Filed 2026-03-26 · Period ending 2025-12-31 · 27,699 words · SEC EDGAR
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# NovelStem International Corp. (NSTM) — 10-K
**Filed:** 2026-03-26
**Period ending:** 2025-12-31
**Accession:** 0001493152-26-012736
**Source:** [SEC EDGAR](https://www.sec.gov/Archives/edgar/data/912544/000149315226012736/)
**Origin leaf:** e050621f5fa5058a646e81307ec22e7765527d109ba955861a2023c798c7609f
**Words:** 27,699
---
**
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**
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For
the fiscal year ended December 31, 2025 |
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Commission
file number: 001-14332 | |
**
TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934**
**NOVELSTEM
INTERNATIONAL CORP.**
(Exact
name of registrant as specified in its charter)
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Florida |
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65-0385686 | |
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State
or other jurisdiction of |
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(I.R.S.
Employer | |
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incorporation
or organization |
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Identification
No.) | |
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7740
Cavern Lane Suite 100, Parkland FL |
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33067 | |
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(Address
of principal executive offices) |
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(Zip
Code) | |
Registrants
telephone number, including area code (410) 598-9024
Securities
registered pursuant to Section 12(b) of the Act:
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Title
of each class |
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Trading
Symbol(s) |
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Name
of each exchange on which registered | |
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None |
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Securities
registered pursuant to section 12(g) of the Act:
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Common
Stock, par value $0.01 per share | |
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(Title
of Class) | |
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes No
Indicate
by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes No
**Note** Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Exchange
Act from their obligations under those Sections.
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 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.
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Large
accelerated filer |
Accelerated
filer | |
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Non-accelerated
filer |
Smaller
reporting company | |
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Emerging
growth company | |
If
an emerging growth company, indicate by check mark if the registrant has 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 has filed a report on and attestation to its managements assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report.
If
securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant
included in the filing reflect the correction of an error to previously issued financial statements.
Indicate
by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation
received by any of the registrants executive officers during the relevant recovery period pursuant to 240.10D-1(b).
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
As
of the last day of the second fiscal quarter of 2025, the aggregate market value of the registrants common stock held by non-affiliates
of the registrant was approximately $1,275,000 based on the closing sale price on that date as reported on the OTCQB marketplace. As
of March 25, 2026, there were 49,332,455 shares of Common Stock, $0.01 par value per share, outstanding.
**DOCUMENTS
INCORPORATED BY REFERENCE**
None
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****
**TABLE
OF CONTENTS**
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PAGE | |
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PART I |
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Item
1. |
BUSINESS |
3 | |
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Item
1A. |
RISK FACTORS |
7 | |
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Item
1B. |
UNRESOLVED STAFF COMMENTS |
10 | |
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Item
1C. |
CYBERSECURITY |
10 | |
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Item
2. |
PROPERTIES |
10 | |
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Item
3. |
LEGAL PROCEEDINGS |
10 | |
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Item
4. |
MINE SAFETY DISCLOSURES |
10 | |
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PART II |
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Item
5. |
MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES |
11 | |
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Item
6. |
[RESERVED] |
11 | |
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Item
7. |
MANAGEMEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
11 | |
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Item
7A. |
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK |
16 | |
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Item
8. |
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA |
16 | |
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Item
9. |
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE |
16 | |
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Item
9A. |
CONTROLS AND PROCEDURES |
17 | |
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Item
9B. |
OTHER INFORMATION |
17 | |
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Item
9C. |
DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS |
17 | |
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PART III |
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Item
10. |
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE |
18 | |
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Item
11. |
EXECUTIVE COMPENSATION |
20 | |
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Item
12. |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
23 | |
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Item
13. |
CERTAIN RELATIONSHIPS, RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE |
24 | |
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Item
14. |
PRINCIPAL ACCOUNTING FEES AND SERVICES |
25 | |
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PART IV |
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Item
15. |
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES |
26 | |
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Item
16. |
FORM 10-K SUMMARY |
27 | |
Certain
statements contained in this report are forward-looking in nature. These statements can be identified by the use of forward-looking terminology
such as believes, expects, may, will, should or anticipates,
or the negatives thereof, or comparable terminology, or by discussions of strategy. You are cautioned that our business and operations
are subject to a variety of risks and uncertainties and, consequently, our actual results may materially differ from those projected
by any forward-looking statements. Certain of such risks and uncertainties are discussed below under the heading Item 1A. Risk
Factors.
| 2 | |
**PART
I**
**Item
1. Business.**
NovelStem
International Corp. (NovelStem or the Company) is a holding company whose principal assets consisted of an
approximate 31% equity interest in NewStem Ltd, an Israeli biotech company (NewStem) and its developed technology, and
a 50% equity interest in NetCo Partners (NetCo). The interest in NetCo was sold in May 2025 in a noncash transaction which
settled significant debt of the Company in the form of a litigation funding agreement. As described below, NewStem was liquidated in
October 2025. Currently, the Companys principal asset consists of rights to profits from a license held by Yissum Research Development
Company, Hebrew Universitys technology transfer company (Yissum), which we previously held through our ownership
interest in NewStem. NovelStem was formerly known as Hollywood Media Corp. The Company was incorporated in the State of Florida on January
22, 1993 and changed its name to NovelStem International Corp. in September 2018.
With
the purchase of NewStem, an Israeli biotech company, in 2018 the Company expanded its business focus from media to cutting edge biotech.
As a significant shareholder in NewStem, and the substantial commitment of our management and financial resources to NewStem, including
the fact that our Executive Chairman, Jan Loeb, was also the Chairman of NewStem, we had the ability to exert significant influence over
the management and operations of NewStem resulting in NewStem functioning as a minority operating subsidiary of the Company. Concurrent
to his appointment in July 2018, Mr. Loeb acted in an executive capacity on behalf of the Company and has served in a *de facto*
leadership role. In September 2022, the Board appointed Mr. Loeb as Executive Chairman of NovelStem in order to ratify Mr. Loebs
position and clarify his executive role. On January 13, 2023, the Board appointed Mr. Loeb as President. With respect to NewStem, Mr.
Loeb, as the Chairman, presided over the meetings of NewStems Board of Directors. Additionally, Mr. Loeb leveraged his financial
expertise by guiding NewStems financial and strategic planning, including the raising and deployment of capital, developing and
modifying NewStems business plan and budget and by participating in the negotiation of NewStems material contracts as required.
NewStem did not have an appointed Chief Financial Officer and, as such, Mr. Loeb served as the *de facto* Chief Financial Officer
and Chief Strategic Officer of NewStem.
Through
the second quarter of 2024, the Company was a development stage biotechnology holding company focused on the stem cell-based technology
developed by Hebrew University under exclusive license to NewStem. The Company signed an agreement (the Purchase Agreement)
on June 20, 2024 to acquire the remainder of NewStem in exchange for Company stock as well as funding for NewStem. The Company was unable
to obtain funding to proceed, and the Purchase Agreement was not fully consummated. As such, no Company shares were issued to NewStem
shareholders in exchange for NewStem shares.
During
the third quarter of 2024, it became evident that NewStem would not be able to raise funds to continue operations consisting of research
and development and further development of the technology. In October 2024, NewStem ceased operations and began the process of liquidation
under which the current state of the technology reverted back to the original licensor, Yissum, with the Company retaining a financial
interest of up to $3,750,000 in any future licensing. NewStems liquidation was completed in October 2025.
Additionally,
NovelStem owned a 50% interest in NetCo, a joint venture that owns the Net Force publishing franchise. On May 9, 2025, the Company entered
into a Settlement Agreement and Release whereby the investment in NetCo was sold to the Companys JV partner for $1,300,000 to
settle the related litigation funding liability to Omni Bridgeway in full. This transaction was fully consummated as funds were received
by Omni Bridgeway from CP Partners pursuant to the terms of the agreement.
