Fibrocell Science Inc
Annual Report 2010

Plain-text annual report

Table of ContentsUNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K þ Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934For the fiscal year ended December 31, 2010OR o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Fibrocell Science, Inc.(Exact name of registrant as specified in its Charter.) Delaware 001-31564 87-0458888(State or other jurisdiction (Commission File Number) (I.R.S. Employerof incorporation) Identification No.)405 Eagleview BoulevardExton, Pennsylvania 19341(Address of principal executive offices, including zip code)(484) 713-6000(Issuer’s telephone number, including area code)Securities registered pursuant to Section 12(g) of the Act: Title of Each Class Name of Each Exchange on which RegisteredCommon Stock, $.001 par value Over the Counter Bulletin Board Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.Yes o No þIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.Yes o No þIndicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of theExchange Act during the preceding 12 months (or for any shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements for the past 90 days. Yes þ No oIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any,every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes o No oIndicate by check mark if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-K contained inthis form, and no disclosure will be contained, to the best of registrant’s knowledge, in definitive proxy or information statementsincorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. oIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer or asmaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” inRule 12b-2 of the Exchange Act. (Check one): Large accelerated filero Accelerated filer o Non-accelerated filer o Smaller reporting company þ (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is shell company (as defined in the Exchange Act Rule 12b-2) Yes o No þThe aggregate market value of common stock held by non-affiliates of the registrant was $15.3 million as of June 30, 2010,the last business day of the registrant’s most recently completed second fiscal quarter. Such aggregate market value was computed byreference to the closing price of the common stock as reported on the OTC Bulletin Board on June 30, 2010. For purposes ofdetermining this amount only, the registrant has defined affiliates as including (a) the executive officers of the registrant as ofJune 30, 2010 and (b) all directors of the registrant as of June 30, 2010.Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.Yes þ No oAs of June 30, 2010, issuer had 19,168,831 shares issued and outstanding of common stock, par value $0.001.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Proxy Statement for the 2010 Annual Meeting of Stockholders (the “Proxy Statement”), to be filed within120 days of the end of the fiscal year ended December 31, 2010, are incorporated by reference in Part III hereof. Except with respectto information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part hereof.  TABLE OF CONTENTS Page PART I ITEM 1. BUSINESS 2 ITEM 1A. RISK FACTORS 15 ITEM 1B. UNRESOLVED STAFF COMMENTS 32 ITEM 2. PROPERTIES 32 ITEM 3. LEGAL PROCEEDINGS 32 ITEM 4. (REMOVED AND RESERVED) PART II ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS ANDISSUER PURCHASES OF EQUITY SECURITIES 33 ITEM 6. SELECTED FINANCIAL DATA 34 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OFOPERATIONS 34 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 40 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIALDISCLOSURE 40 ITEM 9A. CONTROLS AND PROCEDURES 41 ITEM 9B. OTHER INFORMATION 42 PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 42 ITEM 11. EXECUTIVE COMPENSATION 42 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT ANDRELATED STOCKHOLDER MATTERS 42 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE 42 ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 42 PART IV ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE 43 SIGNATURE PAGE 45 Exhibit 23.1 Exhibit 31.1 Exhibit 31.2 Exhibit 32.1 Exhibit 32.2 Table of ContentsPart 1This Annual Report on Form 10-K (including the section regarding Management’s Discussion and Analysis of FinancialCondition and Results of Operations) contains certain “forward-looking statements” within the meaning of Section 27A of theSecurities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, as well as informationrelating to Fibrocell Science, Inc. and its subsidiaries (referred to as “Fibrocell,” “Company,” “we,” or “our”) that is based onmanagement’s exercise of business judgment and assumptions made by and information currently available to management.Although forward-looking statements in this Annual Report on Form 10-K reflect the good faith judgment of our management, suchstatements can only be based on facts and factors currently known by us. Consequently, forward-looking statements are inherentlysubject to risks and uncertainties and actual results and outcomes may differ materially from the results and outcomes discussed in oranticipated by the forward-looking statements. When used in this document and other documents, releases and reports released by us,the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “the facts suggest” and words of similar import, are intended toidentify any forward-looking statements. You should not place undue reliance on these forward-looking statements. These statementsreflect our current view of future events and are subject to certain risks and uncertainties as noted below. Should one or more of theserisks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results could differ materially fromthose anticipated in these forward-looking statements. Actual events, transactions and results may materially differ from theanticipated events, transactions or results described in such statements. Although we believe that our expectations are based onreasonable assumptions, we can give no assurance that our expectations will materialize. Many factors could cause actual results todiffer materially from our forward looking statements including those set forth in Item 1A of this report. Other unknown, unidentifiedor unpredictable factors could materially and adversely impact our future results. We undertake no obligation and do not intend toupdate, revise or otherwise publicly release any revisions to our forward-looking statements to reflect events or circumstances afterthe date hereof or to reflect the occurrence of any unanticipated events.We file reports with the Securities and Exchange Commission (“SEC” or “Commission”). We make available on ourwebsite (www.Fibrocellscience.com) free of charge our annual report on Form 10-K, quarterly reports on Form 10-Q, current reportson Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file such materials with orfurnish them to the SEC. Information appearing at our website is not a part of this Annual Report on Form 10-K. You can also readand copy any materials we file with the Commission at its Public Reference Room at 100 F Street, NE, Washington, DC 20549. Youcan obtain additional information about the operation of the Public Reference Room by calling the Commission at 1-800-SEC-0330.In addition, the Commission maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements, andother information regarding issuers that file electronically with the Commission, including Fibrocell Science.Our corporate headquarters is located at 405 Eagleview Boulevard, Exton, Pennsylvania 19341. Our phone number is(484) 713-6000. Our fiscal year begins on January 1, and ends on December 31, and any references herein to “Fiscal 2010” mean theyear ended December 31, 2010, and references to other “Fiscal” years mean the year ending December 31, of the year indicated.We own or have rights to various copyrights, trademarks and trade names used in our business including but not limited tothe following: Fibrocell Science, Fibrocell Therapy, Fibrocell Science Process, Agera and Agera Rx. This report also includes othertrademarks, service marks and trade names of other companies. Other trademarks and trade names appearing in this report are theproperty of the holder of such trademarks and trade names.We obtained statistical data, market data and other industry data and forecasts used in this Form 10-K from publiclyavailable information. While we believe that the statistical data, industry data, forecasts and market research are reliable, we have notindependently verified the data, and we do not make any representation as to the accuracy of that information.Item 1. BusinessOverview 2Table of ContentsWe are an aesthetic and therapeutic development stage biotechnology company focused on developing novel skin andtissue rejuvenation products. Our clinical development product candidates are designed to improve the appearance of skin injured bythe effects of aging, sun exposure, acne and burn scars with a patient’s own, or autologous, fibroblast cells produced by ourproprietary Fibrocell process. Our clinical development programs encompass both aesthetic and therapeutic indications. Our mostadvanced indication is for the treatment of nasolabial folds/wrinkles (United States adopted name, or USAN, is azficel-T, proposedbrand name laViv®) and has completed Phase III clinical studies, and the related Biologics License Application, or BLA, has beensubmitted to the Food and Drug Administration, or FDA. In October 2009, the FDA’s Cellular, Tissue and Gene Therapies AdvisoryCommittee reviewed this indication. On December 21, 2009, Fibrocell received a Complete Response (“CR”) letter from the FDArelated to the BLA for azficel-T, an autologous cell therapy for the treatment of moderate to severe nasolabial folds/wrinkles inadults. A Complete Response letter is issued by the FDA’s Center for Biologics Evaluation and Research (“CBER”) when the reviewof a file is completed and additional data are needed prior to approval. The Complete Response letter requested that FibrocellScience provide data from a histopathological study on biopsied tissue samples from patients following injection of azficel-T. Thehistology study (IT-H-001) evaluated tissue treated with azficel-T as compared to tissue treated with sterile saline (placebo). Thestudy also provided information about the skin after treatment, including evaluation of collagen and elastin fibrils, and cellularstructure of the sampled tissues.On May 13, 2010, we announced the initiation of the small histology study of azficel-T, discussed above. The study had atarget enrollment of approximately 20 participants from the completed and statistically significant pivotal Phase III studies of azficel-T (IT-R-005 and IT-R-006). We announced on July 8, 2010, the completion of enrollment of and first treatment visits for participantsin its histology study of azficel-T. The second treatment visits for participants enrolled in the histology study of azficel-T werecompleted by the end of July. The third treatment visits for participants enrolled in the histology study of azficel-T were completedby the end of August.The Complete Response letter also requested finalized Chemistry, Manufacturing and Controls (“CMC”) informationregarding the manufacture of azficel-T as follow-up to discussions that occurred during the BLA review period, as well as revisedpolicies and procedures.We announced on December 20, 2010, that we had submitted our complete response to the CR letter issued by the FDAregarding our BLA for azficel-T. On January 22, 2011, the FDA accepted for review our complete response submission. Even thoughthe FDA has accepted our response for complete evaluation, there is no assurance that it will approve our product. The FDA, underthe Prescription Drug User Fee Act (“PDUFA”), has a target six months review window to completely evaluate the Company’sresponse. The PDUFA date is June 22, 2011. We announced on March 16, 2011, that we had submitted a final study report to the FDAfor the completed, six-month histological study examining skin after injections of azficel-T.During 2009 we completed a Phase II/III study for the treatment of acne scars. During 2008 we completed our open-labelPhase II study related to full face rejuvenation.We also develop and market an advanced skin care product line through our Agera subsidiary, in which we acquired a 57%interest in August 2006.Exit from BankruptcyOn August 27, 2009, the United States Bankruptcy Court for the District of Delaware in Wilmington entered an order, orConfirmation Order, confirming the Joint First Amended Plan of Reorganization dated July 30, 2009, as supplemented by the PlanSupplement dated August 21, 2009, or the Plan, of Isolagen, Inc. and Isolagen’s wholly owned subsidiary, Isolagen Technologies,Inc. The effective date of the Plan was September 3, 2009. Isolagen, Inc. and Isolagen Technologies, Inc. were subsequently renamedFibrocell Science, Inc. and Fibrocell Technologies, Inc., respectively. Fibrocell now operates outside of the restraints of thebankruptcy process, free of the debts and liabilities discharged by the Plan. 3Table of ContentsGoing ConcernThe Successor Company emerged from Bankruptcy in September 2009 and continues to operate as a going concern. AtDecember 31, 2010, the Successor Company had cash and cash equivalents of approximately $0.9 million and negative workingcapital of less than $0.1 million. The Successor Company has raised approximately $6.1 million less fees as the result of the issuanceof Preferred Stock Series D and warrants in the period from January 1, 2011 through March 1, 2011. The Company received$0.2 million in subscription receivables from a July financing in mid-March 2011.As of March 24, 2011, the Company had cash and cash equivalents of approximately $3.4 million and current liabilities ofapproximately $0.6 million. The Company’s current monthly cash run-rate is approximately $1.0 million. The Company is alsoplanning to purchase manufacturing equipment and incur marketing expenditures within the next three months to prepare theCompany for launch post a possible FDA approval. Thus, the Successor Company will need to access the capital markets in the nearfuture in order to fund future operations. There is no guarantee that any such required financing will be available on termssatisfactory to the Successor Company or available at all. These matters create uncertainty relating to its ability to continue as agoing concern. The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability andclassification of assets or liabilities that might result from the outcome of these uncertainties.Further, if the Successor Company raises additional cash resources in the near future, it may be raised in contemplation ofor in connection with bankruptcy. In the event of a bankruptcy, it is likely that its common stock and common stock equivalents willbecome worthless and our creditors will receive significantly less than what is owed to them.Through December 31, 2010, the Successor Company has been primarily engaged in developing its initial producttechnology. In the course of its development activities, the Company has sustained losses and expects such losses to continuethrough at least 2011. During the year ended December 31, 2010, the Successor Company financed its operations primarily throughits existing cash received from external equity financings, but as discussed above it now requires additional financing. There issubstantial doubt about the Successor Company’s ability to continue as a going concern.The Successor Company’s ability to complete additional offerings is dependent on the state of the debt and/or equitymarkets at the time of any proposed offering, and such market’s reception of the Successor Company and the offering terms. TheSuccessor Company’s ability to complete an offering is also dependent on the status of its FDA regulatory milestones and its clinicaltrials, and in particular, the status of its indication for the treatment of nasolabial folds/wrinkles and the potential approval of therelated BLA, which cannot be predicted. There is no assurance that capital in any form would be available to the Company, and ifavailable, on terms and conditions that are acceptable.As a result of the conditions discussed above, and in accordance with GAAP, there exists substantial doubt about theSuccessor Company’s ability to continue as a going concern, and its ability to continue as a going concern is contingent, amongother things, upon its ability to secure additional adequate financing or capital in the near future. If the Successor Company does notobtain additional funding, or does not anticipate additional funding, in the very near future, it will likely enter into bankruptcyand/or cease operations. Further, if it does raise additional cash resources in the near future, it may be raised in contemplation of or inconnection with bankruptcy. If the Successor Company enters into bankruptcy, it is likely that its common stock and common stockequivalents will become worthless and its creditors, including preferred stock, will receive significantly less than what is owed tothem. 4Table of ContentsFibrocell Science’s Technology PlatformWe use our proprietary Fibrocell Science Process to produce an autologous living cell therapy. We refer to this autologousliving cell therapy as the Fibrocell Therapy. We believe this therapy addresses the normal effects of aging or injury to the skin. Eachof our product candidates is designed to use Fibrocell Therapy to treat an indicated condition. We use our Fibrocell Science Processto harvest autologous fibroblasts from a small skin punch biopsy from behind the ear with the use of a local anesthetic. We chose thislocation both because of limited exposure to the sun and to avoid creating a visible scar. In the case of our dental product candidate,the biopsy is taken from the patient’s palette. The biopsy is then packed in a vial in a special shipping container and shipped to ourlaboratory where the fibroblast cells are released from the biopsy and initiated into our cell culture process where the cells proliferateuntil they reach the required cell count. The fibroblasts are then harvested, tested by quality control and released by qualityassurance prior to shipment. The number of cells and the frequency of injections may vary and will depend on the indication orapplication being studied.If and when approved, we expect our product candidates will offer patients their own living fibroblast cells in apersonalized therapy designed to improve the appearance of damaged skin and wrinkles; or in the case of restrictive burn scars,improve range of motion. Our product candidates are intended to be a minimally invasive alternative to surgical intervention and aviable natural alternative to other chemical, synthetic or toxic treatments. We also believe that because our product candidates areautologous, the risk of an immunological or allergic response is low. With regard to the therapeutic markets, we believe that ourproduct candidates may address an insufficiently met medical need for the treatment of each of restrictive burn scars, acne scars anddental papillary insufficiency, or gum recession, and potentially help patients avoid surgical intervention. Certain of our productcandidates are still in clinical development and, as such, benefits we expect to see associated with our product candidates may not bevalidated in our clinical trials. In addition, disadvantages of our product candidates may become known in the future.Our StrategyOur business strategy is primarily focused on our approval efforts related to our nasolabial folds/wrinkles indication, forwhich we have submitted our response to the FDA’s Complete Response letter and have a PDUFA date of June 22, 2011. Ouradditional objectives include achieving regulatory milestones related to our other Phase II/III Acne Scar program and potentiallypursuing other clinical trials in burn scarring, vocal scarring and the dental arena, as funding permits in the future. Refer to ClinicalDevelopment Programs below for current status.Trading of Common StockThe Predecessor’s common stock ceased trading on the NYSE Amex on May 6, 2009 and in June 2009 the NYSE Amexdelisted the Predecessor’s common stock from listing on the NYSE Amex. Upon the Effective Date, the outstanding common stock ofthe Predecessor Company was cancelled for no consideration. Consequently, the Predecessor’s stockholders prior to the EffectiveDate no longer have any interest as stockholders of the Predecessor Company by virtue of their ownership of the Predecessor’scommon stock prior to the emergence from bankruptcy. On October 21, 2009, the Successor Company was available for trading onthe OTC Bulletin Board under the symbol “FCSC”.Clinical Development ProgramsOur product development programs are focused on the aesthetic and therapeutic markets. These programs are supported bya number of clinical trial programs at various stages of development.Our aesthetics development programs include product candidates to treat nasolabial folds/wrinkles and to provide full-facerejuvenation that includes the improvement of fine lines, wrinkles, skin texture and appearance. Our therapeutic developmentprograms are designed to treat acne scars, restrictive burn scars and dental papillary recession. All of our product candidates are non-surgical and minimally invasive. Although the discussions below may include estimates of when we expect trials to be completed,the prediction of when a clinical trial will be completed is subject to a number of factors and uncertainties. Also, please refer to Part I,Item 1A of our Form 10-K for the year ended December 31, 2010, for a discussion of certain of our risk factors related to our clinicaldevelopment programs, as well as other risk factors related to our business. 5Table of ContentsAesthetic Development ProgramsNasolabial Folds/Wrinkles — Phase III Trials: In October 2006, we reached an agreement with the FDA, on the design of aPhase III pivotal study protocol for the treatment of nasolabial folds/wrinkles (lines which run from the sides of the nose to thecorners of the mouth). The randomized, double-blind protocol was submitted to the FDA under the agency’s Special ProtocolAssessment, or SPA. Pursuant to this assessment process, the FDA has agreed that our study design for two identical trials, includingsubject numbers, clinical endpoints, and statistical analyses, is adequate to provide the necessary data that, depending on theoutcome, could form the basis of an efficacy claim for a marketing application. The pivotal Phase III trials evaluated the efficacy andsafety of our Fibrocell therapy (USAN name - azficel-T) against placebo in approximately 400 subjects total with approximately 200subjects enrolled in each trial. The injections were completed in January 2008 and the trial data results were disclosed inOctober 2008. The Phase III trial data results indicated statistically significant efficacy results for the treatment of nasolabialfolds/wrinkles. The Phase III data analysis, including safety results, was disclosed in October 2008. We submitted the related BLA tothe FDA in March 2009. In May 2009, the FDA accepted our BLA submission for filing. On October 9, 2009, the FDA’s Cellular,Tissue and Gene Therapies Advisory Committee reviewed azficel-T. The committee voted 11 “yes” to 3 “no” that the data presentedon azficel-T demonstrated efficacy, and 6 “yes” to 8 “no” that the data demonstrated safety, both for the proposed indication. AComplete Response letter is issued by the FDA’s CBER when the review of a file is completed and additional data are needed prior toapproval. On December 21, 2009, we received a Complete Response letter from the FDA related to the BLA for azficel-T. TheComplete Response letter requested that we provide data from a histopathological study on biopsied tissue samples from patientsfollowing injection of azficel-T. The histology study (IT-H-001) evaluated tissue treated with azficel-T as compared to tissue treatedwith sterile saline (placebo). The study also provided information about the skin after treatment, including evaluation of collagenand elastin fibrils, and cellular structure of the sampled tissues.On May 13, 2010, we announced the initiation of a small histology study (IT-H-001) of azficel-T, discussed above. Thestudy had a target enrollment of approximately 20 participants from the completed and statistically significant pivotal Phase IIIstudies of azficel-T (IT-R-005 and IT-R-006). We announced on July 8, 2010, the completion of enrollment of and first treatmentvisits for participants in our histology study of azficel-T. The second treatment visits for participants enrolled in the histology studyof azficel-T were completed by the end of July. The third treatment visits for participants enrolled in the histology study of azficel-Twere completed by the end of August.The Complete Response letter also requested finalized Chemistry, Manufacturing and Controls (“CMC”) informationregarding the manufacture of azficel-T as follow-up to discussions that occurred during the BLA review period, as well as revisedpolicies and procedures regarding shipping practices, and proposed labeling.We announced on December 20, 2010, that we had submitted our complete response to the Complete Response (“CR”)letter issued by the FDA regarding the Company’s BLA for azficel-T. On January 22, 2011, the FDA accepted for review theCompany’s complete response submission for azficel-T. Even though the FDA has accepted the Company’s response for completeevaluation, there is no assurance that it will approve our product. The FDA, under the Prescription Drug User Fee Act (“PDUFA”), hasa target six months review window to completely evaluate the Company’s response upon acceptance of the response. The PDUFAdate is June 22, 2011. The Company announced on March 16, 2011, that it had submitted a final study report to the FDA for thecompleted, six-month histological study examining skin after injections of azficel-T.The United States Adopted Names (USAN) Council adopted the USAN name, azficel-T, on October 28, 2009, and the FDAis currently evaluating a proposed brand name, laViv®.Full Face Rejuvenation — Phase II Trial: In March 2007, the Predecessor Company commenced an open label(unblinded) trial of approximately 50 subjects. Injections of azficel-T began to be administered in July 2007. This trial was designedto further evaluate the safety and use of azficel-T to treat fine lines and wrinkles for the full face. Five investigators across the UnitedStates participated in this trial. The subjects received two series of injections approximately one month apart. In late December 2007,all 45 remaining subjects completed injections. The subjects were followed for twelve months following each subject’s last injection.Data results related to this trial were disclosed in August 2008, which included top line positive efficacy results related to this openlabel Phase II trial.Additional safety data from this trial, collected through telephone calls placed to participating subjects twelve monthsfrom the date of their final study treatment, were submitted to the FDA on November 1, 2009. No changes to the safety profile ofazficel-T were identified during our review of this data. 6Table of ContentsTherapeutic Development ProgramsAcne Scars — Phase II/III Trial: In November 2007, the Predecessor Company commenced an acne scar Phase II/III study.This study included approximately 95 subjects. This placebo controlled trial was designed to evaluate the use of azficel-T to corrector improve the appearance of acne scars. Each subject served as their own control, receiving azficel-T on one side of their face andplacebo on the other. The subjects received three treatments two weeks apart. The follow-up and evaluation period was completedfour months after each subject’s last injection. In March 2009, the Predecessor Company disclosed certain trial data results, whichincluded statistically significant efficacy results for the treatment of moderate to severe acne scars. Compilation of safety data anddata related to the validation of the study photo guide assessment scale discussed below is ongoing and is also subject to additionalfinancing.In connection with this acne scar program, the Predecessor Company developed a photo guide for use in the evaluators’assessment of acne study subjects. The Predecessor Company had originally designed the acne scar clinical program as tworandomized, double-blind, Phase III, placebo-controlled trials. However, our evaluator assessment scale and photo guide have notpreviously been utilized in a clinical trial. In November 2007, the FDA recommended that the Predecessor Company considerconducting a Phase II study in order to address certain study issues, including additional validation related to our evaluatorassessment scale. As such, the Predecessor Company modified our clinical plans to initiate a single Phase II/III trial. This Phase II/IIIstudy, was powered to demonstrate efficacy, and has allowed for a closer assessment of the evaluator assessment scale and photoguide that is ongoing. The Successor Company submitted on August 9, 2010, a clinical study report for its Phase II/III study ofazficel-T for the treatment of moderate to severe acne scars to the FDA. The next step is to initiate a discussion with the FDAconcerning the validation of the evaluator assessment scale and agree the path forward. These steps will be subject to obtainingsufficient financial resources.Restrictive Burn Scars - Phase II Trial: In January 2007, the Predecessor Company met with the FDA to discuss our clinicalprogram for the use of azficel-T for restrictive burn scar patients. This Phase II trial would evaluate the use of azficel-T to improverange of motion, function and flexibility, among other parameters, in existing restrictive burn scars in approximately 20 patients.However, the Predecessor Company delayed the screening and enrollment in this trial until such time as we raise sufficient additionalfinancing and gather additional data regarding the burn scar market. The development of this program will be subject to obtainingsufficient financial resources.Dental Study - Phase II Trial: In late 2003, the Predecessor Company completed a Phase I clinical trial for the treatment ofcondition relating to periodontal disease, specifically to treat Interdental Papillary Insufficiency. In the second quarter of 2005, thePredecessor Company concluded the Phase II dental clinical trial with the use of azficel-T and subsequently announced thatinvestigator and subject visual analog scale assessments demonstrated that the azficel-T was statistically superior to placebo at fourmonths after treatment. Although results of the investigator and subject assessment demonstrated that the azficel-T was statisticallysuperior to placebo, an analysis of objective linear measurements did not yield statistically significant results.In 2006, the Predecessor Company commenced a Phase II open-label dental trial for the treatment of Interdental PapillaryInsufficiency. This single site study included 11 subjects. All study treatment and follow up visits were completed, but full analysisof the study was previously placed on internal hold due to our financial resource constraints. The Company is also currentlyreviewing potential other clinical paths in the dental arena.Agera Skincare SystemsThe Successor Company markets and sells a skin care product line through our majority-owned subsidiary, AgeraLaboratories, Inc., which the Predecessor Company acquired in August 2006. Agera offers a complete line of skincare systems basedon a wide array of proprietary formulations, trademarks and nano-peptide technology. These skincare products can be packaged tooffer anti-aging, anti-pigmentary and acne treatment systems. Agera primarily markets its products in both the United States andEurope (primarily the United Kingdom). 7Table of ContentsOur Target Market OpportunitiesAesthetic Market OpportunityOur product candidate for nasolabial folds/wrinkles and full face rejuvenation are directed primarily at the aestheticmarket. Aesthetic procedures have traditionally been performed by dermatologists, plastic surgeons and other cosmetic surgeons.According to the American Society for Aesthetic Plastic Surgery, or ASAPS, the total market for non-surgical cosmetic procedureswas approximately $4.5 billion in 2009. We believe the aesthetic procedure market is driven by: • aging of the “baby boomer” population, which currently includes ages approximately 46 to 64; • the desire of many individuals to improve their appearance; • impact of managed care and reimbursement policies on physician economics, which has motivated physicians to establishor expand the menu of elective, private-pay aesthetic procedures that they offer; and • broadening base of the practitioners performing cosmetic procedures beyond dermatologists and plastic surgeons to non-traditional providers.According to the ASAPS, 10.0 million surgical and non-surgical cosmetic procedures were performed in 2009, as comparedto 10.3 million in 2008. Also according to the ASAPS, approximately 8.5 million non-surgical procedures were performed in 2009and 2008. We believe that the concept of non-surgical cosmetic procedures involving injectable materials has become moremainstream and accepted. According to the ASAPS, the following table shows the top five non-surgical cosmetic proceduresperformed in 2009: Procedure Number Botulinum toxin type A 2,557,068 Hyaluronic acid 1,313,038 Laser hair removal 1,280,031 Microdermabrasion 621,943 Chemical peel 529,285 Procedures among the 35 to 50 year old age group made up approximately 44% of all cosmetic procedures in 2009. The 51to 64 year old age group made up 27% of all cosmetic procedures in 2009, while the 19 to 34 year old age group made up 20% ofcosmetic procedures in 2009. The Botulinum toxin type A injection was the most popular treatment among the 35 to 50 year old agegroup.Therapeutic Market OpportunitiesIn addition to the aesthetic market, we believe there are opportunities for our Fibrocell Therapy to treat certain medicalconditions such as acne scars, restrictive burn scars and tissue loss due to papillary recession. Presently, we are studying therapeuticapplications of our technology for acne scars. Indications related to acne scars, restrictive burn scars and periodontal disease are oninternal company hold. We are not aware of other autologous cell-based treatments for any of these therapeutic applications.Sales and MarketingWhile our Fibrocell Therapy product candidates are still in the pre-approval phase in the United States, no marketing orsales can occur within the United States. Our Agera skincare products are primarily sold directly to our established distributors andsalons, with historically and recently very little focus on marketing efforts. We continue to attempt to identify additional third partydistributors for our Agera product line.Intellectual PropertyWe believe that patents, trademarks, copyrights, proprietary formulations (related to our Agera skincare products) andother proprietary rights are important to our business. We also rely on trade secrets, know-how and continuing technologicalinnovations to develop and maintain our competitive position. We seek to protect our intellectual property rights by a variety ofmeans, including obtaining patents, maintaining trade secrets and proprietary know-how, and technological innovation to operatewithout infringing on the proprietary rights of others and to prevent others from infringing on our proprietary rights. Our policy is toseek to protect our proprietary position by, among other methods, actively seeking patent protection in the United States and certainforeign countries. 8Table of ContentsAs of December 31, 2010, we had 10 issued U.S. patents, 3 pending U.S. patent applications, 30 granted foreign patentsand no pending international patent applications. Our issued patents and patent applications primarily cover the method of usingautologous cell fibroblasts for the repair of skin and soft tissue defects and the use of autologous fibroblast cells for tissueregeneration. We are in the process of pursuing several other patent applications.In January 2003, the Predecessor Company acquired two pending U.S. patent applications. As consideration, thePredecessor Company issued 100,000 shares of its common stock and agreed to pay a royalty on revenue from commercialapplications and licensing, up to a maximum of $2.0 million.In August 2006, we acquired 57% of the common stock of Agera Laboratories. Agera has a number of trade names,trademarks, exclusive proprietary rights to product formulations and specified peptides that are used in the Agera skincare products.Our success depends in part on our ability to maintain our proprietary position through effective patent claims and theirenforcement against our competitors, and through the protection of our trade secrets. Although we believe our patents and patentapplications provide a competitive advantage, the patent positions of companies like ours are generally uncertain and involvecomplex legal and factual questions. We do not know whether any of our patent applications or those patent applications which wehave acquired will result in the issuance of any patents. Our issued patents, those that may be issued in the future or those acquired byus, may be challenged, invalidated or circumvented, and the rights granted under any issued patent may not provide us withproprietary protection or competitive advantages against competitors with similar technology. In particular, we do not know ifcompetitors will be able to design variations on our treatment methods to circumvent our current and anticipated patent claims.Furthermore, competitors may independently develop similar technologies or duplicate any technology developed by us. Because ofthe extensive time required for the development, testing and regulatory review of a potential product, it is possible that, before any ofour products can be commercialized or marketed, any related patent claim may expire or remain in force for only a short periodfollowing commercialization, thereby reducing the advantage of the patent.We also rely upon trade secrets, confidentiality agreements, proprietary know-how and continuing technologicalinnovation to remain competitive, especially where we do not believe patent protection is appropriate or obtainable. We continue toseek ways to protect our proprietary technology and trade secrets, including entering into confidentiality or license agreements withour employees and consultants, and controlling access to and distribution of our technologies and other proprietary information.While we use these and other reasonable security measures to protect our trade secrets, our employees or consultants mayunintentionally or willfully disclose our proprietary information to competitors.Our commercial success will depend in part on our ability to operate without infringing upon the patents and proprietaryrights of third parties. It is uncertain whether the issuance of any third party patents would require us to alter our products ortechnology, obtain licenses or cease certain activities. Our failure to obtain a license to technology that we may require to discover,develop or commercialize our future products may have a material adverse impact on us. One or more third-party patents or patentapplications may conflict with patent applications to which we have rights. Any such conflict may substantially reduce the coverageof any rights that may issue from the patent applications to which we have rights. If third parties prepare and file patent applicationsin the United States that also claim technology to which we have rights, we may have to participate in interference proceedings in theUnited States Patent and Trademark Office to determine priority of invention.We have collaborated and may collaborate in the future with other entities on research, development andcommercialization activities. Disputes may arise about inventorship and corresponding rights in know-how and inventions resultingfrom the joint creation or use of intellectual property by us and our subsidiaries, collaborators, partners, licensors and consultants. Asa result, we may not be able to maintain our proprietary position. 