. We are highly dependent upon our senior scientific staff, many of whom have developed very specialized expertise in their position. The loss of services of one or more members of our senior scientific staff could significantly delay or prevent the successful completion of our clinical trials or commercialization of our product candidates. The employment of each of our employees with us is “at will,” and each employee can terminate his or her employment with us at any time. We do not have a succession plan in place for any of our officers and key employees. Although we are seeking to secure “key person” insurance on Mr. Leonhardt and Mr. Pinon, we do not carry insurance on any of our other key employees and, accordingly, their death or disability may have a material adverse effect on our business.

      The competition for qualified personnel in the life sciences field is intense. We will need to hire additional personnel, including regulatory and sales personnel, as we continue to expand our development activities. We may not be able to attract and retain quality personnel on acceptable terms given our geographic location and the competition for such personnel among life sciences, biotechnology, pharmaceutical and other companies. If we are unable to attract new employees and retain existing employees, we may be unable to continue our development and commercialization activities and our business may be harmed.

If we acquire other businesses and technologies our performance may suffer.

      If we are presented with opportunities, we may seek to acquire additional businesses and/or technologies. The acquisition of businesses and technologies may require significant expenditures and management resources that could otherwise be available for development of other aspects of our business and, despite the expenditures and use of resources, we may not immediately seek to further develop such technologies or seek to develop such technologies at all. In the past, we have expended resources to acquire rights to future product candidates which we have not chosen to develop to date as we have focused our efforts on the development of our lead product candidate. Future acquisitions may require the issuance of additional shares of stock or other securities which would further dilute your investment or the incurrence of additional debt and liabilities which could create additional expenses, any of which may negatively impact our financial results and result in restrictions on our business that may harm our future outlook and cause our stock price to decline.

We may not be able to effectively manage our future growth.

      If we are able to commercialize one or more of our product candidates, we may not be able to manage future growth following such commercialization because:

      Although certain members of our management team have prior experience in successfully developing, seeking regulatory approval for and commercializing medical products, we have never successfully developed, obtained regulatory approval for and commercialized any drug, device or therapy or operated our business outside of the development stage and our ability to successfully do so is unproven. Any inability to manage our growth effectively could adversely affect our business.

Expansion into international markets is important to our long-term success, and our inexperience in operations outside the United States increases the risk that our international operations may not be successful.

      We believe that our future growth depends on obtaining regulatory approvals to sell our product candidates in foreign countries and our ability to sell our product candidates in those countries. It is our intention to initially seek regulatory approval of MyoCell in certain countries in Europe. We and our

management team have only limited experience with operations outside the United States. We believe that many of the risks we face in the United States are heightened in international markets because, among other things, our existing management team has devoted the vast majority of their professional careers to businesses located in the United States. As a result, our management team may be more likely than their European counterparts to inaccurately assess, estimate or project:

      In addition, our goal of selling our products into international markets will require management attention and resources and is subject to inherent risks, which may adversely affect us, including:

      These factors and other factors could adversely affect our ability to execute our international marketing strategy or otherwise have a material adverse effect on our business.

Because we have operated as a private company, we have no experience complying with public company obligations. Compliance with these requirements will increase our costs and require additional management resources, and we may still fail to comply.

      We will incur significant additional legal, accounting, insurance and other expenses as a result of being a public company that we have not incurred as a private company. For example, laws and regulations affecting public companies, including the provisions of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and rules related to corporate governance and other matters subsequently adopted by the Securities and Exchange Commission, or the SEC, and the NASDAQ Global Market will result in substantially increased costs to us, including legal and accounting costs, and may divert our management’s attention from other matters that are important to our business. These rules and any related regulations that may be proposed in the future will likely make it more difficult or more costly for us to obtain certain types of insurance, including directors’ and officers’ liability insurance, and we may be forced to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. The impact of these laws, rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers. We cannot predict or estimate the amount of the additional costs we may incur, but we expect our operating results will be adversely affected by the costs of operating as a public company.

Our internal control over financial reporting may be insufficient to detect in a timely manner misstatements that could occur in our financial statements in amounts that may be material.

      In connection with the audit of our financial statements for the year ended December 31, 2005, we identified a significant deficiency in our internal control over financial reporting which constituted a material weakness. A material weakness is a significant deficiency, or combination of significant deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The significant deficiency related to our year-end closing methodologies and was based on the number and size of year-end adjustments we recorded. As of December 31, 2006, our management determined that this material weakness and significant deficiency was remedied through, among other things, our addition of a chief financial officer and a corporate controller. We may still experience material weaknesses and significant deficiencies in the future, which, if not remediated, may render us unable to prevent or detect in a timely manner material misstatements that could occur in our monthly or interim financial statements.

Failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could have a material adverse effect on our business.

      As a public company, within the next 24 months, we will be required to document and test our internal financial control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act, which will require annual management assessments of the effectiveness of our internal control over financial reporting and a report by our independent auditors that both addresses management’s assessments and provides for the independent auditor’s assessment of the effectiveness of our internal control over financial reporting. During the course of our testing, we may identify deficiencies which we may not be able to remediate in time to meet our deadline for compliance with Section 404, and we may also identify inaccuracies or deficiencies in our financial reporting that could require revisions to or restatement of prior period results. Testing and maintaining internal control over financial reporting also will involve significant costs and can divert our management’s attention from other matters that are important to our business. We may not be able to conclude on an ongoing basis that our internal control over financial reporting is effective in accordance with Section 404, and our independent registered public accounting firm may not be able or willing to issue a favorable assessment of our conclusions. Failure to achieve and maintain an effective internal control environment could harm our operating results and could cause us to fail to meet our reporting obligations and could require that we restate our financial statements for prior periods, any of which could cause investors to lose confidence in our reported financial information and cause a decline, which could be material, in the trading price of our common stock.

We face intense competition in the biotechnology and healthcare industries.

      We face, and will continue to face, intense competition from pharmaceutical, biopharmaceutical, medical device and biotechnology companies developing heart failure treatments both in the United States and abroad, as well as numerous academic and research institutions, governmental agencies and private organizations engaged in drug discovery activities or funding both in the United States and abroad. We also face competition from entities and healthcare providers using more traditional methods, such as surgery and pharmaceutical regimens, to treat heart failure. We believe there are a substantial number of heart failure products under development by numerous pharmaceutical, biopharmaceutical, medical device and biotechnology companies, and it is likely that other competitors will emerge. We are also aware of several competitors developing cell- based therapies for the treatment of heart damage, including MG Biotherapeutics, LLC (a joint venture between Genzyme Corporation and Medtronic, Inc.), Mytogen, Inc., Baxter International, Inc., Osiris Therapeutics, Inc., Viacell, Inc., Cytori Therapeutics, Inc. and potentially others. We also recognize that there may be competitors and competing technologies, therapies and/or products that we are not aware of.

      These third parties also compete with us in recruiting and retaining qualified personnel, establishing clinical trial sites and registering patients for clinical trials, as well as acquiring or licensing intellectual property and technology. Many competitors have more experience than we do in research and development, marketing, cell culturing, manufacturing, preclinical testing, conducting clinical trials, obtaining FDA and

foreign regulatory approvals and marketing approved products. The competitors, some of which have their own sales and marketing organizations, have greater financial and technical resources than we do and may be better equipped than we are to sell competing products, obtain patents that block or otherwise inhibit our ability to further develop and commercialize our product candidates, obtain approvals from the FDA or other regulatory agencies for products more rapidly than we do, or develop treatments or cures that are safer or more effective than those we propose to develop. In addition, academic institutions, governmental agencies, and other public and private organizations conducting research in the field of heart damage may seek patent protection with respect to potentially competitive products or technologies and may establish exclusive collaborative or licensing relationships with our competitors.

      MyoCell is a clinical therapy designed to be utilized at least a few months after a patient has suffered heart damage. Our competitors may discover technologies and techniques for the acute treatment of heart failure, which, if successful in treating heart failure shortly after its occurrence, may reduce the market size for treatments for chronic heart damage, including MyoCell.

Our industry is subject to rapid technological change.

      Our industry is subject to rapid technological change and our cellular-based therapies involve new and rapidly developing technology. Our competitors may discover and develop new technologies and techniques, or enter into partnerships with collaborators in order to develop, competing products that are more effective or less costly than the product candidates we hope to secure regulatory approval for. In light of the industry’s limited experience with cell-based therapies and the dedication of significant resources to a better understanding of this field, we expect these cell-based technologies to undergo significant change in the future. For example, some of our competitors are exploring whether the use of cells, other than myoblasts, is safer or more effective than MyoCell. If there is rapid technological development or new product introductions, our current and future product candidates or methods may become obsolete or noncompetitive before or after we commercialize them.

We have a contingent liability under California law due to our issuances of some securities that may have violated California securities laws.

      We believe that we may have issued options to purchase common stock to certain of our employees, directors and consultants in California in violation of the registration or qualification provisions of applicable California securities laws. As a result, we intend to make a rescission offer to these persons pursuant to a registration statement we expect to file after this offering under the Securities Act of 1933, as amended, or the Securities Act, and pursuant to California securities laws. We will make this offer to all persons who have a continuing right to rescission, which we believe to include two persons. In the rescission offer, in accordance with California law, we will offer to repurchase all options issued to these persons at 77% of the option exercise price times 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 may be subject to rescission as of September 1, 2007, assuming that all such options are tendered in the rescission offer, we estimate that our total rescission liability would be up to approximately $350,000. However, as we believe 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 us, no liability has been recorded in our financial statements.

Risks Related to This Offering

There is no prior public market for our stock. Our stock price may be volatile and you may be unable to sell your shares at or above the offering price.

