International Stem Cell Corporation Announces Second Quarter 2011 Financial Results and Corporate Events

By Dr. Matthew Watson

International Stem Cell Corporation (OTCBB: ISCO), a biotechnology company that developed a powerful new stem cell technology called "parthenogenesis" which promises to significantly advance the field of regenerative medicine, today announced financial results for the quarter ended June 30, 2011 and for the first six months of the fiscal year and provided an update on corporate events.

ISCO reported year-to-date revenues of $2.6 million compared to $0.7 million for the same time period in 2010, representing an increase of 271%. The increase in our revenues relates to sales generated by ISCO's wholly-owned subsidiaries Lifeline Skin Care (LSC) which contributed $1.7 million and Lifeline Cell Technology (LCT) which contributed $0.9 million of revenues.

Total year-to-date expenses, excluding cost of sales increased $2.0 million or 38%, compared to the first six months of the previous year. The most significant reasons for the increase in total expenses related to increases in R&D and G&A. Research & Development expenses increased primarily due to increased activity on our scientific projects. General & Administrative expenses increased primarily due to increased headcount, non-cash stock-based compensation and increased expenses related to business development activity and general corporate expenses.

Our cash balance at June 30, 2011 was $3.6 million. Net cash used in operating activities for the six months ended June 30, 2011 was $3.0 million.

Second Quarter 2011 Highlights:

-- The first U.S.-based donor was enrolled in ISCO's program to establish a bank of clinical-grade human parthenogenetic stem cells (hpSCs) capable of being immune-matched to millions of patients.

-- We strengthened our senior management team to assist in the continued development of the Company. Kurt May was appointed Senior Vice President responsible for mergers and acquisitions and development of new international collaborations. Donna Queen was added to the management team as Vice President of LSC, where she is responsible for marketing and business development.

-- We started a series of preclinical animal studies of neuronal cells derived from hpSCs. The studies will evaluate the in vivo safety and tumorigenicity of neuronal cells as well as their ability to develop into functioning dopaminergic neuron–like cells to treat Parkinson's disease.

-- We successfully completed the first series of preclinical testing of hepatocytes derived from hpSCs. In the transplantation mouse model, inoculated cells were capable of engrafting and surviving in specific niches within the liver, and were further developing into cells with essential hepatocyte-like features.

About International Stem Cell Corporation

International Stem Cell Corporation is focused on the therapeutic applications of human parthenogenetic stem cells and the development and commercialization of cell-based research and cosmetic products. ISCO's core technology, parthenogenesis, results in the creation of pluripotent human stem cells from unfertilized oocytes (eggs). hpSCs avoid ethical issues associated with the use or destruction of viable human embryos. ISCO scientists have created the first parthenogenic, homozygous stem cell line that can be a source of therapeutic cells with minimal immune rejection after transplantation into hundreds of millions of individuals of differing genders, ages and racial background. This offers the potential to create the first true stem cell bank, UniStemCell™. ISCO also produces and markets specialized cells and growth media for therapeutic research worldwide through its subsidiary Lifeline Cell Technology, and cell-based skin care products through its subsidiary Lifeline Skin Care. More information is available at http://www.internationalstemcell.com.

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International Stem Cell Corporation and Subsidiaries (A Development Stage Company) Condensed Consolidated Statements of Financial Condition

	June 30, 2011			December 31, 2010 (Restated)(1)
	(Unaudited)
Assets
Cash and cash equivalents	$	3,581,933		$	5,782,027
Accounts receivable		341,666			738,506
Inventory		1,329,433			856,083
Prepaid expenses and other current assets		290,196			228,338

Total current assets		5,543,228			7,604,954
Property and equipment, net		1,495,916			1,295,328
Patent licenses, net		1,056,562			986,714
Deposits and other assets		16,279			39,812

