UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549  
 ___________________________________________________________________
FORM 10-Q
 
x Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the quarterly period ended June 30, 2015
 
OR
 
o          Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
 ___________________________________________________________________

Commission File Number 001-31564

Fibrocell Science, Inc.
(Exact name of registrant as specified in its Charter)
Delaware
 
87-0458888
(State or other jurisdiction of incorporation)
 
(I.R.S. Employer Identification No.)
405 Eagleview Boulevard
Exton, Pennsylvania 19341
(Address of principal executive offices, including zip code)
(484) 713-6000
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 12 months (or for any shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  ý   No  o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
    Yes  ý   No  o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer o
 
Accelerated filer x
 
 
 
Non-accelerated filer  o
 
Smaller reporting company  o
(Do not check if a smaller reporting company)
 
 
 
Indicate by check mark whether the registrant is shell company (as defined in Rule 12b-2of the Exchange Act)     Yes  o   No  ý
As of July 31, 2015, issuer had 43,887,201 shares issued and outstanding of common stock, par value $0.001.
 


Table of Contents

TABLE OF CONTENTS
 
 
 
 
PAGE
 
 
 
 
 
 
 
 
PART I.
FINANCIAL INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II.
OTHER INFORMATION
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

_____________________________

Unless the context otherwise requires, all references in this Form 10-Q to the "Company," "Fibrocell," "we," "us," and "our" include Fibrocell Science, Inc. and its subsidiaries.

Trademark Notice
Fibrocell Science® and LAVIV® are registered and common law trademarks of Fibrocell Science, Inc. (Exton, PA). All other trademarks, service marks or trade names appearing in this Form 10-Q are the property of their respective owners.


Table of Contents

NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements, other than statements of historical facts, included in this Form 10-Q regarding our future operations, financial performance and financial position, prospects, strategies and objectives and other future events (including assumptions relating to the foregoing) are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing,” “scheduled” and similar expressions, although not all forward-looking statements contain these identifying words. Forward-looking statements appear in this Form 10-Q primarily in Part I., Item 1. “Notes to Unaudited Financial Statements,” Part I., Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Part II., Item 1. "Legal Proceedings" and include, among others, statements relating to:
•
our focus on developing first-in-class treatments for rare and serious skin and connective tissue diseases with high unmet medical needs;
•
our expectation to complete dosing in our Phase II clinical trial by year-end 2015 and announce efficacy results in the second quarter of 2016;
•
our plan to seek orphan drug designation for FCX-013;
•
the initiation, timing and scope of a Phase I/II clinical trial for FCX-007;
•
our expectation to complete proof-of-concept studies for FCX-013 in the first half of 2016 and submit an IND application to the FDA in the second half of 2016;
•
our ability to complete, or obtain modifications to, the postmarketing study that the FDA required as a condition for the approval of LAVIV;
•
the potential for our collaboration with UCLA to expand our biologics platform;
•
the use of proceeds from our July 2015 underwritten public offering; and
•
the sufficiency of our cash and cash equivalents to fund our operations into the fourth quarter of 2016.
Forward-looking statements are based upon our current expectations, intentions and beliefs and are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results to differ materially and adversely from those expressed or implied by such statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in this Form 10-Q and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2014 (our "Form 10-K for 2014") under the caption "Item 1A. Risk Factors."
As a result, you should not place undue reliance on forward-looking statements. The forward-looking statements contained in this Form 10-Q represent our views only as of the date of this Form 10-Q (or any earlier date indicated in such statement). While we may update certain forward-looking statements from time to time, we specifically disclaim any obligation to do so, whether as a result of new information, future developments or otherwise. You are advised, however, to consult any further disclosures we make on related subjects in the periodic and current reports that we file with the SEC.




1
Table of Contents

PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Fibrocell Science, Inc.
Consolidated Balance Sheets
(unaudited)
($ in thousands, except share and per share data)
 
June 30, 2015
 
December 31, 2014
Assets
 

 
 

Current assets:
 

 
 

Cash and cash equivalents
$
26,850

 
$
37,495

Accounts receivable, net of allowance for doubtful accounts of $16 and $17, respectively
3

 
4

Inventory
484

 
571

Prepaid expenses and other current assets
730

 
1,279

Total current assets
28,067

 
39,349

Property and equipment, net of accumulated depreciation of $1,121 and $1,051, respectively
1,639

 
1,598

Intangible assets, net of accumulated amortization of $1,929 and $1,653, respectively
4,411

 
4,687

Total assets
$
34,117

 
$
45,634

Liabilities and Stockholders’ Equity
 

 
 

Current liabilities:
 

 
 

Accounts payable
$
1,957

 
$
1,124

Accrued expenses
2,113

 
1,675

Deferred revenue
500

 
416

Warrant liability, current
650

 
278

Total current liabilities
5,220

 
3,493

Warrant liability, long term
11,697

 
11,008

Other long term liabilities
773

 
724

Total liabilities
17,690

 
15,225

Stockholders’ equity:
 

 
 

Preferred stock, $0.001 par value; 5,000,000 shares authorized; no shares outstanding
—

 
—

Common stock, $0.001 par value; 100,000,000 shares authorized; 40,913,065 and 40,856,815 shares issued and outstanding, respectively
41

 
41

Additional paid-in capital
144,385

 
143,086

Accumulated deficit
(127,999
)
 
(112,718
)
Total stockholders’ equity
16,427

 
30,409

Total liabilities and stockholders’ equity
$
34,117

 
$
45,634

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


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Fibrocell Science, Inc.
Consolidated Statements of Operations
(unaudited)
($ in thousands, except share and per share data)

 
Three months ended June 30, 2015
 
Three months ended June 30, 2014
 
Six months ended June 30, 2015
 
Six months ended June 30, 2014
Revenue from product sales
$
55

 
$
58

 
$
168

 
$
104

Collaboration revenue
82

 
—

 
163

 
—

Total revenue
137

 
58

 
331

 
104

Cost of product sales
77

 
547

 
221

 
1,340

Cost of collaboration revenue
85

 
—

 
88

 
—

Total cost of revenue
162

 
547

 
309

 
1,340

Gross (loss) profit
(25
)
 
(489
)
 
22

 
(1,236
)
Research and development expense
3,694

 
2,925

 
7,681

 
10,840

Selling, general and administrative expense
3,640

 
3,182

 
6,564

 
5,520

Operating loss
(7,359
)
 
(6,596
)
 
(14,223
)
 
(17,596
)
Other income (expense):
 

 
 

 
 
 
 
Warrant revaluation and other finance income (expense)
602

 
4,008

 
(1,061
)
 
958

Other income
—

 
330

 
—

 
370

Interest income
1

 
1

 
3

 
2

Loss before income taxes
(6,756
)
 
(2,257
)
 
(15,281
)
 
(16,266
)
Deferred tax benefit
—

 
—

 
—

 
—

Net loss
$
(6,756
)
 
$
(2,257
)
 
$
(15,281
)
 
$
(16,266
)
 
 
 
 
 
 
 
 
Per Share Information:
 

 
 

 
 
 
 
Net loss:
 
 
 
 
 
 
 
     Basic
$
(0.17
)
 
$
(0.06
)
 
$
(0.37
)
 
$
(0.40
)
     Diluted
$
(0.17
)
 
$
(0.09
)
 
$
(0.37
)
 
$
(0.43
)
Weighted average number of common shares outstanding
 

 
 

 
 
 
 
     Basic
40,889,732

 
40,856,815

 
40,875,704

 
40,720,958

     Diluted
40,889,732

 
41,250,886

 
40,875,704

 
40,917,993

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


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Fibrocell Science, Inc.
Consolidated Statement of Stockholders’ Equity
(unaudited)
($ in thousands, except share data) 
 
Common Stock
 
Additional paid-in capital
 
Accumulated deficit
 
Total Equity
 
Shares
 
Amount
 
 
 
Balance, December 31, 2014
40,856,815

 
$
41

 
$
143,086

 
$
(112,718
)
 
$
30,409

Stock-based compensation expense
—

 
—

 
1,044

 
—

 
1,044

Exercise of stock options
56,250

 
—

 
255

 
—

 
255

Net loss
—

 
—

 
—

 
(15,281
)
 
(15,281
)
Balance, June 30, 2015
40,913,065

 
$
41

 
$
144,385

 
$
(127,999
)
 
$
16,427

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


4
Table of Contents

Fibrocell Science, Inc.
Consolidated Statements of Cash Flows
(unaudited)
($ in thousands)
 
Six months ended June 30, 2015
 
Six months ended June 30, 2014
Cash flows from operating activities:
 

 
 

Net loss
$
(15,281
)
 
$
(16,266
)
Adjustments to reconcile net loss to net cash used in operating activities:
 

 
 

Stock-based compensation expense
1,044

 
739

Stock issued for supplemental stock issuance agreement
—

 
5,154

Warrant revaluation and other finance expense (income)
1,061

 
(958
)
Depreciation and amortization
346

 
452

Provision for doubtful accounts
(1
)
 
16

Change in operating assets and liabilities:
 

 
 

Accounts receivable
2

 
(2
)
Inventory
87

 
121

Prepaid expenses and other current assets
549

 
496

Other assets
—

 
214

Accounts payable
833

 
(1,590
)
Accrued expenses and other long-term liabilities
489

 
1,206

Deferred revenue
84

 
132

Net cash used in operating activities
(10,787
)
 
(10,286
)
Cash flows from investing activities:
 

 
 

Purchase of property and equipment
(111
)
 
(211
)
Net cash used in investing activities
(111
)
 
(211
)
Cash flows from financing activities:
 

 
 

Proceeds from the exercise of stock options
255

 
—

Principle payments on capital lease obligations
(2
)
 
—

Net cash provided by financing activities
253

 
—

Net decrease in cash and cash equivalents
(10,645
)
 
(10,497
)
Cash and cash equivalents, beginning of period
37,495

 
60,033

Cash and cash equivalents, end of period
$
26,850

 
$
49,536

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


5
Table of Contents
Fibrocell Science, Inc.
Notes to Consolidated Financial Statements
(unaudited)


Note 1. Business and Organization

Fibrocell Science, Inc. (as used herein, “we,” “us,” “our,” “Fibrocell” or the “Company”) is the parent company of Fibrocell Technologies, Inc. (“Fibrocell Tech”) and Fibrocell Science Hong Kong Limited (“Fibrocell Hong Kong”), a company organized under the laws of Hong Kong. Fibrocell Tech is the parent company of Isolagen Europe Limited, a company organized under the laws of the United Kingdom (“Isolagen Europe”), Isolagen Australia Pty Limited, a company organized under the laws of Australia (“Isolagen Australia”), and Isolagen International, S.A., a company organized under the laws of Switzerland (“Isolagen Switzerland”). The Company’s international activities are currently immaterial.
Fibrocell is an autologous cell and gene therapy company focused on developing first-in-class treatments for rare and serious skin and connective tissue diseases with high unmet medical needs. Fibrocell's most advanced product candidate, azficel-T, uses its proprietary autologous fibroblast technology and is in a Phase II clinical trial for the treatment of chronic dysphonia resulting from vocal cord scarring. In collaboration with Intrexon Corporation ("Intrexon") (NYSE:XON), a leader in synthetic biology, Fibrocell is also developing gene therapies for skin diseases using gene-modified autologous fibroblasts. Fibrocell has submitted an Investigational New Drug ("IND") application to the Food and Drug Administration ("FDA") for FCX-007, its lead orphan gene-therapy product candidate, for the treatment of recessive dystrophic epidermolysis bullosa ("RDEB"). Fibrocell is in preclinical development of FCX-013, its second gene-therapy product candidate, for the treatment of linear scleroderma.
Note 2. Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnote disclosures required by GAAP for complete consolidated financial statements.  In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included.  These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014, filed with the Securities and Exchange Commission (“SEC”). The results of the Company’s operations for any interim period are not necessarily indicative of the results of operations for any other interim period or full year.
There have been certain reclassifications made to the prior year’s results of operations to conform to the current year’s presentation. Compensation and related expenses for manufacturing and facilities personnel of $0.3 million and $0.8 million were reclassified from selling, general and administrative expense to research and development expense for the three and six months ended June 30, 2014, respectively.
Note 3. Summary of Significant Accounting Policies

Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and notes.  In addition, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows.  Actual results may differ materially from those estimates.
Revenue Recognition
Product Sales. In June 2011, the FDA approved the Company's Biologics License Application ("BLA") for LAVIV (azficel-T) for the treatment of nasolabial fold wrinkles. The Company recognizes revenue over the period LAVIV is shipped for injection in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification ("ASC") 605, Revenue Recognition (“ASC 605”).  In general, ASC 605 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) collectability is reasonably assured.  One full course of LAVIV therapy includes three series of injections. Corresponding revenue is recognized on a prorata basis as each of the three series of injections is shipped to the physician. The Company no longer actively promotes this product.