      There previously has been no public market for our common stock. The initial public offering price for our shares was determined by negotiations between us and representatives of the underwriters and does not purport to be indicative of prices that will prevail in the trading market. The market price of our common

stock could be subject to wide fluctuations in response to many risk factors described in this section and other matters, including:

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

Our existing shareholders, including Mr. Leonhardt, have significant control of our management and affairs, which they could exercise against your best interests.

      Immediately following the completion of this offering, based on shares outstanding as of September 27, 2007, our executive officers and directors and persons and entities that were our shareholders prior to this offering will beneficially own an aggregate of approximately 76.2% of our outstanding common stock, or approximately 73.6% of our outstanding common stock if the underwriters’ over-allotment option is exercised in full.

      In particular, Mr. Leonhardt, our Executive Chairman and Chief Technology Officer will own approximately 26.2% of our outstanding common stock immediately following this offering, or approximately 25.3% of our outstanding common stock if the underwriters’ over-allotment option is exercised in full, in each case based on shares outstanding as of September 30, 2007.

      Since our inception, Mr. Leonhardt has, at various times, provided us with financial support, including by:

      We anticipate that we may continue to enter into transactions with Mr. Leonhardt in the future. Although we believe that all prior transactions with Mr. Leonhardt were on terms no less favorable to us than could have been obtained from unaffiliated third parties, there can be no assurances that future transactions or arrangements between us and Mr. Leonhardt will be advantageous to us, that conflicts of interest will not arise with respect to such transactions or arrangements, or that if such conflicts arise, they will be resolved in a manner favorable to us.

      The following transactions or events, among others, could increase Mr. Leonhardt’s direct or indirect influence over our management by increasing his ownership of our common stock and otherwise:

      For instance, since we do not intend to use the proceeds of this offering to repay the Bank of America Loan, we anticipate that we might offer common stock or other securities to satisfy our various obligations to Mr. Leonhardt and various other guarantors of the Bank of America Loan. We cannot predict the terms, if any, upon which Mr. Leonhardt would agree to accept such securities.

      As a result of his current holdings of our common stock, Mr. Leonhardt currently has, and could continue to have, a significant influence over the outcome of all corporate actions requiring shareholder approval, including the election of directors. This concentration of ownership in the hands of management or Mr. Leonhardt may have the effect of delaying or preventing a change of control, including a merger, consolidation or other business combination involving us, or discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control, even if such a change of control would benefit our other shareholders.

An active trading market for our common stock may not develop.

      This is our initial public offering of common stock, and prior to this offering there has been no public market for our common stock. The initial public offering price for our common stock will be determined through negotiations with the representatives of the underwriters. Although we have applied to have our common stock approved for quotation on the NASDAQ Global Market, an active trading market for our common stock may never develop or be sustained following this offering. If an active market for our common stock does not develop, it may be difficult for you to sell shares you purchase in this offering without depressing the market price for our common stock.

If you purchase shares of common stock sold in this offering, you will experience immediate and substantial dilution. You may also experience dilution in the future.

      The initial public offering price per share is substantially higher than the net tangible book value per share immediately after the offering. As a result, you will pay a price per share that substantially exceeds the book value of our assets after subtracting our liabilities. Assuming an offering price of $7.00, the midpoint of the range set forth on the cover of this prospectus, you will incur immediate and substantial dilution of $5.46 in the net tangible book value per share of the common stock from the price you paid. We also have outstanding stock options to purchase 2,102,008 shares of our common stock at a weighted average exercise price of $5.23 per share as of the end of the second quarter of 2007 and outstanding warrants to purchase 2,050,924 shares of our common stock at a weighted average exercise price of $7.50 per share as of the end of the second quarter of 2007. To the extent that options and warrants with an exercise price less than the initial public offering price are exercised, there will be further dilution.

      Under certain of our patent license agreements, including our license agreements with Cell Transplants International and the Cleveland Clinic, we are required to make certain large milestone payments upon our achievement of certain development and commercialization objectives. We may be required to or, to the extent we do not have the cash resources necessary to satisfy our obligations may seek to, issue shares or other securities in satisfaction of our financial obligations under these license agreements. To the extent we issue shares at a price per share less than the initial public offering price per share, you will incur dilution in the net tangible book value per share.

Following this offering, a substantial number of our shares of common stock will become available for sale in the public market, which may cause the market price of our stock to decline.

      Sales of our common stock in the public market following this offering, or the perception that those sales may occur, could cause the market price of our common stock to decline. Immediately upon completion of this offering, we will have 17,500,012 outstanding shares of common stock based on shares outstanding as of September 30, 2007. In general, the shares sold in this offering will be freely tradable without restriction, assuming they are not held by our affiliates. The remaining 13,333,345 shares of common stock outstanding after this offering will be available for sale in the public markets, pursuant to Rule 144 or Rule 701 under the Securities Act, although 8,007,347 shares held by our directors, officers and greater than 1% shareholders are subject to a 180 day lock-up period following the completion of this offering (subject to extension for up to an additional 34 days under limited circumstances as described under “Underwriting”).

      In addition, we intend to file one or more registration statements to register shares of common stock subject to outstanding stock options and warrants and common stock reserved for issuance under our Officers and Employees Stock Option Plan and Directors and Consultants Stock Option Plan. We expect these additional registration statements to become effective immediately upon filing.

      Furthermore, immediately after completion of this offering, the holders of 13,006 shares of our outstanding common stock will also have the right to require that we register those shares under the Securities Act on several occasions and will also have the right to include those shares in any registration statement we file with the SEC, subject to exceptions, which would enable those shares to be sold in the public markets, subject to the restrictions under lock-up agreements referred to above.

      Any or all shares subject to the lock-up agreements may be released, without notice to the public, for sale in the public markets prior to expiration of the lock-up period at the discretion of Merriman Curhan Ford & Co.

Our management has broad discretion in the use of the net proceeds from this offering and may not use them effectively.

      As of the date of this prospectus, we cannot specify with certainty the amount of net proceeds from this offering that we will spend on particular uses. Although our management currently intends to use the net proceeds in the manner described in “Use of Proceeds,” it will have broad discretion in the application of the

net proceeds. The failure by our management to apply these funds effectively could adversely affect our ability to continue to maintain and expand our business.

Anti-takeover provisions of Florida law, our articles of incorporation and our bylaws may prevent or delay an acquisition of us that shareholders may consider favorable or attempts to replace or remove our management that could be beneficial to our shareholders.

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

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

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

Our common stock may be considered a “penny stock,” and thereby be subject to additional sale and trading regulations that may make it more difficult to sell.

      Our common stock, which is not currently listed or quoted for trading, may be considered to be a “penny stock” if it does not qualify for one of the exemptions from the definition of “penny stock” under Section  3a51-1 of the Securities Exchange Act of 1934, as amended, or the Securities Exchange Act, once, and if, it starts trading. Our common stock may be a “penny stock” if it meets one or more of the following conditions (i) the stock trades at a price less than $5.00 per share; (ii) it is not traded on a “recognized” national exchange or (iii) it is not quoted on the Nasdaq Global Market, or even if so, has a price less than $5.00 per share.

      The principal result or effect of being designated a “penny stock” is that securities broker-dealers participating in sales of our common stock will be subject to the “penny stock” regulations set forth in Rules  15-2 through 15g-9 promulgated under the Securities Exchange Act. For example, Rule  15g-2 requires broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document at least two business days before effecting any transaction in a penny stock for the investor’s account. Moreover, Rule  15g-9 requires broker-dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor’s financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult and time consuming for holders of our common stock to resell their shares to third parties or to otherwise dispose of them in the market or otherwise.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

      This prospectus may contain forward-looking statements that 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 “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business.” 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.

      The forward-looking statements in this prospectus include, among other things, statements about:

      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 prospectus. You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which the prospectus is a part, 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. The forward-looking statements contained in this prospectus are not eligible for the safe harbor protection provided by the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended.

USE OF PROCEEDS

      Based upon an assumed initial public offering price of $7.00 per share (the mid-point of the range set forth on the cover page of this prospectus), we estimate that our net proceeds from the sale of shares of our common stock in this offering, after deducting underwriting discounts and commissions and estimated offering costs of approximately $5.5 million payable by us, will be approximately $23.6 million (or $27.7 million if the underwriters exercise their over-allotment option in full). Of the $5.5 million of estimated offering costs, approximately $1.3 million has been paid as of June 30, 2007. A $1.00 increase (decrease) in the assumed initial public offering price of $7.00 per share would increase (decrease) the net proceeds to us from this offering by $3.9 million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated expenses payable by us.

      We intend to use the net proceeds of this offering to fund the growth of our business, including:

      We intend to use the balance of the proceeds for general corporate purposes, including working capital needs.

      The enumerated uses of the proceeds of this offering described above include all the offering proceeds we expect to utilize to make payments under our existing license agreements, collaborative agreements, partnerships and joint ventures. We do not have any agreements or understandings relating to the acquisition of technologies or businesses or the establishment of new partnerships or joint ventures with respect to which we anticipate using the proceeds of this offering.

      The amounts and timing of our actual expenditures may vary significantly from our expectations depending upon numerous factors, including our results of operation, financial condition and capital requirements. Accordingly, we will retain the discretion to allocate the net proceeds of this offering among the identified uses described above, and we reserve the right to change the allocation of the net proceeds among the uses described above. Pending their use, we intend to invest the net proceeds in short-term, interest-bearing, investment-grade securities.

      The proceeds of the $5 million BlueCrest Loan, which bears interest at the rate of 12.85% and which is scheduled to mature in May 2010, are anticipated to be used for general corporate purposes. The BlueCrest Loan is secured by a first priority security interest in all of our assets, excluding our intellectual property but including the proceeds from any sale of our intellectual property.

