UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C.  20549
                       ----------------------------------
                                    FORM 10-K

                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2002     COMMISSION FILE NUMBER:  0-19890

                              LIFECELL CORPORATION
             (Exact name of registrant as specified in its charter)

              DELAWARE                                           76-0172936
  (State or other jurisdiction of                             (I.R.S. employer
   Incorporation or organization)                            identification no.)

                               ONE MILLENNIUM WAY
                          BRANCHBURG, NEW JERSEY 08876
          (Address of principal executive offices, including zip code)

                                 (908) 947-1100
              (Registrant's telephone number, including area code)


           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
                                      NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
                     COMMON STOCK, PAR VALUE $.001 PER SHARE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding  12  months  (or  for such shorter period that the registrant was
required  to  file  such  reports),  and  (2)  has  been  subject to such filing
requirements  for  the  past  90  days.
     Yes  X  No
                ---

Indicate  by  check mark if disclosure of delinquent filers pursuant to Item 405
of  Regulation  S-K  is  not contained herein, and will not be contained, to the
best  of  registrant's  knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form  10-K.  [X]

     Indicate  by  check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
     Yes      No X
         ---

The  aggregate  market  value  of  the  voting  stock (Common Stock and Series B
Preferred  Stock,  assuming conversion of such Preferred Stock into Common Stock
at  the current conversion rate) held by non-affiliates of registrant as of June
30,  2002:  $46,013,000.

Number  of shares of registrant's Common Stock outstanding as of March 21, 2003:
21,317,248.  (As  of  March  21,  2003  there  were  73,995  shares  of Series B
Preferred  Stock  outstanding which are convertible into an additional 2,680,986
shares  of  Common  Stock.)

                      DOCUMENTS INCORPORATED BY REFERENCE:
Portions  of registrant's definitive proxy statement to be issued in conjunction
with  registrant's  annual stockholders' meeting to be held on May 30, 2003 have
been  incorporated  by  reference  into  Part  III  hereof.


<PAGE>
<TABLE>
<CAPTION>
                                TABLE OF CONTENTS

                                   DESCRIPTION

Item                                                                                             Page
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<S>       <C>                                                                                    <C>


PART I
  Item 1.   Business                                                                                3
              General                                                                               3
              Technology                                                                            3
              Products and Product Development Activities                                           5
              Marketing and Distribution                                                            9
              Sources of Materials                                                                  9
              Government Regulation                                                                10
              Research and Development                                                             14
              Patents, Proprietary Information & Trademarks                                        14
              Competition                                                                          15
              Employees                                                                            15
              Risk Factors                                                                         15
              Special Note Regarding Forward-Looking Statements                                    23
  Item 2.   Properties                                                                             23
  Item 3.   Legal Proceedings                                                                      23
  Item 4    Submission of Matters to a Vote of Security Holders                                    24

PART II
  Item 5.   Market for the Registrant's Common Equity and Related Stockholder Matters              24
              Dividend Policy                                                                      24
  Item 6.   Selected Financial Data                                                                25
  Item 7.   Management's Discussion and Analysis of Financial Condition and Results of Operations  26
              General and Background                                                               26
              Critical Accounting Policies                                                         26
              Results of Operations                                                                27
              Liquidity and Capital Resources                                                      29
  Item 7A   Quantitative and Qualitative Disclosure About Market Risk                              31
  Item 8.   Financial Statements and Supplementary Data                                            31
  Item 9.   Changes and Disagreements with Accountants on Accounting and Financial Disclosure      31

PART III
  Item 10.  Directors and Executive Officers of the Registrant                                     32
  Item 11.  Executive Compensation                                                                 32
  Item 12   Security Ownership of Certain Beneficial Owners and Management and                     32
              Related Stockholder Matters
  Item 13.  Certain Relationships and Related Transactions                                         32
  Item 14.  Controls and Procedures                                                                32

PART IV
  Item 15.  Exhibits, Financial Statement Schedules, and Reports on Form 8-K                       33
</TABLE>


                                        2
<PAGE>
PART I

     This  Annual  Report  on  Form  10-K  contains,  in  addition to historical
information,  "forward-looking statements" (within the meaning of Section 27A of
the  Securities  Act  of  1933,  as  amended,  and Section 21E of the Securities
Exchange  Act  of  1934,  as  amended) that involve risks and uncertainties. See
"Business-Special  Note  Regarding  Forward-Looking  Statements."

  ITEM 1. BUSINESS- LIFECELL CORPORATION

GENERAL

     We develop and market biological products for the repair and replacement of
damaged  or inadequate human tissue in numerous different clinical applications.
Our  proprietary  tissue matrix technology removes all cells from the tissue and
preserves  the  tissue without damaging the essential biochemical and structural
components  necessary  for normal tissue regeneration.  We currently market four
proprietary human tissue based products: AlloDerm(R) for plastic reconstructive,
general  surgical,  burn  and  periodontal  procedures;  Cymetra(R) a version of
AlloDerm(R)  in  particulate  form  for  non-surgical  correction of soft tissue
defects;  Repliform(R)  for  urologic  and  gynecologic  procedures;  and  Graft
Jacket(TM),  an  acellular  periosteum  replacement  graft.  We  also distribute
cryopreserved  allograft  skin  for  use  as  a  temporary wound dressing in the
treatment  of  burns  and  we  are  the  exclusive  marketing  agent  for  the
SmartPReP(TM)  Platelet  Concentration  System in the United States to ENT (ear,
nose and throat), plastic reconstructive and general surgeons in hospitals.  Our
development  programs  include  the  potential  application of our tissue matrix
technology  to  vascular,  nerve  and orthopedic tissues; investigation of human
tissues as carriers for therapeutics; ThromboSol(TM), a formulation for extended
storage  of platelets and technologies to enhance the storage of red blood cells
for  transfusion.

     We were incorporated in the State of Delaware in 1992 as the successor to a
Delaware  corporation  that  was  incorporated  in  1986.  Our  address  is  One
Millennium  Way,  Branchburg,  New  Jersey  08876,  our  phone  number  is (908)
947-1100,  and  our  website  address  is  www.lifecell.com.

TECHNOLOGY

     To  date  our  product  development  programs  have been generated from the
following  proprietary  technologies:

     -    methods for producing an acellular tissue matrix by removing antigenic
          cellular  elements  while  stabilizing  the  matrix  against  damage;

     -    methods  for  cell  preservation  by manipulating cells through signal
          transduction  (i.e.,  manipulation  of cellular metabolism) to protect
          cells  during  prolonged  storage;  and

     -    methods  for  freeze-drying  biological  cells and tissues without the
          damaging  effects  of  ice  crystals.

     TISSUE MATRIX TECHNOLOGY

     Our tissue matrix technology removes antigenic cells from the tissue matrix
to  eliminate  the  potential for specific rejection of the transplanted tissue.
Our  tissue  matrix  technology  also:

     -    stabilizes  the  tissue matrix by preserving its natural structure and
          biochemical  properties  that  promote  cell  repopulation;  and

     -    allows for extended storage by freeze-drying the tissue matrix without
          significant  ice  crystal  damage  thus avoiding a non-specific immune
          response  upon  transplantation.

     Soft  tissue,  such  as  dermis,  heart  valves,  blood  vessels  and nerve
connective tissue, contains a complex, three-dimensional structure consisting of
multiple  forms  of  collagen,  elastin,  proteoglycans,  other proteins, growth
factors and blood vessels (the "tissue matrix"). Together, the tissue matrix and
the  cells  that  populate it form the soft tissues of the body and other tissue
types.  As  part of the body's natural remodeling process, cells within a tissue
continuously degrade and, in the process, replace the tissue matrix. However, in
the  event  that  a  large  portion  of  the


                                        3
<PAGE>
tissue matrix is destroyed or lost because of trauma or surgery, the body cannot
regenerate  the  damaged portion. The only method of replacing large sections of
the  tissue  matrix  is  through  transplantation.

     Soft  tissue  transplants  from  one  part of the patient's body to another
("autograft")  generally  are  successful, however, the procedure results in the
creation  of  an  additional wound site. Historically, the ability to transplant
tissue  from  one  person  to another ("allograft") has been limited because the
donor's  cells  within  the  transplanted tissue may trigger an immune response,
resulting  in  rejection  of  the  transplanted tissue. We believe that previous
attempts  to remove cells from soft tissue grafts before performing an allograft
transplant  have  resulted in disruption or damage of the tissue matrix, causing
an  inflammatory response and rejection of the tissue following transplantation.

     We  believe  our  tissue  matrix  technology offers the following important
benefits:

          Natural  Tissue  Regeneration.  Tissue grafts produced with our tissue
     matrix  technology  retain  the  structural and biochemical properties that
     stimulate  normal cell repopulation and normal soft tissue regeneration. In
     addition,  in  our  clinical  studies  with  dermis  and preliminary animal
     studies  with  heart  valve  leaflets,  nerve connective tissue grafts, and
     vascular  grafts  processed  using  our  technology we have shown that such
     tissues can be remodeled by the recipient's own cells and eventually become
     the  recipient's  own  tissue.

          Multiple  Potential  Applications.  We  believe that our tissue matrix
     technology  has the potential to generate additional products with multiple
     clinical  applications.  In addition to the current commercial applications
     of  our  proprietary  tissue  products,  we believe that these products may
     provide  additional  benefits  in  other clinical applications. We also are
     evaluating  the  applicability  of  our  technology  to process other human
     tissues  and  are  conducting  pre-clinical  studies  with  vascular  and
     orthopedic  tissues.

          Safety.  Our  tissue  matrix  technology  yields  products  that  can
     revascularize  and  integrate  into the body's own tissues thereby allowing
     the  patient's  immune  cells to penetrate into the transplanted tissue and
     thus  aid in preventing infections. In contrast, certain synthetic implants
     do  not  allow  penetration  of  the  patient's  immune  cells,  thereby
     compromising  the body's natural ability to fight infections. Our processed
     human  tissue  products  have  a proven safety record of over ten years and
     with  over  400,000  tissue  grafts  processed  and  distributed  to  date.

          Prolonged  Shelf  Life.  Our  tissue matrix technology allows extended
     storage  and  ease  of  transportation of products. AlloDerm, Repliform and
     Graft  Jacket  can  be stored at normal refrigerated temperatures for up to
     two years. In contrast, traditionally processed skin allografts require low
     temperature  (-80  C)  storage  and  shipping  with dry ice. Cymetra can be
     stored  at  normal  refrigerated  temperatures  for  up  to  one  year.

          Compatibility  with  Other  Technologies. Human tissues processed with
     our  technology  retain  important  biochemical  components,  such  as
     proteoglycans  including hyaluronic acid. These biochemical components bind
     growth  factors  and  interact  with  cells  that  are  involved  in tissue
     regeneration.  Therefore,  we  believe  it  may  be  possible  to  use  our
     technology  to develop tissue-based delivery vehicles for these factors and
     cells.

     CELL PRESERVATION TECHNOLOGY

     Blood  cells  circulating  within  the body are exposed to multiple factors
that  maintain  their stability and/or prevent spontaneous clotting.  When blood
cells  are  removed  from the body for storage, these stabilizing influences are
absent  and  result  in  the  destabilization  and/or  irreversible  spontaneous
clotting  of the cells.  These damaging events currently limit the shelf life of
transfusable  red blood cells to 42 days under refrigeration and blood platelets
to  five  days  at  room  temperature.

     Through  our  research  efforts,  we  have  developed  cell  preservation
technology  that  mimics  the  stabilizing  influences  present  in the body. We
accomplish  this  through  manipulation  of  signal transduction mechanisms that
control  cellular  metabolism and function, combined with either low temperature
storage  or  our patented freeze-drying technology. If successfully implemented,
our  cell  preservation  technology  could  result  in multiple products for the
preservation  of  directly  transfusable  blood  cells with extended shelf life,
which  could  be  stored  in  a  manner  consistent  with  current blood banking
practices.


                                        4
<PAGE>
PRODUCTS AND PRODUCT DEVELOPMENT ACTIVITIES

     ACELLULAR TISSUE PRODUCTS

     ALLODERM

     AlloDerm  is donated cadaveric skin that has been processed with our tissue
matrix technology.  We believe that AlloDerm is the only human tissue product on
the  market  today  that  supports the regeneration of normal human soft tissue.
Following  transplant, AlloDerm becomes repopulated with the patient's own cells
and  is revascularized (i.e., blood supply is restored), becoming engrafted into
the  patient.  AlloDerm  is  a  versatile  tissue  and  has  multiple  surgical
applications.

     AlloDerm  is  marketed to plastic reconstructive and general surgeons as an
"off-the-shelf"  alternative  to  autograft.  AlloDerm  is predominately used in
plastic reconstructive, general surgical, burn and periodontal procedures:

     -    as  an  implant  for  soft  tissue  reconstruction  or  tissue deficit
          correction;

     -    as an interpositional graft for tissue coverage or closure; and

     -    as a sling to support tissue following nerve or muscle damage.

     In  these  procedures,  alternatives  to  using AlloDerm include autologous
tissue,  synthetic  and biosynthetic materials.  We believe the disadvantages of
using  autologous tissue are the creation of a separate donor site wound and the
associated  pain,  morbidity  and  scarring  from  this  additional  wound.
Additionally,  we believe the disadvantages of using synthetic materials are the
susceptibility  of  synthetics  to infection, encapsulation (scaring), the graft
moving  away  from  the  transplanted  area (mobility), and erosion of the graft
through  the  skin  (extrusion).  Some biosynthetic materials may include bovine
collagen,  which  requires  patient  sensitivity  testing.

     AlloDerm  has  been  used  in  the  treatment  of  third  degree  and  deep
second-degree  burns  requiring  skin  grafting  since  1994. Skin is the body's
largest  organ  and  is  the  first  line of defense against invasion of foreign
substances.  It  contains  two  functional  layers, the upper surface consisting
primarily  of  cells (epidermis) and an underlying foundational layer consisting
primarily  of extracellular matrix proteins and collagen (dermis). The epidermis
functions  as a water barrier and maintains hydration. The dermis provides other
important skin properties including tensile strength, durability and elasticity.
Dermis,  like  many  other  tissues  of  the  body,  is  not  capable of de novo
regeneration.  The  most  conservative  and  common  surgical treatment of third
degree  and  deep  second-degree  burns use split-thickness skin autografts (the
epidermal  layer  and a portion of the dermis) taken from uninjured areas of the
patient's  body.  The  surgical  procedure when using AlloDerm in treating these
patients  is to place AlloDerm where the patient is missing dermis and cover the
AlloDerm  with an ultra-thin split-thickness skin autograft (the epidermal layer
and  a  much  thinner  portion  of  the  dermis).  This  procedure  has produced
comparable  results  to normal thickness autografts while significantly reducing
donor  site  trauma.

     The  use  of  AlloDerm  in  burn  grafting has clinically shown performance
equivalent  to  autograft  in  reducing  the  occurrence  and  effects  of  scar
contracture.  Scar  contracture  is a progressive tightening of scar tissue that
can  cause  joint  immobility.  Severe  scar  contracture  can limit the use and
function  of all mobile joints, such as in the arms, legs, feet, hands and neck.
Burn  patients  commonly  need  repetitive  reconstructive  surgeries  for  scar
contracture.  We  believe  that  AlloDerm provides significant therapeutic value
when  used  in  burn  grafting  over  a  patient's  mobile  joints.

     AlloDerm  is  also  used  in  general  surgical procedures. For example, in
abdominal  procedures,  AlloDerm is used to replace tissue during hernia repair,
replacement  of  infected  synthetic  mesh  and  repair of the abdominal wall in
trauma  cases.

     Periodontal  surgeons  use  AlloDerm to increase the amount of attached gum
tissue supporting the teeth. Until the development of AlloDerm, these procedures
were  predominately  performed  with autologous connective tissue grafts excised
from  the  roof  of  the  patient's  mouth  and  then  transplanted  to the gum.
BioHorizons  Implant  Systems, Inc. is our exclusive distributor of AlloDerm and
AlloDerm(R)GBR(TM)  for use in periodontal applications in the United States and
certain  international  markets.


                                        5
<PAGE>
     Multiple  independent  prospective  clinical  trials have demonstrated that
AlloDerm  is  equivalent  to  autologous  tissue  grafts for root coverage. This
procedure  involves placing AlloDerm underneath gum tissue, which is then lifted
up  to  cover  the  exposed  root.  AlloDerm allows for the coverage of multiple
exposed  roots  in a single surgery without being limited by the availability of
autologous  palatal  tissue.

     In  periodontal  surgery, alternatives to using AlloDerm include autologous
tissue  as  well  as synthetic material. We believe that AlloDerm has advantages
over  autologous  tissue  because of the reduced trauma to the patient, and over
certain  non-resorbable  synthetic  materials  because  it  integrates  into the
patient's tissue and does not require a separate procedure for removal.


     REPLIFORM TISSUE REGENERATION MATRIX

     Repliform  is  the  trade  name  for  our proprietary tissue matrix product
intended  for  use  in  repairing  damaged  or inadequate integumental tissue in
urologic  and  gynecologic  surgical procedures.  Since 1997, surgeons have used
Repliform  in  urology  and  gynecology  procedures  as  a  bladder sling in the
treatment  of  urinary  incontinence and for the repair of pelvic floor defects.
Boston  Scientific  Corporation  is  our exclusive worldwide sales and marketing
representative for Repliform for use in urology and gynecology.

     Fewer  than  half  of the individuals affected by urinary incontinence seek
treatment  due to the combined factors of embarrassment and a lack of acceptable
therapeutic  options for some types of incontinence. Some forms of female stress
urinary  incontinence  can  be  treated  with  a sling procedure, which involves
lifting  and  supporting  the  bladder  neck  to  provide  urethral  support and
compression.

     Cystocele,  rectocele  and  other  pelvic  floor  conditions  also  occur
frequently  in  women  and require soft tissue surgical repair. These conditions
are  particularly  common  after  multiple  vaginal births and cause significant
discomfort  to  the  patient.  It is common that these conditions exist together
with  urinary  incontinence.  Therefore,  it is becoming the current standard of
care  to  correct  pelvic  floor  conditions  at  the  same  time  as a sling or
suspension  procedure  to ensure that there are no conditions that can adversely
affect  patient  outcome.

     Currently,  materials  used  for  slings  and pelvic floor repair surgeries
include  autologous  tissue,  synthetic  materials  and  cadaveric  fascia.  The
autologous  tissue  often is taken from the patient's thigh or abdomen resulting
in  a  painful donor site. The greatest drawback of using synthetic materials is
the  occurrence  of erosion through the urethra or vaginal wall causing pain and
infection,  necessitating  repeat  surgery.  We believe that Repliform used as a
sling  for  urinary  incontinence  or  pelvic  floor  repair provides a safe and
effective alternative that eliminates the need for a donor site, will repopulate
as  the patient's own tissue and will not erode through the soft pelvic tissues.


     GRAFT JACKET PERIOSTEUM REPLACEMENT SCAFFOLD

      Graft Jacket is the trade name for our proprietary tissue product intended
for  use  in  repairing  damaged or inadequate integumental tissue in orthopedic
surgical  procedures.  We introduced Graft Jacket in 2002 through Wright Medical
Technology,  Inc.,  a developer, manufacturer and marketer of medical devices in
the  orthopedic  field.


     CYMETRA MICRONIZED ALLODERM(R) TISSUE

     Cymetra  Micronized  AlloDerm  Tissue is made from AlloDerm sheets that are
micronized  at  a  low  temperature  to  create  a  particulate form of AlloDerm
suitable  for  injection.  This  form  allows  a  non-surgical  alternative  in
reconstructive  plastic  and  other  procedures to replace damaged or inadequate
integumental  tissue,  such  as  correction of soft tissue defects and depressed
scars  or to replace integumental tissue lost through atrophy.  Cymetra does not
require  patient  sensitivity  testing  and  similar  to  AlloDerm  promotes the
regeneration  of  normal  human  soft  tissue.


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<PAGE>
     SMARTPREP PLATELET CONCENTRATION SYSTEM

     We  are  the  exclusive  marketing  agent  for  the  SmartPReP(TM) Platelet
Concentration  System  in  the  United States to ENT, plastic reconstructive and
general  surgeons in hospitals. The SmartPReP System is used for the preparation
and  application  of  a  biomaterial  comprised  of  concentrations  of  plasma,
platelets and white blood cells from a small volume of a patient's own blood, at
the  point-of-care,  which  can  be  applied  to  a  wound  or  surgical  site.


     FDA  STATUS  OF  OUR  PRODUCTS

     The  United  States  Food and Drug Administration ("FDA") generally permits
tissue  products  classified  as  human  tissue  for  transplantation  to  be
commercially distributed without obtaining prior FDA approval. In 1996, AlloDerm
was  reviewed  by  the  FDA and found to meet the definition of human tissue for
transplantation  when  intended  for  the  replacement  or  repair of damaged or
inadequate  integumental  tissue,  including  gingival  dermis. Repliform is the
trade  name  given  to  AlloDerm  when  it  is  labeled  for the intended use of
repairing  damaged or inadequate integumental tissue in urologic and gynecologic
procedures.  Cymetra  is  Alloderm that has been micronized at a low temperature
into  injectable  powder  form.  This  form  of  AlloDerm  permits  delivery  to
subcutaneous  locations  by injection rather than open surgery to repair damaged
or  inadequate  integumental  tissue. The micronized particles are biochemically
identical  to  AlloDerm.

     In  November  2000,  the FDA wrote to us and requested detailed information
about  Repliform  and  Cymetra,  including  copies  of  existing  labeling  and
advertising,  a  description  of  product  composition and processing, and other
information  supporting  our  belief  that  each  of  these  products  meet  the
definition  of human tissue for transplantation. In February 2001, we provided a
detailed submission responding to the FDA's request. In June 2001, we received a
letter  from  the  FDA  indicating  that  Repliform  and  Cymetra,  as currently
marketed,  meet  the  definition  of  human  tissue  for  transplantation.

     In 2002, we commenced commercial distribution of Graft Jacket. Graft Jacket
is  the  trade name given to AlloDerm when it is labeled for the intended use of
repairing  damaged  or  inadequate  integumental  tissue  in orthopedic surgery.
Relying  on  the FDA's findings with respect to AlloDerm, Repliform and Cymetra,
we  believe  that  Graft  Jacket  meets  the  definition  of  human  tissue  for
transplantation  and therefore we did not seek approval from FDA to market Graft
Jacket. In March 2003, the FDA contacted us and requested information supporting
our  belief  that  Graft  Jacket  meets  the  definition  of  human  tissue  for
transplantation.  We  are  currently  preparing a response to the FDA's request.
There  can  be  no  assurance  that the FDA will agree with us that Graft Jacket
meets  the  definition  of human tissue for transplantation. If the FDA does not
agree,  they  may  impose medical device regulation upon Graft Jacket. FDA could
also require us to cease marketing and/ or recall product already sold until FDA
approval  is  obtained  and  could  seek  to  impose  enforcement  sanctions for
marketing  this  product  without  FDA  approval.

     The  SmartPReP(TM) Platelet Concentration System is classified as a medical
device and Harvest Technologies Corporation, the manufacturer of the system, has
obtained  510K  clearance  from  the  FDA.


     PRODUCT DEVELOPMENT ACTIVITIES

     ORTHOPEDIC TISSUE PRODUCTS

     We  are  evaluating  potential orthopedic applications of our tissue matrix
technology.  In  October  2000,  we  received  final approval for a $2.3 million
research  grant  from  the  Department of Defense, through the U.S. Army Medical
Research  Acquisition Activity, to investigate the application of our technology
to the regeneration of orthopedic tissues. We retain all rights to commercialize
products  resulting  from this collaboration. In 2001, we commenced pre-clinical
studies  to investigate the ability of acellular tissue matrices to remodel into
various  orthopedic  tissues. Based on these preliminary results, we commenced a
product  development program for orthopedic applications of AlloDerm and Cymetra
and we intend to conduct additional studies investigating the potential of these
tissue  products  to  remodel  into orthopedic tissues such as tendon, ligament,
cartilage, meniscus and bone. In 2002, we commenced development of a bone repair
product  comprised  of  Micronized AlloDerm Tissue in combination with allograft
bone  particles.  We  are  also  completing  process development of applying our


                                        7
<PAGE>
tissue  matrix  technology  to  allograft  tendons  that  would  be  used in ACL
("anterior  cruciate  ligament")  repair  procedures.


