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

 

FORM 10-Q/A
Amendment No. 1

 

(Mark One)
x		QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2009

OR

o		TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from   to 

Commission File Number 001-32518

 

CYTOMEDIX, INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		23-3011702
(State or Other Jurisdiction of Incorporation or Organization)		(IRS Employer Identification No.)

209 Perry Parkway, Suite 7
Gaithersburg, MD 20877

(Address of Principal Executive Offices) (Zip Code)

(240) 499-2680

(Registrant’s Telephone Number, Including Area Code)

 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes  o  No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer o    Accelerated Filer o    Non-accelerated Filer o    Smaller Reporting Company x

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

APPLICABLE ONLY TO CORPORATE ISSUERS

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. 33,973,201 shares of Common stock, par value $.0001, outstanding as of April 30, 2009.

TABLE OF CONTENTS

EXPLANATORY NOTE

We are filing this Amended Quarterly Report on Form 10-Q/A (the “Amended Filing” or “Form 10-Q/A”) to our Quarterly Report on Form 10-Q for the three months ended March 31, 2009 (the “Original Filing”) to amend and restate our unaudited consolidated financial statements and related disclosures for the three months ended March 31, 2009 as discussed in Note 2 to the accompanying restated unaudited financial statements.

Background of the Restatement

On January 3, 2011, the Company concluded, based on the recommendation of management, that the previously issued financial statements for the year ended December 31, 2009 included in the Company’s most recently filed Form 10-K, and each of the quarterly periods from March 31, 2009 through September 30, 2010 included in the Company’s quarterly reports on Forms 10-Q (collectively, the “Affected Periods”) are no longer reliable because they failed to incorporate non-cash charges resulting from required adjustments to certain outstanding warrants (the “Warrants”).

An explanation of the errors and their impact on the Company’s financial statements is contained in Note 2 to the financial statements contained in Part I Item 1 of this report. The following is a brief summary of the accounting errors:

Restatement of Other Financial Statements

Along with the filing of this Form 10-Q/A, we are concurrently filing amendments to our Annual Report on Form 10-K/A Amendment No. 1 for 2009 and our Quarterly Reports on Form 10-Q for the quarterly periods ended June 30 and September 30, 2009 and March 31, June 30 and September 30, 2010. The amendments to our Quarterly Reports on Form 10-Q are being filed to restate our unaudited financial statements and related financial information for the periods contained in those reports. The amendment to our Annual Report on Form 10-K/A Amendment No. 1 is being filed to restate our financial statements for the fiscal year ended December 31, 2009.

Internal Control Considerations

Management determined that there was a control deficiency in its internal control that constitutes a material weakness, as discussed in Part I - Item 4 of the Amended Filing. A material weakness is a deficiency, or combination of control deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the annual or interim financial statements will not be prevented or detected on a timely basis. For a discussion of management’s consideration of the Company’s disclosure controls and procedures and the material weakness identified, see Part I - Item 4 included in this Amended Filing.

For the convenience of the reader, this Amended Filing sets forth the Original Filing as modified and superseded where necessary to reflect the restatement. The following items have been amended principally as a result of, and to reflect, the restatement:

TABLE OF CONTENTS

In accordance with applicable SEC rules, this Amended Filing includes certifications from our Chief Executive Officer and Chief Financial Officer dated as of the date of this filing.

Except for the items noted above, no other information included in the Original Filings is being amended by this Amended Filing. The Amended Filing continues to speak as of the date of the Original Filing and we have not updated the filing to reflect events occurring subsequently to the Originial Filing date other than those associated with the restatement of the Company’s financial statements. Accordingly, this Amended Filing should be read in conjunction with our filings made with the SEC subsequent to the filing of the Original Filing.

TABLE OF CONTENTS

CYTOMEDIX, INC.
  
TABLE OF CONTENTS

		Page
PART I. FINANCIAL INFORMATION			1
Item 1. Financial Statements			1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			11
Item 3. Quantitative and Qualitative Disclosures About Market Risk			16
Item 4. Controls and Procedures			16
PART II. OTHER INFORMATION			18
Item 1. Legal Proceedings			18
Item 1A. Risk Factors			18
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			18
Item 3. Defaults Upon Senior Securities			18
Item 4. Submission of Matters to a Vote of Security Holders			18
Item 5. Other Information			18
Item 6. Exhibits (see Exhibit Index at end of report)			18
Signatures			19
Exhibit Index			20

TABLE OF CONTENTS

PART I
FINANCIAL INFORMATION

Item 1. Financial Statements

CYTOMEDIX, INC.
BALANCE SHEETS

		March 31, 2009 (restated)		December 31, 2008
		(Unaudited)
ASSETS
Current assets
Cash		$	3,088,165			$	4,027,026
Accounts and royalties receivable, net			369,852				390,739
Patent settlements receivable			97,979				102,618
Prepaid expenses, inventory, and other current assets			153,375				190,720
Total current assets			3,709,371				4,711,103
Property and equipment, net			108,445				87,389
Total assets		$	3,817,816			$	4,798,492
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable and accrued expenses		$	1,256,625			$	1,325,325
Deferred revenues			143,523				197,344
Dividends payable on Series A and Series B preferred stock			11,037				7,243
Derivative liabilities, current portion			178,393				—
Total current liabilities			1,589,578				1,529,912
Derivative and other liabilities			62,049				123,241
Total liabilities			1,651,627				1,653,153
Commitments and contingencies
Stockholders’ equity
Series A Convertible preferred stock; $.0001 par value, authorized 5,000,000 shares; 2009 and 2008 issued and outstanding – 90,217 shares, liquidation preference of $90,217			9				9
Series B Convertible preferred stock; $.0001 par value, authorized 5,000,000 shares; 2009 and 2008 issued and outstanding – 92,300 shares, liquidation preference of $92,300			10				10
Series C Convertible preferred stock; $.0001 par value, authorized 1,000,000 shares; 2009 and 2008 issued and outstanding – 0.0 shares			—				—
Common stock; $.0001 par value, authorized 65,000,000 shares; 2009 and 2008 issued and outstanding –  33,962,623 shares			3,396				3,396
Additional paid-in capital			40,690,368				42,219,802
Accumulated deficit			(38,527,594	)			(39,077,878	)
Total stockholders’ equity			2,166,189				3,145,339
Total liabilities and stockholders’ equity		$	3,817,816			$	4,798,492

 
 
The accompanying notes are an integral part of these financial statements.

