Fibrocell Science Inc (FCSC) 2003年年度報告「NASDAQ」.pdf

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1、Use these links to rapidly review the documentTABLE OF CONTENTS Isolagen,Inc.(A Development Stage Company)Index to Consolidated Financial StatementsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington,D.C.20549FORM 10-K Annual Report Pursuant to Section 13 or 15(d)of the Securities Exchange Act

2、 of 1934For the fiscal year ended December 31,2003ORoo Transition Report Pursuant to Section 13 or 15(d)of the Securities Exchange Act of 1934Isolagen,Inc.(Exact name of registrant as specified in its Charter.)Delaware 0-12666 87-0458888(State or other jurisdictionof incorporation)(Commission File N

3、umber)(I.R.S.EmployerIdentification No.)2500 Wilcrest,5th FloorHouston,Texas 77042(Address of principal executive offices,including zip code)(713)780-4754(Issuers telephone number,including area code)Securities registered pursuant to Section 12(b)of the Act:Title of Each Class Name of Each Exchange

4、on which RegisteredCommon Stock,$.001 par value American Stock Exchange Indicate by check mark whether the registrant:(1)filed all reports required to be filed by Section 13 or 15(d)of the Exchange Act during thepreceding 12 months(or for any shorter period that the registrant was required to file s

5、uch reports),and(2)has been subject to such filingrequirements for the past 90 days.Yes o No Indicate by check mark if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained in this form,and nodisclosure will be contained,to the best of registrants knowledge,

6、in definitive proxy or information statements incorporated by reference in Part IIIof this Form 10-K or any amendment to this Form 10-K.Indicate by check mark whether the registrant is an accelerated filer(as defined in the Exchange Act Rule 12b-2)oYes No As of March 24,2004,the aggregate market val

7、ue of the issuers common stock held by non-affiliates of the issuer based upon the price ofat which such common stock was sold on the American Stock Exchange as of such date was$185,917,466.As of March 24,2004,issuer had 26,768,893 shares of issued and outstanding common stock,par value$0.001.Docume

8、nts Incorporated by Reference:Portions of the information set forth in the definitive proxy statement to be filed by the registrantwithin 120 days of the close of the fiscal year are incorporated by reference in Part III hereof.TABLE OF CONTENTS PART IITEM 1.BUSINESSITEM 2.PROPERTIESITEM 3.LEGAL PRO

9、CEEDINGSITEM 4.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS PART IIITEM 5.MARKET FOR COMMON EQUITY RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITYSECURITIESITEM 6.SELECTED CONSOLIDATED FINANCIAL DATAITEM 7.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OP

10、ERATIONSITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSUREITEM 9A.CONTROLS AND PROCEDURES PART IIIITEM 10.DIRECTORS AND EXECUTIVE OFFICERS OF T

11、HE REGISTRANTITEM 11.EXECUTIVE COMPENSATIONITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONSITEM 14.PRINCIPAL ACCOUNTANT FEES AND SERVICES PART IVITEM 15.EXHIBITS,FINANCIAL STATEMENT SCHEDULES A

12、ND REPORTS ON FORM 8-KForward-Looking Information This report contains forward-looking statements that relate to future events or our future financial performance and involve known andunknown risks,uncertainties and other factors that may cause Isolagen,Inc.s or its industrys actual results,levels o

13、f activity,performance orachievements to be materially different from any future results,levels of activity,performance or achievements expressed or implied by theforward-looking statements.In some cases,you can identify forward-looking statements by terminology such as may,will,should,expects,plans

14、,anticipates,believes,estimates,predicts,potential,or the negative of these terms or other comparable terminology.These statements are onlypredictions.Actual events or results may differ materially.Although Isolagen,Inc.believes that the expectations reflected in the forward-looking statements are r

15、easonable,it cannot guarantee futureresults,levels of activity,performance,or achievements.Moreover,neither Isolagen,Inc.nor any other person assumes responsibility for theaccuracy and completeness of these forward-looking statements.Isolagen,Inc.is under no duty to update any of the forward-looking

16、 statementsafter the date of this report to conform its prior statements to actual results.Isolagen Inc.s actual results could differ materially from its historicaloperating results and from those anticipated in these forward-looking statements as a result of certain factors,including,without limita

17、tion,thoseset forth under BusinessRisk Factors of this Form 10-K and those set forth under Managements Discussion and Analysis of FinancialCondition and Results of Operation.We are under no obligation to and do not intend to update,revise or otherwise publicly release any revisions to these forward-

18、lookingstatements to reflect events or circumstances after the date hereof or to reflect the occurrence of any unanticipated events.Part I Item 1.Business Overview Isolagen Technologies,Inc.is a biopharmaceutical company located in Houston,Texas that specializes in the development andcommercializati

19、on of autologous cellular therapy for hard and soft tissue regeneration.Our lead product candidate is in Phase III clinicaldevelopment and has applications in cosmetic dermatology to correct and reduce the normal effects of aging,such as wrinkles,laugh lines,smokers lines,fine lines and all types of

20、 depressed scars.We expect to file a Biologics License Application(BLA)for this product in late 2004.Our second product candidate,which is being developed to treat periodontal disease,completed a Phase I clinical trial in late 2003.Autologous cellular therapy is the process whereby a patients own ce

21、lls are extracted,processed,and then reintroduced to the patient.TheIsolagen Process is an autologous cellular therapy designed to replenish deficiencies caused through the loss of fibroblast cells.As the bodyages,it loses approximately 1%of its fibroblast cells each year.Fibroblast cells are respon

22、sible for producing collagen and elastin,which supportthe skin.By the time a person is 40 years old,his or her body has lost approximately 40%of its fibroblast cells,leading to dermal depressions andwrinkles.In the Isolagen Process,the patients cells are taken from a small skin sample from which mil

23、lions of fibroblast cells are separated andreproduced and then injected into the patient in or around the areas to be treated.Following injection,the new fibroblast cells lead to the productionof collagen and elastin,which diminish the depressions and wrinkles.The procedure is minimally invasive and

24、 non-surgical.Currently,there are multiple competitive alternatives to reduce the signs of aging.In this market area there have been a number of productsdeveloped over the years designed to treat the symptoms of1 this pathology.These products include various collagen formulations fabricated from ani

25、mal and human cadaver,hyaluronic acid from animal andsynthetic sources,plastic beads,and calcium,hydroxyapatite.Other therapies include paralysis of the underlying superficial musculature withBotulinum toxin and transplantation of autologous fat.These products are associated with clinical problems w

26、hich vary from the one product to theother product such as short duration of action for collagen and Botulinum toxin products(3-6 months),immunological reactions,irregular correctionof contour,and significant pain associated with the injection.Isolagens process is designed to address many of these i

27、ssues.As the cells used inthe Isolagen process are derived from the patients own skin,they express identical antigens to those of the cells in the treatment area,andtherefore do not stimulate immune rejection.In addition to the United States,we plan to commercialize the Isolagen Process in other cou

28、ntries.In August 2001,we formed IsolagenEurope Limited,our subsidiary organized under the laws of the United Kingdom,for the purpose of marketing the Isolagen Process to patientslocated in Europe.We began commercialization in the United Kingdom in the first quarter of 2003.In August 2003,we received

29、 a license fromAustralias Therapeutic Goods Administration(TGA)to begin the manufacture of autologous fibroblast cells.Consequently,we commencedcommercialization in Australia in the fourth quarter of 2003.We are also investigating commercialization in South Korea,Hong Kong,Italy andMexico.Throughout

30、 2003,Isolagen focused its market introduction activities in the UK and European markets on establishing a solid foundation forfuture growth.This consisted of introducing the Isolagen Process to selected leading medical practitioners,primarily plastic surgeons anddermatologists to the Isolagen Proce

31、ss who could offer the treatment to their patients.Periodically,training sessions were given throughout theyear as well to train a broader group of practitioners.During this initial phase,Isolagen also gradually exposed potential patients to the therapy through articles in health and beauty journals

32、.Inthe beginning of 2004 the landscape was sufficiently covered with trained physicians such that the public relations activities could be increased.An additional public relations firm was hired that had extensive contacts in broadcast media.Additionally,an agreement was reached with EmmaSamms,the a

33、ctress who played Falon on Dynasty,to represent Isolagen for 2004.As a result of this increased exposure,a marked increase in demand for Isolagens dermal therapy was experienced in recent months.InJanuary 2004,the London laboratory received more than a 30%increase in the number of biopsies from pati

34、ents as compared to the 2003 monthlyaverage.In February 2004,the number of biopsies received increased by more than 100%over January.In the last week of February a majorpublic relations campaign was started.Isolagen was featured on a UK television talk show,in an article in which the actress Emma Sa

35、mms wasinterviewed about her experience with Isolagen and in a feature story in the most widely read newspaper in the UK.The resultant increaseddemand far exceeded Isolagens capacity.As part of Isolagens continued marketing efforts,the Company is in negotiations with several British national medical

36、 clinics that areinterested in providing enough patients that could increase the monthly demand substantially.The recent sharp increase in demand hasoutstripped the supply to such an extent that the Company,in March 2004,is scheduling patients as far out as August 2004.Additionally,theCompany has ha

37、d to suspend marketing and sales efforts in all European countries except the UK.Because of tremendous demand,the Company is expanding its European production facilities.With the introduction of the new moreautomated and scalable manufacturing system as well as the increase in capacity,the Company e

38、xpects to be able to meet the increasingdemand,not only from the UK but also from the other European countries.2 Market OpportunityCosmetic The Isolagen Process is directed primarily at the dermatological and plastic surgery markets.Options to ameliorate the signs of aging or todelay or avoid invasi

39、ve surgery are becoming increasingly popular.According to statistics released in March 2004 by the American Society ofPlastic Surgeons(ASPS),consumer demand jumped 41%in 2003 for minimally invasive plastic surgery,exceeding more than 6.9 millionprocedures.More than 8.7 million procedures were perfor

40、med on people who took action to proactively manage signs of aging or enhance theirappearance by choosing cosmetic plastic surgery in 2003,according to the statistics released in March 2004 by the ASPS,up 32%from nearly6.6 million in 2002.Ultimately,the concept of cosmetic injectables has become mor

