Company Quick10K Filing
International Stem Cell
Price0.93 EPS-0
Shares8 P/E-5
MCap7 P/FCF-8
Net Debt-0 EBIT-1
TEV7 TEV/EBIT-4
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-06-30 Filed 2020-08-12
10-Q 2020-03-31 Filed 2020-06-19
10-K 2019-12-31 Filed 2020-06-01
10-Q 2019-09-30 Filed 2019-11-12
10-Q 2019-06-30 Filed 2019-08-27
10-Q 2019-03-31 Filed 2019-05-15
10-K 2018-12-31 Filed 2019-04-15
10-Q 2018-09-30 Filed 2018-11-14
10-Q 2018-06-30 Filed 2018-08-14
10-Q 2018-03-31 Filed 2018-05-21
10-K 2017-12-31 Filed 2018-04-09
10-Q 2017-09-30 Filed 2017-11-14
10-Q 2017-06-30 Filed 2017-08-11
10-Q 2017-03-31 Filed 2017-05-15
10-K 2016-12-31 Filed 2017-03-31
10-Q 2016-09-30 Filed 2016-11-14
10-Q 2016-06-30 Filed 2016-08-15
10-Q 2016-03-31 Filed 2016-05-16
10-K 2015-12-31 Filed 2016-03-30
10-Q 2015-09-30 Filed 2015-11-13
10-Q 2015-06-30 Filed 2015-08-13
10-Q 2015-03-31 Filed 2015-05-11
10-K 2014-12-31 Filed 2015-03-30
10-Q 2014-09-30 Filed 2014-11-13
10-Q 2014-06-30 Filed 2014-08-08
10-Q 2014-03-31 Filed 2014-05-13
10-K 2013-12-31 Filed 2014-03-17
10-Q 2013-09-30 Filed 2013-11-13
10-Q 2013-06-30 Filed 2013-08-08
10-Q 2013-03-31 Filed 2013-05-14
10-K 2012-12-31 Filed 2013-03-26
10-Q 2012-06-30 Filed 2012-08-08
10-Q 2012-03-31 Filed 2012-05-14
10-K 2011-12-31 Filed 2012-03-16
10-Q 2011-09-30 Filed 2011-11-14
10-Q 2011-06-30 Filed 2011-08-15
10-Q 2011-03-31 Filed 2011-06-23
10-K 2010-12-31 Filed 2011-03-24
10-Q 2010-09-30 Filed 2010-11-08
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-14
10-K 2009-12-31 Filed 2010-03-23
8-K 2020-06-23 Shareholder Vote
8-K 2020-05-13
8-K 2020-04-28
8-K 2020-03-30
8-K 2019-12-17
8-K 2019-07-25
8-K 2019-06-03
8-K 2019-04-17
8-K 2019-01-21
8-K 2018-11-12
8-K 2018-09-27
8-K 2018-06-21
8-K 2018-05-31
8-K 2018-05-14
8-K 2018-03-06
8-K 2018-02-13

ISCO 10Q Quarterly Report

Part I - Financial Information
Item 1. Condensed Consolidated Financial Statements (Unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-10.1 isco-ex101_49.htm
EX-10.2 isco-ex102_225.htm
EX-31.1 isco-ex311_6.htm
EX-31.2 isco-ex312_8.htm
EX-32.1 isco-ex321_10.htm
EX-32.2 isco-ex322_7.htm

International Stem Cell Earnings 2020-06-30

Balance SheetIncome StatementCash Flow
10.05.00.0-5.0-10.0-15.02012201420172020
Assets, Equity
1593-3-9-152012201420172020
Rev, G Profit, Net Income
10.07.65.12.70.2-2.22012201420172020
Ops, Inv, Fin

10-Q 1 isco-10q_20200630.htm 10-Q isco-10q_20200630.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended June 30, 2020  

or

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

For the transition period from                      to                     

Commission File Number: 0-51891

 

INTERNATIONAL STEM CELL CORPORATION

(Exact name of Registrant as specified in its charter)

 

 

Delaware

 

20-4494098

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

5950 Priestly Drive

Carlsbad, CA

 

92008

(Address of Principal Executive Offices)

 

(Zip Code)

(760) 940-6383

(Registrant’s telephone number)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

None

 

None

 

None

Indicated 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      NO  

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    YES      NO  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.            