NovelStem
depended entirely on earnings and cash from its investments in NewStem and the NewStem technology and our 50% equity interest in the
NetCo joint venture. The Companys principal operations coincided with those of NewStem. We have not received any dividend payments
or other distributions from NewStem in the fiscal years ended December 31, 2025 and 2024. We received minimal distributions (approximately
$600) of earnings from NetCo during the year ended December 31, 2025 and none during the year ended December 31, 2024.
| 3 | |
**NewStem**
NewStem
was a development stage Israeli biotech limited liability company that performed research focused on human Pluripotent Stem Cells (hPSCs)
in general, and Haploid human Pluripotent Stem Cells (HhPSCs), in particular. These cells have the potential to change the face of medical
research as they play a pivotal role in cancer research, regenerative medicine and disease therapy. NewStem established a discovery bio-platform
based on haploid human embryonic stem cell technology for genome-wide screenings and is currently using this platform for the discovery
and development of oncology drugs based on synthetic lethal interaction and developing a personalized diagnostic for early detection
of chemotherapy resistance. NewStem incurred losses from inception and generated minimal revenues from a licensing agreement. NewStem
filed an FDA Pre-Submission and received a CE Mark from the European Medicines Agency (EMA) for its in vitro diagnostic device (IVDD).
NewStem does not have an FDA approved medical device. The NewStem Software Diagnostic Device (NSDD) is CE marked under EU regulation
as an other IVD under Directive 98/79/EC since March 2022.
We
believe that NewStem was the only company worldwide to develop products based on this innovative proprietary technology. These products
refer to the medical device platform that provides information to oncologists regarding the presence of mutations in the patients
tumor profile which may confer resistance to different anti-cancer drugs and to anticancer drugs that target tumors with specific mutations
based on a synthetic-lethal interaction approach.
NewStems
technology solutions were derived from an exclusive, worldwide license from Yissum and The New York Stem Cells Foundation, based on the
findings and inventions of Prof. Nissim Benvenisty, Director of the Azrieli Center for Stem Cells and Genetic Research, The Hebrew University
of Jerusalem (the License). The License provided NewStem with an exclusive worldwide license to make commercial use of
the License and to develop, manufacture, market, distribute or sell a product in the field of therapeutics, diagnostics, screening, development
and testing. In consideration for the grant of the License, NewStem was obligated to pay royalties of up to 3% of net sales and up to
12% of Sublicense Consideration (as defined in the License Agreement). As part of the liquidation of NewStem, the License
reverted to the original holders and NovelStem retained a significant financial interest in any future monetization of the License.
NovelStem
was the original seed investor in NewStem providing $2 million in July 2018 and another $2 million over the next two and a half years.
At the time of liquidation, we owned a 30.51% equity interest in NewStem. The remaining equity interests in NewStem are owned by Yissum
and Professor Benvenisty, each of whom owned a 30.51% equity interest, Illumina Cambridge LTD, which owned a 5.31% equity interest, and
management and a number of other shareholders who owned collectively approximately 3.18%.
**
*Competition*
The
technologies underlying future monetization of the License are subject to rapid and profound technological change. Competition intensifies
as technical advances in each field are made and become more widely known. We can give no assurance that others will not develop services,
products, or processes with significant advantages over the products, services, and processes that can be developed through the License.
Any such occurrence could have a material and adverse effect on our business, results of operations and financial condition.
| 4 | |
Yissum
plans to find new users for the technology based on the License. The success of a future licensee to enhance and broaden its product
offerings in response to changing customer demands and competitive pressure and technologies will depend on numerous factors, including
the ability to:
|
- |
Properly
identify and anticipate physician and patient needs; | |
|
- |
Develop
and introduce new products or product enhancements in a timely manner; | |
|
- |
Adequately
protect intellectual property and avoid infringing upon the intellectual property rights of third parties; | |
|
- |
Demonstrate
the safety and efficacy of new products; and | |
|
- |
Obtain
the necessary regulatory clearances or approvals for new products or product enhancements. | |
*Government
Regulation*
In
the United States, pharmaceutical products are subject to extensive regulation by the Federal Food and Drug Administration and Cosmetic
Act or the FDA. The FDA and other federal and state statutes and regulations, govern, among other things, the research, development,
testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and
reporting, sampling, and import and export of pharmaceutical products. The FDA has very broad enforcement authority and failure to abide
by applicable regulatory requirements can result in administrative or judicial sanctions being imposed on NewStem, including warning
letters, refusals of government contracts, clinical holds, civil penalties, injunctions, restitution, disgorgement of profits, recall
or seizure of products, total or partial suspension of production or distribution, withdrawal of approval, refusal to approve pending
applications, and criminal prosecution.
*FDA
Approval Process*
NewStems
therapeutic product candidates were expected to be regulated by the FDA as drugs, and it is expected that this would be applicable to
any future licensee as well. No manufacturer may market a new drug until it has submitted a New Drug Application, or NDA, to the FDA,
and the FDA has approved it.
The
testing and approval process requires substantial time, effort and financial resources, and any future licensees product candidates
may not be approved on a timely basis, if at all. The time and expense required to perform the clinical testing necessary to obtain FDA
approval for regulated products can frequently exceed the time and expense of the research and development initially required to create
the product. The results of preclinical studies and initial clinical trials of NewStems product candidates are not necessarily
predictive of the results from large-scale clinical trials, and clinical trials may be subject to additional costs, delays or modifications
due to a number of factors, including difficulty in obtaining enough patients, investigators or product candidate supply. Failure by
any licensee to obtain, or any delay in obtaining, regulatory approvals or in complying with requirements could adversely affect the
commercialization of product candidates and the Companys ability to receive licensing revenues.
*Other
Regulatory Requirements*
After
approval, drug products are subject to extensive continuing regulation by the FDA, which include obligations to manufacture products
in accordance with Good Manufacturing Practice, or GMP, maintain and provide to the FDA updated safety and efficacy information, report
adverse experiences with the product, keep certain records and submit periodic reports, obtain FDA approval of certain manufacturing
or labeling changes, and comply with FDA promotion and advertising requirements and restrictions. Failure by a licensee to meet these
obligations can result in various adverse consequences, both voluntary and FDA-imposed, including product recalls, withdrawal of approval,
restrictions on marketing, and the imposition of civil fines and criminal penalties against the NDA holder. In addition, later discovery
of previously unknown safety or efficacy issues may result in restrictions on the product, manufacturer or NDA holder.
Outside
the United States, a licensees ability to market a product is contingent upon receiving marketing authorization from the appropriate
regulatory authorities. The requirements governing marketing authorization, pricing and reimbursement vary widely from jurisdiction to
jurisdiction. At present, foreign marketing authorizations are applied for at a national level, although within the European Union registration
procedures are available to companies wishing to market a product in more than one European Union member state.
| 5 | |
****
**NetCo**
In
June 1995, we and C.P. Group Inc. (C.P. Group), formed the joint venture, NetCo. NetCo owns the entertainment property,
Net Force, about a division of the FBI investigating crimes and adventures involving the internet and the digital world.
NovelStem and C.P. Group each owned 50% of the ownership interest in NetCo. NetCo owns all rights in all media to the Net Force property
including film, television, and video games.
In
1997, NetCo licensed the rights to publish the first six Net Force books in North America to Putnam Berkely, which books were written
and published. This agreement was subsequently renewed in December 2001 for four more books that were created and published. There was
also a series of books targeted to the young adult market, Net Force Explorer, also published by Putnam Berkley. Net Force books have
so far been published in mass market paperback format. The first book in the series was adapted as a four-hour mini-series on the ABC
television network.
In
2019, NetCo entered into a new publishing agreement with HarperCollins. Three novels and two Net Force novellas were published under
that agreement. Through its interest in NetCo, NovelStem received distributions of its 50% share of proceeds generated from the rights
to Net Force.
In
May 2025, we sold our interest in NetCo to our joint venture partner in exchange for the settlement of related debt in the form of a
litigation funding agreement.
**
*Employees*
We
do not currently have any employees; however, the Company relies on consultants to perform the duties that would be performed by employees.
*Additional
Financial Information*
For
additional financial information regarding our operations, see Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations and our Financial Statements included in this Annual Report.
*Available
Information*
We
file annual, quarterly and current reports and other information with the U.S. Securities and Exchange Commission (the SEC).
