10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2005

OR

o Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange

Act of 1934

Isolagen, Inc.

(Exact name of registrant as specified in its charter)

Delaware	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)

Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for any shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  ý  Yes    o  No

Check whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act.)  ý  Yes    o  No

As of August 4, 2005, issuer had 34,260,289 shares of issued and 30,260,289 shares outstanding common stock, par value $0.001.

TABLE OF CONTENTS

		PAGE
Part I.	Financial Information
Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheets
	June 30, 2005 and December 31, 2004	1
	Consolidated Statements of Operations
	Three months ended June 30, 2005 and June 30, 2004	2
	Six months ended June 30, 2005 and June 30, 2004 and cumulative period from inception to June 30, 2005	3
	Consolidated Statements of Shareholders’ Equity
	From inception to June 30, 2005	4
	Consolidated Statements of Cash Flows
	Six months ended June 30, 2005 and June 30, 2004 and cumulative period from inception to June 30, 2005	10
	Notes to Unaudited Consolidated Financial Statements	11
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	35
Item 4.	Controls and Procedures	35
Part II.	Other Information
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
Item 4.	Submission of Matters for a Vote of Security Holders	37
Item 5.	Other Information	38
Item 6.	Exhibits	38

PART I - - FINANCIAL INFORMATION

ITEM 1: FINANCIAL STATEMENTS

Isolagen, Inc.

(A Development Stage Company)

Consolidated Balance Sheets

(unaudited)

	June 30,			December 31,
	2005			2004
ASSETS
Current assets:
Cash and cash equivalents	$	34,077,672		$	64,329,356
Short-term investments and securities held for sale	54,291,292			51,809,660
Accounts receivable; net of allowance for doubtful accounts of $144,380 and $50,533	874,967			1,516,591
Inventory	289,777			1,010,768
Other receivables	500,637			350,861
Prepaid expenses	516,433			769,984
Assets held for sale	96,775			—
Total current assets	90,647,553			119,787,220
Property and equipment, net	15,429,586			3,634,992
Intangible assets	540,000			540,000
Other assets, net of amortization of $499,492 and $124,873	3,511,424			4,158,926
Total assets	$	110,128,563		$	128,121,138
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,220,004		$	2,360,363
Accrued expenses	3,390,782			3,441,805
Deferred revenue	2,554,856			2,923,328
Total current liabilities	8,165,642			8,725,496
Long-term debt	90,000,000			90,000,000
Other long-term liabilities	106,406			410,217
Total liabilities	98,272,048			99,135,713
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized	—			—
Common stock, $0.001 par value, 100,000,000 shares authorized	34,248			34,195
Additional paid-in capital	109,981,924			109,935,174
Treasury stock, at cost, 4,000,000 shares	(25,974,000		)	(25,974,000		)
Accumulated other comprehensive income (loss)	(291,184		)	464,110
Accumulated deficit during development stage	(71,894,473		)	(55,474,054		)
Total stockholders’ equity	11,856,515			28,985,425
Total liabilities and stockholders’ equity	$	110,128,563		$	128,121,138

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

1

Isolagen, Inc.

(A Development Stage Company)

Consolidated Statements of Operations

(unaudited)

	For Three Months Ended June 30,
	2005			2004
Revenues:
Product sales	$	2,346,513		$	544,246
License fees	—			—
Total revenues	2,346,513			544,246
Cost of sales	2,764,931			1,013,991
Gross loss	(418,418		)	(469,745		)
Operating expenses:
Selling, general and administrative	5,864,870			2,612,267
Research and development	3,436,921			798,823
Operating loss	(9,720,209		)	(3,880,835		)
Other income (expense):
Interest income	637,100			21,516
Other income	71,544			—
Interest expense	(977,648		)	—
Net loss attributable to common stockholders	$	(9,989,213	)	$	(3,859,319	)
Per share information:
Net loss basic and diluted	$	(0.33	)	$	(0.14	)
Deemed dividend associated with beneficial conversion of preferred stock	—			—
Preferred stock dividends	—			—
Net loss attributed to common shareholders — basic and diluted	$	(0.33	)	$	(0.14	)
Weighted average number of basic and diluted common shares outstanding	30,246,463			27,986,126

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

2

Isolagen, Inc.

(A Development Stage Company)

Consolidated Statements of Operations

(unaudited)

							Cumulative Period
							December 28, 1995
	Six Months Ended June 30,						(date of inception)
	2005			2004			to June 30, 2005
Revenues:
Product sales	$	5,013,047		$	833,603		$	11,079,088
License fees	—			—			260,000
Total revenues	5,013,047			833,603			11,339,088
Cost of sales	5,184,603			1,756,431			13,756,445
Gross loss	(171,556		)	(922,828		)	(2,417,357		)
Operating expenses:
Selling, general and administrative expenses	10,684,237			5,861,051			39,061,662
Research and development	5,031,502			1,981,805			16,944,687
Operating loss	(15,887,295		)	(8,765,684		)	(58,423,706		)
Other income (expense):
Interest income	1,352,914			39,621			2,197,220
Other income	71,544			—			251,584
Interest expense	(1,957,582		)	—			(2,905,886		)
Net loss	$	(16,420,419	)	$	(8,726,063	)	$	(58,880,788	)
Deemed dividend associated with beneficial conversion of preferred stock	—			—			(11,423,824		)
Preferred stock dividends	—			—			(1,589,861		)
Net loss attributable to common shareholders	$	(16,420,419	)	$	(8,726,063	)	$	(71,894,473	)
Per share information:
Net loss basic and diluted	$	(0.54	)	$	(0.32	)	$	(5.60	)
Deemed dividend associated with beneficial conversion of preferred stock	—			—			(1.09		)
Preferred stock dividends	—			—			(0.15		)
Net loss attributed to common shareholders — basic and diluted	$	(0.54	)	$	(0.32	)	$	(6.84	)
Weighted average number of basic and diluted common shares outstanding	30,231,735			27,350,296			10,520,605

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

3

Isolagen, Inc.

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity

	Series A		Series B
	Preferred Stock		Preferred Stock		Common Stock
	Shares	Amount	Shares	Amount	Shares	Amount
Issuance of common stock for cash on 12/28/95	—	$—	—	$—	2,285,291	$2,285
Issuance of common stock for cash on 11/07/96	—	—	—	—	11,149	11
Issuance of common stock for cash on 11/29/96	—	—	—	—	2,230	2
Issuance of common stock for cash on 12/19/96	—	—	—	—	6,690	7
Issuance of common stock for cash on 12/26/96	—	—	—	—	11,148	11
Net loss	—	—	—	—	—	—
Balance, 12/31/96	—	$—	—	$—	2,316,508	$2,316
Issuance of common stock for cash on 12/27/97	—	$—	—	$—	21,182	$21
Issuance of common stock for services 09/01/97	—	—	—	—	11,148	11
Issuance of common stock for services 12/28/97	—	—	—	—	287,193	287
Net loss	—	—	—	—	—	—
Balance, 12/31/97	—	$—	—	$—	2,636,031	$2,635
Issuance of common stock for cash on 08/23/98	—	$—	—	$—	4,459	$4
Repurchase of common stock on 09/29/98	—	—	—	—	—	—
Net loss	—	—	—	—	—	—
Balance, 12/31/98	—	$—	—	$—	2,640,490	$2,639
Issuance of common stock for cash on 09/10/99	—	$—	—	$—	52,506	$53
Net loss	—	—	—	—	—	—
Balance, 12/31/99	—	$—	—	$—	2,692,996	$2,692

								Accumulated		Accumulated			Total
								Other		Deficit During			Shareholder
	Additional			Treasury Stock				Comprehensive		Development			Equity
	Paid-In Capital			Shares	Amount			Income		Stage			(Deficit)
Issuance of common stock for cash on 12/28/95	$	(1,465	)	—	$	—		$	—	$	—		$	820
Issuance of common stock for cash on 11/07/96	49,989			—	—			—		—			50,000
Issuance of common stock for cash on 11/29/96	9,998			—	—			—		—			10,000
Issuance of common stock for cash on 12/19/96	29,993			—	—			—		—			30,000
Issuance of common stock for cash on 12/26/96	49,989			—	—			—		—			50,000
Net loss	—			—	—			—		(270,468		)	(270,468		)
Balance, 12/31/96	$	138,504		—	$	—		$	—	$	(270,468	)	$	(129,648	)
Issuance of common stock for cash on 12/27/97	$	94,979		—	$	—		$	—	—			$	95,000
Issuance of common stock for services 09/01/97	36,249			—	—			—		—			36,260
Issuance of common stock for services 12/28/97	9,968			—	—			—		—			10,255
Net loss	—			—	—			—		(52,550		)	(52,550		)
Balance, 12/31/97	$	279,700		—	$	—		$	—	$	(323,018	)	$	(40,683	)
Issuance of common stock for cash on 08/23/98	$	20,063		—	$	—		$	—	—			$	20,067
Repurchase of common stock on 09/29/98	—			2,400	(50,280		)	—		—			(50,280		)
Net loss	—			—	—			—		(195,675		)	(195,675		)
Balance, 12/31/98	$	299,763		2,400	$	(50,280	)	$	—	$	(518,693	)	$	(266,571	)
Issuance of common stock for cash on 09/10/99	$	149,947		—	$	—		$	—	—			$	150,000
Net loss	—			—	—			—		(1,306,778		)	(1,306,778		)
Balance, 12/31/99	$	449,710		2,400	$	(50,280	)	$	—	$	(1,825,471	)	$	(1,423,349	)

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

4

Isolagen, Inc.

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (continued)

	Series A			Series B
	Preferred Stock			Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Shares	Amount
Issuance of common stock for cash on 01/18/00	—	$	—	—	$	—	53,583	54
Issuance of common stock for services on 03/01/00	—	—		—	—		68,698	69
Issuance of common stock for services on 04/04/00	—	—		—	—		27,768	28
Net loss	—	—		—	—		—	—
Balance, 12/31/00	—	$	—	—	$	—	2,843,045	$	2,843
Issuance of common stock for services on 07/01/01	—	$	—	—	$	—	156,960	$	157
Issuance of common stock for service son 07/01/01	—	—		—	—		125,000	125
Issuance of common stock for capitalization of accrued salaries on 08/10/01	—	—		—	—		70,000	70
Issuance of common stock for conversion of convertible debt on 08/10/01	—	—		—	—		1,750,000	1,750
Issuance of common stock for conversion of convertible shareholder notes payable on 08/10/01	—	—		—	—		208,972	209
Issuance of common stock for bridge financing on 08/10/01	—	—		—	—		300,000	300
Retirement of treasury stock on 08/10/01	—	—		—	—		—	—
Issuance of common stock for net assets of Gemini on 08/10/01	—	—		—	—		3,942,400	3,942
Issuance of common stock for net assets of AFH on 08/10/01	—	—		—	—		3,899,547	3,900
Issuance of common stock for cash on 08/10/01	—	—		—	—		1,346,669	1,347
Transaction and fund raising expenses on 08/10/01	—	—		—	—		—	—
Issuance of common stock for service on 08/10/01	—	—		—	—		60,000	60
Issuance of common stock for cash on 08/28/01	—	—		—	—		26,667	27
Issuance of common stock for services on 09/30/01	—	—		—	—		314,370	314
Uncompensated contribution of services — 3rd qtr	—	—		—	—		—	—

									Accumulated		Accumulated			Total
									Other		Deficit During			Shareholder
	Additional			Treasury Stock					Comprehensive		Development			Equity
	Paid-In Capital			Shares		Amount			Income		Stage			(Deficit)
Issuance of common stock for cash on 01/18/00	$	1,869		—		$	—		$	—	$	—		$	1,923
Issuance of common stock for services on 03/01/00	(44		)	—		—			—		—			25
Issuance of common stock for services on 04/04/00	(18		)	—		—			—		—			10
Net loss	—			—		—			—		(807,076		)	(807,076		)
Balance, 12/31/00	$	451,517		2,400		$	(50,280	)	$	—	$	(2,632,547	)	$	(2,228,467	)
Issuance of common stock for services on 07/01/01	$	(101	)	—		$	—		$	—	$	—		$	56
Issuance of common stock for service son 07/01/01	(80		)	—		—			—		—			45
Issuance of common stock for capitalization of accrued salaries on 08/10/01	328,055			—		—			—		—			328,125
Issuance of common stock for conversion of convertible debt on 08/10/01	1,609,596			—		—			—		—			1,611,346
Issuance of common stock for conversion of convertible shareholder notes payable on 08/10/01	135,458			—		—			—		—			135,667
Issuance of common stock for bridge financing on 08/10/01	(192		)	—		—			—		—			108
Retirement of treasury stock on 08/10/01	(50,280		)	(2,400	)	50,280			—		—			—
Issuance of common stock for net assets of Gemini on 08/10/01	(3,942		)	—		—			—		—			—
Issuance of common stock for net assets of AFH on 08/10/01	(3,900		)	—		—			—		—			—
Issuance of common stock for cash on 08/10/01	2,018,653			—		—			—		—			2,020,000
Transaction and fund raising expenses on 08/10/01	(48,547		)	—		—			—		—			(48,547		)
Issuance of common stock for service on 08/10/01	—			—		—			—		—			60
Issuance of common stock for cash on 08/28/01	39,973			—		—			—		—			40,000
Issuance of common stock for services on 09/30/01	471,241			—		—			—		—			471,555
Uncompensated contribution of services — 3rd qtr	55,556			—		—			—		—			55,556

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

5

Isolagen, Inc.

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (continued)

	Series A			Series B
	Preferred Stock			Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Shares	Amount
Issuance of common stock for services on 11/01/01	—	$	—	—	$	—	145,933	$	146
Uncompensated contribution of services — 4th qtr	—	—		—	—		—	—
Net loss	—	—		—	—		—	—
Balance, 12/31/01	—	$	—	—	$	—	15,189,563	$	15,190
Uncompensated contribution of services — 1st qtr	—	—		—	—		—	—
Issuance of preferred stock for cash on 04/26/02	905,000	905		—	—		—	—
Issuance of preferred stock for cash on 05/16/02	890,250	890		—	—		—	—
Issuance of preferred stock for cash on 05/31/02	795,000	795		—	—		—	—
Issuance of preferred stock for cash on 06/28/02	229,642	230		—	—		—	—
Uncompensated contribution of services — 2nd qtr	—	—		—	—		—	—
Issuance of preferred stock for cash on 07/15/02	75,108	75		—	—		—	—
Issuance of common stock for cash on 08/01/02	—	—		—	—		38,400	38
Issuance of warrants for services on 09/06/02	—	—		—	—		—	—
Uncompensated contribution of services — 3rd qtr	—	—		—	—		—	—
Uncompensated contribution of services — 4th qtr	—	—		—	—		—	—
Issuance of preferred stock for dividends	143,507	144		—	—		—	—
Deemed dividend associated with beneficial conversion of preferred stock	—	—		—	—		—	—
Comprehensive income: net loss	—	—		—	—		—	—
Other comprehensive income, foreign currency translation adjustment	—	—		—	—		—	—
Comprehensive loss	—	—		—	—		—	—
Balance, 12/31/02	3,038,507	$	3,039	—	$	—	15,227,963	$	15,228

						Accumulated		Accumulated			Total
						Other		Deficit During			Shareholder
	Additional		Treasury Stock			Comprehensive		Development			Equity
	Paid-In Capital		Shares	Amount		Income		Stage			(Deficit)
Issuance of common stock for services on 11/01/01	$	218,754	—	$	—	$	—	$	—		$	218,900
Uncompensated contribution of services — 4th qtr	100,000		—	—		—		—			100,000
Net loss	—		—	—		—		(1,652,004		)	(1,652,004		)
Balance, 12/31/01	$	5,321,761	—	$	—	$	—	$	(4,284,551	)	$	1,052,400
Uncompensated contribution of services — 1st qtr	100,000		—	—		—		—			100,000
Issuance of preferred stock for cash on 04/26/02	2,817,331		—	—		—		—			2,818,236
Issuance of preferred stock for cash on 05/16/02	2,772,239		—	—		—		—			2,773,129
Issuance of preferred stock for cash on 05/31/02	2,473,380		—	—		—		—			2,474,175
Issuance of preferred stock for cash on 06/28/02	712,991		—	—		—		—			713,221
Uncompensated contribution of services — 2nd qtr	100,000		—	—		—		—			100,000
Issuance of preferred stock for cash on 07/15/02	233,886		—	—		—		—			233,961
Issuance of common stock for cash on 08/01/02	57,562		—	—		—		—			57,600
Issuance of warrants for services on 09/06/02	103,388		—	—		—		—			103,388
Uncompensated contribution of services — 3rd qtr	100,000		—	—		—		—			100,000
Uncompensated contribution of services — 4th qtr	100,000		—	—		—		—			100,000
Issuance of preferred stock for dividends	502,517		—	—		—		(502,661		)	—
Deemed dividend associated with beneficial conversion of preferred stock	10,178,944		—	—		—		(10,178,944		)	—
Comprehensive income: net loss	—		—	—		—		(5,433,055		)	(5,433,055		)
Other comprehensive income, foreign currency translation adjustment	—		—	—		13,875		—			13,875
Comprehensive loss	—		—	—		—		—			(5,419,180		)
Balance, 12/31/02	$	25,573,999	—	$	—	$	13,875	$	(20,399,211	)	$	5,206,930

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

6

Isolagen, Inc.

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (continued)

	Series A					Series B
	Preferred Stock					Preferred Stock					Common Stock
	Shares		Amount			Shares		Amount			Shares		Amount
Issuance of common stock for cash on 01/07/03	—		$	—		—		$	—		61,600		$	62
Issuance of common stock for patent pending acquisition on 03/31/03	—		—			—		—			100,000		100
Cancellation of common stock on 03/31/03	—		—			—		—			(79,382	)	(79		)
Uncompensated contribution of services — 1st qtr	—		—			—		—			—		—
Issuance of preferred stock for cash on 05/09/03	—		—			110,250		110			—		—
Issuance of preferred stock for cash on 05/16/03	—		—			45,500		46			—		—
Conversion of preferred stock into common stock — 2nd qtr	(70,954	)	(72		)	—		—			147,062		147
Conversion of warrants into common stock — 2nd qtr	—		—			—		—			114,598		114
Uncompensated contribution of services — 2nd qtr	—		—			—		—			—		—
Issuance of preferred stock dividends	—		—			—		—			—		—
Deemed dividend associated with beneficial conversion of preferred stock	—		—			—		—			—		—
Issuance of common stock for cash 3rd qtr	—		—			—		—			202,500		202
Issuance of common stock for cash on 08/27/03	—		—			—		—			3,359,331		3,359
Conversion of preferred stock into common stock — 3rd qtr	(2,967,553	)	(2,967		)	(155,750	)	(156		)	7,188,793		7,189
Conversion of warrants into common stock — 3rd qtr	—		—			—		—			212,834		213
Compensation expense on warrants issued to non-employees	—		—			—		—			—		—
Issuance of common stock for cash 4th qtr	—		—			—		—			136,500		137
Conversion of warrants into common stock — 4th qtr	—		—			—		—			393		—
Comprehensive income: net loss	—		—			—		—			—		—
Other comprehensive income, foreign currency translation adjustment	—		—			—		—			—		—
Comprehensive loss	—		—			—		—			—		—
Balance, 12/31/03	—		$	—		—		$	—		26,672,192		$	26,672

							Accumulated		Accumulated			Total
							Other		Deficit During			Shareholder
	Additional			Treasury Stock			Comprehensive		Development			Equity
	Paid-In Capital			Shares	Amount		Income		Stage			(Deficit)
Issuance of common stock for cash on 01/07/03	$	92,338		—	$	—	$	—	$	—		$	92,400
Issuance of common stock for patent pending acquisition on 03/31/03	539,900			—	—		—		—			540,000
Cancellation of common stock on 03/31/03	(119,380		)	—	—		—		—			(119,459		)
Uncompensated contribution of services — 1st qtr	100,000			—	—		—		—			100,000
Issuance of preferred stock for cash on 05/09/03	2,773,218			—	—		—		—			2,773,328
Issuance of preferred stock for cash on 05/16/03	1,145,704			—	—		—		—			1,145,750
Conversion of preferred stock into common stock — 2nd qtr	40,626			—	—		—		—			40,701
Conversion of warrants into common stock — 2nd qtr	(114		)	—	—		—		—			—
Uncompensated contribution of services — 2nd qtr	100,000			—	—		—		—			100,000
Issuance of preferred stock dividends	—			—	—		—		(1,087,200		)	(1,087,200		)
Deemed dividend associated with beneficial conversion of preferred stock	1,244,880			—	—		—		(1,244,880		)	—
Issuance of common stock for cash 3rd qtr	309,798			—	—		—		—			310,000
Issuance of common stock for cash on 08/27/03	18,452,202			—	—		—		—			18,455,561
Conversion of preferred stock into common stock — 3rd qtr	(82,875		)	—	—		—		—			(78,809		)
Conversion of warrants into common stock — 3rd qtr	(213		)	—	—		—		—			—
Compensation expense on warrants issued to non-employees	412,812			—	—		—		—			412,812
Issuance of common stock for cash 4th qtr	279,363			—	—		—		—			279,500
Conversion of warrants into common stock — 4th qtr	—			—	—		—		—			—
Comprehensive income: net loss	—			—	—		—		(11,268,294		)	(11,268,294		)
Other comprehensive income, foreign currency translation adjustment	—			—	—		360,505		—			360,505
Comprehensive loss	—			—	—		—		—			(10,907,789		)
Balance, 12/31/03	$	50,862,258		—	$	—	$	374,380	$	(33,999,585	)	$	17,263,725

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

7

Isolagen, Inc.

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (continued)

	Series A			Series B
	Preferred Stock			Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Shares	Amount
Conversion of warrants into common stock — 1st qtr	—	$	—	—	$	—	78,526	$	79
Issuance of common stock for cash in connection with exercise of stock options — 1st qtr	—	—		—	—		15,000	15
Issuance of common stock for cash in connection with exercise of warrants — 1st qtr	—	—		—	—		4,000	4
Compensation expense on options and warrants issued to non-employees and directors — 1st qtr	—	—		—	—		—	—
Issuance of common stock for cash in connection with exercise of warrants — 2nd qtr	—	—		—	—		51,828	52
Issuance of common stock for cash 2nd qtr	—	—		—	—		7,200,000	7,200
Compensation expense on options and warrants issued to non-employees and directors — 2nd qtr	—	—		—	—		—	—
Issuance of common stock in connection with exercise of warrants — 3rd qtr	—	—		—	—		7,431	7
Issuance of common stock for cash in connection with exercise of stock options — 3rd qtr	—	—		—	—		110,000	110
Issuance of common stock for cash in connection with exercise of warrants — 3rd qtr	—	—		—	—		28,270	28
Compensation expense on options and warrants issued to non-employees and directors — 3rd qtr	—	—		—	—		—	—
Issuance of common stock in connection with exercise of warrants — 4th qtr	—	—		—	—		27,652	28
Compensation expense on options and warrants issued to non-employees and directors — 4th qtr	—	—		—	—		—	—
Purchase of treasury stock — 4th qtr	—	—		—	—		—	—
Comprehensive income: net loss	—	—		—	—		—	—
Other comprehensive income, foreign currency translation adjustment	—	—		—	—		—	—
Other comprehensive income, net unrealized gain on available-for-sale securities	—	—		—	—		—	—
Comprehensive loss	—	—		—	—		—	—
Balance, 12/31/04	—	$	—	—	$	—	34,194,899	$	34,195

								Accumulated		Accumulated			Total
								Other		Deficit During			Shareholder
	Additional			Treasury Stock				Comprehensive		Development			Equity
	Paid-In Capital			Shares	Amount			Income		Stage			(Deficit)
Conversion of warrants into common stock — 1st qtr	$	(79	)	—	$	—		$	—	$	—		$		—
Issuance of common stock for cash in connection with exercise of stock options — 1st qtr	94,985			—	—			—		—			95,000
Issuance of common stock for cash in connection with exercise of warrants — 1st qtr	7,716			—	—			—		—			7,720
Compensation expense on options and warrants issued to non-employees and directors — 1st qtr	1,410,498			—	—			—		—			1,410,498
Issuance of common stock for cash in connection with exercise of warrants — 2nd qtr	(52		)	—	—			—		—			—
Issuance of common stock for cash 2nd qtr	56,810,234			—	—			—		—			56,817,434
Compensation expense on options and warrants issued to non-employees and directors — 2nd qtr	143,462			—	—			—		—			143,462
Issuance of common stock in connection with exercise of warrants — 3rd qtr	(7		)	—	—			—		—			—
Issuance of common stock for cash in connection with exercise of stock options — 3rd qtr	189,890			—	—			—		—			190,000
Issuance of common stock for cash in connection with exercise of warrants — 3rd qtr	59,667			—	—			—		—			59,695
Compensation expense on options and warrants issued to non-employees and directors — 3rd qtr	229,133			—	—			—		—			229,133
Issuance of common stock in connection with exercise of warrants — 4th qtr	(28		)	—	—			—		—			—
Compensation expense on options and warrants issued to non-employees and directors — 4th qtr	127,497			—	—			—		—			127,497
Purchase of treasury stock — 4th qtr	—			4,000,000	(25,974,000		)	—		—			(25,974,000			)
Comprehensive income: net loss	—			—	—			—		(21,474,469		)	(21,474,469			)
Other comprehensive income, foreign currency translation adjustment	—			—	—			79,725		—			79,725
Other comprehensive income, net unrealized gain on available-for-sale securities	—			—	—			10,005		—			10,005
Comprehensive loss	—			—	—			—		—			(21,384,739			)
Balance, 12/31/04	$	109,935,174		4,000,000	$	(25,974,000	)	$	464,110	$	(55,474,054	)	$	28,985,425

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

8

Isolagen, Inc.

(A Development Stage Company)

Consolidated Statements of Shareholders’ Equity (continued)

	Series A			Series B
	Preferred Stock			Preferred Stock			Common Stock
	Shares	Amount		Shares	Amount		Shares	Amount
Issuance of common stock for cash in connection with exercise of stock options — 1st qtr	—	$	—	—	$	—	25,000	$	25
Compensation expense on options and warrants issued to non-employees and directors — 1st qtr	—	—		—	—		—	—
Compensation expense on options and warrants issued to non-employees and directors — 2nd qtr	—	—		—	—		—	—
Conversion of warrants into common stock — 2nd qtr	—	—		—	—		27,785	28
Comprehensive income: net loss	—	—		—	—		—	—
Other comprehensive income, foreign currency translation adjustment	—	—		—	—		—	—
Other comprehensive income, net unrealized gain on available-for-sale securities	—	—		—	—		—	—
Comprehensive loss	—	—		—	—		—	—
Balance, 06/30/05	—	$	—	—	$	—	34,247,684	$	34,248

								Accumulated			Accumulated			Total
								Other			Deficit During			Shareholder
	Additional			Treasury Stock				Comprehensive			Development			Equity
	Paid-In Capital			Shares	Amount			Income			Stage			(Deficit)
Issuance of common stock for cash in connection with exercise of stock options — 1st qtr	$	74,975		—	$	—		$	—		$	—		$	75,000
Compensation expense on options and warrants issued to non-employees and directors — 1st qtr	33,565			—	—			—			—			33,565
Compensation expense on options and warrants issued to non-employees and directors — 2nd qtr	(61,762		)	—	—			—			—			(61,762			)
Conversion of warrants into common stock — 2nd qtr	(28		)	—	—			—			—			—
Comprehensive income: net loss	—			—	—			—			(16,420,419		)	(16,420,419			)
Other comprehensive income, foreign currency translation adjustment	—			—	—			(745,289		)	—			(745,289			)
Other comprehensive income, net unrealized loss on available-for-sale securities	—			—	—			(10,005		)	—			(10,005			)
Comprehensive loss	—			—	—			—			—			(17,175,713			)
Balance, 06/30/05	$	109,981,924		4,000,000	$	(25,974,000	)	$	(291,184	)	$	(71,894,473	)	$		11,856,515

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

9

Isolagen, Inc.

(A Development Stage Company)

Consolidated Statements of Cash Flows

(unaudited)

							Cumulative Period
							December 28, 1995
	Six Months Ended June 30,						(date of inception)
	2005			2004			to June 30, 2005
Cash flows from operating activities:
Net loss	$	(16,420,419	)	$	(8,726,063	)	$	(58,880,788	)
Adjustments to reconcile net loss to net cash used in operating activities:
Equity awards issued for services	(28,197		)	1,553,960			3,504,988
Uncompensated contribution of services	—			—			755,556
Depreciation and amortization	829,055			545,459			3,135,312
Provision for doubtful accounts	93,613			—			144,146
Amortization of debt issue costs	374,620			—			499,493
Amortization of debt discounts	(453,275		)	—			(453,275		)
Loss on disposal or impairment of property and equipment	—			—			575,861
Change in operating assets and liabilities:
(Increase) decrease in accounts receivable	410,547			(653,544		)	(1,082,581		)
(Increase) decrease in other receivables	3,625			(103,550		)	(325,803		)
(Increase) decrease in inventory	683,331			(229,532		)	(303,775		)
(Increase) decrease in prepaid expenses	234,373			(263,463		)	(510,450		)
(Increase) decrease in other assets	196,452			(393,179		)	(92,349		)
Increase (decrease) in accounts payable	(978,108		)	609,526			1,322,802
Increase (decrease) in accrued expenses	(237,187		)	349,339			3,030,570
Increase (decrease) in deferred revenue	(192,185		)	908,201			2,600,283
Net cash used in operating activities	(15,483,755		)	(6,402,846		)	(46,080,010		)
Cash flows from investing activities:
Purchase of property and equipment	(12,454,680		)	(440,861		)	(18,796,216		)
Proceeds from the sale of property and equipment	—			—			34,300
Purchase of investments	(72,848,313		)	—			(145,648,313		)
Proceeds from sales and maturities of investments	70,810,000			—			91,810,000
Net cash used in investing activities	(14,492,993		)	(440,861		)	(72,600,229		)
Cash flows from financing activities:
Proceeds from convertible debt	—			—			91,450,000
Offering costs associated with issuance of convertible debt	—			—			(3,746,193		)
Proceeds from notes payable to shareholders, net	—			—			135,667
Proceeds from the issuance of preferred stock, net	—			—			12,931,800
Proceeds from the issuance of common stock, net	75,000			56,920,154			78,907,720
Cash dividends paid on preferred stock	—			—			(1,087,200		)
Cash paid for fractional shares of preferred stock	—			—			(38,108		)
Merger and acquisition expenses	—			—			(48,547		)
Repurchase of common stock	—			—			(26,024,280		)
Net cash provided by financing activities	75,000			56,920,154			152,480,859
Effect of exchange rate changes on cash balance	(349,936		)	51,993			277,052
Net increase (decrease) in cash and cash equivalents	(30,251,684		)	50,128,440			34,077,672
Cash and cash equivalents, beginning of period	64,329,356			15,935,558			—
Cash and cash equivalents, end of period	$	34,077,672		$	66,063,998		$	34,077,672
Supplemental disclosures of cash flow information:
Cash paid for interest	$	1,557,500		$	—		$	1,707,783
Deemed dividend associated with beneficial conversion of preferred stock	—			—			11,423,824
Preferred stock dividend	—			—			1,589,861
Uncompensated contribution of services	—			—			755,556
Common stock issued for intellectual property	—			—			540,000
Equipment acquired through capital lease	—			—			167,154

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

10

Isolagen, Inc.

(A Development Stage Company)

Notes to Unaudited Consolidated Financial Statements

Note 1.       Basis of Presentation, Business and Organization

Isolagen, Inc. f/k/a American Financial Holding, Inc., a Delaware corporation (“Isolagen” or the “Company”) is the parent company of Isolagen Technologies, Inc., a Delaware corporation (“Isolagen Technologies”). Isolagen Technologies is the parent company of Isolagen Europe Limited, a company organized under the laws of the United Kingdom (“Isolagen Europe”). Isolagen Technologies is the parent company of Isolagen Australia Pty Limited, a company organized under the laws of Australia (“Isolagen Australia”). Isolagen Technologies is the parent company of Isolagen International, S.A., a company organized under the laws of Switzerland (“Isolagen Switzerland”). The common stock of the Company, par value $0.001 per share, (“Common Stock”) is traded on the American Stock Exchange (“AMEX”) under the symbol “ILE.”

Isolagen specializes in the development and commercialization of autologous cellular therapies for soft and hard tissue regeneration. Autologous cellular therapy is the process whereby a patient’s own cells are extracted, allowed to multiply and then injected into the patient for applications such as correction and reduction of the normal effects of aging like wrinkles and nasolabial folds. The procedure is minimally invasive and non-surgical.

Commencing in 1995, a predecessor of our Isolagen Process was used to correct facial defects, such as wrinkles, depressions and scars. From 1995 to 1999, approximately 200 physicians utilized this process on approximately 1,000 patients, for a total of approximately 4,000 injections. The physicians who used this process during this period did not document any significant adverse reactions.

