UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
ISOLAGEN, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-12666 87-0458888
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
2500 Wilcrest, 5th Floor
Houston, Texas 77042
(Address of principal executive offices, including zip code)
(713) 780-4754
(Registrant's telephone number, including area code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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.
[X] Yes [ ] No
Check whether the registrant is an accelerated filer (as defined in Rule
12b-2 of the Exchange Act.) [ ] Yes [X] No
As of August 7, 2003, issuer had 15,916,769 shares of issued and outstanding
common stock, par value $0.001.
EXPLANATORY NOTE
THIS QUARTERLY REPORT ON FORM 10-Q/A IS BEING FILED FOR THE PURPOSE OF
AMENDING AND RESTATING ITEMS 1 AND 2 OF PART 1 SOLELY TO THE EXTENT NECESSARY
(I) TO REFLECT THE RESTATEMENT OF OUR CONSOLIDATED FINANCIAL STATEMENTS AS OF
AND FOR THE SIX MONTH PERIODS ENDED JUNE 30, 2003 AND JUNE 30, 2002 AND FOR THE
THREE MONTH PERIODS ENDED JUNE 30, 2003 AND JUNE 30, 2002, AS DESCRIBED IN NOTE
2 TO THE CONSOLIDATED FINANCIAL STATEMENTS, (II) TO MAKE REVISIONS TO
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS", AS WARRANTED BY THE RESTATEMENT, (III) TO INCLUDE THE
CERTIFICATIONS REQUIRED BY THE SARBANES-OXLEY ACT OF 2002 AND (IV) TO UPDATE THE
EXHIBITS AND REPORTS ON FORM 8-K IN ACCORDANCE WITH THE AMENDMENT. WE HAVE MADE
NO FURTHER CHANGES TO THE PREVIOUSLY FILED FORM 10-Q. ALL INFORMATION IN THIS
QUARTERLY REPORT ON FORM 10-Q/A IS AS OF JUNE 30, 2003 AND DOES NOT REFLECT ANY
SUBSEQUENT INFORMATION OR EVENTS OTHER THAN THOSE REFLECTED IN THE RESTATEMENT.
Isolagen, Inc. has not amended its Annual Report on Form 10-KSB for the
period ended December 31, 2001 or Quarterly Reports on Form 10-QSB for the
periods affected by the restatement during the year ended December 31, 2001,
therefore, the consolidated financial statements and related financial
information contained therein should no longer be relied upon. The consolidated
balance sheet for the year ended December 31, 2002 and the consolidated
statement of operations and cash flows for the period ended June 30, 2002 are
included as part of the consolidated financial statements included in this
Quarterly Report on Form 10-Q/A. See Isolagen's Annual Report on Form 10-KSB/A
for the period ended December 31, 2002 for more information on the effects of
the restatement on prior periods.
TABLE OF CONTENTS
PAGE
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets
June 30, 2003 (unaudited) and December 31, 2002...............1
Consolidated Statements of Operations
Six months ended June 30, 2003 (unaudited)
and June 30, 2002 (unaudited).................................2
Three months ended June 30, 2003 (unaudited)
and June 30, 2002 (unaudited).................................3
Consolidated Statements of Cash Flows
Six months ended June 30, 2003 (unaudited) and
June 30, 2002 (unaudited).....................................4
Notes to Unaudited Consolidated Financial Statements................5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................13
Item 3. Quantitative and Qualitative Disclosures About Market Risk.........19
Item 4. Controls and Procedures............................................20
Part II. Other Information
Item 2. Changes in Securities and Use of Proceeds..........................20
Item 4. Submission of Matters to a Vote of Security Holders................20
Item 6. Exhibits and Reports...............................................21
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Isolagen, Inc.
(A Development Stage Company)
Consolidated Balance Sheets
June 30, December 31,
2003 2002
------------ ------------
(unaudited)
------------ ------------
(as restated) (as restated)
ASSETS
Current assets
Cash and cash equivalents $ 3,292,242 $ 4,244,640
Accounts receivable, net of allowance for doubtful accounts 59,177 40,204
Inventory 264,288 138,910
Other receivables 99,011 153,583
Prepaid expenses 256,902 284,557
------------ ------------
Total current assets 3,971,620 4,861,894
------------ ------------
Property and equipment, net 2,848,007 2,159,913
Intangible assets 540,000 --
Other assets 143,063 235,857
------------ ------------
Total assets $ 7,502,690 $ 7,257,664
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,538,004 $ 1,881,236
Accrued expenses 743,975 112,224
Deferred revenue 271,531 57,274
------------ ------------
Total current liabilities 2,553,510 2,050,734
Total liabilities 2,553,510 2,050,734
------------ ------------
Commitments and contingencies
Shareholders' equity (deficit)
Preferred stock, $.001 par value; 5,000,000 shares authorized:
Preferred Stock - Series A $.001 par value; 3,500,000 shares
authorized; 2,967,553 shares issued and outstanding 2,967 3,039
Preferred Stock - Series B $.001 par value; 200,000 shares
authorized; 155,750 shares issued and outstanding 156 --
Common stock, $.001 par value; 50,000,000 shares
authorized; 15,571,841 shares issued and outstanding 15,572 15,228
Additional paid-in capital 31,491,171 25,573,999
Other comprehensive income 124,970 13,875
Accumulated deficit during development stage (26,685,656) (20,399,211)
------------ ------------
Total shareholders' equity (deficit) 4,949,180 5,206,930
------------ ------------
Total liabilities and shareholder's equity $ 7,502,690 $ 7,257,664
------------ ------------
The accompanying notes are an integral part of these statements.
1
Isolagen, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(unaudited)
Cumulative
Period from
December 28,
Six Months Ended 1995 (date of
June 30, inception) to
------------------------------- June 30,
2003 2002 2003
------------ ------------ ------------
(as restated) (as restated) (as restated)
Revenues
Sales $ 79,796 $ 2,518 $ 1,520,901
License fees -- 40,000 260,000
------------ ------------ ------------
Total revenues 79,796 42,518 1,780,901
Cost of sales 48,861 -- 486,453
------------ ------------ ------------
Gross profit 30,935 42,518 1,294,448
Selling, general and administrative expenses 3,523,056 1,474,109 10,683,715
Research and development 1,204,538 647,354 4,974,658
------------ ------------ ------------
Operating loss (4,696,659) (2,078,945) (14,363,925)
Other income (expense)
Interest income 10,620 19,063 247,709
Other income 55,663 32,421 88,084
Loss on disposal of asset -- -- (8,222)
Interest expense -- -- (311,628)
------------ ------------ ------------
Net loss $ (4,630,376) $ (2,027,461) $(14,347,982)
------------ ------------ ------------
Deemed dividend associated with beneficial
conversion of preferred stock (1,244,880) (9,594,052) (11,423,824)
Preferred stock dividends (411,189) (94,906) (913,850)
------------ ------------ ------------
Net loss attributable to common stockholders $ (6,286,445) $(11,716,419) $(26,685,656)
------------ ------------ ------------
Per shares information
Net loss - basic and diluted $ (0.30) $ (0.13) $ (1.26)
Deemed dividend associated with beneficial
conversion of preferred stock (0.08) (0.63) (1.00)
Preferred stock dividends (0.03) (0.01) (0.08)
------------ ------------ ------------
Net loss common share - basic and diluted $ (0.41) $ (0.77) $ (2.34)
------------ ------------ ------------
Weighted average number of basic and diluted
common shares outstanding 15,348,709 15,189,563 11,385,871
------------ ------------ ------------
The accompanying notes are an integral part of these statements.
2
Isolagen, Inc.
(A Development Stage Company)
Consolidated Statements of Operations
(unaudited)
Three Months Ended June 30,
2003 2002
------------ ------------
(as restated) (as restated)
Revenues
Sales $ 79,425 $ --
License fees -- 20,000
------------ ------------
Total revenues 79,425 20,000
Cost of sales 47,867 --
------------ ------------
Gross profit 31,558 20,000
Selling, general and administrative expenses 1,862,566 925,597
Research and development 613,457 422,272
------------ ------------
Operating loss (2,444,465) (1,327,869)
Other income (expense)
Interest income 3,190 14,525
Other income -- 32,421
Interest expense -- --
------------ ------------
Net loss $ (2,441,275) $ (1,280,923)
------------ ------------
Deemed dividend associated with beneficial
conversion of preferred stock (1,244,880) (9,594,052)
Preferred stock dividends (201,450) (94,506)
------------ ------------
Net loss attributable to common stockholders $ (3,887,605) $(10,869,481)
------------ ------------
Per shares information
Net loss - basic and diluted $ (0.16) $ (0.08)
Deemed dividend associated with beneficial
conversion of preferred stock (0.08) (0.63)
Preferred stock dividends (0.01) (0.01)
------------ ------------
Net loss common share - basic and diluted $ (0.25) $ (0.72)
------------ ------------
Weighted average number of basic and diluted
common shares outstanding 15,343,047 15,189,563
------------ ------------
The accompanying notes are an integral part of these statements.