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES      NO  

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

As of August 10, 2020, the Registrant had 7,539,089 shares of Common Stock outstanding.

 

 

 


 

International Stem Cell Corporation and Subsidiaries

Form 10-Q

Table of Contents

 

 

  

Page Numbers

PART I—FINANCIAL INFORMATION

  

 

 

 

 

Item 1.

Condensed Consolidated Financial Statements (Unaudited)

  

3

 

Condensed Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019 (Unaudited)

 

3

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2020 and 2019 (Unaudited)

 

4

 

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Deficit for the three and six months ended June 30, 2020 and 2019 (Unaudited)

 

5

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 (Unaudited)

 

6

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

  

29

Item 4.

Controls and Procedures

  

30

 

PART II—OTHER INFORMATION

  

 

 

 

 

Item 1.

Legal Proceedings

  

32

Item 1A.

Risk Factors

  

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

  

32

Item 3.

Defaults Upon Senior Securities

  

32

Item 4.

Mine Safety Disclosures

  

32

Item 5.

Other Information

  

32

Item 6.

Exhibits

  

33

 

Signatures

 

35

 

 

2


 

PART I—FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements (Unaudited)

International Stem Cell Corporation and Subsidiaries

Condensed Consolidated Balance Sheets

(In thousands, except share and par value data)

(Unaudited)

 

 

June 30,

 

 

December 31,

 

 

2020

 

 

2019

 

Assets

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash

$

1,315

 

 

$

484

 

Accounts receivable, net

 

694

 

 

 

1,515

 

Inventory, net

 

1,010

 

 

 

1,246

 

Prepaid expenses and other current assets

 

379

 

 

 

207

 

Total current assets

 

3,398

 

 

 

3,452

 

Non-current inventory

 

356

 

 

 

358

 

Property and equipment, net

 

607

 

 

 

668

 

Intangible assets, net

 

1,345

 

 

 

1,335

 

Right-of-use assets

 

1,006

 

 

 

717

 

Deposits and other assets

 

71

 

 

 

90

 

Total assets

$

6,783

 

 

$

6,620

 

Liabilities, Redeemable Convertible Preferred Stock and Stockholders' Deficit

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

$

579

 

 

$

654

 

Accrued liabilities

 

507

 

 

 

642

 

Operating lease liabilities, current

 

323

 

 

 

367

 

Advances

 

250

 

 

 

250

 

Related party note payable

 

2,422

 

 

 

 

Total current liabilities

 

4,081

 

 

 

1,913

 

Related party note payable

 

 

 

 

2,370

 

Paycheck Protection Program loan

 

654

 

 

 

 

Fair value of warrant liability

 

322

 

 

 

207

 

Operating lease liabilities, net of current portion

 

1,031

 

 

 

718

 

Total liabilities

 

6,088

 

 

 

5,208

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

Series D redeemable convertible preferred stock, $0.001 par value; 50 shares

   authorized; 43 shares issued and outstanding; liquidation preference of $4,300

   at June 30, 2020 and December 31, 2019

 

4,300

 

 

 

4,300

 

Stockholders' Deficit:

 

 

 

 

 

 

 

Non-redeemable convertible preferred stock, $0.001 par value; 10,006,310 shares

   authorized; 5,255,124 shares issued and outstanding; liquidation preference

   of $10,557 and $10,550 at June 30, 2020 and December 31, 2019, respectively

 

5

 

 

 

5

 

Common stock, $0.001 par value; 120,000,000 shares authorized; 7,539,089 shares

   issued and outstanding at June 30, 2020 and December 31, 2019

 

8

 

 

 

8

 

Additional paid-in capital

 

104,232

 

 

 

103,490

 

Accumulated deficit

 

(107,850

)

 

 

(106,391

)

Total stockholders' deficit

 

(3,605

)

 

 

(2,888

)

Total liabilities, redeemable convertible preferred stock

   and stockholders' deficit

$

6,783

 

 

$

6,620

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 

3


 