41、e mainstream and accepted.The following table shows the top five minimally invasive cosmetic procedures in 2003:Botox injections*2,891,390Chemical Peel 995,238Microdermabrasion 935,984Laser hair removal 523,297Collagen injections 576,255*most popular with both genders The 35-50 age group made up 46%

42、of all minimally invasive procedures in 2003.The 51-64 age group made up 26%of the populationreceiving these procedures,while patients 19 to 34 made up 19%of the minimally invasive procedures.Botox was the most popular treatmentamong all three age groups.ASPS offers the most comprehensive,reliable s

43、tatistics on plastic surgery procedures.For 2003,the ASPS statistics were collected throughthe first online national database for plastic surgery procedures called Tracking Operations and Outcomes for Plastic Surgeons(TOPS).Thisdata combined with an annual survey sent to more than 17,000 board certi

44、fied physicians in specialties most likely to perform plastic surgeryprocedures resulted in the most comprehensive report on plastic surgery procedures to date.Dental In addition to the dermatological market,there is an extensive dental market opportunity.The Companys research shows that,in the Unit

45、edStates,there are approximately 33,000 practitioners performing cosmetic procedures,whereas there are approximately 150,000 dentists.As our population has aged and conservative dentistry has improved,there has been an increasing demand for therapeutic options thatpreserve and replace teeth.The sing

46、le greatest cause of bone and tooth loss in the mouth is periodontal disease.As the periodontal pocketsdeepen,the amount of debris and infection trapped leads to increasing inflammation and bone loss around the tooth.Any process which couldlessen the depth of the pockets or reverse the progression o

47、f the disease would greatly decrease the root damage and tooth loss.Recent studieshave shown that the Isolagen Process has the ability to decrease the size of pockets greater than 4 mm by as much as 2.4 mm(see below)providing a therapeutic tool to the family dentist that can be simply administered i

48、n the dental chair in a few brief sessions.While there have been dramatic improvements in restorative dentistry allowing us to maintain good dentition,there have not beencorresponding improvements in the preservation of gum and soft tissue.The Isolagen Process can be used therapeutically for those p

49、atients withsymptoms of3 periodontal disease such as deep pocket disease,papillary recession,and gingival recession in other areas.Papillary recession,also known as black triangles,is part of the progression of periodontal disease,and involves the recession of thetriangular section of gum tissue bet

50、ween two teeth.To date,the Company is not aware of any documented effective treatment for this condition.Incases where the recession of the gum has progressed to an advanced stage,the accepted treatment is to surgically transfer a skin graft from thepalate to the site of recession.This process is pa

51、inful and can potentially create donor site defects.The results of this procedure have been variedand are not fully embraced by periodontists due to the donor site morbidity associated with the skin graft extraction.The vast majority of the population will experience periodontal disease at some poin

52、t in their lives.Others will have a need for a toothextraction or have a dry or contracted socket.Only a small percentage of the population,however,will elect to undergo a cosmetic procedure.Forthese reasons,we consider the Isolagen Process to be a viable solution for the dental market.Our SolutionT

53、he Isolagen Process The Isolagen Process begins when the patients doctor obtains a 3mm punch biopsy from behind the patients ear.In the case of the dentalproduct,a 1mm biopsy is taken from the patients gingiva.The biopsy is then packed in an Isolagen-provided container at the doctors office and issh

54、ipped overnight to the Isolagen laboratory.Upon arrival at the laboratory,the specimen is initiated into culture.Through a series of plastic culturevessels and growth media over a period of approximately six weeks,the fibroblasts within the specimen are cultured to tens of millions of cells.The fibr

55、oblasts are then harvested and put into a transport vial.After completion of a series of quality control tests,the cells are released to thephysician and are shipped to the physicians office overnight.A total of three injections are supplied and administered to the patient overapproximately one mont

56、h.A patient may elect for Isolagen to cryogenically store a fibroblast culture for future treatments.Isolagen has developed a new cell culturing system and is in the final stages of a significant improvement in the manufacturing process aspart of its cost reduction efforts.Through a collaboration wi

57、th Applikon Biotechnology,the Company has developed a new system that permits anautomated harvesting process in a closed loop sterile environment.The existing process separates cells manually utilizing centrifuge technology.This new harvesting process is expected to yield significant cost reductions

58、 and is a key component of a platform for scalable mass production.Historically,autologous cell companies have been hampered by manufacturing technologies that use traditional methodology for culturingcells through the utilization of plastic flasks.This methodology is labor intensive and slow and in

59、volves many sterile interventions and therefore iscostly.Our focus over the past 27 months has been to automate the culturing technology incorporating newer technology and concepts commonto the pharmaceutical industry particularly those that have already been well established in cGMP facilities.We h

60、ave been collaborating with Applikon under a Joint Intellectual Property Collaboration that will allow Isolagen to patent the manufacturingsystem improvements beyond Applikons existing patents.The system has been successful in research setting and we are now undertaking thedesign and fabrication of

61、the massed-produced single-use(disposable)component.The production unit will then undergo validation testing prior toincorporation into the manufacturing process.The functioning unit,combined with novel application of existing manufacturing systems,shouldpermit significant cost reduction.4 Dermal Ap

62、plication The primary application of the Isolagen Process is to repair dermal defects.Some of the advantages of the Isolagen Process are as follows:The Isolagen product is a living cell therapy.Therefore,the fibroblasts in the dermis continue to multiply and produce matrix until thetissue reaches it

63、s optimal repair.The cells are subject to the normal physiological controls of tissue and therefore can return the tissue to its youthful appearance butdo not overcorrect or cause deformity to the area.As it is autologous,it is devoid of immune rejection complications.It is applicable to virtually e

64、very area of the face,unlike many competitor products,which,because of their mechanism of action,arerestricted as to where they can be applied.Fibroblast cells remain viable for many years and therefore the effects are likely to be long-lasting.A permanency claim is thesubject of the extended portio

65、n of our clinical trials.Fibroblasts are a general support cell for the tissue,and in addition to their direct production of collagen and matrix,produceendocrine factors which may assist in the growth or repair of surrounding tissues such as the overlying epithelium.Under prior management,William K.

66、Boss,Jr.,M.D.,currently a director of the Company and a board certified plastic surgeon,began treatingpatients with the Isolagen Process to correct facial defects(e.g.,wrinkles,depressions,and scars)in 1995.Dr.Boss,along with 200 otherdoctors,utilized the Isolagen Process on approximately 950 patien

67、ts with positive results.Of these patients,totaling 2,000 procedures,theparticipating physicians documented no significant adverse reactions.The FDA notified Isolagen Technologies in 1999 that the Isolagen Processwould require FDA approval as a regulated biologic product.Isolagen Technologies filed

68、an investigational new drug application(IND),which wasaccepted by the FDA and commenced the FDA process.In January 2003,we commenced a two site Phase II study.The double blind trial consisted of forty patients and four dose regimens.Thetrial confirmed the therapeutic dosage used previously in the UK

69、 and produced significant information used in the design of the subsequent PhaseIII study.In July 2003,Isolagen commenced a Phase III clinical trial for dermal defects pursuant to the IND for the treatment of wrinkles and scars.The trial was conducted at ten sites and included 158 patients in the In

70、tent To Treat group.It was a double-blind study with 75%of the patientsreceiving the therapeutic dosage and the remaining 25%receiving a placebo.Of the evaluable population,77%of treatment group patients wereresponders whereas 36%of the placebo group were responders(Fishers Exact test p 0.0001).In t

71、his statistically significant result,responsewas determined by a change of two or more on a seven point photo guide scale.There were few adverse events related to Isolagen and none wereclassified as serious adverse events.The results confirmed statistically the early efficacy of the Isolagen process

72、 at 4 months.Most fillers havean immediate response but are then actively cleared by the body.In a recently reported study 73.3%of the patients treated with Hyalformreturned to baseline by 12 weeks.The Isolagen process is based on an approach of curing the disease rather than covering the symptoms.T

73、he cells are instilled into the area and begin the reparative process.The cumulative injury causing the depletion of the fibroblasts may have takenseveral decades to occur.The cohort study conducted on UK patients demonstrated that the process shows 75%response rate by 2-4 monthsand a 100%response r

74、ate at 6 months.This response rate is still present at 12 months for the patients studied.We hope to confirm this ongoingimprovement in the present and anticipated clinical trials.Isolagen has had numerous communications throughout 2003 with the FDA with regard to the IND.These communications includ

75、e numeroussubmissions of data and protocols,meeting requests and5 annual reports.We had face to face meetings in April,September and December 2003 with senior FDA staff in the Center for Biologics Evaluationand Research and the review committee following the IND.Though this is the normal process for

76、 license application,we believe Isolagen has hada disproportionate degree of attention and level of interest reflecting the unique nature of the process as well as a great deal of support andencouragement from the FDA during this process.Some of the remaining issues stem from the fact that the produ

77、ct is not easily classified as a biologic as it so closely resembles a tissuegraft and is inherently safe.Numerous issues have and are being resolved that may affect study design and the license application itself.Successful resolution of any study design issues and data related questions are critic

78、al for the eventual license application.The majority of issuesare resolved simply by analysis of data from the existing trials.The discussions to date have been very productive.Following the recommendations of the FDA,Isolagen has simplified the study designand added some additional reports or studi

79、es including,establishing the Clinical Meaningfullness of the process and establishing the purity of thefibroblasts produced.In the latter case,the FDA requested that Isolagen demonstrate that greater than 98%of the cells were fibroblasts as part ofan ongoing discussion with regard to purity testing

80、.Data submitted to the FDA showed that 99.6%of all cells in the study showed positive forfibroblast antibody.Remaining study design issues will be determined largely from analysis of the results from the present Phase III trial.Such matters as towhether it is better to use the physician investigator

81、s or independent assessors can be evaluated from this data.The decisions will be presentedwith the supporting data to the FDA.In essence,most of the queries from the FDA relate to provision of supportive data for claims made byIsolagen.Objective supporting data is now available because of the succes

82、sful completion of the acute phase of the trials.Dental Application Isolagen has completed a Phase I clinical trial of twenty-one patients for dental applications treating gingival recession and deep periodontalpockets.The trial is a 12-month double blind clinical study conducted at the University o