     CARDIOVASCULAR TISSUE PRODUCTS

     We are evaluating human tissue based small-diameter vascular graft products
for potential use in cardiovascular surgery.  In October 2001, we received final
approval  for  a  $2.1  million  research  grant from the Department of Defense,
through  the U.S. Army Medical Research Acquisition Activity, to investigate the
application of our technology to the regeneration of vascular and nerve tissues.
We  retain  all  rights  to  commercialize  products  resulting  from  this
collaboration.  We  have  demonstrated  in  an  animal  study that tissue grafts
processed  by us using our tissue matrix technology had an equivalent patency to
the  animal's  fresh  autologous  vein.  This  study  also  showed  the  graft
repopulated  with  the animal's own cells and hence, remodeled into the animal's
own tissue.  We are conducted additional pre-clinical studies focused on testing
the suitability of a processed acellular umbilical vein as a potential graft for
vascular  access  in  hemodialysis.

     If  successfully  developed,  a  human tissue based vascular graft could be
used  in  coronary  artery bypass procedures or used to restore peripheral blood
circulation  in  patients  with  peripheral vascular disease, such as below-knee
bypass  procedures.  According  to  an  independent  market  research report and
published  articles, annually in the United States replacement vascular conduits
are required for 375,000 coronary artery bypass surgeries and 230,000 peripheral
vascular  reconstructions. There are additional requirements for construction of
arterio-venous  (A-V)  fistulas for vascular access in hemodialysis, patches for
closure  following  carotid  endarterectomy  and  microvascular  conduits  for
microsurgical  repair  techniques.

     Veins  and  arteries  harvested  from  the patient for use as a replacement
graft  continue  to be the mainstay of therapy, yet these vessels are frequently
donor  site limited as a result of the condition of the patient. When available,
autologous  vessel  harvest  leads  to  significant  patient  discomfort  and an
increase in risk for complications. To address these drawbacks, we believe there
is  a  critical need for an "off-the-shelf" small diameter vascular graft, which
is  non-immunogenic,  non-thrombotic  and  has  compliance  characteristics  and
handling  properties  equivalent  to  native  vessels.


     BLOOD CELL PRESERVATION PRODUCTS

     THROMBOSOL  We  are  developing  ThromboSol;  a  patented  biochemical
formulation  designed  to  protect  transfusable  platelets  from  damage during
storage  at low temperatures.  The expected use of the product would be by blood
banks  to  increase  the  safety  and  extend  the  shelf  life  of transfusable
platelets,  thereby  increasing the supply of available platelets, as well as to
store  autologous  platelets  in  advance  for  individuals expecting to undergo
surgery  or  chemotherapy.

     Platelets  are  blood cells that initiate clotting. Untreated platelets are
sensitive to storage at low temperatures and cannot be refrigerated effectively.
Presently,  platelets  are  stored  at  room temperature and, due to the risk of
microbial  contamination,  have a limited shelf life of five days. We have shown
in  laboratory  tests  that the addition of ThromboSol solution preserves the in
vitro  functional  aspects  of  refrigerated  platelets  for up to nine days and
frozen platelets for more than two years. During 1999, we successfully completed
biocompatibility  testing  on  the  ThromboSol solutions. A pilot clinical study
under  a  physician-sponsored  Investigational  New Drug Application ("IND") was
conducted  during 1998 and the study found that ThromboSol treated cryopreserved
platelets  performed  better  than  standard  cryopreserved  platelets. A second
physician-sponsored  IND  was  performed  which  involved  a  "standard of care"
transfusion  of  ThromboSol cryopreserved platelets into oncology patients. This
study was completed in 2001 and demonstrated that Thrombosol preserved platelets
performed  equivalent  to  fresh  platelets.  Any product developed will require
extensive  regulatory  approvals  prior  to  marketing in the United States. Our
development  efforts  to  date have primarily been funded through research grant
funds  from  the  Department  of  Defense.

     RED  BLOOD CELLS We are conducting research to develop procedures to freeze
and freeze-dry red blood cells. Such technology would be used by blood banks for
long-term  storage  of donated units of red blood cells, extending the available
blood  supply,  and  for  storage  of autologous red blood cells for individuals
expecting  to


                                        8
<PAGE>
require  blood  transfusions  as  part  of planned surgery. In February 2002, we
received  final  approval  of  an $824,000 research grant from the Department of
Defense  to investigate the potential to preserve red blood cells through freeze
drying.  We  retain  all  rights  to  commercialize products resulting from this
collaboration.

     Red  blood cells currently may be stored up to 42 days under refrigeration.
Current  procedures  to freeze red blood cells require the use of cryoprotectant
solutions  that  are  toxic  to the recipient and must be removed by washing the
cells  prior  to  transfusion.  This  removal  procedure  is labor-intensive and
requires  the  immediate  transfusion of the thawed and washed blood. We believe
that  the successful development of non-toxic low temperature methods of storage
could  simplify the use of frozen blood and potentially allow widespread storage
of  autologous  blood.

     Any  product  developed  will  require  extensive  regulatory  approvals,
including  approval  of  an  IND  by  the  FDA  to  conduct clinical trials. Our
development  efforts  to  date have primarily been funded through research grant
funds  from  the Department of Defense. Additionally, we may decide to establish
collaborative  out-licensing  arrangements with appropriate partners to fund the
development  and  commercialization  of  certain  of  these  products.


MARKETING AND DISTRIBUTION

     We  currently  market  AlloDerm  in  the  United  States  for  plastic
reconstructive,  burn and general surgical applications through our direct sales
and  marketing  organization.  Boston  Scientific  Corporation  is our exclusive
worldwide  sales  and  marketing  agent  for  Repliform  for  use in urology and
gynecology.  OMP,  Inc. is our exclusive sales and marketing agent for promotion
of  Cymetra  to  office-based  dermatologists and plastic surgeons in the United
States  and  certain  international  markets.  Our  direct  sales  and marketing
representatives  also  market  Cymetra  to hospital based surgeons.  BioHorizons
Implant  Systems,  Inc.,  is  our exclusive distributor in the United States and
select  international  markets  of AlloDerm for use in periodontal applications.
In  April  2002,  we  entered  into  an  exclusive agreement with Wright Medical
Technology,  Inc., granting it distributor rights in the United States for Graft
Jacket.

     As  of  March  1,  2003,  we  had  sales and marketing staff of 43 persons,
including  32  domestic  sales  personnel, and 11 marketing and customer service
personnel.  Our  sales representatives are responsible for interacting with ear,
nose  and  throat surgeons, plastic surgeons, burn surgeons and general surgeons
and  educating  them  regarding  the  use  and anticipated benefits of AlloDerm,
Cymetra  and  the  SmartPreP  System.  We  also participate in numerous national
fellowship  programs, national and international conferences and trade shows and
participate  in,  or  fund  certain  educational  symposia.


SOURCES OF MATERIALS

     We  receive  donated  human  cadaveric  tissue  from tissue banks and organ
procurement  organizations  in  the United States that comply with the FDA human
tissue  regulations.  In  addition,  we require supplying tissue banks and organ
procurement  organizations  to comply with procedural guidelines outlined by the
American  Association  of  Tissue  Banks.  We  conduct microbiological and other
rigorous  quality  assurance  testing before our acellular human tissue products
are  released  for  shipment.

     In  2002,  we  obtained  all  of our donated human cadaveric tissue from 23
tissue  banks  and  organ  procurement organizations. We estimate that there are
approximately 100 tissue banks and organ procurement organizations in the United
States.  We  believe  that we have established adequate sources of donated human
tissue  to  satisfy  the  expected  demand  for  our products in the foreseeable
future.  Although  we  have not experienced any material difficulty in procuring
adequate  donated cadaveric tissue, there is a risk that the future availability
of  donated  human  tissue  will  not  be  sufficient  to  meet  our  demand.

     Procurement  of  certain  human  organs  and  tissue for transplantation is
subject to the restrictions of the National Organ Transplant Act ("NOTA"), which
prohibits  the  acquisition  of certain human organs, including skin and related
tissue  for  valuable  consideration,  but  permits  the  payment  of reasonable
expenses  associated  with  the  procurement,  transportation,  processing,
preservation, quality control and storage of human tissue and skin. We reimburse
tissue  banks  for their expenses incurred associated with the recovery, storage
and transportation of donated human skin that they provide to us for processing.


                                        9
<PAGE>
     We are accredited by the American Association of Tissue Banks ("AATB"). The
AATB  is recognized for the development of industry standards and its program of
inspection and accreditation. The AATB provides a standards-setting function and
has  procedures  for  accreditation  similar  to  the  International  Standards
Organization  ("ISO")  standards.  Our initial accreditation was granted in 1997
following  a  detailed  audit  by the AATB of our operations and procedures. The
accreditation,  which was renewed in 2000, must be renewed every three years and
covers  the  processing,  storage  and  distribution of tissue used in AlloDerm,
Repliform,  Cymetra,  Graft  Jacket  and  cryopreserved  allograft  skin.

GOVERNMENT REGULATION

     Overview

     Government  regulation,  both domestic and foreign, is a significant factor
in  the  processing,  marketing  and  distribution  of  our current products and
products  that  we  are  developing.  In  the  United  States,  our human tissue
products  are  subject  to  regulation  by the FDA.  The FDA applies the Federal
Food,  Drug, and Cosmetics Act (the "FDC Act") and the Public Health Service Act
(the  "PHS  Act").  These  statutes  and  implementing  regulations  govern  the
testing, manufacturing, labeling, storage, record keeping, approval, advertising
and  promotion  of  our  products.

     The  FDA  does  not  apply  a single regulatory scheme to human tissues and
products  derived from human tissue. On a case-by-case basis, the FDA may choose
to  regulate  such products as human tissue for transplantation, medical devices
or  biologics. A fundamental difference in the treatment of products under these
various  classifications  is  that  the  FDA  generally permits human tissue for
transplantation  to  be  commercially distributed without premarket clearance or
approval.  In  contrast,  products  regulated  as  medical  devices or biologics
usually  require  such clearance or approval. The process of obtaining premarket
approval  for  a  medical  device  or  biologic  is often expensive, lengthy and
uncertain.

     Once  on the market, our human tissue products are subject to pervasive and
continuing  regulation  by  the FDA. We are subject to inspection at any time by
the  FDA and state agencies for compliance with regulatory requirements. The FDA
may  impose  a  wide  range  of  enforcement  sanctions  if  we  fail to comply,
including:

     -    fines;

     -    injunctions;

     -    civil  penalties;

     -    recall  or  seizure  of  our  products;

     -    total  or  partial  suspension  of  production;

     -    refusal  of  the government to authorize the marketing of new products
          or  to  allow  us  to  enter  into  supply  contracts;  and

     -    criminal  prosecution.

     Tissue Regulation

     In  1996,  correspondence  from  the  FDA stated that AlloDerm used for the
replacement or repair of damaged or inadequate integumental tissue (i.e. "tissue
lining  the  surface  of the body or a body cavity") would be regulated as human
tissue  under  an  interim regulation governing human tissue for transplantation
then  in  effect.  This letter reversed the FDA's initial position that AlloDerm
for these indications should be regulated as a medical device.  In 1997, the FDA
issued  a  final  regulation  that  became  effective  in 1998 regulating "human
tissue."  The  rule defines human tissue as any tissue derived from a human body
which  is  (i)  intended  for administration to another human for the diagnosis,
cure,  mitigation,  treatment or prevention of any condition or disease and (ii)
recovered,  processed,  stored  or distributed by methods not intended to change
tissue  function  or  characteristics.  The FDA definition excludes, among other
things,  tissue  that currently is regulated as a human drug, biological product
or  medical  device  and  excludes  vascularized  human  organs.


                                       10
<PAGE>
     The  final  1997  tissue  regulation requires establishments engaged in the
procurement,  processing,  and  distribution  of  human  tissue to conduct donor
screening  and  infectious disease testing and to maintain records available for
FDA  inspection  documenting  that  the  procedures were followed. The rule also
provides  the FDA with authority to conduct inspections of tissue establishments
and  to detain, recall, or destroy tissue where the procedures were not followed
or  appropriate  documentation  of  the  procedures  is  not  available.

     Relying  on  the  1996  letter, we have not obtained prior FDA approval for
commercial  distribution  of AlloDerm for use in the treatment of burns, plastic
reconstructive  surgery  procedures  (such  as  facial sling and scar revision),
periodontal  surgical  procedures  (such  as  free-gingival  grafting and guided
tissue  regeneration) and general surgical procedures. We believe that the final
tissue  regulation  did  not alter the provisions of the interim regulation that
was  the  foundation  of the FDA's decision not to regulate AlloDerm as a device
when used for these indications. Therefore, we continue to believe that AlloDerm
for  these  uses  is  regulated  as  human  tissue for transplantation. However,
because  the  FDA's  approach to tissue regulation is evolving, we cannot assure
you  that  FDA will adhere to this position. In the future, the FDA could choose
to  impose  device  regulation  on  AlloDerm  for  these  indications.

     The  FDA also stated in the 1996 letter that their decision applied only to
AlloDerm  when  intended for use in transplantation to repair or replace damaged
or  inadequate integumental tissue and that the regulatory status of the product
when  it  is promoted for other uses, such as a void filler for soft tissue, for
cosmetic  augmentation  or  as  a  wound healing agent, would be determined on a
case-by-case  basis.

     In  1999,  we began marketing two additional tissue products, Repliform and
Cymetra.  Repliform  is  the trade name given to AlloDerm when it is labeled for
the  intended  use  of  repairing  damaged or inadequate integumental connective
tissue  in  urological  and  gynecological surgery. Cymetra is Alloderm that has
been  micronized  at  low  temperature  to create a particulate form of AlloDerm
suitable  for  injection. This form of AlloDerm permits delivery to subcutaneous
locations  by injection rather than open surgery to repair damaged or inadequate
integumental  tissue.  The  micronized  particles are biochemically identical to
AlloDerm.

     In  November  2000,  the FDA wrote to us and requested detailed information
about  Repliform  and  Cymetra,  including  copies  of  existing  labeling  and
advertising,  a  description  of  product  composition and processing, and other
information  supporting  our belief that each of these products is human tissue.
In  February  2001,  we  provided  a detailed submission responding to the FDA's
request.  In  June  2001,  we  received  a  letter  from the FDA indicating that
Repliform  and  Cymetra,  as  currently  marketed,  meet the definition of human
tissue  for  transplantation.

     In 2002, we commenced commercial distribution of Graft Jacket. Graft Jacket
is  the  trade name given to AlloDerm when it is labeled for the intended use of
repairing  damaged  or  inadequate  integumental  tissue  in orthopedic surgery.
Relying  on  the FDA's findings with respect to AlloDerm, Repliform and Cymetra,
we  believe  that  Graft  Jacket  meets  the  definition  of  human  tissue  for
transplantation  and therefore we did not seek approval from FDA to market Graft
Jacket. In March 2003, the FDA contacted us and requested information supporting
our  belief  that  Graft  Jacket  meets  the  definition  of  human  tissue  for
transplantation.  We  are  currently  preparing a response to the FDA's request.
There  can  be  no  assurance  that the FDA will agree with us that Graft Jacket
meets  the  definition  of human tissue for transplantation. If the FDA does not
agree,  they  may  impose medical device regulation upon Graft Jacket. FDA could
also require us to cease marketing and/ or recall product already sold until FDA
approval  is  obtained  and  could  seek  to  impose  enforcement  sanctions for
marketing  this  product  without  FDA  approval.

     In  January  2001,  the  FDA  issued a final rule requiring registration of
tissue  banking  establishments  and  the  listing  of  tissue  products.  These
requirements  became  effective  on April 4, 2001. A proposed regulation pending
since  September  1999  would  require  that  most tissue donors be screened for
relevant  communicable  diseases.  Another proposed regulation issued in January
2001  would  require manufacturers of tissue products to follow proposed current
good  tissue  practices.  These  final and pending regulations demonstrate FDA's
increasingly  proactive  regulation  of  human  tissue,  which  may  lead to the
imposition  of  significant  additional  regulatory  requirements  upon  tissue
products.  Such  requirements  could  cause  us  to incur significant additional
costs.

     Procurement  of  certain  human  organs  and  tissue for transplantation is
subject  to  the  restrictions  of  the NOTA, which prohibits the acquisition of
certain  human  organs,  including  skin  and  related  tissue,  for  valuable
consideration,  but  permits  the payment of reasonable expenses associated with
the  procurement,  transportation  processing, preservation, quality control and
storage  of  human  tissue  and  skin.  We  reimburse  tissue banks for expenses
incurred  that  are associated with the recovering and transportation of donated
human  skin that we process into AlloDerm, Repliform, Cymetra and allograft skin
as  a  temporary  wound  dressing.  We  include  in  our  pricing


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<PAGE>
structure  certain  costs  associated  with  processing,  preservation,  quality
control and storage of the tissue, and marketing and medical education expenses,
in addition to amounts paid to tissue banks to reimburse them for their expenses
associated  with  the  removal  and  transportation  of  the  tissue.

     Medical Device Regulation

     A  medical  device generally may be marketed in the United States only with
the  FDA's  prior  authorization.  Devices  classified by the FDA as posing less
risk  are  placed  in  class  I or class II.  Class II devices (and some class I
devices)  generally require the manufacturer to seek "510(k) clearance" from the
FDA  prior to marketing through the filing of a "premarket notification," unless
exempted  from  this  requirement  by  regulation.  Such  clearance generally is
granted  based  upon  a  finding  that  a  proposed  device  is  "substantially
equivalent"  in  intended  use  and  safety  and  effectiveness  to a "predicate
device,"  which  is  a  legally  marketed  class I or II device that already has
510(k)  clearance  or  a  "pre-amendment"  class  III  device  (in  commercial
distribution  prior  to  May  28, 1976) for which the FDA has not called for PMA
applications  (defined  below).  No  assurance  can  be  given  that  any 510(k)
submission  will  ever  receive  clearance.  After  a  device  receives  510(k)
clearance,  any  modification  that  could  significantly  affect  its safety or
effectiveness,  or  that  would constitute a major change in the intended use of
the  device,  will  require  a  new  510(k)  submission.

     A  medical  device  that does not qualify for 510(k) clearance is placed in
class  III,  which  is  reserved for devices classified by the FDA as posing the
greatest risk (e.g., life-sustaining, life-supporting or implantable devices, or
devices  that  are  not substantially equivalent to a predicate device). A class
III  device generally must undergo the premarket approval ("PMA") process, which
requires the manufacturer to prove the safety and effectiveness of the device to
the FDA's satisfaction. A PMA application must provide extensive preclinical and
clinical  trial  data  and  information  about  the  device  and  its components
regarding, manufacturing, labeling and promotion. As part of the PMA review, the
FDA  will  inspect the manufacturer's facilities for compliance with the Quality
System  Regulation  ("QSR"),  which  includes  elaborate  testing,  control,
documentation  and  other quality assurance procedures. Upon submission, the FDA
determines  if the PMA application is sufficient to permit a substantive review,
and,  if  so,  the application is accepted for filing. The FDA then commences an
in-depth  review of the PMA application, which we believe typically takes one to
three  years,  but  may  take  longer.

     If  the  FDA's  evaluation  of  the  PMA  application is favorable, the FDA
typically  issues  an  "approval  letter" requiring the applicant's agreement to
comply  with  specific  conditions  (e.g.,  changes  in  labeling)  or to supply
specific  additional data (e.g., longer patient follow up) or information (e.g.,
submission  of  final  labeling)  in  order  to secure final approval of the PMA
application.  Once  the  approval  letter is satisfied, the FDA will issue a PMA
order  for  the  approved  indications,  which  can  be  more limited than those
originally  sought  by the manufacturer. The PMA order can include post approval
conditions  that  the  FDA  believes  necessary  to  ensure  the  safety  and
effectiveness of the device including, restrictions on labeling, promotion, sale
and  distribution.  Failure to comply with the conditions of approval can result
in enforcement action, including withdrawal of the approval. The PMA process can
be expensive and lengthy, and no assurance can be given that any PMA application
will  ever be approved for marketing. Even after approval of a PMA, a new PMA or
PMA  supplement  is  required  in  the  event  of  a modification to the device.

     A clinical study in support of a PMA application or 510(k) submission for a
"significant  risk"  device requires an Investigational Device Exemption ("IDE")
application approved in advance by the FDA for a limited number of patients. The
IDE  application  must  be  supported  by  appropriate  data, such as animal and
laboratory  testing  results.  The  clinical  study may begin if the FDA and the
appropriate  Institutional  Review  Board  ("IRB")  at  each clinical study site
approve  the IDE application. If the device presents a "non-significant risk" to
the patient, a sponsor may begin the clinical study after obtaining IRB approval
without  the  need  for  FDA  approval. In all cases, the clinical study must be
conducted under the auspices of an IRB pursuant to FDA's regulatory requirements
intended for the protection of subjects and to assure the integrity and validity
of  the  data.

     If  we  market medical device products, we will be subject to pervasive and
continuing regulation. We will have to comply with these requirements, including
the  FDA's  labeling  regulations, the QSR, the Medical Device Reporting ("MDR")
regulations  (which  require that a manufacturer report to the FDA certain types
of  adverse  events  involving its products), and the FDA's general prohibitions
against  promoting  products  for  unapproved  or "off-label" uses. In addition,
class  II  devices  can  be  subject  to  additional  special  controls  (e.g.,
performance  standards,  post  market  surveillance, patient registries, and FDA
guidelines)  that  do  not  apply  to  class  I  devices.


                                       12
<PAGE>
     In  1997,  the  FDA  told  us  that  one  of  our products, NeoDura(TM) (an
acellular  tissue matrix for use in dura mater replacement procedures), would be
classified  as  a  medical  device requiring 510(k) clearance and we submitted a
510(k)  application.  In  March  1999,  we  voluntarily  withdrew  this  510(k)
submission and have not determined if we will submit a new 510(k) submission for
NeoDura.

     Based  upon  relevant  precedents,  it  is  not  clear whether the FDA will
regulate  our  vascular  and  orthopedic  products now in development as medical
devices  requiring  510(k)  clearance  or  PMA  approval  or as human tissue for
transplantation.

     Biologics Regulation

     Biologic products are regulated under the FDC Act and Section 351(a) of the
PHS  Act.  The PHS Act imposes a special additional licensing requirement, known
as a Biologic License.  This license imposes very specific requirements upon the
facility  and  the  manufacturing  and  marketing of licensed products to assure
their  safety,  purity, and potency.  Some licensed biological products are also
subject  to  batch  release  by  the  FDA.  That  is,  the products from a newly
manufactured batch cannot be shipped until the FDA has evaluated either a sample
or the specific batch records and given permission to ship the batch of product.
The  PHS  Act  also grants the FDA authority to impose mandatory product recalls
and  provides  for  civil  and  criminal  penalties  for  violations.

     Before conducting the required clinical testing of a biological product, an
applicant  must  submit  an  IND  to  the  FDA,  containing  preclinical  data
demonstrating  the  safety  of  the  product  for  human  investigational  use,
information  about  the  manufacturing processes and procedures and the proposed
clinical  protocol.  Clinical  trials  of  biological  products  typically  are
conducted  in  three sequential phases, but may overlap. Phase 1 trials test the
product in a small number of healthy subjects, primarily to determine its safety
and  tolerance  at  one  or  more  doses. In Phase 2, in addition to safety, the
efficacy,  optimal  dose  and  side  effects  of  the product are evaluated in a
patient  population  somewhat  larger  than  the Phase 1 trial. Phase 3 involves
further  safety  and  efficacy  testing  on  an  expanded  patient population at
geographically  dispersed  test  sites.

     All  clinical  studies  must  be  conducted in accordance with FDA approved
protocols  and  are  subject  to  the  approval  and  monitoring  of one or more
Institutional  Review Boards. In addition, clinical investigators must adhere to
good  clinical practices. Completion of all three phases of clinical studies may
take  several  years,  and  the  FDA  may  temporarily  or permanently suspend a
clinical  study  at  any  time.

     Upon  completion  and  analysis of clinical trials, the applicant assembles
and  submits  a  Biologic  License Application containing, among other things, a
complete  description  of  the manufacturing process. Before the licenses can be
granted,  the  applicant must undergo a successful establishment inspection. FDA
review and approval of a biological product is very onerous and can take several
years.  We  cannot  assure  you  that  we  will obtain the required approval for
ThromboSol  platelet storage solution or any other proposed biological products.

     Other Regulation

     We  are  subject  to various federal, state and local laws, regulations and
requirements relating to such matters as safe working conditions, laboratory and
manufacturing  practices,  and  the  use,  handling and disposal of hazardous or
potentially  hazardous  substances  used  and  produced  in  connection with our
research  and  development  work.  We  cannot  assure you that we will not incur
significant  additional  costs  to  comply with these laws or regulations in the
future.