International Stem Cell Corporation and Subsidiaries

Condensed Consolidated Statements of Operations

(In thousands, except per share data)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Product sales

 

$

1,812

 

 

$

2,321

 

 

$

4,171

 

 

$

4,539

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

719

 

 

 

857

 

 

 

1,576

 

 

 

1,698

 

Research and development

 

 

200

 

 

 

268

 

 

 

503

 

 

 

921

 

Selling and marketing

 

 

427

 

 

 

739

 

 

 

944

 

 

 

1,430

 

General and administrative

 

 

1,298

 

 

 

1,398

 

 

 

2,436

 

 

 

2,920

 

Total operating expenses

 

 

2,644

 

 

 

3,262

 

 

 

5,459

 

 

 

6,969

 

Loss from operations

 

 

(832

)

 

 

(941

)

 

 

(1,288

)

 

 

(2,430

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in fair value of warrant liability

 

 

(225

)

 

 

311

 

 

 

(115

)

 

 

908

 

Interest expense

 

 

(29

)

 

 

(20

)

 

 

(56

)

 

 

(34

)

Miscellaneous income

 

 

 

 

 

2

 

 

 

 

 

 

2

 

Total other income (expense), net

 

 

(254

)

 

 

293

 

 

 

(171

)

 

 

876

 

Net loss

 

$

(1,086

)

 

$

(648

)

 

$

(1,459

)

 

$

(1,554

)

Net loss per common share, basic and diluted

 

$

(0.14

)

 

$

(0.09

)

 

$

(0.19

)

 

$

(0.21

)

Weighted-average common shares used to compute

   net loss per share, basic and diluted

 

 

7,539

 

 

 

7,533

 

 

 

7,539

 

 

 

7,467

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 

4


 

International Stem Cell Corporation and Subsidiaries

Condensed Consolidated Statements of Changes in Redeemable Convertible 

Preferred Stock and Stockholders’ Deficit

(In thousands)

(Unaudited)

 

 

Three and Six Months Ended June 30, 2020

 

 

Series D Redeemable

 

 

 

Non-redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible

 

 

 

Convertible

 

 

Common

 

 

Additional

 

 

 

 

 

 

Total

 

 

Preferred Stock

 

 

 

Preferred Stock

 

 

Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2019

 

 

 

$

4,300

 

 

 

 

5,255

 

 

$

5

 

 

 

7,539

 

 

$

8

 

 

$

103,490

 

 

$

(106,391

)

 

$

(2,888

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

418

 

 

 

 

 

 

418

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(373

)

 

 

(373

)

Balance at March 31, 2020

 

 

 

 

4,300

 

 

 

 

5,255

 

 

 

5

 

 

 

7,539

 

 

 

8

 

 

 

103,908

 

 

 

(106,764

)

 

 

(2,843

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

324

 

 

 

 

 

 

324

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,086

)

 

 

(1,086

)

Balance at June 30, 2020

 

 

 

$

4,300

 

 

 

 

5,255

 

 

$

5

 

 

 

7,539

 

 

$

8

 

 

$

104,232

 

 

$

(107,850

)

 

$

(3,605

)

 

 

Three and Six Months Ended June 30, 2019

 

 

Series D Redeemable

 

 

 

Non-redeemable

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Convertible

 

 

 

Convertible

 

 

Common

 

 

Additional

 

 

 

 

 

 

Total

 

 

Preferred Stock

 

 

 

Preferred Stock

 

 

Stock

 

 

Paid-in

 

 

Accumulated

 

 

Stockholders'

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance at December 31, 2018

 

 

 

$

 

 

 

 

5,255

 

 

$

5

 

 

 

6,934

 

 

$

7

 

 

$

109,188

 

 

$

(106,663

)

 

$

2,537

 

Out of period correction

 

 

 

 

4,300

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,837

)

 

 

4,537

 

 

 

(4,300

)

Conversion of bridge loan

   from a related party to

   common stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

599

 

 

 

1

 

 

 

1,048

 

 

 

 

 

 

1,049

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

506

 

 

 

 

 

 

506

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(906

)

 

 

(906

)

Balance at March 31, 2019,

   as revised

 

 

 

 

4,300

 

 

 

 

5,255

 

 

 

5

 

 

 

7,533

 

 

 

8

 

 

 

101,905

 

 

 

(103,032

)

 

 

(1,114

)

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

571

 

 

 

 

 

 

571

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(648

)

 

 

(648

)

Balance at June 30, 2019

 

 

 

$

4,300

 

 

 

 

5,255

 

 

$

5

 

 

 

7,533

 

 

$

8

 

 

$

102,476

 

 

$

(103,680

)

 

$

(1,191

)

See accompanying notes to the unaudited condensed consolidated financial statements.