83、f Texas Health Science Center(UTHSC)Dental Branch.InFebruary 2004,we reported that the Isolagen Process demonstrated significant improvement in the oral therapeutic treatment of periodontaldisease by reducing deep pocket areas in a majority of sites,whereas placebo treated sites showed only a nomina

84、l improvement.For pocketsgreater than 5 mm in depth the difference between placebo and therapeutic group was 2.4 mm.The study included areas with gingival recessionbetween teeth,showing improvement at 20 of 21 Isolagen-treated sites,with deterioration of the gum height recorded at most placebo sites

85、(14 of21).Furthermore,no adverse event was related to the Isolagen Process.The Isolagen Dental Product also potentially provides a solution for problems that may develop when teeth are removed,such as dry socketor contracted socket.The accepted treatment by oral surgeons is to implant a cellular mat

86、erial to prevent these defects.Treatment often requiresa follow-up surgical procedure for correction and to prevent additional soft tissue problems.Further studies are planned and protocols have been prepared to assess the efficacy and safety of treatment of the papilla and deeppockets.These studies

87、 are traditional placebo controlled double blinded studies on a statistically larger population and are designed to establishthe therapeutic efficacy and safety of the Isolagen process.A smaller study to explore variations on the injection technique used with the papilla,is also anticipated.A second

88、 confirmatory study will probably be needed for license application in each area.6 Our Strategy Our goal is to become the industry leader in the research,development and commercialization of autologous cellular therapy fordermatological and dental applications.We will endeavor to increase and streng

89、then our market position in the following ways:Working with regulatory agencies,on a country-by-country basis,to obtain the approval of the Isolagen Process and any futureproducts.We are currently in late-stage clinical development in the United States.We have begun commercialization in the UnitedKi

90、ngdom and Australia.Expanding and solidifying our relationship with the approximately 200 physicians who have treated their patients with the IsolagenProcess,as well as marketing our processes and products to other doctors(e.g.,plastic surgeons,facial plastic surgeons,dermatologists and aesthetician

91、s).Currently,we are not approved to market our products in the United States.Optimizing our manufacturing processes to achieve cost reductions and scalability.Through the Companys collaboration withApplikon Biotechnology,the Company has developed a new system that permits an automated cell harvestin

92、g process in a closedloop sterile system compared to the existing process of separating cells utilizing centrifuge technology.This new harvesting processis expected to yield significant cost reductions and allow the Company to move toward a platform that enables scalable massproduction.Developing ne

93、w applications for the Isolagen Process beyond repair of facial dermal defects.The research capability that hasproduced the Isolagen Process could be applicable to other areas,such as gum rejuvenation and other dental applications,urology,bone marrow and other pigment-related maladies.Investigating

94、additional foreign countries to market the Isolagen Process and any future products.We are currently assessing thecommencement of operations in Italy,South Korea,Hong Kong,Brazil,and Mexico.We are investigating regulatory and otherrequirements in these countries and evaluating potential joint ventur

95、e partners and licensees.Establishing strategic partnering relationships to enhance application-specific sales and distribution of our products.Continuing our current research into the science of autologous cellular therapy.7Intellectual Property Protecting our proprietary technology is vitally impo

96、rtant to our competitive position.We currently hold the following patents:Number Business Line Title Filing Date Patent Date Term5,591,444United States Cosmetic Use of autologous dermal fibroblasts for the repair of skin and softtissue Defects July 28,1995 Jan.7,1997 20 Years5,660,850United States C

97、osmetic Use of autologous dermal fibroblasts for the repair of skin and softtissue defects June 6,1996 Aug.26,1997 20 Years5,665,372United States Cosmetic Autologous dermal fibroblasts for the repair of skin and soft tissuedefects June 6,1996 Sept.9,1997 20 Years5,858,390United States Cosmetic Use o

98、f autologous undifferentiated mesenchylmal cells for the repairof skin and soft tissue defects Sept.8,1997 Jan.12,1999 20 Years698440Australia Cosmetic Use of autologous dermal fibroblasts for the repair of skin and softtissue defects July 28,1995 Feb.11,1999 20 Years312548New Zealand Dental Use of

99、autologous dermal fibroblasts for the repair of skin and softtissue defects July 3,1996 March 9,2000 20 Years206136 Cosmetic Use of autologous dermal fibroblasts for the repair of skin and softtissue defects July 3,1996 Jan.24,2002 20 Years9,083,618United States Dental Compositions for regenerating

100、tissue that has deteriorated andmethods for using such compositions May 2,1998 Aug.13,2002 20 Years0845963Europe Cosmetic Use of autologous dermal fibroblasts for the repair of skin and softtissue defects July 3,1996 Sept.24,2003 20 Years123077Israel Cosmetic Use of autologous dermal fibroblasts for

101、 the repair of skin and softtissue defects July 3,1996 Oct.7,2003 20 Years Effective January 31,2003,the Company entered into an Intellectual Property Purchase Agreement to acquire two pending patentapplications titled Augmentation and Repair of Vocal Cord Tissue Defects and A Method of Using Autolo

102、gous Fibroblasts to Promote Healing ofWounds and Fistulas.As consideration,the Company issued the seller,on March 31,2003,100,000 shares of its Common Stock and royaltyequal to(a)5%of all revenues recognized by the Company or its Affiliates from commercial application of the Intellectual Property ma

103、de,provided,distributed,sold or manufactured directly by the Company or its Affiliates,or(b)25%of all revenues recognized by the Company or itsAffiliates from licensing,sublicensing,transferring or selling the Intellectual Property to a third party,without offset or deduction for general andadminist

104、rative or operating costs,subject to a total maximum royalty of$2 million.The Company has recorded an intangible asset of$540,000related to the acquisition of the Intellectual Property and intends to amortize this cost over the life of any future patent granted.We are in the process of pursuing seve

105、ral other patent applications.We continue to seek ways to protect our proprietary technology andtrade secrets,including entering into confidentiality or license agreements with our employees,consultants and corporate partners,and controllingaccess to and distribution of our technologies and other pr

106、oprietary information.8 Competition Tissue regeneration companies compete in the dermatology and plastic surgery markets with substantially different treatments.Theseinclude silicone injections,laser procedures,facial surgical procedures(e.g.,facelifts and eyelid surgeries),fat injections,dermabrasi

107、on,collageninjections,and botulisum toxin injections.Indirect competition comes from facial care treatment products.Items catering to the growing demandfor therapeutic skin care products are facial scrubs,anti-aging treatments,tonics,astringents and skin-restoration formulas.The standard treatment f

108、or tissue regeneration has been bovine collagen,a foreign protein derived from cows,which is generally fullyreabsorbed by a patients body within a few months after application,leaving the patient with no visible signs of correction.As additionaltreatments with bovine collagen are performed,there may

109、 be an immune response that could compromise the treatments effectiveness.Combinedwith the expense and the continued intrusiveness of ongoing treatments,we believe the value and benefit of bovine collagen injections arediminished.We believe that the benefits of the Isolagen Process counters the draw

110、backs of bovine collagen treatments,thereby extending the marketpotential for soft tissue regeneration to a broader population of patients.This broader population includes those who have tried and discontinueduse of bovine collagen and those that never considered treatments due to potential drawback

111、s.Patients who might consider using the Isolagen Process could also consider the following products:Product Type Examples CompanyCollagen Implants AutologenDermolagenFibrelZyderm/Zyplast Collagenesis Corp.Collagenesis Corp.MentorInamed AestheticsArtificial Implants ArtecollSilicone DropletsSoftformR

112、adiance ArtecollSilicone DropletsCollagen Corp.BioFormMedical Devices Ablative LasersNon-Ablative LasersMicrodermabrasion Coherent and LuminesseCoherent and LuminesseMicrodermex,Parisian Peel and DermaglowOther AllodermBotoxHylaformRestylaneLypocytic Dermal AugmentationSculpturaChemical Peels Lifece

113、ll Corp.AllerganBiomatrixMedicisPhysician manufacturedAventisTCA,Pharmacist fumulated Phenol chemicals We believe that many of our competitors have greater financial and other resources than we have.Although we are not aware of any similarproducts to the Isolagen Process that have received pre-marke

114、t approval from the FDA,there may be other companies with greater financialresources that are developing or may develop similar products in the future.9 Government Regulation Our technologies are subject to extensive government regulation principally by the FDA and state and local authorities in the

115、 United Statesand by comparable agencies in certain foreign countries.Governmental authorities in the United States and other countries extensively regulatethe preclinical and clinical testing,manufacturing,labeling,storage,record-keeping,advertising,promotion,export,marketing and distribution,among

116、 other things,of pharmaceutical products.Domestic Regulation In the United States,the FDA under the Federal Food,Drug,and Cosmetic Act,the Public Health Service Act and other federal statutes andregulations subjects pharmaceutical and biologic products to rigorous review.If we do not comply with app

117、licable requirements,we may be fined,the government may refuse to approve our marketing applications or allow us to manufacture or market our product candidates,and we may becriminally prosecuted.The FDA also has the authority to revoke previously granted marketing authorizations if we fail to compl

118、y with regulatorystandards or if we encounter problems following initial marketing.FDA Approval Process To obtain approval of a new product from the FDA,we must,among other requirements,submit data supporting safety and efficacy as wellas detailed information on the manufacture and composition of th

119、e product candidate.In most cases,this entails extensive laboratory tests andpreclinical and clinical trials.This testing and the preparation of necessary applications and processing of those applications by the FDA areexpensive and typically take many years to complete.The FDA may not act quickly o

120、r favorably in reviewing these applications,and we mayencounter significant difficulties or costs in our efforts to obtain FDA approvals that could delay or preclude us from marketing any products wemay develop.The FDA also may require post-marketing testing and surveillance to monitor the effects o

121、f approved products or place conditions onany approvals that could restrict the commercial applications of these products.Regulatory authorities may withdraw product approvals if we fail tocomply with regulatory standards or if we encounter problems following initial marketing.With respect to patent

122、ed products or technologies,delaysimposed by the governmental approval process may materially reduce the period during which we will have the exclusive right to exploit theproducts or technologies.The FDA does not apply a single regulatory scheme to human tissues and the products derived from human

123、tissue.On a case-by-casebasis,the FDA may choose to regulate such products as transplanted human tissue,medical devices or biologics.A fundamental difference in thetreatment of products under these classifications is that the FDA generally permits human tissue for transplantation to be commercially