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Table of Contents
Fibrocell Science, Inc.
Notes to Consolidated Financial Statements
(unaudited)
Note 3. Summary of Significant Accounting Policies (continued)

Collaboration Revenue. The Company's collaboration agreements may contain multiple elements, such as fees to perform proof of concept studies, product development, aid in obtaining U.S. patents and trademarks, and royalties based upon future commercial sales. The deliverables under such an arrangement are evaluated under ASC 605-25, Revenue Recognition: Multiple-Element Arrangements . Each required deliverable is evaluated to determine whether it qualifies as a separate unit of accounting based on whether the deliverable has “stand-alone value” to the customer. The arrangement’s consideration that is fixed or determinable is then allocated to each separate unit of accounting based on the relative selling price of each deliverable. In general, the consideration allocated to each unit of accounting is recognized as the related goods or services are delivered, limited to the consideration that is not contingent upon future deliverables. Collaboration revenue is recognized on a gross basis, in accordance with the criteria set forth in ASC 605-45, Revenue Recognition: Principal Agent Considerations . Collaboration revenue for the three and six months ended June 30, 2015 is related to a research and development agreement that the Company has with an unrelated third party to investigate potential new non-pharmaceutical applications for the Company's conditioned fibroblast media technology. Revenue recognized from this collaboration relates to an upfront license fee and a proof of concept study currently underway.
Cost of Revenue.
Cost of revenue includes expenses related to product sales and collaboration revenue.
Cost of Product Sales . Costs include the processing of cells for LAVIV, including direct and indirect costs. Cost of product sales is accounted for using a standard cost system which allocates the direct costs associated with the Company’s manufacturing, facility, quality control, and quality assurance operations as well as an allocation of overhead costs.
Cost of Collaboration Revenue . Costs directly related to deliverables in a revenue-generating collaboration are charged to cost of revenue as incurred.
Research and Development Expense.
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 an allocation of overhead cost. Research and development costs also include costs to develop manufacturing, cell collection and logistical process improvements.
Clinical trial costs are a significant component of research and development expenses and include costs associated with third party contractors. Invoicing from third party contractors for services performed can lag several months. The Company accrues the costs of services rendered in connection with third party contractor activities based on its estimate of management fees, site management and monitoring costs and data management costs.
Warrant Liability .
The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement. Stock warrants are accounted for as a derivative in accordance with ASC 815, Derivatives and Hedging , (“ASC 815”) if the stock warrants contain “down-round protection” or other terms that could potentially require “net cash settlement” and therefore, do not meet the scope exception for treatment as a derivative. Since “down-round protection” is not an input into the calculation of the fair value of the warrants, the warrants cannot be considered indexed to the Company’s own stock which is a requirement for the scope exception as outlined under ASC 815. Warrant instruments that could potentially require “net cash settlement” in the absence of express language precluding such settlement and those which include “down-round provisions” are initially classified as derivative liabilities at their estimated fair values, regardless of the likelihood that such instruments will ever be settled in cash. The Company will continue to classify the fair value of the warrants that contain “down-round protection” and “net cash settlement” as a liability until the warrants are exercised, expire or are amended in a way that would no longer require these warrants to be classified as a liability.
Income Taxes.
In accordance with ASC 270, Interim Reporting, and ASC 740, Income Taxes , the Company is required at the end of each interim period to determine the best estimate of its annual effective tax rate and then apply that rate in providing for income taxes on a current year-to-date (interim period) basis.  For the three and six months ended June 30, 2015 and 2014, the

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Fibrocell Science, Inc.
Notes to Consolidated Financial Statements
(unaudited)
Note 3. Summary of Significant Accounting Policies (continued)

Income Taxes. (continued)
Company recorded no tax expense or benefit due to the expected current year loss and its historical losses.  The Company had not recorded its net deferred tax asset as of either June 30, 2015 or December 31, 2014, because it maintains a full valuation allowance against all deferred tax assets as management has determined that it is not more likely than not that the Company will realize these future tax benefits. As of June 30, 2015 and December 31, 2014, the Company had no uncertain tax positions.
Intangible Assets.
Intangible assets are research and development assets related to the Company’s primary study on azficel-T that was recognized upon emergence from bankruptcy. Azficel-T has three current or target indications: the Company’s commercial product, LAVIV; a clinical development program for azficel-T for the treatment of chronic dysphonia resulting from vocal cord scarring; and a clinical development program for azficel-T for the treatment of restrictive burn scarring. Effective January 1, 2012, the Company launched LAVIV and as a result, the research and development intangible assets related to the Company’s primary study were considered to be finite-lived intangible assets and are being amortized over 12 years.
Finite-lived intangible assets are recorded at cost, net of accumulated amortization and, if applicable, impairment charges. Amortization of finite-lived intangible assets is provided over their estimated useful lives on a straight-line basis. In accordance with ASC 360-10-35, Impairment or Disposal of Long-Lived Assets , the Company reviews its finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. There was no impairment expense recognized for either the three or six months ended June 30, 2015 or 2014.
Recently Issued Accounting Pronouncements
In April 2015, the FASB issued Accounting Standards Update ("ASU") 2015-05, Customer's Accounting for Fees Paid in a Cloud Computing Arrangement , which provides additional guidance to customers about whether a cloud computing arrangement includes a software license. Under ASU 2015-05, if a software cloud computing arrangement contains a software license, customers should account for the license element of the arrangement in a manner consistent with the acquisition of other software licenses. If the arrangement does not contain a software license, customers should account for the arrangement as a service contract. ASU 2015-05 also removes the requirement to analogize to ASC 840-10, Leases , to determine the asset acquired in a software licensing arrangement. An entity can elect to adopt the amendments either prospectively to all arrangements entered into or materially modified after the effective date or retrospectively. This ASU will be effective beginning in the first quarter of 2017 and early adoption is permitted. The Company is currently evaluating the effects of the adoption of this ASU on its financial statements but does not believe the impact to be material.
Note 4. Inventory

Inventories consisted of the following as of:
 
($ in thousands)
June 30, 2015
 
December 31, 2014
 
 
Raw materials (LAVIV and product candidates)
$
298

 
$
357

 
Work in process (LAVIV)
186

 
214

 
Inventory (LAVIV)
$
484

 
$
571

Note 5. Warrants

The Company accounts for stock warrants as either equity instruments or derivative liabilities depending on the specific terms of the warrant agreement.  Stock warrants are accounted for as a derivative in accordance with ASC 815, Derivatives and Hedging, (“ASC 815”) if the stock warrants contain “down-round protection” or other terms that could potentially require “net cash settlement” and therefore, do not meet the scope exception for treatment as an equity instrument.  Since “down-round protection” is not an input into the calculation of the fair value of the warrants, the warrants cannot be considered indexed to the Company’s own stock which is a requirement for the scope exception as outlined under ASC 815. 
    

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Fibrocell Science, Inc.
Notes to Consolidated Financial Statements
(unaudited)

Note 5. Warrants (continued)

Warrant instruments that could potentially require “net cash settlement” in the absence of express language precluding such settlement or those which include “down-round provisions” are initially classified as derivative liabilities at their estimated fair values, regardless of the likelihood that such instruments will ever be settled in cash.  The Company will continue to classify the fair value of the warrants that contain “down-round protection” or “net cash settlement” as a liability until the warrants are exercised, expire or are amended in a way that would no longer require these warrants to be classified as a liability.
The following table summarizes outstanding liability-classified warrants to purchase common stock as of:
 
Number of Warrants
 
 
 
 
Liability-classified warrants
June 30, 2015
 
December 31, 2014
 
Exercise
Price
 
Expiration
Dates
Issued in Series A, B and D Preferred Stock offerings
2,247,118

 
2,247,118

 
$
6.25

 
Oct 2015 - Dec 2016
Issued in March 2010 financing
393,416

 
393,416

 
$
6.25

 
Mar 2016
Issued in June 2011 financing
6,113

 
6,113

 
$
22.50

 
Jun 2016
Issued in August 2011 financing
565,759

 
565,759

 
$
18.75

 
Aug 2016
Issued to placement agents in August 2011 financing
50,123

 
50,123

 
$
13.635

 
Aug 2016
Issued in Series B, D and E Preferred Stock offerings
76,120

 
76,120

 
$
2.50

 
Nov 2015 - Dec 2017
Issued with Convertible Notes
1,125,578

 
1,125,578

 
$
2.50

 
Jun 2018
Issued in Series E Preferred Stock offering
1,568,823

 
1,568,823

 
$
7.50

 
Dec 2018
Total
6,033,050

 
6,033,050

 
 

 
 
There were no warrants exercised or canceled during the six months ended June 30, 2015.
Liability-classified Warrants
The foregoing warrants were recorded as derivative liabilities at their estimated fair value at the date of issuance, with the subsequent changes in estimated fair value recorded in other income (expense) in the Company’s consolidated statement of operations in each subsequent period. The change in the estimated fair value of the warrant liability for the three and six months ended June 30, 2015 resulted in non-cash income of approximately $0.6 million and expense of $1.1 million , respectively. The change in the estimated fair value of the warrant liability for the three and six months ended June 30, 2014 resulted in non-cash income of approximately $4.0 million and $1.0 million , respectively. The Company utilizes a Monte Carlo simulation valuation method to value its liability-classified warrants.
     The estimated fair value of these warrants is determined using Level 3 inputs.  Inherent in the Monte Carlo valuation method are assumptions related to expected stock-price volatility, expected life, risk-free interest rate and dividend yield.  The Company estimates the volatility of its common stock based on historical volatility of a peer group that matches the expected remaining life of the warrants.  The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve on the grant date for a maturity similar to the expected remaining life of the warrants.  The expected life of the warrants is assumed to be equivalent to their remaining contractual term.  The dividend rate is based on the historical rate, which the Company anticipates will remain at zero. 
The following table summarizes the calculated aggregate fair values, along with the assumptions utilized in each calculation:      
 ($ in thousands)
June 30, 2015
 
December 31, 2014
Calculated aggregate value
$
12,347

 
$
11,286

Weighted average exercise price per share
$
7.08

 
$
7.08

Closing price per share of common stock
$
5.27

 
$
2.59

Volatility
84.2
%
 
67.6
%
Weighted average remaining expected life
2 years, 1 month

 
2 years, 7 months

Risk-free interest rate
0.67
%
 
0.86
%
Dividend yield
—

 
—


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Fibrocell Science, Inc.
Notes to Consolidated Financial Statements
(unaudited)

Note 6. Fair Value Measurements

Assets and Liabilities Measured at Fair Value on a Recurring Basis  
The Company adopted the accounting guidance on fair value measurements for financial assets and liabilities measured on a recurring basis. The guidance requires fair value measurements be classified and disclosed in one of the following three categories: 
• Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
• Level 2: Quoted prices in markets that are not active or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability.
• Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The following fair value hierarchy table presents information about each major category of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014:
 
Fair value measurement using
($ in thousands) 
Quoted prices in
  active markets (Level 1)
 
Significant
  other
  observable
  inputs (Level 2)
 
Significant
unobservable
  inputs
  (Level 3)
 
Total
Balance at June 30, 2015
 

 
 

 
 

 
 

Assets:
 

 
 

 
 

 
 

Cash and cash equivalents
$
26,850

 
$
—

 
$
—

 
$
26,850

Liabilities:
 

 
 

 
 

 
 

Warrant liability
$
—

 
$
—

 
$
12,347

 
$
12,347

 
 
Fair value measurement using
($ in thousands) 
Quoted prices in
  active markets (Level 1)
 
Significant
  other
  observable
  inputs (Level 2)
 
Significant
unobservable
  inputs
  (Level 3)
 
Total
Balance at December 31, 2014
 

 
 

 
 

 
 

Assets:
 

 
 

 
 

 
 

Cash and cash equivalents
$
37,495

 
$
—

 
$
—

 
$
37,495

Liabilities:
 

 
 

 
 

 
 

Warrant liability
$
—

 
$
—

 
$
11,286

 
$
11,286

The reconciliation of the warrant liability measured at fair value on a recurring basis using unobservable inputs (Level 3) was as follows:
 
