10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

xQuarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2014

OR

oTransition 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. Employer
of incorporation)		Identification No.)

405 Eagleview Boulevard

Exton, Pennsylvania 19341

(Address of principal executive offices, including zip code)

(484) 713-6000

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during 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 x  No o

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

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

Large accelerated filer o	Accelerated filer x
Non-accelerated filer  o	Smaller reporting company  o
(Do not check if a smaller reporting company)

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x  No o

As of August 4, 2014, issuer had 40,856,815 shares issued and outstanding of common stock, par value $0.001.

TABLE OF CONTENTS

			PAGE
Part I.	Financial Information
	Item 1.	Financial Statements
		Consolidated Balance Sheets as of June 30, 2014 (unaudited) and December 31, 2013	1
		Consolidated Statements of Operations (unaudited) For the three and six months ended June 30, 2014 and 2013	2
		Consolidated Statement of Stockholders’ Equity For the six months ended June 30, 2014 (unaudited)	3
		Consolidated Statements of Cash Flows (unaudited) For the six months ended June 30, 2014 and 2013	4
		Notes to Consolidated Financial Statements (unaudited)	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 1.	Legal Proceedings	21
	Item 1A.	Risk Factors	21
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
	Item 3.	Defaults upon Senior Securities	23
	Item 4.	Mine Safety Disclosure	23
	Item 5.	Other Information	23
	Item 6.	Exhibits	23
	Signature Page		24

PART I. FINANCIAL INFORMATION

ITEM 1.                Financial Statements.

Fibrocell Science, Inc.

Consolidated Balance Sheets

($ in thousands, except share and per share data)

	June 30, 2014 (unaudited)			December 31, 2013
Assets
Current assets:
Cash and cash equivalents	$	49,536		$	60,033
Accounts receivable, net of allowance for doubtful accounts of $22 and $5, respectively	14			28
Inventory	476			597
Prepaid expenses and other current assets	706			1,202
Total current assets	50,732			61,860
Property and equipment, net of accumulated depreciation of $911 and $735, respectively	1,736			1,701
Intangible assets, net of accumulated amortization of $1,378 and $1,102, respectively	4,962			5,238
Other assets	1			215
Total assets	$	57,431		$	69,014
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,368		$	2,958
Accrued expenses	1,600			487
Deferred revenue	280			148
Total current liabilities	3,248			3,593
Warrant liability	14,258			15,216
Other long term liabilities	632			539
Total liabilities	18,138			19,348
Stockholders’ equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares outstanding	—			—
Common stock, $0.001 par value; 100,000,000 shares authorized; 40,856,815 and 39,832,225 shares issued and outstanding, respectively	41			40
Additional paid-in capital	142,586			136,694
Accumulated deficit	(103,334		)	(87,068		)
Total stockholders’ equity	39,293			49,666
Total liabilities and stockholders’ equity	$	57,431		$	69,014

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

1

Fibrocell Science, Inc.

Consolidated Statements of Operations

(unaudited)

 ($ in thousands, except share and per share data)

	Three months endedJune 30, 2014			Three months endedJune 30, 2013			Six months endedJune 30, 2014			Six months endedJune 30, 2013
Revenue from product sales	$	58		$	62		$	104		$	88
Cost of sales	547			2,104			1,340			4,317
Gross loss	(489		)	(2,042		)	(1,236		)	(4,229		)
Selling, general and administrative expense	3,487			2,294			6,302			4,504
Research and development expense	2,620			1,478			10,058			2,985
Operating loss	(6,596		)	(5,814		)	(17,596		)	(11,718		)
Other income (expense):
Warrant revaluation and other finance income (expense)	4,008			(8,818		)	958			(7,480		)
Other income	330			—			370			—
Interest income	1			—			2			—
Loss from continuing operations before income taxes	(2,257		)	(14,632		)	(16,266		)	(19,198		)
Deferred tax benefit	—			—			—			—
Loss from continuing operations, net of tax	(2,257		)	(14,632		)	(16,266		)	(19,198		)
Loss from discontinued operations, net of tax	—			(5		)	—			(9		)
Net loss	$	(2,257	)	$	(14,637	)	$	(16,266	)	$	(19,207	)
Per Share Information:
Loss from continuing operations, net of tax — basic	$	(0.06	)	$	(0.63	)	$	(0.40	)	$	(0.73	)
Loss from discontinued operations, net of tax — basic	—			—			—			—
Net loss per common share — basic	$	(0.06	)	$	(0.63	)	$	(0.40	)	$	(0.73	)
Loss from continuing operations, net of tax — diluted	$	(0.09	)	$	(0.63	)	$	(0.43	)	$	(0.74	)
Loss from discontinued operations, net of tax — diluted	—			—			—			—
Net loss per common share — diluted	$	(0.09	)	$	(0.63	)	$	(0.43	)	$	(0.74	)
Weighted average number of common shares outstanding
- Basic	40,856,815			23,260,802			40,720,958			26,230,358
- Diluted	41,250,886			23,260,802			40,917,993			26,437,817

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

2

Fibrocell Science, Inc.

Consolidated Statements of Stockholders’ Equity

($ in thousands, except share and per share data)

	Common Stock
	Shares	Amount		Additional paid-in capital		Accumulated deficit			Total Equity
Balance, December 31, 2013	39,832,225	$	40	$	136,694	$	(87,068	)	$	49,666
Stock-based compensation expense	—	—		739		—			739
Issuance of common stock	1,024,590	1		5,153		—			5,154
Net loss	—	—		—		(16,266		)	(16,266		)
Balance, June 30, 2014 (unaudited)	40,856,815	$	41	$	142,586	$	(103,334	)	$	39,293

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

3

Fibrocell Science, Inc.

Consolidated Statements of Cash Flows

(unaudited)

($ in thousands, except share and per share data)

	Six months ended June 30, 2014			Six months ended June 30, 2013
Cash flows from operating activities:
Net loss	$	(16,266	)	$	(19,207	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	739			209
Stock issued for supplemental stock issuance agreement	5,154			—
Warrant revaluation and other finance (income) expense	(958		)	7,480
Depreciation and amortization	452			456
Provision for doubtful accounts	16			—
Change in operating assets and liabilities:
Accounts receivable	(2		)	(10		)
Inventory	121			(144		)
Prepaid expenses and other current assets	496			537
Other assets	214			—
Accounts payable	(1,590		)	221
Accrued expenses and other liabilities	1,206			30
Deferred revenue	132			11
Net cash used in operating activities	(10,286		)	(10,417		)
Cash flows from investing activities:
Purchase of property and equipment	(211		)	(122		)
Net cash used in investing activities	(211		)	(122		)
Cash flows from financing activities:
Subscriptions received	—			4
Net cash provided by financing activities	—			4
Effect of exchange rate changes on cash balances	—			(1		)
Net decrease in cash and cash equivalents	(10,497		)	(10,536		)
Cash and cash equivalents, beginning of period	60,033			31,346
Cash and cash equivalents, end of period	$	49,536		$	20,810

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

4

Fibrocell Science, Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 1. Business and Organization

Fibrocell Science, Inc. (as used herein, “we,” “us,” “our,” “Fibrocell” or the “Company”) is the parent company of Fibrocell Technologies (“Fibrocell Tech”) and Fibrocell Science Hong Kong Limited (“Fibrocell Hong Kong”), a company organized under the laws of Hong Kong.  Fibrocell Tech is the parent company of Isolagen Europe Limited, a company organized under the laws of the United Kingdom (“Isolagen Europe”), Isolagen Australia Pty Limited, a company organized under the laws of Australia (“Isolagen Australia”), and Isolagen International, S.A., a company organized under the laws of Switzerland (“Isolagen Switzerland”).  The Company’s international activities are currently immaterial.

Fibrocell is an autologous cell therapy company focused on developing first-in-class treatments for rare and serious skin and connective tissue diseases with high unmet medical needs.  Based on its proprietary autologous fibroblast technology, the Company is pursuing medical applications of azficel-T for restrictive burn scarring and vocal cord scarring.  The Company’s collaboration with Intrexon Corporation (NYSE:XON) (“Intrexon”), a leader in synthetic biology, includes using genetically-modified fibroblasts for treating rare and serious skin and connective tissue diseases for which there are no currently approved products.  Fibrocell’s ongoing scientific research collaboration with UCLA has yielded discoveries and technologies related to stem cells and regenerative cells in human skin. The technologies from this collaboration and our exclusive license agreements with UCLA enable Fibrocell to expand its proprietary personalized biologics platform which uses human fibroblasts and stem cells from skin to create localized therapies that are compatible with the unique biology of each patient.

Note 2. Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.    Accordingly, they do not include all of the information and footnote disclosures required by GAAP for complete consolidated financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments and the impact of restatements on prior periods discussed below) considered necessary for a fair presentation have been included.  These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, as amended, filed with the Securities and Exchange Commission (“SEC”) as discussed below.  The results of the Company’s operations for any interim period are not necessarily indicative of the results of operations for any other interim period or full year.

On May 6, 2014, the Audit Committee of the Company’s Board of Directors, in connection with an internal review initiated by Company management, concluded that, because of a misapplication of the accounting guidance related to certain of the Company’s warrants, the Company’s previously issued consolidated financial statements for all periods beginning with the quarterly period ended September 30, 2011 through December 31, 2013 should no longer be relied upon.  On June 2, 2014, the Company restated all affected interim and annual periods in its Annual Report on Form 10-K/A (Amendment No. 2) for the fiscal year ended December 31, 2013 in an SEC approved “omnibus” filing.  As such, the comparative information provided for the year ended December 31, 2013 and the three and six months ended June 30, 2013 contained in the preceding financial statements and the accompanying footnotes reflect these previously restated amounts.

The prior year financial statements contain certain reclassifications to the results of operations for the three and six months ended June 30, 2013 to conform to the presentation for the three and six months ended June 30, 2014 on this Form 10-Q.  These reclassifications were made in conjunction with the Company’s shift in focus away from its commercial product LAVIV® and to further research and development of the underlying azficel-T process.

For the three and six months ended June 30, 2014, amortization expense of approximately $0.1 million and $0.3 million, respectively, was included in research and development expense on the Consolidated Statements of Operations.  For the three and six months ended June 30, 2013, amortization expense of approximately $0.1 million and $0.3 million, respectively, was reclassed from cost of sales to research and development expense on the Consolidated Statements of Operations to conform to the current presentation.  For the three and six months ended June 30, 2014, Food and Drug Administration (“FDA”) license fees related to the Company’s Biologics License Application (“BLA”) of approximately $0.2 million and $0.3 million, respectively, were included in research and development expense on the Consolidated Statements of Operations.  For the three and six months ended June 30, 2013, FDA license fees of approximately $0.2 million and $0.3 million, respectively, were reclassified from selling, general and administrative expense to research and development expense on the Consolidated Statements of Operations to conform to the current presentation.

5

Fibrocell Science, Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 3. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and notes.  In addition, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows.  Actual results may differ materially from those estimates.

Cost of Sales

Cost of sales includes the costs related to the processing of cells for LAVIV®, including direct and indirect costs.  Beginning in 2014, cost of sales is accounted for using a standard cost system which allocates the direct costs associated with our manufacturing, facility, quality control, and quality assurance operations as well as overhead costs.  The principal reason for the relatively small level of revenue as compared to the cost of sales is that we changed corporate strategy in 2013 to de-emphasize sales of azficel-T into the aesthetic markets, and transitioned our business strategy to focus on high-value therapeutic applications for treatment of unmet medical conditions of the skin and connective tissue.

Research and Development Expenses

Research and development costs are expensed as incurred and include salaries and benefits, costs paid to third party contractors to perform research, conduct clinical trials, develop and manufacture drug materials and delivery devices, and a portion of facilities cost.  Research and development costs also include costs to develop manufacturing, cell collection and logistical process improvements.

Clinical trial costs are a significant component of research and development expenses and include costs associated with third party contractors.  Invoicing from third party contractors for services performed can lag several months.  The Company accrues 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.

Property and Equipment

Property and equipment is carried at acquisition cost less accumulated depreciation.  Depreciation is computed on a straight-line basis over the estimated useful life of the asset.  The cost of repairs and maintenance is charged to expense as incurred.  As of December 31, 2013, the useful life for all property and equipment was three years, except for leasehold improvements which were depreciated over the remaining lease term or the life of the asset, whichever was shorter.  In the first quarter of 2014, the Company adjusted its useful lives to reflect the expected consumption of the economic benefit of these assets as noted in the following table:

Property and equipment category	Useful life
Laboratory equipment	6 years
Computer equipment and software	3 years
Furniture and fixtures	10 years
Leasehold improvements	Lesser of remaining lease term or life of asset

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) ASC 250 Accounting Changes and Error Corrections, the Company accounted for this change in useful lives as a change in estimate, with prospective application only.  The impact of this change in estimate on depreciation expense for the three and six months ended June 30, 2014 was immaterial to the results on the Consolidated Statements of Operations.

Intangible Assets

Intangible assets are research and development assets related to the Company’s primary study on azficel-T that was recognized upon emergence from bankruptcy.  Azficel-T has three current or target indications: the Company’s commercial product, LAVIV®, a clinical development program for restrictive burn scarring and a clinical development program for vocal cord scarring.  Effective January 1, 2012, the Company launched LAVIV® and as a result, the research and development intangible assets related to the Company’s primary study were considered to be finite-lived intangible assets and are being amortized over 12 years.

6

Fibrocell Science, Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 3. Summary of Significant Accounting Policies (continued)

Finite-lived intangible assets are recorded at cost, net of accumulated amortization and, if applicable, impairment charges.  Amortization of finite-lived intangible assets is provided over their estimated useful lives on a straight-line basis.  In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 360-10-35 Impairment or Disposal of Long-Lived Assets, the Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  There was no impairment expense recognized for either the three or six months ended June 30, 2014 or 2013.

Income Taxes

Income taxes are recorded in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which provides for reporting of amounts that are currently payable and also for deferred taxes using an asset and liability approach.  The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740.  When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized.  The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2013 and June 30, 2014, the Company did not have any uncertain tax positions.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” under ASC Topic 606 which supersedes the current revenue recognition requirements under ASC Topic 605, “Revenue Recognition”.  The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.  It also provides a five step approach to achieve this principle.  For public entities, the new guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  Early application is not permitted.  Based on the Company’s current financial operations, the Company anticipates the potential impact of ASU No. 2014-09 to be immaterial to its financial statements.

Subsequent Events

The Company evaluates all subsequent events, through the date the consolidated financial statements are issued, to determine if there are any events that require disclosure.  No such events have been identified through the date of this filing.

Note 4. Inventory

Inventories consisted of the following as of:

	June 30,		December 31,
($ in thousands)	2014		2013
Raw materials	$	383	$	511
Work in process	93		86
Inventory	$	476	$	597

7

Fibrocell Science, Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 5. Warrants

The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement.  Stock warrants are accounted for as a derivative in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”) if the stock warrants contain “down-round protection” or other terms that could potentially require “net cash settlement” and therefore, do not meet the scope exception for treatment as a derivative.  Since “down-round protection” is not an input into the calculation of the fair value of the warrants, the warrants cannot be considered indexed to the Company’s own stock which is a requirement for the scope exception as outlined under ASC 815.  Warrant instruments that could potentially require “net cash settlement” in the absence of express language precluding such settlement and those which include “down-round provisions” are initially classified as derivative liabilities at their estimated fair values, regardless of the likelihood that such instruments will ever be settled in cash.  The Company will continue to classify the fair value of the warrants that contain “down-round protection” or “net cash settlement” as a liability until the warrants are exercised, expire or are amended in a way that would no longer require these warrants to be classified as a liability.

The following table summarizes outstanding warrants to purchase common stock as of:

	Number of Warrants
Liability-classified warrants	June 30, 2014	December 31, 2013	Exercise Price		Expiration Dates
Issued in March 2010 and Preferred Stock offerings	2,640,534	2,640,534	$	6.25	Oct 2015-Dec 2016
Issued in Preferred Stock offerings	76,120	76,120	$	2.50	Nov 2015-Sept 2017
Issued in June 2011 financing	6,113	6,113	$	22.50	June 2016
Issued in August 2011 financing	565,759	565,759	$	18.75	Aug 2016
Issued to placement agents in August 2011 financing	50,123	50,123	$	13.64	Aug 2016
Issued with Convertible Notes	1,125,578	1,125,578	$	2.50	June 2018
Issued in Series E Preferred Stock offering	1,568,823	1,568,823	$	7.50	Sept 2018
Total	6,033,050	6,033,050

There were no warrants exercised or cancelled during the six months ended June 30, 2014.

Liability-classified Warrants

The foregoing warrants are recorded as liabilities at their estimated fair value at the date of issuance, with the subsequent changes in estimated fair value recorded in other income (expense) in the Company’s statements of operations in each subsequent period.  The change in the estimated fair value of our warrant liability for the three and six months ended June 30, 2014 resulted in non-cash income of approximately $4.0 million and $1.0 million, respectively.  The change in the estimated fair value of our warrant liability for the three and six months ended June 30, 2013 resulted in non-cash expense of approximately $8.8 million and $7.5 million, respectively.  The Company utilizes the Monte Carlo simulation valuation method to value the liability classified warrants.

The estimated fair value of these warrants is determined using Level 3 inputs.  Inherent in the Monte Carlo valuation model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield.  The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants.  The expected life of the warrants is assumed to be equivalent to their remaining contractual term.  The dividend rate is based on the historical rate, which the Company anticipates will remain at zero.

The estimated fair value of these warrants also require Level 3 inputs which are based on the Company’s estimates of the probability and timing of potential future financings and qualifying fundamental transactions.  The other assumptions used by the Company are summarized in the following table:

	June 30, 2014		June 30, 2013
Weighted average remaining expected life (years)	3.0		3.6
Interest rate	0.9	%	1.0	%
Dividend yield	—		—
Volatility	73	%	64	%

8

Fibrocell Science, Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 6. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company adopted the accounting guidance on fair value measurements for financial assets and liabilities measured on a 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, unrestricted assets or liabilities.

·   Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially 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 and unobservable (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 and liability measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013:

	Fair value measurement using
($ in thousands)	Quoted prices inactive markets (Level 1)		Significantotherobservableinputs (Level 2)		Significant unobservableinputs(Level 3)		Total
Balance at June 30, 2014
Assets:
Cash and cash equivalents	$	49,536	$	—	$	—	$	49,536
Liabilities:
Warrant liability	$	—	$	—	$	14,258	$	14,258

	Fair value measurement using
($ in thousands)	Quoted prices inactive markets (Level 1)		Significantotherobservableinputs (Level 2)		Significant unobservableinputs(Level 3)		Total
Balance at December 31, 2013
Assets:
Cash and cash equivalents	$	60,033	$	—	$	—	$	60,033
Liabilities:
Warrant liability	$	—	$	—	$	15,216	$	15,216

The reconciliation of warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:

	Warrant
($ in thousands)	Liability
Balance at December 31, 2013	$	15,216
Exercise of warrants	—
Change in fair value of warrant liability	(958		)
Balance at June 30, 2014	$	14,258

The fair value of the warrant liability is based on Level 3 inputs. For this liability, the Company developed its own assumptions that do not have observable inputs or available market data to support the fair value.  See Note 5 for further discussion of the warrant liability.  The Company believes that the fair values of our current assets and current liabilities approximate their reported carrying amounts. There were no transfers between Level 1, 2 and 3 during the periods presented.

9

Fibrocell Science, Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 7. Share-Based Compensation

The Company’s board of directors (the “Board”) adopted the 2009 Equity Incentive Plan (as amended to date, the “Plan”) effective September 3, 2009.  The Plan is intended to further align the interests of the 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 the Company.  The Plan allows for the issuance of up to 5,600,000 shares of the Company’s common stock.  In addition, there were 206,000 options issued outside of the Plan to consultants.

The types of awards that may be granted 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.  The term of each award is determined by the Compensation Committee of the Board at the time each award is granted, provided that the terms of options do not exceed ten years.  Vesting schedules for the stock options vary, but generally vest 25% per year, over four years.  The Plan had 3,384,286 options available for grant as of June 30, 2014.

Total share-based compensation expense recognized using the straight-line attribution method in the Consolidated Statements of Operations is as follows:

	Three months ended				Six months ended
	June 30,				June 30,
($ in thousands)	2014		2013		2014		2013
Stock option compensation expense for employees and directors	$	436	$	33	$	736	$	206
Equity awards for nonemployees issued for services	—		3		3		3
Total stock-based compensation expense	$	436	$	36	$	739	$	209

($ in thousands except share and per share data)	Number of shares		Weighted- average exercise price		Weighted- average remaining contractual term (in years)	Aggregate intrinsic value
Outstanding at December 31, 2013	2,068,720		$	7.93	8.4	$	544
Granted	333,000		4.25
Exercised	—		—
Forfeited	(3,883	)	5.89
Expired	(120	)	15.50
Outstanding at June 30, 2014	2,397,717		$	7.42	8.3	$	507
Exercisable at June 30, 2014	883,517		$	13.09	7.3	$	73

The total fair value of shares vested during the six months ended June 30, 2014 was approximately $0.5 million.  As of June 30, 2014, there was approximately $3.0 million of total unrecognized compensation cost, related to time-based non-vested stock options.  That cost is expected to be recognized over a weighted-average period of 4.2 years.  As of June 30, 2014, there was no unrecognized compensation expense related to performance-based, non-vested non-employee options.

During the six months ended June 30, 2014 and 2013, the weighted average fair market value of the options granted was $2.74 and $2.07, respectively.  The fair market value of the options was computed using the Black-Scholes option-pricing model with the following key weighted average assumptions for the six months ended as of the dates indicated:

	June 30, 2014		June 30, 2013
Expected life (years)	6.25 years		5.0 years
Interest rate	2.0	%	0.9	%
Dividend yield	—		—
Volatility	70	%	69	%

10

Fibrocell Science, Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 8.  Loss Per Share

Basic loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during a period.  The diluted loss per share calculation gives effect to dilutive options, warrants, convertible notes, convertible preferred stock, and other potential dilutive common stock including selected restricted shares of common stock outstanding during the period.  Diluted loss per share is based on the treasury stock method and includes the effect from potential issuance of common stock, such as shares issuable pursuant to the exercise of stock options, assuming the exercise of all in-the-money stock options.  Common share equivalents have been excluded where their inclusion would be anti-dilutive.

($ in thousands except share and per	For the three months ended June 30,						For the six months ended June 30,
share data)	2014			2013			2014			2013
Loss per share - basic:
Numerator for basic loss per share	$	(2,257	)	$	(14,637	)	$	(16,266	)	$	(19,207	)
Denominator for basic loss per share	40,856,815			23,260,802			40,720,958			26,230,358
Basic loss per common share	$	(0.06	)	$	(0.63	)	$	(0.40	)	$	(0.73	)
Loss per share - diluted:
Numerator for diluted loss per share	$	(2,257	)	$	(14,637	)	$	(16,266	)	$	(19,207	)
Add back: Fair value of “in the money” warrants outstanding	1,284			—			1,284			315
Net loss attributable to common share	$	(3,541	)	$	(14,637	)	$	(17,550	)	$	(19,522	)
Denominator for basic loss per share	40,856,815			23,260,802			40,720,958			26,230,358
Plus: Incremental shares underlying “in the money” warrants outstanding	394,071			—			197,035			207,459
Denominator for diluted loss per share	41,250,886			23,260,802			40,917,993			26,437,817
Diluted net loss per common share	$	(0.09	)	$	(0.63	)	$	(0.43	)	$	(0.74	)

The following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding, as their effect would be anti-dilutive:

	Three months ended June 30,		Six months ended June 30,
	2014	2013	2014	2013
“In the money” stock options	852,000	214,000	852,000	214,000
“Out of the money” stock options	1,545,717	529,406	1,545,717	592,406
“In the money” warrants	—	1,276,698	—	1,320
“Out of the money” warrants	4,831,352	4,831,352	4,831,352	4,831,352

Note 9. Equity

Preferred stock

The Company is authorized to issue 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges, and restrictions thereof.  These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock.  The issuance of the Company’s preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation.  In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change of control of the Company or other corporate action.  There were no preferred shares issued or outstanding as of June 30, 2014 or December 31, 2013.

11

Fibrocell Science, Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 9. Equity (continued)

Common stock

In connection with the execution of the Second Amendment to the Exclusive Channel Collaboration Agreement (the “Second Amendment”) on January 10, 2014 between the Company and Intrexon Corporation (“Intrexon”), the Company entered into a Supplemental Stock Issuance Agreement with Intrexon.  The Company agreed to issue to Intrexon, who is an affiliate of NRM VII Holdings I, LLC, the Company’s largest shareholder, a number of shares of Company common stock based on a per share value of the closing price of the Company’s common stock on the NYSE MKT on the day prior to execution of the Supplemental Stock Issuance Agreement (the “Supplemental Access Fee Shares”).  The Supplemental Access Fee Shares were issued upon the satisfaction of customary closing conditions, including the approval for the listing of the Supplemental Access Fee Shares on the NYSE MKT.  The closing took place on January 24, 2014.  The Company recorded a research and development expense in the first quarter of 2014 for the shares issued to Intrexon as a technology access fee.  1,024,590 shares were issued based on a per share value of $5.03 based on the closing price of the Company’s common stock on the closing date, totaling approximately $5.2 million.  For additional discussion on the Company’s collaboration with Intrexon, see Note 11.

Note 10. Income Taxes

In accordance with ASC Topic No. 270 “Interim Reporting” and ASC Topic No. 740 “Income Taxes”, the Company is required at the end of each interim period to determine the best estimate of its annual effective tax rate and then apply that rate in providing for income taxes on a current year-to-date (interim period) basis.  For the six months ended June 30, 2014 and 2013, the Company recorded no tax expense or benefit due to the expected current year loss and its historical losses.  The Company had not recorded its net deferred tax asset as of either June 30, 2014 or December 31, 2013, because it maintains a full valuation against all deferred tax assets as management has determined that it is not more likely than not that the Company will realize these future tax benefits.

Note 11. Collaboration with Related Party

Intrexon is an affiliate of our largest shareholder, NRM VII Holdings I, LLC.  In addition, two of our seven directors are also affiliates of NRM VII Holdings I, LLC.

On January 10, 2014, the Company and Intrexon entered into a Second Amendment to the parties’ Exclusive Channel Collaboration Agreement dated October 5, 2012, as previously amended on June 28, 2013 (the “Channel Agreement” and such previous amendment, the “First Amendment”).  The Channel Agreement provides for a “channel collaboration” arrangement governing a strategic collaboration for the development and commercialization of genetically-modified and non-genetically-modified autologous fibroblasts and autologous dermal cells in the United States.  The Channel Agreement originally granted the Company an exclusive license to use proprietary technologies and other intellectual property of Intrexon to research, develop, use, import, export, make, have made, sell, and offer for sale certain products in the field in the United States.

Pursuant to the Channel Agreement and Amendments, the Company engaged Intrexon for support services for the development of new products covered under the Channel Agreement and Amendments, and will reimburse Intrexon for its fully-loaded cost for time and materials for transgenes, cell processing, or other work performed by Intrexon for such research and manufacturing. For the three and six months ended June 30, 2014, the Company incurred expenses of $0.7 million and $1.8 million, respectively, for work performed.  For the three and six months ended June 30, 2013, the Company incurred expenses of $0.6 million and $1.0 million, respectively, for work performed.  As of June 30, 2014 and December 31, 2013, the Company had outstanding trade payables with Intrexon of $0.2 million and $1.3 million, respectively.