124、distributedwithout pre-market approval.In contrast,products regulated as medical devices or biologics usually require such approval.The process required by the FDA before a new drug or biologic may be marketed in the United States generally involves the following:completion of preclinical laboratory

125、 testing;submission of an IND,which must become effective before human clinical trials may begin;performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposed drug or biologicfor its intended use;and submission and approval of a New Drug Appli

126、cation,or NDA,for a drug,or a Biologics License Application,or BLA,for a biologic.10 The sponsor typically conducts human clinical trials in three sequential phases,but the phases may overlap:In Phase I clinical trials,the product is tested in a small number of patients or healthy volunteers,primari

127、ly for safety at one or moredoses.In Phase II,in addition to safety,the sponsor evaluates the efficacy of the product on targeted indications,and identifies possibleadverse effects and safety risks,in a patient population somewhat larger than Phase I clinical trials.Phase III clinical trials typical

128、ly involve additional testing for safety and clinical efficacy in an expanded population at geographically-dispersed test sites.Clinical trials must be conducted in accordance with the FDAs Good Clinical Practices requirements.Prior to commencement of eachclinical trial,the sponsor must submit to th

129、e FDA a clinical plan,or protocol,accompanied by the approval of the committee responsible foroverseeing clinical trials at one of the clinical trial sites.The FDA may order the temporary or permanent discontinuation of a clinical trial at anytime if it believes that the clinical trial is not being

130、conducted in accordance with FDA requirements or presents an unacceptable risk to the clinicaltrial patients.The Institutional Review Board,or IRB,at each clinical site may also require the clinical trial at that site to be halted,eithertemporarily or permanently for the same reasons.The sponsor mus

131、t submit to the FDA the results of the preclinical and clinical trials,together with,among other things,detailed informationon the manufacture and composition of the product,in the form of a new drug application,or NDA,or,in the case of a biologic,a BLA.The FDAhas advised the Company it is regulatin

132、g the Isolagen Process as a biologic.Therefore,we will be submitting BLAs to obtain approval of ourproduct candidate.In a process that may take from several months to several years,the FDA reviews these applications and,when and if itdecides that adequate data are available to show that the new comp

133、ound is both safe and effective and that other applicable requirements havebeen met,approves the drug or biologic for marketing.The amount of time taken for this approval process is a function of a number of variables,including whether the product has received a fast track designation,the quality of

134、 the submission and studies presented,the potential contributionthat the compound will make in improving the treatment of a condition in question,and the workload at the FDA.It is possible that our productcandidates will not successfully proceed through this approval process or that the FDA will not

135、 approve them in any specific period of time,or atall.The FDA may,during its review of a NDA or BLA,ask for additional test data.If the FDA does ultimately approve the product,it may requirepost-marketing testing,including potentially expensive Phase IV studies,to monitor the safety and effectivenes

136、s of the drug.In addition,the FDAmay,in some circumstances,impose restrictions on the use of the drug,which may be difficult and expensive to administer and may require priorapproval of promotional materials.Ongoing FDA Requirements Before approving an NDA or BLA,the FDA will inspect the facilities

137、at which the product is manufactured and will not approve the productunless the manufacturing facilities are in compliance with FDAs good manufacturing practice regulations which govern the manufacture,holdingand distribution of a product.Manufacturers of biologics also must comply with FDAs general

138、 biological product standards.Following approval,theFDA periodically inspects drug and biologic manufacturing facilities to ensure continued compliance with the good manufacturing practicesregulations.Manufacturers must continue to expend time,money and effort in the areas of production and quality

139、control and record keeping andreporting to ensure full compliance with those requirements.Failure to comply with these requirements subjects the manufacturer to possible legalor regulatory action,such as suspension of manufacturing,seizure of product,or voluntary recall of product.Adverse experience

140、s11 with the product must be reported to the FDA and could result in the imposition of marketing restrictions through labeling changes or marketremoval.Product approvals may be withdrawn if compliance with regulatory requirements is not maintained or if problems concerning safety orefficacy of the p

141、roduct occur following approval.The labeling,advertising,promotion,marketing and distribution of a drug or biologic product also must be in compliance with FDA andFederal Trade Commission,or FTC,requirements which include,among others,standards and regulations for direct-to-consumer advertising,off-

142、label promotion,industry sponsored scientific and educational activities,and promotional activities involving the internet.The FDA and FTC havevery broad enforcement authority,and failure to abide by these regulations can result in penalties,including the issuance of a Warning Letterdirecting the co

143、mpany to correct deviations from regulatory standards and enforcement actions that can include seizures,injunctions and criminalprosecution.Manufacturers are also subject to various laws and regulations governing laboratory practices,the experimental use of animals,and the useand disposal of hazardo

144、us or potentially hazardous substances in connection with their research.In each of these areas,as above,the FDA hasbroad regulatory and enforcement powers,including the ability to levy fines and civil penalties,suspend or delay issuance of approvals,seize orrecall products,and deny or withdraw appr

145、ovals.International Regulation The regulation of our products,including the Isolagen Process,outside of the United States varies by country.Certain countries regulatehuman tissue products as a pharmaceutical product,which would require us to make extensive filings and obtain regulatory approvals bef

146、oreselling our products.Certain countries classify our products,including the Isolagen Process,as human tissue for transplantation but may restrictits import or sale.Other countries have no application regulations regarding the import or sale of products similar to our products,creatinguncertainty a

147、s to what standards we may be required to meet.Management made inquiry to the Medicines Control Agency with respect to ourproposed use of the Isolagen Process in cosmetic applications in the United Kingdom.Based on the written responses received from theMedicines Control Agency,management believes t

148、hat the proposed use of the Isolagen Process in cosmetic applications in the United Kingdomdoes not require regulatory approval.We began commercialization of the Isolagen Process in the United Kingdom in the first quarter of 2003.In August 2003,we received a license from the Therapeutic Goods Admini

149、stration,the agency that regulates medical drugs and devices inAustralia,to begin the manufacture of autologous fibroblasts including the initiation of primary cultures of fibroblasts,the propagation of fibroblasts,the harvesting of cultured fibroblasts,the storage of cultured fibroblasts and releas

150、e for supply of cultured fibroblasts.Consequently,we havecommenced commercialization in Australia in the fourth quarter of 2004.In addition,we are assessing commercialization in Italy,South Korea,Hong Kong,Brazil and Mexico.Corporate History On August 10,2001,the Company,then known as American Finan

151、cial Holding,Inc.,acquired Isolagen Technologies through the merger ofits wholly-owned subsidiary,Isolagen Acquisition Corp.,and an affiliated entity,Gemini IX,Inc.,with and into Isolagen Technologies(theMerger).As a result of the Merger,Isolagen Technologies became a wholly-owned subsidiary of the

152、Company.On November 13,2001,theCompany changed its name to Isolagen,Inc.12 Research and Development Our research and development focus is not just limited to the dermal and dental product developments,but includes extensive activities forimproved process science,manufacturing and cost reduction.Furt

153、hermore,we continue to explore applications for the Isolagen Process liketherapies to regrow hair,to repair damaged nerves,and to heal burned skin.We expense research and development costs as they are incurred.For the years ending December 31,2003,2002 and 2001,we incurred research and development e

154、xpenses of$3.3 million,$1.7 million,and$0.9 million,respectively.Employees We presently employ fifty-five(55)people on a full-time basis including,thirty(30)in Houston,Texas,seventeen(17)in London,England,and eight(8)in Sydney,Australia.We anticipate hiring additional employees in the areas of quali

155、ty assurance,manufacturing,marketing andresearch and development as the need arises.None of these individuals are covered by a collective bargaining agreement and managementconsiders its relations with the companys employees to be good.We may also employ consultants on an as needed basis to suppleme

156、nt existingstaff.Risk Factors We Will Need to Raise Substantial Additional Capital To Fund Our Operations Over the Course of the Next Two Years.No AssuranceCan Be Given That Any Such Financing,If Obtained,Will Be Adequate To Meet Our Ultimate Capital Needs and To Support Our Growth.Although we belie

157、ve our current cash resources will be sufficient to fund our planned operations until June 30,2005,we will require substantialadditional capital to meet our long-term needs.Subsequent to June 30,2005 we will require approximately$20 million of additional capital to bringour product to market in the

158、United States and expand operations in the United Kingdom and Australia.This estimate assumes that no furthertesting requirements are imposed by the FDA,that FDA approval is forthcoming and that FDA approval is received during 2005.The FDA approvalprocess is extremely complicated and is dependent up

159、on our study protocols and the results of our studies.In the event that the FDA requiresadditional studies or requires changes in our study protocols or in the event that the results of the studies are not consistent with our expectations,the process will be more expensive and time consuming.Due to

160、the vagaries of the FDA approval process we are unable to predict what the costof obtaining approval will be if FDA approval is not forthcoming in 2005.We recently commenced operations,are suffering losses from operations,have limited capital resources,do not have access to a line of credit or other

161、 debt facility,and will be unable to sustain operations absentsubstantial infusions of capital.We are actively assessing various financing opportunities.There can be no assurance that we will be successful inraising the necessary capital;or that we will be able to raise capital on acceptable terms.A

162、dditionally,no assurance can be given that any suchfinancing,if obtained,will be adequate to meet our ultimate capital needs and to support our growth.If adequate capital cannot be obtained onsatisfactory terms,our operations could be materially and adversely impacted.The Need To Raise Additional Ca

163、pital Will Expose Existing Shareholders To The Risk Of Substantial Dilution.In the event that wesell equity securities or securities convertible into our equity securities to raise additional capital,such sales will dilute the public ownership of theCompany.Isolagen Has Not Demonstrated An Ability T

164、o Generate Significant Revenue,And There Is No Assurance That We Will Produce AnyMaterial Revenues.Isolagen is a development stage company with a limited operating history and no significant revenues to date.Isolagen hasnot yet demonstrated its ability to generate significant revenue,and there is no

165、 assurance that we will produce any material revenues,or that wewill ever operate on a profitable basis.13 As A Result Of Our Limited Operating History And Because Of The Emerging Nature Of The Markets In Which We Will Compete,OurFinancial Data Is Of Limited Value In Planning Future Operating Expens