In May 1996, the Food and Drug Administration, or FDA, in response to the increasing use of cellular therapy to treat serious illness, released draft regulation for public comment to regulate cellular therapy. In May 1998, this regulation was passed, and in 1999, the FDA notified the Company that the Isolagen Process would require FDA approval as a regulated biologic product. In October 1999, the Company filed an investigational new drug application, or IND, which was accepted by the FDA. In November 1999, the Company’s IND was placed on clinical hold while it established a cGMP facility and standard operating procedures, including quality control release criteria. The clinical hold was released in May 2002. From June 2002, the Company assembled its management and scientific team and improved its Isolagen Process. These improvements included the introduction of an improved transport medium to extend cell viability, the standardization of the injection technique and the standardization of the Company’s manufacturing and laboratory techniques. The Company commenced clinical trials in January 2003 upon completion of its cGMP facility.

On April 7, 2004, the Company submitted a request for a Special Protocol Assessment, or SPA, to the FDA with all the supporting information for its two pivotal Phase III clinical trials for specific dermal applications. In the SPA process, the FDA reviewed the design and size of a proposed Phase III program and provided comments regarding the adequacy of the clinical trial design to support a claim of efficacy in an approvable Biologics License Application, or BLA. The FDA’s comments are binding on its review decision, except in limited circumstances, such as when a substantial scientific issue essential to determining the safety and efficacy of a product candidate is identified after the Phase III program commences. In May 2004, the FDA approved the Company’s request for an SPA relating to the design of two pivotal Phase III clinical trials to be conducted by Isolagen in support of registration of the Isolagen Process for the treatment of nasolabial folds and glabellar lines. In July 2004, the Company announced the commencement of two pivotal Phase III trials, which were conducted in two different geographic and demographic populations in the United States as two identical trials for the treatment of facial wrinkles. These trials were randomized, double blind and placebo-controlled and were being conducted at various sites in the United States. The trials, which were conducted simultaneously, each had in excess of 100 patients split evenly between the treatment group and the placebo group. Efficacy was measured by a two-point improvement on a six-point scale, as evaluated by an independent assessor at four, six, nine and twelve months. The Company announced on August 1, 2005 the results of the Phase III dermal studies. The dermal studies met three of the four primary end points and achieved statistical significance when combined. The studies’ primary end points were based on blinded patient and physician visual assessment using a six-point scale with a two point change required to meet the endpoint. Trial B of the study proved to be statistically significant with both the patient and physician assessment achieving positive results. Trial A results were mixed with a positive assessment from the patients only. In addition, there was a wide variance in results from site to site with a range of response rates from 73.3% to 7.6%, where a “response” represents an improvement of at least two points, on a six point scale, based on a visual assessment

11

performed by the physician. The Company believes that this range of outcomes suggests that results are dependent on injection technique. The Company expects to commence a 100 patient clinical trial in November 2005 with a six month endpoint. The Company anticipates that the results of the new study together with the positive Phase III study B results will support a BLA filing in 2006.

The Company completed a Phase I clinical trial for its second candidate for the treatment of periodontal disease in late 2003. In the second quarter of 2004, the Company initiated a Phase II clinical trial for the cosmetic, or “black triangle,” application of this product candidate. This Phase II clinical trial concluded during the second quarter of 2005. The analysis of the Investigator and Subject Visual Analog Scale assessment demonstrated that the Isolagen Process was statistically superior to placebo at four months after treatment. Although results of the Investigator and Subject assessment demonstrate that the Isolagen Process was statistically superior to placebo, an analysis of objective linear measurements did not yield statistically significant results despite a positive change observed as a result of treatment with the Isolagen Process. The Company’s clinical experts believe that current measurement techniques are not precise enough to accurately record the positive change. The Company is investigating alternative measurement techniques to assess change in future trials.

The Company’s goal is to become a leading provider of solutions for soft and hard tissue regeneration. The Company currently sells its dermal product in the United Kingdom. The Company plans to expand sales of its dermal product to other parts of Europe, Asia and the Americas.

Through June 30, 2005, the Company has been primarily engaged in developing its initial product technology, recruiting personnel, commencing its UK operations and raising capital. In the course of its development activities, the Company has sustained losses and expects such losses to continue through at least 2006. The Company will finance its operations primarily through its existing cash and future financing.

The Company’s ability to operate profitably under its current business plan is largely contingent upon its success in obtaining regulatory approval to sell its products and upon its successful development of markets for its products and profitable manufacturing processes. The Company may be required to obtain additional capital in the future to expand its operations. No assurance can be given that the Company will be able to obtain such regulatory approvals, successfully develop the markets for its products or develop profitable manufacturing methods, or any such additional capital as it might need, either through equity or debt financing, on satisfactory terms or at all. Additionally, no assurance can be given that any such financing, if obtained, will be adequate to meet the Company’s ultimate capital needs and to support the Company’s growth. If adequate capital cannot be obtained on satisfactory terms, the Company’s operations could be negatively impacted.

If the Company achieves growth in its operations in the next few years, such growth could place a strain on its management, administrative, operational and financial infrastructure. The Company’s ability to manage its current operations and future growth requires the continued improvement of operational, financial and management controls, reporting systems and procedures. In addition, the Company may find it necessary to hire additional management, financial and sales and marketing personnel to manage the Company’s expanding operations. If the Company is unable to manage this growth effectively and successfully, the Company’s business, operating results and financial condition may be materially adversely affected.

As of June 30, 2005, the Company had cash and cash equivalents and short-term investments of $88.4 million. The Company believes that its existing capital resources are adequate to finance its operations until June 30, 2007; however, its long-term viability is dependent upon successful operation of its business, its ability to automate its manufacturing process, the approval of its products and the ability to raise additional debt and equity to meet its business objectives.

Acquisition and merger and basis of presentation

On August 10, 2001, Isolagen Technologies consummated a merger with American Financial Holdings, Inc. (“AFH”) and Gemini IX, Inc. (“Gemini”). Pursuant to an Agreement and Plan of Merger, dated August 1, 2001, by and among AFH, ISO Acquisition Corp, a Delaware corporation and wholly-owned subsidiary of AFH (“Merger Sub”), Isolagen Technologies, Gemini, a Delaware corporation, and William J. Boss, Jr., Olga Marko and Dennis McGill, stockholders of Isolagen Technologies (the “Merger Agreement”), AFH (i) issued 5,453,977 shares of its common stock, par value $0.001 to acquire, in a privately negotiated transaction, 100% of the issued and outstanding common stock (195,707 shares, par value $0.01, including the shares issued immediately prior to the Merger for the conversion of certain

12

liabilities, as discussed below) of Isolagen Technologies, and (ii) issued 3,942,400 shares of its common stock to acquire 100% of the issued and outstanding common stock of Gemini. Pursuant to the terms of the Merger Agreement, Merger Sub, together with Gemini, merged with and into Isolagen Technologies (the “Merger”), and AFH was the surviving corporation. AFH subsequently changed its name to Isolagen, Inc. on November 13, 2001.

Prior to the Merger, Isolagen Technologies had no active business and was seeking funding to begin FDA trials of the Isolagen Process. AFH was a non-operating, public shell company with limited assets. Gemini was a non-operating private company with limited assets and was unaffiliated with AFH.

Since AFH and Gemini had no operations and limited assets at the time of the Merger, the merger has been accounted for as a recapitalization of Isolagen Technologies and an issuance of common stock by Isolagen Technologies for the net assets of AFH and Gemini. In the recapitalization, Isolagen Technologies is treated as having affected (i) a 27.8694 for 1 stock split, whereby the 195,707 shares of its common stock outstanding immediately prior to the merger are converted into the 5,453,977 shares of common stock received and held by the Isolagen Technologies stockholders immediately after the merger, and (ii) a change in the par value of its common stock, from $0.01 per share to $0.001 per share. The stock split and change in par value have been reflected in the accompanying consolidated financial statements by retroactively restating all share and per share amounts. The stock issuances are accounted for as the issuance of (i) 3,942,400 shares for the net assets of Gemini, recorded at their book value, and (ii) the issuance of 3,899,547 shares (the number of shares AFH had outstanding immediately prior to the Merger) for the net assets of AFH, recorded at their book value.

Immediately prior to and as a condition of the Merger, Isolagen Technologies issued an aggregate of 2,328,972 shares (post split) of its common stock to convert to equity an aggregate of $2,075,246 of liabilities, comprised of (i) accrued salaries of $328,125, (ii) convertible debt and related accrued interest of $1,611,346, (iii) convertible shareholder notes and related accrued interest of $135,667 and (iv) bridge financing costs of $108. Simultaneous with the Merger, the Company sold 1,346,669 shares of restricted common stock to certain accredited investors in a private placement transaction. The consideration paid by such investors for the shares of common stock aggregated $2,020,000 in transactions exempt from the registration requirements of the Securities Act. The net cash proceeds of this private placement were used to fund Isolagen’s research and development projects and the initial FDA trials of the Isolagen Process, to explore the viability of entering foreign markets, to provide working capital and for general corporate purposes.

The financial statements presented include Isolagen, Inc. and its wholly-owned subsidiaries. All significant intercompany transactions and balances have been eliminated. Isolagen Technologies was, for accounting purposes, the surviving entity of the Merger, and accordingly for the periods prior to the Merger, the financial statements reflect the financial position, results of operations and cash flows of Isolagen Technologies. The assets, liabilities, operations and cash flows of AFH and Gemini are included in the consolidated financial statements from August 10, 2001 onward.

13

Note 2.   Summary of Significant Accounting Policies

Interim financial information

                The financial statements included herein, which have not been audited pursuant to the rules and regulations of the Securities and Exchange Commission, reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods on a basis consistent with the annual audited statements. All such adjustments are of a normal recurring nature. The results of operations for interim periods are not necessarily indicative of the results that may be expected for any other interim period or a full year. Certain information, accounting policies and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted pursuant to such rules and regulation, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004 filed with the Securities and Exchange Commission on March 15, 2005 and the Form 10-K/A for the year ended December 31, 2004 filed with the Securities and Exchange Commission on April 28, 2005.

Use of Estimates

                The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Examples include provisions for bad debts and inventory obsolescence, useful lives of property and equipment and intangible assets, impairment of property and equipment and intangible assets, deferred taxes, and the provision for and disclosure of litigation and loss contingencies. Actual results may differ materially from those estimates.

Foreign Currency Translation

                The financial position and results of operations of the Company’s foreign subsidiaries are determined using the local currency as the functional currency. Assets and liabilities of these subsidiaries are translated at the exchange rate in effect at each period-end. Income statement accounts are translated at the average rate of exchange prevailing during the period. Adjustments arising from the use of differing exchange rates from period to period are included in accumulated other comprehensive income in shareholders’ equity. Gains and losses resulting from foreign currency transactions are included in earnings and have not been material in any one period.

                Balances of related after-tax components comprising accumulated other comprehensive income (loss) included in stockholders’ equity, at June 30, 2005 and December 31, 2004 are as follows:

	June 30,				December 31,
	2005				2004
Unrealized gains on available-for-sale securities	$	—			$	10,005
Foreign currency translation adjustment	(291,184			)	454,105
Accumulated other comprehensive income (loss)	$		(291,184	)	$	464,110

Statement of Cash Flows

                For purposes of the statements of cash flows, the Company considers all highly liquid investments (i.e., investments which, when purchased, have original maturities of three months or less) to be cash equivalents. At June 30, 2005, the Company had $2,968,000 of restricted cash. This cash is restricted for the purpose of securing future Exton, Pennsylvania facility lease payments due monthly through March 2008.

Concentration of Credit Risk

                The Company maintains its cash primarily with major U.S. domestic banks. The amounts held in these banks exceed the insured limit of $100,000 from time to time. The terms of these deposits are on demand to minimize risk. The Company has not incurred losses related to these deposits. Cash equivalents are maintained in two financial institutions. The Company invests these funds primarily in Fannie Mae and government securities.

                The Company’s short-term investments, as set forth below, subject it to certain credit risk that is concentrated in securities issued by U.S. government sponsored mortgage entities, and various U.S. states. Due to the credit ratings of these issuers, the Company does not believe that the credit risk is significant.

Short-Term Investments

                At June 30, 2005, the Company held certain investments in marketable debt securities as a means of temporarily investing the proceeds from its issuance of shares of common stock and 3.5% Convertible Subordinated Notes until the funds are needed for operating purposes. These investments are being accounted for as “available-for-sale” securities under Statement of Financial Accounting Standards (“SFAS”) No. 115, “Accounting for Certain Investments in Debt and Equity Securities.” As a result, the investments are reflected at their fair value, based on quoted market prices, with any unrealized gains and losses recorded in accumulated other comprehensive income until the investments are sold, at which time the realized gains and losses are included in the results of operations.

14

                The following sets forth information concerning marketable debt securities as of June 30, 2005:

					Gross
		Amortized			Unrealized	Fair
Type of Issue	Maturity	Cost			Gains (Losses)	Value
Mortgage-backed securities	2005	$		29,241,292	—	$	29,241,292
State and local government	2012-2044	16,050,000			—	16,050,000
Corporate	2021-2043	9,000,000			—	9,000,000
		$	54,291,292		—	$	54,291,292

                The face amount of the investments is equal to the amortized cost amount, except for mortgage-backed securities where the face amount is $29,297,000 at June 30, 2005. The Company’s investments in state and local government and corporate issues are principally investments in Auction Rate Securities (“ARS”), for which the interest rates are reset periodically through a Dutch auction process.

                The following sets forth the aggregate maturities of the Company’s investments in marketable debt securities without regard to the dates at which the interest rates for ARS investments reset:

	Amortized		Fair
Maturity	Cost		Value
2005	$	29,241,292	$	29,241,292
2006-2010	—		—
2011-2015	3,000,000		3,000,000
2016 and after	22,050,000		22,050,000
	$	54,291,292	$	54,291,292

                Proceeds from the sale of available-for-sale marketable debt securities were $62,010,000 and $70,810,000 for the three and six months ended June 30, 2005, and no realized gains and losses based on specific identification were included in the results of operations upon those sales.

Allowance for Doubtful Accounts

                The Company maintains an allowance for doubtful accounts related to its accounts receivable that have been deemed to have a high risk of collectibility. Management reviews its accounts receivable on a monthly basis to determine if any receivables will potentially be uncollectible. Management analyzes historical collection trends and changes in its customer payment patterns, customer concentration, and creditworthiness when evaluating the adequacy of its allowance for doubtful accounts. In its overall allowance for doubtful accounts, the Company includes any receivable balances that are determined to be uncollectible. Based on the information available, management believes the allowance for doubtful accounts is adequate; however, actual future write-offs may exceed the recorded allowance.

Inventory

                Inventory primarily consists of raw materials used in the Isolagen Process. Inventory is stated at the lower of cost or market and cost is determined by the weighted average method.

Property and equipment

                Property and equipment, consisting primarily of land, buildings, lab equipment, computer equipment, software, leasehold improvements and office furniture and fixtures is carried at cost less accumulated depreciation and amortization. Depreciation and amortization for financial reporting purposes is provided by the straight-line method over the estimated useful lives of three to five years, except for buildings, which have an estimated useful life of up to 25 years. Leasehold improvements are amortized using the straight-line method over the remaining lease term or the life of the asset, whichever is shorter. The cost of repairs and maintenance is charged as an expense as incurred.

In April 2005, the Company acquired a two-building corporate campus in Bevaix, Canton of Neuchâtel, Switzerland for $10,000,000 cash. Approximately $2,750,000 of the purchase price was allocated to the land and the remaining $7,250,000 was allocated to the buildings. The 100,000 square foot, five-acre facility was acquired from

15

Ascom, a Swiss-based microelectronics and information technology company.

                Included in property and equipment at June 30, 2005, as construction-in-progress, is $6,324,000 related to a Switzerland building currently under renovation and $1,099,000 related to the construction of our Exton production facility equipment.

Intangible assets

                The Company’s intangible assets represent patent applications which are recorded at cost. The Company has filed applications for patents in connection with technologies being developed. The patent applications and any patents issued as a result of these applications are important to the protection of the Company’s technologies that may result from its research and development efforts. Costs associated with patent applications and maintaining patents are expensed, unless future benefits are reasonably assured, in which case the costs are capitalized and amortized over their useful life. The Company currently has $540,000 included in intangible assets at June 30, 2005 and December 31, 2004 related to two pending patents. Amortization of this amount will begin once these patents are issued by the United States Patent and Trademark Office. The Company reviews the value recorded for intangibles to assess recoverability from future operations using undiscounted cash flows. Impairments are recognized in operating results to the extent the carrying value exceeds fair value determined based on the net present value of estimated future cash flows.

Debt Issue Costs

                The costs incurred in issuing the Company’s 3.5% Convertible Subordinated Notes, including placement agent fees, legal and accounting costs and other direct costs are included in Other Assets and are being amortized to expense using the effective interest method over five years, through November 2009. Debt issuance costs, net of amortization, were approximately $3,247,000 at June 30, 2005 and approximately $3,621,000 at December 31, 2004.

Accrued liabilities

                At June 30, 2005 and December 31, 2004, accrued liabilities include $528,000 and $493,000, respectively, for accrued compensation costs. At June 30, 2005 and December 31, 2004, accrued liabilities include $525,000 and $508,000, respectively, for accrued interest expense.

Treasury Stock

                The Company utilizes the cost method for accounting for its treasury stock acquisitions and dispositions.

Revenue recognition

                The Company recognizes revenue over the period the service is performed in accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements” (“SAB 104”). In general, SAB 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services rendered, (3) the fee is fixed and determinable, and (4) collectibility is reasonably assured.

                Currently the Isolagen Process is delivered through an attending physician to each patient using the Company’s recommended regimen of up to three injections. Due to the short shelf life, each injection is cultured on an as needed basis and shipped prior to the individual injection being administered by the physician. The Company believes each injection has stand alone value to the patient. The Company invoices the attending physician upon that physician submitting his or her patient’s tissue sample to the Company, as a result of which the contractual arrangement is between the Company and the medical professional. The amount invoiced varies directly with the number of injections requested. Generally, all orders are paid in advance by the physician prior to the first injection and are not refundable and there is no performance provision under any arrangement with any doctor, and there is no right to refund or returns for unused injections.

                As a result, the Company believes that the requirements of SAB 104 are met as each injection is shipped, as the risk of loss transfers to the customer at that time, the fee is fixed and determinable and collection is reasonably assured.

16

Advance payments are deferred until shipment. The amount of the revenue deferred represents the fair value of the remaining undelivered injections measured in accordance with Emerging Issues Task Force Issue (“EITF”) 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables,” which addresses the issue of accounting for arrangements that involve the delivery of multiple products or services. Should the physician discontinue the regimen prematurely all remaining deferred revenue is recognized.

                Revenue from licenses and other upfront fees are recognized on a ratable basis over the term of the respective agreement.

                The Company also offers a service whereby it stores a patient’s cells for later use in the preparation of injections, and a service whereby it processes a patient’s cells to expand the cells to the mass necessary to prepare an injection, but then store the expanded cells for later use in the preparation of injections. In accordance with EITF 00-21, the fees charged for both of these services are recognized as revenue ratably over the length of the storage agreement. No separate revenue is recognized for the initial cell expansion service, as the Company does not offer this service separately and the process of cell expansion has no value without either the subsequent preparation of an injection or the storage of the expanded cells for later use in the preparation of injections.

Promotional incentives

                The Company periodically offers promotional incentives to physicians on a case-by-case basis. Promotional incentives are provided to physicians in the form of “at no charge” Isolagen Treatments and Isolagen Treatments offered at a discount from the suggested price list. The Company does not receive any identifiable benefit from the physicians in exchange for any promotional incentives granted.

                In accordance with EITF 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products),” the Company does not record any revenue related to “at no charge” Isolagen Treatments and the estimated cost to provide such treatments is expensed as selling, general and administrative expense at the time the promotion is granted. The Company records discounts granted as a reduction in revenue (i.e., net revenue after discount) from that specific transaction.

                The Company typically does not charge customers for shipping and handling costs. These costs are included in selling, general and administrative expenses and totaled approximately $80,000 and $175,000 for the three and six months ended June 30, 2005, respectively, and approximately $50,000 and $105,000 for the three and six months ended June 30, 2004, respectively.

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 incurred to develop future manufacturing processes. We are currently developing an Automated Cell Expansion system, or ACE system, that will permit an automated cell growth and harvesting process. It is anticipated that the ACE system will eliminate several of the steps and materials involved in our current system, which we expect will lead to significant cost reductions in both skilled labor and materials and will enable scalable mass production. However, the commercial viability of the automation techniques under consideration is uncertain, and we do not know whether we will be successful in implementing our ACE System.

                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. Actual clinical trial costs may differ from estimated clinical trial costs and are adjusted for in the period in which they become known.

17

Costs of Exit Activities

                In September 2004, the Company approved a plan for the closure of its Australian facilities and the servicing of Australia from the Company’s London, England facility. The Company adopted this plan because it believed that anticipated processing enhancements and improved delivery logistics will eliminate the need for an Australian laboratory. The Company expects that the closure of the Australian facility will be completed by December 2005.

The costs associated with the closure of the Australian facilities, which are comprised principally of statutory or contractual employee severance costs and the cost of terminating certain contracts, are being accounted for in accordance with SFAS No. 146, “Accounting for Costs Associated with Exit or Disposal Activities.” Under SFAS No. 146, employee severance costs are accrued over the period beginning with the date on which the Company communicated the exit plan and the severance benefits to the affected employees, and ending on the date through which the affected employees must continue working to be entitled to the severance benefit, and costs incurred to terminate other contracts are accrued when the Company terminates the contract in accordance with the contract terms or has otherwise negotiated a termination with the counterparty. The exit costs charged to expense are included in selling, general and administrative expenses in the consolidated statements of operations. During June 2005, the Company fully paid and settled its early contract termination fee with an Australian distributor.

The following sets forth information about the major components of the exit costs:

	Costs Incurred for	Costs Incurred for
	Three Months Ended	Six months Ended	Cumulative Costs
	June 30, 2005	June 30, 2005	Incurred to Date
Employee severance	$—	3,695	$208,589
Contract termination	41,311	66,527	428,152
Total	$41,311	70,222	$636,741

The following sets forth information about the changes in the accrued exit costs for the six months ended June 30, 2005:

	Accrued Liability	Costs Charged	Costs Paid		Accrued Liability
	December 31, 2004	to Expense	or Settled		June 30, 2005
Employee severance	$—	$3,695	$(3,695	)	$—
Contract Termination	361,625	66,527	(428,152	)	—
Total	$361,625	$70,222	$(431,847	)	$—

The Company has discontinued depreciating the equipment it intends to dispose of and has reclassified the equipment, at estimated fair value, as assets held for sale in the consolidated balance sheet. A third party has estimated the fair market value of lab and office equipment at approximately $97,000.

Stock based compensation and expenses

                The Company accounts for its stock-based compensation under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123 “Accounting for Stock Based Compensation.” Under SFAS No. 123, the Company is permitted to either record expenses for stock options and other employee compensation plans based on their fair value at the date of grant or to continue to apply the provisions of Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees,” (“APB No. 25”), and recognize compensation expense, if any, based on the intrinsic value of the equity instrument at the measurement date. To the extent the options have cashless exercise provisions, the Company utilizes variable accounting. The Company has elected to continue following the provisions of APB No. 25. Stock options issued to other than employees or directors are recorded on the basis of their fair value as required by SFAS No. 123.

The Company from time to time issues common stock, stock options or common stock warrants to acquire services or goods from non-employees. Common stock, stock options and common stock warrants issued to other than employees or directors are recorded on the basis of their fair value, as required by SFAS No. 123, which is measured as of the date required by EITF Issue 96-18, “Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services.” In accordance with EITF 96-18, the stock options or

18

common stock warrants are valued using the Black-Scholes model on the basis of the market price of the underlying common stock on the “valuation date,” which for options and warrants related to contracts that have substantial disincentives to non-performance is the date of the contract, and for all other contracts is the vesting date. Expense related to the options and warrants is recognized on a straight-line basis over the shorter of the period over which services are to be received or the vesting period. Where expense must be recognized prior to a valuation date, the expense is computed under the Black-Scholes model on the basis of the market price of the underlying common stock at the end of the period, and any subsequent changes in the market price of the underlying common stock up through the valuation date is reflected in the expense recorded in the subsequent period in which that change occurs.

In December 2002, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148, “Accounting for Stock-Based Compensation-Transition and Disclosure.” This statement provides guidance for those companies wishing to voluntarily change to the fair value based method of accounting for stock-based compensation. SFAS No. 148 also amends the disclosure requirements of SFAS No. 123, requiring prominent disclosure in annual and interim financial statements regarding a company’s method for accounting for stock-based employee compensation and the effect of the method on reported results. While Isolagen continues to utilize the disclosure-only provisions of SFAS No. 123, the Company has modified its disclosures to comply with SFAS No. 148.

Had compensation costs for the Company’s stock option grants to employees and directors been determined based on the fair value at the grant date consistent with the provisions of SFAS No. 123, the Company’s net loss and net loss per share would have increased to the pro forma amounts indicated below:

	Three Months Ended June 30,				Six Months Ended June 30,
	2005		2004		2005		2004
Net loss attributable to common shareholders, as reported	$(9,989,213	)	$(3,859,319	)	$(16,420,419	)	$(8,726,063	)
Add: Stock-based employee compensation expense (gain) included in reported net loss, net of related tax effects of $0	979		(109,685	)	26,708		339,505
Less: Total stock-based employee compensation expense determined under fair value based method for all rewards granted to employees, net of related tax effect of $0	103,775		(974,303	)	(1,431,970	)	(2,074,386	)
Net loss, pro forma	$(9,884,459	)	$(4,943,307	)	$(17,825,681	)	$(10,460,944	)
Net loss per share, as reported:
basic and diluted	$(0.33	)	$(0.14	)	$(0.54	)	$(0.32	)
Net loss per share, pro forma:
basic and diluted	$(0.33	)	$(0.18	)	$(0.59	)	$(0.38	)

                As required under SFAS 123 and SFAS 148, the pro forma effects of stock-based compensation on net loss per share have been estimated at the date of grant using the Black Scholes option-pricing model based on the following weighted average assumptions:

	Six Months		Six Months
	Ended		Ended
	June 30, 2005		June 30, 2004
Expected life (years)	5 Years		5 Years
Interest rate	4	%	4	%
Dividend yield	—		—
Volatility	78	%	71	%

Income taxes

An asset and liability approach is used for financial accounting and reporting for income taxes. Deferred income taxes arise from temporary differences between income tax and financial reporting and principally relate to recognition of revenue and expenses in different periods for financial and tax accounting purposes and are measured using currently

19

enacted tax rates and laws. In addition, a deferred tax asset can be generated by net operating loss carryforwards (“NOLs”). If it is more likely than not that some portion or all of a deferred tax asset will not be realized, a valuation allowance is recognized.

Loss per share data

Basic loss per share is calculated based on the weighted average common shares outstanding during the period, after giving effect to the manner in which the merger was accounted for as described in Note 1. Diluted earnings per share also gives effect to the dilutive effect of stock options, warrants (calculated based on the treasury stock method) and convertible preferred stock and debt. The Company does not present diluted earnings per share for years in which it incurred net losses as the effect is antidilutive.

At June 30, 2005, options and warrants to purchase 8,659,478 shares of common stock at exercise prices ranging from $1.50 to $11.38 per share were outstanding, but were not included in the computation of diluted earnings per share due to their antidilutive effect.At June 30, 2004, options and warrants to purchase 7,144,551 shares of common stock at exercise prices ranging from $1.50 to $11.38 per share were outstanding, but were not included in the computation of diluted earnings per share due to their antidilutive effect. In addition, our 3.5% convertible, subordinated debt is convertible at $9.16 per common share, but were not included in the computation of diluted earnings per share due to the antidilutive effect

Comprehensive loss

                Comprehensive loss encompasses all changes in equity other than those with shareholders and consists of net loss and foreign currency translation adjustments and unrealized gains and losses on available-for-sale marketable debt securities. The Company does not provide for U.S. income taxes on foreign currency translation adjustments since it does not provide for such taxes on undistributed earnings of foreign subsidiaries. Comprehensive loss is calculated as follows:

	Six months			Six months
	ended			ended
	June 30, 2005			June 30, 2004
Net loss	$	(16,420,419	)	$	(8,726,063	)
Foreign currency translation adjustment	(745,289		)	23,570
Net unrealized loss on available-for-sale securities	(10,005		)	—
Comprehensive loss	$	(17,175,713	)	$	(8,702,493	)

Fair Value of Financial Instruments

                The Company’s financial instruments consist of accounts receivable, marketable debt securities, accounts payable and convertible subordinated debentures. The fair values of the Company’s accounts receivable and accounts payable approximate, in the Company’s opinion, their respective carrying amounts. The Company’s marketable debt securities are carried at fair value. The Company’s convertible subordinated debentures were quoted at approximately 72% of par value on June 30, 2005. Accordingly, the fair value of our convertible subordinated debentures is approximately $64,800,000 at June 30, 2005.

Reclassifications

                In the fourth quarter of 2004, the Company changed the manner by which it classifies the costs incurred in its London and Australia facilities as either costs of sales or selling, general and administrative expenses. The Company believes that the new classifications better reflect the primary purpose and functions of each of these facilities. The new manner of classifying these costs is reflected in the accompanying consolidated statements of operations for all periods presented. The reclassifications did not have any effect on net loss or net loss per share.

                In the fourth quarter of 2004, the Company changed the manner by which it classifies losses on disposal of assets and includes these amounts in selling, general and administrative expenses. The new manner of classifying these costs is reflected in the accompanying consolidated statements of operations for all periods presented. The reclassifications did not have any effect on net loss or net loss per share.

20

Recent accounting pronouncements

                In December 2004, the FASB issued SFAS No. 123 (Revised 2004), “Share Based Payment,” which eliminates the use of APB Opinion No. 25 and will require the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the reward (the requisite service period). No compensation cost is recognized for equity instruments for which employees do not render the requisite service. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments.  SFAS 123 (Revised) must be applied to all options granted or modified after its effective date and also to recognize the cost associated with the portion of any option awards made before its effective date for with the associated service has not been rendered as of its effective date. The Company is still studying the requirements of SFAS No. 123 (Revised 2004) and has not yet determined what impact it will have on the Company’s results of operations and financial position. On April 14, 2005, the U.S. Securities and Exchange Commission announced that the effective date of SFAS 123(Revised) is deferred for calendar year companies until the beginning of 2006.

                In May, 2005 the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections -

a replacement of APB Opinion No. 20 and FASB Statement No. 3.” SFAS No. 154 replaces APB Opinion (“APB”) No. 20, “Accounting Changes”, and SFAS No. 3, “Reporting Accounting Changes in Interim Financial Statements,” and changes the requirements for the accounting for and reporting of a change in accounting principle. SFAS No. 154 will apply to all voluntary changes in accounting principle as well as to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle.  SFAS No. 154 requires retrospective application to prior periods’ financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, SFAS No. 154 requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, SFAS No. 154 requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. SFAS No. 154 carries forward without change the guidance contained in APB No. 20 for reporting the correction of an error in previously issued financial statements and a change in accounting estimate, and also the guidance in APB No. 20 requiring justification of a change in accounting principle on the basis of preferability. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date SFAS No. 154 was issued. The Company presently does not believe that the adoption of the provisions of SFAS No. 154 will have a material affect on its financial statements.

21

Note 3.   Contingencies

                On October 9, 1996, the Company was advised by the Enforcement Division of the Securities and Exchange Commission (the “Commission”) that it is considering recommending that the Commission bring an enforcement action, which could include a civil penalty, against the Company in U.S. District Court for failing to file timely periodic reports in violation of Section 13(a) of the Securities and Exchange Act of 1934 and the rules thereunder.

                In October 1996, the Company also received a request for the voluntary production of information to the Enforcement Division of the Commission related to the resignation of Coopers & Lybrand LLP and the termination of Arthur Andersen LLP and the appointment of Jones, Jensen & Company as the Company’s independent public accountants and the reasons therefore. In addition, the Company was requested to provide certain information with respect to its previous sales of securities. The Company cooperated in providing information in response to these inquiries in early 1997. The Company has not been advised of the outcome of the foregoing, and has had no further contact by the Enforcement Division of the Commission.

Note 4.   Equity, Stock Plan and Warrants

Equity instruments issued to non-employees

                From time to time, in order to preserve cash and to fund operating activities of the Company, common stock or other equity instruments may be issued for cash or in exchange for goods or services. Equity instruments issued for goods or services are recorded at the fair value of the goods or services received or the fair value of the equity instruments issued, whichever is more reliably measurable.

Common Stock

                During the three months ended March 31, 2005, the Company issued 25,000 shares of common stock for cash totaling $75,000 in connection with the exercise of stock options. During the three months ended June 30, 2005, the Company issued 27,785 shares of common stock in exchange for the cashless exercise of warrants.

2001 Stock Option and Stock Appreciation Rights Plan

                Effective August 10, 2001, the Company adopted the Isolagen, Inc. 2001 Stock Option and Stock Appreciation Rights Plan (the “Stock Plan”). The Stock Plan is discretionary and allows for an aggregate of up to 5,000,000 shares of the Company’s common stock to be awarded through incentive and non-qualified stock options and stock appreciation rights. The Stock Plan is administered by the Company’s Board of Directors, who has exclusive discretion to select participants who will receive the awards and to determine the type, size and terms of each award granted.