 

5


 

 

International Stem Cell Corporation and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

 

Six Months Ended June 30,

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net loss

$

(1,459

)

 

$

(1,554

)

Adjustments to reconcile net loss to net cash provided

   by (used in) operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

128

 

 

 

138

 

Operating lease expense

 

132

 

 

 

158

 

Stock-based compensation

 

742

 

 

 

1,077

 

Change in fair value of warrant liability

 

115

 

 

 

(908

)

Allowance for inventory obsolescence

 

7

 

 

 

22

 

Interest expense on related party note payable

 

52

 

 

 

30

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

 

821

 

 

 

(325

)

Inventory

 

231

 

 

 

184

 

Prepaid expenses and other current assets

 

(172

)

 

 

103

 

Deposits and other assets

 

19

 

 

 

(16

)

Accounts payable

 

(75

)

 

 

273

 

Accrued liabilities

 

(142

)

 

 

(21

)

Operating lease liabilities

 

(152

)

 

 

(150

)

Net cash provided by (used in) operating activities

 

247

 

 

 

(989

)

Cash flows from investing activities

 

 

 

 

 

 

 

Purchases of property and equipment

 

(22

)

 

 

(113

)

Payments for patent licenses

 

(48

)

 

 

(178

)

Net cash used in investing activities

 

(70

)

 

 

(291

)

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from Paycheck Protection Program loan

 

654

 

 

 

 

Proceeds from note payable from a related party

 

 

 

 

800

 

Net cash provided by financing activities

 

654

 

 

 

800

 

Net increase (decrease) in cash

 

831

 

 

 

(480

)

Cash, beginning of period

 

484

 

 

 

1,075

 

Cash, end of period

$

1,315

 

 

$

595

 

Supplemental disclosure of cash flow information:

 

 

 

 

 

 

 

Cash paid for interest

$

3

 

 

$

3

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

Right-of-use asset obtained in exchange for operating lease liability

$

421

 

 

$

 

Patent license costs included in accrued liabilities

$

7

 

 

$

 

Conversion of bridge loan from a related party to common stock

$

 

 

$

1,049

 

See accompanying notes to the unaudited condensed consolidated financial statements.

 

 

6


 

International Stem Cell Corporation and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Description of Business, Basis of Presentation and Summary of Significant Accounting Policies

Description of Business

International Stem Cell Corporation (the “Company”) was organized in Delaware in June 2005 and is publicly traded on the OTCQX under the symbol “ISCO”. The Company is primarily a research and development company, for the therapeutic market, which has focused on advancing potential clinical applications of human parthenogenetic stem cells (“hpSCs”) for the treatment of various diseases of the central nervous system and liver diseases. The Company has the following wholly-owned subsidiaries:

 

Lifeline Cell Technology, LLC (“LCT”) – for the biomedical market, develops, manufactures and commercializes primary human cell research products including over 200 human cell culture products, including frozen human “primary” cells and the reagents (called “media”) needed to grow, maintain and differentiate the cells;

 

Lifeline Skin Care, Inc. (“LSC”) – for the anti-aging cosmetic market, develops, manufactures and markets a category of anti-aging cosmetic skin care products based on the Company’s proprietary parthenogenetic stem cell technology and small molecule technology;

 

Cyto Therapeutics Pty. Ltd. (“Cyto Therapeutics”) – performs research and development (“R&D”) for the therapeutic market and is currently conducting clinical trials in Australia for the use of ISC-hpNSC® in the treatment of Parkinson’s disease.