TABLE OF CONTENTS

CYTOMEDIX, INC.
STATEMENTS OF OPERATIONS
(Unaudited)

		Three Months Ended March 31,
		2009 (restated)		2008
Revenues
Sales		$	42,375			$	19,239
Royalties			496,762				608,154
Total revenues			539,137				627,393
Cost of revenues
Cost of sales			8,054				1,866
Cost of royalties			124,933				216,294
Total cost of revenues			132,987				218,160
Gross profit			406,150				409,233
Operating expenses
Salaries and wages			635,655				535,102
Consulting expenses			15,821				36,810
Professional fees			159,854				357,029
Trials and studies			79,193				—
General and administrative expenses			413,293				447,369
Total operating expenses			1,303,816				1,376,310
Loss from operations			(897,666	)			(967,077	)
Other income (expense)
Interest income, net			6,830				59,299
Change in fair value of derivative liabilities			(50,272	)			—
Other			(1,969	)			3,250
Patent litigation settlements, net			--				5,256
Total other income (expense)			(45,411	)			67,805
Loss before provision for income taxes			(943,077	)			(899,272	)
Income tax provision			—				—
Net loss			(943,077	)			(899,272	)
Preferred dividend on:
Series A preferred stock			1,877				2,048
Series B preferred stock			1,917				1,774
Net loss to common stockholders		$	(946,871	)		$	(903,094	)
Loss per common share –  Basic and diluted		$	(0.03	)		$	(0.03	)
Weighted average shares outstanding –  Basic and diluted			33,962,623				31,927,138

 
 
The accompanying notes are an integral part of these financial statements.

TABLE OF CONTENTS

CYTOMEDIX, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)

		Three Months Ended March 31,
		2009 (restated)		2008
Cash flows from operating activities:
Net loss		$	(943,077	)		$	(899,272	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization			8,387				39,851
Stock-based compensation – consultants and other			—				32,265
Stock-based compensation – employees and directors			85,997				153,549
Change in fair value of derivative liabilities			50,272				—
Gain on disposal of assets			—				(3,200	)
Change in accounts and other receivables, net			25,526				(223,760	)
Change in other current assets			45,221				(59,320	)
Change in patent settlements receivable, non-current			—				95,999
Change in accounts payable and accrued expenses			(68,700	)			120,273
Change in deferred revenues			(53,821	)			(53,821	)
Change in other liabilities			(61,192	)			(9,600	)
Net cash used in operating activities			(911,387	)			(807,036	)
Cash flows from investing activities:
Purchase of equipment			(27,474	)			(13,190	)
Proceeds from sale of equipment			—				3,200
Net cash used in investing activities			(27,474	)			(9,990	)
Cash flows from financing activities			—				—
Net decrease in cash			(938,861	)			(817,026	)
Cash, beginning of period			4,027,026				5,136,446
Cash, end of period		$	3,088,165			$	4,319,420

 
 
The accompanying notes are an integral part of these financial statements.

TABLE OF CONTENTS

CYTOMEDIX, INC.
  
NOTES TO FINANCIAL STATEMENTS

Note 1 — Description of Business

Cytomedix is a biotechnology company that develops, sells, and licenses regenerative biological therapies, to primarily address the areas of wound care, inflammation, and angiogenesis. The Company currently markets the AutoloGel ^TM System, a device for the production of platelet rich plasma (“PRP”) gel derived from the patient’s own blood. The AutoloGel ^TM System is cleared by the Food and Drug Administration (“FDA”) for use on a variety of exuding wounds. The Company is currently pursuing a multi-faceted strategy to penetrate the chronic wound market with its AutoloGel ^TM System. The Company is also moving forward with the development of other product candidates in its pipeline. Most notably is its an anti-inflammatory peptide (designated “CT-112”) that has shown promise in pre-clinical testing, and for which the Company is currently preparing an Investigational New Drug application for the FDA. Cytomedix sells its products primarily to health care providers in the United States and licenses its patents to surgical medical device suppliers in the United States. The Company was incorporated in the State of Delaware on April 29, 1998, and has its headquarters in Rockville, Maryland.

Note 2 — Restatement of 2009 Financial Statements

Historically, the Company has issued stock purchase warrants as part of various financings and as compensation to consultants for various services. Prior to January 1, 2009, the Company assessed whether or not stock purchase warrants should be accounted for and classified as equity or liabilities based on the accounting guidance in effect at the time.

On January 1, 2009, the Company adopted new accounting guidance (ASC 815-40, formerly EITF 07-5 “ Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock ”) that required additional analysis as to whether or not stock purchase warrants are “indexed to” its stock, a condition that is required to attain equity accounting and classification. Upon the adoption of this new guidance, the Company concluded that its previously issued stock purchase warrants were appropriately classified as equity and, therefore, the adoption of the new guidance did not have any impact on its historical financial statements or on its 2009 financial statements.

In connection with the review of certain equity transactions in 2010, the Company determined that, upon the adoption of the new accounting guidance on January 1, 2009, certain stock purchase warrants issued in 2004 should have been appropriately classified as derivative liabilities (and not equity) due to the presence of non-standard anti-dilution provisions in those warrant agreements. These provisions require that the Company modify existing warrants (as to the actual number of warrants and their exercise price) in the event that the Company issues subsequent equity (or equity-linked instruments) at a price below the exercise price of the existing warrants. Also, as a result of the improper accounting treatment for warrants, certain offering expenses were accounted for incorrectly.

As a result, the Company has restated its 2009 quarterly financial statements to correct for the misapplication of the new accounting guidance related to the accounting and classification of stock purchase warrants. This correction resulted in adjustments to the following financial statement line items as of and for the period indicated:

		As Previously Reported		Increase (Decrease)		As Restated
Three months ended March 31, 2009
Statement of Operations
Change in fair value of derivative liabilities		$	—			$	(50,272	)		$	(50,272	)
Other, Net						$	(1,969	)		$	(1,969	)
Total other income (expense)		$	6,830			$	(52,241	)		$	(45,411	)
Loss before provision for income taxes		$	(890,836	)		$	(52,241	)		$	(943,077	)
Net loss		$	(890,836	)		$	(52,241	)		$	(943,077	)
Net loss to common stockholders		$	(894,630	)		$	(52,241	)		$	(946,871	)
Loss per common share – Basic and diluted		$	(0.03	)		$	(0.00	)		$	(0.03	)

TABLE OF CONTENTS

CYTOMEDIX, INC.
  