In the first quarter of 2005, the Company issued under the Stock Plan a total of 56,000 options to purchase its common stock with an exercise price of $7.24 per share to three employees. The options vest over a three year period from the date of grant. In the second quarter of 2005, the Company issued under the Stock Plan a total of 1,100 options to purchase its common stock with an exercise price of $5.08 per share to one employee. The options vest over a three year period from the date of grant.

2003 Stock Option and Stock Appreciation Rights Plan

                On January 29, 2003, the Company’s Board of Directors approved the 2003 Stock Option and Appreciation Rights Plan (the “2003 Stock Plan”). The 2003 Stock Plan is discretionary and allows for an aggregate of up to 2,250,000 shares of the Company’s common stock to be awarded through incentive and non-qualified stock options and stock appreciation rights. The 2003 Stock Plan is administered by the Company’s Board of Directors, who has exclusive discretion to select participants who will receive the awards and to determine the type, size and terms of each award granted.

                In the first quarter of 2005, the Company issued a total of 80,000 options to purchase its common stock with an exercise price of $7.67 per share to four board members. The options vest over a one year period.  Further, the Company issued a total of 100,000 options to purchase its common stock with an exercise price of $7.24 per share to six employees. The options vest over a three year period from the date of grant. No options were granted under the 2003 Stock Plan during the second quarter of 2005.

2005 Equity Incentive Plan

                On April 26, 2005, the Company’s Board of Directors approved the 2005 Equity Incentive Plan (the “2005 Stock Plan”). The 2005 Stock Plan is discretionary and allows for an aggregate of up to 2,100,000 shares of the Company’s common stock to be awarded through incentive and non-qualified stock options, stock units, stock awards, stock appreciation rights and other stock-based awards. The 2005 Stock Plan is administered by the Compensation Committee of the Company’s Board of Directors, who has exclusive discretion to select participants who will receive the awards and to determine the type, size and terms of each award granted.

In the second quarter of 2005, the Company issued 400,000 options to purchase its common stock with an exercise price of $3.45 per share to the Company’s Chairman and Interim Chief Executive Officer. The options vest on a monthly basis from the date of grant through December 31, 2007.

22

Other Stock Options

                In the first quarter of 2005, the Company did not issue any options outside the Stock Plan or the 2003 Stock Plan. In the second quarter of 2005, the Company issued 810,000 options outside the Stock Plan, the 2003 Stock Plan and the 2005 Stock Plan. The exercise prices range from $4.45 to $5.08 per share.  650,000 of these options vest over three years from the date of grant and 160,000 of these options vest over two years from the date of grant.

Warrants and Options Issued for Services

As of June 30, 2005, the Company has outstanding 653,600 warrants and options issued to non-employees under consulting and distribution agreements. The following sets forth certain information concerning these warrants and options:

	Vested	Unvested
Warrants and options outstanding	472,765	180,835
Vesting period	n/a	3 to 36 mos.
Range of exercise prices	$1.50-$10.49	$3.50-$10.49
Weighted average exercise price	$4.96	$6.24
Expiration dates	2007-2012	2007-2013

Income related to these contracts was approximately $63,000 and $55,000 for the three and six months ended June 30, 2005, respectively.  Expense related to these contracts was approximately $300,000 and $1,300,000 for the three and six months ended June 30, 2004, respectively. The income and expense was calculated using the Black Scholes option-pricing model based on the following weighted average assumptions for the six months ended June 30, 2005 and 2004:

	Six Months		Six Months
	ended		ended
	June 30, 2005		June 30, 2004
Expected life (years)	5 Years		5 Years
Interest rate	4	%	4	%
Dividend yield	—		—
Volatility	83	%	83	%

Note 5.Geographical Information

                The Company operates its business on the basis of a single reportable segment. The Company markets its products on a global basis. The Company’s principal markets are the United States, Europe and Australia. While no commercial operations have commenced in the United States, the United States is presented separately as it is the Company’s headquarters.

The following sets forth revenues and property and equipment, net, by geographical location:

	Revenues
	Three months ended June 30,
	2005		2004
United States	$	—	$	—
United Kingdom	2,346,513		454,616
Australia	—		89,630
Total	$	2,346,513	$	544,246

	Revenues
	Six months ended June 30,
	2005		2004
United States	$	—	$	—
United Kingdom	5,013,047		656,295
Australia	—		177,308
Total	$	5,013,047	$	833,603

	Property and Equipment, net
	June 30,		December 31,
	2005		2004
United States	3,429,560		1,824,296
United Kingdom	1,825,610		1,574,077
Switzerland	10,174,416		—
Australia	—		236,619
Total	$	15,429,586	$	3,634,992

23

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following discussion should be read in conjunction with the information contained in the unaudited consolidated financial statements, including the notes thereto, and in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2004, with any amendments thereto, filed with the Securities and Exchange Commission (“SEC”).

Forward-Looking Information

                This report contains certain “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, as well as information relating to Isolagen that is based on management’s exercise of business judgment and assumptions made by and information currently available to management. When used in this document and other documents, releases and reports released by us, the words “anticipate,” “believe,” “estimate,” “expect,” “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. The discovery and development of applications for autologous cellular therapy are subject to substantial risks and uncertainties. There can be no assurance that Isolagen’s trials relating to autologous cellular therapy applications for the treatment of dermal defects or gingival recession can be conducted within the timeframe that Isolagen expects, that such trials will yield positive results, or that additional applications for the commercialization of autologous cellular therapy can be identified and advanced into human clinical trials. These and other factors, some of which are described below, could cause future results to differ materially from the expectations expressed in this report.    Although we believe that our expectations are based on reasonable assumptions, we can give no assurance that our expectations will materialize. Many factors could cause actual results to differ materially from our forward looking statements. Several of these factors include, without limitation:

•our ability to develop autologous cellular therapies that have specific applications in cosmetic dermatology, and our ability to explore (and possibly develop) applications for periodontal disease, reconstructive dentistry and other health-related markets;

•whether our clinical human trials relating to autologous cellular therapy applications for the treatment of dermal defects or gingival recession can be conducted within the timeframe that we expect, whether such trials will yield positive results, or whether additional applications for the commercialization of autologous cellular therapy can be identified by us and advanced into human clinical trials;

•our ability to provide and deliver any autologous cellular therapies that we may develop, on a basis that is cost competitive with other therapies, drugs and treatments that may be provided by our competitors;

•our ability to finance our business;

•our ability to improve our current pricing model;

•our ability to decrease our cost of goods sold through the development of our Automated Cell Expansion (“ACE”) System that permits an automated harvesting process in a closed loop sterile environment, which we believe will eliminate several of the steps and materials involved in our current system and will lead to significant cost reductions in both skilled labor and materials and will enable scalable mass production;

•our ability to complete and integrate the ACE System into our UK operations;

•our ability to service the demand for our dermal product in the United Kingdom, which is highly dependent on our ability to complete and integrate the ACE System or institute other process improvements;

•our ability to significantly reduce our need for fetal bovine calf serum for culturing cells, which process is in the exploratory phase and which we hope will result in an 80% or greater reduction in the use of such serum;

•a stable interest rate market in the world, and specifically the countries we are doing business in or plan to do business in;

•management’s ability to estimate the patient data including patients started and patients completed;

24

•a stable currency rate environment in the world, and specifically the countries we are doing business in or plan to do business in;

•our ability to receive requisite regulatory approvals in the United States, Europe, Asia and the Americas, and our ability to retain the licenses that we have obtained and may obtain; and the absence of adverse regulatory developments in the United States, Europe, Asia and the Americas or any other country where we plan to conduct commercial operations;

•continued availability of supplies at satisfactory prices;

•no new entrance of competitive products in our markets;

•no adverse publicity related to our products or the Company itself;

•no adverse claims relating to our intellectual property;

•the adoption of new, or changes in, accounting principles; and/or legal proceedings;

•our ability to maintain compliance with the AMEX requirements for continued listing of our common stock;

•the costs inherent with complying with new statutes and regulations applicable to public reporting companies, such as the Sarbanes-Oxley Act of 2002;

•our ability to efficiently integrate future acquisitions, if any;

•other new lines of business that we may enter in the future; and

•other risks referenced from time to time elsewhere in this report and in our filings with the SEC.

                These factors are not necessarily all of the important factors that could cause actual results of operations to differ materially from those expressed in these forward-looking statements. Other unknown or unpredictable factors also could have material adverse effects on our future results. We undertake no obligation and do not intend to update, revise or otherwise publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of any unanticipated events. We cannot assure you that projected results will be achieved.

RECENT DEVELOPMENTS

The Company announced on August 1, 2005 the results of the Phase III dermal studies. The dermal studies met three of the four primary end points and achieved statistical significance when combined. The studies’ primary end points were based on blinded patient and physician visual assessment using a six-point scale with a two point change required to meet the endpoint. Trial B of the study proved to be statistically significant with both the patient and physician assessment achieving positive results. Trial A results were mixed with a positive assessment from the patients only. In addition, there was a wide variance in results from site to site with a range of response rates from 73.3% to 7.6%, where a “response” represents an improvement of at least two points, on a six point scale, based on a visual assessment performed by the physician. The Company believes that this range of outcomes suggests that results are dependent on injection technique. The Company will commence a 100 patient clinical trial in November 2005 with a six month endpoint. The Company anticipates that the results of the new study together with the positive Phase III study B results will support a BLA filing in 2006.

The Company completed a Phase I clinical trial for its second candidate for the treatment of periodontal disease in late 2003. In the second quarter of 2004, the Company initiated a Phase II clinical trial for the cosmetic, or “black triangle,” application of this product candidate. This Phase II clinical trial concluded during the second quarter of 2005. The analysis of the Investigator and Subject Visual Analog Scale assessment demonstrated that the Isolagen Process was statistically superior to placebo at four months after treatment. Although results of the Investigator and Subject assessment demonstrate that the Isolagen Process was statistically superior to placebo, an analysis of objective linear measurements did not yield statistically significant results despite a positive change observed as a result of treatment with the Isolagen Process. The Company’s clinical experts believe that current measurement techniques are not precise enough to accurately record the positive change. The Company is investigating alternative measurement techniques to assess change in future trials.

GENERAL

                We specialize in the development and commercialization of autologous cellular technology that has specific applications in cosmetic dermatology and are exploring applications for periodontal disease, reconstructive dentistry and

25

other health-related markets. Our ability to operate profitably under our current business plan is largely contingent upon our success in obtaining regulatory approval to sell our products and upon our successful development of markets for our products and the development of profitable manufacturing processes. We may be required to obtain additional capital in the future to support these efforts or expand our operations. No assurance can be given that we will be able to obtain such regulatory approvals, successfully develop the markets for our products or develop profitable manufacturing methods, or obtain such additional capital as we might need, either through equity or debt financing, on satisfactory terms or at all. Additionally, no assurance can be given that any such financing, if obtained, will be adequate to meet our ultimate capital needs and to support our growth. If adequate capital cannot be obtained on satisfactory terms, our operations could be negatively impacted.

                If we achieve growth in our operations in the next few years, such growth could place a strain on our management, administrative, operational and financial infrastructure. Our ability to manage operations and growth requires the continued improvement of operational, financial and management controls, reporting systems and procedures. In addition, we may find it necessary to hire additional management, financial and sales and marketing personnel to manage our expanding operations. If we are unable to manage this growth effectively and successfully, our business, operating results and financial condition may be materially adversely affected.

                Although the focus of our efforts has been and will continue to be the development, testing and approval of the aesthetic and dental applications of our process, and research into other applications of our process, as a result of which our company is still considered to be a “development stage” enterprise, we have, since 2002, made Isolagen Process injections available to physicians in the United Kingdom and Australia as a means of developing our marketing, sales and manufacturing processes. Revenues from the sale of these treatments were approximately $2.3 million for the three months ending June 30, 2005 and approximately $5.0 million for the six months ended June 30, 2005.

                As of June 30, 2005, we had cash, cash equivalents and short-term investments of $88.4 million. We believe our existing capital resources are adequate to finance our operations until June 30, 2007, however our long-term viability is dependent upon the successful operation of our business, our ability to automate our manufacturing process, the approval of our products and the ability to raise additional debt and equity to meet our business objectives.

CRITICAL ACCOUNTING POLICIES

                The following discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States of America. Our significant accounting policies are more fully described in Note 2 of Notes to the Unaudited Consolidated Financial Statements. However, certain accounting policies and estimates are particularly important to the understanding of the our financial position and results of operations and require the application of significant judgment by our management or can be materially affected by changes from period to period in economic factors or conditions that are outside the control of management. As a result they are subject to an inherent degree of uncertainty. In applying these policies, our management uses their judgment to determine the appropriate assumptions to be used in the determination of certain estimates. Those estimates are based on our historical operations, our future business plans and projected financial results, the terms of existing contracts, our observance of trends in the industry, information provided by our customers and information available from other outside sources, as appropriate. The following discusses our significant accounting policies and estimates.

                Revenue Recognition:  We recognize revenue over the period the service is performed in accordance with SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements” (“SAB 104”). In general, SAB 104 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists, (2) delivery has occurred or services rendered, (3) the fee is fixed and determinable and (4) collectibility is reasonably assured.

                Currently the Isolagen Process is administered by an attending physician to each patient using our recommended regimen of up to three injections. Due to the short shelf life, each injection is cultured on an as needed basis and shipped prior to the individual injection being administered by the physician. We believe each injection has stand alone value to the patient. We invoice the attending physician upon that physician submitting his or her patient’s tissue sample to us; as a result of which the contractual arrangement is between us and the medical professional. The amount invoiced varies directly with

26

the number of injections requested. Generally, orders are paid in advance by the physician prior to the first injection and are not refundable and there is no performance provision under any arrangement with any doctor, and there is no right to refund, or returns for unused injections.

                As a result, we believe that the requirements of SAB 104 are met as each injection is shipped, as the risk of loss transfers to the customer at that time, the fee is fixed and determinable and collection is reasonably assured. Advance payments are considered deferred revenue until shipment. The amount of the revenue deferred represents the fair value of the remaining undelivered injections measured in accordance with Emerging Issues Task Force Issue (“EITF”) 00-21, “Accounting for Revenue Arrangements with Multiple Deliverables,” which addresses the issue of accounting for arrangements that involve the delivery of multiple products or services. Should the physician discontinue the regimen prematurely all remaining deferred revenue is recognized.

                Revenue from licenses and other upfront fees are recognized on a ratable basis over the term of the respective agreement.

                We also offer a service whereby we store a patient’s cells for later use in the preparation of injections, and a service whereby we process a patient’s cells to expand the cells to the mass necessary to prepare an injection, but then store the expanded cells for later use in the preparation of injections. In accordance with EITF 00-21, the fees charged for both of these services are recognized as revenue ratably over the length of the storage agreement. No separate revenue is recognized for the initial cell expansion service, as we do not offer this service separately and the process of cell expansion has no value without either the subsequent preparation of an injection or the storage of the expanded cells for later use in the preparation of injections. This service resulted in less than $0.1 million of revenue during the three and six months ended June 30, 2005.

                In accordance with EITF 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products),” the Company does not record any revenue related to “at no charge” Isolagen Treatments and the estimated cost to provide such treatments is expensed as selling, general and administrative expense at the time the promotion is granted. The Company records discounts granted as a reduction in revenue (i.e., net revenue after discount) from that specific transaction.

                Cost of Sales and Selling, General and Administrative Expenses and Research and Development Expenses:  In the fourth quarter of 2004, we changed the manner by which we classify the costs incurred in our London and Australia facilities as either costs of sales or selling, general and administrative expenses or research and development expenses. We believe that the new classifications better reflect the primary purpose and functions of each of these facilities, as described below. The new manner of classifying these costs is reflected in the accompanying consolidated statements of operations for all periods presented. The reclassifications did not have any effect on net loss or net loss per share.

                The primary purpose of our Houston, Texas facility is to conduct research on the development, testing and approval of the aesthetic and dental applications of our process, including the required clinical trials, and research into other applications of our process, while our London and Australia (expected to be closed by December 2005) facilities were engaged in the commercialization of our process (for which they earned revenues from the sale of Isolagen Process Injections) in these markets as a means of improving manufacturing technologies that are more automated and therefore can be used to produce commercial quantities of injections on a profitable basis. Therefore, we have classified as cost of sales the costs (except for costs related to marketing, sales and general corporate administration) incurred in operating our London and Australia facilities, while the costs incurred in operating our Houston, Texas facility (except for costs related to general corporate administration) have been classified as research and development expenses. Previously some of the costs of operating our London and Australia facilities now included in cost of sales had been included in selling, general and administrative expenses and research and development expenses.

                Costs of sales includes salaries and benefits, costs paid to third-party contractors to develop and manufacture drug materials and delivery devices, and a portion of facilities cost. Those costs, except for the costs of raw materials that have not been used, are expensed as incurred to cost of sales.

                Historically, autologous cell companies have been hampered by manufacturing technologies that use traditional methodology for culturing cells through the utilization of plastic flasks. This methodology is labor intensive, slow, involves many sterile interventions and is costly. The use of this process to produce Isolagen Process injections in commercial quantities would not, over time, be profitable. We have been using the commercialization of our process in these markets as

27

a means of researching and developing manufacturing technologies that are more automated and therefore can be used to produce commercial quantities of injections on a profitable basis. Cumulative to date, our cost of sales has exceeded our revenues. This reflects the fact that the level of our sales from our commercialization efforts in the United Kingdom and previously Australia, while increasing over 2004, have not yet reached the levels necessary for profitable operations, and the development and implementation of our automated processes has not yet achieved all of the cost efficiencies we hope to achieve.

                If, in the future, the purposes for which we operate our Houston, Texas, or London facilities, or any new facilities we open, changes, the allocation of the costs incurred in operating that facility between cost of sales and research and development expenses could change to reflect such operational changes. During the three months ended June 30, 2005, we entered into a non-cancelable three year operating lease in Exton, Pennsylvania. This new Exton facility currently houses members of our senior management team and the Finance department. We recently began constructing a production line in a portion of this facility in anticipation of eventual FDA approval. We expect to complete the facility during 2005, and complete validation of the production line during 2006.

                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 incurred to develop future manufacturing processes. We are currently developing an Automated Cell Expansion system, or ACE system, that will permit an automated cell growth and harvesting process. It is anticipated that the ACE system will eliminate several of the steps and materials involved in our current system, which we expect will lead to significant cost reductions in both skilled labor and materials and will enable scalable mass production. However, the commercial viability of the automation techniques under consideration is uncertain, and we do not know whether we will be successful in implementing our ACE System.

                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. Actual clinical trial costs may differ from estimated clinical trial costs and are adjusted for in the period in which they become known.

                Intangible Assets:  Our intangible assets represent patent applications which are recorded at cost. We have filed applications for patents in connection with technologies being developed. The patent applications and any patents issued as a result of these applications are important to the protection of our technologies that may result from our research and development efforts. Costs associated with patent applications and maintaining patents are capitalized when future benefits are reasonably assured and will be amortized over the life of the patents. We review the value recorded for intangibles to assess recoverability from future operations using undiscounted cash flows. Impairments are recognized in operating results to the extent the carrying value exceeds fair value determined based on the net present value of estimated future cash flows. The projection of future cash flows requires us to make estimates about when product approvals may be obtained, and the amount of future revenues. The actual future results could differ significantly from these estimates, and resulting changes in the estimates of future cash flows could be significant and could affect the recoverability of intangible assets.

                Stock-Based Compensation:  We account for our stock-based compensation under the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123—”Accounting for Stock Based Compensation.” Under SFAS No. 123, we are permitted to either record expenses for stock options and other employee compensation plans based on their fair value at the date of grant or to continue to apply the provisions of Accounting Principles Board Opinion No. 25 “Accounting for Stock Issued to Employees,” (“APB No. 25”), and recognize compensation expense, if any, based on the intrinsic value of the equity instrument at the measurement date. We have elected to continue following the provisions of APB No. 25. Stock options issued to other than employees or directors are recorded on the basis of their fair value as required by SFAS No. 123.

                Beginning the first quarter of fiscal year 2006, we will be required to adopt SFAS No. 123 (Revised 2004), “Share Based Payment,” which eliminates the use of APB Opinion No. 25 and we will be required to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. That cost will be recognized over the period during which an employee is required to provide service in exchange for the reward—the requisite service period. No compensation cost will be recognized for equity instruments for which employees do not render

28

the requisite service. The grant-date fair value of employee share options and similar instruments will be estimated using option-pricing models adjusted for the unique characteristics of those instruments. SFAS No. 123 (Revised 2004) must be applied to all options granted or modified after its effective date and also to recognize the cost associated with the portion of any option awards made before its effective date for which the associated service has not been rendered as of its effective date. We are still studying the requirements of SFAS No. 123 (Revised 2004) and have not yet determined what impact it will have on our results of operations and financial position.

RESULTS OF OPERATIONS

Comparison of the three months ending June 30, 2005 and 2004

                REVENUES.  Revenues increased $1.8 million to $2.3 million for the three months ended June 30, 2005, as compared to $0.5 million for the three months ended June 30, 2004. The increase in revenues is primarily attributable to the continuation of operations in the United Kingdom, increased demand and, accordingly, increased treatments shipped.  Product volumes increased by approximately 395% during the three months ended June 30, 2005, as compared to the three months ended June 30, 2004. Average selling price per milliliter of treatment decreased approximately 15% during the three months ended June 30, 2005, as compared to the three months ended June 30, 2004. Average selling price has fluctuated as the Company continues to investigate various price points in the European market.

                Promotional activities in the United Kingdom include direct to consumer advertising and special events.  Our marketing communications are governed by the UK advertising rules, based on voluntary code and statutory provisions.  The Advertising Standards Authority (the “ASA”) is the UK entity that monitors and regulates the content of advertising in the United Kingdom.  In June 2004, the Medicines and Healthcare products Regulatory Agency (the “MHRA”) informed Isolagen that it had received inquiries about the Isolagen product. Accordingly, the MHRA requested copies of all the material used to advertise and/or promote Isolagen within the United Kingdom for review.  Following this inquiry and based on our discussions with both the MHRA and the ASA, we agreed to modify our advertising and promotional materials to address concerns, including clarifying the regulatory status of the product in the United Kingdom and deleting references to long-lasting effects. We do not believe these modifications will seriously affect our ability to generate future sales though it is possible that further questions could be forthcoming from the agency requiring further revisions to promotional material. Such revisions could negatively impact our ability to promote the product. However, the Company has subsequently resumed its advertising with the modified content approved by the ASA.

                The Isolagen Process involves a patient’s physician obtaining an approximately three millimeter punch skin sample from the patient. The skin sample is packed in a container provided by us and shipped overnight to our laboratory. We invoice the physician upon receipt of the skin sample. The specimen is then cultured utilizing our Isolagen Process. Approximately six weeks later the patient’s cells are sent to the doctor for treatment. Additional amounts are available for re-injection every two to three weeks.  For example, for three injection treatments we recognize one-third of the revenue associated with each treatment upon the shipment of the first injection to the patient’s physician, an additional one-third of revenue associated with each treatment is recognized upon shipment of the second injection to the patient’s physician, and the remaining one-third is recognized upon the shipment of the last injection to the patient’s physician. For two injection treatments, we recognize one-half of the revenue associated with each treatment upon the shipment of the first injection to the patient’s physician and the remaining one-half of revenue is recognized upon shipment of the second injection to the patient’s physician.

                The revenues which we recognized during the three months ended June 30, 2005 and 2004 from our United Kingdom operations were in part reduced by the effects of promotional incentives provided to doctors utilizing the Isolagen Process. We expect to continue providing such promotional incentives to doctors during the introduction phase of the Isolagen Process in the United Kingdom.

                We also offer a service whereby we store a patient’s cells for later use in the preparation of injections, and a service whereby we process a patient’s cells to expand the cells to the mass necessary to prepare an injection, but then store the expanded cells for later use in the preparation of injections. The fees charged for both of these services are recognized as revenue ratably over the length of the storage agreement. Revenues from these services in each three month period ended June 30, 2005 and 2004 were less than $0.1 million.

COST OF SALES.  Costs of sales increased $1.8 million to $2.8 million for the three months ended June 30, 2005, as compared to $1.0 million for the three months ended June 30, 2004. The increase in cost of sales is primarily related to the increase in activities of our London facility. The increase resulted from increases in essentially all categories of costs as this facility increased its commercialization of our process and revenues have increased. During the three months ended June 30, 2005, the Company has continued to increase manufacturing headcount and related overhead costs in anticipation of future increases in demand. As a result, our cost of sales for the three months ended June 30, 2005 increased, as compared to our cost of sales for the three months ended March 31, 2005, despite the fact that our product sales declined in

29

the three months ended June 30, 2005 as compared to the three months ended March 31, 2005. For both the three and six months ended June 30, 2005, our cost of sales exceeded revenues as the development and implementation of our automated processes has not yet achieved all of the cost efficiencies we anticipate.

As a percentage of revenues, cost of sales were approximately 118% for the three months ended June 30, 2005 and approximately 186% for the three months ended June 30, 2004. The change in this percentage is the result of the low level of sales activity during 2004, given the London facility’s early stage of commercial development, and the associated low level of operational activity. Since 2002 we have made our Isolagen Process available to physicians in the United Kingdom. The Company has been using the commercialization of the Isolagen Process in this market as a means of researching and developing manufacturing technologies that are more automated and, therefore, we believe could be used to produce commercial quantities of injections on a profitable basis. As the London facility operations continue to develop and mature, resulting in significant changes to its stage of commercial development, large fluctuations in the percentage of cost of sales to revenues are experienced.

                SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased $3.3 million, or 125%, to $5.9 million for the three months ended June 30, 2005, as compared to $2.6 million for the three months ended June 30, 2004. The fluctuation in selling, general and administrative expenses are primarily due to the following:

                a)  Salaries increased by approximately $0.8 million to $1.5 million for the three months ended June 30, 2005 compared to $0.7 million for three months ended June 30, 2004 due to an increase in our number of employees.

                b)  Promotional expense increased by approximately $0.6 million to $0.9 million for the three months ended June 30, 2005, as compared to $0.3 million for three months ended June 30, 2004 due to increased marketing and promotional efforts related to the expansion of our operations in the United Kingdom.

                c)  Travel expense increased by approximately $0.2 million to $0.4 million for the three months ended June 30, 2005, as compared to $0.2 million  for three months ended June 30, 2004 primarily due to increased travel between our Houston, Texas and Exton, Pennsylvania facilities.

                d)  Other general and administrative operating costs increased by approximately $1.4 million to $2.3 million for the three months ended June 30, 2005, as compared to $0.9 million for three months ended June 30, 2004 due to increased facility rents of $0.5 million, increased accounting fees of $0.3 million and increased office, legal and other costs associated with our increasing headcount of $0.6 million.

RESEARCH AND DEVELOPMENT. Research and development expenses increased by approximately $2.6 million during the three months ended June 30, 2005 to $3.4 million, as compared to $0.8 million for the three months ended June 30, 2004. Research and development costs are composed primarily of costs related to the Company’s efforts to gain FDA approval for the Isolagen Process for specific dermal applications in the United States and costs to develop our ACE manufacturing system. Our initial Phase III dermal studies and our Phase II dental studies concluded during the three months ended June 30, 2005. These costs include those personnel and laboratory costs related to the FDA trials and certain consulting costs. The total cost of research and development as of June 30, 2005 was $16.9 million. We expect to commence an additional Phase III dermal trial during the fourth quarter of 2005. Further testing requirements for the dermal applications may be imposed by the FDA. The FDA approval process is extremely complicated and is dependent upon our study protocols and the results of our studies. In the event that the FDA requires additional studies for dermal applications or requires changes in our study protocols or in the event that the results of the studies are not consistent with our expectations the process will be more expensive and time consuming. Due to the vagaries of the FDA approval process and the recent developments as to our initial dermal studies (see the Recent Developments section) we are unable to predict what the cost of obtaining approval for the dermal applications will be at this time. We have other research projects currently underway. However, research and development costs related to these projects were not material during the three months ended June 30, 2005 and 2004. The major changes in research and development expense are due to the following: a) consulting expense increased by approximately $1.1 million to $1.4 million for the three months ended June 30, 2005, as compared to $0.3 million for the three months ended June 30, 2004; b) development costs related to the ACE manufacturing system have increased  by $1.0 million for the three months ended June 30, 2005, as compared to less than $0.1 million for the three months ended June 30, 2004; and c) salaries and payroll taxes increased by approximately

30

$0.4 million to $0.8 million for the three months ended June 30, 2005, as compared to $0.4 million for the three months ended June 30, 2004.

                INTEREST INCOME. Interest income increased to $0.6 million for the three months ended June 30, 2005, as compared to less than $0.1 million for the three months ended June 30, 2004. The increase in interest income resulted principally from an increase in the amount of cash held in interest bearing accounts, and our investment in marketable debt securities, as the result of our receipt of $56.8 million in proceeds from the issuance of common stock in the second quarter of 2004 and the issuance of $90 million of 3.5% convertible subordinated debt in the fourth quarter of 2004.

INTEREST EXPENSE.  Interest expense was $1.0 million for three months ended June 30, 2005, as compared to zero for the three months ended June 30, 2004. The increase in interest expense is primarily related to the interest expense associated with the issuance on November 1, 2004 of $90 million in principal amount of 3.5% convertible subordinated debt, as well as the related amortization of deferred debt issuance costs of $0.2 million for the three months ended June 30, 2005.

                NET LOSS. Net loss for the three months ended June 30, 2005 was $10.0 million, as compared to a net loss of $3.9 million for the three months ended June 30, 2004. This increase in net loss represents the effects of the increases in our gross loss, selling, general and administrative expenses and research and development expenses, partially offset by the increase in interest income.

Comparison of the six months ending June 30, 2005 and 2004

                REVENUES.  Revenues increased $4.2 million, to $5.0 million for the six months ended June 30, 2005, as compared to $0.8 million for the six months ended June 30, 2004. The increase in revenues is primarily attributable to the continuation of operations in the United Kingdom. Product volumes increased by approximately 500% during the six months ended June 30, 2005, as compared to the six months ended June 30, 2004. Average selling price per milliliter of treatment decreased approximately 2% during the six months ended June 30, 2005, as compared to the six months ended June 30, 2004. Average selling price has fluctuated as the Company continues to investigate various price points in the European market.

                Promotional activities in the United Kingdom include direct to consumer advertising and special events.  Our marketing communications are governed by the UK advertising rules, based on voluntary code and statutory provisions.  The Advertising Standards Authority (the “ASA”) is the UK entity that monitors and regulates the content of advertising in the United Kingdom.  In June 2004, the Medicines and Healthcare products Regulatory Agency (the “MHRA”) informed Isolagen that it had received inquiries about the Isolagen product. Accordingly, the MHRA requested copies of all the material used to advertise and/or promote Isolagen within the United Kingdom for review.  Following this inquiry and based on our discussions with both the MHRA and the ASA, we agreed to modify our advertising and promotional materials to address concerns, including clarifying the regulatory status of the product in the United Kingdom and deleting references to long-lasting effects. We do not believe these modifications will seriously affect our ability to generate future sales though it is possible that further questions could be forthcoming from the agency requiring further revisions to promotional material. Such revisions could negatively impact our ability to promote the product. However, the Company has subsequently resumed its advertising with the modified content approved by the ASA.

                We also offer a service whereby we store a patient’s cells for later use in the preparation of injections, and a service whereby we process a patient’s cells to expand the cells to the mass necessary to prepare an injection, but then store the expanded cells for later use in the preparation of injections. The fees charged for both of these services are recognized as revenue ratably over the length of the storage agreement. Revenues from these services were less than $0.1million for the six months ended June 30, 2005 and 2004.

COST OF SALES.  Costs of sales increased to $5.2 million for the six months ended June 30, 2005, as compared to $1.8 million for the six months ended June 30, 2004. The increase in cost of sales is primarily related to the increase in activities of our London facility and increased sales. The increase resulted from increases in essentially all categories of costs as these facilities increased their commercialization of our process. During the six months ended June 30, 2005, the Company has continued to increase manufacturing headcount and related overhead costs in anticipation of future increases in demand.

As a percentage of revenues, cost of sales were approximately 103% for the six months ended June 30, 2005 and approximately 211% for the six months ended June 30, 2004. The change in this percentage is the result of the low level of sales activity during 2004, given the London facility’s early stage of commercial development, and the associated low level of operational activity. Since 2002 we have made our Isolagen Process available to physicians in the United Kingdom. The Company has been using the commercialization of the Isolagen Process in this market as a means of researching and developing manufacturing technologies that are more automated and, therefore, we believe could be used to produce

31

commercial quantities of injections on a profitable basis. As the London facility operations continue to develop and mature, resulting in significant changes to its stage of commercial development, large fluctuations in the percentage of cost of sales to revenues are experienced.

                SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses increased $4.8 million, or 82%, to $10.7 million for the six months ended June 30, 2005, as compared to $5.9 million for the six months ended June 30, 2004. The increase in selling, general and administrative expense is primarily due to the following:

                a)  Consulting expense decreased by approximately $1.2 million to $0.5 million for the six months ended June 30, 2005, as compared to $1.7 million or six months ended June 30, 2004. For the six months ended June 30, 2004, the costs included $1.2 million of stock based expenses related to options and warrants issued under consulting and distribution agreements, and $0.3 million of stock compensation related to stock options issued to directors and officers. There was less than $0.1 million of stock based income for the six months ended June 30, 2005. The level of the expense recorded for the warrants issued under consulting and distribution contracts varies from quarter to quarter based on changes in the market price of our common stock.

                b)  Salaries increased by approximately $1.4 million to $2.4 million for the six months ended June 30, 2005, as compared to $1.0 million for six months ended June 30, 2004 due to an increase in our number of employees.

                c)  Travel expense increased by approximately $0.5 million to $0.8 million for the six months ended June 30, 2005, as compared to $0.3 million for six months ended June 30, 2004 due primarily to increased travel between our Houston, Texas and Exton, Pennsylvania facilities.

                d)  Promotional expense increased by approximately $0.9 million to $1.5 million for the six months ended June 30, 2005, as compared to $0.6 million for six months ended June 30, 2004 due to increased marketing and promotional efforts related to the expansion of our operations in the United Kingdom.

                e)  Other general and administrative costs increased by approximately $2.8 million to $4.4 million for the six months ended June 30, 2005, as compared to $1.6 million for six months ended June 30, 2004 due to increased facility rents of $0.7 million, increased accounting fees $0.7 million, increased insurance and office costs of $0.5 million and increased miscellaneous costs and costs related to increasing headcount of $0.9 million.

RESEARCH AND DEVELOPMENT. Research and development expenses increased by approximately $3.0 million during the six months ended June 30, 2005 to $5.0 million, as compared to $2.0 million in the three months ended June 30, 2004. Research and development costs are composed primarily of costs related to the Company’s efforts to gain FDA approval for the Isolagen Process for specific dermal applications in the United States and costs to develop our ACE manufacturing system. Our initial Phase III dermal studies and our Phase II dental studies concluded during the three months ended June 30, 2005. These costs include those personnel and laboratory costs related to the FDA trials and certain consulting costs. The total cost of research and development as of June 30, 2005 was $16.9 million. We expect to commence an additional Phase III dermal trial during the fourth quarter of 2005. Further testing requirements for the dermal applications may be imposed by the FDA. The FDA approval process is extremely complicated and is dependent upon our study protocols and the results of our studies. In the event that the FDA requires additional studies for dermal applications or requires changes in our study protocols or in the event that the results of the studies are not consistent with our expectations the process will be more expensive and time consuming. Due to the vagaries of the FDA approval process and the recent developments as to our initial dermal studies (see the Recent Developments section) we are unable to predict what the cost of obtaining approval for the dermal applications will be at this time. We have other research projects currently underway. However, research and development costs related to these projects were not material during the three months ended June 30, 2005 and 2004.The major changes in research and development expense are due primarily to the following: a) consulting expense increased by approximately $1.1 million to $2.1 million for the six months ended June 30, 2005, as compared to $1.0 million for the six months ended June 30, 2004; b) development costs related to the ACE manufacturing system have increased  by $1.0 million for the six months ended June 30, 2005, as compared to less than $0.1 million for the six months ended June 30, 2004; and c) salaries and payroll taxes increased by approximately $0.9 million to $1.6 million for the six months ended June 30, 2005, as compared to $0.7 million for the six months ended June 30, 2004.

32

                INTEREST INCOME. Interest income increased to $1.4 million for the six months ended June 30, 2005 compared to less than $0.1 million for the six months ended June 30, 2004. The increase in interest income resulted principally from an increase in the amount of cash held in interest bearing accounts, and our investment in marketable debt securities, as the result of our receipt of $56.8 million in proceeds from the issuance of common stock in the second quarter of 2004 and the issuance of $90 million of 3.5% convertible subordinated debt in the fourth quarter of 2004.

INTEREST EXPENSE.  Interest expense increased to $2.0 million for six months ended June 30, 2005, as compared to zero for the six months ended June 30, 2004. The increase in interest expense is primarily related to the interest expense associated with the issuance on November 1, 2004 of $90 million in principal amount of 3.5% convertible subordinated debt, as well as the related amortization of deferred debt issuance costs of $0.4 million for the three months ended June 30, 2005.

NET LOSS. Net loss for the six months ended June 30, 2005 was $16.4 million as compared to a net loss of $8.7 million for the six months ended June 30, 2004. This increase in net loss represents the effects of the increases in selling, general and administrative expenses and research and development expenses, partially offset by the increase in our sales, decrease in gross loss and increase in interest income.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Cash used in operating activities during the six months ended June 30, 2005, amounted to $15.5 million, as compared to the $6.4 million of cash used in operating activities during the six months ended June 30, 2004. The increase in the cash used in operations reflects the increases in our expenses, and in our net loss as discussed above (adjusted for non-cash expenditures). For both the quarters ended June 30, 2005 and June 30, 2004, we financed our operating cash flow needs from our cash on hand at the beginning of the periods. Those cash balances were the result of debt and equity offerings we completed in 2004 and 2003.

Investing Activities

Cash used by investing activities during the six months ended June 30, 2005 amounted to $14.5 million as compared to cash used by investing activities of $0.4 million during the six months ended June 30, 2004. This increase in cash used is due to our capital expenditures of $12.5 million during the six months ended June 30, 2005, which consisted primarily of our April 2005 purchase of the Switzerland land and buildings for $10.0 million and purchases related the Exton, Pennsylvania facility production equipment, and the net purchases of short-term investments of $2.0 for the six months ended June 30, 2005.

Financing Activities

                Cash provided by financing activities was less than $0.1 million for the six months ended June 30, 2005, as compared to $56.9 million for the six months ended June 30, 2004. In the prior year period, the cash flows represented cash received upon the issuance of common stock.

Working Capital

As of December June 30, 2005, we had cash, cash equivalents and short-term investments of $88.4 million and working capital of $82.5 million (including our cash and short-term investments). We believe our existing capital resources are adequate to finance our operations until June 30, 2007; however, our long-term viability is dependent upon successful operation of our business, our ability to automate our manufacturing process, the approval of our products and the ability to raise additional debt and equity to meet our business objectives.

In November 2004, we issued $90.0 million in principal amount of 3.5% convertible subordinated notes due November 1, 2024.

The notes are our general, unsecured obligations. The notes are subordinated in right of payment, which means that they will rank in right of payment behind other indebtedness of ours. In addition, the notes are effectively

33

subordinated to all existing and future liabilities of our subsidiaries. We will be required to repay the full principal amount of the notes on November 1, 2024 unless they are previously converted, redeemed or repurchased.

The notes bear interest at an annual rate of 3.5% from the date of issuance of the notes. We will pay interest twice a year, on each May 1 and November 1, until the principal is paid or made available for payment or the notes have been converted. Interest will be calculated on the basis of a 360-day year consisting of twelve 30-day months.

The note holders may convert the notes into shares of our common stock at any time before the close of business on November 1, 2024, unless the notes have been previously redeemed or repurchased. The initial conversion rate (which is subject to adjustment) for the notes is 109.2001 shares of common stock per $1,000 principal amount of notes, which is equivalent to an initial conversion price of approximately $9.16 per share. Holders of notes called for redemption or submitted for repurchase will be entitled to convert the notes up to and including the business day immediately preceding the date fixed for redemption or repurchase.

At any time on or after November 1, 2009, we may redeem some or all of the notes at a redemption price equal to 100% of the principal amount of such notes plus accrued and unpaid interest (including additional interest, if any) to, but excluding, the redemption date.

The note holders will have the right to require us to repurchase their notes on November 1 of 2009, 2014 and 2019. In addition, if we experience a fundamental change (which generally will be deemed to occur upon the occurrence of a change in control or a termination of trading of our common stock), note holders will have the right to require us to repurchase their notes. In the event of certain fundamental changes that occur on or prior to November 1, 2009, we will also pay a make-whole premium to holders that require us to purchase their notes in connection with such fundamental change.

Inflation did not have a significant impact on the Company’s results during the six months ended June 30, 2005.

OFF-BALANCE SHEET TRANSACTIONS

                We do not engage in material off-balance sheet transactions.

34

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

                Our market risk relates to foreign currency transactions and the potential effects of changes in exchange rates.  Such market risks have not changed materially from those described in Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the year ended December 31, 2004 filed with the SEC on March 15, 2005, except that during the six months ended June 30, 2005, the Company purchased approximately $10 million of land and buildings located in Switzerland. These assets are translated from Swiss francs into U.S. dollars each accounting period and the effect of such translation is reflected as a separate component of consolidated stockholders’ equity. Our consolidated stockholders’ equity fluctuates depending on the weakening or strengthening of the U.S. dollar against the foreign currency in which foreign assets and liabilities are denominated.

ITEM 4. CONTROLS AND PROCEDURES

As of the end of the period covered by this Quarterly Report on Form 10-Q (the “Quarterly Report”), our Interim Chief Executive Officer and Chief Financial Officer (the “Certifying Officers”) have conducted evaluations of our disclosure controls and procedures. As defined under Sections 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), the term “disclosure controls and procedures” means controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive officer or officers and principal financial officer or officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.  Based upon their evaluation of these disclosure controls and procedures, the Certifying Officers have concluded that the disclosure controls and procedures were not effective as of the date of such evaluation to ensure that material information relating to us, including our consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this Quarterly Report was being prepared.

In our Amended Annual Report on Form 10-K/A for the year ended December 31, 2004, filed with the SEC on April 28, 2005, we disclosed that our assessment of the effectiveness of internal control over financial reporting as of December 31, 2004, which was based on criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (COSO Framework), had identified five material weaknesses, as follows:

•The Company’s accounting systems and control procedures, including certain control procedures that are dependent on the review of the Company’s accounting by management, were inadequate to insure that certain indirect costs associated with the production process were properly classified in the Company’s financial statements.

•The Company failed to perform certain control procedures designed to ensure that the financial statement presentations and related disclosures were complete and in accordance with generally accepted accounting principles.

•The Chief Financial Officer is actively involved in the preparation of the financial statements, and therefore cannot provide an independent review and quality assurance function within the accounting and financial reporting group.

•The number of qualified accounting personnel with experience in public company SEC reporting and GAAP is extremely limited. There is a risk that a material misstatement of the financial statements could be caused, or at least not be detected in a timely manner, by this shortage of qualified resources.

•The Company lacks effective controls to prevent or detect fraud, including that insuring that transactions are properly authorized, in a timely manner. This material weakness exists because of the aggregate effect of multiple significant deficiencies in internal control which affect the Company’s fraud detection and prevention controls, including: a) a failure to effectively implement, follow, and enforce the limits on the delegation of authority for expenditure from the Board of Directors to management, including the failure by management to obtain the required Board approvals for certain expenditures; b) the lack of an effective risk assessment process for the identification of fraud risks; c) a failure to ensure the consistent and timely completion of employee acknowledgments of the Company’s Code of Ethics required by Company policy; d) the lack of an internal audit function or other effective mechanism for ongoing monitoring of the effectiveness of internal controls.

As of June 30, 2005, the Certifying Officers have assessed our disclosure controls and have not identified any material weaknesses that were not previously identified as of December 31, 2004. The Company has been in the process of implementing changes and improvements in its system of internal controls over financial reporting on a continuous basis. Our Certifying Officers have determined as of June 30, 2005 that we have remedied the first three material weaknesses listed above that occurred as of December 31, 2004:

• The Company remedied the weakness in its internal controls, including certain control procedures that are dependent on the review of the Company’s accounting by management, that had previously been inadequate to insure that certain indirect costs associated with the production process were properly classified in the Company’s financial statements.

• The Company completed the design and implementation of certain control procedures designed to ensure that the financial statement presentations and related disclosures were completed in accordance with generally accepted accounting principles. Such control procedures included the hiring of two new

35

qualified accounting employees and compliance with a control procedure whereby, on a quarterly basis, a financial reporting disclosure checklist is completed to ensure financial statement presentation and disclosures are in accordance with generally accepted accounting principles and SEC requirements.

•The Chief Financial Officer is no longer actively involved in the preparation of the financial statements, and therefore provides an independent review and quality assurance function within the accounting and financial reporting group.

                The Company plans to continue to implement changes and improvements in its system of internal controls over financial reporting. During the three months ended June 30, 2005, the Company hired two new accounting employees, whom the Company believes will assist in addressing the remaining material weaknesses discussed above. The Company will continue to evaluate its disclosure controls and procedures, and to seek to both implement, on a timely basis, changes to its disclosure controls and procedures that may be necessary to keep them effective in light of any changes in the nature of its business and any rapidly changing environment, and improve them.

Except as described above, there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

36

PART II - - OTHER INFORMATION

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

In the second quarter of 2005, the Company issued 810,000 options outside of the Company’s registered stock option plans. The exercise prices range from $4.45 to $5.08 per share.  650,000 of these options vest over three years from the date of grant and 160,000 of these options vest over two years from the date of grant.. We relied upon Section 4(2) and/or Regulation D under the Securities Act in connection with these sales. The securities were sold to “accredited investors” within the meaning of the rules and regulations issued under the Securities Act, or to sophisticated persons that had such knowledge and experience in financial and business matters that they were able to evaluate the merits and risks of an investment in the company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

(a)  Our annual meeting of stockholders was held on June 23, 2005.

(b)  Henry Y. L. Toh and Ralph V, DeMartino were elected at the annual meeting to serve until our 2008 annual meeting of stockholders or until their successors are duly elected and qualified. In addition to Messrs. Toh and DeMartino, the directors whose terms of office continued after the meeting were: Frank DeLape, Steve Morrell, Marshall G. Webb, Susan Ciallella and Steven Fanning.

(c)  In addition to the election of directors, there were three additional matters presented to the stockholder vote at the annual meeting: the ratification of BDO Seidman, LLP, the adoption of the 2005 Equity Incentive Plan, and the increase of authorized shares of common stock. The following table is a tabulation of the final votes for each of the matters presented at the annual meeting:

37

	Affirmative	Withheld/	Broker
	Votes	Negative Votes	Abstentions	Non-Votes
Election of Henry Y. L. Toh	19,313,074	4,624,177	—	—
Election of Ralph V. DeMartino	17,483,062	6,454,189	—	—
Ratification of BDO	22,388,310	1,536,070	12,871	—
Adoption of the 2005 Equity Incentive Plan	6,831,687	6,351,482	24,851	10,729,231
Increase in the number of authorized shares of Common Stock from 50 million shares to 100 million shares	19,743,796	4,176,959	16,495	—

(d)   n/a.

ITEM 5. OTHER INFORMATION

On August 3, 2005, Mr. Stephen J. Fanning resigned from the Company's Board of Directors.

ITEM 6.  EXHIBITS

(a)           Exhibits

EXHIBIT NO.	IDENTIFICATION OF EXHIBIT
3(i)	Certificate of Incorporation of Isolagen, Inc., as amended
10.1	Employment Agreement between Isolagen, Inc. and Marie Lindner, M.D.
10.2	Amended and Restated Employment Agreement between Isolagen, Inc. and Frank DeLape
31.1	Certification of Interim Chief Executive Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Interim Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

38

SIGNATURES

                In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ISOLAGEN, INC.
Date: August 9, 2005	By:	/s/ Martin E. Schmieg
	Martin E. Schmieg, CFO
	(Principal Financial Officer)

39

EX-3.(I)

EXHIBIT 3(i)

DELAWARE

The First State

I, HARRIET SMITH WINDSOR, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED ARE TRUE AND CORRECT COPIES OF ALL DOCUMENTS ON FILE OF “ISOLAGEN, INC.” AS RECEIVED AND FILED IN THIS OFFICE.

THE FOLLOWING DOCUMENTS HAVE BEEN CERTIFIED:

ERTIFICATE OF INCORPORATION, FILED THE TWENTY-EIGHTH DAY OF SEPTEMBER, A.D. 1992, AT 10 O’CLOCK A.M.

ERTIFICATE OF MERGER, FILED THE SECOND DAY OF OCTOBER, A.D. 1992, AT 9 O’CLOCK A.M.

ERTIFICATE OF RENEWAL, FILED THE TWENTY-EIGHTH DAY OF DECEMBER, A.D. 2000, AT 4 O’CLOCK P.M.

CERTIFICATE OF RENEWAL, FILED THE FIFTH DAY OF JULY, A.D. 2001, AT 9 O’CLOCK A.M.

CERTIFICATE OF AMENDMENT, FILED THE FIFTH DAY OF JULY, A.D. 2001, AT 9:01 O’CLOCK A.M.

CERTIFICATE OF AMENDMENT, CHANGING ITS NAME FROM “AMERICAN FINANCIAL HOLDING, INC.” TO “ISOLAGEN, INC.”, FILED THE THIRTEENTH DAY OF NOVEMBER, A.D. 2001, AT 6:33 O’CLOCK P.M.

CERTIFICATE OF DESIGNATION, FILED THE NINETEENTH DAY OF APRIL, A.D. 2002, AT 10:30 O’CLOCK A.M.

	/s/ Harriet Smith Windsor
[SEAL]	Harriet Smith Windsor, Secretary of State

2310946 8100H	AUTHENTICATION: 2629561
030588139	DATE: 09-12-03

1

DELAWARE

The First State

CERTIFICATE OF DESIGNATION, FILED THE EIGHTH DAY OF MAY, A.D. 2003, AT 2:19 O’CLOCK P.M.

CERTIFICATE OF AMENDMENT, FILED THE ELEVENTH DAY OF AUGUST, A.D. 2003, AT 5:15 O’CLOCK P.M.

AND I DO HEREBY FURTHER CERTIFY THAT THE AFORESAID CERTIFICATES ARE THE ONLY CERTIFICATES ON RECORD OF THE AFORESAID CORPORATION.

	/s/ Harriet Smith Windsor
[SEAL]	Harriet Smith Windsor, Secretary of State

2310946  8100H	AUTHENTICATION: 2629561
030588139	DATE: 09-12-03

2

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 10:00 AM 09/28/2002

922726166 2010946

CERTIFICATE OF INCORPORATION

OF

AMERICAN FINANCIAL HOLDING, INC.

Article I

Name

The name of the corporation (the “Corporation”) shall be:

American Financial Holding, Inc.

Article II

Duration

The Corporation shall continue in existence perpetually unless money dissolved according to law.

Article III

Purposes

The purposes for which the Corporation is organized are:

To act as a financial services company with broad-based marketing of life, health, and accident insurances and annuities,

To do all and everything necessary, suitable, convenient, or proper for the accomplishment of any of the purposes or the attainment of any one or more of the abjects herein enumurated or incidental to the powers herein named or which shall at any time appear conducive or expedient for the protection or benefit of the Corporation, with all the powers hereafter conferred by the laws under which this Corporation is organized; and

To engage in any and all other lawful purposes, activities, and pursuits, whether similar or dissimilar in the foregoing, for which corporations may be organized under the General Corporation Law of Delaware and to exercise all powers allowed or permitted thereunder.

Article IV

Authorized Shares

The Corporation shall have authority to issue a total of 20,000,000 shares of common stock, par value $0.01 per share thereinafter the “Common Stock”). Each share of stock shall entitle the holder thereof to one (1) vote on each matter submitted to a vote at a meeting of the shareholders. All stock of the Corporation shall be of the same class and shall have the same rights and preferences. The capital stock of the Corporation shall be issued as fully paid, and the private property of the shareholders shall not be liable for the debts, obligations, or liabilities of the Corporation. Fully paid stock of the Corporation shall not be liable to any further call or assessment. There shall be no cumulative voting. The authorized and treasury stock of this Corporation may be issued at such time, upon such terms and conditions and for such consideration as the board of directors shall determine. Shareholders shall not have pre-emptive rights to acquire any shares of the stock of this Corporation.

3

Article V

Limitation on Liability

A director of the Corporation shall have no personal liability to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except (i) for any breach of a director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under section 174 of the General Corporation Law of Delaware as it may from time to time be amended or any successor provision thereto, or (iv) for any transaction from which a director derived an improper personal benefit.

Article VI

Business Combinations with Interested Stockholders

The Corporation elects not to be governed by the provisions of section 203 of the General Corporation Law of Delaware regarding business combinations with interested shareholders.

Article VII

Registered Office and Registered Agent

The name and address of the Corporation’s registered agent in the state of Delaware is The Corporation Trust Company, 1209 Orange Street, in the city of Wilmington, county of New Castle, Delaware. Either the registered office or the registered agent may be changed in the manner provided by law.

Article VIII

Amendment

The Corporation reserves the right to amend, alter, change, or repeal all or any portion of the provisions contained in its Certificate of Incorporation from time to time in accordance with the laws of the state of Delaware, and all rights conferred on stockholders herein are granted subject to this reservation.

Article IX

Adoption and Amendment of Bylaws

The initial bylaws of the Corporation shall be adopted by the board of directors. The power to alter, amend, or repeal the bylaws or adopt new bylaws shall be vested in the board of directors, but the stockholders of the Corporation may also alter, amend, or repeal the bylaws or adopt new bylaws. The bylaws may contain any provisions for the regulation or management of the affairs of the Corporation not inconsistent with the laws of the state of Delaware now or hereafter existing.

Article X

Directors

The governing board of the Corporation shall be known as the board of directors. The number of directors comprising the board of directors shall be fixed and may be increased or decreased from time to time by the board of directors. The original board of directors shall consist of seven persons. The name and address of each person who is to serve as a director until the first annual meeting of stockholders and until his or her successor is elected and shall qualify is as follows:

4

Name	Address
Kenton L. Stanger	5 Triad Center, Suite 585
	Salt Lake City, Utah 84180
Raymond L. Punta	5 Triad Center, Suite 585
	Salt Lake City, Utah 84180
Chelton S. Feeny	2925 DeBarr Street, VARO-11A
	Anchorage, Alaska 99508
Donald E. Manuel	3886 Mount Diable Boulevard, Suite 25
	Lafayette, California 94649
Ray P. Brown	42 East Claybourne Avenue
	Salt Lake City, Utah 84115
Tim L. Hansen	42 East Claybourne Avenue
	Salt Lake City, Utah 84115
William E. Waterman, Jr.	1100 Wilshire Boulevard, Suite 2800
	Los Angeles, California 90012

ARTICLE X

INCORPORATORS

The name and mailing address of the incorporator signing this certificate of Incorporation is as follows:

Name	Address
Kenton L. Stanger	5 Triad Center, Suite 585
	Salt Lake City, Utah 84180

The undersigned, being the sole Incorporator herein before named, for the purpose of forming a corporation pursuant to the General Corporation Law of the state of Delaware, makes this certificate, hereby declaring and certifying that this is his/her act and deed and that the facts herein stated are true, and accordingly have hereunto set his hand this 25th day of September 1992.

/s/ Kenton L. Stanger

Kenton L. Stanger

President

5

STATE OF UTAH	}
	} SS
COUNTY OF SALT LAKE	}

I, a notary public, hereby certify that on the 25th day of September 1992, personally appeared before me Kenton I. Stanger, who being by me first duly sworn, declared that he signed such instrument as his own act and deed and that the facts stated therein are true.

WITNESS MY HAND AND OFFICIAL SEAL.

/s/ Linda L. Gasaway

Notary Public

[SEAL]

6

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 09:00 AM 10/02/1992

922795003 - 2310946

CERTIFICATE OF MERGER

OF

AMERICAN FINANCIAL HOLDING, INC.,

(A Colorado Corporation)

WITH AND INTO

AMERICAN FINANCIAL HOLDING, INC.,

(A Delaware Corporation)

THIS CERTIFICATE OF MERGER is executed and entered into this 29th day of September, 1992, by and between AMERICAN FINANCIAL HOLDING, INC., a Delaware corporation (hereinafter referred to as “AFH Delaware” or the “Surviving Corporation”), and AMERICAN FINANCIAL HOLDING, INC., a Colorado corporation (hereinafter referred to as “AFH Colorado”).

WITNESSETH

I. PLAN OF MERGER

Pursuant to this Certificate and Articles of Merger, it is intended and agreed that AFH Colorado will be merged with and into AFH Delaware and that AFH Delaware shall be the Surviving Corporation with the name of American Financial Holding, Inc., as provided below. The terms, conditions, and understandings of the merger are set forth in the Agreement and Plan of Merger between AFH Delaware and AFH Colorado dated as of September 29, 1992, which has been approved, adopted, certified, and executed by each of the constituent corporations in accordance with subsection (c) of Section 262 of the Delaware Corporation Law. A copy of such Agreement and Plan of Merger is on file at the principal place of business of the surviving corporation at No. 5 Triad Center, Suite 585, Salt Lake City, Utah 84180. A copy of such Agreement and Plan of Merger will be furnished by the surviving corporation, on request and without cost, to any stockholder of any constituent corporation.

II. CERTIFICATE OF INCORPORATION AND BYLAWS

On the consummation of the merger, the certificate of incorporation and bylaws of AFH Delaware shall be the certificate of incorporation and bylaws of the Surviving Corporation.

III. NAME OF SURVIVING CORPORATION

The name of the Surviving Corporation, which will continue in existence after the merger, shall be American Financial Holding, Inc.

IV. AUTHORIZED AND OUTSTANDING SHARES

OF AFH COLORADO

AFH Colorado is authorized to issue 50,000,000 shares of common stock, par value $0.001 per share, of which 49,116,630 shares are issued and outstanding as of the date hereof, and 1,000,000 shares of preferred stock, par value $10.00 per share, of which 806,960 shares are issued and outstanding as of the date hereof. All issued and outstanding preferred stock of AFH Colorado shall be converted into common stock and reverse split 20-to-1, rounded downward to the nearest whole share, and all issued and outstanding common stock of AFH Colorado shall be reverse split 20-to-1, rounded downward to the nearest whole share, in the merger.

7

V. AUTHORIZED AND OUTSTANDING SHARES

OF AFH DELAWARE

AFH Delaware is authorized to issue 20,000,000 shares of common stock, par value $0.01 per share, of which one hundred shares are issued and outstanding as of the date hereof.

VI. APPROVAL BY SHAREHOLDERS OF

AFH COLORADO

Of the 49,116,630 shares of common stock of AFH Colorado issued and outstanding, 24,558,315 shares were required to vote in favor to approve of AFH Colorado entering into the Agreement and Plan of Merger. 27,091,145 shares of common stock of AFH Colorado were voted in favor, and - 0 - shares of common stock of AFH Colorado voted against, and - 0 - shares abstained, all in accordance with the provisions of the Colorado Corporation Code. Of the 206,950 shares of preferred stock of AFH Colorado issued and outstanding, 103,475 shares were required to vote in favor to approve of AFH Colorado entering into the Agreement and Plan of Merger. 168,450 shares of preferred stock of AFH Colorado were voted in favor, - 0 - shares of preferred stock of AFH Colorado voted against, and - 0 - shares abstained, all in accordance with the provisions of the Colorado Corporation Code. Such shares were voted as a class; no shares of any other class of stock were issued and outstanding and entitled to vote thereon.

VII. APPROVAL BY SHAREHOLDERS OF

AFH DELAWARE

All one hundred shares of common stock of AFH Delaware issued and outstanding were voted in favor of entering into the Agreement and Plan of Merger, with no shares of common stock of AFH Delaware voting against or dissenting, all in accordance with the provisions of the General Corporation Law of the state of Delaware. Such shares were voted as a class; no shares of any other class of stock were issued and outstanding and entitled to vote thereon.

VIII. AGREEMENT OF SURVIVING CORPORATION

The Surviving Corporation hereby consents and agrees that:

(a)  The Surviving Corporation may be served with process in the state of Colorado in any proceeding for the enforcement of any obligation of AFH Colorado and in any proceeding for the enforcement of the rights of a dissenting shareholder of AFH Colorado against the Surviving Corporation;

(b)  The Secretary of State of the state of Colorado shall be, and hereby is, irrevocably appointed as the agent of such Surviving Corporation to accept service of process in any such proceeding; the address to which the service of process in any such proceeding shall be mailed is: 5 Triad Center, Suite 586, Salt Lake City, Utah 84180; and

(c)  Such Surviving Corporation will promptly pay to the dissenting shareholders of AFH Colorado the amount, if any, to which they shall be entitled under the provisions of the Colorado Corporation Code with respect to the rights of dissenting shareholders.

IN WITNESS WHEREOF, the undersigned corporations, acting by their respective presidents and secretaries, have executed this Certificate of Merger as of the date first above written.

8

AMERICAN FINANCIAL HOLDING, INC., a

Colorado corporation

ATTEST:

/s/ Maxine Heap	/s/ Kenton L. Stanger
Maxine Heap, Secretary	Kenton L. Stanger, President

AMERICAN FINANCIAL HOLDING, INC., a

Delaware corporation

ATTEST:

/s/ Maxine Heap	/s/ Kenton L. Stanger
Maxine Heap, Secretary	Kenton L. Stanger, President

STATE OF UTAH	}
	} SS
COUNTY OF SALT LAKE	}

I, the undersigned notary public, hereby certify that on the 29th day of September, 1992, personally appeared before me Kenton L. Stanger and Maxine Heap, the president and secretary, respectively, of American Financial Holding, Inc., a Colorado corporation, who being be me first duly sworn, severally declared that they are the persons who signed the foregoing documents as president and secretary of American Financial Holding, Inc., a Colorado corporation, and that the statements therein contained are true

WITNESS MY HAND AND OFFICIAL SEAL,
[	SEAL LYNDON RICKS	]
[	NOTARY PUBLIC	]
[	STATE OF UTAH	]
[	MY COMMISSION EXPIRES	]
[	DECEMBER 4, 1995	]
[	SEAL?]

/s/ Lyndon Ricks

Notary Public

STATE OF UTAH	}
	} SS
COUNTY OF SALT LAKE	}

I, the undersigned notary public, hereby certify that on the 29th day of September, 1992, personally appeared before me Kenton L. Stanger and Maxine Heap, the president and secretary, respectively, of American Financial Holding, Inc., a Delaware corporation, who being be me first duly sworn, severally declared that they are the persons who signed the foregoing documents as president and secretary of American Financial Holding, Inc., a Delaware corporation, and that the statements therein contained are true.

WITNESS MY HAND AND OFFICIAL SEAL,
[	SEAL LYNDON RICKS	]
[	NOTARY PUBLIC	]
[	STATE OF UTAH	]
[	MY COMMISSION EXPIRES	]
[	DECEMBER 4, 1995	]
[	SEAL?]

/s/ Lyndon Ricks

Notary Public

9

STATE OF DELAWARE

CERTIFICATE FOR RENEWAL

AND REVIVAL OF CHARTER

American Financial Holding, Inc., a corporation organized under the laws of Delaware, the charter of which was voided for non-payment of taxes, now desires to procure a restoration, renewal and revival of its charter, and hereby certifies as follows:

1. The name of this corporation is American Financial Holding, Inc.

2.  Its registered office in the State of Delaware is located at 1209 Orange Street, City of Wilmington, Zip Code 19801, County of the name and address of its registered agent is The Corporation Trust Company, 1205 Orange Street, Wilmington, DE 19801.

3.  The date of filing of the original Certificate of Incorporation in Delaware was September 28, 1992.

4.  The date when restoration, renewal, and revival of the charter of this company is to commence is the 29th day of Feb. 2000, same being prior to the date of the expiration of the charter. This renewal and revival of the charter of this corporation is to be perpetual.

5.  This corporation was duly organized and carried on the business authorized by its charter until the 1st day of March A.D. 2000, at which time its charter became inoperative and void for non-payment of taxes and this certificate for renewal and revival is filed by authority of the duly elected directors of the corporation in accordance with the laws of the State of Delaware.

IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312 of the General Corporation Law of the State of Delaware, as amended, providing for the renewal, extension and restoration of charters, Kenton L. Stanger, the last and acting authorized officer hereunto set his/her hand to this certificate this 26th day of December 2000.

AMERICAN FINANCIAL HOLDINGS, INC.

	By: /s/ Kenton L. Stanger
	Kenton L. Stanger
TITLE OF OFFICER:	President

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 04:00 PM 12/28/2000

001658007 - 2310946

10

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 09:00 AM 07/05/2002

010329242 - 2310946

STATE OF DELAWARE

CERTIFICATE FOR RENEWAL

AND REVIVAL OF CHARTER

American Financial Holding, Inc., a corporation organized under the laws of Delaware, the charter of which was voided for non-payment of taxes, now desires to procure a restoration, renewal and revival of its charter, and hereby certifies as follows:

1.  The name of this corporation is American Financial Holding, Inc.

2.  Its registered office in the State of Delaware is located at 1209 Orange Street, City of Wilmington, Zip Code 19801, County of New Castle, the name and address of its registered agent is The Corporation Trust Company.

3.  The date of filing of the original Certificate of Incorporation in Delaware was 9/28/92.

4.  The date when restoration, renewal, and revival of the charter of this company is to commence is the 28 day of Feb., same being prior to the date of the expiration of the charter. This renewal and revival of the charter of this corporation is to be perpetual.

5.  This corporation was duly organized and carried on the business authorized by its charter until the 1st day of March A.D. 2001, at which time its charter became inoperative and void for non-payment of taxes and this certificate for renewal and revival is filed by authority of the duly elected directors of the corporation in accordance with the laws of the State of Delaware.

IN TESTIMONY WHEREOF, and in compliance with the provisions of Section 312 of the General Corporation Law of the State of Delaware, as amended, providing for the renewal, extension and restoration of charters. Raymond L. Punta the last and acting authorized officer hereunto set his/her hand to this certificate this 20th day of June, A.D. 2001.