COVID-19 Pandemic

In January 2020, the World Health Organization (“WHO”) announced a global health emergency because of a new strain of coronavirus (“COVID-19”) originating in Wuhan, China and the risks to the international community as the virus spreads globally beyond its point of origin. In March 2020, the WHO classified COVID-19 as a pandemic, based on its rapid increase in exposure globally.

The Company is uncertain as to the full magnitude of effects that the COVID-19 pandemic will have on its financial condition, liquidity, and future results of operations. As of the date of this report, the Company is currently experiencing a year-over-year decline in the volume of product sales and in response has reduced its capital spending and, where possible, operating expenses while facilitating ongoing safe and reliable operations. In addition, management is actively monitoring the impact of COVID-19 on the Company’s operations, workforce, suppliers, customers and industry. The full impact that COVID-19 will have on the Company’s consolidated financial statements throughout and beyond 2020 remains uncertain and ultimately will be dictated by the length and severity of the pandemic, as well as the economic recovery and federal, state and local government actions taken in response. Therefore, the Company cannot reasonably predict the extent to which its consolidated financial statements will be impacted.

Basis of Presentation

The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”) applicable to interim financial statements. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to those rules and regulations. The unaudited interim condensed consolidated financial statements reflect all adjustments consisting of normal recurring adjustments which, in the opinion of management, are necessary for a fair statement of the Company’s financial position and the results of its operations and cash flows for the periods presented. The operating results presented in these unaudited interim condensed consolidated financial statements are not necessarily indicative of the results that may be expected for any future periods. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2019 included in the Company’s annual report on Form 10-K filed with the SEC on June 1, 2020.

Liquidity and Going Concern

The Company had an accumulated deficit of approximately $107.9 million as of June 30, 2020 and has, on an annual basis, incurred net losses and negative operating cash flows since inception. The Company has had no revenue from its principal operations in therapeutic and clinical product development through research and development efforts. Unless the Company obtains additional

7


 

financing, the Company does not have sufficient cash on hand to sustain operations at least through one year after the issuance date of these financial statements.

There can be no assurance that the Company will be successful in maintaining normal operating cash flow or obtaining additional funding. These circumstances raise substantial doubt about the Company’s ability to continue as a going concern. For the foreseeable future, the Company’s ability to continue its operations is dependent upon its ability to obtain additional financing. The accompanying condensed consolidated financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classifications of liabilities that may result from the outcome of the uncertainty concerning the Company’s ability to continue as a going concern.

The Company continues to evaluate various financing sources and options to raise working capital to help fund current research and development programs and operations. The Company will need to obtain significant additional funding from sources, including through the exercise of outstanding warrants, debt and/or equity financing, license arrangements, grants and/or collaborative research arrangements to sustain its operations and develop products.

The timing and degree of any future capital requirements will depend on many factors, including:

 

the accuracy of the assumptions underlying the estimates for capital needs in 2020 and beyond;

 

the extent that revenues from sales of LSC and LCT products cover the related costs and provide capital;

 

scientific progress in research and development programs;

 

the magnitude and scope of the Company’s research and development programs and its ability to establish, enforce and maintain strategic arrangements for research, development, clinical testing, manufacturing and marketing;

 

the progress with preclinical development and clinical trials;

 

the time and costs involved in obtaining regulatory approvals;

 

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims;

 

the number and type of product candidates that the Company decides to pursue; and

 

the development of major public health concerns, including COVID-19 or other pandemics arising globally, and the current and future impact that such concerns may have on the Company’s operations and funding requirements.

As a result of the COVID-19 pandemic and actions taken to slow its spread, the global credit and financial markets have recently experienced extreme volatility and disruptions, including diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If equity and credit markets continue to deteriorate, it may make any additional debt and/or equity financing more difficult, more costly and more dilutive.

In addition, debt financing may be expensive and require the Company to pledge all or a substantial portion of its assets. If additional funds are obtained through arrangements with collaborative partners, these arrangements may require the Company to relinquish rights to some of its technologies, product candidates or products that the Company would otherwise seek to develop and commercialize on its own. Furthermore, if sufficient capital is not available, the Company may be required to delay, reduce the scope of or eliminate one or more of its product initiatives. The Company’s failure to raise capital or enter into applicable arrangements when needed would have a negative impact on its financial condition.