DIVIDEND POLICY

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

CAPITALIZATION

      The following table presents our cash and cash equivalents and our capitalization as of June 30, 2007:

      The pro forma information below is illustrative only and our capitalization table following the completion of this offering will be adjusted based on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with the sections of this prospectus entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus.

      The table above reflects a 1-for-1.6187 reverse stock split that became effective on September 27, 2007.

      The table above excludes as of June 30, 2007:

      From July 1, 2007 through September 30, 2007, we issued options to purchase an aggregate of 68,420 shares of our common stock with a weighted average exercise price of $8.47 per share and warrants to

purchase 60,118 shares of our common stock with an exercise price of $7.69 per share. In addition, on September 30, 2007, the number of shares underlying certain of our outstanding warrants, each with an exercise price of $7.69 per share, increased from an aggregate of 276,213 shares to an aggregate of 315,073 shares in accordance with the terms of such warrants. We also issued, in this same period, an aggregate of 1,050 shares of our common stock upon the exercise of options with an exercise price of $5.67 per share.

DILUTION

      If you invest in our common stock, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock in this offering and the pro forma net tangible book value per share of our common stock after completion of this offering.

      Our net tangible book value as of June 30, 2007 was approximately $1.8 million, or approximately $0.13 per share of our common stock. Net tangible book value per share is determined at any date by subtracting our total liabilities from our total tangible assets (total assets less intangible assets) and dividing the difference by the number of our shares of common stock deemed to be outstanding at that date. Dilution in net tangible book value per share represents the difference between the amount per share paid by purchasers of shares of common stock in this offering and the net tangible book value per share of common stock immediately after completion of this offering.

      After giving effect to the sale of 4,166,667 shares offered by us in this offering at an assumed initial public offering price of $7.00 per share, the midpoint of the range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and our estimated offering expenses, our pro forma net tangible book value as of June 30, 2007 would have been approximately $26.9 million, or approximately $1.54 per share of common stock. This represents an immediate increase in pro forma net tangible book value of $1.41 per share to existing shareholders and an immediate dilution in pro forma net tangible book value of $5.46 per share to new investors. The following table illustrates this per share dilution:

      The following table summarizes as of June 30, 2007, the number of shares of our common stock purchased from us, the total consideration paid to us, and the average price per share paid to us by our existing shareholders and to be paid by new investors purchasing shares of our common stock in this offering based on an assumed public offering price of $7.00 per share, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us:

      The number of shares of common stock outstanding in the table above is based on the number of shares outstanding as of June 30, 2007, reflects a 1-for-1.6187 reverse stock split that became effective on September 27, 2007 and excludes:

      From July 1, 2007 through September 30, 2007, we issued options to purchase an aggregate of 68,420 shares of our common stock with an exercise price of $8.47 per share and warrants to purchase 60,118 shares of our common stock with a weighted average exercise price of $7.69 per share. In addition, on September 30, 2007, the number of shares underlying certain of our outstanding warrants, each with an exercise price of $7.69 per share, increased from an aggregate of 276,213 shares to an aggregate of 315,073 shares in accordance with the terms of such warrants. We also issued, in this same period, an aggregate of 1,050 shares of our common stock upon the exercise of options with an exercise price of $5.67 per share.

      Because the weighted average exercise price of the outstanding options is below the anticipated offering price, investors purchasing common stock in this offering will suffer additional dilution when and if these options are exercised. See “Management — Our Stock Option Plans” for further information regarding our equity incentive plans.

      A $1.00 increase (decrease) in the assumed initial public offering price of $7.00 per share would increase (decrease) our pro forma net tangible book value by $3.9 million and the pro forma net tangible book value per share after completion of this offering by $0.22 per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

      If the underwriters exercise their over-allotment option in full, the net tangible book value per share after completion of this offering would be $1.71 per share, the increase in net tangible book value per share to existing shareholders would be $1.58 per share and the dilution in net tangible book value to new investors would be $5.29 per share.

SELECTED CONSOLIDATED FINANCIAL DATA

      The following tables present selected consolidated historical financial data. We derived the selected consolidated statement of operations data for the years ended December 31, 2004, 2005 and 2006 and consolidated balance sheet data as of December 31, 2005 and 2006 from our audited financial statements and notes thereto that are included elsewhere in this prospectus. We derived the selected consolidated statement of operations data for the years ended December 31, 2002 and 2003 and the consolidated balance sheet data as of December 31, 2002, 2003 and 2004 from our audited financial statements that do not appear in this prospectus. We derived the consolidated statement of operations data for the six months ended June 30, 2006 and 2007 and the consolidated balance sheet data as of June 30, 2007 from our unaudited financial statements that are included elsewhere in this prospectus. The unaudited interim financial statements have been prepared on the same basis as our audited annual financial statements and, in our opinion, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the results of operations for the periods ended June 30, 2006 and 2007 and our financial condition as of June 30, 2007. The historical results are not necessarily indicative of the results to be expected for any future periods and the results for the six months ended June 30, 2007 should not be considered indicative of results expected for the full fiscal year.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

      The following discussion and analysis by our management of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes included elsewhere in this prospectus. This discussion and other parts of this prospectus contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in “Risk Factors.” Moreover, past financial and operating performances are not necessarily reliable indicators of future performance and you are cautioned in using our historical results to anticipate future results or to predict future trends.

Overview

      We are a biotechnology company focused on the discovery, development and, subject to regulatory approval, commercialization of autologous cell therapies for the treatment of chronic and acute heart damage. Our lead product candidate is MyoCell, an innovative clinical therapy designed to populate regions of scar tissue within a patient’s heart with muscle tissue for the purpose of improving cardiac function in chronic heart failure patients. Since our inception in August 1999, our principal activities have included:

      Our principal objective is to become a leading company that discovers, develops and commercializes novel, autologous cell therapies, and related devices, for the treatment of heart damage. To achieve this objective, we plan to pursue the following key strategies:

      We completed the MyoCell implantation procedure on the final patient in the SEISMIC Trial in July 2007. If the final SEISMIC Trial data is available in the first quarter of 2008 and is generally consistent with the interim data we intend to seek, in the second quarter of 2008, approval from various European regulatory bodies to market MyoCell to treat the Class III Subgroup.

      In November 2006, we submitted our amended IND application setting forth the proposed protocol for the MARVEL Trial to the FDA. As further amended, this study is planned to include 330 patients, including 110 controls, at 20 sites in the United States and Canada and up to 15 sites in Europe and Israel. In August 2007, we received clearance from the FDA to proceed with the MARVEL Trial.

      We are a development stage company and our lead product candidate has not received regulatory approval or generated any material revenues and is not expected to until early 2009, if ever. We have generated substantial net losses and negative cash flow from operations since inception and anticipate incurring significant and increasing 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. In particular, we expect that our research and development and general and administrative expenses will increase substantially from prior periods. As of June 30, 2007, our deficit accumulated during our development stage was approximately $69.6 million. From inception in August 1999 through June 30, 2007, we have financed our operations through private placements of our common stock in which we have raised an aggregate of $55.6 million.

      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.

Financial Operations Overview

      We have not generated any material revenues from our lead product candidate. The revenues we have recognized to date are related to (i) sales of MyoCath to ACS in connection with the testing of MyoCell, (ii) fees associated with our assignment to ACS of our rights relating to the primary patent covering MyoCath, or the Primary MyoCath Patent, and (iii) revenues generated from a paid registry trial in Mexico.

      In June 2003, we entered into agreements with ACS pursuant to which we assigned to ACS our rights relating to the Primary MyoCath Patent, committed to deliver 160 units of MyoCath and sold other related intellectual property for aggregate consideration of $900,000. We initially recorded payments received by us pursuant to these agreements as deferred revenue. We are recognizing the $900,000 as revenue on a pro rata basis as the catheters are delivered.

      We do not anticipate that our revenues will materially increase unless and until our lead product candidate, MyoCell, receives regulatory approval. Our revenue may vary substantially from quarter to quarter and from year to year. We believe that period-to-period comparisons of our results of operations are not meaningful and should not be relied upon as indicative of our future performance.

      Cost of sales consists primarily of the costs associated with the production of MyoCath and the costs associated with the culturing of cells for paid registry trials.

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

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

      We are focused on the development of a number of autologous cell-based therapies, and related devices, for the treatment of heart damage. Accordingly, many of our costs are not attributable to a specifically identified product candidate. We use our employee and infrastructure resources across several projects, and we do not account for internal research and development costs on a product candidate by product candidate basis. From inception through June 30, 2007, we incurred aggregate research and development costs of approximately $48.6 million related to our product candidates. We estimate that at least $11.5 million and $19.9 million of these expenses relate to our preclinical and clinical development of MyoCell, respectively, and at least $1.8 million and $3.3 million of these expenses relate to our preclinical and clinical development of MyoCath, respectively.

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

      Due to the risks inherent in the clinical trial process, development completion dates and costs vary significantly for each product candidate, are difficult to estimate and are likely to change as clinical trials progress. We currently estimate that, in addition to the costs we have incurred through June 30, 2007, it will cost us approximately $800,000 to complete the SEISMIC Trial and approximately $17.0 million to complete the MARVEL Trial.

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

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

      Stock-based compensation reflects our recognition as an expense of the value of stock options and other equity instruments issued to our employees and non-employees over the vesting period of the options.

      We have granted to our employees options to purchase common stock at exercise prices equal to the fair market value of the underlying stock at the time of each grant, as determined by our Board of Directors, with input from management.

      We granted stock options in 2005, during the first two quarters of 2006 and during part of the third quarter of 2006 at an exercise price of $5.67 per share. In part of the third quarter of 2006 and the fourth quarter of 2006, we granted stock options at an exercise price of $7.69 per share. During the first half of 2007, we granted stock options at an exercise price of $8.47 per share.

