Executive Summary

Q3 2014 delivered record revenue of $1.96M, up 17% year over year, with balanced growth across Lifeline Skin Care (cosmeceuticals) and Lifeline Cell Technology (biomedical) segments; EPS improved to $(0.01) from $(0.03) YoY .
R&D advanced meaningfully: FDA cleared ISCO’s parthenogenetic stem cell lines for clinical use; management targeted IND submission and commencement of the first Parkinson’s disease clinical study pending approval .
Strategic catalysts strengthened: signed a research agreement with Rohto Pharmaceutical, added distributors in Asia-Pacific, and received a positive EU patent opinion—collectively expanding commercialization and IP optionality .
Liquidity remains a key risk: cash fell to $471K and monthly burn ran ~$495K excluding capex/patents; management emphasized financing plans and insider support to bridge to regulatory milestones .
Street consensus via S&P Global was unavailable; no formal quantitative guidance was issued. Focus near term is on IND filing, regulatory de-risking, and segment execution .

What Went Well and What Went Wrong

What Went Well

Record revenue and segment growth: Q3 total revenue $1.96M (+17% YoY); Cosmeceutical $0.97M (+20% YoY), Biomedical $0.99M (+16% YoY) .
Regulatory momentum: “The US FDA cleared ISCO’s parthenogenetic stem cell lines for clinical use” and the company intends to submit materials before year-end to seek approval to begin the first stem cell clinical trial in Parkinson’s disease .
Strategic partnerships and distribution: Signed research agreement with Rohto (potential license after 12 months) and expanded distributors in Korea, Taiwan, Australia, New Zealand, India; EU Advocate General delivered a positive opinion on pending stem cell patents .
Management tone: “We’ve made excellent progress… completion of the preclinical phase… submission of the necessary regulatory filing and, if approved, the beginning of the first clinical study…” — CEO Andrey Semechkin .

What Went Wrong

Continued losses despite revenue growth: Q3 operating loss $(2.03)M and net loss $(2.03)M; nine-month net loss $(7.88)M .
Elevated R&D spend: Q3 R&D $1.39M (+49% YoY) driven by stem cell line research and preclinical testing for IND-enabling studies .
Liquidity strain and going concern: Cash $471K; average monthly burn ~$495K; management disclosed substantial doubt about continuing as a going concern absent additional financing .
Margin mix headwinds: LSC cost of sales rose to 16% of sales due to channel mix; overall cost of sales held at ~26% of revenue, limiting near-term gross margin expansion .

Financial Results

Quarterly progression (oldest → newest)

Metric	Q1 2014	Q2 2014	Q3 2014
Revenue ($USD thousands)	1,649	1,588	1,963
Net Loss ($USD thousands)	(1,435)	(4,410)	(2,034)
EPS (Basic & Diluted, $USD)	(0.01)	(0.03)	(0.01)
Operating Loss ($USD thousands)	(2,065)	(2,243)	(2,034)
Cost of Sales (% of Revenue)	27%	26%	26%

Year-over-year (Q3 2013 vs Q3 2014)

Metric	Q3 2013	Q3 2014
Revenue ($USD thousands)	1,670	1,963
Net Loss ($USD thousands)	(3,799)	(2,034)
EPS (Basic & Diluted, $USD)	(0.03)	(0.01)
Cost of Sales (% of Revenue)	27%	26%

Segment breakdown (Revenue)

Segment Revenue ($USD thousands)	Q1 2014	Q2 2014	Q3 2014
Cosmeceutical (LSC)	803	746	970
Biomedical (LCT)	846	842	993

KPIs

KPI	Q1 2014	Q2 2014	Q3 2014
Cash & Cash Equivalents (period-end, $USD thousands)	991	748	471
Avg Monthly Burn (ex-capex & patents, $USD thousands)	~677	~560	~495
R&D Expense ($USD thousands)	958	1,411	1,392

Operational and accounting notes:

Non-operating items materially impacted results in 2014: warrant exchange inducement expense of $3.45M in Q2 and fair value changes in warrant liability (+$1.89M YTD through Q2), with nine-month other expense of $(1.54)M; Q3 other income/expense was immaterial .

Guidance Changes

No formal quantitative guidance was issued; management provided qualitative milestones (IND submission timing, PD clinical initiation pending approval). The company did not disclose revenue, margin, OpEx, or tax guidance in its Q3 press release or 10-Q .