     International Regulation

     The regulation of our products outside the United States varies by country.
Certain  countries  regulate  our  human  tissue  products  as  a pharmaceutical
product,  requiring us to make extensive filings and obtain regulatory approvals
before  selling  our  product.  Certain countries classify our products as human
tissue for transplantation but may restrict its import or sale.  Other countries
have  no applicable regulations regarding the import or sale of products similar
to our products, creating uncertainty as to what standards we may be required to
meet.

     Our  human  tissue  products are currently distributed in several countries
internationally.  Additionally,  we  are  pursuing  clearance  to distribute our
products  in certain other countries. The uncertainty of the regulations in each
country  may  delay  or  impede  the  marketing of our products in the future or
impede  our  ability  to negotiate distribution arrangements on favorable terms.
Certain  foreign  countries  have  laws  similar  to  NOTA.  These  laws


                                       13
<PAGE>
may restrict the amount that we can charge for our products and may restrict our
ability  to  export  or  distribute  our  products  to  licensed  not-for-profit
organizations  in  those  countries.  Noncompliance  with  foreign  country
requirements  may include some or all of the risks associated with noncompliance
with  FDA  regulation  as  well  as  other  risks.

RESEARCH AND DEVELOPMENT

     We  have  historically  funded the development of our human tissue products
and  blood  cell  preservation  products  primarily  through  external  sources,
including  a  corporate  alliance  and government grants, as well as through the
proceeds from equity offerings. Our research and development costs in 2000, 2001
and  2002  for  all  programs were approximately  $4.5 million, $4.4 million and
$5.0  million,  respectively.  See  "Management's  Discussion  and  Analysis  of
Financial  Condition and Results of Operations-Liquidity and Capital Resources."

     We have received a substantial portion of our government grant funding from
the  United  States  government's  Small  Business  Innovation Research ("SBIR")
program.  The SBIR grant program provides funding to evaluate the scientific and
technical  merit  and  feasibility  of an idea. To date, we have been awarded in
excess  of  $10  million  through approved SBIR program awards and Department of
Defense  contracts.  We  intend  to  continue  to  seek funding through the SBIR
programs,  as  well  as  to  pursue  additional  government  grant  and contract
programs. Generally, we have the right to patent any technologies developed from
government  grants  and  contract  funding,  subject  to  the  United  States
government's  right to receive a royalty-free license for federal government use
and  to  require  licensing  to  others  in  certain  circumstances.


PATENTS, PROPRIETARY INFORMATION AND TRADEMARKS

     Our  ability  to  compete  effectively  with  other  companies is dependent
materially  upon  the proprietary nature of our technologies.  We rely primarily
on  patents,  trade  secrets  and  confidentiality  agreements  to  protect  our
technologies.  We  currently  license the exclusive right to eight United States
patents  and  related  foreign  patents and the non-exclusive right to 14 United
States  patents.  In  addition,  we have been issued eight United States utility
patents,  one  United  States  design patent and have five pending United States
patent  applications.

     Three  primary  families  of  patents  and  patent applications protect our
technology.  One  United  States  patent  covers  methods  of  producing  our
tissue-based  products.  Nine  additional United States patents and four pending
patent  applications  supplement this patent and cover methods and apparatus for
freeze-drying  without the damaging effects of ice crystal formation. Six United
States patents and one pending patent application cover methods of extending the
shelf  life  of  platelets,  red  blood  cells  and  other  blood  cells.

     We  also  have  applied for patent protection in several foreign countries.
Because  of  the  differences  in  patent  laws  and laws concerning proprietary
rights,  the  extent  of  protection  provided  by  United  States  patents  or
proprietary  rights  owned  by  or  licensed to us may differ from that of their
foreign  counterparts.

     In  general, the patent position of biotechnology and medical product firms
is  highly  uncertain  and  involves  complex  legal,  scientific  and  factual
questions.  There  is risk that other patents may not be granted with respect to
the  patent  applications  filed  by us.  Furthermore, there is risk that one or
more  patents issued or licensed to us will not provide commercial benefit to us
or  will be infringed, invalidated or circumvented by others.  The United States
Patent  and  Trademark  Office  currently  has  a  significant backlog of patent
applications,  and  the approval or rejection of patents may take several years.

     Prior to actual issuance, the contents of United States patent applications
are generally not made public.  Once issued, a patent would constitute prior art
from  its  filing  date, which might predate the date of a patent application on
which  we  rely.  Conceivably,  the  issuance of such a prior art patent, or the
discovery  of  "prior art" of which we are currently unaware, could invalidate a
patent  of  ours  or  our  licensor or discourage commercialization of a product
claimed  within  such  patent.

     No assurances may be given that our products or planned products may not be
the  subject of additional infringement actions by third parties. Any successful
patent  infringement  claim  relating  to any products or planned products could
have  a  material  adverse  effect  on  our  financial  condition and results of
operations.  Further,  there can be no assurance that any patents or proprietary
rights  owned  by  or  licensed  to  us  will  not  be  challenged, invalidated,


                                       14
<PAGE>
circumvented,  or  rendered  unenforceable  based  on,  among  other  things,
subsequently  discovered  prior  art,  lack of entitlement to the priority of an
earlier,  related application or failure to comply with the written description,
best  mode,  enablement  or  other  applicable  requirements.

     We  generally  conduct a cursory review of issued patents prior to engaging
in  research  or  development  activities. If others already have issued patents
covering  new  products  that we develop, we may be required to obtain a license
from  others  to  commercialize  such future products. There can be no assurance
that  any such license that may be required could be obtained on favorable terms
or  at  all.

     We  may  decide  for  business  reasons to retain certain knowledge that we
consider  proprietary as confidential and elect to protect such information as a
trade  secret,  as  business  confidential  information, or as know-how. In that
event,  we  must  rely upon trade secrets, know-how and continuing technological
innovation  to maintain our competitive position. There can be no assurance that
others  will  not  independently  develop  substantially  equivalent proprietary
information  or  otherwise  gain  access  to  or  disclose  such  information.

     We  have  federal trademark or service mark registrations that we currently
use  for  LifeCell(R),  which concerns processing and preserving tissue samples,
AlloDerm(R),  which  concerns  our  commercial  acellular  dermal graft product,
Micronized  AlloDerm(R),  the particulate form of AlloDerm, Cymetra(R) the brand
name  for  Micronized  AlloDerm(R) and Repliform(R), the version of AlloDerm for
urology  and  gynecology.  We  have  filed  trademark  registrations  for
ThromboSol(TM),  a  formulation  for  extended  storage  of  platelets  and
AlloDerm(R)GBR(TM),  for  use in periodontal applications. Graft Jacket(TM) is a
trademark  of  Wright  Medical  Technology, Inc. SmartPReP(TM) is a trademark of
Harvest  Technologies  Corporation.

COMPETITION

     The  biomedical  field  is  undergoing  rapid and significant technological
change.  Our  success  depends  upon  our  ability  to develop and commercialize
efficient  and  effective  products  based  on our technologies.  There are many
companies,  including  Regeneration  Technologies,  Inc.,  Cook,  Inc.  and  its
affiliates,  Cryolife,  Inc., Integra Life Sciences Holdings Corporation, Tissue
Science  Laboratories, plc and academic institutions, including Rice University,
The  University  of  Pittsburgh  and  Georgia  Institute of Technology, that are
capable  of  developing  products  based  on  similar  technology, and that have
developed  and  are  capable of developing products based on other technologies,
which  are or may be competitive with our products.  Many of these companies and
academic  institutions  are well-established, and may have substantially greater
financial  and  other  resources, research and development capabilities and more
experience  in  conducting  clinical  trials,  obtaining  regulatory  approvals,
manufacturing  and  marketing  than  we  do.  These  companies  and  academic
institutions  may  succeed  in  developing  competing  products  that  are  more
effective  than  our products, or that receive government approvals more quickly
than  our  products,  which may render our products or technology uncompetitive,
uneconomical  or  obsolete.

     We believe that for most current applications of our human tissue products,
the  principal  form of competition is with the use of the patient's own tissue.
We  anticipate  direct  competition  for our tissue products as well as indirect
competition from advances in therapeutic agents, such as growth factors now used
to enhance wound healing. We believe that therapeutic growth factors may be used
in  conjunction  with  our  proposed  products  and  may potentially enhance the
products'  efficacy.  There  can be no assurance that we will be able to compete
effectively  with  other  commercially available products or that development of
other technologies will not detrimentally affect our commercial opportunities or
competitive  advantage.

EMPLOYEES

     At  March  1, 2003, we had 155 employees of which 43 were employed in sales
and  marketing  and customer service, 70 in production and quality assurance, 23
in  research  and development and 19 in administration and accounting.  Also, at
such date, we employed, full-time, two with M.D. degrees and 11 individuals with
Ph.D.  degrees.

RISK FACTORS

     You  should  carefully  consider  these  risk  factors  in  addition to our
financial  statements.  In  addition  to  the following risks, there may also be
risks  that we do not yet know of or that we currently think are immaterial that
may  also  impair our business operations.  If any of the following risks occur,
our  business,  financial  condition  or  operating  results  could be adversely
affected.


                                       15
<PAGE>
WE HAVE A HISTORY OF OPERATING LOSSES AND A SUBSTANTIAL ACCUMULATED EARNINGS
DEFICIT.

     Since  our  inception  in  1986  through  2001  we incurred substantial net
losses.  At  December  31,  2002, we had an accumulated deficit of approximately
$64.3 million.  Our first profitable quarter was the fourth quarter of 2001 with
net  income  of  $102,000.  We were profitable each of the four quarters of 2002
with  a  total  net income of $1.4 million.  Additionally, we generated positive
cash  flow from operations in every quarter since the third quarter of 2001. Our
ability  to  maintain  profitability  and  generate  positive  cash  flows  from
operations  in  the  future  will  depend  on:


     -    continued market acceptance and revenues from our products; and

     -    commercialization of products under development.

     We  may  not be profitable and generate positive cash flows from operations
in  the  future.

WE MAY NEED ADDITIONAL CAPITAL TO MARKET OUR CURRENT PRODUCTS AND TO DEVELOP AND
COMMERCIALIZE  NEW  PRODUCTS  AND  IT  IS UNCERTAIN WHETHER SUCH CAPITAL WILL BE
AVAILABLE.

     We  intend  to  expend  funds  for:

     -    product research and development;

     -    expansion of sales and marketing activities;

     -    product education efforts; and

     -    other  working capital and general corporate purposes, including fixed
          asset  requirements  and  potential  acquisitions  of  complementary
          technologies  or  products.

     We may need additional capital, depending on:

     -    the costs and progress of our research and development efforts;

     -    the number and types of product development programs undertaken;

     -    the costs and timing of expansion of sales and marketing activities;

     -    the costs and timing of expansion of manufacturing capacity;

     -    the amount of revenues from our existing and new products;

     -    changes  in,  termination  of,  and  the  success  of existing and new
          distribution  arrangements;

     -    the  cost  of  maintaining,  enforcing and defending patents and other
          intellectual  property  rights;

     -    competing technological and market developments; and

     -    developments  related  to  regulatory  and  third  party reimbursement
          matters.

     Although  we  believe  that  our  current  cash  resources  together  with
anticipated  cash  from  ongoing  operating activities, committed research grant
funding  and remaining availability under our credit facility will be sufficient
to  fund  our  planned  operations,  research and development programs and fixed
asset  additions  in the foreseeable future, there can be no assurance that such
sources  will  be  sufficient to meet our long-term needs and as a result we may


                                       16
<PAGE>
need  additional  funding.  We  have  no  commitments for any future funding and
there can be no assurance that we will be able to obtain additional financing in
the  future from either debt or equity financings, collaborative arrangements or
other  sources  on terms acceptable to us, or at all.  If adequate funds are not
available,  we expect that we will be required to delay, scale back or eliminate
one  or  more  of  our  product  development  programs.  Any  additional  equity
financing may be dilutive to stockholders, and debt financing, if available, may
involve  significant  restrictive  covenants.  Collaborative  arrangements,  if
necessary  to raise additional funds, may require us to relinquish our rights to
certain  of  our  technologies,  products  or  marketing  territories.


IF  THE UNITED STATES FDA IMPOSES MORE STRINGENT TISSUE, MEDICAL DEVICE OR OTHER
REGULATIONS THAT AFFECT OUR PRODUCTS, THE COSTS OF DEVELOPING, MANUFACTURING AND
MARKETING  OUR  PRODUCTS  WILL  BE  INCREASED.

     The  FDA  generally  permits  human  tissue  for  transplantation  to  be
commercially  distributed  without  obtaining prior FDA clearance or approval of
the  product.  In  contrast,  products regulated as medical devices or biologics
usually  must  undergo  a  lengthy,  uncertain  and  expensive  premarket review
process.  In  1996,  the  FDA  determined  that  AlloDerm used for the repair or
replacement  of  damaged or inadequate integumental tissue would be regulated as
transplanted  human tissue.  On that basis, we continued commercial distribution
of  this  product  for plastic reconstructive, burn and periodontal surgery.  In
its decision with respect to the regulation of AlloDerm, the FDA stated that the
regulatory  status of any different uses, such as a void filler for soft tissue,
for  cosmetic augmentation procedures or as a wound healing agent, would need to
be  determined  on  a  case-by-case  basis.

     In 1999, we began marketing the following products as human tissue:

     -    Repliform,  a  version  of  AlloDerm,  for  urologic  and  gynecologic
          surgical  procedures;  and

     -    Cymetra, a version of AlloDerm in a particulate form, for non-surgical
          correction  of  soft  tissue  defects.


     Repliform  is  used  as  a  bladder  sling  for  the  treatment  of urinary
incontinence  and  for  the repair of pelvic floor defects.  Cymetra is used for
the  correction  of soft tissue deficits, such as acne or other depressed scars,
and  to  restore  tissue  loss  from  disease.

     In  November  2000,  the FDA wrote to us and requested detailed information
about  Repliform  and  Cymetra,  including  copies  of  existing  labeling  and
advertising,  a  description  of  product  composition and processing, and other
information  supporting  our belief that each of these products is human tissue.
In  February  2001,  we  provided  a detailed submission responding to the FDA's
request.  In  June  2001, we received a letter from the FDA indicating that each
of  these  products,  as currently marketed, meet the definition of transplanted
human  tissue.

     In  2002,  we  commenced  commercial  distribution  of Graft Jacket.  Graft
Jacket  is  the trade name given to AlloDerm when it is labeled for the intended
use  of  repairing  damaged  or  inadequate  integumental  tissue  in orthopedic
surgery.  Relying  on the FDA's findings with respect to AlloDerm, Repliform and
Cymetra,  we  believe that Graft Jacket meets the definition of human tissue for
transplantation  and therefore we did not seek approval from FDA to market Graft
Jacket.  In  March  2003,  the  FDA  contacted  us  and  requested  information
supporting our belief that Graft Jacket meets the definition of human tissue for
transplantation.  We  are  currently  preparing a response to the FDA's request.
There  can  be  no  assurance  that the FDA will agree with us that Graft Jacket
meets  the  definition of human tissue for transplantation.  If the FDA does not
agree,  they  may impose medical device regulation upon Graft Jacket.  FDA could
also require us to cease marketing and/ or recall product already sold until FDA
approval  is  obtained  and  could  seek  to  impose  enforcement  sanctions for
marketing  this  product  without  FDA  approval.

     We  cannot  assure  that  Graft  Jacket or other products we develop in the
future  will  similarly be regulated as human tissue. The regulation of each new
product  we  develop  will be decided by the FDA on a case-by-case basis. If the
FDA  chooses  to  regulate  any  of  our  future products as a medical device or
biologic,  the process of obtaining FDA approval would be expensive, lengthy and
unpredictable.  We  anticipate  that  it  could  take from one to three years or
longer  to  obtain  such  approval.  We  do  not  know if such approval could be
obtained  in  a  timely  fashion,  or


                                       17
<PAGE>
at  all.  Such  approval process would almost certainly include a requirement to
provide  extensive  supporting  clinical  testing  data.

     The  FDA  has  issued  proposed  rules  that  would impose additional donor
suitability  and  Current  Good Tissue Practice requirements on manufacturers of
tissue-based  products. If these or similar requirements actually become law, we
will  likely  incur  additional  manufacturing  and  compliance  costs  for  our
tissue-based  products.

     In  addition,  the  FDA  requires that devices and biologics be produced in
accordance  with  the  Quality  System  Regulation  for  medical devices or Good
Manufacturing  Practice regulation for biologics. As a result, our manufacturing
and  compliance  costs  would  increase  and any such future device and biologic
products would be subject to more comprehensive development, testing, monitoring
and  validation  standards.

     A few states impose their own regulatory requirements on transplanted human
tissue.  We  believe that we are in compliance with such regulations.  There can
be no assurance that the various states in which our products are sold will find
that  we are in compliance or will not impose additional regulatory requirements
or  marketing  impediments  on  our  products.

THE FDA CAN IMPOSE CIVIL AND CRIMINAL ENFORCEMENT ACTIONS AND OTHER PENALTIES ON
US  IF  WE  FAIL  TO  COMPLY  WITH  THE  STRINGENT FDA REGULATIONS AT OUR TISSUE
FACILITIES.

     Failure  to  comply  with  any  applicable FDA requirements could result in
civil  and criminal enforcement actions and other fines and penalties that would
increase  our  expenses  and  adversely  affect  our  cash  flows.  Tissue
establishments  must  engage  in:

     -    Donor screening and infectious disease testing; and

     -    Stringent record keeping.

As  a result, our involvement in the processing and distribution of human tissue
for  transplantation  requires  us  to  ensure  that  proper donor screening and
infectious  disease  testing  are  done appropriately and conducted under strict
procedures.  In  addition, we must maintain records, which are available for FDA
inspectors  documenting that the procedures were followed. The FDA has authority
to  conduct  inspections  of  tissue  establishments  and  to detain, recall, or
destroy  tissue if the procedures were not followed or appropriate documentation
is  not  available.

     Labeling and promotional activities are also subject to scrutiny by the FDA
and,  in certain instances, by the Federal Trade Commission.  From time to time,
the  FDA  may  modify  such  requirements,  imposing  additional  or  different
requirements,  which  may  require  us  to  alter  our  business  methods.

THE  NATIONAL  ORGAN  TRANSPLANT ACT ("NOTA") COULD BE INTERPRETED IN A WAY THAT
COULD  REDUCE  OUR  REVENUES  AND  INCOME  IN  THE  FUTURE.

     Procurement  of  certain  human  organs  and  tissue for transplantation is
subject  to the restrictions of NOTA, which prohibits the acquisition of certain
human  organs, including skin and related tissue for valuable consideration, but
permits  the  payment  of  reasonable  expenses associated with the procurement,
transportation,  processing,  preservation, quality control and storage of human
tissue,  including  skin.  We  reimburse tissue banks for expenses incurred that
are associated with the recovering and transportation of donated cadaveric human
skin that we process into AlloDerm, Repliform, Cymetra and cryopreserved skin as
a  temporary  wound  dressing.  In  addition  to amounts paid to tissue banks to
reimburse  them  for  their  expenses  associated  with  the  procurement  and
transportation  of human skin, we include in our pricing structure certain costs
associated  with:

     -    processing;

     -    preservation;

     -    quality control and storage of the tissue; and

     -    marketing and medical education expenses.


                                       18
<PAGE>
     NOTA payment allowances may be interpreted to limit the amount of costs and
expenses  that we may recover in our pricing for our products thereby negatively
impacting  our  revenues  and  profitability. We also are potentially subject to
criminal  enforcement  sanctions  if  we  are  found  to  have  violated  NOTA's
prohibition  on  the  sale  of  human  tissue.

WE  ARE  SUBJECT TO VARYING AND EXTENSIVE REGULATION BY FOREIGN GOVERNMENTS THAT
CAN BE COSTLY, TIME CONSUMING AND SUBJECT US TO UNANTICIPATED DELAYS.

     We  distribute some of our products in countries outside the United States.
The  regulation  of  our  products in these countries varies.  Certain countries
regulate  our  products  as  a  pharmaceutical  product,  requiring  us  to make
extensive  filings  and  obtain regulatory approvals before selling our product.
Certain  countries classify our products as human tissue for transplantation but
may restrict the import or sale.  Other countries have no applicable regulations
regarding  the  import  or  sale  of  products similar to our products, creating
uncertainty  as  to  what  standards  we  may  be  required  to  meet.

     The  uncertainty of the regulations in each country may delay or impede the
marketing of our products in these countries in the future or impede our ability
to  negotiate  distribution  arrangements  on  favorable  terms. Certain foreign
countries  have  laws  similar  to National Organ Transplant Act. These laws may
restrict  the  amount  that  we can charge for our products and may restrict our
ability  to  export  or  distribute  our  products  to  licensed  not-for-profit
organizations  in  those  countries.  Noncompliance  with  foreign  country
requirements  may include some or all of the risks associated with noncompliance
with  FDA  regulation  as  well  as  other  risks.

INCREASING OUR REVENUES AND MAINTAINING PROFITABILITY WILL DEPEND ON OUR ABILITY
TO  INCREASE  MARKET  PENETRATION  OF  OUR  CURRENT  PRODUCTS AND TO DEVELOP AND
COMMERCIALIZE  NEW  PRODUCTS.

     Much  of  our  ability to increase revenues and to continue to generate net
income and positive cash flows from operations will depend on:

     -    expanding the use and market penetration of our current products; and

     -    the successful introduction of our products in development.

     Products  based  on  our  technologies  represent new methods of treatment.
Physicians  will  not  use  our products unless they determine that the clinical
benefits to the patient are greater than those available from competing products
or  therapies.  Even  if  the  advantage  of  our  products  is  established  as
clinically  significant,  physicians  may not elect to use such products for any
number  of  reasons.

     Consequently,  physicians,  health  care payers and patients may not accept
our  current  products or products under development. Broad market acceptance of
our  products may require the training of numerous physicians and clinicians, as
well as conducting or sponsoring clinical studies to demonstrate the benefits of
such products. The amount of time required to complete such training and studies
could result in a delay or dampening of such market acceptance. Moreover, health
care payers' approval of reimbursement for our products in development may be an
important  factor  in  establishing  market  acceptance.

     We  may  be  required  to  undertake  time-consuming and costly development
activities  and seek regulatory clearance or approval for new products. Although
we have conducted animal studies on many of our products under development which
indicate  that the product may be feasible for a particular application, results
obtained  from expanded studies may not be consistent with earlier trial results
or  be  sufficient  for  us  to  obtain  any  required  regulatory  approvals or
clearances.  The  completion  of  the  development  of any of our products under
development  remains  subject  to  all  the  risks  associated  with  the
commercialization  of  new products based on innovative technologies, including:

     -    unanticipated  technical  or  other  problems;

     -    manufacturing  difficulties;  and

     -    the  possibility  of  insufficient  funds  for  the completion of such
          development.


                                       19
<PAGE>
WE  ARE  HIGHLY  DEPENDENT  UPON  SALES AND MARKETING AGENTS AND DISTRIBUTORS TO
GENERATE  OUR  REVENUES.

     We  have  engaged:

          -    Boston  Scientific  Corporation  as our exclusive worldwide sales
               and marketing representative for Repliform for use in the urology
               and  gynecology  markets;

          -    OMP  Inc. as our exclusive sales and marketing representative for
               Cymetra  to  office-based  dermatologists and plastic surgeons;

          -    Biohorizons Implant Systems, Inc. as our exclusive distributor of
               AlloDerm  for  periodontal  applications in the United States and
               select  international  markets;  and

          -    Wright  Medical  Technology, Inc. as our exclusive distributor of
               Graft  Jacket  in  the  United  States.

     Additionally,  we utilize distributors in certain international markets and
may  grant  additional  distribution  rights  in the future.  For the year ended
December 31, 2002, our sales and marketing agents and distributors generated 48%
of  our  total  product  revenues.  Boston  Scientific  Corporation and OMP Inc.
represented  approximately  31%  and  8%,  respectively,  of  our  total product
revenues.  No  other  individual distributor generated more than 5% of our total
product  revenues  in  2002.  If  an  exclusive marketing agent or a distributor
fails to adequately promote, market and sell our products, our revenues could be
adversely affected until a replacement agent or distributor could be retained by
us.  Finding  replacement  agents  and  distributors  could  be a time consuming
process  during  which  our  revenues  could  be  negatively  impacted.