3
Isolagen, Inc.
(A Development Stage Company)
Consolidated Statements of Cash Flows
Cumulative
Period from
December 28,
Six Months Ended 1995 (date of
June 30, inception) to
------------------------------- June 30,
2003 2002 2003
------------ ------------ ------------
(as restated) (as restated) (as restated)
Cash flows from operating activities
Net loss $ (4,630,376) $ (2,027,461) $(14,347,982)
Adjustments to reconcile net loss to net
cash used in operating activities:
Common stock issued for services -- 43,573 1,209,783
Uncompensated contribution of services 200,000 200,000 755,556
Depreciation 357,077 8,918 524,606
Loss on sale of property and equipment -- -- 8,222
Change in operating assets and liabilities:
(Increase) in accounts receivable (18,973) (32,392) (59,177)
(Increase) decrease in other receivables 54,572 -- (99,011)
(Increase) in inventory (125,378) -- (264,288)
(Increase) decrease in prepaid expenses 27,655 -- (256,902)
Increase (decrease) in other assets 92,794 (18,443) (22,713)
Increase (decrease) in accounts payable (343,232) 94,681 1,538,004
Increase in accrued expenses 220,519 134,880 332,743
Increase (decrease) in deferred revenue 214,257 (40,000) 271,531
------------ ------------ ------------
Net cash used in operating activities (3,951,085) (1,636,244) (10,409,628)
------------ ------------ ------------
Cash flows from investing activities
Purchase of property and equipment (1,045,170) (86,327) (3,381,834)
Proceeds from the sale of property and equipment -- -- 1,000
------------ ------------ ------------
Net cash used in investing activities (1,045,170) (86,327) (3,380,834)
------------ ------------ ------------
Cash flows from financing activities
Proceeds from the issuance of preferred stock 3,919,078 8,778,762 12,931,800
Proceeds from convertible debt -- -- 1,450,000
Proceeds from notes payable to shareholders -- -- 135,667
Proceeds from the issuance of common stock 92,400 -- 2,617,810
Merger and acquisition expenses -- -- (48,547)
Repurchase of common stock -- -- (50,280)
------------ ------------ ------------
Net cash provided by financing activities 4,011,478 8,778,762 17,036,450
------------ ------------ ------------
Effect of exchange rate changes on cash balance 32,379 477 46,254
Net increase (decrease) in cash and cash equivalents (952,398) 7,056,668 3,292,242
Cash and cash equivalents, beginning of period 4,244,640 1,380,824 --
------------ ------------ ------------
Cash and cash equivalents, end of period $ 3,292,242 $ 8,437,492 $ 3,292,242
------------ ------------ ------------
Supplemental disclosures of cash flow information:
Cash paid for interest $ -- $ -- $ 150,283
------------ ------------ ------------
Deemed dividend associated with beneficial
conversion of preferred stock 1,244,880 9,594,052 11,423,824
------------ ------------ ------------
Preferred stock dividend 411,189 94,906 913,850
------------ ------------ ------------
Common stock issued for services -- 43,573 1,209,783
------------ ------------ ------------
Uncompensated contribution of services 200,000 200,000 755,556
------------ ------------ ------------
The accompanying notes are an integral part of these statements.
4
Isolagen, Inc.
(A Development Stage Company)
Notes to Unaudited Consolidated Financial Statements
NOTE 1 - BASIS OF PRESENTATION, BUSINESS AND ORGANIZATION
Isolagen, Inc. f/k/a American Financial Holding, Inc., a Delaware
corporation ("Isolagen" or the "Company") is the parent company of Isolagen
Technologies, Inc., a Delaware corporation ("Isolagen Technologies"). Isolagen
Technologies is the parent company of Isolagen Europe Limited ("Isolagen
Europe"), a company organized under the laws of the United Kingdom and
wholly-owned subsidiary of Isolagen Technologies. Isolagen Technologies is the
parent company of Isolagen Australia Pty Limited ("Isolagen Australia"), a
company organized under the laws of the Australia and wholly-owned subsidiary of
Isolagen Technologies. The common stock, par value $0.001 per share, of the
Company ("Common Stock") is traded on the American Stock Exchange ("AMEX") under
the symbol "ILE."
Isolagen is an emerging pharmaceutical bioscience company specializing in
the development and commercialization of autologous cellular therapy for hard
and soft tissue regeneration and other therapies. Isolagen currently holds five
patents. Autologous cellular therapy is a process whereby a patient's own cells
are extracted, reproduced and then reintroduced to the patient for specific
cosmetic and medical applications. Unlike other applications for the treatment
of dermal defects, Isolagen utilizes only the patient's unique, living cells to
produce the patient's own collagen. There is no foreign substance utilized in
this treatment protocol. Isolagen's goal is to become an industry leader in the
research, development and commercialization of autologous cellular therapy which
stimulate a patient's own collagen production.
In 1995, Isolagen Technologies began treating a small percentage of
patients to correct defects (e.g., wrinkles, depressions and scarring) in the
patient's face. Between 1995 and 1999, approximately 200 doctors utilized the
Isolagen Process on approximately 963 patients with positive results. In 1997,
the FDA began regulating the science of biologics. Biologics, in contrast to
drugs that are chemically synthesized, are derived from living sources (such as
humans, animals, and microorganisms) like the Isolagen Process. In 1995, when
Isolagen Technologies began operations, the FDA had no regulations governing
this area of biologics. After reviewing the new regulations and seeking the
advice of consultants, Isolagen concluded that the use of the Isolagen Process
in cosmetic applications did not require the approval of the FDA. In 1999,
Isolagen Technologies filed a request for authorization from the FDA to
administer an investigational drug or biological product to humans. Such
authorization must be secured prior to commercialization of any new drug or
biological product. The FDA placed the authorization on clinical hold until
Isolagen Technologies' manufacturing processes and procedures were changed to
meet these new biologics standards, and FDA approval is obtained. In April 2002,
the FDA approved Isolagen's Investigational New Drug Application ("IND") for the
treatment of wrinkles and scars and clinical trial are underway. The Company's
Phase III/Exploratory trial for dermal defects has commenced, is being conducted
in ten sites, and involves physicians who are either plastic surgeons or
dermatologists with practices that emphasize aesthetic procedures. The patients'
enrollment has been completed and totals one hundred fifty-two patients. To
date, 100% of the patients have had their first consultation. The final patient
injection are scheduled for November 2003. This Phase III/Exploratory trial is a
double-blind study with 75% of the patients receiving the therapeutic dosage and
the remaining 25% receiving a placebo. In addition, in January of 2003, Isolagen
commenced a double-blind Phase II trial under the IND, which is a two-site dose
ranging study of forty patients. Isolagen is completing its analysis of the data
from the Phase II trial. Finally, Isolagen also has a Phase I clinical trial of
twenty-one patients for dental applications addressing gingival recession.
Isolagen expects to complete this study in the first quarter of 2004.
The Company received a letter from the FDA dated October 28, 2003, from
the Office of Cellular, Tissue, and Gene Therapies. The letter is in response to
our request for clarification of study design comments that the FDA alluded to
previously. The Company believes that they will be able to respond to all
comments in the letter and will be doing so in a face to face meeting with the
FDA at the end of 2003. The majority of issues relate to comments that have
already been addressed and are the subject of submissions which we will make in
preparation for our upcoming meeting with the FDA. At that time, the Company
will attempt to resolve any remaining study design issues. Successful resolution
of these issues with the FDA may permit the Company to use the study data from
the Phase III/Exploratory study for license application or to supplement this
data with well controlled additional studies. However, there can be no assurance
that we will be able to satisfy the study design issues presented by the FDA.
The Company's goal is to become an industry leader in the research,
development and commercialization of autologous cellular therapy which stimulate
a patient's own collagen production. The Company, through Isolagen Europe, has
commenced commercial operations in the United Kingdom and is pursuing commercial
operations through subsidiaries, joint ventures or license arrangements in
Australia, South Korea, Hong Kong, Brazil, Mexico and elsewhere. The Company is
investigating regulatory and other requirements in these countries and
evaluating markets and potential joint venture partners and licensees. In July
2003, the Company received License No. 174347 from the Therapeutic Goods
Administration ("TGA"), in Australia, to begin the manufacture of autologous
fibroblasts including the initiation of primary cultures of fibroblasts, the
propagation of fibroblasts, the
5
harvesting of cultured fibroblasts, the storage of cultured fibroblasts and
release for supply of cultured fibroblasts. The Company is not in a position to
predict, when or if licenses will be granted in any jurisdiction.