These filings are available to the public over the internet at the SECs website at http://www.sec.gov. You may also read and copy
any document we file at the SECs public reference room located at 100 F Street, NE, Washington, DC 20549. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference room.
Our
website can be found at http://novelstem.com.
****
| 6 | |
****
**Item
1A. Risk Factors.**
Our
business is subject to certain risks, including those described below. If any of the events described in the following risk factors actually
occurs then our business, results of operations and financial condition could be materially adversely affected. More detailed information
concerning these risks is contained in other sections of this registration statement, including Business and Managements
Discussion and Analysis of Financial Condition and Results of Operations.
**Risks
Relating to our Business**
**We
are a holding company, the principal assets of which are illiquid rights to a licensing agreement.**
Our
Companys primary asset is the residual value of relicensing the License formerly held by NewStem.
We
conduct no other business and, as a result, we depend entirely upon earnings and cash flow from the License held by Yissum.
If we decide in the future to pay dividends, as a holding company, our ability to pay dividends and meet other obligations depends upon
the receipt of profits from this license agreement.
**We
depend on our executive officers and consultants and other key individuals along with the executive officers and key individuals of NewStem
to continue the implementation of our long-term business strategy and could be harmed by the loss of their services and our inability
to make up for such loss with qualified replacements.**
We
believe that our future success will depend in large part on the skills of our management team and the management team of Yissum related
to subsequent monetization of the License. The loss of any of the key individuals services could reduce our ability to successfully
implement our long-term business strategy which may result in a loss of revenue, and the value of our common stock could be materially
adversely affected. Leadership changes will occur from time to time, and we cannot predict whether significant resignations will occur.
We believe these management teams possess valuable knowledge about our and former NewStems respective industries and that their
knowledge and relationships would be very difficult to replicate. The loss of key personnel, or the inability to recruit and retain qualified
and talented personnel in the future, could have an adverse effect on our business, financial condition and/or operating results.
**We
have limited operating histories and have generated minimal revenue to date.**
We
have a limited operating history and do not have a meaningful historical record of sales and revenues, nor do we have an established
business track record. While we believe that we have the opportunity to be successful, there can be no assurance that we will be successful
in accomplishing our business initiatives, or that we will be able to achieve any significant levels of revenue or net income.
**We
have identified material weaknesses in our internal control and procedures and internal control over financial reporting. If not remediated,
our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could
result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which
could have a material adverse effect on our financial condition and the trading price of our common stock.**
Maintaining
effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce
reliable financial statements. We have re-evaluated our internal control over financial reporting and our disclosure controls and procedures
and concluded that they were not effective as of December 31, 2025 and we concluded there was a material weakness in the design of our
internal control over financial reporting.
A
material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis.
| 7 | |
****
**Rapid
technological change could cause the License to become obsolete.**
Success
from NewStems efforts will depend upon the ability of Yissum to relicense the technology supported by the License.
The
technologies underlying NewStems products and the license technology are subject to rapid and profound technological change. Competition
intensifies as technical advances in each field are made and become more widely known. We can give no assurance that others will not
develop services, products, or processes with significant advantages over the products, services, and processes that have developed.
Any such occurrence could have a material and adverse effect on our business, results of operations and financial condition.
Yissum
plans to find new users for the technology based on the License. The success of a future licensee to enhance and broaden its product
offerings in response to changing customer demands and competitive pressure and technologies will depend on numerous factors, including
the ability to:
|
- |
Properly
identify and anticipate physician and patient needs; | |
|
- |
Develop
and introduce new products or product enhancements in a timely manner; | |
|
- |
Adequately
protect intellectual property and avoid infringing upon the intellectual property rights of third parties; | |
|
- |
Demonstrate
the safety and efficacy of new products; and | |
|
- |
Obtain
the necessary regulatory clearances or approvals for new products or product enhancements. | |
****
**Risks
relating to our common stock**
**Because
our holding company structure creates restrictions on the payment of dividends, our ability to pay dividends is limited.**
We
are a holding company whose primary asset is our right to income from the License. We currently conduct no other business and, as a result,
we depend entirely upon cash flow from the License. If we decide in the future to pay dividends, as a holding company, our ability to
pay dividends and meet other obligations depends upon the receipt of cash flow from the License. We do not presently have any intention
to declare or pay dividends in the future. You should not purchase shares of our common stock in anticipation of receiving dividends
in future periods.
**Because
we do not intend to pay any cash dividends on our common stock, our shareholders will not be able to receive a return on their shares
unless they sell them.**
We
intend to retain any future earnings to reduce debt. We do not anticipate paying any cash dividends on our common stock in the foreseeable
future. Unless we pay dividends, our shareholders will not be able to receive a return on their shares unless they sell them. Shareholders
may never be able to sell shares when desired. Before you invest in our securities, you should be aware that there are various risks.
You should consider carefully these risk factors, together with all of the other information included in this annual report before you
decide to purchase our securities. If any of the following risks and uncertainties develop into actual events, our business, financial
condition or results of operations could be materially adversely affected.
| 8 | |
****
**Reporting
requirement under the Securities Exchange Act of 1934, as amended (the Exchange Act), and compliance with the Sarbanes-Oxley
Act of 2002 (the Sarbanes-Oxley Act), including establishing and maintaining acceptable internal controls over financial
reporting, are costly and may increase substantially.**
The
rules and regulations of the SEC require a public company to prepare and file periodic reports under the Exchange Act, which require
that the Company engage legal, accounting, auditing and other professional services. The engagement of such services is costly. Additionally,
the Sarbanes-Oxley Act requires, among other things, that we design, implement and maintain adequate internal controls and procedures
over financial reporting. The costs of complying with the Sarbanes-Oxley Act and the limited technically qualified personnel we have
may make it difficult for us to design, implement and maintain adequate internal controls over financial reporting. In the event that
we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls, we may not be
able to produce reliable financial reports or report fraud, which may harm our overall financial condition and result in loss of investor
confidence and a decline in our share price.
We
are working with our legal, accounting and financial advisors to identify those areas in which changes should be made to our financial
and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance,
corporate control, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue
to make, changes in these and other areas. However, we anticipate that the expenses that will be required in order to adequately prepare
for being a public company could be material. We estimate that the aggregate cost of increased legal services; accounting and audit functions;
consultants to design and implement internal controls; and financial printing alone will be a few hundred thousand dollars per year and
could be several hundred thousand dollars per year. In addition, we may incur additional expenses related to director compensation and/or
premiums for directors and officers liability insurance, the costs of which we cannot estimate at this time. We may also
incur additional expenses associated with investor relations and similar functions, the cost of which we also cannot estimate at this
time. However, these additional expenses individually, or in the aggregate, may also be material.
The
continued increased costs associated with operating as a public company may decrease our net income or increase our net loss and may
cause us to reduce costs in other areas of our business. Additionally, if these requirements divert our managements attention
from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations.
**There
is a very limited trading market for our common stock and investors are not assured of the opportunity to sell their stock, should they
desire to do so.**
Our
common stock is currently quoted on the OTC Pink Market. However, our stock has traded in very limited quantities in the past. We believe
a significant factor in the limited market is our limited capitalization and liquidity, results of operations and the characterization
of our stock as a penny stock. We hope to remedy our financial condition and results of operation in the future. This,
in turn, may assist us in obtaining listing of our stock on other exchanges. However, there is no assurance that any of these objectives
will be met or that the market will ever increase to a point where investors could sell their stock at a desirable price, should they
desire to do so.
**The
price of our common stock could be highly volatile.**
Our
shares of common stock are quoted on the OTC Pink Market. It is likely that our common stock will be subject to price volatility, low
volumes of trades and large spreads in bid and ask prices quoted by market makers. Due to the low volume of shares traded on any trading
day, persons buying or selling in relatively small quantities may easily influence prices of our common stock. This low volume of trades
could also cause the price of our stock to fluctuate greatly, with large percentage changes in price occurring in any trading day session.