12

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

This report contains certain “forward-looking statements” relating to Fibrocell that are based on management’s exercise of business judgment and assumptions made by and information currently available to management.  When used in this document, the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “the facts suggest” 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.  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:

·the progress and results of our clinical trials of our cell therapy applications, including whether our clinical human trials relating to the use of autologous cell therapy applications, in particular, for restrictive burn scars, vocal cord scars and genetically-modified orphan indications, and such other target indications as we may identify and pursue 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 cell therapy can be identified by us and advanced into human clinical trials;

·the cost of manufacturing related to our pre-clinical and clinical trials;

·our ability to meet requisite regulations or receive regulatory approvals in the United States, our ability to retain any regulatory approvals that we may obtain and the absence of adverse regulatory developments in the United States;

·the costs, timing and outcome of regulatory review of our product engines;

·our dependence on one facility in Exton, Pennsylvania for our research, development [and manufacturing operations], and the potential that such facility is damaged or if we are otherwise required to discontinue production at such facility;

·the scope, progress, results and costs of pre-clinical development, laboratory testing and clinical trials for our cell therapy applications;

·the number and development requirement of other product engines that we pursue;

·the emergence of competing technologies and other adverse market developments;

·the extent to which we acquire or invest in businesses, products and technologies;

·our ability to establish collaborations and obtain milestone, royalty or other payments from any such collaborators;

·any adverse claims relating to our intellectual property and the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property related claims; and

·our dependence on physicians to correctly follow our established protocols for the safe and optimal administration of our product.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in Part I Item 1A — “Risk Factors” of the Annual Report on Form 10-K, as amended on June 2, 2014, for the year ended December 31, 2013 that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations or investments we may make.

You should read this quarterly report on Form 10-Q in conjunction with the documents that we reference herein.  We do not assume any obligation to update any forward-looking statements.

General

We are an autologous cell therapy company primarily focused on developing first-in-class treatments for rare and serious skin and connective tissue diseases with high unmet medical needs. Based on our proprietary autologous fibroblast technology, we are

13

pursuing breakthrough medical applications of azficel-T for restrictive burn scarring and vocal cord scarring. Driving Fibrocell’s innovative therapies is its Personalized Biologics platform, which embraces two product engines: the Azficel-T Autologous Fibroblast Product Engine and the Protein Expression Product Engine. These two product engines enable Fibrocell to harness the favorable characteristics of fibroblasts to develop new therapies for diseases and conditions of the skin and connective tissues where there are limited or no treatment options. The Azficel-T Autologous Fibroblast Product Engine is developing biologic solutions for the treatment of serious and debilitating scarring conditions. The Protein Expression Product Engine is creating biologic products by genetically modifying fibroblasts to express target proteins that are inactive or missing from patients with rare genetic skin and tissue disorders.

Our collaboration with Intrexon, a leader in synthetic biology, includes using genetically-modified fibroblasts for treating orphan skin diseases for which there are no currently approved products and exploring the localized treatment of the most common autoimmune skin disease, moderate-to-severe psoriasis. Additional collaborations with the University of California, Los Angeles (“UCLA”) and the Massachusetts Institute of Technology (“MIT”) focus on skin-derived stem cells.

Critical Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make significant judgments and estimates that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period.  Management bases these significant judgments and estimates on historical experience and other assumptions it believes to be reasonable based upon information presently available.  Actual results could differ from those estimates under different assumptions, judgments or conditions.  There were no material changes to our critical accounting policies and use of estimates previously disclosed in our 2013 Annual Report on Form 10-K, as amended on June 2, 2014, other than those discussed below.

On May 6, 2014, the Audit Committee of the Company’s Board of Directors, in connection with an internal review initiated by Company management, concluded that, because of a misapplication of the accounting guidance related to certain of the Company’s warrants, the Company’s previously issued consolidated financial statements for all periods beginning with the quarterly period ended September 30, 2011 through December 31, 2013 should no longer be relied upon.  On June 2, 2014, the Company restated all affected interim and annual periods in its Annual Report on Form 10-K/A (Amendment No. 2) for the fiscal year ended December 31, 2013 in an SEC approved “omnibus” filing.  As such, the comparative information provided for the three and six months ended June 30, 2013 contained in the results of operations discussed below reflect these previously restated amounts.  In addition, there have been other reclassifications made to the prior year’s results of operations to conform to the current year’s presentation.

Warrant Liability:  We account for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement.  Stock warrants are accounted for as a derivative in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”) if the stock warrants contain “down-round protection” or other terms that could potentially require “net cash settlement” and therefore, do not meet the scope exception for treatment as a derivative.  Since “down-round protection” is not an input into the calculation of the fair value of the warrants, the warrants cannot be considered indexed to the Company’s own stock which is a requirement for the scope exception as outlined under ASC 815.  Warrant instruments that could potentially require “net cash settlement” in the absence of express language precluding such settlement and those which include “down-round provisions” are initially classified as derivative liabilities at their estimated fair values, regardless of the likelihood that such instruments will ever be settled in cash.  We will continue to classify the fair value of the warrants that contain “down-round protection” and “net cash settlement” as a liability until the warrants are exercised, expire or are amended in a way that would no longer require these warrants to be classified as a liability.

Cost of Sales:  Cost of sales includes the costs related to the processing of cells for LAVIV®, including direct and indirect costs.  Beginning in 2014, cost of sales is accounted for using a standard cost system which allocates the direct costs associated with our manufacturing, facility, quality control, and quality assurance operations as well as overhead costs.

14

Results of Operations

Comparison of Three Months Ended June 30, 2014 and 2013

Revenue and Cost of Sales. Revenue and cost of sales were comprised of the following:

	Three months ended June 30,						Increase (Decrease)
($ in thousands)	2014			2013			$			%
Total revenue	$	58		$	62		$	(4	)	-0.06	%
Cost of sales	547			2,104			(1,557		)	-74.0	%
Gross loss	$	(489	)	$	(2,042	)	$	1,553		-76.0	%

Revenue was immaterial for each of the three months ended June 30, 2014 and 2013.  Revenue is booked based on the shipment of LAVIV® to patients.

Cost of sales was approximately $0.5 million and $2.1 million for the three months ended June 30, 2014 and 2013, respectively.  Cost of sales includes the costs related to the processing of cells for LAVIV®, including direct and indirect costs.  Beginning in 2014, cost of sales is accounted for using a standard cost system which allocates the costs associated with our manufacturing, facility, quality control, and quality assurance operations as well as overhead costs.  The decrease of $1.6 million is primarily due to the transition away from the aesthetic market (LAVIV®) and to a focus on research and development as evidenced by a reduction in the number of biopsies and injections performed during the three months ended June 30, 2014 as compared to the three months ended June 30, 2013.

The principal reason for the relatively small level of revenue as compared to the cost of sales is that we changed corporate strategy in 2013 to de-emphasize sales of azficel-T into the aesthetic markets, and strategically transition to focus on high-value therapeutic applications for treatment of unmet medical conditions of the skin and connective tissue.  We currently have adequate manufacturing capacity to meet clinical demand and the limited commercial demand we expect for 2014.  We believe that cost of sales will remain at or above product revenue for the foreseeable future and, thus, we anticipate that we will continue to report gross losses from sales of LAVIV® for the aesthetic indication for the foreseeable future.

Selling, General and Administrative Expense. Selling, general and administrative expense was comprised of the following:

	Three months ended June 30,				Increase (Decrease)
($ in thousands)	2014		2013		$			%
Compensation and related expense	$	1,352	$	643	$	709		110.3	%
Professional fees	670		266		404			151.9	%
Marketing expense	59		134		(75		)	-56.0	%
Legal expense	307		209		98			46.9	%
Facilities and related expense and other	1,099		1,042		57			5.5	%
Total selling, general and administrative expense	$	3,487	$	2,294	$	1,193		52.0	%

Selling, general and administrative expense increased by approximately $1.2 million, or 52%, to $3.5 million for the three months ended June 30, 2014 as compared to $2.3 million for the three months ended June 30, 2013.  Compensation and related expense increased $0.7 million due to additional costs for salaries, bonuses and stock compensation. Professional fees increased $0.4 million and legal costs increased $0.1 million due to the costs of our warrant restatement project in the second quarter of 2014.  Marketing expense decreased $0.1 million as our strategic focus has shifted away from our commercial product LAVIV®.  Facilities and related expense and other increased $0.1 million due to an increase in office costs.

Research and Development Expense.

For each of our research and development programs, we incur both direct and indirect expenses. Direct expenses include third party costs related to these programs such as contract research, consulting, pre-clinical and clinical development costs.  Indirect expenses include regulatory, lab costs, personnel, facility, stock compensation and other overhead costs that are not attributable to any one program.  We expect research and development costs to continue to be significant for the foreseeable future as a result of our clinical trials and our collaboration with Intrexon.

15

Research and development expense was comprised of the following:

	Three months ended June 30,				Increase (Decrease)
($ in thousands)	2014		2013		$			%
Direct costs:
Restrictive Burn Scarring	$	202	$	60	$	142		236.7	%
Vocal Cord Scarring	150		53		97			183.0	%
Recessive Dystrophic Epidermolysis Bullosa	863		345		518			150.1	%
Morphea Profunda/ Linear Scleroderma	73		—		73			100.0	%
Cutaneous Eosinophilias	73		—		73			100.0	%
azficel-T	193		403		(210		)	-52.1	%
Ehlers-Danlos Syndrome hypermobility type	8		—		8			100.0	%
Other	37		150		(113		)	-75.3	%
Total direct costs	1,599		1,011		588			58.2	%
Indirect costs:
Regulatory costs	227		226		1			0.40	%
Intangible amortization	138		138		—			—
Indirect lab costs	581		38		543			1428.9	%
Compensation and related expense	75		65		10			15.4	%
Total indirect costs	1,021		467		554			118.6	%
Total research and development expense	$	2,620	$	1,478	$	1,142		77.3	%

Total research and development expense increased $1.1 million to approximately $2.6 million for the three months ended June 30, 2014 as compared to $1.5 million for the three months ended June 30, 2013.  The overall increase is due to a $0.1 million increase related to research and development costs in connection with our collaboration with Intrexon, increased costs of $0.2 million related to enrollment of our phase II clinical trials, increased manufacturing and laboratory costs of $0.5 million, and an increase of $0.3 million in other spending.

Direct research and development expense by major clinical and pre-clinical development program were as follows:

Restrictive Burn Scarring (“RBS”) — Costs increased approximately $0.1 million compared to the three months ended June 30, 2013 due to additional costs related to our phase II clinical trials currently in enrollment.

Vocal Cord Scarring (“VCS”) — Costs increased approximately $0.1 million compared to the three months ended June 30, 2013 due to additional costs related to our phase II clinical trials currently in enrollment.

Recessive Dystrophic Epidermolysis Bullosa (“RDEB”) — Costs increased approximately $0.5 million compared to the three months ended June 30, 2013 due to the expansion of our pre-clinical development program for RDEB during the three months ended June 30, 2014.

Morphea Profunda/ Linear Scleroderma  — This program began in the second half of 2013. Costs during the three months ended June 30, 2014 were approximately $0.1 million and related to early stage pre-clinical development.

Cutaneous Eosinophilias — This program began in the second half of 2013. Costs during the three months ended June 30, 2014 were approximately $0.1 million and related to early stage pre-clinical development.

Azficel-T — Costs decreased approximately $0.2 million compared to the three months ended June 30, 2013 due to the reduction in our process development program for azficel-T during the three months ended June 30, 2014.

Ehlers-Danlos Syndrome hypermobility type — No substantive work has yet begun on the development of this pre-clinical program.

Change in Revaluation of Warrant Liability.  During the three months ended June 30, 2014 and 2013, we recorded non-cash warrant income of approximately $4.0 million and non-cash warrant expense of $8.8 million in our statements of operations, respectively.

Other Income.  During the three months ended June 30, 2014, we recorded approximately $0.3 million of other income related to a settlement agreement with one of our suppliers.  There was no such income during the three months ended June 30, 2013.

16

Net Loss. Net loss for the three months ended June 30, 2014 and June 30, 2013 was $2.3 million and $14.6 million, respectively, representing a decrease of approximately $12.4 million.  The change is primarily due to a decrease of $12.8 million in the non-cash revaluation of the warrant liability offset by an increase in other income of $0.3 million.

Comparison of Six Months Ended June 30, 2014 and 2013

Revenue and Cost of Sales. Revenue and cost of sales were comprised of the following:

	Six months ended June 30,						Increase (Decrease)
($ in thousands)	2014			2013			$			%
Total revenue	$	104		$	88		$	16		18.2	%
Cost of sales	1,340			4,317			(2,977		)	-69.0	%
Gross loss	$	(1,236	)	$	(4,229	)	$	2,993		-70.8	%

Revenue was immaterial for each of the six months ended June 30, 2014 and 2013.  Revenue is booked based on the shipment of LAVIV® to patients.

Cost of sales was approximately $1.3 million and $4.3 million for the six months ended June 30, 2014 and 2013, respectively.  Cost of sales includes the costs related to the processing of cells for LAVIV®, including direct and indirect costs.  Beginning in 2014, cost of sales is accounted for using a standard cost system which allocates the costs associated with our manufacturing, facility, quality control, and quality assurance operations as well as overhead costs.  The decrease of $2.9 million is primarily due to the transition away from the aesthetic market (LAVIV®) and to a focus on research and development as evidenced by a reduction in the number of biopsies and injections performed during the six months ended June 30, 2014 as compared to the six months ended June 30, 2013.

The principal reason for the relatively small level of revenue as compared to the cost of sales is that we changed corporate strategy in 2013 to de-emphasize sales of azficel-T into the aesthetic markets, and strategically transition to focus on high-value therapeutic applications for treatment of unmet medical conditions of the skin and connective tissue.  We currently have adequate manufacturing capacity to meet clinical demand and the limited commercial demand we expect for 2014.  We believe that cost of sales will remain at or above product revenue for the foreseeable future and, thus, we anticipate that we will continue to report gross losses from sales of LAVIV® for the aesthetic indication for the foreseeable future.

Selling, General and Administrative Expense. Selling, general and administrative expense was comprised of the following:

	Six months ended June 30,				Increase (Decrease)
($ in thousands)	2014		2013		$			%
Compensation and related expense	$	2,638	$	1,616	$	1,022		63.2	%
Professional fees	1,002		449		553			123.2	%
Marketing expense	81		244		(163		)	-66.8	%
Legal expense	467		402		65			16.2	%
Facilities and related expense and other	2,114		1,793		321			17.9	%
Total selling, general and administrative expense	$	6,302	$	4,504	$	1,798		39.9	%

Selling, general and administrative expense increased by approximately $1.8 million, or 40%, to $6.3 million for the six months ended June 30, 2014 as compared to $4.5 million for the six months ended June 30, 2013.  Compensation and related expense increased $1.0 million due to additional costs for salaries, bonuses and stock compensation. Professional fees increased $0.6 million and legal costs increased $0.1 million primarily due to the costs of our warrant restatement project in the second quarter of 2014 as well as increase in other consulting expenses.  Marketing expense decreased $0.2 million as our strategic focus has shifted away from our commercial product LAVIV®.  Facilities and related expense and other increased $0.3 million due to an increase in office costs.

Research and Development Expense.

For each of our research and development programs, we incur both direct and indirect expenses. Direct expenses include third party costs related to these programs such as contract research, consulting, pre-clinical and clinical development costs.  Indirect expenses include regulatory, lab costs, personnel, facility, stock compensation and other overhead costs that are not attributable to any one program.  We expect research and development costs to continue to be significant for the foreseeable future as a result of our clinical trials and our collaboration with Intrexon.

17

Research and development expense was comprised of the following:

	Six months ended June 30,				Increase (Decrease)
($ in thousands)	2014		2013		$			%
Direct costs:
Restrictive Burn Scarring	$	334	$	123	$	211		171.5	%
Vocal Cord Scarring	273		107		166			155.1	%
Recessive Dystrophic Epidermolysis Bullosa	1,564		528		1,036			196.2	%
Morphea Profunda/ Linear Scleroderma	165		—		165			100.0	%
Cutaneous Eosinophilias	165		—		165			100.0	%
azficel-T	251		766		(515		)	-67.2	%
Ehlers-Danlos Syndrome hypermobility type	5,169		—		5,169			100.0	%
Other	187		329		(142		)	-43.2	%
Total direct costs	8,108		1,853		6,255			337.6	%
Indirect costs:
Regulatory costs	431		484		(53		)	-11.0	%
Intangible amortization	276		276		—			—
Indirect lab costs	1,095		239		856			358.2	%
Compensation and related expense	148		133		15			11.3	%
Total indirect costs	1,950		1,132		818			72.3	%
Total research and development expense	$	10,058	$	2,985	$	7,073		237.0	%

Total research and development expense increased $7.1 million to approximately $10.1 million for the six months ended June 30, 2014 as compared to $3.0 million for the six months ended June 30, 2013.  The increase is due primarily to stock issuance costs of approximately $5.2 million and a $0.8 million increase related to research and development costs incurred in the six months ended June 30, 2014, both in connection with our collaboration with Intrexon.  In addition, there was a $0.9 million increase in manufacturing and laboratory costs and an increase of $0.2 million in other spending.

Direct research and development expense by major clinical and pre-clinical development program were as follows:

Restrictive Burn Scarring (“RBS”) —  Costs increased approximately $0.2 million compared to the six months ended June 30, 2013 due to additional costs related to our phase II clinical trials currently in enrollment.

Vocal Cord Scarring (“VCS”) — Costs increased approximately $0.2 million compared to the six months ended June 30, 2013 due to additional costs related to our phase II clinical trials currently in enrollment.

Recessive Dystrophic Epidermolysis Bullosa (“RDEB”) — Costs increased approximately $1.0 million compared to the six months ended June 30, 2013 due to the expansion of our pre-clinical development program for RDEB during the six months ended June 30, 2014.

Morphea Profunda/ Linear Scleroderma  — This program began in the second half of 2013. Costs during the six months ended June 30, 2014 were approximately $0.2 million and related to early stage pre-clinical development.

Cutaneous Eosinophilias — This program began in the second half of 2013. Costs during the six months ended June 30, 2014 were approximately $0.2 million and related to early stage pre-clinical development.

Azficel-T — Costs decreased approximately $0.5 million compared to the six months ended June 30, 2013 due to the reduction in our process development program for azficel-T during the six months ended June 30, 2014.

Ehlers-Danlos Syndrome hypermobility type  — Costs to date are approximately $5.2 million and represent the cost of the 2014 supplemental stock issuance in connection with the second amendment to the exclusive channel collaboration agreement with Intrexon. No substantive work has yet begun on the development of this pre-clinical program.

Change in Revaluation of Warrant Liability.  During the six months ended June 30, 2014 and 2013, we recorded non-cash warrant income of approximately $1.0 million and non-cash warrant expense of $7.5 million in our statements of operations, respectively.

Other Income.  During the six months ended June 30, 2014, we recorded approximately $0.4 million of other income, primarily due to a settlement agreement with one of our suppliers.  There was no such income during the six months ended June 30, 2013.

18

Net Loss. Net loss for the six months ended June 30, 2014 and June 30, 2013 was $16.3 million and $19.2 million, respectively, representing a decrease of approximately $3.0 million.  The change is primarily due to a decrease of $8.4 million in the non-cash revaluation of the warrant liability, offset by $5.2 million in costs during the first quarter for the 2014 supplemental stock issuance in connection with the Second Amendment to the Channel Agreement with Intrexon

Liquidity and Capital Resources

The following table summarizes our cash flows from operating, investing and financing activities for the six months ended June 30, 2014 and 2013:

Statement of Cash Flows Data:	Six months Ended June 30,
($ in thousands)	2014			2013
Cash used in operating activities	$	(10,286	)	$	(10,417	)
Cash used in investing activities	$	(211	)	$	(122	)
Cash provided by financing activities	$	—		$	4

Operating Activities.  Cash used in operating activities during the six months ended June 30, 2014 was approximately $10.3 million, relatively consistent with cash used in operating activities during the six months ended June 30, 2013.

Investing Activities. Cash used in investing activities amounted to $0.2 million for the six months ended June 30, 2014 and $0.1 million for the six months ended June 30, 2013, due to the purchase of equipment for the laboratory facility in Exton, Pennsylvania.

Financing Activities. There was no cash used in or provided by financing activities for the six months ended June 30, 2014.  For the six months ended June 30, 2013, cash provided by financing activities amounted to less than $0.1 million on subscriptions of common stock.

Working Capital

As of June 30, 2014, we had cash and cash equivalents of approximately $49.5 million and working capital of approximately $47.5 million.  We expect to have sufficient cash to operate for at least the next twelve months. In addition, we expect we will require additional financing prior to our business achieving significant net cash from operations. We would likely raise such additional capital through the issuance of our equity or equity-linked securities, which may result in dilution to our investors, or by entering into strategic partnerships. Our ability to raise additional capital is dependent on, among other things, the state of the financial markets at the time of any proposed offering of equity or debt. To secure funding through strategic partnerships, it may be necessary to partner one or more of our technologies at an earlier stage of development, which could cause us to share a greater portion of the potential future economic value of those programs with our partners. There is no assurance that additional funding, through any of the aforementioned means, will be available on acceptable terms, or at all. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, our operations could be materially negatively impacted.

Contractual Obligations

On April 6, 2005, we entered into a non-cancellable operating lease (the “Lease”) for its office, warehouse and laboratory facilities in Exton, Pennsylvania.  The lease agreement had a term of 8 years.  On February 17, 2012, we entered into an amended and restated lease (the “Amended Lease”) for an additional term of 10 years through the year 2023.  At June 30, 2014, our minimum lease payments under the Amended Lease total approximately $11.7 million.

During the six month period ended June 30, 2014, there have been no material changes to our other contractual obligations outside the ordinary course of business from those specified in our Annual Report on Form 10-K, as amended, for the year ended December 31, 2013.

Recently Issued Accounting Pronouncements

See Note 3 in the accompanying notes to the consolidated financial statements for discussion on recently issued accounting pronouncements.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk.

None

19

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15 promulgated under the Exchange Act as of June 30, 2014. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the rules and forms of the SEC. These disclosure controls and procedures include, among other things, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, management is required to apply its judgment in evaluating the benefits of possible disclosure controls and procedures relative to their costs to implement and maintain.

Based on management’s evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

Except for the changes described below to remediate the previously reported material weakness, there have been no changes in our internal control over financial reporting during the quarter ended June 30, 2014 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Remediation of Material Weakness

As more fully described in Part II, Item 9A of our Annual Report on Form 10-K, as amended on June 2, 2014, for the year ended December 31, 2013 and as referenced in Note 2 to the consolidated financial statements included in this Quarterly Report on Form 10-Q, a material weakness existed in our internal control over financial reporting.  As a result, management concluded that our internal control was not effective to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for financial reporting in accordance with GAAP as of December 31, 2013 and March 31, 2014.  The material weakness was as follows:

On May 6, 2014, Company management, in consultation with its Audit Committee, revised its prior position on accounting for warrants and concluded that its previously issued consolidated financial statements for all periods beginning with the quarterly period ended September 30, 2011 through December 31, 2013 (collectively, the “Affected Periods”) should not be relied on because of a misapplication in the guidance on accounting for warrants.

Of the Company’s warrants, approximately 5,335,000 were originally and correctly classified as liabilities on the Company’s balance sheets.  In connection with the Company’s October 2012 financing and a contemporaneous modification of those warrants to remove “down-round” anti-dilution protection, such warrants were erroneously reclassified as a component of equity as opposed to liabilities on the Consolidated Balance Sheets.  The corresponding Consolidated Statements of Operations did not include the subsequent non-cash changes in the estimated fair value of such warrants.  Those warrants, however, continued to contain a cash settlement feature regarding fundamental transactions that allowed those warrant holders to have a different settlement option than the Company’s stockholders upon certain fundamental transactions, including a change of control of the Company, thereby precluding equity treatment for the warrants.  In the course of management’s investigation, the Company also reviewed the warrant agreements for approximately 622,000 warrants that were originally classified as equity instruments upon their issuance.  Those warrants contained a similar fundamental transaction settlement provision that precluded equity treatment for such warrants.

The Company has devoted, and plans to continue to devote, significant efforts and resources to the remediation and improvement of its internal control over financial reporting.  While the Company has processes to identify and intelligently apply developments in accounting, the Company plans to continue to enhance these processes to better evaluate its research and understanding of the nuances of increasingly complex accounting standards.  The Company implemented the following changes in its internal control over financial reporting during the three months ended June 30, 2014:

·provided enhanced access to accounting literature, research materials and documents; and

20

·increased communication among its personnel and third party professionals with whom the Company consults regarding complex accounting applications.

We believe that the controls that we have implemented have remediated this material weakness in our internal control over financial reporting.  As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address the material weakness or determine to supplement or modify certain of the remediation efforts described above.

PART II - OTHER INFORMATION

Item 1.Legal Proceedings

None

Item 1A.Risk Factors

Investing in our company involves a high degree of risk.  Before investing in our company you should carefully consider the following risks, together with the financial and other information contained in this Form 10-Q as well as the Form 10-K, as amended for the year ended December 31, 2013.  If any of the following risks actually occurs, our business, prospects, financial condition and results of operations could be adversely affected.  In that case, the trading price of our common stock would likely decline and you may lose all or a part of your investment.

We have identified a material weakness in our internal control over financial reporting that resulted in the restatement of certain of our previously issued consolidated financial statements. This material weakness could continue to adversely affect our ability to report our results of operations and financial condition accurately and in a timely manner.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of consolidated financial statements for external purposes in accordance with U.S. generally accepted accounting principles (“GAAP”).   Our management is also required, on a quarterly basis, to disclose any change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the internal control over financial reporting.  A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual or interim financial statements will not be prevented or detected on a timely basis.

As described elsewhere in this Quarterly Report on Form 10-Q, in connection with the restatement process, we identified a material weakness in our internal control regarding our process and procedures related to our prior interpretation of ASC 815 and our initial classification and subsequent accounting of warrants as either liabilities or equity instruments. As a result of this material weakness, our management concluded that our internal control over financial reporting was not effective as of December 31, 2013. This material weakness resulted in a misstatement of our liabilities, non-cash expense relating to the changes in fair value of common stock warrants, accumulated deficit accounts and related financial disclosures as discussed herein and in Note 2 to the consolidated financial statements included in this Quarterly Report on Form 10-Q. See Part I, Item 4, “Controls and Procedures.”

To respond to the material weakness, we have and plan to continue to devote significant effort and resources to the remediation and improvement of our internal control over financial reporting.  While we have processes to identify and intelligently apply developments in accounting, we plan to enhance these processes to better evaluate our research and understanding of the nuances of increasingly complex accounting standards.  Our plans at this time include providing enhanced access to accounting literature, research materials and documents and increased communication among our finance personnel and third party professionals with whom we consult regarding complex legal and accounting applications.  The elements of our remediation plan can only be accomplished over time and we can offer no assurance that these initiatives will ultimately have the intended effects.

Any failure to maintain such internal controls could adversely impact our ability to report our financial results on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis as required by the SEC and NYSE, we could face severe consequences from those authorities. In either case, there could result a material adverse effect on our business. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock. We can give no assurance that the measures we have taken and plan to take in the future will remediate the material weaknesses identified or that any additional material weaknesses or restatements of financial results will not arise in the future due to a failure to implement and maintain adequate internal control over financial reporting or circumvention of these controls. In addition, even if we are successful in strengthening our controls and procedures, in the future those controls and procedures may not be adequate to prevent or identify irregularities or errors or to facilitate the fair presentation of our consolidated financial statements.

21

The Company faces risks in connection with the expansion of its business in China.

In April 2010, we entered into a letter of intent with Chinese company Heifei Meifu Bio-Tech Limited Co. to form a joint venture to commercialize autologous fibroblast therapies in Asia (excluding Japan) and to produce and develop such therapies in China. This letter of intent was intended to serve as the template for a joint venture agreement between the Company and Heifei Meifu, which would expand the scope of the Company’s operations to China and Asia more broadly. However, to date we and Heifei Meifu have not received Chinese governmental approval to form the proposed joint venture and we are considering alternative business structures to develop our business in Asia (excluding Japan). As the Company furthers its commitment to China, it is increasingly exposed to risks in that region. These risks include changes in laws and regulations, currency fluctuations, increased competition and changes in economic conditions, including those related to consumer spending. Adverse developments in these areas could cause the Company to lose some or all of its future investment in China and could cause the Company to fail to achieve anticipated growth.