Through June 30, 2003, the Company has been primarily engaged in
developing its initial product technology, recruiting personnel, commencing its
United Kingdom operations and raising capital. In the course of its development
activities, the Company has sustained losses and expects such losses to continue
through 2004. The Company will finance its operations primarily through its
existing cash, future financing and revenues.
The Company's ability to operate profitably under its current business
plan is largely contingent upon its success in obtaining further sources of debt
and equity capital, prompt regulatory approval to sell its products and upon its
continued expansion. The Company will require additional capital in the future
to expand its operations. No assurance can be given that the Company will be
able to obtain any such additional capital, either through equity or debt
financing, on satisfactory terms or at all. Additionally, no assurance can be
given that any such financing, if obtained, will be adequate to meet the
Company's ultimate capital needs and to support the Company's growth. If
adequate capital cannot be obtained on satisfactory terms, the Company's
operations could be negatively impacted.
If the Company achieves growth in its operations in the next few years,
such growth could place a strain on its management, administrative, operational
and financial infrastructure. The Company's ability to manage its operations and
growth requires the continued improvement of operational, financial and
management controls, reporting systems and procedures. In addition, the Company
may find it necessary to hire additional management, financial and sales and
marketing personnel to manage the Company's expanding operations. If the Company
is unable to manage this growth effectively and successfully, the Company's
business, operating results and financial condition may be materially adversely
affected.
As of June 30, 2003, the Company had a cash balance of $3,292,242. As of
August 7, 2003, the Company had a cash balance of approximately $2.2 million.
The long-term viability of the Company is dependent upon successful operation of
its business and the ability to raise additional debt and equity within the near
future.
Acquisition and merger and basis of presentation
On August 10, 2001, Isolagen Technologies consummated a merger with
American Financial Holdings, Inc. ("AFH") and Gemini IX, Inc. ("Gemini").
Pursuant to an Agreement and Plan of Merger, dated August 1, 2001, by and among
AFH, ISO Acquisition Corp, a Delaware corporation and wholly-owned subsidiary of
AFH ("Merger Sub"), Isolagen Technologies, Gemini, a Delaware corporation, and
William J Boss, Jr., Olga Marko and Dennis McGill, stockholders of Isolagen
Technologies (the "Merger Agreement"), AFH (i) issued 5,453,977 shares of its
common stock, par value $0.001 to acquire, in a privately negotiated
transaction, 100% of the issued and outstanding common stock (195,707 shares,
par value $0.01, including the shares issued immediately prior to the Merger for
the conversion of certain liabilities, as discussed below) of Isolagen
Technologies, and (ii) issued 3,942,000 shares of its common stock to acquire
100% of the issued and outstanding common stock of Gemini. Pursuant to the terms
of the Merger Agreement, Merger Sub, together with Gemini, merged with and into
Isolagen Technologies (the "Merger"), and AFH was the surviving corporation. AFH
subsequently changed its name to Isolagen, Inc. on November 13, 2001.
Prior to the Merger, Isolagen Technologies had no active business and was
seeking funding to begin U.S. Food and Drug Administration ("FDA") trials of the
Isolagen Process. AFH was a non-operating, public shell company with limited
assets. Gemini was a non-operating private company with limited assets and was
unaffiliated with AFH.
Since AFH and Gemini had no operations and limited assets at the time of
the Merger, the merger has been accounted for as a recapitalization of Isolagen
Technologies and an issuance of common stock by Isolagen Technologies for the
net assets of AFH and Gemini. In the recapitalization, Isolagen Technologies is
treated as having affected (i) a 27.8694 for 1 stock split, whereby the 195,707
shares of its common stock outstanding immediately prior the merger are
converted into the 5,453,977 shares of common stock received and held by the
Isolagen Technologies stockholders immediately after the merger, and (ii) a
change in the par value of its common stock, from $0.01 per share to $0.001 per
share. The stock split has been reflected in the accompanying consolidated
financial statements by retroactively restating all shares and per share
amounts. The change in par
6
value is reflected by a transfer between the common stock and additional paid-in
capital accounts at the date of the Merger. The stock issuances are accounted
for as the issuance of (i) 3,942,400 shares for the net assets of Gemini,
recorded at their book value, and (ii) the issuance of 3,899,547 shares (the
number of shares AFH had outstanding immediately prior to the Merger) for the
net assets of AFH, recorded at their book value.
Immediately prior to and as a condition of the Merger, Isolagen
Technologies issued an aggregate of 2,328,972 shares (post split) of its common
stock to convert to equity an aggregate of $2,075,246 of liabilities, comprised
of (i) accrued salaries of $328,125, (ii) convertible debt and related accrued
interest of $1,611,346, (iii) convertible shareholder notes and related accrued
interest of $135,667 and (iv) bridge financing costs of $108. Simultaneous with
the Merger, the Company sold 1,346,669 shares of restricted common stock to
certain accredited investors in a private placement transaction. The
consideration paid by such investors for the shares of common stock aggregated
$2,020,000 in transactions exempt from the registration requirements of the
Securities Act. The net cash proceeds of this private placement were used to
fund Isolagen's research and development projects and the initial FDA trials of
the Isolagen Process, to explore the viability of entering foreign markets, to
provide working capital and for general corporate purposes.
The financial statements presented include Isolagen, Inc. and its
wholly-owned subsidiaries. All significant intercompany transactions and
balances have been eliminated. Isolagen Technologies was, for accounting
purposes, the continuing entity of the Merger, and accordingly for the periods
prior to the Merger, the financial statements reflect the financial position,
results of operations and cash flows of Isolagen Technologies. The assets,
liabilities, operations and cash flows of AFH and Gemini are included in the
consolidated financial statements from August 10, 2001 onward.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Interim financial information
The financial statements included herein, which have not been audited
pursuant to the rules and regulations of the Securities and Exchange Commission,
reflect all adjustments which, in the opinion of management, are necessary for a
fair presentation of financial position, results of operations and cash flows
for the interim periods on a basis consistent with the annual audited
statements. All such adjustments are of a normal recurring nature. The results
of operations for interim periods are not necessarily indicative of the results
that may be expected for any other interim period of a full year. Certain
information, accounting policies and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been omitted pursuant to such
rules and regulation, although the Company believes that the disclosures are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the Company's audited financial
statements included in the Company's current report on Form 10-KSB filed with
the Securities and Exchange Commission on March 31, 2003.
RESTATEMENT OF FINANCIAL STATEMENTS
Subsequent to the issuance of the Company's financial statements as of
June 30, 2003 and for the six month and three month periods ended June 30, 2003
and 2002, the Company identified several errors that were required to be
corrected in the previously reported financial statements. The principal reasons
and effects of the adjustments are summarized below:
Beneficial Conversion Feature: During 2003 and 2002, the Company completed
private placements of Series A and Series B Convertible Preferred Stock.
Imbedded within the instruments was a beneficial conversion feature that was not
recorded. Accordingly, the Company revised its financial statements as of June
30, 2003 and for the six month and three month periods ended June 30, 2003 and
2002 to record deemed dividends to the holders of the preferred stock totaling
$1,244,880 and $9,594,052 for the six and three month periods ended June 30,
2003 and 2002, respectively. The Company's financial statements reflect an
increase in the retained deficit and a corresponding increase in paid-in capital
for this amount. The deemed dividend associated with the beneficial conversion
is calculated as the difference between the fair value of the underlying common
stock less the proceeds that have been received for the Series A Preferred Stock
and the Series B Preferred Stock limited to the value of the proceeds received.
Also, the Company has included preferred dividends accrued for the six months
ended June 30,
7
2003 and 2002 of $411,189 and $94,906, respectively, and for the three months
ended June 30, 2003 and 2002 of $201,450 and $94,906, respectively, in the
computation of net loss attributable to common shareholders. (see Note 4)
Contributed Services: During 2002 and 2001, certain officers and directors
of the Company were not compensated for a portion of their services provided to
Company. The financial statements are to reflect the total cost of conducting
its business which includes the value of contributed services. Accordingly, the
Company has recorded contribution services from officers totaling $200,000 for
each of the six month periods ended June 30, 2003 and 2002 and $100,000 for each
of the three month periods ended June 30, 2003 and 2002, respectively. We
estimated the value of the contributed services based upon our estimate of their
fair market value. This contribution of services was recorded as an increase in
compensation expense and an increase in additional paid in capital. (see Note 4)
Weighted Average Shares Utilized in the Calculation Percentage Loss Per
Share: Similar to a reverse merger, the weighted average shares outstanding
utilized in the computation of earnings per share are to be adjusted to give
effect as if the Merger transaction had occurred as of the beginning of the
earliest year presented, similar to a stock split. For all years presented prior
to the Merger, the weighted average shares outstanding were not adjusted to
reflect the recapitalization as of the earliest period presented. Accordingly,
the Company has retroactively restated its financial statements to the earliest
period presented for the purposes of computing weighted average shares
outstanding and loss per share data.