By:	Raymond L. Punta
	Authorized Officer
Name:	Raymond L. Punta
	Print or Type
Title:	Vice President

11

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 09:01 AM 07/05/2001

010329247 - 2310946

CERTIFICATE OF AMENDMENT

TO THE

CERTIFICATE OF INCORPORATION OF

AMERICAN FINANCIAL HOLDING, INC.

A DELAWARE CORPORATION

American Financial Holding, Inc., a corporation organized and existing under the laws of the state of Delaware (the “Company”), does hereby certify as follows:

FIRST: That at a meeting of the board of directors of the Company, resolutions were duly adopted setting forth the proposed amendment of the Certificate of Incorporation of the Company, declaring the amendment to be advisable and calling a meeting of the stockholders of the Company for consideration thereof.

SECOND: By executing this Certificate of Amendment of the Certificate of Incorporation, the president and secretary of the Company do hereby certify that effective April 17, 2001, the foregoing amendment to the Certificate of Incorporation of American Financial Holding, Inc. was authorized and approved pursuant to Section 242 of the General Corporation Law of the state of Delaware by the written consent of a majority of the issued and outstanding shares of the Company’s common stock. No other class of shares was entitled to vote thereon as a class.

THIRD: That the Certificate of Incorporation of the Company is hereby amended as follows:

A. Article IV is hereby amended by striking the existing article in its entirety and inserting in lieu thereof the following:

ARTICLE IV

CAPITALIZATION

The Company shall have authority to issue an aggregate of 55,000,000 shares, of which 5,000,000 shares shall be preferred stock, $0.001 par value (hereinafter the “Preferred Stock”), and 50,000,000 shares shall be common stock, par value $0.001 (hereinafter the “Common Stock”). The powers, preferences and rights, and the qualifications, limitations or restrictions thereof, of the shares of stock of each class and series which the Company shall be authorized to issue, are as follows:

(a) Preferred Stock. Shares of Preferred Stock may be issued from time to time in one or more series as may from time to time be determined by the board of directors. Each series shall be distinctly designated. All shares of any one series of the Preferred Stock shall be alike in every particular, except that there may be different dates from

12

which dividends thereon, if any, shall be cumulative, if made cumulative. The powers, preferences, participating, optional and other rights of each such series and qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. Except as hereinafter provided, the board of directors of this Company is hereby expressly granted authority to fix by resolution or resolutions adopted prior to the issuance of any shares of each particular series of Preferred Stock, the designation, powers, preferences and relative participating, optional and other rights and the qualifications, limitations and restrictions thereof, if any, of such series, including, without limiting the generality of the foregoing, the following:

(i) the distinctive designation of and the number of shares of Preferred Stock that shall constitute each series, which number may be increased (except as otherwise fixed by the board of directors) or decreased (but not below the number of shares thereof outstanding) from time to time by action of the board of directors;

(ii) the rate and times at which, and the terms and conditions on which, dividends, if any, on the shares of the series shall be paid; the extent of preferences or relation, if any, of such dividends to the dividends payable on any other class or classes of stock of this Company or on any series of Preferred Stock; and whether such dividends shall be cumulative or noncumulative;

(iii) the right, if any, of the holders of the shares of the same series to convert the same into, or exchange the same for, any other class or classes of stock of this Company and the terms and conditions of such conversion or exchange;

(iv) whether shares of the series shall be subject to redemption and the redemption price or prices, including, without limitation, a redemption price or prices payable in shares of any other class or classes of stock of the Company, cash or other property and the time or times at which, and the terms and conditions on which, shares of the series may be redeemed;

(v) the rights, if any, of the holders of shares of the series on voluntary or involuntary liquidation, merger, consolidation, distribution or sale of assets, dissolution or winding up of this Company;

(vi) the terms of the sinking fund or redemption or purchase account, if any, to be provided for shares of the series; and

13

(vii) the voting powers, if any, of the holders of shares of the series which may, without limiting the generality of the foregoing, include (1) the right to more or less than one vote per share on any or all matters voted on by the stockholders, and (2) the right to vote as a series by itself or together with other series of Preferred Stock or together with all series of Preferred Stock as a class, on such matters, under such circumstances, and on such conditions as the board of directors may fix, including, without limitation, the right, voting as a series by itself or together with other series of Preferred Stock or together with all series of Preferred Stock as a class, to elect one or more directors of this Company in the event there shall have been a default in the payment of dividends on any one or more series of Preferred Stock or under such other circumstances and upon such conditions as the board of directors may determine.

(b) Common Stock. The Common Stock shall have the following powers, preferences, rights, qualifications, limitations and restrictions;

(i) After the requirements with respect to preferential dividends of Preferred Stock, if any, shall have been met and after this Company shall comply with all the requirements, if any, with respect to the setting aside of funds as sinking funds or redemption or purchase accounts, and subject further to any other conditions that may be required by the Delaware General Corporation Law, then, but not otherwise, the holders of Common Stock shall be entitled to receive such dividends, if any, as may be declared from time to time by the board of directors without distinction to series;

(ii) After distribution in full of any preferential amount to be distributed to the holders of Preferred Stock, if any, in the event of a voluntary or involuntary liquidation, distribution or sale of assets, dissolution or winding up of this Company, the holders of the Common Stock shall be entitled to receive all of the remaining assets of the Company, tangible and intangible, of whatever kind available for distribution to stockholders, ratably in proportion to the number of shares of Common Stock held by each without distinction as to series; and

(iii) Except as may otherwise be required by law or this Certificate of Incorporation, in all matters as to which the vote or consent of stockholders of the Company shall be required or be taken, including, any vote to amend this Certificate of Incorporation, to increase or decrease the par value of any class of

14

stock, effect a stock split or combination of shares, or alter or change the powers, preferences or special rights of any class or series of stock, the holders of the Common Stock shall have one vote per share of Common Stock on all such matters and shall not have the right to cumulate their votes for any purpose.

(c) Other Provisions:

(i) The board of directors of the Company shall have authority to authorize the issuance, from time to time without any vote or other action by the stockholders, of any or all shares of the Company of any class at any time authorized, and any securities convertible into or exchangeable for such shares, in each case to such persons and for such consideration and on such terms as the board of directors from time to time in its discretion lawfully may determine; provided, however, that the consideration for the issuance of shares of stock of the Company having par value shall not be less than such par value. Shares so issued, for which the full consideration determined by the board of directors has been paid to the Company, shall be fully paid stock, and the holders of such stock shall not be liable for any further call or assessment thereon.

(ii) Unless otherwise provided in the resolution of the board of directors providing for the issue of any series of Preferred Stock, no holder of shares of any class of the Company or of any security of obligation convertible into, or of any warrant, option or right to purchase, subscribe for or otherwise acquire, shares of any class of the Company, whether now or hereafter authorized, shall, as such holder, have any preemptive right whatsoever to purchase, subscribe for or otherwise acquire shares of any class of the Company, whether now or hereafter authorized.

(iii) Anything herein contained to the contrary notwithstanding, any and all right, title, interest and claim in and to any dividends declared or other distributions made by the Company, whether in cash, stock or otherwise, that are unclaimed by the stockholder entitled thereto for a period of six years after the close of business on the payment date, shall be and be deemed to be extinguished and abandoned; and such unclaimed dividends or other distributions in the possession of the Company, its transfer agents or other agents or depositories shall at such time become the absolute property of the Company, free and clear of any and all claims of any person whatsoever.

B. The shares of Common Stock of the Company issued and outstanding as of the Effective Date shall be reverse-split or consolidated, without any change in the authorized

15

number of shares of Common Stock or the par value thereof, to become effective on the date this Certificate of Amendment is duly filed in the office of the Secretary of State of the State of Delaware (the “Effective Date”) as follows:

(a) Each 21.4 shares of Common Stock issued and outstanding immediately prior to the Effective Date shall be converted into the right to receive one share of post-reverse-split common stock (“New Common Stock”).

(b) No fractional shares of New Common Stock shall be issued in connection with the foregoing, and in lieu thereof, the Company shall issue scrip in registered form, not represented by a certificate, that shall entitle the holder to receive a full share upon the surrender of such scrip evidencing a whole share. Upon the surrender of scrip evidencing a whole share, the Company shall issue to the holder thereof a certificate evidencing such whole share. Holders of scrip shall not be entitled to exercise voting rights, to receive dividends thereon, or to participate in any of the assets of the Company in the event of liquidation. Such scrip shall be void if not exchanged for certificates representing full shares of uncertificated full shares before 12:00 midnight on the 120th day following the Effective Date.

(c) As soon as reasonably practicable after the Effective Date, the Company shall cause its registrar and transfer agent, acting as exchange agent (the “Exchange Agent”), to mail to each holder of record of shares of Common Stock immediately prior to the Effective Date (the “Pre-Reverse-Split Common Stock”), a letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Pre-Reverse-Split Common Stocks shall pass, only upon delivery of a certificate representing such Pre-Reverse-Split Common Stock to the Exchange Agent, which shall be in such form and have such other provisions as the Company may reasonably specify, and which shall specify the fee payable in order to effectuate such exchange) and instructions for use in effecting the surrender of certificates representing Pre-Reverse-Split Common Stock in exchange for certificates representing shares of New Common Stock issuable pursuant hereto. Upon surrender of a certificate representing Pre-Reverse-Split Common Stock for cancellation to the Exchange Agent, together with such duly executed letter of transmittal and the payment of the prescribed fee, the holder of such certificate representing Pre-Reverse-Split Common Stock shall be entitled to receive in exchange therefor a certificate representing that number of whole shares of New Common Stock that such holder has the right to receive in exchange for the Pre-Reverse-Split Common Stock surrendered pursuant to the provisions hereof (after taking into account all Pre-Reverse-Split Common Stock then held by such holder), and the Pre-Reverse-Split Common Stock so surrendered shall forthwith be canceled. In the event of a transfer of ownership of Pre-Reverse-Split Common Stock that is not registered in the transfer records of the Company, a certificate representing the proper number of shares of New Common Stock may be issued to a transferee if the certificate representing such Pre-Reverse-Split Common Stock is presented to the Exchange Agent, accompanied by all documents required to evidence and effect such transfer and by evidence that any applicable stock transfer taxes and other transfer fees have been paid. Holders of certificates representing Pre-Reverse-Split Common Stock shall not be required to convert their certificates into

16

certificates representing New Common Stock. Until surrendered as contemplated hereby, each certificate representing Pre-Reverse-Split Common Stock shall be deemed at any time after the Effective Date to represent only the New Common Stock into which such certificate representing Pre-Reverse-Split Common Stock is convertible as provided herein and the right to receive, upon such surrender prior to the expiration date of scrip as provided above, scrip in lieu of any fractional shares of New Common Stock as provided above.

(d) After the Effective Date, there shall be no further registration of transfers of certificates representing Pre-Reverse-Split Common Stock. If, after the Effective Date, certificates representing shares of Pre-Reverse-Split Common Stock are presented to the Company or the Exchange Agent for registration of transfer, such certificates shall be canceled and exchanged for certificates representing New Common Stock and scrip in accordance with the procedures set forth herein.

DATED effective this 30th day of May, 2001

AMERICAN FINANCIAL HOLDING, INC.

By:	/s/ Raymond L. Punta
	Raymond L. Punta, Vice-President

17

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 06:33 PM 11/13/2001

010574087 - 2910946

CERTIFICATE OF AMENDMENT

OF

CERTIFICATE OF INCORPORATION

OF

AMERICAN FINANCIAL HOLDING, INC.

American Financial Holding, Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the “Corporation”), does hereby certify:

The amendment to the Corporation’s Certificate of Incorporation set forth in the following resolution approved by the Corporation’s Board of Directors and stockholders was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware:

“RESOLVED, that the Certificate of Incorporation of the Corporation be amended by striking the text of Article I in its entirety and replacing it with the following:

The name of the corporation (the “Corporation”) is Isolagen, Inc.”

IN WITNESS WHEREOF, American Financial Holding, Inc. has caused this Certificate of Amendment to be signed by its duly authorized officer this 13th day of November 2001.

AMERICAN FINANCIAL HOLDING, INC.

By:	/s/ Michael Macaluso
	Michael Macaluso
	Chief Executive Officer

18

STATE OF DELAWARE

SECRETARY OF STATE

DIVISION OF CORPORATIONS

FILED 10:30 AM 04/19/2002

020249991-2310946

CERTIFICATE OF DESIGNATION

OF

SERIES A CONVERTIBLE PREFERRED STOCK

OF

ISOLAGEN, INC.

April 18, 2002

Pursuant to Section 151(g) of the General Corporation Law of the State of Delaware (“DGCL”), Isolagen, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Company”), hereby certifies that the following resolution was duly adopted by the Board of Directors of the Company on March 11, 2002, pursuant to authority conferred upon the Board of Directors by the Certificate of Incorporation of the Company (the “Certificate of Incorporation”), which authorizes the issuance of up to 5,000,000 shares of preferred stock, par value $0.001 per share.

RESOLVED, that pursuant to authority expressly granted to and vested in the Board of Directors of the Company and pursuant to the provisions of the Certificate of Incorporation, the Board of Directors hereby creates a series of preferred stock, herein designated and authorized as Series A Convertible Preferred Stock, par value $0.001 per share (“Series A Preferred Stock”), which shall consist of 3,500,000 of the 5,000,000 shares of preferred stock which the Company now has authority to issue, and the Board of Directors hereby fixes the powers, designations, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations and restrictions thereof as follows:

1.  NUMBER AND RANK.  The number of shares constituting the Series A Preferred Stock shall be 3,500,000. The Series A Preferred Stock shall rank senior to the Common Stock (as defined below) with respect to the payment of dividends and distributions on Liquidation (as defined below).

2.  DEFINITIONS.  Unless the context otherwise requires, when used herein the following terms shall have the meaning indicated.

“Board” means the Board of Directors of the Company.

“Business Combination” means (i) any consolidation or merger of the Company with or into any Person or (ii) any Change of Control Stock Issuance, or (iii) the sale, assignment conveyance, transfer, lease or other disposition by the Company of all or substantially all of its assets followed by a liquidation of the Company.

“Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in Houston, Texas generally are authorized or required by law or other governmental actions to close.

“Capital Stock” means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated) of capital or capital stock of such Person and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person.  “Certificate” means the Certificate of Incorporation of the Company, as amended (including any certificate of designation establishing a series of preferred stock).

“Certificate of Designation” means this Certificate of Designation of the Series A Preferred Stock.

19

“Change of Control Stock Issuance” shall mean any issuance, in a single transaction or series of related transactions, by the Company of shares of Common Stock or Common Stock Equivalents in connection with the acquisition of assets (including cash) or securities by the Company or a Subsidiary of the Company (including by way of a merger of a Subsidiary of the Company with or into a Person), except where (i) the shareholders of the Company immediately prior to such issuance own (in substantially the same proportion relative to each other as such shareholders owned the Common Stock or Voting Stock of the Company, as the case may be, immediately prior to such consummation) (x) more than 50% of the Voting Stock of the Company immediately after such issuance, and (y) more than 50% of the outstanding Common Stock immediately after such issuance, or (ii) the members of the Board immediately prior to entering into the agreement relating to such issuance, or if no such agreement is entered into, then immediately prior to the consummation of such issuance) constitute at least a majority of the Board immediately after such issuance, with no agreements or arrangements in place immediately after such consummation that would result in the members of the Board immediately prior to the entering into the agreement relating to such issuance ceasing to constitute at least a majority of the Board. In calculating the percentage of the Voting Stock of the Company owned by the shareholders of the Company immediately prior to an issuance of Common Stock or Common Stock Equivalents in which there is more than one class or series of Voting Stock, the percentage of the Voting Stock shall be calculated based on the number of votes eligible to be cast in the election of the directors of the Company generally. In calculating the percentages of Voting Stock and Common Stock owned for purposes of this definition, such calculation shall be calculated on a basis assuming the exercise or conversion in full of all Common Stock Equivalents and on a basis disregarding all Common Stock Equivalents, and the percentage which results in the lower percentage owned by the shareholders of the Company shall apply in the application of clause (i) above.

“Common Stock” means the Company’s common stock, par value $0.001 per share, and any Capital Stock for or into which such Common Stock hereafter is exchanged, converted, reclassified or recapitalized by the Company or pursuant to a Business Combination to which the Company is a party.

“Common Stock Equivalents” means (without duplication with any other Common Stock or Common Stock Equivalents) rights, warrants, options, convertible securities or exchangeable securities, exercisable for or convertible or exchangeable into, directly or indirectly, Common Stock, whether at the time of issuance or upon the passage of time or the occurrence of some future event.

“Company” means Isolagen, Inc. a Delaware corporation.

“Conversion Date” is defined in Section 6(C).

“Conversion Price” means $1.75, as adjusted from time to time in accordance with Section 7.

“Conversion Ratio” is defined in Section 6(B).

“DGCL” means the General Corporation Law of the State of Delaware, as amended, or any successor statute or other legislation.

“Dividend Payment Date” is defined in Section 3(A).

“Dividend Period” is defined in Section 3(A).

“Excluded Stock” means (i) shares of Series A Preferred Stock issued by the Company as a stock dividend payable in shares of Series A Preferred Stock in accordance with Section 3 or upon conversion

20

of shares of Capital Stock (but not the issuance of such Capital Stock which will be subject to the provisions of Section 7(A)(iii)), (ii) shares of Common Stock to be issued to employees, directors, consultants and advisors of the Company pursuant to Stock Plans in accordance with their respective terms.

“Holder” means a holder of record of Series A Preferred Stock.

“Issue Date” means with respect to any shares of Series A Preferred Stock the original date of issuance of such shares of Series A Preferred Stock.

“Junior Securities” means Capital Stock that, with respect to dividends and distributions upon Liquidation, ranks junior to the Series A Preferred Stock.

“Liquidation” means the voluntary or involuntary liquidation, dissolution or winding up of the Company; provided, however, that a merger or consolidation shall not be deemed a Liquidation nor shall the sale of assets not requiring shareholder approval be deemed to be a Liquidation.

“Liquidation Preference” is defined in Section 5.

“Market Price” means, with respect to a particular security, on any given day, the last reported sale price regular way or, in case no such reported sale takes place on such day, the average of the last closing bid and asked prices regular way, in either case on the principal national securities exchange on which the applicable security is listed or admitted to trading, or if not listed or admitted to trading on any national securities exchange, (i) the closing sale price for such day reported by the Nasdaq Stock Market if such security is traded over-the-counter and quoted in the Nasdaq Stock Market, or (ii) if such security is so traded, but not so quoted, the average of the closing reported bid and asked prices of such security as reported by the Nasdaq Stock Market or any comparable system, or (iii) if such security is not listed on the Nasdaq Stock Market or any comparable system but is actively traded, the average of the closing bid and asked prices as furnished by two members of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. If such security is not listed and traded in a manner that the quotations referred to above are available for the period required hereunder, the Market Price shall be deemed to be the fair value per share of such security as determined by a nationally recognized investment banking firm selected by the Board and reasonably acceptable to the Holders of a majority of the outstanding shares of Series A Preferred Stock.

“Offering” means the offering of shares of Series A Preferred Stock pursuant to that certain private placement memorandum of the Company, dated March 11, 2002.

“Parity Securities” means Capital Stock that, with respect to dividends or distributions upon Liquidation, is pari passu with the Series A Preferred Stock.

“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, limited liability company, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

“Record Date” is defined in Section 3(A).

“Redemption Date” is defined in Section 8(B).

“Redemption Price” is defined in Section 8(A).

21

“Securities Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules and regulations promulgated thereunder.

“Senior Securities” means Capital Stock that, with respect to dividends or distributions upon Liquidation, ranks senior to the Series A Preferred Stock.

“Stated Value” is an amount equal to $3.50 per share of Series A Preferred Stock.

“Stock Plans” means the Company’s stock option, stock incentive, restricted stock, employee stock purchase or other similar plans, in each case that have been approved by the Company’s shareholders.

“Subsidiary” of a Person means (i) a corporation, a majority of whose stock with voting power, under ordinary circumstances, to elect directors is at the time of determination, directly or indirectly, owned by such Person or by one or more Subsidiaries of such Person, or (ii) any other entity (other than a corporation) in which such Person or one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof has a majority ownership interest or, with respect to a limited partnership, is a general partner of such limited partnership.

“Trading Day” means a day on which the principal market with respect to the security in question is regularly scheduled to be open for trading, or if there is not such principal market, then a day on which the New York Stock Exchange is regularly scheduled to be open for trading.

“Voting Stock” of a Person means Capital Stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to vote in the election of the board of directors, manager or trustees of such Person.

The foregoing definitions will be equally applicable to both the singular and plural forms of the defined terms.

3.  DIVIDENDS AND DISTRIBUTIONS

(A)  The holders of Series A Preferred Stock shall be entitled to receive, out of the assets of the Company legally available for that purpose, cumulative preferential dividends in either shares of Series A Preferred Stock at its Stated Value or cash, as determined by the Company in its sole discretion, at a rate per annum of eight percent (8%) of the Stated Value (equivalent to $0.28 per share per annum) for each share of Series A Preferred Stock, and, except as provided in Section 3(B), no more, to be paid in accordance with the terms of this Section 3. Such dividends shall be cumulative from the Issue Date and shall be payable in arrears, when and as declared by the Board, on December 31 of each year (“Dividend Payment Date”), commencing on the first such Dividend Payment Date following the Issue Date; provided that if any Dividend Payment Date shall not be a Business Day, then the Dividend Payment Date shall be on the next succeeding day that is a Business Day. The period from the Issue Date to the next Dividend Payment Date and each annual period between consecutive Dividend Payment Dates shall hereinafter be referred to as “Dividend Periods.” Dividends from the Initial Dividend Period shall be pro rated on a daily basis commencing on and including the Issue Date on the basis of a 365-day year. Each such dividend shall be paid to the holders of record of the Series A Preferred Stock as their names appear on the share register of the Company on the corresponding Record Date. As used above, the term “Record Date” means, with respect to the dividend payable on the Dividend Payment Date of each year, the preceding December 15, or such other record date designated by the Board with respect to the dividend payable on such respective Dividend

22

Payment Date not exceeding 30 days preceding such Dividend Payment Date. Dividends on account of arrears for any past Dividend Periods may be declared and paid, together with any accrued but unpaid interest thereon to and including the date of payment, at any time, without reference to any Dividend Payment Date, to holders of record on a date designated by the Board, not exceeding 30 days preceding the payment date thereof, as may be fixed by the Board.

(B) If, on any Dividend Payment Date, the Company fails to pay dividends, then until the dividends that were scheduled to be paid on such date are paid, such dividends shall cumulate. Dividends for any period less than a full annual Dividend Period or for a period commencing on a Dividend Payment Date and ending on a Conversion Date shall cumulate on a day-to-day basis and shall be computed on the basis of a 365-day year.

(C) So long as any shares of the Series A Preferred Stock shall be outstanding, (i) the Company shall not declare or pay any dividend whatsoever, whether in cash, property or otherwise, set aside any cash or property for the payment of dividends, or make any other distribution on any Junior Securities (except a dividend or distribution payable solely in shares of Junior Securities), (ii) the Company shall not declare or pay any dividend whatsoever, whether in cash, property or otherwise, set aside any cash or property for the payment of dividends, or make any other distribution on any Parity Securities ranking on parity with the Series A Preferred Stock with respect to dividends or distributions (except a dividend or distribution payable solely in shares of Junior Securities), unless declared and paid pro rata with the Series A Preferred Stock in proportion to the full amount to which they would otherwise be respectively entitled, and (iii) the Company shall not and shall cause its Subsidiaries not to repurchase, redeem or otherwise acquire or set aside any cash or property for the repurchase or redemption of any Junior Securities or Parity Securities, unless in each such case all dividends to which the holders of the Series A Preferred Stock shall have been entitled for all previous Dividend Periods shall have been paid or declared and a sum of money sufficient for the payment thereof shall have been set aside.

4.   VOTING RIGHTS. The Holders shall have the following voting rights with respect to the Series A Preferred Stock:

(A) Subject to applicable law, the shares of Series A Preferred Stock shall have no voting rights other than as set forth in this Section 4.

(B) Holders of shares of the Series A Preferred Stock shall be entitled to vote upon all matters upon which holders of Common Stock have the right to vote, and Holders shall have that number of votes on all such matters as is equal to the Conversion Ratio that would apply if such Holder’s shares of Series A Preferred Stock were to be converted pursuant to Section 6(A) as of the record date for the determination of the shareholders entitled to vote on such matters, or, if no such record date is established as of the date such vote is taken or any written consent of shareholders is being solicited, such votes to be counted together with all other shares of capital stock having general voting powers and not separately as a class. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Series A Preferred Stock held by each Holder could be converted) shall be rounded up to the nearest whole number.

(C) The consent of the Holders of at least a majority of the Series A Preferred Stock, voting separately as a single class with one vote per share, in person or by proxy, either in writing without a meeting or at an annual or a special meeting of shareholders called for the purpose, shall be necessary to;

23

(i)  amend, alter or repeal, by way of merger or otherwise, any of the provisions of the Certificate so as to authorize, create or issue any shares of Parity Securities or Senior Securities (or amend the provisions of any existing class of Capital Stock to make such class of Capital Stock a class of Parity Securities or Senior Securities),

(ii)  issue any Parity Securities or Senior Securities; or

(iii) amend, alter or repeal, by way or merger or otherwise, any of the provisions of (x) the Certificate of Designation or any certificate of designation of terms of any Parity Securities, or (y) the Certificate so as to affect adversely any of the rights, preferences or privileges of Holders.

5.   Liquidation Preferences. In the event of any Liquidation, after payment or provision for payment by the Company of the debts and other liabilities of the Company and the liquidation preference of any Senior Securities that rank senior to the Series A Preferred Stock with respect to distributions on Liquidation, each Holder shall be entitled to receive an amount in cash for each share of the then outstanding Series A Preferred Stock held by such Holder equal to the Stated Value per share, plus an amount equal to all accrued but unpaid dividends thereon, whether or not earnings are available in respect of such dividends or such dividends have been declared, to and including the date full payment is tendered to the Holders with respect to such Liquidation, and no more (such amount being referred to herein as the “Liquidation Preference”), before any distribution shall be made to the holders of any Junior Securities upon the Liquidation of the Company. In case the assets of the Company available for payment to the Holders upon a Liquidation are insufficient to pay the full Liquidation Preference on all outstanding shares of the Series A Preferred Stock and all outstanding Senior Securities or Parity Securities, in each case ranking on parity with the Series A Preferred Stock as to distributions on Liquidation, in the amounts to which the holders of such shares are entitled, then the entire assets of the Company available for payment to the Holders of Series A Preferred Stock and holders of such Senior Securities or Parity Securities will be distributed ratably among the Holders of the Series A Preferred Stock and the holders of such Senior Securities or Parity Securities, based upon the aggregate amount due on such shares upon Liquidation. Written notice of any Liquidation of the Company, stating a payment date and the place where the distributable amounts shall be payable, shall be given by mail, postage prepaid, not less than 30 days prior to the payment date stated therein, to the Holders of record of the Series A Preferred Stock at their respective addresses as the same shall appear on the books of the Company.

6.   Conversion Rights. The Series A Preferred Stock shall be convertible as follows:

(A)  Conversion at Holder’s Option. The Holder of any shares of Series A Preferred Stock shall have the right at such Holder’s option, at any time and without the payment of any additional consideration, to convert any or all of such shares of Series A Preferred Stock into a number of fully paid and nonassessable shares of Common Stock for each such share of Series A Preferred Stock equal to the Conversion Ratio, upon the terms hereinafter set forth.

(B)  Conversion Ratio. In the event of a conversion pursuant to Section 6(A), the “Conversion Ratio” shall be a number of shares of Common Stock calculated by dividing (a) the Stated Value plus any accrued and unpaid dividends to and including the applicable Conversion Date by (b) the Conversion Price in effect on the applicable Conversion Date.

(C)  Mechanics of Conversion. The Holder of any shares of Series A Preferred Stock may exercise the conversion right specified in Section 6(A) by surrendering to the Company or any transfer agent of the Company the certificate or certificates representing the shares of Series

24

A Preferred Stock to be converted, accompanied by written notice specifying the number of such shares to be converted. If the certificates representing shares of Common Stock issuable upon conversion of shares of Series A Preferred Stock are to be issued in a name other than the name on the face of the certificates representing such shares of Series A Preferred Stock, such certificates shall be accompanied by such evidence of the assignment and such evidence of the signatory’s authority with respect thereto as deemed appropriate by the Company or its transfer agent. Conversion shall be deemed to have been effected on the date when the notice of an election to convert pursuant to Section 6(A) and certificates representing the shares being converted are actually received by the Company or any transfer agent of the Company. Such dates that the conversion shall be deemed to be effective shall be referred to herein as the “Conversion Date.” Subject to the provisions of Section 7(E), as promptly as practicable after the Conversion Date, the Company shall issue and deliver to or upon the written order of such Holder a certificate or certificates for the number of shares of Common Stock to which such Holder is entitled upon such conversion and a check or cash with respect to any fractional interest in a share of Common Stock, as provided in Section 6(D). The person in whose name the certificate or certificates for shares of Common Stock are to be issued shall be deemed to have become a holder of record of such shares of Common Stock on the applicable Conversion Date. Upon conversion of only a portion of the shares covered by a certificate representing shares of Series A Preferred Stock surrendered for conversion pursuant to Section 6(A), the Company shall issue and deliver to or upon the written order of the Holder of the certificates so surrendered for conversion, at the expense of the Company, a new certificate representing the number of shares of Series A Preferred Stock representing the unconverted portion of the certificate so surrendered.

(D)  Fractional Shares. No fractional shares of Common Stock or scrip shall be issued upon conversion of shares of Series A Preferred Stock. If more than one share of Series A Preferred Stock shall be surrendered for conversion at any one time by the same Holder, the number of shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series A Preferred Stock so surrendered. Instead of any fractional share of Common Stock which would otherwise be issuable upon conversion of any shares of Series A Preferred Stock, the Company shall pay a cash adjustment in respect of such fractional interest in an amount equal to that fractional interest of the Market Price of the Common Stock on the Conversion Date.

(E)  Authorization and Issuance. The Company covenants and agrees that:

(i)   the shares of Common Stock issuable upon any conversion of any shares of Series A Preferred Stock will be deemed to have been issued to the Person exercising such conversion rights set forth herein on the Conversion Date, and the Person exercising such conversion rights will be deemed for all purposes to have become he record holder of such shares of Common Stock on the Conversion Date;

(ii)  all shares of Common Stock which may be issued upon any conversion of any Series A Preferred Stock will, upon issuance, be fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof;

(iii) the Company will take all such actions as may be necessary to assure that all shares of Common Stock issuable upon conversion of shares of Series A Preferred Stock may be issued without violation of any applicable law or regulation or of any requirements of any domestic securities exchange upon which securities of the same class may be listed;

25

(iv) the Company will not take any action which would result in any adjustment of the Conversion Price if the total number of shares of Common Stock issuable after such action upon conversion of all shares of Series A Preferred Stock, together with all shares of Common Stock then outstanding and all shares of Common Stock then issuable upon the exercise of all outstanding Common Stock Equivalents, would exceed the total number of shares of Common Stock then authorized by the Certificate of Incorporation;

(v)  the Company will at all times reserve and keep available, out of its authorized but unissued shares of Common Stock or out of shares of Common Stock held in its treasury, the full number of shares of Common Stock into which all shares of the Series A Preferred Stock having conversion privileges from time to time outstanding are convertible; and

(vi) the Company will at no time close its transfer books against the transfer of the Series A Preferred Stock or of any share of Common Stock issued or issuable upon the conversion of the Series A Preferred Stock in any manner which interferes with the timely conversion of the Series A Preferred Stock.