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

      A number of factors, including, but not limited to, our achievement of various clinical and operational milestones and an increase in the probability of our prospects for a liquidity event, contributed to increases in the fair value of our common stock as determined by our Board of Directors, from $5.67 to $7.69 in August 2006, from $7.69 to $8.47 in January 2007 and from $8.47 to our proposed offering price range. The following is a non-exhaustive summary of specific factors that contributed to changes in our Board’s determination of the fair value of our common stock:

      Change in Fair Value as of August 2006:

      Change in Fair Value as of January 2007:

      As of June 25, 2007, the date the Board last assessed the fair value of our common stock in connection with a grant of stock options, the Board’s determination of the fair value of our common stock had not materially changed since January 2007. The $8.47 exercise price of the options granted to our new Vice President of Financial Operations in July 2007 was established in an offer letter sent on June 11, 2007. While we had continued to achieve clinical and operational milestones, such as our hiring of our current Chief Executive Officer, the Board also considered our financial position, interim funding alternatives, delays we were experiencing in our efforts to conduct an initial public offering and the effect of potential future offering delays on our product development timelines.

      At the date of each option grant, our Board of Directors determined that the exercise price for each option was equivalent to the fair value of our common stock on such date. Our Board of Directors believes it properly valued our common stock in all periods, although we understand that the judgments required in such efforts necessarily involve an element of subjectivity. Contemporaneous valuations of our common stock by an unrelated party were not obtained because we were focusing our financial resources on expanding our business, and believed that our Board of Directors had considerable experience in the valuation of emerging companies.

      In December 2006 and February 2007, as part of our preparation for this offering and our 2005 and 2006 year-end audits, management retrospectively analyzed the fair value of our common stock as of December 31, 2005, September 30, 2006 and December 31, 2006. In performing these analyses, management utilized both a discounted cash flow methodology and a market multiple methodology. In preparing the discounted cash flow analysis, the key assumptions included a discount rate between 48% and 49%, an annual growth rate between 4% and 5% and a marketability discount of 30%. As part of the market multiples analysis, management developed a list of 19 companies that were considered comparable to us, and derived appropriate valuation multiples based on financial statements and stock data from the comparable companies. Those valuation multiples were then used to determine an implied total-invested-capital value for our company. From this amount, management derived a per share value for our common stock and then discounted the value of our common stock using a marketability discount of 30%. Based in part upon these analyses, we believe that our prior valuations of our common stock during these periods are appropriate.

      During 2005, 2006 and the first half of 2007, we recognized stock-based compensation expense of $2.0 million, $4.8 million and $695,000, respectively. A substantial portion of the expense recognized in 2006 relates to our issuance of common stock, stock options and stock warrants to an employee as part of a settlement in August 2006. We intend to grant stock options and other stock-based compensation in the future and we may therefore recognize additional stock-based compensation in connection with these future grants. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

Critical Accounting Policies

      This discussion and analysis of our financial condition and results of operations are based on 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 judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. While our critical accounting policies are described in Note 1 to our financial statements appearing elsewhere in this prospectus, we believe the following policies are important to understanding and evaluating our reported financial results:

      Prior to January 1, 2006, we accounted for stock-based compensation arrangements with employees under the intrinsic value method specified in Accounting Principles Board Opinion No. 25, or APB No. 25. Statement of Financial Accounting Standards, or SFAS, No. 123, Accounting for Stock-Based Compensation, as amended by SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, established the use of the fair value based method of accounting for stock-based compensation arrangements, under which compensation cost is determined using the fair value of stock-based compensation determined as of the grant date, and is recognized over the periods in which the related services are rendered. SFAS No. 123 permitted companies to elect to continue using the intrinsic value accounting method specified in APB No. 25 to account for stock-based compensation related to option grants and stock awards to employees. In 2005, we elected to retain the intrinsic value based method for such grants and awards and disclosed the pro forma effect of using the fair value based method to account for our stock-based compensation in Note 1 to our

financial statements. Option grants to non-employees are valued using the fair value based method prescribed by SFAS No. 123 and expensed over the period services are provided.

      In December 2004, the Financial Accounting Standards Board, or FASB, issued SFAS No. 123 (revised 2004) “Share-Based Payment,” or SFAS No. 123R. SFAS No. 123R eliminates, among other items, the use of the intrinsic value method of accounting and requires companies to recognize the cost of employee services received in exchange for awards of equity instruments, based on the grant date fair value of those awards, in the financial statements. SFAS No. 123R became effective for us as of January 1, 2006, resulting in an increase in our stock-based compensation expense. We expense amounts related to employee stock options granted after January 1, 2006 utilizing the Black-Scholes option pricing model to measure the fair value of stock options. We amortize the estimated fair value of employee stock option grants over the vesting period. Additionally, we are required to apply the provisions of SFAS No. 123R on a modified prospective basis to awards granted before January 1, 2006. Stock-based compensation expense for 2006 and future periods will include the unamortized portion of employee stock options granted prior to January 1, 2006. Our future equity-based compensation expense will also depend on the number of equity instruments granted and the estimated value of the underlying common stock at the date of grant.

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

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

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

Results of Operations

      We are a development stage company and our lead product candidate has not received regulatory approval or generated any material revenues and is not expected to until early 2009, if ever. We have generated substantial net losses and negative cash flow from operations since inception and anticipate incurring significant and increasing 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. In particular, we expect that our research and development and marketing, general and administrative expenses will increase substantially from prior periods.

      We recognized revenues of $208,000 in the six months ended June 30, 2007, an increase of $133,000 from revenues of $75,000 in the six months ended June 30, 2006. Our primary source of revenue continues to be sales of MyoCath catheters to ACS. In June 2007, we delivered 30 MyoCath catheters to ACS pursuant to our agreement with them, recognized $191,000 of revenue and a corresponding decrease to deferred revenue.

In the first six months of 2006, we recognized $57,000 of revenue upon delivery of MyoCath catheters to ACS and a corresponding charge to deferred revenue.

      Cost of sales was $34,000 in the six months ended June 30, 2007 as compared to $44,000 in the six months ended June 30, 2006. The costs attributable to the catheters delivered in the first half of 2007 was less than the cost attributable to the catheters delivered in the first half of 2006.

      Research and development expenses were $3.2 million in the six months ended June 30, 2007, an increase of $500,000 from research and development expenses of $2.7 million in the six months ended June 30, 2006. Of the expenses incurred in the first half of 2007, approximately $963,000 relates to the MYOHEART and SEISMIC Trials, approximately $507,000 relates to advanced research and business development and approximately $402,000 relates to start-up costs for the MARVEL Trial.

      Marketing, general and administrative expenses were $1.8 million in the six months ended June 30, 2007, an increase of $500,000, or approximately 32.1%, from marketing, general and administrative expenses of $1.3 million in the six months ended June 30, 2006. The increase in marketing, general and administrative expenses is primarily attributable to increases in legal fees, professional recruiting fees, salary expense for our Chief Financial Officer hired in August 2006 and our Chief Executive Officer hired in March 2007 and lease expenses for additional office space.

      Interest income consists of interest earned on our cash and cash equivalents. Interest income was $116,000 in the six months ended June 30, 2007 compared to interest income of $58,000 in the six months ended June 30, 2006. The increase in interest income was primarily attributable to higher cash balances in the first half of 2007 as compared to the first half of 2006 resulting from sales of our common stock in the third and fourth quarters of 2006 and the first quarter of 2007.

      Interest expense consists of interest incurred on our outstanding indebtedness and the amortization of related deferred loan costs. On June 1, 2007, we entered into both the BlueCrest Loan in the principal amount of $5,000,000 and the Bank of America Loan in the principal amount of $5,000,000. Interest expense attributable to these loans was $300,000 in the six months ended June 30, 2007.

      In the six months ended June 30, 2007, we incurred a loss from operations of $5.0 million as compared to a loss from operations of $3.9 million in the six months ended June 30, 2006.

      Total revenues were $106,000 and $135,000 in 2006 and 2005, respectively. In 2006, we generated revenue primarily from $82,000 of sales of MyoCath and $20,000 from a paid registry trial in Mexico.

      Cost of sales was $73,000 in 2006 as compared to $87,000 in 2005. Our cost of sales in 2006 consisted primarily of $55,000 of costs associated with the production of MyoCath and $18,000 of costs associated with

the culturing of cells for the paid registry trial in Mexico. The decrease in cost of sales in 2006 as compared to 2005 was primarily attributable to our decreased sales of MyoCath in 2006.

      Research and development expenses were $6.9 million in 2006, an increase of $2.4 million, or 51.7%, from research and development expenses of $4.5 million in 2005. Our increase in research and development expenses in 2006 was primarily attributable to $1.5 million of expenses recognized in connection with the licensing agreement with the Cleveland Clinic, stock-based compensation costs of $303,000 and increased clinical costs of $192,000. Approximately $2.7 million of the expenses incurred in 2006 were related to the MYOHEART Trial and the SEISMIC Trial, including $952,000 of fees paid to our clinical trial investigators, $632,000 of costs related to cell culturing and $576,000 of clinical site expenses.

      On February 1, 2006, we entered into a patent licensing agreement with the Cleveland Clinic pursuant to which we acquired worldwide exclusive licenses to five pending U.S. patent applications related to our MyoCell II with SDF-1 product candidate. Pursuant to this agreement, we paid Cleveland Clinic an upfront license fee of $250,000 and additional license fees of $1.25 million in 2006.