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue	FY/Q4 outlook	Not provided	Not provided	Maintained (no guidance)
Gross/Operating Margins	FY/Q4 outlook	Not provided	Not provided	Maintained (no guidance)
OpEx (R&D, S&M, G&A)	FY/Q4 outlook	Not provided	Not provided; R&D expected to increase with IND preparations	Qualitative only
PD Program Milestones	Late 2014 / 2015	Preclinical progressing	Submit IND-enabling materials by YE14; target first clinical study if approved	Raised specificity

Earnings Call Themes & Trends

Note: An earnings call was hosted on Nov 14, 2014; a transcript was not available in our document corpus. Call details and replay information are posted on ISCO’s investor site and Marketwired notice .

Topic	Previous Mentions (Q-2 and Q-1)	Current Period (Q3 2014)	Trend
PD IND path	Pre-IND meeting; FDA clarity (Q1)	Submit materials by YE2014; first clinical study if approved	Accelerating toward IND
PD preclinical data	Acute toxicity study completion; 6-month behavioral improvements (Q2)	Completion of preclinical phase targeted	De-risking safety/efficacy
FDA/regulatory status	—	FDA cleared hpSC lines for clinical use	Regulatory de-risking
Partnerships	Rohto research agreement initiated (Q2)	Rohto agreement signed; evaluation ongoing	Expanding BD
Distribution	Mexico distributor (Q2)	New APAC distributors (Korea, Taiwan, Australia, NZ, India)	International expansion
IP/Legal	—	Positive EU Advocate General opinion on patents	IP strengthening
Pipeline	—	New stroke program; rodent study with Tulane	Portfolio expansion
Financial discipline	Burn ~$677K/mo (Q1) to ~$560K/mo (Q2)	Burn ~$495K/mo; cash $471K	Improving burn, tight liquidity

Management Commentary

CEO outlook: “We’ll reach… milestones… completion of the preclinical phase… submission of the necessary regulatory filing and… beginning of the first clinical study using our proprietary stem cell derived human neural stem cells for… Parkinson’s disease” — Andrey Semechkin, PhD .
PD program progress: “We’ve taken another important step forward… completing the acute toxicity study… encouraging signs of behavioral improvements after six months in the primate study… pivotal to a successful IND submission” — Andrey Semechkin .
Regulatory clarity: “Obtaining clarity from the FDA on our Parkinson’s disease program allows us to substantially lower the risk of unforeseen regulatory issues… prepare a stronger IND submission” — Andrey Semechkin .
Financing commitment: “I recognize that our cash position remains challenging, but I continue to be committed to supporting the company until… we can bring in additional investment on appropriate terms” — Andrey Semechkin .

Q&A Highlights

A replay was available, but no transcript could be retrieved. Call logistics (date/time, dial-in, webcast, replay PIN) are posted on ISCO’s investor relations and Marketwired pages .
Given lack of transcript, specific Q&A themes, guidance clarifications, and tone shifts cannot be independently verified.

Estimates Context

Wall Street consensus (EPS and revenue) via S&P Global was unavailable for Q3 2014 and prior two quarters; therefore, we cannot assess beat/miss versus Street.
ISCO did not issue quantitative guidance in Q3 materials, further limiting comparative analysis to internal trends .

Key Takeaways for Investors

Execution on regulatory milestones is the primary near-term catalyst: IND submission for PD and potential initiation of first clinical study if approved could materially re-rate risk .
Commercial segments continue to scale: both LSC and LCT sustained multi-quarter YoY growth; maintaining mix and operating efficiency will be key to margin trajectory .
Liquidity is constrained; watch for financing (equity/preferred/warrants or strategic partnerships) and insider support to bridge to IND and early clinical phases .
Non-operating items (warrant accounting and exchanges) created volatility in P&L; underlying operating loss narrowed YoY in Q3—focus on core OpEx discipline while funding R&D .
International expansion and IP tailwinds (EU opinion) support medium-term commercialization optionality beyond PD, including liver, corneal, and stroke programs .
Risk management: substantial doubt language on going concern underscores financing dependency; position sizing should reflect binary regulatory and funding outcomes .
Monitor upcoming disclosures: IND submission status, any Rohto license progression, distributor performance in APAC, and cash runway updates in subsequent filings .

Sources: ISCO Q3 2014 8-K (press release and financials) ; Q3 2014 10-Q (financials, MD&A, segments, risk) ; Q2 2014 8-K/10-Q ; Q1 2014 8-K/10-Q . Call logistics: investor notice and Marketwired .

International Stem Cell CORP (ISCO)·Q3 2014 Earnings Summary