Warrant
($ in thousands)
Liability
Balance at December 31, 2014
$
11,286

Exercise of warrants
—

Change in fair value of warrant liability
1,061

Balance at June 30, 2015
$
12,347

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

10
Table of Contents
Fibrocell Science, Inc.
Notes to Consolidated Financial Statements
(unaudited)

Note 7. Share-Based Compensation

The Company’s board of directors (the “Board”) adopted the 2009 Equity Incentive Plan (as amended to date, the “Plan”) effective September 3, 2009.  The Plan is intended to further align the interests of the Company and its stockholders with its employees, including its officers, non-employee directors, consultants and advisers by providing incentives for such persons to exert maximum efforts for the success of the Company.  The Plan allows for the issuance of up to 5,600,000 shares of the Company’s common stock.  The Company issued 206,000 options outside of the Plan to consultants.
The types of awards that may be granted under the Plan include stock options (both non-qualified stock options and incentive stock options), stock appreciation rights, stock awards, stock units and other stock-based awards.  The term of each award is determined by the Compensation Committee of the Board of Directors at the time each award is granted, provided that the terms of options do not exceed ten years .  Vesting schedules for the stock options vary, but generally vest 25% per year, over four years .  The Plan had 2,323,939 shares available for future grants as of June 30, 2015.
Total share-based compensation expense, net of estimated forfeitures, recognized using the straight-line attribution method in the consolidated statements of operations is as follows:
 
Three months ended June 30,
 
Six months ended June 30,
($ in thousands)
2015
 
2014
 
2015
 
2014
Stock option compensation expense for employees and directors
$
804

 
$
436

 
$
1,044

 
$
736

Equity awards for non-employees issued for services
—

 
—

 
—

 
3

Total stock-based compensation expense
$
804

 
$
436

 
$
1,044

 
$
739

($ in thousands except share and per share data)
Number of
shares
 
Weighted-
average
exercise
price
 
Weighted-average
remaining
contractual
term (in
years)
 
Aggregate
intrinsic
value ($ in thousands)
Outstanding at December 31, 2014
2,086,450

 
$
7.43

 
8 years
 
$
—

Granted
1,333,614

 
4.45

 
 
 
 

Exercised
(56,250
)
 
4.53

 
 
 
 

Forfeited
(115,000
)
 
3.91

 
 
 
 

Expired
(12,000
)
 
10.50

 
 
 
 

Outstanding at June 30, 2015
3,236,814

 
$
6.37

 
8 years, 5 months
 
$
2,910

Exercisable at June 30, 2015
1,353,075

 
$
9.39

 
7 years, 4 months
 
$
810

The total fair value of options vested during the six months ended June 30, 2015 was approximately $1.0 million .  As of June 30, 2015, there was approximately $4.9 million of total forfeiture adjusted unrecognized compensation cost, related to time-based and performance-based non-vested stock options.  That cost is expected to be recognized over a weighted-average period of 3.0 years.  As of June 30, 2015, there was no unrecognized compensation expense related to non-vested non-employee options.

11
Table of Contents
Fibrocell Science, Inc.
Notes to Consolidated Financial Statements
(unaudited)
Note 7. Share-Based Compensation (continued)

During the six months ended June 30, 2015 and 2014, the weighted average fair market value of the options granted was $3.57 and $2.74 , respectively.  The fair market value of these options was computed using the Black-Scholes option-pricing model with the following key weighted average assumptions for the six months ended as of the dates indicated:
 
June 30, 2015
 
June 30, 2014
Expected life
6 years, 1 month

 
6 years, 3 months

Interest rate
1.56
%
 
1.97
%
Dividend yield
—

 
—

Volatility
103.3
%
 
70.4
%
The Company uses a peer group to determine historical stock price volatility as it has not had enough standalone trading to satisfy the "look-back" requirements of ASC 718, Compensation: Stock Compensation . For grants issued during the first half of 2015, the Company reassessed those companies it includes in its peer group, which resulted in an increase in volatility as compared to the first half of 2014.
Note 8. Collaboration Agreement with Related Party
The Company and Intrexon are parties to an exclusive channel collaboration agreement, as amended. Randal J. Kirk is the chairman of the board and chief executive officer of Intrexon and, together with his affiliates, owns more than 50% of Intrexon's common stock. Affiliates of Randal J. Kirk also collectively own more than 35% of our common stock. Our directors, Marcus Smith and Julian Kirk (who is the son of Randal J. Kirk), are employees of Third Security, LLC, which is an affiliate of Randal J. Kirk.
For the three months ended June 30, 2015 and 2014, the Company incurred expenses of $1.1 million and $0.7 million , respectively, for work performed under the Company's exclusive channel collaboration agreement, as amended, with Intrexon. 
For the six months ended June 30, 2015 and 2014, the Company incurred expenses of $2.9 million and $1.8 million , respectively, for work performed under the Company's exclusive channel collaboration agreement, as amended, with Intrexon. As of June 30, 2015 and December 31, 2014, the Company had outstanding payables to Intrexon of $0.7 million and $1.0 million , respectively.

12
Table of Contents
Fibrocell Science, Inc.
Notes to Consolidated Financial Statements
(unaudited)

Note 9.  Loss Per Share
Basic loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during a period.  The diluted loss per share calculation gives effect to dilutive options, warrants, convertible notes, convertible preferred stock, and other potentially dilutive common stock including selected restricted shares of common stock outstanding during the period.  Diluted loss per share is based on the treasury stock method and includes the effect from potential issuance of common stock, such as shares issuable pursuant to the exercise of stock options and warrants, assuming the exercise of all in-the-money stock options based on the average market price during the period.  Common share equivalents have been excluded where their inclusion would be anti-dilutive.
 
For the three months ended  June 30,
 
For the six months ended  June 30,
($ in thousands except share and per share data)
2015
 
2014
 
2015
 
2014
Loss per share - basic:
 

 
 

 
 

 
 

Numerator for basic loss per share
$
(6,756
)
 
$
(2,257
)
 
$
(15,281
)
 
$
(16,266
)
Denominator for basic loss per share
40,889,732

 
40,856,815

 
40,875,704

 
40,720,958

Basic loss per common share
$
(0.17
)
 
$
(0.06
)
 
$
(0.37
)
 
$
(0.40
)
Loss per share - diluted:
 

 
 

 
 

 
 

Numerator for diluted loss per share
$
(6,756
)
 
$
(2,257
)
 
$
(15,281
)
 
$
(16,266
)
Add back: Fair value of “in the money” warrants outstanding
—

 
1,284

 
—

 
1,284

Net loss attributable to common share
$
(6,756
)
 
$
(3,541
)
 
$
(15,281
)
 
$
(17,550
)
Denominator for basic loss per share
40,889,732

 
40,856,815

 
40,875,704

 
40,720,958

Plus: Incremental shares underlying “in the money” warrants outstanding
—

 
394,071

 
—

 
197,035

Denominator for diluted loss per share
40,889,732

 
41,250,886

 
40,875,704

 
40,917,993

Diluted net loss per common share
$
(0.17
)
 
$
(0.09
)
 
$
(0.37
)
 
$
(0.43
)
      The following potentially dilutive securities have been excluded from the computations of diluted weighted-average shares outstanding, as their effect would be anti-dilutive: 
 
Three months ended June 30,
 
Six months ended June 30,
 
2015
 
2014
 
2015
 
2014
“In the money” stock options
1,482,614

 
844,000

 
1,518,957

 
1,094,000

“Out of the money” stock options
1,654,200

 
1,553,717

 
1,442,200

 
1,241,719

“In the money” warrants
1,201,698

 
—

 
1,201,698

 
600,849

“Out of the money” warrants
4,831,352

 
4,831,352

 
4,831,352

 
4,831,352

 
 
 
 
 
 
 
 
Other securities excluded from the calculation of diluted loss per share:
 
 
 
 
 
 
 
Stock options with performance condition
100,000

 
—

 
100,000

 
—


Note 10. Subsequent Events
On July 27, 2015, Fibrocell sold 2,974,136 shares of its common stock, par value $0.001 per share, in an underwritten public offering at a price per share of $5.80 (the "Offering"). The net proceeds to Fibrocell from the Offering, after deducting underwriting commissions and other estimated offering expenses payable by Fibrocell, was approximately $15.7 million .     

13

Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This following discussion and analysis should be read in conjunction with:
•
our unaudited consolidated financial statements and accompanying notes included in Part I, Item 1 of this Form 10-Q; and
•
our audited consolidated financial statements and accompanying notes included in our Form 10-K for 2014, as well as the information contained under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Form 10-K for 2014.
Overview
We are an autologous cell and gene therapy company focused on developing first-in-class treatments for rare and serious skin and connective tissue diseases with high unmet medical needs. All of our product candidates use our proprietary autologous fibroblast technology. Fibroblasts are the most common cells located in skin and connective tissue and are responsible for synthesizing extracellular matrix proteins that provide cellular structure and support. Our autologous fibroblast technology uses our patented manufacturing process, which involves collecting small skin samples from patients, separating the tissue into its component cells, then expanding the fibroblast cells using classical tissue culture techniques until the numbers are adequate for repeated injection. In this manner, each patient is treated with cells that were grown from his or her own dermal tissue (i.e., autologous).
Our most advanced development program is azficel-T for the treatment of chronic dysphonia resulting from vocal cord scarring. We are currently in a Phase II clinical trial for this indication. We expect to complete dosing in our Phase II clinical trial by year-end 2015 and announce efficacy results in the second quarter of 2016. In collaboration with Intrexon, a leader in synthetic biology, we are also in the preclinical development stage with two gene-therapy product candidates. Our lead orphan gene-therapy product candidate, FCX-007, has received an orphan drug designation from the FDA and is in late stage preclinical development for the treatment of recessive dystrophic epidermolysis bullosa ("RDEB"), a devastating, rare, congenital, painful, progressive blistering skin disease that typically leads to premature death. We are also in preclinical development of our second gene-therapy product candidate, FCX-013, for the treatment of linear scleroderma, an excess production of extracellular matrix characterized by skin fibrosis and linear scars. We plan to seek orphan drug designation for FCX-013.
Azficel-T for Chronic Dysphonia
Dysphonia is a reduction in vocal capacity and is caused by damage to the fibroblast layer of the vocal cords, which limits airflow and results in severe and significant limitations in voice quality. Depending on the severity of dysphonia, a patient's resulting voice is hoarse or raspy and is perceived by sufferers as a communication disorder. Severe cases can lead to a total loss of voice. The number of U.S. patients suffering from chronic dysphonia caused by vocal fold scarring is approximately 125,000. No long-term effective therapy is presently available, and rehabilitation of subjects (for example, with voice therapy) is difficult. In our Phase I clinical trial of azficel-T for chronic dysphonia, which involved a feasibility study to determine the safety and efficacy of injections for the treatment of chronic dysphonia in patients who had failed to improve following currently available treatments, a positive trend of sustained improvement was noted in a majority of clinical trial subjects. Our Phase II clinical trial for chronic dysphonia currently in progress is a double-blind, randomized, placebo-controlled trial that is designed to test the safety and efficacy of azficel-T in subjects with chronic dysphonia caused by idiopathic vocal cord scarring or age-related dysphonia. Efficacy endpoints will be assessed four months after administration of final treatment.
FCX-007 for RDEB
Recessive dystrophic epidermolysis bullosa is the most severe form of dystrophic epidermolysis bullosa ("DEB"), a congenital, progressive, devastatingly painful and debilitating genetic disorder that often leads to death. RDEB is caused by a mutation of the COL7A1 gene, the gene which encodes for type VII collagen ("COL7"), a protein that forms anchoring fibrils. Anchoring fibrils hold together the layers of skin, and without them, skin layers separate causing severe blistering, open wounds and scarring in response to any kind of friction, including normal daily activities like rubbing or scratching. Children who inherit the condition are often called "butterfly children" because their skin is as fragile as a butterfly's wings. There are approximately 1,100 - 2,500 RDEB patients in the United States. Current treatments for RDEB address only the sequelae, including daily bandaging, hydrogel dressings, antibiotics, feeding tubes and surgeries.
FCX-007, our lead gene-therapy product candidate, is an autologous fibroblast cell genetically modified to express COL7. We are developing FCX-007 in collaboration with Intrexon. We submitted our investigational new drug ("IND") application for FCX-007 to the FDA on July 17, 2015 and expect to initiate a Phase I/II clinical trial for FCX-007 by the end of