Principles of Consolidation and Foreign Currency Transactions

The unaudited condensed consolidated financial statements include the accounts of International Stem Cell Corporation and its subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. The functional currency of the Company and its subsidiaries, including its wholly-owned Australian subsidiary, Cyto Therapeutics, is the U.S. dollar. Assets and liabilities that are not denominated in the functional currency are remeasured into U.S. dollars at foreign currency exchange rates in effect at the respective balance sheet dates. Revenue and expenses are translated at the average rate in effect on the date of the transaction. Net realized and unrealized gains and losses from foreign currency transactions and remeasurement are reported in general and administrative expense in the accompanying condensed consolidated statements of operations and were not material for the periods presented.

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Reclassifications

For the three and six months ended June 30, 2020, the Company reclassified certain prior period amounts to conform to the current period presentation, as follows:

 

The carrying value and shares of the Company’s Series B, Series G, Series I-1 and Series I-2 non-redeemable convertible preferred stock were aggregated on the accompanying condensed consolidated balance sheets and statements of changes in redeemable convertible preferred stock and stockholders’ deficit. Refer to Note 6 – Convertible Preferred Stock and Stockholders’ Deficit for further discussion;

 

Non-cash operating lease expense was reclassified from changes in operating assets and liabilities to adjustments to reconcile net loss to net cash provided by (used in) operating activities on the accompanying condensed consolidated statements of cash flows; and

 

Financed insurance premiums and payments on financed insurance premiums were reclassified from non-cash financing activities and cash flows from financing activities, respectively, to cash flows from operating activities on the accompanying condensed consolidated statements of cash flows.

These reclassifications had no effect on previously reported net loss, stockholders’ deficit or cash flows for the prior period.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the accompanying condensed consolidated financial statements. Significant estimates include patent life (remaining legal life versus remaining useful life), inventory carrying values, allowance for excess and obsolete inventories, allowance for sales returns and doubtful accounts, and transactions using the Black-Scholes option valuation model, for example, common stock options and common stock warrants, as well as the Monte-Carlo simulation method for certain common stock warrants. Actual results could differ from those estimates.

Segments

The Company’s chief operating decision-maker reviews financial information presented on a consolidated basis, accompanied by disaggregated information by each reportable company’s statement of operations. The Company operates the business on the basis of three reporting segments, the parent company and two business units: ISCO – therapeutic market; LCT – biomedical market, and; LSC – anti-aging cosmetic market.

Inventory

Inventory is accounted for using the average cost and first-in, first-out (FIFO) methods for LCT cell culture media and reagents, average cost and specific identification methods for LSC products, and specific identification method for other LCT products. Inventory balances are stated at the lower of cost or net realizable value. Laboratory supplies used in the research and development process are expensed as consumed. Inventory is reviewed periodically for product expiration and obsolescence and is adjusted accordingly. The value of the inventory that is not expected to be sold within twelve months of the current reporting period is classified as non-current inventory on the accompanying condensed consolidated balance sheets.

Accounts Receivable

Trade accounts receivable are recorded at the net invoice value and are not interest bearing. Accounts receivable primarily consist of trade accounts receivable from the sales of LCT’s products, timing of cash receipts by the Company related to LSC credit card sales to customers, as well as LSC trade receivable amounts related to spa and distributor sales. The Company considers receivables past due based on the contractual payment terms. The Company reviews its exposure to accounts receivable and reserves specific amounts if collectability is no longer reasonably assured. The Company recorded an allowance for doubtful accounts of $12,000 as of June 30, 2020 and December 31, 2019.

Research and Development Tax Credit Receivable

As of June 30, 2020, the Company recognized a research and development tax credit receivable within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets earned by its wholly-owned subsidiary, Cyto Therapeutics, which conducts various research and development activities on the Company’s product candidates in Australia. Under Australian tax

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law, the Australian Taxation Office provides for a refundable tax credit in the form of a cash refund equal to 43.5% of qualified research and development expenditures, not to exceed established thresholds. The Company recognizes the R&D tax credit as a reduction to research and development expense when there is reasonable assurance that the tax credit will be received, the relevant expenses have been incurred, and the amount can be reliably measured.