9Table of ContentsCompetitionThe pharmaceutical and dermal aesthetics industries are characterized by intense competition, rapid product developmentand technological change. Competition is intense among manufacturers of prescription pharmaceuticals and dermal injectionproducts. Our core products are considered dermal injection products.If certain of our product candidates are approved, we will compete with a variety of companies in the dermatology andplastic surgery markets, many of which offer substantially different treatments for similar problems. These include silicone injections,laser procedures, facial surgical procedures, such as facelifts and eyelid surgeries, fat injections, dermabrasion, collagen, allogeniccell therapies, hyaluronic acid injections and Botulinum toxin injections, and other dermal fillers. Indirect competition comes fromfacial care treatment products. Items catering to the growing demand for therapeutic skin care products include facial scrubs, anti-aging treatments, tonics, astringents and skin-restoration formulas.Many of our competitors are large, well-established pharmaceutical, chemical, cosmetic or health care companies withconsiderably greater financial, marketing, sales and technical resources than those available to us. Additionally, many of our presentand potential competitors have research and development capabilities that may allow them to develop new or improved products thatmay compete with our product lines. Our products could be rendered obsolete or made uneconomical by the development of newproducts to treat the conditions addressed by our products, technological advances affecting the cost of production, or marketing orpricing actions by one or more of our competitors. Our facial aesthetics product may compete for a share of the existing market withnumerous products and/or technologies that have become relatively accepted treatments recommended or prescribed bydermatologists and administered by plastic surgeons and aesthetic dermatologists.There are several dermal filler products under development and/or in the FDA pipeline for approval which claim to offercertain facial aesthetic benefits. Depending on the clinical outcomes of the Fibrocell Therapy trials in aesthetics, the success orfailure of gaining approval and the label granted by the FDA if and when the therapy is approved, the competition for the FibrocellTherapy may prove to be direct competition to certain dermal fillers, laser technologies or new technologies. However, if we gainapproval, we believe our Fibrocell Therapy would be a “first to market” autologous cellular technology that could complement othermodalities of treatment and represent a significant additional market opportunity.The field for therapeutic treatments or tissue regeneration for use in wound healing is rapidly evolving. A number ofcompanies are either developing or selling therapies involving stem cells, human-based, animal-based or synthetic tissue products. Ifapproved as a therapy for acne scars, restrictive burn scars or periodontal disease, our product candidates would or may compete withsynthetic, human or animal derived cell or tissue products marketed by companies larger and better capitalized than us.The market for skincare products is quite competitive with low barriers to entry.Government RegulationOur Fibrocell Therapy technologies are subject to extensive government regulation, principally by the FDA and state andlocal authorities in the United States and by comparable agencies in foreign countries. Governmental authorities in the United Statesextensively regulate the pre-clinical and clinical testing, safety, efficacy, research, development, manufacturing, labeling, storage,record-keeping, advertising, promotion, import, export, marketing and distribution, among other things, of pharmaceutical productsunder various federal laws including the Federal Food, Drug and Cosmetic Act, or FFDCA, the Public Health Service Act, or PHSA,and under comparable laws by the states and in most foreign countries.Domestic RegulationIn the United States, the FDA, under the FFDCA, the PHSA, and other federal statutes and regulations, subjectspharmaceutical and biologic products to rigorous review. If we do not comply with applicable requirements, we may be fined, thegovernment may refuse to approve our marketing applications or allow us to manufacture or market our products or productcandidates, and we may be criminally prosecuted. The FDA also has the authority to discontinue or suspend manufacture ordistribution, require a product withdrawal or recall or revoke previously granted marketing authorizations if we fail to comply withregulatory standards or if we encounter problems following initial marketing. 10Table of ContentsFDA Approval ProcessTo obtain approval of a new product from the FDA, we must, among other requirements, submit data demonstrating theproduct’s safety and efficacy as well as detailed information on the manufacture and composition of the product candidate. In mostcases, this entails extensive laboratory tests and pre-clinical and clinical trials. This testing and the preparation of necessaryapplications and processing of those applications by the FDA are expensive and typically take many years to complete. The FDAmay deny our applications or may not act quickly or favorably in reviewing these applications, and we may encounter significantdifficulties or costs in our efforts to obtain FDA approvals that could delay or preclude us from marketing any products we maydevelop. The FDA also may require post-marketing testing and surveillance to monitor the effects of approved products or placeconditions on any approvals that could restrict the commercial applications of these products. Regulatory authorities may withdrawproduct approvals if we fail to comply with regulatory standards or if we encounter problems following initial marketing. Withrespect to patented products or technologies, delays imposed by the governmental approval process may materially reduce the periodduring which we will have the exclusive right to exploit the products or technologies.The FDA does not apply a single regulatory scheme to human tissues and the products derived from human tissue. On aproduct-by-product basis, the FDA may regulate such products as drugs, biologics, or medical devices, in addition to regulating themas human cells, tissues, or cellular or tissue-based products (“HCT/Ps”), depending on whether or not the particular product triggersany of an enumerated list of regulatory factors. A fundamental difference in the treatment of products under these classifications isthat the FDA generally permits HCT/Ps that do not trigger any of those regulatory factors to be commercially distributed withoutmarketing approval. In contrast, products that trigger those factors, such as if they are more than minimally manipulated whenprocessed or manufactured, are regulated as drugs, biologics, or medical devices and require FDA approval. We have determined thatour Fibrocell Therapy (TM) triggers regulatory factors that make it a biologic, in addition to an HCT/P, and consequently, we mustobtain approval from FDA before marketing Fibrocell Therapy (TM) and must also satisfy all regulatory requirements for HCT/Ps.The process required by the FDA before a new drug or biologic may be marketed in the United States generally involvesthe following: • completion of pre-clinical laboratory tests or trials and formulation studies; • submission to the FDA of an IND for a new drug or biologic, which must become effective before human clinical trialsmay begin; • performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the proposeddrug or biologic for its intended use; • detailed information on product characterization and manufacturing process; and • submission and approval of a New Drug Application, or NDA, for a drug, or a Biologics License Application, or BLA,for a biologic.Pre-clinical tests include laboratory evaluation of product chemistry formulation and stability, as well as animal and otherstudies to evaluate toxicity. In view of the autologous nature of our product candidates and our prior clinical experience with ourproduct candidates, we concluded that it was reasonably safe to initiate clinical trials without pre-clinical studies and that the clinicaltrials would be adequate to further assess both the safety and efficacy of our product candidates. Under FDA regulations, the results ofany pre-clinical testing, together with manufacturing information and analytical data, are submitted to the FDA as part of an INDapplication. The FDA requires a 30-day waiting period after the filing of each IND application before clinical trials may begin, inorder to ensure that human research subjects will not be exposed to unreasonable health risks. At any time during this 30-day periodor at any time thereafter, the FDA may halt proposed or ongoing clinical trials, or may authorize trials only on specified terms. TheIND application process may become extremely costly and substantially delay development of our products. Moreover, positiveresults of pre-clinical tests will not necessarily indicate positive results in clinical trials. 11Table of ContentsThe sponsor typically conducts human clinical trials in three sequential phases, which may overlap. These phasesgenerally include the following: • Phase I: The product is usually first introduced into healthy humans or, on occasion, into patients, and is tested forsafety, dosage tolerance, absorption, distribution, excretion and metabolism. • Phase II: The product is introduced into a limited subject population to: • assess its efficacy in specific, targeted indications; • assess dosage tolerance and optimal dosage; and • identify possible adverse effects and safety risks. • Phase III: These are commonly referred to as pivotal studies. If a product is found to have an acceptable safety profileand to be potentially effective in Phase II clinical trials, new clinical trials will be initiated to further demonstrateclinical efficacy, optimal dosage and safety within an expanded and diverse subject population at geographically-dispersed clinical study sites. • If the FDA does ultimately approve the product, it may require post-marketing testing, including potentiallyexpensive Phase IV studies, to confirm or further evaluate its safety and effectiveness.Before proceeding with a study, sponsors may seek a written agreement from the FDA regarding the design, size, andconduct of a clinical trial. This is known as a Special Protocol Assessment, or SPA. Among other things, SPAs can cover clinicalstudies for pivotal trials whose data will form the primary basis to establish a product’s efficacy. SPAs thus help establish up-frontagreement with the FDA about the adequacy of a clinical trial design to support a regulatory approval, but the agreement is notbinding if new circumstances arise. Even if the FDA agrees to a SPA, the agreement may be changed by the sponsor or the FDA onwritten agreement by both parties, or a senior FDA official determines that a substantial scientific issue essential to determining thesafety or effectiveness of the product was identified after the testing began. There is no guarantee that a study will ultimately beadequate to support an approval even if the study is subject to an SPA. The FDA retains significant latitude and discretion ininterpreting the terms of the SPA agreement and the data and results from any study that is the subject of the SPA agreement.Clinical trials must meet requirements for Institutional Review Board, or IRB, oversight, patient informed consent and theFDA’s Good Clinical Practices. Prior to commencement of each clinical trial, the sponsor must submit to the FDA a clinical plan, orprotocol, accompanied by the approval of the committee responsible for overseeing clinical trials at the clinical trial sites. The FDAor the IRB at each institution at which a clinical trial is being performed may order the temporary or permanent discontinuation of aclinical trial at any time if it believes that the clinical trial is not being conducted in accordance with FDA requirements or presentsan unacceptable risk to the clinical trial subjects. Data safety monitoring committees, who monitor certain studies to protect thewelfare of study subjects, may also require that a clinical study be discontinued or modified. 12Table of ContentsThe sponsor must submit to the FDA the results of the pre-clinical and clinical trials, together with, among other things,detailed information on the manufacturing and composition of the product, and proposed labeling, in the form of an NDA, or, in thecase of a biologic, a BLA. The applicant must also submit with the NDA or BLA a substantial user fee payment, unless a waiver orreduction applies. On February 17, 2009, the US Small Business Administration issued a letter formally determining that we are asmall business and therefore qualify for the Small Business Exception to the Prescription Drug and User fee Act of 1992 (21 USC §379h(b)(2)) related to our BLA submission for the nasolabial folds/wrinkles indication. For fiscal year 2009, this fee was $1,247,200for companies that did not receive an exception. The FDA has advised us it is regulating our Fibrocell Therapy as a biologic.Therefore, we expect to submit BLAs to obtain approval of our product candidates. In some cases, we may be able to expand theindications in an approved BLA through a Prior Approval Supplement. Each NDA or BLA submitted for FDA approval is usuallyreviewed for administrative completeness and reviewability within 45 to 60 days following submission of the application. If deemedcomplete, the FDA will “file” the NDA or BLA, thereby triggering substantive review of the application. The FDA can refuse to fileany NDA or BLA that it deems incomplete or not properly reviewable. Once the submission has been accepted for filing, the FDA willreview the application and will usually respond to the applicant in accordance with performance goals the FDA has established forthe review of NDAs and BLAs — six months from the receipt of the application for priority applications and ten months for regularapplications. The review process is often significantly extended by FDA requests for additional information, preclinical or clinicalstudies, clarification, or a risk evaluation and mitigation strategy, or REMS, or by changes to the application submitted by theapplicant in the form of amendments.It is possible that our product candidates will not successfully proceed through this approval process or that the FDA willnot approve them in any specific period of time, or at all. The FDA may deny or delay approval of applications that do not meetapplicable regulatory criteria, or if the FDA determines that the clinical data do not adequately establish the safety and efficacy of theproduct. Satisfaction of FDA pre-market approval requirements for a new biologic is a process that may take a number of years andthe actual time required may vary substantially based upon the type, complexity and novelty of the product or disease. The FDAreviews these applications and, when and if it decides that adequate data are available to show that the product is both safe andeffective and that other applicable requirements have been met, approves the drug or biologic for marketing. Government regulationmay delay or prevent marketing of potential products for a considerable period of time and impose costly procedures upon ouractivities. Success in early stage clinical trials does not assure success in later stage clinical trials. Data obtained from clinicalactivities is not always conclusive and may be susceptible to varying interpretations that could delay, limit or prevent regulatoryapproval. Upon approval, a product candidate may be marketed only for those indications approved in the BLA or NDA and may besubject to labeling and promotional requirements or limitations, including warnings, precautions, contraindications and uselimitations, which could materially impact profitability. Once approved, the FDA may withdraw the product approval if compliancewith pre- and post-market regulatory standards is not maintained or if safety, efficacy or other problems occur after the productreaches the marketplace.The FDA may, during its review of an NDA or BLA, ask for additional test data. If the FDA does ultimately approve theproduct, it may require post-marketing testing, including potentially expensive Phase IV studies, to confirm or otherwise furtherevaluate the safety and effectiveness of the product. The FDA also may require, as a condition to approval or continued marketing ofa drug, a risk evaluation and mitigation strategy, or REMS, if deemed necessary to manage a known or potential serious riskassociated with the product. REMS can include additional educational materials for healthcare professionals and patients such asMedication Guides and Patient Package Inserts, a plan for communicating information to healthcare professionals, and restricteddistribution of the product. In addition, the FDA may, in some circumstances, impose restrictions on the use of the product, whichmay be difficult and expensive to administer and may require prior approval of promotional materials. Following approval, FDA mayrequire labeling changes or impose new post-approval study, risk management, or distribution restriction requirements.Ongoing FDA RequirementsBefore approving an NDA or BLA, the FDA usually will inspect the facilities at which the product is manufactured andwill not approve the product unless the manufacturing facilities are in compliance with the FDA’s current Good ManufacturingPractices, or cGMP, requirements which govern the manufacture, holding and distribution of a product. Manufacturers of humancellular or tissue-based biologics also must comply with the FDA’s Good Tissue Practices, as applicable, and the general biologicalproduct standards. Following approval, the FDA periodically inspects drug and biologic manufacturing facilities to ensure continuedcompliance with the cGMP requirements. Manufacturers must continue to expend time, money and effort in the areas of production,quality control, record keeping and reporting to ensure compliance with those requirements. Failure to comply with theserequirements subjects the manufacturer to possible legal or regulatory action, such as suspension of manufacturing, seizure ofproduct, voluntary recall of product, withdrawal of marketing approval or civil or criminal penalties. Adverse experiences with theproduct 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 problemsconcerning safety or efficacy of the product occur following approval. 13Table of ContentsThe labeling, advertising, promotion, marketing and distribution of a drug or biologic product also must be in compliancewith FDA and FTC requirements which include, among others, standards and regulations for direct-to-consumer advertising, industry-sponsored scientific and educational activities, and promotional activities involving the internet. In general, all product promotionmust be consistent with the FDA approval for such product, contain a balanced presentation of information on the product’s uses andbenefits and important safety information and limitations on use, and otherwise not be false or misleading. The FDA and FTC havevery broad enforcement authority, and failure to abide by these regulations can result in penalties, including the issuance of aWarning Letter directing a company to correct deviations from regulatory standards and enforcement actions that can includeseizures, injunctions and criminal prosecution.Manufacturers are also subject to various laws and regulations governing laboratory practices, the experimental use ofanimals and the use and disposal of hazardous or potentially hazardous substances in connection with their research. In each of theabove areas, the FDA has broad regulatory and enforcement powers, including the ability to levy fines and civil penalties, suspend ordelay issuance of approvals, seize or recall products and deny or withdraw approvals.HIPAA RequirementsOther federal legislation may affect our ability to obtain certain health information in conjunction with our researchactivities. The Health Insurance Portability and Accountability Act of 1996, or HIPAA, mandates, among other things, the adoptionof standards designed to safeguard the privacy and security of individually identifiable health information. In relevant part, the U.S.Department of Health and Human Services, or HHS, has released two rules to date mandating the use of new standards with respect tosuch health information. The first rule imposes new standards relating to the privacy of individually identifiable health information.These standards restrict the manner and circumstances under which covered entities may use and disclose protected healthinformation so as to protect the privacy of that information. The second rule released by HHS establishes minimum standards for thesecurity of electronic health information. While we do not believe we are directly regulated as a covered entity under HIPAA, theHIPAA standards impose requirements on covered entities conducting research activities regarding the use and disclosure ofindividually identifiable health information collected in the course of conducting the research. As a result, unless they meet theseHIPAA requirements, covered entities conducting clinical trials for us may not be able to share with us any results from clinical trialsthat include such health information.Other U.S. Regulatory RequirementsIn the United States, the research, manufacturing, distribution, sale, and promotion of drug and biological products arepotentially subject to regulation by various federal, state and local authorities in addition to the FDA, including the Centers forMedicare and Medicaid Services (formerly the Health Care Financing Administration), other divisions of the U.S. Department ofHealth and Human Services (e.g., the Office of Inspector General), the U.S. Department of Justice and individual U.S. Attorney officeswithin the Department of Justice, and state and local governments. For example, sales, marketing and scientific/educational grantprograms must comply with the anti-fraud and abuse provisions of the Social Security Act, the False Claims Act, and similar statelaws, each as amended. Pricing and rebate programs must comply with the Medicaid rebate requirements of the Omnibus BudgetReconciliation Act of 1990 and the Veterans Health Care Act of 1992, each as amended. If products are made available to authorizedusers of the Federal Supply Schedule of the General Services Administration, additional laws and requirements apply. All of theseactivities are also potentially subject to federal and state consumer protection, unfair competition, and other laws.International RegulationThe regulation of our product candidates outside of the United States varies by country. Certain countries regulate humantissue products as a pharmaceutical product, which would require us to make extensive filings and obtain regulatory approvals beforeselling our product candidates. Certain other countries classify our product candidates as human tissue for transplantation but mayrestrict its import or sale. Other countries have no application regulations regarding the import or sale of products similar to ourproduct candidates, creating uncertainty as to what standards we may be required to meet. 14Table of ContentsManufacturingWe currently have one operational manufacturing facility located in Exton, Pennsylvania. The costs incurred in operatingour Exton facility (except for costs related to general corporate administration) are currently classified as research and developmentexpenses as the activities there have been devoted to the research and development of our clinical applications and the developmentof a commercial scale in a cost-effective production method. All component parts used in our Exton, Pennsylvania manufacturingprocess are readily available with short lead times, and all machinery is maintained and calibrated. We believe we have madeimprovements in our manufacturing processes, and we expect to continue such efforts in the future.Our Agera products are manufactured by a third-party contract manufacturer under a contract manufacturing agreement.The agreement is effective through July 2014.Research and DevelopmentIn addition to our clinical development activities, our research and development activities include improving ourmanufacturing processes and reducing manufacturing costs. We expense research and development costs as they are incurred. For theyears ended December 31, 2010 and 2009, we incurred research and development expenses of $5.5 million and $3.9 million,respectively.EmployeesAs of March 22, 2011, we employed 23 people on a full-time basis, all located in the United States, and one employee, ourChief Operating and Chief Financial Officer, who is based in Ireland and works in both Ireland and the United States. We also employone full-time and one part-time Agera employees. None of our employees are covered by a collective bargaining agreement, and weconsider our relationship with our employees to be good. We also employ consultants and temporary labor on an as needed basis tosupplement existing staff.Segment InformationFinancial information concerning the Company’s business segments and geographic areas of operation is included in Note17 in the Notes to Consolidated Financial Statements contained in Item 8 of this Form 10-K.Corporate HistoryOn August 10, 2001, our company, then known as American Financial Holding, Inc., acquired Isolagen Technologiesthrough the merger of our wholly-owned subsidiary, Isolagen Acquisition Corp., and an affiliated entity, Gemini IX, Inc., with andinto Isolagen Technologies. As a result of the merger, Isolagen Technologies became our wholly owned subsidiary. On November 13,2001, we changed our name to Isolagen, Inc. On August 27, 2009, the United States Bankruptcy Court for the District of Delaware inWilmington entered an order, or Confirmation Order, confirming the Joint First Amended Plan of Reorganization dated July 30,2009, as supplemented by the Plan Supplement dated August 21, 2009, or the Plan, of Isolagen, Inc. and Isolagen’s wholly ownedsubsidiary, Isolagen Technologies, Inc. The effective date of the Plan was September 3, 2009. Isolagen, Inc. and IsolagenTechnologies, Inc. were subsequently renamed Fibrocell Science, Inc. and Fibrocell Technologies, Inc. respectively.Item 1A. Risk FactorsInvesting in our company involves a high degree of risk. Before investing in our company you should carefully consider thefollowing risks, together with the financial and other information contained in this 10-K. If any of the following risks actuallyoccurs, our business, prospects, financial condition and results of operations could be adversely affected. In that case, the tradingprice of our common stock would likely decline and you may lose all or a part of your investment.We could fail to remain a going concern. We will need to raise substantial additional capital to fund our operations throughcommercialization of our product candidates, and we do not have any commitments for that capital. 15Table of ContentsThere exists substantial doubt regarding our ability to continue as a going concern. As of December 31, 2010 we had cashand cash equivalents of $0.9 million and negative working capital of less than $0.1 million. The Successor Company has raisedapproximately $6.1 million less fees as the result of the issuance of Preferred Stock Series D and warrants in the period fromJanuary 1, 2011 through March 1, 2011. We received $0.2 million in subscription receivables from a July financing in mid-March 2011.As of March 24, 2011, we had cash and cash equivalents of approximately $3.4 million and current liabilities ofapproximately $0.6 million. Our current monthly cash run-rate is approximately $1.0 million. The Company is also planning topurchase manufacturing equipment and incur marketing expenditures within the next three months to prepare the Company forlaunch post a possible FDA approval. Thus, we will be required to raise additional cash resources in the near future, or it will likelycease operations. We will need to access the capital markets in the near future in order to fund future operations. There is noguarantee that any such required financing will be available on terms satisfactory to us or available at all. These matters createuncertainty relating to its ability to continue as a going concern.We will need additional capital to achieve commercialization of our product candidates and to execute our businessstrategy, and if we are unsuccessful in raising additional capital we will be unable to achieve commercialization of our productcandidates or unable to fully execute our business strategy on a timely basis, if at all. If we raise additional capital through theissuance of debt securities, the debt securities may be secured and any interest payments would reduce the amount of cash availableto operate and grow our business. If we raise additional capital through the issuance of equity securities, such issuances will likelycause dilution to our stockholders, particularly if we are required to do so during periods when our common stock is trading at lowprice levels. If we file for bankruptcy, it is likely that our common stock will become worthless, given that there currently existsapproximately $7.5 million of debt as of March 25, 2011, which has a priority over common shareholders. In addition, our Series A, Band D Preferred Stock are senior to our common stock, and would be given a liquidation preference prior to the common stock in abankruptcy event. Additionally, we do not know whether any financing, if obtained, will be adequate to meet our capital needs andto support our growth. If adequate capital cannot be obtained on satisfactory terms, we may terminate or delay our efforts related toregulatory approval of one or more of our product candidates, curtail or delay the implementation of manufacturing processimprovements or delay the expansion of our sales and marketing capabilities, any of which could cause our business to fail.If we do not obtain additional funding, we will likely enter into bankruptcy and/or cease operations. Further, if we do raiseadditional cash resources in the near future, it may be raised in contemplation of or in connection with bankruptcy. If we enter intobankruptcy, it is likely that our common stock and common stock equivalents will become worthless and our creditors will receivesignificantly less than what is owed to them.Our independent registered public accounting firm issued their report for our fiscal year ended December 31, 2010, whichincluded an explanatory paragraph for our uncertainty to continue as a going concern. If we became unable to continue as a goingconcern, we would have to liquidate our assets and we may likely receive significantly less than the values at which they are carriedon our consolidated financial statements. The inclusion of a going concern explanatory paragraph in our independent registeredpublic accounting firm’s audit opinion for the year ended December 31, 2010 may materially and adversely affect our stock price andour ability to raise new capital. 16Table of ContentsWe could fail to obtain approval of our lead product, azficel-T, from the FDA. The FDA accepted our response to their CompleteResponse Letter in January 2011 and set a PDUFA date of June 22, 2011. However, the FDA may not approve our productcandidate or may delay our approval. Either of these situations could significantly impact our ability to raise required capital tocontinue operations.We have finished injections related to our pivotal Phase III clinical trial for our lead facial product candidate, azficel-T,and have submitted the related BLA to the FDA. In October 2009, the FDA Cellular, Tissue and Gene Therapies Advisory Committeereviewed our nasolabial folds/wrinkles product candidate. The Committee voted 11 “yes” to 3 “no” that the data presented on ourproduct demonstrated efficacy, and 6 “yes” to 8 “no” that the data demonstrated safety; both for the proposed indication of treatmentof nasolabial folds/wrinkles. The Committee’s recommendations are not binding on the FDA, but the FDA will consider theirrecommendations during their review of our application, which could adversely affect the application. On December 21, 2009, wereceived a Complete Response letter from the FDA related to the BLA for azficel-T. A Complete Response letter is issued by theFDA’s CBER when the review of a file is completed and additional data are needed prior to approval. The Complete Response letterrequested that we provide data from a histopathological study on biopsied tissue samples from patients following injection of azficel-T. The letter also requested finalized CMC information regarding the manufacture of azficel-T as follow-up to discussions thatoccurred during the BLA review period, as well as revised policies and procedures. We announced on December 20, 2010, that wehad submitted our complete response to the CR letter issued by the FDA regarding our BLA for azficel-T. On January 22, 2011, theFDA accepted for review our complete response submission for azficel-T. Even though the FDA has accepted our response forcomplete evaluation, there is no assurance that it will approve our product. The FDA, under the PDUFA, has a target six monthsreview window to completely evaluate our response. The PDUFA date is June 22, 2011. To the extent that the data obtained from thehistopathological study is negative and/or the CMC information and revised policies and procedures required by the FDA is notsatisfactory, we may not obtain approval from the FDA or there may be a delay in approval.If the FDA does not approve our product candidate or, alternatively, if there is a delay in approval, we will be required to raiseadditional cash resources in the near future, or it will likely cease operations. There is no guarantee that any such requiredfinancing will be available to us.Obtaining FDA and other regulatory approvals is complex, time consuming and expensive, and the outcomes are uncertain.The process of obtaining FDA and other regulatory approvals is time consuming, expensive and difficult. Clinical trials arerequired and the marketing and manufacturing of our product candidates are subject to rigorous testing procedures.The commencement and completion of clinical trials for any of our product candidates could be delayed or prevented by avariety of factors, including: • delays in obtaining regulatory approvals to commence a study; • delays in identifying and reaching agreement on acceptable terms with prospective clinical trial sites; • delays or failures in obtaining approval of our clinical trial protocol from an institutional review board, or IRB, to conducta clinical trial at a prospective study site; • delays in the enrollment of subjects; • manufacturing difficulties; • failure of our clinical trials and clinical investigators to be in compliance with the FDA’s Good Clinical Practices, or GCP; • failure of our third-party contract research organizations, clinical site organizations and other clinical trial managers, tosatisfy their contractual duties, comply with regulations or meet expected deadlines; • lack of efficacy during clinical trials; or • unforeseen safety issues. 17Table of ContentsWe do not know whether our clinical trials will need to be restructured or will be completed on schedule, if at all, orwhether they will provide data necessary to support necessary regulatory approval. Significant delays in clinical trials will impedeour ability to commercialize our product candidates and generate revenue, and could significantly increase our development costs.We utilize bovine-sourced materials to manufacture our Fibrocell Therapy. Future FDA regulations, as well as currentlyproposed regulations, may require us to change the source of the bovine-sourced materials we use in our products or to cease usingbovine-sourced materials. If we are required to use alternative materials in our products, and in the event that such alternativematerials are available to us, or if we choose to change the materials used in our products in the future, we would need to validate thenew manufacturing process and run comparability trials with the reformulated product, which could delay our submission forregulatory approval.Even if marketing approval from the FDA is received for one or more of our product candidates, the FDA may impose post-marketing requirements, such as: • labeling and advertising requirements, restrictions or limitations, including the inclusion of warnings, precautions, contra-indications or use limitations that could have a material impact on the future profitability of our product candidates; • testing and surveillance to further evaluate or monitor our future products and their continued compliance with regulatorystandards and requirements; • submitting products for inspection; or • imposing a risk evaluation and mitigation strategy, or REMS, to ensure that the benefits of the drug outweigh the risks.Because our consolidated financial statements for the year ended December 31, 2009 reflect fresh-start accounting adjustmentsmade on emergence from bankruptcy and because of the effects of the transactions that became effective pursuant to the Plan,financial information in our current and future financial statements will not be comparable to our financial information fromprior periods.In connection with our emergence from bankruptcy, we adopted fresh-start accounting as of September 1, 2009 inaccordance with ASC 852-10. The adoption of fresh-start accounting resulted in our becoming a new entity for financial reportingpurposes. As required by fresh-start accounting, our assets and liabilities have been preliminarily adjusted to fair value, and certainassets and liabilities not previously recognized in our financial statements have been recognized. In addition to fresh-startaccounting, our financial statements reflect all effects of the transactions implemented by the Plan. Accordingly, the financialstatements prior to September 1, 2009 are not comparable with the financial statements for periods on or after September 1, 2009.Furthermore, the estimates and assumptions used to implement fresh-start accounting are inherently subject to significantuncertainties and contingencies beyond our control. Accordingly, we cannot provide assurance that the estimates, assumptions, andvalues reflected in the valuations will be realized, and actual results could vary materially. For further information about fresh-startaccounting, see Note 5 — “Fresh-Start Accounting” in Notes to Consolidated Financial Statements.Protocol deviations may release the FDA from its binding acceptance of our SPA study design, which may result in the delay, ornon-approval, by the FDA of the Fibrocell Therapy.In connection with preparations for FDA Investigator Inspections related to our nasolabial folds/wrinkles Phase III studies,we identified protocol deviations related to the timing of visits and other types of deviations. The possibility exists that our specialprotocol assessment could no longer be binding on the FDA if the FDA considers these deviations, individually or in aggregate, to besignificant. Further, future investigator audits may identify deviations unknown at this time. Accordingly, the possibility exists thatalthough our Phase III studies yielded statistically significant results, the studies may not be acceptable to the FDA under the SPA. 18Table of ContentsClinical trials may fail to demonstrate the safety or efficacy of our product candidates, which could prevent or significantlydelay regulatory approval and prevent us from raising additional financing.Prior to receiving approval to commercialize any of our product candidates, we must demonstrate with substantialevidence from well-controlled clinical trials, and to the satisfaction of the FDA and other regulatory authorities in the United Statesand abroad, that our product candidates are both safe and effective. We will need to demonstrate our product candidates’ efficacy andmonitor their safety throughout the process. We have recently completed a pivotal Phase III clinical trial related to our lead facialaesthetic product candidate. The success of prior pre-clinical or clinical trials does not ensure the success of these trials, which arebeing conducted in populations with different racial and ethnic demographics than our previous trials. If our current trials or anyfuture clinical trials are unsuccessful, our business and reputation would be harmed and the price at which our stock trades could beadversely affected. In addition, if our Phase III clinical trials related to our lead facial aesthetic product candidate is deemed to beunacceptable or deficient in any way by the FDA, we may be unable to raise additional equity or debt financing that we may requireto continue our operations.All of our product candidates are subject to the risks of failure inherent in the development of biotherapeutic products. Theresults of early-stage clinical trials of our product candidates do not necessarily predict the results of later-stage clinical trials.Product candidates in later-stage clinical trials may fail to demonstrate desired safety and efficacy traits despite having successfullyprogressed through initial clinical testing. Even if we believe the data collected from clinical trials of our product candidates ispromising, this data may not be sufficient to support approval by the FDA or any other U.S. or foreign regulatory approval. Pre-clinical and clinical data can be interpreted in different ways. Accordingly, FDA officials could reach different conclusions inassessing such data than we do, which could delay, limit or prevent regulatory approval. In addition, the FDA, other regulatoryauthorities, our Institutional Review Boards or we, may suspend or terminate clinical trials at any time.Unlike our Phase III nasolabial folds/wrinkles trial, our Phase II/III Acne Scar trial is not subject to a SPA with the FDA. Inaddition, we have developed a photo guide for use in the evaluators’ assessment of acne study subjects. Our evaluator assessmentscale and photo guide have not been previously used in a clinical trial. To obtain FDA approval with respect to the acne scarindication, we will require FDA concurrence with the use of our evaluator assessment scale and photo guide.Any failure or delay in completing clinical trials for our product candidates, or in receiving regulatory approval for the saleof any product candidates, has the potential to materially harm our business, and may prevent us from raising necessary, additionalfinancing that we may need in the future.Since our emergence from bankruptcy we have completed numerous equity financings of convertible securities, and it is likelythat we will make additional equity financings in the future, which may materially and adversely affect the price of our commonstock. We have a significant number of convertible securities that may result in significant dilution to our common stockholders.Sales of substantial amounts of shares of our common stock in the public market, or the perception that those sales mayoccur, could cause the market price of our common stock to decline. We have used and it is likely that we will continue to use ourcommon stock or securities convertible into or exchangeable for our common stock to fund our working capital needs or to acquiretechnology, product rights or businesses, or for other purposes. If we issue additional equity securities, particularly during times whenour common stock is trading at relatively low price levels, the price of our common stock may be materially and adversely affected.Since our emergence from bankruptcy we have completed numerous equity financings of convertible preferred stock andwarrants. The conversion or exercise of the preferred stock or warrants, as applicable, into common stock and the sale of suchcommon stock into the market may cause the price of our common stock to fall. Even if such sales do not occur, the market mayanticipate such sales in the future, which may cause the price of our common stock to fall.Furthermore, the preferred stock has a mandatory conversion feature that we may trigger if the price of our common stocktrades above $1.00 per share. As of March 24, 2011, if such price occurs and if we trigger the mandatory conversion feature, we wouldbe required to issue in excess of 27 million shares of common stock. The issuance of these shares or the sale of these shares maymaterially reduce the price of our common stock. 