Holders of our common stock may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due
to low volume trading. If high spreads between the bid and ask prices of our common stock exist at the time of a purchase, the stock
would have to appreciate substantially on a relative percentage basis for an investor to recoup their investment. Broad market fluctuations
and general economic and political conditions may also adversely affect the market price of our common stock. No assurance can be given
that an active market in our common stock will be sustained. If an active market does not continue, holders of our common stock may be
unable to readily sell the shares they hold or may not be able to sell their shares at all.
| 9 | |
**We
may be deemed an investment company, which could impose on us burdensome compliance requirements.**
The
Investment Company Act of 1940, as amended (the Investment Company Act), requires companies to register as an investment
company if they are engaged primarily in the business of investing, reinvesting, owning, holding, or trading securities. Generally, companies
may be deemed investment companies under the Investment Company Act if they are viewed as engaging in the business of investing in securities
or they own investment securities having a value exceeding 40% of certain assets. We are not in the business of investing, reinvesting,
owning, holding or trading securities. However, if the Securities and Exchange Commission deems us to be an investment company, we may
have imposed upon us additional burdensome requirements, including having to register as an investment company, adopting a specific form
of corporation structure and having to comply with certain reporting, record keeping, voting, proxy, and disclosure requirements. Such
additional requirements would require us to incur additional costs and have an adverse effect on our results of operations and our ability
to effectively carry out our business plan.
**Item
1B. Unresolved Staff Comments.**
None
**Item
1C. Cybersecurity**
****
**Risk
Management and Strategy**
****
We
focus on a comprehensive approach to identifying, preventing, and mitigating cybersecurity threats and incidents, as such term is defined
in Item 106(a) of Regulation S-K, and have integrated these processes into our overall risk management systems and processes.
As
the Company has no operations and no employees, we have no operating procedures related to cybersecurity. We do design and monitor reasonable
technical safeguards to minimize any identified risks with our financial reporting.
Our
risk management strategy also considers cybersecurity risks associated with the use of our third-party vendors and service providers.
****
**Governance**
****
Our
Board of Directors oversees our cybersecurity risk management as part of its general oversight and management is responsible for the
day-to-day management of material cybersecurity risks.
**Item
2. Properties**.
Our
corporate office is located at 7740 Cavern Lane, Parkland FL 33067. We believe that our facilities are adequate for current operations.
**Item
3. Legal Proceedings.**
None
**Item
4. Mine Safety Disclosures.**
Not
applicable
| 10 | |
**PART
II**
[See
General Instruction G2]
**Item
5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.**
**Market
information**
There
is no established public trading market in our common stock, and a regular trading market may not develop, or if developed, may not be
sustained. Our securities are currently quoted on the OTC Markets Pink under the symbol NSTM. The following reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.
|
| |
High | | |
Low | | |
|
| |
| | |
| | |
|
Fiscal 2025 | |
| | | |
| | | |
|
Quarter ended 12/31/2025 | |
$ | 0.012 | | |
$ | 0.009 | | |
|
Quarter ended 9/30/2025 | |
$ | 0.028 | | |
$ | 0.028 | | |
|
Quarter ended 6/30/2025 | |
$ | 0.027 | | |
$ | 0.023 | | |
|
Quarter ended 3/31/2025 | |
$ | 0.01 | | |
$ | 0.008 | | |
|
| |
| | | |
| | | |
|
Fiscal 2024 | |
| | | |
| | | |
|
Quarter ended 12/31/2024 | |
$ | 0.04 | | |
$ | 0.01 | | |
|
Quarter ended 9/30/2024 | |
$ | 0.07 | | |
$ | 0.04 | | |
|
Quarter ended 6/30/2024 | |
$ | 0.07 | | |
$ | 0.06 | | |
|
Quarter ended 3/31/2024 | |
$ | 0.08 | | |
$ | 0.06 | | |
**Holders**
As
of March 25, 2026 there were 49,332,455 shares of common stock outstanding held by approximately 80 record holders.
**Dividends**
We
have not paid cash dividends on any of our capital stock since our name change and business focus shift in 2018 and currently intend
to retain our future earnings, if any, to reduce debt and fund the development and growth of our business. We do not expect to pay any
dividends on any of our capital stock in the foreseeable future.
**Item
6. [Reserved]**
****
**Item
7. Managements Discussion and Analysis of Financial Condition and Results of Operations.**
The
following discussion includes statements that are forward-looking in nature. Whether such statements ultimately prove to be accurate
depends on a variety of factors that may affect our business and operations. Certain of these factors are discussed in Item 1A.
Risk Factors.
The
following discussion of our financial condition and results of operations should be read in conjunction with our financial statements
and the related notes thereto and other financial information appearing elsewhere in this report.
****
**Overview**
We
are a development stage company and reported net income (losses) of approximately $2,380,000 and $(3,233,000) for the years ended December
31, 2025 and 2024, respectively. We had current assets of approximately $16,000 and current liabilities of approximately $2,157,000 as
of December 31, 2025. As of December 31, 2024, our current assets and current liabilities were approximately $32,000 and $5,304,000,
respectively. We have prepared our financial statements for the years ended December 31, 2025 and 2024 assuming that we will continue
as a going concern. Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support
from our shareholders as well as Yissums ability to successfully commercialize the License. Our sources of capital in the past
have included the sale of equity securities, which include common stock sold in private transactions, and short-term debt. During the
current year, we entered into a bridge loan agreement with our Executive Chairman to obtain funding for current operating expenses.
| 11 | |
****
**Critical
Accounting Policies**
The
SEC defines critical accounting policies as those that require application of managements most difficult, subjective
or complex judgements, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and
my change in subsequent periods.
The
following discussion of critical accounting policies represents our attempt to report on these accounting policies which we believe are
critical to our financial statements and other financial disclosures. It is not intended to be a comprehensive list of all of our significant
accounting policies, which are more fully described in Note 2 of the Notes to the Financial Statements included in this Annual Report.
We
have identified our accounting policies for stock-based compensation and accounting for derivative liabilities as critical accounting
policies.
We
recognize stock-based compensation expense based on the fair value recognition provision of applicable accounting principles, using the
Black-Scholes option valuation method. Accordingly, we are required to measure the cost of services received in exchange for an award
of equity instruments based on the grant-date fair value of the award and to recognize that cost over the period during which services
are provided in exchange for the award. Under the Black-Scholes method, we make assumptions with respect to the expected lives of the
options that have been granted and are outstanding, the expected volatility, the dividend yield percentage of our common stock and the
risk-free interest rate at the respective dates of grant.
The
Company did not grant any options during the year ended December 31, 2025. The expected volatility factor used to value stock options
granted in 2024 was based on the historical volatility of the market price of our common stock over the period from our change to a biotechnology
company, September 2018, through December 2024. For the expected term of the option, we used an estimate of the expected option life
based on historical experience. The risk-free interest rate used is based upon U.S. Treasury yields for a period consistent with the
expected term of the options. We assumed no quarterly dividend rate. Due to the numerous assumptions involved in calculating stock-based
compensation expense, the expense recognized in our financial statements may differ significantly from the value realized by option holders
on exercise of the share-based instruments. In accordance with the prescribed methodology, we do not adjust our recognized compensation
expense to reflect these differences.
For
the years ended December 31, 2025 and 2024, we incurred stock compensation expense with respect to options of approximately $8,800 and
$40,000, respectively.
See
Note 5 to the financial statements for the assumptions used to calculate the fair value of stock-based compensation.
In
accordance with Accounting Standards Codification (ASC) 815, Derivatives and Hedging, we identify and, if applicable, bifurcate
embedded derivatives in financial instruments. Those embedded features that are identified, bifurcated and accounted for separately
are measured at fair value continuously at each financial statement reporting date. If the fair value of a financial liability (the derivative)
exceeds the proceeds received for the issuance of a hybrid instrument in an arms length transaction with no rights or privileges
that require separate accounting recognition as an asset identified, then we record the embedded derivative at fair value with the excess
of fair value over proceeds recognized as a loss in earnings. Our only identified derivative was terminated as part of the amendment of a note payable to a shareholder during
the year ended December 31, 2025.
****
**Results
of Operations**
The
selected statement of operations data for the years ended December 31, 2025 and 2024 and balance sheet data as of December 31, 2025 and
2024 have been derived from our audited financial statements included in this Annual Report.