Together these restatements changed the net loss per share attributable to
common shareholders from $0.29 to $0.41 for the six months ended June 30, 2003,
from $0.12 to $0.77 for the six months ended June 30, 2002, from $0.15 to $0.25
for the three months ended June 30, 2003, from $0.08 to $0.72 for the three
months ended June 30, 2002, and the cumulative from inception net loss per share
has decreased from $2.37 to $2.34.
Statement of cash flows
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with an original maturity of three
months or less to be cash equivalents.
Concentration of credit risk
The Company maintains its cash with a major U.S. domestic bank. The
amounts held in this bank exceed the insured limit of $100,000 from time to
time. The terms of these deposits are on demand to minimize risk. The Company
has not incurred losses related to these deposits.
The Company is subject to risks common to companies in the development
stage including, but not limited to, development of new products, development of
markets and distribution channels, dependence on key personnel, and the ability
to obtain additional capital as needed to fund its product plans. The Company
has a limited operating history and has yet to generate any significant revenues
from customers. To date, the Company has been funded by private debt and equity
financings. The Company's ultimate success is dependent upon its ability to
raise additional capital and to successfully develop and market its products.
The products developed by the Company require approvals from the United
States FDA or other international regulatory agencies prior to commercial sales.
There can be no assurance that all of the Company's products will receive the
necessary approvals. If the Company was denied such approvals or such approvals
were delayed, it may have a material adverse impact on the Company.
Inventory
Inventory primarily consists of raw materials used in the Isolagen
Process. Inventory is stated at the lower of cost or market and cost is
determined by the weighted average method.
8
Property and equipment
Property and equipment, consisting primarily of lab equipment, computer
equipment, leasehold improvements, and office furniture and fixtures is carried
at cost less accumulated depreciation. Depreciation for financial reporting
purposes is provided by the straight-line method over the estimated useful lives
of three to five years subject to half year convention. Leasehold improvements
are amortized using the straight-line method over the remaining life of the
lease. The cost of repairs and maintenance is charged against income as
incurred.
Intangible assets
In the first quarter of 2003, the Company entered into an Intellectual
Property Purchase Agreement to acquire two pending patent applications. As
consideration, the Company issued the seller 100,000 shares of its Common Stock
and royalty equal to (a) 5% of all revenues recognized by the Company or its
Affiliates from commercial application of the Intellectual Property made,
provided, distributed, sold or manufactured directly by the Company or its
Affiliates, or (b) 25% of all revenues recognized by the Company or its
Affiliates from licensing, sublicensing, transferring or selling the
Intellectual Property to a third party, without offset or deduction for general
and administrative or operating costs, subject to a total maximum royalty of $2
million. The pending patent applications are recorded as intangible assets at
their acquisition cost and will be amortized over their estimated useful lives
on a straight-line basis.
Earnings per share data
Basic earnings (loss) per share is calculated based on the weighted
average common shares outstanding during the period. Diluted earnings per share
also gives effect to the dilutive effect of stock options, warrants and
convertible preferred stock (calculated based on the treasury stock method). The
Company does not present diluted earnings per share for years in which it
incurred net losses as the effect is antidilutive.
Shares of Isolagen common stock outstanding prior to the Merger were
deemed converted to its equivalent shares of the Company's common stock using a
conversion factor as defined in the Merger Agreement.
Stock-based compensation
The Company accounts for its stock-based compensation under the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 123 - "Accounting
for Stock Based Compensation." Under SFAS No. 123, the Company is permitted to
either record expenses for stock options and other employee compensation plans
based on their fair value at the date of grant or to continue to apply its
current accounting policy under Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees," ("APB No. 25"), and recognize
compensation expense, if any, based on the intrinsic value of the equity
instrument at the measurement date. The Company elected to continue following
the provisions of APB No. 25.
In December 2002, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and
Disclosure". This statement provides guidance for those companies wishing to
voluntarily change to the fair value based method of accounting for stock-based
compensation. The statement also amends the disclosure requirements of SFAS No,
123, requiring prominent disclosure in annual and interim financial statements
regarding a company's method for accounting for stock-based employee
compensation and the effect of the method on reported results. While Isolagen
continues to utilize the disclosure-only provisions of SFAS No. 123, it has
modified its disclosures to comply with the new statement.
Income taxes
An asset and liability approach is used for financial accounting and
reporting for income taxes. Deferred income taxes arise from temporary
differences between income tax and financial reporting and principally relate to
recognition of revenue and expenses in different periods for financial and tax
accounting purposes and are measured using currently enacted tax rates and laws.
In addition, a deferred tax asset can be generated by net operating loss
carryforwards ("NOLs"). If it is more likely than not that some portion or all
of a deferred tax asset will not be realized, a valuation allowance is
recognized.
9
Revenue recognition
The Company recognizes revenue from product sales when goods are shipped
and the risk of loss transfers to the customer. Revenue from licenses and other
upfront fees are recognized on a ratable basis over the term of the respective
agreement. Milestone payments are recognized upon successful completion of a
performance milestone event. Any amounts received in advance of performance are
recorded as deferred revenue. The Company recognizes revenue over the period the
service is performed in accordance with SEC Staff Accounting Bulletin No. 101,
"Revenue Recognition in Financial Statements" ("SAB 101"). SAB 101 requires that
four basic criteria must be met before revenue can be recognized: (1) persuasive
evidence of an arrangement exists, (2) delivery has occurred or services
rendered, (3) the fee is fixed and determinable, and (4) collectibility is
reasonably assured. We believe that all of these conditions are met at the time
of shipment. Currently, three injections are recommended, although the decision
to utilize one, two or three injections is between the attending physician and
his/her patient. The amount invoiced is fixed and determinable and only varies
among customers depending upon the number of injections requested. There is no
performance provision under any arrangement with any doctor and there is no
right to refund, or returns for unused injections.
Currently the Isologen Process is delivered through an attending physician
to each patient in the Company's recommended regimen of up to three injections.
Each injection has stand alone value to the patient. The Company invoices the
attending physician upon that physician submitting his/her patient's tissue
sample to the Company; thus the contractual arrangement is between the Company
and the medical professional. The amount invoiced varies directly with the
number of injections requested. All orders are paid in advance by the physician
and are not refundable. Revenue is deferred until shipment, provided no
significant obligations remain, and is recognized in installments corresponding
to the number of injections shipped to the attending physician. Due to the short
shelf life, each injection is cultured on an as needed basis and shipped prior
to the individual injection being administered by the physician. The amount of
the revenue deferral represents the fair value of the remaining undelivered
injections defined in accordance with EITF 00-21, which addresses the issue of
accounting for arrangements that involve the delivery of multiple products or
services. Should the physician discontinue the regimen prematurely all remaining
deferred revenue is recognized.
Promotional incentives
The Company periodically offers promotional incentives to physicians on a
case-by-case basis. Promotional incentives are provided to physicians in the
form of 'at no charge' Isolagen Treatments and Isolagen Treatments offered at a
discount to the suggested price list. The Company does not receive any
identifiable benefit from the physicians in exchange for any promotional
incentives granted.
The Company does not record any revenue related to 'at no charge' Isolagen
Treatments and the cost to provide such treatments is expensed as incurred. The
Company records any discounts granted as a reduction in revenue (i.e.net revenue
after discount) from that specific transaction. The Company believes this
accounting treatment complies with Emerging Issues Task Force ("EITF")-01-09:
"Accounting for Consideration Given by a Vendor to a Customer (Including a
Reseller of the Vendor's Products)."
Foreign currency translation
The financial position and results of operations of the Company's foreign
subsidiaries are generally determined using the local currency as the functional
currency. Assets and liabilities of these subsidiaries are translated at the
exchange rate in effect at each year-end. Income statement accounts are
translated at the average rate of exchange prevailing during the year.
Adjustments arising from the use of differing exchange rates from period to
period are included in other comprehensive income in stockholders' equity. Gains
and losses resulting from foreign currency transactions are included in earnings
and have not been material in any one year.
Comprehensive income
Comprehensive income encompasses all changes in equity other than those
with stockholders and consists of net earnings and foreign currency translation
adjustments. The Company does not provide for U.S. income taxes on
10
foreign currency translation adjustments since it does not provide for such
taxes on undistributed earnings of foreign subsidiaries.
Research and development expenses
Research and development expenses include direct costs, research-related
overhead, and costs associated with improved process science, manufacturing and
cost reduction are charged to operations as incurred.
Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Recent accounting pronouncements
In December 2002, the Emerging Issues Task Force, ("EITF"), issued EITF
Issue 00-21, Accounting for Revenue Arrangements with Multiple Deliverables.