7.   Conversion Price Adjustments. The Conversion Price shall be subject to adjustment from time to time as follows:

(A)  Common Stock Issued at Less than Conversion Price. If the Company issues or sells any Common Stock other than Excluded Stock without consideration or for a consideration per share less than the Conversion Price in effect immediately prior to such issuance or sale, the Conversion Price in effect immediately prior to each such issuance or sale will immediately (except as provided below) be reduced to the price determined by multiplying the Conversion Price in effect immediately prior to such issuance or sale, by a fraction, (1) the numerator of which shall be (i) the number of shares of Common Stock outstanding immediately prior to such issuance or sale plus (ii) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of such additional shares of Common Stock so issued or sold would purchase at the Conversion Price in effect immediately prior to such issuance or sale and (2) the denominator of which shall be the number of shares of Common Stock outstanding immediately after such issue or sale. For the purposes of any adjustment of the Conversion Price pursuant to this Section 7(A), the following provisions shall be applicable:

(i)  in the case of the issuance of Common Stock for cash, the amount of the consideration received by the Company shall be deemed to be the amount of the cash proceeds received by the Company for such Common Stock before deducting therefrom any discounts or commissions allowed, paid or incurred by the Company for any underwriting or otherwise in connection with the issuance and sale thereof;

(ii) in the case of the issuance of Common Stock (otherwise than upon the conversion of shares of Capital Stock or other securities of the Company) for a consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the fair value thereof as reasonably determined by the Board, irrespective of any accounting treatment;

26

(iii)     in the case of the issuance of (a) options, warrants or other rights to purchase or acquire Common Stock (whether or not at the time exercisable), (b) securities by their terms convertible into or exchangeable for Common Stock (whether or not at the time so convertible or exchangeable) or (c) options, warrants or rights to purchase such convertible or exchangeable securities (whether or not at the time exercisable):

(1)  the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options, warrants or other rights to purchase or acquire Common Stock shall be deemed to have been issued at the time such options, warrants or rights are issued and for a consideration equal to the consideration (determined in the manner provided in Section 7(A)(i) and (ii), if any, received by the Company upon the issuance of such options, warrants or rights plus the minimum purchase price provided in such options, warrants or rights for the Common Stock covered thereby;

(2)  the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities, or upon the exercise of options, warrants or other rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof, shall be deemed to have been issued at the time such securities were issued or such options, warrants or rights were issued and for a consideration equal to the consideration, if any, received by the Company for any such securities and related options, warrants or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration (determined in the manner provided in Section 7(A)(i) and (ii)), if any, to be received by the Company upon the conversion or exchange of such securities, or upon the exercise of any related options, warrants or rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof;

(3)  on any change in the number of shares of Common Stock deliverable upon exercise of any such options, warrants or rights or conversion or exchange of such convertible or exchangeable securities or any change in the consideration to be received by the Company upon such exercise, conversion or exchange, but excluding changes resulting from the anti-dilution provisions thereof (to the extent comparable to the anti-dilution provisions contained herein), the Conversion Price as then in effect shall forthwith be readjusted to such Conversion Price as would have been obtained had an adjustment been made upon the issuance of such options, warrants or rights not exercised prior to such change, or of such convertible or exchangeable securities not converted or exchanged prior to such change, upon the basis of such change;

(4)  on the expiration or cancellation of any such options, warrants or rights (without exercise), or the termination of the right to convert or exchange such convertible or exchangeable securities (without exercise), if the Conversion Price shall have been adjusted upon the issuance thereof, the Conversion Price shall forthwith be readjusted to such Conversion Price as would have been obtained had an adjustment been made upon the issuance of such options, warrants, rights or such convertible or exchangeable securities on the basis of the issuance of only the number of shares of Common Stock actually issued upon the

27

exercise of such options, warrants or rights, or upon the conversion or exchange of such convertible or exchangeable securities; and

(5)  If the Conversion Price shall have been adjusted upon the issuance of any such options, warrants, rights or convertible or exchangeable securities, no further adjustment of the Conversion Price shall be made for the actual issuance of Common Stock upon the exercise, conversion or exchange thereof; provided, however, that no increase in the Conversion Price shall be made pursuant to subclauses (1) or (2) of this Section 7(A)(iii).

(B)  Stock Splits, Subdivisions, Reclassifications or Combinations. If the Company shall (1) declare a dividend or make a distribution on its Common Stock in shares of Common Stock, (2) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares, or (3) combine or reclassify the outstanding Common Stock into a smaller number of shares, the Conversion Price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder of any shares of Series A Preferred Stock surrendered for conversion or exchange after such date shall be entitled to receive the number of shares of Common Stock which such holder would have owned or been entitled to receive after such date had such Series A Preferred Stock been converted or exchanged immediately prior to such date. Successive adjustments in the Conversion Price shall be made whenever any event specified above shall occur.

(C)   Business Combinations. In case of any Business Combination in which the holders of shares of Common Stock are entitled to receive stock, securities or property by virtue of their ownership of Common Stock or a reclassification of Common Stock (other than a reclassification of Common Stock referred to in Section 7(B)), each share of Series A Preferred Stock shall after the date of such Business Combination or reclassification be convertible into the number of shares of stock or other securities or property (including cash) to which the Common Stock issuable upon conversion of such share of Series A Preferred Stock immediately prior to such Business Combination or reclassification would have been entitled upon such Business Combination or reclassification; and in any such case, if necessary, the provisions set forth herein with respect to the rights and interests thereafter of the Holders of the shares of Series A Preferred Stock shall be approximately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of stock or other securities or property thereafter deliverable on the conversion of the shares of Series A Preferred Stock. In determining the kind and amount of stock, securities or the property receivable upon consummation of such Business Combination, if the holders of Common Stock have the right to elect the kind or amount of consideration receivable upon consummation of such Business Combination, then the Holder of the Series A Preferred Stock shall have the right to make a similar election as of the Conversion Date with respect to the number of shares of stock or other securities or property into which the Series A Preferred Stock shall be convertible.

(D)  Rounding of Calculations; Minimum Adjustments. All calculations under this Section 7 shall be made to the nearest one tenth (1/10th) of a cent or to the nearest one hundredth (1/100th) of a share, as the case may be. Any provision of this Section 7 to the contrary notwithstanding, no adjustment in the Conversion Price shall be made if the amount of such adjustment would be less than $0.01, but any such amount shall be carried forward and an adjustment with respect thereto shall be made at the time of and together with any subsequent

28

adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate $0.01 or more. In addition, in no event shall the Conversion Price be adjusted to less than the lesser of $0.01 per share or the par value of the Common Stock.

(E)  Timing of Issuance of Additional Common Stock Upon Certain Adjustments. In any case in which the provisions of this Section 7 shall require that an adjustment shall become effective immediately after a record date for an event, the Company may defer until the occurrence of such event (1) issuing to the Holder of any share of Series A Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the shares of Common Stock issuable upon such conversion before giving effect to such adjustment and (B) paying to such Holder any amount of cash in lieu of a fractional share of such Common Stock, provided, however, that the Company upon request shall deliver to such Holder a due bill or other appropriate instrument evidencing such Holder’s right to receive such additional shares, and such cash, upon the occurrence of the event requiring such adjustment.

(F) Statement Regarding Adjustments. Whenever the Conversion Price shall be adjusted as provided in Section 7 the Company shall forthwith file, at the office of any transfer agent for the Series A Preferred Stock and at the principal office of the Company, a statement showing in reasonable detail the facts requiring such adjustment and the Conversion Price that shall be in effect after such adjustment and the Company shall also cause a copy of such statement to be sent by mail, first class postage prepaid, to each Holder at its address appearing in the Company’s records.

(G) Notices. In the event that the Company shall propose to take any action of the type described in Section 7 (but only if the action of the type described in Section 7 would result in an adjustment in the Conversion Price or a change in the type of securities or property to be delivered upon a conversion or exchange of Series A Preferred Stock), the Company shall give notice to each Holder, in the manner set forth in Section 7(F), which notice shall specify the record date, if any, with respect to any such action and the approximate date on which such action is to take place. Such notice shall also set forth the facts with respect thereto as shall be reasonably necessary to indicate the effect on the Conversion Price and the number, kind or class of shares or other securities or property which shall be deliverable upon conversion of shares of the Series A Preferred Stock. In the case of any action which would require the fixing or a record date, such notice shall be given at least 10 days prior to the date so fixed, and in case of all other action, such notice shall be given at least 15 days prior to the taking of such proposed action. Failure to give such notice, or any defect therein, shall not affect the legality or validity of any such action.

(H) No Impairment. The Company will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of Sections 6 and 7 and in taking of all such action as may be necessary or appropriate in order to protect the conversion rights of the Holders of the Series A Preferred Stock against impairment.

(I) No Duplication of Adjustments. If any action would require adjustment of the Conversion Price pursuant to more than one of the provisions of this Section 7, only one adjust-

29

ment shall be made and such adjustment shall be the adjustment that results in the lowest Conversion Price after giving effect to such adjustment.

6.   Redemption.

(A)  Optional Redemption by the Company. After January 1, 2005, the Company may, at its option, to the extent that it shall have funds legally available for such payment, redeem at any time in whole or in part, shares of Series A Preferred Stock at a redemption price per share payable in cash equal to $4.00 plus any accrued and unpaid dividends to and including the applicable date of redemption (“Redemption Price”).

(B)  Procedure for Optional Redemption by the Company.

(i)  In the event that fewer than all the outstanding shares of Series A Preferred Stock are to be redeemed pursuant to Section 8(A) hereof, the number of shares to be redeemed shall be determined by the Board of Directors and the shares so redeemed shall be selected pro rata according to the number of shares held by each Holder of the Series A Preferred Stock.

(ii) In the event the Company shall redeem shares of Series A Preferred Stock pursuant to Section 8(A), notice of such redemption shall be given by first class mail, postage prepaid, mailed not less than 30 days nor more than 60 days prior to the redemption date, to each Holder of record of the shares to be redeemed at such Holder’s address as the same appears on the stock register of the Company, provided that neither the failure to give such notice nor any defect therein shall affect the validity of the giving of notice for the redemption of any share of Series A Preferred Stock to be redeemed except as to the Holder to whom the Company has failed to give said notice or exchange as to the Holder whose notice was defective. Each such notice shall state (i) the Redemption Date; (ii) the number of shares of Series A Preferred Stock to be redeemed and, if fewer than all the shares held by such holder are to be redeemed, the number of shares to be redeemed from such Holder; (iii) the Redemption Price; and (iv) the place or places where certificates for such shares are to be surrendered for payment of the redemption price. Upon the receipt of notice, unless the Holder elects to convert such shares into Common Stock pursuant to Section 6 hereof, the Holder shall surrender to the Company or any transfer agent of the Company the certificate or certificates representing the shares of Series A Preferred Stock to be redeemed. Redemption shall be deemed to have been effected on the date when the notice of redemption is mailed to the Holders (“Redemption Date”). As promptly as practicable after the Redemption Date and the receipt of certificate or certificates of Series A Preferred Stock, the Company shall issue and deliver to the Holder the Redemption Price by check or wire transfer of immediately available funds.

9.   Limitations on Series A Preferred Stock. No share or shares of Series A Preferred Stock the Company acquires through redemption, option, exchange or otherwise will be reissued as Series A Preferred Stock, and all such shares will be canceled, retired and eliminated from the shares of Series A Preferred Stock which the Company will be authorized to issue, and will be restored to the status of authorized by undesignated preferred stock of the Company eligible for designation and reissuance subject to the terms hereof and the Certificate. The Company will not issue any further shares of Series A Preferred Stock.

30

10.  Waivers. With the written consent of Holders of a majority of the Series A Preferred Stock, the obligations of the Company and the rights of the Holders under this Certificate of Designation may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely). Upon the effectuation of each such waiver, the Company will promptly give written notice thereof to the Holders who have not previously consented thereto in writing.

Remainder of page intentionally left blank.

31

IN WITNESS WHEREOF, this Certificate of Designation has been signed on behalf of the Company by its President and attested to by its Secretary, all as of the 18th day of April 2002.

Isolagen, Inc.

By:	/s/ Michael Macaluso
	Michael Macaluso
	President

ATTEST:

By:	/s/ Jeffrey W. Tomz
	Jeffrey W. Tomz
	Chief Financial Officer and Secretary

32

State of Delaware

Secretary of State

Division of Corporations

Delivered 02:21 PM 05/08/2003

FILED 02:19 PM 08/08/2003

SRV 030299918 — 2310946 FILE

CERTIFICATE OF DESIGNATION

OF

SERIES B CONVERTIBLE PREFERRED SOCK

OF

ISOLAGEN, INC.

Pursuant to Section 151(g) of the General Corporation Law of the State of Delaware (“DGCL”), Isolagen, Inc.,  a corporation organized and existing under the laws of the State of Delaware (the “Company”), hereby certifies that the following resolution was duly adopted by the Board of Directors of the Company on May 7, 2003, pursuant to authority conferred upon the Board of Directors by the Certificate of Incorporation of the Company, which authorizes the issuance of up to 5,000,000 shares of preferred stock, par value $0.001 per share:

RESOLVED, that pursuant to authority expressly granted to and vested in the Board of Directors of the Company and pursuant to the provisions of the Certificate of Incorporation, the Board of Directors hereby creates a series of preferred stock, herein designated and authorized as Series B Convertible Preferred Stock, par value $0.001 per share (“Series B Preferred Stock”), which shall consist of 200,000 of the 5,000,000 shares of preferred stock which the Company now has authority to issue, and the Board of Directors hereby fixes the powers, designations, preferences and relative, participating, optional and other special rights of the shares of such series and the qualifications, limitations and restrictions thereof as follows:

1.    NUMBER AND RANK.  The number of shares constituting the Series B Preferred Stock shall be 200,000. The Series B Preferred Stock shall rank senior to the Common Stock (as defined below) with respect to the payment of dividends and distributions on Liquidation (as defined below). The Series B Preferred Stock shall rank junior to the Series A Preferred Stock (as defined below) with respect to the payment of dividends and distributions on Liquidation.

2.    DEFINITIONS.  Unless the context otherwise requires, when used herein the following terms shall have the meaning indicated.

“Board” means the Board of Directors of the Company.

“Business Combination” means (i) any consolidation or merger of the Company with or into any Person; (ii) any Change of Control Stock Issuance; or (iii) the sale, assignment conveyance, transfer, lease or other disposition by the Company of all or substantially all of its assets followed by a liquidation of the Company.

“Business Day” means any day except Saturday, Sunday and any day which shall be a legal holiday or a day on which banking institutions in Houston, Texas generally are authorized or required by law or other governmental actions to close.

“Capital Stock” means (i) with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated) of capital or capital stock of such Person and (ii) with respect to any Person that is not a corporation, any and all partnership or other equity interests of such Person.

“Certificate” means the Certificate of Incorporation of the Company, as amended (including any certificate of designation establishing a series of preferred stock).

“Certificate of Designation” means this Certificate of Designation of Series B Preferred Stock.

“Change of Control Stock Issuance” shall mean any issuance, in a single transaction or series of related transactions, by the Company of shares of Common Stock or Common Stock Equivalents in connection with the acquisition of assets (including cash) or securities by the Company or a Subsidiary of the Company (including by way of a merger of a Subsidiary of the Company with or into a Person), except where (i) the shareholders of the Company immediately prior to such issuance own (in substantially the same proportion relative to each other as such shareholders owned the Common Stock or Voting Stock of the Company, as the case may be, immediately prior to such consummation) (x) more than 50% of the Voting Stock of the Company immediately after such issuance, and (y) more than 50% of the outstanding Common Stock immediately after such issuance; or (ii) the members of the Board immediately prior to entering into the agreement relating to such issuance; or (ii) the members of the Board immediately prior to entering into the agreement relating to such issuance (or if no such agreement is entered into, then immediately prior to the consummation of such issuance) constitute at least a majority of the Board immediately after such issuance, with no agreements or arrangements in place immediately after such consummation that would result in the members of the Board immediately prior to the entering into the agreement relating to such issuance ceasing to constitute at least a majority of the board. In calculating the percentage of the Voting Stock of the Company owned by the shareholders of the Company immediately prior to an issuance of Common Stock or Common Stock Equivalents in which there is more than one class or series of Voting Stock, the percentage of the Voting Stock shall be calculated based on the number of votes eligible to be cast in the election of the directors of the Company generally. In calculating the percentages of Voting Stock and Common Stock owned for the purposes of this definition, such calculation shall be calculated on a basis assuming the exercise or conversion in full of all Common Stock Equivalents and on a basis disregarding all Common Stock Equivalents, and the percentage which results in the lower percentage owned by the shareholders of the Company shall apply in the application of clause (i) above.

“Common Stock” means the Company’s common stock, par value $0.001 per share, and any Capital Stock for or into which such Common Stock hereafter is exchanged, converted, reclassified or recapitalized by the Company or pursuant to a Business Combination to which the Company is a party.

“Common Stock Equivalents” means (without duplication with any other Common Stock or Common Stock Equivalents) rights, warrants, options, convertible securities or exchangeable securities, exercisable for or convertible or exchangeable into, directly or indirectly, Common Stock.

“Company” means Isolagen, Inc., a Delaware corporation.

“Conversion Date” is defined in Section 6(E).

“Conversion Price” means $3.50 per share of Series B Preferred Stock, as adjusted from time to time in accordance with Section 7.

“Conversion Ratio” is defined in Section 6(D).

“DGCL” means the General Corporation Law of the State of Delaware, as amended, or any successor statute or other legislation.

“Dividend Payment Date” is defined in Section 3(A).

“Dividend Period” is defined in Section 3(A).

“Excluded Stock” means (i) shares of Series B Preferred Stock issued by the Company as a stock dividend payable in shares of Series B Preferred Stock in accordance with Section 3 or upon conversion of shares of Capital Stock (but not the issuance of such Capital Stock, which will be subject to the provisions of Section 7(A)(iii)), (ii) shares of Common Stock to be issued to employees, directors, consultants and advisors of the Company pursuant to the Stock Plans in accordance with their respective terms; and (iii) shares of Series A Preferred Stock issued by the Company as a stock dividend payable in shares of Series A Preferred Stock in accordance the Series A Preferred Stock Certificate of Designation

33

or upon conversion of shares of Capital Stock (but not the issuance of such Capital Stock, which will be subject to the provisions of Section 7(A)(iii).

“Final Mandatory Conversion Date” is defined in Section 6(C).

“Holder” means a holder of record of Series B Preferred Stock.

“Issue Date” means with respect to any shares of Series B Preferred Stock the original date of issuance of such shares of Series B Preferred Stock.

“Junior Securities” means Capital Stock that, with respect to dividends and distributions upon Liquidation, ranks junior to the Series B Preferred Stock.

“Liquidation” means the voluntary or involuntary liquidation, dissolution or winding up of the Company; provided, however, that a merger or consolidation shall not be deemed a Liquidation nor shall the sale of assets nor requiring shareholder approval be deemed to be a Liquidation.

“Liquidation Preference” is defined in Section 5.

“Mandatory Trading Conversion Date” is defined in Section 6(B).

“Market Price” means, with respect to a particular security, on any given day, the last reported sale price regular way or, in case no such reported sale takes place on such day, the average of the last closing bid and asked prices regular way, in either case on the principal national securities exchange on which the applicable security is limited or admitted to trading, or if not listed or admitted to trading on any national securities exchange, (1) the closing sale price for such day reported by the Nasdaq Stock Market if such security is traded over-the-counter and quoted in the Nasdaq Stock Market; or (ii) if such security is so traded, but not so quoted, the average of the closing reported bid and asked prices of such security as reported by the Nasdaq Stock Market or any comparable system; or (iii) if such security is not listed on the Nasdaq Stock Market or any comparable system but is actively traded, the average of the closing bid and asked prices as furnished by two (2) members of the National Association of Securities Dealers, Inc. selected from time to time by the Company for that purpose. If such security is not listed and traded in a manner that the quotations referred to above are available for the period required hereunder, the Market Price shall be deemed to be the fair value per share of such security as determined by a nationally recognized investment banking firm selected by the Board and reasonably acceptable to the Holders of a majority of the outstanding shares of Series B Preferred Stock.

“Offering” means the offering of shares of Series B Preferred Stock pursuant to that certain private placement memorandum of the Company, dated March 10, 2003, as amended or supplemented.

“Parity Securities” means Capital Stock that with respect to dividends or distributions upon Liquidation, is pari passu with the Series B Preferred Stock.

“Person” means an individual or a corporation, partnership, trust, incorporated or unincorporated association, limited liability company, joint venture, joint stock company, government (or an agency or political subdivision thereof) or other entity of any kind.

“Record Date” is defined in Section 3(A).

“Securities Act” means the Securities Act of 1933, as amended, or successor statue, and the rules and regulations promulgated thereunder.

“Senior Securities” means Capital Stock that with respect to dividends or distributions upon Liquidation, ranks senior to the Series B Preferred Stock.

34

“Series A Preferred Stock” means the Series A Preferred Stock, par value $0.001 per share, of the Company.

“Series B Preferred Stock” means the Series B Preferred Stock, par value $0.001 per share, of the Company.

“Stated Value” is an amount equal to $28.00 per share of Series B Preferred Stock.

“Stock Plans” means the Company’s stock option, stock incentive, restricted stock, employee stock purchase or other similar plans, in each case that have been approved by the Company’s shareholders.

“Subsidiary” of a Person means (i) a corporation, a majority of whose stock with voting power, under ordinary circumstances, to elect directors is at the time of determination, directly or indirectly, owned by such Person or by one or more Subsidiaries of such Person; or (ii) any other entity (other than a corporation) in which such Person or one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof has a majority ownership interest or, with respect to a limited partnership, is a general partner of such limited partnership.

“Trading Day” means a day on which the principal market with respect to the security in question is regularly scheduled to be open for trading, or if there is not such principal market, then a day on which the New York Stock Exchange is regularly scheduled to be open for trading.

“Voting Stock” of a Person means Capital Stock of such Person of the class or classes pursuant to which the holders thereof have the general voting power under ordinary circumstances to vote in the election of the board of directors, managers or trustees of such Person.

The foregoing definitions will be equally applicable to both the singular and plural forms of the defined terms.

3.   Dividends and Distributions.

(A)  The holders of Series B Preferred Stock shall be entitled to receive, out of the assets of the Company legally available for that purpose, cumulative preferential dividends in either shares of Series B Preferred Stock at its Stated Value or cash, as determined by the Board in its sole discretion, at a rate per annum of six percent (6%) of the Stated Value (equivalent to $1.68 per share per million) for each share of Series B Preferred Stock, and, except as provided in Section 3(B), no more, to be paid in accordance with the terms of this Section 3. Such dividends shall be cumulative from the Issue Date and shall be payable in arrears, when and as declared by the Board, on December 31 of each year (“Dividend Payment Date”), commencing on the first such Dividend Payment Date following the Issue Date; provided that if any Dividend Payment Date shall not be a Business Day, then the Dividend Payment Date shall be on the next succeeding day that is a Business Day. The period from the Issue Date to the next Dividend Payment Date and each annual period between consecutive Dividend Payment Dates shall hereinafter be referred to as “Dividend Periods.” Dividends for the initial Dividend Period shall be pro rated on a daily basic commencing on and including the Issue Date on the basis of a 365-day year. Each such dividend shall be paid to the holder of record of the Series B Preferred Stock as their names appear on the share register of the Company on the corresponding Record Date. As used above, the term “Record Date” means, with respect to the dividend payable on the Dividend Payment Date of each year, the preceding December 15, or such other record date designated by the Board with respect to the dividend payable on such respective Dividend Payment Date not exceeding thirty (30) days preceding such Dividend Payment Date. Dividends on account of arrears for any past Dividend Periods may be declared and paid, together with any accrued but unpaid interest thereon to and including the date of payment, at any time, without

35

reference to any Dividend Payment Date, to holders of record on a date designated by the Board, not exceeding thirty (30) days preceding the payment date thereof, as may be fixed by the Board.

(B)  If, on any Dividend Payment Date, the Company fails to pay dividends, then until the dividends that were scheduled to be paid on such date are paid, such dividends shall cumulate. Dividends for any period less than a full annual Dividend Period or for a period commencing on a Dividend Payment Date and ending on a Conversion Date shall cumulate on a day-to-day basis and shall be computed on the basis of a 365-day year.

(C)  So long as any shares of the Series B Preferred Stock shall be outstanding, (i) the Company shall not declare or pay any dividend whatsoever, whether in cash, property or otherwise, set aside any cash or property for the payment of dividends, or make any other distribution on any Junior Securities (except a dividend or distribution payable solely in shares of Junior Securities); (ii) the Company shall not declare or pay any dividend whatsoever, whether in cash, property or otherwise, set aside any cash or property for the payment of dividends, or make any other distribution on any Parity Securities ranking on parity with the Series B Preferred Stock with respect to dividends or distributions (except a dividend or distribution payable solely in shares of Junior Securities), unless declared and paid pro rata with the Series B Preferred Stock in proportion to the full amount to which they would otherwise be respectively entitled; and (iii) the Company shall not and shall cause its Subsidiaries not to repurchase, redeem or otherwise acquire or set aside any cash or property for the repurchase or redemption of any Junior Securities or Parity Securities, unless in each such case all dividends to which the holders of the Series B Preferred Stock shall have been entitled for all previous Dividend Periods shall have been paid or declared and a sum of money sufficient for the payment thereof shall have been set aside.

4.  Voting Rights.  The Holders shall have the following voting rights with respect to the Series B Preferred Stock:

(A)  Subject to applicable law, the shares of Series B Preferred Stock shall have no voting rights other than as set forth in this Section 4.

(B)  Holders of shares of the Series B Preferred Stock shall be entitled to vote upon all matters upon which holders of Common Stock and Series A Preferred Stock have the right to vote, and Holders shall have that number of votes on all such matters as is equal to the Conversion Ratio that would apply if such Holder’s shares of Series B Preferred Stock were to be converted pursuant to Section 6(A) as of the record date for the determination of the shareholders entitled to vote on such matters, or, if no such record date is established as of the date such vote is taken or any written consent of shareholders is solicited, such votes to be counted together with all other shares of capital stock having general voting powers and not separately as a class. Fractional votes shall not, however, be permitted and any fractional voting rights resulting from the above formula (after aggregating all shares into which shares of Series B Preferred Stock held by each Holder could be converted) shall be rounded up to the nearest whole number.

(C)  The consent of the Holders of at least a majority of the Series B Preferred Stock, voting separately as a single class with one (1) vote per share, in person or by proxy, either in writing without a meeting or at an annual or special meeting of shareholders called for the purpose, shall be necessary to:

(i) amend, alter or repeal, by way of merger or otherwise, any of the provisions of the Certificate so as to authorize, create or issue any shares of Parity Securities or Senior Securities (or amend the provisions of any existing class of Capital Stock to make such class of Capital Stock a class of Parity Securities or Senior Securities);

36

(ii)  issue any Parity Securities or Senior Securities; or

(iii) amend, alter or repeal, by way of merger or otherwise, any of the provisions of (x) the Certificate of Designation or any certificate of designation of terms of any Parity Securities; or (y) the Certificate so as to affect adversely any of the rights, preferences or privileges of the Holders.

5.   Liquidation Preference. In the event of any Liquidation, after payment or provision for payment by the Company of the debts and other liabilities of the Company and the liquidation preference of any Senior Securities that rank senior to the Series B Preferred Stock with respect to distributions on Liquidation, each Holder shall be entitled to receive an amount in cash for each share of the then outstanding Series B Preferred Stock held by such Holder equal to the Stated Value per share, plus an amount equal to all accrued but unpaid dividends thereon, whether or not earnings are available in respect of such dividends or such dividends have been declared, to and including the date full payment is tendered to the Holders with respect to such Liquidation, and no more (such amount being referred to herein as the “Liquidation Preference”), before any distribution shall be made to the holders of any Junior Securities upon the Liquidation of the Company. In case the assets of the Company available for payment to the Holders upon a Liquidation are insufficient to pay the full Liquidation Preference on all outstanding shares of the Series B Preferred Stock and all outstanding Senior Securities or Parity Securities, in each case ranking on parity with the Series B Preferred Stock as to distributions on Liquidation, in the amounts to which the holders of such shares are entitled, then the entire assets of the Company available for payment to the Holders of Series B Preferred Stock and holders of such Senior Securities or Parity Securities will be distributed ratably among the Holders of the Series B Preferred Stock and the holders of such Senior Securities or Parity Securities, based upon the aggregate amount due on such shares upon Liquidation. Written notice of any Liquidation of the Company, stating a payment date and the place where the distributable amounts shall be payable, shall be given by mail, postage prepaid, not less than thirty (30) days prior to the payment date stated therein, to the Holders of record of the Series B Preferred Stock at their respective addresses as the same shall appear on the books of the Company.

6.   Convertible Rights. The Series B Preferred Stock shall be convertible as follows:

(A)  Conversion of Holder’s Option. The Holder of any shares of Series B Preferred Stock shall have the right at such Holder’s option, at any time prior to either the Mandatory Trading Conversion Date or the Final Mandatory Conversion Date and without the payment of any additional consideration, to convert any or all of such shares of Series B Preferred Stock into a number of fully paid and nonassessable shares of Common Stock for each such share of Series B Preferred Stock equal to the Conversion Ratio, upon the terms hereinafter set forth.

(B)  Mandatory Conversion in the Event of Certain Market Price of Common Stock. If after June 1, 2004 the shares of Common Stock are traded on a nationally recognized exchange, then at such time that the Market Price of shares of Common Stock for a period of twenty (20) consecutive Trading Days, as reported on such exchange, is equal to or greater than $8.00 per share (the “Mandatory Trading Conversion Date”), each outstanding share of Series B Preferred Stock shall, without any action on the part of the Holder of such share or the Company, be converted automatically into a number of full paid and nonassessable shares of Common Stock equal to the Conversion Ratio in effect on the Mandatory Trading Conversion Date.

(C)  Mandatory Conversion on June 1, 2008. On June 1, 2008 (the “Final Mandatory Conversion Date”), each outstanding share of Series B Preferred Stock shall, without any action on the part of the Holder of such share or the Company, be converted automatically into a number of full paid and nonassessable shares of Common Stock equal to the Conversion Ratio in effect on the Final Mandatory Conversion Date.

37

(D)  Conversion Ratio. In the event of a conversion pursuant to Sections 6(A), (B) or (C), the “Conversion Ratio” shall be a number of shares of Common Stock calculated by dividing (a) the Stated Value plus any accrued and unpaid dividends to and including the applicable Conversion Date by (b) the Conversion Price in effect on the applicable Conversion Date.

(E)  Mechanics of Conversion. The Holder of any shares of Series B Preferred Stock may exercise the conversion right specified in Section 6(A) by surrendering to the Company or any transfer agent of the Company the certificate or certificates representing the shares of Series B Preferred Stock to be converted, accompanied by written notice specifying the number of such shares to be converted. Upon the occurrence of the Mandatory Trading Conversion Date of the Final Mandatory Conversion Date, all of the outstanding shares of Series B Preferred Stock shall be converted automatically without any further action by the Holders of such shares of the Company and whether or not the certificates representing such shares are surrendered to the Company or its transfer agent; provided that the Company shall not be obligated to issue to any such Holder certificates evidencing the shares of Common Stock issuable upon such conversion unless (i) certificates evidencing the shares of Series B Preferred Stock are either delivered to the Company or any transfer agent of the Company; or (ii) the holder notifies the Company or any transfer agent of the Company that the such certificates have been lost, stolen or destroyed and executes an agreement reasonably satisfactory to the Company to indemnify the Company from any loss incurred by it in connection therewith. If the certificates representing shares of Common Stock issuable upon conversion of shares of Series B Preferred Stock are to be issued in a name other than the name on the face of the certificates representing such shares of Series B Preferred Stock, such certificates shall be accompanied by such evidence of the assignment and such evidence of the signatory’s authority with respect thereto as deemed appropriate by the Company or its transfer agent. Conversion shall be deemed to have been effected (i) on the date when the notice of an election to convert pursuant to Section 6(A) and certificates representing the shares being converted are actually received by the Company or any transfer agent of the Company; (ii) on the Mandatory Trading Conversion Date; or (iii) on the Final Mandatory Conversion Date, as the case may be. Such dates that conversion shall be deemed to be effective shall be referred to herein as the “Conversion Date.” Subject to the provisions of Section 7(E), as promptly as practicable after the Conversion Date, the Company shall issue and deliver to or upon the written order of such Holder a certificate or certificates for the number of shares of Common Stock to which such Holder is entitled upon such conversion and a check or cash with respect to any fractional interest in a share of Common Stock, as provided in Section 6(F). The person in whose name the certificate or certificates for shares of Common Stock are to be issued shall be deemed to have become a holder of record of such shares of Common Stock on the applicable Conversion Date. Upon conversion of only a portion of the shares covered by a certificate representing shares of Series B Preferred Stock surrendered for conversion pursuant to Section 6(A), the Company shall issue and deliver to or upon the written order of the Holder of the certificate so surrendered for conversion, at the expense of the Company, a new certificate representing the number of shares of Series B Preferred Stock representing the unconverted portion of the certificate so surrendered.

(F)  Fractional Shares. No fractional shares of Common Stock or scrip shall be issued upon conversion of shares of Series B Preferred Stock. If more than one (1) share of Series B Preferred Stock shall be surrendered for conversion at any one time by the same Holder, the number of shares of Common Stock issuable upon conversion thereof shall be computed on the basis of the aggregate number of shares of Series B Preferred Stock so surrendered. Instead of any fractional share of Common Stock which would otherwise be issuable upon conversion of any shares of Series B Preferred Stock, the Company shall pay a cash adjustment in respect of such fractional interest in an amount equal to that fractional interest of the Market Price of the Common Stock on the Conversion Date.

38

(G)  Authorization and Insurance.  The Company covenants and agrees that:

(i)   the shares of Common Stock issuable upon any conversion of any shares of Series B Preferred Stock will be deemed to have been issued (i) to the Person exercising such conversion rights under Section 6(A) on the Conversion Date or (ii) the record holder of the shares of Series B Preferred Stock to be converted, as reflected on the books and records of the Company or its transfer agent, on the Mandatory Trading Conversion Date or the Final Mandatory Conversion Date, as the case may be, and such Person will be deemed for all purposes to have become the record holder of such shares of Common Stock on the Conversion Date;

(ii)  all shares of Common Stock which may be issued upon any conversion of any Series B Preferred Stock will, upon issuance, be fully paid and non-assessable and free from all taxes, liens and charges with respect to the issue thereof;

(iii) the Company will take all such action as may be necessary to assure that all shares of Common Stock issuable upon conversion of shares of Series B Preferred Stock may be issued without violation of any applicable law or regulation or of any requirements of any domestic securities exchange upon which securities of the same class may be listed;

(iv)  the Company will not take any action which would result in any adjustment of the Conversion Price if the total number of shares of Common Stock issuable after such action upon conversion of all shares of Series B Preferred Stock, together with all shares of Common Stock then outstanding and all shares of Common Stock then issuable upon the exercise of all outstanding Common Stock Equivalents, would exceed the total number of shares of Common Stock then authorized by the Certificate;

(v)   the Company will at all times reserve and keep available, out of its authorized but unissued shares of Common Stock or out of shares of Common Stock held in its treasury, the full number of shares of Common Stock into which all shares of the Series B Preferred Stock having conversion privileges from time to time outstanding are convertible; and

(vi)  the Company will at no time close its transfer books against the transfer of the Series B Preferred Stock or of any share of Common Stock issued or issuable upon the conversion of the Series B Preferred Stock in any manner which interferes with the timely conversion of the Series B Preferred Stock.