Moreover, certain risks and uncertainties of doing business in China are solely within the control of the Chinese government, and Chinese law regulates both the scope of the Company’s investment in China and the business conducted by it within China. The Company cannot provide assurance that the Chinese government will permit the distribution of the Company’s products in China or that the timing of such distribution will be favorable to the Company. There are also uncertainties regarding the interpretation and application of laws and regulations and the enforceability of intellectual property and contract rights in China. If the Company were unable to navigate China’s regulatory environment, including with respect to the joint venture, or if the Company were unable to enforce its intellectual property or contract rights in China, the Company’s business could be adversely impacted.

Our proposed joint venture with Heifei Meifu Bio-Tech Limited Co., if consummated, may limit our ability to independently develop and commercialize our products in China.

In April 2010, we entered into a letter of intent with Chinese company Heifei Meifu Bio-Tech Limited Co. to form a joint venture to commercialize autologous fibroblast therapies in Asia (excluding Japan) and to produce and develop such therapies in China. This letter of intent was intended to serve as the template for a joint venture agreement between the Company and Heifei Meifu. To date, we and Heifei Meifu have not received Chinese governmental approval to form the proposed joint venture and we are considering alternative business structures to develop our business in Asia (excluding Japan). Assuming we receive the necessary approvals and the joint venture is formed or if we enter into an alternative business structure, the joint venture or alternative business structure would establish the exclusive means for us to develop, produce and commercialize autologous fibroblast therapies in Asia (excluding Japan). Assuming we receive the necessary approvals and the joint venture is formed or we enter into an alternative business structure, we expect to grant the joint venture or alternative business structure exclusive licenses under certain of our intellectual property to make and sell joint venture products. As a result of these licenses, we expect to generally no longer have an independent right to make or sell autologous fibroblast therapies in Asia (excluding Japan).

If, for any reason, the joint venture or alternative business structure is not fully supported or is not successful and the joint venture or alternative business structure does not allow us to pursue autologous fibroblast therapies independently, this arrangement could impair our ability to develop and commercialize such products, which could have a material adverse effect on our business and long term prospects. In addition, Heifei Meifu Bio-Tech Limited Co. could take steps that could weaken our intellectual property rights with respect to our autologous fibroblast therapies in China.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on all of our product candidates throughout the world would be prohibitively expensive, and our or our licensors’ intellectual property rights in some countries outside the U.S. can be less extensive than those in the U.S. In addition, the laws and practices of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the U.S. Consequently, we and our licensors may not be able to prevent third parties from practicing our and our licensors’ inventions in all countries outside the U.S., or from selling or importing products made using our and our licensors’ inventions in and into the U.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products, and may export otherwise infringing products to territories where we or our licensors have patent protection, but where enforcement is not as strong as that in the U.S. These products may compete with our products in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our or our licensor’s patents or marketing of competing products in violation of our proprietary rights generally in those countries. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business, could put our and our licensors’ patents at risk of being invalidated or

22

interpreted narrowly and our and our licensors’ patent applications at risk of not issuing and could provoke third parties to assert claims against us or our licensors. We or our licensors may not prevail in any lawsuits that we or our licensors initiate and the damages or other remedies awarded, if any, may not be commercially meaningful.

The laws of certain foreign countries may not protect our rights to the same extent as the laws of the U.S., and these foreign laws may also be subject to change. For example, methods of treatment and manufacturing processes may not be patentable in certain jurisdictions, and the requirements for patentability may differ in certain countries, particularly developing countries. Furthermore, generic drug manufacturers or other competitors may challenge the scope, validity or enforceability of our or our licensors’ patents, requiring us or our licensors to engage in complex, lengthy and costly litigation or other proceedings. Generic drug manufacturers may develop, seek approval for, and launch generic versions of our products. Many countries, including European Union countries, India, Japan and China, have compulsory licensing laws under which a patent owner may be compelled under certain circumstances to grant licenses to third parties. In those countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our and our licensors’ efforts to enforce intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we own or license.

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

None

Item 3.Defaults Upon Senior Securities

None

Item 4.Mine Safety Disclosure

Not Applicable

Item 5.Other Information

None

Item 6.Exhibits

(a) Exhibits

EXHIBIT NO.	IDENTIFICATION OF EXHIBIT
10.1+	Exclusive License Agreement, dated June 1, 2014, by and between The Regents of the University of California and the Company (which we refer to as the “BMP2 Agreement”)
10.2+	Exclusive License Agreement, dated June 1, 2014, by and between The Regents of the University of California and the Company (which we refer to as the “Genomic Stability Agreement”)
10.3	Fibrocell Science, Inc. 2009 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 20, 2014)
31.1*	Certification pursuant to Rule 13a-14(a) and 15d-14(a), required under Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification pursuant to Rule 13a-14(a) and 15d-14(a), required under Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

+ Confidential treatment has been requested as to certain portions of the document, which portions have been omitted and filed separately with the Securities and Exchange Commission.

* Filed or furnished, as applicable herewith.

23

SIGNATURE

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

FIBROCELL SCIENCE, INC.
By:	/s/ Gregory Weaver
	Gregory Weaver
	SVP and Chief Financial Officer
Date:	August 11, 2014

24

INDEX TO EXHIBITS

EXHIBIT NO.	IDENTIFICATION OF EXHIBIT
10.1+	Exclusive License Agreement, dated June 1, 2014, by and between The Regents of the University of California and the Company (which we refer to as the “BMP2 Agreement”)
10.2+	Exclusive License Agreement, dated June 1, 2014, by and between The Regents of the University of California and the Company (which we refer to as the “Genomic Stability Agreement”)
10.3	Fibrocell Science, Inc. 2009 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K filed on June 20, 2014)
31.1*	Certification pursuant to Rule 13a-14(a) and 15d-14(a), required under Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification pursuant to Rule 13a-14(a) and 15d-14(a), required under Section 302 of the Sarbanes-Oxley Act of 2002
32.1*	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*	Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document.
101.SCH	XBRL Taxonomy Extension Schema Document.
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB	XBRL Taxonomy Extension Label Linkbase Document.
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document.

+ Confidential treatment has been requesteded as to certain portions of the document, which portions have been omitted and filed separately with the Securities and Exchange Commission.

* Filed or furnished, as applicable herewith.

25

EX-10.1

Exhibit 10.1

Portions of this exhibit have been omitted and filed separately with the Secretary of the Securities and Exchange Commission (the “Commission”) pursuant to an application for confidential treatment filed with the Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.  Such portions are marked as indicated below.

EXCLUSIVE LICENSE AGREEMENT

BETWEEN

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA

AND

FIBROCELL SCIENCE, INC

FOR

UCLA CASE NO. ******:

“Inducing In Vivo Osteogenesis using BMP2 Expressing Primary Human Adult Skin Cells”

****** - Material has been omitted and filed separately with the Commission.

EXCLUSIVE LICENSE AGREEMENT

TABLE OF CONTENTS

ARTICLE		PAGE NUMBER
RECITALS		1
1.	DEFINITIONS	1
2.	GRANT	4
3.	SUBLICENSES	4
4.	FEES	5
5.	ROYALTIES	6
6.	DILIGENCE	8
7.	PATENT FILING, PROSECUTION AND MAINTENANCE	8
8.	PATENT INFRINGEMENT	10
9.	PROGRESS AND ROYALTY REPORTS	11
10.	BOOKS AND RECORDS	12
11.	LIFE OF THE AGREEMENT	12
12.	TERMINATION BY THE REGENTS	13
13.	TERMINATION BY LICENSEE	13
14.	DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION	14
15.	PATENT MARKING	14
16.	USE OF NAMES AND TRADEMARKS	14
17.	LIMITED WARRANTY	14
18.	INDEMNIFICATION	15
19.	LIMITATION OF LIABILITY	16
20.	NOTICES	16
21.	ASSIGNABILITY	17
22.	LATE PAYMENTS	18
23.	WAIVER	18
24.	FAILURE TO PERFORM	18
25.	GOVERNING LAWS	18
26.	GOVERNMENT APPROVAL OR REGISTRATION	18
27.	COMPLIANCE WITH LAWS	19
28.	FORCE MAJEURE	19
29.	CONFIDENTIALITY	19
30.	MISCELLANEOUS	20
31.	COUTERPARTS AND EXECUTION	21

APPENDIX A

APPENDIX B

APPENDIX C

****** - Material has been omitted and filed separately with the Commission.

EXCLUSIVE LICENSE AGREEMENT

THIS EXCLUSIVE LICENSE AGREEMENT AND THE ATTACHED APPENDICES A, B, AND C (collectively, the “Agreement”) is made and is effective this 1st day of June, 2014 (the “Effective Date”), by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA (“The Regents”), a California corporation having its corporate offices located at 1111 Franklin Street, Oakland, California 94607-5200, acting through The Office of Intellectual Property and Industry Sponsored Research of the University of California, Los Angeles, located at 11000 Kinross Avenue, Suite 200, Los Angeles, CA, 90095-1406, and FIBROCELL SCIENCE, INC. (“Licensee”), a Delaware corporation having a principal place of business at 405 Eagleview Blvd., Exton, PA, 19341. This Agreement refers to The Regents and Licensee collectively as the “Parties” and individually as a “Party.”

RECITALS

WHEREAS, a certain invention, generally characterized as

1)UCLA Case No. ******: “Inducing In Vivo Osteogenesis using BMP2 Expressing Primary Human Adult Skin Cells”

(the “Invention”) was made in the course of research at the University of California, Los Angeles by Drs. ****** and ****** (“Inventors”), and is claimed in Regents’ Patent Rights, as defined below;

WHEREAS, Drs. ****** and ****** are employees of The Regents and as such are obligated to assign his right, title and interest in and to the Invention to The Regents;

WHEREAS, the Invention was developed under a sponsored research agreement with Licensee (Research Agreement No. ****** dated ******); and

WHEREAS, The Regents wishes that Regents’ Patent Rights be developed and utilized to the fullest extent so that the benefits can be enjoyed by the general public.

The Parties agree as follows:

1.  DEFINITIONS

1.1.“Affiliate” means any corporation, company, partnership, joint venture or other entity that controls, is controlled by or is under common control with a Party to this Agreement. For purposes hereof, “control” means (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares entitled to vote for the election of directors; and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entity.  In any jurisdiction where the applicable law does not permit foreign equity participation of at least fifty percent (50%), then “Affiliate” means any corporation, company, partnership, joint venture or other entity in which Licensee owns or controls, directly or indirectly, the maximum percentage of outstanding stock or voting rights that is permitted by such applicable law.

1.2.“Combination Product” means any product that is either (a) a combination of a Licensed Product and another therapeutic product that is not a Licensed Product in a kit form and is intended for sale, transfer, lease or other disposition by Licensee or a Sublicensee or (b) is produced by combining the Licensed Product with another therapeutic product that is not a Licensed Product and is intended for sale, transfer, lease or other disposition by Licensee or a Sublicensee.

****** - Material has been omitted and filed separately with the Commission.

1

1.3.“Commercialization” has the meaning set forth in Paragraph 6.1 of this Agreement.

1.4.“Customer” means any third party that receives Licensed Products in exchange for consideration or purchases services that require the practice of Licensed Methods, provided however, that a Sublicensee or a Joint Venture shall be deemed a Customer only if it receives Licensed Products or Licensed Methods that are not intended for further sale, transfer, lease, exchange or other disposition.

1.5.“Field of Use” means any and all research and commercialization related to osteogenesis therapy.

1.6.“Final Sale” means any sale, transfer, lease, exchange or other disposition or provision of a Licensed Product and/or a Licensed Method to a Customer by Licensee or a Sublicensee. A Final Sale will be deemed to have occurred upon the earliest to occur of the following (as applicable):  (a) the transfer of title to such Licensed Product and/or Licensed Method to a Customer, (b) the shipment of such Licensed Product to a Customer, (c) the provision of a Licensed Method to a Customer, (d) the provision of an invoice for such Licensed Product or Licensed Method to a Customer, or (e) payment by the Customer for Licensed Products or Licensed Methods.  Exchange of Licensed Products between Licensee and a Sublicensee is not a Final Sale if the Licensed Product is intended for further sale, transfer, lease, exchange or other disposition, in which case the Final Sale will be deemed to have occurred upon payment for the sale, transfer, lease, exchange or other disposition or provision of Licensed Product by Licensee or Sublicensee to a Customer.  If Licensee or a Sublicensee transfers Licensed Product at no cost solely for use in, or for purposes of, a clinical study, clinical trial, or as a free sample in product promotion, then such transfers will not be considered a Final Sale and no royalty will be owed hereunder.

1.7.“First Commercial Sale” means a bona fide transaction for which consideration is earned for the sale of any Licensed Product or the practice of a Licensed Method by Licensee or a Sublicensee, following approval of its marketing by the appropriate governmental agency for the country in which the sale is to be made.  When governmental approval is not required, “First Commercial Sale” means the first bona fide transaction for which consideration is earned for the sale of any Licensed Product or the practice of a Licensed Method by Licensee or a Sublicensee in that country.

1.8.“Joint Venture” means any separate entity established pursuant to a written agreement between a third party and Licensee and/or a Sublicensee, in which the separate entity manufactures, uses, purchases, sells or acquires Licensed Products from Licensee or a Sublicensee.

1.9.“Licensed Method” means any process, service, or method covered by a Valid Claim within Regents’ Patent Rights or whose use or practice would, absent the license granted under this Agreement, constitute an infringement, inducement of infringement or contributory infringement of any Valid Claim within Regents’ Patent Rights.

1.10.“Licensed Product” means any article, composition, apparatus, substance, chemical, or any other material covered by a Valid Claim within Regents’ Patent Rights and whose manufacture, import use, offer for sale, or sale would, absent the license granted under this Agreement, constitute an infringement, inducement of infringement or contributory infringement of any Valid Claim within Regents’ Patent Rights.  This definition of Licensed Product also includes a service either used by Licensee or a Sublicensee or provided by Licensee or a Sublicensee to a Customer when such service requires the use of Licensed Product or performance of a Licensed Method.

1.11.“Minimum Annual Royalty” has the meaning set forth in Section 5.3 of this Agreement.

1.12.“Net Sales” means the total of the gross amount received (whether consisting of cash or any other forms of consideration) for all Final Sales, less the following deductions (to the extent included in and not already deducted from the gross amount invoiced or otherwise charged): sales, use, tariff,

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import/export duties or other excise taxes imposed on particular sales, and deductible value added taxes (“VAT”), that is, VAT not refunded, credits, or deducted by a governmental taxing authority; rebates paid or credited to Customers including managed care rebates and chargebacks; outbound transportation prepaid or allowed; and allowances or credits to Customers because of rejections or returns. Income taxes are not an allowed deduction under Net Sales. If a Sublicensee, development partner or Joint Venture is a Customer, then Licensee will pay royalties on Net Sales based on the total gross amount normally charged to other Customers in arm’s length transactions.  Notwithstanding the foregoing, in the event a Licensed Product is sold as a Combination Product, Net Sales shall be calculated by multiplying the Net Sales of the Combination Product by the fraction A/(A+B), where A is the gross invoice price of the Licensed Product when sold separately in a country and B is the gross invoice price of the other product(s) included in the Combination Product when sold separately in such country.  In the event no such separate sales are made by Licensee or its Sublicensees, Net Sales of the Combination Product shall be calculated in a manner to be negotiated and agreed upon by the Parties, reasonably and in good faith, prior to any sale of such Combination Product, which shall be based upon the respective cost of goods sold of the therapeutic components of such Combination Product.

1.13.“Patent Action(s)” means the preparation, filing, prosecution and maintenance of patent applications and patents in Regents’ Patent Rights. Prosecution includes, but is not limited to, reexaminations, interferences, oppositions, and any other ex parte or inter partes matters originating in a patent office.

1.14.“Patent Costs” means all out-of-pocket costs incurred by The Regents for Patent Actions.

1.15.“Regents’ Patent Rights” means The Regents’ interest in any of the patent applications and patents listed in Appendix A attached to this Agreement and at least partially assigned or assignable to The Regents; any applications claiming priority thereto including divisionals, continuations and continuations-in-part (but only to the extent of claims that are entirely supported in the specification and entitled to the priority date of the parent application); any patents issuing on these applications including reissues, substitutions, and patent extensions; and any corresponding foreign patents, patent applications and supplemental protection certificates; all of which are automatically incorporated in and added to Appendix A and made a part of this Agreement

1.16.“Side Deal” means an arrangement, understanding, agreement, or transaction (collectively “Deals”) between the Licensee and a Sublicensee and/or its affiliates, which does not include the transfer of a sublicense under this Agreement.

1.17.“Sublicensee” means any person or entity (including any Affiliate or Joint Venture) to which any of the rights granted to Licensee hereunder are sublicensed.

1.18.“Sublicensing Income” means amounts received by Licensee or its Affiliates in consideration for a Sublicense or other agreement providing the right to negotiate or obtain a Sublicense. Sublicensing Income includes amounts received by Licensee or its Affiliates in consideration for the sublicensed Regents’ Patent Rights in the form of license issue fees, milestone payments (excluding milestone payments received by Licensee upon achievement of the milestones set forth in Section 4.2), and the like but specifically excludes royalties on the sale or distribution of Licensed Products or the practice of Licensed Methods. Not included in the definition of Sublicensing Income is income received by Licensee as payment or reimbursement for research costs at fair market value applied to the licensed Invention and conducted by or for Licensee, including costs of materials, equipment or clinical testing, or any amount received by Licensee or its Affiliates that could be construed as uncollectible debt.

1.19.“Valid Claim” means (i) a claim of an issued patent that has not expired or been held unenforceable or invalid by a final judgment or decision of a court or other government agency of competent

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jurisdiction from which no appeal has been or can be taken, and which has not been admitted to be invalid or unenforceable through reissue, disclaimer or the like, or (ii) a claim of a pending patent application that has not been abandoned or finally rejected without the possibility of appeal or refiling or been pending for more than ******. For purposes of clarity, both (i) and (ii) are Valid Claims for purposes of this Agreement.

2. GRANT

2.1.Subject to the limitations set forth in this Agreement, The Regents hereby grants to Licensee an exclusive license (the “License”) under Regents’ Patent Rights, in jurisdictions where Regents’ Patent Rights exist, to make, have made, use, have used, sell, offer for sale import and otherwise commercially exploit Licensed Products and to practice Licensed Methods in the Field of Use. Licensee will not make, use, have made, sell, offer for sale, or import Licensed Products outside the Field of Use. For the avoidance of doubt, Affiliates and Joint Ventures have no rights hereunder unless granted a Sublicense.

2.2.The Regents expressly reserves the right to: (a) use Regents’ Patent Rights and associated technology for educational and research purposes, (b) publicly disclose results of such research, and (c) allow other nonprofit institutions to use Regents’ Patent Rights and associated technology for educational and research purposes; provided that in the case of Section 2.2(c), if The Regents will transfer tangible matters covered by any of Regents’ Patent Rights, then such transfer will be subject the execution of a written material transfer agreement that does not conflict with the rights granted to Licensee under this Agreement.

2.3.The Agreement will terminate immediately if Licensee files a claim including in any way the assertion that any portion of Regents’ Patent Rights is invalid or unenforceable where the filing is by Licensee, a third party on behalf of Licensee, or a third party at the written urging of, or with the assistance of, the Licensee.

3. SUBLICENSES

3.1.The Regents grants to Licensee the right to sublicense the rights granted to Licensee hereunder (“Sublicenses”). All Sublicenses will: (i) be issued in writing; (ii) include an express prohibition against issuing further sublicenses under any or all of Regents’ Patent Rights; and (iii) to the extent applicable include all of the rights of The Regents and require the performance of obligations due to The Regents contained in this Agreement. For the purposes of this Agreement, operations of Sublicensees are deemed to be the operations of Licensee, for which Licensee is responsible.

3.2.Licensee must pay to The Regents ****** of all Sublicensing Income. Licensee must pay such Sublicensing Income to The Regents on or before the following dates:

·February 28 (for Sublicensing Income received by Licensee on or before the last day of the calendar quarter ending December 31 of the prior year);

·May 31 (for Sublicensing Income received by Licensee on or before the last day of the calendar quarter ending March 31);

·August 31 (for Sublicensing Income received by Licensee on or before the last day of the calendar quarter ending June 30); and

·November 30 (for Sublicensing Income received by Licensee on or before the last day of the calendar quarter ending September 30).

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3.3.On Net Sales of Licensed Products sold or disposed of by a Sublicensee, Licensee must pay to The Regents an earned royalty in accordance with Article 5 (ROYALTIES) as if these were Licensee’s Net Sales. Any royalties received by Licensee in excess of royalties due to The Regents under this Paragraph 3.3 belong to Licensee.

3.4.Licensee must provide to The Regents a copy of each Sublicense within thirty (30) days of execution and is prohibited from entering into any Side Deal with a third party where such Side Deal intentionally dilutes, diverts, conceals or misrepresents the amount of consideration paid to the Licensee in consideration for a Sublicense.

3.5.Licensee will require that each Sublicensee provide Licensee with reports that are sufficiently detailed to establish all amounts due to The Regents under this Agreement. Licensee will provide a copy of all such information submitted to Licensee by Sublicensees relevant to the computation of the payments due to The Regents under this Agreement within thirty (30) days after receipt of such information from such Sublicensee.

3.6.If this Agreement is terminated for any reason, all outstanding Sublicenses not in default will be assigned by Licensee to The Regents. Prior to any such assignment such Sublicensees shall furnish to The Regents the completed licensee contact information form attached hereto as “APPENDIX C” and incorporated herein by this reference. The assigned Sublicenses will remain in full force and effect with The Regents as the licensor or sublicensor instead of Licensee, but the duties of The Regents under the assigned Sublicenses will not be greater than the duties of The Regents under this Agreement, and the rights of The Regents under the assigned Sublicenses will not be less than the rights of The Regents under this Agreement, including all financial consideration and other rights of The Regents.

4. FEES

4.1.In partial consideration for the License, Licensee will pay to The Regents a license issue fee of ****** within thirty (30) days of the Effective Date. This fee is non- refundable and is not an advance against royalties.

4.2.For the first Licensed Product reaching any of the milestones indicated below, Licensee must make the following one-time payments (“Milestone Payments”) to The Regents within thirty (30) days of reaching such milestone. For purposes of clarity such Milestone Payments are due from Licensee irrespective of whether the associated milestone listed below was reached by Licensee itself or a third party acting on Licensee’s behalf or by a Sublicensee, Joint Venture or Affiliate.

4.2.a****** upon the first Investigational New Drug Application (“IND”) for the first Licensed Product being allowed to become effective by the FDA.

4.2.b****** upon the first Biological License Application (“BLA”) for the first Licensed Product being approved by the FDA.

4.2.c****** upon the First Commercial Sale of the first Licensed Product in the United States.

4.3.Licensee must pay to The Regents a license maintenance fee (“License Maintenance Fee”) of ****** beginning on the one-year anniversary date of the Effective Date of this Agreement and continuing annually on each anniversary date of the Effective Date until the anniversary year in which the First Commercial Sale occurs.  The maintenance fee will not be due and payable on any anniversary date of the Effective Date if on that date Licensee or a Sublicensee is commercially selling a Licensed Product and paying an Earned Royalty to The Regents on the sales of that Licensed Product. On each

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anniversary date of the Effective Date after the occurrence of the First Commercial Sale, Licensee will pay The Regents a minimum annual royalty in lieu of the License Maintenance Fee and in accordance with Section 5.3.  The License Maintenance Fees are non-refundable and are not an advance against royalties.

5. ROYALTIES

5.1.Licensee must pay to The Regents for sales by Licensee and Sublicensees an earned royalty at the following rates of Net Sales of Licensed Products (“Earned Royalty”). This Earned Royalty will accrue until expiration or termination of this Agreement:

Licensed Product Sold In Stated Time Period	Percent (%) of Net Sales
Exogenous recombinant therapeutic protein BMP-2A produced by fibroblast cultures (“Recombinant Protein”) that is Licensed Product.	******	%
Endogenously produced therapeutic BMP-2A from implanted fibroblasts (“Implanted Protein”) that is Licensed Product.	******	%
Endogenously produced therapeutic BMP-2A from modified autologous cells (“Autologous Protein”) that is Licensed Product.	******	%

5.2.Licensee must pay Earned Royalties owed to The Regents on a quarterly basis. Licensee must pay such Earned Royalties on or before the following dates:

·February 28 (for any Final Sales that took place on or before the last day of the calendar quarter ending December 31 of the prior year);

·May 31 (for any Final Sales that took place on or before the last day of the calendar quarter ending March 31);

·August 31 (for any Final Sales that took place on or before the last day of the calendar quarter ending June 30); and

·November 30 (for any Final Sales that took place on or before the last day of the calendar quarter ending September 30).

5.3.Licensee must pay to The Regents a minimum annual royalty of ****** (referred to below as “Minimum Annual Royalty”) during each calendar year (measured relative to the calendar year in which there was a First Commercial Sale, and referred to below as “Calendar Years after FCS”) until expiration or termination of this Agreement.  Licensee must pay the Minimum Annual Royalty for a given Calendar Year after FCS to The Regents on or before February 28 of such Calendar Year after FCS. The Minimum Annual Royalty for a given Calendar Year after FCS will be credited against the Earned royalty due and owing with respect to Net Sales made during the calendar year in which such Minimum Annual Royalty was paid. By way of example, if First Commercial Sale took place on February 1, 2015, the first Calendar Year After FCS would be 2016 and the Minimum Annual Royalty would be due on or before February 28, 2016. Such Minimum Annual Royalty would be credited against the Earned Royalties due in 2016.  If the Agreement is terminated prior to expiration of the Agreement in a given calendar year, any payment due to the Regents for the Minimum Annual Royalty in any subsequent year will be waived and Licensee will only pay Earned Royalties accrued until any remaining inventories of Licensed Product are sold subject to the terms of this Agreement.

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5.4.If Licensee is obligated to pay a non-Affiliate third party (other than The Regents) royalties on Net Sales (“Third Party Royalty”) in consideration for patent rights owned or controlled by such non- Affiliate third party without a license to which Licensee would infringe such third party patent rights in the manufacture, use, import, offer for sale, or sale of a Licensed Product, then Licensee will have the right, upon Licensee’s execution of a license with such third party for such third party patent rights, to credit ****** of any earned royalty payment made to such third party in any given year in consideration for such third party patent rights, against the Earned Royalty due The Regents under this Agreement, provided that:

(i)The sum of such Third Party Royalty rate and the Earned Royalty rate set forth in this Agreement is equal to, or greater than, ******.

(ii)Prior to reduction of any Earned Royalty due The Regents under this Agreement for a given calendar quarter, Licensee first provides written evidence to The Regents of Licensee’s royalty obligations to such third party and must thereafter provide written evidence of any payment made to such third party;

(iii)In no event shall royalties or other amounts due to The Regents under this Agreement in any reporting period be so reduced to less than fifty percent (50%) of the amount that would otherwise be due The Regents under this Agreement.

5.5.All monies due The Regents must be paid in United States funds. With respect to sales of Licensed Products in a currency other than United States Dollars, the royalties due The Regents will first be determined in the foreign currency of the country in which the Licensed Products were sold and, second, converted into equivalent United States Funds by using the applicable conversion rates for buying and selling United States dollars for such foreign currency as published by Reuters on the final business day of the quarter in which such sales were made.

5.6.Any tax for the account of The Regents required to be withheld by Licensee under the laws of any foreign country must be promptly paid by Licensee for and on behalf of The Regents to the appropriate governmental authority. Licensee will use its best efforts to furnish The Regents with proof of payment of any tax. Licensee is responsible for all bank transfer charges. All payments made by Licensee in fulfillment of The Regents’ tax liability in any particular country will be credited against fees or royalties due The Regents for that country.

5.7.If at any time legal restrictions prevent the acquisition or prompt remittance of United States Dollars by Licensee with respect to any country where a Licensed Product is sold, Licensee shall pay royalties due to The Regents from Licensee’s other sources of United States Dollars.

5.8.If any patent or any claim included in Regents’ Patent Rights is held invalid or unenforceable in a final decision by a court of competent jurisdiction from which no appeal has or can be taken, all obligation to pay royalties based on that patent or claim or any claim patentably indistinct from it will cease as of the date of that final decision. Licensee will not, however, be relieved from paying any royalties that accrued before that decision or that is based on another of the Regents’ Patent Rights or claim of the Regents’ Patent Rights not involved in that decision.