19Table of ContentsWe have a significant number of warrants and convertible preferred stock outstanding that contain anti-dilution and price-protection provisions that may result in the reduction of their exercise prices or conversion prices in the future.In October 2009, we completed an offering of Series A Preferred Stock and warrants, and, in March 2010, we completed anoffering of common stock and warrants. In November 2010, we completed an offering of Series B Preferred Stock and warrants, and, inMarch 2011, we completed an offering of Series D Preferred Stock and warrants. Each of the foregoing securities were subject tocertain anti-dilution provisions, which provisions require the lowering of the conversion price or exercise price, as applicable, to thepurchase price of future offerings. Furthermore, with respect to the warrants, if we complete an offering below the exercise price ofsuch warrants, the number of shares issuable under the warrants will be proportionately increased such that the aggregate exerciseprice payable after taking into account the decrease in the exercise price, shall be equal to the aggregate exercise price prior to suchadjustment. The conversion and exercise price of securities related to the Preferred Stock Series A and warrants, the common stockand warrants issued in the March 2010 offering and the Preferred Stock Series B and warrants offering were adjusted due to thePreferred Stock Series D and warrants offering. If in the future we issue securities for less than the conversion or exercise price of thesecurities we issued so far, we may be required to further reduce the relevant conversion or exercise prices, and the number of sharesunderlying the warrants may be increased.During the term that the warrants and preferred stock are outstanding, the holders of those securities are given theopportunity to profit from a rise in the market price of our common stock. In addition, certain of the warrants are not redeemable byus. We may find it more difficult to raise additional equity capital while these warrants or preferred stock are outstanding. At any timeduring which these warrants are likely to be exercised, we may be able to obtain additional equity capital on more favorable termsfrom other sources.We have yet to be profitable, losses may continue to increase from current levels and we will continue to experience significantnegative cash flow as we expand our operations, which may limit or delay our ability to become profitable.We have incurred losses since our inception, have never generated significant revenue from commercial sales of ourproducts, and have never been profitable. We are focused on product development, and we have expended significant resources onour clinical trials, personnel and research and development. We expect these costs to continue to rise in the future. We expect tocontinue to experience increasing operating losses and negative cash flow as we expand our operations.We expect to continue to incur significant additional costs and expenses related to: • FDA clinical trials and regulatory approvals; • expansion of laboratory and manufacturing operations; • research and development; • brand development; • personnel costs; • development of relationships with strategic business partners, including physicians who might use our future products; and • interest expense and amortization of issuance costs related to our outstanding note payables.If our product candidates fail in clinical trials or do not gain regulatory approval, if our product candidates do not achievemarket acceptance, or if we do not succeed in effectively and efficiently implementing manufacturing process and technologyimprovements to make our product commercially viable, we will not be profitable. If we fail to become and remain profitable, or if weare unable to fund our continuing losses, our business may fail.We will continue to experience operating losses and significant negative cash flow until we begin to generate significantrevenue from (a) the sale of our product candidates, which is dependent on the receipt of FDA approval for our product candidatesand is dependent on our ability to successfully market and sell such product candidates, and (b) our Agera product line, which isdependent on achieving significant market penetration in its markets. 20Table of ContentsWe may be unable to successfully commercialize any of our product candidates currently under development.Before we can commercialize any of our product candidates in the United States, we will need to: • conduct substantial additional research and development; • successfully complete lengthy and expensive pre-clinical and clinical testing, including the Phase II/III clinical trial forour acne scar product candidate; • successfully improve our manufacturing process; and • obtain FDA approvals.Even if our product development efforts are successful, we cannot assure that we will be able to commercialize any of ourproduct candidates currently under development. In that event, we will be unable to generate significant revenue, and our businesswill fail.We have not generated significant revenue from commercial sales of our products to date, and we do not know whether we willever generate significant revenue.We are focused on product development and have not generated significant revenue from commercial sales of our productsto date. Prior to the fourth quarter of 2006 we offered the Fibrocell Therapy for sale in the United Kingdom. Our United Kingdomoperation had been operating on a negative gross margin as we investigated means to improve manufacturing technologies for theFibrocell Process.We do not currently offer any products for sale that are based upon our Fibrocell Therapy, and we cannot guarantee that wewill ever market any such products. We must demonstrate that our product candidates satisfy rigorous standards of safety and efficacybefore the FDA and other regulatory authorities in the United States and abroad will approve the product candidates for commercialmarketing. We will need to conduct significant additional research, including potentially pre-clinical testing and clinical testingbefore we can file additional applications with the FDA for approval of our product candidates. We must also develop, validate andobtain FDA approval of any improved manufacturing process. In addition, to compete effectively our future products must be easy touse, cost-effective and economical to manufacture on a commercial scale. We may not achieve any of these objectives, and we maynever generate revenue from our product candidates.Our ability to effectively commercialize our product candidates depends on our ability to improve our manufacturing processand validate such future improvements.As part of the approval process, we must pass a pre-approval inspection of our manufacturing facility before we can obtainmarketing approval for our product candidates. The Complete Response letter that we received from the FDA in December 2009requested finalized CMC information regarding the manufacture of azficel-T as follow-up to discussions that occurred during theBLA review period. We cannot guarantee that this CMC information will satisfy the FDA’s requirements for approval. All of ourmanufacturing methods, equipment and processes for the active pharmaceutical ingredient and finished product must comply withthe FDA’s current Good Manufacturing Practices, or cGMP, requirements. We will also need to perform extensive audits of oursuppliers, vendors and contract laboratories. The cGMP requirements govern all areas of recordkeeping, production processes andcontrols, personnel and quality control. To ensure that we meet these requirements, we will expend significant time, money andeffort. Due to the unique nature of our Fibrocell Therapy, we cannot predict the likelihood that the FDA will approve our facility ascompliant with cGMP requirements even if we believe that we have taken the steps necessary to achieve compliance. 21Table of ContentsThe FDA, in its regulatory discretion, may require us to undergo additional clinical trials with respect to any new orimproved manufacturing process we develop or utilize, in the future, if any. This could include a requirement to change the materialsused in our manufacturing process. These improvements or modifications could delay or prevent approval of our product candidates.If we fail to comply with cGMP requirements, pass an FDA pre-approval inspection or obtain FDA approval of our manufacturingprocess, we would not receive FDA approval and would be subject to possible regulatory action. The failure to successfullyimplement our manufacturing process may delay or prevent our future profitability.Even if we obtain FDA approval in the future and satisfy the FDA with regard to a validated manufacturing process, we stillmay be unable to commercially manufacture the Fibrocell Therapy profitably. Our manufacturing cost has been subject tofluctuation, depending, in part, on the yields obtained from our manufacturing process. There is no guarantee that futuremanufacturing improvements will result in a manufacturing cost low enough to effectively compete in the market. Further, wecurrently manufacture the Fibrocell Therapy on a limited basis (for research and development and for trial purposes only) and wehave not manufactured commercial levels of the Fibrocell Therapy in the United States. Such commercial manufacturing volumes, inthe future, could lead to unexpected inefficiencies and result in unprofitable performance results.We may not be successful in our efforts to develop commercial-scale manufacturing technology and methods.In order to successfully commercialize any approved product candidates, we will be required to produce such products ona commercial scale and in a cost-effective manner. As stated in the preceding risk factor, we intend to seek FDA approval of ourmanufacturing process as a component of the BLA application and approval process. However, we can provide no assurance that wewill be able to cost-effectively and commercially scale our operations using our current manufacturing process. If we are unable todevelop suitable techniques to produce and manufacture our product candidates, our business prospects will suffer.We depend on a third-party manufacturer for our Agera product line, the loss or unavailability of which would require us to finda substitute manufacturer, if available, resulting in delays in production and additional expenses.Our Agera skin care product line is manufactured by a third party. We are dependent on this third party to manufactureAgera’s products, and the manufacturer is responsible for supplying the formula ingredients for the Agera product lines. If for anyreason the manufacturer discontinues production of Agera’s products at a time when we have a low volume of inventory on hand orare experiencing a high demand for the products, significant delays in production of the products and interruption of product salesmay result as we seek to establish a relationship and commence production with a new manufacturer, which would negatively impactour results of operation.The large majority of our revenue, which relates to the Agera business segment, is to one international customer.Our revenues, which relate solely to the Agera business segment, are highly concentrated in one large, internationalcustomer. This large customer represented 72% and 64% of 2010 and 2009 consolidated revenues, respectively. Further, this largecustomer represented 88% and 87% of consolidated accounts receivable, net, at December 31, 2010 and December 31, 2009,respectively. A reduction of revenue related to this large customer, due to competitor product alternatives, pricing pressures, thefinancial health of the large customer, or otherwise, would have a significant, negative impact on the business of Agera, and therelated value thereof.If our Fibrocell Therapy is found to be unsafe or ineffective, or if our Fibrocell Therapy is perceived to be unsafe or ineffective,our business would be materially harmed.Our product candidates utilize our Fibrocell Therapy. In addition, we expect to utilize our Fibrocell Therapy in thedevelopment of any future product candidates. If our Fibrocell Therapy is found to be, or perceived to be, unsafe or ineffective, wewill not be successful in obtaining marketing approval for any product candidates then pending, and we may have to modify or ceaseproduction of any products that previously may have received regulatory approval. Negative media exposure, whether founded orunfounded, related to the safety and/or effectiveness of our Fibrocell Therapy may harm our reputation and/or competitive position. 22Table of ContentsIf physicians do not follow our established protocols, the efficacy and safety of our product candidates may be adversely affected.We are dependent on physicians to follow our established protocols both as to the administration and the handling of ourproduct candidates in connection with our clinical trials, and we will continue to be dependent on physicians to follow suchprotocols if our product candidates are commercialized. The treatment protocol requires each physician to verify the patient’s nameand date of birth with the patient and the patient records immediately prior to injection. In the event more than one patient’s cells aredelivered to a physician or we deliver the wrong patient’s cells to the physician, which has occurred in the past, it is the physician’sobligation to follow the treatment protocol and assure that the patient is treated with the correct cells. If the physicians do not followour protocol, the efficacy and safety of our product candidates may be adversely affected.Our business, which depends on one facility, is vulnerable to natural disasters, telecommunication and information systemsfailures, terrorism and similar problems, and we are not fully insured for losses caused by all of these incidents.We currently conduct all our research, development and manufacturing operations in one facility located in Exton,Pennsylvania. As a result, if we obtain FDA approval of any of our product candidates, all of the commercial manufacturing for theU.S. market are currently expected to take place at a single U.S. facility. If regulatory, manufacturing or other problems require us todiscontinue production at that facility, we will not be able to supply product, which would adversely impact our business.Our Exton facility could be damaged by fire, floods, power loss, telecommunication and information systems failures orsimilar events. Our insurance policies have limited coverage levels for loss or damages in these events and may not adequatelycompensate us for any losses that may occur. In addition, terrorist acts or acts of war may cause harm to our employees or damage ourExton facility. The potential for future terrorist attacks, the national and international responses to terrorist attacks or perceivedthreats to national security, and other acts of war or hostility have created many economic and political uncertainties that couldadversely affect our business and results of operations in ways that we cannot predict, and could cause our stock price to fluctuate ordecline. We are uninsured for these types of losses.As a result of our limited operating history, we may not be able to correctly estimate our future operating expenses, which couldlead to cash shortfalls.We have a limited operating history and our primary business activities consist of conducting clinical trials. As such, ourhistorical financial data is of limited value in estimating future operating expenses. Our budgeted expense levels are based in part onour expectations concerning the costs of our clinical trials, which depend on the success of such trials and our ability to effectivelyand efficiently conduct such trials, and expectations related to our efforts to achieve FDA approval with respect to our productcandidates. In addition, our budgeted expense levels are based in part on our expectations of future revenue that we may receive fromour Agera product line, and the size of future revenue depends on the choices and demand of individuals. Our limited operatinghistory and clinical trial experience make these costs and revenues difficult to forecast accurately. We may be unable to adjust ouroperations in a timely manner to compensate for any unexpected increase in costs or shortfall in revenue. Further, our fixedmanufacturing costs and business development and marketing expenses will increase significantly as we expand our operations.Accordingly, a significant increase in costs or shortfall in revenue could have an immediate and material adverse effect on ourbusiness, results of operations and financial condition. 23Table of ContentsOur operating results may fluctuate significantly in the future, which may cause our results to fall below the expectations ofsecurities analysts, stockholders and investors.Our operating results may fluctuate significantly in the future as a result of a variety of factors, many of which are outsideof our control. These factors include, but are not limited to: • the level of demand for the products that we may develop; • the timely and successful implementation of improved manufacturing processes; • our ability to attract and retain personnel with the necessary strategic, technical and creative skills required for effectiveoperations; • the amount and timing of expenditures by practitioners and their patients; • introduction of new technologies; • product liability litigation, class action and derivative action litigation, or other litigation; • the amount and timing of capital expenditures and other costs relating to the expansion of our operations; • the state of the debt and/or equity markets at the time of any proposed offering we choose to initiate; • our ability to successfully integrate new acquisitions into our operations; • government regulation and legal developments regarding our Fibrocell Therapy in the United States and in the foreigncountries in which we may operate in the future; and • general economic conditions.As a strategic response to changes in the competitive environment, we may from time to time make pricing, service,technology or marketing decisions or business or technology acquisitions that could have a material adverse effect on our operatingresults. Due to any of these factors, our operating results may fall below the expectations of securities analysts, stockholders andinvestors in any future period, which may cause our stock price to decline.We may be liable for product liability claims not covered by insurance.Physicians who used our facial aesthetic product in the past, or who may use any of our future products, and patients whohave been treated by our facial aesthetic product in the past, or who may use any of our future products, may bring product liabilityclaims against us. While we have taken, and continue to take, what we believe are appropriate precautions, we may be unable toavoid significant liability exposure. We currently keep in force product liability insurance, although such insurance may not beadequate to fully cover any potential claims or may lapse in accordance with its terms prior to the assertion of claims. We may beunable to obtain product liability insurance in the future, or we may be unable to do so on acceptable terms. Any insurance we obtainor have obtained in the past may not provide adequate coverage against any asserted claims. In addition, regardless of merit oreventual outcome, product liability claims may result in: • diversion of management’s time and attention; • expenditure of large amounts of cash on legal fees, expenses and payment of damages; • decreased demand for our products or any of our future products and services; or • injury to our reputation.If we are the subject of any future product liability claims, our business could be adversely affected, and if these claims arein excess of insurance coverage, if any, that we may possess, our financial position will suffer. 24Table of ContentsOur failure to comply with extensive governmental regulation may significantly affect our operating results.Even if we obtain regulatory approval for some or all of our product candidates, we will continue to be subject to extensiveongoing requirements by the FDA, as well as by a number of foreign, national, state and local agencies. These regulations will impactmany aspects of our operations, including testing, research and development, manufacturing, safety, efficacy, labeling, storage,quality control, adverse event reporting, import and export, record keeping, approval, distribution, advertising and promotion of ourfuture products. We must also submit new or supplemental applications and obtain FDA approval for certain changes to an approvedproduct, product labeling or manufacturing process. Application holders must also submit advertising and other promotional materialto the FDA and report on ongoing clinical trials. The FDA enforces post-marketing regulatory requirements, including the cGMPrequirements, through periodic unannounced inspections. We do not know whether we will pass any future FDA inspections. Failureto pass an inspection could disrupt, delay or shut down our manufacturing operations. Failure to comply with applicable regulatoryrequirements could, among other things, result in: • administrative or judicial enforcement actions; • changes to advertising; • failure to obtain marketing approvals for our product candidates; • revocation or suspension of regulatory approvals of products; • product seizures or recalls; • court-ordered injunctions; • import detentions; • delay, interruption or suspension of product manufacturing, distribution, marketing and sales; or • civil or criminal sanctions.The discovery of previously unknown problems with our future products may result in restrictions of the products,including withdrawal from the market. In addition, the FDA may revisit and change its prior determinations with regard to the safetyor efficacy of our future products. If the FDA’s position changes, we may be required to change our labeling or cease to manufactureand market our future products. Even prior to any formal regulatory action, we could voluntarily decide to cease the distribution andsale or recall any of our future products if concerns about their safety or efficacy develop.In their regulation of advertising and other promotion, the FDA and the FTC may issue correspondence alleging that someadvertising or promotional practices are false, misleading or deceptive. The FDA and FTC are authorized to impose a wide array ofsanctions on companies for such advertising and promotion practices, which could result in any of the following: • incurring substantial expenses, including fines, penalties, legal fees and costs to comply with the FDA’s requirements; • changes in the methods of marketing and selling products; • taking FDA mandated corrective action, which may include placing advertisements or sending letters to physiciansrescinding previous advertisements or promotions; or • disruption in the distribution of products and loss of sales until compliance with the FDA’s position is obtained.Improper promotional activities may also lead to investigations by federal or state prosecutors, and result in criminal andcivil penalties. If we become subject to any of the above requirements, it could be damaging to our reputation and restrict our abilityto sell or market our future products, and our business condition could be adversely affected. We may also incur significant expensesin defending ourselves. 25Table of ContentsPhysicians may prescribe pharmaceutical or biologic products for uses that are not described in a product’s labeling ordiffer from those tested by us and approved by the FDA. While such “off-label” uses are common and the FDA does not regulatephysicians’ choice of treatments, the FDA does restrict a manufacturer’s communications on the subject of off-label use. Companiescannot promote FDA-approved pharmaceutical or biologic products for off-label uses, but under certain limited circumstances theymay disseminate to practitioners articles published in peer-reviewed journals. To the extent allowed by the FDA, we intend todisseminate peer-reviewed articles on our future products to practitioners. If, however, our activities fail to comply with the FDA’sregulations or guidelines, we may be subject to warnings from, or enforcement action by, the FDA or other regulatory or lawenforcement authorities.Our sales, marketing, and scientific/educational grant programs, if any in the future, must also comply with applicablerequirements of the anti-fraud and abuse provisions of the Social Security Act, the False Claims Act, the federal anti-kickback law,and similar state laws, each as amended. Pricing and rebate programs must comply with the Medicaid rebate requirements of theOmnibus Budget Reconciliation Act of 1990 and the Veteran’s Health Care Act of 1992, each as amended. If products are madeavailable to authorized users of the Federal Supply Schedule of the General Services Administration, additional laws andrequirements apply. All of these activities are also potentially subject to federal and state consumer protection and unfair competitionlaws. The distribution of product samples to physicians must comply with the requirements of the Prescription Drug Marketing Act.Depending on the circumstances, failure to meet post-approval requirements can result in criminal prosecution, fines orother penalties, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-marketing product approvals, or refusal to allow us to enter into supply contracts, including government contracts. Any governmentinvestigation of alleged violations of law could require us to expend significant time and resources in response, and could generatenegative publicity.Legislative or regulatory reform of the healthcare system may affect our ability to sell our future products profitably.In the United States and a number of foreign jurisdictions, there have been legislative and regulatory proposals to changethe healthcare system in ways that could impact our ability to sell our future products profitably. For instance, there currently is nolegal pathway for generic or similar versions of BLA-approved biologics, sometimes called “follow-on biologics” or “biosimilars,”but there is continuing interest by Congress on this issue and on healthcare reform in general. It is unknown what type of regulatoryframework, what legal provisions, and what timeframes for issuance of regulations or guidance any final legislation on biosimilarswould contain, but the future profitability of any approved biological product could be materially adversely impacted by theapproval of a biosimilar product. The FDA’s policies may change and additional government regulations may be enacted, whichcould prevent or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of adversegovernment regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we arenot able to maintain regulatory compliance, we might not be permitted to market our future products and our business could suffer.Any future products that we develop may not be commercially successful.Even if we obtain regulatory approval for our product candidates in the United States and other countries, those productsmay not be accepted by the market. A number of factors may affect the rate and level of market acceptance of our products, including: • labeling requirements or limitations; • market acceptance by practitioners and their patients; • our ability to successfully improve our manufacturing process; • the effectiveness of our sales efforts and marketing activities; and • the success of competitive products. 26Table of ContentsIf our current or future product candidates fail to achieve market acceptance, our profitability and financial condition willsuffer.Our competitors in the pharmaceutical, medical device and biotechnology industries may have superior products,manufacturing capabilities, financial resources or marketing position.The human healthcare products and services industry is extremely competitive. Our competitors include majorpharmaceutical, medical device and biotechnology companies. Most of these competitors have more extensive research anddevelopment, marketing and production capabilities and greater financial resources than we do. Our future success will depend onour ability to develop and market effectively our future products against those of our competitors. If our future products receivemarketing approval but cannot compete effectively in the marketplace, our results of operations and financial position will suffer.We are dependent on our key scientific and other management personnel, and the loss of any of these individuals could harm ourbusiness.We are dependent on the efforts of our key management and scientific staff. The loss of any of these individuals, or ourinability to recruit and train additional key personnel in a timely manner, could materially and adversely affect our business and ourfuture prospects. A loss of one or more of our current officers or key personnel could severely and negatively impact our operations.We have employment agreements with most of our key management personnel, but some of these people are employed “at-will,” andany of them may elect to pursue other opportunities at any time. We have no present intention of obtaining key man life insurance onany of our executive officers or key management personnel.We may need to attract, train and retain additional highly qualified senior executives and technical and managerial personnelin the future.In the future, we may need to seek additional senior executives, as well as technical and managerial staff members. There isa high demand for highly trained executive, technical and managerial personnel in our industry. We do not know whether we will beable to attract, train and retain highly qualified technical and managerial personnel in the future, which could have a material adverseeffect on our business, financial condition and results of operations.If we are unable to effectively promote our brands and establish a competitive position in the marketplace, our business may fail.Our Fibrocell Therapy brand names are new and unproven. We believe that the importance of brand recognition willincrease over time. In order to gain brand recognition, we may increase our marketing and advertising budgets to create and maintainbrand loyalty. We do not know whether these efforts will lead to greater brand recognition. If we are unable to effectively promoteour brands, including our Agera product line, and establish competitive positions in the marketplace, our business results will bematerially adversely affected.If we are unable to adequately protect our intellectual property and proprietary technology, the value of our technology andfuture products will be adversely affected, and if we are unable to enforce our intellectual property against unauthorized use bythird parties our business may be materially harmed.Our long-term success largely depends on our future ability to market technologically competitive products. Our ability toachieve commercial success will depend in part on obtaining and maintaining patent protection and trade secret protection of ourtechnology and future products, as well as successfully defending these patents against third party challenges. In order to do so wemust: • obtain and protect commercially valuable patents or the rights to patents both domestically and abroad; • operate without infringing upon the proprietary rights of others; and • prevent others from successfully challenging or infringing our proprietary rights. 27Table of ContentsAs of December 31, 2010, we had 10 issued U.S. patents, 3 pending U.S. patent applications, 30 granted foreign patentsand no pending international patent application. However, we may not be able to obtain additional patents relating to ourtechnology or otherwise protect our proprietary rights. If we fail to obtain or maintain patents from our pending and futureapplications, we may not be able to prevent third parties from using our proprietary technology. We will be able to protect ourproprietary rights from unauthorized use only to the extent that these rights are covered by valid and enforceable patents that wecontrol or are effectively maintained by us as trade secrets. Furthermore, the degree of future protection of our proprietary rights isuncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep acompetitive advantage.The patent situation of companies in the markets in which we compete is highly uncertain and involves complex legal andfactual questions for which important legal principles remain unresolved. No consistent policy regarding the breadth of claimsallowed in such companies’ patents has emerged to date in the United States. The laws of other countries do not protect intellectualproperty rights to the same extent as the laws of the United States, and many companies have encountered significant problems inprotecting and defending such rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developingcountries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating tobiotechnology and/or pharmaceuticals, which could make it difficult for us to stop the infringement of our patents in foreigncountries in which we hold patents. Proceedings to enforce our patent rights in the United States or in foreign jurisdictions wouldlikely result in substantial cost and divert our efforts and attention from other aspects of our business. Changes in either the patentlaws or in interpretations of patent laws in the United States or other countries may diminish the value of our intellectual property.Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or in third-party patents.Other risks and uncertainties that we face with respect to our patents and other proprietary rights include the following: • the inventors of the inventions covered by each of our pending patent applications might not have been the first to makesuch inventions; • we might not have been the first to file patent applications for these inventions or similar technology; • the future and pending applications we will file or have filed, or to which we will or do have exclusive rights, may notresult in issued patents or may take longer than we expect to result in issued patents; • the claims of any patents that are issued may not provide meaningful protection; • our issued patents may not provide a basis for commercially viable products or may not be valid or enforceable; • we might not be able to develop additional proprietary technologies that are patentable; • the patents licensed or issued to us may not provide a competitive advantage; • patents issued to other companies, universities or research institutions may harm our ability to do business; • other individual companies, universities or research institutions may independently develop or have developed similar oralternative technologies or duplicate our technologies and commercialize discoveries that we attempt to patent; • other companies, universities or research institutions may design around technologies we have licensed, patented ordeveloped; and • many of our patent claims are method, rather than composition of matter, claims; generally composition of matter claimsare easier to enforce and are more difficult to circumvent. 