Total assets	$	8,111,985		$	9,926,808

Liabilities and Stockholders' Equity
Accounts payable	$	1,032,531		$	582,824
Accrued expenses		855,315			545,781
Deferred revenue		137,834			759,667
Advances		250,000			250,000
Warrants to purchase common stock		1,027,171			2,399,605

Total current liabilities		3,302,851			4,537,877


Commitments and contingencies

Stockholders' Equity
Common stock, $.001 par value, 200,000,000 shares authorized, 76,599,928 shares and 74,771,107 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively		76,600			74,771
Convertible preferred stock, $.001 par value, 20,000,000 shares authorized, 2,800,043 shares issued and outstanding at June 30, 2011 and December 31, 2010, respectively		2,800			2,800
Subscription receivable on common stock		-			(4,875	)
Additional paid-in capital		59,780,363			56,170,006
Deficit accumulated during the development stage		(55,050,629	)		(50,853,771	)

Total stockholders' equity		4,809,134			5,388,931

Total liabilities and stockholders' equity	$	8,111,985		$	9,926,808

			(1)			The Company restated its financial statements for the year ended December 31, 2010, and the quarter ended March 31, 2011.


International Stem Cell Corporation and Subsidiaries (A Development Stage Company) Condensed Consolidated Statements of Operations (Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,						Inception (August 2001) through June 30, 2011 (Restated)(1)
	2011			2010 (Restated)(1)			2011 (Restated)(1)			2010 (Restated)(1)
Revenues
Product sales	$	1,114,309		$	441,118		$	2,629,225		$	713,744		$	5,728,390
Royalties and license		-			-			-			-			135,000

Total revenue	$	1,114,309		$	441,118		$	2,629,225		$	713,744		$	5,863,390


Development expenses
Cost of sales		362,131			214,330			791,125			360,706			2,506,597
Research and development		1,128,869			754,000			2,132,279			1,338,069			15,992,557
Marketing		345,800			291,576			664,006			424,994			3,063,155
General and administrative		2,135,732			2,033,615			4,368,470			3,408,821			27,692,292

Total development expenses		3,972,532			3,293,521			7,955,880			5,532,590			49,254,601

Loss from development activities		(2,858,223	)		(2,852,403	)		(5,326,655	)		(4,818,846	)		(43,391,211	)


Other income (expense)
Settlement with related company		-			-			-			-			(92,613	)
Miscellaneous expense		(12,040	)		(256	)		(11,140	)		(20,649	)		(28,652	)
Dividend income		-			350			-			25,999			92,875
Interest expense		-			(6,805	)		-			(14,079	)		(2,225,074	)
Sublease income		2,450			2,125			4,650			3,525			303,083
Change in market value of warrants		478,669			7,083,365			1,349,518			(1,347,960	)		(2,380,664	)

Total other income (expense)		469,079			7,078,779			1,343,028			(1,353,164	)		(4,331,045	)


Income (loss) before income taxes		(2,389,144	)		4,226,376			(3,983,627	)		(6,172,010	)		(47,722,256	)
Provision for income taxes		-			-			-			-			6,800

Net income (loss)	$	(2,389,144	)	$	4,226,376		$	(3,983,627	)	$	(6,172,010	)	$	(47,729,056	)


Dividends on preferred stock	$	(107,203	)	$	-		$	(213,231	)	$	(1,238,067	)	$	(7,751,380	)
Net income (loss) attributable to common stockholders	$	(2,496,347	)	$	4,226,376		$	(4,196,858	)	$	(7,410,077	)	$	(55,480,436	)

Basic earnings per common share	$	(0.03	)	$	0.06		$	(0.06	)	$	(0.11	)

Diluted earnings per common share	$	(0.03	)	$	0.04		$	(0.06	)	$	(0.11	)

Share used in per share calculations:
Weighted average shares outstanding		76,340,016			68,676,504			75,842,071			64,789,250

Weighted average shares outstanding on a Fully Diluted Basis		76,340,016			114,797,830			75,842,071			64,789,250