WE DEPEND HEAVILY UPON A LIMITED NUMBER OF SOURCES OF HUMAN CADAVERIC TISSUE AND
ANY  INTERRUPTION  IN  THE AVAILABILITY OF HUMAN TISSUE WOULD INTERFERE WITH OUR
ABILITY  TO  PROCESS  AND  DISTRIBUTE  OUR  PRODUCTS.

     Our  business  is  dependent on the availability of donated human cadaveric
tissue.  We  currently  receive human tissue from approximately 23 United States
tissue  banks  /  organ  procurement  organizations.  We estimate that there are
approximately  100  tissue banks / organ procurement organizations in the United
States.  Although  we have established what we believe to be adequate sources of
donated  human  tissue  to  satisfy  the  expected  demand  for our human tissue
products  in  the  foreseeable  future,  we  cannot  be  sure that donated human
cadaveric  tissue  will  continue  to  be available at current levels or will be
sufficient to meet our needs.  If our current sources can no longer supply human
cadaveric  tissue  or  our  requirements for human cadaveric tissue exceed their
current  capacity,  we may not be able to locate other sources.  Any significant
interruption in the availability of human cadaveric tissue would likely cause us
to  slow  down  the  processing  and  distribution of our human tissue products.

NEGATIVE  PUBLICITY CONCERNING THE USE OF DONATED HUMAN TISSUE IN RECONSTRUCTIVE
COSMETIC  PROCEDURES  COULD  REDUCE  THE  DEMAND FOR OUR PRODUCTS AND NEGATIVELY
IMPACT  THE  SUPPLY  OF  AVAILABLE  DONOR  TISSUE.

     Although  we  do  not  promote  the  use  of  our human tissue products for
cosmetic  applications,  clinicians  may  use  our  products  in applications or
procedures that may be considered "cosmetic."  Negative publicity concerning the
use  of  donated human tissue in cosmetic procedures could reduce the demand for
our  products  or  negatively  impact  the  willingness of families of potential
donors  to  agree  to  donate tissue or tissue banks to provide tissue to us for
processing.

THE  BIOMEDICAL FIELD, WHICH WE ARE IN, IS HIGHLY COMPETITIVE AND SUSCEPTIBLE TO
RAPID  CHANGE  AND  SUCH  CHANGES  COULD  RENDER  OUR  PRODUCTS  OBSOLETE.

     The  biomedical  field  is  undergoing  rapid and significant technological
change.  Our  success  depends  upon  our  ability  to develop and commercialize
efficient  and  effective  products  based  on our technologies.  There are many
companies,  including  Regeneration  Technologies,  Inc.,  Cook,  Inc.  and  its
affiliates,  Cryolife,  Inc., Integra Life Sciences Holdings Corporation, Tissue
Science  Laboratories, plc and academic institutions, including Rice University,
The  University  of  Pittsburgh  and  Georgia  Institute of Technology, that are
capable  of  developing  products  based  on similar technology.  Some or all of
these competitors have developed and are capable of developing products based on
other  technologies, which are or may be competitive with our products.  Many of
these  companies  and  academic  institutions  are  well-established,  and  have
substantially  greater  financial  and other resources, research and development
capabilities  and  more  experience  in  conducting  clinical  trials, obtaining


                                       20
<PAGE>
regulatory  approvals,  manufacturing and marketing than we do.  These companies
and  academic institutions may succeed in developing competing products that are
more  effective  than  our  products,  or that receive government approvals more
quickly  than  our  products,  which  may  render  our  products  or  technology
uncompetitive,  uneconomical  or  obsolete.

THE  ABILITY  TO  OBTAIN  THIRD-PARTY REIMBURSEMENT FOR THE COSTS OF NEW MEDICAL
TECHNOLOGIES  IS  LIMITED.

     Generally,  hospitals,  physicians and other health care providers purchase
products,  such  as  the  products  being  sold  or  developed by us, for use in
providing  care  to their patients.  These parties typically rely on third-party
payers,  including:

          -    Medicare;

          -    Medicaid;

          -    private  health  insurance;  and

          -    managed  care  plans

to  reimburse  all  or  part  of the costs of acquiring those products and costs
associated  with  the  medical  procedures  performed  with  those  products.
Third-party  payers have adopted cost control measures in recent years that have
had and may continue to have a significant effect on the purchasing practices of
many  health  care providers, generally causing them to be more selective in the
purchase  of  medical  products.  Significant  uncertainty  exists  as  to  the
reimbursement  status  of  newly approved health care products.  We believe that
certain  third-party  payers  provide  reimbursement for medical procedures at a
specified  rate  without  additional  reimbursement  for products, such as those
being  sold  or  developed by us, used in such procedures.  Adequate third-party
payer  reimbursement  may  not  be  available  for  us  to maintain price levels
sufficient  for  realization  of  an  appropriate  return  on  our investment in
developing  new  products.  The  FDA  generally  permits  human  tissue  for
transplantation  to  be  commercially  distributed  without  obtaining prior FDA
approval  of the product.  In contrast, products regulated as medical devices or
biologics  usually  require  such  approval.  Certain  government  and  other
third-party  payers  refuse,  in some cases, to provide any coverage for uses of
products  for  indications for which the FDA has not granted marketing approval.
Further,  certain  of our products are used in medical procedures that typically
are  not  covered  by  third-party payers or for which patients sometimes do not
obtain  coverage.  These  and  future changes in third-party payer reimbursement
practices  regarding  the procedures performed with our products could adversely
affect  the  market  acceptance  of  our  products.

OUR  SUCCESS  DEPENDS  ON  THE SCOPE OF OUR INTELLECTUAL PROPERTY RIGHTS AND NOT
INFRINGING  THE  INTELLECTUAL  PROPERTY  RIGHTS  OF  OTHERS.  THE  VALIDITY,
ENFORCEABILITY  AND  COMMERCIAL  VALUE  OF  THESE  RIGHTS  ARE HIGHLY UNCERTAIN.

     Our  ability  to  compete  effectively  with  other companies is materially
dependent upon the proprietary nature of our technologies.  We rely primarily on
patents  and  trade  secrets to protect our technologies.  We currently license:

          -    the  exclusive  right  to eight United States patents and related
               foreign  patents;  and

          -    non-exclusive  rights  to  14  patents.

     In  addition,  we:

          -    have  been  issued  eight  United  States utility patents and one
               United  States  design  patent  ;  and

          -    have  five  United  States  patent  applications  pending.

     Third  parties  may  seek  to  challenge,  invalidate, circumvent or render
unenforceable any patents or proprietary rights owned by or licensed to us based
on,  among  other  things:

          -    subsequently  discovered  prior  art;


                                       21
<PAGE>
          -    lack  of  entitlement  to  the  priority  of  an earlier, related
               application;  or

          -    failure  to  comply  with  the  written  description,  best mode,
               enablement  or  other  applicable  requirements.

     In  general, the patent position of biotechnology and medical product firms
is  highly  uncertain, still evolving and involves complex legal, scientific and
factual  questions.  We  are  at  risk  that:

          -    other  patents  may  be  granted  with  respect  to  the  patent
               applications  filed  by  us;  and

          -    any  patents  issued or licensed to us may not provide commercial
               benefit  to  us or will be infringed, invalidated or circumvented
               by  others.

     The  United  States Patent and Trademark Office currently has a significant
backlog  of  patent  applications,  and the approval or rejection of patents may
take  several  years.  Prior  to  actual issuance, the contents of United States
patent  applications  are generally not made public.  Once issued, such a patent
would constitute prior art from its filing date, which might predate the date of
a  patent  application  on  which  we rely.  Conceivably, the issuance of such a
prior  art  patent,  or  the  discovery of "prior art" of which we are currently
unaware,  could  invalidate  a  patent  of  ours  or  our  licensor  or  prevent
commercialization  of  a  product  claimed  thereby.

     We  generally  conduct a cursory review of issued patents prior to engaging
in  research  or  development  activities. If others already have issued patents
covering  new  products  that we develop, we may be required to obtain a license
from them to commercialize such new products. There can be no assurance that any
necessary  license  could  be  obtained  on  favorable  terms  or  at  all.

     There  can  be  no  assurance  that  we  will  not be required to resort to
litigation  to  protect our patented technologies or other proprietary rights or
that  we  will  not be the subject of additional patent litigation to defend our
existing or proposed products or processes against claims of patent infringement
or  other  intellectual property claims.  Any of such litigation could result in
substantial  costs  and  diversion  of  our  resources.

     We  also  have  applied for patent protection in several foreign countries.
Because  of  the  differences  in  patent  laws  and laws concerning proprietary
rights,  the  extent  of  protection  provided  by  United  States  patents  or
proprietary  rights  owned  by  or  licensed to us may differ from that of their
foreign  counterparts.

     We  may  decide  for  business  reasons to retain certain knowledge that we
consider  proprietary as confidential and elect to protect such information as a
trade  secret,  as  business  confidential  information or as know-how.  In that
event,  we  must  rely upon trade secrets, know-how and continuing technological
innovation to maintain our competitive position.  There can be no assurance that
others  will  not  independently  develop  substantially  equivalent proprietary
information  or  otherwise  gain  access  to  or  disclose  such  information.

WE  ARE  EXPOSED  TO  PRODUCT  LIABILITY  CLAIMS FOR WHICH OUR PRODUCT LIABILITY
INSURANCE  MAY  BE  INADEQUATE.

     Our  business  exposes  us to potential product liability risks inherent in
the testing, manufacturing, marketing and use of medical products.  We cannot be
certain  that:

          -    our  insurance  will  provide adequate coverage against potential
               liabilities;

          -    adequate  product  liability  insurance  will  continue  to  be
               available  in  the  future;  or

          -    our  insurance  can  be  maintained  on  acceptable  terms.

The  obligation  to  pay  any  product  liability  claim  in  excess of whatever
insurance  we  are  able  to  acquire  would  increase  our  expenses.

     We  use  donated  human  tissue  as the raw material for our products.  The
non-profit  organizations  that  supply  such  tissue are required to follow FDA
regulations  for  screening  donors  for  potential  disease transmission.


                                       22
<PAGE>
Such  procedures  include  donor testing for certain viruses, including HIV. Our
manufacturing  process  also  has  been  demonstrated to inactivate concentrated
suspensions  of HIV. While we believe such procedures are adequate to reduce the
threat  of  disease  transmission,  there  can  be  no  assurance  that:

          -    our products will not be associated with transmission of disease;
               or

          -    a  patient  otherwise infected with disease would not erroneously
               assert  a  claim  that  the  use  of our products resulted in the
               disease  transmission.

Any  such  transmission  or  alleged  transmission could have a material adverse
effect  on our ability to manufacture or market our products and could result in
litigation.

OUR FAILURE TO COMPLY WITH REGULATIONS REGARDING DISPOSAL OF HAZARDOUS MATERIALS
COULD  RESULT  IN  THE  IMPOSITION  OF  PENALTIES,  FINES  OR  SANCTIONS.

     Our  research and development and processing techniques generate waste that
is  classified as hazardous by the United States Environmental Protection Agency
and  the  New  Jersey Natural Resources Commission.  We segregate such waste and
dispose of it through licensed hazardous waste transporters. Although we believe
we  are  currently  in  compliance  in  all  material  respects  with applicable
environmental regulations, our failure to comply fully with any such regulations
could  result  in  the  imposition  of  penalties,  fines  or  sanctions.

SPECIAL  NOTE  REGARDING  FORWARD-LOOKING  STATEMENTS

     This  Annual  Report  on Form 10-K contains forward-looking statements made
pursuant  to  the  safe  harbor  provisions of the Private Securities Litigation
Reform  Act of 1995.  Forward-looking statements typically are identified by use
of  terms  such  as  "may,"  "will,"  "should,"  "plan," "expect," "anticipate,"
"estimate"  and  similar  words,  although  some  forward-looking statements are
expressed  differently.  Forward-looking  statements  represent our management's
judgment  regarding  future  events.  Although  we believe that the expectations
reflected  in  such  forward-looking  statements  are reasonable, we can give no
assurance that such expectations will prove to be correct.  All statements other
than  statements  of  historical  fact included in this prospectus regarding our
financial  position, business strategy, products, products under development and
clinical  trials,  markets,  budgets, plans, or objectives for future operations
are  forward-looking  statements.  We  cannot  guarantee  the  accuracy  of  the
forward-looking  statements,  and  you  should  be aware that our actual results
could  differ  materially from those contained in the forward-looking statements
due  to  a  number of factors, including the statements under "Risk Factors" set
forth  above  and  "Critical Accounting Policies" in "Managements Discussion and
Analysis  of  Financial  Condition  and  Results  of  Operations".


  ITEM 2. PROPERTIES

     We  lease  approximately  90,000  square feet of laboratory, production and
office  space  in one building in Branchburg, New Jersey under a lease agreement
that expires in November 2010.  The current monthly rental obligation under this
lease  is  approximately  $69,000.  We  believe  that  our  current  laboratory,
production and office space will be sufficient to meet our anticipated needs for
the  next  several  years.

  ITEM 3. LEGAL PROCEEDINGS

     The previously reported litigation in the Superior Court of California, Los
Angeles  County,  Central  District,  captioned  Regner,  et  al.,  on behalf of
themselves  and  others  similarly  situated,  v.  Inland  Eye  & Tissue Bank of
Redlands,  et  al.  and  Thacker,  et  al.,  on  behalf of themselves and others
similarly situated, v. Inland Eye & Tissue Bank of Redlands, et al. was settled,
whereby  the plaintiffs dismissed all claims against us and we agreed not to sue
the  plaintiffs  for  malicious  prosecution.

     In  June  2002,  a complaint was filed in the Superior Court of California,
Los Angeles County, Central District, captioned Joan Savitt, individually and on
behalf  of  others  similarly  situated, v. Doheny Eye & Tissue Bank, et al. The
complaint  alleges  among  other  things,  defendants,  including  LifeCell,  by
engaging  in  the  storing,


                                       23
<PAGE>
processing  and distribution of human tissue, violate the public policy and laws
of the state of California in various ways. In March 2003, we filed our response
to the complaint and discovery has commenced. We believe that the claims against
LifeCell  in this complaint are without merit and we intend to vigorously defend
against  such  action.

     We  do  not  expect  the final resolution of this matter to have a material
impact  on  our  financial  position,  results  of  operations,  or  cash flows.
However,  there  can be no assurance that the resolution of this matter will not
be  material  to  LifeCell's  financial position, results of operations, or cash
flows.




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

None.

PART II

  ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
          MATTERS

     Our  Common  Stock is listed on the NASDAQ National Market under the symbol
"LIFC."  On March 21, 2003, the last reported sale price for our Common Stock on
the  NASDAQ National Market was $2.52 per share.  The following table sets forth
the  high  and  low  sales  information  for  our  Common  Stock for the periods
indicated,  as  reported  by  the  NASDAQ  Stock  Market.

                                                            Price Range
                                                       ---------------------
                                                          High        Low
                                                       ----------  ---------
          2001    First Quarter                        $     2.81  $    1.47
                  Second Quarter                             2.57       1.25
                  Third Quarter                              2.64       1.54
                  Fourth Quarter                             2.66       1.64

          2002    First Quarter                        $     3.82  $    2.30
                  Second Quarter                             3.54       2.26
                  Third Quarter                              2.50       1.72
                  Fourth Quarter                             3.28       1.70


     As  of February 28, 2003, there were approximately 360 holders of record of
shares  of Common Stock and 35 holders of record of shares of Series B Preferred
Stock.  We  estimate  that  there  are  in excess of 8,000 beneficial holders of
Common  Stock.

DIVIDEND  POLICY

     We  have  not paid a cash dividend to holders of shares of Common Stock and
do  not  anticipate  paying cash dividends to the holders of our Common Stock in
the  foreseeable  future.  Additionally,  pursuant  to  the  terms  of  our debt
agreement  we  are  restricted  from  paying  dividends  on  our  Common  Stock.

     Holders  of our Series B Preferred Stock were entitled to receive dividends
through  September  30,  2001 at the per share annual rate of the greater of (i)
$6.00  (subject  to adjustment in certain events) and (ii) the per annum rate of
dividends  per  share  paid,  if  applicable,  by  us, on the Common Stock.  The
dividends  were  payable quarterly, at our option, in cash or shares of Series B
Preferred  Stock  or  in  a combination of cash and shares of Series B Preferred
Stock.  On  February  15,  May  15,  August  15  and  November 15, 2001, we paid
dividends  in  additional  shares  of our Series B Preferred Stock equivalent to
$1.51,  $1.48,  $1.50 and $1.51 respectively, per share to the holders of shares
of  Series B Preferred Stock.  Under the General Corporation Law of the State of
Delaware,  a corporation's board of directors may declare and pay dividends only
out  of  surplus,  including additional paid-in capital, or current net profits.


                                       24
<PAGE>
  ITEM 6. SELECTED FINANCIAL DATA.

     The  following table sets forth certain selected financial data of LifeCell
for  each  of the years in the five-year period ended December 31, 2002, derived
from  the  audited  financial  statements.  This  information  should be read in
conjunction  with  "Management's  Discussion and Analysis of Financial Condition
and  Results  of  Operations"  and  the  Financial  Statements and notes thereto
included  elsewhere  in  this  Annual  Report  on  Form  10-K.

<TABLE>
<CAPTION>
                                                              Year Ended December 31,
                                    -------------------------------------------------------------------------
                                        1998           1999           2000           2001           2002
                                    -------------  -------------  -------------  -------------  -------------
<S>                                 <C>            <C>            <C>            <C>            <C>
Operations Statement Data:
--------------------------
Revenues:
  Product revenues                  $  7,245,000   $ 11,912,000   $ 21,330,000   $ 26,560,000   $ 32,935,000
  Research grant revenues                747,000        764,000      1,442,000      1,209,000      1,493,000
                                    -------------  -------------  -------------  -------------  -------------
    Total revenues                     7,992,000     12,676,000     22,772,000     27,769,000     34,428,000
                                    -------------  -------------  -------------  -------------  -------------
Costs and expenses:
  Costs of products sold               2,837,000      3,452,000      6,949,000      8,862,000     10,134,000
  Research and development             3,376,000      3,871,000      4,523,000      4,351,000      5,015,000
  General and administrative           3,484,000      4,840,000      6,180,000      4,098,000      4,590,000
  Selling and marketing                6,500,000      7,236,000     11,779,000     11,978,000     13,288,000
  Relocation costs                            --      2,937,000             --             --             --
                                    -------------  -------------  -------------  -------------  -------------
    Total costs and expenses          16,197,000     22,336,000     29,431,000     29,289,000     33,027,000
                                    -------------  -------------  -------------  -------------  -------------
Income (loss) from operations         (8,205,000)    (9,660,000)    (6,659,000)    (1,520,000)     1,401,000
Interest and other income
    (expense), net                       864,000        468,000       (479,000)      (550,000)      (129,000)
                                    -------------  -------------  -------------  -------------  -------------
Income (loss) before income taxes     (7,341,000)    (9,192,000)    (7,138,000)    (2,070,000)     1,272,000
  Income tax benefit, net                     --             --             --             --        157,000
                                    -------------  -------------  -------------  -------------  -------------
Net income (loss)                     (7,341,000)    (9,192,000)    (7,138,000)    (2,070,000)     1,429,000
Preferred stock and deemed
  Dividends                             (723,000)      (710,000)      (593,000)    (1,591,000)            --
                                    -------------  -------------  -------------  -------------  -------------
Net income (loss) to common
  Shareholders                      $ (8,064,000)  $ (9,902,000)  $ (7,731,000)  $ (3,661,000)  $  1,429,000
                                    =============  =============   ============  =============  =============

Income (loss) per common share:
  Basic                             $      (0.72)  $      (0.83)  $      (0.54)  $      (0.20)  $       0.07
                                    =============  =============   ============  =============  =============
  Diluted                           $      (0.72)  $      (0.83)  $      (0.54)  $      (0.20)  $       0.06
                                    =============  =============  =============  =============  =============
Shares used in computing
  income (loss) per share:
  Basic                               11,229,000     11,938,000     14,372,000     18,240,000     21,176,000
                                    =============  =============   ============  =============  =============
  Diluted                             11,229,000     11,938,000     14,372,000     18,240,000     24,696,000
                                    =============  =============  =============  =============  =============


                                                                 As of December 31,
                                    -------------------------------------------------------------------------
                                        1998           1999           2000           2001           2002
                                    -------------  -------------  -------------  -------------  -------------
Balance Sheet Data:
-------------------
Cash, cash equivalents and
  short-term investments            $ 12,026,000   $  5,052,000   $  5,535,000   $  4,900,000   $  5,458,000
Working capital                       12,597,000      2,542,000      5,330,000      8,851,000     11,466,000
Total assets                          17,031,000     18,083,000     25,410,000     23,131,000     24,116,000
Notes payable and term debt                   --      2,792,000      6,285,000      2,197,000        863,000
Common stock, subject to
  Redemption                                  --      3,885,000      3,885,000      1,935,000        478,000
Accumulated deficit                  (44,476,000)   (54,378,000)   (62,109,000)   (65,770,000)   (64,341,000)
Total stockholders' equity            14,261,000      5,364,000      8,904,000     14,833,000     17,719,000
</TABLE>


                                       25
<PAGE>
  ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
          RESULTS OF OPERATIONS

     The  following discussion of operations and financial condition of LifeCell
should  be  read  in conjunction with the Financial Statements and Notes thereto
included  elsewhere  in  this  Annual  Report  on  Form  10-K.

     Special Note: Certain statements set forth below constitute forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities
Litigation  Reform  Act  of  1995.  See  "Business-Special  Note  Regarding
Forward-Looking  Statements"  and  "Business-Risk  Factors."  In  the  following
discussions,  most  percentages  and dollar amounts have been rounded to aid the
presentation.  As  a  result,  all  such  figures  are  approximations.

GENERAL AND BACKGROUND


     We develop and market biological products for the repair and replacement of
damaged  or inadequate human tissue in numerous different clinical applications.
Our  proprietary  tissue  matrix  technology  removes  cells from the tissue and
preserves  the  tissue without damaging the essential biochemical and structural
components  necessary  for normal tissue regeneration.  We currently market four
proprietary human tissue based products: AlloDerm(R) for plastic reconstructive,
burn  and  periodontal  procedures;  Cymetra(R),  a  version  of  AlloDerm  in
particulate  form  for  non-surgical  correction  of  soft  tissue  defects;
Repliform(R)  for  urologic and gynecologic procedures; and Graft Jacket(TM), an
acellular  periosteum  replacement  graft.  We  also  distribute  cryopreserved
allograft  skin for use as a temporary dressing in the treatment of burns and we
are  the  exclusive marketing agent for the SmartPReP(TM) Platelet Concentration
System  in  the  United  States  to  ear,  nose  and  throat  ("ENT"),  plastic
reconstructive  and  general  surgeons  in  hospitals.  Our development programs
include  the  potential application of our tissue matrix technology to vascular,
nerve  and  orthopedic  tissues;  investigation of human tissues as carriers for
therapeutics;  ThromboSol(TM),  a  formulation for extended storage of platelets
and  technologies  to  enhance  the  storage of red blood cells for transfusion.

CRITICAL ACCOUNTING POLICIES

     We  have  identified the policies below as critical to the understanding of
our  financial  statements. The application of these polices requires management
to  make  estimates  and  assumptions  that  affect  the valuation of assets and
expenses  during  the  reporting  period.  There can be no assurance that actual
results  will  not  differ  from  these estimates. The impact and any associated
risks  related to these policies on our business operations are discussed below.
For  a  detailed  discussion  on  the  application of these and other accounting
policies, including the impact of recent accounting pronouncement, see Note 2 in
the Notes to the Financial Statements in Part IV, Item. 15 of this Annual Report
on  Form  10-K.

     Revenue  Recognition.  We recognize revenue for product sales when title to
products  and risk of loss are transferred to customers.   Additional conditions
for  recognition  of revenue are that collection of sales proceeds is reasonably
assured  and  we  have no further performance obligations.  For products held by
our  sales  agents,  Boston  Scientific  Corporation and OMP, Inc.  we recognize
revenue  when the products are delivered to the third-party customer, as this is
when  title  and  risk  of  loss  to  the  product transfers.  Amounts billed to
customers  for  shipping  and  handling  are included in revenue at the time the
related  product revenue is recognized.   Research grant revenues are recognized
as  the work is performed, unless we have continuing performance obligations, in
which  case  revenue  is  recognized  upon the satisfaction of such obligations.