5.9.If no Valid Claim has issued on The Regents’ Patent Rights after ****** from the earliest priority date to which The Regents’ Patent Rights are entitled, royalties and the portion of Sublicensing Income payable to University under this Agreement shall be reduced by ****** until such time as a Valid Claim so issues on The Regents Patent Rights.  Licensee shall not be entitled to a refund of amounts paid prior to the running of the aforementioned ****** period, and University shall not be entitled to any “catch up” payment in respect of amounts due during the period between the running of the

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aforementioned ****** period and the date on which a Valid Claim does issue on The Regents’ Patent Rights.

6. DILIGENCE

6.1.Upon execution of this Agreement, Licensee must earnestly and diligently (a) develop Licensed Products or Licensed Methods; (b) market Licensed Products and Licensed Methods to the extent they are adequately developed in accordance with Section 6.1(a); and (c) manufacture and sell Licensed Products and Licensed Methods in quantities sufficient to meet the market demands for them (all of the foregoing collectively “Commercialization”).  For purposes of clarity, the requirements under the foregoing subsection (b) and (c) shall continue to apply after a First Commercial Sale.

6.2.The Regents has the right and option to either terminate this Agreement or reduce Licensee’s exclusive license to a nonexclusive license if Licensee fails to perform any of the terms in Paragraph 6.1 or this Paragraph 6.2. This right, if exercised by The Regents, supersedes the rights granted in Article 2 (GRANT).

(a)******.

(b)******.

(c)******.

Without limiting Licensee’s obligations under Paragraphs 6.1 and 6.2 of this Agreement, Licensee has the sole discretion for making all decisions as to how to commercialize any Licensed Product.

7.  PATENT FILING, PROSECUTION AND MAINTENANCE

7.1.Patent Prosecution

7.1.aRegents’ Patent Rights will be held in the name of The Regents and obtained with counsel of The Regents’ choice. The Regents shall control all Patent Actions and all decisions with respect to Patent Actions but will consider any comments or suggestions by Licensee or its appointed counsel with respect to Patent Actions. The Regents is entitled to take action to preserve rights and minimize costs whether or not Licensee has commented, and will use reasonable efforts not to allow any Regents’ Patent Rights for which Licensee is licensed and is underwriting the costs of to lapse or become abandoned without Licensee’s written authorization under this Article 7, except for the filing of continuations, divisional, or the like that substitute for the lapsed application. The Regents shall have no requirement to file, prosecute, or maintain Regents’ Patent Rights if Licensee is not current with its Patent Cost obligations as set forth in this Article 7.

7.1.bThe Regents will provide Licensee with copies of all documentation related to prosecution of the Regent’s Patent Rights including each patent application, office action, response to office action, request for terminal disclaimer, and request for reissue or reexamination of any patent or patent application under Regents’ Patent Rights.

7.1.cAs long as the Licensee has paid Patent Prosecution Costs as provided for in this Article 7, The Regents will diligently prosecute and maintain the United States and foreign patents comprising the Regents’ Patent Rights using counsel of its choice.  The Regents’ counsel will take instructions only from The Regents, however, The Regents agree to consult in good faith with

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Licensee in respect to Licensee recommendations and requests concerning the patent prosecution (each recommendation or request a “Patent Prosecution Request”).  The Regents will provide the Licensee with copies of all relevant documentation so that Licensee will be informed of the continuing prosecution and Licensee may comment upon such documentation sufficiently in advance of any initial deadline for filing a response; provided that, if the Licensee has not commented upon such documentation in a reasonable time for The Regents to sufficiently consider the Licensee’s comments prior to a deadline with the relevant government patent office or if The Regents must act to preserve the Patent Rights, The Regents will be free to respond without consideration of the Licensee’s comments. If Licensee does not provide a Patent Prosecution Request in relation to filing a particular patent application by a non-extendible deadline in a particular jurisdiction, The Regents will have the right to file patent applications at its own expense in any territory which Licensee has not identified in written notice pursuant to this Paragraph 7.1 and such patent application(s) and patent(s) will not be part of Regents’ Patent Rights and therefore not subject to this Agreement, and Licensee will have no further rights or license to them.

7.2.Past Patent Costs

Licensee will bear all Patent Costs incurred prior to the term of this Agreement (“Past Patent Costs”) in an amount not to exceed ******.  Licensee must send payment for such Past Patent Costs to The Regents within thirty (30) days of Licensee’s receipt of an invoice for these costs.

7.3.Ongoing Patent Costs

Licensee will bear all Patent Costs incurred during the term of this Agreement (“Ongoing Patent Costs”) and shall pay in advance The Regents’ patent counsel’s estimated costs for undertaking a Patent Action before The Regents authorizes its patent counsel to proceed (“Advanced Payment”).  Fees and expenses that are due to incidentals (for example photocopy charges or long distance phone charges) are not included within such estimate unless expressly so stated, nor is Licensee’s interaction with The Regents’ counsel such as by phone calls, e-mails, and in person meetings. The absence of this Advanced Payment will be considered an election not to secure the patent rights associated with the specific phase of patent prosecution in such territory, and such patent application(s) and patent(s) will not be part of Regents’ Patent Rights and therefore not subject to this Agreement, and Licensee will have no further rights or license to them.

7.4.Termination of Patent Prosecution by Licensee

Licensee may terminate its obligations with respect to any or all of Regents’ Patent Rights by providing written notice to The Regents (“Patent Termination Notice”). Termination of Licensee’s obligations with respect to such patent application or patent will be effective three (3) months after receipt of such Patent Termination Notice by The Regents. The Regents will use reasonable efforts to curtail Patent Costs chargeable to Licensee under this Agreement after this Patent Termination Notice is received by The Regents. The Regents may continue prosecution or maintenance of these application(s) or patent(s) at its sole discretion and expense, and such application(s) and patent(s) will not be part of Regents’ Patent Rights and therefore not subject to this Agreement, and Licensee will have no rights or license to them.

7.5.Patent Extensions

7.5.aLicensee will apply for an extension of the term of any patent included within The Regents’ Patent Rights, if appropriate, under the Drug Price Competition and Patent Term

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Restoration Act of 1984 and/or European, Japanese and other foreign counterparts. Licensee shall prepare all documents and The Regents agrees to execute the documents and to take additional action as Licensee reasonably requests in connection therewith. Licensee will be liable for all costs relating to such application.

7.5.bIf either Party (in the case of The Regents, the licensing officer responsible for administration of this Agreement) receives notice pertaining to the infringement or potential infringement of any issued patent included with Regents’ Patent Rights under the Drug Price Competition and Patent Term Restoration Act of 1984 (and/or foreign counterparts of this law) then that Party shall within ten (10) days notify the other Party after receipt of such notice of infringement.

8. PATENT INFRINGEMENT

8.1.In the event that The Regents (to the extent of the actual knowledge of the licensing professional responsible for the administration of this Agreement) or Licensee learns of infringement of potential commercial significance of any patent licensed under this Agreement, the knowledgeable Party will provide the other with (i) written notice of such infringement and (ii) evidence of such infringement available to it (the “Infringement Notice”). During the period in which, and in the jurisdiction where, Licensee has exclusive rights under this Agreement, neither The Regents nor Licensee will notify a third party (including the infringer) of infringement or put such third party on notice of the existence of any Regents’ Patent Rights without first obtaining the written consent of the other. If Licensee puts such infringer on notice of the existence of any Regents’ Patent Rights with respect to such infringement without first obtaining the written consent of The Regents and if a declaratory judgment action is filed by such infringer against The Regents, then Licensee’s right to initiate a suit against such infringer for infringement under Paragraph 8.2 below will terminate immediately without the obligation of The Regents to provide notice to Licensee. Both The Regents and Licensee will use their diligent efforts to cooperate with each other to terminate such infringement without litigation.

8.2.If infringing activity of potential commercial significance by the infringer has not been abated within ninety (90) days following the date the Infringement Notice takes effect, then Licensee may institute suit for patent infringement against the infringer. The Regents may voluntarily join such suit at its own expense, but may not thereafter commence suit against the infringer for the acts of infringement that are the subject of Licensee’s suit or any judgment rendered in the suit. If, in a suit initiated by Licensee, The Regents is involuntarily joined by a party other than Licensee, then Licensee will pay the reasonable and documented costs incurred by The Regents arising out of such suit, including but not limited to, reasonable and documented legal fees of counsel that The Regents selects and retains to represent it in the suit.

8.3.If, within one hundred and twenty (120) days following the date the Infringement Notice takes effect, infringing activity of potential commercial significance by the infringer has not been abated and if Licensee has not brought suit against the infringer, then The Regents may institute suit for patent infringement against the infringer; provided that before The Regents proceed with such suit, The Regents will consult in good faith with Licensee concerning the reason(s) that Licensee declined to file suit against the infringer and only proceed with the infringement suit if the infringer’s infringing product or service holds market share of ****** or more of the relevant market in the field of use.  If The Regents has the right to institute an infringement suit (as set forth in this Section 8.3) and institutes such a suit, then Licensee may not join such suit without The Regents’ consent and may not thereafter commence suit against the infringer for acts of infringement that are subject to The Regents’ suit or any judgment rendered in that suit.

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8.4.Any recovery or settlement received in connection with any suit will first be shared by The Regents and Licensee equally to cover any litigation costs each incurred and next shall be paid to The Regents or Licensee to cover any litigation costs it incurred in excess of the litigation costs of the other. In any suit initiated by The Regents in compliance with this Agreement, any recovery in excess of litigation costs will belong to The Regents. The Regents will receive at least ****** of any recovery if The Regents is a party in the litigation.  The Regents and Licensee agree to be bound by all final and non-appealable determinations of patent infringement, validity and enforceability (but no other issue) resolved by any adjudicated judgment in a suit brought in compliance with this Article 8 (PATENT INFRINGEMENT).

8.5.Any agreement made by Licensee for purposes of settling litigation or other dispute shall comply with the requirements of Article 3 (SUBLICENSES) of this Agreement.

8.6.Each Party will cooperate with the other in litigation proceedings instituted hereunder but at the expense of the Party who initiated the suit, unless such suit is being jointly prosecuted by the Parties.

8.7.Any litigation proceedings will be controlled by the Party bringing the suit, except that The Regents may be represented by counsel of its choice in any suit brought by Licensee.

9. PROGRESS AND ROYALTY REPORTS

9.1.Beginning January 31, 2015, and for the term of this Agreement, Licensee must submit to The Regents semiannual progress reports covering Licensee’s (and any Affiliates’, Joint Ventures’, and Sublicensees’) activities related to the development and testing of all Licensed Products and the obtaining of the governmental approvals necessary for marketing.

9.2.Each progress report must include all of the following for each semiannual period:

9.2.aSummary of work completed.

9.2.bKey scientific discoveries.

9.2.cSummary of work in progress.

9.2.dCurrent schedule of anticipated events or milestones.

9.2.eMarket plans for introduction of Licensed Products.

9.2.fAn updated listing of any and all Sublicenses granted by Licensee or any Sublicensees.

9.2.gThe names and addresses of all Sublicensees, and a current and valid phone number and e-mail address for a principal point of contact at each such Sublicensee who is responsible for administering the Sublicense.

9.3.After the First Commercial Sale of each Licensed Product, Licensee must submit quarterly royalty reports to The Regents by February 28, May 31, August 31 and November 30 of each year (i.e., within sixty (60) days from the end of each calendar quarter). Licensee will state in its royalty report if it had no sales of any Licensed Product in the applicable quarter. Each royalty report must cover Licensee’s and all Sublicensees’ activities for most recently completed calendar quarter and shall include the completed Royalty Statement attached hereto as “APPENDIX B” and incorporated herein by this reference, showing:

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9.3.aNumber of each Licensed Product sold by Licensee and any Sublicensees and the corresponding commercial name of each such Licensed Product;

9.3.bGross sales, Final Sales and Net Sales of each Licensed Product made by Licensee and any Sublicensees;

9.3.cEarned Royalties payable to The Regents;

9.3.dThe method and currency exchange rates (if any) used to calculate the Earned Royalty based on Net Sales; and

9.3.eA specification of all deductions and their dollar value that were taken to arrive at Net Sales.

9.3.fA list of all countries in which Licensed Products are being manufactured.

9.3.gDate of First Commercial Sale (this need only be reported in the first royalty report following such First Commercial Sale).

9.4.The Regents shall have the right to terminate this Agreement in accordance with Article 12 (TERMINATION BY THE REGENTS) if Licensee does not provide progress reports and royalty reports in accordance with this Article 9.

10. BOOKS AND RECORDS

10.1.Licensee must keep accurate books and records of all Licensed Products developed, manufactured, used or sold and all Sublicenses, collaboration agreements and joint venture agreements entered into by Licensee that involve Regents’ Patent Rights. Licensee must preserve these books and records for at least five (5) years from the date of the royalty payment to which they pertain. These books and records will be open to examination by representatives or agents of The Regents during regular office hours to determine their accuracy and assess Licensee’s compliance with the terms of this Agreement. Licensee will pay fees and expenses of these inspections if an underpayment of more than five percent (5%) of the total payments due The Regents within a given year under this Agreement is discovered or any material term of this Agreement is discovered to have been breached, otherwise The Regents will pay the fees and expenses of inspections. Payment owed by Licensee hereunder for underpayment of royalties will be due within thirty (30) days of the examination result and payment by Licensee for any examination costs incurred by The Regents will be due within thirty (30) days from the date of The Regents’ invoice.

11. LIFE OF THE AGREEMENT

11.1.Unless otherwise terminated by operation of law or by acts of the Parties in accordance with the terms of this Agreement, this Agreement is in force from the Effective Date recited on page one and remains in effect until the expiration or abandonment of the last-to-expire patent or last to-be-abandoned patent application in Regents’ Patent Rights.

11.2.Upon termination of this Agreement, Licensee will have no further right to make, have made, use or sell any Licensed Product except as provided in Article 14 (DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION).

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11.3.Any expiration or termination of this Agreement will not affect the rights and obligations set forth in the following Articles:

Article 1	DEFINITIONS;
Paragraph 3.6	Survival of Sublicenses;
Article 10	BOOKS AND RECORDS;
Article 11	LIFE OF THE AGREEMENT;
Article 14	DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION;
Article 16	USE OF NAMES AND TRADEMARKS;
Article 17	LIMITED WARRANTY;
Article 18	INDEMNIFICATION;
Article 19	LIMITATION OF LIABILITY;
Article 24	FAILURE TO PERFORM;
Article 25	GOVERNING LAWS; and
Article 29	CONFIDENTIALITY.

12. TERMINATION BY THE REGENTS

12.1.If Licensee violates or fails to perform any material term of this Agreement, then The Regents may give written notice of the default (“Notice of Default”) to Licensee. If Licensee does not repair the default within sixty (60) days after the effective date of the Notice of Default (“Period to Cure”), then The Regents has the right to terminate this Agreement and the License by a second written notice (“Notice of Termination”) to Licensee. If The Regents sends a Notice of Termination to Licensee, then this Agreement automatically terminates on the effective date of this notice. Termination does not relieve Licensee of its obligation to pay any monies owed on the Termination Effective Date, and does not impair any accrued right of The Regents.

13. TERMINATION BY LICENSEE

13.1.Licensee has the right at any time to terminate this Agreement in whole or with respect to any portion of Regents’ Patent Rights by giving written notice to The Regents. This notice of termination will be subject to Article 20 (NOTICES) and will be effective ninety (90) days after the effective date of the notice (“Termination Effective Date”).

13.2.Any termination in accordance with Paragraph 13.1 does not relieve Licensee of any obligation or liability accrued prior to termination. Nor does termination rescind anything done by Licensee or any payments made to The Regents prior to the effective date of termination. Termination does not affect in any manner any rights of The Regents arising under this Agreement prior to termination.

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14. DISPOSITION OF LICENSED PRODUCTS
ON HAND UPON TERMINATION

14.1.Upon termination of this Agreement by Licensee, Licensee may continue to sell any previously made Licensed Products during the one hundred eighty (180) days following the Termination Effective Date.

14.2.Licensee must submit royalty reports on the sale of Licensed Products allowed under this Article 14 in accordance with Article 9 (PROGRESS AND ROYALTY REPORTS) and must pay royalties on such sales at the same rate and at the same time provided in this Agreement for royalties on sales of Licensed Products made during the term of this Agreement.

14.3.Except as set forth in this Article 14, Licensee will not otherwise make, sell, offer for sale, or import Licensed Products after termination of this Agreement by Licensee or The Regents.

15. PATENT MARKING

15.1.Licensee must mark all Licensed Products made, used or sold under the terms of this Agreement, or their containers, in accordance with the applicable patent marking laws. Licensee shall be responsible for all monetary and legal liabilities arising from or caused by (i) failure to abide by applicable patent marking laws and (ii) any type of incorrect or improper patent marking.

16. USE OF NAMES AND TRADEMARKS

16.1.Each Party will not use any name, trade name, trademark or other designation of the other Party or its employees (including contraction, abbreviation or simulation of any of the foregoing) in advertising, publicity or other promotional activity without the consent of the Party. Unless required by law, Licensee is expressly prohibited from using the name “The Regents of the University of California” or the name of any campus of the University of California in advertising, publicity, or other promotional activity, without written permission of The Regents.

17. LIMITED WARRANTY

17.1.The Regents warrants that it has the lawful right to grant this license to Licensee and does not violate or breach any agreement with any third party by entering into this Agreement and granting the rights granted by this Agreement and to the extent of the actual knowledge of the licensing professional responsible for administration of this Agreement as of the Effective Date, is the sole and exclusive owner of Regents’ Patent Rights set forth in clause (i) of the definition of Regents’ Patent Rights.

17.2.This License and the associated Invention are provided WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. THE REGENTS MAKES NO REPRESENTATION OR WARRANTY THAT ANY LICENSED PRODUCT WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT.

17.3.Nothing in this Agreement will be construed as:

17.3.aA warranty or representation by The Regents as to the validity or scope of any Regents’ Patent Rights.

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17.3.bA warranty or representation that anything made, used, sold or otherwise disposed of under any license granted in this Agreement is or will be free from infringement of patents, copyrights, trademarks or any other forms of intellectual property rights or tangible property rights of third parties.

17.3.cObligating The Regents to bring or prosecute actions or suits against third parties for patent, copyright or trademark infringement except as provided in Article 8 (PATENT INFRINGEMENT).

17.3.dConferring by implication, estoppel or otherwise any license or rights under any patents of The Regents other than Regents’ Patent Rights as defined herein, regardless of whether such patents are dominant or subordinate to Regents’ Patent Rights.

17.3.eObligating The Regents to furnish any know-how not provided in Regents’ Patent Rights.

18. INDEMNIFICATION

18.1.To the maximum extent permitted by law, including California Civil Code Sec. 2773, Licensee will, and will require its Sublicensees to, indemnify, hold harmless and defend The Regents, The Regents’ officers, employees, and agents, the sponsors of the research that led to the Invention, the inventors of the patents and patent applications in Regents’ Patent Rights and their respective employers (the “Indemnitees”) from and against any and all liability, claims, suits, losses, damages, costs, fees,  and expenses (the “Claims”) arising out of Licensee’s activities or exercise of obligations under this Agreement, except for any of those Claims arising from The Regents’ own breach of contract, representation,  covenant, or warranty.Indemnification includes but is not limited to products liability. If The Regents make a reasonable determination that there will be a conflict of interest or it will not otherwise be adequately represented by counsel chosen by Licensee to defend The Regents in accordance with this Paragraph 18.1, then The Regents may retain counsel of its choice to represent it and Licensee will pay all documented expenses for such representation,  provided that, if The Regents believes it will not be adequately represented, The Regents will notify the Licensee in writing of the basis of its belief.   The obligations of this Paragraph 18.1 shall be expressly contingent on: (a) an Indemnitee giving Licensee prompt written notice of the applicable Claim; (b) the Indemnitees allowing Licensee to control the investigation, defense and settlement of the Claim with counsel selected by Licensee and reasonably acceptable to The Regents; and (c) the indemnitees reasonably cooperating with Licensee’s investigation, defense and settlement of the Claim.  Licensee shall have no liability or obligation in respect of any settlement of any Claim entered into by any indemnitee without Licensee’s consent.  Licensee may not admit liability or wrongdoing on the part of The Regents without The Regents’ prior express written consent. Licensee shall keep The Regents informed on a current basis of its defense of any claims under this Article 18.

18.2.Licensee, at its sole cost and expense, must insure its activities in connection with the work under this Agreement and obtain, keep in force and maintain Commercial Form General Liability Insurance (contractual liability included) with limits as follows:

18.2.a Each occurrence	$	5,000,000.
18.2.b Products/completed operations aggregate	$	10,000,000.
18.2.c Personal and advertising injury	$	5,000,000.
18.2.d General aggregate	$	10,000,000.

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18.3.If the above insurance is written on a claims-made form, it shall continue for three (3) years following termination or expiration of this Agreement. The insurance shall have a retroactive date of placement prior to or coinciding with the Effective Date of this Agreement.

18.4.Licensee will obtain, keep in force and maintain Worker’s Compensation Insurance as legally required in the jurisdiction in which Licensee is doing business.

18.5.Licensee expressly understands, however, that the coverages and limits in Paragraph 18.2 do not in any way limit Licensee’s liability or indemnification obligations. Licensee’s insurance must:

18.5.aProvide for thirty (30) day advance written notice to The Regents of any modification.

18.5.bState that The Regents of the University of California is endorsed as an additional insured under the coverages listed in Paragraph 18.2.

18.5.cInclude a provision that the coverages will be primary and will not participate with nor will be excess over any valid and collective insurance or program of self-insurance carried or maintained by The Regents.

18.6.Licensee must furnish The Regents with valid certificates of insurance evidencing compliance with all requirements of this Agreement naming “The Regents of the University of California” as an additional insured. Licensee must furnish the certificates of insurance within thirty (30) days of the execution of the Agreement and once per year thereafter for the duration of this Agreement. The Regents has to issue a Notice of Default in accordance with Article 12 (TERMINATION BY THE REGENTS) should Licensee fail to provide the certificates of insurance.

19. LIMITATION OF LIABILITY

19.1.THE REGENTS WILL NOT BE LIABLE FOR ANY LOST PROFITS, COSTS OF PROCURING SUBSTITUTE GOODS OR SERVICES, LOST BUSINESS, ENHANCED DAMAGES FOR INTELLECTUAL PROPERTY INFRINGEMENT OR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR OTHER SPECIAL DAMAGES SUFFERED BY LICENSEE, SUBLICENSEES, JOINT VENTURES, AFFILIATES OR DEVELOPMENT PARTNERS ARISING OUT OF OR RELATED TO THIS AGREEMENT FOR ALL CAUSES OF ACTION OF ANY KIND (INCLUDING TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY AND BREACH OF WARRANTY) EVEN IF THE REGENTS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE REGENTS WILL NOT BE LIABLE FOR ANY DIRECT DAMAGES SUFFERED BY LICENSEE, SUBLICENSEES, JOINT VENTURES, OR AFFILIATES ARISING OUT OF OR RELATED TO PATENT RIGHTS TO THE EXTENT ASSIGNED OR LICENSED BY THE REGENTS’ INVENTORS TO THIRD PARTIES.

20. NOTICES

20.1.Any notice, progress report, royalty report or payment (except for Advanced Payments due under this Agreement) required to be given to either Party must be sent to the respective address given below and is effective: (a) on the date of delivery if delivered in person, (b) five (5) days after mailing if mailed by first-class certified mail, postage paid, or (c) on the next business day if sent by overnight delivery. Either Party may change its designated address by written notice.

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For Licensee:Fibrocell Science, Inc.

405 Eagleview Blvd

Exton, PA 19341

Attn: Chief Financial Officer

For The Regents:The Regents of the University of California

University of California, Los Angeles

Office of Intellectual Property 11000 Kinross Avenue, Suite 200

Los Angeles, CA 90095-1406

Attn: Director of Licensing

All Advanced Payments due under this Agreement shall be sent via wire transfer as follows:

******

20.2.Licensee shall furnish to The Regents the completed licensee contact information form attached hereto as “APPENDIX C” concurrent to execution of the Agreement and incorporated herein by this reference, showing:

20.2.aThe Progress Reports Contact (i.e. the contact responsible for ensuring that such progress reports are submitted to The Regents);

20.2.bThe Patent Prosecution Contact to whom patent prosecution correspondence should be sent to; and

20.2.cThe Financial Contact (i.e. the contact responsible for ensuring that payments are made under this Agreement to The Regents).

21. ASSIGNABILITY

21.1.Consent to Assign

This Agreement is binding upon and inures to the benefit of The Regents, its successors and assignees. This Agreement is personal to Licensee and assignable by Licensee only with the prior written consent of The Regents. The consent of The Regents will not be required if the assignment of this Agreement is in conjunction with the transfer of all or substantially all of the business of Licensee to which this license relates to either (a) a non-Affiliate third party or (b) an Affiliate.

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Conditions of Assignment

No later than thirty (30) days prior to any assignment of this Agreement all of the following terms and conditions shall be met and if they are not then this Agreement and any assignment thereof will be considered null and void with no further notice from The Regents.

(i)Licensee shall inform The Regents in writing of the identity of the proposed acquirer or successor entity and shall provide updated contact information in writing to The Regents for such acquirer or successor entity by updating and submitting in writing to The Regents Appendix C of this Agreement; and

(ii)If the successor will not be bound to this Agreement by operation of law, the proposed acquirer or successor entity shall agree in writing to be bound by all the terms and conditions of this Agreement as if such acquirer or successor entity were the original Licensee and a copy of such written agreement shall be provided to The Regents by Licensee or the proposed acquirer or successor entity.

22. LATE PAYMENTS

22.1.For each royalty payment or fee not received by The Regents when due, Licensee must pay to The Regents a simple interest charge of Ten Percent (10%) per annum to be calculated from the date payment was due until it was actually received by The Regents. For purposes of clarity, this Article 22 (LATE PAYMENTS) does not limit any rights of The Regents under this Agreement arising from the failure by Licensee to make such payments when due.

23. WAIVER

23.1.The waiver of any breach of any term of this Agreement does not waive any other breach of that or any other term.

24. FAILURE TO PERFORM

24.1.If either Party takes legal action against the other because of a failure of performance due under this Agreement, then the prevailing Party is entitled to reasonable attorney’s fees in addition to costs and necessary disbursements.

25. GOVERNING LAW

25.1.THIS AGREEMENT IS TO BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, but the scope and validity of any patent or patent application will be governed by the applicable laws of the country of the patent or patent application.

26. GOVERNMENT APPROVAL OR REGISTRATION

26.1.If this Agreement or any associated transaction is required by the law of any nation to be either approved or registered with any governmental agency, Licensee will assume all legal obligations to do

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so. Licensee will notify The Regents if it becomes aware that this Agreement is subject to a United States or foreign government reporting or approval requirement. Licensee will make all necessary filings and pay all costs including fees, penalties, and all other out-of-pocket costs associated with such reporting or approval process.

27. COMPLIANCE WITH LAWS

27.1.Licensee will comply with all applicable laws and regulations in performing its obligations hereunder and in its use, manufacture, offer for sale, sale or import of Licensed Products or practice of Licensed Methods, including, but not limited to, obtaining and maintaining all necessary governmental approvals for the commercialization of Licensed Products and Licensed Methods. Licensee will observe all applicable United States and foreign laws with respect to the transfer of Licensed Products and related technical data and the provision of services using Licensed Methods to foreign countries, including and without limitation, the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations. Licensee will manufacture Licensed Products and practice the Licensed Methods in compliance with all applicable government importation laws and regulations of a country into which Licensed Products are imported.