This
data should be read in conjunction with our financial statements and related notes included herein.
| 12 | |
*Selected
Statement of Operations Data:*
|
| |
Years Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
Change | | |
|
Administrative fee income | |
$ | - | | |
$ | 12,000 | | |
$ | (12,000 | ) | |
|
Operating expenses: | |
| | | |
| | | |
| | | |
|
G&A expenses | |
$ | 238,755 | | |
$ | 880,947 | | |
$ | (642,192 | ) | |
|
Litigation expenses (contra expenses) | |
| - | | |
| 58,975 | | |
| (58,975 | ) | |
|
Total operating expenses | |
| 238,755 | | |
| 939,922 | | |
| (701,167 | ) | |
|
Loss from operations | |
| (238,755 | ) | |
| (927,922 | ) | |
| 689,167 | | |
|
Other (income) expenses: | |
| | | |
| | | |
| | | |
|
Loss on derivative instrument | |
| - | | |
| 90,000 | | |
| (90,000 | ) | |
|
Gain on disposal of equity method investment | |
| (1,171,760 | ) | |
| - | | |
| (1,171,760 | ) | |
|
Relief of indebtedness income | |
| (1,697,024 | ) | |
| - | | |
| (1,697,024 | ) | |
|
Interest expense | |
| 256,219 | | |
| 425,417 | | |
| (169,198 | ) | |
|
Total other (income) expenses | |
| (2,612,565 | ) | |
| 515,417 | | |
| (3,127,982 | ) | |
|
Net income (loss) before equity in net income (loss) of equity method
investees | |
| 2,373,810 | | |
| (1,443,339 | ) | |
| 3,817,149 | | |
|
Equity in net income (loss) of equity method investees | |
| 640 | | |
| (161,046 | ) | |
| 161,686 | | |
|
Impairment loss on equity method investee | |
| 5,432 | | |
| (1,628,657 | ) | |
| 1,634,089 | | |
|
Net income (loss) | |
$ | 2,379,882 | | |
$ | (3,233,042 | ) | |
$ | 5,612,924 | | |
**2025
Compared to 2024**
We
are a holding company whose primary asset currently is our right to the monetization of the former NewStem license now held by Yissum.
We currently conduct no other business and as a result, we have no operating revenue or cost of revenue. We did charge annual administrative
fees to an affiliated entity through the year ended December 31, 2024.
The
Company incurs general and administrative (G&A) expenses primarily related to professional fees, insurance and stock-based compensation. We incurred G&A expenses of approximately $239,000 and $881,000 for the years ended December 31, 2025 and 2024,
respectively. Our decrease in G&A expenses relates primarily to decreases in bad debt expense, stock-based compensation and professional
fees incurred in the audit of our financial statements for the years ended December 31, 2025 and 2024, preparation of our quarterly reports
for 2025 and 2024, and for documents and advice related to our attempt to purchase the remaining shares of NewStem in 2024.
Specifically,
we wrote off as bad debt uncollected management fees of $9,500 during the year ended December 31, 2025 as compared to the net balance
due from NewStem of $458,000 in the year ended December 31, 2024, and professional fees decreased by approximately $145,000 in the year
ended December 31, 2025 as compared to the year ended December 31, 2024. Insurance costs decreased by approximately $17,000 in the year
ended December 31, 2025 as compared to the year ended December 31, 2024.
Total
stock compensation expense, included in G&A expenses, decreased by approximately $31,000 in the year ended December 31, 2025 as compared
to the year ended December 31, 2024 due to the fact that no options were awarded during the current fiscal year.
The
remaining decrease in G&A expenses of approximately $700 during the year ended December 31, 2025 consists primarily of decreases
in expenses related to investor relations and information technology.
We
incurred costs related to litigation and the related litigation funding agreement involving our former settled arbitration with our NetCo
joint venture partner of approximately $59,000 during the year ended December 31, 2024.
| 13 | |
The
Company has recorded a loss on derivative instruments of $90,000, for the year ended December 31, 2024 related to a guarantee previously
included in the note payable shareholder entered into in May 2023. The guarantee was removed in an amendment to the note payable during
the year ended December 31, 2024, terminating the derivative.
The
Company reported a gain on disposal of equity method investment of approximately $1,172,000 during the year ended December 31, 2025 related
to the sale of our investment in NetCo. We also reported relief of indebtedness income of approximately $1,697,000 related to the cancellation
of the remaining balance on the litigation funding agreement from the same transaction.
The
Company recorded an impairment loss of approximately $1,629,000 during the year ended December 31, 2024 related to its investment in
NewStem. This loss reduced our investment in NewStem to zero ($0.00) as of December 31, 2024. This adjustment was made in response to
the fact that NewStem ceased operations and was in the process of liquidation. The technology and license held by NewStem reverted to
the original licensee, Yissum, and the Company retains a right to a share of future licensing or monetization of the technology and license.
The Company does expect to recover some value from the license, up to a total of $3,750,000, however, as of December 31, 2025 and 2024,
the realization of this value is not certain, therefore has not been recorded by the Company. During the year ended December 31, 2025,
the Company received approximately $5,000 from the liquidation of the remaining assets of NewStem which was reported as a partial recovery
of the impairment loss.
Interest
expense decreased by approximately $169,000 in the year ended December 31, 2025 as compared to the year ended December 31, 2024. The
decrease in interest expense is primarily related to the reduction of interest from the settlement of the litigation funding agreement
offset by increased debt incurred for operations.
The
Company has recorded no income tax expense as we have incurred operating losses and all deferred tax assets are fully offset by an income
tax valuation allowance.
We
reported net income and losses from equity method investees during the years ended December 31, 2025 and 2024. The net income reported
for the year ended December 31, 2025 included net income of $640 from NetCo. Net losses reported for the year ended December 31, 2024
included net loss of approximately $5,000 from NetCo combined with net loss of approximately $156,000 from NewStem.
**Liquidity
and Capital Resources**
We
have not paid dividends on our common stock since our name change and business focus shift in 2018. Our present policy is to apply cash
to investments in product development at NewStem, acquisitions or expansion; consequently, we do not expect to pay dividends on common
stock in the foreseeable future.
The
Company will need to obtain additional funds to continue its operations. Managements plans with regard to these matters include
fundraising until our interest in NewStems technology via monetization of the License is profitable. Although management continues
to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient cash from financing on terms
acceptable to the Company, or that NewStems technology will be monetized and become profitable.
During
the year ended December 31, 2022, the Company entered into note agreements with Jan Loeb, our Executive Chairman and Jerry Wolasky, a
member of the Board, to borrow up to an aggregate of $600,000 for working capital needs. The note agreements were amended in March 2024
to increase the total borrowing to $650,000 and extend the maturity date. The note agreements were refinanced in August 2024 providing
for total borrowings of $750,000 and extending the maturity date to December 31, 2025. The agreements provide for interest at a rate
of 10% per annum. Prior to the filing of this Annual Report, the maturity date of these notes was extended to June 30, 2026.
During
the year ended December 31, 2023, the Company entered into a note agreement with a shareholder to borrow $300,000 for continued working
capital. This note bore interest at zero percent (0%) and matured on May 5, 2025. The note included a guarantee which has been identified
as an embedded derivative with a fair value of a liability of $650,000 at December 31, 2024. This note was amended in May 2025 to provide
for fixed interest, remove the guarantee and extend the maturity date to September 30, 2025. This note was amended for a second time
in October 2025 to extend the maturity date to December 31, 2026.
| 14 | |
In
December 2023, the Company entered into two short term notes payable with unrelated parties for a total of $250,000 in borrowings utilized
for the funding of NewStem. The notes bear interest at 12% per annum and matured December 21, 2025, at which time all principal and accrued
interest were due and payable. Prior to the filing of this Annual Report, the maturity date of these notes was extended to June 30, 2026.
The note agreements include a provision whereby, in the event of a capital raise transaction by the Company, the note holders would be
entitled to participate in the transaction in an amount equal to 133% of the amounts owed on the note agreements at the closing of the
transaction.