     Accounts  receivable.  We  maintain  an  allowance  for  estimated bad debt
losses  on  our accounts receivable based upon our historical experience and any
specific  customer  collection  issues that we have identified.  In addition, we
monitor  collections  and  payments  from  our  customers  and  perform  credit
evaluations of their financial condition.  Since our accounts receivable are not
concentrated  within  a  relatively  few  number of customers, we believe that a
significant  change  in  the liquidity or financial position of any one customer
would  not  have a material adverse impact on the collectability of our accounts
receivable  and  therefore  our future operating results.  While bad debt losses
depend  to a large degree on future economic conditions affecting our customers,
we  do  not  anticipate  significant  bad  debt  losses  in  2003.


                                       26
<PAGE>
     Inventories.  We  value  our inventory at the lower of cost or market, with
cost  being determined on a first-in, first-out basis. We record a provision for
excess  and  obsolete inventory based primarily on inventory quantities on hand,
our  historical  product  sales, and estimated forecast of future product demand
and  production  requirements.  Although  we  believe that our current inventory
reserves  are  adequate,  any  significant  change  in  demand  or technological
developments  could  have a significant impact on the value of our inventory and
therefore  our  future  operating  results.

     Income  Taxes.  We  apply an asset and liability approach to accounting for
income  taxes.  Deferred  tax  liabilities  and  assets  are  recognized for the
expected  future tax consequences of temporary differences between the financial
statement  and  tax  bases  of assets and liabilities using enacted tax rates in
effect  for  the  year  in  which  the  differences are expected to reverse. The
recoverability  of  deferred  tax  assets  is  dependent  upon our assessment of
whether it is more likely than not that sufficient future taxable income will be
generated  to  utilize  the  deferred  tax asset. In the event we determine that
future  taxable income will not be sufficient to utilize the deferred tax asset,
a  valuation allowance is recorded. At December 31, 2002, we have provided for a
full  valuation  allowance  against  our  deferred tax assets, which principally
relate  to federal and state net operating loss and credit carryforwards. In the
event  we  determine  that  it is more likely than not that some or all of these
assets  will be realized, the reversal of this valuation allowance would lead to
a significant tax benefit being recorded for financial reporting purposes in the
period  of  reversal.


RESULTS OF OPERATIONS

     YEARS ENDED DECEMBER 31, 2002 AND 2001

     Total  revenues for the year ended December 31, 2002 increased 24% to $34.4
million  compared  to  $27.8  million  in  2001.  The  increase  was principally
attributable  to  a  24%  increase  in  product revenues to $32.9 million in the
current  year  as  compared to $26.6 million in the prior year.  The increase in
product  revenues was largely due to increased demand for our AlloDerm products.
AlloDerm  revenues increased 35% to $17.1 million in the year ended December 31,
2002  compared  to $12.7 million in the same period in 2001.  Repliform revenues
increased  9%  to  $10.1 million in the year ended December 31, 2002 compared to
$9.3 million for the same period in 2001.  Cymetra revenues decreased 5% to $3.8
million  in  2002  compared  to  $4.0  million  in  2001.

     For  the  year  ended December 31, 2002, our sales and marketing agents and
distributors  generated  48%  of  our  total product revenues. Boston Scientific
Corporation  is  our  exclusive worldwide sales and marketing representative for
Repliform  for  use  in  the urology and gynecology markets and OMP, Inc. is our
exclusive  sales  and  marketing  representative  for  Cymetra  to  office-based
dermatologists  and plastic surgeons. During 2002, sales of our products through
Boston  Scientific  Corporation  and  OMP,  Inc.  represented  31%  and  8%,
respectively,  of  our  total  product  revenues  compared  to  35%  and  9%,
respectively, in 2001. Both Boston Scientific and OMP are paid agency fees based
on  the  amount of product revenues they generate for us. Such fees are recorded
as  selling  and  marketing  expenses. No other individual distributor generated
more  than  5%  of  our  total  product  revenues  in  2002.

     Total  revenues  were also favorably impacted by a 23% increase in research
grant  revenues,  which totaled $1.5 million in 2002 compared to $1.2 million in
2001.  This  increase  was  primarily due to an increase in research spending on
projects funded by research grants, since research grant revenues are recognized
as qualified expenses are incurred. During 2002, we were awarded grants from the
Department of Defense and the National Institute of Health totaling $927,000. As
of  December  31, 2002, approximately $3.9 million of approved grant funding was
available  to  fund  future  research  and  development  expenses  through 2004.

     Cost  of  products  sold  for  the  year  ended December 31, 2002 was $10.1
million,  or  31% of product revenues, compared to cost of products sold of $8.9
million, or 33% for the same period in 2001. The cost of products sold decreased
as  a  percentage  of  product  revenues  due  to  efficiencies  realized in our
processing  operation  as a result of volume increases and process improvements.

     Total  research  and  development expenses increased 15% to $5.0 million in
2002  compared  to  $4.4  million in 2001. The increase was primarily associated
with  higher  spending  on  research focused on the potential application of our
tissue  matrix  technology  to  vascular tissue, which is funded through a grant
from  the  Department  of  Defense,  and  to increased spending on other product
development  projects.


                                       27
<PAGE>
     General  and  administrative expenses increased 12% to $4.6 million in 2002
compared  to  $4.1  million  in  2001.  The increase was primarily the result of
increased  investor relations activities, higher recruiting expenses and payroll
related  costs.

     Selling  and  marketing  expenses  increased  11%  to $13.3 million in 2002
compared  to  $12.0 million in the same period in 2001. The increase in 2002 was
primarily attributable to higher selling expense associated with the increase in
product  revenues.  Selling  and marketing expenses decreased as a percentage of
product  revenues  from  45%  in  2001  to  40%  in  2002.

     Interest  and  other  income  (expense),  net  decreased  $421,000  in 2002
compared  to  2001.  The net decrease was due to a $517,000 decrease in interest
expense,  resulting  from  a decrease in debt outstanding, partially offset by a
$96,000  decline  in interest income resulting from lower average interest rates
during  the  period.

     In  the  year  ended  December  31,  2002, we recorded a net tax benefit of
$155,000  consisting of a provision for state income taxes of $93,000, offset by
proceeds  of  $248,000 from the sale of state net operating losses. The sale was
made  through  the  Technology Business Tax Certificate Program sponsored by the
New Jersey Economic Development Authority. No federal provision for income taxes
has  been  recorded  as we intend to utilize net operating loss carryforwards to
offset  our  estimated  federal  tax  liability  of  $492,000. We were unable to
utilize  net  operating  loss carryforwards to offset our state tax liability in
2002  because  the  State  of New Jersey enacted tax legislation during the year
suspending  the  use  of loss carryforwards to offset taxable income in 2002 and
2003.  We  have  provided  a  full  valuation allowance against our deferred tax
assets based on the uncertainty as to whether it is more likely than not that we
will  realize  future  benefit  of  these  assets.

     Net  income  for  the  year  ended  December  31,  2002  was  $1.4 million,
representing  a $3.5 million improvement from the $2.1 million loss for the same
period in 2001. The improvement in net income in 2002 was principally due to the
positive  contribution  from  higher  product  revenues.

     Preferred  stock  and  deemed  dividends  totaled $1.6 million for the year
ended December 31, 2001 and consisted of preferred stock dividends, which ceased
accruing  September 30, 2001, of $440,000 and a non-cash deemed dividend of $1.2
million  recorded  in  connection  with  issuance  of  additional shares and the
repricing  of  warrants,  pursuant  to  the terms of an investment made in 1999.

     Basic net income per common share increased to $0.07 and diluted net income
per  common  share  increased  to  $0.06  in  the  year ended December 31, 2002,
compared  to  $0.20  basic  and diluted per share net loss in the same period in
2001.  The  net  loss  per  common  share  in  2001  included  $0.02  per  share
attributable to dividends on preferred stock and $0.06 per share attributable to
the  deemed  dividend.


     YEARS ENDED DECEMBER 31, 2001 AND 2000

     Total  revenues for the year ended December 31, 2001 increased 22% to $27.8
million  compared  to  $22.8  million  in  2000.  The  increase  was principally
attributable  to  a  25%  increase  in  product revenues to $26.6 million in the
current  year  as  compared to $21.3 million in the prior year.  The increase in
product revenues was largely due to increased demand for Repliform and AlloDerm.
Repliform  revenues increased 56% to $9.3 million in the year ended December 31,
2001  compared  to  $5.9 million for the same period in 2000.  AlloDerm revenues
increased  21%  to $12.7 million in the year ended December 31, 2001 compared to
$10.5  million  in  the  same period in 2000.  Cymetra revenues contributed $4.0
million in 2001 compared to $4.1 million in 2000.  Cymetra unit demand increased
slightly,  however revenues decreased due to a reduction in the average per unit
selling  price.

     During  the  year  ended December 31, 2001, sales of our products generated
through  Boston  Scientific  Corporation  and  OMP, Inc. represented 35% and 9%,
respectively,  of  our  total  product  revenues,  compared  to  28%  and  13%,
respectively,  for  the  same  period  in  2000.

     Total  revenue  was  also  impacted  by  a  16%  decrease in research grant
revenues,  which  totaled $1.2 million in 2001 compared to $1.4 million in 2000.
This  decrease  was primarily due to a decrease in research spending on projects
funded  by  research  grants.

     Cost  of  products  sold  for  the  year  ended  December 31, 2001 was $8.9
million,  or  33% of product revenues, compared to cost of products sold of $6.9
million,  or  33%  for  the  same period in 2000. The cost of products sold as a
percentage  of  sales  remained  unchanged  for  the  year. Certain efficiencies
realized  in  manufacturing  cost,  as  a


                                       28
<PAGE>
result  of volume increases and process improvements, were offset by a reduction
in the average selling price of Cymetra.

     Total  research  and  development  expenses decreased 4% to $4.4 million in
2001  compared  to  $4.5  million  in  2000. The decrease was due primarily to a
reduction in expenditures for Cymetra product development related to the product
launch  in  2000.

     General  and  administrative expenses decreased 34% to $4.1 million in 2001
compared  to  $6.2  million  in  2000.  General and administrative expenses were
higher  in  2000  because  they  included recruiting expenses and other employee
related  costs  associated  with  hiring  new  employees in conjunction with our
relocation  from  Texas  to  New  Jersey  and  settlement  costs  and legal fees
associated  with  the  settlement  of  litigation  with  Inamed  Corporation.

     Selling  and  marketing  expenses  increased  2%  to  $12.0 million in 2001
compared  to  $11.8  million  in  the  same period in 2000. The increase in 2001
compared to 2000 was primarily attributable to an increase in agency fees earned
by  our  independent  marketing  agents  for  the  distribution of Repliform and
Cymetra,  partially  offset  by  a  reduction  in  promotion  expenses.

     Interest and other income (expense), net increased $71,000 in 2001 compared
to  2000. The net increase was due to a $14,000 increase in interest expense and
a $57,000 decline in interest income resulting from lower average interest rates
during  the  period.

     The  net  loss  for  the year ended December 31, 2001 decreased 71% to $2.1
million  compared  to  $7.1  million  in  2000. The decrease in net loss in 2001
compared to 2000 was principally due to higher product revenues and the decrease
in  general  and  administrative  expenses  discussed  above.

     Preferred stock and deemed dividends increased 150% to $1.6 million for the
year  ended  December 31, 2001 compared to $0.6 million in 2000. Preferred stock
dividends  decreased  in  2001  to  $440,000 from $636,000 as Series B Preferred
Stockholders  were  entitled to receive dividends through September 30, 2001. In
2001,  we recorded a non-cash deemed dividend of $1.2 million in connection with
the  issuance  of  additional  shares and repricing of warrants, pursuant to the
terms  of  an  investment  made  in  1999.


LIQUIDITY AND CAPITAL RESOURCES

     At  December  31,  2002,  we  had  cash,  cash  equivalents  and short-term
investments  of  $5.5  million  compared  to  $4.9  million  at the end of 2001.
Working  capital  increased  to  $11.5  million  at  December 31, 2002 from $8.9
million  at December 31, 2001.  The increase resulted principally from increases
in  cash  and  investments,  receivables  and  inventories,  partially offset by
increases in accounts payable and accrued liabilities.  Inventories and accounts
payable  increased  as  a  result  of planned higher receipts of tissue from our
organ  procurement  organizations  and  tissue  banks.   Accounts  receivable
increased  as a result of higher sales in the fourth quarter of 2002 compared to
the  same  period in 2001.   Accrued liabilities increased as a result of higher
fees  owed  to  our  sales agents based on revenue generated and higher employee
compensation  accruals  as  a  result  of  improved  Company  performance.

     Our  operating  activities  generated  net  cash  of  $2.5  million in 2002
compared  to  net  cash  used  of  $1.7 million for the same period in 2001. The
increase  in  2002  resulted  primarily from higher net income, partly offset by
increases  in  inventories  and  accounts  receivable  as  discussed  above.
Additionally,  in  2001, we used $1.8 million in cash to reduce accounts payable
and  accrued  liabilities.

     Our investing activities, which consist principally of purchases of capital
equipment  in  2002,  used  net cash of $582,000 for the year ended December 31,
2002  compared  to  $564,000  for the same period in 2001. In 2003, we expect to
invest  approximately  $2.3  million  for  the  purchase  of  capital  equipment
principally  related  to  the  implementation of an Enterprise Resource Planning
(ERP)  System and manufacturing equipment to support anticipated revenue growth.

     Our  financing  activities used $1.3 million in 2002 for principal payments
on long-term debt. For the year ended December 31 2001, our financing activities
provided  net  cash of $1.7 million as the result of the receipt of $5.9 million
from  the  proceeds  of a private placement of common stock, net of $4.2 million
used to reduce notes payable and long-term debt. At December 31, 2002, we had an
aggregate  of  $863,000 outstanding under our borrowing arrangements compared to
$2.2  million  outstanding  at  December  31,  2001.


                                       29
<PAGE>
     In  January  2003,  we  secured  a  $4  million  credit  facility through a
financial  institution.  The  credit facility consists of a $2 million revolving
line of credit due in January 2004 and an equipment line for up to an additional
$2  million  due  in January 2005.  The credit facility is collateralized by our
accounts  receivable,  inventory,  intellectual  property,  intangible and fixed
assets.  The  agreement  contains  certain  financial covenants and a subjective
acceleration  clause.  The  revolving  line of credit bears interest at the bank
prime  rate  plus  0.75%  and the equipment term note bears interest at the bank
prime  rate  plus  1.5%  and  requires  equal  monthly principal payments over a
twenty-four month term.  In January 2003, we received proceeds of $880,000 under
the  equipment  line  portion  of  the credit facility and used such proceeds to
repay  all  of  our  debt and accrued interest outstanding at December 31, 2002.
The  balance  of  the  equipment  line  is available to fund equipment purchases
through  March  2003.

     The  following table reflects a summary of our contractual cash obligations
as  of  December  31,  2002,  after  giving  effect  to  the  refinancing of our
outstanding  indebtedness:

<TABLE>
<CAPTION>
                                                   Payments Due by Period
                         ----------------------------------------------------------------------------
                                         Less than one
                              Total           year       1 to 3 years   4 to 5 years   After 5 years
                         --------------  -------------  -------------  --------------  --------------
<S>                      <C>             <C>            <C>            <C>             <C>
Long-term debt(1)        $      880,000  $     440,000  $     440,000  $           --  $           --
Operating leases              7,076,000        833,000      1,724,000       1,839,000       2,680,000
                         --------------  -------------  -------------  --------------  --------------
Total contractual
    cash obligations     $    7,956,000  $   1,273,000  $   2,164,000  $    1,839,000      $2,680,000
                         ==============  =============  =============  ==============  ==============

        (1)  Under our debt agreements, the maturity of our outstanding debt could be accelerated if
             we do not maintain certain covenants.
</TABLE>

     We  believe  that  our  current  cash  resources  together with anticipated
product revenues, committed research and development grant funding and remaining
availability under our credit facility will be sufficient to finance our planned
operations,  research  and  development programs and fixed asset requirements in
the foreseeable future.  However, there can be no assurance that such sources of
funds  will  be  sufficient  to meet our long-term needs and as a result, we may
need  additional  funding.  There  can  be  no assurance that we will be able to
obtain  additional  funding  from either debt or equity financing, collaborative
arrangements  or  other  sources  on  terms  acceptable  to  us, or at all.  Any
additional equity financing may be dilutive to stockholders, and debt financing,
if  available,  may  involve  significant  restrictive covenants.  Collaborative
arrangements,  if  necessary  to  raise  additional  funds,  may  require  us to
relinquish  our  rights  to  certain  of our technologies, products or marketing
territories.

     It  is  possible  that  our  results of operations or liquidity and capital
resources  could  be  adversely  affected  by  the  ultimate  outcome of pending
litigation  or  as  a  result of the cost of contesting such legal action. For a
discussion  of  these matters see Note 12 of "Notes to Financial Statements" and
Part  I.,  Item  3.  "Legal  Proceedings".

     At December 31, 2002, there were 113,836 shares of common stock outstanding
that are subject to redemption by us under certain conditions. These shares were
issued  to one investor in a private placement in November 1999. Pursuant to the
terms of the purchase agreement, if we do not maintain a listing on or quotation
of  our shares of common stock on a U.S. stock exchange or market system we will
be  required  to  redeem  such  shares  at  $4.20  per  share or $478,000 in the
aggregate.

     Since  our  inception  in  1986  through  2001  we  incurred net losses and
therefore  have  not  been  subject  to federal income taxes. As of December 31,
2002,  we had net operating loss ("NOL") and research and development tax credit
carryforwards for federal income tax purposes of $56.7 million and $1.0 million,
respectively,  available to reduce future federal income taxes. Federal tax laws
provide  for  a  limitation  on  the  use  of  NOL  and tax credit carryforwards
generated  prior  to  certain  ownership  changes. Our public offering of common
stock  in  1997 resulted in an ownership change for federal income tax purposes,
and  as  a  result  we  estimate that at December 31, 2002, $24.1 million of our
total federal NOL carryforwards is subject to an annual limitation. Accordingly,
if we generate taxable income in any year in excess of our limitation, we may be
required  to  pay  federal  income  taxes  even  though  we  have  unexpired NOL
carryforwards.  In  addition, we have $12.3 million of NOL's available to reduce
future  state  income  taxes.  In  2002,  the  State  of  New Jersey enacted tax
legislation suspending the use of loss carryforwards to offset taxable income in
2002  and  2003. Accordingly, if we generate taxable income for state income tax
purposes in 2003, we will be required to pay New Jersey income taxes even though
we  have  unexpired  NOL  carryforwards.  In  January 2003, we realized $235,000
through  the  sale  and  transfer  of  $3.0  million  of  state  tax


                                       30
<PAGE>
net  operating  losses.  The  sale  and transfer was made through the Technology
Business  Tax  Certificate  Program  sponsored  by  the  New  Jersey  Economic
Development  Authority.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

     We  are  exposed  to  changes  in  interest  rates  primarily from our debt
arrangements  and,  secondarily,  from  our  investments  in certain securities.
Although  our  short-term  investments are available for sale, we generally hold
such  investments  until  maturity.  We do not utilize derivative instruments or
other  market  risk  sensitive  instruments  to manage exposure to interest rate
changes.  We  believe  that  a  hypothetical  100  basis  point  adverse move in
interest  rates  along the entire interest rate yield curve would not materially
affect  the  fair  value  of  our  interest  sensitive  financial instruments at
December  31,  2002.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The  financial  statements and supplementary financial information required
to  be  filed under this Item are presented commencing on page F-1 of the Annual
Report  on  Form  10-K,  and  are  incorporated  herein  by  reference.

ITEM 9. CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

        None




                                       31
<PAGE>
PART III

ITEM 10.  DIRECTORS  AND  EXECUTIVE  OFFICERS  OF  THE  REGISTRANT

     The information required by this Item will be set forth in the Registrant's
Proxy  Statement relating to the annual meeting of the Registrant's stockholders
scheduled to be held on May 30, 2003, under the captions "Election of Directors"
and  "Executive  Compensation,"  and  such information is incorporated herein by
reference.


ITEM 11.  EXECUTIVE COMPENSATION

     The information required by this Item will be set forth in the Registrant's
Proxy  Statement relating to the annual meeting of the Registrant's stockholders
scheduled  to  be  held  on  May  30,  2003,  under  the  caption  "Executive
Compensation,"  and  such  information  is  incorporated  herein  by  reference.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
          RELATED STOCKHOLDER MATTERS

     The information required by this Item will be set forth in the Registrant's
Proxy  Statement relating to the annual meeting of the Registrant's stockholders
scheduled  to  be held on May 30, 2003, under the caption "Security Ownership of
Certain  Beneficial  Owners and Management and Related Stockholder Matters," and
such  information  is  incorporated  herein  by  reference.

ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information required by this Item will be set forth in the Registrant's
Proxy  Statement relating to the annual meeting of the Registrant's stockholders
scheduled  to  be held on May 30, 2003, under the caption "Certain Relationships
and  Related  Transactions,"  and  such  information  is  incorporated herein by
reference.


ITEM 14.  CONTROLS AND PROCEDURES

     Within  90  days  prior  to  the  date  of  this  report, we carried out an
evaluation,  under the supervision and with the participation of our management,
including  our  Chief  Executive  Officer  and  Chief  Financial Officer, of the
effectiveness  of  the  design  and  operation  of  our  disclosure controls and
procedures  pursuant  to  Securities  Exchange  Act Rule 13a-14. Based upon that
evaluation,  our  Chief  Executive Officer and Chief Financial Officer concluded
that  our  disclosure  controls  and procedures are effective in timely alerting
them  to  material  information  relating  to  us required to be included in our
periodic  SEC  filings.  There  have been no significant changes in our internal
controls  or  in other factors that could significantly affect internal controls
subsequent  to  the  date  of their evaluation, including any corrective actions
with  regard  to  significant  deficiencies  and  material  weaknesses.


                                       32
<PAGE>
PART IV

ITEM 15.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)     DOCUMENTS INCLUDED IN THIS REPORT:

2.   FINANCIAL STATEMENT SCHEDULES
          All  other  schedules are omitted because they are not applicable, not
     required, or because the required information is contained in the Company's
     financial  statements  and  the  notes  thereto.

(B)  REPORTS ON FORM 8-K:

     On  December  23,  2002,  the  Company  announced  the  appointment of Lisa
     Colleran  to  the  position  of  Vice  President  -  Marketing and Business
     Development.

     On  January  15,  2003,  the Company announced that it secured a $4,000,000
     credit  facility  through  Silicon  Valley  Bank.

     On  February  25, 2003, the Company announced that effective April 1, 2003,
     Dr.  Stephen Livesey will transition from Chief Scientific Officer to Chief
     Scientist.

     On  March  3,  2003, the Company announced its fourth quarter and full year
     2002  operating  results  as  well  as  guidance for 2003. The Company also
     announced  that  it  planned  to  conduct  a conference call to discuss the
     operating  results  and  related  matters.

(C)  EXHIBITS:

          Exhibits  designated by the symbol * are filed with this Annual Report
     on  Form 10-K. All exhibits not so designated are incorporated by reference
     to  a  prior  filing  as  indicated.

          Exhibits  designated  by  the  symbol  **  are management contracts or
     compensatory  plans or arrangements that are required to be filed with this
     report  pursuant  to  this  Item  15.

          LifeCell undertakes to furnish to any stockholder so requesting a copy
     of  any  of  the  following  exhibits  upon  payment  to the Company of the
     reasonable  costs  incurred  by  Company  in  furnishing  any such exhibit.

<TABLE>
<CAPTION>
<S>     <C>
3.1     Restated Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the
        Company's Quarterly Report on Form 10-Q for the period ended June 30, 1998, filed with the Securities
        and Exchange Commission ("the Commission") on August 10, 1998).


                                       33
<PAGE>
3.2     Amended and Restated By-laws (incorporated by reference to Exhibit 3.2 to the Company's Quarterly
        Report on Form 10-Q for the period ended June 30, 1996, filed with the Commission on August 14,
        1996.)

10.1*   LifeCell Corporation Amended and Restated 1992 Stock Option Plan, as amended (incorporated by
        reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended June 30,
        1998, filed with the Commission on August 10, 1998).

10.2*   LifeCell Corporation Second Amended and Restated 1993 Non-Employee Director Stock Option Plan, as
        amended (incorporated by reference to Exhibit 10.4 to the Company's Annual Report on Form 10-K for
        the fiscal year ended December 31, 1996).

10.3    Securities Purchase Agreement dated November 18, 1996, between LifeCell Corporation and the
        Investors named therein (incorporated by reference to Exhibit 10.15 to the Company's Annual Report on
        Form 10-K for the fiscal year ended December 31, 1996).