NOTES TO FINANCIAL STATEMENTS

Note 2 — Restatement of 2009 Financial Statements – (continued)

		As Previously Reported		Increase (Decrease)		As Restated
Statement of Cashflows
Net loss			(890,836	)			(52,241	)			(943,077	)
Depreciation and amortization			6,418				1,969				8,387
Change in fair value of derivative liabilities			—				50,272				50,272
As of March 31, 2009
Prepaid Expenses and other current assets		$	145,499			$	7,876			$	153,375
Total current assets		$	3,701,495			$	7,876			$	3,709,371
Total assets		$	3,809,940			$	7,876			$	3,817,816
Derivative liabilities, current portion		$	—			$	178,393			$	178,393
Total current liabilities		$	1,411,185			$	178,393			$	1,589,578
Total liabilities		$	1,473,234			$	178,393			$	1,651,627
Additional paid-in capital		$	42,305,799			$	(1,615,431	)		$	40,690,368
Accumulated deficit		$	(39,972,508	)		$	1,444,914			$	(38,527,594)
Total stockholders’ equity		$	2,336,706			$	(170,517	)		$	2,166,189
Total liabilities and stockholders’ equity		$	3,809,940			$	7,876			$	3,817,816

The cumulative effect of the adoption of the new accounting guidance as of January 1, 2009 was a $1.6 million decrease in additional paid in capital, a $1.5 million decrease in accumulated deficit and a $0.1 million increase in derivative liabilities. The effect of the adoption on the three months ended March 31, 2009 was a $0.1 million increase in other expenses.

Note 3 — Liquidity Risks and Management’s Plans

The accompanying financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business. Since inception, the Company has incurred, and continues to incur, significant losses from operations. The licensing agreements, under which the Company’s royalty revenues are generated, expire in late November 2009. In addition, the Company needs to obtain increased product sales and additional capital to continue its business operations and fund deficits in operating cash flow. The Company is currently executing a new sales strategy, but it is difficult to forecast the success of this new strategy in the current market. The Company also plans to obtain additional capital, to finance the development of its business operations, through strategic collaborations, issuance of its equity securities, grant funding, or any other means it deems appropriate. There is no assurance that such capital will be available on acceptable terms or at all. As a result, there is substantial doubt as to the Company’s ability to continue as a going concern.

In the event the Company is unable to successfully increase product sales and obtain additional capital, it is unlikely that the Company will have sufficient cash flows and liquidity to finance its business operations as currently contemplated. Accordingly, in the event new financing is not obtained, the Company will likely reduce general and administrative expenses, delay new product development efforts, and/or reduce spending on sales and marketing activities until it is able to obtain sufficient financing to do so.

The balance sheets do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should the Company be unable to continue in existence.

Note 4 — Basis of Presentation

The unaudited condensed financial statements included herein have been prepared by Cytomedix without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements reflect all adjustments that are, in the opinion of management, necessary to fairly state such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote

TABLE OF CONTENTS

CYTOMEDIX, INC.
  
NOTES TO FINANCIAL STATEMENTS

Note 4 — Basis of Presentation  – (continued)

disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, have been condensed or omitted pursuant to such rules and regulations.

The year-end condensed balance sheet data were derived from audited financial statements but do not include all disclosures required by accounting principles generally accepted in the United States of America.

These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company’s 2008 Annual Report on Form 10-K filed with the Securities and Exchange Commission. The results of operations for interim periods are not necessarily indicative of the results for any subsequent quarter or the entire fiscal year ending December 31, 2009.

Basic and diluted net losses per common share are presented in accordance with Statement of Financial Accounting Standards (“SFAS”) No. 128, Earnings Per Share (“SFAS 128”), for all periods presented. In accordance with SFAS 128, basic and diluted net losses per common share have been computed using the weighted-average number of shares of common stock outstanding during the period. During periods of net losses, shares associated with outstanding stock options, stock warrants, and convertible preferred stock are not included because the inclusion would be anti-dilutive (i.e., reduce the net loss per share). The total numbers of such shares excluded from diluted net loss per common share were 9,587,565 and 8,158,826 for the three months ended March 31, 2009 and 2008, respectively.

Note 5 — Fair Value Measurements

The Company determines the fair value of its financial instruments utilizing a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. The following summarizes the three levels of inputs required, as well as the assets that we value using those levels of inputs.

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

Level 2  — Observable inputs, other than quoted prices in active markets for identical assets and liabilities, such as quoted prices for similar assets and liabilities; quoted prices in markets that are not active; or other inputs that are observable.

Level 3  — Unobservable inputs, supported by little or no market data available, where the reporting entity is required to develop its own assumptions to determine the fair value of the instrument.

An asset’s or liability’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. At each reporting period, we perform a detailed analysis of our assets and liabilities that are measured at fair value. All assets and liabilities for which the fair value measurement is based on significant unobservable inputs or instruments which trade infrequently and therefore have little or no price transparency are classified as Level 3.

The following table sets forth a summary of changes in the fair value of our Level 3 liabilities for the three months ended March 31, 2009:

Description		Balance at December 31, 2008		Cumulative Effect of Adoption of New Accounting Guidance		Change in Fair Value		Balance at March 31, 2009 (restated)
Derivative Liabilities		$	—			$	128,121			$	50,272			$	178,393

The change in fair value of the derivative liabilities is classified in other income (expense) in the Company’s statement of operations. The fair value of the Company’s derivative liabilities related to stock purchase warrants was determined using the Black-Scholes option pricing model — a Level 3 input.

The Company does not have any non financial assets or liabilities that it measures at fair value.

TABLE OF CONTENTS

CYTOMEDIX, INC.
  
NOTES TO FINANCIAL STATEMENTS

Note 6 — Capital Stock Activity

The Company issued no shares of Common stock during the three months ended March 31, 2009.

The following table summarizes the stock options granted by the Company during the three months ended March 31, 2009. These options were granted to board members under the Company’s Long-Term Incentive Plan.

		Three Months Ended March 31, 2009
		Options Granted		Exercise Price
		190,000		$0.30 – $0.35

During the three months ended March 31, 2009, 36,834 options were forfeited by contract due to the termination of the underlying service arrangement.

No dividends were declared or paid on the Company’s Common Stock in any of the periods discussed in this report.

The Company had the following outstanding warrants and options:

		# Outstanding
Equity Instrument		March 31, 2009		December 31, 2008
D Warrants			304,033				304,033
Unit Warrants (1)			1,812,500				1,812,500
Fitch/Coleman Warrants			975,000				975,000
August 2008 Warrants			1,000,007				1,000,007
Other warrants			1,261,632				1,261,632
Options issued under the Long-Term Incentive Plan			4,173,554				4,020,388

Note 7 — Patent Amortization

In the fourth quarter of 2008, the Company wrote-off the remaining balance of its patents. Amortization expense was approximately $38,000 for the three months ended March 31, 2008, and zero for the corresponding period in 2009.