In
April 2024, the Company borrowed $100,000 from unrelated parties pursuant to convertible debt agreements accounted for as debt. These
agreements bear interest at 10% per annum and matured December 30, 2025. Prior to the filing of this Annual Report, the maturity dates
have been extended to June 30, 2026.
During
the year ended December 31, 2025, the Company borrowed $161,867 from the Executive Chairman in the form of an interim bridge loan until
alternate funding sources can be found. The Company is accruing interest at 10% per annum for these advances. The agreement matured December
31, 2025. Prior to the filing of this Annual Report, the maturity date has been extended to June 30, 2026.
On
May 9, 2025 the Company sold its interest in NetCo to its JV partner for $1,300,000 which was paid directly to Omni Bridgeway in full
settlement of all liabilities related to the litigation funding agreement totaling $2,959,625.
*Net
Cash Used In Operating Activities.*
For
the year ended December 31, 2025, net cash used in operating activities was approximately $168,000, which consisted primarily of a net
income of approximately $2,380,000 reduced by noncash gain of approximately $1,172,000 from the sale of our interest in NetCo and the
related noncash relief of indebtedness income from the settlement of the litigation funding agreement with Omni Bridgeway of $1,697,000,
stock-based compensation of approximately $9,000. Further offset by accretion of discount on notes payable of $60,000 and interest added
to notes payable and convertible debt of approximately $194,000. Additionally, cash was used in operations related to an increase in
current assets of approximately $10,000 and an increase in accrued liabilities and other payables of approximately $48,000.
For
the year ended December 31, 2024, net cash used in operating activities was approximately $272,000, which consisted primarily of a net
loss of approximately $3,233,000, offset by noncash equity in loss of equity method investees of approximately $161,000, impairment of
equity method investees of approximately $1,629,000, bad debt expense of $500,000, and stock-based compensation of approximately $40,000.
Further offset by loss on derivative instrument of $90,000, accretion of discount on notes payable of $178,000 and interest added to
notes payable and convertible debt of approximately $215,000. Additionally, cash was used in operations related to an increase in current
assets of approximately $8,000 and an increase in accrued liabilities and other payables of approximately $140,000.
| 15 | |
**
*Net
Cash Used In Investing Activities.*
During
the year ended December 31, 2024, the Company loaned $250,000 to NewStem in anticipation of a purchase transaction. This transaction
was not consummated and NewStem ceased operations and began liquidation proceedings in October 2024, resulting in the loan becoming uncollectible.
As such, the Company determined the note was uncollectible and wrote the balance, including $250,000 loaned in 2023, off as a bad debt
during the year ended December 31, 2024.
*Net
Cash Provided By Financing Activities.*
For
the year ended December 31, 2025, net cash provided by financing activities was $161,867, consisting of advances on the bridge loan payable
to our Executive Chairman.
For
the year ended December 31, 2024, net cash provided by financing activities was $475,000, consisting of long-term borrowings from two
directors and a stockholder totaling $375,000 and borrowings from convertible debt with unrelated parties of $100,000.
**Off-Balance
Sheet Arrangements**
We
are not party to any off-balance sheet transactions.
**Contractual
Obligations and Commercial Commitments**
As
of December 31, 2025, we had a contractual obligation related to our directors and officers insurance providing for 10
monthly installments of $5,109 payable through June 2026.
As
of December 31, 2024, we had a contractual obligation related to our directors and officers insurance providing for 10
monthly installments of $5,127 payable through June 2025.
**Item
7A. Quantitative and Qualitative Disclosures About Market Risk.**
This
section is not applicable.
**Item
8. Financial Statements and Supplementary Data.**
Furnished
at the end of this Annual Report, commencing on page F-1.
**Item
9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.**
****
None.
| 16 | |
**Item
9A. Controls and Procedures.**
Our
Principal Executive Officer and Chief Financial Officer conducted an evaluation of our controls and procedures. We have identified material
weaknesses in our internal control and procedures and internal control over financial reporting. If not remediated, our failure to establish
and maintain effective disclosure controls and procedures and internal control over financial reporting could result in material misstatements
in our financial statements and a failure to meet our reporting and financial obligations, each of which could have a material adverse
effect on our financial condition and the trading price of our common stock.
Maintaining
effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce
reliable financial statements. We have re-evaluated our internal control over financial reporting and our disclosure controls and procedures
and concluded that they were not effective as of December 31, 2025 and we concluded there was a material weakness in the design of our
internal control over financial reporting as it relates to insufficient resources to employ proper segregation of duties over the processing
of transactions and financial reporting.
A
material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis.
**Remediation
Actions**
Management
continues to focus on strengthening the Companys internal controls within the parameters of what can be done with limited resources.
As resources permit, management will continue to attempt to build the necessary capabilities and infrastructure to implement corrective
action. At the current time, financial resources are limited thereby impeding the ability of management to employ personnel to provide
proper separation of duties.
**Changes
in Internal Control Over Financial Reporting**
There
was no change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during
the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over
financial reporting.
**Item
9B. Other Information.**
None
**Item
9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.**
Not
applicable.
| 17 | |
**PART
III**
**Item
10. Directors, Executive Officers and Corporate Governance.**
Biographical
and certain other information concerning the Companys officers and directors is set forth below. There are no familial relationships
among any of our officers or directors. Except as indicated below, none of our directors is a director in any other reporting companies.
None of our officers or directors has been affiliated with any company that has filed for bankruptcy within the last ten years. We are
not aware of any proceedings to which any of our officers or directors, or any associate of any such officer or director is a party adverse
to us or any of our subsidiaries or has a material interest adverse to us or any of our subsidiaries. Unless otherwise indicated, there
are no arrangements or understandings between any officer and any other person pursuant to which such person was selected as an officer.
|
|
Jan
Loeb President and Executive Chairman 67 Mr. Loeb has more than forty years of business, money management and
investment banking experience. He has served as Chairman of our Board since July 2018 and on September 29, 2022 was appointed as
Executive Chairman. On January 13, 2023, Mr. Loeb was appointed President of the Company. He has been the Managing Member of Leap
Tide Capital Management LLC since 2007 and has served as President and CEO of Acorn Energy, Inc. since January 2016 and as a Director
since August 2015. He has been a Director of Keweenaw Land Association, Ltd. From 2005 to 2007, Mr. Loeb was President of Leap Tides
predecessor, formerly known as AmTrust Capital Management Inc. He served as a Portfolio Manager of Chesapeake Partners from February
2004 to January 2005 and as Managing Director at Jefferies & Company, Inc. from 2002 to 2004. From 1994 to 2001, he served as
Managing Director at Dresdner Kleinwort Wasserstein, Inc. (formerly Wasserstein Perella & Co., Inc.). Mr. Loeb was a Lead Director
of American Pacific Corporation from 2013 to 2014 and a Director from 1997 to 2014. He also served as an Independent Director of
Pernix Therapeutics Holdings Inc. (formerly, Golf Trust of America, Inc.) from 2006 to 2011 and as a Director of TAT Technologies,
Ltd. from 2009 to 2016. | |
|
|
| |
|
|
Christine
Jenkins Vice President and Chief Financial Officer 62 Ms. Jenkins has over thirty-six years of experience in
public accounting, including audit, consulting and corporate tax. Ms. Jenkins is currently serving as a consultant providing audit
and accounting consultation to publicly-traded and large privately held companies. From 2010 to 2018 Ms. Jenkins was an audit partner
with Cherry Bekaert, LLP. Prior to Cherry Bekaert, from 1995 to 2010, Ms. Jenkins was a partner in a local accounting firm in Atlanta,
GA. Prior experience included audit and tax positions in public accounting firms. | |
|
|
| |
|
|
Mitchell
Rubenstein Director 71 Mr. Rubenstein co-founded and served as Chairman of HMC from its inception to June 2018,
during which period the company returned approximately $37 million to shareholders in the form of dividends and share repurchases,
including a tender offer. He founded Syfy Channel and numerous other media and digital businesses. | |
|
|
| |
|
|
Eric
Richman Director -64 Mr. Richman is a life science executive with significant leadership, operational and strategic experience
from over twenty-five years in the field. He is currently The CEO of Gain Therapeutics and was a Venture Partner at Brace Pharma
Capital and serves on the boards of LabConnect, F2G (board observer) and previously ADMA Biologics (NASDAQ: ADMA). Previously he
served as President & CEO of PharmAthene and prior to that was part of the founding team at MedImmune, responsible for the U.S.