14
Table of Contents

2015. We expect that the primary objective of our Phase I/II trial will be to evaluate the safety of FCX-007. We also expect that the secondary objectives will be to (i) assess the mechanism of action at weeks 4, 12, 25, 52 and unscheduled visits through the evaluation of skin biopsies for COL7 expression and the presence of anchoring fibrils and (ii) assess the efficacy of FCX-007 through an intra-subject paired analysis of target wound area at weeks 4, 8, 12, 25, 52 and unscheduled visits. We expect to access efficacy by comparing FCX-007 treated wounds to untreated wounds in Phase I and to wounds administered sterile saline in Phase II through the evaluation of digital imaging of wounds. We aim to enroll nine subjects in this Phase I/II clinical trial (three adults in Phase I followed by six pediatric subjects in Phase II).
FCX-013 for Linear Scleroderma
Linear scleroderma is a localized autoimmune skin disorder that manifests as excess production of extracellular matrix characterized by fibrosis and linear scars. The linear areas of skin thickening may extend to underlying tissue and muscle in children which may impair growth and development. Lesions appearing across joints can be painful, impair motion and may be permanent. Current treatments only address symptoms, including systemic or topical corticosteroids, UVA light therapy and physical therapy. Our second gene-therapy product candidate, FCX-013, is also being developed in collaboration with Intrexon and is currently in preclinical development for the treatment of linear scleroderma. Our product development efforts to date have included gene selection and design, transduction efficiency and protein expression analysis, ligand development for use in connection with Intrexon's proprietary RheoSwitch Therapeutic System® ("RTS®") expression technology and analytical assay design. Research is ongoing to select the optimal gene configuration, optimize RTS® control, develop animal models to establish proof of concept and progress the regulatory path for FCX-013. We expect to complete the proof-of-concept studies in the first half of 2016 and plan to submit our IND application to the FDA in the second half of 2016.
LAVIV (azficel-T) for Nasolabial Fold Wrinkles
We currently market LAVIV® (azficel-T), an FDA-approved biological product that uses our proprietary autologous fibroblast technology, for the improvement of the appearance of moderate to severe nasolabial fold wrinkles in adults. In 2013, we changed our business strategy to focus on rare skin and connective tissue diseases, resulting in our product candidates mentioned above. As a result, we devote minimal sales and marketing efforts towards our LAVIV aesthetic product line, and we intend to support only a nominal amount of LAVIV aesthetic procedures in 2015 and beyond. Given the limited use of LAVIV we are experiencing difficulties in recruiting a sufficient number of subjects for the postmarketing study that the FDA required as a condition for the approval of LAVIV. We are actively engaged in discussions with the FDA about how to fulfill the requirement in light of the limited patient population given our shift in focus to rare skin and connective tissue diseases.
Research Collaboration with UCLA    
We also have an ongoing scientific research collaboration with the Regents of the University of California, Los Angeles ("UCLA") focusing on discoveries and technologies related to regenerative medicine. The technologies from this collaboration and our exclusive license agreements with UCLA may enable us to expand our biologics platform which uses human fibroblasts to create localized therapies that are compatible with the unique biology of each subject.
Results of Operations
Comparison of Three Months Ended June 30, 2015 and 2014
Revenue and Cost of Revenue.
Revenue and cost of revenue was comprised of the following:
 
Three months ended
June 30,
 
Increase
(Decrease)
($ in thousands)
2015
 
2014
 
$
 
%
Revenue from product sales
$
55

 
$
58

 
$
(3
)
 
(5.2
)%
Collaboration revenue
82

 
—

 
82

 
100.0
 %
Total revenue
137

 
58

 
79

 
136.2
 %
Cost of product sales
77

 
547

 
(470
)
 
(85.9
)%
Cost of collaboration revenue
85

 
—

 
85

 
100.0
 %
Total cost of revenue
162

 
547

 
(385
)
 
(70.4
)%
Gross loss
$
(25
)
 
$
(489
)
 
$
464

 
(94.9
)%

15
Table of Contents

Total revenue was approximately $ 0.1 million for each of the three months ended June 30, 2015 and 2014, respectively. Revenue from product sales is recognized based on the shipment of LAVIV injections to patients and was relatively constant in the second quarter of 2015 as compared to the second quarter of 2014. Collaboration revenue is related to a research and development agreement that we have with an unrelated third party to investigate potential new non-pharmaceutical applications for our conditioned fibroblast media technology. Revenue recognized from our collaboration relates to an upfront license fee and a proof of concept study currently underway.
Cost of product sales was approximately $0.1 million and $0.5 million for the three months ended June 30, 2015 and 2014, respectively.  Cost of product sales includes the costs related to the processing of cells for LAVIV, including direct and indirect costs.  The decrease of $0.5 million is primarily due to our continued de-emphasis on commercial sales in the aesthetic market (LAVIV) as well as the increase in clinical manufacturing which reduces the allocation of fixed overhead costs to commercial sales. We believe that cost of product sales will remain at or above product sales for the foreseeable future and, thus, we anticipate that we will continue to report gross losses from product sales of LAVIV for the foreseeable future. Cost of collaboration revenue was $0.1 million for the three months ended June 30, 2015, and consists primarily of manufacturing costs related to a proof of concept study which began in 2015.
Research and Development Expense.
For each of our research and development programs, we incur both direct and indirect expenses. Direct expenses include third party costs related to these programs such as contract research, consulting, preclinical and clinical development costs.  Indirect expenses include regulatory, laboratory, personnel, facility, stock compensation and other overhead costs that we do not allocate to any specific program.  We expect research and development costs to continue to be significant for the foreseeable future as we continue in our efforts to develop first-in-class treatments for rare and serious skin and connective tissue diseases.
Research and development expense was comprised of the following:
 
Three months ended
June 30,
 
Increase
(Decrease)
($ in thousands)
2015
 
2014
 
$
 
%
Direct costs:
 

 
 

 
 

 
 

azficel-T for chronic dysphonia
$
436

 
$
110

 
$
326

 
296.4
 %
FCX-007
905

 
917

 
(12
)
 
(1.3
)%
FCX-013
254

 
78

 
176

 
225.6
 %
Other
43

 
204

 
(161
)
 
(78.9
)%
Total direct costs
1,638

 
1,309

 
329

 
25.1
 %
Indirect costs:
 

 
 

 
 

 
 

Regulatory costs
239

 
227

 
12

 
5.3
 %
Intangible amortization
138

 
138

 
—

 
—

Compensation and related expense
888

 
811

 
77

 
9.5
 %
Process development
71

 
(5
)
 
76

 
1,520.0
 %
Other indirect R&D costs
720

 
445

 
275

 
61.8
 %
Total indirect costs
2,056

 
1,616

 
440

 
27.2
 %
Total research and development expense
$
3,694

 
$
2,925

 
$
769

 
26.3
 %
Total research and development expense increased $ 0.8 million , or 26.3%, to approximately $ 3.7 million for the three months ended June 30, 2015 as compared to $ 2.9 million for the three months ended June 30, 2014.  The overall increase is due primarily to increased costs during the 2015 period of $ 0.3 million for our azficel-T for chronic dysphonia Phase II clinical trial, $ 0.2 million for preclinical development of FCX-013 and increased costs of $0.3 million for other indirect R&D costs.
Direct research and development expense by major clinical and preclinical development program was as follows:
•
azficel-T for chronic dysphonia — Our Phase II clinical trial began enrollment in the second quarter of 2014. Costs increased approximately $ 0.3 million for the three months ended June 30, 2015 as compared to the same period last year due to costs for additional patient enrollment, clinical site fees and clinical manufacturing costs.

16
Table of Contents

•
FCX-007 — Costs were relatively constant for the three months ended June 30, 2015 as compared to the same period last year.
•
FCX-013 — Costs increased approximately $ 0.2 million for the three months ended June 30, 2015 as compared to the same period last year due to the advancement of our preclinical work related to linear scleroderma, specifically for gene screening and selection, construct build and optimization, vector optimization, assay development, RheoSwitch® and ligand optimization and early animal model work. RheoSwitch® refers to Intrexon’s proprietary RheoSwitch Therapeutic System® technology which is a biologic switch activated by a small molecule ligand that provides the ability to control level and timing of protein expression in those diseases where such control is critical.
•
Other - Other direct research and development expenses decreased approximately $0.2 million due to the reduction of efforts on our azficel-T for the treatment of restrictive burn scarring program. While enrollment for the Phase II clinical trial for this indication was closed in the fourth quarter of 2014, the trial is continuing with the subjects currently enrolled.
Total indirect research and development expense increased by $ 0.4 million for the three months ended June 30, 2015 as compared to the same period last year. This increase is primarily due to an increase in other miscellaneous indirect research and development costs of $0.3 million due to increased allocation of fixed overhead costs for our manufacturing facility due to lower commercial volume of LAVIV.
Selling, General and Administrative Expense.
Selling, general and administrative expense was comprised of the following:
 
Three months ended
June 30,
 
Increase
(Decrease)
($ in thousands)
2015
 
2014
 
$
 
%
Compensation and related expense
$
1,638

 
$
1,311

 
$
327

 
24.9
 %
Professional fees
1,277

 
1,014

 
263

 
25.9
 %
Facilities and related expense and other
725

 
857

 
(132
)
 
(15.4
)%
Total selling, general and administrative expense
$
3,640

 
$
3,182

 
$
458

 
14.4
 %
Selling, general and administrative expense increased by approximately $0.5 million , or 14.4% , to $3.6 million for the three months ended June 30, 2015 as compared to $3.2 million for the same period last year.  This increase is attributable to a $0.3 million increase in compensation and related expense due to an increase in stock based compensation and a $0.3 million increase in professional fees offset by a $0.1 million reduction in facilities and related expense and other. The total increase in professional fees was driven by increased legal expense of $0.7 million and was offset by a decrease of $0.4 million in accounting fees due to the warrant restatement project which drove costs higher in the second quarter of 2014.
Other Income.
During the three months ended June 30, 2014, we recorded approximately $0.3 million of other income related to a settlement agreement with one of our suppliers. There was no such income during the three months ended June 30, 2015.
Warrant Revaluation and Other Finance Expense. 
During the three months ended June 30, 2015 and 2014, we recorded non-cash warrant income of approximately $ 0.6 million and $ 4.0 million in our consolidated statements of operations, respectively, related to the change in the fair value of our warrants.

17
Table of Contents

Comparison of Six Months Ended June 30, 2015 and 2014
Revenue and Cost of Revenue.
Revenue and cost of revenue was comprised of the following:
 
Six months ended June 30,
 
Increase
(Decrease)
($ in thousands)
2015
 
2014
 
$
 
%
Revenue from product sales
$
168

 
$
104

 
$
64

 
61.5
 %
Collaboration revenue
163

 
—

 
163

 
100.0
 %
Total revenue
331

 
104

 
227

 
218.3
 %
Cost of product sales
221

 
1,340

 
(1,119
)
 
(83.5
)%
Cost of collaboration revenue
88

 
—

 
88

 
100.0
 %
Total cost of revenue
309

 
1,340

 
(1,031
)
 
(76.9
)%
Gross profit (loss)
$
22

 
$
(1,236
)
 
$
1,258

 
(101.8
)%
Total revenue was $ 0.3 million and $ 0.1 million for each of the six months ended June 30, 2015 and 2014, respectively.  Revenue from product sales is recognized based on the shipment of LAVIV injections to patients. The increase in total revenue was primarily due to collaboration revenue received in 2015 related to a research and development agreement that we have with an unrelated third party to investigate potential new non-pharmaceutical applications for our conditioned fibroblast media technology. This revenue relates to an upfront license fee and a proof of concept study currently underway. No collaboration revenue was recognized in the 2014 period.
Cost of product sales was approximately $0.2 million and $1.3 million for the six months ended June 30, 2015 and 2014, respectively.  Cost of product sales includes the costs related to the processing of cells for LAVIV, including direct and indirect costs.  The decrease of $1.1 million is primarily due to our continued de-emphasis on commercial sales in the aesthetic market (LAVIV) as well as the increase in clinical manufacturing which reduces the allocation of fixed overhead costs to commercial sales. We believe that cost of product sales will remain at or above product sales for the foreseeable future and, thus, we anticipate that we will continue to report gross losses from product sales of LAVIV for the foreseeable future. Cost of collaboration revenue was $0.1 million for the six months ended June 30, 2015, and consists primarily of manufacturing costs related to a proof of concept study which began in 2015.
Research and Development Expense.
For each of our research and development programs, we incur both direct and indirect expenses. Direct expenses include third party costs related to these programs such as contract research, consulting, preclinical and clinical development costs.  Indirect expenses include regulatory, laboratory, personnel, facility, stock compensation and other overhead costs that we do not allocate to any specific program.  We expect research and development costs to continue to be significant for the foreseeable future as we continue in our efforts to develop first-in-class treatments for rare and serious skin and connective tissue diseases with high unmet medical needs.