28. FORCE MAJEURE

28.1.Except for Licensee’s obligation to make any payments to The Regents hereunder, the Parties shall not be responsible for any failure to perform due to the occurrence of any events beyond their reasonable control that render their performance impossible or onerous, including, but not limited to: accidents (environment, toxic spill, etc.); acts of God; biological or nuclear incidents; casualties; earthquakes; fires; floods; governmental acts; orders or restrictions; inability to obtain suitable and sufficient labor, transportation, fuel and materials; local, national or state emergency; power failure and power outages; acts of terrorism; strike; and war.

28.2.Either Party to this Agreement, however, will have the right to terminate this Agreement upon thirty (30) days’ prior written notice if either Party is unable to fulfill its obligations under this Agreement due to any of the causes specified in Paragraph 29.1 for a period of one (1) year.

29. CONFIDENTIALITY

29.1.If either Party discloses confidential information to the other Party, the disclosing Party will designate this information as confidential by appropriate legend or instruction and the receiving Party will:

29.1.aUse the same degree of care to maintain the secrecy of the confidential information as it uses to maintain the secrecy of its own information of like kind.

29.1.bUse the confidential information only to accomplish the purposes of this Agreement or for audit or management purposes.

29.1.cEnsure that any employees, customers, distributors and other agents to whom the confidential information is disclosed are bound to it by similar obligations of confidence and to make such disclosure only as required to accomplish the purposes of this Agreement.

29.2.Neither Party will have any confidentiality obligation with respect to the confidential information belonging to or disclosed by the other Party that:

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29.2.athe receiving Party can demonstrate by written records was previously known to it under no obligation of confidentiality;

29.2.bthe receiving Party lawfully obtained from sources under no obligation of confidentiality; and

29.2.cis or becomes publicly available other than through an act or omission of the receiving Party or any of its employees.

29.3.In the event a receiving Party is requested by oral questions, interrogatories, requests for information or documents, subpoena, civil investigate demand or similar process or is required by law (including the California Public Records Act) or the rules of any stock exchange on which receiving Party’s securities are traded to disclose any part of the confidential information, the receiving Party shall notify the other Party promptly of such request(s) and requirement(s), and (if applicable) the documents requested thereby, so that the other Party may seek an appropriate protective order and/or waive in writing receiving Party’s obligation not to disclose the confidential information.  The receiving Party further agrees that, if in the absence of a protective order or the receipt of a waiver hereunder, the receiving Party is nonetheless, based on the advice of its counsel, compelled to disclose all or part of the Confidential Information or be in breach of its obligations under law, or else stand liable for contempt or suffer other censure or penalty from any tribunal or governmental or similar authority or the aforementioned security exchange, the receiving Party may disclose such confidential information without liability hereunder; provided, however, that the receiving Party shall deliver to the other Party written notice of the confidential information to be disclosed as far in advance of its disclosure as is practicable,  So that the disclosing party may seek relief, if available.

29.4.The provisions of this Article 29 (CONFIDENTIALITY) will continue in effect for five (5) years after expiration or termination of this Agreement.

29.5.The Regents is free to release to the Inventors and senior administrators employed by The Regents the terms and conditions of this Agreement. If such release is made, then The Regents shall give notice of the confidential nature and shall request that the recipient not disclose such terms and conditions to others.

29.6.If a third party inquires whether a license to Regents’ Patent Rights is available, then The Regents may disclose the existence of this Agreement and the extent of the grant in Article 2 (GRANT) and Article 3 (SUBLICENSES) to such third party, but will not disclose the name of Licensee or any other negotiated terms or conditions of this Agreement to such third party, except where The Regents is required to release information under the California Public Records Act, a governmental audit requirement or other applicable law.

29.7.Licensee hereby grants permission for The Regents (including UCLA) to include Licensee’s name and a link to Licensee’s website annual reports and websites that showcase technology transfer-related stories as well as links to any publicly-available news stories about Licensee on such websites.

30. MISCELLANEOUS

30.1.The headings of the several sections are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement.

30.2.This Agreement is not binding upon the Parties until it has been signed below on behalf of each Party, in which event it becomes effective as of the date recited on page one.

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30.3.No amendment or modification of this Agreement will be valid or binding upon the Parties unless made in writing and signed by each Party.

30.4.This Agreement and Appendix A (REGENTS’ PATENT RIGHTS) embodies the entire understanding of the Parties and supersedes all previous communications, representations or understandings, either oral or written, between the parties relating to the subject matter hereof including the Exclusive Option Agreement between the Parties dated May 17, 2013 for UCLA Case No. 2013-454.

30.5.If any part of this Agreement is for any reason found to be unenforceable, all other parts nevertheless remain enforceable as long as a Party’s rights under this Agreement are not materially affected. In lieu of the unenforceable provision, the Parties will substitute or add as part of this Agreement a provision that will be as similar as possible in economic and business objectives as was intended by the unenforceable provision.

30.6.No provisions of this Agreement are intended or shall be construed to confer upon or give to any person or entity other than The Regents and the Licensee any rights, remedies or other benefits under, or by reason of, this Agreement.

30.7.In performing their respective duties under this Agreement, each of the Parties will be operating as an independent contractor. Nothing contained herein will in any way constitute any association, partnership, or joint venture between the Parties, or be construed to evidence the intention of the Parties to establish any such relationship. Neither Party will have the power to bind the other Party or incur obligations on the other Party’s behalf without the other Party’s prior written consent.

31. COUNTERPARTS AND EXECUTION

31.1.This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Delivery of executed copies of this Agreement by facsimile, Portable Document Format (PDF) or other electronic means will have the same legal validity as delivery of ink-signed original documents.

Both The Regents and Licensee have executed this Agreement in duplicate originals by their authorized officers on the dates written below:

FIBROCELL SCIENCE, INC.		THE REGENTS OF THE UNIVERSITY OF
		CALIFORNIA
By:	/s/ David Pernock	By:	/s/ Emily Loughran
	Signature		Signature
Name:	David Pernock	Name:	Emily Loughran
Title:	Chief Executive Officer	Title:	Director, Licensing
Date:	June 06, 2014	Date:	June 13, 2014

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APPENDIX A

REGENTS’ PATENT RIGHTS

1)UCLA CASE NO. ******: “Inducing In Vivo Osteogenesis using BMP2 Expressing Primary Human Adult Skin Cells”

Provisional Patent Application No. 61/746,025 entitled, “Inducing In Vivo Osteogeneis using BMP2 Expressing Primary Human Adult Skin Cells,” filed on December 26, 2012 (UCLA Case No. ******) by Drs.  ****** and ******, and assigned to The Regents.

EXPIRED. APPLICATION CLAIMING PRIORITY:

United States Patent Application No. 14/140,420 entitled, “Cellular Compositions for Tissue Engineering,” filed on December 24, 2013 (UCLA Case No. ******) by Drs. ****** and ******, and assigned to The Regents.

Patent Cooperation Treaty Application No. PCT/US13/77715 entitled, “Cellular Compositions for Tissue Engineering,” filed on December 24, 2013 (UCLA Case No. ******) by Drs. ****** and ******, and assigned to The Regents.

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APPENDIX B

ROYALTY STATEMENT

UC Control No.:	Product Name/Code(s)
Licensee Name:
Licensee Phone No.:
Licensee Fax No.:
Licensee Email Address:		Quarter Covered:

Product Name Number
of Units
Sold Unit Selling
Price
(US $) Gross
Sales
(US $) Final Sales
(US $) Net Sales
(US $) Royalty
Rate (%) Total Earned
Royalties (US
$)

Total Royalties Earned:

Less Minimum Annual Royalty:

Balance Due The REGENTS:

Prepared By:

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APPENDIX C

LICENSEE CONTACT INFORMATION

******

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EX-10.2

Exhibit 10.2

Portions of this exhibit have been omitted and filed separately with the Secretary of the Securities and Exchange Commission (the “Commission”) pursuant to an application for confidential treatment filed with the Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended.  Such portions are marked as indicated below.

EXCLUSIVE LICENSE AGREEMENT

BETWEEN

THE REGENTS OF THE UNIVERSITY OF CALIFORNIA

AND

FIBROCELL SCIENCE, INC

FOR

UCLA CASE NO. ******:

“Nucleoside Supplementation in HIPSC Culture Medium to Promote Genetic Stability”

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EXCLUSIVE LICENSE AGREEMENT

TABLE OF CONTENTS

ARTICLE		PAGE NUMBER
RECITALS		1
1.	DEFINITIONS	1
2.	GRANT	4
3.	SUBLICENSES	5
4.	FEES	6
5.	ROYALTIES	6
6.	DILIGENCE	8
7.	PATENT FILING, PROSECUTION AND MAINTENANCE	9
8.	PATENT INFRINGEMENT	11
9.	PROGRESS AND ROYALTY REPORTS	12
10.	BOOKS AND RECORDS	13
11.	LIFE OF THE AGREEMENT	13
12.	TERMINATION BY THE REGENTS	14
13.	TERMINATION BY LICENSEE	14
14.	DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION	14
15.	PATENT MARKING	14
16.	USE OF NAMES AND TRADEMARKS	15
17.	LIMITED WARRANTY	15
18.	INDEMNIFICATION	15
19.	LIMITATION OF LIABILITY	17
20.	NOTICES	17
21.	ASSIGNABILITY	18
22.	LATE PAYMENTS	19
23.	WAIVER	19
24.	FAILURE TO PERFORM	19
25.	GOVERNING LAWS	19
26.	GOVERNMENT APPROVAL OR REGISTRATION	19
27.	COMPLIANCE WITH LAWS	20
28.	FORCE MAJEURE	20
29.	CONFIDENTIALITY	20
30.	MISCELLANEOUS	22
31.	COUTERPARTS AND EXECUTION	22

APPENDIX A

APPENDIX B

APPENDIX C

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EXCLUSIVE LICENSE AGREEMENT

THIS EXCLUSIVE LICENSE AGREEMENT AND THE ATTACHED APPENDICES A, B, AND C (collectively, the “Agreement”) is made and is effective this 1st day of June, (the “Effective Date”), by and between THE REGENTS OF THE UNIVERSITY OF CALIFORNIA (“The Regents”), a California corporation having its corporate offices located at 1111 Franklin Street, Oakland, California 94607-5200, acting through The Office of Intellectual Property and Industry Sponsored Research of the University of California, Los Angeles, located at 11000 Kinross Avenue, Suite 200, Los Angeles, CA, 90095-1406, and FIBROCELL SCIENCE, INC. (“Licensee”), a Delaware corporation having a principal place of business at 405 Eagleview Blvd., Exton, PA, 19341.This Agreement refers to The Regents and Licensee collectively as the “Parties” and individually as a “Party.”

RECITALS

WHEREAS, a certain invention, generally characterized as

1)UCLA Case No. ******: “Nucleoside Supplementation in HIPSC Culture Medium to Promote Genetic Stability”

(the “Invention”) was made in the course of research at the University of California, Los Angeles by Drs. ****** and ****** (“Inventors”), and is claimed in Regents’ Patent Rights, as defined below;

WHEREAS, Drs. ****** and ******are employees of The Regents and as such are obligated to assign his right, title and interest in and to the Invention to The Regents;

WHEREAS, the Invention was developed under a sponsored research agreement with Licensee (Research Agreement No. ****** dated ******); and

WHEREAS, The Regents wishes that Regents’ Patent Rights be developed and utilized to the fullest extent so that the benefits can be enjoyed by the general public.

The Parties agree as follows:

1. DEFINITIONS

1.1.“Affiliate” means any corporation, company, partnership, joint venture or other entity that controls, is controlled by or is under common control with a Party to this Agreement. For purposes hereof, “control” means (a) in the case of corporate entities, direct or indirect ownership of at least fifty percent (50%) of the stock or shares entitled to vote for the election of directors; and (b) in the case of non-corporate entities, direct or indirect ownership of at least fifty percent (50%) of the equity interest with the power to direct the management and policies of such non-corporate entity.  In any jurisdiction where the applicable law does not permit foreign equity participation of at least fifty percent (50%), then “Affiliate” means any corporation, company, partnership, joint venture or other entity in which Licensee owns or controls, directly or indirectly, the maximum percentage of outstanding stock or voting rights that is permitted by such applicable law.

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1.2.“Combination Product” means any product that is either (a) a combination of a Licensed Product and another therapeutic product that is not a Licensed Product in a kit form and is intended for sale, transfer, lease or other disposition by Licensee or a Sublicensee or (b) is produced by combining the Licensed Product with another therapeutic product that is not a Licensed Product and is intended for sale, transfer, lease or other disposition by Licensee or a Sublicensee.

1.3.“Commercialization” has the meaning set forth in Paragraph 6.1 of this Agreement.

1.4.“Customer” means any third party that receives Licensed Products in exchange for consideration or purchases services that require the practice of Licensed Methods, provided however, that a Sublicensee or a Joint Venture shall be deemed a Customer only if it receives Licensed Products or Licensed Methods that are not intended for further sale, transfer, lease, exchange or other disposition.

1.5.“Field of Use” means any and all research and commercialization fields.

1.6.“Final Sale” means any sale, transfer, lease, exchange or other disposition or provision of a Licensed Product and/or a Licensed Method to a Customer by Licensee or its Affiliate (not any other Sublicensee).  A Final Sale will be deemed to have occurred upon the earliest to occur of the following (as applicable):  (a) the transfer of title to such Licensed Product and/or Licensed Method to a Customer, (b) the shipment of such Licensed Product to a Customer, (c) the provision of a Licensed Method to a Customer, (d) the provision of an invoice for such Licensed Product or Licensed Method to a Customer, or (e) payment by the Customer for Licensed Products or Licensed Methods.  Exchange of Licensed Products between Licensee and an Affiliate is not a Final Sale if the Licensed Product is intended for further sale, transfer, lease, exchange or other disposition, in which case the Final Sale will be deemed to have occurred upon payment for the sale, transfer, lease, exchange or other disposition or provision of Licensed Product by Licensee or its Affiliate to a Customer.  If Licensee or its Affiliate transfers Licensed Product at no cost solely for use in, or for purposes of, a clinical study, clinical trial, or as a free sample in product promotion, then such transfers will not be considered a Final Sale and no royalty will be owed hereunder.

1.7.“First Commercial Sale” means a bona fide transaction for which consideration is earned for the sale of any Licensed Product or the practice of a Licensed Method by Licensee or a Sublicensee, following approval of its marketing by the appropriate governmental agency for the country in which the sale is to be made.  When governmental approval is not required, “First Commercial Sale” means the first bona fide transaction for which consideration is earned for the sale of any Licensed Product or the practice of a Licensed Method by Licensee or a Sublicensee in that country.

1.8.“Joint Venture” means any separate entity established pursuant to a written agreement between a third party and Licensee and/or a Sublicensee, in which the separate entity manufactures, uses, purchases, sells or acquires Licensed Products from Licensee or a Sublicensee.

1.9.“Licensed Method” means any process, service, or method covered by a Valid Claim within Regents’ Patent Rights or whose use or practice would, absent the license granted under this Agreement, constitute an infringement, inducement of infringement or contributory infringement of any Valid Claim within Regents’ Patent Rights.

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1.10.“Licensed Product” means any article, composition, apparatus, substance, chemical, or any other material covered by a Valid Claim within Regents’ Patent Rights and whose manufacture, import use, offer for sale, or sale would, absent the license granted under this Agreement, constitute an infringement, inducement of infringement or contributory infringement of any Valid Claim within Regents’ Patent Rights.  This definition of Licensed Product also includes a service either used by Licensee or a Sublicensee or provided by Licensee or a Sublicensee to a Customer when such service requires the use of Licensed Product or performance of a Licensed Method.

1.11.“Minimum Annual Royalty” has the meaning set forth in Section 5.3 of this Agreement.

1.12.“Net Sales” means the total of the gross amount received (whether consisting of cash or any other forms of consideration) for all Final Sales, less the following deductions (to the extent included in and not already deducted from the gross amount invoiced or otherwise charged):sales, use, tariff, import/export duties or other excise taxes imposed on particular sales, and deductible value added taxes (“VAT”), that is, VAT not refunded, credits, or deducted by a governmental taxing authority; rebates paid or credited to Customers including managed care rebates and chargebacks; outbound transportation prepaid or allowed; and allowances or credits to Customers because of rejections or returns. Income taxes are not an allowed deduction under Net Sales. If a Sublicensee, development partner or Joint Venture is a Customer, then Licensee will pay royalties on Net Sales based on the total gross amount normally charged to other Customers in arm’s length transactions. Notwithstanding the foregoing, in the event a Licensed Product is sold as a Combination Product, Net Sales shall be calculated by multiplying the Net Sales of the Combination Product by the fraction A/(A+B), where A is the gross invoice price of the Licensed Product when sold separately in a country and B is the gross invoice price of the other product(s) included in the Combination Product when sold separately in such country.  In the event no such separate sales are made by Licensee or its Sublicensees, Net Sales of the Combination Product shall be calculated in a manner to be negotiated and agreed upon by the Parties, reasonably and in good faith, prior to any sale of such Combination Product, which shall be based upon the respective cost of goods sold of the therapeutic components of such Combination Product.

1.13.“Patent Action(s)”means the preparation, filing, prosecution and maintenance of patent applications and patents in Regents’ Patent Rights. Prosecution includes, but is not limited to, reexaminations, interferences, oppositions, and any other ex parte or inter partes matters originating in a patent office.

1.14.“Patent Costs” means all out-of-pocket costs incurred by The Regents for Patent Actions.

1.15.“Research Product” means a Licensed Product that is sold for production or manufacture of stem cells lines intended for internal research.

1.16.“Regents’ Patent Rights” means The Regents’ interest in any of the patent applications and patents listed in Appendix A attached to this Agreement and at least partially assigned or assignable to The Regents; any applications claiming priority thereto including divisionals, continuations and continuations-in-part (but only to the extent of claims that are entirely supported in the specification and entitled to the priority date of the parent application); any patents issuing on these applications including reissues, substitutions, and patent extensions; and any corresponding foreign patents, patent applications and supplemental protection certificates; all of which are automatically incorporated in and added to Appendix A and made a part of this Agreement.

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1.17.“Side Deal” means an arrangement, understanding, agreement, or transaction (collectively “Deals”) between the Licensee and a Sublicensee and/or its affiliates, which does not include the transfer of a sublicense under this Agreement.

1.18.“Sublicensee” means any person or entity (including any Affiliate or Joint Venture) to which any of the rights granted to Licensee hereunder are sublicensed.

1.19.“Sublicensing Income” means amounts received by Licensee or its Affiliates in consideration for a Sublicense or other agreement providing the right to negotiate or obtain a Sublicense. Sublicensing Income includes amounts received by Licensee or its Affiliates in consideration for the sublicensed Regents’ Patent Rights in the form of license issue fees, milestone payments (excluding (i) license issue or upfront fees received by Licensee under any of the Sublicenses described in Sections 4.2.a and 4.2.b and (ii) milestone payments received by Licensee upon achievement of any of the milestones set forth in Sections 4.2.c and 4.2.d) and royalties. Not included in the definition of Sublicensing Income is income received by Licensee as payment or reimbursement for research costs at fair market value applied to the licensed Invention and conducted by or for Licensee, including costs of materials, equipment or clinical testing, or any amount received by Licensee or its Affiliates that could be construed as uncollectible debt.

1.20.“Supplement” shall mean a Licensed Product comprising ****** used to supplement culture media to ameliorate human induced pluripotent stems cells (hIPSCs) deoxyribonucleotide triphosphate (dNTP) pool deficiency and reduce genomic instabilityinsuch hIPSCs.

1.21.“Therapeutic Product” means a stem cell line that is grown or maintained with the use of the Supplement, which stem cell line is intended for therapeutic use.

1.22.“Valid Claim” means (i) a claim of an issued patent that has not expired or been held unenforceable or invalid by a final judgment or decision of a court or other government agency of competent jurisdiction from which no appeal has been or can be taken, and which has not been admitted to be invalid or unenforceable through reissue, disclaimer or the like, or (ii) a claim of a pending patent application that has not been abandoned or finally rejected without the possibility of appeal or refiling or been pending for more than ******. For purposes of clarity, both (i) and (ii) are Valid Claims for purposes of this Agreement.

2. GRANT

2.1.Subject to the limitations set forth in this Agreement, The Regents hereby grants to Licensee an exclusive license (the “License”) under Regents’ Patent Rights, in jurisdictions where Regents’ Patent Rights exist, to make, have made, use, have used, sell, offer for sale import and otherwise commercially exploit Licensed Products and to practice Licensed Methods in the Field of Use. Licensee will not make, use, have made, sell, offer for sale, or import Licensed Products outside the Field of Use. For the avoidance of doubt, Affiliates and Joint Ventures have no rights hereunder unless granted a Sublicense.

2.2.The Regents expressly reserves the right to: (a) use Regents’ Patent Rights and associated technology for educational and research purposes, (b) publicly disclose results of such research, and (c) allow other nonprofit institutions to use Regents’ Patent Rights and associated technology for educational and research purposes; provided that in the case of Section 2.2(c), if The Regents will transfer tangible matters covered by any of Regents’ Patent Rights, then such

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transfer will be subject the execution of a written material transfer agreement that does not conflict with the rights granted to Licensee under this Agreement.

2.3.The Agreement will terminate immediately if Licensee files a claim including in any way the assertion that any portion of Regents’ Patent Rights is invalid or unenforceable where the filing is by Licensee, a third party on behalf of Licensee, or a third party at the written urging of, or with the assistance of, the Licensee.

3. SUBLICENSES

3.1.The Regents grants to Licensee the right to sublicense the rights granted to Licensee hereunder (“Sublicenses”). All Sublicenses will: (i) be issued in writing; (ii) include an express prohibition against issuing further sublicenses under any or all of Regents’ Patent Rights; and (iii) to the extent applicable include all of the rights of The Regents and require the performance of obligations due to The Regents contained in this Agreement. For the purposes of this Agreement, operations of Sublicensees are deemed to be the operations of Licensee, for which Licensee is responsible.

3.2.Licensee must pay to The Regents, as royalty, ****** of all Sublicensing Income. Licensee must pay such Sublicensing Income to The Regents on or before the following dates:

·February 28 (for Sublicensing Income received by Licensee on or before the last day of the calendar quarter ending December 31 of the prior year);

·May 31 (for Sublicensing Income received by Licensee on or before the last day of the calendar quarter ending March 31);

·August 31 (for Sublicensing Income received by Licensee on or before the last day of the calendar quarter ending June 30); and

·November 30 (for Sublicensing Income received by Licensee on or before the last day of the calendar quarter ending September 30).

3.3.Licensee must provide to The Regents a copy of each Sublicense within thirty (30) days of execution and is prohibited from entering into any Side Deal with a third party where such Side Deal intentionally dilutes, diverts, conceals or misrepresents the amount of consideration paid to the Licensee in consideration for a Sublicense.

3.4.If this Agreement is terminated for any reason, all outstanding Sublicenses not in default will be assigned by Licensee to The Regents. Prior to any such assignment such Sublicensees shall furnish to The Regents the completed licensee contact information form attached hereto as “APPENDIX C” and incorporated herein by this reference. The assigned Sublicenses will remain in full force and effect with The Regents as the licensor or sublicensor instead of Licensee, but the duties of The Regents under the assigned Sublicenses will not be greater than the duties of The Regents under this Agreement, and the rights of The Regents under the assigned Sublicenses will not be less than the rights of The Regents under this Agreement, including all financial consideration and other rights of The Regents.

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4. FEES

4.1.In partial consideration for the License, Licensee will pay to The Regents a license issue fee of ****** within thirty (30) days of the Effective Date. This fee is non- refundable and is not an advance against royalties.

4.2.For the first Licensed Product reaching any of the milestones indicated below, Licensee must make the following one-time payments (“Milestone Payments”) to The Regents within thirty (30) days of reaching such milestone. For purposes of clarity such Milestone Payments are due from Licensee irrespective of whether the associated milestone listed below was reached by Licensee itself or a third party acting on Licensee’s behalf or by a Sublicensee, Joint Venture or Affiliate.

4.2.a****** within ten (10) days of execution of a first Sublicense sublicensing the right to sell Licensed Product under this Agreement.

4.2.b****** within ten (10) days of execution of a second Sublicense sublicensing the right to sell Licensed Product under this Agreement.

4.2.c****** upon the First Commercial Sale of the first Licensed Product that is a Research Product in the United States.

4.2.d****** upon the First Commercial Sale of the first Licensed Product that is a Therapeutic Product  in the United States.

4.3.Licensee must pay to The Regents a license maintenance fee (“License Maintenance Fee”) of ****** beginning on the one-year anniversary date of the Effective Date of this Agreement and continuing annually on each anniversary date of the Effective Date until the anniversary year in which the First Commercial Sale occurs.  The maintenance fee will not be due and payable on any anniversary date of the Effective Date if on that date Licensee or a Sublicensee is commercially selling a Licensed Product. The License Maintenance Fees are non-refundable and are not an advance against royalties.

5. ROYALTIES

5.1.Licensee must pay to The Regents for sales by Licensee an earned royalty at the following rates of Net Sales of Licensed Products (“Earned Royalty”). This Earned Royalty will accrue until expiration or termination of this Agreement:

Licensed Product Sold In Stated Time Period	Percent (%) of Net Sales
Supplement	******	%
Therapeutic Product	******	%

5.2.Licensee must pay Earned Royalties owed to The Regents on a quarterly basis. Licensee must pay such Earned Royalties on or before the following dates:

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·February 28 (for any Final Sales that took place on or before the last day of the calendar quarter ending December 31 of the prior year);

·May 31 (for any Final Sales that took place on or before the last day of the calendar quarter ending March 31);

·August 31 (for any Final Sales that took place on or before the last day of the calendar quarter ending June 30); and

·November 30 (for any Final Sales that took place on or before the last day of the calendar quarter ending September 30).

5.3.Licensee must pay to The Regents a minimum annual royalty under Section 3.2 of ****** (referred to below as “Minimum Annual Royalty”) during each calendar year (measured relative to the calendar year in which there was a First Commercial Sale, and referred to below as “Calendar Years after FCS”) until expiration or termination of this Agreement.  Licensee must pay the Minimum Annual Royalty for a given Calendar Year after FCS to The Regents on or before February 28 of such Calendar Year after FCS. The Minimum Annual Royalty for a given Calendar Year after FCS will be credited against the royalty due under Section 3.2 for the calendar year in which such Minimum Annual Royalty was paid. By way of example, if First Commercial Sale took place on February 1, 2015, the first Calendar Year After FCS would be 2016 and the Minimum Annual Royalty would be due on or before February 28, 2016. Such Minimum Annual Royalty would be credited against the royalty due under Section 3.2 for 2016.  If the Agreement is terminated prior to expiration of the Agreement in a given calendar year, any payment due to the Regents for the Minimum Annual Royalty in any subsequent year will be waived and Licensee will only pay royalty under Section 3.2until any remaining inventories of Licensed Product are sold subject to the terms of this Agreement.

5.4.If Licensee is obligated to pay a non-Affiliate third party (other than The Regents) royalties on Net Sales (“Third Party Royalty”) in consideration for patent rights owned or controlled by such non- Affiliate third party without a license to which Licensee would infringe such third party patent rights in the manufacture, use, import, offer for sale, or sale of a Licensed Product, then Licensee will have the right, upon Licensee’s execution of a license with such third party for such third party patent rights, to credit ****** of any earned royalty payment made to such third party in any given year in consideration for such third party patent rights, against the Earned Royalty due The Regents under this Agreement, provided that:

(i)The sum of such Third Party Royalty rate and the Earned Royalty rate set forth in this Agreement is equal to, or greater than, ******.

(ii)Prior to reduction of any Earned Royalty due The Regents under this Agreement for a given calendar quarter, Licensee first provides written evidence to The Regents of Licensee’s royalty obligations to such third party and must thereafter provide written evidence of any payment made to such third party;

(iii)In no event shall royalties or other amounts due to The Regents under this Agreement in any reporting period be so reduced to less than fifty percent (50%) of the amount that would otherwise be due The Regents under this Agreement.

5.5.All monies due The Regents must be paid in United States funds. With respect to Sublicensing Income paid in a currency other than United States Dollars, the amount due The Regents will first be determined in the foreign currency received by Licensee and, second, converted into equivalent United States Funds by using the applicable conversion rates for buying and selling

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United States dollars for such foreign currency as published by Reuters on the final business day of the quarter in which such sales were made.