EITF 00-21 provides guidance on determining whether a revenue arrangement
contains multiple deliverable items and if so, requires that revenue be
allocated amongst the different items based on fair value. EITF 00-21 also
requires that revenue or any item in a revenue arrangement with multiple
deliverables not delivered completely must be deferred until delivery of the
item is completed. The guidance in EITF 00-21 is effective for revenue
arrangements entered into in fiscal periods beginning after June 15, 2003. The
Company does not expect that implementation of EITF 00-21 will have a material
impact on its results of operations or financial position.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure". This statement provides
guidance for those companies wishing to voluntarily change to the fair value
based method of accounting for stock-based compensation. The statement also
amends the disclosure requirements of Statement 123, requiring prominent
disclosure in annual and interim financial statements regarding a company's
method for accounting for stock-based employee compensation and the effect of
the method on reported results. While Isolagen continues to utilize the
disclosure-only provisions of SFAS No. 123, it has modified its disclosures to
comply with the new statement.
In January 2003, the FASB issued FIN 46, "Consolidation of Variable
Interest Entities", which requires the consolidation of variable interest
entities. FIN 46 is applicable to variable interest entities created after
January 31, 2003. Variable interest entities created prior to February 1, 2003
must be consolidated effective July 1, 2003. Isolagen adopted FIN 46 in the
quarter ended June 30, 2003, and it did not have a material impact on our
financial position or results of operations.
In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities", which amends and clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities
under SFAS 133. SFAS 149 is effective for contracts entered into or modified
after June 30, 2003, and for hedging relationships designated after June 30,
2003. Isolagen will adopt SFAS 149 effective July 1, 2003, and does not expect
that the provisions of SFAS 149 will have a material impact on the Company's
financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity". SFAS
150 requires that certain financial instruments, which under previous guidance
were accounted for as equity, must now be accounted for as liabilities. The
financial instruments affected include mandatory redeemable stock, certain
financial instruments that require or may require the issuer to buy back some of
its shares in exchange for cash or other assets and certain obligations that can
be settled with shares of stock. SFAS 150 is effective for all financial
instruments entered into or modified after May 31, 2003, and otherwise is
effective at the beginning of the first interim period beginning after June 15,
2003. SFAS 150 was adopted in the quarter ended June 30, 2003 and it did not
have an impact of the Company's financial positions or results of operations.
11
NOTE 3 - CONTINGENCIES
On October 9, 1996, the Company was advised by the Enforcement Division of
the Securities and Exchange Commission (the "Commission") that it is considering
recommending that the Commission bring an enforcement action, which could
include a civil penalty, against the Company in U.S. District Court for failing
to file timely periodic reports in violation of Section 13(a) of the Securities
and Exchange Act of 1934 and the rules thereunder.
In October 1996, the Company also received a request for the voluntary
production of information to the Enforcement Division of the Commission related
to the resignation of Coopers & Lybrand LLP and the termination of Arthur
Andersen LLP and the appointment of Jones, Jensen & Company as the Company's
independent public accountants and the reasons therefore. In addition, the
Company was requested to provide certain information respecting its previous
sales of securities. The Company cooperated in providing information in response
to these inquiries in early 1997. The Company has not been advised of the
outcome of the foregoing, and has had no further contact by the Enforcement
Division of the Commission.
NOTE 4 - EQUITY
From the date of the Merger through June 30, 2003, the Company has not
paid compensation to certain officers and directors. Accordingly, the Company
has capitalized the estimated fair value of these services. The uncompensated
contributed services totaled $200,000 for each of the six month periods ended
June 30, 2002 and 2003. We estimated the value of the contributed services based
upon our estimate of their fair market value. This contribution of services was
recorded as an increase to compensation expense and increase in additional paid
in capital.
During the six months ended June 30, 2003, the Company issued 61,600
shares of common stock for cash totaling $92,400 in connection with the exercise
of stock options and issued 114,598 shares of common stock in exchange for
cashless exercise of warrants.
In May 2003, the Company sold in a private offering 155,750 shares of
Series B Convertible Preferred Stock, par value $0.001 per share, at an offering
price of $28 per share. Each share of Series B preferred stock is convertible
into 8 shares of common stock at any time after issuance and accrues dividends
at 6% per annum payable in cash or additional shares of Series B Preferred
Stock. After deducting the costs and expenses associated with the sale, the
Company received cash totaling $3,919,078. In conjunction with the private
offering, the Company issued to the placement agent warrants to purchase 124,600
shares of common stock with an exercise price of $3.50 per share. The warrants
are exercisable immediately after grant and expire five years thereafter. The
fair value of the warrants granted to the placement agent, based on the
Black-Scholes valuation model is estimated to be $2.77 per warrant. The value of
the warrants granted has been offset from the proceeds received from the sale of
the Series B Preferred Stock and recorded as additional paid in capital.
The price of the preferred stock sold was $28 per share. The market value
of the Company's common stock sold on the dates that the preferred stock was
sold had a range of $4.40 - $4.54 per common share. In accordance with EITF
00-27 this created a beneficial conversion to the holders of the preferred stock
and a deemed dividend to the preferred stockholders totaling $1,244,880 was
recorded by the Company with a corresponding amount recorded as additional
paid-in capital. The deemed dividend associated with the beneficial conversion
is calculated as the difference between the fair value of the underlying common
stock less the proceeds that have been received for the Series B Preferred Stock
limited to the value of the proceeds received.
In April 2003, the Company issued 150,000 warrants to purchase its common
stock with an exercise price of $3.50 per share in conjunction with a
distribution agreement. The warrants vest over a three year period, subject to
certain acceleration clauses. The Company recognized consulting expenses
totaling $22,391 during the three months ended June 30, 2002 based on the fair
value of the warrants granted on the grant date.
In May 2003, the Company issued 150,000 options to purchase its common
stock with an exercise price of $3.50 per share under the 2001 Stock Option Plan
("Stock Option Plan"). The options vest over a three year period from the date
of grant. The Company recognized compensation expense totaling $8,750 during the
three months ended
12
June 30, 2002 based on the options intrinsic value on the grant date. Had
compensation costs for all options issued under the Stock Option Plan been
determined based on the fair value at the grant date consistent with the
provisions of SFAS No. 123, net income and net income per share would have
decreased to the pro forma amounts indicated below:
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- -----------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net loss - as reported $(2,441,275) $(1,280,923) $(4,630,376) $(2,027,461)
Less: total stock-based employee compensation
expense determined under fair value based
method for all awards granted to employees,
net of related tax effect (316,955) (191,134) (605,322) (382,268)
----------- ----------- ----------- -----------
Net loss - pro forma $(2,758,680) $(1,472,057) $(5,235,698) $(2,409,729)
----------- ----------- ----------- -----------
Net loss per share - as reported
Basic and diluted $ (0.16) $ (0.08) $ (0.30) $ (0.13)
Net loss per share - pro forma
Basic and diluted $ (0.18) $ (0.10) $ (0.34) $ (0.16)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
FORWARD-LOOKING INFORMATION
This report contains certain "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of
the Securities Exchange Act of 1934, as amended, and information relating to
Isolagen that is based on management's exercise of business judgment as well as
assumptions made by and information currently available to management. When used
in this document and other documents, releases and reports released by us, the
words "anticipate," "believe," "estimate," "expect," and "intend" and words of
similar import, are intended 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. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect, our
actual results could differ materially from those anticipated in these
forward-looking statements. Actual events, transactions and results may
materially differ from the anticipated events, transactions or results described
in such statements. The discovery and development of applications for autologous
cellular therapy are subject to substantial risks and uncertainties. There can
be no assurance that Isolagen's trials relating to autologous cellular therapy
applications for the treatment of dermal defects or gingival recession can be
conducted within the timeframe that Isolagen expects, that such trials will
yield positive results, or that additional applications for the
commercialization of autologous cellular therapy can be identified and advanced
into human clinical trials. These and other factors, some of which are described
below, could cause future results to differ materially from the expectations
expressed in this report. Although we believe that our expectations are based on
reasonable assumptions, we can give no assurance that our expectations will
materialize. Many factors could cause actual results to differ materially from
our forward looking statements. Several of these factors include, without
limitation:
- our ability to develop autologous cellular therapies that have
specific applications in cosmetic dermatology, and our ability to
explore (and possibly develop) applications for periodontal disease,
reconstructive dentistry and other health-related markets;
- whether our clinical human trials relating to autologous cellular
therapy applications for the treatment of dermal defects or gingival
recession can be conducted within the timeframe that we expect,
whether such trials will yield positive results, or whether
additional applications for the commercialization of autologous
cellular therapy can be identified by us and advanced into human
clinical trials;
- our ability to provide and deliver any autologous cellular therapies
that we may develop, on a basis is that is cost competitive with
other therapies, drugs and treatments that may be provided by our
competitors;
13
- our ability to finance our business;
- our ability to maintain our current pricing model;
- our ability to decrease our cost of goods sold;
- a stable interest rate market in the world, and specifically the
countries we are doing business in or plan to do business in;
- management's best estimate on the patient data including patients
started and patients completed;
- a stable currency rate environment in the world, and specifically
the countries we are doing business in or plan to do business in;
- our ability to receive requisite regulatory approvals in the United
States, European Community, Australia, South Korea, Hong Kong,
Mexico, and our ability to retain the licenses that we have obtained
and may obtain; and the absence of adverse regulatory developments
in the United States, European Community, Australia, South Korea,
Hong Kong, Mexico or any other country we plan to do conduct
commercial operations;
- continued availability of supplies at the current prices;
- no new entrance of competitive products in our markets;
- no adverse publicity related to our products or the Company itself;
- no adverse claims relating to our Intellectual Property;
- the adoption of new, or changes in, accounting principles; and/or
legal proceedings;
- our ability to maintain compliance with the AMEX requirements for
continued listing of our common stock;
- the costs inherent with complying with new statutes and regulations
applicable to public reporting companies, such as the Sarbanes-Oxley
Act of 2002;
- our ability to efficiently integrate future acquisitions, if any;
- other new lines of business that the Company may enter in the
future; and
- other risks referenced from time to time elsewhere in this report
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 materially from those expressed in
these forward-looking statements. Other unknown or unpredictable factors also
could have material adverse effects on our future results. We undertake no
obligation and do not intend to update, revise or otherwise publicly release any
revisions to these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of any unanticipated events.