28Table of ContentsOur business may be harmed and we may incur substantial costs as a result of litigation or other proceedings relating to patentand other intellectual property rights.A third party may assert that we, one of our subsidiaries or one of our strategic collaborators has infringed his, her or itspatents and proprietary rights or challenge the validity or enforceability of our patents and proprietary rights. Likewise, we may needto resort to litigation to enforce our patent rights or to determine the scope and validity of a third party’s proprietary rights.We cannot be sure that other parties have not filed for or obtained relevant patents that could affect our ability to obtainpatents or operate our business. Even if we have previously filed patent applications or obtain issued patents, others may file theirown patent applications for our inventions and technology, or improvements to our inventions and technology. We have becomeaware of published patent applications filed after the issuance of our patents that, should the owners pursue and obtain patent claimsto our inventions and technology could require us to challenge such patent claims. Others may challenge our patent or otherintellectual property rights or sue us for infringement. In all such cases, we may commence legal proceedings to resolve our patent orother intellectual property disputes or defend against charges of infringement or misappropriation. An adverse determination in anylitigation or administrative proceeding to which we may become a party could subject us to significant liabilities, result in ourpatents being deemed invalid, unenforceable or revoked, or drawn into an interference, require us to license disputed rights fromothers, if available, or to cease using the disputed technology. In addition, our involvement in any of these proceedings may cause usto incur substantial costs and result in diversion of management and technical personnel. Furthermore, parties making claims againstus may be able to obtain injunctive or other equitable relief that could effectively block our ability to develop, commercialize andsell products, and could result in the award of substantial damages against us.The outcome of these proceedings is uncertain and could significantly harm our business. If we do not prevail in this typeof litigation, we or our strategic collaborators may be required to: • pay monetary damages; • expend time and funding to redesign our Fibrocell Therapy so that it does not infringe others’ patents while still allowingus to compete in the market with a substantially similar product; • obtain a license, if possible, in order to continue manufacturing or marketing the affected products or services, and paylicense fees and royalties, which may be non-exclusive. This license may be non-exclusive, giving our competitors accessto the same intellectual property, or the patent owner may require that we grant a cross-license to our patented technology;or • stop research and commercial activities relating to the affected products or services if a license is not available onacceptable terms, if at all.Any of these events could materially adversely affect our business strategy and the value of our business.In addition, the defense and prosecution of intellectual property suits, interferences, oppositions and related legal andadministrative proceedings in the United States and elsewhere, even if resolved in our favor, could be expensive and time consumingand could divert financial and managerial resources. Some of our competitors may be able to sustain the costs of complex patentlitigation more effectively than we can because they have substantially greater financial resources. 29Table of ContentsIf we are unable to keep up with rapid technological changes, our future products may become obsolete or unmarketable.Our industry 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 future products obsolete.If we cannot compete effectively in the marketplace, our potential for profitability and financial position will suffer.We have not declared any dividends on our common stock to date, and we have no intention of declaring dividends in theforeseeable future.The decision to pay cash dividends on our common stock rests with our Board of Directors and will depend on ourearnings, unencumbered cash, capital requirements and financial condition. We do not anticipate declaring any dividends in theforeseeable future, as we intend to use any excess cash to fund our operations. Investors in our common stock should not expect toreceive dividend income on their investment, and investors will be dependent on the appreciation of our common stock to earn areturn on their investment.Provisions in our charter documents could prevent or delay stockholders’ attempts to replace or remove current management.Our charter documents provide for staggered terms for the members of our Board of Directors. Our Board of Directors isdivided into three staggered classes, and each director serves a term of three years. At stockholders’ meetings, only those directorscomprising one of the three classes will have completed their term and be subject to re-election or replacement.In addition, our Board of Directors is authorized to issue “blank check” preferred stock, with designations, rights andpreferences as they may determine. Accordingly, our Board of Directors has in the past and may in the future, without stockholderapproval, issue shares of preferred stock with dividend, liquidation, conversion, voting or other rights that could adversely affect thevoting power or other rights of the holders of our common stock. This type of preferred stock could also be issued to discourage,delay or prevent a change in our control.The use of a staggered Board of Directors, the ability to issue “blank check” preferred stock, and the adoption ofstockholder rights plans are traditional anti-takeover measures. These provisions in our charter documents make it difficult for amajority stockholder to gain control of the Board of Directors and of our company. These provisions may be beneficial to ourmanagement and our Board of Directors in a hostile tender offer and may have an adverse impact on stockholders who may want toparticipate in such a tender offer, or who may want to replace some or all of the members of our Board of Directors.Provisions in our bylaws provide for indemnification of officers and directors, which could require us to direct funds away fromour business and future products.Our bylaws provide for the indemnification of our officers and directors. We have in the past and may in the future berequired to advance costs incurred by an officer or director and to pay judgments, fines and expenses incurred by an officer ordirector, including reasonable attorneys’ fees, as a result of actions or proceedings in which our officers and directors are involved byreason of being or having been an officer or director of our company. Funds paid in satisfaction of judgments, fines and expenses maybe funds we need for the operation of our business and the development of our product candidates, thereby affecting our ability toattain profitability.Future sales of our common stock may depress our stock price.The market price of our common stock could decline as a result of sales of substantial amounts of our common stock in thepublic market, or as a result of the perception that these sales could occur, which could occur if we issue a large number of shares ofcommon stock (or securities convertible into our common stock) in connection with a future financing, as our common stock istrading at low levels. These factors could make it more difficult for us to raise funds through future offerings of common stock orother equity securities. As of March 24, 2011, there were 24,469,099 shares of common stock issued and outstanding. All of ouroutstanding shares are freely transferable without restriction or further registration under the Securities Act. In addition to ourcommon stock outstanding, as of such date, we had preferred stock outstanding that was convertible into a total of 26,806,000 sharesof common stock and warrants outstanding that were exercisable for a total of 33,701,250 shares of common stock. 30Table of ContentsThere is a limited, volatile and sporadic public trading market for our common stock.There is a limited, volatile and sporadic public trading market for our common stock. Without an active trading market,there can be no assurance of any liquidity or resale value of our common stock, and stockholders may be required to hold shares ofour common stock for an indefinite period of time.Lack of effectiveness of internal controls over financial reporting could adversely affect the value of our securities.As directed by Section 404 of the Sarbanes-Oxley Act, the SEC adopted rules requiring public companies to include areport of management on the company’s internal control over financial reporting in their annual reports on Form 10-K that containsan assessment by management of the effectiveness of the company’s internal control over financial reporting. Ineffective internalcontrols over our financial reporting have occurred in the past and may arise in the future. As a consequence, our investors could loseconfidence in the reliability of our financial statements, which could result in a decrease in the value of our securities.SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSThis report, including the documents we incorporate by reference, contains certain “forward-looking statements” withinthe meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, asamended, as well as information relating to Fibrocell that is based on management’s exercise of business judgment and assumptionsmade by and information currently available to management. When used in this document and other documents, releases and reportsreleased by us, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “the facts suggest” and words of similar import, areintended to identify any forward-looking statements. You should not place undue reliance on these forward-looking statements.These statements reflect our current view of future events and are subject to certain risks and uncertainties as noted below. Shouldone or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, our actual results coulddiffer materially from those anticipated in these forward-looking statements. Actual events, transactions and results may materiallydiffer from the anticipated events, transactions or results described in such statements. Although we believe that our expectations arebased on reasonable assumptions, we can give no assurance that our expectations will materialize. Many factors could cause actualresults to differ materially from our forward looking statements. Several of these factors include, without limitation: • our ability to finance our business and continue in operations; • whether the results of our full Phase III pivotal study and our BLA filing will result in approval of our productcandidate, and whether any approval will occur on a timely basis; • our ability to meet requisite regulations or receive regulatory approvals in the United States, Europe, Asia and theAmericas, and our ability to retain any regulatory approvals that we may obtain; and the absence of adverseregulatory developments in the United States, Europe, Asia and the Americas or any other country where we plan toconduct commercial operations; • whether our clinical human trials relating to the use of autologous cellular therapy applications, and such otherindications as we may identify and pursue can be conducted within the timeframe that we expect, whether such trialswill yield positive results, or whether additional applications for the commercialization of autologous cellulartherapy can be identified by us and advanced into human clinical trials; • our ability to develop autologous cellular therapies that have specific applications in cosmetic dermatology, and ourability to explore (and possibly develop) applications for periodontal disease, reconstructive dentistry, treatment ofrestrictive scars and burns and other health-related markets; 31Table of Contents • our ability to decrease our manufacturing costs for our Fibrocell Therapy product candidates through theimprovement of our manufacturing process, and our ability to validate any such improvements with the relevantregulatory agencies; • our ability to reduce our need for fetal bovine calf serum by improved use of less expensive media combinations anddifferent media alternatives; • continued availability of supplies at satisfactory prices; • new entrance of competitive products or further penetration of existing products in our markets; • the effect on us from adverse publicity related to our products or the company itself; • any adverse claims relating to our intellectual property; • the adoption of new, or changes in, accounting principles; • our issuance of certain rights to our shareholders that may have anti-takeover effects; • our dependence on physicians to correctly follow our established protocols for the safe administration of ourFibrocell Therapy; and • other risks referenced from time to time elsewhere in this prospectus and in our filings with the SEC.These factors are not necessarily all of the important factors that could cause actual results of operations to differ materiallyfrom those expressed in these forward-looking statements. Other unknown or unpredictable factors also could have material adverseeffects on our future results. We undertake no obligation and do not intend to update, revise or otherwise publicly release anyrevisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence ofany unanticipated events. We cannot assure you that projected results will be achieved.Item 1B. Unresolved Staff CommentsNone.Item 2. PropertiesOur corporate headquarters and manufacturing operations are located in one location, Exton, Pennsylvania. The Exton,Pennsylvania location is leased and consists of approximately 86,500 square feet. The lease is noncancelable through March 31,2013.Item 3. Legal ProceedingsNone.Item 4. (Removed and Reserved)Reserved. 32Table of ContentsPart IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket InformationOn October 21, 2009, our common stock became available for trading OTCBB under the symbol “FCSC.” Currently, thereis only a limited, sporadic and volatile market for our stock on the OTCBB. The table below presents the high and low bid price forour common stock each quarter during the past two years and reflects inter-dealer prices, without retail markup, markdown, orcommission, and may not represent actual transactions. Quarter Ended High Low December 31, 2009 (from October 21, 2009) $2.40 $0.50 March 31, 2010 $1.13 $0.80 June 30, 2010 $1.04 $0.65 September 30, 2010 $0.85 $0.53 December 31, 2010 $0.60 $0.40 The closing price of our common stock on March 24, 2011 was $0.77.The common stock of our predecessor company, Isolagen, Inc., traded on the NYSE Amex under the symbol “ILE.” Thecommon stock ceased trading on the NYSE Amex on May 6, 2009 and in June 2009 the NYSE Amex delisted the common stock fromlisting on the NYSE Amex. Upon the effective date of our bankruptcy plan, the outstanding common stock of Isolagen was cancelled.Consequently, the stockholders of Isolagen prior to the effective date of the bankruptcy plan no longer have any interest asstockholders of Fibrocell by virtue of their ownership of Isolagen’s common stock prior to the emergence from bankruptcy.HoldersAs of March 24, 2011, there were 24,469,099 shares of our common stock outstanding and held by 227 stockholders ofrecord. As of March 24, 2011, there were 3,250 shares issued and 2,886 shares outstanding for Series A preferred stock, 4,640 sharesissued and 2,738 shares outstanding for Series B preferred stock and 7,779 shares Series D preferred stock issued and outstanding.DividendsWe have never paid any cash dividends on our common stock and our board of directors does not intend to do so in theforeseeable future. The declaration and payment of dividends in the future, of which there can be no assurance, will be determined bythe board of directors in light of conditions then existing, including earnings, financial condition, capital requirements and otherfactors.Holders of the Series A, Series B and Series D Preferred Stock are entitled to receive cumulative dividends at the rate pershare (as a percentage of the stated value per share) of 6% per annum (subject to increase in certain circumstances), payable quarterlyin arrears on January 15, April 15, July 15 and October 15, beginning on April 15, 2010, January 15, 2011 and July 15, 2011,respectively. The dividends are payable in cash, or at our option, in duly authorized, validly issued, fully paid and non-assessableshares of common stock equal to 110% of the cash dividend amount payable on the dividend payment date, or a combinationthereof; provided that we may not pay the dividends in shares of common stock unless we meet certain conditions described in theCertificate of Designation, including that the resale of the shares has been registered under the Securities Act. If we pay the dividendin shares of common stock, the common stock will be valued for such purpose at 80% of the average of the volume weighted averageprice for the 10 consecutive trading days ending on the trading day that is immediately prior to the dividend payment date. Cashpayments for Series A dividends were approximately $0.1 million for both 2010 and the first quarter 2011. No dividend cashpayments have been made for the Series B or Series D as of March 24, 2011. 33Table of ContentsPenny StockThe SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Our stockis currently a “penny stock.” Penny stocks are generally equity securities with a price of less than $5.00, other than securitiesregistered on certain national securities exchanges. The penny stock rules require a broker-dealer, prior to a transaction in a pennystock not otherwise exempt from those rules, deliver a standardized risk disclosure document prepared by the SEC, which:(a) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondarytrading; (b) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to thecustomer with respect to a violation to such duties or other requirements of securities’ laws; (c) contains a brief, clear, narrativedescription of a dealer market, including bid and ask prices for penny stocks and significance of the spread between the bid and askprice; (d) contains a toll-free telephone number for inquiries on disciplinary actions; (e) defines significant terms in the disclosuredocument or in the conduct of trading in penny stocks; and (f) contains such other information and is in such form as the SEC shallrequire by rule or regulation. The broker-dealer also must provide to the customer, prior to effecting any transaction in a penny stock,(a) bid and offer quotations for the penny stock; (b) the compensation of the broker-dealer and its salesperson in the transaction;(c) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidityof the market for such stock; and (d) monthly account statements showing the market value of each penny stock held in thecustomer’s account. In addition, the penny stock rules require that prior to a transaction in a penny stock not otherwise exempt fromthose rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for thepurchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement totransactions involving penny stocks, and a signed and dated copy of a written suitably statement.These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock ifit becomes subject to these penny stock rules.Recent Sales of Unregistered SecuritiesAll information regarding the financings we completed during 2010 have been previously disclosed in current reports wehave filed on Form 8-K.Purchases of Equity Securities.We did not repurchase any of our equity securities during the twelve months ended 2010.Item 6. Selected Financial DataWe are a smaller reporting company, and are not required to report this information.Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsGeneralWe are an aesthetic and therapeutic development stage biotechnology company focused on developing novel skin andtissue rejuvenation products. Our clinical development product candidates are designed to improve the appearance of skin injured bythe effects of aging, sun exposure, acne and burn scars with a patient’s own, or autologous, fibroblast cells produced by ourproprietary Fibrocell Process. Our clinical development programs encompass both aesthetic and therapeutic indications. Our mostadvanced indication utilizing the Fibrocell Therapy is for the treatment of nasolabial folds/wrinkles, which completed Phase IIIclinical studies and the related Biologics License Application (“BLA”) was accepted for filing by the Food and Drug Administration(“FDA”) during May 2009. On October 9, 2009 the FDA Cellular, Tissue and Gene Therapies Advisory Committee reviewed ournasolabial folds/wrinkles product candidate. The Committee voted 11 “yes” to 3 “no” that the data presented on our productdemonstrated efficacy, and 6 “yes” to 8 “no” that the data demonstrated safety; both for the proposed indication of treatment ofnasolabial folds/wrinkles. The committee’s recommendations are not binding on the FDA, but the FDA will consider theirrecommendations during their review of our application. The United States Adopted Names (“USAN”) Council adopted the USANname, azficel-T, for our product on October 28, 2009, and the FDA is currently evaluating a proposed brand name, laViv®. OnDecember 21, 2009, Fibrocell Science received a Complete Response letter from the FDA related to the BLA for azficel-T. AComplete Response letter is issued by the FDA’s Center for Biologics Evaluation and Research (CBER) when the review of a file iscompleted and additional data are needed prior to approval. The Complete Response letter requested that Fibrocell Science 34Table of Contentsprovide data from a histopathological study on biopsied tissue samples from patients following injection of azficel-T. The letter alsorequested finalized Chemistry, Manufacturing and Controls (CMC) information regarding the manufacture of azficel-T as follow-upto discussions that occurred during the BLA review period, as well as revised policies and procedures regarding shipping practices,and proposed labeling. The Company announced on December 20, 2010, that it had submitted its complete response to the CompleteResponse (CR) letter issued by the FDA regarding the Company’s BLA for azficel-T. On January 22, 2011, the FDA accepted forreview the Company’s complete response submission for azficel-T. Even though the FDA has accepted the Company’s response forcomplete evaluation, there is no assurance that it will approve our product. The FDA, under the Prescription Drug User Fee Act(PDUFA), has a target six months review window to completely evaluate the Company’s response upon acceptance of the response.The PDUFA date is June 22, 2011. The Company announced on March 16, 2011, that it had submitted a final study report to the FDAfor the completed, six-month histological study examining skin after injections of azficel-T.During 2009 we completed a Phase II/III study for the treatment of acne scars. During 2008 we completed our open-labelPhase II study related to full face rejuvenation.We also develop and market an advanced skin care product line through our Agera subsidiary, in which we acquired a 57%interest in August 2006.Exit from BankruptcyOn August 27, 2009, the United States Bankruptcy Court for the District of Delaware in Wilmington entered an order, orConfirmation Order, confirming the Joint First Amended Plan of Reorganization dated July 30, 2009, as supplemented by the PlanSupplement dated August 21, 2009, or the Plan, of Isolagen, Inc. and Isolagen’s wholly owned subsidiary, Isolagen Technologies,Inc. The effective date of the Plan was September 3, 2009. Isolagen, Inc. and Isolagen Technologies, Inc. were subsequently renamedFibrocell Science, Inc. and Fibrocell Technologies, Inc., respectively. Fibrocell now operates outside of the restraints of thebankruptcy process, free of the debts and liabilities discharged by the Plan.Going ConcernThe Successor Company emerged from Bankruptcy in September 2009 and continues to operate as a going concern. AtDecember 31, 2010, the Successor Company had cash and cash equivalents of approximately $0.9 million and negative workingcapital of less than $0.1 million. The Successor Company has also raised approximately $6.1 million less fees as the result of theissuance of Preferred Stock Series D and warrants in the period from January 1, 2011 through March 1, 2011. We received$0.2 million in subscription receivables from a July financing in mid-March 2011.As of March 24, 2011, the Company had cash and cash equivalents of approximately $3.4 million and current liabilities ofapproximately $0.6 million. The Company’s current monthly cash run-rate is approximately $1.0 million. The Company is alsoplanning to purchase manufacturing equipment and incur marketing expenditures within the next three months to prepare theCompany for launch post a possible FDA approval. Thus, the Successor Company will need to access the capital markets in the nearfuture in order to fund future operations. There is no guarantee that any such required financing will be available on termssatisfactory to the Successor Company or available at all. These matters create uncertainty relating to its ability to continue as agoing concern. The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability andclassification of assets or liabilities that might result from the outcome of these uncertainties.Further, if the Successor Company raises additional cash resources in the near future, it may be raised in contemplation ofor in connection with bankruptcy. In the event of a bankruptcy, it is likely that its common stock and common stock equivalents willbecome worthless and our creditors will receive significantly less than what is owed to them.Through December 31, 2010, the Successor Company has been primarily engaged in developing its initial producttechnology. In the course of its development activities, the Company has sustained losses and expects such losses to continuethrough at least 2011. During the year ended December 31, 2010, the Successor Company financed its operations primarily throughits existing cash, but as discussed above it now requires additional financing. There is substantial doubt about the SuccessorCompany’s ability to continue as a going concern. 35Table of ContentsThe Successor Company’s ability to complete additional offerings is dependent on the state of the debt and/or equitymarkets at the time of any proposed offering, and such market’s reception of the Successor Company and the offering terms. TheSuccessor Company’s ability to complete an offering is also dependent on the status of its FDA regulatory milestones and its clinicaltrials, and in particular, the status of its indication for the treatment of nasolabial folds/wrinkles and the potential approval of therelated BLA, which cannot be predicted. There is no assurance that capital in any form would be available to the Company, and ifavailable, on terms and conditions that are acceptable.As a result of the conditions discussed above, and in accordance with GAAP, there exists substantial doubt about theSuccessor Company’s ability to continue as a going concern, and its ability to continue as a going concern is contingent, amongother things, upon its ability to secure additional adequate financing or capital in the near future. If the Successor Company does notobtain additional funding, or does not anticipate additional funding, in the near future, it will likely enter into bankruptcy and/orcease operations. Further, if it does raise additional cash resources in the near future, it may be raised in contemplation of or inconnection with bankruptcy. If the Successor Company enters into bankruptcy, it is likely that its common stock and common stockequivalents will become worthless and its creditors, including preferred stock, will receive significantly less than what is owed tothem.Critical Accounting PoliciesThe following discussion and analysis of financial condition and results of operations are based upon our consolidatedfinancial statements, which have been prepared in conformity with accounting principles generally accepted in the United States ofAmerica. However, certain accounting policies and estimates are particularly important to the understanding of our financial positionand results of operations and require the application of significant judgment by our management or can be materially affected bychanges from period to period in economic factors or conditions that are outside of the control of management. As a result they aresubject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine theappropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations,our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry,information provided by our customers and information available from other outside sources, as appropriate. The following discussesour critical accounting policies and estimates.Intangible assets: Intangible assets are research and development assets related to the Successor Company’s primary studythat was recognized upon emergence from bankruptcy (see Note 5). Intangibles are tested for recoverability whenever events orchanges in circumstances indicate the carrying amount may not be recoverable. An impairment loss, if any, would be measured as theexcess of the carrying value over the fair value determined by discounted cash flows.Income taxes: An asset and liability approach is used for financial accounting and reporting for income taxes. Deferredincome taxes arise from temporary differences between income tax and financial reporting and principally relate to recognition ofrevenue and expenses in different periods for financial and tax accounting purposes and are measured using currently enacted taxrates and laws. In addition, a deferred tax asset can be generated by net operating loss (“NOLs”) carryover. If it is more likely than notthat some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.Warrant Liability: We account for our warrants in accordance with U.S. GAAP. The warrants are measured at fair value andliability-classified under ASC 815, Derivatives and Hedging, (“ASC 815”) because the warrants contain “down-round protection”and therefore, do not meet the scope exception for treatment as a derivative under ASC 815. Since “down-round protection” is not aninput into the calculation of the fair value of the warrants, the warrants cannot be considered indexed to the Company’s own stockwhich is a requirement for the scope exception as outlined under ASC 815. The fair value of the warrants is determined using theBlack-Scholes option pricing model and is affected by changes in inputs to that model including our stock price, expected stockprice volatility, the contractual term, and the risk-free interest rate. We will continue to classify the fair value of the warrants as aliability until the warrants are exercised, expire or are amended in a way that would no longer require these warrants to be classifiedas a liability. 36Table of ContentsPreferred Stock and Derivative Liability: The preferred stock has been classified within the mezzanine section betweenliabilities and equity in its consolidated balance sheets in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC480”) because any holder of Series A, B or D Preferred may require the Successor Company to redeem all of its Series A, B or DPreferred in the event of a triggering event which is outside of the control of the Successor Company.The embedded conversion option for the Series A Preferred, Series B Preferred and Series D Preferred has been recorded as aderivative liability under ASC 815 in the Successor’s consolidated balance sheet as of December 31, 2010 and will be re-measured onthe Successor Company’s reporting dates. The fair value of the derivative liability is determined using the Black-Scholes optionpricing model and is affected by changes in inputs to that model including our stock price, expected stock price volatility, thecontractual term, and the risk-free interest rate. The Successor Company will continue to classify the fair value of the embeddedconversion option as a liability until the preferred stock is converted into common stock.Stock-Based Compensation: We account for stock-based awards to employees and non-employees using the fair valuebased method to determine compensation for all arrangements where shares of stock or equity instruments are issued forcompensation. We use a Black-Scholes options-pricing model to determine the fair value of each option grant as of the date of grantfor expense incurred. The Black-Scholes model requires inputs for risk-free interest rate, dividend yield, volatility and expected livesof the options. Expected volatility is based on historical volatility of our competitor’s stock since the Predecessor Company ceasedtrading as part of the bankruptcy and emerged as a new entity. The risk-free rate for periods within the contractual life of the option isbased on the U.S. Treasury yield curve in effect at the time of the grant. The expected lives for options granted represents the periodof time that options granted are expected to be outstanding and is derived from the contractual terms of the options granted. Weestimate future forfeitures of options based upon expected forfeiture rates.Research and Development Expenses: Research and development costs are expensed as incurred and include salaries andbenefits, costs paid to third-party contractors to perform research, conduct clinical trials, develop and manufacture drug materials anddelivery devices, and a portion of facilities cost. Clinical trial costs are a significant component of research and developmentexpenses and include costs associated with third-party contractors. Invoicing from third-party contractors for services performed canlag several months. We accrue the costs of services rendered in connection with third-party contractor activities based on our estimateof management fees, site management and monitoring costs and data management costs. Actual clinical trial costs may differ fromestimated clinical trial costs and are adjusted for in the period in which they become known.Emergence from Voluntary Reorganization Under Chapter 11 Proceedings and Reorganization PlanFibrocell emerged from Chapter 11 on September 3, 2009. See Note 2 in the accompanying Consolidated FinancialStatements.Basis of PresentationAs of September 1, 2009, the Successor Company adopted fresh-start accounting in accordance with ASC 852-10,Reorganizations. The Successor Company selected September 1, 2009, as the date to effectively apply fresh-start accounting basedon the absence of any material contingencies at the August 27, 2009 confirmation hearing and the immaterial impact of transactionsbetween August 27, 2009 and September 1, 2009. The adoption of fresh-start accounting resulted in the Successor Companybecoming a new entity for financial reporting purposes.Accordingly, the financial statements prior to September 1, 2009 are not comparable with the financial statements forperiods on or after September 1, 2009. References to “Successor” or “Successor Company” refer to the Company on or afterSeptember 1, 2009, after giving effect to the cancellation of Isolagen, Inc. common stock issued prior to the Effective Date, theissuance of new Fibrocell Science, Inc. common stock in accordance with the Plan, and the application of fresh-start accounting.References to “Predecessor” or “Predecessor Company” refer to the Company prior to September 1, 2009. See Note 5 — “Fresh StartAccounting” in the notes to these Consolidated Financial Statements for further details. 37Table of ContentsFor discussions on the results of operations, the Successor Company has combined the results of operations for the eightmonths ended August 31, 2009, with the results of operations for the four months ended December 31, 2009. The combined periodshave been compared to the year-ended December 31, 2010. The Successor Company believes that the combined financial resultsprovide management and investors a more meaningful analysis of the Company’s performance and trends for comparative purposes.The following discussion should be read in conjunction with the Consolidated Financial Statements and theaccompanying Notes to the Consolidated Financial Statements in Part 1, Item 1 of this report.Results of Operations—Comparison of Years Ending December 31, 2010 and 2009REVENUES. Revenue remained constant at $0.9 million for the year ended December 31, 2010 and for the year endedDecember 31, 2009. Our revenue from continuing operations is from the operations of Agera which we acquired on August 10, 2006.Agera markets and sells a complete line of advanced skin care systems based on a wide array of proprietary formulations, trademarksand non-peptide technology.COST OF SALES. Costs of sales decreased $0.1 million to $0.5 million for the year ended December 31, 2010 as comparedto $0.6 million for the year ended December 31, 2009. Our cost of sales relates to the operation of Agera. As a percentage of revenue,Agera cost of sales were approximately 55% for the year ended December 31, 2010 and 70% for the year ended December 31, 2009.Cost of sales as a percentage of revenue in 2010 has decreased as compared to 2009 primarily due to the recording of a reserve forslow moving and obsolete inventory in 2009.SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased byapproximately $0.4 million, or 6%, to $6.5 million for the year ended December 31, 2010 as compared to $6.1 million for the yearended December 31, 2009. The increase primarily relates to a $0.3 million increase related to general and administrative expensesassociated with consultants for financing and marketing as well as office expenses, $0.3 million increase related to legal expenses,$0.1 million increase in marketing, offset by a $0.3 million decrease in payroll related expenses. Legal expenses for the year endedDecember 31, 2009 were $0.2 million due to a $0.3 million reimbursement received from our insurance carrier related to defense costsassociated with our class action and derivative matters. Had we not received this reimbursement, legal expenses would have been$0.5 million for both years ended December 31, 2010 and December 31, 2009.RESEARCH AND DEVELOPMENT. Research and development expenses increased by approximately $1.6 million, or40%, to $5.5 million for the year ended December 31, 2010 as compared to $3.9 million for the year ended December 31, 2009. Theincrease primarily relates to a $0.7 million increase in payroll related expenses, $0.5 million increase in consulting fees and$0.2 million increase in laboratory costs associated with clinical and manufacturing activities in our Exton, Pennsylvania location.Research and development costs are composed primarily of costs related to our efforts to gain FDA approval for our FibrocellTherapy for specific dermal applications in the United States, as well as costs related to other potential indications for our FibrocellTherapy, such as acne scars and burn scars. Also, research and development expense includes costs to develop manufacturing, cellcollection and logistical process improvements. Research and development costs primarily include personnel and laboratory costsrelated to these FDA trials and certain consulting costs. The total inception (December 28, 1995) to date cost of research anddevelopment as of August 31, 2009 for the Predecessor Company was $56.3 million and total inception (September 1, 2009) to datecost of research and development as of December 31, 2010, for the Successor Company was $7.3 million.The FDA approval process is extremely complicated and is dependent upon our study protocols and the results of ourstudies. In the event that the FDA requires additional studies for our product candidate or requires changes in our study protocols orin the event that the results of the studies are not consistent with our expectations, the process will be more expensive and timeconsuming. Due to the complexities of the FDA approval process, we are unable to predict what the cost of obtaining approval for ourdermal product candidate will be. 38Table of ContentsREORGANIZATION ITEMS, NET. On June 15, 2009, Isolagen, Inc. and its wholly-owned, U.S. subsidiary IsolagenTechnologies, Inc., filed voluntary petitions for relief under Chapter 11 of the federal bankruptcy laws in the United StatesBankruptcy Court for the District of Delaware, as more fully discussed under Bankruptcy, Debt and Going Concern. A reorganizationgain, net of reorganization costs, of less than $0.1 million and $73.5 million was recorded for the year ended December 31, 2010 andDecember 31, 2009, respectively, which was comprised primarily of legal fees and the unamortized debt acquisition costs, and gainof discharge of liabilities.OTHER INCOME, NET. In November 2010, we received one grant totaling $0.2 million under the Qualified TherapeuticDiscovery Project Grants Program. The Qualified Therapeutic Discovery Project Grants Program was included in the healthcarereform legislation, and established a one-time pool of $1 billion for grants to small biotechnology companies developing noveltherapeutics which show potential to: (a) result in new therapies that either treat areas of unmet medical need, or prevent, detect, ortreat chronic or acute diseases and conditions; (b) reduce long-term health care costs in the United States; or (c) significantly advancethe goal of curing cancer within a the 30-year period. There are no matching funding requirements or other requirements necessary toreceive the funding.INTEREST EXPENSE. Interest expense decreased $1.4 million to $1.1 million for the year ended December 31, 2010, ascompared to $2.5 million for the year ended December 31, 2009. Our interest expense for the year ended December 31, 2010 isrelated to the 12.5% notes we issued in connection with our bankruptcy plan. We have been accreting the interest to principal at therate of 15%. Our interest expense for the year ended December 31, 2009 is related to our $90.0 million, 3.5% convertiblesubordinated notes, as well as the related amortization of deferred debt issuance costs of $0.1 million and interest expense related tothe secured bridge loan and DIP financing until the emergence out of bankruptcy. With the emergence out of bankruptcy, the 3.5%convertible subordinated notes were exchanged for $6.0 million of debt and 3,960,000 shares of the new common stock. There is alsointerest expense related to the 12.5% notes for the year end December 31, 2009.NONCONTROLLING INTEREST. The noncontrolling interest income was approximately $0.1 million for the year endedDecember 31, 2010, as compared to noncontrolling interest income of $0.2 million for the year ended December 31, 2009. Thedecrease in noncontrolling interest income of $0.1 million is due to Agera’s decrease in net income in 2010 as compared to 2009.NET INCOME/(LOSS). Net loss, excluding reorganization items, was relatively constant at $12.9 million for the yearended December 31, 2010 as compared to a net loss of $12.8 million for the year ended December 31, 2009. Net income of$60.7 million for the year ended December 31, 2009, included reorganization items of $73.5 million as a result of the emergence outof bankruptcy and discharge of debt and unsecured liabilities.Liquidity and Capital ResourcesNet cash provided by (used in) operating, investing and financing activities for the two years ended December 31, 2010and 2009 were as follows: Year Ended December 31, 2010 2009 (in millions) Cash flows from operating activities $(9.3) $(9.0)Cash flows from investing activities — — Cash flows from financing activities 8.8 7.5 OPERATING ACTIVITIES. Cash used in operating activities during the year ended December 31, 2010 amounted to$9.3 million, an increase of $0.3 million over the year ended December 31, 2009. The increase in our cash used in operating activitiesover the prior year is primarily due to an increase in net losses (adjusted for non-cash items) of $0.7 million, offset by operating cashinflows from changes in operating assets and liabilities. The change in operating assets and liabilities is primarily due to a largeincrease in accounts payable at December 31, 2010 as compared to December 31, 2009. 