5.6.Any tax for the account of The Regents required to be withheld by Licensee under the laws of any foreign country must be promptly paid by Licensee for and on behalf of The Regents to the appropriate governmental authority. Licensee will use its best efforts to furnish The Regents with proof of payment of any tax. Licensee is responsible for all bank transfer charges. All payments made by Licensee in fulfillment of The Regents’ tax liability in any particular country will be credited against fees or royalties due The Regents for that country.

5.7.If at any time legal restrictions prevent the acquisition or prompt remittance of United States Dollars by Licensee with respect to any country where a Licensed Product is sold, Licensee shall pay royalties due to The Regents from Licensee’s other sources of United States Dollars.

5.8.If any patent or any claim included in Regents’ Patent Rights is held invalid or unenforceable in a final decision by a court of competent jurisdiction from which no appeal has or can be taken, all obligation to pay royalties based on that patent or claim or any claim patentably indistinct from it will cease as of the date of that final decision. Licensee will not, however, be relieved from paying any royalties that accrued before that decision or that is based on another of the Regents’ Patent Rights or claim of the Regents’ Patent Rights not involved in that decision.

5.9.If no Valid Claim has issued on The Regents’ Patent Rights after ****** from the earliest priority date to which The Regents’ Patent Rights are entitled, royalties and the portion of Sublicensing Income payable to University under this Agreement shall be reduced by ****** until such time as a Valid Claim so issues on The Regents Patent Rights.  Licensee shall not be entitled to a refund of amounts paid prior to the running of the aforementioned ****** period, and University shall not be entitled to any “catch up” payment in respect of amounts due during the period between the running of the aforementioned ****** period and the date on which a Valid Claim does issue on The Regents’ Patent Rights.

6. DILIGENCE

6.1.Upon execution of this Agreement, Licensee must earnestly and diligently (a) develop Licensed Products or Licensed Methods; (b) market Licensed Products and Licensed Methods to the extent they are adequately developed in accordance with Section 6.1(a); and (c) manufacture and sell Licensed Products and Licensed Methods in quantities sufficient to meet the market demands for them (all of the foregoing collectively “Commercialization”).  For purposes of clarity, the requirements under the foregoing subsection (b) and (c) shall continue to apply after a First Commercial Sale.

6.2.The Regents has the right and option to either terminate this Agreement or reduce Licensee’s exclusive license to a nonexclusive license if Licensee fails to perform any of the terms in Paragraph 6.1 or this Paragraph 6.2. This right, if exercised by The Regents, supersedes the rights granted in Article 2 (GRANT).

(a)******.

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(b)******.

(c)******.

(d)******.

Without limiting Licensee’s obligations under Paragraphs 6.1 and 6.2 of this Agreement, Licensee has the sole discretion for making all decisions as to how to commercialize any Licensed Product.

7. PATENT FILING, PROSECUTION AND MAINTENANCE

7.1.Patent Prosecution

7.1.aRegents’ Patent Rights will be held in the name of The Regents and obtained with counsel of The Regents’ choice. The Regents shall control all Patent Actions and all decisions with respect to Patent Actions but will consider any comments or suggestions by Licensee or its appointed counsel with respect to Patent Actions. The Regents is entitled to take action to preserve rights and minimize costs whether or not Licensee has commented, and will use reasonable efforts not to allow any Regents’ Patent Rights for which Licensee is licensed and is underwriting the costs of to lapse or become abandoned without Licensee’s written authorization under this Article 7, except for the filing of continuations, divisional, or the like that substitute for the lapsed application. The Regents shall have no requirement to file, prosecute, or maintain Regents’ Patent Rights if Licensee is not current with its Patent Cost obligations as set forth in this Article 7.

7.1.bThe Regents will provide Licensee with copies of all documentation related to prosecution of the Regent’s Patent Rights including each patent application, office action, response to office action, request for terminal disclaimer, and request for reissue or reexamination of any patent or patent application under Regents’ Patent Rights.

7.1.cAs long as the Licensee has paid Patent Prosecution Costs as provided for in this Article 7, The Regents will diligently prosecute and maintain the United States and foreign patents comprising the Regents’ Patent Rights using counsel of its choice.  The Regents’ counsel will take instructions only from The Regents, however, The Regents agree to consult in good faith with Licensee in respect to Licensee recommendations and requests concerning the patent prosecution (each recommendation or request a “Patent Prosecution Request”).  The Regents will provide the Licensee with copies of all relevant documentation so that Licensee will be informed of the continuing prosecution and Licensee may comment upon such documentation sufficiently in advance of any initial deadline for filing a response; provided that, if the Licensee has not commented upon such documentation in a reasonable time for The Regents to sufficiently consider the Licensee’s comments prior to a deadline with the relevant government patent office or if The Regents must act to preserve the Patent Rights, The Regents will be free to respond without consideration of the Licensee’s comments. If Licensee does not provide a Patent Prosecution Request in relation to filing a particular patent application by a non-extendible deadline in a particular jurisdiction, The Regents will have the right to file patent applications at its own expense in any territory which Licensee has not identified in written notice pursuant to this Paragraph 7.1 and such patent application(s) and

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patent(s) will not be part of Regents’ Patent Rights and therefore not subject to this Agreement, and Licensee will have no further rights or license to them.

7.2.Past Patent Costs

Licensee will bear all Patent Costs incurred prior to the term of this Agreement (“Past Patent Costs”) in an amount not to exceed ******. Licensee must send payment for such Past Patent Costs to The Regents within thirty (30) days of Licensee’s receipt of an invoice for these costs.

7.3.Ongoing Patent Costs

Licensee will bear all Patent Costs incurred during the term of this Agreement (“Ongoing Patent Costs”) and shall pay in advance The Regents’ patent counsel’s estimated costs for undertaking a Patent Action before The Regents authorizes its patent counsel to proceed (“Advanced Payment”).  Fees and expenses that are due to incidentals (for example photocopy charges or long distance phone charges) are not included within such estimate unless expressly so stated, nor is Licensee’s interaction with The Regents’ counsel such as by phone calls, e-mails, and in person meetings. The absence of this Advanced Payment will be considered an election not to secure the patent rights associated with the specific phase of patent prosecution in such territory, and such patent application(s) and patent(s) will not be part of Regents’ Patent Rights and therefore not subject to this Agreement and Licensee will have no further rights or license to them.

7.4.Termination of Patent Prosecution by Licensee

Licensee may terminate its obligations with respect to any or all of Regents’ Patent Rights by providing written notice to The Regents (“Patent Termination Notice”). Termination of Licensee’s obligations with respect to such patent application or patent will be effective three (3) months after receipt of such Patent Termination Notice by The Regents. The Regents will use reasonable efforts to curtail Patent Costs chargeable to Licensee under this Agreement after this Patent Termination Notice is received by The Regents. The Regents may continue prosecution or maintenance of these application(s) or patent(s) at its sole discretion and expense, and such application(s) and patent(s) will not be part of Regents’ Patent Rights and therefore not subject to this Agreement, and Licensee will have no rights or license to them.

7.5.Patent Extensions

7.5.aLicensee will apply for an extension of the term of any patent included within The Regents’ Patent Rights, if appropriate, under the Drug Price Competition and Patent Term Restoration Act of 1984 and/or European, Japanese and other foreign counterparts. Licensee shall prepare all documents and The Regents agrees to execute the documents and to take additional action as Licensee reasonably requests in connection therewith. Licensee will be liable for all costs relating to such application.

7.5.bIf either Party (in the case of The Regents, the licensing officer responsible for administration of this Agreement) receives notice pertaining to the infringement or potential infringement of any issued patent included with Regents’ Patent Rights under the Drug Price Competition and Patent Term Restoration Act of 1984 (and/or foreign counterparts of this law) then that Party shall within ten (10) days notify the other Party after receipt of such notice of infringement.

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8. PATENT INFRINGEMENT

8.1.In the event that The Regents (to the extent of the actual knowledge of the licensing professional responsible for the administration of this Agreement) or Licensee learns of infringement of potential commercial significance of any patent licensed under this Agreement, the knowledgeable Party will provide the other with (i) written notice of such infringement and (ii) evidence of such infringement available to it (the “Infringement Notice”). During the period in which, and in the jurisdiction where, Licensee has exclusive rights under this Agreement, neither The Regents nor Licensee will notify a third party (including the infringer) of infringement or put such third party on notice of the existence of any Regents’ Patent Rights without first obtaining the written consent of the other. If Licensee puts such infringer on notice of the existence of any Regents’ Patent Rights with respect to such infringement without first obtaining the written consent of The Regents and if a declaratory judgment action is filed by such infringer against The Regents, then Licensee’s right to initiate a suit against such infringer for infringement under Paragraph 8.2 below will terminate immediately without the obligation of The Regents to provide notice to Licensee. Both The Regents and Licensee will use their diligent efforts to cooperate with each other to terminate such infringement without litigation.

8.2.If infringing activity of potential commercial significance by the infringer has not been abated within ninety (90) days following the date the Infringement Notice takes effect, then Licensee may institute suit for patent infringement against the infringer. The Regents may voluntarily join such suit at its own expense, but may not thereafter commence suit against the infringer for the acts of infringement that are the subject of Licensee’s suit or any judgment rendered in the suit. If, in a suit initiated by Licensee, The Regents is involuntarily joined by a party other than Licensee, then Licensee will pay the reasonable and documented costs incurred by The Regents arising out of such suit, including but not limited to, reasonable and documented legal fees of counsel that The Regents selects and retains to represent it in the suit.

8.3.If, within one hundred and twenty (120) days following the date the Infringement Notice takes effect, infringing activity of potential commercial significance by the infringer has not been abated and if Licensee has not brought suit against the infringer, then The Regents may institute suit for patent infringement against the infringer; provided that before The Regents proceed with such suit, The Regents will consult in good faith with Licensee concerning the reason(s) that Licensee declined to file suit against the infringer and only proceed with the infringement suit if the infringer’s infringing product or service holds market share of ****** or more of the relevant market in the field of use.  If The Regents has the right to institute an infringement suit (as set forth in this Section 8.3) and institutes such a suit, then Licensee may not join such suit without The Regents’ consent and may not thereafter commence suit against the infringer for acts of infringement that are subject to The Regents’ suit or any judgment rendered in that suit.

8.4.Any recovery or settlement received in connection with any suit will first be shared by The Regents and Licensee equally to cover any litigation costs each incurred and next shall be paid to The Regents or Licensee to cover any litigation costs it incurred in excess of the litigation costs of the other. In any suit initiated by The Regents in compliance with this Agreement, any recovery in excess of litigation costs will belong to The Regents. The Regents will receive at least ****** of any recovery if The Regents is a party in the litigation.  The Regents and Licensee agree to be bound by all final and non-appealable determinations of patent infringement, validity and enforceability (but no other issue) resolved by any adjudicated judgment in a suit brought in compliance with this Article 8 (PATENT INFRINGEMENT).

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8.5.Any agreement made by Licensee for purposes of settling litigation or other dispute shall comply with the requirements of Article 3 (SUBLICENSES) of this Agreement.

8.6.Each Party will cooperate with the other in litigation proceedings instituted hereunder but at the expense of the Party who initiated the suit, unless such suit is being jointly prosecuted by the Parties.

8.7.Any litigation proceedings will be controlled by the Party bringing the suit, except that The Regents may be represented by counsel of its choice in any suit brought by Licensee.

9. PROGRESS AND REPORTS

9.1.Beginning January 31, 2015, and for the term of this Agreement, Licensee must submit to The Regents semiannual progress reports covering Licensee’s (and any Affiliates’, Joint Ventures’, and Sublicensees’) activities related to the development and testing of all Licensed Products and the obtaining of the governmental approvals necessary for marketing.

9.2.Each progress report must include all of the following for each semiannual period:

9.2.aSummary of work completed.

9.2.bKey scientific discoveries.

9.2.cSummary of work in progress.

9.2.dCurrent schedule of anticipated events or milestones.

9.2.eMarket plans for introduction of Licensed Products.

9.2.fAn updated listing of any and all Sublicenses granted by Licensee or any Sublicensees.

9.2.gThe names and addresses of all Sublicensees, and a current and valid phone number and e-mail address for a principal point of contact at each such Sublicensee who is responsible for administering the Sublicense.

9.3.After the grant of the first Sublicense, Licensee must submit quarterly reports to The Regents by February 28, May 31, August 31 and November 30 of each year (i.e., within sixty (60) days from the end of each calendar quarter). Each report must cover Sublicensing Income received by Licensee.

9.4.The Regents shall have the right to terminate this Agreement in accordance with Article 12 (TERMINATION BY THE REGENTS) if Licensee does not provide progress reports and reports in accordance with this Article 9.

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10. BOOKS AND RECORDS

10.1.Licensee must keep accurate books and records of all Licensed Products developed, manufactured, used or sold and all Sublicenses, collaboration agreements and joint venture agreements entered into by Licensee that involve Regents’ Patent Rights. Licensee must preserve these books and records for at least five (5) years from the date of the royalty payment to which they pertain. These books and records will be open to examination by representatives or agents of The Regents during regular office hours to determine their accuracy and assess Licensee’s compliance with the terms of this Agreement. Licensee will pay fees and expenses of these inspections if an underpayment of more than five percent (5%) of the total payments due The Regents within a given year under this Agreement is discovered or any material term of this Agreement is discovered to have been breached, otherwise The Regents will pay the fees and expenses of inspections. Payment owed by Licensee hereunder for underpayment of royalties will be due within thirty (30) days of the examination result and payment by Licensee for any examination costs incurred by The Regents will be due within thirty (30) days from the date of The Regents’ invoice.

11. LIFE OF THE AGREEMENT

11.1.Unless otherwise terminated by operation of law or by acts of the Parties in accordance with the terms of this Agreement, this Agreement is in force from the Effective Date recited on page one and remains in effect until the expiration or abandonment of the last-to-expire patent or last to-be-abandoned patent application in Regents’ Patent Rights..

11.2.Upon termination of this Agreement, Licensee will have no further right to make, have made, use or sell any Licensed Product except as provided in Article 14 (DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION).

11.3.Any expiration or termination of this Agreement will not affect the rights and obligations set forth in the following Articles:

Article 1	DEFINITIONS;
Paragraph 3.6	Survival of Sublicenses;
Article 10	BOOKS AND RECORDS;
Article 11	LIFE OF THE AGREEMENT;
Article 14	DISPOSITION OF LICENSED PRODUCTS ON HAND UPON TERMINATION;
Article 16	USE OF NAMES AND TRADEMARKS;
Article 17	LIMITED WARRANTY;
Article 18	INDEMNIFICATION;
Article 19	LIMITATION OF LIABILITY;
Article 24	FAILURE TO PERFORM;
Article 25	GOVERNING LAWS; and
Article 29	CONFIDENTIALITY.

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12. TERMINATION BY THE REGENTS

12.1.If Licensee violates or fails to perform any material term of this Agreement, then The Regents may give written notice of the default (“Notice of Default”) to Licensee. If Licensee does not repair the default within sixty (60) days after the effective date of the Notice of Default (“Period to Cure”), then The Regents has the right to terminate this Agreement and the License by a second written notice (“Notice of Termination”) to Licensee. If The Regents sends a Notice of Termination to Licensee, then this Agreement automatically terminates on the effective date of this notice. Termination does not relieve Licensee of its obligation to pay any monies owed on the Termination Effective Date, and does not impair any accrued right of The Regents.

13. TERMINATION BY LICENSEE

13.1.Licensee has the right at any time to terminate this Agreement in whole or with respect to any portion of Regents’ Patent Rights by giving written notice to The Regents. This notice of termination will be subject to Article 20 (NOTICES) and will be effective ninety (90) days after the effective date of the notice (“Termination Effective Date”).

13.2.Any termination in accordance with Paragraph 13.1 does not relieve Licensee of any obligation or liability accrued prior to termination. Nor does termination rescind anything done by Licensee or any payments made to The Regents prior to the effective date of termination. Termination does not affect in any manner any rights of The Regents arising under this Agreement prior to termination.

14. DISPOSITION OF LICENSED PRODUCTS
ON HAND UPON TERMINATION

14.1.Upon termination of this Agreement by Licensee, Licensee may continue to sell any previously made Licensed Products during the one hundred eighty (180) days following the Termination Effective Date.

14.2.Licensee must submit reports on the sale of Licensed Products allowed under this Article 14 in accordance with Article 9 (PROGRESS AND REPORTS) and must pay The Reagents the portion of the Sublicensing Income received by Licensee, as specified in Paragraph 3.2, in respect of such sales.

14.3.Except as set forth in this Article 14, Licensee will not otherwise make, sell, offer for sale, or import Licensed Products after termination of this Agreement by Licensee or The Regents.

15. PATENT MARKING

15.1.Licensee must mark all Licensed Products made, used or sold under the terms of this Agreement, or their containers, in accordance with the applicable patent marking laws. Licensee shall be responsible for all monetary and legal liabilities arising from or caused by (i) failure to abide by applicable patent marking laws and (ii) any type of incorrect or improper patent marking.

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16. USE OF NAMES AND TRADEMARKS

16.1.Each Party will not use any name, trade name, trademark or other designation of the other Party or its employees (including contraction, abbreviation or simulation of any of the foregoing) in advertising, publicity or other promotional activity without the consent of the Party. Unless required by law, Licensee is expressly prohibited from using the name “The Regents of the University of California” or the name of any campus of the University of California in advertising, publicity, or other promotional activity, without written permission of The Regents.

17. LIMITED WARRANTY

17.1.The Regents warrants that it has the lawful right to grant this license to Licensee and does not violate or breach any agreement with any third party by entering into this Agreement and granting the rights granted by this Agreement and to the extent of the actual knowledge of the licensing professional responsible for administration of this Agreement as of the Effective Date, is the sole and exclusive owner of Regents’ Patent Rights set forth in clause (i) of the definition of Regents’ Patent Rights.

17.2.This License and the associated Invention are provided WITHOUT WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER WARRANTY, EXPRESS OR IMPLIED. THE REGENTS MAKES NO REPRESENTATION OR WARRANTY THAT ANY LICENSED PRODUCT WILL NOT INFRINGE ANY PATENT OR OTHER PROPRIETARY RIGHT.

17.3.Nothing in this Agreement will be construed as:

17.3.aA warranty or representation by The Regents as to the validity or scope of any Regents’ Patent Rights.

17.3.bA warranty or representation that anything made, used, sold or otherwise disposed of under any license granted in this Agreement is or will be free from infringement of patents, copyrights, trademarks or any other forms of intellectual property rights or tangible property rights of third parties.

17.3.cObligating The Regents to bring or prosecute actions or suits against third parties for patent, copyright or trademark infringement except as provided in Article 8 (PATENT INFRINGEMENT).

17.3.dConferring by implication, estoppel or otherwise any license or rights under any patents of The Regents other than Regents’ Patent Rights as defined herein, regardless of whether such patents are dominant or subordinate to Regents’ Patent Rights.

17.3.eObligating The Regents to furnish any know-how not provided in Regents’ Patent Rights.

18. INDEMNIFICATION

18.1.To the maximum extent permitted by law, including California Civil Code Sec. 2773, Licensee will, and will require its Sublicensees to, indemnify, hold harmless and defend

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The Regents, The Regents’ officers, employees, and agents, the sponsors of the research that led to the Invention, the inventors of the patents and patent applications in Regents’ Patent Rights and their respective employers (the “Indemnitees”) from and against any and all liability, claims, suits, losses, damages, costs, fees, and expenses(the “Claims”) arising out of Licensee’s activities or exercise of obligations under this Agreement, except for any of those Claims arising from The Regents’ own breach of contract, representation, covenant, or warranty.  Indemnification includes but is not limited to products liability. If The Regents make a reasonable determination that there will be a conflict of interest or it will not otherwise be adequately represented by counsel chosen by Licensee to defend The Regents in accordance with this Paragraph 18.1, then The Regents may retain counsel of its choice to represent it and Licensee will pay all documented expenses for such representation, provided that, if The Regents believes it will not be adequately represented, The Regents will notify the Licensee in writing of the basis of its belief.   The obligations of this Paragraph 18.1 shall be expressly contingent on: (a) an Indemnitee giving Licensee prompt written notice of the applicable Claim; (b) the Indemnitees allowing Licensee to control the investigation, defense and settlement of the Claim with counsel selected by Licensee and reasonably acceptable to The Regents; and (c) the indemnitees reasonably cooperating with Licensee’s investigation, defense and settlement of the Claim.  Licensee shall have no liability or obligation in respect of any settlement of any Claim entered into by any indemnitee without Licensee’s consent. Licensee may not admit liability or wrongdoing on the part of The Regents without The Regents’ prior express written consent. Licensee shall keep The Regents informed on a current basis of its defense of any claims under this Article 18.

18.2.Licensee, at its sole cost and expense, must insure its activities in connection with the work under this Agreement and obtain, keep in force and maintain Commercial Form General Liability Insurance (contractual liability included) with limits as follows:

18.2.a Each occurrence	$	5,000,000.
18.2.b Products/completed operations aggregate	$	10,000,000.
18.2.c Personal and advertising injury	$	5,000,000.
18.2.d General aggregate	$	10,000,000.

18.3.If the above insurance is written on a claims-made form, it shall continue for three (3) years following termination or expiration of this Agreement. The insurance shall have a retroactive date of placement prior to or coinciding with the Effective Date of this Agreement.

18.4.Licensee will obtain, keep in force and maintain Worker’s Compensation Insurance as legally required in the jurisdiction in which Licensee is doing business.

18.5.Licensee expressly understands, however, that the coverages and limits in Paragraph 18.2 do not in any way limit Licensee’s liability or indemnification obligations. Licensee’s insurance must:

18.5.aProvide for thirty (30) day advance written notice to The Regents of any modification.

18.5.bState that The Regents of the University of California is endorsed as an additional insured under the coverages listed in Paragraph 18.2.

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18.5.cInclude a provision that the coverages will be primary and will not participate with nor will be excess over any valid and collective insurance or program of self-insurance carried or maintained by The Regents.

18.6.Licensee must furnish The Regents with valid certificates of insurance evidencing compliance with all requirements of this Agreement naming “The Regents of the University of California” as an additional insured. Licensee must furnish the certificates of insurance within thirty (30) days of the execution of the Agreement and once per year thereafter for the duration of this Agreement. The Regents has to issue a Notice of Default in accordance with Article 12 (TERMINATION BY THE REGENTS) should Licensee fail to provide the certificates of insurance.

19. LIMITATION OF LIABILITY

19.1.THE REGENTS WILL NOT BE LIABLE FOR ANY LOST PROFITS, COSTS OF PROCURING SUBSTITUTE GOODS OR SERVICES, LOST BUSINESS, ENHANCED DAMAGES FOR INTELLECTUAL PROPERTY INFRINGEMENT OR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, PUNITIVE OR OTHER SPECIAL DAMAGES SUFFERED BY LICENSEE, SUBLICENSEES, JOINT VENTURES, AFFILIATES OR DEVELOPMENT PARTNERS ARISING OUT OF OR RELATED TO THIS AGREEMENT FOR ALL CAUSES OF ACTION OF ANY KIND (INCLUDING TORT, CONTRACT, NEGLIGENCE, STRICT LIABILITY AND BREACH OF WARRANTY) EVEN IF THE REGENTS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE REGENTS WILL NOT BE LIABLE FOR ANY DIRECT DAMAGES SUFFERED BY LICENSEE, SUBLICENSEES, JOINT VENTURES, OR AFFILIATES ARISING OUT OF OR RELATED TO PATENT RIGHTS TO THE EXTENT ASSIGNED OR LICENSED BY THE REGENTS’ INVENTORS TO THIRD PARTIES.

20. NOTICES

20.1.Any notice, progress report, report or payment (except for Advanced Payments due under this Agreement) required to be given to either Party must be sent to the respective address given below and is effective: (a) on the date of delivery if delivered in person, (b) five (5) days after mailing if mailed by first-class certified mail, postage paid, or (c) on the next business day if sent by overnight delivery. Either Party may change its designated address by written notice.

For Licensee:Fibrocell Science, Inc.

405 Eagleview Blvd

Exton, PA 19341

Attn: Chief Financial Officer

For The Regents:The Regents of the University of California

University of California, Los Angeles

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Office of Intellectual Property 11000

Kinross Avenue, Suite 200

Los Angeles, CA 90095-1406

Attn: Director of Licensing

All Advanced Payments due under this Agreement shall be sent via wire transfer as follows:

******

20.2.Licensee shall furnish to The Regents the completed licensee contact information form attached hereto as “APPENDIX C” concurrent to execution of the Agreement and incorporated herein by this reference, showing:

20.2.aThe Progress Reports Contact (i.e. the contact responsible for ensuring that such progress reports are submitted to The Regents);

20.2.bThe Patent Prosecution Contact to whom patent prosecution correspondence should be sent to; and

20.2.cThe Financial Contact (i.e. the contact responsible for ensuring that payments are made under this Agreement to The Regents).

21. ASSIGNABILITY

21.1.Consent to Assign

This Agreement is binding upon and inures to the benefit of The Regents, its successors and assignees. This Agreement is personal to Licensee and assignable by Licensee only with the prior written consent of The Regents. The consent of The Regents will not be required if the assignment of this Agreement is in conjunction with the transfer of all or substantially all of the business of Licensee to which this license relates to either (a) a non-Affiliate third party or (b) an Affiliate.

Conditions of Assignment

No later than thirty (30) days prior to any assignment of this Agreement all of the following terms and conditions shall be met and if they are not then this Agreement and any assignment thereof will be considered null and void with no further notice from The Regents.

(i)Licensee shall inform The Regents in writing of the identity of the proposed acquirer or successor entity and shall provide updated contact information in writing to The Regents for such acquirer or successor entity by updating and submitting in writing to The Regents Appendix C of this Agreement; and

(ii)If the successor will not be bound to this Agreement by operation of law, the proposed acquirer or successor entity shall agree in writing to be bound by all the terms and

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conditions of this Agreement as if such acquirer or successor entity were the original Licensee and a copy of such written agreement shall be provided to The Regents by Licensee or the proposed acquirer or successor entity.

22. LATE PAYMENTS

22.1.For each payment or fee not received by The Regents when due, Licensee must pay to The Regents a simple interest charge of Ten Percent (10%) per annum to be calculated from the date payment was due until it was actually received by The Regents. For purposes of clarity, this Article 22 (LATE PAYMENTS) does not limit any rights of The Regents under this Agreement arising from the failure by Licensee to make such payments when due.

23. WAIVER

23.1.The waiver of any breach of any term of this Agreement does not waive any other breach of that or any other term.

24. FAILURE TO PERFORM

24.1.If either Party takes legal action against the other because of a failure of performance due under this Agreement, then the prevailing Party is entitled to reasonable attorney’s fees in addition to costs and necessary disbursements.

25. GOVERNING LAW

25.1.THIS AGREEMENT IS TO BE INTERPRETED AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, but the scope and validity of any patent or patent application will be governed by the applicable laws of the country of the patent or patent application.

26. GOVERNMENT APPROVAL OR REGISTRATION

26.1.If this Agreement or any associated transaction is required by the law of any nation to be either approved or registered with any governmental agency, Licensee will assume all legal obligations to do so. Licensee will notify The Regents if it becomes aware that this Agreement is subject to a United States or foreign government reporting or approval requirement. Licensee will make all necessary filings and pay all costs including fees, penalties, and all other out-of-pocket costs associated with such reporting or approval process.

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27. COMPLIANCE WITH LAWS

27.1.Licensee will comply with all applicable laws and regulations in performing its obligations hereunder and in its use, manufacture, offer for sale, sale or import of Licensed Products or practice of Licensed Methods, including, but not limited to, obtaining and maintaining all necessary governmental approvals for the commercialization of Licensed Products and Licensed Methods. Licensee will observe all applicable United States and foreign laws with respect to the transfer of Licensed Products and related technical data and the provision of services using Licensed Methods to foreign countries, including and without limitation, the International Traffic in Arms Regulations (ITAR) and the Export Administration Regulations. Licensee will manufacture Licensed Products and practice the Licensed Methods in compliance with all applicable government importation laws and regulations of a country into which Licensed Products are imported.