10.4    Voting Agreement dated November 18, 1996, as amended as of April 15, 1999 between LifeCell
        Corporation and certain stockholders named therein (incorporated by reference to Exhibit 10.1 to the
        Company's Quarterly Report on Form 10-Q filed with the Commission on May 17, 1999).

10.5    Second Amended and Restated Voting Agreement dated as of April 13, 2000 among the Company and the
        Series B Preferred Shareholders (incorporated by reference to Exhibit 10.1 of the Company's Quarterly
        Report on Form 10-Q filed with the Commission on May 12, 2000).

10.6    Waiver Agreement dated as of March 11, 2002 among the Company and certain holders of the Series B
        preferred stock (incorporated by reference to Exhibit 10.31 to the Company's Annual Report on Form 10-
        K for the fiscal year ended December 31, 2001).

10.7    Registration Rights Agreement dated November 18, 1996, between LifeCell Corporation and certain
        stockholders named therein (incorporated by reference to Exhibit 10.17 to the Company's Annual Report
        on Form 10-K for the fiscal year ended December 31, 1996).

10.8    Form of Stock Purchase Warrant dated November 18, 1996, issued to each of the warrant holders named
        on Schedule 10.18 attached thereto (incorporated by reference to Exhibit 10.18 to the Company's Annual
        Report on Form 10-K for the fiscal year ended December 31, 1996).

10.9    Stock Purchase Warrant dated November 18, 1996, issued to Gruntal & Co., Incorporated (incorporated
        by reference to Exhibit 10.19 to Amendment No. 1 to the Company's Annual Report on Form 10-K for the
        fiscal year ended December 31, 1996 on Form 10-K/A).

10.10*  Agreement dated August 19, 1998, between LifeCell Corporation and Paul M. Frison (incorporated by
        reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the period ended
        September 30, 1998 filed with the Commission on November 13, 1998).

10.11*  Agreement dated July 1, 1997, between LifeCell Corporation and Stephen A. Livesey (incorporated by
        reference to Exhibit 10.20 to the Company's Registration Statement No. 333-37123 on Form S-2 filed
        with the Commission on October 3, 1997).

10.12*  Agreement dated October 5, 1998 between LifeCell Corporation and Paul G. Thomas (incorporated by
        reference to Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q filed with the Commission on
        November 13, 1998.)


                                       34
<PAGE>
10.13*  Letter agreement dated September 8, 1998 between LifeCell Corporation and Paul G. Thomas, as
        amended by letter agreements dated September 9, 1998 and September 29, 1998 (incorporated by
        reference to Exhibit 10.3 to the Company's Quarterly Report on Form 10-Q filed with the Commission on
        November 13, 1998.)

10.14   Lease Agreement by and between Maurice M. Weill, Trustee for Branchburg Property and LifeCell
        Corporation dated June 17, 1999 (incorporated by reference to Exhibit 10.1 of the Company's Quarterly
        Report on Form 10-Q filed with the Commission on November 15, 1999.)

10.15   Amendment dated September 21, 1999 to Lease Agreement by and between Maurice M. Weill, Trustee
        for Branchburg Property and LifeCell Corporation (incorporated by reference to Exhibit 10.16 to the
        Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000).

10.16   Amendment dated April 7, 2000 to Lease Agreement by and between Maurice M. Weill, Trustee for
        Branchburg Property and LifeCell Corporation (incorporated by reference to Exhibit 10.17 to the
        Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000).

10.17   Stock Purchase and Registration Rights Agreements dated November 17, 1999 between LifeCell
        Corporation and The Tail Wind Fund, Ltd. (incorporated by reference to Exhibit 10.18 to the Company's
        Annual Report on Form 10-K for the fiscal year ended December 31, 1999).

10.18   Stock Purchase Warrant dated November 17, 1999, issued to The Tail Wind Fund, Ltd. (incorporated by
        reference to Exhibit 4.4 to the Company's Registration Statement on Form S-3 (Registration No. 333-
        94715) filed with the Commission on January 14, 2000.)

10.19   Loan Agreement dated December 6, 1999 between LifeCell Corporation and Transamerica Business
        Credit Corporation (incorporated by reference to Exhibit 10.17 to the Company's Annual Report on Form
        10-K for the fiscal year ended December 31, 1999).

10.20   LifeCell Corporation Year 2000 Stock Option Plan (incorporated by reference to Exhibit 10.1 of the
        Company's Quarterly Report on Form 10-Q filed with the Commission on July 28, 2000).

10.21   Loan Agreement dated May 31, 2000 between LifeCell Corporation and Public Service Millennium
        Economic Development Fund L.L.C. (incorporated by reference to Exhibit 10.2 of the Company's
        Quarterly Report on Form 10-Q filed with the Commission on July 28, 2000).

10.22   Amendment dated as of May 1, 2001 to the Loan Agreement dated May 31, 2000 between LifeCell
        Corporation and Public Service Millennium Economic Development Fund L.L.C. (incorporated by
        reference to Exhibit 10.29 to the Company's Annual Report on Form 10-K for the fiscal year ended
        December 31, 2001).

10.23   Amendment (Second) dated as of February 15, 2002 to the Loan Agreement dated May 31, 2000 between
        LifeCell Corporation and Public Service Millennium Economic Development Fund L.L.C. (incorporated
        by reference to Exhibit 10.30 to the Company's Annual Report on Form 10-K for the fiscal year ended
        December 31, 2001).

10.24   Loan Agreement dated June 9, 2000 between LifeCell Corporation and   The New Jersey Economic
        Development Authority (incorporated by reference to Exhibit 10.3 of the Company's Quarterly Report on
        Form 10-Q filed with the Commission on July 28, 2000).

10.25   Form of Purchase Agreement dated September 1, 2000 between LifeCell Corporation and Certain
        Investors (incorporated by reference to Exhibit 10.1 of the Company's Quarterly Report on Form 10-Q
        filed with the Commission on November 13, 2000).


                                       35
<PAGE>
10.26*  Form of Change in Control Agreement (incorporated by reference to Exhibit 10.26 to the Company's
        Annual Report on Form 10-K for the fiscal year ended December 31, 2000).

10.27   Stock Purchase Warrant dated October 31, 2000, issued to Prudential Securities Incorporated
        (incorporated by reference to Exhibit 10.27 to the Company's Annual Report on Form 10-K for the fiscal
        year ended December 31, 2000).

10.28   Stock Purchase Warrant dated October 31, 2000, issued to Gruntal & Co., L.L.C. (incorporated by
        reference to Exhibit 10.28 to the Company's Annual Report on Form 10-K for the fiscal year ended
        December 31, 2000).

10.29   Form of Purchase Agreement dated June 29, 2001 between LifeCell Corporation and Certain Investors
        (incorporated by reference to Exhibit 10.29 of the Company's Form 8-K filed with the Commission on
        July 11, 2001).

10.30   Form of Purchase Agreement dated June 29, 2001 between LifeCell Corporation and Certain Investors
        (incorporated by reference to Exhibit 10.30 of the Company's Form 8-K filed with the Commission on
        July 11, 2001).

10.31   Form of Warrants dated July 10, 2001 between LifeCell Corporation and Certain Investors (incorporated
        by reference to Exhibit 10.31 of the Company's Form 8-K filed with the Commission on July 11, 2001).

10.32   Loan and Security Agreement dated January 15, 2003 between LifeCell Corporation and Silicon Valley
        Bank (incorporated by reference to Exhibit 10.32 of the Company's Form 8-K filed with the Commission
        on February 14, 2003).

10.33   Revolving Promissory Note in the principal amount of $2,000,000 between LifeCell Corporation and
        Silicon Valley Bank (incorporated by reference to Exhibit 10.33 of the Company's Form 8-K filed with
        the Commission on February 14, 2003).

10.34   Equipment Term Note in the principal amount of $2,000,000 between LifeCell Corporation and Silicon
        Valley Bank (incorporated by reference to Exhibit 10.34 of the Company's Form 8-K filed with the
        Commission on February 14, 2003).

23.1 *  Consent of PricewaterhouseCoopers LLP.

99.1    Representation letter dated March 22, 2002 regarding the audit performed by Arthur Andersen
        (incorporated by reference to Exhibit 99.1 to the Company's Annual Report on Form 10-K for the fiscal
        year ended December 31, 2001).

99.2 *  Certification of the Registrant's Chief Executive Officer, Paul G. Thomas, pursuant to Section 906 of the
        Sarbanes-Oxley Act of 2002


99.3 *  Certification of the Registrant's Chief Financial Officer, Steven T. Sobieski, pursuant to Section 906 of
        the Sarbanes-Oxley Act of 2002
</TABLE>


                                       36
<PAGE>
                                   SIGNATURES

     In  accordance  with  Section 13 or 15(d) of the Securities Exchange Act of
1934,  the  registrant  caused  this  report  to  be signed on its behalf by the
undersigned,  thereunto  duly  authorized.

                                     LIFECELL CORPORATION
                                         (Registrant)


                                     By:  /s/ Paul G. Thomas
                                        ----------------------------------------
                                          Paul G. Thomas
                                          President, Chief Executive Officer and
                                          Chairman of the Board of Directors

Dated: March 26, 2003.

     In  accordance  with  the  Securities Exchange Act of 1934, this report has
been  signed  by  the  following  persons on behalf of the registrant and in the
capacities  and  on  the  dates  indicated:


<TABLE>
<CAPTION>
SIGNATURE                                      TITLE                             DATE
------------------------  ------------------------------------------------  --------------
<S>                       <C>                                               <C>


/s/ Paul G. Thomas        President and Chief Executive                     March 26, 2003
------------------------  Officer (Principal Executive Officer) and
Paul G. Thomas            Chairman of the Board of Directors


/s/ Steven T. Sobieski    Vice President and Chief Financial                March 26, 2003
------------------------  Officer (Principal Financial Officer)
Steven T. Sobieski


/s/ Bradly C. Tyler       Controller                                        March 26, 2003
------------------------  (Principal Accounting Officer)
Bradly C. Tyler


/s/ Michael E. Cahr       Director                                          March 26, 2003
------------------------
Michael E. Cahr


/s/ James G. Foster       Director                                          March 26, 2003
------------------------
James G. Foster


/s/ David Fitzgerald      Director                                          March 26, 2003
------------------------
David Fitzgerald


/s/ Stephen A. Livesey    Executive Vice President, Chief Science Officer   March 26, 2003
------------------------  Director
Stephen A. Livesey


/s/ Jonathan Silverstein  Director                                          March 26, 2003
------------------------
Jonathan Sliverstein
</TABLE>


                                       37
<PAGE>
    CERTIFICATIONS PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Paul G. Thomas, certify that:

1.  I  have  reviewed  this  annual report on Form 10-K of LifeCell Corporation;

2.  Based  on  my  knowledge,  this  annual  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 annual
report;

3.  Based  on  my  knowledge,  the  financial  statements,  and  other financial
information  included  in  this  annual  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 annual report;

4.  The  registrant's  other  certifying  officers  and  I  are  responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-14  and  15d-14)  for  the  registrant  and  we  have:

     a) designed such disclosure controls and procedures 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  annual  report is being
     prepared;

     b)  evaluated the effectiveness of the registrant's disclosure controls and
     procedures  as  of  a  date within 90 days prior to the filing date of this
     annual  report  (the  "Evaluation  Date");  and

     c)  presented in this annual report our conclusions about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation  Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most  recent evaluation, to the registrant's auditors and the audit committee of
registrant's  board  of  directors  (or  persons  performing  the  equivalent
functions):

     a)  all  significant  deficiencies  in  the design or operation of internal
     controls  which  could adversely affect the registrant's ability to record,
     process,  summarize  and  report financial data and have identified for the
     registrant's  auditors  any  material  weaknesses in internal controls; and

     b)  any  fraud,  whether or not material, that involves management or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls;  and

6.  The  registrant's  other  certifying  officers  and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard  to  significant  deficiencies  and  material  weaknesses.

Date: March 26, 2003


/s/ Paul G. Thomas
------------------
Paul G. Thomas
Chairman of the Board
President and Chief Executive Officer


                                       38
<PAGE>
I, Steven T. Sobieski, certify that:

1.   I have reviewed this annual report on Form 10-K of LifeCell Corporation;

2.  Based  on  my  knowledge,  this  annual  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 annual
report;

3.  Based  on  my  knowledge,  the  financial  statements,  and  other financial
information  included  in  this  annual  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 annual report;

4.  The  registrant's  other  certifying  officers  and  I  are  responsible for
establishing  and  maintaining disclosure controls and procedures (as defined in
Exchange  Act  Rules  13a-14  and  15d-14)  for  the  registrant  and  we  have:

     a) designed such disclosure controls and procedures 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  annual  report is being
     prepared;

     b)  evaluated the effectiveness of the registrant's disclosure controls and
     procedures  as  of  a  date within 90 days prior to the filing date of this
     annual  report  (the  "Evaluation  Date");  and

     c)  presented in this annual report our conclusions about the effectiveness
     of the disclosure controls and procedures based on our evaluation as of the
     Evaluation  Date;

5. The registrant's other certifying officers and I have disclosed, based on our
most  recent evaluation, to the registrant's auditors and the audit committee of
registrant's  board  of  directors  (or  persons  performing  the  equivalent
functions):

     a)  all  significant  deficiencies  in  the design or operation of internal
     controls  which  could adversely affect the registrant's ability to record,
     process,  summarize  and  report financial data and have identified for the
     registrant's  auditors  any  material  weaknesses in internal controls; and

     b)  any  fraud,  whether or not material, that involves management or other
     employees  who  have  a  significant  role  in  the  registrant's  internal
     controls;  and

6.  The  registrant's  other  certifying  officers  and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard  to  significant  deficiencies  and  material  weaknesses.

Date: March 26, 2003


/s/ Steven T. Sobieski
----------------------
Steven T. Sobieski
Vice President, Finance
Chief Financial Officer and Secretary


                                       39
<PAGE>
<TABLE>
<CAPTION>
1.   FINANCIAL STATEMENTS
                                                                                             PAGE
                                                                                             ----
<C>  <S>                                                                                     <C>

     Reports of Independent Public Accountants . . . . . . . . . . . . . . . . . . . . . . .  F-1

     Balance Sheets as of December 31, 2001 and 2002 . . . . . . . . . . . . . . . . . . . .  F-3

     Statements of Operations for the years ended December 31, 2000, 2001 and 2002 . . . . .  F-4

     Statements of Stockholders' Equity for the years ended December 31, 2000, 2001 and 2002  F-5

     Statements of Cash Flows for the years ended December 31, 2000, 2001 and 2002 . . . . .  F-6

     Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  F-7
</TABLE>


<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



To the Board of Directors and Shareholders:


     In  our opinion, the accompanying balance sheet as of December 31, 2002 and
the  related  statements  of  operations,  shareholders'  equity  and cash flows
present  fairly,  in  all  material respects, the financial position of LifeCell
Corporation at December 31, 2002, and the results of its operations and its cash
flows for the year then ended in conformity with accounting principles generally
accepted  in  the  United  States of America. These financial statements are the
responsibility  of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of  these statements in accordance with auditing standards generally accepted in
the  United  States of America, which require that we plan and perform the audit
to  obtain  reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting  the  amounts  and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating  the  overall  financial  statement presentation. We believe that our
audit  provides  a reasonable basis for our opinion. The financial statements of
LifeCell  Corporation  as of December 31, 2001, and for each of the two years in
the  period  ended  December  31,  2001,  were  audited  by  other  independent
accountants  who have ceased operations. Those independent accountants expressed
an  unqualified  opinion  on  those  financial  statements in their report dated
February  25,  2002.


PRICEWATERHOUSECOOPERS, LLP


Florham Park, New Jersey
February 12, 2003



                                      F - 1
<PAGE>
                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS



THE  FOLLOWING REPORT IS A COPY OF A REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN
LLP AND HAS NOT BEEN REISSUED BY ARTHUR ANDERSEN LLP.

To Lifecell Corporation:

     We  have audited the accompanying balance sheets of LifeCell Corporation (a
Delaware  corporation)  as  of  December  31,  2000  and  2001,  and the related
statements  of  operations,  stockholders' equity and cash flows for each of the
three  years  in  the period ended December 31, 2001. These financial statements
are  the  responsibility  of  the Company's management. Our responsibility is to
express  an  opinion  on  these  financial  statements  based  on  our  audits.

     We  conducted  our  audits  in accordance with auditing standards generally
accepted in the United States.  Those standards require that we plan and perform
the  audit to obtain reasonable assurance about whether the financial statements
are  free  of  material  misstatement.  An  audit  includes examining, on a test
basis,  evidence  supporting  the  amounts  and  disclosures  in  the  financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made  by  management,  as well as evaluating the overall
financial  statement  presentation.  We  believe  that  our  audits  provide  a
reasonable  basis  for  our  opinion.

     As  more fully described in Note 8 to the financial statements, the Company
has  revised  the  balance  sheet  as  of December 31, 2000 and the statement of
stockholders'  equity  for the years ended December 31, 1999 and 2000 to reflect
the  reclassification  of common stock, subject to redemption from stockholders'
equity.

     In  our opinion, the financial statements referred to above present fairly,
in  all  material respects, the financial position of LifeCell Corporation as of
December 31, 2000 and 2001, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2001, in conformity
with  accounting  principles  generally  accepted  in  the  United  States.


                                              ARTHUR ANDERSEN LLP

Philadelphia, Pennsylvania
February 25, 2002



                                      F - 2
<PAGE>
<TABLE>
<CAPTION>
                                         LIFECELL CORPORATION

                                            BALANCE SHEETS

                                                                                 DECEMBER 31,
                                                                         ----------------------------
                                                                             2001           2002
                                                                         -------------  -------------
<S>                                                                      <C>            <C>
                                   Assets
Current assets
  Cash and cash equivalents                                              $  4,650,000   $  5,202,000
  Short-term investments                                                      250,000        256,000
  Receivables, less allowance for doubtful accounts of
    114,000 in 2001 and $40,000 in 2002                                     3,799,000      4,332,000
  Inventories                                                               4,691,000      6,367,000
  Prepayments and other                                                       319,000        257,000
                                                                         -------------  -------------
      Total current assets                                                 13,709,000     16,414,000

Fixed assets, net                                                           8,728,000      7,091,000
Other assets, net                                                             694,000        611,000
                                                                         -------------  -------------
Total assets                                                             $ 23,131,000   $ 24,116,000
                                                                         =============  =============

                      Liabilities and Stockholders' Equity
Current liabilities
  Accounts payable                                                       $    792,000   $  1,438,000
  Accrued liabilities                                                       2,732,000      3,173,000
  Current portion of long-term debt                                         1,334,000        337,000
                                                                         -------------  -------------
      Total current liabilities                                             4,858,000      4,948,000
                                                                         -------------  -------------

Deferred revenue                                                              572,000        351,000
                                                                         -------------  -------------
Long-term debt                                                                863,000        526,000
                                                                         -------------  -------------
Other liabilities                                                              70,000         94,000
                                                                         -------------  -------------

Commitments and contingencies

Temporary equity
  Common stock, subject to redemption, $.001 par value, 460,636
    and 113,836 shares issued and outstanding in 2001 and 2002              1,935,000        478,000
                                                                         -------------  -------------

Stockholders' equity
  Series B preferred stock, $.001 par value, 182,205 shares authorized,
    101,726 and 74,278 shares issued and outstanding in 2001 and 2002
    (liquidation preference at December 31, 2002 of $7,428,000)                     -              -
  Undesignated preferred stock, $.001 par value 1,817,795
    shares authorized, none issued and outstanding                                  -              -
  Common stock, $.001 par value, 48,000,000 shares authorized;
    19,851,868 and 21,193,159 shares issued and oustanding in
    2001 and 2002                                                              20,000         21,000
  Warrants outstanding to purchase shares of common stock,
    2,284,211 outstanding  in 2001 and 2002                                 4,002,000      4,002,000
  Additional paid-in capital                                               76,581,000     78,037,000
  Accumulated deficit                                                     (65,770,000)   (64,341,000)
                                                                         -------------  -------------
      Total stockholders' equity                                           14,833,000     17,719,000
                                                                         -------------  -------------
Total liabilities and stockholders' equity                               $ 23,131,000   $ 24,116,000
                                                                         =============  =============
</TABLE>


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


                                      F - 3
<PAGE>
<TABLE>
<CAPTION>
                              LIFECELL CORPORATION
                            STATEMENTS OF OPERATIONS


                                                 For the Year Ended December 31,
                                            ----------------------------------------
                                                2000          2001          2002
                                            ------------  ------------  -------------
<S>                                         <C>           <C>           <C>
Revenues:

  Product revenues                           $21,330,000   $26,560,000   $32,935,000
  Research grant revenues                      1,442,000     1,209,000     1,493,000
                                             ------------  ------------  ------------

    Total revenues                            22,772,000    27,769,000    34,428,000
                                             ------------  ------------  ------------

Costs and expenses:

  Cost of products sold                        6,949,000     8,862,000    10,134,000
  Research and development                     4,523,000     4,351,000     5,015,000
  General and administrative                   6,180,000     4,098,000     4,590,000
  Selling and marketing                       11,779,000    11,978,000    13,288,000
                                             ------------  ------------  ------------

    Total costs and expenses                  29,431,000    29,289,000    33,027,000
                                             ------------  ------------  ------------

Income (loss) from operations                 (6,659,000)   (1,520,000)    1,401,000

  Interest and other income (expense), net      (479,000)     (550,000)     (129,000)
                                             ------------  ------------  ------------

Income (loss) before income taxes             (7,138,000)   (2,070,000)    1,272,000

  Income tax benefit, net                             --            --       157,000

Net income (loss)                             (7,138,000)   (2,070,000)    1,429,000

Preferred stock and deemed dividends            (593,000)   (1,591,000)           --
                                             ------------  ------------  ------------

Net income (loss) applicable to
  common stockholders                        $(7,731,000)  $(3,661,000)  $ 1,429,000
                                             ============  ============  ============

Net income (loss) per common share:
   Basic                                     $     (0.54)  $     (0.20)  $      0.07
                                             ============  ============  ============
   Diluted                                   $     (0.54)  $     (0.20)  $      0.06
                                             ============  ============  ============

Shares used in computing net income (loss)
  per common share:
   Basic                                      14,372,083    18,240,431    21,175,602
                                             ============  ============  ============
   Diluted                                    14,372,083    18,240,431    24,696,376
                                             ============  ============  ============
</TABLE>

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


                                      F - 4
<PAGE>
<TABLE>
<CAPTION>
                                                        LIFECELL CORPORATION
                                                 STATEMENTS OF STOCKHOLDERS' EQUITY

                                                        SERIES B                              WARRANTS TO PURCHASE
                                                     PREFERRED STOCK       COMMON STOCK          COMMON STOCK           ADDITIONAL
                                                     ---------------------------------------------------------------     PAID-IN
                                                     SHARES   AMOUNT     SHARES    AMOUNT     SHARES       AMOUNT        CAPITAL
                                                    ------------------------------------------------------------------------------
<S>                                                 <C>       <C>      <C>         <C>      <C>          <C>          <C>
Balance at December 31, 1999                        118,016         -  11,974,643   12,000   3,466,399      888,000    58,842,000
  Stock options exercised                                 -         -     206,311        -           -            -       726,000
  Warrants exercised                                      -         -     299,324        -    (327,896)     (26,000)    1,227,000
  Warrants expired                                        -         -           -        -     (60,000)           -             -
  Warrants issued                                         -         -           -        -     291,795      407,000      (407,000)
  Conversion of Series B preferred stock            (24,927)        -     804,090    1,000           -            -         1,000
  Common stock issued for cash                            -         -   2,500,000    3,000           -            -     9,055,000
  Dividends on Series B preferred stock               2,842         -           -        -           -            -       284,000
  Net loss                                                -         -           -        -           -            -             -
                                                    ------------------------------------------------------------------------------

Balance at December 31, 2000                         95,931         -  15,784,368   16,000   3,370,298    1,269,000    69,728,000
  Stock options exercised                                 -         -         135        -           -            -             -
  Warrants issued                                         -         -           -        -   2,224,030    3,231,000    (3,231,000)
  Warrants expired                                        -         -           -        -  (3,310,117)    (498,000)      498,000
  Common stock issued for cash                            -         -   3,125,000    4,000           -            -     5,906,000
  Reclassification of common stock, subject to
    redemption                                            -         -     464,364        -           -            -     1,950,000
  Dividends on Series B preferred stock               5,795         -           -        -           -            -       579,000
  Deemed dividend recorded in connection with
    issuance of additional shares of common stock
    and warrant re-pricing                                -         -     478,001        -           -            -     1,151,000
  Net loss                                                -         -           -        -           -            -             -
                                                    ------------------------------------------------------------------------------