7.   Conversion Price Adjustments.  The Conversion Price shall be subject to adjustment from time to time as follows:

(A)  Common Stock Issued at Less than Conversion Price.  If the Company issues or sells any Common Stock, other than Excluded Stock, without consideration or for a consideration per share less than the Conversion Price in effect immediately prior to such issuance or sale, the Conversion Price in effect immediately prior to each such issuance or sale will immediately (except as provided below) be reduced to the price determined by multiplying the Conversion Price in effect immediately prior to such issuance or sale, by a fraction, (1) the numerator of which shall be (i) the number of shares of Common Stock outstanding immediately prior to such issuance or sale plus (ii) the number of shares of Common Stock which the aggregate consideration received by the Company for the total number of such additional shares of Common Stock so issued or sold would purchase at the Conversion Price in effect immediately prior to such issuance or sale and (2) the denominator of which shall be the number of shares of

39

Common Stock outstanding immediately after such issue or sale. For the purposes of any adjustment of the Conversion Price pursuant to this Section 7(A), the following provisions shall be applicable:

(i) in the case of the issuance of Common Stock for cash, the amount of the consideration received by the Company shall be deemed to be the amount of the cash proceeds received by the Company for such Common Stock before deducting therefrom any discounts or commissions allowed, paid or incurred by the Company for any underwriting or otherwise in connection with the issuance and sale thereof;

(ii) in the case of the issuance of Common Stock (otherwise than upon the conversion of shares of Capital Stock or other securities of the Company) for a consideration in whole or in part other than cash, including securities acquired in exchange therefor (other than securities by their terms so exchangeable), the consideration other than cash shall be deemed to be the fair value thereof as reasonably determined by the Board, irrespective of any accounting treatment;

(iii) in the case of the issuance of (a) options, warrants or other rights to purchase or acquire Common Stock, (b) securities by their terms convertible into or exchangeable for Common Stock or (c) options, warrants or rights to purchase such convertible or exchangeable securities:

(1) the aggregate maximum number of shares of Common Stock deliverable upon exercise of such options, warrants or other rights to purchase or acquire Common Stock shall be deemed to have been issued at the time such options, warrants or rights are issued and for a consideration equal to the consideration (determined in the manner provided in Section 7(A)(i) and (ii)), if any, received by the Company upon the issuance of such options, warrants or rights plus the minimum purchase price provided in such options, warrants or rights for the Common Stock covered thereby;

(2) the aggregate maximum number of shares of Common Stock deliverable upon conversion of or in exchange for any such convertible or exchangeable securities, or upon the exercise of options, warrants or other rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof, shall be deemed to have been issued at the time such securities were issued or such options, warrants or rights were issued and for a consideration equal to the consideration, if any, received by the Company for any such securities and related options, warrants or rights (excluding any cash received on account of accrued interest or accrued dividends), plus the additional consideration (determined in the manner provided in Section 7(A)(i) and (ii)), if any, to be received by the Company upon the conversion or exchange of such securities, or upon the exercise of any related options, warrants or rights to purchase or acquire such convertible or exchangeable securities and the subsequent conversion or exchange thereof;

(3) on any change in the number of shares of Common Stock deliverable upon exercise of any such options, warrants or rights or conversion or exchange of such convertible or exchangeable securities or any change in consideration to be received by the Company upon such exercise, conversion or exchange, but excluding changes resulting from the anti-dilution provisions thereof (to the extent comparable to the anti-dilution provisions contained herein), the Conversion Price as then in effect shall forthwith be readjusted to such Conversion Price as would have been obtained had an adjustment been

40

made upon the issuance of such options, warrants or rights not exercised prior to such change, or of such convertible or exchangeable securities not converted or exchanged prior to such change, upon the basis of such change;

(4) on the expiration or cancellation of any such options, warrants or rights (without exercise), or the termination of the right to convert or exchange such convertible or exchangeable securities (without exercise), if the Conversion Price shall have been adjusted upon the issuance thereof, the Conversion Price shall forthwith be readjusted to such Conversion Price as would have been obtained had an adjustment been made upon the issuance of such options, warrants, rights or such convertible or exchangeable securities on the basis of the issuance of only the number of shares of Common Stock actually issued upon the exercise of such options, warrants or rights, or upon the conversion or exchange of such convertible or exchangeable securities; and

(5) If the Conversion Price shall have been adjusted upon the issuance of any such options, warrants, rights or convertible or exchangeable securities, no further adjustment of the Conversion Price shall be made for the actual issuance of Common Stock upon the exercise, conversion or exchange thereof;provided, however, that no increase in the Conversion Price shall be made pursuant to subclauses (1) or (2) of this Section 7(A)(iii),

(B) Stock Splits, Subdivisions, Reclassifications or Combinations. If the Company shall (1) declare a dividend or make a distribution on its Common Stock in shares of Common Stock, (2) subdivide or reclassify the outstanding shares of Common Stock into a greater number of shares, or (3) combine or reclassify the outstanding Common Stock into a smaller number of shares, the Conversion Price in effect at the time of the record date for such dividend or distribution or the effective date of such subdivision, combination or reclassification shall be proportionately adjusted so that the Holder of any shares of Series B Preferred Stock surrendered for conversion or exchange after such date shall be entitled to receive the number of shares of Common Stock which such holder would have owned or been entitled to receive after such date had such Series B Preferred Stock been converted or exchanged immediately prior to such date. Successive adjustments in the Conversion Price shall be made whenever any event specified above shall occur.

(C) Business Combinations. In case of any Business Combination in which the holders of shares of Common Stock are entitled to receive stock, securities or property by virtue of their ownership of Common Stock or a reclassification of Common Stock (other than a reclassification of Common Stock referred to in Section 7(B)), each share of Series B Preferred Stock shall after the date of such Business Combination or reclassification be convertible into the number of shares of stock or other securities or property (including cash) to which the Common Stock issuable upon conversion of such share of Series B Preferred Stock immediately prior to such Business Combination or reclassification would have been entitled upon such Business Combination or reclassification; and in any such case, if necessary, the provisions set forth herein with respect to the rights and interests thereafter of the Holders of the shares of Series B Preferred Stock shall be appropriately adjusted so as to be applicable, as nearly as may reasonably be, to any shares of stock or other securities or property thereafter deliverable on the conversion of the shares of Series B Preferred Stock. In determining the kind and amount of stock, securities or the property receivable upon consummation of such Business Combination, if the holders of Common Stock have the right to elect the kind or amount of consideration receivable upon consummation of such Business Combination, then the Holder of the Series B Preferred Stock shall have the right to make a similar election as of the Conversion Date with respect to the

41

number of shares of stock or other securities or property into which the Series B Preferred Stock shall be convertible.

(D) Rounding of Calculations: Minimum Adjustments. All calculations under this Section 7 shall be made to the nearest one tenth (1/10th) of a cent or to the nearest one hundredth (1/100th) of a share, as the case may be. Any provision of this Section 7 to the contrary notwithstanding, no adjustment in the Conversion Price shall be made if the amount of such adjustment would be less than $0.01, but any such amount shall be carried forward and an adjustment with respect thereto shall be made at the time of and together with any subsequent adjustment which, together with such amount and any other amount or amounts so carried forward, shall aggregate $0.01 or more. In addition, in no event shall be Conversion Price be adjusted to less than the lesser of $0.01 per share or the par value of the Common Stock.

(E) Timing of Issuance of Additional Common Stock Upon Certain Adjustments. In any case in which the provisions of this Section 7 shall require that an adjustment to the Conversion Price shall become effective immediately after a record date for an event, the Company may defer the following until the occurrence of such event: (1) issuing to the Holder of any share of Series B Preferred Stock converted after such record date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the shares of Common Stock issuable upon such conversion before giving effect to such adjustment; and (2) paying to such Holder any amount of cash in lieu of a fractional share of such Common Stock; provided, however, that the Company upon request shall deliver to such Holder a due bill or other appropriate instrument evidencing such Holder’s right to receive such additional shares, and such cash, upon the occurrence of the event requiring such adjustment. 

(F) Statement Regarding Adjustments. Whenever the Conversion Price shall be adjusted as provided in Section 7 the Company shall forthwith file, at the office of any transfer agent for the Series B Preferred Stock and at the rincipal office of the Company, a statement showing in reasonable detail the facts requiring such adjustment and the Conversion Price that shall be in effect after such adjustment and the Company shall also cause a copy of such statement to be sent by mail, first class postage prepaid, to each Holder at its address appearing in the Company’s records.

(G) Notices. In the event that the Company shall propose to take any action of the type described in Section 7 (but only if the action of the type described in Section 7 would result in an adjustment in the Conversion Price or a change in the type of securities or property to be delivered upon a conversion or exchange of Series B Preferred Stock), the Company shall give notice to each Holder, in the manner set forth in Section 7(F), which notice shall specify the record date, if any, with respect to any such action and the approximate date on which such action is to take place. Such notice shall also set forth the facts with respect thereto as shall be reasonably necessary to indicate the effect on the Conversion Price and the number, kind or class of shares or other securities or property which shall be deliverable upon conversion of shares of the Series B Preferred Stock. In the case of any action which would require the fixing or a record date, such notice shall be given at least ten (10) days prior to the date so fixed, and in case of all other action, such notice shall be given at least fifteen (15) days prior to the taking of such proposed action. Failure to give such notice, or any defect therein, shall not affect the legality or validity of any such action.

(H) No Impairment. The Company will not, by amendment of the Certificate or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Company, but will at all times in good faith assist in the carrying out of all the provisions of Sections 6 and 7 and in taking of all

42

such action as may be necessary or appropriate in order to protect the conversion rights of the Holders of the Series B Preferred Stock against impairment.

(l)  No Duplication of Adjustments.  If any action would require adjustment of the Conversion Price pursuant to more than one of the provisions of this Section 7, only one adjustment shall be made and such adjustment shall be made the adjustment that results in the lowest Conversion Price after giving effect to such adjustment.

8.  Limitations on Series B Preferred Stock.  No share or shares of Series B Preferred Stock the Company acquires through conversion, redemption, option, exchange or otherwise will be reissued as Series B Preferred Stock, and all such shares will be canceled, retired and eliminated from the shares of Series B Preferred Stock which the Company will be authorized to issue, and will be restored to the status of authorized but undesignated preferred stock of the Company eligible for designation and reissuance subject to the terms hereof and the Certificate.

9.   Waivers.  With the written consent of Holders of a majority of the Series B Preferred Stock, the obligations of the Company and the rights of the Holders under this Certificate of Designation may be waived (either generally or in a particular instance, either retroactively or prospectively and either for a specified period of time or indefinitely). Upon the effectuation of each such waiver, the Company will promptly give written notice thereof to the Holders who have not previously consented thereto in writing.

IN WITNESS WHEREOF, this Certificate of Designation has been signed on behalf of the Company by its Chief Executive Officer and attested to by its Chief Financial Officer and Secretary, all as of the 8th day of May, 2003.

	ISOLAGEN, INC.
By:	By:  /s/ Michael Macaluso
	Michael Macaluso, Chief Executive Officer

ATTEST:

By: /s/ Jeffrey W. Tomz

Jeffrey W. Tomz, Chief Financial Officer and Secretary

43

State of Delaware

Secretary of State

Division of Corporations

Delivered 08:15 PM 08/11/2003

FILED 05:15 PM 08/11/2003

SRV 030523817 - 2310946 FILE

CERTIFICATE OF AMENDMENT

OF

CERTIFICATE OF INCORPORATION

OF

ISOLAGEN, INC.

A DELAWARE CORPORATION

It is hereby certified that:

1.   The name of the corporation (the “Corporation”) is “Isolagen, Inc.”

2.   The first Article X of the Certificate of Incorporation of the Corporation is hereby amended and restated in its entirety and shall read as follows:

“ARTICLE X

The number of directors of the Corporation shall be set forth in the bylaws of the Corporation, which number may be increased or decreased pursuant to the bylaws of the Corporation. The board of directors is authorized to make, alter or repeal the bylaws of the Corporation. The Board of Directors shall be classified, in respect solely to the time for which they shall severally hold office, by dividing them into three (3) classes, each such class to be as nearly as possible equal in number of directors to each other class. The first term of office of directors of the first class shall expire at the first annual meeting after their election, and thereafter such terms shall expire on each three (3) year anniversary of such date; the term of office of the directors of the second class shall expire on the one (1) year anniversary of the first annual meeting after their election, and thereafter such terms shall expire on each three (3) year anniversary of such one (1) year anniversary; and the term of office of the directors of the third class shall expire on the two (2) year anniversary of the first annual meeting after their election, and thereafter such terms shall expire on each three (3) year anniversary of such two (2) year anniversary. At each succeeding annual meeting, the stockholders shall elect directors for a full term or the remainder thereof, as the case may be, to succeed those whose terms have expired. Each director shall hold office for the term for which elected and until his successor shall be elected and qualify.”

3.   The amendment of the Certificate of Incorporation herein certified has been duly adopted in accordance with the provision of Section 242 of the General Corporation Law of the State of Delaware.

4.   The second Article X of the Certificate of Incorporation shall be remembered as “Article XI”.

IN WITNESS WHEREOF, Isolagen, Inc. has caused this Certificate of Amendment of the Certificate of Incorporation to be executed by its authorized officer this 11th day of August, 2003.

	ISOLAGEN, INC.
By:	/s/ Jeffrey Tomz
Name:	Jeffrey Tomz
Title:	Chief Financial Officer

44

CERTIFICATE OF AMENDMENT

OF THE

CERTIFICATE OF INCORPORATION OF

ISOLAGEN, INC.

A Delaware Corporation

Isolagen, Inc., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware does hereby certify:

FIRST: That at a meeting of the Board of Directors of Isolagen, Inc. resolutions were duly adopted setting forth a proposed amendment of the Certificate of Incorporation of said corporation, declaring said amendment to be advisable and calling a meeting of the stockholders of said corporation for consideration thereof. The resolution setting forth the proposed amendment is as follows:

RESOLVED, that the Certificate of Incorporation of this corporation be amended by changing the first sentence of the Article thereof numbered “Article IV”, with the remaining text of Article IV being unamended and remaining as currently set forth in Article IV, so that, as amended, the first sentence of said Article shall be and read as follows:

“The Company shall have the authority to issue an aggregate of 105,000,000 shares, of which 5,000,000 shares shall be preferred stock, par value $.001 per share (“Preferred Stock”), and 100,000,000 shares shall be Common Stock, par value $.001 per share (“Common Stock”).”

SECOND: That thereafter, pursuant to resolution of its Board of Directors, a meeting of the stockholders of said corporation was duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware at which meeting the necessary number of shares as required by statute were voted in favor of the amendment.

THIRD: That said amendment was duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment of the Certificate of Incorporation to be executed by its authorized officer this 28^th day of June, 2005.

	ISOLAGEN, INC.
By:	/s/ Susan S. Ciallella
Name:	Susan S. Ciallella
Title:	Executive Vice President,
	General Counsel & Secretary

45

EX-10.1

Exhibit 10.1

EMPLOYMENT AGREEMENT

THIS EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”) dated as of July 5^th, 2005, is by and between Isolagen, Inc., a Delaware corporation (together with its subsidiaries, the “Company” or “Isolagen”), and Marie Lindner, an individual residing in Radnor, Pennsylvania (the “Executive”).

W I T N E S S E T H:

WHEREAS, the Executive desires to serve the Company as its Senior Vice President of Medical and Business Affairs; and

WHEREAS, the Company desires to employ Executive as its Senior Vice President;

NOW THEREFORE in consideration of the mutual benefits to be derived from this Agreement, the Company and the Executive hereby agree as follows:

1.             Term of Employment; Office and Duties.

(a)           Commencing on July 5, 2005 (the “Employment Date”), and for an initial term ending July 4, 2007 the Company shall employ the Executive as a senior executive of the Company with the title of Senior Vice President and Chief Financial Officer, with the duties and responsibilities prescribed for such offices in the Bylaws of the Company and such additional duties and responsibilities consistent with such positions as may from time to time be assigned to the Executive by the Board of Directors.  Executive agrees to perform such duties and discharge such responsibilities in accordance with the terms of this Agreement.  This Agreement shall be renewed for an additional one (1) year term, by the mutual written agreement of the Executive and the Company at least one hundred-twenty (120) days prior to its expiration.  In addition, the Company shall pay to Executive a one-time signing bonus upon her six month anniversary with the Company.

(b)           The Executive shall devote substantially all of her working time to the business and affairs of the Company other than during vacations of four weeks per year and periods of illness or incapacity; provided, however, that nothing in this Agreement shall preclude the Executive from devoting time required:  (i) for serving as a director, advisor or officer of any organization or entity not in a competing business with the Company, and any other businesses in which the Company becomes involved; (ii) delivering lectures or fulfilling speaking engagements;  or (iii) engaging in charitable and community activities provided that such activities do not interfere with the performance of his duties hereunder.

2.             Compensation and Benefits.

For all services rendered by the Executive in any capacity during the period of Executive’s employment by the Company, including without limitation, services as an

executive officer or member of any committee of the Board of Directors or any subsidiary, affiliate or division thereof, from and after the Effective Date, the Executive shall be compensated as follows:

(a)           Base Salary.       The Company shall pay the Executive a fixed salary (“Base Salary”) at a rate of Two Hundred Seventy-five Thousand Dollars ($275,000) per year.  The Board of Directors may periodically review the Executive’s Base Salary and may determine to increase (but not decrease) the Executive’s salary, in accordance with such policies as the Company may hereafter adopt from time to time, if it deems appropriate.  Base Salary will be payable in accordance with the customary payroll practices of the Company.

(b)           Executive will also be entitled to receive an annual bonus (“the “Annual Bonus”), payable each year subsequent to the issuance of final audited financial statements, but in no case later than 120 days after the end of the Company’s most recently completed fiscal year. The initial target bonus for Executive will be 30% of the base salary.  The final determination on the amount of the Annual Bonus will be made by the Compensation Committee of the Board of Directors, based primarily on the Executive’s performance . The Compensation Committee may also consider other more subjective factors in making its determination.

(c)           A one time signing bonus of  fifteen thousand dollars ($15,000)

(d)           Fringe Benefits, Option Grants and Miscellaneous Employment Matters. 

(i)            The Executive shall be entitled to participate in such disability, health and life insurance and other fringe benefit plans or programs, including a Section 401(k) retirement plan, of the Company established from time to time by the Board of Directors, if any, to the extent that her position, tenure, salary, age, health and other qualifications make him eligible to participate, subject to the rules and regulations applicable thereto.  In addition, the Executive shall be entitled to the following benefits:

(ii)           Contemporaneous with the execution of this Agreement, the Executive will be granted  a non-qualified stock option  (the “Employment Option”) to purchase 60,000 shares of the Company’s Common Stock, par value $.001 per share (the “Common Stock”) with an exercise price per share equal to the closing price of Isolagen on the date of the grant. The term of the Employment Option will be for a period of five (5) years from the date of grant and governed by the terms of an Option Agreement  between the Executive and the Company.  The shares eligible for purchase under the Employment Option grant vest ratably, annually, over the two years following the Employment Date.  In the event the Executive is terminated without cause or due to a material diminution in responsibilities as described below in Paragraph 4(b), the Employment Option will vest immediately upon such termination.  Nothing in this paragraph shall limit the board of directors or the compensation committee from making any additional grant of options.

2

(d)           Withholding and Employment Tax.       Payment of all compensation hereunder shall be subject to withholding tax and other employment taxes as may be required with respect to compensation paid by an employer/corporation to an employee.

(e)           Disability.       The Company shall, to the extent such benefits can be obtained at a reasonable cost, provide the Executive with disability insurance benefits.

(f)            Death.       The Company shall, to the extent such benefits can be obtained at a reasonable cost, provide the Executive with life insurance benefits in the amount of at least One Million Dollars ($1,000,000).

(g)           Vacation.       Executive shall receive four (4) weeks of vacation annually, administered in accordance with the Company’s existing vacation policy.

3.             Business Expenses.

The Company shall pay or reimburse all reasonable travel and entertainment expenses incurred by the Executive in connection with the performance of his duties under this Agreement, including travel between Executive’s current domicile to the Company’s various offices (other than his primary assigned office in Exton, PA) and facilities in the United States and abroad, for attending out-of-town meetings of the Board of Directors, and such other travel as may be required or appropriate to fulfill the responsibilities of her office, all in accordance with such policies and procedures as the Company may from time to time establish for senior officers and as required to preserve any deductions for federal income taxation purposes to which the Company may be entitled and subject to the Company’s normal requirements with respect to reporting and documentation of such expenses.

4.             Termination of Employment.

Notwithstanding any other provision of this Agreement, Executive’s employment with the Company may be terminated upon written notice to the other party as follows:

(a)           By the Company, in the event of the Executive’s death or Disability (as hereinafter defined) or for Cause (as hereinafter defined). For purposes of this Agreement, “Cause” shall mean either: (i) the indictment of, or the bringing of formal charges against, Executive by a governmental authority of competent jurisdiction for charges involving criminal fraud or embezzlement; (ii) the conviction of Executive of a crime involving an act or acts of dishonesty, fraud or moral turpitude by the Executive, which act or acts constitute a felony; (iii) Executive having willfully caused the Company, without the approval of the Board of Directors, to fail to abide by either a valid contract to which the Company is a party or the Company’s Bylaws or; (iv) Executive having committed acts or omissions constituting gross negligence or willful misconduct with respect to the Company; (v) Executive having committed acts or omissions constituting a material breach of Executive’s duty of loyalty or fiduciary duty to the Company or any material act of dishonesty or fraud with respect to the Company which are not cured in a reasonable time, which time shall be 30 days from receipt

3

of written notice from the Company of such material breach; or (vi) Executive having committed acts or omissions constituting a material breach of this Agreement, including any failure of the Executive to follow a directive from the Board of Directors and/or its Audit Committee, which are not cured in a reasonable time, which time shall be 30 days from receipt of written notice from the Company of such material breach (vii) Executive having failed to meet agreed upon minimum performance criteria.  A determination that Cause exists as defined in clauses (iv), (v), (vi) or (vii) (as to this Agreement) of the preceding sentence shall be made in good faith and by at least a majority of the members of the Board of Directors.  For purposes of this Agreement, “Disability” shall mean the inability of Executive, in the reasonable judgment of a physician appointed by the Board of Directors, to perform his duties of employment for the Company or any of its subsidiaries because of any physical or mental disability or incapacity, where such disability shall exist for an aggregate period of more than 120 days in any 365-day period or for any period of 90 consecutive days.  The Company shall by written notice to the Executive specify the event relied upon for termination pursuant to this Section 4(a), and Executive’s employment hereunder shall be deemed terminated as of the date of such notice.  In the event of any termination under this Subsection 4(a), the Company shall pay all amounts then due to the Executive under Section 2(a) of this Agreement for any portion of the payroll period worked but for which payment had not yet been made up to the date of termination, and, if such termination was for Cause, the Company shall have no further obligations to Executive under this Agreement, and any and all options granted hereunder shall terminate according to their terms.  In the event of a termination due to Executive’s Disability or death, the Company shall comply with its obligations under Sections 2(e) and 2(f).

(b)           By the Company, in the absence of Cause, for any reason and in its sole and absolute discretion, provided that in such event the Company shall, as liquidated damages or severance pay, or both, continue to pay to Executive the Base Salary (at a monthly rate equal to the rate in effect immediately prior to such termination) for the lesser of the remaining term as defined above or one year from the date of termination (the “Termination Payments”), when, as and if such payments would have been made in the absence of Executive’s termination subject to the following limitation:  if the Executive becomes employed following termination, all Termination Payments shall cease except that Executive shall receive at least six months of Termination Payments notwithstanding reemployment.  In addition, if upon the retention of a new chief executive officer the duties and responsibilities of the Executive are materially diminished or changed without the Executive’s consent and the Executive raises a timely objection (within 30 days) to such change in her duties and responsibilities, Executive may resign her position and shall be entitled to six months of Termination Payments as if she were terminated without Cause.

(c)           By the Executive, for any reason, upon providing 14 days (2 weeks) written notice.  The Executive will be entitled to only such compensation as due through that period, including unpaid vacation, but shall not be entitled to any other remuneration, unless agreed to by the Company.

4

5.             Non-Competition.

During the period of Executive’s employment hereunder and during the period, if any, during which payments are required to be made to the Executive by the Company pursuant to Sections 4(a) or 4(b), the Executive shall not, within any state or foreign jurisdiction in which the Company or any subsidiary of the Company is then providing services or products or marketing its services or products (or engaged in active discussions to provide such services), or within a one hundred (100) mile radius of any such state, directly or indirectly own any interest in, manage, control, participate in, consult with, render services for, or in any manner engage in any business engaged in competition with the Company (unless the Board of Directors shall have authorized such activity and the Company shall have consented thereto in writing).  By way of further clarification, a business would be deemed to be in competition with the Company if it utilized cellular therapies for aesthetic or therapeutic treatment. Investments of less than five percent of the outstanding securities of any class of a corporation subject to the reporting requirements of Section 13 or Section 15(d) of the Securities Exchange Act of 1934, as amended, shall not be prohibited by this Section 5. Executive’s obligations under this Section 5 arising after the termination of Executive shall be suspended during any period in which the Company fails to pay to him Termination Payments required to be paid to him pursuant to this Agreement.  The provisions of this Section 5 are subject to the provisions of Section 14 of this Agreement.

6.             Inventions and Confidential Information.

The parties hereto recognize that a major need of the Company is to preserve its specialized knowledge, trade secrets, and confidential information.  The strength and good will of the Company is derived from the specialized knowledge, trade secrets, and confidential information generated from experience with the activities undertaken by the Company and its subsidiaries.  The disclosure of this information and knowledge to competitors would be beneficial to them and detrimental to the Company, as would the disclosure of information about the marketing practices, pricing practices, costs, profit margins, design specifications, analytical techniques, and similar items of the Company and its subsidiaries.  The Executive acknowledges that the proprietary information, observations and data obtained by him while employed by the Company concerning the business or affairs of the Company are the property of the Company.  The Executive also agrees to execute a separate agreement relating to the ownership of intellectual property of the Company upon the commencement of her employment.  By reason of her being a senior executive of the Company, the Executive has or will have access to, and has obtained or will obtain, specialized knowledge, trade secrets and confidential information about the Company’s operations and the operations of its subsidiaries, which operations extend throughout the United States.  [For purposes of this Section 6, “Company” shall mean the Company and each of its controlled subsidiaries.]  Therefore, subject to the provisions of Section 14 hereof, the Executive hereby agrees as follows, recognizing that the Company is relying on these agreements in entering into this Agreement:

5

(i)            During the period of Executive’s employment with the Company and for ten  (10) years thereafter, the Executive will not use, disclose to others, or publish or otherwise make available to any other party any inventions or any confidential business information about the affairs of the Company, including but not limited to confidential information concerning the Company’s products, methods, engineering designs and standards, analytical techniques, technical information, customer information, employee information, and other confidential information acquired by him in the course of her past or future services for the Company.  Executive agrees to hold as the Company’s property all books, papers, letters, formulas, memoranda, notes, plans, records, reports, computer tapes, printouts, software and other documents, and all copies thereof and therefrom, in any way relating to the Company’s business and affairs, whether made by him or otherwise coming into her possession, and on termination of her employment, or on demand of the Company, at any time, to deliver the same to the Company within seventy-two (72) hours of such termination or demand.

(ii)           During the period of Executive’s employment with the Company and for eighteen (18) months thereafter, (a) the Executive will not directly or indirectly through another entity induce or otherwise attempt to influence any employee of the Company to leave the Company’s employ and (b) the Executive will not directly hire or cause to be hired or induce a third party to hire, any such employee (unless the Board of Directors shall have authorized such employment and the Company shall have consented thereto in writing) or in any way interfere with the relationship between the Company and any employee thereof and (c) induce or attempt to induce any customer, supplier, licensee, licensor or other business relation of the Company to cease doing business with the Company or in any way interfere with the relationship between any such customer, supplier, licensee or business relation of the Company.

7.             Indemnification.

The Company will indemnify (and advance the costs of defense of) the Executive (and her legal representatives) to the fullest extent required by the laws of the state in which the Company is incorporated, as in effect at the time of the subject act or omission, or by the Certificate of Incorporation and Bylaws of the Company, as in effect at such time or on the date of this Agreement, whichever affords greater protection to the Executive, and the Executive shall be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit of its executive officers, against all judgments, damages, liabilities, costs, charges and expenses whatsoever incurred or sustained by her or her legal representative in connection with any action, suit or proceeding to which he (or  legal representatives or other successors) may be made a party by reason of her being or having been an officer of the Company or any of its subsidiaries except that the Company shall have no obligation to indemnify Executive for liabilities resulting from conduct of the Executive with respect to which a court of competent jurisdiction has made a final determination that Executive committed gross negligence or willful misconduct.

6

8.             Litigation Expenses.

In the event of any litigation or other proceeding between the Company and the Executive with respect to the subject matter of this Agreement and the enforcement of the rights hereunder and such litigation or proceeding results in final judgment or order in favor of the Executive, which judgment or order is substantially inconsistent with the positions asserted by the Company in such litigation or proceeding, the losing party shall reimburse the prevailing party for all of her/its reasonable costs and expenses relating to such litigation or other proceeding, including, without limitation, her/its reasonable attorneys’ fees and expenses.

9.             Consolidation; Merger; Sale of Assets; Change of Control.

Nothing in this Agreement shall preclude the Company from combining, consolidating or merging with or into, transferring all or substantially all of its assets to, or entering into a partnership or joint venture with, another corporation or other entity, or effecting any other kind of corporate combination provided that the corporation resulting from or surviving such combination, consolidation or merger, or to which such assets are transferred, or such partnership or joint venture assumes this Agreement and all obligations and undertakings of the Company hereunder. Upon such a consolidation, merger, transfer of assets or formation of such partnership or joint venture, this Agreement shall inure to the benefit of, be assumed by, and be binding upon such resulting or surviving transferee corporation or such partnership or joint venture, and the term “Company,” as used in this Agreement, shall mean such corporation, partnership or joint venture or other entity, and this Agreement shall continue in full force and effect and shall entitle the Executive and his heirs, beneficiaries and representatives to exactly the same compensation, benefits, perquisites, payments and other rights as would have been their entitlement had such combination, consolidation, merger, transfer of assets or formation of such partnership or joint venture not occurred.

10.           Survival of Obligations.

Sections 4, 5, 6, 7, 8, 9, 11, 12 and 14 shall survive the termination for any reason of this Agreement (whether such termination is by the Company, by the Executive, upon the expiration of this Agreement or otherwise).

11.           Executive’s Representations.

The Executive hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by the Executive do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Executive is a party or by which he is bound, (ii) the Executive is not a party to or bound by any employment agreement, non-compete agreement or confidentiality agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of the Executive, enforceable in accordance with its terms.  The Executive hereby

7

acknowledges and represents that he has consulted with legal counsel regarding her rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein.

12.           Company’s Representations.

The Company hereby represents and warrants to the Executive that (i) the execution, delivery and performance of this Agreement by the Company do not and shall not conflict with, breach, violate or cause a default under any contract, agreement, instrument, order, judgment or decree to which the Company is a party or by which it is bound and (ii) upon the execution and delivery of this Agreement by the Executive, this Agreement shall be the valid and binding obligation of the Company, enforceable in accordance with its terms.

13.           Enforcement.

Because the Executive’s services are unique and because the Executive has access to confidential information concerning the Company, the parties hereto agree that money damages would not be an adequate remedy for any breach of this Agreement.  Therefore, in the event of a breach or threatened breach of this Agreement, the Company may, in addition to other rights and remedies existing in its favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security).

14.           Severability.

In case any one or more of the provisions or part of a provision contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality or unenforceability shall be deemed not to affect any other jurisdiction or any other provision or part of a provision of this Agreement, nor shall such invalidity, illegality or unenforceability affect the validity, legality or enforceability of this Agreement or any provision or provisions hereof in any other jurisdiction; and this Agreement shall be reformed and construed in such jurisdiction as if such provision or part of a provision held to be invalid or illegal or unenforceable had never been contained herein and such provision or part reformed so that it would be valid, legal and enforceable in such jurisdiction to the maximum extent possible.  In furtherance and not in limitation of the foregoing, the Company and the Executive each intend that the covenants contained in Sections 5 and 6 shall be deemed to be a series of separate covenants, one for each county of the Commonwealth of Pennsylvania and one for each and every other state, territory or jurisdiction of the United States and any foreign country set forth therein.  If, in any judicial proceeding, a court shall refuse to enforce any of such separate covenants, then such unenforceable covenants shall be deemed eliminated from the provisions hereof for the purpose of such proceedings to the extent necessary to permit the remaining separate covenants to be enforced in such proceedings.  If, in any judicial proceeding, a court shall refuse to enforce any one or more of such separate covenants because the total time, scope or area thereof is deemed to be excessive or unreasonable, then it is the intent of the parties

8

hereto that such covenants, which would otherwise be unenforceable due to such excessive or unreasonable period of time, scope or area, be enforced for such lesser period of time, scope or area as shall be deemed reasonable and not excessive by such court.