39Table of ContentsOur negative operating cash flows in 2010 were funded from cash on hand at December 31, 2009, which were primarily theresult of previously completed debt and equity offerings, as well as funds received for the issuance of preferred stock and commonstock in 2010.INVESTING ACTIVITIES. Minimal or no cash was used in investing activities during the year ended December 31, 2010and during the year ended December 31, 2009.FINANCING ACTIVITIES. There were $8.8 million cash proceeds from financing activities during the year endedDecember 31, 2010, as compared to $7.5 million received from financing activities during the year ended December 31, 2009. During2010, we raised cash from the issuance of preferred stock, common stock and warrants.Working CapitalAs of December 31, 2010, we had cash and cash equivalents of $0.9 million and negative working capital of less than$0.1 million. The Successor Company has raised approximately $6.1 million less fees as the result of the issuance of Series DPreferred Stock and warrants in the period from January 1, 2011 through March 1, 2011. As of March 24, 2011, the Company hadcash and cash equivalents of approximately $3.4 million and current liabilities of approximately $0.6 million. The Company’scurrent monthly cash run-rate is approximately $1.0 million. The Company is also planning to purchase manufacturing equipmentand incur marketing expenditures within the next three months to prepare the Company for launch post a possible FDA approval.Thus, the Successor Company will need to access the capital markets in the near future in order to fund future operations. There is noguarantee that any such required financing will be available on terms satisfactory to the Successor Company or available at all. Thesematters create uncertainty relating to its ability to continue as a going concern. The accompanying consolidated financial statementsdo not reflect any adjustments relating to the recoverability and classification of assets or liabilities that might result from theoutcome of these uncertainties.DebtThe Successor Company’s outstanding long-term debt at December 31, 2010 and December 31, 2009 consists of$7.3 million and $6 million, respectively, of 12.5% Unsecured Promissory Notes (“New Notes”). Unpaid interest has been accreted tothe principal at a rate of 15%. The New Notes have the following features: (1) 12.5% interest payable quarterly in cash or, at theSuccessor Company’s option, 15% payable in kind by capitalizing such unpaid amount and adding it to the principal as of the date itwas due; (2) maturing June 1, 2012; (3) at any time prior to the maturity date, the Successor Company may redeem any portion of theoutstanding principal of the New Notes in Cash at 125% of the stated face value of the New Notes. There is a mandatory redemptionfeature that requires the Successor Company to redeem all outstanding new notes if: (1) the Successor Company successfullycompletes a capital campaign raising in excess of $10 million; or (2) the Successor Company is acquired by, or sell a majority staketo, an outside party.Factors Affecting Our Capital ResourcesInflation did not have a significant impact on the Company’s results during the year ended December 31, 2010.Off-Balance Sheet TransactionsWe do not engage in material off-balance sheet transactions.Item 8. Financial Statements and Supplementary DataThe financial statements, including the notes thereto and report of the independent registered public accounting firmthereon are included in this report as set forth in the “Index to Financial Statements.” See F-1 for Index to Consolidated FinancialStatements.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.None. 40Table of ContentsItem 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur management, including our principal executive officer and principal financial officer, evaluated the disclosurecontrols and procedures related to the recording, processing, summarization and reporting of information in the periodic reports thatthe Company files with the SEC. These disclosure controls and procedures have been designed to ensure that (a) material informationrelating to the Company, including its consolidated subsidiaries, is made known to management, including these officers, by otheremployees of the Company, and (b) this information is recorded, processed, summarized, evaluated and reported, as applicable,within the time periods specified in the SEC’s rules and forms. As of December 31, 2010, the officers (the principal executive officerand principal financial officer) concluded that the Company’s disclosure controls and procedures were effective.Management’s Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as suchterm is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Under the supervision and with the participation of our management,including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of ourinternal control over financial reporting based on the framework in Internal Control — Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission.Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliabilityof financial reporting and the preparation of financial statements for external purposes in accordance with generally acceptedaccounting principles in the United States of America. Our internal control over financial reporting includes those policies andprocedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions anddispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expendituresof the company are being made only in accordance with authorizations of management and directors of the company; and(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate becauseof changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.Based on our evaluation under the framework in Internal Control — Integrated Framework, our management concludedthat our internal control over financial reporting was effective as of December 31, 2010. This annual report does not include anattestation report of our registered public accounting firm regarding internal control over financial reporting. As we are a smallerreporting company, management’s report is not subject to attestation by our registered public accounting firm pursuant to Section404(c) of the Sarbanes-Oxley Act of 2002 that permits us to provide only management’s report in this annual report.Changes in Internal ControlsThere was no change in our internal control over financial reporting that occurred during the fourth fiscal quarter that hasmaterially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 41Table of ContentsItem 9B. Other InformationOn January 28, 2011, we completed a private placement of securities in which we sold to certain accredited investors in theaggregate: (i) 1,414 shares of Series D Convertible Preferred Stock, with a par value of $0.001 per share and a stated value of $1,000per share (“Series D Preferred”), and (ii) warrants to purchase 2,828,000 shares of Company common stock (“Common Stock”) at anexercise price of $0.50 per share.The aggregate purchase price paid by the Purchasers for the Series D Preferred and the warrants was $1,414,000(representing $1,000 for each share of Series D Preferred together with warrants). We intend to use the proceeds for working capitalpurposes.The placement agents for the offering received cash compensation of $113,120 and warrants to purchase 226,240 shares ofCommon Stock at an exercise price of $0.50 per share.Part IIIItem 10. Directors, Executive Officers and Corporate GovernanceThe information required by this Item 10 will be included in the Company’s Proxy Statement for the 2011 Annual Meetingof Stockholders which will be filed with the Securities and Exchange Commission no later than May 2, 2011 and is incorporated intothis Item 10 by reference.Code of Ethics. We have adopted a written code of ethics that applies to our principal executive officer, principal financialofficer, principal accounting officer or controller and any persons performing similar functions. The code of ethics is on our websiteat www.fibrocellscience.com. We intend to disclose any future amendments to, or waivers from, the code of ethics within fourbusiness days of the waiver or amendment through a website posting or by filing a Current Report on Form 8-K with the SEC.Item 11. Executive CompensationThe information required by this Item 11 will be included in the Company’s Proxy Statement for the 2011 Annual Meetingof Stockholders which will be filed with the Securities and Exchange Commission no later than May 2, 2011 and is incorporated intothis Item 11 by reference.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item 12 will be included in the Company’s Proxy Statement for the 2011 Annual Meetingof Stockholders which will be filed with the Securities and Exchange Commission no later than May 2, 2011 and is incorporated intothis Item 12 by reference.Item 13. Certain Relationships and Related Transactions, and Director IndependenceThe information required by this Item 13 will be included in the Company’s Proxy Statement for the 2011 Annual Meetingof Stockholders which will be filed with the Securities and Exchange Commission no later than May 2, 2011 and is incorporated intothis Item 13 by reference.Item 14. Principal Accountant Fees and ServicesThe information required by this Item 14 will be included in the Company’s Proxy Statement for the 2011 Annual Meetingof Stockholders which will be filed with the Securities and Exchange Commission no later than May 2, 2011 and is incorporated intothis Item 14 by reference. 42Table of ContentsPart IVItem 15. Exhibits and Financial Statement Schedule(a)(1) Financial Statements. • Report of Independent Registered Public Accounting Firm • Consolidated Balance Sheets as of December 31, 2010 (Successor Company) and 2009 (Successor Company) • Consolidated Statements of Operations for the year ended December 31, 2010 (Successor Company), four monthsended December 31, 2009 (Successor Company), from inception (September 1, 2009) to December 31, 2010(Successor Company), eight months ended August 31, 2009 (Predecessor Company) and from inception to August 31,2009 (Predecessor Company) • Consolidated Statements of Shareholders’ Equity (Deficit) and Comprehensive Income (Loss) from inception toAugust 31, 2009 (Predecessor Company) and from inception (September 1, 2009) to December 31, 2010 (SuccessorCompany) • Consolidated Statements of Cash Flows for the year ended December 31, 2010, four months ended December 31,2009, from inception (September 1, 2009) to December 31, 2010 (Successor Company), eight months endedAugust 31, 2009 (Predecessor Company) and cumulative period from inception to August 31, 2009 (PredecessorCompany) • Notes to Consolidated Financial Statements(a)(2) Financial Statement Schedule.All schedules are omitted because of the absence of conditions under which they are required or because the requiredinformation is presented in the Financial Statements or Notes thereto.(a)(3) The exhibits listed under Item 15(b) are filed or incorporated by reference herein.(b) Exhibits.The following exhibits are filed as part of this annual report:EXHIBIT NO. IDENTIFICATION OF EXHIBIT EXHIBIT NO. IDENTIFICATION OF EXHIBIT 2.1 Debtors’ First Amended Joint Plan of Reorganization dated July 30, 2009 and Disclosure Statement (filed asExhibit 10.2 to the Company’s Form 10-Q for quarter ended June 30, 2009, filed on August 12, 2009 and asExhibit 99.1 to our Form 8-K filed September 2, 2009) 3.1 Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to our Form 8-Kfiled September 2, 2009) 3.2 Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to our Form 8-K filed September 2,2009) 3.3 Certificate of Designation of Preferences, Rights and Limitations of Series A 6% Convertible Preferred Stock(incorporated by reference to Exhibit 3.1 to our Form 8-K filed October 14, 2009) 3.4 Certificate of Designation of Preferences, Rights and Limitations of Series B Convertible Preferred Stock,dated July 16, 2010. (incorporated by reference to Exhibit 3.1 to our Form 8-K filed July 20, 2010). 3.5 Amended and Restated Certificate of Designation of Preferences, Rights and Limitations of Series DConvertible Preferred Stock. (incorporated by reference to Exhibit 3.2 to our Form 8-K filed December 8,2010). 4.1 Form of Common Stock Certificate (incorporated by reference to Exhibit 4.1 to our Form 10-Q filedNovember 23, 2009) 43Table of Contents EXHIBIT NO. IDENTIFICATION OF EXHIBIT 4.2 Form of Class A/B Common Stock Purchase Warrant issued in October 2009 offering (incorporated byreference to Exhibit 4.1 to our Form 8-K filed October 14, 2009) 4.3 Form of 12.5% Promissory Note (incorporated by reference to Exhibit 10.1 to our Form 8-K filedSeptember 10, 2009) 4.4 Form of Placement Agent Warrant issued in November 2009 offering (incorporated by reference toExhibit 4.2 to our Form 10-Q filed November 23, 2009) 4.5 Common Stock Purchase Warrant issued in March 2010 offering (incorporated by reference to Exhibit 4.1 toour Form 8-K filed March 3, 2010) 4.6 Form of Common Stock Purchase Warrant issued in July 2010 Series B preferred stock offering (incorporatedby reference to Exhibit 4.1 to our Form 8-K filed July 20, 2010) 4.7 Form of Placement Agent Warrant issued in July 2010 Series B preferred stock offering (incorporated byreference to Exhibit 4.2 to our Form 8-K filed July 20, 2010) 4.8 Form of Common Stock Purchase Warrant used for Series B preferred stock offering (incorporated byreference to Exhibit 4.1 of the Form 8-K filed October 22, 2010). 4.9 Form of Common Stock Purchase Warrant used for the Series D preferred stock offering (incorporated byreference to Exhibit 4.1 of the Form 8-K filed February 15, 2011). 10.1 Securities Purchase Agreement dated October 13, 2009 between the Company and the Series A PreferredStock Purchasers (incorporated by reference to Exhibit 10.1 to our Form 8-K filed October 14, 2009) 10.2 Amended and Restated Employment Agreement between the Company and Declan Daly dated August 24,2010 (incorporated by reference to Exhibit 10.1 to our Form 8-K filed August 27, 2010) 10.3 Consulting Agreement between the Company and Robert Langer (incorporated by reference to Exhibit 10.2to our Form 10-Q filed November 23, 2009) 10.4 2009 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 4.5 to our Form S-8 filedMarch 3, 2011) 10.5 Lease Agreement between Isolagen, Inc and The Hankin Group dates April 7, 2005 (previously filed as anexhibit to the company’s Form 8-K, filed on April 12, 2005) 10.6 Purchase Option Agreement between Isolagen, Inc and 405 Eagleview Associates dated April 7, 2005(previously filed as an exhibit to the company’s Form 8-K, filed on April 12, 2005) 10.7 Intellectual Property Purchase Agreement between Isolagen Technologies, Inc., Gregory M. Keller, andPacGen Partners (previously filed as an exhibit to the company’s amended Form S-1, as filed on October 24,2003) 10.8 Employment Agreement between the Company and David Pernock (incorporated by reference toExhibit 10.1 to our Form 8-K filed February 1, 2010) 10.9 Securities Purchase Agreement dated March 2, 2010 (incorporated by reference to Exhibit 10.1 to ourForm 8-K filed March 3, 2010) 10.10 Registration Rights Agreement dated March 2, 2010 (incorporated by reference to Exhibit 10.1 to ourForm 8-K filed March 3, 2010) 10.11 Registration Rights Agreement between the Company and the Series A Preferred Stock Purchasers, datedOctober 13, 2009 (incorporated by reference to Exhibit 10.2 to our Form 8-K filed October 14, 2009) 10.12 Securities Purchase Agreement between the Company and Series B Preferred Stock Purchasers (incorporatedby reference to Exhibit 10.1 to our Form 8-K filed July 20, 2010) 10.13 Form of Registration Rights Agreement between the Company and Series B Preferred Stock Purchasers(incorporated by reference to Exhibit 10.2 to our Form 8-K filed July 20, 2010) 10.14 Form of Securities Purchase Agreement between the Company and Series B Preferred Stock Purchasers(incorporated by reference to Exhibit 4.1 of the Form 8-K filed October 22, 2010). 21 List of Subsidiaries (previously filed as an exhibit to the company’s Annual Report on Form 10-K for thefiscal year ended December 31, 2006) *23.1 Consent of BDO USA, LLP *31.1 Certification pursuant to Rule 13a-14(a) and 15d-14(a), required under Section 302 of the Sarbanes-OxleyAct of 2002 *31.2 Certification pursuant to Rule 13a-14(a) and 15d-14(a), required under Section 302 of the Sarbanes-OxleyAct of 2002 *32.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002 *32.2 Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002 * Filed herewith. 44Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly causedthis report to be signed on its behalf by the undersigned, thereunto duly authorized. Fibrocell Science, Inc. By: /s/ David Pernock David Pernock Chief Executive Officer Date: March 30, 2011Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the followingpersons on behalf of the Registrant and in the capacities and on the date indicated. Signature Title Date /s/ David PernockDavid Pernock Chief Executive Officer and Chairman of the Board of Directors March 30, 2011 /s/ Declan DalyDeclan Daly Chief Financial Officer, Chief Operating Officer and Director March 30, 2011 /s/ Kelvin MooreKelvin Moore Director March 30, 2011 /s/ Dr. Robert LangerDr. Robert Langer Director March 30, 2011 /s/ Marc MazurMarc Mazur Director March 30, 2011 /s/ Dr. George KorkosDr. George Korkos Director March 30, 2011 45Table of ContentsFibrocell Science, Inc.(A Development Stage Company)Index to Consolidated Financial Statements PAGE Report of Independent Registered Public Accounting Firm F-2 Consolidated Balance Sheets as of December 31, 2010 and 2009 F-3 Consolidated Statements of Operations for the year ended December 31, 2010 (Successor Company), four monthsended December 31, 2009 (Successor Company), from inception (September 1, 2009) to December 31, 2010(Successor Company), eight months ended August 31, 2009 (Predecessor Company) and from inception toAugust 31, 2009 (Predecessor Company) F-4 Consolidated Statements of Shareholders’ Deficit and Comprehensive Income (Loss) From Inception(December 28, 1995) to August 31, 2009 (Predecessor Company) and four months ended December 31, 2009(Successor Company) and year ended December 31, 2010 (Successor Company) F-5 Consolidated Statements of Cash Flows for the year ended December 31, 2010 (Successor Company), four monthsended December 31, 2009 (Successor Company), cumulative period from inception (September 1, 2009) toDecember 31, 2010 (Successor Company), eight months ended August 31, 2009 (Predecessor Company) andcumulative period from inception (December 28, 1995) to August 31, 2009 (Predecessor Company) F-17 Notes to Consolidated Financial Statements F-19 F1Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMTo the Board of Directors and Shareholders of Fibrocell Science, Inc. (a development stage company)Exton, PennsylvaniaWe have audited the accompanying consolidated balance sheets of Fibrocell Science, Inc. (in the development stage) as ofDecember 31, 2010 and 2009 and the related consolidated statements of operations, shareholders’ equity (deficit) and comprehensiveloss, and cash flows for the year ended December 31, 2010 (“Successor”), for the period from January 1 to August 31, 2009(“Predecessor — as described in Note 1 of the notes to the consolidated financial statements”) and for the period from the Successor’sinception of operations (September 1, 2009) through December 31, 2009. We have also audited the statements of shareholders’equity (deficit) for the period from December 28, 1995 (Predecessor’s inception) to December 31, 2008. These consolidated financialstatements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements arefree of material misstatement. Our audit included consideration of internal control over financial reporting as a basis for designingaudit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness ofthe Company’s internal control over financial reporting. Accordingly, we express no opinion. An audit also includes examining, on atest basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position ofFibrocell Science, Inc. at December 31, 2010 and 2009, and the results of its operations and its cash flows for the year endedDecember 31, 2010 (“Successor”), for the period from January 1 to August 31, 2009 (“Predecessor”) and for the period from theSuccessor’s inception of operations (September 1, 2009) through December 31, 2009 and the statements of shareholders’ equity(deficit) for the period from December 28, 1995 (Predecessor’s inception) to August 31, 2009 and for the period from the Successor’sinception of operations (September 1, 2009) through December 31, 2009, in conformity with accounting principles generallyaccepted in the United States of America.The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. Asdiscussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations, has a net capital deficit,and has limited cash resources that raise substantial doubt about its ability to continue as a going concern. Management’s plan inregard to these matters is also described in Note 3. The financial statements do not include any adjustments that might result from theoutcome of this uncertainty./s/ BDO USA, LLPHouston, TexasMarch 30, 2011 F2Table of ContentsFibrocell Science, Inc.(A Development Stage Company)Consolidated Balance Sheets December 31, December 31, 2010 2009 Assets Current assets: Cash and cash equivalents $867,738 $1,362,488 Accounts receivable, net 229,891 269,759 Inventory, net 258,939 226,032 Prepaid expenses and other current assets 559,082 525,024 Total current assets 1,915,650 2,383,303 Property and equipment, net of accumulated depreciation of $8,085 and $0, respectively 21,589 — Other assets 250 250 Intangible assets 6,340,656 6,340,656 Total assets $8,278,145 $8,724,209 Liabilities, Redeemable Preferred Stock, Shareholders’ Deficit and Noncontrolling Interest Current liabilities: Current debt $56,911 $47,795 Accounts payable 1,096,125 245,023 Accrued expenses 789,482 544,260 Total current liabilities 1,942,518 837,078 Long-term debt 7,290,881 6,000,060 Deferred tax liability 2,500,000 2,500,000 Warrant liability 8,171,518 635,276 Derivative liability 2,120,360 — Other long-term liabilities 255,606 369,210 Total liabilities 22,280,883 10,341,624 Commitments and contingencies Preferred stock series A, $0.001 par value; 9,000 shares authorized; 3,250 shares issued and2,886 shares outstanding 1,280,150 2,511,070 Preferred stock series B, $0.001 par value; 9,000 shares authorized; 4,640 shares issued andoutstanding — — Preferred stock series B, $0.001 par value; subscription receivable (210,000) — Preferred stock series D, $0.001 par value; 8,000 shares authorized; 1,645 shares issued andoutstanding — — Fibrocell Science, Inc. shareholders’ deficit: Successor common stock, $0.001 par value; 250,000,000 shares authorized; 20,375,500issued and outstanding 20,376 14,692 Additional paid-in capital 2,437,893 508,347 Accumulated deficit during development stage (17,981,530) (5,049,999)Total Fibrocell Science, Inc. shareholders’ deficit (15,523,261) (4,526,960)Noncontrolling interest 450,373 398,475 Total deficit and noncontrolling interest (15,072,888) (4,128,485)Total liabilities, preferred stock, shareholders’ deficit and noncontrolling interest $8,278,145 $8,724,209 The accompanying notes are an integral part of these consolidated financial statements. F3Table of ContentsFibrocell Science, Inc.(A Development Stage Company)Consolidated Statements of Operations Successor Successor Successor Predecessor Predecessor Cumulative period Cumulative period from September 1, from December 28, For the four months 2009 (date of For the eight 1995 (date of For the year ended ended December 31, inception) to months ended inception) to August December 31, 2010 2009 December 31, 2010 August 31, 2009 31, 2009 Revenue Product sales $936,369 $329,941 $1,266,310 $538,620 $4,818,994 License fees — — — — 260,000 Total revenue 936,369 329,941 1,266,310 538,620 5,078,994 Cost of sales 502,648 182,048 684,696 424,139 2,279,335 Gross profit 433,721 147,893 581,614 114,481 2,799,659 Selling, general and administrativeexpenses 6,515,581 2,708,356 9,223,937 3,427,374 84,805,520 Research and developmentexpenses 5,486,319 1,823,196 7,309,515 2,107,718 56,269,869 Operating loss (11,568,179) (4,383,659) (15,951,838) (5,420,611) (138,275,730)Other income (expense) Interest income — 1 1 248 6,989,539 Reorganization items, net 3,303 (72,477) (69,174) 73,538,984 73,538,984 Other income (expense) 244,479 — 244,479 (6,243) 316,338 Warrant expense (465,232) (319,084) (784,316) — — Interest expense (1,045,199) (247,174) (1,292,373) (2,232,138) (18,790,218)Income (loss) from continuingoperations before income taxes (12,830,828) (5,022,393) (17,853,221) 65,880,240 (76,221,087)Income tax benefit — — — — 190,754 Income (loss) from continuingoperations (12,830,828) (5,022,393) (17,853,221) 65,880,240 (76,030,333)Income (loss) from discontinuedoperations (48,805) (12,113) (60,918) 46,923 (41,091,311)Net income (loss) (12,879,633) (5,034,506) (17,914,139) 65,927,163 (117,121,644)Deemed dividend associated withbeneficial conversion — — — — (11,423,824)Preferred stock dividends — — — — (1,589,861)Net (income)/loss attributable tononcontrolling interest (51,898) (15,493) (67,391) (205,632) 1,799,523 Net income (loss) attributable toFibrocell Science, Inc. commonshareholders $(12,931,531) $(5,049,999) $(17,981,530) $65,721,531 $(128,335,806) Per share information: Income (loss) from continuingoperations-basic and diluted $(0.68) $(0.35) $(1.01) $1.72 $(4.30)Loss from discontinuedoperations-basic and diluted — — — — (2.32)Income attributable tononcontrolling interest — — — — 0.10 Deemed dividend associatedwith beneficial conversion ofpreferred stock — — — — (0.65)Preferred stock dividends — — — — (0.09)Net income (loss) attributable tocommon shareholders percommon share—basic anddiluted $(0.68) $(0.35) $(1.01) $1.72 $(7.26)Weighted average number of basicand diluted common sharesoutstanding 18,757,756 14,380,381 17,681,500 38,230,886 17,678,219 The accompanying notes are an integral part of these consolidated financial statements. F4Table of ContentsFibrocell Science, Inc.(A Development Stage Company)Consolidated Statements of Shareholders’ Equity (Deficit) and Comprehensive Income (Loss) Accumulated Series A Series B Accumulated Deficit Total Preferred Stock Preferred Stock Common Stock Additional Treasury Stock Other During Shareholders’ Number of Number of Number of Paid-In Number of Comprehensive Development Equity Shares Amount Shares Amount Shares Amount Capital Shares Amount Income Stage (Deficit) Issuance of commonstock for cash on12/28/95 — $— — $— 2,285,291 $2,285 $(1,465) — $— $— $— $820 Issuance of commonstock for cash on11/7/96 — — — — 11,149 11 49,989 — — — — 50,000 Issuance of commonstock for cash on11/29/96 — — — — 2,230 2 9,998 — — — — 10,000 Issuance of commonstock for cash on12/19/96 — — — — 6,690 7 29,993 — — — — 30,000 Issuance of commonstock for cash on12/26/96 — — — — 11,148 11 49,989 — — — — 50,000 Net loss — — — — — — — — — — (270,468) (270,468)Balance, 12/31/96(Predecessor) — $— — $— 2,316,508 $2,316 $138,504 — $— $— $(270,468) $(129,648)Issuance of commonstock for cash on12/27/97 — — — — 21,182 21 94,979 — — — — 95,000 Issuance of commonstock for services on9/1/97 — — — — 11,148 11 36,249 — — — — 36,260 Issuance of commonstock for services on12/28/97 — — — — 287,193 287 9,968 — — — — 10,255 Net loss — — — — — — — — — — (52,550) (52,550)Balance,12/31/97(Predecessor) — $— — $— 2,636,031 $2,635 $279,700 — $— $— $(323,018) $(40,683)The accompanying notes are an integral part of these consolidated financial statements. F5Table of Contents Accumulated Series A Series B Accumulated Deficit Total Preferred Stock Preferred Stock Common Stock Additional Treasury Stock Other During Shareholders’ Number of Number of Number of Paid-In Number of Comprehensive Development Equity Shares Amount Shares Amount Shares Amount Capital Shares Amount Income Stage (Deficit) Issuance ofcommonstock forcash on8/23/98 — $— — $— 4,459 $4 $20,063 — $— $— $— $20,067 Repurchase ofcommonstock on9/29/98 — — — — — — — 2,400 (50,280) — — (50,280)Net loss — — — — — — — — — — (195,675) (195,675)Balance,12/31/98(Predecessor) — $— — $— 2,640,490 $2,639 $299,763 2,400 $(50,280) $— $(518,693) $(266,571)Issuance ofcommonstock forcash on9/10/99 — — — — 52,506 53 149,947 — — — — 150,000 Net loss — — — — — — — — — — (1,306,778) (1,306,778)Balance,12/31/99(Predecessor) — $— — $— 2,692,996 $2,692 $449,710 2,400 $(50,280) $— $(1,825,471) $(1,423,349)Issuance ofcommonstock forcash on1/18/00 — — — — 53,583 54 1,869 — — — — 1,923 Issuance ofcommonstock forserviceson 3/1/00 — — — — 68,698 69 (44) — — — — 25 Issuance ofcommonstock forserviceson 4/4/00 — — — — 27,768 28 (18) — — — — 10 Net loss — — — — — — — — — — (807,076) (807,076)Balance,12/31/00(Predecessor) — $— — $— 2,843,045 $2,843 $451,517 2,400 $(50,280) $— $(2,632,547) $(2,228,467)The accompanying notes are an integral part of these consolidated financial statements. F6Table of Contents Accumulated Series A Series B Accumulated Deficit Total Preferred Stock Preferred Stock Common Stock Additional Treasury Stock Other During Shareholders’ Number of Number of Number of Paid-In Number of Comprehensive Development Equity Shares Amount Shares Amount Shares Amount Capital Shares Amount Income Stage (Deficit) Issuance ofcommonstock forservices on7/1/01 — $— — $— 156,960 $157 $(101) — $— $— $— $56 Issuance ofcommonstock forservices on7/1/01 — — — — 125,000 125 (80) — — — — 45 Issuance ofcommonstock forcapitalizationof accruedsalaries on8/10/01 — — — — 70,000 70 328,055 — — — — 328,125 Issuance ofcommonstock forconversion ofconvertibledebt on8/10/01 — — — — 1,750,000 1,750 1,609,596 — — — — 1,611,346 Issuance ofcommonstock forconversion ofconvertibleshareholdernotes payableon 8/10/01 — — — — 208,972 209 135,458 — — — — 135,667 Issuance ofcommonstock forbridgefinancing on8/10/01 — — — — 300,000 300 (192) — — — — 108 Retirement oftreasury stockon 8/10/01 — — — — — — (50,280) (2,400) 50,280 — — — Issuance ofcommonstock for netassets ofGemini on8/10/01 — — — — 3,942,400 3,942 (3,942) — — — — — Issuance ofcommonstock for netassets of AFHon 8/10/01 — — — — 3,899,547 3,900 (3,900) — — — — — Issuance ofcommonstock for cashon 8/10/01 — — — — 1,346,669 1,347 2,018,653 — — — — 2,020,000 Transaction andfund raisingexpenses on8/10/01 — — — — — — (48,547) — — — — (48,547)Issuance ofcommonstock forservices on8/10/01 — — — — 60,000 60 — — — — — 60 Issuance ofcommonstock for cashon 8/28/01 — — — — 26,667 27 39,973 — — — — 40,000 Issuance ofcommonstock forservices on9/30/01 — — — — 314,370 314 471,241 — — — — 471,555 The accompanying notes are an integral part of these consolidated financial statements. F7Table of Contents Accumulated Series A Series B Accumulated Deficit Total Preferred Stock Preferred Stock Common Stock Additional Treasury Stock Other During Shareholders’ Number of Number of Number of Paid-In Number of Comprehensive Development Equity Shares Amount Shares Amount Shares Amount Capital Shares Amount Income Stage (Deficit) Uncompensatedcontribution ofservices—3rdquarter — $— — $— — $— $55,556 — $— $— $— $55,556 Issuance ofcommon stockfor services on11/1/01 — — — — 145,933 146 218,754 — — — — 218,900 Uncompensatedcontribution ofservices—4thquarter — — — — — — 100,000 — — — — 100,000 Net loss — — — — — — — — — — (1,652,004) (1,652,004)Balance, 12/31/01(Predecessor) — $— — $— 15,189,563 $15,190 $5,321,761 — $— $— $(4,284,551) $1,052,400 Uncompensatedcontribution ofservices—1stquarter — — — — — — 100,000 — — — — 100,000 Issuance ofpreferred stockfor cash on4/26/02 905,000 905 — — — — 2,817,331 — — — — 2,818,236 Issuance ofpreferred stockfor cash on5/16/02 890,250 890 — — — — 2,772,239 — — — — 2,773,129 Issuance ofpreferred stockfor cash on5/31/02 795,000 795 — — — — 2,473,380 — — — — 2,474,175 Issuance ofpreferred stockfor cash on6/28/02 229,642 230 — — — — 712,991 — — — — 713,221 Uncompensatedcontribution ofservices—2ndquarter — — — — — — 100,000 — — — — 100,000 Issuance ofpreferred stockfor cash on7/15/02 75,108 75 — — — — 233,886 — — — — 233,961 Issuance ofcommon stockfor cash on8/1/02 — — — — 38,400 38 57,562 — — — — 57,600 Issuance ofwarrants forservices on9/06/02 — — — — — — 103,388 — — — — 103,388 Uncompensatedcontribution ofservices—3rdquarter — — — — — — 100,000 — — — — 100,000 Uncompensatedcontribution ofservices—4thquarter — — — — — — 100,000 — — — — 100,000 Issuance ofpreferred stockfor dividends 143,507 144 — — — — 502,517 — — — (502,661) — Deemed dividendassociated withbeneficialconversion ofpreferred stock — — — — — — 10,178,944 — — — (10,178,944) — Comprehensiveincome: Net loss — — — — — — — — — — (5,433,055) (5,433,055)Othercomprehensiveincome, foreigncurrencytranslationadjustment — — — — — — — — — 13,875 — 13,875 Comprehensiveloss — — — — — — — — — — — (5,419,180)Balance, 12/31/02(Predecessor) 3,038,507 $3,039 — $— 15,227,963 $15,228 $25,573,999 — $— $13,875 $(20,399,211) $5,206,930 The accompanying notes are an integral part of these consolidated financial statements. F8Table of Contents Accumulated Series A Series B Accumulated Deficit Total Preferred Stock Preferred Stock Common Stock Additional Treasury Stock Other During Shareholders’ Number of Number of Number of Paid-In Number of Comprehensive Development Equity Shares Amount Shares Amount Shares Amount Capital Shares Amount Income Stage (Deficit) Issuance ofcommon stockfor cash on1/7/03 — $— — $— 61,600 $62 $92,338 — $— $— $— $92,400 Issuance ofcommon stockfor patentpendingacquisition on3/31/03 — — — — 100,000 100 539,900 — — — — 540,000 Cancellation ofcommon stockon 3/31/03 — — — — (79,382) (79) (119,380) — — — — (119,459)Uncompensatedcontribution ofservices—1stquarter — — — — — — 100,000 — — — — 100,000 Issuance ofpreferred stockfor cash on5/9/03 — — 110,250 110 — — 2,773,218 — — — — 2,773,328 Issuance ofpreferred stockfor cash on5/16/03 — — 45,500 46 — — 1,145,704 — — — — 1,145,750 Conversion ofpreferred stockinto commonstock—2nd qtr (70,954) (72) — — 147,062 147 40,626 — — — — 40,701 Conversion ofwarrants intocommon stock—2nd qtr — — — — 114,598 114 (114) — — — — — Uncompensatedcontribution ofservices—2ndquarter — — — — — — 100,000 — — — — 100,000 Issuance ofpreferred stockdividends — — — — — — — — — — (1,087,200) (1,087,200)Deemed dividendassociated withbeneficialconversion ofpreferred stock — — — — — — 1,244,880 — — — (1,244,880) — Issuance ofcommon stockfor cash—3rdqtr — — — — 202,500 202 309,798 — — — — 310,000 Issuance ofcommon stockfor cash on8/27/03 — — — — 3,359,331 3,359 18,452,202 — — — — 18,455,561 Conversion ofpreferred stockinto commonstock—3rd qtr (2,967,553) (2,967) (155,750) (156) 7,188,793 7,189 (82,875) — — — — (78,809)Conversion ofwarrants intocommon stock—3rd qtr — — — — 212,834 213 (213) — — — — — Compensationexpense onwarrants issuedto non-employees — — — — — — 412,812 — — — — 412,812 Issuance ofcommon stockfor cash—4thqtr — — — — 136,500 137 279,363 — — — — 279,500 Conversion ofwarrants intocommon stock—4th qtr — — — — 393 — — — — — — — Comprehensiveincome: Net loss — — — — — — — — — — (11,268,294) (11,268,294)Othercomprehensiveincome, foreigncurrencytranslationadjustment — — — — — — — — — 360,505 — 360,505 Comprehensiveloss — — — — — — — — — — — (10,907,789)Balance, 12/31/03(Predecessor) — $— — $— 26,672,192 $26,672 $50,862,258 — $— $374,380 $(33,999,585) $17,263,725 The accompanying notes are an integral part of these consolidated financial statements. F9Table of Contents Accumulated Series A Series B Accumulated Deficit Total Preferred Stock Preferred Stock Common Stock Additional Treasury Stock Other During Shareholders’ Number Number of Number of Paid-In Number of Comprehensive Development Equity of Shares Amount Shares Amount Shares Amount Capital Shares Amount Income Stage (Deficit) Conversion ofwarrants intocommon stock—1st qtr — $— — $— 78,526 $79 $(79) — $— $— $— $— Issuance ofcommon stockfor cash inconnectionwith exerciseof stockoptions—1stqtr — — — — 15,000 15 94,985 — — — — 95,000 Issuance ofcommon stockfor cash inconnectionwith exerciseof warrants—1st qtr — — — — 4,000 4 7,716 — — — — 7,720 Compensationexpense onoptions andwarrants issuedto non-employees anddirectors—1stqtr — — — — — — 1,410,498 — — — — 1,410,498 Issuance ofcommon stockin connectionwith exerciseof warrants—2nd qtr — — — — 51,828 52 (52) — — — — — Issuance ofcommon stockfor cash—2ndqtr — — — — 7,200,000 7,200 56,810,234 — — — — 56,817,434 Compensationexpense onoptions andwarrants issuedto non-employees anddirectors—2ndqtr — — — — — — 143,462 — — — — 143,462 Issuance ofcommon stockin