      Marketing, general and administrative expenses were $6.4 million in 2006, an increase of $3.6 million, or 125%, from marketing, general and administrative expenses of $2.8 million in 2005. The increase in marketing, general and administrative expenses during 2006 was primarily attributable to the $3.5 million of stock-based compensation costs related to the issuance of common stock, stock options and stock warrants to a related party pursuant to a settlement.

      Total net interest income was $127,000 in 2006 compared to total net interest income of $37,000 in 2005. The increase in total net interest income was primarily attributable to higher cash balances resulting from sales of our common stock received in the third and fourth quarters of 2006.

      In 2006, we incurred a loss from operations of $13.2 million, which was $5.9 million greater than the loss from operations incurred in 2005.

      Total revenues were $135,000 in 2005, an increase of $49,000 from total revenues of $86,000 in 2004. The increase in revenues is primarily attributable to sales of MyoCath to ACS in 2005.

      Cost of sales was $87,000 in 2005, an increase of $41,000 from cost of sales of $46,000 in 2004. The increase in cost of sales is primarily attributable to increased sales of MyoCath to ACS in 2005.

      Research and development expenses were $4.5 million in 2005, an increase of $700,000, or 18.4%, from research and development expenses of $3.8 million in 2004, primarily attributable to an increase in the number of patients participating in our clinical trials in 2005. Approximately $2.5 million of the expenses incurred in 2005 were related to the MYOHEART and SEISMIC Trials, including costs related to cell culturing, cell shipping, investigator fees, and clinical site expenses. Approximately $1.2 million of the expenses incurred in 2005 were related to our preclinical studies.

      Marketing, general and administrative expenses were $2.8 million in 2005, an increase of $1.1 million, or 64.7%, from marketing, general and administrative expenses of $1.7 million in 2004. The increase in marketing, general and administrative expenses was primarily due to stock-based compensation expense of $1.2 million in 2005 compared to $149,000 in 2004.

      Total net interest income was $37,000 in 2005 compared to total net interest expense of $7,000 in 2004.

      In the year ended December 31, 2005, we incurred a loss from operations of $7.3 million, which is $1.8 million greater than the loss from operations incurred in the year ended December 31, 2004.

Liquidity and Capital Resources

      In 2007, we continued to finance our considerable operational cash needs with cash generated from financing activities.

      Net cash used in operating activities was $4.2 million in the six months ended June 30, 2007 as compared to $3.0 million of cash used in the six months ended June 30, 2006.

      Our use of cash for operations in the first six months of 2007 was primarily attributable to net losses of $5.0 million, a decrease in deferred revenue of $191,000 and an increase in prepaid expenses of $154,000. Partially offsetting these uses of cash were stock based compensation of $695,000 and an increase in accounts payable of $213,000. Our use of cash for operations in the first six months of 2006 was primarily attributable to net losses of $3.9 million, which was partially offset by stock based compensation of $482,000 and an increase in accrued expenses of $293,000.

      Net cash used in investing activities was $41,000 in the six months ended June 30, 2007 as compared to $49,000 in the six months ended June 30, 2006. All of the cash utilized in investing activities for the six months ended June 30, 2007 and 2006 related to our acquisition of property and equipment.

      Net cash provided by financing activities was $12.2 million during the six months ended June 30, 2007. In June 2007, we borrowed funds pursuant to both the BlueCrest Loan and the Bank of America Loan, each in the principal amount of $5.0 million. We also generated $4.0 million from our issuance of common stock. These sources of cash were partially offset by $1.1 million related to the payment of offering costs related to our planned initial public offering and $745,000 related to the payment of costs incurred in connection with obtaining the BlueCrest Loan and Bank of America Loan. We did not generate or use any cash related to financing activities in the six months ended June 30, 2006.

      Net cash used in operating activities was $7.8 million in the year ended December 31, 2006 as compared to $5.8 million of cash used in the year ended December 31, 2005 and $5.0 million of cash used in the year ended December 31, 2004, primarily due to net losses of $13.2 million, $7.3 million and $5.5 million in 2006, 2005 and 2004, respectively.

      The cash used in the year ended December 31, 2006 was reduced by the following items:

      Net cash used in investing activities was $203,000 in the year ended December 31, 2006 as compared to $326,000 in the year ended December 31, 2005 and $59,000 in the year ended December 31, 2004. All of the

cash utilized in investing activities for 2006, 2005 and 2004 related to our acquisition of property and equipment.

      Net cash provided by financing activities was $7.9 million during the year ended December 31, 2006 as compared to $11.1 million of cash provided by financing activities in the year ended December 31, 2005 and $4.6 million of cash provided by financing activities in the year ended December 31, 2004. In 2006, we generated $8.1 million of cash from our issuance of common stock, which source of cash was partially offset by $224,000 related to the payment of deferred offering costs related to our planned initial public offering. Substantially all of the cash provided by financing activities from January 1, 2004 to December 31, 2006 has been generated from our issuance of common stock in various private placements. Since our inception in August 1999 through December 31, 2006, we have received aggregate net proceeds of $51.6 million from these private placements.

      During 2006, we agreed to pay $153,000 in cash and issued equity instruments with a fair value of $3.3 million in connection with a settlement with one of our officers. We also issued common stock with a fair value of $100,000 and warrants with a fair value of $145,000 during this same period in exchange for distribution rights and licenses of intellectual property.

Existing Capital Resources and Future Capital Requirements

      At December 31, 2006 and June 30, 2007, we had cash and cash equivalents totaling $5.0 million and $12.9 million, respectively. Assuming that we secure $23.6 million of net proceeds in connection with this offering, we believe that the net proceeds together with our existing cash and cash equivalents will be sufficient to fund our currently budgeted cash needs for at least the next 15 months.

      On May 31, 2007, we entered into a Loan and Security Agreement with BlueCrest Capital pursuant to which they agreed to provide us a three year, $5.0 million term loan. The transaction closed on June 1, 2007. For the first three months of the BlueCrest Loan, we are only required to make payments of interest. Commencing in October 2007 we are required to make 33 equal monthly payments of principal and interest. Interest accrues at an annual rate of 12.85%. As consideration for providing us the BlueCrest Loan, we issued to BlueCrest Capital a warrant to purchase 65,030 shares of our common stock at an exercise price of $7.69 per share. The warrant, which is not exercisable until the date that is one year following the date the warrant was issued, has a ten year term, unless we close an initial public offering of our common stock or undertake a merger with or into a publicly traded corporation or similar transaction during 2007, in which case the warrant will have a five year term. This warrant had a fair value of $432,635, which amount was 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 BlueCrest Loan using the effective interest method. We also paid BlueCrest Capital a fee of $100,000 to cover diligence and other costs and expenses incurred in connection with the loan.

      We may voluntarily prepay the BlueCrest Loan in whole but not in part. However, we are subject to a prepayment penalty equal to 3% of the outstanding principal if paid during the first year of the BlueCrest Loan, 2% of the outstanding principal if paid during the second year of the BlueCrest Loan and 1% of the outstanding principal if paid during the third year of the BlueCrest Loan. As collateral to secure our repayment obligations to BlueCrest Capital, we have granted them a first priority security interest in all of our assets, excluding our intellectual property but including the proceeds from any sale of any of our intellectual property.

      Pursuant to the agreement, we may not, among other things:

      We also are subject to certain affirmative covenants, including but not limited to, maintaining the collateral in good operating condition and providing BlueCrest with certain financial information on a periodic basis.

      In the event of an uncured event of default under the Loan and Security Agreement, all amounts owed to BlueCrest Capital are immediately due and payable and BlueCrest Capital has the right to enforce its security interest in the assets securing the BlueCrest Loan. Events of default include, among others, our failure to timely make payments of principal when due, our uncured failure to timely pay any other amounts owing to BlueCrest Capital under the Loan and Security Agreement, our material breach of the representations and warranties contained in the Loan and Security Agreement, any material misstatement in any financial statement, report or certificate delivered under the Loan and Security Agreement, our uncured breach of any filing of a notice of lien with respect to any of the collateral securing the BlueCrest Loan, the entry of a money judgment against us in excess of $100,000, a change of control of the company, the entry of a court order that prevents us from conducting all or any material part of our business and our default in the payment of any debt to any of our 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 June 1, 2007, or the Closing Date, we entered into a loan agreement with Bank of America pursuant to which Bank of America agreed to provide us with an eight month, $5.0 million term loan, or the Bank of America Loan, to be used for working capital purposes. The Bank of America Loan bears interest at the prime rate plus 1.5%. The prime rate was 8.25% as of June 30, 2007. As consideration for the Bank of America Loan, we paid Bank of America a fee of $100,000.

      We did not pledge any assets to Bank of America as security for this loan. However, on the Closing Date, Mr. and Mrs. Leonhardt provided a $1.1 million limited personal guarantee of the Bank of America Loan and pledged securities accounts with Bank of America to back-up this limited personal guarantee. As discussed below, in October 2007, Mr. and Mrs. Leonhardt guaranteed additional portions of the loan. Two of our other

directors, including Dr. William Murphy and Mr. Richard Spencer, III, or the Director Guarantors, provided collateral on the Closing Date valued at $750,000 and $1.5 million, respectively, to secure the Bank of America Loan. In addition, one of our current shareholders, or the Shareholder Guarantor and collectively with Mr. and Mrs. Leonhardt and the Director Guarantors referred to herein as the Guarantors, provided collateral on the Closing Date valued at $2.2 million to secure the Bank of America Loan. Each Director Guarantor’s and the Shareholder Guarantor’s exposure under the Bank of America Loan is or was limited to the collateral it provided to Bank of America.