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Research and development expense was comprised of the following:
 
Six months ended June 30,
 
Increase
(Decrease)
($ in thousands)
2015
 
2014
 
$
 
%
Direct costs:
 

 
 

 
 

 
 

azficel-T for chronic dysphonia
$
724

 
$
198

 
$
526

 
265.7
 %
FCX-007
2,227

 
1,622

 
605

 
37.3
 %
FCX-013
704

 
262

 
442

 
168.7
 %
Ehlers-Danlos Syndrome (hypermobility type)
—

 
5,156

 
(5,156
)
 
(100.0
)%
Other
102

 
311

 
(209
)
 
(67.2
)%
Total direct costs
3,757

 
7,549

 
(3,792
)
 
(50.2
)%
 
 
 
 
 
 
 
 
Indirect costs:
 

 
 

 
 

 
 

Regulatory costs
480

 
392

 
88

 
22.4
 %
Intangible amortization
276

 
276

 
—

 
—

Compensation and related expense
1,816

 
1,433

 
383

 
26.7
 %
Process development
71

 
37

 
34

 
91.9
 %
Other indirect R&D costs
1,281

 
1,153

 
128

 
11.1
 %
Total indirect costs
3,924

 
3,291

 
633

 
19.2
 %
Total research and development expense
$
7,681

 
$
10,840

 
$
(3,159
)
 
(29.1
)%
Total research and development expense decreased $ 3.2 million to approximately $ 7.7 million for the six months ended June 30, 2015 as compared to $ 10.8 million for the six months ended June 30, 2014.  The overall decrease is due primarily to $ 5.2 million of supplemental stock issuance costs incurred in the 2014 period related to our Ehlers-Danlos Syndrome (hypermobility type) program in connection with the second amendment to the exclusive channel collaboration agreement with Intrexon. This up-front licensing cost did not recur in the 2015 period. That decrease was partially offset by increased costs during the 2015 period of $ 0.5 million for our azficel-T for chronic dysphonia Phase II clinical trial, $ 0.6 million for preclinical development of FCX-007, $ 0.4 million for preclinical development of FCX-013 and $0.4 million of compensation and related expenses related to salaries, bonus and stock based compensation.
Direct research and development expense by major clinical and preclinical development program was as follows:
•
azficel-T for chronic dysphonia — Our Phase II clinical trial began enrollment in the second quarter of 2014. Costs increased approximately $ 0.5 million for the six months ended June 30, 2015 as compared to the same period last year due to costs for additional patient enrollment, clinical site fees and clinical manufacturing costs.
•
FCX-007 — Costs increased approximately $ 0.6 million for the six months ended June 30, 2015 as compared to the same period last year due to the progression of our preclinical development program, specifically our animal studies and preclinical product manufacturing costs.
•
FCX-013 — Costs increased approximately $ 0.4 million for the six months ended June 30, 2015 as compared to the same period last year due to the advancement of our preclinical work related to linear scleroderma, specifically for gene screening and selection, construct build and optimization, vector optimization, assay development, RheoSwitch® and ligand optimization and some early animal model work.
•
Ehlers-Danlos Syndrome (hypermobility type)   — Costs decreased approximately $ 5.2 million for the six months ended June 30, 2015 as compared to the same period last year due to the 2014 supplemental stock issuance costs incurred in connection with the second amendment to the exclusive channel collaboration agreement with Intrexon. No substantive work has yet begun on this program.
•
Other   — Other direct research and development expenses decreased approximately $0.2 million due to the reduction of efforts on our azficel-T for the treatment of restrictive burn scarring program. While enrollment for the Phase II clinical trial for this indication was closed in the fourth quarter of 2014, the trial is continuing with the subjects currently enrolled.

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Total indirect research and development expense increased by $ 0.6 million for the six months ended June 30, 2015 as compared to the same period last year. This increase is primarily due to increases in compensation and related expenses including stock based compensation.
Selling, General and Administrative Expense.
Selling, general and administrative expense was comprised of the following:
 
Six months ended June 30,
 
Increase
(Decrease)
($ in thousands)
2015
 
2014
 
$
 
%
Compensation and related expense
$
2,525

 
$
2,277

 
$
248

 
10.9
 %
Professional fees
2,569

 
1,739

 
830

 
47.7
 %
Facilities and related expense and other
1,470

 
1,504

 
(34
)
 
(2.3
)%
Total selling, general and administrative expense
$
6,564

 
$
5,520

 
$
1,044

 
18.9
 %
Selling, general and administrative expense increased by approximately $ 1.0 million , or 18.9% , to $ 6.6 million for the six months ended June 30, 2015 as compared to $ 5.5 million for the same period last year.  The primary driver of increased expense was a $0.8 million increase in professional fees. The total increase in professional fees was driven by increased legal expense of $1.3 million and was offset by a decrease of $0.4 million in accounting fees due to costs incurred related to the warrant restatement project in the second quarter of 2014 and of $0.1 million in investor relations services. Compensation and related expense increased $0.2 million mostly due to an increase in stock based compensation.
Other Income.
During the six months ended June 30, 2014, we recorded approximately $0.4 million of other income mostly related to a settlement agreement with one of our suppliers. There was no such income during the six months ended June 30, 2015.
Warrant Revaluation and Other Finance Expense. 
During the six months ended June 30, 2015 and 2014, we recorded non-cash warrant expense of approximately $ 1.1 million and warrant income of $ 1.0 million in our consolidated statements of operations, respectively, related to the change in the fair value of our warrants.
Liquidity and Capital Resources
Overview
As of June 30, 2015, we had cash and cash equivalents of approximately $ 26.9 million and working capital of approximately $ 22.8 million .  On July 27, 2015, we sold 2,974,136 shares of our common stock in an underwritten public offering at a price per share of $5.80 (the "July 2015 Offering"). The net proceeds to us from the sale of stock in the Offering, after deducting underwriting commissions and other estimated offering expenses payable by us, was approximately $15.7 million.
We believe that our cash and cash equivalents at June 30, 2015 and the net proceeds from the July 2015 Offering will be sufficient to fund our operations into the fourth quarter of 2016. The additional capital that will be required to fund our operations beyond that point will depend largely on the timing and outcomes of our current clinical and preclinical product development programs, the number of other product candidates we choose to develop and the amount of capital investment we choose to make in our manufacturing facility.
To address our future capital needs, we will consider a range of possibilities, including raising additional capital through the issuance of equity or equity-linked securities, through debt financing or by entering into corporate collaborations, partnerships or other strategic transactions. Our ability to raise additional capital will be dependent on, among other things, the the status of our development programs and the state of the financial markets at the time of any proposed capital-raising transaction. There is no assurance that additional capital, through any of the aforementioned means, will be available on acceptable terms, or at all. If adequate capital cannot be obtained on a timely basis and on satisfactory terms, our operations could be materially harmed.

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If we raise additional funds by issuing equity or equity-linked securities, our stockholders will experience dilution. Debt financing, if available, will result in fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences, which are not favorable to our stockholders. If we raise additional capital through corporate collaborations, partnerships or other strategic transactions, it may be necessary to relinquish valuable rights to our product candidates, our technologies or future revenue streams or to grant licenses or sell assets on terms that may not be favorable to us.
Cash Flows
The following table summarizes our cash flows from operating, investing and financing activities for the six months ended June 30, 2015 and 2014:
Statement of Cash Flows Data:
Six months ended June 30,
($ in thousands)
2015
 
2014
Cash used in operating activities
$
(10,787
)
 
$
(10,286
)
Cash used in investing activities
$
(111
)
 
$
(211
)
Cash provided by financing activities
$
253

 
$
—

Operating Activities.
Cash used in operating activities during the six months ended June 30, 2015 was approximately $ 10.8 million , an increase of $ 0.5 million as compared to the same period last year, due largely to the increase in selling, general and administrative expense related to professional fees.
Investing Activities.
Cash used in investing activities during the six months ended June 30, 2015 was approximately $0.1 million, a decrease of $0.1 million as compared to the same period last year, due to fewer equipment purchases.
Financing Activities.
Cash provided by financing activities during the six months ended June 30, 2015 was approximately $ 0.3 million , an increase of $0.3 million as compared to the same period last year, due to cash received for the exercise of stock options.
Contractual Obligations
During the six months ended June 30, 2015, there have been no material changes to our contractual obligations outside the ordinary course of business from those specified in our Form 10-K for 2014.
Recently Issued Accounting Pronouncements
Please refer to Note 3 in the accompanying notes to the consolidated financial statements for additional information on recently issued accounting pronouncements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
There have been no material changes to our market risk since December 31, 2014.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures  
Our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures, pursuant to Rule 13a-15 promulgated under the Exchange Act, as of June 30, 2015. Our disclosure controls and procedures are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported, within the time periods specified in the rules and forms of the SEC. These disclosure controls and procedures include, among other things, controls and procedures designed to ensure that information required to be disclosed by us in the reports that we file under the Exchange Act is accumulated and communicated to our management, including our principal

21
Table of Contents

executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, management is required to apply its judgment in evaluating the benefits of possible disclosure controls and procedures relative to their costs to implement and maintain.
Based on management’s evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures are designed at a reasonable assurance level and are effective to provide reasonable assurance that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in SEC rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
During the quarter ended June 30, 2015, the Company devoted significant effort and resources to the remediation and improvement of our internal control over financial reporting and completed its corrective actions to respond to a material weakness with respect to internal control over management's review of the assumptions used in the valuation modeling of our liability-classified warrants identified in our 2014 Annual Report on Form 10-K. We require additional communication between management and any third parties who perform advisory services. We have also supplemented procedures for both compiling inputs to the warrant valuation model and for reviewing the outputs of such model provided by any third parties with whom we contract to verify that management's assumptions were used as expected during the valuation process. We believe that these controls and procedures have remediated this material weakness in our internal control over financial reporting. As we continue to evaluate and work to improve our internal control over financial reporting, we may determine to take additional measures to address the material weakness or determine to supplement or modify certain of the remediation efforts described above.
There have been no other changes in internal control over financial reporting that have occurred during the quarterly period ended June 30, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
Shandong Fabosaier Bio-Tech Co., Ltd. and Ran Liu v. Fibrocell Science, Inc., Civil Action No. 14-7180 (U.S. Dist. Ct. for the E.D. of PA)

On or about December 19, 2014, Shandong Fabosaier Bio-Tech Co., Ltd. of China (“Shandong”) and Ran Liu of Vancouver, Canada, who is allegedly a director of Shandong, commenced a lawsuit against us in the United States District Court for the Eastern District of Pennsylvania, Case No. 2:14-cv-07180-CMR. The Complaint asserts claims for breach of contract, promissory estoppel, and unjust enrichment against us relating to the marketing of our LAVIV product in China and Vancouver. We vigorously deny and dispute the factual allegations contained in the Complaint and, on February 12, 2015, we filed an amended answer, additional defenses and counterclaims against Shandong and Ms. Liu. Our counterclaims include counts for trademark infringement, violations of the Lanham Act and the Anti-cybersquatting Consumer Protection Act, unfair competition, and tortious interference with contractual relations resulting from Shandong’s repeated, unauthorized use of our marks on Shandong’s website and in other marketing materials. At this time, we are unable to state whether an outcome unfavorable to us is either probable or remote nor are we able to estimate the amount or range of loss in the event of an unfavorable outcome.

Item 1A.    Risk Factors.
You should carefully consider each of the risk factors set forth under the heading "Risk Factors" in our Form 10-K for 2014. The risk factor set forth below supplements those risk factors. The occurrence of any one or more of these risks could materially harm our business, operating results, financial condition and prospects. These risks and uncertainties could also cause actual results to differ materially and adversely from those expressed or implied by forward-looking statements that we make from time to time. Please see "Note Regarding Forward-Looking Statements" appearing at the beginning of this Form 10-Q.

