Artes Medical Announces Plan for Nasdaq Listing Compliance and Agenda for Its Annual Meeting

Business Wire, Sept 2, 2008

Financing Proposal. As discussed in its public filings, the Company intends to raise additional funds to support its operations and business plan. The Company recently received a notice from The Nasdaq Stock Market ("Nasdaq") indicating that its stockholders' equity at June 30, 2008 was less than the $10 million in stockholders' equity required for continued listing on The Nasdaq Global Market. The Company intends to submit a plan to Nasdaq on September 3, 2008 addressing how it plans to achieve and sustain compliance with Nasdaq's continued listing requirements. A central part of this plan is to complete one or more financing transactions as soon as practical to raise funds to increase the Company's stockholders' equity to levels required to maintain its Nasdaq listing. Nasdaq, however, requires the Company to obtain approval from its stockholders for any financing or series of related financings in which the Company issues 20% or more of its outstanding common stock.

At the Annual Meeting, the Company intends to seek authorization from its stockholders to approve the sale of its securities in one or more financings (the "Financing Proposal"). We, the Board of Directors, will be responsible for determining the actual terms and conditions of the financing(s), provided, that the financing(s) must fit within the bounds approved by the stockholders at the Annual Meeting. Obtaining stockholder approval of the Financing Proposal will facilitate our efforts to raise funds on a timely basis to support the Company's continued listing on Nasdaq and allow the Company to implement its business plan.

Non-Management Proposals

On August 11, 2008, H. Michael Shack, who collectively with the other stockholders named in his filing own less than 1% of the Company's outstanding voting stock, filed a preliminary proxy statement stating that, at the Company's Annual Meeting, he intends to submit proposals to: (i) amend the Company's Bylaws to fill vacancies on the Company's Board of Directors resulting from the removal of directors, (ii) remove "for cause" three (3) of the Company's current directors and (iii) elect five (5) of his nominees to the Board. As outlined in a recent lawsuit filed in San Diego Superior Court and discussed below, the Company is informed and believes that the Shack filing was instigated and is supported by the Lemperles in violation of, among other things, their contractual obligations to the Company.

The Shack Proposals are Legally Deficient. The Shack proposals are deficient in that he did not provide the Company with notice of the proposals as required by Article II, Section 2.1 of the Company's Bylaws. Further, the Company believes, and has received a written opinion from Abrams & Laster LLP, the Company's special Delaware counsel, that the Shack proposals do not comply with the substantive and procedural requirements of Article II, Section 2.1 of the Company's Bylaws and Section 141(k) of the Delaware General Corporation Law.

Further, we do not believe that the Shack proposals are in the best interests of the Company's stockholders, and for the reasons stated above, the Company does not intend to have the Shack proposals brought before the Annual Meeting. In short, the Shack proposals seek to circumvent the orderly process required in the Company's stockholder-approved Bylaws and Certificate of Incorporation, and we urge you to discard any proxy card that you may receive regarding the Shack proposals.