We cannot assure you that projected results will be achieved.
GENERAL
Isolagen is a Houston, Texas based emerging pharmaceutical bioscience
company which has focused its efforts in the development and commercialization
of autologous cellular technology that has specific applications in cosmetic
dermatology and is exploring applications for periodontal disease,
reconstructive dentistry and other health-related markets. Autologous cellular
therapy is a process whereby a patient's own cells are extracted, reproduced and
then reintroduced to the patient for specific cosmetic and medical applications.
Unlike other applications for the treatment of dermal defects, Isolagen utilizes
only the patient's unique, living cells to produce the patient's own collagen.
There is no foreign substance utilized in this treatment protocol. Isolagen's
goal is to become the industry leader in the research, development and
commercialization of autologous cellular therapy which stimulate a patient's own
collagen production.
CRITICAL ACCOUNTING POLICIES
The following discussion and analysis of financial condition and results
of operations are based upon the Company's consolidated financial statements,
which have been prepared in conformity with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires management to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues, expenses and related disclosures. On
an on-going basis, the Company evaluates its estimates and assumptions,
including but not limited to those related to the impairment of long-lived
assets, reserves for doubtful accounts, revenue recognition and certain accrued
liabilities. The Company bases its estimates on historical experience and
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
14
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.
Revenue Recognition: The Company recognizes revenue from product sales
when goods are shipped and the risk of loss transfers to the customer. Revenue
from licenses and other upfront fees are recognized on a ratable basis over the
term of the respective agreement. Milestone payments are recognized upon
successful completion of a performance milestone event. Any amounts received in
advance of performance are recorded as deferred revenue. The Company recognizes
revenue over the period the service is performed in accordance with SEC Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB
101"). SAB 101 requires that four basic criteria must be met before revenue can
be recognized: (1) persuasive evidence of an arrangement exists, (2) delivery
has occurred or services rendered, (3) the fee is fixed and determinable, and
(4) collectibility is reasonably assured. We believe that all of these
conditions are met at the time of shipment. Currently, three injections are
recommended, although the decision to utilize one, two or three injections is
between the attending physician and his/her patient. The amount invoiced is
fixed and determinable and only varies among customers depending upon the number
of injections requested. There is no performance provision under any arrangement
with any doctor and there is no right to refund, or returns for unused
injections.
Currently the Isologen Process is delivered through an attending physician
to each patient in the Company's recommended regimen of up to three injections.
Each injection has stand alone value to the patient. The Company invoices the
attending physician upon that physician submitting his/her patient's tissue
sample to the Company; thus the contractual arrangement is between the Company
and the medical professional. The amount invoiced varies directly with the
number of injections requested. All orders are paid in advance by the physician
and are not refundable. Revenue is deferred until shipment, provided no
significant obligations remain, and is recognized in installments corresponding
to the number of injections shipped to the attending physician. Due to the short
shelf life, each injection is cultured on an as needed basis and shipped prior
to the individual injection being administered by the physician. The amount of
the revenue deferral represents the fair value of the remaining undelivered
injections defined in accordance with Emerging Issues Task Force ("EITF") 00-21,
which addresses the issue of accounting for arrangements that involve the
delivery of multiple products or services. Should the physician discontinue the
regimen prematurely all remaining deferred revenue is recognized.
Research and development expenses: Research and development expenses
include direct costs, research-related overhead, and costs associated with
improved process science, manufacturing and cost reduction are charged to
operations as incurred.
Stock-based compensation: The Company accounts for its stock-based
compensation under the provisions of SFAS No. 123 - "Accounting for Stock Based
Compensation." Under SFAS No. 123, the Company is permitted to either record
expenses for stock options and other employee compensation plans based on their
fair value at the date of grant or to continue to apply its current accounting
policy under Accounting Principles Board Opinion No. 25 "Accounting for Stock
Issued to Employees," ("APB NO. 25"), and recognize compensation expense, if
any, based on the intrinsic value of the equity instrument at the measurement
date. The Company elected to continue following the provisions of APB No. 25.
In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation-Transition and Disclosure." This statement provides
guidance for those companies wishing to voluntarily change to the fair value
based method of accounting for stock-based compensation. The statement also
amends the disclosure requirements of SFAS No. 123, requiring prominent
disclosure in annual and interim financial statements regarding a company's
method for accounting for stock-based employee compensation and the effect of
the method on reported results. While Isolagen continues to utilize the
disclosure-only provisions of SFAS No. 123, it has modified its disclosures to
comply with the new statement.
RESULTS OF OPERATIONS, AS RESTATED
Comparison of the six months ending June 30, 2003 and 2002
REVENUES. Revenues increased $37,278, to $79,796 for the six months ended
June 30, 2003 compared to $42,518 for the six months ended June 30, 2002. The
increase in revenues is primarily attributable to the
15
commencement of operations in the United Kingdom. Included in the six months
ended June 30, 2002 was $40,000 in license fees recognized which did not recur
in the six months ended June 30, 2003.
The Isolagen Process involves a patient's doctor obtaining an
approximately 3 mm punch skin sample from the patient. The skin sample is packed
in a container provided by the Company and shipped overnight to the Company's
laboratory. The specimen is then cultured utilizing the Company's patented
Isolagen Process. This process separates the cell, called a fibroblast, from the
rest of the tissue then multiplies these fibroblasts. Approximately six (6)
weeks later, approximately 1 ml of the patient's cells is also sent to the
doctor for treatment. Additional amounts of approximately 1 ml are available for
re-injection every two (2) to three (3) weeks. The Company recognizes one-third
of the revenue associated with each treatment upon the shipment of the first
injection to the patient's doctor, an additional one-third of revenue associated
with each treatment is recognized upon shipment of the second injection to the
patient's doctor, and the remaining one-third is recognized upon the shipment of
the last injection to the patient's doctor.
In addition, those revenues which the Company did recognize during the
first six months of 2003 from its United Kingdom operations were in part reduced
by promotional incentives provided by the Company to doctors utilizing the
Isolagen Process. The Company expects to continue providing such promotional
incentives to doctor's during the introduction phase of the Isolagen Process in
the United Kingdom.
COST OF SALES. Costs of sales increased to $48,861 for the six months
ended June 30, 2003 compared to $0 for the six months ended June 30, 2002. The
increase in cost of sales is primarily related to the commencement of operations
in the United Kingdom.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 139%, or $2,048,947, to $3,523,056 for the six
months ended June 30, 2003 compared to $1,474,109 for the six months ended June
30, 2002. The major components of the approximately $2.0 million increase in
selling, general and administrative expense are as follows: a) consulting
expense increased by approximately $0.1 million to $0.6 million for the six
months ended June 30, 2003 compared to $0.5 million for the six months ended
June 30, 2002; b) salaries increased by approximately $0.3 million to $0.5
million for the six months ended June 30, 2003 compared to $0.2 million for the
six months ended June 30, 2002 (these amounts include an imputed expense of
$200,000 in each period relating to the fair market value of services provided
by certain officers for which they will not be compensated); c) travel expense
increased by approximately $0.3 million to $0.4 million for the six months ended
June 30, 2003 compared to $0.1 million for the six months ended June 30, 2002;
d) legal expense increased by approximately $0.1 million to $0.3 million for the
six months ended June 30, 2003 compared to $0.2 million for the six months ended
June 30, 2002; e) promotional expense increased by approximately $0.2 million to
$0.3 million for the six months ended June 30, 2003 compared to $0.1 million for
the six months ended June 30, 2002; and f) depreciation and amortization
increased by approximately $0.4 million to $0.4 million for the six months ended
June 30, 2003 compared to $0.0 million for the six months ended June 30, 2002.