166、es.Our operating Expenses Are Difficult To Forecast Accurately.To The Extent That Such Expenses Precede Or Are Not Rapidly Followed By Increased Revenue,Our Business,Results Of OperationsAnd Financial Condition May Be Materially Adversely Affected.As a result of our limited operating history and bec

167、ause of the emerging natureof the markets in which we will compete,our financial data is of limited value in planning future operating expenses.Our expense levels will bebased in part on our expectations concerning future revenues.A significant portion of our revenue is anticipated to be derived fro

168、m the IsolagenProcess;however,the size and extent of such revenues are wholly dependent upon the choices and demand of individuals,which are difficult toforecast accurately.We may be unable to adjust our operations in a timely manner to compensate for any unexpected shortfall in revenues.Accordingly

169、,a significant shortfall in demand for the Isolagen Process could have an immediate and material adverse effect on our business,results of operations and financial condition.Further,business development and marketing expenses may increase significantly as we expand ouroperations.To the extent that s

170、uch expenses precede or are not rapidly followed by increased revenue,our business,results of operations andfinancial condition may be materially adversely affected.The Development of the Isolagen Process and the Companys Other Products Involves a Lengthy and Complex Process,and theCompany May be Un

171、able to Commercialize the Isolagen Process or any of its Other Processes or Products Currently UnderDevelopment.Before the Company can commercialize the Isolagen Process or any other of its development-stage products or processes in theU.S.,the Company will need to conduct substantial research and d

172、evelopment;undertake preclinical and clinical testing;and pursue regulatoryapprovals,including but not limited to FDA approval of its IND for the Isolagen Process.This process involves a high degree of risk and may takeseveral years.The Companys process and product development efforts may fail for m

173、any reasons,including:failure of the process or product inpreclinical studies;clinical trial data that is insufficient to support the safety or effectiveness of the process or product;or the failure to obtain therequired regulatory approvals.Specifically,the FDA may withhold approval of the IND for

174、several years or reject the IND outright.For thesereasons,and others,the Company may not successfully commercialize the Isolagen Process or any of its other processes or products currentlyunder development.We are unable to determine whether or when the Isolagen Dental Process will prove to be medica

175、lly effective or commerciallyviable,and whether or when FDA approval will occur.Obtaining FDA and Other Regulatory Approvals is Time Consuming and Expensive,And The Respective Outcomes Are Uncertain.The process of obtaining FDA and other regulatory approvals is time consuming and expensive.Clinical

176、trials are required and the marketing andmanufacturing of Companys products and services are subject to rigorous testing procedures.The Company may not be able to obtain FDAapproval or other regulatory approval to conduct clinical trials or to manufacture and market any of the products it develops,a

177、cquires or licenses.Moreover,the costs to obtain approvals could be considerable and the failure to obtain or delays in obtaining an approval could significantly harmthe Companys business performance and financial results.Even if pre-marketing approval from the FDA is received,the FDA is authorized

178、toimpose post-marketing requirements such as:(i)testing and surveillance to monitor a product and its continued compliance with regulatoryrequirements;(ii)submitting products for inspection and,if any inspection reveals that the product is not in compliance,prohibiting the sale of allproducts;(iii)s

179、uspending manufacturing;and(iv)withdrawing marketing clearance.In their regulation of advertising,the FDA and Federal TradeCommission(the FTC)from time to time issue correspondence alleging that some advertising or promotional practices are false,misleading ordeceptive.The FDA has the power to impos

180、e a wide array of sanctions on companies for such advertising practices,and the receipt ofcorrespondence from the FDA alleging these practices could result in the following:(i)incurring substantial expenses,including fines,penalties,legal fees and costs to comply with the FDAs requirements;(ii)chang

181、es in14 the methods of marketing and selling products;(iii)taking FDA-mandated corrective action,which may include placing advertisements or sendingletters to physicians,rescinding previous advertisements or promotions;and(iv)disruption in the distribution of products and loss of sales untilcomplian

182、ce with the FDAs position is obtained.Our Operating Results May Fluctuate Significantly In The Future As A Result Of A Variety Of Factors,Many Of Which Are Outside OfOur Control.Our Operating Results May Fall Below The Expectations Of Securities Analysts,Stockholders And Investors In Any FuturePerio

183、d.Our operating results may fluctuate significantly in the future as a result of a variety of factors,many of which are outside of our control.These factors include:the level of demand for the Isolagen Process and other services and products that we may develop;our ability to attractand retain perso

184、nnel with the necessary strategic,technical and creative skills required for effective operations;the amount and timing ofexpenditures by customers;the amount and timing of capital expenditures and other costs relating to the expansion of our operations;governmentregulation and legal developments re

185、garding the use of the Isolagen Process;and general economic conditions.As a strategic response tochanges in the competitive environment,we may from time to time make certain pricing,service,technology or marketing decisions or business ortechnology acquisitions that could have a material adverse ef

186、fect on our quarterly results.Due to all of these factors,our operating results may fallbelow the expectations of securities analysts,stockholders and investors in any future period.We Anticipate That Losses Will Continue To Increase From Current Levels And That We Will Experience Negative Cash Flow

187、,WhichMay Limit Or Delay Ability To Become Profitable.The Company expects to expend significant resources on consultants,technology,advertising,hiring of personnel and startup costs.As a result,the Company has incurred losses since its inception and expects to experienceoperating losses and negative

188、 cash flow for the foreseeable future.The Company anticipates its losses will continue to increase from currentlevels because it expects to incur additional costs and expenses related to brand development,consulting costs,laboratory development costs,FDA clinical trials,marketing and other promotion

189、al activities,the addition of customer service personnel,the continued development of itswebsite,its computer network,and development of relationships with strategic business partners,including but not limited to doctors who mightuse the Isolagen Process.For the years ending December 31,2003,2002 an

190、d 2001,we incurred losses of$11.3 million,$5.4 million and$1.7 million,respectively.Since inception we have incurred losses of$20.9 million.Our Ability to Become Profitable May Be Limited or Delayed by a Number of Factors.Inasmuch as we are still in the developmentstage,our operations are subject to

191、 all of the risks inherent in the establishment of a new business enterprise,the development of new processes,and the marketing of new products.As we have had virtually no sales or revenues to date and are in the process of developing initial operations inthe UK related to our first product,we expec

192、t to continue to incur significant additional costs and expenses related to:brand development;consulting costs;laboratory and manufacturing development and operation costs;FDA clinical trials and regulatory approvals;promotional and marketing activities;15customer service and other personnel;develop

193、ment of our website,computer network;and development of relationships with strategic business partners,including doctors who might use the Isolagen Process.If we cannot adequately manage our costs and expenses,then we will continue to experience operating losses and negative cash flow for theforesee

194、able future.In particular,the costs to obtain regulatory approvals could be considerable and the failure to obtain or delays in obtaining suchapprovals could materially adversely affect our business performance and financial results.The FDA approval process is extremely complicatedand is dependent u

195、pon our study protocols and the results of our studies.In the event that the FDA requires additional studies or requires changesin our study protocols or in the event that the results of the studies are not consistent with our expectations,the process will be more expensiveand time consuming.Due to

196、the vagaries of the FDA approval process,we are unable to predict what the cost of obtaining approval will ultimatelybe.Our Inability to Increase Capacity in our UK Operations to Meet Increasing Demand in the UK Will Limit or Delay our Ability toAttain Profitability.We began commercialization of the

197、 Isolagen Process in cosmetic applications in the UK in the first quarter of 2003.However,our facilities in the UK were designed to demonstrate the efficacy of the Isolagen Process.In light of increasing demand for the IsolagenProcess in the UK,we will be required to expend additional funds to incre

198、ase the capacity of the operation,including addition of personnel,introduction of systems enhancements and the establishment of new facilities.Large scale improvements in capacity and operating margins arelargely dependent upon our successful completion of our ongoing efforts to automate the Isolage

199、n Process.We anticipate that improvedmanufacturing practices as a result of our collaboration with Applikon Biotechnology will allow the Companys laboratories to have significantlygreater through-put and reduce many of the Companys variable costs;however,there can be no assurance we will be successf

200、ul in establishingsuitable operations,automating the manufacturing process,obtaining the required scalability or achieving significant cost savings or profitableoperations.We Are Subject to Extensive Governmental Regulation That May Significantly Affect Our Operating Results.Human healthcareproducts

201、 and services companies are subject to significant regulation by a number of national,foreign,state and local agencies.The FDA hasjurisdiction covering testing,manufacturing,safety,effectiveness,labeling,storage,record keeping,approval,advertising and promotion of theCompanys products.Failure to com

202、ply with applicable regulatory requirements could,among other things,result in:(i)fines;(ii)changes toadvertising;(iii)suspensions of regulatory approvals of products;(iv)delays in product distribution,marketing and sale;and(iv)civil or criminalsanctions.The Companys products receive FDA review rega

203、rding their safety and effectiveness.However,the FDA is permitted to revisit andchange its prior determinations.The Company cannot be sure that the FDA will not change its position with regard to the safety or effectiveness ofits products.If the FDAs position changes,the Company may be required to c

204、hange its labeling or cease to manufacture and market thechallenged products.Even prior to any formal regulatory action,the Company could voluntarily decide to cease distribution and sale or recall anyof its products if concerns about the safety or effectiveness develop.We Are Also Subject To A Vari

205、ety Of Other Regulations In Various Foreign Markets That Could Have A Material Adverse Effect OnOur Business In A Particular Market Or In General.The Company is also subject to a variety of other regulations in various foreign markets.The Companys failure to comply,or assertions that the Company fai

206、ls to comply,with these regulations could have a material adverse effect onthe Companys business in a particular market or in general.To the extent the Company decides to commence or expand operations in additionalcountries,government regulations in those countries may prevent or delay entry into or

207、 expansion of operations in those16 markets.In addition,the Company may introduce additional products into the foreign markets.However,government regulations in both theCompanys domestic and international markets can delay or prevent the introduction,or require the reformulation or withdrawal,of som

208、e of theCompanys products.Our Foreign Operations are Exposed to Risks Associated with Foreign Regulations,Exchange Rate Fluctuations,Trade Restrictionsand Political,Economic and Social Instability.A foreign government may impose trade or foreign exchange restrictions or increased tariffs,which could