connectionwith exerciseof warrants—3rd qtr — — — — 7,431 7 (7) — — — — — Issuance ofcommon stockfor cash inconnectionwith exerciseof stockoptions—3rdqtr — — — — 110,000 110 189,890 — — — — 190,000 Issuance ofcommon stockfor cash inconnectionwith exerciseof warrants—3rd qtr — — — — 28,270 28 59,667 — — — — 59,695 Compensationexpense onoptions andwarrants issuedto non-employees anddirectors—3rdqtr — — — — — — 229,133 — — — — 229,133 Issuance ofcommon stockin connectionwith exerciseof warrants—4th qtr — — — — 27,652 28 (28) — — — — — Compensationexpense onoptions andwarrants issuedto non-employees,employees, anddirectors—4thqtr — — — — — — 127,497 — — — — 127,497 Purchase oftreasury stock—4th qtr — — — — — — — 4,000,000 (25,974,000) — — (25,974,000)Comprehensiveincome: Net loss — — — — — — — — — — (21,474,469) (21,474,469)Othercomprehensiveincome, foreigncurrencytranslationadjustment — — — — — — — — — 79,725 — 79,725 Othercomprehensiveincome, netunrealized gainon available-for-saleinvestments — — — — — — — — — 10,005 — 10,005 Comprehensiveloss — — — — — — — — — — — (21,384,739)Balance, 12/31/04(Predecessor) — $— — $— 34,194,899 $34,195 $109,935,174 4,000,000 $(25,974,000) $464,110 $(55,474,054) $28,985,425 The accompanying notes are an integral part of these consolidated financial statements. F10Table of Contents Accumulated Series A Series B Accumulated Deficit Total Preferred Stock Preferred Stock Common Stock Additional Treasury Stock Other During Shareholders’ Number of Number of Number of Paid-In Number of Comprehensive Development Equity Shares Amount Shares Amount Shares Amount Capital Shares Amount Income (Loss) Stage (Deficit) Issuance ofcommon stockfor cash inconnectionwith exerciseof stockoptions—1stqtr — $— — $— 25,000 $25 $74,975 — $— $— $— $75,000 Compensationexpense onoptions andwarrants issuedto non-employees—1st qtr — — — — — — 33,565 — — — — 33,565 Conversion ofwarrants intocommon stock—2nd qtr — — — — 27,785 28 (28) — — — — — Compensationexpense onoptions andwarrants issuedto non-employees—2nd qtr — — — — — — (61,762) — — — — (61,762)Compensationexpense onoptions andwarrants issuedto non-employees—3rd qtr — — — — — — (137,187) — — — — (137,187)Conversion ofwarrants intocommon stock—3rd qtr — — — — 12,605 12 (12) — — — — — Compensationexpense onoptions andwarrants issuedto non-employees—4th qtr — — — — — — 18,844 — — — — 18,844 Compensationexpense onacceleration ofoptions—4thqtr — — — — — — 14,950 — — — — 14,950 Compensationexpense onrestricted stockaward issued toemployee—4thqtr — — — — — — 606 — — — — 606 Conversion ofpredecessorcompanyshares — — — — 94 — — — — — — — Comprehensiveloss: Net loss — — — — — — — — — — (35,777,584) (35,777,584)Othercomprehensiveloss, foreigncurrencytranslationadjustment — — — — — — — — — (1,372,600) — (1,372,600)Foreign exchangegain onsubstantialliquidation offoreign entity 133,851 133,851 Othercomprehensiveloss, netunrealized gainon available-for-saleinvestments — — — — — — — — — (10,005) — (10,005)Comprehensiveloss — — — — — — — — — — — (37,026,338)Balance, 12/31/05(Predecessor) — $— — $— 34,260,383 $34,260 $109,879,125 4,000,000 $(25,974,000) $(784,644) $(91,251,638) $(8,096,897)The accompanying notes are an integral part of these consolidated financial statements. F11Table of Contents Accumulated Series A Series B Accumulated Deficit Total Preferred Stock Preferred Stock Common Stock Additional Treasury Stock Other During Shareholders’ Number of Number of Number of Paid-In Number of Comprehensive Development Noncontrolling Equity Shares Amount Shares Amount Shares Amount Capital Shares Amount Income Stage Interest (Deficit) Compensationexpense onoptions andwarrants issuedto non-employees—1stqtr — $— — $— — $— $42,810 — $— $— $— $— $42,810 Compensationexpense onoption awardsissued toemployees anddirectors—1stqtr — — — — — — 46,336 — — — — — 46,336 Compensationexpense onrestricted stockissued toemployees—1stqtr — — — — 128,750 129 23,368 — — — — — 23,497 Compensationexpense onoptions andwarrants issuedto non-employees—2nd qtr — — — — — — 96,177 — — — — — 96,177 Compensationexpense onoption awardsissued toemployees anddirectors—2ndqtr — — — — — — 407,012 — — — — — 407,012 Compensationexpense onrestricted stockto employees—2nd qtr — — — — — — 4,210 — — — — — 4,210 Cancellation ofunvestedrestricted stock— 2nd qtr — — — — (97,400) (97) 97 — — — — — — Issuance ofcommon stockfor cash inconnectionwith exercise ofstock options—2nd qtr — — — — 10,000 10 16,490 — — — — — 16,500 Compensationexpense onoptions andwarrants issuedto non-employees—3rd qtr — — — — — — 25,627 — — — — — 25,627 Compensationexpense onoption awardsissued toemployees anddirectors—3rdqtr — — — — — — 389,458 — — — — — 389,458 Compensationexpense onrestricted stockto employees—3rd qtr — — — — — — 3,605 — — — — — 3,605 Issuance ofcommon stockfor cash inconnectionwith exercise ofstock options—3rd qtr — — — — 76,000 76 156,824 — — — — — 156,900 Acquisition ofAgera — — — — — — — — — — — 2,182,505 2,182,505 Compensationexpense onoptions andwarrants issuedto non-employees—4thqtr — — — — — — 34,772 — — — — — 34,772 Compensationexpense onoption awardsissued toemployees anddirectors—4thqtr — — — — — — 390,547 — — — — — 390,547 Compensationexpense onrestricted stockto employees—4th qtr — — — — — — 88 — — — — — 88 Cancellation ofunvestedrestricted stockaward—4th qtr — — — — (15,002) (15) 15 — — — — — — Comprehensiveloss: Net loss — — — — — — — — — — (35,821,406) (78,132) (35,899,538)Othercomprehensivegain, foreigncurrencytranslationadjustment — — — — — — — — — 657,182 — — 657,182 Comprehensiveloss — — — — — — — — — — — — (35,242,356)Balance 12/31/06(Predecessor) — $— — $— 34,362,731 $34,363 $111,516,561 4,000,000 $(25,974,000) $(127,462) $(127,073,044) $2,104,373 $(39,519,209)The accompanying notes are an integral part of these consolidated financial statements. F12Table of Contents Accumulated Series A Series B Accumulated Deficit Total Preferred Stock Preferred Stock Common Stock Additional Treasury Stock Other During Shareholders’ Number of Number of Number of Paid-In Number of Comprehensive Development Noncontrolling Equity Shares Amount Shares Amount Shares Amount Capital Shares Amount Income (Loss) Stage Interest (Deficit) Compensationexpense onoptions andwarrants issuedto non-employees—1stqtr — $— — $— — $— $39,742 — $— $— $— $— $39,742 Compensationexpense onoption awardsissued toemployees anddirectors—1stqtr — — — — — — 448,067 — — — — — 448,067 Compensationexpense onrestricted stockissued toemployees—1stqtr — — — — — — 88 — — — — — 88 Issuance ofcommon stockfor cash inconnection withexercise ofstock options—1st qtr — — — — 15,000 15 23,085 — — — — — 23,100 Expense inconnection withmodification ofemployee stockoptions —1stqtr — — — — — — 1,178,483 — — — — — 1,178,483 Compensationexpense onoptions andwarrants issuedto non-employees—2nd qtr — — — — — — 39,981 — — — — — 39,981 Compensationexpense onoption awardsissued toemployees anddirectors—2ndqtr — — — — — — 462,363 — — — — — 462,363 Compensationexpense onrestricted stockissued toemployees—2nd qtr — — — — — — 88 — — — — — 88 Compensationexpense onoption awardsissued toemployees anddirectors—3rdqtr — — — — — — 478,795 — — — — — 478,795 Compensationexpense onrestricted stockissued toemployees—3rdqtr — — — — — — 88 — — — — — 88 Issuance ofcommon stockupon exerciseof warrants—3rd qtr — — — — 492,613 493 893,811 — — — — — 894,304 Issuance ofcommon stockfor cash, net ofoffering costs—3rd qtr — — — — 6,767,647 6,767 13,745,400 — — — — — 13,752,167 Issuance ofcommon stockfor cash inconnection withexercise ofstock options—3rd qtr — — — — 1,666 2 3,164 — — — — — 3,166 Compensationexpense onoption awardsissued toemployees anddirectors—4thqtr — — — — — — 378,827 — — — — — 378,827 Compensationexpense onrestricted stockissued toemployees—4thqtr — — — — — — 88 — — — — — 88 Comprehensiveloss: Net loss — — — — — — — — — — (35,573,114) (246,347) (35,819,461)Othercomprehensivegain, foreigncurrencytranslationadjustment — — — — — — — — — 846,388 — — 846,388 Comprehensiveloss — — — — — — — — — — — — (34,973,073)Balance 12/31/07(Predecessor) — $— — $— 41,639,657 $41,640 $129,208,631 4,000,000 $(25,974,000) $718,926 $(162,646,158) $1,858,026 $(56,792,935)The accompanying notes are an integral part of these consolidated financial statements. F13Table of Contents Accumulated Series A Series B Accumulated Deficit Total Preferred Stock Preferred Stock Common Stock Additional Treasury Stock Other During Shareholders’ Number of Number of Number of Paid-In Number of Comprehensive Development Noncontrolling Equity Shares Amount Shares Amount Shares Amount Capital Shares Amount Income (Loss) Stage Interest (Deficit) Compensationexpense onvested optionsrelated to non-employees—1stqtr — $— — $— — $— $44,849 — $— $— $— $— $44,849 Compensationexpense onoption awardsissued toemployees anddirectors—1stqtr — — — — — — 151,305 — — — — — 151,305 Expense inconnectionwithmodification ofemployee stockoptions —1stqtr — — — — — — 1,262,815 — — — — — 1,262,815 Retirement ofrestricted stock — — — — (165) (1) — — — — — — (1)Compensationexpense onvested optionsrelated to non-employees—2nd qtr — — — — — — 62,697 — — — — — 62,697 Compensationexpense onoption awardsissued toemployees anddirectors—2ndqtr — — — — — — 193,754 — — — — — 193,754 Compensationexpense onvested optionsrelated to non-employees—3rd qtr — — — — — — 166,687 — — — — — 166,687 Compensationexpense onoption awardsissued toemployees anddirectors—3rdqtr — — — — — — 171,012 — — — — — 171,012 Compensationexpense onvested optionsrelated to non-employees—4th qtr — — — — — — (86,719) — — — — — (86,719)Compensationexpense onoption awardsissued toemployees anddirectors—4thqtr — — — — — — 166,196 — — — — — 166,196 Comprehensiveloss: Net loss — — — — — — — — — — (31,411,179) (1,680,676) (33,091,855)Reclassification offoreignexchange gainon substantialliquidation offoreign entities — — — — — — — — — (2,152,569) — — (2,152,569)Othercomprehensivegain, foreigncurrencytranslationadjustment — — — — — — — — — 1,433,643 — — 1,433,643 Comprehensiveloss — — — — — — — — — — — — (33,810,781)Balance 12/31/08(Predecessor) — $— — $— 41,639,492 $41,639 $131,341,227 4,000,000 $(25,974,000) $— $(194,057,337) $177,350 $(88,471,121)The accompanying notes are an integral part of these consolidated financial statements. F14Table of Contents Accumulated Series A Series B Accumulated Deficit Preferred Stock Preferred Stock Common Stock Additional Treasury Stock Other During Total Number of Number of Number of Paid-In Number of Comprehensive Development Noncontrolling Equity Shares Amount Shares Amount Shares Amount Capital Shares Amount Income (Loss) Stage Interest (Deficit) Compensationexpense onvested optionsrelated to non-employees—1stqtr — $— — $— — $— $1,746 — $— $— $— $— $1,746 Compensationexpense onoption awardsissued toemployees anddirectors—1stqtr — — — — — — 138,798 — — — — — 138,798 Conversion ofdebt intocommon stock— 1st qtr 2009 — — — — 37,564 38 343,962 — — — — — 344,000 Compensationexpense onoption awardsissued toemployees anddirectors—2ndqtr — — — — — — 112,616 — — — — — 112,616 Conversion ofdebt intocommon stock— 2nd qtr2009 — — — — 1,143,324 1,143 10,468,857 — — — — — 10,470,000 Compensationexpense onoption awardsissued toemployees anddirectors—2months ended8/31/09 — — — — — — 35,382 — — — — — 35,382 Balance ofexpense due tocancellation ofoptions issuedto employeesand directors inbankruptcy—2 monthsended 8/31/09 — — — — — — 294,912 — — — — — 294,912 Comprehensiveincome: Net income — — — — — — — — — — 65,721,531 205,632 65,927,163 Comprehensiveincome — — — — — — — — — — — — 65,927,163 Balance 8/31/09(Predecessor) — — — — 42,820,380 $42,820 $142,737,500 4,000,000 $(25,974,000) $— $(128,335,806) $382,982 $(11,146,504)Cancellation ofPredecessorcommon stockand fresh startadjustments — — — — (42,820,380) (42,820) (150,426,331) (4,000,000) 25,974,000 — — — (124,495,151)Elimination ofPredecessoraccumulateddeficit andaccumulatedothercomprehensiveloss — — — — — — — — — — 128,335,806 — 128,335,806 Balance 9/1/09(Predecessor) — — — — — — (7,688,831) — — — — 382,982 (7,305,849)Issuance of11.4 millionshares ofcommon stockin connectionwith emergencefromChapter 11 — — — — 11,400,000 11,400 5,460,600 — — — — — 5,472,000 Balance 9/1/09(Successor) — — — — 11,400,000 11,400 (2,228,231) — — — — 382,982 (1,833,849)Issuance of2.7 millionshares ofcommon stockin connectionwith the exitfinancing — — — — 2,666,666 2,667 1,797,333 — — — — — 1,800,000 Issuance ofcommon stockon Oct. 28,2009 — — — — 25,501 25 58,627 — — — — — 58,652 Compensationexpense onshares issuedto management — — — — 600,000 600 167,400 — — — — — 168,000 Compensationexpense onoption awardsissued todirectors — — — — — — 326,838 — — — — — 326,838 Compensationexpense onoption awardsissued to non-employees — — — — — — 386,380 — — — — — 386,380 Comprehensiveloss: Net loss — — — — — — — — — — (5,049,999) 15,493 (5,034,506) Comprehensiveloss — — — — — — — — — — — — (5,034,506)Balance 12/31/09(Successor) — $— — $— 14,692,167 $14,692 $508,347 — $— $— $(5,049,999) $398,475 $(4,128,485)The accompanying notes are an integral part of these consolidated financial statements. F15Table of Contents Accumulated Series A Series B Accumulated Deficit Preferred Stock Preferred Stock Common Stock Additional Treasury Stock Other During Total Number of Number of Number of Paid-In Number of Comprehensive Development Noncontrolling Equity Shares Amount Shares Amount Shares Amount Capital Shares Amount Income (Loss) Stage Interest (Deficit) Issuance of 5.1 millionshares of commonstock inMarch 2010, net ofissuance costs of$338,100 — $— — $— 5,076,664 $5,077 $3,464,323 — $— $— $— $— $3,469,400 Warrant fair valueassociated withcommon sharesissued inMarch 2010 — — — — — — (2,890,711) — — — — — (2,890,711)Compensation expenseon shares issued tomanagement —1Q10 — — — — — — 18,000 — — — — — 18,000 Compensation expenseon option awardsissued todirectors/employees-1Q10 — — — — — — 324,377 — — — — — 324,377 Compensation expenseon option awardsissued to non-employees-1Q10 — — — — — — 18,391 — — — — — 18,391 Compensation expenseon shares issued tomanagement —2Q10 — — — — — — 18,000 — — — — — 18,000 Compensation expenseon option awardsissued todirectors/employees-2Q10 — — — — — — 222,011 — — — — — 222,011 Compensation expenseon option awardsissued to non-employees-2Q10 — — — — — — 33,206 — — — — — 33,206 Compensation expenseon shares issued tomanagement —3Q10 — — — — — — 18,000 — — — — — 18,000 Compensation expenseon option awardsissued todirectors/employees-3Q10 — — — — — — 183,231 — — — — — 183,231 Compensation expenseon option awardsissued to non-employees-3Q10 — — — — — — 7,724 — — — — — 7,724 Compensation expenseon shares issued tomanagement —4Q10 — — — — — — 18,000 — — — — — 18,000 Compensation expenseon option awardsissued todirectors/employees-4Q10 — — — — — — 104,094 — — — — — 104,094 Compensation expenseon option awardsissued to non-employees-4Q10 — — — — — — 27,507 — — — — — 27,507 Preferred StockSeries A conversion — — — — 606,667 607 363,393 — — — — — 364,000 Comprehensive loss: Net loss — — — — — — — — — — (12,931,531) 51,898 (12,879,633) Comprehensive loss — — — — — — — — — — — — (12,879,633) Balance 12/31/10(Successor) — $— — $— 20,375,498 $20,376 $2,437,893 — $— $— $(17,981,530) $450,373 $(15,072,888)The accompanying notes are an integral part of these consolidated financial statements. F16Table of ContentsFibrocell Science, Inc.(A Development Stage Company)Consolidated Statements of Cash Flows Successor Successor Successor Predecessor Predecessor Cumulative period from September 1, Cumulative period Twelve months Four months 2009 (date of from December 31, ended ended inception) to Eight months 1995 (date of December 31, December 31, December 31, ended August 31, inception) to August 2010 2009 2010 2009 31, 2009 Cash flows from operatingactivities: Net (loss) income $(12,931,531) $(5,049,999) $(17,981,530) $65,721,531 $(115,322,121)Adjustments to reconcile net(loss) income to net cashused in operatingactivities: Reorganization items, net — 72,477 72,477 (74,648,976) (74,648,976)Expense related to equityawards and issuance ofstock 992,541 881,218 1,873,759 583,453 10,608,999 Warrant expense 465,232 319,084 784,316 — — Uncompensatedcontribution of services — — — — 755,556 Depreciation andamortization 8,085 — 8,085 — 9,091,990 Provision for doubtfulaccounts (7,818) (46,619) (54,437) 501 337,810 Provision for excessiveand/or obsoleteinventory (60,366) 11,664 (48,702) 169,085 259,427 Amortization of debt issuecosts — — — 985,237 4,107,067 Amortization of debtdiscounts oninvestments — — — — (508,983)Loss on disposal orimpairment of propertyand equipment — — — — 17,668,477 Foreign exchange gain onsubstantial liquidationof foreign entity (5,072) (2,614) (7,686) 30,012 (2,256,408)Net (loss) incomeattributable to non-controlling interest 51,898 15,493 67,391 205,632 (1,799,523)Change in operating assetsand liabilities,excluding effects ofacquisition: Decrease (increase) inaccounts receivable 47,686 23,544 71,230 91,666 (91,496)Decrease (increase) inother receivables (4,033) 4,740 707 23,632 218,978 Decrease (increase) ininventory 27,459 30,923 58,382 29,543 (455,282)Decrease (increase) inprepaid expenses 42,799 (244,905) (202,106) 628,197 34,341 Decrease (increase) inother assets — 4,120 4,120 (112,441) 71,000 Increase (decrease) inaccounts payable 851,102 107,622 958,724 (230,592) 57,648 Increase (decrease) inaccrued expenses,liabilities subject tocompromise and otherliabilities 1,256,140 (425,794) 830,346 1,868,162 3,311,552 Increase (decrease) indeferred revenue — — — (7,522) (50,096)Net cash used inoperating activities (9,265,878) (4,299,046) (13,564,924) (4,662,880) (148,610,040)Cash flows from investingactivities: Acquisition of Agera, net ofcash acquired — — — — (2,016,520)Purchase of property andequipment (29,674) — (29,674) — (25,515,170)Proceeds from the sale ofproperty and equipment,net of selling costs — — — — 6,542,434 Purchase of investments — — — — (152,998,313)Proceeds from sales andmaturities of investments — — — — 153,507,000 Net cash used ininvesting activities (29,674) — (29,674) — (20,480,569)Cash flows from financingactivities: Proceeds from convertibledebt — — — — 91,450,000 Offering costs associated withthe issuance of convertibledebt — — — — (3,746,193)Proceeds from notes payableto shareholders, net — — — — 135,667 Proceeds from the issuance ofredeemable preferred stockseries A, net — 2,870,000 2,870,000 — 12,931,800 Proceeds from the issuance ofredeemable preferred stockseries B, net 4,019,570 — 4,019,570 — — Proceeds from the issuance ofredeemable preferred stockseries D, net 1,509,400 — 1,509,400 — — Proceeds from the issuance ofcommon stock, net 3,469,400 1,800,000 5,269,400 — 93,753,857 Costs associated with securedloan and debtor-in-possession loan — — — (360,872) (360,872)Proceeds from secured loan — — — 500,471 500,471 Proceeds from debtor-in-possession loan — — — 2,750,000 2,750,000 Payments on insurance loan (63,683) (21,891) (85,574) (63,983) (79,319)Cash dividends paid onpreferred stock (139,750) — (139,750) — (1,087,200)Cash paid for fractional sharesof preferred stock — — — — (38,108)Merger and acquisitionexpenses — — — — (48,547)Repurchase of common stock — — — — (26,024,280)Net cash provided byfinancing activities 8,794,937 4,648,109 13,443,046 2,825,616 170,137,276 Effect of exchange rate changeson cash balances 5,865 3,149 9,014 (6,760) (36,391) F17Table of Contents Successor Successor Successor Predecessor Predecessor Cumulative period from September 1, Cumulative period Twelve months Four months 2009 (date of from December 31, ended ended inception) to Eight months 1995 (date of December 31, December 31, December 31, ended August 31, inception) to August 2010 2009 2010 2009 31, 2009 Net increase (decrease) in cashand cash equivalents (494,750) 352,212 (142,538) (1,844,024) 1,010,276 Cash and cash equivalents,beginning of period 1,362,488 1,010,276 1,010,276 2,854,300 — Cash and cash equivalents, end ofperiod $867,738 $1,362,488 $867,738 $1,010,276 $1,010,276 Supplemental disclosures of cashflow information: Predecessor cash paid forinterest $— $— $— $— $12,715,283 Successor cash paid fordividends 139,750 — 139,750 — — Non-cash investing and financingactivities: Predecessor deemed dividendassociated with beneficialconversion of preferredstock $— $— $— $— $11,423,824 Predecessor preferred stockdividend — — — — 1,589,861 Successor accrued preferredstock dividend 191,417 42,740 191,417 — — Predecessor uncompensatedcontribution of services — — — — 755,556 Predecessor common stockissued for intangible assets — — — — 540,000 Predecessor common stockissued in connection withconversion of debt — — — 10,814,000 10,814,000 Predecessor equipmentacquired through capitallease — — — — 167,154 Successor/Predecessorfinancing of insurancepremiums 97,065 81,517 178,582 — 87,623 Successor issuance of notespayable — — — 6,000,060 6,000,060 Successor common stockissued in connection withreorganization — — — 5,472,000 5,472,000 Successor intangible assets — — — 6,340,656 6,340,656 Successor deferred tax liabilityin connection with fresh-start — — — 2,500,000 2,500,000 Elimination of Predecessorcommon stock and freshstart adjustment — — — 14,780,320 14,780,320 Successor subscriptionreceivable 210,000 316,192 210,000 — — Successor accrued warrantliability 7,071,010 316,192 7,387,202 — — Successor conversion ofpreferred stock into commonstock 364,000 — 364,000 — — Successor accrued derivativeliability 2,120,360 — 2,120,360 — — The accompanying notes are an integral part of these consolidated financial statements. F18Table of ContentsFibrocell Science, Inc.(A Development Stage Company)Notes to Consolidated Financial StatementsNote 1—Business and OrganizationFibrocell Science, Inc. (“Fibrocell” or the “Company” or the “Successor”) is the parent company of Fibrocell Technologies(“Fibrocell Tech”) and Agera Laboratories, Inc., a Delaware corporation (“Agera”). Fibrocell Technologies is the parent company ofIsolagen Europe Limited, a company organized under the laws of the United Kingdom (“Isolagen Europe”), Isolagen Australia PtyLimited, a company organized under the laws of Australia (“Isolagen Australia”), and Isolagen International, S.A., a companyorganized under the laws of Switzerland (“Isolagen Switzerland”).The Company is an aesthetic and therapeutic company focused on developing novel skin and tissue rejuvenationproducts. The Company’s clinical development product candidates are designed to improve the appearance of skin injured by theeffects of aging, sun exposure, acne and burns with a patient’s own, or autologous, fibroblast cells produced in the Company’sproprietary Fibrocell Process. The Company also markets an advanced skin care line with broad application in core target marketsthrough its Agera subsidiary.In October 2006, the Predecessor Company reached an agreement with the U.S. Food and Drug Administration (“FDA”) onthe design of a Phase III pivotal study protocol for the treatment of nasolabial folds/wrinkles. The randomized, double-blind protocolwas submitted to the FDA under the agency’s Special Protocol Assessment (“SPA”) regulations. Pursuant to this assessment process,the FDA has agreed that the Predecessor Company’s study design for two identical trials, including patient numbers, clinicalendpoints, and statistical analyses, is acceptable to the FDA to form the basis of an efficacy claim for a marketing application. Therandomized, double-blind, pivotal Phase III trials will evaluate the efficacy and safety of our product against placebo inapproximately 400 patients with approximately 200 patients enrolled in each trial. The Predecessor Company completed enrollmentof the study and commenced injection of subjects in early 2007. All injections were completed in January 2008 and top line resultsfrom this trial were publically announced in August 2008. The data analysis, including safety data, was publically released inOctober 2008. The related Biologics License Application (“BLA”) was submitted to the FDA in March 2009. In May 2009, thePredecessor Company announced that the FDA had completed its initial review of the Company’s BLA related to its nasolabialfolds/wrinkles product candidate and that the FDA had accepted (or filed) the BLA for full review.On October 9, 2009, the FDA Cellular, Tissue and Gene Therapies Advisory Committee reviewed the Company’snasolabial folds/wrinkles product candidate. The Committee voted 11 “yes” to 3 “no” that the data presented on our productdemonstrated efficacy, and 6 “yes” to 8 “no” that the data demonstrated safety; both for the proposed indication of treatment ofnasolabial folds/wrinkles. The Committee’s recommendations are not binding on the FDA, but the FDA will consider theirrecommendations during their review of our application. The United States Adopted Names (“USAN”) Council adopted the USANname, azficel-T, for our nasolabial folds/wrinkles product candidate on October 28, 2009, and the FDA is currently evaluating aproposed brand name, laViv®.On December 21, 2009, Fibrocell received a Complete Response letter from the FDA related to the BLA for azficel-T, anautologous cell therapy for the treatment of moderate to severe nasolabial folds/wrinkles in adults. A Complete Response letter isissued by the FDA’s Center for Biologics Evaluation and Research (“CBER”) when the review of a file is completed and additionaldata are needed prior to approval. The Complete Response letter requested that Fibrocell Science provide data from ahistopathological study on biopsied tissue samples from patients following injection of azficel-T. The histology study (IT-H-001)will evaluate tissue treated with azficel-T as compared to tissue treated with sterile saline (placebo). The study will also provideinformation about the skin after treatment, including evaluation of collagen and elastin fibrils, and cellular structure of the sampledtissues. The Company submitted a proposed protocol concerning a histopathological study on biopsied samples to the FDA and tothe Company’s Investigational Review Board (“IRB”). The IRB has approved the protocol and the Company received the commentsfrom the FDA on the protocol in May 2010. F19Table of ContentsOn May 13, 2010, the Company announced the initiation of the small histology study of azficel-T, discussed above. Thestudy had a target enrollment of approximately 20 participants from the completed and statistically significant pivotal Phase IIIstudies of azficel-T (IT-R-005 and IT-R-006). The Company announced on July 8, 2010, the completion of enrollment of and firsttreatment visits for participants in its histology study of azficel-T. The second treatment visits for participants enrolled in thehistology study of azficel-T were completed by the end of July. The third treatment visits for participants enrolled in the histologystudy of azficel-T were completed by the end of August.The Complete Response letter also requested finalized Chemistry, Manufacturing and Controls (“CMC”) informationregarding the manufacture of azficel-T as follow-up to discussions that occurred during the BLA review period, as well as revisedpolicies and procedures.The Company announced on December 20, 2010, that it had submitted its complete response to the Complete Response(“CR”) letter issued by the FDA regarding the Company’s BLA for azficel-T. On January 22, 2011, the FDA accepted for review theCompany’s complete response submission. Even though the FDA has accepted the Company’s response for complete evaluation,there is no assurance that it will approve our product. The FDA, under the Prescription Drug User Fee Act (“PDUFA”), has a target sixmonths review window to completely evaluate the Company’s response. The PDUFA date is June 22, 2011.Trading of Common StockThe Predecessor’s common stock ceased trading on the NYSE Amex on May 6, 2009 and in June 2009 the NYSE Amexdelisted the Predecessor’s common stock from listing on the NYSE Amex. Upon the Effective Date, the outstanding common stock ofthe Predecessor Company was cancelled for no consideration. Consequently, the Predecessor’s stockholders prior to the EffectiveDate no longer have any interest as stockholders of the Predecessor Company by virtue of their ownership of the Predecessor’scommon stock prior to the emergence from bankruptcy. On October 21, 2009, the Successor Company was available for trading onthe OTC Bulletin Board under the symbol “FCSC”.Note 2—Basis of PresentationBasis of PresentationIn June 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification 105(“ASC”), Generally Accepted Accounting Principles, which became the single source of authoritative nongovernmental U.S.generally accepted accounting principles (“GAAP”), superseding existing FASB, American Institute of Certified Public Accountants(“AICPA”), Emerging Issues Task Force (“EITF”), and related accounting literature. This pronouncement reorganizes the thousandsof GAAP pronouncements into roughly 90 accounting topics and displays them using a consistent structure. Also included isrelevant Securities and Exchange Commission guidance organized using the same topical structure in separate sections and will beeffective for financial statements issued for reporting periods that end after September 15, 2009. This will have an impact on ourfinancial disclosures since all future references to authoritative accounting literature will be references in accordance with ASC 105.Financial Reporting by Entities in Reorganization under the Bankruptcy CodeOn June 15, 2009 Isolagen, Inc. (“the Predecessor”) and Isolagen’s wholly owned subsidiary, Isolagen Technologies, Inc.(“Isolagen Tech”) (Isolagen and Isolagen Tech are referred as the “Debtors”), each filed a voluntary petition for reorganization underChapter 11 of the United States Bankruptcy Code (the “Bankruptcy Code”) in the United States Bankruptcy Court for the District ofDelaware in Wilmington (the “Bankruptcy Court”) under Case Nos. 09-12072 and 09-12073, respectively. F20Table of ContentsOn August 27, 2009 (the “Confirmation Date”), the Bankruptcy Court entered an order (the “Confirmation Order”)confirming the Debtors’ Joint First Amended Plan of Reorganization dated July 30, 2009, as supplemented by the Plan Supplementdated August 21, 2009 (as so modified and supplemented, the “Plan”). The (“Effective Date”) of the Plan was September 3, 2009.Isolagen and Isolagen Tech emerged from bankruptcy as the reorganized debtors, Fibrocell Science, Inc. (“Fibrocell” or the“Company” or the “Successor”) and Fibrocell Technologies, Inc. (“Fibrocell Tech”), respectively (collectively, the “ReorganizedDebtors”), and the bankruptcy cases remain pending only to reconcile the claims asserted against the Debtors. Fibrocell now operatesoutside of the restraints of the bankruptcy process, free of the debts and liabilities discharged by the Plan.Overall, ASC 852-10, Financial Reporting by Entities in Reorganization under the Bankruptcy Code, (“ASC 852”) appliesto the Company’s financial statements for the periods that the Company operated under the provisions of Chapter 11. ASC 852 doesnot change the application of generally accepted accounting principles in the preparation of financial statements. However, forperiods including and subsequent to the filing of the Chapter 11 petition, ASC 852 does require that the financial statementsdistinguish transactions and events that are directly associated with the reorganization from the ongoing operations of the business.Accordingly, certain revenues, expenses, gains, and losses that were realized or incurred during the Chapter 11 proceedings havebeen classified as “reorganization items, net” on the accompanying consolidated statements of operations.As of September 1, 2009, the Successor Company adopted fresh-start accounting in accordance with ASC 852-10. TheSuccessor Company selected September 1, 2009, as the date to effectively apply fresh-start accounting based on the absence of anymaterial contingencies at the September 3, 2009 effective date and the immaterial impact of transactions between September 1, 2009and September 3, 2009. The adoption of fresh-start accounting resulted in the Successor Company becoming a new entity forfinancial reporting purposes. The Successor Company is a development stage company in accordance with ASC 915, DevelopmentStage Entities. As such, the cumulative to date totals commenced on September 1, 2009 for the Successor Company.Accordingly, the financial statements prior to September 1, 2009 are not comparable with the financial statements forperiods on or after September 1, 2009. References to “Successor” or “Successor Company” refer to the Company on or afterSeptember 1, 2009, after giving effect to the cancellation of Isolagen, Inc. common stock issued prior to the Effective Date, theissuance of new Fibrocell Science, Inc. common stock in accordance with the Plan, and the application of fresh-start accounting.References to “Predecessor” or “Predecessor Company” refer to the Company prior to September 1, 2009. See Note 5 — “Fresh-StartAccounting” in the notes to these Consolidated Financial Statements for further details.For discussions on the results of operations, the Successor Company has combined the results of operations for the eightmonths ended August 31, 2009, with the results of operations for the four months ended December 31, 2009. The combined periodshave been compared to the year ended December 31, 2010. The Successor Company believes that the combined financial resultsprovide management and investors a more meaningful analysis of the Successor Company’s performance and trends for comparativepurposes.Note 3—Going ConcernThe Successor Company emerged from Bankruptcy in September 2009 and continues to operate as a going concern. AtDecember 31, 2010, the Successor Company had cash and cash equivalents of approximately $0.9 million and negative workingcapital of less than $0.1 million. The Successor Company has raised approximately $6.1 million less fees as the result of the issuanceof Series D Preferred Stock and warrants in the period from January 1, 2011 through March 1, 2011. The Company received$0.2 million in subscription receivables from a July financing in mid-March 2011. F21Table of ContentsAs of March 24, 2011, the Company had cash and cash equivalents of approximately $3.4 million and current liabilities ofapproximately $0.6 million. The Company’s current monthly cash run-rate is approximately $1.0 million. The Company is alsoplanning to purchase manufacturing equipment and incur marketing expenditures within the next three months to prepare theCompany for launch post a possible FDA approval. Thus, the Successor Company will need to access the capital markets in the nearfuture in order to fund future operations. There is no guarantee that any such required financing will be available on termssatisfactory to the Successor Company or available at all. These matters create uncertainty relating to its ability to continue as agoing concern. The accompanying consolidated financial statements do not reflect any adjustments relating to the recoverability andclassification of assets or liabilities that might result from the outcome of these uncertainties.Further, if the Successor Company raises additional cash resources in the near future, it may be raised in contemplation ofor in connection with bankruptcy. In the event of a bankruptcy, it is likely that its common stock and common stock equivalents willbecome worthless and our creditors will receive significantly less than what is owed to them.Through December 31, 2010, the Successor Company has been primarily engaged in developing its initial producttechnology. In the course of its development activities, the Company has sustained losses and expects such losses to continuethrough at least 2011. During the year ended December 31, 2010, the Successor Company financed its operations primarily throughits existing cash received from external financings, but as discussed above it now requires additional financing. There is substantialdoubt about the Successor Company’s ability to continue as a going concern.The Successor Company’s ability to complete additional offerings is dependent on the state of the debt and/or equitymarkets at the time of any proposed offering, and such market’s reception of the Successor Company and the offering terms. TheSuccessor Company’s ability to complete an offering is also dependent on the status of its FDA regulatory milestones and its clinicaltrials, and in particular, the status of its indication for the treatment of nasolabial folds/wrinkles and the potential approval of therelated BLA, which cannot be predicted. There is no assurance that capital in any form would be available to the Company, and ifavailable, on terms and conditions that are acceptable.As a result of the conditions discussed above, and in accordance with GAAP, there exists substantial doubt about theSuccessor Company’s ability to continue as a going concern, and its ability to continue as a going concern is contingent, amongother things, upon its ability to secure additional adequate financing or capital in the near future. If the Successor Company does notobtain additional funding, or does not anticipate additional funding, in the near future, it will likely enter into bankruptcy and/orcease operations. Further, if it does raise additional cash resources in the near future, it may be raised in contemplation of or inconnection with bankruptcy. If the Successor Company enters into bankruptcy, it is likely that its common stock and common stockequivalents will become worthless and its creditors, including preferred stock, will receive significantly less than what is owed tothem.Note 4—Summary of Significant Accounting PoliciesUse of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptionsthat affect the reported amounts in the consolidated financial statements and notes. In addition, management’s assessment of theSuccessor Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflowsand outflows. Actual results may differ materially from those estimates.Cash and Cash EquivalentsThe Company considers highly liquid investments with an original maturity of three months or less when purchased to becash equivalents. F22Table of ContentsConcentration of Credit RiskAs of December 31, 2010, the Successor Company maintains the majority of its cash primarily with one major U.S.domestic bank. All of our non-interest bearing cash balances were fully insured at December 31, 2010 due to a temporary federalprogram in effect from December 31, 2010 through December 31, 2012. Under the program, there is no limit to the amount ofinsurance for eligible accounts. Beginning 2013, insurance coverage will revert to $250,000 per depositor at each financialinstitution, and our non-interest bearing cash balances may again exceed federally insured limits. The terms of these deposits are ondemand to minimize risk. The Successor Company has not incurred losses related to these deposits. Cash and cash equivalents ofapproximately $0.1 million, related to Agera and the Successor Company’s Swiss subsidiary, is maintained in two separate financialinstitutions. The Successor Company invests these funds primarily in demand deposit accounts.Allowance for Doubtful AccountsThe Successor Company maintains an allowance for doubtful accounts related to its accounts receivable that have beendeemed to have a high risk of collectability. Management reviews its accounts receivable on a monthly basis to determine if anyreceivables will potentially be uncollectible. One foreign customer represents 88% and 87% of accounts receivable, net, at December31, 2010 and 2009, respectively. Management analyzes historical collection trends and changes in its customer payment patterns,customer concentration, and creditworthiness when evaluating the adequacy of its allowance for doubtful accounts. In its overallallowance for doubtful accounts, the Successor Company includes any receivable balances that are determined to be uncollectible.Based on the information available, management believes the allowance for doubtful accounts is adequate; however, actual write-offsmight exceed the recorded allowance.The allowance for doubtful accounts was $29,280 and $37,098 at December 31, 2010 and 2009, respectively.InventoryAgera purchases the large majority of its inventory from one contract manufacturer. Agera accounts for its inventory on