Note 8 — Commitments and Contingencies

The Company is prohibited from granting a security interest in the Company’s patents and/or future royalty streams under the terms of the Series A and B Convertible Preferred stock.

Under the Company’s plan of reorganization upon emergence from bankruptcy in July 2002, the Series A Preferred stock and the dividends accrued thereon that existed prior to emergence from bankruptcy are to be exchanged into one share of new Common stock for every five shares of Series A Preferred stock held as of the date of emergence from bankruptcy. This exchange is contingent on the Company’s attaining aggregate gross revenues for four consecutive quarters of at least $10,000,000 prior to July 2009 and would result in the issuance of approximately 325,000 shares of Common stock.

The Company is party to a registration rights agreement and a related warrant agreement with one of its former consultants. The registration rights agreement provides for liquidated damages, at the discretion of the warrant holder, in the event that the registration statement relating to the shares underlying the warrants becomes ineffective. The Company’s obligations under this agreement run through the earlier of April 1, 2012 or two years after the exercise of the related warrants. At the discretion of the warrant holder, the liquidated damages may take the form of cash or additional shares of the Company’s Common stock. As of March 31, 2009, the Company has estimated the maximum undiscounted liquidated damages at $90,000. However, the

TABLE OF CONTENTS

CYTOMEDIX, INC.
  
NOTES TO FINANCIAL STATEMENTS

Note 8 — Commitments and Contingencies  – (continued)

Company has determined that it is unlikely that circumstances allowing for the aforementioned liquidated damages would arise, and therefore no contingent liability has been recorded.

In conjunction with its FDA clearance, the Company agreed to conduct a post-market surveillance study to further analyze the safety profile of bovine thrombin as used in the AutoloGel ^TM System. This study is estimated to cost approximately $500,000 over a period of three years, beginning in the third quarter of 2008. As of March 31, 2009, $58,000 had been incurred.

In June 2008, the Company renewed its operating lease for its office space in Rockville, MD which was set to expire in July 2008. Under the terms of the renewed lease, the new expiration date is December 31, 2009 and monthly rent expense is approximately $5,600 from August 2008 through July 2009 and approximately $5,800 thereafter.

Note 9 — Income Taxes

No provision for income taxes has been recorded as there are no taxes payable due to the Company’s significant net operating loss carryforwards. Because the Company has determined that the realization of future benefit from the net operating losses is not assured, the Company has reserved for the entire remaining benefit.

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The only periods subject to examination for the Company’s federal return are the 2003 through 2007 tax years. The Company believes that its income tax filing positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material change to its financial position. Therefore, no reserves for uncertain income tax positions have been recorded.

The Company’s policy for recording interest and penalties associated with audits is to record such items as a component of income before taxes. There were no such items during the periods covered in this report.

Note 10 — Termination and Consulting Agreement

On June 5, 2008, the Company and Kshitij Mohan, the Company’s former Chief Executive Officer and Chairman of the Board of Directors, entered into a Termination and Consulting Agreement (the “Agreement”), pursuant to which Dr. Mohan agreed, among other things, to step down as the CEO and Chairman and to become a consultant to the Company effective June 30, 2008.

As part of the Agreement, Dr. Mohan is entitled to the following compensation:

The Company recorded $510,000 in compensation expense in the second quarter of 2008 which represents the present value of the above outlined special termination benefits to Dr. Mohan. At March 31, 2009, $252,000 and $62,000, representing the short and long-term components of the remaining obligation to Dr. Mohan, are reflected in the Accounts payable and accrued expenses and Other liabilities lines of the Balance Sheets, respectively.

TABLE OF CONTENTS

CYTOMEDIX, INC.
  
NOTES TO FINANCIAL STATEMENTS

Note 11 — Recent Accounting Pronouncements

In October 2008, the FASB issued FSP SFAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active , to clarify the application of SFAS 157 in a market that is not active. On January 1, 2009, the Company adopted SFAS No. 157, Fair Value Measurements (“SFAS 157”), for non-financial assets and non-financial liabilities, which was previously deferred under FSP SFAS 157-2, Effective Date of FASB Statement No. 157 . The adoption of FSP SFAS 157-2 and 157-3 did not have a significant impact on the financial statements.

On January 1, 2009, the Company adopted new accounting guidance (ASC 815-40, formerly EITF 07-5 “ Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock ”) that required additional analysis as to whether or not stock purchase warrants are “indexed to” its stock, a condition that is required to attain equity accounting and classification. Upon the adoption of this new guidance, the Company concluded that its previously issued stock purchase warrants were appropriately classified as equity and, therefore, the adoption of the new guidance did not have any impact on its historical financial statements or on its 2009 financial statements.

In connection with the review of certain equity transactions in 2010, the Company determined that, upon the adoption of the new accounting guidance on January 1, 2009, certain stock purchase warrants issued in 2004 should have been appropriately classified as derivative liabilities (and not equity) due to the presence of non-standard anti-dilution provisions in those warrant agreements. These provisions require that the Company modify existing warrants (as to the actual number of warrants and their exercise price) in the event that the Company issues subsequent equity (or equity-linked instruments) at a price below the exercise price of the existing warrants. Also, as a result of the improper accounting treatment for the above-mentioned stock purchase warrants, certain offering expenses were also misclassified and accounted for incorrectly.

As a result, the Company has restated its 2009 quarterly financial statements to correct for the misapplication of the new accounting guidance related to the accounting and classification of stock purchase warrants. See Note 2 for further discussion.

Note 12 — Subsequent Events

Grant of Stock Options

In May 2009, the Board of Directors granted 84,000 stock options under the Company’s LTIP to various officers and employees in lieu of cash bonuses for 2008. These options have an exercise price of $0.60, which was the closing market price on their date of grant, vest immediately, and expire ten years from the date of grant. The Board also granted 20,000 stock options to certain employees pursuant to their recent employment. These options have an exercise price of $0.60, vest over a three year period, and expire ten years from the date of grant.

NYSE Amex Listing Deficiency Notification

On May 13, 2009, the Company received notice from the NYSE Amex (the “Exchange”) notifying the Company it is not in compliance with Section 1003(a)(ii) of the Company Guide with stockholders’ equity of less than $4,000,000 and losses from continuing operation and/or net losses in three of its four most recent fiscal years, and Section 1003(a)(iii) with stockholders’ equity of less than $6,000,000 and losses from continuing operation and/or net losses in five most recent fiscal years.