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Table of Contents

The results seen in preclinical studies of our product candidates may not be replicated in humans.
Although we have seen positive results in preclinical studies of FCX-007 and FCX-013, we may not see positive results when these and any other product candidates undergo future clinical trials in humans. Preclinical studies are not designed to test the efficacy of a product candidate in humans, but rather to:
• test short-term safety;
• establish biological plausibility;
• identify biologically active dose levels;
• establish feasibility and reasonable safety of the investigational product's proposed clinical route of administration;
• identify physiologic parameters that can guide clinical monitoring; and/or
• establish proof of concept, or the feasibility and rationale for use of an investigational product in the targeted patient population.
Success in preclinical studies does not ensure that later studies or any clinical trials will be successful nor does it predict future results. The rate of failure in drug development is quite high, and many companies in the biotechnology and pharmaceutical industries have suffered significant setbacks in advanced clinical trials, even after promising results in preclinical studies and earlier clinical trials. Product candidates may fail to show desired safety and efficacy when used with human subjects. Negative or inconclusive results from any of our ongoing preclinical studies could result in delays, modifications, or abandonment of clinical trials and the termination of our development of a product candidate.
Item 6.     Exhibits.
 
(a) Exhibits    

EXHIBIT NO.
 
IDENTIFICATION OF EXHIBIT
10.1*
 
Employment Agreement, dated June 1, 2015, by and between Fibrocell Science, Inc. and Michael F. Marino, Esq.
31.1*
 
Certification pursuant to Rule 13a-14(a) and 15d-14(a), required under Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
 
Certification pursuant to Rule 13a-14(a) and 15d-14(a), required under Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
 
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*
 
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
 
XBRL Instance Document. 
101.SCH
 
XBRL Taxonomy Extension Schema Document.
101.CAL
 
XBRL Taxonomy Extension Calculation  Linkbase Document.
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
* Filed or furnished, as applicable herewith.

23
Table of Contents

SIGNATURE
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
FIBROCELL SCIENCE, INC.
 
 
By:
/s/ Keith A. Goldan
 
Keith A. Goldan
 
Senior Vice President and Chief Financial Officer
 
(Principal Financial and Accounting Officer)

 
 
Date:
August 7, 2015


24
Table of Contents

INDEX TO EXHIBITS

EXHIBIT NO.
 
IDENTIFICATION OF EXHIBIT
10.1*
 
Employment Agreement, dated June 1, 2015, by and between Fibrocell Science, Inc. and Michael F. Marino, Esq.
31.1*
 
Certification pursuant to Rule 13a-14(a) and 15d-14(a), required under Section 302 of the Sarbanes-Oxley Act of 2002
31.2*
 
Certification pursuant to Rule 13a-14(a) and 15d-14(a), required under Section 302 of the Sarbanes-Oxley Act of 2002
32.1*
 
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*
 
Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS
 
XBRL Instance Document. 
101.SCH
 
XBRL Taxonomy Extension Schema Document.
101.CAL
 
XBRL Taxonomy Extension Calculation  Linkbase Document.
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document.
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document.
 
* Filed or furnished, as applicable herewith.

25


Exhibit 10.1

EMPLOYMENT AGREEMENT
This Employment Agreement (this “ Agreement ”), is entered into as of June 1, 2015 (the “ Effective Date ”), by and between Fibrocell Science, Inc., a Delaware corporation (the “ Company ”), and Michael F. Marino Esq. (the “ Executive ”).
Recitals
WHEREAS, the Company desires to hire the Executive and to employ him as the Company’s Sr. Vice President, General Counsel and Corporate Secretary and the Executive agrees to accept such employment, in accordance with the terms and conditions set forth in this Agreement.
Agreement
NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the Company and the Executive hereby agree as follows:
1. Definitions .

1.1. “ Affiliate ” means any person or entity controlling, controlled by or under common control with the Company.
1.2.     “ Board ” means the Board of Directors of the Company.

1.3.     “ Cause ” means (A) the Executive’s conviction of or plea of nolo contendere to a felony or a misdemeanor involving moral turpitude; (B) the Executive’s commission of fraud, misappropriation or embezzlement against any Person; (C) the theft or misappropriation by the Executive of any property or money of the Company or an Affiliate; (D) the Executive’s material breach of the terms of this Agreement; or (E) the willful or gross neglect of the Executive’s duties, the willful or gross misconduct in performance of the Executive’s duties or the willful violation by the Executive of any material Company policy. Notwithstanding the foregoing, Cause shall not exist with respect to Section 1.3(D) or Section 1.3(E), until and unless the Executive fails to cure such breach, neglect or misconduct (if such breach, neglect or misconduct is capable of cure) within 10 days after written notice from the Board.

1.4.     “ Change of Control ” means “Change of Control” as defined under the Company’s 2009 Equity Incentive Plan (or any successor plan) (the “Plan”); provided however, that a Change in Control will not be deemed to have occurred unless such event would also be a Change in Control under Section 409A of the Code or would otherwise be a permitted distribution event under Section 409A of the Code.

1.5.     “ Code ” means the Internal Revenue Code of 1986, as amended from time to time.

1.6.     “ Disability ” means the Executive’s termination of employment with the Company as a result of the Executive’s incapacity due to reasonably documented physical or mental illness that is reasonably expected to prevent the Executive from performing his duties for the Company on a full-time basis for more than six consecutive months.

1.7.      “ Good Reason ” means (i) a material breach of this Agreement by the Company, (ii) any change of the Executive’s principal office location to location that required a one-way commute of more than fifty (50) miles from 405 Eagleview Boulevard, Exton, PA, or (iii) the assignment to the Executive of any duties materially inconsistent with the duties or responsibilities of the General Counsel of the Company or any other action by the Company that results in a material diminution in such position, authority, duties, or responsibilities, excluding an isolated, insubstantial, and inadvertent action not taken in bad faith. Notwithstanding the foregoing, Good Reason shall not be deemed to exist unless the Executive gives the Company written notice within ninety (90) days after the occurrence of the event which the Executive believes constitutes the basis for Good Reason, specifying the particular act or failure to act which the Executive believes constitutes the basis for Good Reason. If the Company fails to cure such act or failure to act, if curable, within thirty (30) days after receipt of such notice, the Executive may terminate his employment for Good Reason.


1


1.8.     “ Person ” means an individual, partnership, limited liability company, corporation, association, joint stock company, trust, joint venture, investment fund, government, governmental agency or body or any other group or entity, no matter how organized and whether or not for profit.

1.9.     “ Termination Date ” means the date the Executive’s employment with the Company is terminated for any reason.

2. Employment .

2.1.     Subject to the terms and provisions set forth in this Agreement, during the “ Term of Employment ” (as defined below) the Executive shall be employed as the Sr. Vice President, General Counsel and Corporate Secretary of the Company and in such other positions with the Company and its Affiliates (for no additional compensation) as may be determined by the Board or its designee from time to time. The Executive shall have the duties, responsibilities and authority associated with such position and such other duties and responsibilities as are reasonably assigned by the Company’s Chief Executive Officer and/or the Board or their respective designees from time to time.

2.2.     During the Term of Employment, the Executive shall report to the Board (or a committee thereof) and the Company’s Chief Executive Officer, and the Executive shall devote the Executive’s best efforts and the Executive’s full business time and attention to the business and affairs of the Company and its Affiliates. The Executive shall not engage, directly or indirectly, in any other business, investment or activity that (a) interferes with the performance of the Executive’s duties under this Agreement, (b) is contrary to the interests of the Company or any of its Affiliates or (c) requires any portion of the Executive’s business time; provided, however, that, to the extent that the following does not impair the Executive’s ability to perform the Executive’s duties pursuant to this Agreement, the Executive may continue to expeditiously wind-down his client engagements and, with the Board’s prior written approval (which approval may be withheld in the sole discretion of the Board), may serve on the board or committee of any business, non-profit, charitable or other organization.

2.3.     Term of Employment . The term of employment under this Agreement shall commence on the Effective Date until terminated pursuant to Section 4 below (the “ Term of Employment ”).     

3. Compensation and Other Benefits .

3.1.     Base Salary . During the Term of Employment, the Executive shall receive a base salary per annum payable in accordance with the Company’s normal payroll practices as in effect from time to time of $325,000 (as adjusted from time to time, “ Base Salary ”). The Executive’s Base Salary shall be reviewed by the Board (or a committee thereof) on an annual basis commencing in the first quarter of 2016 and shall be subject to upward adjustment, as determined by the Board (or a committee thereof).

3.2.      Annual Bonus . Commencing with the year ended December 31, 2015, during the Term of Employment, the Executive shall be eligible to earn an annual performance bonus, subject to the attainment of annual performance goals as determined by the Board (or a committee thereof) (the “ Annual Bonus ”). The Executive’s target Annual Bonus will be 35% of Base Salary, subject to the attainment of annual performance goals as determined by the Board (or a committee thereof); provided, that, for the year ended December 31, 2015 only, such Annual Bonus shall be pro-rated based on the number of days in the calendar year which the Executive is employed by the Company. The actual Annual Bonus payable to the Executive for any given period may be higher or lower than his then target Annual Bonus. Any such Annual Bonus payable under this Section shall be paid by March 15 th of the year following the year to which such bonus relates. Unless otherwise determined by the Board (or a committee thereof), the Executive will not receive any bonus under this Section unless the Executive is still employed by the Company on the date such bonus is paid. The Executive’s target Annual Bonus shall be reviewed by the Board (or a committee thereof) on an annual basis commencing in the first quarter of 2016 and may be subject to upward adjustment, as determined by the Board (or a committee thereof).

3.3     Equity Grant . On the Effective Date, the Executive shall receive a grant of stock options (the “ Stock Options ”) to purchase 220,000 shares of the Company’s common stock at an exercise price per share equal to the closing price of the Company’s common stock on the date of such grant. Subject to the Executive’s continued service through such applicable date, 25% of the Stock Options will vest and become exercisable on the first anniversary of the date of grant and thereafter, an additional 6.25% of the Stock Options shall vest and become exercisable at the end of each calendar quarter thereafter (such that, again subject to the Executive’s continued service through such date 100% of the Stock Option will be vested and exercisable by the end of the calendar quarter that coincides or immediately follows the 4 th anniversary of the date of grant). The Stock Option Grant shall be made pursuant to the Fibrocell Science, Inc. 2009 Equity Incentive Plan and shall

2


be made pursuant to the Company’s stock option award agreement, and the Stock Options shall in all respects be subject to the terms and conditions of such plan and such agreement.
The vesting of any unvested Stock Options set forth above held by the Executive immediately prior to a Change of Control shall accelerate upon a Change of Control. Notwithstanding the foregoing, upon a termination of the Executive’s employment by the Company for Cause any unexercised Stock Options shall terminate immediately and upon a termination of the Executive’s employment for any other reason, the Stock Options, to the extent vested and exercisable shall remain exercisable for no less than 180 days following such termination.
Thereafter, the Board of Directors (or a committee thereof) may consider granting additional equity-based awards to the Executive at least once per calendar year commencing in the first quarter of 2016.
3.4.      Relocation . The Executive shall receive a $ 15,000 relocation allowance upon completion of his relocation.

3.5.      Benefit Plans . During the Term of Employment, the Executive shall be eligible to participate in and be covered on the same basis as other senior management of the Company, under all employee benefit plans and programs maintained by the Company, including without limitation vacation, retirement, health insurance and life insurance. During the Term of Employment, the Executive will be eligible to receive four (4) weeks of vacation annually.
3.6.      Expenses . During the Term of Employment, the Company shall, subject to Section 9.6, pay or reimburse the Executive for reasonable and necessary expenses directly incurred by the Executive in the course of the Executive’s employment in accordance with the Company’s standard policies and practices as in effect from time to time.
4. Termination . Upon the occurrence of the Termination Date, the Executive shall and shall be deemed to have immediately resigned from any and all officer, director and other positions he then holds with the Company and its Affiliates (and this Agreement shall act as notice of resignation by the Executive without any further action required by the Executive). The Executive shall receive any Base Salary earned but unpaid through the Termination Date in accordance with the Company’s normal payroll practices and any benefits accrued and due under any applicable benefit plans and programs of the Company and its Affiliates. Except as specifically provided in this Section 4 and Section 5, all other rights the Executive may have to compensation and benefits from the Company or its Affiliates shall terminate immediately upon the Termination Date.

4.1.     Termination by the Company. The Company may terminate the Executive’s employment (a) for Cause or due to the Executive’s death or Disability, upon written notice to the Executive or (b) for any other reason upon thirty (30) days’ advance written notice to the Executive, provided that the Company may pay the Executive thirty (30) days’ pay in lieu of such notice.

4.2.     Termination at Executive’s Election . The Executive may terminate his employment hereunder (a) at any time for Good Reason or (b) for any other reason, upon thirty (30) days’ advance written notice to the Company (“ Voluntary Resignation ”), provided that upon notice of Voluntary Resignation, the Company may terminate the Executive’s employment immediately and pay the Executive thirty (30) days’ pay in lieu of notice.