thefirst-in-first-out method. At December 31, 2010, Agera’s inventory of $0.3 million consisted of $0.2 million of raw materials and$0.1 million of finished goods. At December 31, 2009, Agera’s inventory of $0.2 million consisted of $0.2 million of raw materialsand less than $0.1 million of finished goods.Property and equipmentProperty and equipment is carried at cost less accumulated depreciation and amortization. Generally, depreciation andamortization for financial reporting purposes is provided by the straight-line method over the estimated useful life of three years,except for leasehold improvements which are amortized using the straight-line method over the remaining lease term or the life of theasset, whichever is shorter. The cost of repairs and maintenance is charged as an expense as incurred.Intangible assetsIntangible assets are research and development assets related to the Successor Company’s primary study that wasrecognized upon emergence from bankruptcy (see Note 5). Intangibles are tested for recoverability whenever events or changes incircumstances indicate the carrying amount may not be recoverable. An impairment loss, if any, would be measured as the excess ofthe carrying value over the fair value determined by discounted cash flows. There was no impairment of the intangible assets as ofDecember 31, 2010.Revenue recognitionThe Successor Company recognizes revenue over the period the service is performed in accordance with ASC 605,Revenue Recognition (“ASC 605”). In general, ASC 605 requires that four basic criteria must be met before revenue can berecognized: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services rendered, (3) the fee is fixed anddeterminable and (4) collectability is reasonably assured. F23Table of ContentsRevenue from the sale of Agera’s products is recognized upon transfer of title, which is upon shipment of the product tothe customer. The Successor Company believes that the requirements of ASC 605 are met when the ordered product is shipped, as therisk of loss transfers to our customer at that time, the fee is fixed and determinable and collection is reasonably assured. Anyadvanced payments are deferred until shipment.Shipping and handling costsAgera charges its customers for shipping and handling costs. Such charges to customers are presented net of the costs ofshipping and handling, as selling, general and administrative expense, and are not significant to the consolidated statements ofoperations.Advertising costAgera advertising costs are expensed as incurred and include the costs of public relations and certain marketing relatedactivities. These costs are included in selling, general and administrative expenses in the accompanying consolidated statements ofoperations.Research and development expensesResearch and development costs are expensed as incurred and include salaries and benefits, costs paid to third-partycontractors to perform research, conduct clinical trials, develop and manufacture drug materials and delivery devices, and a portion offacilities cost. Research and development costs also include costs to develop manufacturing, cell collection and logistical processimprovements.Clinical trial costs are a significant component of research and development expenses and include costs associated withthird-party contractors. Invoicing from third-party contractors for services performed can lag several months. The Successor Companyaccrues the costs of services rendered in connection with third-party contractor activities based on its estimate of management fees,site management and monitoring costs and data management costs. Actual clinical trial costs may differ from estimated clinical trialcosts and are adjusted for in the period in which they become known.Other Income, NetIn November 2010, we received one grant totaling $0.2 million under the Qualified Therapeutic Discovery Project GrantsProgram. The Qualified Therapeutic Discovery Project Grants Program was included in the healthcare reform legislation, andestablished a one-time pool of $1 billion for grants to small biotechnology companies developing novel therapeutics which showpotential to: (a) result in new therapies that either treat areas of unmet medical need, or prevent, detect, or treat chronic or acutediseases and conditions; (b) reduce long-term health care costs in the United States; or (c) significantly advance the goal of curingcancer within a the 30-year period. There are no matching funding requirements or other requirements necessary to receive thefunding.Warrant LiabilityThe warrants for the Successor Company are measured at fair value and liability-classified under ASC 815, Derivatives andHedging, (“ASC 815”) because the warrants contain “down-round protection” and therefore, do not meet the scope exception fortreatment as a derivative under ASC 815. Since “down-round protection” is not an input into the calculation of the fair value of thewarrants, the warrants cannot be considered indexed to the Company’s own stock which is a requirement for the scope exception asoutlined under ASC 815. The fair value of the warrants is determined using the Black-Scholes option pricing model and is affectedby changes in inputs to that model including our stock price, expected stock price volatility, the contractual term, and the risk-freeinterest rate. The Successor Company will continue to classify the fair value of the warrants as a liability until the warrants areexercised, expire or are amended in a way that would no longer require these warrants to be classified as a liability. F24Table of ContentsPreferred Stock and Derivative LiabilityThe preferred stock has been classified within the mezzanine section between liabilities and equity in its consolidatedbalance sheets in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) because any holder of Series A, Band D Preferred may require the Successor Company to redeem all of its Series A, B or D Preferred in the event of a triggering eventwhich is outside of the control of the Successor Company.The embedded conversion option for the Series A Preferred, Series B Preferred and Series D Preferred has been recorded as aderivative liability under ASC 815 in the Successor’s consolidated balance sheet as of December 31, 2010 and will be re-measured onthe Successor Company’s reporting dates. The fair value of the derivative liability is determined using the Black-Scholes optionpricing model and is affected by changes in inputs to that model including our stock price, expected stock price volatility, thecontractual term, and the risk-free interest rate. The Successor Company will continue to classify the fair value of the embeddedconversion option as a liability until the preferred stock is converted into common stock.Stock-based CompensationThe Successor Company accounts for stock-based awards to employees and non-employees using the fair value basedmethod to determine compensation for all arrangements where shares of stock or equity instruments are issued for compensation. TheSuccessor Company uses a Black-Scholes options-pricing model to determine the fair value of each option grant as of the date ofgrant for expense incurred. The Black-Scholes model requires inputs for risk-free interest rate, dividend yield, volatility and expectedlives of the options. Expected volatility is based on historical volatility of the Company’s competitor’s stock since the PredecessorCompany ceased trading as part of the bankruptcy and emerged as a new entity. The risk-free rate for periods within the contractuallife of the option is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected lives for options grantedrepresents the period of time that options granted are expected to be outstanding and is derived from the contractual terms of theoptions granted. The Successor Company estimates future forfeitures of options based upon expected forfeiture rates.Income taxesAn asset and liability approach is used for financial accounting and reporting for income taxes. Deferred income taxes arisefrom temporary differences between income tax and financial reporting and principally relate to recognition of revenue and expensesin different periods for financial and tax accounting purposes and are measured using currently enacted tax rates and laws. Inaddition, a deferred tax asset can be generated by net operating loss (“NOLs”) carryover. If it is more likely than not that some portionor all of a deferred tax asset will not be realized, a valuation allowance is recognized.In the event the Company is charged interest or penalties related to income tax matters, the Company would record suchinterest as interest expense and would record such penalties as other expense in the consolidated statements of operations. No suchcharges have been incurred by the Company. As of December 31, 2010 and December 31, 2009, the Successor Company had noaccrued interest related to uncertain tax positions.At December 31, 2010 and December 31, 2009, the Company has provided a full valuation allowance for the net deferredtax assets, the large majority of which relates to the future benefit of loss carryovers. In addition, as a result of fresh-start accounting,the Successor Company may be limited by section 382 of the Internal Revenue Service Code. The tax years 2007 through 2010remain open to examination by the major taxing jurisdictions to which we are subject. The deferred tax liability at December 31,2010 and December 31, 2009, relates to the intangible assets recognized upon fresh-start accounting. F25Table of ContentsEarnings (loss) per share dataBasic earnings (loss) per share is calculated based on the weighted average common shares outstanding during the period.Diluted earnings per share (“Diluted EPS’) also gives effect to the dilutive effect of stock options, warrants, restricted stock andconvertible preferred stock calculated based on the treasury stock method.The Predecessor and Successor Company’s potentially dilutive securities consist of potential common shares related tostock options, warrants, restricted stock and convertible preferred stock. Diluted EPS includes the impact of potentially dilutivesecurities except in periods in which there is a loss because the inclusion of the potential common shares would be anti-dilutive. TheCompany does not present diluted earnings per share for periods in which it incurred net losses as the effect is anti-dilutive. Therewere no potentially dilutive securities for the eight months ended August 31, 2009, due to the cancellation of the convertible notesand the cancellation of all the outstanding stock option plans and the last known market price was less than exercise price.Fair Value of Financial InstrumentsThe carrying values of certain of the Successor Company’s financial instruments, including cash equivalents and accountspayable approximates fair value due to their short maturities. The fair values of the Successor Company’s long-term obligations arebased on assumptions concerning the amount and timing of estimated future cash flows and assumed discount rates reflectingvarying degrees of risk. The carrying values of the Successor Company’s long-term obligations approximate their fair values.The fair value of the reorganization value which applies in fresh-start accounting was estimated by applying the incomeapproach and a market approach. This fair value measurement is based on significant inputs that are not observable in the market and,therefore, represents a Level 3 measurement as defined in ASC 820, Fair Value Measurements.Adoption of StandardsIn January 2010, the FASB issued Accounting Standards Update (“ASU”) 2010-06, Fair Value Measurements andDisclosures (Topic 820): “Improving Disclosures about Fair Value Measurements” (“ASU 2010-06”), which amends the existing fairvalue measurement and disclosure guidance currently included in ASC Topic 820, “Fair Value Measurements and Disclosures,” torequire additional disclosures regarding fair value measurements. Specifically, ASU 2010-06 requires entities to disclose the amountsof significant transfers between Level 1 and Level 2 of the fair value hierarchy and the reasons for these transfers, the reasons for anytransfer in or out of Level 3 and information in the reconciliation of recurring Level 3 measurements about purchases, sales, issuancesand settlements on a gross basis. In addition, ASU 2010-06 also clarifies the requirement for entities to disclose information aboutboth the valuation techniques and inputs used in estimating Level 2 and Level 3 fair value measurements. ASU 2010-06 is effectivefor interim and annual reporting periods beginning after December 15, 2009, except for additional disclosures related to Level 3 fairvalue measurements, which are effective for fiscal years beginning after December 15, 2010. The adoption of ASU 2010-06 did notimpact the Company’s consolidated financial statements or results of operations.In September 2009, the FASB issued ASU 2009-13, Revenue Recognition (Topic 605): “Multiple-Deliverable RevenueArrangements” (“ASU 2009-13”), which requires companies to allocate revenue in arrangements involving multiple deliverablesbased on the estimated selling price of each deliverable when such deliverables are not sold separately either by the company orother vendors. ASU 2009-13 eliminates the requirement that all undelivered elements must have objective and reliable evidence offair value before a company can recognize the portion of the overall arrangement fee that is attributable to items that already havebeen delivered. As a result, the new guidance may allow some companies to recognize revenue on transactions that involve multipledeliverables earlier than under current requirements. ASU 2009-13 is effective for revenue arrangements entered into or materiallymodified in fiscal years beginning on or after June 15, 2010. Early adoption is permitted at the beginning of a company’s fiscal year.The Company expects to adopt ASU 2009-13 on January 1, 2011 and does not expect ASU 2009-13 to have a material impact on itsconsolidated financial statements. F26Table of ContentsNote 5—Fresh-Start AccountingOn September 1, 2009, the Successor Company adopted fresh-start accounting upon the emergence of bankruptcy inaccordance with ASC 852-10, Reorganization. Fresh-start accounting results in the Company becoming a new entity for financialreporting purposes. Accordingly, the Company’s consolidated financial statements for periods prior to September 1, 2009 are notcomparable to consolidated financial statements presented on or after September 1, 2009. The Company selected September 1, 2009,as the date to apply fresh-start accounting based on the absence of any material contingencies at the September 3, 2009 effective dateand the immaterial impact of transactions between September 1, 2009 and September 3, 2009.Under ASC 852-10, the Successor Company must determine a value to be assigned to the equity of the emerging companyas of the date of the adoption of fresh-start accounting. The Successor Company obtained an independent appraisal to value theequity and it served as the fair market value of the emerging Company’s equity.Fresh-start accounting reflects the value of the Successor Company as determined in the confirmed Plan. Under fresh-startaccounting, the Successor Company’s assets values are remeasured and allocated in conformity with ASC 805-20, BusinessCombinations, Identifiable Assets and Liabilities, and Any Noncontrolling Interest. Fresh-start accounting also requires that allliabilities should be stated at fair value. The portion of the reorganization value which was attributed to identified intangible assetswas $6,340,656. This value is related to research and development assets that are not subject to amortization. In accordance with ASC805-20, this amount is reported as intangibles in the consolidated balance sheets, and is not being amortized.Note 6—Liabilities Subject to Compromise and Reorganization ItemsLiabilities subject to compromise refers to pre-petition obligations that were impacted by the Chapter 11 reorganizationprocess. For further information regarding the discharge of liabilities subject to compromise, see Note 5- “Fresh-Start Accounting inthe notes of these Financial Statements. As of December 31, 2010, there were no liabilities subject to compromise.The Company incurred certain professional fees and other expenses directly associated with the bankruptcy proceedings.In addition, the Company has made adjustments to the carrying value of certain prepetition liabilities. Such costs and adjustments areclassified as “reorganization items, net” and are presented separately in the unaudited consolidated statements of operations. For theyear ended December 31, 2010, for the four months ended December 31, 2009 and for the eight months ended December 31, 2009,the following have been incurred: Successor Successor Predecessor Year ended Four months ended Eight months ended December 31, 2010 December 31, 2009 August 31, 2009 Professional fees expense $(13,150) $(13,825) $(533,271)Debt issuance costs related to DIP facility — — (295,757)Other debt issuance costs — — (280,964)Gain (loss) on discharge of liabilities subject to compromise 16,453 (58,652) 74,648,976 Total reorganization items, net $3,303 $(72,477) $73,538,984 F27Table of ContentsThe $74.6 million gain from discharge of liabilities subject to compromise is the result of the settlement of 3.5%Subordinated Notes in exchange for $6.0 million in Notes Payable and 3,960,000 shares of the Successor company, Debtor-in-Possession Credit Facility and Prepetition Secured Loan in exchange for 7,320,000 shares of the Successor Company’s commonstock and unsecured claims in exchange for 120,000 shares. On the Effective Date, all stock option plans of the Predecessor Companywere cancelled.Cash paid for reorganization items during the year ended December 31, 2010 and December 31, 2009 was less than$0.1 million and $0.6 million, respectively. Professional fees include financial, legal and valuation services directly associated withthe reorganization process.Note 7—Agera Laboratories, Inc.On August 10, 2006, the Predecessor Company acquired 57% of the outstanding common shares of Agera. Agera is askincare company that has proprietary rights to a scientifically-based advanced line of skincare products. Agera markets its productprimarily in the United States and Europe. The results of Agera’s operations and cash flows have been included in the consolidatedfinancial statements from the date of the acquisition. The assets and liabilities of Agera have been included in the consolidatedbalance sheets since the date of the acquisition.Note 8—Fair Value MeasurementsThe Company adopted the accounting guidance on fair value measurements for financial assets and liabilities measured ona recurring basis. The guidance requires fair value measurements be classified and disclosed in one of the following three categories: • Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestrictedassets or liabilities; • Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, forsubstantially the full term of the asset or liability. • Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement andunobservable (i.e., supported by little or no market activity).The following fair value hierarchy table presents information about each major category of the Company’s financial assets andliability measured at fair value on a recurring basis as of December 31, 2010 and 2009: Fair value measurement using Significant Significant Quoted prices in other unobservable active markets observable inputs (Level 1) inputs (Level 2) (Level 3) Total At December 31, 2010 Cash and cash equivalents $867,738 $— $— $867,738 Liabilities Warrant liability $— $— $8,171,518 $8,171,518 Derivative liability — — 2,120,360 2,120,360 Total $— $— $10,291,878 $10,291,878 F28Table of Contents Fair value measurement using Significant Significant Quoted prices in other unobservable active markets observable inputs (Level 1) inputs (Level 2) (Level 3) Total At December 31, 2009 Cash and cash equivalents $1,362,488 $— $— $1,362,488 Liabilities Warrant liability $— $— $635,276 $635,276 The reconciliation of warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is asfollows: Warrant Liability Balance at January 1, 2009 $— Issuance of additional warrants 316,192 Change in fair value of warrant liability 319,084 Balance at December 31, 2009 635,276 Issuance of additional warrants 7,071,010 Change in fair value of warrant liability 465,232 Balance at December 31, 2010 $8,171,518 The fair value of the warrant liability is based on Level 3 inputs. For this liability, the Company developed its ownassumptions that do not have observable inputs or available market data to support the fair value. See note 15 for further discussionof the warrant liability.The reconciliation of derivative liability measured at fair value on a recurring basis using unobservable inputs (Level 3) isas follows: Derivative Liability Balance at December 31, 2009 $— Record fair value of derivative liability 2,120,360 Balance at December 31, 2010 $2,120,360 The fair value of the derivative liability is based on Level 3 inputs. For this liability, the Company developed its ownassumptions that do not have observable inputs or available market data to support the fair value. See note 14 for further discussionof the derivative liability. F29Table of ContentsNote 9—Property and EquipmentAs of December 31, 2010 and 2009, property and equipment consisted of the following: December 31, December 31, 2010 2009 Lab equipment $18,685 $— Computer equipment and software 10,989 — 29,674 — Less: Accumulated depreciation and amortization (8,085) — Property and equipment, net $21,589 $— Depreciation expense was $8,085 for the year ending December 31, 2010.Note 10—Accrued ExpensesAccrued expenses consist of the following: December 31, December 31, 2010 2009 Accrued professional fees $413,384 $147,410 Accrued compensation 7,076 7,208 Accrued interest — 246,578 Dividend on preferred stock payable 191,417 42,740 Accrued other 177,605 100,324 Accrued expenses $789,482 $544,260 Note 11—DebtThe Successor Company’s outstanding long-term debt at December 31, 2010 and December 31, 2009 consists of$7.3 million and $6 million, respectively, of 12.5% Unsecured Promissory Notes (“New Notes”). Unpaid interest has been accreted tothe principal at a rate of 15%. The New Notes have the following features: (1) 12.5% interest payable quarterly in cash or, at theSuccessor Company’s option, 15% payable in kind by capitalizing such unpaid amount and adding it to the principal as of the date itwas due; (2) maturing June 1, 2012; (3) at any time prior to the maturity date, the Successor Company may redeem any portion of theoutstanding principal of the New Notes in Cash at 125% of the stated face value of the New Notes. There is a mandatory redemptionfeature that requires the Successor Company to redeem all outstanding new notes if: (1) the Successor Company successfullycompletes a capital campaign raising in excess of $10 million; or (2) the Successor Company is acquired by, or sell a majority staketo, an outside party. The current debt of $57K is due in 2011 and the promissory note is due June 2012.Total debt is comprised of the following: December 31, December 31, 2010 2009 Current debt $56,911 $47,795 Total Current Debt 56,911 47,795 Promissory Note 7,290,881 6,000,060 Total debt $7,347,792 $6,047,855 Note 12—Income TaxesFibrocell Science, Inc. and Fibrocell Technologies, Inc. file a consolidated U.S. Federal income tax return. During the thirdquarter of 2006, the Company acquired a 57% interest in Agera (see Note 7 — “Agera Laboratories, Inc.”). Agera files a separate U.S.Federal income tax return. The Company’s foreign subsidiaries, which comprise loss from discontinued operations, file income taxreturns in their respective jurisdictions. The geographic source of loss from continuing operations is the United States. F30Table of ContentsThe components of the income tax expense/(benefit) related to continuing operations, are as follows: Successor Successor Predecessor Eight Four months Months Year ended ended ended December 31, December 31, August 31, 2010 2009 2009 U.S. Federal: Current $— $— $— Deferred — — — U.S. State: Current — — — Deferred — — — $— $— $— The reconciliation between income taxes/(benefit) at the U.S. federal statutory rate and the amount recorded in theaccompanying consolidated financial statements is as follows: Successor Successor Predecessor Four months Eight months Year ended ended ended December 31, December 31, August 31, 2010 2009 2009 Tax expense/(benefit) at U.S. federal statutory rate $(4,490,789) $(1,757,838) $23,058,084 Increase/(decrease) in domestic valuation allowance 5,077,136 2,303,065 (30,209,991)State income taxes/(benefit) before valuation allowance, net of federalbenefit (789,894) (357,619) 4,690,990 Deferred tax impact of reorganization — (172,395) 2,261,359 Other 203,547 (15,213) 199,558 $— $— $— The components of the Successor Company’s net deferred tax liabilities at December 31, 2010 and 2009 are as follows: December 31, December 31, 2010 2009 Deferred tax liabilities: Intangible assets $2,500,000 $2,500,000 Total deferred tax liabilities $2,500,000 $2,500,000 Deferred tax assets: Loss carryforwards $38,003,210 $32,942,543 Property and equipment 1,460,890 1,559,631 Accrued expenses and other 1,285,007 1,551,822 Stock compensation 930,103 548,078 Total deferred tax assets 41,679,210 36,602,074 Less: valuation allowance (41,679,210) (36,602,074)Total deferred tax assets $— $— Net deferred tax liabilities $2,500,000 $2,500,000 F31Table of ContentsAs of December 31, 2010, the Company had generated U.S. net operating loss carryforwards of approximately$81.6 million which expire from 2026 to 2030 and net loss carryforwards in certain non-US jurisdictions of approximately$24.4 million. The U.S. net operating loss carryforwards were reduced by approximately $74 million as a result of the Company’semergence from bankruptcy (see Note 6 — “Liabilities Subject to Compromise and Reorganization Items”). The net operating losscarryforwards are available to reduce future taxable income. However, a, change in ownership, as defined by federal income taxregulations, could significantly limit the Company’s ability to utilize its U.S. net operating loss carryforwards. Additionally, becausefederal tax laws limit the time during which the net operating loss carryforwards may be applied against future taxes, if the Companyfails to generate taxable income prior to the expiration dates it may not be able to fully utilize the net operating loss carryforwards toreduce future income taxes. As the Company has had cumulative losses and there is no assurance of future taxable income, valuationallowances have been recorded to fully offset the deferred tax asset at December 31, 2010 and 2009. The valuation allowanceincreased by $5.1 million during 2010, due to the impact from the current year net loss, and decreased by $27.3 million during 2009,due primarily to the impact from the Company’s reorganization described above and net loss in that period.Note 13—Commitments and ContingenciesLegal ProceedingsAs of December 31, 2010, there were no legal proceedings.Employment AgreementsOn February 1, 2010, the Company entered into an employment agreement with Mr. Pernock pursuant to whichMr. Pernock agreed to serve as Chief Executive Officer of the Company for an initial term ending February 1, 2013, which may berenewed for an additional one-year term by mutual agreement. The agreement provides for an annual salary of $450,000. Mr. Pernockis entitled to receive an annual bonus each year, payable subsequent to the issuance of the Company’s final audited financialstatements, but in no case later than 120 days after the end of its most recently completed fiscal year. The final determination on theamount of the annual bonus will be made by the Board of Directors (or the Compensation Committee of the Board of Directors, ifsuch committee has been formed), based on criteria established by the Board of Directors (or the Compensation Committee of theBoard of Directors, if such committee has been formed). The targeted amount of the annual bonus shall be 60% of Mr. Pernock’s basesalary, although the actual bonus may be higher or lower.Under the agreement, Mr. Pernock was granted a ten-year option to purchase 1,650,000 shares at an exercise price per shareequal to the closing price of the Company’s common stock on the date of execution of the agreement, or February 1, 2010. Theoptions vest as follows: (i) 250,000 shares upon execution of the agreement; (ii) 100,000 shares upon the closing of a strategicpartnership or licensing deal with a major partner that enables the Company to significantly improve and/or accelerate its capabilitiesin such areas as research, production, marketing and/or sales and enable the Company to reach or exceed its major businessmilestones within the Company’s strategic and operational plans, provided Mr. Pernock is the CEO on the closing date of suchpartnership or licensing deal (the determination of whether any partnership or licensing deal meets the foregoing criteria will be madein good faith by the Board upon the closing of such partnership or licensing deal); and (iii) 1,300,000 shares in equal 1/36thinstallments (or 36,111 shares per installment) monthly over a three-year period, provided Executive is the CEO on each vesting date.The vesting of all options set forth above shall accelerate upon a “change in control” as defined in the agreement, providedMr. Pernock is employed by the Company within 60 days prior to the date of such change in control. F32Table of ContentsIf Mr. Pernock’s employment is terminated at the Company’s election at any time, for reasons other than death, disability,cause (as defined in the agreement) or a voluntary resignation, or by Mr. Pernock for good reason (as defined in the agreement),Mr. Pernock shall be entitled to receive severance payments equal to twelve months of Mr. Pernock’s base salary and of the premiumsassociated with continuation of Mr. Pernock’s benefits pursuant to COBRA to the extent that he is eligible for them following thetermination of his employment; provided that if anytime within eighteen months after a change in control either (i) Mr. Pernock isterminated, at the Company’s election at any time, for reasons other than death, disability, cause or voluntary resignation, or(ii) Mr. Pernock terminates the agreement for good reason, Mr. Pernock shall be entitled to receive severance payments equal to:(1) two years of Mr. Pernock’s base salary, (2) Mr. Pernock’s most recent annual bonus payment, and (3) the premiums associated withcontinuation of Mr. Pernock’s benefits pursuant to COBRA to the extent that he is eligible for them following the termination of hisemployment for a period of one year after termination. All severance payments shall be made in a lump sum within ten business daysof Mr. Pernock’s execution and delivery of a general release of the Company, its parents, subsidiaries and affiliates and each of itsofficers, directors, employees, agents, successors and assigns in a form acceptable to the Company. If severance payments are beingmade, Mr. Pernock has agreed not to compete with the Company until twelve months after the termination of his employment.On August 24, 2010, the Company entered into an amended and restated employment agreement with Mr. Declan Daly,which replaced and terminated his prior employment agreement with the Company, pursuant to which Mr. Daly agreed to serve asChief Operating Officer and Chief Financial Officer of the Company for an initial term ending August 24, 2013, which may berenewed for an additional one-year term by mutual agreement. The agreement provides for an annual salary of $300,000. Mr. Daly isentitled to receive an annual bonus each year, payable subsequent to the issuance of the Company’s final audited financialstatements, but in no case later than 120 days after the end of its most recently completed fiscal year. The final determination on theamount of the annual bonus will be made by the Board of Directors (or the Compensation Committee of the Board of Directors, ifsuch committee has been formed), based on criteria established by the Board of Directors (or the Compensation Committee of theBoard of Directors, if such committee has been formed). The targeted amount of the annual bonus shall be 50% of Mr. Daly’s basesalary, although the actual bonus may be higher or lower.Under the agreement, Mr. Daly was granted a ten-year option to purchase 400,000 shares at an exercise price per shareequal to the closing price of the Company’s common stock on the date of execution of the agreement, or $0.55 per share. The optionsvest as follows: (i) 40,000 shares upon execution of the agreement; and (ii) 360,000 shares in equal 1/36th installments (or 10,000shares per installment) monthly over a three-year period, provided Mr. Daly is the COO or CFO on each vesting date. The vesting ofall options set forth above shall accelerate upon a “change in control” as defined in the agreement, provided Mr. Daly is employed bythe Company within 60 days prior to the date of such change in control.Mr. Daly is entitled to receive a one-time bonus in the amount of $50,000 (the “Milestone Bonus”) upon the FDA’sapproval of the Company’s Biologics License Application filing, provided that Mr. Daly is the CFO or COO at the time of said event.If Mr. Daly’s employment is terminated at the Company’s election at any time, for reasons other than death, disability,cause (as defined in the agreement) or a voluntary resignation, or by Mr. Daly for good reason (as defined in the agreement), Mr. Dalyshall be entitled to receive severance payments equal to twelve months of Mr. Daly’s base salary and of the premiums associated withcontinuation of Mr. Daly’s benefits pursuant to COBRA to the extent that he is eligible for them following the termination of hisemployment; provided that if anytime within eighteen months after a change in control either (i) Mr. Daly is terminated, at theCompany’s election at any time, for reasons other than death, disability, cause or voluntary resignation, or (ii) Mr. Daly terminatesthe agreement for good reason, Mr. Daly shall be entitled to receive severance payments equal to: (1) two years of Mr. Daly’s basesalary, (2) Mr. Daly’s most recent annual bonus payment, and (3) the premiums associated with continuation of Mr. Daly’s benefitspursuant to COBRA to the extent that he is eligible for them following the termination of his employment for a period of one yearafter termination. All severance payments shall be made in a lump sum within ten business days of Mr. Daly’s execution and deliveryof a general release of the Company, its parents, subsidiaries and affiliates and each of its officers, directors, employees, agents,successors and assigns in a form acceptable to the Company. If severance payments are being made, Mr. Daly has agreed not tocompete with the Company until twelve months after the termination of his employment. F33Table of ContentsConsulting AgreementsIn June 2010, we entered into two consulting agreements with two individuals. We issued the two consultants options topurchase 150,000 shares each. The options have an expiration date five years from the date of issuance and an exercise price of $0.93per share.In September 2010, we entered into a consulting agreement with one individual and issued the consultant options topurchase 120,000 shares. The options have an expiration date five years from the date of issuance and an exercise price of $0.59 pershare.Effective upon our exit from bankruptcy on September 3, 2009, we entered into a consultant agreement, pursuant to whichDr. Langer agreed to provide consulting services to us, including serving as a scientific advisor. The agreement has a one year term,provided that either party may terminate the agreement on 30 days notice. The agreement provides Dr. Langer annual compensationof $50,000.In October 2009, we entered into two consulting agreements with two individuals. We issued the two consultants optionsto purchase 200,000 shares and 150,000 shares, respectively. The options have an expiration date five years from the date of issuanceand an exercise price of $0.75 per share.In December 2009, we entered into a consulting agreement with one individual and issued the consultant options topurchase 100,000 shares. The options have an expiration date five years from the date of issuance and an exercise price of $1.25 pershare.LeasesThe Company has entered into a lease for office, warehouse and laboratory facilities in Exton, Pennsylvania under a thirdparty non-cancelable operating lease through 2013. Future minimum lease commitments at December 31, 2010 are as follows: Year Ending December 31, 2011 $1,194,350 2012 1,194,350 2013 298,588 Total $2,687,288 For each of the years ended December 31, 2010 and 2009, rental expense totaled $1.4 million.In April 2005, the Company entered into a non-cancelable three year operating lease for approximately 86,500 square feetin Exton, Pennsylvania. This facility houses members of the senior management team, quality and manufacturing personnel, and thecorporate finance department. The Company began constructing a production line in a portion of this facility in anticipation ofeventual FDA approval. The facility was completed during September 2005. This production line is expected to be utilized for theproduction of clinical supplies. During 2007, the Company extended the lease through March 31, 2013. Lease expense is recognizedon a straight-line basis through March 31, 2013. The Exton, Pennsylvania minimum lease payments are included in the futureminimum lease commitments table above through March 31, 2013.Note 14—EquityRedeemable Preferred stockAs of December 31, 2010 the number of Redeemable Preferred stock (“Preferred”) outstanding, with a par value of $0.001per share and a stated value of $1,000 per share is as follows: Preferred stock Series A 2,886 Preferred stock Series B 4,640 Preferred stock Series D 1,645 Total 9,171 F34Table of ContentsTerms of Redeemable Preferred stockDividends; Rank; LiquidationHolders of the Preferred stock Series A (“Series A Preferred’), Preferred stock Series B (“Series B Preferred’) and Preferredstock Series D (“Series D Preferred’) are entitled to receive cumulative dividends at the rate per share (as a percentage of the statedvalue per share) of 6% per annum (subject to increase in certain circumstances), payable quarterly in arrears on January 15, April 15,July 15 and October 15. The dividends are payable in cash, or at our option, in duly authorized, validly issued, fully paid and non-assessable shares of common stock equal to 110% of the cash dividend amount payable on the dividend payment date, or acombination thereof; provided that we may not pay the dividends in shares of common stock unless we meet certain conditionsdescribed in the Certificate of Designation, including that the resale of the shares has been registered under the Securities Act. If wepay the dividend in shares of common stock, the common stock will be valued for such purpose at 80% of the average of the volumeweighted average price for the 10 consecutive trading days ending on the trading day that is immediately prior to the dividendpayment date.The Series A Preferred, Series B Preferred and Series D Preferred ranks senior to all shares of Company common stock(“Common Stock”). The Series D Preferred ranks junior to the Company’s Series A Preferred and Series B Preferred.Upon our liquidation, dissolution or winding-up, whether voluntary or involuntary, the holders of the Series A Preferred,Series B Preferred and Series D Preferred shall be entitled to receive out of our assets, whether capital or surplus, an amount equal tothe stated value of the common stock, plus any accrued and unpaid dividends thereon and any other fees or liquidated damages thendue and owing thereon under the Certificate of Designation, for each share of Series A Preferred, Series B Preferred and Series DPreferred before any distribution or payment shall be made to the holders of any junior securities, and if our assets are insufficient topay in full such amounts, then the entire assets to be distributed to the holders of the Series A Preferred, Series B Preferred andSeries D Preferred