launch of its first commercial product and an integral part of the global launch teams for other products. He began his career at
HealthCare Ventures, a life-sciences focused VC firm and formerly was a Director of Lev Pharmaceuticals (sold to Viropharma) and
American Bank (sold to Congressional Bancshares) and served as CEO of Tyrogenex (sold to Betta Pharma). | |
|
|
| |
|
|
David
Seltzer Director 65 Mr. Seltzer is the CEO and Founder of Reliable 1 Laboratories LLC, a distributor of OTC medications
and nutritional supplements to independent pharmacies, long-term care pharmacies, hospitals and government organizations. He is also
a minority owner and Director at Leading Pharma LLC, a generic manufacturer of prescription drugs, having previously served as President
and CEO and later Chairman of Hi-Tech Pharmacal Co., Inc., which was acquired by Akorn, Inc. for $640 million in 2014. | |
|
|
| |
|
|
Jerry
Wolasky Director 65 Mr. Wolasky has over thirty-five years experience in the wholesale pharmaceutical
business, most recently for the past sixteen years in his current role as President of HealthSource Distributors LLC. He previously
served in executive positions of increasing responsibility for AmerisourceBergen, and its predecessor company, Bergen Brunswig. | |
|
|
| |
|
|
Tracy
Clifford Director -57 Ms. Clifford has over twenty years of experience in accounting and finance, including mergers and
acquisitions of public companies. Ms. Clifford is the CFO of Acorn Energy, Inc. and COO of its operating subsidiary Omnimetrix Inc.
and since 2015 she has served as a contract CFO and COO for several clients, participated on advisory boards and worked on numerous
project engagements. Ms. Clifford previously served as CFO, Principal Accounting Officer, Corporate Controller and Secretary for
a publicly traded pharmaceutical company and a publicly-traded REIT from 1999 to 2015. Ms. Cliffords prior experience included
accounting leadership positions at United Healthcare, the North Broward Hospital District and the audit team of Deloitte & Touche. | |
| 18 | |
**Audit
Committee; Audit Committee Financial Expert**
The
Companys full board is functioning as our audit committee at the time of this Annual Report.
**Compensation
Committee**
We
do not have a compensation committee or persons participating in deliberations concerning executive officer compensation as there was
no executive officer compensation paid other than hourly payments for Chief Financial Officer services during 2025 and 2024.
**Nominating
Committee**
We
do not have a nominating committee. All directors participate in the nomination and election of directors.
**Section
16(a) Beneficial Ownership Reporting Compliance; Delinquent Section 16(a) Reports**
Section
16(a) of the Securities Exchange Act of 1934 (the Exchange Act) requires our executive officers and directors, and persons
who own more than 10% of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC.
These persons are also required by SEC regulation to furnish us with copies of all Section 16(a) forms they file. Further, we have implemented
measures to assure timely filing of Section 16(a) reports by our executive officers and directors. Based solely on our review of such
forms or written representations from certain reporting persons, we believe that during 2025 our executive officers and directors complied
with the filing requirements of Section 16(a).
**Code
of Ethics**
We
have adopted a Code of Business Conduct and Ethics that applies to all our directors, officers and employees. This code of ethics is
designed to comply with the NASDAQ marketplace rules related to codes of conduct.
**Changes
in control**
There
are no arrangements which may at a subsequent date result in a change in control of the Company.
| 19 | |
**Item
11. Executive Compensation.**
**Executive
and Director Compensation**
|
Summary
Compensation Table | |
|
|
|
|
|
|
|
|
|
|
|
|
Option |
|
|
All
Other |
|
|
|
| |
|
|
|
|
|
|
Salary |
|
|
Bonus |
|
|
Awards |
|
|
Compensation |
|
|
Total |
| |
|
Name
and Principal Position |
|
Year |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
|
|
($) |
| |
|
Jan
H. Loeb |
|
|
2025 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
| |
|
President
and Executive Chairman |
|
|
2024 |
|
|
|
- |
|
|
|
- |
|
|
|
5,924 |
(1) |
|
|
- |
|
|
|
5,924 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Christine
Jenkins |
|
|
2025 |
|
|
|
29,940 |
(2) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
29,940 |
| |
|
Vice
President and Chief Financial Officer |
|
|
2024 |
|
|
|
48,275 |
(3) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
48,275 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Mitchell
Rubenstein |
|
|
2025 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
| |
|
Director |
|
|
2024 |
|
|
|
- |
|
|
|
- |
|
|
|
5,924 |
(1) |
|
|
- |
|
|
|
5,924 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Eric
Richman |
|
|
2025 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
| |
|
Director |
|
|
2024 |
|
|
|
- |
|
|
|
- |
|
|
|
5,924 |
(1) |
|
|
- |
|
|
|
5,924 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
David
Seltzer |
|
|
2025 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
| |
|
Director |
|
|
2024 |
|
|
|
- |
|
|
|
- |
|
|
|
5,924 |
(1) |
|
|
- |
|
|
|
5,924 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Jerry
Wolasky |
|
|
2025 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
| |
|
Director |
|
|
2024 |
|
|
|
- |
|
|
|
- |
|
|
|
5,924 |
(1) |
|
|
- |
|
|
|
5,924 |
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
Tracy
Clifford |
|
|
2025 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
| |
|
Director |
|
|
2024 |
|
|
|
- |
|
|
|
- |
|
|
|
5,924 |
(1) |
|
|
- |
|
|
|
5,924 |
| |
|
|
(1) |
Represents
the grant date fair value calculated in accordance with applicable accounting principles with respect to 100,000 options granted
per Director and 100,000 options granted to the President and Executive Chairman on April 1, 2024 with an exercise price of $0.06.
The fair value of the options was determined using the Black-Scholes option pricing model using the following assumptions: (i) a
risk-free interest rate of 4.34% (ii) an expected term of 5.09 years (iii) an assumed volatility of 116.9853% and (iv) no dividends. | |
|
|
(2) |
Represents
hourly fees due to Ms. Jenkins for the provision of services as Chief Financial Officer of the Company. | |
|
|
(3) |
Represents
hourly fees paid to Ms. Jenkins for the provision of services as Chief Financial Officer of the Company. | |
| 20 | |
****
**Executive
Compensation for 2025 and 2024**
Our
Chief Financial Officer and Vice President, Ms. Jenkins is paid on an hourly basis. Mr. Loeb, our Executive Chairman and President does
not receive any compensation for his role as an officer of the Company.
The
Company pays compensation to its directors pursuant to the NovelStem International Corp. Equity Incentive Plan (the Plan).
The
Plan provides for the grant to officers, directors, third party contractors and other future key employees of options to purchase shares
of common stock. Under the Plan, the Company is authorized to issue up to 7,000,000 shares of common stock as equity awards under the
Plan. Awards may be made in the form of options, stock appreciation rights (SARs), restricted stock or restricted stock
units, or stock bonus awards in respect of the Companys common stock of the Company. Grants to any single participant or non-executive
director during any calendar year may not exceed 1,000,000 shares.
The
purchase price may be paid in cash or at the end of the option term, if the option is in-the-money, it is automatically
exercised net. In a net exercise of an option, the Company does not require a payment of the exercise price of the option
from the optionee but reduces the number of shares of common stock issued upon the exercise of the option by the smallest number of whole
shares that has an aggregate fair market value equal to or in excess of the aggregate exercise price for the option shares covered by
the option exercised. Each option is exercisable to one share of the Companys common stock.
Options
awarded under the Plan shall be awarded at an exercise price of not less than the fair market value of a share of our common stock as
of the grant date and shall vest and become exercisable after a period not to exceed seven (7) years. SARs awarded under the Plan shall
have a strike price per share of common stock of not less than the fair market value of a share of our common stock, provided that, in
the case of a SAR granted in tandem with an option, the strike price shall not be less than the exercise price of the related option.