209、 adversely affect our operations.We are also exposed to risks associated with foreign currency fluctuations.Our operations in somemarkets also may be adversely affected by political,economic and social instability in foreign countries.As we continue to focus on expanding ourexisting international op

210、erations,these and other risks associated with international operations may increase.We are also subject to the risks ofdoing business abroad,including unexpected changes in regulatory requirements,export and import restrictions,tariffs and other trade barriers,difficulties in staffing and managing

211、foreign operations,longer payment cycles,problems in collecting accounts receivable,potential adverse taxconsequences,exchange rate fluctuations,increased risks of piracy,limits on our ability to enforce our intellectual property rights,limits onrepatriation of funds and political risks that may lim

212、it or disrupt international sales.Such limitations and interruptions could have a material adverseeffect on our business,financial condition and results of operations.In addition,operations of our foreign subsidiaries are translated from localcurrency into U.S.dollars based on average monthly exchan

213、ge rates.We currently do not hedge our foreign currency transactions and aretherefore subject to the risk of changes in exchange rates.Terrorist Attacks or Acts of War May Seriously Harm the Companys Business.Terrorist attacks or acts of war may cause damage ordisruption to the Company,its employees

214、,its facilities and its customers,which could impact the Companys revenues,costs and expenses,andfinancial condition.The terrorist attacks that took place in the United States on September 11,2001 were unprecedented events that have createdmany economic and political uncertainties,some of which may

215、materially adversely affect the Companys business,results of operations,andfinancial condition.The potential for future terrorist attacks,the national and international responses to terrorist attacks,and other acts of war orhostility have created many economic and political uncertainties,which could

216、 materially adversely affect the Companys business,results ofoperations,and financial condition in ways that management currently cannot predict.Any Marketable Processes or Products that the Company Develops May Not be Commercially Successful.Even if the Companyobtains regulatory approval for the Is

217、olagen Process or any of its other development-stage processes or products in the U.S.and other countries,those processes or products may not be accepted by the market.A number of factors may affect the rate and level of market acceptance of theIsolagen Process or our other processes or products,inc

218、luding:regulation by the FDA and other government authorities;market acceptance bydoctors and hospital administrators;the effectiveness of the Companys sales force;the effectiveness of the Companys production and marketingcapabilities;the success of competitive products;and the availability and exte

219、nt of reimbursement from third-party payers.If the Isolagen Processor any other Company processes or products fail to achieve market acceptance,the Companys profitability and financial condition will suffer.Our Competitors in the Biotechnology and Pharmaceutical Industries May Have Superior Products

220、,Manufacturing Capabilities orMarketing Position.The human healthcare products and services industry is extremely competitive.The Companys competitors include majorpharmaceutical companies and other biotechnology companies.Most of these competitors have more extensive research and development,market

221、ing and production capabilities and greater financial resources than the Company.The Companys future success will depend on its abilityto develop and market effectively its17 processes and products against those of its competitors.If the Companys processes and products receive marketing approval but

222、 cannotcompete effectively in the marketplace,the Companys profitability and financial position will suffer.Difficulties Managing Growth Could Adversely Affect Our Business,Operating Results And Financial Condition.If the Companyachieves growth in its operations in the next few years,such growth cou

223、ld place a strain on its management,administrative,operational andfinancial infrastructure.The Companys ability to manage its operations and growth requires the continued improvement of operational,financialand management controls,reporting systems and procedures.In addition,the Company may find it

224、necessary to hire additional management,financial and sales and marketing personnel to manage the Companys operations.If the Company is unable to manage this growth effectively andsuccessfully,the Companys business,operating results and financial condition may be materially adversely affected.We Are

225、 Dependent On Our Key Officers and Employees.The Company is dependent on the efforts of Frank DeLape(Chairman of theBoard of Directors),William K.Boss,Jr.(Vice Chairman of the Board of Directors),Michael Macaluso,(Chief Executive Officer,President andDirector),Jeffrey Tomz,(Chief Financial Officer a

226、nd Secretary),Olga Marko(Senior Vice President and Director of Research),and Vaughan Clift,(Vice President of Operations).The loss of any of these officers or employees or our inability to recruit and train additional key service personnelin a timely manner,could materially and adversely affect our

227、business and our future prospects.While no assurances can be given that theCompanys current management resources will enable it to succeed as planned,a loss of one or more of its current officers or key employeescould severely and negatively impact its operations.No assurances can be given that the

228、Company will not suffer the loss of key humanresources for one reason or another.The Company has employment agreements with certain of its officers,but some of its key managementpersonnel are employed at-will and may elect to pursue other opportunities at any time.Specifically,the loss of Michael Ma

229、caluso,the ChiefExecutive Officer of the Company,or Frank DeLape,Chairman of the Board,could significantly harm the Companys business.The Company hasno present intention of obtaining key man life insurance on any of the executive officers or management.We have had no difficulty hiring andretaining t

230、he necessary management and personnel in the recent past.We Will Need To Attract,Train Or Retain Additional Highly Qualified Technical And Managerial Personnel In The Future.OurInability To Do So Could Have A Material Adverse Affect On Our Business,Operating Results And Financial Condition.There can

231、 be noassurance that we will be able to attract,train or retain additional highly qualified technical and managerial personnel in the future,which couldhave a material adverse effect on the our business,financial condition and results of operations.Our Officers And Directors Have Effective Voting Co

232、ntrol Of The Common Stock.Therefore,Our Other Stockholders Will HaveLimited Participation In Our Affairs.As of December 31,2003,our present executive officers,directors and controlling stockholdersbeneficially hold 51.2%of the outstanding shares of Common Stock.Our officers,directors and controlling

233、 stockholders currently are,and in theforeseeable future will continue to be,in a position to control Isolagen by being able to nominate and elect a majority of our Board of Directors.TheBoard of Directors establishes corporate policies and has the sole authority to nominate and elect our officers t

234、o carry out those policies.Otherstockholders therefore will have limited participation in our affairs.We Have Not Declared Any Dividends On Our Common Stock To Date And We Have No Intention Of Declaring Dividends In TheForeseeable Future.Investors In Our Common Stock Cannot Rely On Dividend Income.T

235、he future payment by the Company of cashdividends on the Common Stock rests within the discretion of its Board of Directors and will depend,among other things,upon the Companysearnings,its unencumbered cash,its capital requirements and its financial condition,as18 well as other relevant factors.The

236、Company does not anticipate making any cash distributions on the Common Stock in the foreseeable future.Investors in our common stock cannot rely on dividend income.If We Are Unable To Effectively Promote Our Brand And Establish A Leading Position In The Biotechnology Marketplace,Results OfOperation

237、 And Financial Condition Will Suffer.The Companys brand name is new and unproven.If the Company is unable to effectivelypromote its brand and establish a leading position in the biotechnology marketplace,our results of operations and financial condition will suffer.Company management believes that t

238、he importance of brand recognition will increase over time.In order to gain brand recognition,the Companymay increase its marketing and advertising budgets to create and maintain brand loyalty.We May Fail to Protect Adequately Our Proprietary Technology,Which Would Allow Competitors to Take Advantag

239、e of Its Researchand Development Efforts.The Companys long-term success largely depends on its ability to market technologically competitive processesand products.If the Company fails to obtain or maintain these protections it may not be able to prevent third parties from using its proprietaryrights

240、.The Companys currently pending or future patent applications may not result in issued patents.In the United States,patent applicationsare confidential until patents issue,and because third parties may have filed patent applications for technology covered by its pending patentapplications without th

241、e Company being aware of those applications,the Companys patent applications may not have priority over any patentapplications of others.In addition,the Companys issued patents may not contain claims sufficiently broad to protect the Company against thirdparties with similar technologies or products

242、 or provide the Company with any competitive advantage.If a third party initiates litigation regardingthe Companys patents,and is successful,a court could revoke the Companys patents or limit the scope of coverage for those patents.The U.S.Patent and Trademark Office,commonly referred to as the USPT

243、O,and the courts have not consistently treated the breadth ofclaims allowed in biotechnology patents.If the USPTO or the courts begin to allow broader claims,the incidence and cost of patent interferenceproceedings and the risk of infringement litigation will likely increase.On the other hand,if the

244、 USPTO or the courts begin to allow narrower claims,the value of the Companys proprietary rights may be limited.Any changes in,or unexpected interpretations of,the patent laws may adverselyaffect the Companys ability to enforce its patent position.The Company also relies upon trade secrets,proprieta

245、ry know-how and continuing technological innovation to remain competitive.TheCompany protects this information with reasonable security measures,including the use of confidentiality agreements with its employees,consultants and corporate collaborators.It is possible that these individuals will breac

246、h these agreements and that any remedies for a breach willbe insufficient to allow the Company to recover its costs.Furthermore,the Companys trade secrets,know-how and other technology mayotherwise become known or be independently discovered by its competitors.We May Incur Substantial Costs as a Res

247、ult of Litigation or Other Proceedings Relating to Patent and Other Intellectual PropertyRights.A third party may sue us,one of our subsidiaries or one of our strategic collaborators for infringing a third-partys patent rights.Likewise,we may need to resort to litigation to enforce our patent rights

248、 or to determine the scope and validity of third-party proprietary rights.The cost to us of any litigation or other proceeding relating to intellectual property rights,even if resolved in the our favor,could besubstantial,and the litigation would divert managements efforts.Some of our competitors ma

249、y be able to sustain the costs of complex patentlitigation more effectively than we can because they have substantially greater resources.If we do not prevail in this type of litigation,we or ourstrategic collaborators may be required to:pay monetary damages;stop19 commercial activities relating to

250、the affected products or services;obtain a license in order to continue manufacturing or marketing the affectedproducts or services;or compete in the market with a substantially similar product.Uncertainties resulting from the initiation and continuation of any litigation could limit our ability to

251、continue some of our operations.Inaddition,a court may require that we pay expenses or damages and litigation could disrupt the Companys commercial activities.We May be Liable for Product Liability Claims Not Covered by Insurance.Doctors who use the Companys processes and products,including but not

252、limited to the Isolagen Process,and patients who have been treated by the Isolagen Process or any other process or products ofthe Company may bring product liability claims against the Company or its subsidiaries.While the Company has taken,and continues to take,what the Company believes are appropr