28. FORCE MAJEURE

28.1.Except for Licensee’s obligation to make any payments to The Regents hereunder, the Parties shall not be responsible for any failure to perform due to the occurrence of any events beyond their reasonable control that render their performance impossible or onerous, including, but not limited to: accidents (environment, toxic spill, etc.); acts of God; biological or nuclear incidents; casualties; earthquakes; fires; floods; governmental acts; orders or restrictions; inability to obtain suitable and sufficient labor, transportation, fuel and materials; local, national or state emergency; power failure and power outages; acts of terrorism; strike; and war.

28.2.Either Party to this Agreement, however, will have the right to terminate this Agreement upon thirty (30) days’ prior written notice if either Party is unable to fulfill its obligations under this Agreement due to any of the causes specified in Paragraph 29.1 for a period of one (1) year.

29. CONFIDENTIALITY

29.1.If either Party discloses confidential information to the other Party, the disclosing Party will designate this information as confidential by appropriate legend or instruction and the receiving Party will:

29.1.aUse the same degree of care to maintain the secrecy of the confidential information as it uses to maintain the secrecy of its own information of like kind.

29.1.bUse the confidential information only to accomplish the purposes of this Agreement or for audit or management purposes.

29.1.cEnsure that any employees, customers, distributors and other agents to whom the confidential information is disclosed are bound to it by similar obligations of confidence and to make such disclosure only as required to accomplish the purposes of this Agreement.

29.2.Neither Party will have any confidentiality obligation with respect to the confidential information belonging to or disclosed by the other Party that:

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29.2.athe receiving Party can demonstrate by written records was previously known to it under no obligation of confidentiality;

29.2.bthe receiving Party lawfully obtained from sources under no obligation of confidentiality; and

29.2.cis or becomes publicly available other than through an act or omission of the receiving Party or any of its employees.

29.3.In the event a receiving Party is requested by oral questions, interrogatories, requests for information or documents, subpoena, civil investigate demand or similar process or is required by law (including the California Public Records Act) or the rules of any stock exchange on which receiving Party’s securities are traded to disclose any part of the confidential information, the receiving Party shall notify the other Party promptly of such request(s) and requirement(s), and (if applicable) the documents requested thereby, so that the other Party may seek an appropriate protective order and/or waive in writing receiving Party’s obligation not to disclose the confidential information.  The receiving Party further agrees that, if in the absence of a protective order or the receipt of a waiver hereunder, the receiving Party is nonetheless, based on the advice of its counsel, compelled to disclose all or part of the Confidential Information or be in breach of its obligations under law, or else stand liable for contempt or suffer other censure or penalty from any tribunal or governmental or similar authority or the aforementioned security exchange, the receiving Party may disclose such confidential information without liability hereunder; provided, however, that the receiving Party shall deliver to the other Party written notice of the confidential information to be disclosed as far in advance of its disclosure as is practicable, So that the disclosing party may seek relief, if available.

29.4.The provisions of this Article 29 (CONFIDENTIALITY) will continue in effect for five (5) years after expiration or termination of this Agreement.

29.5.The Regents is free to release to the Inventors and senior administrators employed by The Regents the terms and conditions of this Agreement. If such release is made, then The Regents shall give notice of the confidential nature and shall request that the recipient not disclose such terms and conditions to others.

29.6.If a third party inquires whether a license to Regents’ Patent Rights is available, then The Regents may disclose the existence of this Agreement and the extent of the grant in Article 2 (GRANT) and Article 3 (SUBLICENSES) to such third party, but will not disclose the name of Licensee or any other negotiated terms or conditions of this Agreement to such third party, except where The Regents is required to release information under the California Public Records Act, a governmental audit requirement or other applicable law.

29.7.Licensee hereby grants permission for The Regents (including UCLA) to include Licensee’s name and a link to Licensee’s website annual reports and websites that showcase technology transfer-related stories as well as links to any publicly-available news stories about Licensee on such websites.

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30. MISCELLANEOUS

30.1.The headings of the several sections are inserted for convenience of reference only and are not intended to be a part of, or to affect the meaning or interpretation of, this Agreement.

30.2.This Agreement is not binding upon the Parties until it has been signed below on behalf of each Party, in which event it becomes effective as of the date recited on page one.

30.3.No amendment or modification of this Agreement will be valid or binding upon the Parties unless made in writing and signed by each Party.

30.4.This Agreement and Appendix A (REGENTS’ PATENT RIGHTS) embodies the entire understanding of the Parties and supersedes all previous communications, representations or understandings, either oral or written, between the parties relating to the subject matter hereof.

30.5.If any part of this Agreement is for any reason found to be unenforceable, all other parts nevertheless remain enforceable as long as a Party’s rights under this Agreement are not materially affected. In lieu of the unenforceable provision, the Parties will substitute or add as part of this Agreement a provision that will be as similar as possible in economic and business objectives as was intended by the unenforceable provision.

30.6.No provisions of this Agreement are intended or shall be construed to confer upon or give to any person or entity other than The Regents and the Licensee any rights, remedies or other benefits under, or by reason of, this Agreement.

30.7.In performing their respective duties under this Agreement, each of the Parties will be operating as an independent contractor. Nothing contained herein will in any way constitute any association, partnership, or joint venture between the Parties, or be construed to evidence the intention of the Parties to establish any such relationship. Neither Party will have the power to bind the other Party or incur obligations on the other Party’s behalf without the other Party’s prior written consent.

31. COUNTERPARTS AND EXECUTION

31.1.This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. Delivery of executed copies of this Agreement by facsimile, Portable Document Format (PDF) or other electronic means will have the same legal validity as delivery of ink-signed original documents.

(SIGNATURE PAGE TO FOLLOW)

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Both The Regents and Licensee have executed this Agreement in duplicate originals by their authorized officers on the dates written below:

FIBROCELL SCIENCE, INC.			THE REGENTS OF THE UNIVERSITY OF
			CALIFORNIA
By:	/s/ David Pernock		By:	/s/ Emily Loughran
Signature			Signature
Name:		David Pernock	Name:		Emily Loughran
Title:		Chief Executive Officer	Title:		Director, Licensing
Date:		June 06, 2014	Date:		June 13, 2014

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APPENDIX A

REGENTS’ PATENT RIGHTS

1)UCLA CASE NO. ******: “Nucleoside Supplementation in HIPSC Culture Medium to Promote Genetic Stability”

Provisional Patent Application No. 61/891,846 entitled, “Nucleoside Supplementation In Stem Cell Culture Medium To Promote Genetic Stability,” filed on October 16, 2013 (UCLA Case No. ******) by Drs. ****** and ******, and assigned to The Regents.

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APPENDIX B

[INTENTIONALLY DELETED]

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APPENDIX C

LICENSEE CONTACT INFORMATION

******

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EX-31.1

Exhibit 31.1

OFFICER’S CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, David Pernock, certify that:

1.  I have reviewed this Quarterly Report on Form 10-Q 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 fact necessary to make the statements made, in light of the circumstances under which such statements were made not misleading with respect 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 all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this 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 Act Rules 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 under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known 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 be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation 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 conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2014
By:	/s/ David Pernock
David Pernock
Chief Executive Officer

EX-31.2

Exhibit 31.2

OFFICER’S CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Gregory Weaver, certify that:

1.  I have reviewed this Quarterly Report on Form 10-Q 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 fact necessary to make the statements made, in light of the circumstances under which such statements were made not misleading with respect 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 all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this 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 Act Rules 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 under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known 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 be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation 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 conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2014
By:	/s/ Gregory Weaver
Gregory Weaver
SVP and Chief Financial Officer

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014 of Fibrocell Science, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Pernock, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

·The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C 78m or 78o(d)); and

·The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 11, 2014
By:	/s/ David Pernock
David Pernock
Chief Executive Officer

A signed original of this written statement required by Section 906 has been provided to Fibrocell Science, Inc. and will be retained by Fibrocell Science, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2014 of Fibrocell Science, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gregory Weaver, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:

·The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C 78m or 78o(d)); and

·The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 11, 2014
By:	/s/ Gregory Weaver
Gregory Weaver
SVP and Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to Fibrocell Science, Inc. and will be retained by Fibrocell Science, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.

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Equity (Details) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Equity
Preferred stock, authorized (in shares)	5,000,000	5,000,000
Preferred stock, issued (in shares)	0	0
Preferred stock, outstanding (in shares)	0	0
Issuance of common stock	$ 5,154
Intrexon Corporation
Equity
Issuance of common stock (in shares)	1,024,590
Issuance price of shares issued (in dollars per share)	$ 5.03
Issuance of common stock	$ 5,200

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Share-Based Compensation (Details)				6 Months Ended
	Jun. 30, 2014	Dec. 31, 2013	Jun. 30, 2014 The Plan Maximum	Jun. 30, 2014 The Plan Options	Jun. 30, 2014 The Plan Options Maximum	Jun. 30, 2014 Equity incentive outside of the Plan Options
Equity-based compensation
Number of shares allowed for issuance			5,600,000
Options issued (in shares)	2,397,717	2,068,720				206,000
Terms of options					10 years
Vesting percentage per year				25.00%
Vesting period				4 years
Options available for grant (in shares)				3,384,286

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Basis of Presentation (Details) (USD $) In Millions, unless otherwise specified	1 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended	3 Months Ended	6 Months Ended
	Apr. 30, 2013	Jun. 30, 2014	Jun. 30, 2014	Jun. 30, 2014 Research and development	Jun. 30, 2014 Research and development	Jun. 30, 2013 Adjustment Cost of sales	Jun. 30, 2013 Adjustment Cost of sales	Jun. 30, 2013 Adjustment Research and development	Jun. 30, 2013 Adjustment Research and development	Jun. 30, 2013 Adjustment Selling, General and Administrative Expenses	Jun. 30, 2013 Adjustment Selling, General and Administrative Expenses
Finite-lived intangibles
Amortization of Intangible Assets				$ 0.1	$ 0.3	$ (0.1)	$ (0.3)	$ 0.1	$ 0.3
FDA License Fees
FDA license fees		$ 0.2	$ 0.3					$ 0.2	$ 0.3	$ (0.2)	$ (0.3)
Stockholders equity reverse stock split ratio	0.04

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Loss Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Loss per share - basic:
Numerator for basic loss per share	$ (2,257)	$ (14,637)	$ (16,266)	$ (19,207)
Denominator for basic loss per share	40,856,815	23,260,802	40,720,958	26,230,358
Basic loss per common share (in dollars per share)	$ (0.06)	$ (0.63)	$ (0.40)	$ (0.73)
Loss per share - diluted:
Numerator for diluted loss per share	(2,257)	(14,637)	(16,266)	(19,207)
Add back: Fair value of "in the money" warrants outstanding	(1,284)		(1,284)	(315)
Net loss attributable to common share	$ (3,541)	$ (14,637)	$ (17,550)	$ (19,522)
Denominator for basic loss per share	40,856,815	23,260,802	40,720,958	26,230,358
Plus: Incremental shares underlying "in the money" warrants outstanding (in shares)	394,071		197,035	207,459
Denominator for diluted loss per share	41,250,886	23,260,802	40,917,993	26,437,817
Diluted net loss per common share (in dollars per share)	$ (0.09)	$ (0.63)	$ (0.43)	$ (0.74)

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2014

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 3. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and notes.  In addition, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows.  Actual results may differ materially from those estimates.

Cost of Sales

Cost of sales includes the costs related to the processing of cells for LAVIV®, including direct and indirect costs.  Beginning in 2014, cost of sales is accounted for using a standard cost system which allocates the direct costs associated with our manufacturing, facility, quality control, and quality assurance operations as well as overhead costs.  The principal reason for the relatively small level of revenue as compared to the cost of sales is that we changed corporate strategy in 2013 to de-emphasize sales of azficel-T into the aesthetic markets, and transitioned our business strategy to focus on high-value therapeutic applications for treatment of unmet medical conditions of the skin and connective tissue.

Research and Development Expenses

Research and development costs are expensed as incurred and include salaries and benefits, costs paid to third party contractors to perform research, conduct clinical trials, develop and manufacture drug materials and delivery devices, and a portion of facilities cost.  Research and development costs also include costs to develop manufacturing, cell collection and logistical process improvements.

Clinical trial costs are a significant component of research and development expenses and include costs associated with third party contractors.  Invoicing from third party contractors for services performed can lag several months.  The Company accrues 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.

Property and Equipment

Property and equipment is carried at acquisition cost less accumulated depreciation.  Depreciation is computed on a straight-line basis over the estimated useful life of the asset.  The cost of repairs and maintenance is charged to expense as incurred.  As of December 31, 2013, the useful life for all property and equipment was three years, except for leasehold improvements which were depreciated over the remaining lease term or the life of the asset, whichever was shorter.  In the first quarter of 2014, the Company adjusted its useful lives to reflect the expected consumption of the economic benefit of these assets as noted in the following table:

Property and equipment category	Useful life
Laboratory equipment	6 years
Computer equipment and software	3 years
Furniture and fixtures	10 years
Leasehold improvements	Lesser of remaining lease term or life of asset

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) ASC 250 Accounting Changes and Error Corrections, the Company accounted for this change in useful lives as a change in estimate, with prospective application only.  The impact of this change in estimate on depreciation expense for the three and six months ended June 30, 2014 was immaterial to the results on the Consolidated Statements of Operations.

Intangible Assets

Intangible assets are research and development assets related to the Company’s primary study on azficel-T that was recognized upon emergence from bankruptcy.  Azficel-T has three current or target indications: the Company’s commercial product, LAVIV®, a clinical development program for restrictive burn scarring and a clinical development program for vocal cord scarring.  Effective January 1, 2012, the Company launched LAVIV® and as a result, the research and development intangible assets related to the Company’s primary study were considered to be finite-lived intangible assets and are being amortized over 12 years.

Finite-lived intangible assets are recorded at cost, net of accumulated amortization and, if applicable, impairment charges.  Amortization of finite-lived intangible assets is provided over their estimated useful lives on a straight-line basis.  In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 360-10-35 Impairment or Disposal of Long-Lived Assets, the Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  There was no impairment expense recognized for either the three or six months ended June 30, 2014 or 2013.

Income Taxes

Income taxes are recorded in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which provides for reporting of amounts that are currently payable and also for deferred taxes using an asset and liability approach.  The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740.  When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized.  The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2013 and June 30, 2014, the Company did not have any uncertain tax positions.

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” under ASC Topic 606 which supersedes the current revenue recognition requirements under ASC Topic 605, “Revenue Recognition”.  The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.  It also provides a five step approach to achieve this principle.  For public entities, the new guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  Early application is not permitted.  Based on the Company’s current financial operations, the Company anticipates the potential impact of ASU No. 2014-09 to be immaterial to its financial statements.

Subsequent Events

The Company evaluates all subsequent events, through the date the consolidated financial statements are issued, to determine if there are any events that require disclosure.  No such events have been identified through the date of this filing.

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Warrants (Details) (USD $)	Jun. 30, 2014	Dec. 31, 2013
Warrants
Warrants issued to purchase common stock	6,033,050	6,033,050
Issued in March 2010 and Preferred Stock offerings
Warrants
Warrants issued to purchase common stock	2,640,534	2,640,534
Warrant Exercise Price (in dollars per share)	$ 6.25
Issued in Preferred Stock offerings
Warrants
Warrants issued to purchase common stock	76,120	76,120
Warrant Exercise Price (in dollars per share)	$ 2.50
Issued in June 2011 financing
Warrants
Warrants issued to purchase common stock	6,113	6,113
Warrant Exercise Price (in dollars per share)	$ 22.50
Issued in August 2011 financing
Warrants
Warrants issued to purchase common stock	565,759	565,759
Warrant Exercise Price (in dollars per share)	$ 18.75
Issued to placement agents in August 2011 financing
Warrants
Warrants issued to purchase common stock	50,123	50,123
Warrant Exercise Price (in dollars per share)	$ 13.64
Issued with Convertible Notes
Warrants
Warrants issued to purchase common stock	1,125,578	1,125,578
Warrant Exercise Price (in dollars per share)	$ 2.50
Issued in Series E Preferred Stock offering
Warrants
Warrants issued to purchase common stock	1,568,823	1,568,823
Warrant Exercise Price (in dollars per share)	$ 7.50

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Inventory (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Inventory
Raw materials	$ 383	$ 511
Work-in-process	93	86
Inventory	$ 476	$ 597

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Warrants (Details 2) (USD $) In Millions, except Share data in Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Warrants
Warrants exercised			0
Cancellation of Warrants			0
Warrants | Level 3
Fair value assumptions
Change in estimated fair value resulted in non-cash expense (income)	$ (4.0)	$ 8.8	$ (1.0)	$ 7.5
Weighted average remaining expected life			3 years	3 years 7 months 6 days
Interest rate (as a percent)			0.90%	1.00%
Volatility (as a percent)			73.00%	64.00%

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Fair Value Measurements (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Liabilities
Amount transferred from Level 1 to Level 2	$ 0	$ 0
Amount transferred from Level 2 to Level 1	0	0
Amount transferred from Level 1 to Level 2	0	0
Amount transferred from Level 2 to Level 1	0	0
Amount transferred into Level 3	0	0
Amount transferred out of Level 3	0	0
Amount transferred into Level 3	0	0
Amount transferred out of Level 3	0	0
Recurring | Measured at fair value
Assets
Cash and cash equivalents	49,536	60,033
Liabilities
Warrant liability	14,258	15,216
Recurring | Measured at fair value | Quoted prices in active markets (Level 1)
Assets
Cash and cash equivalents	49,536	60,033
Recurring | Measured at fair value | Significant unobservable inputs (Level 3)
Liabilities
Warrant liability	$ 14,258	$ 15,216

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Basis of Presentation

6 Months Ended

Jun. 30, 2014

Basis of Presentation

Basis of Presentation

Note 2. Basis of Presentation

The accompanying unaudited financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X.    Accordingly, they do not include all of the information and footnote disclosures required by GAAP for complete consolidated financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments and the impact of restatements on prior periods discussed below) considered necessary for a fair presentation have been included.  These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013, as amended, filed with the Securities and Exchange Commission (“SEC”) as discussed below.  The results of the Company’s operations for any interim period are not necessarily indicative of the results of operations for any other interim period or full year.

On May 6, 2014, the Audit Committee of the Company’s Board of Directors, in connection with an internal review initiated by Company management, concluded that, because of a misapplication of the accounting guidance related to certain of the Company’s warrants, the Company’s previously issued consolidated financial statements for all periods beginning with the quarterly period ended September 30, 2011 through December 31, 2013 should no longer be relied upon.  On June 2, 2014, the Company restated all affected interim and annual periods in its Annual Report on Form 10-K/A (Amendment No. 2) for the fiscal year ended December 31, 2013 in an SEC approved “omnibus” filing.  As such, the comparative information provided for the year ended December 31, 2013 and the three and six months ended June 30, 2013 contained in the preceding financial statements and the accompanying footnotes reflect these previously restated amounts.

The prior year financial statements contain certain reclassifications to the results of operations for the three and six months ended June 30, 2013 to conform to the presentation for the three and six months ended June 30, 2014 on this Form 10-Q.  These reclassifications were made in conjunction with the Company’s shift in focus away from its commercial product LAVIV® and to further research and development of the underlying azficel-T process.

For the three and six months ended June 30, 2014, amortization expense of approximately $0.1 million and $0.3 million, respectively, was included in research and development expense on the Consolidated Statements of Operations.  For the three and six months ended June 30, 2013, amortization expense of approximately $0.1 million and $0.3 million, respectively, was reclassed from cost of sales to research and development expense on the Consolidated Statements of Operations to conform to the current presentation.  For the three and six months ended June 30, 2014, Food and Drug Administration (“FDA”) license fees related to the Company’s Biologics License Application (“BLA”) of approximately $0.2 million and $0.3 million, respectively, were included in research and development expense on the Consolidated Statements of Operations.  For the three and six months ended June 30, 2013, FDA license fees of approximately $0.2 million and $0.3 million, respectively, were reclassified from selling, general and administrative expense to research and development expense on the Consolidated Statements of Operations to conform to the current presentation.

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Fair Value Measurements (Details 2) (Warrants, USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014
Warrants
Fair value measurements
Beginning Balance	$ 15,216
Change in fair value of warrant liability	(958)
Ending Balance	$ 14,258

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Income Taxes
Tax expense or benefit	$ 0	$ 0

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Current assets:
Cash and cash equivalents	$ 49,536	$ 60,033
Accounts receivable, net of allowance for doubtful accounts of $22 and $5, respectively	14	28
Inventory	476	597
Prepaid expenses and other current assets	706	1,202
Total current assets	50,732	61,860
Property and equipment, net of accumulated depreciation of $911 and $735, respectively	1,736	1,701
Intangible assets, net of accumulated amortization of $1,378 and $1,102, respectively	4,962	5,238
Other assets	1	215
Total assets	57,431	69,014
Current liabilities:
Accounts payable	1,368	2,958
Accrued expenses	1,600	487
Deferred revenue	280	148
Total current liabilities	3,248	3,593
Warrant liability	14,258	15,216
Other long term liabilities	632	539
Total liabilities	18,138	19,348
Stockholders' equity:
Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares outstanding
Common stock, $0.001 par value; 100,000,000 shares authorized; 40,856,815 and 39,832,225 shares issued and outstanding, respectively	41	40
Additional paid-in capital	142,586	136,694
Accumulated deficit	(103,334)	(87,068)
Total stockholders' equity	39,293	49,666
Total liabilities and stockholders' equity	$ 57,431	$ 69,014

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Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Cash flows from operating activities:
Net loss	$ (16,266)	$ (19,207)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense	739	209
Stock issued for supplemental stock issuance agreement	5,154
Warrant revaluation and other finance (income) expense	(958)	7,480
Depreciation and amortization	452	456
Provision for doubtful accounts	16
Change in operating assets and liabilities:
Accounts receivable	(2)	(10)
Inventory	121	(144)
Prepaid expenses and other current assets	496	537
Other assets	214
Accounts payable	(1,590)	221
Accrued expenses and other liabilities	1,206	30
Deferred revenue	132	11
Net cash used in operating activities	(10,286)	(10,417)
Cash flows from investing activities:
Purchase of property and equipment	(211)	(122)
Net cash used in investing activities	(211)	(122)
Cash flows from financing activities:
Subscriptions received		4
Net cash provided by financing activities		4
Effect of exchange rate changes on cash balances		(1)
Net decrease in cash and cash equivalents	(10,497)	(10,536)
Cash and cash equivalents, beginning of period	60,033	31,346
Cash and cash equivalents, end of period	$ 49,536	$ 20,810

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Share-Based Compensation (Details 3) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Number of shares
Outstanding at beginning of period (in shares)	2,068,720
Granted (in shares)	333,000
Forfeited (in shares)	(3,883)
Expired (in shares)	(120)
Outstanding at end of period (in shares)	2,397,717	2,068,720
Exercisable at end of period (in shares)	883,517
Weighted-average exercise price
Outstanding at beginning of period (in dollars per share)	$ 7.93
Granted (in dollars per share)	$ 4.25
Forfeited (in dollars per share)	$ 5.89
Expired (in dollars per share)	$ 15.50
Outstanding at end of period (in dollars per share)	$ 7.42	$ 7.93
Exercisable at end of period (in dollars per share)	$ 13.09
Additional disclosures
Weighted-average remaining contractual term (in years), Outstanding	8 years 3 months 18 days	8 years 4 months 24 days
Weighted-average remaining contractual term (in years), Exercisable	7 years 3 months 18 days
Aggregate intrinsic value, Outstanding	$ 507	$ 544
Aggregate intrinsic value, Exercisable	$ 73

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2014

Fair Value Measurements

Company's Financial Assets and Liability Measured at Fair Value on a Recurring Basis

	Fair value measurement using
($ in thousands)	Quoted prices inactive markets (Level 1)		Significantotherobservableinputs (Level 2)		Significant unobservableinputs(Level 3)		Total
Balance at June 30, 2014
Assets:
Cash and cash equivalents	$	49,536	$	—	$	—	$	49,536
Liabilities:
Warrant liability	$	—	$	—	$	14,258	$	14,258

	Fair value measurement using
($ in thousands)	Quoted prices inactive markets (Level 1)		Significantotherobservableinputs (Level 2)		Significant unobservableinputs(Level 3)		Total
Balance at December 31, 2013
Assets:
Cash and cash equivalents	$	60,033	$	—	$	—	$	60,033
Liabilities:
Warrant liability	$	—	$	—	$	15,216	$	15,216

Reconciliation of Warrant Liability Measured at Fair Value on Recurring Basis

	Warrant
($ in thousands)	Liability
Balance at December 31, 2013	$	15,216
Exercise of warrants	—
Change in fair value of warrant liability	(958		)
Balance at June 30, 2014	$	14,258

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Share-Based Compensation (Details 4) (USD $) In Millions, except Per Share data, unless otherwise specified	6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013
Equity-based compensation
Fair value of shares vested	$ 0.5
Fair market value of options granted (in dollars per share)	$ 2.74	$ 2.07
Weighted average assumptions
Expected life (years)	6 years 3 months	5 years
Interest rate (as a percent)	2.00%	0.90%
Volatility (as a percent)	70.00%	69.00%
Time-based stock options
Equity-based compensation
Total unrecognized compensation cost	3.0
Weighted-average period to recognize compensation cost	4 years 2 months 12 days
Performance based options | Non-employee
Equity-based compensation
Total unrecognized compensation cost	$ 0

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Loss Per Share (Tables)

6 Months Ended

Jun. 30, 2014

Loss Per share

Schedule of computation of basic and diluted earnings per share

($ in thousands except share and per	For the three months ended June 30,						For the six months ended June 30,
share data)	2014			2013			2014			2013
Loss per share - basic:
Numerator for basic loss per share	$	(2,257	)	$	(14,637	)	$	(16,266	)	$	(19,207	)
Denominator for basic loss per share	40,856,815			23,260,802			40,720,958			26,230,358
Basic loss per common share	$	(0.06	)	$	(0.63	)	$	(0.40	)	$	(0.73	)
Loss per share - diluted:
Numerator for diluted loss per share	$	(2,257	)	$	(14,637	)	$	(16,266	)	$	(19,207	)
Add back: Fair value of “in the money” warrants outstanding	1,284			—			1,284			315
Net loss attributable to common share	$	(3,541	)	$	(14,637	)	$	(17,550	)	$	(19,522	)
Denominator for basic loss per share	40,856,815			23,260,802			40,720,958			26,230,358
Plus: Incremental shares underlying “in the money” warrants outstanding	394,071			—			197,035			207,459
Denominator for diluted loss per share	41,250,886			23,260,802			40,917,993			26,437,817
Diluted net loss per common share	$	(0.09	)	$	(0.63	)	$	(0.43	)	$	(0.74	)

Securities Excluded from Calculation of Weighted-Average Shares Outstanding

	Three months ended June 30,		Six months ended June 30,
	2014	2013	2014	2013
“In the money” stock options	852,000	214,000	852,000	214,000
“Out of the money” stock options	1,545,717	529,406	1,545,717	592,406
“In the money” warrants	—	1,276,698	—	1,320
“Out of the money” warrants	4,831,352	4,831,352	4,831,352	4,831,352

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Business and Organization

6 Months Ended

Jun. 30, 2014

Business and Organization

Business and Organization

Note 1. Business and Organization

Fibrocell Science, Inc. (as used herein, “we,” “us,” “our,” “Fibrocell” or the “Company”) is the parent company of Fibrocell Technologies (“Fibrocell Tech”) and Fibrocell Science Hong Kong Limited (“Fibrocell Hong Kong”), a company organized under the laws of Hong Kong.  Fibrocell Tech is the parent company of Isolagen Europe Limited, a company organized under the laws of the United Kingdom (“Isolagen Europe”), Isolagen Australia Pty Limited, a company organized under the laws of Australia (“Isolagen Australia”), and Isolagen International, S.A., a company organized under the laws of Switzerland (“Isolagen Switzerland”).  The Company’s international activities are currently immaterial.