In order to maintain its listing, the Company intends to submit a plan by June 12, 2009 outlining its compliance strategy to address the above-referenced deficiency within a maximum of 18 months. If the Company’s plan to regain compliance is accepted by the Exchange, the Company may be able to continue its listing during this period, during which time it will be subject to periodic review to determine progress consistent with the plan. If the Company does not submit a plan or if the plan is not accepted by the Exchange, the Company will be subject to delisting procedures as set forth in the Exchange Company Guide. Under Company Guide rules, the Company has the right to appeal the determination by the Exchange staff to initiate

TABLE OF CONTENTS

CYTOMEDIX, INC.
  
NOTES TO FINANCIAL STATEMENTS

Note 12 — Subsequent Events – (continued)

delisting proceedings. There is no assurance that the Exchange staff will accept the Company’s plan of compliance or that, even if such plan is accepted, the Company will be able to implement the plan within the prescribed timeframe.

The Company may appeal a staff determination to initiate such proceedings and seek a hearing before a NYSE Amex Panel. The time and place of such a hearing will be determined by the Panel. If the Panel does not grant the relief sought by the Company, its securities could be delisted from the exchange. In the event that the Company's securities are delisted from the Exchange, the Company will seek to cause them be quoted on the Over-The-Counter Bulletin Board.

Effective within 5 days of the receipt of the above-referenced deficiency, the Company’s stock trading symbol will be appended with a “.BC” indicator denoting the Company’s current noncompliance. The indicator will remain in place until the Company regains compliance with all applicable continued listing requirements.

TABLE OF CONTENTS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Quarterly Report on Form 10-Q contains forward-looking statements regarding Cytomedix, Inc. (“Cytomedix,” the “Company,” “we,” “us,” or “our”) and our business, financial condition, results of operations and prospects within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include those that express plans, anticipation, intent, contingency, goals, targets or future development and/or otherwise are not statements of historical fact. These forward-looking statements are based on our current expectations and projections about future events and they are subject to risks and uncertainties known and unknown that could cause actual results and developments to differ materially from those expressed or implied in such statements. You should read the following discussion and analysis in conjunction with our unaudited financial statements contained in this report, as well as the audited financial statements, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Risk Factors” contained in our Annual Report on Form 10-K, for the fiscal year ended December 31, 2008. The Company undertakes no obligation to update the forward-looking statements contained in this report to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as may occur as part of its ongoing periodic reports filed with the SEC. Given these uncertainties, the reader is cautioned not to place undue reliance on such statements.

Restatements

On January 1, 2009, we adopted new accounting guidance (ASC 815-40, formerly EITF 07-5 “ Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock ”) that required additional analysis as to whether or not stock purchase warrants are “indexed to” our stock, a condition that is required to attain equity accounting and classification. Upon the adoption of this new guidance, we concluded that our previously issued stock purchase warrants were appropriately classified as equity and, therefore, the adoption of the new guidance did not have any impact on our historical financial statements or on our 2009 financial statements.

In connection with the review of certain equity transactions in 2010, we determined that, upon the adoption of the new accounting guidance on January 1, 2009, certain stock purchase warrants issued in 2004 should have been appropriately classified as derivative liabilities (and not equity) due to the presence of non-standard anti-dilution provisions in those warrant agreements. These provisions require that we modify existing warrants (as to the actual number of warrants and their exercise price) in the event that we issue subsequent equity (or equity-linked instruments) at a price below the exercise price of the existing warrants. Also, as a result of the improper accounting treatment for the above-mentioned stock purchase warrants, certain offering expenses were also misclassified and accounted for incorrectly.

As a result, we have restated our 2009 quarterly financial statements to correct for the misapplication of the new accounting guidance related to the accounting and classification of stock purchase warrants. See Note 2 to the financial statements contained in Part 1 Item 1 of this report for further discussion.

The following discussion and analysis incorporates the impact of the above-mentioned restatements.

Description of the Business

Overview

Cytomedix is a biotechnology company that develops, sells, and licenses regenerative biological therapies, to primarily address the areas of wound care, inflammation, and angiogenesis. The Company currently markets the AutoloGel ^TM System, a device for the production of platelet rich plasma (“PRP”) gel derived from the patient’s own blood. The AutoloGel ^TM System is cleared by the Food and Drug Administration (“FDA”) for use on a variety of exuding wounds. The Company is currently pursuing a multi-faceted strategy to penetrate the chronic wound market with its AutoloGel ^TM System. The Company is also moving forward with the development of other product candidates in its pipeline. Most notably is its anti-inflammatory peptide (designated “CT-112”) that has shown promise in pre-clinical testing, and for which the Company is currently preparing an Investigational New Drug application for the FDA. Cytomedix sells its products primarily to health care providers in the United States and licenses its patents to surgical medical device suppliers in the

TABLE OF CONTENTS

United States. A more complete discussion of our business and related matters, including risk factors, is set forth in our Annual Report on Form 10-K for the year ended December 31, 2008. Following is an update on critical Company initiatives.

AutoloGel ^TM System

In January 2009, we implemented a strategic shift in the commercialization tactics for marketing of the AutoloGel ^TM System. New emphasis has been placed on scientific and clinical messaging, and the commercial organization has been realigned to reflect a stronger requirement for clinical support during the sales process. We have added two new clinical support staff to facilitate clinical product evaluations and establish protocols for the standardized use of the AutoloGel ^TM System. Our top company executives have joined sales managers and clinical staff in the selling process to establish a greater sense of importance and commitment to the AutoloGel ^TM System and the positive patient outcomes it produces. Early results of the strategy indicate sales growth and broader customer acceptance. We have experienced a marked increase in the number of product evaluations and interest in the technology. Our focus over the upcoming weeks and months will be to convert this heightened interest and resulting evaluations into lasting commercial relationships.

We have developed a new packaging concept, based on customer feedback, which will be introduced in the second half of this year. The new design will improve the customer experience, reduce process steps and simplify the preparation of AutoloGel ^TM .

We continue to publish in trade journals and at industry conferences. Two abstracts demonstrating the use of the AutoloGel ^TM System were published at the April 2009 Symposium on Advanced Wound Care and Wound Healing Society (SAWC/WHS) Meeting, and an AutoloGel ^TM case series authored by one of our customers is scheduled for May publication in the journal Wounds . These publications, other published literature, and the data we continue to collect through product evaluations, will support our marketing efforts and help build a compelling case for Medicare Part B reimbursement with the Centers for Medicare and Medicaid Services (“CMS”).

While we prepare to reengage CMS regarding coverage for the AutoloGel ^TM System, the new presidential administration and Congress are changing the leadership and resources available at CMS. The American Recovery and Reinvestment Act has authorized additional funds for CMS to compare the effectiveness of related therapies, and a committee has recently been named to make recommendations regarding the use of the funds. Through our network of contacts and consultants retained to help us navigate the CMS process, we are monitoring and analyzing these changes to identify appropriate opportunities, with the ultimate goal to convince CMS to allow coverage for the AutoloGel ^TM System.