15.           Entire Agreement; Amendment.

Except as otherwise set forth in this Agreement, this Agreement contains the entire agreement between the Company and the Executive with respect to the subject matter hereof and thereof.  This Agreement may not be amended, waived, changed, modified or discharged except by an instrument in writing executed by or on behalf of the party against whom enforcement of any amendment, waiver, change, modification or discharge is sought.  No course of conduct or dealing shall be construed to modify, amend or otherwise affect any of the provisions hereof.

16.           Notices.

All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if physically delivered, delivered by express mail or other expedited service or upon receipt if mailed, postage prepaid, via registered mail, return receipt requested, addressed as follows:

(a)	To the Company:	(b)	To the Executive:
	Isolagen, Inc.		Dr. Marie Lindner
	405 Eagleview Blvd.		631 Hollow Road
	Exton, PA		Radnor, PA 19087
Attn:	Susan Ciallella, Esq.

and/or to such other persons and addresses as any party shall have specified in writing to the other.

17.           Assignability.

This Agreement shall not be assignable by either party and shall be binding upon, and shall inure to the benefit of, the heirs, executors, administrators, legal representatives, successors and assigns of the parties.  In the event that all or substantially all of the business of the Company is sold or transferred, then this Agreement shall be binding on the transferee of the business of the Company whether or not this Agreement is expressly assigned to the transferee.

18.           Governing Law.

This Agreement shall be governed by and construed under the laws of the Commonwealth of Pennsylvania.

9

19.           Waiver and Further Agreement.

Any waiver of any breach of any terms or conditions of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof.  Each of the parties hereto agrees to execute all such further instruments and documents and to take all such further action as the other party may reasonably require in order to effectuate the terms and purposes of this Agreement.

20.           Headings of No Effect.

The paragraph headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first above written.

COMPANY:
ISOLAGEN, INC.
By:
	Susan Ciallella, Executive Vice President
	General Counsel
EXECUTIVE :
Marie Lindner, M.D.

10

EX-10.2

Exhibit 10.2

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT (this “Agreement”), dated as of June 8, 2005, is by and between Isolagen Technologies, Inc., a Delaware corporation (“Isolagen” together with its subsidiaries, the “Company”), and Frank DeLape (the “Employee” or “DeLape”).

W I T N E S S E T H:

WHEREAS, the Employee currently does and desires to continue to serve the Company as executive Chairman of the Board of Directors of Isolagen (the “Board”); and

WHEREAS, the Company desires to continue to employ DeLape as Chairman of the Board of Isolagen for an additional term.

NOW THEREFORE in consideration of the mutual benefits to be derived from this Agreement, the Company and the Employee hereby agree as follows:

1.Term of Employment; Office and Duties.

(a)Commencing on the date hereof, and for an initial term ending December 31, 2007, the Company shall employ the Employee as a senior executive officer of the Company with the title of Chairman of the Board, with the duties and responsibilities prescribed for such office in the Bylaws of Isolagen and such additional duties and responsibilities consistent with such position as may from time to time be assigned to the Employee by the Board.  The Employee agrees to perform such duties and discharge such responsibilities in accordance with the terms of this Agreement.  This Agreement shall be renewed automatically for an additional 1 year term, unless notice not to renew is provided to the other party at least 30 days prior to its expiration.  The period that the Employee serves as an employee of Isolagen pursuant to this Agreement shall be referred to as the “Employment Term” (including as a result of any extension of the initial term ending December 31, 2007).

(b)The Employee shall devote substantially all of his working time to the business and affairs of the Company other than during vacations and periods of illness or incapacity; provided, however, that nothing in this Agreement shall preclude the Employee from devoting time required: (i) for serving as a director or officer of any organization or entity not in a competing business with the Company, and any other businesses in which the Company becomes involved; (ii) delivering lectures or fulfilling speaking engagements; or (iii) engaging in charitable and community activities provided that such activities do not interfere with the performance of his duties hereunder.

2.Compensation and Benefits.  For all services rendered by the Employee in any capacity during the period of Employee’s employment by the Company including without limitation,

1

services as an executive officer director generally or member of any committee of the Board or any subsidiary or division thereof, the Employee shall be compensated as follows:

(a)Base Salary.  The Company shall pay the Employee a fixed base salary (“Base Salary”) at a rate of $450,000 per year.  The Board may periodically review the Employee’s Base Salary and may determine to increase the Employee’s salary, in accordance with such policies as the Company may hereafter adopt from time to time, if it deems appropriate, but such Base Salary may not be reduced below $450,000 per year.  Base Salary will be payable in accordance with the customary payroll practices of the Company.

(b)Bonus.  The Employee will be entitled to receive an annual bonus (the “Annual Bonus”), payable each fiscal year subsequent to the issuance of final audited financial statements for the prior fiscal year, but in no case later than 120 days after the end of the Company’s most recently completed fiscal year.  The final determination on the amount of the Annual Bonus will be made by the Compensation Committee of the Board, based on mutually agreed upon criteria.  The Compensation Committee may also consider other more subjective factors inmaking its determination.  The targeted amount of the Annual Bonus shall be 40% of the then-current Base Salary.  The actual Annual Bonus for any given period may be higher or lower than 40% on an annual basis as provided above.

(c)Fringe Benefits.

(i)The Employee shall be entitled to participate in such employee benefit and other compensatory or non-compensatory plans that senior executives and/or directors are permitted to participate in, including disability, health, dental and life insurance plans, option and bonus plans, and other fringe benefit plans or programs, including a 401(k) retirement plan, of the Company established from time to time by the Board, subject to the rules and regulations applicable thereto.  At the Employee’s option and as permitted by law, the Employee may elect to have the Company pay him a nonaccountable allowance in an amount equal to the amount the Company would expend on the benefits described in this Section to reimburse the Employee for benefits obtained independently;

(ii)Notwithstanding anything in Section 2(c)(i) to the contrary, contemporaneous with the execution of this Agreement and in addition to any stock options currently held by the Employee, the Employee will be granted a non-qualified stock option (the “Employment Option”) to purchase 400,000 shares of Isolagen’s common stock, par value $.001 per share (the “Common Stock”), with an exercise price equal to the closing transaction price of the Common Stock on the date of this Agreement which shall vest ratably monthly over the term of this Agreement, provided, however, that in the event (A) of a “Change in Control” or (B) the Employee’s employment is terminated by the Company without “Cause” pursuant to Section 4(b) or (III) the Employee for “Good Reason” pursuant to Section 4(c), all unvested options the Employee has with respect to any Common Stock of the Company (whether under this grant or otherwise) shall accelerate and immediately vest and become exercisable in full on the earliest of the date of the Change in Control or the date of the Employee’s termination pursuant to Sections 4(a), (b) and (c), as applicable.  The term of all options granted to the Employee pursuant to this Agreement or otherwise shall be 10 years from the date of grant;

2

(A)For purposes of this Agreement, a “Change in Control” shall have the meaning set forth in Rule 405 of the Securities Act of 1933.

(B)(I) approval by the stockholders of Isolagen of a complete liquidation or dissolution of Isolagen or (II) the first to occur of (a) the sale or other disposition (in one transaction or a series of related transactions) of all or substantially all of the assets of Isolagen, or (b) the approval by the stockholders of Isolagen of any such sale or disposition.

(d)Withholding and Employment Tax.  Payment of all compensation hereunder shall be subject to customary withholding tax and other employment taxes as may be required with respect to compensation paid by an employer to an employee.

(e)Disability.  The Company shall, to the extent such benefits can be obtained at a reasonable cost, provide the Employee with disability insurance benefits of at least 60% of his gross Base Salary per month.  In the event of the Employee’s Disability (as hereinafter defined), the Employee and his family shall continue to be covered by all of the Company’s employee welfare benefit plans described under Section 2(c), at the Company’s expense, to the extent such benefits can be obtained at a reasonable cost, for the lesser of the term of such Disability or 18 months, in accordance with the terms of such plans.

(f)Death.  The Company shall, to the extent such benefits can be obtained at a reasonable cost, provide the Employee with life insurance benefits in the amount of at least $4,000,000.  In the event of the Employee’s death, the Employee’s family shall continue to be covered by all of the Company’s employee welfare benefit plans described under Section 2(c), at the Company’s expense, to the extent such benefits can be obtained at a reasonable cost, for 18 months following the Employee’s death in accordance with the terms of such plans.

(g)Vacation.  The Employee shall receive four (4) 4 weeks of vacation annually, administered in accordance with the Company’s existing vacation policy.

(h)Secretary.  The Company shall provide the Employee with a secretary/administrative assistant designated by and acceptable to the Employee and the Company shall pay all costs for such secretary, including salary, benefits and office equipment and materials.

3.Business Expenses.

The Company shall pay or reimburse the Employee for all reasonable travel, business and entertainment expenses incurred by or necessary for the Employee to perform his duties under this Agreement, including reimbursement for attending out-of-town meetings of the Board, in accordance with such policies and procedures as the Company may from time to time establish for senior officers and subject to the Company’s normal requirements with respect to reporting and documentation of such expenses.  The Company shall also pay or reimburse any and all expenses incurred by the Employee for Employee’s automobile a nonaccountable expense allowance of $2,500 to cover lease payments, the cost of insurance, tires maintenance, and gasoline and oil, as well as all expenses incurred by the Employee for one cellular telephone

3

and PDA including monthly service charges, equipment purchase, maintenance and all other ancillary charges.  Further, the Company agrees to reimburse the Employee, pursuant to a separate reimbursement agreement for reasonable office expenses relating to Employee’s services hereunder.

4.Termination of Employment.  Notwithstanding any other provision of this Agreement, the Employee’s employment with the Company may be terminated upon written notice to the other party as follows and with such other requirements as are set forth below:

(a)By the Company, in the event of the Employee’s Disability or for Cause.  The Employee’s employment automatically terminates on his death.  For purposes of this Agreement, “Cause” shall mean any one of the following: (i) the indictment of, or the bringing of formal charges against, Employee by a governmental authority of competent jurisdiction for charges involving criminal fraud or embezzlement, provided, however, that if the Employee is acquitted or dismissed from defending against any such charges, he shall be entitled to payment under this Agreement for the time remaining under the Term of this Agreement from the date of termination for Cause; (ii) the final, non-appealable conviction of Employee of a crime involving an act or acts of dishonesty, fraud or moral turpitude by the Employee, which act or acts constitute a the Employee of a felony; (ii) causing the Company, without the approval of the Board of Directors, to fail to abide by either a valid contract to which the Company is a party or the Company’s Bylaws; (iii) Employee having committed acts or omissions constituting gross negligence or willful misconduct with respect to the Company; (iv) the Employee having committed acts or omissions constituting a material breach of his duty of loyalty or fiduciary duty to the Company or any material act of dishonesty or fraud with respect to the Company which are not cured in a reasonable time, which time shall be 30 days from receipt of written notice from the Company of such material breach; or (v) Employee having committed any material act of dishonesty or fraud with respect to the Company; or (iv) the Employee having committed acts or omissions constituting gross negligence or willful misconduct with respect to the Company including with respect to any material contract to which the Company is a party, or a willful and material breach of this Agreement, that remain uncured after 30 days written notice.  A determination that Cause exists shall be made by a majority of the Board of Directors.  Termination of the Employee’s employment for Cause shall be communicated by delivery to the Employee of a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the entire membership of the Board at a meeting of the Board called and held for

such purpose (after reasonable advance written notice to the Employee and reasonable opportunity for the Employee, together with the Employee’s counsel, to be heard before the Board prior to such vote), finding that in the good faith opinion of the Board an event constituting Cause for termination in accordance with Section 4(a) has occurred and specifying the particulars thereof (a “Notice of Termination”).  If the event constituting Cause for termination is of a type specified in Section 4(a)(ii), (iii) or (iv), any Notice of Termination shall state the reasons for material breach and the Employee shall have 30 calendar days from the date of receipt of such notice or such longer reasonable cure period agreed to by the Company and the Employee to effect a cure of the event described therein and, upon cure thereof by the Employee as set forth in the Notice of Termination to the reasonable satisfaction of the Board, such event shall no longer constitute Cause for purposes of this Agreement and the Company shall thereafter have no further right hereunder to terminate the Employee’s employment for Cause as a result of

4

such event.  The Employee must be advised within 30 calendar days of the occurrence of any event constituting Cause in order for the Company to terminate him pursuant to this Section 4(a).  The date of termination for Cause shall be the date specified in the Notice of Termination; provided, however, that no such written notice shall be effective unless the cure period specified above has expired without the Employee having corrected the event or events subject to cure as provided herein.

(b)By the Company, in the absence of Cause, for any reason and in its sole and absolute discretion, provided that in such event the Company shall, as liquidated damages or severance pay, or both, continue to pay to Employee the Base Salary (at a monthly rate equal to the rate in effect immediately prior to such termination) for the longer of the remaining term through December 31, 2007 or eighteen months from the date of termination (the “Termination Payments”).  In addition, the Company will pay to Employee a minimum bonus, payable as severance within 120 days after the close of the Company’s most recent fiscal year for which an annual bonus hereunder has not yet been determined as of the date of termination, in an amount equal to the greater of (i) $70,000 or (ii) the amount of Annual Bonus determined in accordance with the provisions of Section 2(b)(i) hereof, pro rated for that portion of the fiscal year during which the Employee served as Chairman of the Board.

(c)The date of termination for Disability shall be the date the Company sends the Employee a written notice to such effect.  For purposes of this Agreement, “Disability” shall mean the inability of the Employee, in the reasonable judgment of a physician appointed by the Board, to perform his duties of employment because of any physical or mental disability or incapacity, where such disability shall exist for an aggregate period of more than 150 days in any 365-day period or for any period of 120 consecutive days.

(iv)In the event of any termination under this Section 4(a), the Company shall pay by the next payroll period all amounts then due to the Employee under Section 2(a) of this Agreement for any portion of the payroll period worked but for which payment had not yet been made up to the date of termination (including bonuses), and, if such termination was for Cause, the Company shall have no further obligations to the Employee under this Agreement (including no obligation with respect to bonuses), and any and all options granted hereunder shall terminate according to their terms of grant.  In the event of a termination due to the Employee’s Disability or death, the Company shall also comply with its obligations under Sections 2(e) and 2(f).

(b)By the Company, in the absence of Cause, for any reason and in its sole and absolute discretion, provided that in such event the Company shall, as liquidated damages or severance pay, or both, continue to pay to the Employee the Base Salary (collectively, the “Termination Payment”) (at a monthly rate equal to the rate in effect immediately prior to such termination) for the longer of (i) the number of months (including partial months) remaining in the Employment Term or (ii) 18 months from the date of termination (the longer of such two-periods, the “Termination Period”).  In addition, the Company will pay to the Employee a

5

minimum bonus, payable as severance within 120 days after the close of the Company’s most recent fiscal year for which an annual bonus hereunder has not yet been determined as of the date of termination, in an amount equal to the greater of (i) $70,000 or (ii) the amount of Annual Bonus determined in accordance with the provisions of Section 2(b) hereof, pro rated for that portion of the fiscal year during which the Employee was employed by the Company.  On the date of termination, all unvested options or similar rights of any kind (including restricted stock) granted to the Employee whether under this Agreement or otherwise shall accelerate and immediately vest and become exercisable (or, with respect to restricted stock, owned) in full.  Such options may be exercised for the longer of (A) the Termination Period and (B) the exercise term of each relevant option grant which shall be ten years from the date of the grant.  Finally, during the Termination Period, the Company shall continue the benefits for the Employee and his family provided for under Section 2 at no cost to the Employee, as well as the secretarial services under Section 2(h) and the reimbursement of office, computing and telephonic expenses under Section 3 for the Employee’s office, as if the Employee remained employed by the Company through the end of the Termination Period.

(c)By the Employee for “Good Reason” (as the Employee shall determine in good faith), which shall be deemed to exist: (i) if the Board fails to elect or reelect the Employee to, or removes the Employee from, any of the offices referred to in Section l(a) or the Employee fails to be reelected to the Board or ceases to hold the “Chairman” title; (ii) if the Employee is assigned any duties materially inconsistent with the duties or responsibilities as contemplated by this Agreement, for a Chairman of the Board, or any other action by the Company that results in a material diminution in such position, authority, compensation benefits duties, or responsibilities; (iii) if the Company shall have continued to fail to comply with any material provision of this Agreement after a 30-day period to cure (if such failure is curable) following written notice by the Employee to the Company of such non-compliance; (iv) upon a Change in Control; or (v) if the Company requires that the Employee be based at any office or location other than his offices at 700 Gemini Street, Houston, Texas or other comparable offices in the greater Houston area or offices mutually agreed to by the Parties.  In the event of any termination under this Section 4(c), the Company shall, as liquidated damages or severance pay, or both, pay the Termination Payment to the Employee in the same amount and manner as under Section 4(b).  In addition, the Company will pay to the Employee a minimum bonus, payable as severance within 120 days after the close of the Company’s most recent fiscal year for which an annual bonus hereunder has not yet been determined as of the date of termination, in an amount equal to the greater of (i) $70,000 or (ii) the amount of Annual Bonus determined in accordance with the provisions of Section 2(b) hereof, pro rated for that portion of the fiscal year during which the Employee was employed by the Company pursuant to this Agreement.  On the date of termination, all unvested options or similar rights of any kind (including restricted stock) granted to the Employee whether under this Agreement or otherwise shall accelerate and immediately vest and become exercisable (or, with respect to restricted stock, owned) in full.  Such options may be exercised for ten years from the date of each grant of options, respectively.  Finally, during the Termination Period, the Company shall continue the benefits for the Employee and his family provided for under Section 2(c)(i), at no cost to the Employee, as well as the reimbursement of office, computing and telephonic expenses under Section 3 for the Employee’s office for a reasonable period of transition not to exceed three months.

6

(d)During any period in which the Employee is obligated not to compete with the Company pursuant to Section 5 hereof (unless the Employee was terminated for Cause), the Employee and his family shall continue to be covered by the Company’s employee welfare benefit plans under Section 2(c).  This Section 4(d) shall not limit any greater rights granted under Sections 4(a), (b) or (c).  Such coverage shall be at the Company’s expense to the same extent as if the Employee were still employed by the Company.  In the event of a termination pursuant to Sections 4(b) or 4(c), the Company shall provide to the Employee, at the Company’s expense, outplacement services of a nature customarily provided to a senior executive.  Notwithstanding the foregoing, the obligations of the Company pursuant to this Section 4(d) shall remain in effect no longer than the term of the Termination Period.

(e)Nothing in this Agreement shall prohibit the Employee from voluntarily terminating his employment at any time and such termination shall not be a breach of this Agreement.  In the event of such voluntary termination (that does not constitute voluntary termination for “Good Reason” pursuant to Section 4(c)), following the date of termination, the Company shall pay the Employee by the next payroll period all amounts then due to the Employee under Section 2(a) of this Agreement for any portion of the payroll period worked but for which payment had not yet been made up to the date of termination (including bonuses) and otherwise provide transition employee welfare benefits as may be required by law.

5.Non-Competition.  During the period of the Employee’s employment hereunder and during the Termination Period, if any (but only to the extent if during such time the Company has paid the Termination Payment in full and is otherwise timely making any other payments (including bonuses), and providing benefits, in full under Sections 4(b) or 4(c)), the Employee shall not, within any state in which the Company or any subsidiary of the Company is duly qualified to do business, or in any state in which the Company is then providing services, or within a 100 mile radius of any such state, directly or indirectly own any interest in, manage, control, participate in, consult with, render services for, or in any manner engage in any business engaged in any business engaged in by the Company (unless the Board shall have authorized such activity and the Company shall have consented thereto in writing). Investments in less than 10% of the outstanding securities of any entity subject to the reporting requirements of Section 13 or Section 15(d) of the Exchange Act shall not be prohibited by this Section 5.  The Employee’s obligations under this Section 5 arising after the termination of the Employee shall be terminated if the Company fails to pay to him timely any Termination Payment or bonus required to be paid, or benefits required to be provided, to him pursuant to this Agreement. The provisions of this Section 5 are subject to the provisions of Section 14 of this Agreement.

6.Inventions and Confidential Information.  The parties hereto recognize that a major need of the Company is to preserve its specialized knowledge, trade secrets, and confidential information.  The strength and good will of the Company is derived from the specialized knowledge, trade secrets, and confidential information generated from experience with the activities undertaken by the Company.  The unauthorized disclosure of this information and knowledge to competitors would be beneficial to them and detrimental to the Company, as would the disclosure of non-public information about the marketing practices, pricing practices, costs, profit margins, design specifications, analytical techniques, and similar items of the Company.  The Employee acknowledges that specific proprietary information and non-public

7

data obtained by him while employed by the Company concerning the business or affairs of the Company are the property of the Company. By reason of his being a senior executive of the Company, the Employee has or will have access to, and has obtained or will obtain, trade secrets and confidential information about the Company’s operations, which operations extend throughout the United States.  Therefore, subject to the provisions of Section 14 hereof, the Employee hereby agrees as follows, recognizing that the Company is relying on these agreements in entering into this Agreement:

(a)During the period of the Employee’s employment with the Company and thereafter, the Employee will not use, disclose to others, or publish or otherwise make available to any other party (other than in furtherance of his obligations hereunder) any non-public inventions or any confidential business information about the affairs of the Company, including but not limited to confidential information concerning the Company’s products, methods, engineering designs  and  standards, analytical techniques, technical  information, customer information, employee information, and other confidential information acquired by him in the course of his past or future services for the Company during the Employment Term.  The Employee agrees to hold as the Company’s property all books, papers, letters, formulas, memoranda, notes, plans, records, reports, computer tapes, printouts, software and other documents, and all copies thereof and therefrom, relating to the Company’s business and affairs whether made by him or otherwise coming into his possession, and on termination of his employment, or on demand of the Company, at any time after termination of his employment, to deliver the same to the Company; provided, however, the Employee shall be permitted to retain one archival copy for himself, including for use in any proceeding involving his employment with the Company; and provided, further, that no information shall be considered confidential information of the Company or otherwise subject to this Section 6 if such information has become publicly known and made generally available, is independently developed by the Employee without use of the Company’s confidential information or is required to be disclosed by law or court order or is otherwise disclosed in a legal proceeding.

(b)During the period of the Employee’s employment with the Company and for 18 months thereafter, (i) the Employee will not through another entity knowingly induce or otherwise attempt to influence any employee of the Company to leave the Company’s employ and (ii) the Employee will not knowingly hire or cause to be hired or induce a third party to hire, any such employee (unless the Board shall have authorized such employment and the Company shall have consented thereto in writing) or in any way materially interfere to the detriment of the Company with the relationship between the Company and any employee thereof and (iii) the Employee will not induce or attempt to induce any customer, supplier, licensee, licensor or other business relation of the Company to cease doing business with the Company or in any way materially interfere to the detriment of the Company with the relationship between any such customer, supplier, licensee or business relation of the Company, Such obligation shall not extend to employees of the Company who respond to general inquiries or advertisements (e.g., classified ads or internet job postings) or other persons who approach the Employee independently about a possible business relationship with the Employee or his business or employer without him having affirmatively caused such approach.

8

7.Indemnification.  The Company will indemnify (and advance the costs of defense of) the Employee (and his legal representatives) to the fullest extent permitted by the laws of the state in which Isolagen is incorporated, as in effect at the time of the subject act or omission, or by the Certificate of Incorporation and Bylaws of Isolagen, as in effect at such time or on the date of this Agreement, whichever affords greater protection to the Employee, and the Employee shall be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit of its employees, officers and directors, against all judgments, damages, claims, liabilities, costs, charges and expenses whatsoever incurred or sustained by him or his legal representative in connection with any action, suit or proceeding to which he (or his legal representatives or other successors) may be made a party by reason of his being or having been an employee, officer or director of Isolagen or any of its subsidiaries except that Isolagen shall have no obligation to indemnify the Employee for liabilities resulting from conduct of the Employee with respect to which a court of competent jurisdiction has made a final non-appealable determination that the Employee would not, by law, be entitled to indemnity.

8.Litigation Expenses.  In the event of any litigation or other proceeding between the Company and the Employee with respect to the subject matter of this Agreement and the enforcement of the rights hereunder and such litigation or proceeding results in final judgment or order in favor of the Employee, which judgment or order is substantially inconsistent with the positions asserted by the Company in such litigation or proceeding, the losing party shall reimburse the prevailing party for all of his/its reasonable costs and expenses relating to such litigation or other proceeding, including, without limitation, his/its reasonable attorneys’ fees and expenses.

9.Consolidation; Merger; Sale of Assets; Change of Control.  Nothing in this Agreement shall preclude the Company from combining, consolidating or merging with or into, transferring all or substantially all of its assets to, or entering into a partnership or joint venture with, another corporation or other entity, or effecting any other kind of corporate combination provided that the corporation resulting from or surviving such combination, consolidation or merger, or to which such assets are transferred, or such partnership or joint venture expressly assumes in writing this Agreement and all obligations and undertakings of the Company hereunder.  Upon such a consolidation, merger, transfer of assets or formation of such partnership or joint venture, this Agreement shall inure to the benefit of, be assumed by, and be binding upon such resulting or surviving transferee corporation or such partnership or joint venture, and the term “Company,” as used in this Agreement, shall mean such corporation, partnership or joint venture or other entity, and this Agreement shall continue in full force and effect and shall entitle the Employee and his heirs, beneficiaries and representatives to exactly the same compensation, benefits, perquisites, payments and other rights as would have been their entitlement had such combination, consolidation, merger, transfer of assets or formation of such partnership or joint venture not occurred.  Nothing in this Section shall limit the Employee’s right to terminate this Agreement for “Good Reason.”

10.Survival of Obligations.  Sections 4, 5, 6, 7, 8, 9, 10, 11, 12 and 14 shall survive the termination for any reason of this Agreement (whether such termination is by the Company, by the Employee, upon the expiration of this Agreement or otherwise).

9

11.Employee’s Representations.  The Employee hereby represents and warrants to the Company that (i) the execution, delivery and performance of this Agreement by the Employee do not and shall not conflict with, breach, violate or cause a default under any material contract, agreement, instrument, order, judgment or decree to which the Employee is a party or by which he is bound, (ii) the Employee is not a party to or bound by any employment agreement, noncompete agreement or confidentiality agreement with any other person or entity and (iii) upon the execution and delivery of this Agreement by the Company, this Agreement shall be the valid and binding obligation of the Employee, enforceable in accordance with its terms.  The Employee hereby acknowledges and represents that he has consulted with legal counsel regarding his rights and obligations under this Agreement and that he fully understands the terms and conditions contained herein.

12.Company’s Representations.  The Company hereby represents and warrants to the Employee that (i) the execution, delivery and performance of this Agreement by the Company do not and shall not conflict with, breach, violate or cause a default under any material contract, agreement, instrument, order, judgment or decree to which the Company is a party or by which it is bound and (ii) upon the execution and delivery of this Agreement by the Employee, this Agreement shall be the valid and binding obligation of the Company, enforceable in accordance with its terms.

13.Enforcement.  Because the Employee’s services are unique and because the Employee has access to confidential information concerning the Company, the parties hereto agree that money damages may not be an adequate remedy for any breach of this Agreement.  Therefore, in the event of a breach or threatened breach of this Agreement that cannot be compensated with monetary damages, the Company may, in addition to other rights and remedies existing in its favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof.

14.Severability.  In case any one or more of the provisions or part of a provision contained in this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect in any jurisdiction, such invalidity, illegality or enforceability shall be deemed not to affect any other jurisdiction or any other provision or part of a provision of this Agreement, nor shall such invalidity, illegality or unenforceability affect the validity, legality or enforceability of this Agreement or any provision or provisions hereof in any other jurisdiction; and this Agreement shall be reformed and construed in such jurisdiction as if such provision or part of a provision held to be invalid or illegal or unenforceable had never been contained herein and such provision or part reformed so that it would be valid, legal and enforceable in such jurisdiction to the maximum extent possible.  In furtherance and not in limitation of the foregoing, the Company and the Employee each intend that the covenants contained in Sections 5 and 6 shall be deemed to be a series of separate covenants.  If, in any judicial proceeding, a court shall refuse to enforce any of such separate covenants, then such unenforceable covenants shall be deemed eliminated from the provisions hereof for the purpose of such proceedings to the extent necessary to permit the remaining separate covenants to be enforced in such proceedings.  If, in any judicial proceeding, a court shall refuse to enforce any one or more of such separate covenants because the total time, scope or area thereof is deemed to be excessive or unreasonable, then it is the intent of the parties hereto that such covenants, which would otherwise be unenforceable due to

10

such excessive or unreasonable period of time, scope or area, be enforced for such lesser period of time, scope or area as shall be deemed reasonable and not excessive by such court.

15.Entire Agreement; Amendment.  This Agreement contains the entire agreement between the Company and the Employee with respect to the subject matter hereof, and it supersedes any previous employment agreement between the Employee and the Company.  This Agreement may not be amended, waived, changed, modified or discharged except by an instrument in writing executed by or on behalf of the party against whom enforcement of any amendment, waiver, change, modification or discharge is sought.  No course of conduct or dealing shall be construed to modify, amend or otherwise affect any of the provisions hereof.

16.Notices.  All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have been duly given if physically delivered, delivered by express mail or other expedited service or upon receipt if mailed, postage prepaid, via registered mail, return receipt requested, addressed as follows:

(a)	To the Company:	(b)	To the Employee:
	Isolagen, Inc.		Frank DeLape
	102 Pickering Way		700 Gemini
	Exton, Pennsylvania 19341		Suite 100
	Facsimile:		Houston, Texas 77058
			Facsimile: 281-488-5353
	With a copy to:
	Susan Ciallella, Esq.		With a copy to:
			Jonathan B. Newton
			Baker & McKenzie
			711 Louisiana Street, Suite 3400
			Houston, Texas 77002
			Facsimile: 713-427-5099

and/or to such other persons and addresses as any party shall have specified in writing to the other.

17.Assignability.  This Agreement shall not be assignable by either party and shall be binding upon, and shall inure to the benefit of, the heirs, executors, administrators, legal representatives, successors and assigns of the parties.  In the event that all or substantially all of the business of the Company is sold or transferred, then this Agreement shall be binding on the transferee of the business of the Company whether or not this Agreement is expressly assigned to the transferee.

18.Governing Law.  This Agreement shall be governed by and construed under the laws of the State of Texas without regard to conflict of laws principles.

11

19.Waiver and Further Agreement.  Any waiver of any breach of any terms or conditions of this Agreement shall not operate as a waiver of any other breach of such terms or conditions or any other term or condition, nor shall any failure to enforce any provision hereof operate as a waiver of such provision or of any other provision hereof.  Each of the parties hereto agrees to execute all such further instruments and documents and to take all such further action as the other party may reasonably require in order to effectuate the terms and purposes of this Agreement.

20.Headings of No Effect.  The paragraph headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.

21.No Mitigation; No Offset.  In the event of any termination of employment under Section 4 of this Agreement, the Employee shall be under no obligation to seek other employment and there shall be no offset against amounts due the Employee under this Agreement on account of any remuneration attributable to any subsequent employment or self-employment that he may obtain.

12

IN WITNESS WHEREOF, the parties hereto have executed this Agreement effective as of the date first above written.

COMPANY:
ISOLAGEN TECHNOLOGIES, INC.
By:	/s/ Ralph V. De Martino
Name:		RALPH V. DE MARTINO
Title:		Lead Independent Director &
		Member, Compensation Committee
EMPLOYEE:
Frank DeLape

Schedule A

EX-31.1

Exhibit 31.1

OFFICER’S CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Frank DeLape, certify that:

1.  I have reviewed this Quarterly Report on Form 10-Q of Isolagen, 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)) 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) 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

c) 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 (or persons performing the equivalent functions):

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 9, 2005

By:  /s/ Frank DeLape

Chairman and Interim Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

OFFICER’S CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Martin E. Schmieg, certify that:

1.  I have reviewed this Quarterly Report on Form 10-Q of Isolagen, 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)) 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) 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

c)  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 (or persons performing the equivalent functions):

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 9, 2005

By: /s/ Martin E. Schmieg

Chief Financial Officer

(Principal 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, 2005 of Isolagen, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Frank DeLape, Interim 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:

•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 9, 2005	By:	/s/ Frank DeLape
	Frank DeLape, Chairman & Interim CEO

A signed original of this written statement required by Section 906 has been provided to Isolagen, Inc. and will be retained by Isolagen, 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, 2005 of Isolagen, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Martin E. Schmieg, 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:

•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 9, 2005	By:	/s/ Martin E. Schmieg
	Martin E. Schmieg, CFO

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