253、iate precautions,the Company may be unable to avoid significant liability exposure.The Company intendsto obtain and keep in force product liability insurance sufficient to protect it from claims;however,the Company may be unable to obtain insurancein the future,or the Company may be unable to do so

254、on acceptable terms.Any additional insurance the Company obtains may not provideadequate coverage against any asserted claims.In addition,regardless of merit or eventual outcome,product liability claims may result in:diversion of managements time and attention;expenditure of large amounts of cash on

255、 legal fees,expenses and payment of damages;decreaseddemand for the Companys products and services;and injury to the Companys reputation.At present,we believe we carry reasonably adequateinsurance coverage against product liability claims.If We Are Unable To Keep Up With Rapid Technological Changes,

256、Our Processes,Products Or Services May Become Obsolete AndUnmarketable.The field of biotechnology is characterized by significant and rapid technological change.Although we attempt to expand ourtechnological capabilities in order to remain competitive,research and discoveries by others may make our

257、processes,products or servicesobsolete.If we cannot compete effectively in the marketplace,our potential for profitability and financial position will suffer.Our Acquisitions Of Companies Or Technologies May Result In Disruptions In Business And Diversion Of Management Attention,Adversely Impacting

258、Our Business,Results Of Operations and Financial Condition.In the near future,the Company may makeacquisitions of complementary companies,products or technologies.Any acquisitions will require the assimilation of the operations,products andpersonnel of the acquired businesses and the training and mo

259、tivation of these individuals.Management may be unable to maintain and improveupon the uniform standards,controls,procedures and policies of the Company if it fails in this integration.Acquisitions may cause disruptions inoperations and divert managements attention from day-to-day operations,which c

260、ould impair the Companys relationships with current employees,customers and strategic partners.The Company may also have to,or choose to,incur debt or issue equity securities to pay for any futureacquisitions.The issuance of equity securities for an acquisition could be substantially dilutive to the

261、 Companys stockholders holdings.Inaddition,profitability of the Company may suffer because of such acquisition-related costs or amortization costs for acquired goodwill and otherintangible assets.If management is unable to fully integrate acquired businesses,products,technologies or personnel with e

262、xisting operations,theCompany may not receive the intended benefits of such acquisitions.We are not party to any agreements,written or oral,for the acquisition of anycompany,product or technology.Provisions in Our Bylaws Provide for Indemnification of Officers and Directors,Which Could Require Us to

263、 Direct Funds AwayFrom Our Business and Products.Our Bylaws provide for indemnification of officers and directors.We may be required to pay judgments,fines,and expenses incurred by an officer or director,including reasonable attorneys fees,as a result of actions or proceedings in which suchofficers

264、and directors are involved by reason of being or having been an officer or director.Funds paid in satisfaction of judgments,fines andexpenses may be funds we need20 for the operation of our business and the development of our products,thereby affecting our ability to attain profitability.This could

265、cause ourstock price to drop.There Is A Limited Public Trading Market For The Common Stock That May Limit Or Preclude Your Ability To Sell Shares OfCommon Stock.There is a limited public trading market for the Common Stock,and there is no assurance that any established public tradingmarket will deve

266、lop for any of the Companys securities.Without such an active or public trading market,there can be no assurance of anyliquidity or resale value of the Common Stock.The Common Stock may be illiquid for indefinite periods of time.Our Stock Price Is Highly Volatile,And Represents Significant Market Ri

267、sk To An Investment In Our Common Stock.The marketprice of the Common Stock is likely to be highly volatile due to risks and uncertainties described in this report,as well as other factors,includingsales of substantial amounts of our stock by existing stockholders and price and volume fluctuations i

268、n the stock market which do not relate to ouroperating performance.During 2002,our common stock traded from$2.20 to$7.25.During 2003,our common stock traded from$4.00 to$11.00.Our Common Stock is Vulnerable to Pricing and Purchasing Actions That are Beyond Our Control And,Therefore,PersonsAcquiring

269、Our Shares May be Unable to Resell Their Shares At a Profit as a Result of This Volatility.The securities markets have fromtime to time experienced significant price and volume fluctuations that may be unrelated to the operating performance of particular companies.Announcements of delays in our test

270、ing,development or regulatory approval schedules,technological innovations or new products developed byus or our competitors and developments or disputes concerning patents or proprietary rights could have a significant and adverse impact on suchmarket prices.Regulatory developments in the United St

271、ates and foreign countries,economic and other external factors,all affect the market priceof our securities.In addition,the realization of any of the risks described in these Risk Factors could have a significant and adverse impact onsuch market prices.Future Sales of Our Common Stock May Cause Our

272、Stock Price to Decline.Therefore,Present Stock Prices May Not Be IndicativeOf The Prices At Which You Will Be Able To Sell Shares Of Common Stock.Our stock price may decline as a result of future sales of ourshares or the perception that such sales may occur.We are unable to estimate the amount,timi

273、ng,or nature of future sales of outstandingcommon stock.Sales of substantial amounts of our common stock in the public market may cause the stocks market price to decline.Item 2.Properties The Company currently leases facilities in three locations:(a)Houston,Texas;(b)London,England,and(c)Sydney,Aust

274、ralia.The Houstonfacility is located at 2500 Wilcrest,5th Floor,Houston,Texas 77042 and houses the corporate headquarters as well as laboratory space used forresearch and development and as the U.S.processing laboratory for cosmetic and dental trials.In September 2002,we opened our London cellular l

275、aboratory to demonstrate the efficacy of the Isolagen Process in the U.K.market.Thenew cellular facility,located at 59/61 Park Royal,London,NW10 7JJ,England began operations in the fourth quarter of 2002.In light of increasingdemand for the Isolagen Process,we will be required to expend additional f

276、unds to increase the capacity of the operation,including addition ofpersonnel,introduction of systems enhancements,the establishment of new facilities,and the like.While we believe that suitable facilities will beavailable or can be developed to suit our requirements,we are unable to estimate the co

277、st of suitable facilities at the present time.21 In August 2003,we opened our Australia cellular laboratory in the city of Sydney to serve the Australian market,and various markets in thePacific Rim if required regulatory approvals are received.The new cellular facility,located at 2 Lincoln Street,L

278、ane Cove,New South Wales,Australia,2066,began operations in August 2003.Our laboratories are designed as cGMP laboratories to process autologous cultured fibroblast cells for therapeutic injections used in ourprocedures and clinical and pivotal trials.We believe our laboratories meet FDA facilities

279、requirements under Center for Biologics Evaluation andResearch(CBER).The following table summarizes the approximate amount of space in square feet utilized by us at each location:Administrative Warehouse Laboratory Total Houston 4,900(1)3,900(2)8,800 London 1,300 2,900 5,200 9,400(3)Sydney 1,100 1,1

280、00 4,900 7,100(4)7,300 4,000 14,000 25,300 1.Certain officers granted us the use of this office space at no charge until August 2003.Beginning in September 2003,the lease rate isapproximately$105,840 annually.We have a month to month lease that may be terminated at our option.The lease is with Axces

281、,Inc.,aDelaware corporation,which is owned by Michael Avignon,Michael Macaluso and Timothy Till.Management believes that the leasedpremises have been made available to us on terms that are superior to those available from arms-length providers of lease space.SeeCertain Relationships and Related Tran

282、sactions.2.The lease rate is approximately$60,840 annually and the term of the lease expires on March 31,2005.3.The lease rate is approximately$146,640 annually and the term of the lease expires on March 24,2010 and we have the option to cancelafter March 24,2005.4.The lease rate is approximately$10

283、2,240 annually and the term of the lease expires on November 19,2004 and we have an option to renewfor an additional one year.Item 3.Legal Proceedings We are not currently subject to any legal proceedings,threatened or pending.We may from time to time become a party to various legalproceedings arisi

284、ng in the ordinary course of our business.Item 4.Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of security holders during the fourth quarter of fiscal year 2003.22 Part II Item 5.Market For Common Equity,Related Stockholder Matters and Issuer Purchases of Eq

285、uity Securities Market Information Since December 11,2002,our common stock has been traded on the American Stock Exchange under the symbol ILE.Prior toDecember 11,2002,our common stock was quoted on the OTC Bulletin Board under the symbol ISLG.The market for our common stock islimited,volatile,and s

286、poradic.The following table sets forth the range of high and low bid quotations or high and low sales prices for our commonstock for each of the periods indicated as reported by the OTC Bulletin Board or the AMEX.These prices for the OTC Bulletin Board reflect inter-dealer prices,without retail mark

287、-up,mark-down or commissions.The OTC Bulletin Board and AMEX prices listed below may not represent actualtransaction prices.December 31,2003 December 31,2002 High Low High LowFirst Quarter$5.60$4.15$7.25$5.00Second Quarter$7.70$4.00$6.95$2.90Third Quarter$11.00$6.35$3.75$2.20Fourth Quarter$9.13$5.10

288、$5.75$3.00Holders As of March 24,2004,we had 717 shareholders of record and approximately 1,500 beneficial owners.Dividends We have never paid dividends on Common Stock.Currently,we anticipate that we will retain earnings,if any,to support operations and tofinance the growth and development of our b

289、usiness and do not anticipate paying cash dividends on the Common Stock in the foreseeable future.We are obligated to pay$1.1 million,which was paid in the third quarter of 2003,to the former holders of the Series A Convertible Preferred Stockand Series B Convertible Preferred Stock,respectively,who

290、 converted their respective holdings into Common Stock shares in August 2003.Securities Authorized for Issuance Under Equity Compensation Plans The following table provides information as of December 31,2003,with respect to securities authorized for issuance under equitycompensation plans.Plan Categ

291、ory Number of Securities tobe Issued Upon Exerciseof Outstanding Options Weighted-AverageExercise Price ofOutstanding Options Number of SecuritiesRemaining Availablefor Future IssuanceEquity compensation plans approved by securityholders 5,849,100$5.81 961,900Equity compensation plans not approved b

292、ysecurity holders 585,000$3.07 NA23Recent Sales of Unregistered Securities The following information relates to securities of the Company issued or sold during the twelve months ended December 31,2003 which werenot registered under the Securities Act of 1933,as amended(the Securities Act):On August