      Under the terms of the Bank of America Loan, Bank of America is entitled to receive a semi-annual payment of interest and all outstanding principal and accrued interest by the maturity date. We and Bank of America have agreed with BlueCrest Capital that we will not individually make any payments due under the Bank of America Loan while the BlueCrest Loan is outstanding. For our benefit, the Guarantors agreed to provide Bank of America in the aggregate up to $5.5 million of funds and/or securities to make these payments.

      We have agreed to reimburse the Guarantors with interest at an annual rate of 13.25% for any and all payments made by them under the Bank of America Loan as well as to pay them certain cash fees in connection with their provision of security for the Bank of America Loan. We have agreed to pay these amounts to the Guarantors upon our repayment in full of the BlueCrest Loan. In addition, we issued to each Guarantor warrants to purchase 3,250 shares, or the Subject Shares, of our common stock at an exercise price of $7.69 per share for each $100,000 of principal amount of the Bank of America Loan guaranteed by such Guarantor. The number of Subject Shares increased to 3,707 shares per $100,000 guaranteed on September 30, 2007. In the event that as of the first anniversary, second anniversary and third anniversary of the closing date of the Bank of America Loan, we have not reimbursed the Guarantors in full for payments made by them in connection with the Bank of America Loan or paid them the cash fees owed to them, the number of Subject Shares per $100,000 guaranteed will increase to 4,634, 6,178 and 9,267 shares, respectively. The warrants have a ten-year term and are not exercisable until the date that is one year following the date the warrants were issued. In total 180,350 warrants were issued to the Guarantors which had an aggregate fair value of $1,199,832, which amount was 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 Bank of America Loan using the effective interest method.

      At closing:

      Until the closing of this offering, each of the Guarantors has the right, between November 1, 2007 and November 30, 2007, to compel us to repay (i) the BlueCrest Loan or (ii) both the BlueCrest Loan and the Bank of America Loan. We have agreed with Dr. Murphy to use our reasonable best efforts to secure an additional person willing to provide collateral to secure the Bank of America Loan in substitution of the $400,000 of collateral being provided by Dr. Murphy and, until Dr. Murphy’s obligations to Bank of America have been released or satisfied in full, use our reasonable best efforts to restructure, amend or renew the Bank of America Loan in an effort to extend the maturity date of the Bank of America Loan.

      In September 2007, one of our directors, Dr. Samuel S. Ahn, and two of our current shareholders Dan Marino and Jason Taylor, or collectively with Dr. Ahn, the New Guarantors, agreed to provide collateral valued at $750,000, $600,000 and $500,000, respectively, to secure the Bank of America Loan. The collateral

provided by the New Guarantors fully replaced the collateral originally provided by Mr. Spencer and partially replaced the collateral originally provided by Dr. Murphy. The collateral provided by Dr. Murphy now secures $400,000 of the Bank of America Loan. Our agreements with the New Guarantors are identical in all respects to our agreements with the original Guarantors as described above, except that the New Guarantors do not have the right to compel us to repay the BlueCrest Loan or the Bank of America Loan. In consideration for providing the collateral, we issued to the New Guarantors warrants to purchase 3,250 shares of our common stock, or the New Guarantor Subject Shares, at an exercise price of $7.69 per share for each $100,000 of principal amount of the Bank of America Loan guaranteed by such New Guarantor. The number of New Guarantor Subject Shares increased to 3,707 shares per $100,000 guaranteed on September 30, 2007 and are subject to further increase in the same amount and under the same conditions as the Subject Shares underlying the warrants issued to the original Guarantors. The warrants have a ten-year term and are not exercisable until the date that is one year following the date the warrants were issued. In total, 60,118 warrants were issued to the New Guarantors, the fair value of which will be 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 Bank of America Loan using the effective interest method.

      In October 2007, Mr. and Mrs. Leonhardt agreed to provide an additional $2.2 million limited personal guarantee of the Bank of America Loan and have pledged securities accounts with Bank of America to back-up this limited personal guarantee. The additional collateral provided by Mr. and Mrs. Leonhardt fully replaced the collateral originally provided by the Shareholder Guarantor. Mr. and Mrs. Leonhardt have now personally guaranteed an aggregate of $3.3 million of the Bank of America Loan. Our agreement with Mr. and Mrs. Leonhardt with respect to the additional collateral is substantially similar to our agreement with them in connection with the $1.1 million personal guarantee they originally provided in June 2007. In consideration for providing the collateral, we issued to Mr. and Mrs. Leonhardt, warrants to purchase 81,547 shares of our common stock at an exercise price of $7.69 per share. In the event that as of the first anniversary, second anniversary and third anniversary of the closing date of the Bank of America Loan, respectively, we have not reimbursed Mr. and Mrs. Leonhardt in full for payments made by them in connection with the Bank of America Loan, the number of shares subject to the warrant will increase to 101,934, 135,912 and 203,868, respectively. The warrant has a ten-year term and is not exercisable until the date that is one year following the date the warrant was issued. The fair value of the warrant will be 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 Bank of America Loan using the effective interest method.

      In October 2007, we cancelled the warrant previously issued to the Shareholder Guarantor, which warrant included the adjustment provisions discussed above, and, in exchange, issued to it a warrant to purchase 101,934 shares of our common stock. The number of shares subject to the warrant is no longer subject to increase.

      On the Closing Date, Mr. and Mrs. Leonhardt agreed with the Shareholder Guarantor to repay to the Shareholder Guarantor any amounts we may have owed to the Shareholder Guarantor on the third anniversary of the Closing Date and, in exchange, assume the Shareholder Guarantor’s rights to be indemnified by us under the loan guarantee agreement. This agreement was terminated in October 2007 in connection with the replacement by Mr. and Mrs. Leonhardt of the collateral provided by the Shareholder Guarantor. As consideration for agreeing to assume this obligation, on the Closing Date, we issued to Mr. and Mrs. Leonhardt an additional warrant to purchase 35,745 shares, or the Put Shares, of our common stock at an exercise price of $7.69 per share. The number of Put Shares increased to 40,774 shares on September 30, 2007. In the event that as of the first anniversary, second anniversary and third anniversary of the closing date of the Bank of America Loan, we have not reimbursed the Shareholder Guarantor in full for payments made by them in connection with the Bank of America Loan or paid them the cash fees owed to them, the number of Put Shares will increase to 50,967, 67,956, and 101,934 shares, respectively. The warrant has a ten-year term and is not exercisable until the date that is one year following the date the warrants were issued. This warrant had a fair value of $237,805, which amount was 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 Bank of America Loan using the effective interest method.

      Our lead product candidate has not received regulatory approval or generated any material revenues. We do not expect to generate any material revenues or cash from sales of our lead product candidate until early 2009, if ever. We have generated substantial net losses and negative cash flow from operations since inception and anticipate incurring significant and increasing net losses and negative cash flows from operations for the foreseeable future. To date, we have relied on proceeds from the private placement of our common stock and our incurrence of debt to provide the funds necessary to conduct our research and development activities and to meet our other cash needs.

      We expect that our expenses and capital expenditures will increase significantly during 2007 and beyond as a result of a number of factors, including:

      The magnitude of our future expenditures and cash requirements will depend on numerous factors, including, but not limited to:

      See “Risk Factors — We may need substantial additional funding and may be unable to raise capital when needed, which would force us to delay or curtail the development or commercialization of our product candidates. An inability to obtain additional financing could adversely affect our business, financial condition, results of operations, and could even prevent us from continuing our business at all.”

Effects of Being a Public Company

      After completion of this offering, we will become subject to the periodic reporting requirements of the Exchange Act and the other rules and regulations of the SEC. We will also be subject to various other regulatory requirements, including the Sarbanes-Oxley Act of 2002. In addition, upon completion of this offering, we will become subject to the rules of the NASDAQ Global Market.

      We are working with our legal and accounting advisors to identify those areas in which changes should be made to our financial and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance, corporate control, internal audit, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue to make, changes in these and other areas, including our internal control over financial reporting.

      In addition, compliance with reporting and other requirements applicable to public companies will create additional costs for us and will require the time and attention of management. We currently expect to incur an estimated $2.0 million of incremental operating expenses in our first year of being a public company and an estimated $1.9 million per year thereafter. The incremental costs are estimates and actual incremental expenses could be materially different from these estimates. We cannot estimate with reasonable certainty the amount of the additional costs we may incur, the timing of such costs or the degree of impact that our management’s attention to these matters will have on our business.

Commitments and Contingencies

      The table below summarizes our commitments and contingencies at December 31, 2006. The information in the table reflects future unconditional payments and is based on the terms of the relevant agreements and appropriate classification of items under generally accepted accounting principles currently in effect.

     We have entered into several operating lease agreements for facilities and equipment, primarily for our office building and cell culturing facility in Sunrise, Florida. Terms of certain lease arrangements include renewal options, payment of executory costs such as real estate taxes, insurance, common area maintenance and escalation clauses.

      Under our licensing agreement and related agreements with Dr. Law and his affiliate, Cell Transplants International, we are required to pay to Cell Transplants International a $3 million payment upon commencement of a bona fide U.S. Phase II human clinical trial that utilizes technology claimed under the patent for heart muscle regeneration licensed to us by Dr. Law and a $5 million payment upon FDA approval of patented technology for heart muscle regeneration. In addition, we are required to pay royalties to Cell Transplants International equal to 5% of gross sales in the territories where the licensed patents are issued for products and services that read directly on the claims of the licensed patents.