5.      Severance.

5.1.     If the Executive’s employment is terminated by the Company without Cause or if the Executive’s employment is terminated by the Executive for Good Reason, the Executive shall be entitled to receive a payment equal to: (a) nine (9) months of the Executive’s then Base Salary plus (b) nine (9) months of the premiums associated with continuation of benefits pursuant to COBRA for the Executive and his spouse and dependents to the extent that he is eligible for them following the termination of his employment; provided that if such termination occurs within sixty (60) day prior to a Change in Control or eighteen (18) months after a Change of Control, in lieu of any severance payments described above, the Executive shall be entitled to receive a payment equal to: (a) eighteen (18) months of the Executive’s Base Salary plus(b) eighteen (18) months of the premiums associated with continuation of benefits pursuant to COBRA for the Executive and his spouse and dependents to the extent that he is eligible for them following the termination of his employment plus (c) the Executive’s most recent Annual Bonus payment. The applicable severance payment shall be made in a lump sum sixty (60) days following such termination, provided that the Executive has executed and delivered (and not revoked) a general release substantially in the form attached as Exhibit A (the “ Release ”), which becomes effective within 60 days following the Termination Date.

5.2.     If any payment or right accruing to the Executive under this Agreement, either alone or together with other payments or rights accruing to the Executive from the Company or any of its Affiliates (“ Total Payments ”) would

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constitute a “parachute payment” (as defined in Section 280G of the Code), such payment or right shall be reduced to the largest amount or greatest right that will result in no portion of the amount payable or right accruing under this Agreement being subject to an excise tax under Section 4999 of the Code or being disallowed as a deduction under Section 280G of the Code (the “ Safe-Harbor Amount ”). The determination whether any reduction in the rights or payments under this Agreement is to apply shall be made by the Company after consultation with the Executive, and such determination shall be conclusive and binding on the Executive. The Executive shall cooperate in good faith with the Company in making such determination and providing the necessary information for this purpose. The foregoing provisions of this Section 5.2 shall apply only if, the aggregate after-tax value of the Total Payments (after giving effect to the Excise Tax) accruing to the Executive would be less than the aggregate after-tax value of the Safe-Harbor Amount. Any such reduction shall be made in the following order: (i) first, any future cash payments (if any) shall be reduced (if necessary, to zero); (ii) second, any current cash payments shall be reduced (if necessary, to zero); (iii) third, all non-cash payments (other than equity or equity derivative related payments) shall be reduced (if necessary, to zero); and (iv) fourth, all equity or equity derivative payments shall be reduced (with the latest occurring payment reduced first).

6.      Successors . This Agreement is personal to the Executive and, without the prior express written consent of the Company, shall not be assignable by the Executive. This Agreement shall inure to the benefit of and be enforceable by the Executive’s heirs, beneficiaries and/or legal representatives. This Agreement shall inure to the benefit of and be binding upon the Company and its respective successors, purchasers and assigns.

7.     Restrictive Covenants . As an inducement and as essential consideration for the Executive’s employment with the Company, the Executive hereby agrees to the restrictive covenants contained in this Section 7. The Parties agree that such restrictive covenants are essential to preserve the Company’s business and that the Company would not have entered into the Agreement without the Executive’s consent to the restrictive covenants set forth in this Section 7.

7.1.     Non-Competition. During the period commencing on the Effective Date and ending on the first anniversary of the Termination Date (the “ Restricted Period ”), the Executive shall not, either directly or indirectly, as a proprietor, partner, stockholder (except as the holder of not more than 1% of the outstanding stock of a publicly held company), director, executive, employee, consultant, joint venturer, investor or in any other capacity, engage in, or own, manage, operate or control, or participate in the ownership, management, operation or control of, any entity within the United States that engages (a) in the development, manufacture, marketing, distribution or sale of, or research directed to the development, manufacture, marketing, distribution or sale of cellular biologic products or (b) in any other business activity carried on or planned to be carried on by the Company or any of its Affiliates during the Executive’s Term of Employment. Notwithstanding the forgoing, if the Company is merged with or into a third party which is engaged in multiple lines of business, or if a party to multiple lines of business succeeds to the Company’s assets or business then for purposes of this Section 7.1, the term “Company” shall mean and refer to the products and services being developed, manufactured, marketed, licensed, sold or provided by the Company immediately prior to such event and as it subsequently develops and not to the third party’s other products and services.

7.2.     Non-Solicitation. During the Restricted Period, the Executive shall not (except on the Company’s behalf), directly or indirectly, on his own behalf or on behalf of any other person, firm, partnership, corporation or other entity, request any past, present or prospective customer of the Company or any of its Subsidiaries (each, a “ Customer ”) to curtail or cancel their business with the Company or any of its Affiliates. After the Termination Date, a past or prospective Customer shall be limited to such Customer measured within the one (1) year period prior to the Termination Date. During the Restricted Period, the Executive shall not (except on the Company’s behalf), directly or indirectly, on his own behalf or on behalf of any other person, firm, partnership, corporation or other entity, contact, solicit, employ, interfere with, attempt to entice away from the Company or any of its Subsidiaries, any individual who is employed by the Company or any of its Subsidiaries at the time of such solicitation, employment, interference, or enticement. During the Restricted Period, the Executive shall not (except on the Company’s behalf), directly or indirectly, on his own behalf or on behalf of any other person, firm, partnership, corporation or other entity, request any Business Associate (as defined below) to curtail or cancel their business with the Company or any of its Affiliates. “ Business Associate ” means any Person which has had at any time during the Term of Employment a business relationship with the Company or any Affiliate, including without limitation, a sales representative, supplier, lender, borrower, guarantor, landlord, tenant, lessor, lessee, but excluding employees and Customers.

7.3.     Confidentiality . The Executive shall not, during the Term of Employment and at any time thereafter, without the prior express written consent of the Company, directly or indirectly divulge, disclose or make available or accessible any Confidential Information (as defined below) to any person, firm, partnership, corporation, trust or any other entity or third party (other than when required to do so in good faith to perform the Executive’s duties and responsibilities or when required to do so by a lawful order of a court of competent jurisdiction, any governmental authority or agency, or any recognized subpoena power). In addition, the Executive shall not create any derivative work or other product based on or

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resulting from any Confidential Information (except in the good faith performance of his duties under this Agreement). The Executive shall also proffer to the Board’s designee, no later than the effective date of any termination of his employment with the Company for any reason, and without retaining any copies, notes or excerpts thereof, all memoranda, computer disks or other media, computer programs, diaries, notes, records, data, customer or client lists, marketing plans and strategies, and any other documents consisting of or containing Confidential Information that are in the Executive’s actual or constructive possession or which are subject to his control at such time. For purposes of this Agreement, “ Confidential Information ” shall mean all information respecting the business and activities of the Company, or any Affiliate, including, without limitation, the terms and provisions of this Agreement, the clients, customers, suppliers, employees, consultants, computer or other files, projects, products, computer disks or other media, computer hardware or computer software programs, marketing plans, financial information, methodologies, know-how, processes, practices, approaches, projections, forecasts, formats, systems, data gathering methods and/or strategies of the Company or any Affiliate. Notwithstanding the immediately preceding sentence, Confidential Information shall not include any information that is, or becomes, generally available to the public (unless such availability occurs as a result of the Executive’s breach of any portion of this Section 7.3).

7.4.     Ownership of Inventions . Each Invention (as defined below) made, conceived or first actually reduced to practice by the Executive, whether alone or jointly with others, during the Term of Employment and each Invention made, conceived or first actually reduced to practice by the Executive, which relates in any way to work performed for the Company or its Subsidiaries during the Term of Employment, shall be promptly disclosed in writing to the Board. Such report shall be sufficiently complete in technical detail and appropriately illustrated by sketch or diagram to convey to one skilled in the art of which the invention pertains, a clear understanding of the nature, purpose, operations, and, to the extent known, the physical, chemical, biological or other characteristics of the Invention. As used in this Agreement, “ Invention ” means any invention, discovery, improvement or innovation with regard to any facet of the business of the Company or its Affiliates, whether or not patentable, made, conceived, or first actually reduced to practice by the Executive, alone or jointly with others, in the course of, in connection with, or as a result of service as an employee of the Company or any of its Subsidiaries, including any art, method, process, machine, manufacture, design or composition of matter, or any improvement thereof. Each Invention shall be the sole and exclusive property of the Company. The Executive agrees to execute an assignment to the Company or its nominee of the Executive’s entire right, title and interest in and to any Invention, without compensation beyond that provided in this Agreement. The Executive further agrees, upon the request of the Company and at its expense, that the Executive will execute any other instrument and document necessary or desirable in applying for and obtaining patents in the United States and in any foreign country with respect to any Invention. The Executive further agrees, whether or not the Executive is then an employee of the Company, to cooperate to the extent and in the manner reasonably requested by the Company in the prosecution or defense of any claim involving a patent covering any Invention or any litigation or other claim or proceeding involving any Invention covered by this Agreement, but all expenses thereof shall be paid by the Company and, in the event the Executive is not then an employee of the Company, reasonable compensation for his time in connection therewith.

7.5.     Works for Hire . The Executive also acknowledges and agrees that all works of authorship, in any format or medium, created wholly or in part by the Executive, whether alone or jointly with others, in the course of performing the Executive’s duties for the Company or any of its Affiliates, or while using the facilities or money of the Company or any of its Affiliates, whether or not during the Executive’s work hours, are works made for hire (“ Works ”), as defined under United States copyright law, and that the Works (and all copyrights arising in the Works) are owned exclusively by the Company. To the extent any such Works are not deemed to be works made for hire, the Executive agrees, without compensation beyond that provided in this Agreement, to execute an assignment to the Company or its nominee of all right, title and interest in and to such Work, including all rights of copyright arising in or related to the Works.

7.6.     Injunctive Relief . The Executive acknowledges and agrees that the Company will have no adequate remedy at law and would be irreparably harmed, if the Executive actually breaches or threatens to breach any of the provisions of this Section 7. The Executive agrees that the Company shall be entitled to equitable and/or injunctive relief to prevent any actual breach or threatened breach of this Section 7, and to specific performance of each of the terms of such Section in addition to any other legal or equitable remedies that the Company may have. The Executive further agrees that he shall not, in any equity proceeding relating to the enforcement of the terms of this Section 7, raise the defense that the Company has an adequate remedy at law.

7.7.     Special Severability. The terms and provisions of this Section 7 are intended to be separate and divisible provisions and if, for any reason, any one or more of them is held to be invalid or unenforceable, neither the validity nor the enforceability of any other provision of this Agreement shall thereby be affected. It is the intention of the parties to this Agreement that the potential restrictions on the Executive’s future employment imposed by this Section 7 be reasonable in both duration and geographic scope and in all other respects. If for any reason any court of competent jurisdiction shall find any

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provisions of this Section 7 unreasonable in duration or geographic scope or otherwise, the restrictions and prohibitions contained herein shall be effective to the fullest extent allowed under applicable law in such jurisdiction.

8.     Indemnification . The Company will indemnify the Executive and hold the Executive harmless to the fullest extent permitted by law with respect to the Executive’s acts of service as an officer of the Company or any of its Affiliates to the extent such acts are covered under the Company’s “directors and officers” insurance policies. The Company further agrees that the Executive will be covered by the Company’s “directors and officers” insurance policies with respect to the Executive’s acts as an officer.

9.     Miscellaneous .

9.1.     Applicable Law . This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Pennsylvania, applied without reference to principles of conflict of laws. Both the Executive and the Company agree to appear before and submit exclusively to the jurisdiction of the federal courts located within the Commonwealth of Pennsylvania.

9.2.     Amendments . This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

9.3.     Notices . All notices and other communications hereunder shall be in writing and shall be given by hand-delivery to the other party by reputable overnight courier, by facsimile or registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

To the Company:            Fibrocell Science, Inc.
405 Eagleview Boulevard
Exton, PA 19341
Attention: Human Resources
 

To the Executive:             at his residence address most recently filed with the Company;

or to such other address as any party shall have furnished to the other in writing in accordance herewith. All such notices shall be deemed to have been duly given: (i) when delivered personally to the recipient, (ii) one (1) business day after being sent to the recipient by reputable overnight courier service (charges prepaid); (iii) upon transmission by facsimile if a customary confirmation of transmission is received during normal business hours and, if not, the next business day after transmission; or (iv) four (4) business days after being mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid.
9.4.     Withholding . The Company may withhold from any amounts payable under this Agreement such federal, state or local income taxes it determines may be appropriate.