The increase in selling, general and administrative expenses is attributed
primarily to: a) higher salaries expense due to an increase in the number of
employees; b) increased travel expenses related to our expansion into the United
Kingdom and Australia; c) higher legal fees related to patent and business
development issues; d) increased marketing and promotion efforts related to the
commencement of operations in the United Kingdom; and e) depreciation and
amortization of assets placed into service during 2003 with the commencement of
operations in the United Kingdom and the completion of the U.S laboratory.
RESEARCH AND DEVELOPMENT. Research and development expenses increased by
approximately $0.6 million during the six months ended June 30, 2003 to $1.2
million as compared to $0.6 million for the same period of 2002. Research and
development costs are composed primarily of costs related to the Company's
efforts to gain FDA approval for the Isolagen Process in the United States.
These costs include those personnel and laboratory costs related to the current
FDA trials and certain consulting costs. This project is still under
development. The total cost of research and development as of June 30, 2003 is
$5.0 million. As of June 30, 2003, we believe at a minimum it will cost $3
million to complete this project. That estimate assumes that no further testing
requirements are imposed by the FDA, that FDA approval is forthcoming and that
FDA approval is received during 2005. The FDA approval process is extremely
complicated and is dependent upon our study protocols and the results of our
studies. In the event that the FDA requires additional studies or requires
changes in our study protocols or in the event that the results of the studies
are not consistent with our expectations the process will be
16
more expensive and time consuming. Due to the vagaries of the FDA approval
process we are unable to predict what the cost of obtaining approval will be if
FDA approval is not forthcoming in 2005. The Company has other research projects
currently underway, including those related to repairing damaged nerves and
therapies to regrow hair and to heal burned skin. However, research and
development costs related to these projects were not material during the 2003 or
2002 periods. The major components of the approximately $0.6 million increase in
research and development expense are as follows: a) salaries increased by
approximately $0.4 million to $0.7 million for the six months ended June 30,
2003 compared to $0.3 million for the six months ended June 30, 2002; and b)
laboratory expense increased by approximately $0.1 million to $0.2 million for
the six months ended June 30, 2003 compared to $0.1 million for the six months
ended June 30, 2002.
INTEREST INCOME. Interest income decreased 44%, or $8,443, to $10,620 for
the six months ended June 30, 2003 compared to $19,063 for the six months ended
June 30, 2002. The decrease in interest income resulted from, among other
things, a decrease in the amount of cash on hand by the Company, and a decrease
in interest rates paid on the Company's deposits.
OTHER INCOME. Other income of $55,663 for the six months ended June 30,
2003 represents gains realized on the sale of certain interest bearing
securities denominated in Australian dollars and British pounds held to mitigate
a portion of the foreign currency exposure related to the Company's
international activity. As of June 30, 2003, the Company holds no such
securities.
NET LOSS. Net loss for the six months ended June 30, 2003 was $4,630,376,
as compared to a net loss of $2,027,461 for the six months ended June 30, 2002.
This increase in net loss is attributed primarily to salaries, travel,
consulting, legal, and promotional expenses. Net loss attributable to common
stockholders for the six months ended June 30, 2003 was $6,286,445, as compared
to a net loss of $11,716,419 for the six months ended June 30, 2002. These
amounts include $1.2 million and $9.6 million of deemed dividend associated with
beneficial conversion of preferred stock for the six months ended June 30, 2003
and June 30, 2002, respectively. These amounts include $0.4 million and $0.1
million of preferred stock dividends for the six months ended June 30, 2003 and
June 30, 2002, respectively.
Comparison of the three months ending June 30, 2003 and 2002
REVENUES. Revenues increased $59,425, to $79,425 for the three months
ended June 30, 2003 compared to $20,000 for the three months ended June 30,
2002. The increase in revenues is primarily attributable to the commencement of
operations in the United Kingdom. Included in the three months ended June 30,
2002 was $20,000 in license fees recognized which did not recur in the three
months ended June 30, 2003.
Those revenues which the Company did recognize during the three months
ended June 30, 2003 from its United Kingdom operations were in part reduced by
promotional incentives provided by the Company to doctors utilizing the Isolagen
Process. The Company expects to continue providing such promotional incentives
to doctor's during the introduction phase of the Isolagen Process in the United
Kingdom.
COST OF SALES. Costs of sales increased to $47,867 for the three months
ended June 30, 2003 compared to $0 for the three months ended June 30, 2002. The
increase in cost of sales is primarily related to the commencement of operations
in the United Kingdom.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased 101%, or $936,969, to $1,862,566 for the three
months ended June 30, 2003 compared to $925,597 for the three months ended June
30, 2002. The major components of the approximately $1.0 million increase in
selling, general and administrative expense are as follows: a) consulting
expense decreased by approximately $0.1 million to $0.3 million for the three
months ended June 30, 2003 compared to $0.4 million for the three months ended
June 30, 2002; b) salaries increased by approximately $0.2 million to $0.3
million for the three months ended June 30, 2003 compared to $0.1 million for
the three months ended June 30, 2002 (these amounts include an imputed expense
of $100,000 in each period relating to the fair market value of services
provided by certain officers for which they will not be compensated); c) travel
expense increased by approximately $0.1 million to $0.2 million for the three
months ended June 30, 2003 compared to $0.1 million for the three months ended
June 30, 2002; d) legal expense increased by approximately $0.1 million to $0.2
million for the three months ended
17
June 30, 2003 compared to $0.1 million for the three months ended June 30, 2002;
e) promotional expense increased by approximately $0.1 million to $0.1 million
for the three months ended June 30, 2003 compared to $0.0 million for the three
months ended June 30, 2002; and f) depreciation and amortization increased by
approximately $0.2 million to $0.2 million for the three months ended June 30,
2003 compared to $0.0 million for the three months ended June 30, 2002. The
increase in selling, general and administrative expenses is attributed primarily
to: a) higher salaries expense due to an increase in the number of employees; b)
increased travel expenses related to our expansion into the United Kingdom and
Australia; c) higher legal fees related to patent and business development
issues; d) increased marketing and promotion efforts related to the commencement
of operations in the United Kingdom; and e) depreciation and amortization of
assets placed into service during 2003 with the commencement of operations in
the United Kingdom and the completion of the U.S laboratory.
RESEARCH AND DEVELOPMENT. Research and development expenses increased by
approximately $0.2 million during the three months ended June 30, 2003 to $0.6
million as compared to $0.4 million for the same period of 2002. Research and
development costs are composed primarily of costs related to the Company's
efforts to gain FDA approval for the Isolagen Process in the United States.
These costs include those personnel and laboratory costs related to the current
FDA trials and certain consulting costs. This project is still under
development. The total cost of research and development as of June 30, 2003 is
$5.0 million. As of June 30, 2003, we believe at a minimum it will cost $3
million to complete this project. That estimate assumes that no further testing
requirements are imposed by the FDA, that FDA approval is forthcoming and that
FDA approval is received during 2005. The FDA approval process is extremely
complicated and is dependent upon our study protocols and the results of our
studies. In the event that the FDA requires additional studies or requires
changes in our study protocols or in the event that the results of the studies
are not consistent with our expectations the process will be more expensive and
time consuming. Due to the vagaries of the FDA approval process we are unable to
predict what the cost of obtaining approval will be if FDA approval is not
forthcoming in 2005. The Company has other research projects currently underway,
including those related to repairing damaged nerves and therapies to regrow hair
and to heal burned skin. However, research and development costs related to
these projects were not material during the 2003 or 2002 periods. The major
components of the approximately $0.2 million increase in research and
development expense are as follows: a) salaries increased by approximately $0.1
million to $0.4 million for the three months ended June 30, 2003 compared to
$0.3 million for the three months ended June 30, 2002; and b) laboratory expense
increased by approximately $0.1 million to $0.1 million for the three months
ended June 30, 2003 compared to $0.0 million for the three months ended June 30,
2002.
INTEREST INCOME. Interest income decreased 78%, or $11,335, to $3,190 for
the three months ended June 30, 2003 compared to $14,525 for the three months
ended June 30, 2002. The decrease in interest income may be attributed to, among
other things, a decrease in the amount of cash on hand by the Company, and a
decrease in interest rates paid on the Company's deposits.
OTHER INCOME. Other income of $32,421 for the three months ended June 30,
2002 represents gains realized on the sale of certain interest bearing
securities denominated in Australian dollars and British pounds held to mitigate
a portion of the foreign currency exposure related to the Company's
international activity. As of June 30, 2003, the Company holds no such
securities.
NET LOSS. Net loss for the three months ended June 30, 2003 was
$2,441,275, as compared to a net loss of $1,280,923 for the three months ended
June 30, 2002. This increase in net loss is attributed primarily to salaries,
travel, consulting, legal, and promotional expenses. Net loss attributable to
common stockholders for the three months ended June 30, 2003 was $3,887,605, as
compared to a net loss of $10,869,481 for the three months ended June 30, 2002.