      Our licensing agreement with the Cleveland Clinic requires us to make certain milestone payments to the Cleveland Clinic upon expected milestones including: (a) $200,000 upon FDA or foreign equivalent approval of an IND application covering product candidates derived from the licensed patents, (b) $300,000 upon full enrollment of an FDA approved Phase I clinical trial, (c) $750,000 upon full enrollment of the last clinical trial needed prior to a Biologic License Application submission to the FDA or foreign equivalent and (d) $1.0 million upon the first commercial sale of an FDA approved product derived from the licensed patent. At the option of the Cleveland Clinic, we may be required to pay one-half of any milestone payment in shares of our common stock. The number of shares payable will be based upon the market value of our common stock on the date of the milestone payment. To the extent we do not complete a milestone activity by the target completion date, we will be required to pay $100,000, or the Extension Fee, to extend the target completion date for an additional one year period, or the Extension Period. If such milestone activity is achieved during the first six months of the Extension Period, the Extension Fee will be credited against the applicable milestone payment. We will also be required to pay Cleveland Clinic royalty fees equal to 5% of net sales of any products derived from the licensed patents.

      In June 2000, we entered into an exclusive license agreement with the William Beaumont Hospital to use certain patents for the whole life of the patents in future projects. The royalty on the gross sales of products and services that directly rely upon the claims of these patents ranges between 2% and 4% of gross sales depending on aggregate gross sales in the applicable period. The patents expire in 2015. This agreement also calls for a minimum royalty fee ranging from $10,000 per year to $200,000 per year for the term of the agreement, which is the remaining useful life of the patents.

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.

Quantitative and Qualitative Disclosure About Market Risks

      Our exposure to market risk is limited to interest income sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because the majority of our investments are expected to be in short-term debt securities. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive without significantly increasing risk. To reduce risk, we maintain our portfolio of cash, cash equivalents and short-term and long-term investments in a variety of interest-bearing instruments, including U.S. government and agency securities, high-grade U.S. corporate bonds, asset-backed securities, commercial paper and money market funds. We do not have any derivative financial investments in our investment portfolio. Due to the nature of our investments and expected investments, we believe that we are not subject to any material market risk exposure.

Recent Accounting Pronouncements

      We adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 , on January 1, 2007. Previously, we had accounted for tax contingencies in accordance with Statement of Financial Accounting Standards 5, Accounting for Contingencies. As required by Interpretation No. 48, we recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more likely than not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. At the adoption date, we applied Interpretation No. 48 to all tax positions for which the statute of limitations remained open. As a result of the implementation of Interpretation No. 48, we did not recognize any change in the liability for unrecognized tax benefits.

      The amount of unrecognized tax benefits as of January 1, 2007 was $0. There have been no material changes in unrecognized tax benefits since January 1, 2007.

      We are subject to income taxes in the U.S. federal jurisdiction, and the State of Florida. Tax regulations within each jurisdiction are subject to the interpretation of the related tax laws and regulations and require significant judgment to apply. With few exceptions, we are no longer subject to U.S. federal, state and local income tax examinations by tax authorities for the years before 1999.

      We are not currently under examination by any federal or state jurisdiction.

      Should we record a liability for unrecognized tax benefits in the future, corresponding interest and penalty accruals will be recognized in operating expenses.

      In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, or SFAS No. 157. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but provides guidance on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. We do not expect the adoption of SFAS No. 157 to have a material effect on our consolidated financial statements.

      In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, or SFAS No. 159. SFAS No. 159 allows an entity the irrevocable option to elect fair value for the initial and subsequent measurement for certain financial assets and liabilities on a contract-by-contract basis. Subsequent changes in fair value of these financial assets and liabilities would be recognized in earnings when they occur. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007. We do not expect the adoption of SFAS No. 159 to have a material effect on our consolidated financial statements.

      A variety of proposed or otherwise potential accounting standards are currently under study by standard-setting organizations and various regulatory agencies. Because of the tentative and preliminary nature of these proposed standards, management has not determined whether implementation of such proposed standards would be material to the Company’s consolidated financial statements.

BUSINESS

Overview

      We are a biotechnology company focused on the discovery, development and, subject to regulatory approval, commercialization of autologous cell therapies for the treatment of chronic and acute heart damage. Our lead product candidate is MyoCell, an innovative clinical therapy designed to populate regions of scar tissue within a patient’s heart with muscle tissue from the patient’s body for the purpose of improving cardiac function in chronic heart failure patients. The core technology used in MyoCell has been the subject of human clinical trials conducted over the last six years involving 84 enrollees and 70 treated patients. Our most recent clinical trials of MyoCell include the SEISMIC Trial, a completed 40 patient Phase II clinical trial in various countries in Europe, and the MYOHEART Trial, a completed 20 patient Phase I dose escalation trial in the United States. Interim results of the SEISMIC and MYOHEART Trials were announced in January 2007 and updated interim results are disclosed in this prospectus. We have been cleared by the FDA to proceed with a 330 patient, multicenter Phase II/III trial of MyoCell in North America, Europe and Israel, or the MARVEL Trial. We intend to seek to have final data available for the MARVEL Trial by the third quarter of 2009. If the results of the MARVEL Trial demonstrate statistically significant evidence of the safety and efficacy of MyoCell, we anticipate having a basis to ask the FDA to consider the MARVEL Trial a pivotal trial. The SEISMIC, MYOHEART and MARVEL Trials have been designed to test the safety and efficacy of MyoCell in treating patients with severe, chronic damage to the heart. Upon regulatory approval of MyoCell, we intend to generate revenue from the sale of MyoCell cell culturing services to patients for treatment of patients by interventional cardiologists.

      In our pipeline, we have multiple product candidates for the treatment of heart damage, including Bioheart Acute Cell Therapy, an autologous, adipose cell treatment for acute heart damage, and MyoCell II with SDF-1, a proposed therapy utilizing autologous cells genetically modified to express additional growth factors. We hope to demonstrate that our various product candidates are safe and effective complements to existing therapies for chronic and acute heart damage.

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

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

      Interim data from the MYOHEART and SEISMIC Trials were presented by the lead investigator of each trial on January 18, 2007 at the Third Annual International Conference on Cell Therapy for Cardiovascular Diseases and the subject SEISMIC Trial data was subsequently published in EuroIntervention Supplement B by the lead investigator and other contributing authors (including our VP of Clinical Affairs

and Physician Relations). The purpose of each trial is to assess the safety and efficacy of MyoCell delivered via MyoCath. The lead investigator for the MYOHEART Trial presented one-month safety data for all 20 of the treated patients, and three and six-month interim efficacy data for a subset of the treated patients. Although not statistically significant due, in part, to the limited number of patients treated, the lead investigator indicated that the safety of MyoCell is strongly suggested and the preliminary efficacy data demonstrated a trend towards an improvement in scores for six-minute walk distance, or Six-Minute Walk Distance, and an improvement in quality of life, or Quality of Life. The lead investigator for the SEISMIC Trial presented data for 16 treated patients and nine control group patients for which at least one-month follow-up data was available. He reported on three efficacy endpoints: Six-Minute Walk Distance scores, NYHA Class and left ventricular ejection fraction, or LVEF. In the EuroIntervention article summarizing the same data presented by the lead investigator, the authors noted that, although complete efficacy data are not yet available and safety data are not yet fully adjudicated, these preliminary results suggested that myoblast therapy for heart failure is largely safe and effective. The authors further indicated that (i) the risk of irregular heartbeats is largely manageable with close observation and prophylactic use of ICDs and anti-arrhythmic drug therapy and (ii) when irregular heart beats do occur, they typically appear during the first months following implantation and can largely be mitigated with appropriate medical management. According to the authors, patients treated with MyoCell also tend to show improvement in quality of life and mechanical function over time, as evidenced by previously completed clinical studies and the initial reported trends from the interim SEISMIC Trial data. As described in greater detail below in the Section entitled “Clinical Trials and Planned Clinical Trials”, as of May 2007, 17 treated patients in the MYOHEART and SEISMIC Trials have experienced serious adverse events, including three patient deaths, in the follow-up period. However, other than irregular heartbeats, patients in these clinical trials have not experienced a larger number of serious adverse events than would be expected to be experienced by patients of similar clinical status.

      We continue to receive interim data from the MYOHEART and SEISMIC Trials, which data, summarized in more detail below, appears to be generally consistent with the interim data presented in January.

      We believe additional testing must be completed before we will, if ever, have sufficient data to apply for and reasonably expect to receive regulatory approval of MyoCell. However, if the final SEISMIC Trial data is available in the first quarter of 2008 and is generally consistent with the interim data, we intend to seek, in the second quarter of 2008, approval from various European regulatory bodies to market MyoCell to treat the Class III Subgroup. We intend to seek to enroll and treat all of the clinical patients in the MARVEL Trial by the end of the fourth quarter of 2008. If we meet that enrollment timeline, we would expect final trial results in the third quarter of 2009. If the final safety and efficacy results provide what we believe is significant evidence that MyoCell is safe and effective, we anticipate submitting such data to the FDA to obtain regulatory approval of MyoCell. However, we face the risks that future clinical test results will not assist us in demonstrating the safety and efficacy of MyoCell and that the results of subsequent testing will not corroborate earlier results.

      In addition to studies we have sponsored, we understand that myoblast-based clinical therapies have been the subject of at least eleven clinical trials involving more than 325 enrollees, including at least 235 treated patients. Although we believe many of the trials are different from the trials sponsored by us in a number of important respects, it is our view that the trials have advanced the cell therapy industry’s understanding of the potential opportunities and limitations of myoblast-based therapies.