shall be ratably distributed among the holders in accordance with the respective amounts that would be payable onsuch shares if all amounts payable thereon were paid in full.Conversion; Conversion Price; Forced Conversion; Optional RedemptionEach share of Series A Preferred, Series B Preferred and Series D Preferred is convertible into a number of shares of commonstock equal to (1) the stated value of the share ($1,000), divided by (2) $0.50 (as a result of the December 2010 Series D Preferredfinancing), subject to adjustment as discussed below. We refer to this price as the Conversion Price.With certain exceptions, if, at any time while the Series A Preferred, Series B Preferred and Series D Preferred isoutstanding, we sell or grant any option to purchase or sell or grant any right to reprice, or otherwise dispose of or issue (or announceany sale, grant or any option to purchase or other disposition), any common stock or common stock equivalents at an effective priceper share that is lower than the then Conversion Price, then the Conversion Price will be reduced to equal the lower price (“down-round” provision). The Conversion Price is also subject to proportional adjustment in the event of any stock split, stock dividend,reclassification or similar event with respect to the common stock.Commencing six months from the date of the agreement pursuant to which we issued the Series A Preferred, Series BPreferred and Series D Preferred, if the volume weighted average price for each of any 20 consecutive trading days exceeds 200% ofthe then effective Conversion Price and various other equity conditions are satisfied (including that the resale of the sharesunderlying the Series A Preferred, Series B Preferred and Series D Preferred, has been registered under the Securities Act), upon30 days notice, the Series A Preferred, Series B Preferred and Series D Preferred plus all accrued and unpaid dividends willautomatically convert into shares of common stock. F35Table of ContentsCommencing two years from the date of the agreement pursuant to which we issued the Series A Preferred, Series BPreferred and Series D Preferred, upon 30 days notice and provided various other equity conditions are satisfied (including that theresale of the shares underlying the Series A Preferred, Series B Preferred and Series D Preferred has been registered under the SecuritiesAct), we may redeem some or all of the then outstanding Series A Preferred, Series B Preferred and Series D Preferred for cash in anamount equal to the 150% of the stated value of the Series A Preferred, Series B Preferred and Series D Preferred.VotingThe holders of the Series A Preferred, Series B Preferred and Series D Preferred have no voting rights except with respect tospecified matters affecting the rights of the Series A Preferred, Series B Preferred and Series D Preferred.Negative CovenantsAs long as any shares of Series A Preferred, Series B Preferred and Series D Preferred are outstanding, we may not, directlyor indirectly: (a) amend our charter documents in any manner that materially and adversely affects any rights of the holders of theSeries A Preferred, Series B Preferred and Series D Preferred; (b) pay cash dividends or distributions on our junior securities (includingthe common stock); or (c) enter into any transaction with any affiliate of ours which would be required to be disclosed in any publicfiling, unless such transaction is made on an arm’s-length basis and expressly approved by a majority of our disinterested directors.Triggering EventsIn the event of a Triggering Event (as defined in the Certificate of Designation and described below), any holder ofSeries A Preferred, Series B Preferred and Series D Preferred may require us to redeem all of its Series A Preferred, Series B Preferredand Series D Preferred, at a redemption price equal to the greater of (a) 130% of the stated value and (b) the product of (i) the volumeweighted average price on the trading day immediately preceding the date of the Triggering Event and (ii) the stated value dividedby the then Conversion Price, plus all accrued but unpaid dividends thereon and all liquidated damages and other costs, expenses oramounts due in respect of the Series A Preferred, Series B Preferred and Series D Preferred. Triggering Events include, among otherthings, bankruptcy related events, change of control transactions (as defined in the Certificate of Designation), and various types offailures to perform under, and breaches of, the transaction documents.Preferred Stock Series AIn October 2009, the Successor Company completed an offering of Series A Preferred, Class A Warrants and Class BWarrants (the “October 2009 Offering”). Each of the foregoing securities were subject to the “down-round” protection, whichprovisions require the lowering of the conversion price or exercise price, as applicable, to the purchase price in the recentDecember 2010 Series D Preferred offering, or $0.50, and with respect to the warrants, the number of shares issuable under thewarrants issued in the October 2009 Offering were proportionately increased such that the aggregate exercise price payable, aftertaking into consideration the decrease in exercise price, is now equal to the aggregate exercise price prior to such adjustment. Thepreferred stock has been classified within the mezzanine section between liabilities and equity in its consolidated balance sheets inaccordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) because any holder of Series A Preferred may requirethe Successor Company to redeem all of its Series A Preferred in the event of a triggering event which is outside of the control of theSuccessor Company. After giving effect to this anti-dilution provision, as of December 31, 2010, there will be 5,772,000 shares ofCommon Stock underlying the Series A Preferred, Class A warrants to purchase 1,624,996 shares of Common Stock at an exerciseprice of $0.50 per share, Class B warrants to purchase 1,624,996 shares of Common Stock at an exercise price of $0.50 per share andco-placement warrants to purchase 650,000 shares of Common Stock at an exercise price of $0.50 per share.Holders of the Series A Preferred are entitled to receive cumulative dividends at the rate per share of 6% per annum,payable quarterly in arrears on January 15, April 15, July 15 and October 15, beginning on April 15, 2010. As of December 31, 2010,$92,404 was accrued for dividends payable. F36Table of ContentsPreferred Stock Series BIn 2010, the Successor Company completed an offering of Series B Preferred and warrants (the “Warrants”). Each of theforegoing securities were subject to the “down-round” protection, which provisions require the lowering of the conversion price orexercise price, as applicable, to the purchase price in the recent December 2010 Series D offering, or $0.50, and with respect to thewarrants, the number of shares issuable under the warrants issued in the 2010 Offerings were proportionately increased such that theaggregate exercise price payable, after taking into consideration the decrease in exercise price, is now equal to the aggregate exerciseprice prior to such adjustment. The preferred stock has been classified within the mezzanine section between liabilities and equity inits consolidated balance sheets in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) because any holderof Series B Preferred may require the Successor Company to redeem all of its Series B Preferred in the event of a triggering eventwhich is outside of the control of the Successor Company.The Successor Company records accrued dividends at a rate of 6% per annum on the Series B Preferred. The SuccessorCompany records accrued dividends at a rate of 6% per annum on the Series B Preferred. As of December 31, 2010, $96,581 isaccrued for dividends payable.The details of the 2010 Preferred Stock Series B financing are as follows:• In the third and fourth quarter of 2010, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”)with certain accredited investors (the “Purchasers”), pursuant to which the Company agreed to sell to the Purchasers in theaggregate: (i) 4,640 shares of Series B Preferred, with a par value of $0.001 per share and a stated value of $1,000 per shareSeries B Preferred, and (ii) the Warrants to purchase 7,733,334 shares of Common Stock at an exercise price of $0.8054 pershare. As of December 31, 2010, the Company had not received $210,000 in subscription proceeds representing 210 sharesSeries B Preferred and Warrants to purchase 350,000 shares. Upon receipt of these subscription proceeds, the Company willissue the foregoing securities.• The aggregate purchase price for the third and fourth quarter 2010 Series B Preferred financing paid by the Purchasers for theSeries B Preferred and the Warrants was $4,430,000 (representing $1,000 for each share of Series B Preferred together with theWarrants and adjusted for subscription receivable of $210,000). The Company used the proceeds for working capital purposes.• Viriathus Capital LLC and John Carris Investments LLC were co-placement agents for the Transaction, and received, in theaggregate, cash compensation of $354,400 and warrants to purchase 590,657 (adjusted for subscription receivable of $210,000)shares of Common Stock at an exercise price of $0.60 per share.• As a result of the December 2010 Series D Preferred Stock transaction the shares and warrants were repriced to $0.50 per share.After giving effect to this anti-dilution provision, as of December 31, 2010, there will be 9,280,000 shares of Common Stockunderlying the Series B Preferred, warrants to purchase 12,456,853 shares of Common Stock at an exercise price of $0.50 pershare and co-placement warrants to purchase 708,789 shares of Common Stock at an exercise price of $0.50 per share.Preferred Stock Series DOn December 15, 17 and 27, 2010, the Successor Company completed a private placement of securities of Series DPreferred and warrants. Each of the foregoing securities were subject to the “down-round” protection and if at any time while theSeries D Preferred is outstanding, we sell or grant any option to purchase or sell or grant any right to reprice, or otherwise dispose ofor issue (or announce any sale, grant or any option to purchase or other disposition), any common stock or common stock equivalentsat an effective price per share that is lower than the then Conversion Price, then the Conversion Price will be reduced to equal thelower price. The preferred stock has been classified within the mezzanine section between liabilities and equity in its consolidatedbalance sheets in accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”) because any holder of Series DPreferred may require the Successor Company to redeem all of its Series D Preferred in the event of a triggering event which is outsideof the control of the Successor Company. F37Table of ContentsThe Successor Company records accrued dividends at a rate of 6% per annum on the Series D Preferred. The SuccessorCompany records accrued dividends at a rate of 6% per annum on the Series D Preferred. As of December 31, 2010, $2,432 is accruedfor dividends payable.The details of the 2010 Series D Preferred financing are as follows:• 1,645 shares of Series D Preferred, with a par value of $0.001 per share and a stated value of $1,000 per share and (ii) warrants topurchase 3,290,000 shares of Common Stock at an exercise price of $0.50 per share.• The aggregate purchase price paid by the Purchasers for the Series D Preferred and the Warrants was $1,645,000 (representing$1,000 for each share of Series D Preferred together with Warrants).• The placement agents for the Transactions received cash compensation of $131,600 and warrants to purchase 263,200 shares ofCommon Stock at an exercise price of $0.50 per share (assuming all subscription proceeds are received in the Transactions).Conversion option of Redeemable Preferred stockThe embedded conversion option for the Series A Preferred, Series B Preferred and Series D Preferred has been recorded as aderivative liability under ASC 815 in the Successor’s consolidated balance sheet as of December 31, 2010 and will be re-measured onthe Successor Company’s reporting dates. The fair value of the derivative liability is determined using the Black-Scholes optionpricing model and is affected by changes in inputs to that model including our stock price, expected stock price volatility, thecontractual term, and the risk-free interest rate. The Successor Company will continue to classify the fair value of the embeddedconversion option as a liability until the preferred stock is converted into common stock.The embedded conversion option for the Series A Preferred, Series B Preferred and Series D Preferred was valued at$2,120,360 at December 31, 2010 at fair value using the Black-Scholes option pricing model. The fair market value of the derivativeliability was computed using the Black-Scholes option-pricing model with the following weighted average assumptions: December 31, 2010 Expected life (years) 1.6 years Interest rate 1.6%Dividend yield — Volatility 63%Common Stock OfferingOn March 2, 2010, the Company entered into a Securities Purchase Agreement with certain accredited investors, pursuantto which the Company sold to the Purchasers in the aggregate 5,076,664 shares of common stock at a purchase price of $0.75 pershare. Each Purchaser also received a warrant to purchase the same number of shares of Common Stock acquired in the offering at anexercise price of $0.98 per share.The aggregate purchase price paid by the Purchasers for the common stock and the warrants was $3,807,500. TheCompany used the proceeds for working capital purposes.Viriathus Capital LLC and John Carris Investments LLC were co-placement agents for the transaction, and received cashcompensation of $304,600 and warrants to purchase 406,133 shares of common stock at an exercise price of $0.75 per share upon theclosing. F38Table of ContentsEach of the foregoing securities were subject to the “down-round” protection and if at any time while the Common Stockis outstanding, we sell or grant any option to purchase or sell or grant any right to reprice, or otherwise dispose of or issue (orannounce any sale, grant or any option to purchase or other disposition), any common stock or common stock equivalents at aneffective price per share that is lower than the then Conversion Price, then the Conversion Price will be reduced to equal the lowerprice. As of result of the December 2010 Series D Preferred Stock transaction the Warrants were repriced to $0.50 per share. Aftergiving effect to this anti-dilution provision, as of December 31, 2010, there will be Warrants to purchase 9,950,261 shares ofCommon Stock at an exercise price of $0.50 per share and co-placement warrants to purchase 609,200 shares of Common Stock at anexercise price of $0.50 per share.Note 15—WarrantsPreferred Stock Series A Class A and B Warrants and Placement Agent WarrantsAs disclosed above in Note 9, the Successor Company issued Class A warrants, Class B warrants and placement agentwarrants in connection with the October 2009 preferred stock transaction. The warrants are liability classified since they have “down-round” price protection and they are re-measured on the Company’s reporting dates. As a result of the December 2010 Series Dconvertible preferred stock financing and the “down-round” provision, the Class A warrants, Class B warrants and placement agentwarrants were reissued to purchase approximately 3.9 million shares of Common Stock at an exercise price of $0.50 per share.Preferred Stock Series B Warrants and Co-placement Agent WarrantsIn connection with the Series B Convertible Preferred Stock transaction, the Successor Company issued warrants and co-placement agent warrants. The warrants are liability classified since they have “down-round” price protection and they are re-measured on the Company’s reporting dates. As a result of the December 2010 Series D convertible preferred stock financing and the“down-round” provision, the Series B warrants and co-placement agent warrants were reissued to purchase approximately13.2 million shares of Common Stock at an exercise price of $0.50 per share.Preferred Stock Series D Warrants and Co-placement Agent WarrantsIn connection with the Series D Convertible Preferred Stock transaction, the Successor Company issued 3,290,000 warrantsat an exercise price of $0.50 per share and 263,200 placement agent warrants at an exercise price of $0.50 per share. The warrants areliability classified since they have “down-round” price protection and they are re-measured on the Company’s reporting dates. Theweighted average fair market value of the warrants, at the date of issuance, granted to the accredited investors and co-placementagents, based on the Black-Scholes valuation model, is estimated to be $0.31 per warrant.Common Stock Warrants and Co-placement Agent WarrantsIn connection with the March 2, 2010 financing, the Successor Company issued 5,076,664 warrants at an exercise price of$0.98 per share to the accredited investors and 406,133 warrants at an exercise price of $0.75 to the co-placement agents uponclosing. The warrants are liability classified since they have “down-round” price protection and they are re-measured on theCompany’s reporting dates. The warrants were exercisable immediately after grant and expire five years thereafter. The fair marketvalue of the warrants, at the date of issuance, granted to the accredited investors and co-placement agents, based on the Black-Scholes valuation model, is estimated to be $0.52 per warrant and $0.58 per warrant, respectively. As a result of the ConvertiblePreferred Stock Series B financing and the “down-round” provision, the Common Stock warrants and placement agent warrants werereissued to purchase 10.6 million shares of Common Stock at an exercise price of $0.50 per share. F39Table of ContentsThe Successor Company recognizes these warrants as a liability at the fair value on each reporting date due to the “down-round” price protection provision. The Company measured the fair value of these warrants as of December 31, 2010, and recordedwarrant expense of $2.0 million resulting from the increase in the liability associated with the fair value of the warrants for the threemonths ended December 31, 2010. The Company computed the value of the warrants using the Black-Scholes method. The fair valueof the warrants will continue to be classified as a liability until such time as the warrants are exercised, expire or an amendment of thewarrant agreements renders these warrants to be no longer classified as a liability. The warrants are exercisable upon issuance andexpire on the fifth anniversary of issuance. There were no warrants exercised in 2010.The fair market value of the warrants was computed using the Black-Scholes option-pricing model with the following keyweighted average assumptions as of the dates indicated: December 31, 2010 December 31, 2009 Expected life (years) 4.7 years 4.8 years Interest rate 1.8% 2.7%Dividend yield — — Volatility 63% 66%Roll forward of Successor Company warrant liability from December 31, 2009 through December 31, 2010: December 31, 2009 Additions Revaluation December 31, 2010 Preferred stock class A warrants $275,378 $— $120,711 $396,089 Preferred stock class B warrants 207,611 — 188,478 396,089 Preferred stock co-placement warrants 152,287 — 6,150 158,437 Common stock warrants — 2,654,752 (123,604) 2,531,148 Common stock placement warrants — 235,958 (80,990) 154,968 Preferred stock series B warrants — 2,837,394 522,678 3,360,072 Preferred stock series B co-placement warrants — 249,778 (58,784) 190,994 Preferred stock series D warrants — 1,011,553 (100,717) 910,836 Preferred stock series D co-placement warrants — 81,575 (8,690) 72,885 Total $635,276 $7,071,010 $465,232 $8,171,518 Warrant liability is comprised of the following as of December 31, 2010: Successor Number of Fair Value of December 31, Warrants Warrants 2010 Preferred stock class A warrants 1,624,996 $0.24 $396,089 Preferred stock class B warrants 1,624,996 0.24 396,089 Preferred stock co-placement warrants 650,000 0.24 158,437 Common stock warrants 9,950,261 0.25 2,531,148 Common stock placement warrants 609,200 0.25 154,968 Preferred stock series B warrants 12,456,853 0.27 3,360,072 Preferred stock series B co-placement warrants 708,789 0.27 190,994 Preferred stock series D warrants 3,290,000 0.28 910,836 Preferred stock series D co-placement warrants 263,200 0.28 72,885 Total 31,178,295 $0.26 $8,171,518 Warrant liability is comprised of the following as of December 31, 2009: Successor Number of Fair Value of Balance as of Warrants Warrants December 31, 2009 Preferred stock class A warrants 501,543 $0.55 $275,378 Preferred stock class B warrants 416,667 0.50 207,611 Preferred stock co-placement warrants 250,000 0.61 152,287 Total 1,168,210 $635,276 F40Table of ContentsNote 16—Equity-based CompensationTotal stock-based compensation expense recognized using the straight-line attribution method in the consolidatedstatement of operations is as follows: Successor Successor Predecessor Twelve months Four months Eight months December 31, December 31, August 31, 2010 2009 2009 Stock option compensation expense for employees and directors $833,713 $326,838 $581,707 Restricted stock expense 72,000 168,000 — Equity awards for nonemployees issued for services 86,828 386,380 1,746 Total stock-based compensation expense $992,541 $881,218 $583,453 Successor CompanyOur board of directors adopted the 2009 Equity Incentive Plan (the “Plan”) effective September 3, 2009. The Plan isintended to further align the interests of the Successor Company and its stockholders with its employees, including its officers, non-employee directors, consultants and advisors by providing incentives for such persons to exert maximum efforts for the success of theSuccessor Company. The Plan allows for the issuance of up to 4,000,000 shares of the Successor Company’s common stock.Subsequent to December 31, 2010, the board of directors of the Company amended the 2009 Equity Incentive Plan to increase thenumber of shares available for issuance under the Plan to 15,000,000 shares of common stock. The types of awards that may begranted under the Plan include options (both nonqualified stock options and incentive stock options), stock appreciation rights,stock awards, stock units, and other stock-based awards. Notwithstanding the foregoing, to the extent the Successor Company isunable to obtain shareholder approval of the Plan within one year of the effective date, any incentive stock options issued pursuantto the Plan shall automatically be considered nonqualified stock options, and to the extent a holder of an incentive stock optionexercises his or her incentive stock option prior to such shareholder approval date, such exercised option shall automatically beconsidered to have been a nonqualified stock option. The term of each award is determined by the Board at the time each award isgranted, provided that the terms of options may not exceed ten years.On February 23, 2010, modifications were made to all fiscal year 2009 grants for directors and employees. Themodifications provided for all options granted under the 2009 Plan in fiscal year 2009 to extend to a ten year term and allowedDirectors to extend the exercise period after departure to one year. As a result of the modifications, the Successor Companyrecognized incremental compensation cost of approximately $149,000 in the first quarter of 2010. F41Table of ContentsDuring the year ended December 31, 2010, the weighted average fair market value using the Black-Scholes option-pricingmodel of the options granted was $0.53 for this period. During the period September 2009 through December 2009, the weightedaverage fair market value using the Black-Scholes option-pricing model of the options granted was $0.33 for this period. The fairmarket value of the stock options at the date of grant was estimated using the Black-Scholes option-pricing model with the followingweighted average assumptions: Four Months Year Ended Ended December 31, December 31, 2010 2009 Expected life 5.1 years 2.7 years Interest rate 2.0% 1.4%Di Dividend yield — — Volatility 64% 67% There were no stock options exercised during the year ended December 31, 2010 and the period September 2009 throughDecember 2009.A summary of option activity for the year ended December 31, 2010 is as follows: Weighted Weighted Average Average Remaining Aggregate Exercise Contractual Intrinsic Options Shares Price Term Value Outstanding at January 1, 2010 2,807,000 $0.77 7.35 $0.38 Granted 2,870,000 0.95 Exercised — — Forfeited — — Outstanding at December 31, 2010 5,677,000 $0.86 7.46 $— Options exercisable at December 31, 2010 3,627,384 $0.84 7.16 $— The following table summarizes the Successor Company’s non-vested stock options: Non-vested Options Weighted- Number of Average Fair Shares Value Non-vested at January 1, 2010 677,000 $0.36 Granted 2,870,000 0.53 Vested (1,497,384) 0.49 Forfeited — — Non-vested at December 31, 2010 2,049,616 $0.50 The total fair value of shares vested during the twelve months ended December 31, 2010 was $0.8 million. As ofDecember 31, 2010, there was $0.7 million of total unrecognized compensation cost, related to non-vested stock options which vestover time. That cost is expected to be recognized over a weighted-average period of two years. As of December 31, 2010, there was$0.3 million of total unrecognized compensation expense related to performance-based, non-vested employee and consultant stockoptions. That cost will be recognized when the performance criteria within the respective performance-based option grants becomeprobable of achievement. F42Table of ContentsRestricted stockThe following table summarizes the Successor’s restricted stock activity for the year ended December 31, 2010: Non-vested Options Weighted- Number of Average Fair Shares Value Non-vested at January 1, 2010 300,000 $0.48 Granted — — Vested (150,000) 0.48 Forfeited — — Non-vested at December 31, 2010 150,000 $0.48 As of December 31, 2010, there was less than $0.1 million of total unrecognized compensation cost related to non-vestedrestricted stock that is expected to be recognized over a weighted-average period less than 1 year.Predecessor CompanyPrior to September 3, 2009, the Effective Date, the Predecessor Company maintained stock-based incentive compensationplans for employees and directors of the Company. On the Effective Date, the following stock option plans were terminated (and anyand all awards granted under such plans were terminated and will no longer be of any force or effect): (1) the 2001 Stock Option andAppreciation Rights Plan, (2) the 2003 Stock Option and Appreciation Rights Plan, (3) the 2005 Stock Option and AppreciationRights Plan. As a result of the cancellation of the stock options, the Predecessor Company recorded additional stock compensationexpense of $0.3 million for the unrecognized stock compensation expense.Note 17—Segment Information and Geographical informationThe Successor Company has two reportable segments: Fibrocell Therapy and Agera. The Fibrocell Therapy segmentspecializes in the development and commercialization of autologous cellular therapies for soft tissue regeneration. The Agerasegment maintains proprietary rights to a scientifically-based advanced line of skincare products. There is no intersegment revenue.The following table provides operating financial information for the continuing operations of the Successor Company’s tworeportable segments: Segment Successor Successor Year Ended December 31, 2010 Fibrocell Therapy Agera Consolidated Total operating revenue $— $936,369 $936,369 Segment income (loss) from continuing operations $(12,840,598) $9,770 $(12,830,828) Supplemental information related to continuing operations Depreciation and amortization expense $8,085 $— $8,085 Total assets, including assets from discontinued operations as ofDecember 31, 2010 7,681,502 596,643 8,278,145 Property and equipment, net 21,589 — 21,589 Intangible assets, net 6,340,656 — 6,340,656 An intercompany receivable as of December 31, 2010, of $0.9 million, due from the Agera segment to the FibrocellTherapy segment, is eliminated in consolidation. This intercompany receivable is primarily due to the intercompany management feecharge to Agera by Fibrocell Technologies, Inc., as well as Agera working capital needs provided by Fibrocell Technologies, Inc.,and has been excluded from total assets of the Fibrocell Therapy segment in the above table. There is no intersegment revenue. Totalassets on the consolidated balance sheet at December 31, 2010 are approximately $8.3 million, which includes assets of discontinuedoperations of less than $0.1 million. F43Table of Contents Segment Successor Successor Four Months Ended December 31, 2009 Fibrocell Therapy Agera Consolidated Total operating revenue $— $329,941 $329,941 Segment income (loss) from continuing operations $(5,026,024) $3,631 $(5,022,393) Supplemental information related to continuing operations Depreciation and amortization expense $— $— $— Total assets, including assets from discontinued operations as ofDecember 31, 2009 8,092,816 631,393 8,724,209 Property and equipment, net — — — Intangible assets, net 6,340,656 — 6,340,656 Segment Predecessor Predecessor Eight Months Ended August 31, 2009 Isolagen Therapy Agera Consolidated Total operating revenue $— $538,620 $538,620 Segment income from continuing operations $65,498,934 $381,306 $65,880,240 An intercompany receivable as of December 31, 2009, of $1.0 million, due from the Agera segment to the FibrocellTherapy segment, is eliminated in consolidation. This intercompany receivable is primarily due to the intercompany management feecharge to Agera by Fibrocell Technologies, Inc., as well as Agera working capital needs provided by Fibrocell Technologies, Inc.,and has been excluded from total assets of the Fibrocell Therapy segment in the above table. There is no intersegment revenue. Totalassets on the consolidated balance sheet at December 31, 2009 are approximately $8.7 million, which includes assets of discontinuedoperations of less than $0.1 million.Geographical information concerning the Company’s revenue is as follows: Successor Successor Predecessor Year ended December 31, Four months ended Eight months ended 2010 December 31, 2009 August 31, 2009 United States $237,286 $68,526 $187,289 United Kingdom 669,921 251,615 308,244 Other 29,162 9,800 43,087 $936,369 $329,941 $538,620 During 2010, revenue from one foreign customer and one domestic customer represented 72% and 17% of consolidatedrevenue, respectively. During the four months ended December 31, 2009, revenue from one foreign customer and one domesticcustomer represented 79% and 15% of consolidated revenue, respectively. During the eight months ended August 31, 2009, revenuefrom one foreign customer and one domestic customer represented 57% and 23% of consolidated revenue, respectively.As of December 31, 2010 and December 31, 2009, one foreign customer represented 88% and 87%, respectively, ofaccounts receivable, net. F44Table of ContentsNote 18—Subsequent EventsOn January 14, 2011, the board of directors of the Company amended the 2009 Equity Incentive Plan (the “Plan”) toincrease the number of shares available for issuance under the Plan to 15,000,000 shares of common stock.On January 14, 2011, the board of directors agreed to provide: (i) Mr. David Pernock, Chief Executive Officer andPresident, with an option to purchase 2,100,000 shares of Company common stock; (ii) Mr. Declan Daly, Chief Financial Officer,with an option to purchase 1,065,000 shares of Company common stock; and (iii) Messrs. Kelvin Moore, Robert Langer, MarcMazur, and George Korkos, each a director of the Company, with an option to purchase 200,000 shares of Company common stock.Each of the foregoing options has: (i) a ten-year term, (ii) an exercise price equal to the closing price of the Company’s common stockon the date of grant, and (iii) vests 50% on the date of grant; 25% on the one-year anniversary of the date of grant; and 25% on thetwo-year anniversary of the date of grant; provided in each case that the grantee is providing service to the Company on the vestingdate.On January 21, 2011, the Company completed a private placement of securities in which the Company sold to certainaccredited investors in the aggregate: (i) 1,234 shares of Series D Convertible Preferred Stock, with a par value of $0.001 per shareand a stated value of $1,000 per share (“Series D Preferred”), and (ii) warrants to purchase 2,468,000 shares of Company commonstock (“Common Stock”) at an exercise price of $0.50 per share.The aggregate purchase price paid by the Purchasers for the Series D Preferred and the Warrants was $1,234,000(representing $1,000 for each share of Series D Preferred together with warrants). The Company intends to use the proceeds forworking capital purposes.The placement agents for the offering received cash compensation of $98,720 and warrants to purchase 197,440 shares ofCommon Stock at an exercise price of $0.50 per share.On January 28, 2011, the Company completed a private placement of securities in which the Company sold to certainaccredited investors in the aggregate: (i) 1,414 shares of Series D at a stated value of $1,000 per share, and (ii) warrants to purchase2,828,000 shares of Common Stock at an exercise price of $0.50 per share.The aggregate purchase price paid by the Purchasers for the Series D Preferred and the warrants was $1,414,000(representing $1,000 for each share of Series D Preferred together with warrants). The Company intends to use the proceeds forworking capital purposes.The placement agents for the offering received cash compensation of $113,120 and warrants to purchase 226,240 shares ofCommon Stock at an exercise price of $0.50 per share.On February 9, 2011, the “Company completed a private placement of securities in which the Company sold to certainaccredited investors in the aggregate: (i) 3,436 shares of Series D at a stated value of $1,000 per share, and (ii) warrants to purchase6,872,000 shares of Common Stock at an exercise price of $0.50 per share.The aggregate purchase price paid by the Purchasers for the Series D Preferred and the warrants was $3,436,000(representing $1,000 for each share of Series D Preferred together with warrants). The Company intends to use the proceeds forworking capital purposes.The placement agents for the offering received cash compensation of $274,880 and warrants to purchase 549,760 shares ofCommon Stock at an exercise price of $0.50 per share. F45Table of ContentsOn March 1, 2011, the Company completed a private placement of securities in which the Company sold to certainaccredited investors in the aggregate: (i) 50 shares of Series D at a stated value of $1,000 per share, and (ii) warrants to purchase100,000 shares of Common Stock at an exercise price of $0.50 per share.The aggregate purchase price paid by the Purchasers for the Series D Preferred and the warrants was $50,000 (representing$1,000 for each share of Series D Preferred together with warrants). The Company intends to use the proceeds for working capitalpurposes.The placement agents for the offering received cash compensation of $4,000 and warrants to purchase 8,000 shares ofCommon Stock at an exercise price of $0.50 per share.As of March 24, 2011, investors in the Series B preferred stock had converted 1,902 preferred shares into 3,804,000common shares. F46Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (File No. 333-172776) of FibrocellScience, Inc.(formerly known as Isolagen, Inc.) of our report dated March 30, 2011, relating to the consolidated financial statementsappearing in the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. Our report contains an explanatoryparagraph regarding the Company’s ability to continue as a going concern./s/ BDO USA, LLPHouston, Texas March 30, 2011 Exhibit 31.1OFFICER’S CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, David Pernock, Chief Executive Officer of Fibrocell Science, Inc., certify that:1. I have reviewed this Annual Report on Form 10-K of Fibrocell Science, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made not misleading withrespect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented inthis report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange ActRules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed underour supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing theequivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.Dated: March 30, 2011 By: /s/ David PernockDavid Pernock, Chief Executive Officer Exhibit 31.2OFFICER’S CERTIFICATION PURSUANT TOSECTION 302 OF THE SARBANES-OXLEY ACT OF 2002I, Declan Daly, Chief Financial Officer of Fibrocell Science, Inc., certify that:1. I have reviewed this Annual Report on Form 10-K of Fibrocell Science, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material factnecessary to make the statements made, in light of the circumstances under which such statements were made not misleading withrespect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in allmaterial respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented inthis report;4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures(as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange ActRules 13a-15(f) and 15d-15(f)) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed underour supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is madeknown to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to bedesigned under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and thepreparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusionsabout the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based onsuch evaluation; and d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during theregistrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materiallyaffected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financialreporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing theequivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reportingwhich are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financialinformation; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in theregistrant’s internal control over financial reporting.Dated: March 30, 2011 By: /s/ Declan DalyDeclan Daly, Chief Financial Officer Exhibit 32.1CERTIFICATION PURSUANT TO SECTION 1350 OFCHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODEFor purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned,David Pernock, Chief Executive Officer of Fibrocell Science, Inc. (the “Company”), hereby certifies that: i. the Annual Report on Form 10-K of the Company for the year ended December 31, 2010, as filed with the Securities andExchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) ofthe Securities Exchange Commission Act of 1934; and ii. the information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company.Dated: March 30, 2011 By: /s/ David PernockDavid Pernock Chief Executive Officer Fibrocell Science, Inc. A signed original of this written statement required by Section 906 has been provided to Fibrocell Science, Inc. and will be retainedby Fibrocell Science, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. Exhibit 32.2CERTIFICATION PURSUANT TO SECTION 1350 OFCHAPTER 63 OF TITLE 18 OF THE UNITED STATES CODEFor purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned,Declan Daly, Chief Financial Officer of Fibrocell Science, Inc. (the “Company”), hereby certifies that: i. the Annual Report on Form 10-K of the Company for the year ended December 31, 2010, as filed with the Securities andExchange Commission on the date hereof (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) ofthe Securities Exchange Commission Act of 1934; and ii. the information contained in the Report fairly presents, in all material respects, the financial condition and results ofoperations of the Company.Dated: March 30, 2011 By: /s/ Declan DalyDeclan Daly Chief Financial Officer Fibrocell Science, Inc. A signed original of this written statement required by Section 906 has been provided to Fibrocell Science, Inc. and will be retainedby Fibrocell Science, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 

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