These amounts include $1.2 million and $9.6 million of deemed dividend
associated with beneficial conversion of preferred stock for the three months
ended June 30, 2003 and June 30, 2002, respectively. These amounts include $0.2
million and $0.1 million of preferred stock dividends for the three months ended
June 30, 2003 and June 30, 2002, respectively.
18
LIQUIDITY AND CAPITAL RESOURCES, AS RESTATED
Operating Activities
Cash used in operating activities during the six months ended June 30,
2003, amounted to $3,951,085, as compared to the $1,636,244 of cash used in
operating activities during the six months ended June 30, 2002. The increase is
attributed primarily to salaries, travel, consulting, legal, and promotional
expenses.
Investing Activities
Cash used by investing activities during the six months ended June 30,
2003, amounted to $1,045,170 as compared to cash used by investing activities of
$86,327 during the six months ended June 30, 2002. This increase in cash used is
due to the purchase of property and equipment for the Houston, Texas, London,
England, and Sydney, Australia laboratories.
Financing Activities
Cash provided by financing activities during the six months ended June 30,
2003, amounted to $4,011,478 consisting of $3,919,078 raised from the issuance
of preferred stock and $92,400 raised from the issuance of common stock as
compared to cash provided by financing activities of $8,778,762 during the six
months ended June 30, 2002 which consisted entirely of proceeds from the
issuance of preferred stock. In May 2003, the Company sold in a private offering
155,750 shares of Series B Convertible Preferred Stock, par value $0.001 per
share, at an offering price of $28 per share. Each share of Series B preferred
stock was convertible into 8 shares of common stock at any time after issuance
and accrues dividends at 6% per annum payable in cash or additional shares of
Series B Preferred Stock. After deducting the costs and expenses associated with
the sale, the Company received cash totaling $3,919,078. In conjunction with the
private offering, the Company issued to the placement agent warrants to purchase
124,600 shares of common stock with an exercise price of $3.50 per share. The
warrants are exercisable immediately after grant and expire five years
thereafter. The fair value of the warrants granted to the placement agent, based
on the Black-Scholes valuation model is estimated to be $2.77 per warrant. The
value of the warrants granted has been offset from the proceeds received from
the sale of the Series B Preferred Stock and recorded as additional paid in
capital.
The price of the Series B Preferred Stock sold was $28 per share. The
market value of the Company's common stock sold on the dates that the preferred
stock was sold had a range of $4.40 - $4.54 per common share. In accordance with
EITF 00-27 this created a beneficial conversion to the holders of the preferred
stock and a deemed dividend to the preferred stockholders totaling $1,244,880
was recorded by the Company with a corresponding amount recorded as additional
paid-in capital. The deemed dividend associated with the beneficial conversion
is calculated as the difference between the fair value of the underlying common
stock less the proceeds that have been received for the Series B Preferred Stock
limited to the value of the proceeds received.
Working Capital
As of June 30, 2003, the Company had a cash balance of $3,292,242. As of
August 7, 2003, the Company had a cash balance of approximately $2.2 million.
The Company does not have any credit facilities with which to fund ongoing
working capital needs. The long-term viability of the Company is dependent upon
successful operation of its business and the ability to raise additional debt
and equity within the near future.
Inflation did not have a significant impact on the Company's results
during the six months ended June 30, 2003.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our market risk as it relates to foreign currency transactions is
described in Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
19
ITEM 4. CONTROLS AND PROCEDURES
In accordance with Rule 13a-15(b) promulgated under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), the Chief Executive
Officer and Chief Financial Officer of the Company (the "Certifying Officers")
have conducted evaluations of the Company's disclosure controls and procedures.
As defined under Sections 13a-15(e) and 15d-15(e) of the Exchange Act, the term
"disclosure controls and procedures" means controls and other procedures of an
issuer that are designed to ensure that information required to be disclosed by
the issuer in the reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the Commission's rules and forms. Disclosure controls and procedures include,
without limitation, controls and procedures designed to ensure that information
required to be disclosed by an issuer in the reports that it files or submits
under the Exchange Act is accumulated and communicated to the issuer's
management, including its principal executive officer or officers and principal
financial officer or officers, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure. The
Certifying Officers have reviewed the Company's disclosure controls and
procedures and have concluded that those disclosure controls and procedures were
effective as of the end of the Company's most recent fiscal quarter.
During the Company's most recent fiscal quarter, there were no changes
in the Company's internal control over financial reporting that has materially
affected, or is reasonably likely to materially affect, the Company's internal
control over financial reporting.
PART II - OTHER INFORMATION
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In May 2003, the Company sold 155,750 shares of Series B Convertible
Preferred Stock at $28.00 per share for a gross amount of approximately $4.4
million in a private placement to a total of 81 accredited investors pursuant to
the exemption from registration under the Securities Act of 1933 provided by
Rule 506 of Regulation D. The Company complied with the applicable requirements
of Regulation D and filed appropriates Forms D. Each share of Series B
Convertible Preferred Stock is convertible into eight shares of the Company's
common stock, at any time at the option of the holder of such shares. The Series
B Convertible Preferred Stock accrues dividends at 6% per annum payable in cash
or additional shares of Series B Convertible Preferred Stock. Fordham Financial
Management, Inc. acted as the Company's placement agent in connection with the
offer and sale of the Series B Convertible Preferred Stock. After deducting the
aggregate costs and expenses associated with the offer and sale of the shares of
the Series B Convertible Preferred Stock, the Company actually received
approximately $3.9 million. The Company also issued to Fordham Financial
Management, Inc. a warrant to purchase 124,600 shares of the Company's common
stock for a purchase price of $3.50 per share (subject to adjustment from time
to time in accordance with the terms of the warrant).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The annual meeting of the Company's stockholders was held on June 18,
2003. At that meeting, four proposals were submitted to a vote of the Company's
stockholders: (1) To approve the adoption of the Isolagen, Inc. 2003 Stock
Option and Appreciation Rights Plan; (2) To ratify the appointment of Pannell
Kerr Forster of Texas, P.C. as the Company's auditors for the year ending
December 31, 2003; (3) To amend the Company's Certificate of Incorporation to
provide for the classification of the Board of Directors into three classes of
directors with staggered terms of office; and (4) To elect seven directors to
hold office until his or her successor is duly elected and qualified.
At the close of business on the record date for the meeting (which was
May 1, 2003), there were 15,310,181 shares of Common Stock outstanding and
entitled to be voted at the meeting and 3,038,506 shares of Series A Convertible
Preferred Stock entitled to be voted at the meeting. Each share of Common Stock
is entitled to one vote per share, and each share of Series A Convertible
Preferred Stock is entitled to two votes per share. Holders of 16,225,113 shares
of voting stock (representing a like number of votes) were present at the
meeting, either in person or by proxy. The following table sets forth the
results of the voting:
20
FOR AGAINST ABSTAIN
--- ------- -------
1. To approve the adoption of the Isolagen, Inc. 2003 Stock Option and 16,011,804 145,813 68,271
Appreciation Rights Plan
2. To ratify the appointment of Pannell Kerr Forster of Texas, P.C. as the 16,219,128 1,157 5,603
Company's auditors for the year ending December 31, 2003
3. To amend the Company's Certificate of Incorporation to provide for the 16,173,054 35,219 17,611
classification of the Board of Directors into three classes of directors with
staggered terms of office
FOR WITHHELD
---------- --------
4. To elect seven directors to hold office until his or her
successor is duly elected and qualified:
Class I Directors:
William K. Boss, Jr 16,225,113 775
Steven Morrell 16,225,113 775
Class II Directors:
Ashley Smith 16,225,113 775
Ralph DeMartino 16,225,113 775
Class III Directors:
Michael Macaluso 16,225,113 775
Michael Avignon 16,225,113 775
Frank DeLape 16,225,113 775
With respect to Proposal 1, 2 & 3, these proposals were duly and
validly approved by the stockholders. With respect to Proposal 4, each nominee
received the favorable votes and each such nominee was duly and validly elected
by the stockholders.
ITEM 6. EXHIBITS AND REPORTS
(A) EXHIBITS
EXHIBIT NO. IDENTIFICATION OF EXHIBIT
----------- -------------------------
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
21
32.1 Certification of Chief Executive
Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial
Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002.
22
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
ISOLAGEN, INC.
Date: November 10, 2003 By: /s/ Jeffrey W. Tomz
---------------------------------
Jeffrey W. Tomz, CFO and Secretary
(Principal Executive and
Financial Officer)
23
EXHIBIT INDEX
Exhibit
Number Description
------- -----------
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) under the Securities Exchange Act of 1934, as
adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002.
32.1 Certification of Chief Executive Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to 18
U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.