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

Business Strategy

      Our principal objective is to become a leading company that discovers, develops and commercializes novel, autologous cell therapies, and related devices, for the treatment of chronic and acute heart damage. To achieve this objective, we plan to pursue the following key strategies:

Industry Background

      Myocardial infarction, or MI, commonly known as a heart attack, occurs when a blockage in a coronary artery severely restricts or completely stops blood flow to a portion of the heart. When blood supply is greatly reduced or blocked for more than a short period of time, heart muscle cells die. If the healthy heart muscle cells do not replace the dead cells within approximately two months, the injured area of the heart becomes unable to function properly. In the healing phase after a heart attack, white blood cells migrate into the affected area and remove the dead heart muscle cells. Then, fibroblasts, the connective tissue cells of the human body, proliferate and form a collagen scar in the affected region of the heart. Following a heart attack, the heart’s ability to maintain normal function will depend on the location and amount of damaged tissue. The remaining initially undamaged heart muscle tissue must perform more work to adequately maintain cardiac

output. Because the uninjured region is then compelled to work harder than normal, the heart can progressively deteriorate until it is unable to pump adequate blood to oxygenate the body properly leading to heart failure and ultimately death.

      Congestive heart failure, or CHF, is a debilitating condition that occurs as the heart becomes progressively less able to pump an adequate supply of blood throughout the body resulting in fluid accumulation in the lungs, kidneys and other body tissues. Persons suffering from NYHA Class II or worse heart failure experience high rates of mortality, frequent hospitalization and poor quality of life. CHF has many causes, generally beginning in patients with a life-long history of high blood pressure or after a patient has suffered a major heart attack or some other heart-damaging event. CHF itself may lead to other complicating factors such as pulmonary hypertension, edema, pulmonary edema, liver dysfunction and kidney failure. Although medical therapy for CHF is improving, it remains a major debilitating condition. According to the American Heart Association Heart Disease Statistics — 2007 Update, the estimated, total direct and indirect costs of heart failure in the United States in 2006 were approximately $33.2 billion.

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

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

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

      Heart disease has been the leading cause of death from 1950 through 2003 within the United States according to the U.S. Department of Health and Human Services. In addition, heart failure is the single most frequent reason for hospitalization in the elderly according to a 2007 study entitled “Long-Term Costs and Resource Use in Elderly Participants with Congestive Heart Failure” by Liao, L., et al. The American College of Cardiology/ American Heart Association 2005 Guideline Update for the Diagnosis and Management of Chronic Heart Failure in the Adult, or the ACC/ AHA Guidelines, provides recommendations for the treatment of chronic heart failure in adults with normal or low LVEF. The treatment escalates and becomes more invasive as the heart failure worsens. Current treatment options for severe, chronic heart damage include, but are not limited to, heart transplantation and other surgical procedures, bi-ventricular pacers, drug therapies, ICDs, and ventricular assist devices. Therapies utilizing drugs, ICDs and bi-ventricular pacers are currently by far the most commonly prescribed treatments for patients suffering from NYHA Class II or NYHA Class III heart failure. Since the therapies generally each address a particular feature of heart disease or a specific subgroup of heart failure patients, the therapies are often complementary and used in combination.

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

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

      Implantable Cardioverter Defibrillators. ACC/ AHA Guidelines recommend ICDs primarily for patients who have experienced a life-threatening clinical event associated with a sustained irregular heartbeat and in patients who have had a prior heart attack and a reduced LVEF. ICDs are surgically implanted devices that continually monitor patients at high risk of sudden heart attack. When an irregular rhythm is detected, the device sends an electric shock to the heart to restore normal rhythm. In 2001, ICDs were implanted in approximately 62,000 and 18,000 patients in the United States and Europe, respectively. Although ICDs have not demonstrated an ability to improve cardiac function, according to the ACC/ AHA Guidelines, ICDs are highly effective in preventing sudden death due to irregular heartbeats. However, according to the ACC/ AHA

Guidelines, frequent shocks from an ICD can lead to a reduced quality of life, whether triggered appropriately or inappropriately. In addition, according to the ACC/ AHA Guidelines, ICDs have the potential to aggravate heart failure and have been associated with an increase in heart failure hospitalizations.

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

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

      Ventricular Assist Devices. Ventricular assist devices are mechanical heart pumps that replace or assist the pumping role of the left ventricle of a damaged heart too weak to pump blood through the body. Ventricular assist devices are primarily used as a bridge for patients on the waiting list for a heart transplant and have been shown in published studies to be effective at halting further deterioration of the patient’s condition and decreasing the likelihood of death before transplantation. In addition, ventricular assist devices are a destination therapy for patients who are in NYHA Class IV heart failure despite optimal medical therapy and who are not eligible for heart transplant. According to the ACC/ AHA Guidelines, device related adverse events are reported to be numerous and include bleeding, infection, blood clots and device failure. In addition, ventricular assist devices are very expensive, with the average first-year cost estimated at $222,460.

      We believe the heart failure treatment industry generally has a history of adopting therapies that have proven to be safe and effective complements to existing therapies and using them in combination with existing therapies. It is our understanding that there is no one or two measurement criteria, either quantitative or qualitative, that define when a therapy for treating heart failure will be deemed safe and effective by the FDA. We believe that the safety and efficacy of certain existing FDA approved therapies for heart damage were demonstrated based upon a variety of endpoints, including certain endpoints (such as LVEF) that individually did not demonstrate large numerical differences between the treated patients and untreated patients. For instance, the use of bi-ventricular pacers with optimal drug therapy has proven to significantly decrease the risk of all-cause hospitalization and all-cause-mortality as well as to improve LVEF, NYHA Class and quality of life as compared to the use of optimal drug therapy alone. In the Multicenter InSync Randomized Clinical Evaluation (MIRACLE) trial, one of the first large studies to measure the therapeutic benefits of bi-ventricular pacing, 69% of the patients in the treatment group experienced an improvement in NYHA Class by one or more classes at six-month follow-up versus a 34% improvement in the control group. However, patients in the treatment group experienced on average only a 2.1% improvement in LVEF as compared with a 1.7% improvement for patients in the control group. Although a number of the therapies described above have

proven to improve the cardiac function of a damaged heart, no currently available heart failure treatment has demonstrated an ability to generate new muscle tissue within the scarred regions of a heart.

Our Proposed Solution

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

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

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

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

      The MyoCell injection process is a minimally invasive procedure which presents less risk and considerably less trauma to a patient than conventional (open) heart surgery. Patients are able to walk immediately following the injection process and require significantly less time in the hospital compared with surgically treated patients. In the 70 patients who have received MyoCell injections delivered via percutaneous catheter, only two minor procedure-related events (2.9%) have been reported. In both cases, however, no complications

resulted from the event, with the patients in each case remaining asymptomatic at all times during and after the procedure.

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

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

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

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

Clinical Trials and Planned Clinical Trials of MyoCell

      Several clinical trials have been conducted for the purpose of demonstrating the safety and efficacy of MyoCell and MyoCath. We have sponsored five clinical trials and one registry study of MyoCell involving 84 enrollees, including 70 treated patients and 14 control patients who received only optimal medical therapy. In addition to studies we have sponsored, we believe myoblast-based clinical therapies have been the subject of at least eleven clinical trials involving more than 325 enrollees, including at least 235 treated patients. We believe additional testing must be completed before we will, if ever, have sufficient data to apply for and reasonably

expect to receive regulatory approval of MyoCell. We face the risks that future clinical trial results will not assist us in demonstrating the safety and efficacy of MyoCell and that the results of subsequent testing will not corroborate earlier results.

      The following table summarizes our planned, ongoing and completed clinical trials of MyoCell. In addition to delivery via MyoCath, MyoCell has been tested in certain trials using MyoStar and Medtronic’s TransAccess ^tm catheter, or the TransAccess catheter.

U.S. Focused Clinical Trials

Other Clinical Trials

     Metrics Used to Evaluate Safety and Efficacy of Heart Failure Treatments

      The performance of therapies used to treat damage to the heart is assessed using a number of metrics, which compare data collected at the time of initial treatment to data collected when a patient is re-assessed at follow-up. The time periods for follow-up are usually three, six and twelve months. Statistical data is often accompanied by a p-value, which is the mathematical probability that the data are the result of random chance. A result is considered statistically significant if the p-value is less than or equal to 5%. The common metrics used to evaluate the efficacy of these therapies include:

      The MARVEL Trial is designed to be a double-blind, randomized, placebo-controlled multicenter trial to evaluate the safety and efficacy of MyoCell delivered via MyoStar. We submitted our amended IND application setting forth the proposed protocol for this clinical trial to the FDA in November 2006. In July 2007, we submitted to the FDA an additional amendment to the trial protocol and, in August 2007, we received clearance from the FDA to proceed with the trial. We intend to seek to have final data available for the MARVEL Trial by the third quarter of 2009. If the results of the MARVEL Trial demonstrate statistically significant evidence of the safety and efficacy of MyoCell, we anticipate having a basis to ask the FDA to consider the MARVEL Trial a pivotal trial, although there can be no assurances that the FDA will consider the trial pivotal. This study is planned to include 330 patients, including 110 controls, at 20 sites in the United States and Canada and up to 15 sites in Europe and Israel. We currently anticipate that our primary and secondary endpoints will be measured at three months and six months following treatment.

      We anticipate that all of the patients selected for enrollment in the MARVEL Trial will have (i) symptoms associated with NYHA Class II or NYHA Class III heart failure, (ii) suffered a previous heart attack at least 90 days prior to the date of treatment, (iii) a LVEF of less than or equal to 35%, (iv) been on optimal drug therapy for at least two months prior to enrollment and (v) had prior placement of an ICD at least 60 days prior to enrollment. We anticipate that patients will be required to use Amiodarone, an anti-arrhythmic drug therapy, at least 24 hours prior to MyoCell implantation.

      We anticipate that the patients will be divided into three groups. Patients in the first group will undergo treatment consisting of 16 injections of an aggregate dosage of approximately 800 million myoblast cells. Patients in the second group will undergo treatment consisting of 16 injections of an aggregate dosage of approximately 400 million myoblast cells. Patients in the third group will receive 16 placebo injections.

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