Advances

On June 18, 2008, the Company entered into an agreement with BioTime, Inc. (“BioTime”), whereby BioTime paid an advance of $250,000 to LCT to produce, make, and distribute certain products. The $250,000 advance will be paid down with the first $250,000 of net revenues that otherwise would be allocated to LCT under the agreement. As of June 30, 2020, no revenues were realized and attributable to BioTime under this agreement.

Property and Equipment

Property and equipment are stated at cost. The provision for depreciation and amortization is computed using the straight-line method over the estimated useful lives of the assets, which are generally three to five years. The costs of major remodeling and leasehold improvements are capitalized and amortized over the shorter of the remaining term of the lease or the estimated life of the asset.

Intangible Assets

Intangible assets consist of acquired patent licenses and capitalized legal fees related to the acquisition, filing, maintenance, and defense of patents and trademarks. Amortization begins once the patent is issued by the appropriate authoritative bodies. In the period in which a patent application is rejected or efforts to pursue the patent are abandoned, all the related accumulated costs are expensed. Patents and other intangible assets are amortized on a straight-line basis over the shorter of the lives of the underlying patents, generally 15 years. All amortization expense and impairment charges related to intangible assets are included in general and administrative expense in the accompanying condensed consolidated statements of operations.

Long-Lived Asset Impairment

The Company reviews long-lived assets for impairment when events or changes in circumstances (“triggering event”) indicate that the carrying value of an asset or group of assets may not be recovered. If a triggering event is determined to have occurred, the carrying value of an asset or group of assets is compared to the future undiscounted cash flows expected to be generated by the asset or group of assets. If the carrying value exceeds the undiscounted cash flows of the asset or group of assets, then impairment exists. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.

Revenue Recognition

Revenue is recognized at an amount that reflects the consideration to which the Company expects to be entitled in exchange for transferring goods or services to a customer. This principle is applied using the following five-step process:

 

1.

Identify the contract with the customer

 

2.

Identify the performance obligations in the contract

 

3.

Determine the transaction price

 

4.

Allocate the transaction price to the performance obligations in the contract

 

5.

Recognize revenue when (or as) each performance obligation is satisfied

The Company recognizes revenue when it satisfies a performance obligation by transferring control of the promised goods or services to its customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods or services.

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The following table presents the Company's revenue disaggregated by segment, product and geography (in thousands):

Biomedical market:

 

Three Months Ended June 30, 2020

 

 

Six Months Ended June 30, 2020

 

 

 

 

 

 

 

 

 

 

Total

 

 

% of Total

 

 

 

 

 

 

 

 

 

 

Total

 

 

% of Total

 

 

Domestic

 

 

International

 

 

Revenues

 

 

Revenues

 

 

Domestic

 

 

International

 

 

Revenues

 

 

Revenues

 

Biomedical products

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cells

$

213

 

 

$

87

 

 

$

300

 

 

 

22

%

 

$

475

 

 

$

204

 

 

$

679

 

 

 

20

%

Media

 

994

 

 

 

85

 

 

 

1,079

 

 

 

77

%

 

 

2,461

 

 

 

210

 

 

 

2,671

 

 

 

79

%

Other

 

16

 

 

 

 

 

 

16

 

 

 

1

%

 

 

16

 

 

 

 

 

 

16

 

 

 

1

%

Total

$

1,223

 

 

$

172

 

 

$

1,395

 

 

 

100

%

 

$

2,952

 

 

$

414

 

 

$

3,366

 

 

 

100

%

 

 

Three Months Ended June 30, 2019

 

 

Six Months Ended June 30, 2019

 

 

 

 

 

 

 

 

 

 

Total

 

 

% of Total

 

 

 

 

 

 

 

 

 

 

Total

 

 

% of Total

 

 

Domestic

 

 

International

 

 

Revenues

 

 

Revenues

 

 

Domestic

 

 

International

 

 

Revenues

 

 

Revenues

 

Biomedical products

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cells

$

283

 

 

$

86

 

 

$