Recent events, including the publicity of procedures for high profile athletes with sports injuries, have led to a heightened interest in using platelet rich plasma in orthopedic procedures. We have been developing a platelet rich plasma system appropriate for these orthopedic applications and anticipate filing a 510(k) submission with the FDA in the late 2nd or early 3rd quarter of this year.

Anti-inflammatory Peptide

The development of our anti-inflammatory peptide, CT-112, continues to progress. Pre-clinical in vivo and in vitro studies have been completed, and we are preparing for an IND submission to the FDA and a Phase I clinical study. In the fourth quarter of 2008, we entered into an agreement with a California based peptide manufacturer to synthesize and purify the first production lot of the CT-112 peptide. The manufactured peptide met purity requirements, and the anti-inflammatory activity was confirmed with both oral and subcutaneous dosing in a rodent model. The bioanalytical method to be used in the Phase I study for measuring levels of CT-112 in patient blood samples is currently being validated by an outside laboratory. We have retained the Frankel Group, a New York, NY and Cambridge, MA based life science strategy consulting firm, to assist with the identification of commercially-relevant high value indications for CT-112 that may be pursued in early clinical trials. Potential collaborators have been engaged in early discussions, and the outcome of our work with the Frankel Group will help guide our efforts to find suitable strategic partners and sources of funding.

TABLE OF CONTENTS

Comparison of Operating Results for the Three Month Periods Ended March 31, 2009 and 2008

Currently, the Company’s revenues are primarily earned through its licensing agreements. These revenues, net of related royalty and contingent legal fees, represent the primary source of cash from operations for the Company. Cash generated from the Company’s licensing agreements is wholly dependent on covered sales generated by its licensees, which are entirely outside of the Company’s control and the Company cannot provide any assurance that these levels will continue. Although royalty revenues decreased by $111,000 comparing the first quarter of 2009 to the same period a year ago, they remain consistent with recent quarters. Our royalty revenues in the first quarter of 2008 were greater than expected due to the timing of certain orders received by our licensees. We therefore do not believe this is indicative of a trend. These revenues, which constituted approximately 95% of the Company’s revenues in 2008, will cease by the end of November 2009 as the underlying license agreements expire at that time.

Sales of the Company’s products are currently very modest. The Company implemented a significantly revamped selling approach beginning in January 2009. This new approach focuses on the scientific mechanisms underpinning AutoloGel ^TM , and leverages the Company’s clinical expertise in chronic wound care. Part of this new sales approach includes increased clinical involvement by our staff to assist prospective customers in conducting intensive on-site evaluations of AutoloGel ^TM and offering on-going support to existing customers in order to optimize healing outcomes. Although it is still very early in the process, this new approach is eliciting positive customer responses to the new messaging and tactics. While still modest, the first quarter’s product sales of approximately $42,000 represents the highest quarterly product sales in over three years. The Company continues to target selected submarkets, including the Veterans Administration and other government agency health facilities as well as capitated payment scheme environments such as long-term acute care facilities.

The Company’s revenues are insufficient to cover its operating expenses. Operating expenses primarily consist of employee compensation, professional fees, consulting expenses, and other general business expenses such as insurance, rent, and sales and marketing related items. Cash outflows have recently risen as we have increased our investment in the sales and marketing effort and pursued the development of CT-112.

Certain numbers in this section have been rounded for ease of analysis.

Revenues

Revenues fell $88,000 (14%) to $539,000 comparing the three months ended March 31, 2009 to the same period last year. Revenues are normally generated from two sources: the sale of the Company’s products and royalties received from licensing activities. The decrease was due to lower royalty revenues ($111,000), partially offset by higher product sales ($23,000). Royalties are directly dependent on sales of covered products by licensees, over which the Company exercises no control. The increase in product sales is a result of the revised selling approach implemented in the first quarter of 2009. The Company plans to devote further resources to its efforts in the sales and marketing areas in the coming quarters.

Gross Profit

The change in Gross profit was nominal comparing the three months ended March 31, 2009 to the same period last year. For the same periods, gross margins rose to 75% from 65%. The improved margins were driven by a shift in revenue to the higher margin royalty and product revenue.

Operating Expenses

Operating expenses fell $72,000 (5%) to $1,304,000 comparing the three months ended March 31, 2009, to the same period last year. A discussion of the various components of Operating expenses follows below.

Salaries and Wages

Salaries and wages rose $101,000 (19%) to $636,000 comparing the three months ended March 31, 2009, to the same period last year. The increase was primarily due to an increased number of employees and salary increases, partially offset by decreased equity-based compensation ($32,000) due to lower fair values of options.

TABLE OF CONTENTS

Consulting Expenses

The change in Consulting expenses was nominal, comparing the three months ended March 31, 2009, to the same period last year.

Professional Fees

Professional fees fell $197,000 (55%) to $160,000 comparing the three months ended March 31, 2009, to the same period last year. The decrease was primarily due to lower legal fees associated with Medicare reimbursement efforts ($110,000), and lower audit fees ($41,000).

Trials and Studies

Trials and studies expenses rose to $79,000 from zero comparing the three month period ended March 31, 2009 to the same period last year. The increase was due to the Company’s TAPS program (post-market surveillance study) for the AutoloGel ^TM System, and preparations for the IND for CT-112, both initiated in the third quarter of 2008.

General and Administrative Expenses

General and administrative expenses fell $34,000 (8%) to $413,000 comparing the three months ended March 31, 2009, to the same period last year. The decrease was primarily due to lower equity-based compensation ($68,000), patent amortization ($38,000) as the Company wrote-off the remaining value of its patents in the fourth quarter of 2008, and recruiting fees ($37,000), partly offset by increased travel expenses ($61,000), director fees ($23,000), and various other expenses.

Other Income (Expense)

Other income (expense) for the three months ended March 31, 2009 reflects lower interest ($52,000) earned on cash invested in money market accounts and notes receivable balances as compared to the same period last year, as well as the changes in the fair value of derivative liabilities of $50,000.

Liquidity and Capital Resources

There exists substantial doubt that the Company will continue as a going concern. The Company believes that it has adequate cash to fund operations through the fourth quarter of 2009, however, this belief is based on the successful execution of its new sales strategy in the current market and resulting increase in revenue from product sales. Furthermore, there is no assurance that the Company will have adequate funding to enable it to operate beyond that point or to reach a point of self-sustainability without additional financing. The licensing agreements, under which the Company’s royalty revenues are generated, expire in late November 2009. This revenue, which constituted approximately 95% of the Company’s revenues in 2008, will cease at that time and there is no assurance that the Company will be able to replace this revenue through increased sales of its products or new license agreements.