293、27,2003,the Company sold an aggregate of 3,359,331 shares of its Common Stock,par value$0.001 per share,at an offeringprice of$6.00 per share,to a group of institutional investors.Legg Mason Wood Walker,Inc.acted as the sole placement agent for the offering.The Company relied upon and complied with

294、Regulation D under the Securities Act of 1933 in connection with the offering,namely,an offering bythe issuer not involving a public offering.The securities were sold to a limited number of institutional purchasers who each were,at the time thesecurities were sold,an accredited investor within the m

295、eaning of the rules and regulations issued under the Securities Act of 1933,as amended.Purchases of Equity Securities by the Issuer and Affiliated Purchasers None.Item 6.Selected Consolidated Financial Data Our selected historical consolidated financial information presented as of December 31,1999,2

296、000,2001,2002 and 2003 and for each of thefive years ended was derived from our audited consolidated financial statements.24 This information should be read in conjunction with the historical financial statements and related notes included herein,and ManagementsDiscussion and Analysis of Financial C

297、ondition and Results of Operations.For the Year Ended December 31,2003 2002 2001 2000 1999 Consolidated Statement of OperationsData Revenues$445,689$50,991$25,482$6,584$121,931 License fees 40,000 80,000 40,000 Total revenues 445,689 90,991 105,482 46,584 121,931 Cost of sales 121,826 35,133 17,891

298、10,846 84,862 Gross profit 323,863 55,858 87,591 35,738 37,069 Selling,general and administrativeexpenses 7,980,757 3,994,782 715,468 265,075 1,079,356 Research and development 3,301,341 1,735,244 933,907 463,304 186,178 Operating loss (10,958,235)(5,674,168)(1,561,784)(692,641)(1,228,465)Other inco

299、me(expense)Interest income 40,691 208,692 17 4,891 5,902 Other income 55,663 32,421 Loss on disposal of asset (406,413)(8,222)Interest expense (82,015)(119,326)(84,215)Net loss$(11,268,294)$(5,433,055)$(1,652,004)$(807,076)$(1,306,778)Deemed dividend associated withbeneficial conversion of preferred

300、stock (1,244,880)(10,178,944)Preferred stock dividends (1,087,200)(502,661)Net loss attributable to commonstockholders$(13,600,374)$(16,114,660)$(1,652,004)$(807,076)$(1,306,778)Per share information Net lossbasic and diluted$(.58)$(.36)$(.22)$(.29)$(.49)Deemed dividend associated withbeneficial con

301、version of preferred stock (.06)(.67)Preferred stock dividends (.06)(.03)Net loss attributable to commonstockholders$(.70)$(1.06)$(.22)$(.29)$(.49)Shares outstanding 19,297,865 15,205,554 7,618,947 2,822,104 2,656,598 December 31,2003 2002 2001 2000 1999 Consolidated Balance Sheet Data Cash and cash

302、 equivalents$15,935,558$4,244,640$1,380,824$2,574$60,994 Working capital(deficit)14,367,768 2,811,160 870,377 (1,435,834)(651,340)Total assets 19,644,465 7,257,664 1,563,914 62,296 166,703 Total liabilities 2,380,740 2,050,734 511,514 2,290,763 1,590,052 Total stockholders equity(deficit)17,263,725

303、5,206,930 1,052,400 (2,228,467)(1,423,349)25 Item 7.Managements Discussion and Analysis of Financial Condition and Results of Operations Certain statements contained herein are not based on historical facts,but are forward-looking statements that are based upon numerousassumptions about future condi

304、tions that could prove not to be accurate.Forward looking statements include statements regarding ourexpectations,hopes,intentions,or strategies regarding the future.Forward looking statements include:statements regarding future products orproducts or product development;statements regarding future

305、selling,general and administrative costs and research and development spending,and our product development strategy;statements regarding future capital expenditures and financing requirements;and similar forward lookingstatements.Actual events,transactions and results may materially differ from the

306、anticipated events,transactions or results described in suchstatements.Our ability to consummate such transactions and achieve such events or results is subject to numerous risks and uncertainties.Suchrisks and uncertainties include,but are not limited to,the existence of demand for and acceptance o

307、f our products and services,regulatoryapprovals and developments,economic conditions,the impact of competition and pricing,results of financing efforts and other factors affectingour business that are beyond our control.Although we believe that our expectations are based on reasonable assumptions,we

308、 can give no assurance that our expectations willmaterialize.Many factors including those contained in Risk Factors could cause actual results to differ materially from our forward lookingstatements.We are under no obligation to and do not intend to update,revise or otherwise publicly release any re

309、visions to these forward-lookingstatements to reflect events or circumstances after the date hereof or to reflect the occurrence of any unanticipated events.General Isolagen is a Houston,Texas based emerging pharmaceutical bioscience company which has focused its efforts in the development andcommer

310、cialization of autologous cellular technology that has specific applications in cosmetic dermatology and is exploring applications forperiodontal disease,reconstructive dentistry and other health-related markets.Autologous cellular therapy is a process whereby a patients owncells are extracted,repro

311、duced and then reintroduced to the patient for specific cosmetic and medical applications.Unlike other applications forthe treatment of dermal defects,Isolagen utilizes only the patients unique,living cells to produce the patients own collagen.There is no foreignsubstance utilized in this treatment

312、protocol.Isolagens goal is to become the industry leader in the research,development and commercializationof autologous cellular therapy which stimulate a patients own collagen production.The Companys ability to operate profitably under its current business plan is largely contingent upon its succes

313、s in obtaining further sourcesof debt and equity capital,prompt regulatory approval to sell its products and upon its continued expansion.The Company will require additionalcapital in the future to expand its operations.No assurance can be given that the Company will be able to obtain any such addit

314、ional capital,eitherthrough equity or debt financing,on satisfactory terms or at all.Additionally,no assurance can be given that any such financing,if obtained,will beadequate to meet the Companys ultimate capital needs and to support the Companys growth.If adequate capital cannot be obtained onsati

315、sfactory terms,the Companys operations could be negatively impacted.If the Company achieves growth in its operations in the next few years,such growth could place a strain on its management,administrative,operational and financial infrastructure.The Companys ability to manage its operations and grow

316、th requires the continued improvement ofoperational,financial and management controls,reporting systems and procedures.In addition,the Company may find it necessary to hireadditional management,financial and sales and marketing personnel to manage the Companys expanding operations.If the Company is

317、unable tomanage this growth effectively and26 successfully,the Companys business,operating results and financial condition may be materially adversely affected.As of December 31,2003,the Company had a cash balance of$15.9 million.As of March 24,2004,the Company had a cash balance ofapproximately$13.

318、5 million.Our existing capital resources are adequate to finance our operations until June 30,2005,however the long-termviability of the Company is dependent upon successful operation of its business and the ability to raise additional debt and equity to meet ourbusiness objectives.Critical Accounti

319、ng Policies The following discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements,which have been prepared in conformity with accounting principles generally accepted in the United States of America.The preparation of thesefinanci

320、al statements requires management to make estimates and judgments that affect the reported amounts of assets,liabilities,revenues,expenses and related disclosures.On an on-going basis,we evaluate our estimates and assumptions,including but not limited to those related tothe impairment of long-lived

321、assets,reserves for doubtful accounts,revenue recognition and certain accrued liabilities.We base our estimates onhistorical experience and various other assumptions that are believed to be reasonable under the circumstances,the results of which form thebasis for making judgments about the carrying

322、values of assets and liabilities that are not readily apparent from other sources.Actual results maydiffer from these estimates under different assumptions or conditions.Revenue Recognition:We recognize revenue from product sales when goods are shipped and the risk of loss transfers to the customer.

323、Revenue from licenses and other up-front fees are recognized on a ratable basis over the term of the respective agreement.Milestone paymentsare recognized upon successful completion of a performance milestone event.Any amounts received in advance of performance are recorded asdeferred revenue.We rec

324、ognize revenue over the period the service is performed in accordance with SEC Staff Accounting Bulletin No.101,Revenue Recognition in Financial Statements(SAB 101).SAB 101 requires that four basic criteria must be met before revenue can berecognized:(1)persuasive evidence of an arrangement exists,(

325、2)delivery has occurred or services rendered,(3)the fee is fixed and determinable,and(4)collectibility is reasonably assured.We believe that all of these conditions are met at the time of shipment.Currently,three injections arerecommended,although the decision to utilize one,two or three injections

326、is between the attending physician and his/her patient.The amountinvoiced is fixed and determinable and only varies among customers depending upon the number of injections requested.There is no performanceprovision under any arrangement with any doctor and there is no right to refund,or returns for

327、unused injections.Currently the Isolagen Process is delivered through an attending physician to each patient using the Companys recommended regimen of upto three injections.Each injection has stand alone value to the patient.The Company invoices the attending physician upon that physiciansubmitting

328、his or her patients tissue sample to the Company;as a result of which the contractual arrangement is between the Company and themedical professional.The amount invoiced varies directly with the number of injections requested.All orders are paid in advance by the physicianand are not refundable.Reven

329、ue is deferred until shipment,provided no significant obligations remain,and is recognized in installmentscorresponding to the number of injections shipped to the attending physician.Due to the short shelf life,each injection is cultured on an as neededbasis and shipped prior to the individual injec

330、tion being administered by the physician.The amount of the revenue deferral represents the fair valueof the remaining undelivered injections measured in accordance with Emerging Issues Task Force Issue(EITF)00-21,Accounting for RevenueArrangements with Multiple Deliverables,which addresses the issue

331、 of accounting for arrangements that involve the delivery of multiple productsor services.Should the physician discontinue the regimen prematurely all remaining deferred revenue is recognized.27 Research and development expenses:Research and development costs are expensed as incurred and include sal

332、aries and benefits,costspaid to third-party contractors to perform research,conduct clinical trials,develop and manufacture drug materials and delivery devices,and aportion of facilities cost.Clinical trial costs are a significant component of research and development expenses and include costs asso

333、ciated withthird-party contractors.Invoicing from third-party contractors for services performed can lag several months.The Company accrues the costs ofservices rendered in connection with third-party contractor activities based on its estimate of management fees,site management and monitoringcosts and data management costs.Actual clinical trial costs may differ from estimated clinical trial costs