9.5.     Representation . The Executive represents and warrants to the Company that he is not subject to any employment agreement, non-competition provision, confidentiality agreement or any other agreement restricting his ability fully to act hereunder. The Executive hereby indemnifies and holds the Company harmless against any losses, claims, expenses (including attorneys’ fees), damages or liabilities incurred by the Company as a result of a breach of the foregoing representation and warranty.

9.6.     Section 409A Compliance . The following rules shall apply, to the extent necessary, with respect to distribution of the payments and benefits, if any, to be provided to the Executive under this Agreement. Subject to the provisions in this Section, the severance payments pursuant to this Agreement shall begin only upon the date of the Executive’s “separation from service” (determined as set forth below) which occurs on or after the date of the Executive’s termination of employment.

9.6.1    This Agreement is intended to comply with Code Section 409A (to the extent applicable) and the parties hereto agree to interpret, apply and administer this Agreement in the least restrictive manner necessary to comply therewith and without resulting in any increase in the amounts owed hereunder by the Company.


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9.6.2    It is intended that each installment of the severance payments and benefits provided under this Agreement shall be treated as a separate “payment” for purposes of Section 409A of the Internal Revenue Code of 1986, as amended, and the guidance issued thereunder (“ Section 409A ”). Neither the Executive nor the Company shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A.

9.6.3    If, as of the date of the Executive’s “separation from service” from the Company, the Executive is not a “specified employee” (within the meaning of Section 409A), then each installment of the severance payments and benefits shall be made on the dates and terms set forth in this Agreement.

9.6.4    If, as of the date of the Executive’s “separation from service” from the Company, the Executive is a “specified employee” (within the meaning of Section 409A), then:

9.6.4.1.    Each installment of the severance payments and benefits due under this Agreement that, in accordance with the dates and terms set forth herein, will in all circumstances, regardless of when the separation from service occurs, be paid within the short-term deferral period (as defined in Section 409A) shall be treated as a short-term deferral within the meaning of Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent permissible under Section 409A; and

9.6.4.2.    Each installment of the severance payments and benefits due under this Agreement that is not described in Section 9.6.4.1 above and that would, absent this subsection, be paid within the six-month period following the Executive’s “separation from service” from the Company shall not be paid until the date that is six months and one day after such separation from service (or, if earlier, the Executive’s death), with any such installments that are required to be delayed being accumulated during the six-month period and paid in a lump sum on the date that is six months and one day following the Executive’s separation from service and any subsequent installments, if any, being paid in accordance with the dates and terms set forth herein; provided , however , that the preceding provisions of this sentence shall not apply to any installment of severance payments and benefits if and to the maximum extent that such installment is deemed to be paid under a separation pay plan that does not provide for a deferral of compensation by reason of the application of Treasury Regulation 1.409A-1(b)(9)(iii) (relating to separation pay upon an involuntary separation from service). Any installments that qualify for the exception under Treasury Regulation Section 1.409A-1(b)(9)(iii) must be paid no later than the last day of the second taxable year following the taxable year in which the separation from service occurs.

9.6.5.    The determination of whether and when the Executive’s separation from service from the Company has occurred shall be made in a manner consistent with, and based on the presumptions set forth in, Treasury Regulation Section 1.409A-1(h). Solely for purposes of this Section, “ Company ” shall include all persons with whom the Company would be considered a single employer as determined under Treasury Regulation Section 1.409A-1(h)(3).

9.6.6.    All reimbursements and in-kind benefits provided under this Agreement shall be made or provided in accordance with the requirements of Section 409A to the extent that such reimbursements or in-kind benefits are subject to Section 409A, including, where applicable, the requirements that (i) any reimbursement is for expenses incurred during the Executive’s lifetime (or during a shorter period of time specified in this Agreement), (ii) the amount of expenses eligible for reimbursement during a calendar year may not affect the expenses eligible for reimbursement in any other calendar year, (iii) the reimbursement of an eligible expense will be made on or before the last day of the calendar year following the year in which the expense is incurred and (iv) the right to reimbursement is not subject to set off or liquidation or exchange for any other benefit.

9.6.7.     Notwithstanding anything herein to the contrary, the Company shall have no liability to the Executive or to any other person if the payments and benefits provided in this Agreement that are intended to be exempt from or compliant with Section 409A are not so exempt or compliant.

9.7.      Waiver of Jury Trial . THE PARTIES HERETO HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF, RELATED TO, OR CONNECTED WITH THIS AGREEMENT.

9.8.     Severability . The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.


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9.9.     Captions . The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.

9.10.     Counterparts . This Agreement may be executed in one or more counterparts each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same Agreement.

9.11.     Entire Agreement . This Agreement contains the entire agreement between the parties, including their respective affiliates, concerning the subject matter hereof and supersedes all prior agreements, understandings, discussions, negotiations and undertakings, whether written or oral, between the parties with respect thereto.

9.12.     Survivorship . The respective rights and obligations of the parties hereunder shall survive any termination of this Agreement hereunder for any reason to the extent necessary to the intended provision of such rights and the intended performance of such obligations.

                 [Remainder of page intentionally omitted]

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IN WITNESS WHEREOF , the Executive has hereunto set the Executive’s hand and the Company has caused this Agreement to be executed in its name on its behalf, all as of the day and year first above written.

FIBROCELL SCIENCE, INC.

By:
/s/ David Pernock
Name:
David Pernock
Its:
Chairman/CEO



INTENDING TO BE LEGALLY BOUND, I hereby set my hand below:
                    
 
/s/ Michael F. Marino
 
Michael F. Marino Esq.
Dated:
June 1, 2015



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Exhibit A
General Release

IN CONSIDERATION of the payments, benefits, terms and conditions contained in the Employment Agreement, dated as of June 1, 2015, (the “ Employment Agreement ”) by and between Michael F. Marino Esq. (the “ Executive ”) and Fibrocell Science, Inc. (the “ Company ”), and for other good and valuable consideration, the receipt of which is hereby acknowledged, the Executive, on behalf of himself and his heirs, executors, administrators, and assigns, hereby releases and discharges the Company and its past present and future subsidiaries, divisions, affiliates and parents, and their respective current and former officers, directors, employees, agents, shareholders, employee benefit plans (and the administrator(s) and fiduciaries of such plans), attorneys, and/or owners, and their respective successors, and assigns, and any other person or entity claimed to be jointly or severally liable with the Company or any of the aforementioned persons or entities (the “ Released Parties ”) from any and all manner of actions and causes of action, suits, debts, dues, accounts, bonds, covenants, contracts, agreements, judgments, charges, claims, attorney’s fees, costs, expenses, and demands whatsoever (“ Claims ”) which the Executive and his heirs, executors, administrators, and assigns have, had, or may hereafter have against the Released Parties or any of them arising out of or by reason of any cause, matter, or thing whatsoever from the beginning of the world to the date hereof (the “ General Release ”). The Claims covered by this General Release include, but are not limited to, all Claims relating to or arising out of the Executive’s employment by the Company and the cessation thereof. The Claims covered by this General Release also include, but are not limited to any and all Claims arising under any employment-related federal, state, or local statute, rule, or regulation, any federal, state or local anti-discrimination law, or any principle of contract law or common law, including but not limited to, the Family and Medical Leave Act of 1993, as amended , 29 U.S.C. §§ 2601 et seq ., Title VII of the Civil Rights Act of 1964, as amended , 42 U.S.C. §§ 2000 et seq ., the Age Discrimination in Employment Act of 1967, as amended , 29 U.S.C. §§ 621 et seq . (the “ ADEA ”), the Older Workers Benefit Protection Act, the Americans with Disabilities Act of 1990, as amended , 42 U.S.C. §§ 12101 et seq ., 42 U.S.C. § 1981, the Worker Adjustment and Retraining Notification Act of 1988, as amended , 29 U.S.C. §§2101 et seq ., the Employee Retirement Income Security Act of 1974, as amended , 29 U.S.C. §§ 1001 et seq ., [INSERT OTHER APPLICABLE FEDERAL AND STATE LAWS] , and any other equivalent or similar federal, state, or local statute; provided, however, that the Executive does not release or discharge the Released Parties from any of the Company’s obligations to him under or pursuant to (a) the Employment Agreement or (b) any tax qualified pension plan of the Company. It is understood that nothing in this General Release is to be construed as an admission on behalf of the Released Parties of any wrongdoing with respect to the Executive, any such wrongdoing being expressly denied.
The Executive represents and warrants that he fully understands the terms of this General Release, that he has been and hereby is encouraged to seek, and has sought, the benefit of advice of legal counsel, and that he knowingly and voluntarily, of his own free will, without any duress, being fully informed, and after due deliberation, accepts its terms and signs below as his own free act. Except as otherwise provided herein, the Executive understands that as a result of executing this General Release, he will not have the right to assert that the Company or any other of the Released Parties unlawfully terminated his employment or violated any of his rights in connection with his employment or otherwise.
The Executive further represents and warrants that he has not filed, and will not file or initiate, or cause to be filed or initiated on his behalf, any lawsuit against any of the Released Parties before any federal, state, or local agency, court, or other body asserting any Claims barred or released in this General Release, and will not voluntarily participate in such a proceeding. If the Executive breaches this promise, and the action is found to be barred in whole or in part by this General Release, the Executive agrees to pay the attorneys’ fees and costs, or the proportions thereof, incurred by the applicable Released Party in defending against those Claims that are found to be barred by this General Release. Notwithstanding the foregoing, nothing in this General Release shall preclude or prevent the Executive from filing a lawsuit which challenges the validity of this General Release solely with respect to the Executive’s waiver of any Claims arising under the ADEA. However, the Executive acknowledges that this General Release applies to all Claims he has under the ADEA and that, unless the release is held to be invalid, all of his claims under the ADEA shall be extinguished. Nothing in this General Release shall preclude or prevent Executive from filing a charge with the United States Equal Employment Opportunity Commission or a similar state or local agency, but the Executive acknowledges and agrees that Executive shall not accept any relief obtained on his behalf in any proceeding by any government agency, private party, class, or otherwise with respect to any Claims covered by this General Release.

The Executive may take twenty-one (21) days [Note: this period will need to be expanded to 45 days in the event that Executive is terminated as part of a group termination program under the Older Workers Benefit Protection Act. If the Executive is under 40 years of age, this period may be shortened and no revocation period need be given.] to consider whether to execute this General Release. Upon the Executive’s execution of this General Release, the Executive will have seven (7) days after such execution during which he may revoke such execution. In order for a revocation

10


of this General Release to be effective, written notice of such revocation must be received by the Company within the aforementioned seven (7) day period. If seven (7) days pass without receipt of such notice of revocation, this General Release shall become binding and effective.

INTENDING TO BE LEGALLY BOUND, I hereby set my hand below:

______________________    
Signature
______________________
Michael F. Marino Esq.
Dated:_________________



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Exhibit 31.1
 
OFFICER’S CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, David Pernock, certify that:
1.  I have reviewed this Quarterly Report on Form 10-Q of Fibrocell Science, Inc.;
2.  Based on my knowledge,  this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made not misleading with respect to the period covered by this report;
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
August 7, 2015
By:
/s/ David Pernock
 
David Pernock
 
Chief Executive Officer





Exhibit 31.2
 
OFFICER’S CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
 
I, Keith A. Goldan, certify that:
1.  I have reviewed this Quarterly Report on Form 10-Q of Fibrocell Science, Inc.;
2.  Based on my knowledge,  this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made not misleading with respect to the period covered by this report;
3.  Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.  The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 
c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date:
August 7, 2015
By:
/s/ Keith A. Goldan
 
Keith A. Goldan
 
SVP and Chief Financial Officer





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, 2015 of Fibrocell Science, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, David Pernock, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
 
• The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C 78m or 78o(d)); and
• The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date:
August 7, 2015
By:
/s/ David Pernock
 
David Pernock
 
Chief Executive Officer
 
A signed original of this written statement required by Section 906 has been provided to Fibrocell Science, Inc. and will be retained by Fibrocell Science, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.





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, 2015 of Fibrocell Science, Inc. (the “Company”) as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Keith A. Goldan, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
 
• The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C 78m or 78o(d)); and
• The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
Date:
August 7, 2015
By:
/s/ Keith A. Goldan
 
Keith A. Goldan
 
SVP and Chief Financial Officer
 
A signed original of this written statement required by Section 906 has been provided to Fibrocell Science, Inc. and will be retained by Fibrocell Science, Inc. and furnished to the Securities and Exchange Commission or its staff upon request.