Additional cash will likely be required for the Company to pursue all elements of its strategic plan. Specific programs that may require additional funding may include development of CT-112 beyond a Phase I trial, accelerated investment in the sales and marketing areas beyond what is currently forecasted, significant new product development or modifications, conduct of the trials the Company may deem necessary in order to obtain CMS coverage, and pursuit of certain other attractive opportunities for the Company. The Company is exploring potential strategic partnerships for some of these endeavors, which could likely provide a capital infusion to the Company. However, it may be necessary to partner one or more of the Company’s technologies at an earlier stage of development, which could cause the Company to share a greater portion of the potential future economic value of those programs with its partners. The Company may also consider raising capital through the issuance of its equity securities, though this may result in significant dilution to its investors. The Company continuously assesses the state of the capital markets and its access to capital. It weighs the cost of capital and dilutive effects of equity issuance against the expected benefits of accelerating the pursuit of certain strategic objectives. The Company’s ability to raise additional capital is dependent on the state of the financial markets at the time of any proposed offering. Given the current state of the financial markets, the likelihood of a capital raise may be significantly diminished. The Company is also exploring the possibility of obtaining grant funding for some of its on-going projects, but it is too early to determine whether these efforts

TABLE OF CONTENTS

are likely to be successful. Because the Company was in bankruptcy in 2002, the Company may not be able to obtain debt financing. There is no assurance that additional funding, through any of the aforementioned means, will be available on acceptable terms, or at all. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, the Company’s operations would be materially negatively impacted.

The Company has certain warrants that are callable, subject to certain requirements including a minimum per share price ranging from $4 to $6, at an aggregate exercise price of approximately $6.0 million. The Company has no material commitments for capital expenditures. The Company has begun implementation of a post-market surveillance study per its understanding reached with the FDA. The Company estimates that this new study will cost approximately $500,000 over the next three years, and of that amount, approximately $200,000 will be expended in the next 12 months.

Contractual Obligations

In June 2008, the Company renewed its operating lease for its office space in Rockville, MD which was set to expire in July 2008. Under the terms of the renewed lease, the new expiration date is December 31, 2009 and monthly rent expense is approximately $5,600 from August 2008 through July 2009 and approximately $5,800 thereafter.

Prospects for the Future

Cytomedix’s success is directly dependent on its ability to generate sales of the AutoloGel ^TM System, and to further develop the other product candidates in its pipeline. The Company believes that AutoloGel ^TM has a reasonable chance for success in the marketplace. First and foremost, the Company believes that, based on the results of the Company’s clinical trial and other historical data as well as the results of a pharmaco-economic study, the AutoloGel ^TM System has higher healing rates for diabetic foot ulcers and is more cost effective than most other wound treatments. Additionally, the Company believes that AutoloGel ^TM offers similar clinical and cost advantages when used to treat other chronic and open cutaneous wounds. Although still very early, the Company’s revised sales strategy, centered around heavy clinician to clinician interaction, is meeting with very positive response from potential and existing customers. However, given limited resources, sales increases are expected to be moderate. The Company owns the patents on the process for utilizing platelet gel for treating damaged tissue and wound healing, which is the basis of its license agreements, through November 2009 and for the specific formulation of AutoloGel ^TM , which it believes provides several competitive advantages, and which patents expire in 2019.

The Company also believes that the AutoloGel ^TM System is the only PRP gel system with a chronic wound indication from the FDA, thus affording another competitive advantage. While the existing CMS decision of non-coverage of autologous blood-derived products when used on chronic wounds will continue to restrict the Company’s ability to target the entire wound care market, it will not have an impact on the Company’s current sales and marketing strategy, which targets selected sub-markets with established payment pathways for its products.

The Company believes that pre-clinical data on CT-112 is promising. The Company believes that the magnitude of the potential markets for CT-112, along with the potential competitive advantage over existing therapies, could make CT-112 an attractive partnering opportunity for well-established drug and biological therapy companies. Such partnerships could provide Cytomedix with initial and milestone-based capital infusions and on-going licensing revenues. However, the ability to secure such a partnership and the attractiveness of the terms to Cytomedix is in part a function of how far through development Cytomedix can take CT-112 on its own.

Cytomedix has other product candidates covered by its intellectual property that have various levels of data supporting their safety and efficacy. The Company is currently evaluating the relative opportunities of these product candidates and determining whether they warrant further pursuit. While Cytomedix’s technologies and opportunities are encouraging, the Company has limited resources, and is currently not self-sustaining. Given the economic conditions in the overall financial markets, the availability of capital on terms acceptable to the Company may be significantly diminished. The Company may therefore seek infusions of capital through strategic collaborations and/or place certain projects on indefinite hold in order to conserve cash.

TABLE OF CONTENTS

Recent Accounting Pronouncements

In October 2008, the FASB issued FSP SFAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active , to clarify the application of SFAS 157 in a market that is not active. On January 1, 2009, the Company adopted SFAS No. 157, Fair Value Measurements (“SFAS 157”), for non-financial assets and non-financial liabilities, which was previously deferred under FSP SFAS 157-2, Effective Date of FASB Statement No. 157 . The adoption of FSP SFAS 157-2 and 157-3 did not have a significant impact on the financial statements.

On January 1, 2009, we adopted new accounting guidance (ASC 815-40, formerly EITF 07-5 “ Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity's Own Stock ”) that required additional analysis as to whether or not stock purchase warrants are “indexed to” our stock, a condition that is required to attain equity accounting and classification. Upon the adoption of this new guidance, we concluded that our previously issued stock purchase warrants were appropriately classified as equity and, therefore, the adoption of the new guidance did not have any impact on our historical financial statements or on our 2009 financial statements.

In connection with the review of certain equity transactions in 2010, we determined that, upon the adoption of the new accounting guidance on January 1, 2009, certain stock purchase warrants issued in 2004 should have been appropriately classified as derivative liabilities (and not equity) due to the presence of non-standard anti-dilution provisions in those warrant agreements. These provisions require that we modify existing warrants (as to the actual number of warrants and their exercise price) in the event that we issue subsequent equity (or equity-linked instruments) at a price below the exercise price of the existing warrants. Also, as a result of the improper accounting treatment for the above-mentioned stock purchase warrants, certain offering expenses were also misclassified and accounted for incorrectly.