Fibrocell is an autologous cell therapy company focused on developing first-in-class treatments for rare and serious skin and connective tissue diseases with high unmet medical needs.  Based on its proprietary autologous fibroblast technology, the Company is pursuing medical applications of azficel-T for restrictive burn scarring and vocal cord scarring.  The Company’s collaboration with Intrexon Corporation (NYSE:XON) (“Intrexon”), a leader in synthetic biology, includes using genetically-modified fibroblasts for treating rare and serious skin and connective tissue diseases for which there are no currently approved products.  Fibrocell’s ongoing scientific research collaboration with UCLA has yielded discoveries and technologies related to stem cells and regenerative cells in human skin. The technologies from this collaboration and our exclusive license agreements with UCLA enable Fibrocell to expand its proprietary personalized biologics platform which uses human fibroblasts and stem cells from skin to create localized therapies that are compatible with the unique biology of each patient.

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Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Jun. 30, 2014	Dec. 31, 2013
Consolidated Balance Sheets
Accounts receivable, allowance for doubtful accounts (in dollars)	$ 22	$ 5
Property and equipment, accumulated depreciation (in dollars)	911	735
Intangible assets, accumulated amortization (in dollars)	$ 1,378	$ 1,102
Preferred stock, par value (in dollars per share)	$ 0.001	$ 0.001
Preferred stock, shares authorized	5,000,000	5,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, shares authorized	100,000,000	100,000,000
Common stock, shares issued	40,856,815	39,832,225
Common stock, shares outstanding	40,856,815	39,832,225

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Collaboration with Related Party

6 Months Ended

Jun. 30, 2014

Collaboration with Related Party

Collaboration with Related Party

Note 11. Collaboration with Related Party

Intrexon is an affiliate of our largest shareholder, NRM VII Holdings I, LLC.  In addition, two of our seven directors are also affiliates of NRM VII Holdings I, LLC.

On January 10, 2014, the Company and Intrexon entered into a Second Amendment to the parties’ Exclusive Channel Collaboration Agreement dated October 5, 2012, as previously amended on June 28, 2013 (the “Channel Agreement” and such previous amendment, the “First Amendment”).  The Channel Agreement provides for a “channel collaboration” arrangement governing a strategic collaboration for the development and commercialization of genetically-modified and non-genetically-modified autologous fibroblasts and autologous dermal cells in the United States.  The Channel Agreement originally granted the Company an exclusive license to use proprietary technologies and other intellectual property of Intrexon to research, develop, use, import, export, make, have made, sell, and offer for sale certain products in the field in the United States.

Pursuant to the Channel Agreement and Amendments, the Company engaged Intrexon for support services for the development of new products covered under the Channel Agreement and Amendments, and will reimburse Intrexon for its fully-loaded cost for time and materials for transgenes, cell processing, or other work performed by Intrexon for such research and manufacturing. For the three and six months ended June 30, 2014, the Company incurred expenses of $0.7 million and $1.8 million, respectively, for work performed.  For the three and six months ended June 30, 2013, the Company incurred expenses of $0.6 million and $1.0 million, respectively, for work performed.  As of June 30, 2014 and December 31, 2013, the Company had outstanding trade payables with Intrexon of $0.2 million and $1.3 million, respectively.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2014	Aug. 04, 2014
Document and Entity Information
Entity Registrant Name	Fibrocell Science, Inc.
Entity Central Index Key	0000357097
Document Type	10-Q
Document Period End Date	Jun. 30, 2014
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Trading Symbol	FCSC
Entity Common Stock, Shares Outstanding		40,856,815
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q2

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2014

Summary of Significant Accounting Policies

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and notes.  In addition, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows.  Actual results may differ materially from those estimates.

Cost of Sales

Cost of Sales

Cost of sales includes the costs related to the processing of cells for LAVIV®, including direct and indirect costs.  Beginning in 2014, cost of sales is accounted for using a standard cost system which allocates the direct costs associated with our manufacturing, facility, quality control, and quality assurance operations as well as overhead costs.  The principal reason for the relatively small level of revenue as compared to the cost of sales is that we changed corporate strategy in 2013 to de-emphasize sales of azficel-T into the aesthetic markets, and transitioned our business strategy to focus on high-value therapeutic applications for treatment of unmet medical conditions of the skin and connective tissue.

Research and Development Expenses

Research and Development Expenses

Research and development costs are expensed as incurred and include salaries and benefits, costs paid to third party contractors to perform research, conduct clinical trials, develop and manufacture drug materials and delivery devices, and a portion of facilities cost.  Research and development costs also include costs to develop manufacturing, cell collection and logistical process improvements.

Clinical trial costs are a significant component of research and development expenses and include costs associated with third party contractors.  Invoicing from third party contractors for services performed can lag several months.  The Company accrues 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.

Property and Equipment

Property and Equipment

Property and equipment is carried at acquisition cost less accumulated depreciation.  Depreciation is computed on a straight-line basis over the estimated useful life of the asset.  The cost of repairs and maintenance is charged to expense as incurred.  As of December 31, 2013, the useful life for all property and equipment was three years, except for leasehold improvements which were depreciated over the remaining lease term or the life of the asset, whichever was shorter.  In the first quarter of 2014, the Company adjusted its useful lives to reflect the expected consumption of the economic benefit of these assets as noted in the following table:

Property and equipment category	Useful life
Laboratory equipment	6 years
Computer equipment and software	3 years
Furniture and fixtures	10 years
Leasehold improvements	Lesser of remaining lease term or life of asset

In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) ASC 250 Accounting Changes and Error Corrections, the Company accounted for this change in useful lives as a change in estimate, with prospective application only.  The impact of this change in estimate on depreciation expense for the three and six months ended June 30, 2014 was immaterial to the results on the Consolidated Statements of Operations.

Intangible Assets

Intangible Assets

Intangible assets are research and development assets related to the Company’s primary study on azficel-T that was recognized upon emergence from bankruptcy.  Azficel-T has three current or target indications: the Company’s commercial product, LAVIV®, a clinical development program for restrictive burn scarring and a clinical development program for vocal cord scarring.  Effective January 1, 2012, the Company launched LAVIV® and as a result, the research and development intangible assets related to the Company’s primary study were considered to be finite-lived intangible assets and are being amortized over 12 years.

Finite-lived intangible assets are recorded at cost, net of accumulated amortization and, if applicable, impairment charges.  Amortization of finite-lived intangible assets is provided over their estimated useful lives on a straight-line basis.  In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification (“ASC”) 360-10-35 Impairment or Disposal of Long-Lived Assets, the Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  There was no impairment expense recognized for either the three or six months ended June 30, 2014 or 2013.

Income Taxes

Income Taxes

Income taxes are recorded in accordance with ASC Topic 740, Income Taxes (“ASC 740”), which provides for reporting of amounts that are currently payable and also for deferred taxes using an asset and liability approach.  The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns.  Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.  Valuation allowances are provided if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company accounts for uncertain tax positions in accordance with the provisions of ASC 740.  When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized.  The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. As of December 31, 2013 and June 30, 2014, the Company did not have any uncertain tax positions.

Recently Issued Accounting Pronouncements

Recently Issued Accounting Pronouncements

In May 2014, the FASB issued Accounting Standards Update (“ASU”) No. 2014-09, “Revenue from Contracts with Customers,” under ASC Topic 606 which supersedes the current revenue recognition requirements under ASC Topic 605, “Revenue Recognition”.  The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods or services.  It also provides a five step approach to achieve this principle.  For public entities, the new guidance is effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period.  Early application is not permitted.  Based on the Company’s current financial operations, the Company anticipates the potential impact of ASU No. 2014-09 to be immaterial to its financial statements.

Subsequent Events

Subsequent Events

The Company evaluates all subsequent events, through the date the consolidated financial statements are issued, to determine if there are any events that require disclosure.  No such events have been identified through the date of this filing.

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Consolidated Statements of Operations (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Consolidated Statements of Operations
Revenue from product sales	$ 58	$ 62	$ 104	$ 88
Cost of sales	547	2,104	1,340	4,317
Gross loss	(489)	(2,042)	(1,236)	(4,229)
Selling, general and administrative expense	3,487	2,294	6,302	4,504
Research and development expense	2,620	1,478	10,058	2,985
Operating loss	(6,596)	(5,814)	(17,596)	(11,718)
Other income (expense):
Warrant revaluation and other finance income (expense)	4,008	(8,818)	958	(7,480)
Other income	330		370
Interest income	1		2
Loss from continuing operations before income taxes	(2,257)	(14,632)	(16,266)	(19,198)
Loss from continuing operations, net of tax	(2,257)	(14,632)	(16,266)	(19,198)
Loss from discontinued operations, net of tax		(5)		(9)
Net loss	$ (2,257)	$ (14,637)	$ (16,266)	$ (19,207)
Per Share Information:
Loss from continuing operations, net of tax - basic (in dollars per share)	$ (0.06)	$ (0.63)	$ (0.40)	$ (0.73)
Net loss per common share - basic (in dollars per share)	$ (0.06)	$ (0.63)	$ (0.40)	$ (0.73)
Loss from continuing operations, net of tax - diluted (in dollars per share)	$ (0.09)	$ (0.63)	$ (0.43)	$ (0.74)
Net loss per common share - diluted (in dollars per share)	$ (0.09)	$ (0.63)	$ (0.43)	$ (0.74)
Weighted average number of common shares outstanding
Basic (in shares)	40,856,815	23,260,802	40,720,958	26,230,358
Diluted (in shares)	41,250,886	23,260,802	40,917,993	26,437,817

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Fair Value Measurements

6 Months Ended

Jun. 30, 2014

Fair Value Measurements

Fair Value Measurements

Note 6. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company adopted the accounting guidance on fair value measurements for financial assets and liabilities measured on a 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, unrestricted assets or liabilities.

· Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially 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 and unobservable (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 and liability measured at fair value on a recurring basis as of June 30, 2014 and December 31, 2013:

	Fair value measurement using
($ in thousands)	Quoted prices inactive markets (Level 1)		Significantotherobservableinputs (Level 2)		Significant unobservableinputs(Level 3)		Total
Balance at June 30, 2014
Assets:
Cash and cash equivalents	$	49,536	$	—	$	—	$	49,536
Liabilities:
Warrant liability	$	—	$	—	$	14,258	$	14,258

	Fair value measurement using
($ in thousands)	Quoted prices inactive markets (Level 1)		Significantotherobservableinputs (Level 2)		Significant unobservableinputs(Level 3)		Total
Balance at December 31, 2013
Assets:
Cash and cash equivalents	$	60,033	$	—	$	—	$	60,033
Liabilities:
Warrant liability	$	—	$	—	$	15,216	$	15,216

The reconciliation of warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) is as follows:

	Warrant
($ in thousands)	Liability
Balance at December 31, 2013	$	15,216
Exercise of warrants	—
Change in fair value of warrant liability	(958		)
Balance at June 30, 2014	$	14,258

The fair value of the warrant liability is based on Level 3 inputs. For this liability, the Company developed its own assumptions that do not have observable inputs or available market data to support the fair value.  See Note 5 for further discussion of the warrant liability.  The Company believes that the fair values of our current assets and current liabilities approximate their reported carrying amounts. There were no transfers between Level 1, 2 and 3 during the periods presented.

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Warrants

6 Months Ended

Jun. 30, 2014

Warrants

Warrants

Note 5. Warrants

The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement.  Stock warrants are accounted for as a derivative in accordance with Accounting Standards Codification 815, Derivatives and Hedging (“ASC 815”) if the stock warrants contain “down-round protection” or other terms that could potentially require “net cash settlement” and therefore, do not meet the scope exception for treatment as a derivative.  Since “down-round protection” is not an input into the calculation of the fair value of the warrants, the warrants cannot be considered indexed to the Company’s own stock which is a requirement for the scope exception as outlined under ASC 815.  Warrant instruments that could potentially require “net cash settlement” in the absence of express language precluding such settlement and those which include “down-round provisions” are initially classified as derivative liabilities at their estimated fair values, regardless of the likelihood that such instruments will ever be settled in cash.  The Company will continue to classify the fair value of the warrants that contain “down-round protection” or “net cash settlement” as a liability until the warrants are exercised, expire or are amended in a way that would no longer require these warrants to be classified as a liability.

The following table summarizes outstanding warrants to purchase common stock as of:

	Number of Warrants
Liability-classified warrants	June 30, 2014	December 31, 2013	Exercise Price		Expiration Dates
Issued in March 2010 and Preferred Stock offerings	2,640,534	2,640,534	$	6.25	Oct 2015-Dec 2016
Issued in Preferred Stock offerings	76,120	76,120	$	2.50	Nov 2015-Sept 2017
Issued in June 2011 financing	6,113	6,113	$	22.50	June 2016
Issued in August 2011 financing	565,759	565,759	$	18.75	Aug 2016
Issued to placement agents in August 2011 financing	50,123	50,123	$	13.64	Aug 2016
Issued with Convertible Notes	1,125,578	1,125,578	$	2.50	June 2018
Issued in Series E Preferred Stock offering	1,568,823	1,568,823	$	7.50	Sept 2018
Total	6,033,050	6,033,050

There were no warrants exercised or cancelled during the six months ended June 30, 2014.

Liability-classified Warrants

The foregoing warrants are recorded as liabilities at their estimated fair value at the date of issuance, with the subsequent changes in estimated fair value recorded in other income (expense) in the Company’s statements of operations in each subsequent period.  The change in the estimated fair value of our warrant liability for the three and six months ended June 30, 2014 resulted in non-cash income of approximately $4.0 million and $1.0 million, respectively.  The change in the estimated fair value of our warrant liability for the three and six months ended June 30, 2013 resulted in non-cash expense of approximately $8.8 million and $7.5 million, respectively.  The Company utilizes the Monte Carlo simulation valuation method to value the liability classified warrants.

The estimated fair value of these warrants is determined using Level 3 inputs.  Inherent in the Monte Carlo valuation model are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield.  The Company estimates the volatility of its common stock based on historical volatility that matches the expected remaining life of the warrants. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants.  The expected life of the warrants is assumed to be equivalent to their remaining contractual term.  The dividend rate is based on the historical rate, which the Company anticipates will remain at zero.

The estimated fair value of these warrants also require Level 3 inputs which are based on the Company’s estimates of the probability and timing of potential future financings and qualifying fundamental transactions.  The other assumptions used by the Company are summarized in the following table:

	June 30, 2014		June 30, 2013
Weighted average remaining expected life (years)	3.0		3.6
Interest rate	0.9	%	1.0	%
Dividend yield	—		—
Volatility	73	%	64	%

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Share-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2014

Share-Based Compensation.

Summary of Share-Based Compensation Expense

	Three months ended				Six months ended
	June 30,				June 30,
($ in thousands)	2014		2013		2014		2013
Stock option compensation expense for employees and directors	$	436	$	33	$	736	$	206
Equity awards for nonemployees issued for services	—		3		3		3
Total stock-based compensation expense	$	436	$	36	$	739	$	209

Summary of Stock Option Activity

($ in thousands except share and per share data)	Number of shares		Weighted- average exercise price		Weighted- average remaining contractual term (in years)	Aggregate intrinsic value
Outstanding at December 31, 2013	2,068,720		$	7.93	8.4	$	544
Granted	333,000		4.25
Exercised	—		—
Forfeited	(3,883	)	5.89
Expired	(120	)	15.50
Outstanding at June 30, 2014	2,397,717		$	7.42	8.3	$	507
Exercisable at June 30, 2014	883,517		$	13.09	7.3	$	73

Details of Fair Value Option Award

	June 30, 2014		June 30, 2013
Expected life (years)	6.25 years		5.0 years
Interest rate	2.0	%	0.9	%
Dividend yield	—		—
Volatility	70	%	69	%

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Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2014

Summary of Significant Accounting Policies

Schedule of useful life of property and equipment

Property and equipment category	Useful life
Laboratory equipment	6 years
Computer equipment and software	3 years
Furniture and fixtures	10 years
Leasehold improvements	Lesser of remaining lease term or life of asset

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Equity

6 Months Ended

Jun. 30, 2014

Equity

Equity

Note 9. Equity

Preferred stock

The Company is authorized to issue 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges, and restrictions thereof.  These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting any series or the designation of such series, any or all of which may be greater than the rights of common stock.  The issuance of the Company’s preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation.  In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change of control of the Company or other corporate action.  There were no preferred shares issued or outstanding as of June 30, 2014 or December 31, 2013.

Common stock

In connection with the execution of the Second Amendment to the Exclusive Channel Collaboration Agreement (the “Second Amendment”) on January 10, 2014 between the Company and Intrexon Corporation (“Intrexon”), the Company entered into a Supplemental Stock Issuance Agreement with Intrexon.  The Company agreed to issue to Intrexon, who is an affiliate of NRM VII Holdings I, LLC, the Company’s largest shareholder, a number of shares of Company common stock based on a per share value of the closing price of the Company’s common stock on the NYSE MKT on the day prior to execution of the Supplemental Stock Issuance Agreement (the “Supplemental Access Fee Shares”).  The Supplemental Access Fee Shares were issued upon the satisfaction of customary closing conditions, including the approval for the listing of the Supplemental Access Fee Shares on the NYSE MKT.  The closing took place on January 24, 2014.  The Company recorded a research and development expense in the first quarter of 2014 for the shares issued to Intrexon as a technology access fee.  1,024,590 shares were issued based on a per share value of $5.03 based on the closing price of the Company’s common stock on the closing date, totaling approximately $5.2 million.  For additional discussion on the Company’s collaboration with Intrexon, see Note 11.

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Share-Based Compensation

6 Months Ended

Jun. 30, 2014

Share-Based Compensation.

Share-Based Compensation

Note 7. Share-Based Compensation

The Company’s board of directors (the “Board”) adopted the 2009 Equity Incentive Plan (as amended to date, the “Plan”) effective September 3, 2009.  The Plan is intended to further align the interests of the 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 the Company.  The Plan allows for the issuance of up to 5,600,000 shares of the Company’s common stock.  In addition, there were 206,000 options issued outside of the Plan to consultants.

The types of awards that may be granted 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.  The term of each award is determined by the Compensation Committee of the Board at the time each award is granted, provided that the terms of options do not exceed ten years.  Vesting schedules for the stock options vary, but generally vest 25% per year, over four years.  The Plan had 3,384,286 options available for grant as of June 30, 2014.

Total share-based compensation expense recognized using the straight-line attribution method in the Consolidated Statements of Operations is as follows:

	Three months ended				Six months ended
	June 30,				June 30,
($ in thousands)	2014		2013		2014		2013
Stock option compensation expense for employees and directors	$	436	$	33	$	736	$	206
Equity awards for nonemployees issued for services	—		3		3		3
Total stock-based compensation expense	$	436	$	36	$	739	$	209

($ in thousands except share and per share data)	Number of shares		Weighted- average exercise price		Weighted- average remaining contractual term (in years)	Aggregate intrinsic value
Outstanding at December 31, 2013	2,068,720		$	7.93	8.4	$	544
Granted	333,000		4.25
Exercised	—		—
Forfeited	(3,883	)	5.89
Expired	(120	)	15.50
Outstanding at June 30, 2014	2,397,717		$	7.42	8.3	$	507
Exercisable at June 30, 2014	883,517		$	13.09	7.3	$	73

The total fair value of shares vested during the six months ended June 30, 2014 was approximately $0.5 million.  As of June 30, 2014, there was approximately $3.0 million of total unrecognized compensation cost, related to time-based non-vested stock options.  That cost is expected to be recognized over a weighted-average period of 4.2 years.  As of June 30, 2014, there was no unrecognized compensation expense related to performance-based, non-vested non-employee options.

During the six months ended June 30, 2014 and 2013, the weighted average fair market value of the options granted was $2.74 and $2.07, respectively.  The fair market value of the options was computed using the Black-Scholes option-pricing model with the following key weighted average assumptions for the six months ended as of the dates indicated:

	June 30, 2014		June 30, 2013
Expected life (years)	6.25 years		5.0 years
Interest rate	2.0	%	0.9	%
Dividend yield	—		—
Volatility	70	%	69	%

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Loss Per Share

6 Months Ended

Jun. 30, 2014

Loss Per share

Loss Per Share

Note 8.  Loss Per Share

Basic loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during a period.  The diluted loss per share calculation gives effect to dilutive options, warrants, convertible notes, convertible preferred stock, and other potential dilutive common stock including selected restricted shares of common stock outstanding during the period.  Diluted loss per share is based on the treasury stock method and includes the effect from potential issuance of common stock, such as shares issuable pursuant to the exercise of stock options, assuming the exercise of all in-the-money stock options.  Common share equivalents have been excluded where their inclusion would be anti-dilutive.

($ in thousands except share and per	For the three months ended June 30,						For the six months ended June 30,
share data)	2014			2013			2014			2013
Loss per share - basic:
Numerator for basic loss per share	$	(2,257	)	$	(14,637	)	$	(16,266	)	$	(19,207	)
Denominator for basic loss per share	40,856,815			23,260,802			40,720,958			26,230,358
Basic loss per common share	$	(0.06	)	$	(0.63	)	$	(0.40	)	$	(0.73	)
Loss per share - diluted:
Numerator for diluted loss per share	$	(2,257	)	$	(14,637	)	$	(16,266	)	$	(19,207	)
Add back: Fair value of “in the money” warrants outstanding	1,284			—			1,284			315
Net loss attributable to common share	$	(3,541	)	$	(14,637	)	$	(17,550	)	$	(19,522	)
Denominator for basic loss per share	40,856,815			23,260,802			40,720,958			26,230,358
Plus: Incremental shares underlying “in the money” warrants outstanding	394,071			—			197,035			207,459
Denominator for diluted loss per share	41,250,886			23,260,802			40,917,993			26,437,817
Diluted net loss per common share	$	(0.09	)	$	(0.63	)	$	(0.43	)	$	(0.74	)

The following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding, as their effect would be anti-dilutive:

	Three months ended June 30,		Six months ended June 30,
	2014	2013	2014	2013
“In the money” stock options	852,000	214,000	852,000	214,000
“Out of the money” stock options	1,545,717	529,406	1,545,717	592,406
“In the money” warrants	—	1,276,698	—	1,320
“Out of the money” warrants	4,831,352	4,831,352	4,831,352	4,831,352

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Income Taxes

6 Months Ended

Jun. 30, 2014

Income Taxes

Income Taxes

Note 10. Income Taxes

In accordance with ASC Topic No. 270 “Interim Reporting” and ASC Topic No. 740 “Income Taxes”, the Company is required at the end of each interim period to determine the best estimate of its annual effective tax rate and then apply that rate in providing for income taxes on a current year-to-date (interim period) basis.  For the six months ended June 30, 2014 and 2013, the Company recorded no tax expense or benefit due to the expected current year loss and its historical losses.  The Company had not recorded its net deferred tax asset as of either June 30, 2014 or December 31, 2013, because it maintains a full valuation against all deferred tax assets as management has determined that it is not more likely than not that the Company will realize these future tax benefits.

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Share-Based Compensation (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Equity-based compensation
Stock-based compensation expense	$ 436	$ 36	$ 739	$ 209
Options | Equity awards for nonemployees issued for services
Equity-based compensation
Stock-based compensation expense		3	3	3
Options | Employees and directors
Equity-based compensation
Stock-based compensation expense	$ 436	$ 33	$ 736	$ 206

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Warrants (Tables)

6 Months Ended

Jun. 30, 2014

Warrants

Outstanding Warrants to Purchase Common Stock

	Number of Warrants
Liability-classified warrants	June 30, 2014	December 31, 2013	Exercise Price		Expiration Dates
Issued in March 2010 and Preferred Stock offerings	2,640,534	2,640,534	$	6.25	Oct 2015-Dec 2016
Issued in Preferred Stock offerings	76,120	76,120	$	2.50	Nov 2015-Sept 2017
Issued in June 2011 financing	6,113	6,113	$	22.50	June 2016
Issued in August 2011 financing	565,759	565,759	$	18.75	Aug 2016
Issued to placement agents in August 2011 financing	50,123	50,123	$	13.64	Aug 2016
Issued with Convertible Notes	1,125,578	1,125,578	$	2.50	June 2018
Issued in Series E Preferred Stock offering	1,568,823	1,568,823	$	7.50	Sept 2018
Total	6,033,050	6,033,050

Shares underlying warrants outstanding | Level 3

Fair value assumptions

Summary of other assumptions used by entity

	June 30, 2014		June 30, 2013
Weighted average remaining expected life (years)	3.0		3.6
Interest rate	0.9	%	1.0	%
Dividend yield	—		—
Volatility	73	%	64	%

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Summary of Significant Accounting Policies (Details)	6 Months Ended	12 Months Ended
	Jun. 30, 2014	Dec. 31, 2013
Laboratory equipment
Property and equipment
Useful life of property and equipment	6 years	3 years
Computer equipment and software
Property and equipment
Useful life of property and equipment	3 years	3 years
Furniture and fixtures
Property and equipment
Useful life of property and equipment	10 years	3 years

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Collaboration with Related Party (Details) (USD $) In Millions, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013	Dec. 31, 2013
Collaboration with related party
Number of directors			7
NRM VII Holdings I, LLC
Collaboration with related party
Number of directors that are affiliates of related party			2
Intrexon Corporation
Collaboration with related party
Expenses for work performed	$ 0.7	$ 0.6	$ 1.8	$ 1.0
Outstanding trade payables	$ 0.2		$ 0.2		$ 1.3

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Consolidated Statements of Stockholders' Equity (USD $) In Thousands, except Share data	Total	Common Stock	Additional paid-in capital	Accumulated deficit
Balance at Dec. 31, 2013	$ 49,666	$ 40	$ 136,694	$ (87,068)
Balance (shares) at Dec. 31, 2013	39,832,225	39,832,225
Stock-based compensation expense	739		739
Issuance of common stock	5,154	1	5,153
Issuance of common stock (in shares)		1,024,590
Net loss	(16,266)			(16,266)
Balance at Jun. 30, 2014	$ 39,293	$ 41	$ 142,586	$ (103,334)
Balance (shares) at Jun. 30, 2014	40,856,815	40,856,815

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Inventory

6 Months Ended

Jun. 30, 2014

Inventory

Inventory

Note 4. Inventory

Inventories consisted of the following as of:

	June 30,		December 31,
($ in thousands)	2014		2013
Raw materials	$	383	$	511
Work in process	93		86
Inventory	$	476	$	597

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Summary of Significant Accounting Policies (Details 2) (Research and development intangibles, LAVIV, USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
Research and development intangibles | LAVIV
Finite-lived intangibles
Intangible amortization period			12 years
Impairment expenses recognized	$ 0	$ 0	$ 0	$ 0

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Loss Per Share (Details 2)	3 Months Ended		6 Months Ended
	Jun. 30, 2014	Jun. 30, 2013	Jun. 30, 2014	Jun. 30, 2013
In the money stock options
Anti-dilutive securities excluded from the computations of diluted weighted-average shares outstanding
Anti-dilutive securities excluded from the computations of diluted weighted-average shares outstanding	852,000	214,000	852,000	214,000
Out of the money stock options
Anti-dilutive securities excluded from the computations of diluted weighted-average shares outstanding
Anti-dilutive securities excluded from the computations of diluted weighted-average shares outstanding	1,545,717	529,406	1,545,717	592,406
In the money warrants
Anti-dilutive securities excluded from the computations of diluted weighted-average shares outstanding
Anti-dilutive securities excluded from the computations of diluted weighted-average shares outstanding		1,276,698		1,320
Out of the money warrants
Anti-dilutive securities excluded from the computations of diluted weighted-average shares outstanding
Anti-dilutive securities excluded from the computations of diluted weighted-average shares outstanding	4,831,352	4,831,352	4,831,352	4,831,352

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Inventory (Tables)

6 Months Ended

Jun. 30, 2014

Inventory

Inventories

	June 30,		December 31,
($ in thousands)	2014		2013
Raw materials	$	383	$	511
Work in process	93		86
Inventory	$	476	$	597