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.

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. 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.

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. 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 non-acute heart failure in adults with normal or low LVEF.

The treatment escalates and becomes more invasive as the heart failure worsens. Current non-acute treatment options for severe heart damage include, but are not limited to, heart transplantation and other surgical procedures, bi-ventricular pacers, drug therapies, ICDs, and ventricular assist devices.

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.

The Company’s clinical research to date suggests that MyoCell may improve the contractile function of the heart. However, the Company has 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.

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, the Company’s proprietary techniques are used to isolate and remove myoblasts from the muscle tissue.

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.

Cost of sales was $63,000 in the nine month period ended September 30, 2006 as compared to $75,000 in the nine month period ended September 30, 2005.

Research and development expenses were $5.4 million in the nine month period ended September 30, 2006, an increase of $2.3 million, or 74.2%, from research and development expenses of $3.1 million in the nine-month period ended September 30, 2005.

Total net interest income was $78,000 in the nine months ended September 30, 2006 compared to total net interest income of $9,000 in the nine months ended September 30, 2005.

In the nine month period ended September 30, 2006, loss from operations was $11.0 million, which was approximately $5.8 million greater than the loss from operations incurred in the nine month period ended September 30, 2005.