As a result, we have restated our 2009 quarterly financial statements to correct for the misapplication of the new accounting guidance related to the accounting and classification of stock purchase warrants. See Note 2 to the financial statements contained in Part I Item 1 of this report for further discussion.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company does not enter into financial instruments for speculation or trading purposes. In accordance with the Company’s investment policy, cash is to be invested in bank and institutional money market funds, or in T-Bills or short-term T-Notes. At March 31, 2009, the Company’s cash balance of approximately $3.1 million was maintained primarily in an institutional money market account, sensitive to changes in the general level of interest rates. Based on the Company’s cash balances at March 31, 2009, a 100 basis point increase or decrease in interest rates would have an approximately $31,000 impact on the Company’s annual interest income and net loss. Actual changes in rates may differ from the hypothetical assumption used in computing this exposure.

Item 4T. Disclosure Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2009. The term “disclosure controls and procedures” is defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934. Management recognizes that any disclosure controls and procedures no matter how well designed and operated, can only provide reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As a result of a material weakness in our internal control over financial reporting relating to the accounting for stock purchase warrants, our management has reassessed the effectiveness of our disclosure controls and procedures and have determined that our disclosure controls and procedures were not effective as of March 31, 2009.

Restatement of Consolidated Financial Statements

On January 3, 2011, the Audit Committee of the Board of Directors concluded, based on the recommendation of management, that the previously issued financial statements for the year ended December 31, 2009 included

TABLE OF CONTENTS

in the Company's most recently filed Form 10-K and the quarterly periods from March 31, 2009 through September 30, 2010 included in the Company's quarterly reports on Forms l0-Q (collectively, the “Affected Periods”) are no longer reliable because they failed to incorporate non-cash charges resulting from required adjustments to certain outstanding warrants (the “Warrants”). The Company’s management and the Audit Committee of the Board of Directors have determined that financial statements in the Affected Periods should be restated to reflect these non-cash charges. The Company’s management and the Audit Committee of the Board of Directors have discussed these matters with the Company’s independent registered public accounting firm.

Remediation Plan

Management has been actively engaged in developing a remediation plan to address the material weakness. Implementation of the remediation plan is in process and consists of redesigning quarterly procedures to enhance management's identification, capture, review, approval and recording of contractual terms included in equity arrangements. Management believes the foregoing efforts will effectively remediate the material weakness. As the Company continues to evaluate and work to improve its internal control over financial reporting, management may execute additional measures to address potential control deficiencies or modify the remediation plan described above. Management will continue to review and make necessary changes to the overall design of the Company's internal control environment, as well as to policies and procedures to improve the overall effectiveness of internal control over financial reporting.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended on the Evaluation Date that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

TABLE OF CONTENTS

PART II
  
OTHER INFORMATION

Item 1. Legal Proceedings

At present, the Company is not engaged in or the subject of any material pending legal proceedings.

Item 1A. Risk Factors

There were no material changes from the risk factors as previously disclosed on our 10-K filed with the Securities and Exchange Commission for the year ended December 31, 2008.

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

The Company issued no unregistered shares of Common stock during the three months ended March 31, 2009. Nor did the Company repurchase any of its equity securities during the same fiscal period.

Item 3. Defaults Upon Senior Securities

N/A

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

NYSE Amex Listing Deficiency Notification

On May 13, 2009, the Company received notice from the NYSE Amex (the “Exchange”) notifying the Company it is not in compliance with Section 1003(a)(ii) of the Company Guide with stockholders’ equity of less than $4,000,000 and losses from continuing operation and/or net losses in three of its four most recent fiscal years, and Section 1003(a)(iii) with stockholders’ equity of less than $6,000,000 and losses from continuing operation and/or net losses in five most recent fiscal years.

In order to maintain its listing, the Company intends to submit a plan by June 12, 2009 outlining its compliance strategy to address the above-referenced deficiency within a maximum of 18 months. If the Company’s plan to regain compliance is accepted by the Exchange, the Company may be able to continue its listing during this period, during which time it will be subject to periodic review to determine progress consistent with the plan. If the Company does not submit a plan or if the plan is not accepted by the Exchange, the Company will be subject to delisting procedures as set forth in the Exchange Company Guide. Under Company Guide rules, the Company has the right to appeal the determination by the Exchange staff to initiate delisting proceedings. There is no assurance that the Exchange staff will accept the Company’s plan of compliance or that, even if such plan is accepted, the Company will be able to implement the plan within the prescribed timeframe.

The Company may appeal a staff determination to initiate such proceedings and seek a hearing before a NYSE Amex Panel. The time and place of such a hearing will be determined by the Panel. If the Panel does not grant the relief sought by the Company, its securities could be delisted from the exchange. In the event that the Company's securities are delisted from the Exchange, the Company will seek to cause them be quoted on the Over-The-Counter Bulletin Board.

Effective within 5 days of the receipt of the above-referenced deficiency, the Company’s stock trading symbol will be appended with a “.BC” indicator denoting the Company’s current noncompliance. The indicator will remain in place until the Company regains compliance with all applicable continued listing requirements.

Item 6. Exhibits

The exhibits listed in the accompanying Exhibit Index are furnished as part of this report.

TABLE OF CONTENTS

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		CYTOMEDIX, INC.
Date: January 7, 2011		By: /s/ Martin P. Rosendale Martin P. Rosendale, Chief Executive Officer
Date: January 7, 2011		By: /s/ Andrew S. Maslan Andrew S. Maslan, Chief Financial Officer and Chief Accounting Officer

TABLE OF CONTENTS

EXHIBIT INDEX

Number		Exhibit Table
2.1		First Amended Plan of Reorganization with All Technical Amendments (Previously filed on June 28, 2002, as exhibit to Current Report on Form 8-K, File No. 000-28443).
2.2		Amended and Restated Official Exhibits to the First Amended Plan of Reorganization of Cytomedix, Inc. with All Technical Amendments (Previously filed on May 10, 2004, as exhibit to Form 10-QSB for the quarter ended March 31, 2004, File No. 000-28443).
3(i)		Restated Certificate of Incorporation of Cytomedix, Inc. (Previously filed on November 7, 2002, as exhibit to Form 10-QSB for quarter ended June 30, 2001, File No. 000-28443).
3(i)(1)		Amendment to Restated Certificate of Incorporation of Cytomedix, Inc. (Previously filed on November 15, 2004, as exhibit to Form 10-QSB for quarter ended September 30, 2004, File No. 000-28443).
3(ii)		Restated Bylaws of Cytomedix, Inc. (Previously filed on November 7, 2002, as exhibit to Form 10-QSB for quarter ended June 30, 2001, File No. 000-28443).
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certificate of Chief Executive Officer pursuant to 18 U.S.C.ss.1350.
32.2		Certificate of Chief Financial Officer pursuant to 18 U.S.C.ss.1350.