Balance at December 31, 2001                        101,726   $     -  19,851,868  $20,000   2,284,211   $4,002,000   $76,581,000
  Conversion of Series B preferred stock            (27,448)        -     994,491    1,000           -            -        (1,000)
  Reclassification of common stock, subject to
    redemption                                            -         -     346,800        -           -            -     1,457,000
  Net income                                              -         -           -        -           -            -             -
                                                    ------------------------------------------------------------------------------

Balance at December 31, 2002                         74,278   $     -  21,193,159  $21,000   2,284,211   $4,002,000   $78,037,000
                                                    ==============================================================================


                                                                       TOTAL
                                                     ACCUMULATED   STOCKHOLDERS'
                                                       DEFICIT        EQUITY
                                                    ---------------------------
<S>                                                  <C>            <C>
Balance at December 31, 1999                         (54,378,000)    5,364,000
  Stock options exercised                                      -       726,000
  Warrants exercised                                           -     1,201,000
  Warrants expired                                             -             -
  Warrants issued                                              -             -
  Conversion of Series B preferred stock                       -         2,000
  Common stock issued for cash                                 -     9,058,000
  Dividends on Series B preferred stock                 (593,000)     (309,000)
  Net loss                                            (7,138,000)   (7,138,000)
                                                    ---------------------------

Balance at December 31, 2000                         (62,109,000)    8,904,000
  Stock options exercised                                      -             -
  Warrants issued                                              -             -
  Warrants expired                                             -             -
  Common stock issued for cash                                 -     5,910,000
  Reclassification of common stock, subject to
    redemption                                                 -     1,950,000
  Dividends on Series B preferred stock                 (440,000)      139,000
  Deemed dividend recorded in connection with
    issuance of additional shares of common stock
    and warrant re-pricing                            (1,151,000)            -
  Net loss                                            (2,070,000)   (2,070,000)
                                                    ---------------------------

Balance at December 31, 2001                        $(65,770,000)  $14,833,000
  Conversion of Series B preferred stock                       -             -
  Reclassification of common stock, subject to
    redemption                                                 -     1,457,000
  Net income                                           1,429,000     1,429,000
                                                    ---------------------------

Balance at December 31, 2002                        $(64,341,000)  $17,719,000
                                                    ===========================
</TABLE>

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


                                      F - 5
<PAGE>
<TABLE>
<CAPTION>
                              LIFECELL CORPORATION

                            STATEMENTS OF CASH FLOWS

                                                                  FOR THE YEAR ENDED DECEMBER 31,
                                                            ----------------------------------------
                                                                2000          2001          2002
                                                            ------------  ------------  ------------
<S>                                                         <C>           <C>           <C>
Cash Flows from Operating Activities:
  Net income (loss)                                         $(7,138,000)  $(2,070,000)  $ 1,429,000
  Adjustments to reconcile net income (loss) to net cash
    used in operating activities:
    Depreciation and amortization                             1,290,000     1,761,000     2,296,000
    Deferred revenues                                           389,000      (222,000)     (221,000)
    Provision for bad debts                                     150,000       (15,000)      (56,000)
    Accretion of debt discount and financing cost                69,000       192,000             -
  Increase (decrease) in cash from working capital:
    Receivables                                              (1,880,000)      503,000      (477,000)
    Inventories                                              (1,509,000)       20,000    (1,676,000)
    Prepayments and other                                      (115,000)      (50,000)       62,000
    Accounts payable and accrued liabilities                   (141,000)   (1,791,000)    1,087,000
    Other liabilities                                            83,000       (13,000)       24,000
                                                            ------------  ------------  ------------
      Net cash provided by (used in) operating activities    (8,802,000)   (1,685,000)    2,468,000
                                                            ------------  ------------  ------------
Cash Flows from Investing Activities:
  Capital expenditures                                       (4,681,000)     (458,000)     (576,000)
  Additions to patents                                          (99,000)     (171,000)            -
  Purchase of short-term investments                                  -             -        (6,000)
  Sales of short-term investments                                     -        65,000             -
                                                            ------------  ------------  ------------
      Net cash used in investing activities                  (4,780,000)     (564,000)     (582,000)
                                                            ------------  ------------  ------------
Cash Flows from Financing Activities:
  Proceeds from issuance of stock and warrants               10,987,000     5,910,000             -
  Proceeds from issuance of long-term debt                    3,653,000             -             -
  Principal payments on long-term debt                         (227,000)   (1,229,000)   (1,334,000)
  Payments on notes payable                                      (2,000)   (2,998,000)            -
  Cash dividends paid                                          (346,000)       (4,000)            -
                                                            ------------  ------------  ------------
      Net cash provided by (used in) financing activities    14,065,000     1,679,000    (1,334,000)
                                                            ------------  ------------  ------------
Net increase (decrease) in cash and cash equivalents            483,000      (570,000)      552,000
                                                            ------------  ------------  ------------
Cash and cash equivalents at beginning of period              4,737,000     5,220,000     4,650,000
                                                            ------------  ------------  ------------
Cash and cash equivalents at end of period                  $ 5,220,000   $ 4,650,000   $ 5,202,000
                                                            ============  ============  ============

Supplemental Disclosure of Cash Flow Information:
  Cash paid during the year for interest                    $   683,000   $   581,000   $   186,000
                                                            ============  ============  ============
Supplemental Disclosure of Non-cash Financing Activities:
  Series B preferred stock issued as payment of dividends   $   284,000   $   579,000   $         -
                                                            ============  ============  ============
  Deemed dividends                                          $         -   $ 1,151,000   $         -
                                                            ============  ============  ============
  Fair value of warrants issued in connection with:
    Common stock                                            $   407,000   $ 3,231,000   $         -
                                                            ============  ============  ============
</TABLE>

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


                                      F - 6
<PAGE>
                              LIFECELL CORPORATION
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 2002


1.   ORGANIZATION

     LifeCell  Corporation  ("LifeCell"  or  "the Company") develops and markets
biologically  based  products  for  the  repair  and  replacement  of damaged or
inadequate  human  tissue.  The  Company's  tissue based products are subject to
regulation by the United States Food and Drug Administration as human tissue for
transplantation.  LifeCell  was incorporated in Delaware in 1992 for the purpose
of  merging  with its predecessor entity, which was formed in 1986.  The Company
began  commercial  sales  of  its  first  tissue  product  during  1993.


2.   ACCOUNTING POLICIES

   Use  of  Estimates
     The  preparation  of  financial  statements  in  conformity  with generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  reported  amounts  of assets and liabilities and
disclosure  of  contingent  assets  and liabilities at the date of the financial
statements  and  the  reported  amounts  of  revenues  and  expenses  during the
reporting  period.  Actual  results  could  differ  from  those  estimates.

   Cash  and  Cash  Equivalents  and  Short-term  Investments
     The  Company  considers  all  highly  liquid  investments  with an original
maturity  of  three  months  or  less,  when  purchased, to be cash equivalents.
Investments with maturities in excess of three months but less than one year are
classified  as  short-term  investments  and  are  stated  at  cost,  net of any
unamortized  premiums  or  discounts,  which  approximates  fair  value.

   Inventories
     Inventories  are  stated  at  the  lower of cost or market, with cost being
determined on a first-in, first-out basis.  Inventories on hand include the cost
of  materials,  freight,  direct  labor  and  manufacturing  overhead.

   Fixed  Assets
     Fixed  assets  are  stated  at  cost  less  accumulated depreciation. Major
expenditures  that  improve  or  extend  the  life of the assets are capitalized
whereas  maintenance  and  repairs are expensed as incurred.  The cost of assets
retired  and  the related accumulated depreciation are removed from the accounts
and  any gain or loss is included in the results of operations.  Depreciation of
office equipment, furniture and fixtures is computed on the straight-line method
based  on  the  estimated  useful  lives  of  the assets of three to five years.
Depreciation  of machinery and equipment is computed on the straight-line method
based  on  the  estimated  useful lives of the assets of five to ten years.  The
cost of leasehold improvements is depreciated over the shorter of the lease term
or  the  estimated  useful  life  of  the  asset.

   Deferred  Patent  Costs
     The  Company  capitalizes  external  legal  costs associated with obtaining
patents.  Net  deferred  patent  costs  amounted to $459,000 and are included in
other  assets,  net in the accompanying balance sheet.  Such costs are amortized
to  expense on a straight-line basis over the legal life of the patent.  For the
years  ended  December 31, 2000, 2001 and 2002, amortization expense relating to
deferred  patent  costs  was  $52,000,  $40,000  and  $83,000,  respectively.


                                      F - 7
<PAGE>
   Impairment  of  Long-Lived  Assets
     The  Company  evaluates  the recoverability of its long-lived assets, which
include property and equipment and deferred patent costs, in accordance with the
provision  of SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets."   Long-lived  assets  are  reviewed  for  impairment whenever events or
changes  in  circumstance  indicate  that  the  carrying  amount  may  not  be
recoverable.  If  indications  are  that the carrying amount of the asset is not
recoverable,  the Company will estimate the future cash flows expected to result
from  use of the asset and its eventual disposition.  If the sum of the expected
future  cash  flows (non-discounted and without interest charges) were less than
the  carrying  amount  of  the  asset, the Company would recognize an impairment
loss.  The  impairment  loss recognized would be measured as the amount by which
the  carrying  amount  of the asset exceeds its fair value, generally determined
using the sum of discounted expected future cash flows.  During 2002, management
believes  that  no  impairment  reviews  were  required.

   Revenue  Recognition
     Product revenues are recognized when title and risk of loss for the product
is  transferred  to  the  customer.    Two  of the Company's sales and marketing
agents, Boston Scientific and OMP, hold the Company's inventory on a consignment
basis.   For  products held by these agents, the Company recognizes revenue when
the  product is delivered to the third-party customer, as this is when title and
risk  of  loss  to  the  product  transfers.  Additionally,  amounts  billed  to
customers  for  shipping  and  handling  are included in revenue at the time the
related  product  revenue  are  recognized.

     Research  grant revenues are recognized as the work is performed unless the
Company  has  continuing  performance  obligations,  in  which  case, revenue is
recognized  upon the satisfaction of such obligations. Revenue received, but not
yet  earned,  is  recorded  as  deferred  revenue.

   Research  and  Development  Expense
     Research  and  development  costs  are  expensed  when  incurred.

   Fair  Value  of  Financial  Instruments
     Financial  instruments  consist  of  cash  and cash equivalents, short-term
investments,  accounts  receivable,  accounts  payable, debt and certain current
liabilities.  Management  believes  the carrying amounts reported in the balance
sheet  for these items approximate fair value.  The carrying amount of long-term
debt  obligations  approximates  fair  value  at  the  balance  sheet  date.

   Income  Taxes
     The  Company  accounts  for  income  taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes."  Under the asset-and-liability method of SFAS No.
109,  deferred  tax  assets  and  liabilities  are recognized for the future tax
consequences  attributable  to  differences  between  the  financial  statement
carrying  amounts  of  existing  assets and liabilities and their respective tax
bases.  Deferred tax assets and liabilities are measured using enacted tax rates
expected  to  apply  to  taxable  income  in  the years in which those temporary
differences  are  expected  to be recovered or settled.  Under SFAS No. 109, the
effect  on  deferred  tax  assets  and  liabilities  of a change in tax rates is
recognized  in  income  in  the  period  that  includes  the  enactment  date.

   Stock-based  Compensation
     The  Company  follows  Accounting  Principles  Board  (APB) Opinion No. 25,
"Accounting  for  Stock  Issued  to  Employees,"  and related interpretations in
accounting  for  equity-based  awards  issued  to  employees  and directors.  No
stock-based compensation cost is reflected in net income, as all options granted
under  the  plans  had  an  exercise  price  equal  to  the  market value of the
underlying  common  stock  on  the  date  of  grant.


                                      F - 8
<PAGE>
     The  following  table illustrates the effect on net income and earnings per
share  if  the company had applied the fair value recognition provisions of FASB
Statement  No.  123,  Accounting  for  Stock-Based  Compensation, to stock-based
compensation  for  the  years  ended  December  31,:

<TABLE>
<CAPTION>
                                                    2000          2001          2002
                                                ------------  ------------  ------------
<S>                                             <C>           <C>           <C>
Net income (loss), as reported                  $(7,138,000)  $(2,070,000)  $ 1,429,000
Less:  Total stock-based compensation expense
    determined under fair value based method
    for all awards, net of related tax effects   (1,783,000)   (1,942,000)   (1,223,000)
                                                ------------  ------------  ------------
Pro forma                                       $(8,921,000)  $(4,012,000)  $   206,000
                                                ============  ============  ============

Income (loss) per common share - basic
As reported                                     $     (0.54)  $     (0.20)  $      0.07
                                                ============  ============  ============
Pro forma                                       $     (0.67)  $     (0.31)  $      0.01
                                                ============  ============  ============

Income (loss) per common share - diluted
As reported                                     $     (0.54)  $     (0.20)  $      0.06
                                                ============  ============  ============
Pro forma                                       $     (0.67)  $     (0.31)  $      0.01
                                                ============  ============  ============
</TABLE>

     See  Note 8 for additional information regarding the computations presented
above.

   Concentrations  of  Credit  Risk
     Financial  instruments,  which  potentially  subject  the  Company  to
concentrations  of  credit risk, consist primarily of cash and cash equivalents,
short-term  investments  and  accounts  receivable.  The  Company has investment
policies  that  limit investments of excess cash to investment grade securities.
The  Company  provides  credit,  in  the normal course of business to hospitals,
medical  professionals  and  distributors.  The  Company performs ongoing credit
evaluations of its customers' financial condition to minimize risk of loss.  The
Company  maintains  an allowance for doubtful accounts and charges actual losses
to  the  allowance  when  incurred.

<TABLE>
<CAPTION>
                                                               Write-offs
                                                   Charge         and
                                  Balance at    (Benefit) to   Deductions       Balance at
Allowance for Doubtful Accounts  Beginning of    Costs and        From            End of
                                    Period        Expenses      Allowance         Period
                                 ------------  -------------  --------------  --------------
<S>                              <C>           <C>            <C>             <C>
December 31, 2000                $   175,000   $    150,000   $     155,000)  $     170,000
December 31, 2001                    170,000        (15,000)        (41,000)        114,000
December 31, 2002                    114,000        (56,000)        (18,000)         40,000
</TABLE>

   New  Accounting  Pronouncements
     In  July  2001,  the  FASB  issued  SFAS  No.  143,  "Accounting  for Asset
Retirement  Obligations"  ("SFAS  143").  This  standard  provides the financial
accounting  and  reporting for the cost of legal obligations associated with the
retirement  of  tangible  long-lived  assets. In accordance with SFAS 143, asset
retirement  obligations  will  be  recorded at fair value in the period they are
incurred.  When  the liability is initially recorded, the cost is capitalized as
part  of  the  related  long-lived  asset  and subsequently depreciated over its
remaining  useful  life.  Changes in the liability resulting from the passage of
time  are  recognized  as  operating  expense.  The  Company will adopt SFAS 143
effective  January  1,  2003 and does not expect the adoption to have a material
impact  on  its  financial  position  or  results  of  operations.


                                      F - 9
<PAGE>
     In  June  2002,  the  FASB  issued  SFAS  No.  146, "Accounting for Exit or
Disposal  Activities"  ("SFAS  146").  SFAS  146  addresses  significant  issues
regarding  the  recognition,  measurement,  and  reporting  of  costs  that  are
associated with exit and disposal activities, including restructuring activities
that  are  currently  accounted  for  pursuant to the guidance that the Emerging
Issues  Task  Force  ("EITF")  set  forth  in  EITF  Issue  No. 94-3, "Liability
Recognition for Certain Employee Termination Benefits and Other Costs to Exit an
Activity  (including  Certain Costs Incurred in a Restructuring)" ("EITF 94-3").
The  scope of SFAS 146 also includes (1) costs related to terminating a contract
that  is  not  a  capital lease, (2) termination benefits that employees who are
involuntarily  terminated  receive  under  the  terms  of  a  one-time  benefit
arrangement  that  is  not  an  ongoing  benefit  arrangement  or  an individual
deferred-compensation  contract  and  (3)  costs  to  consolidate  facilities or
relocate  employees.  SFAS  146  is  effective  for  exit or disposal activities
initiated  after  December 31, 2002. The Company does not expect the adoption of
this statement to have a material impact on its financial position or results of
operations.

     In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation  --  Transition  and  Disclosure -- an amendment of FAS 123" ("SFAS
148").   SFAS  148  amends  FASB  Statement  No. 123, Accounting for Stock-Based
Compensation  ("SFAS  123"),  to provide alternative methods of transition for a
voluntary  change  to  the fair value based method of accounting for stock-based
employee compensation.  In addition, SFAS 148 amends the disclosure requirements
of  SFAS  123  to  require  prominent  disclosures  in  both  annual and interim
financial  statements  about  the  method of accounting for stock-based employee
compensation  and  the  effect  of  the  method used on reported results.   This
statement  is effective for the Company beginning in the year ended December 31,
2002.   The  Company  has  elected  to apply the provisions of APB No. 25 to its
accounting  for  stock-based  compensation  to  employees,  and accordingly, has
adopted  the  disclosure  provisions  of  SFAS 148 in its financial statements.

     In  November  2002,  the  FASB  issued  FIN 45, "Guarantor's Accounting and
Disclosure  Requirements  for  Guarantees,  Including  Indirect  Guarantees  of
Indebtedness of Others," which expands previously issued accounting guidance and
disclosure  requirements for certain guarantees. FIN 45 requires the recognition
of an initial liability for the fair value of an obligation assumed by issuing a
guarantee.  The  provision  for  initial  recognition  and  measurement  of  the
liability  will  be  applied  on  a  prospective  basis  to guarantees issued or
modified  after  December  31,  2002.  The adoption of FIN 45 is not expected to
materially  impact  the  Company's  financial  statements.

     In  January  2003,  the  FASB  issued  FIN  46,  "Consolidation of Variable
Interest  Entities  --  an  interpretation  of  ARB  No.  51,"  which  addresses
consolidation  of  variable interest entities.   FIN 46 expands the criteria for
consideration  in  determining  whether  a  variable  interest  entity should be
consolidated by a business entity, and requires existing unconsolidated variable
interest  entities  (which  include,  but  are  not  limited to, Special Purpose
Entities,  or  SPEs)  to  be  consolidated by their primary beneficiaries if the
entities  do  not  effectively  disperse  risks  among  parties involved.   This
interpretation also addresses the measurement of assets and liabilities of newly
consolidated variable interest entities and requires certain disclosures related
to  the purpose, size, activities, and exposure to risk associated with variable
interest  entities  not  requiring  consolidation.  This  Interpretation applies
immediately to variable interest entities created after January 31, 2003, and to
variable interest entities in which an enterprise obtains an interest after that
date.  It  applies  in  the  first fiscal year or interim period beginning after
June  15,  2003,  to  variable  interest entities in which an enterprise holds a
variable interest that it acquired before February 1, 2003.  The adoption of FIN
46  is  not  expected  to materially impact the Company's financial statements.

     In  January of 2003, the Emerging Issues Task Force of the FASB Issued EITF
00-21,  "Accounting  for  Revenue Arrangements with Multiple Deliverables." EITF
00-21  addresses  certain aspects of the accounting by a vendor for arrangements
under  which  it  will perform multiple revenue-generating activities, including
how to determine whether an arrangement involving multiple deliverables contains
more  than  one  unit of accounting, and how arrangement consideration should be
measured  and  allocated to the separate units of accounting in the arrangement.
The guidance in EITF 00-21 is effective for revenue arrangements entered into in
fiscal  periods  beginning after June 15, 2003, and therefore is not expected to
have  an impact on the Company's financial statements based on the nature of the
Company's  current  revenue  arrangements.


                                     F - 10
<PAGE>
3.   INVENTORIES

     Inventories  consist  of  the  following  at  December  31,:

                                                           2001        2002
                                                        ----------  ----------
       Tissue and materials                             $1,314,000  $2,940,000
       Tissue products in-process                        1,307,000   1,446,000
       Finished tissue products                          2,070,000   1,981,000
                                                        ----------  ----------
         Total inventories                              $4,691,000  $6,367,000
                                                        ==========  ==========

4.   FIXED ASSETS

     Fixed assets consist of the following at December 31,:

                                                          2001          2002
                                                      ------------  ------------
    Machinery and equipment                           $ 3,668,000   $ 3,973,000
    Leasehold improvements                              7,446,000     7,486,000
    Office equipment, furniture and fixtures            2,165,000     1,933,000
                                                     ------------  -------------
                                                       13,279,000    13,392,000
    Accumulated depreciation and amortization          (4,551,000)   (6,301,000)
                                                      ------------  ------------
      Fixed assets, net                               $ 8,728,000   $ 7,091,000
                                                      ============  ============

     For  the  years ended December 31, 2000, 2001 and 2002 the depreciation and
amortization  expense  related  to  fixed assets was $1,238,000, $1, 721,000 and
$2,213,000,  respectively.


5.   ACCRUED LIABILITIES

     Accrued liabilities consist of the following at December 31,:

                                                            2001        2002
                                                         ----------  ----------
       Tissue inventory purchases                        $  922,000  $1,025,000
       Employee compensation and benefits                   911,000   1,436,000
       Marketing and distribution fees                      777,000     601,000
       Operating expenses and other                         122,000     111,000
                                                         ----------  ----------
         Total accrued liabilities                       $2,732,000  $3,173,000
                                                         ==========  ==========


6.   DEFERRED REVENUE

     In  March  1999,  in  conjunction with the signing of a sales and marketing
agreement  with Boston Scientific Corporation, the Company issued 108,577 shares
of  common  stock  at a premium of $506,000 over the closing market price of the
Company's common stock on the date of issuance. This premium, which was recorded
as  deferred  revenue  and  is  being  recognized over the five-year term of the
agreement,  represented  a  payment  for  marketing  rights.  The  total  equity
investment  was  valued  at  $1.0  million  less  offering  costs  of  $100,000.

     In  February  2000,  the Company entered into a co-promotion agreement with
OMP,  Inc.  relating  to  the  marketing  and  distribution  of  the  Company's
Cymetra(TM) product.  Pursuant to the terms of the agreement, OMP agreed to make
a $600,000 payment in exchange for product marketing rights.  The payment, which
was  received  in  September  2000, has been recorded as deferred revenue and is
being  recognized  over  the  five-year  term  of  the  agreement.


                                     F - 11
<PAGE>
7.   FINANCING ARRANGEMENTS AND LONG-TERM DEBT

     As  of  December  31, 2002, the Company had term debt facilities with three
financial  institutions.  These  term  notes  consisted  of  the  following:

     (1)  A three-year term loan bearing an interest rate of 14.2%, repayable in
monthly installments of principal and interest of $100,000 through and including
March  1, 2003. This credit facility is collateralized by the Company's accounts
receivable, inventory, intellectual property, intangible and fixed assets and is
guaranteed  by  the  New  Jersey  Economic  Development  Authority.  The balance
outstanding on the term loan was $1,278,000 at December 31, 2001 and $196,000 at
December  31,  2002.

     (2)  A  three-year term loan bearing an interest rate of 6.5%, repayable in
monthly  installments of principal and interest of $18,000 through and including
June  1,  2003. The loan is collateralized by the Company's accounts receivable,
inventories  and fixed assets. The balance outstanding on this loan was $294,000
at  December  31,  2001,  and  $89,000  at  December  31,  2002.

     (3)  A  ten-year  term  loan bearing an interest rate of 9.0%, repayable in
annual  installments of principal and interest of $106,000 through and including
August  1,  2010.  This  loan  is collateralized by payments that the Company is
entitled  to  receive  through a New Jersey Business Employment Incentive Grant.
Such  payments  have been assigned to the lender and will be used to satisfy the
Company's obligations under the loan agreement as they are received. The balance
outstanding  on  the  note  was  $625,000  at December 31, 2001, and $578,000 at
December  3,  2002.

     Interest  expense  for the years ended December 31, 2000, 2001 and 2002 was
$683,000,  $697,000  and  $180,000,  respectively.

     In January 2003, the Company secured a $4 million credit facility through a
financial  institution.  The  credit facility consists of a $2 million revolving
line of credit due in January 2004 and an equipment line for up to an additional
$2  million  due  in  January 2005. The credit facility is collateralized by the
Company's  accounts receivable, inventory, intellectual property, intangible and
fixed  assets.  The  agreement  contains  certain  financial  covenants  and  a
subjective  acceleration  clause. The revolving line of credit bears interest at
the  bank  prime  rate plus 0.75%. The equipment term note bears interest at the
bank  prime  rate plus 1.5% and requires equal monthly principal payments over a
twenty-four  month  term.  In  January  2003,  the  Company received proceeds of
$880,000  under the equipment line portion of the credit facility and used these
proceeds  to  repay  the  debt  and accrued interest outstanding at December 31,
2002. The balance of the equipment line is available to fund equipment purchases
through  March  2003.

     Long-term  borrowings  at  December 31, 2002 and after giving effect to the
refinancing  had  the  following  scheduled  maturities:

                                  At December 31, 2002       Refinanced
                                  --------------------       ----------
       2003                       $            337,000       $  440,000
       2004                                     57,000          440,000
       2005                                     62,000                0
       2006                                     68,000                0
       2007 and beyond                         339,000                0
                                  --------------------       ----------
            Total                 $            863,000       $  880,000
                                  ====================       ==========


                                     F - 12
<PAGE>
8.   CAPITAL STOCK, OPTIONS AND WARRANTS

   Common  stock,  subject  to  redemption
     In  November  1999,  the Company issued 925,000 shares of common stock in a
private  placement  at a price of $4.20 per share.  The proceeds of the offering
were  approximately  $3.9  million.  Pursuant  to  the  terms  of  the  purchase
agreement, the Company is required to issue additional shares to the investor if
the market price of the Company's common stock is below a fixed amount per share
on  the  first,  second  and/or third anniversary of the date of issuance of the
common  stock.  If  sufficient  additional  shares  are  not  available for such
issuance, a cash payment may be required at 105 percent of the fair value of the
additional  shares  to  be issued.  In November 2000, the first anniversary, the
market  price  was  above  the fixed amount and accordingly no additional shares
were  issued.  In November 2001, the Company issued 478,001 additional shares of
common  stock to the investor, without additional consideration, pursuant to the
terms  of this agreement.  In connection with the issuance, the Company recorded
a  deemed  dividend  of $1,037,000 equal to the fair value of shares issued.  An
additional  deemed  dividend of $114,000 was recorded in 2001 in connection with
the  repricing  of  certain  warrants  that  were  issued as part of the private
placement.  The  Company was not required to issue additional shares in November
2002  because  the market price of the Company's common stock was above $1.96 on
the  third  anniversary.

     The  shares  of  common  stock  originally issued in 1999 are redeemable at
$4.20  per share by the Company if it does not maintain a listing or a quotation
of  its  shares of common stock on a U.S. stock exchange or market system. Given
this  requirement  is  beyond  the  Company's control, the remaining outstanding
shares  held  by  this  investor  are  considered to be temporary equity. In the
fourth  quarter  of  2001  and  2002, the Company received notification that the
investor  sold 464,364 and 346,800 shares, respectively, of the original 925,000
shares  and  accordingly,  $1.9  million  and $1.5 million, respectively, of the
original  amount  was  reclassified  to  stockholders'  equity  -  common stock.

   Series  B  Preferred  Stock
     Each  share  of  Series B preferred stock is convertible at any time at the
option of the holder into approximately 36.232 shares of common stock (2,691,240
shares of common stock at December 31, 2002), subject to adjustment for dilutive
issuances  of  securities.  The  Series  B  preferred  stock  has  a liquidation
preference  of $100 per share, or $7,428,000 as of December 31, 2002, and shares
ratably in any residual assets after payment of such liquidation preference. The
Series  B  preferred  stock will be automatically converted into common stock if
the  closing  price  of the Company's common stock averages or exceeds $9.30 per
share  for  30 consecutive trading days.  On all matters for which the Company's
stockholders  are  entitled to vote, each share of Series B preferred stock will
entitle  the  holder  to  one vote for each share of common stock into which the
share  of  Series  B  preferred  stock  is  then  convertible

     The  Series  B preferred stock paid cumulative dividends quarterly, through
September 30, 2001, at an annual rate of $6.00 per share. Dividends were paid in
cash,  in additional shares of Series B preferred stock based on the liquidation
value of $100 per share, or any combination of cash and Series B preferred stock
at  the  Company's  option.  While  the  preferred shares are outstanding or any
dividends  are  owned thereon, the Company may not declare or pay cash dividends
on  its  common  stock

   Common  Stock
     In  October  2000, the Company issued 2,500,000 shares of common stock in a
private  placement  at a price of $4.00 per share.  The proceeds of the offering
were  approximately  $10.0  million  before  deducting  placement agent fees and
offering  costs  of  $942,000.

     In  July  2001,  the  Company  issued 3,125,000 shares of common stock in a
private  placement  at  a price of $1.92 per share. The proceeds of the offering
were  approximately  $6.0  million  before  deducting  placement  agent fees and
offering  costs  of  $90,000.


                                     F - 13
<PAGE>
   Options
     The Company's Amended and Restated 1992 Stock Option Plan (the "1992 Plan")
provides  for  the grant of options to purchase up to 2,500,000 shares of common
stock  through  January 16, 2002.  In June 2000, the stockholders of the Company
approved  the  Year 2000 Stock Option Plan (the "2000 Plan"), which provides for
the  grant of options to purchase up to 1,500,000 shares of common stock through
March  1,  2010.  Common  stock  authorized for issuance under the 1992 and 2000
Plans  is subject to adjustment in the event of certain changes in the Company's
capitalization, a merger, or a similar transaction.  Such shares may be treasury
shares  or  newly  issued  shares  or  a  combination  of  both.

     Options  generally  become  exercisable over a four-year period, 25 percent
per year beginning on the first anniversary of the date of grant.  To the extent
not  exercised, options generally expire on the tenth anniversary of the date of
grant,  except  for  employees  who  own  more than 10 percent of all the voting
shares  of  the  Company,  in  which  event  the  expiration  date  is the fifth
anniversary  of  the  date  of  grant.  All options granted under the plans have
exercise  prices  equal  to  the  fair  market  value  at  the  date  of  grant.

     The  Second  Amended  and  Restated 1993 Non-Employee Director Stock Option
Plan  ("Director  Plan")  provides  for  the  grant of options to purchase up to
750,000 shares of common stock to non-employee directors.  The provisions of the
Director  Plan provide for an initial grant of options to purchase 25,000 shares
of  common stock for newly elected non-employee directors and an annual grant of
an  option  to  purchase  10,000 shares upon re-election to the Company's Board.
Options  under  the  Director Plan have exercise prices equal to the fair market
value  at  the date of grant, vest one year after date of grant and expire after
10  years.

     A  summary  of stock option activity for the years ended December 31, 2000,
2001  and  2002  is  as  follows:

<TABLE>
<CAPTION>
                                  1992        2000     Director               Weighted
                                 Stock       Stock       Stock      Total      Average
                                 Option      Option     Option      Stock     Exercise
                                  Plan        Plan       Plan      Options    Price ($)
                               ----------  ----------  ---------  ----------  ---------
<S>                            <C>         <C>         <C>        <C>         <C>
Balance at December 31, 1999   2,275,921          --    190,000   2,465,921        4.24
   Granted                       203,050     528,500     50,000     781,550        4.27
   Exercised                     (76,311)         --    (20,000)    (96,311)       4.15
   Forfeited                    (207,787)    (10,950)   (65,000)   (283,737)       5.16
                               ----------  ----------  ---------  ----------
Balance at December 31, 2000   2,194,873     517,550    155,000   2,867,423        4.16
   Granted                       342,050     243,000     65,000     650,050        2.23
   Exercised                        (135)         --         --        (135)       0.73
   Forfeited                    (332,019)    (15,050)        --    (347,069)       4.16
                               ----------  ----------  ---------  ----------
Balance at December 31, 2001   2,204,769     745,500    220,000   3,170,269        3.77
   Granted                           250     651,525     65,000     716,775        2.73
   Forfeited                     (54,800)    (34,075)  (120,000)   (208,875)       4.64
                               ----------  ----------  ---------  ----------
Balance at December 31, 2002   2,150,219   1,362,950    165,000   3,678,169        3.52
                               ==========  ==========  =========  ==========

Available for future grant at
   December 31, 2002                  --     137,050    495,000     632,050
</TABLE>


                                     F - 14
<PAGE>
     A  summary  of  stock options outstanding under the three plans combined at
December  31,  2002  is  as  follows:

<TABLE>
<CAPTION>
                                  Options Outstanding                  Options Exercisable
                      ------------------------------------------  -----------------------------
                                         Weighted
                          Number          Average      Weighted      Number        Weighted
                       Outstanding at    Remaining      Average   Exercisable at    Average
    Range of            December 31,    Contractual     Exercise    December 31,    Exercise
Exercise Prices            2002         Life (Years)     Price        2002           Price
---------------------  -------------  ---------------  ---------  -------------  --------------
<S>                    <C>            <C>              <C>        <C>            <C>
$ 1.64   to   $ 1.99          32,150        8.9        $    1.73         20,500  $         1.72
  2.00   to     2.99       1,652,000        8.6             2.45        448,006            2.32
  3.00   to     3.99       1,058,969        4.9             3.74        996,969            3.76
  4.00   to     4.99         399,900        6.3             4.23        298,663            4.21
  5.00   to     5.99         315,200        7.1             5.37        179,975            5.38
  6.00   to     6.99         209,450        5.5             6.62        202,700            6.62
  7.00   to    10.88          10,500        7.2            10.02          5,250           10.02
                       -------------  ---------------             -------------
$ 1.64   to   $10.88       3,678,169        7.0        $    3.52      2,152,063  $         3.92
                       =============  ===============             =============
</TABLE>

     In  addition  to the amounts set forth in the tables above, during 1996 the
Company  granted options to purchase 220,000 shares of common stock not pursuant
to  a plan, to directors who resigned upon the closing of the sale of the Series
B preferred stock.  During 2000, directors exercised options to purchase 110,000
shares  of common stock pursuant to these grants.  At December 31, 2002, options
to  acquire  110,000 shares of common stock remained outstanding with a weighted
average  exercise  price  of  $5.30.  The weighted average remaining contractual
life  of  the  outstanding  option grants was 2.4 years as of December 31, 2002.

     The  Company accounts for its employee stock-based compensation plans under
APB  No.  25  and  its  related  interpretations.  Had compensation expense been
determined  by  the  Company  based  on the fair value as of the grant dates for
awards  in  2000,  2001 and 2002 consistent with SFAS No. 123, the Company would
have  recorded  stock-based  compensation  expense of $1,783,000, $1,942,000 and
$1,223,000  respectively.  See  Note  2  for the pro forma effect on net income.

     Under  the  provisions  of SFAS No. 123, the weighted average fair value of
options  granted  in  2000, 2001, and 2002 was $2.73, $1.56 and $2.22 per share,
respectively.  The  fair  value of each option grant is estimated on the date of
grant  using  the Black-Scholes option pricing model with the following weighted
average  assumptions  used  for  grants  in 2000, 2001 and 2002, respectively: a
weighted  average  risk-free  interest rate of approximately 3% - 7% percent for
all  years;  no  expected dividend yield during the expected life of the option;
expected lives of 5 to 6 years for each grant and expected volatility between 64
and  112  percent.

   Warrants
     As  of December 31, 2001 and 2002, warrants to acquire a total of 2,284,211
shares  of  common  stock  were  outstanding  as  set  forth  below.

                           Warrants Outstanding to
                         Purchase Shares of Common
                           Stock at December 31,
                           --------------------
          Exercise Price     2001       2002      Expiration Date
          ---------------  ---------  ---------  -----------------
          $          1.92  1,750,000  1,750,000  July 10, 2006
          $          1.96    200,000    200,000  November 16, 2004
          $          4.75     84,211     84,211  December 5, 2004
          $          5.00    250,000    250,000  October 27, 2005
                           ---------  ---------
                           2,284,211  2,284,211
                           =========  =========


                                     F - 15
<PAGE>
9.   EMPLOYEE BENEFIT PLANS

     The  Company  maintains  a 401(k) retirement savings plan, which covers all
full-time employees.  The Company may, at its discretion, contribute amounts not
to  exceed  each  employee's  contribution.  Participant's contributions may not
exceed  15% of their annual compensation, subject to annual dollar limits set by
the  Internal  Revenue  Service.  Participants  are  always 100% vested in their
contributions.  Company  contributions  are  fully  vested  after  one  year  of
employment.  Total  Company  contributions  during  2000,  2001  and  2002  were
$31,000,  $34,000  and  $67,000,  respectively.

     The  Company  also  maintains  an Employee Stock Purchase Plan to allow all
full-time  employees  to  purchase the Company's common stock on the open market
using  employee  and Company matching contributions. Total Company contributions
during  2000,  2001,  and  2002  were $7,000, $13,000 and $21,000, respectively.


10.   INCOME TAXES

     The  Company  has recorded a net tax benefit of $155,000 for the year ended
December  31,  2002, consisting of a provision for state taxes of $93,000 offset
by  proceeds  of  $248,000  from the sale of state tax net operating losses.  No
federal  provision  for  income taxes has been recorded, as the Company plans to
utilize  its  federal  net  operating loss carryforwards to offset its estimated
federal  tax  liability  of  $  492,000.  Although the Company has approximately
$12.3  million of state tax net operating loss carryforwards, the utilization of
such  carryforwards  was  suspended  through  2003  by  recently  enacted  tax
legislation.  The  Company's  effective  tax  rate  differs  from  the  federal
statutory  tax  rate as a result of the following:  the state tax provision, the
utilization  of  federal net operating loss carryforwards, and the proceeds from
the  sale  of  the  company's  state  tax  net  operating  losses.

     The  principal  components  of  the  Company's  deferred  tax  assets as of
December  31,  2001  and  2002, assuming a 34% federal tax rate, are as follows:

<TABLE>
<CAPTION>
                                                                2001          2002
                                                           -------------  -------------
<S>                                                      <C>            <C>
Temporary differences:
  Deferred revenue                                         $    190,000   $    119,000
  Uniform capitalization of inventory costs                      90,000        113,000
  Other items                                                   160,000       (213,000)
                                                           -------------  -------------
  Total temporary differences                                   440,000         19,000
  Federal tax losses and credits not currently utilizable    20,290,000     20,298,000
  State tax losses and credits not currently utilizable         916,000      1,145,000
                                                           -------------  -------------
Total deferred tax assets                                    21,646,000     21,462,000
  Less valuation allowance                                  (21,646,000)   (21,462,000)
                                                           -------------  -------------
Net deferred tax asset                                     $         --   $         --
                                                           =============  =============
</TABLE>

     As  of December 31, 2002, the Company has a net operating loss carryforward
("NOL")  for federal income tax purposes of approximately $56.7 million, subject
to  the  limitations  described  below,  expiring  as  follows:

        Year Expires
            2003                                                  $2,800,000
            2004                                                   2,200,000
            2005                                                   1,700,000
            2006                                                   1,400,000
            2007 and beyond                                       48,600,000
                                                                 -----------
                                                                 $56,700,000
                                                                 ===========


                                     F - 16
<PAGE>
     Under  existing  federal  tax laws, Internal Revenue Code Sec. 382 provides
for  an annual limitation on the utilization of federal net operating losses and
tax  credit carryforwards generated prior to certain ownership changes. The sale
of common stock in the public offering in December 1997 resulted in an ownership
change  for  federal  income  tax purposes, and accordingly this could limit the
Company's  ability  to  use  its  federal  net  operating  loss  and  tax credit
carryforwards  in  future years. As of December 31, 2002, of the Company's total
net  operating  loss  carryover  of  $56,700,000,  approximately  $24,100,000 is
subject  to  an  annual  limitation  under  Internal  Revenue  Code Section 382.

     At  December  31,  2002,  the  Company  also  had  a  net  operating  loss
carryforward for state income tax purposes of approximately $12.3 million, which
expire  in  varying  amounts  commencing  in  2006.

     Additionally,  the  Company  has  approximately  $1,000,000 of research and
development  tax credit carryforwards for federal and state income tax purposes,
which  will  expire  in  varying  amounts  commencing  in  2003.

     For financial reporting purposes, a valuation allowance of $ 21,462,000 has
been recorded as of December 31, 2002 to fully offset the Company's deferred tax
assets,  including  the  federal  and  state  net  operating  loss  and  credit
carryforwards.  The  net change in the deferred tax valuation allowance for 2001
and  2002  was an increase of $715,000 and a decrease of $184,000, respectively.
In  March  2002,  the Company realized $248,000 through the sale and transfer of
$3.2  million of state tax net operating losses.  The sale and transfer was made
through  the  Technology  Business  Tax Certificate Program sponsored by the New
Jersey  Economic  Development  Authority.  The amount was recorded when realized
and  has been reflected as an income tax benefit in the statement of operations.
In  January  2003,  the Company sold an additional $3.0 million of state tax net
operating  losses for $235,000, which will be recorded as a tax benefit in 2003.


11.  NET INCOME (LOSS) PER COMMON SHARE

     The  following  table  sets  forth  the  computation  of  basic and diluted
earnings  per  share  for  the  years  ended  December  31, 2000, 2001 and 2002:

<TABLE>
<CAPTION>
                                                         For the Year Ended December 31,
                                                     ---------------------------------------
                                                         2000          2001         2002
                                                     ------------  ------------  -----------
<S>                                                  <C>           <C>           <C>
Net income (loss) applicable to common stockholders  $(7,731,000)  $(3,661,000)  $ 1,429,000
                                                     ============  ============  ===========

Weighted average common shares outstanding            14,372,083    18,240,431    21,175,602
                                                     ------------  ------------  -----------

Denominator for basic net income (loss) per share     14,372,083    18,240,431    21,175,602
                                                     ------------  ------------  -----------

Effect of dilutive securities:
  Series B preferred stock assuming conversion                 -             -     2,822,635
  Warrants                                                     -             -       540,533
  Common stock options                                         -             -       157,606
                                                     ------------  ------------  -----------

Denominator for diluted net income (loss) per share   14,372,083    18,240,431    24,696,376
                                                     ------------  ------------  -----------

Basic net income (loss) per share                    $     (0.54)  $     (0.20)  $      0.07
                                                     ============  ============  ===========

Diluted net income (loss) per share                  $     (0.54)  $     (0.20)  $      0.06
                                                     ============  ============  ===========
</TABLE>


                                     F - 17
<PAGE>
     The calculation of net loss per share for the years ended December 31, 2000
and  2001 excludes potentially dilutive common stock equivalents of 9,343,455 in
2000  and 9,250,216 in 2001.  These common stock equivalents, which consisted of
convertible  Series  B preferred stock, warrants, and outstanding stock options,
were  not  included  in  the calculation of the net loss per share because their
inclusion  would  be  antidilutive.

     The  calculation  of  net  income per share for the year ended December 31,
2002  excludes  potentially  dilutive  common  stock  equivalents  consisting of
outstanding options to purchase 2,726,444 shares of common stock and warrants to
purchase  334,211  shares  of  common  stock  because  their  inclusion would be
antidilutive.


12.  COMMITMENTS AND CONTINGENCIES

   Litigation
     In  June  2002,  a complaint was filed in the Superior Court of California,
Los Angeles County, Central District, captioned Joan Savitt, individually and on
behalf  of  others  similarly situated, v. Doheny Eye & Tissue Bank, et al.  The
complaint  alleges  among other things, the Company, by engaging in the storing,
processing and distribution of human tissue, violates the public policy and laws
of  the state of California in various ways.  In March 2003, the Company filed a
response  to  the  complaint  and discovery has commenced.  The Company believes
that  the  claims  against it in this complaint are without merit and intends to
vigorously  defend  against  such  action.

     The  Company  does not expect the final resolution of this matter to have a
material impact on its financial position, results of operations, or cash flows.
However,  there  can be no assurance that the resolution of this matter will not
be  material to the Company's financial position, results of operations, or cash
flows.

     The  Company maintains insurance coverage for events and in amounts that it
deems  appropriate.  There  can  be  no  assurance  that  the level of insurance
maintained  will  be  sufficient  to cover any claims incurred by the Company or
that  the  type  of  claims  will be covered by the terms of insurance coverage.

   Marketing  Agency  Agreements
     The  Company  has  engaged  Boston  Scientific Corporation as its exclusive
worldwide  sales  and  marketing  agent for Repliform for use in the urology and
gynecology  markets and OMP, Inc. as its exclusive sales and marketing agent for
Cymetra  to office-based dermatologists and plastic surgeons.  Boston Scientific
and  OMP  are  paid  agency  fees  based  on the amount of product revenues they
generate for the Company.  During 2000, 2001 and 2002, sales of products through
Boston  Scientific  Corporation  represented  approximately  28%,  35%  and 31%,
respectively,  of  total  product revenues. During 2000, 2001 and 2002, sales of
products  OMP  represented  approximately 13%, 9% and 8%, respectively, of total
product  revenues.

     Both  Boston  Scientific  and  OMP  hold Company inventory on a consignment
basis.  The  Company records revenues when products are delivered to third-party
customers.

     In  addition,  the  Company  distributes  products  through  several  other
domestic  and  international distributors.  These distributors take title to and
assume risk of loss for the Company's products upon shipment from the Company to
the  distributor,  and therefore the Company recognizes revenue upon shipment to
the  distributor  for  these  sales.  None  of  these  individual  distributors
represented  more  than  5%  of  total  product  revenues  in  2002.


                                     F - 18
<PAGE>
   Leases
     The  Company leases approximately 90,000 square feet for office, production
and  laboratory  space  in  one building under a lease agreement that expires in
November  2010.  The  lease  contains  a  renewal  option  for an additional two
successive  five-year  periods.  In  addition,  the  Company  has  various other
operating  leases.  The  future minimum lease payments under noncancelable lease
terms  in  excess  of  one  year  as  of  December  31,  2002,  were as follows:

          2003                                           $  833,000
          2004                                              833,000
          2005                                              891,000
          2006                                              919,000
          2007 and beyond                                 3,600,000
                                                         ----------
               Total                                     $7,076,000
                                                         ==========

     Rental  expense  was  $565,000,  $872,000  and $949,000 for the years ended
December  31,  2000,  2001,  and  2002,  respectively.

13.  SEGMENT DATA

     The  Company has one reportable business operating segment - the processing
and  distribution of human tissue intended for transplantation. Product revenues
by  geographic  area  for  the years ended December 31, 2000. 2001 and 2002, are
summarized  as  follows:

                                          2000         2001         2002
                                       -----------  -----------  -----------
     United States                     $20,219,000  $24,939,000  $31,163,000
     Other countries                     1,111,000    1,621,000    1,772,000
                                       -----------  -----------  -----------
          Total Product Revenues       $21,330,000  $26,560,000  $32,935,000
                                       ===========  ===========  ===========


14.  QUARTERLY FINANCIAL DATA (UNAUDITED)

     Following  is a summary of  unaudited quarterly results for the years ended
December  31,  2001  and  2002:

<TABLE>
<CAPTION>
                                                         First     Second      Third       Fourth
(In thousands except per share amounts)                 Quarter    Quarter    Quarter     Quarter
                                                       ---------  ---------  ---------  ------------
<S>                                                    <C>        <C>        <C>        <C>

2001
  Total Revenues. . . . . . . . . . . . . . . . . . .  $  6,771   $  7,451   $  6,654   $     6,893
  Product Revenues. . . . . . . . . . . . . . . . . .     6,424      7,011      6,454         6,671
  Cost of Products Sold . . . . . . . . . . . . . . .     2,495      2,358      1,949         2,060
  Net Income (Loss) . . . . . . . . . . . . . . . . .    (1,316)      (657)      (199)          102
  Net Loss to Common Shareholders . . . . . . . . . .    (1,459)      (804)      (349)       (1,049)(1)
  Loss Per Share of Common Stock - Basic and Diluted      (0.09)     (0.05)     (0.02)        (0.05)

2002
  Total Revenues. . . . . . . . . . . . . . . . . . .  $  7,659   $  8,394   $  9,102   $     9,273
  Product Revenues. . . . . . . . . . . . . . . . . .     7,310      8,050      8,711         8,864
  Cost of Products Sold . . . . . . . . . . . . . . .     2,396      2,513      2,642         2,583
  Net Income. . . . . . . . . . . . . . . . . . . . .       436        214        344           435
  Income Per Share of Common Stock - Diluted. . . . .      0.02       0.01       0.02          0.02
  Income Per Share of Common Stock - Diluted. . . . .      0.02       0.01       0.01          0.02

     (1)  Includes  a  deemed dividend of $1,151,000 resulting from the issuance
          of  additional  shares of common stock in November 2001 to an investor
          pursuant  to  the  terms  of  an  investment  in  1999.
</TABLE>


                                     F - 19
<PAGE>