A SAR granted in tandem with an option shall become exercisable and shall expire according to the same vesting schedule and expiration
provisions as the corresponding option, such date not to exceed seven (7) years of the grant date.
In
the event of the termination of an employee, third party service provider, officer or Directors service on the Board of the Company
for any reason other than for cause, all of the options which are then vested may be exercised within 18 months of such termination,
provided that, in no event shall this extension period continue beyond the expiration of the term of the option(s). In addition, any
such extension shall be applicable only to the extent that such option or options are vested and exercisable according to the terms of
the Plan and any applicable option agreement. Any unvested options are immediately terminated on the effective date of the termination.
In the event of termination of an employee, third party service provider, officer or Directors service for cause, all options
are forfeited and deemed cancelled and no longer exercisable as of the date of termination.
| 21 | |
**Outstanding
Equity Awards at 2025 Fiscal Year End**
The
following tables set forth all outstanding equity awards made to each of the Executives and Directors that were outstanding at December
31, 2025.
|
Options
to Purchase NovelStem International Corp. Stock | |
|
Name |
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Exercisable |
|
|
Number
of
Securities
Underlying
Unexercised
Options (#)
Unexercisable |
|
|
Option
Exercise
Price ($) |
|
|
Option
Expiration Date | |
|
Jan
H. Loeb |
|
|
50,000 |
|
|
|
|
|
|
|
0.10 |
|
|
November
26, 2026 | |
|
|
|
|
1,000,000 |
|
|
|
|
|
|
|
0.10 |
|
|
November
24, 2027 | |
|
|
|
|
100,000 |
|
|
|
|
|
|
|
0.29 |
|
|
January
31, 2029 | |
|
|
|
|
100,000 |
|
|
|
|
|
|
|
0.20 |
|
|
March
23, 2030 | |
|
|
|
|
100,000 |
|
|
|
|
|
|
|
0.06 |
|
|
April
1, 2031 | |
|
Mitchell
Rubenstein |
|
|
50,000 |
|
|
|
|
|
|
|
0.10 |
|
|
November
26, 2026 | |
|
|
|
|
1,000,000 |
|
|
|
|
|
|
|
0.10 |
|
|
November
24, 2027 | |
|
|
|
|
100,000 |
|
|
|
|
|
|
|
0.29 |
|
|
January
31, 2029 | |
|
|
|
|
50,000 |
|
|
|
|
|
|
|
0.20 |
|
|
March
23, 2030 | |
|
|
|
|
100,000 |
|
|
|
|
|
|
|
0.06 |
|
|
April
1, 2031 | |
|
Eric
Richman |
|
|
50,000 |
|
|
|
|
|
|
|
0.10 |
|
|
November
26, 2026 | |
|
|
|
|
50,000 |
|
|
|
|
|
|
|
0.10 |
|
|
November
24, 2027 | |
|
|
|
|
100,000 |
|
|
|
|
|
|
|
0.29 |
|
|
January
31, 2029 | |
|
|
|
|
50,000 |
|
|
|
|
|
|
|
0.20 |
|
|
March
23, 2030 | |
|
|
|
|
100,000 |
|
|
|
|
|
|
|
0.06 |
|
|
April
1, 2031 | |
|
David
Seltzer |
|
|
50,000 |
|
|
|
|
|
|
|
0.10 |
|
|
November
26, 2026 | |
|
|
|
|
50,000 |
|
|
|
|
|
|
|
0.10 |
|
|
November
24, 2027 | |
|
|
|
|
100.000 |
|
|
|
|
|
|
|
0.29 |
|
|
January
31, 2029 | |
|
|
|
|
50,000 |
|
|
|
|
|
|
|
0.20 |
|
|
March
23, 2030 | |
|
|
|
|
100,000 |
|
|
|
|
|
|
|
0.06 |
|
|
April
1, 2031 | |
|
Jerry
Wolasky |
|
|
50,000 |
|
|
|
|
|
|
|
0.10 |
|
|
November
26, 2026 | |
|
|
|
|
50,000 |
|
|
|
|
|
|
|
0.10 |
|
|
November
24, 2027 | |
|
|
|
|
100,000 |
|
|
|
|
|
|
|
0.29 |
|
|
January
31, 2029 | |
|
|
|
|
50,000 |
|
|
|
|
|
|
|
0.20 |
|
|
March
23, 2030 | |
|
|
|
|
100,000 |
|
|
|
|
|
|
|
0.06 |
|
|
April
1, 2031 | |
|
Tracy
Clifford |
|
|
50,000 |
|
|
|
|
|
|
|
0.10 |
|
|
November
26, 2026 | |
|
|
|
|
1,000,000 |
|
|
|
|
|
|
|
0.10 |
|
|
November
24, 2027 | |
|
|
|
|
100,000 |
|
|
|
|
|
|
|
0.29 |
|
|
January
31, 2029 | |
|
|
|
|
50,000 |
|
|
|
|
|
|
|
0.20 |
|
|
March
23, 2030 | |
|
|
|
|
100,000 |
|
|
|
|
|
|
|
0.06 |
|
|
April
1, 2031 | |
|
Christine
Jenkins |
|
|
10,000 |
|
|
|
|
|
|
|
0.20 |
|
|
March
23, 2030 | |
| 22 | |
****
**Option
and Warrant Exercises**
None
**Non-qualified
Deferred Compensation**
The
Company has no deferred compensation plan in place during the years ended December 31, 2025 and 2024.
**Payments
and Benefits Upon Termination or Change in Control**
There
are no agreements in place with any Executive or Director that would provide for any amounts due under any termination scenario at December
31, 2025.
**Item
12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.**
The
following table sets forth certain information with respect to the beneficial ownership of our common stock, as of December 31, 2025,
for each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock, each of our directors
and all directors as a group. The Company has no executive officers. Except as indicated in footnotes to this table, we believe that
the shareholders named in this table will have sole voting and investment power with respect to all shares of common stock shown to be
beneficially owned by them, based on information provided to us by such shareholders.
**Security
Ownership of Certain Beneficial Owners and Management**
|
Name
and Address of beneficial owner (6) |
|
Amount
and nature of beneficial ownership |
|
|
Percent
of
total
common
equity
(1) |
| |
|
Christine
Jenkins |
|
|
10,000 |
|
|
|
0.0 |
% | |
|
Michael
Sosnowik |
|
|
2,770,270 |
|
|
|
5.2 |
% | |
|
Stephen
Gans |
|
|
7,034,172 |
|
|
|
13.3 |
% | |
|
Jan
Loeb |
|
|
5,470,673 |
(2)(4) |
|
|
10.35 |
% | |
|
Jerry
Wolasky |
|
|
10,322,973 |
(3)(4) |
|
|
19.5 |
% | |
|
Tracy
Clifford |
|
|
1,300,000 |
(4)(5) |
|
|
2.5 |
% | |
|
Eric
Richman |
|
|
904,054 |
(3)(4) |
|
|
1.7 |
% | |
|
Mitchell
Rubenstein |
|
|
2,408,108 |
(4)(5) |
|
|
4.5 |
% | |
|
David
Seltzer |
|
|
3,674,324 |
(3)(4) |
|
|
6.9 |
% | |
|
All
directors and officers as a group (seven persons) |
|
|
24,190,132 |
|
|
|
45.7 |
% | |
(1)
Applicable percentage ownership is based on 46,881,475 shares of common stock outstanding as of December 31, 2025, together with securities
exercisable or convertible into shares of common stock within 60 days of December 31, 2025. Beneficial ownership is determined in accordance
with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities.
Shares of common stock that a person has the right to acquire beneficial ownership of upon the exercise or conversion of options, convertible
stock, warrants or other securities that are currently exercisable or convertible or that will become exercisable or convertible within
60 days of December 31, 2025, are deemed to be beneficially owned by the person holding such securities for the purpose of computing
the number of shares beneficially owned and percentage of ownership of such person, but are not treated as outstanding for the purpose
of computing the percentage ownership of any other person.
(2)
Includes 1,108,108 held in an IRA and 874,528 held as Trustee for the Steinberg Family Trust. Includes options to purchase 1,050,000
million shares of common stock at an exercise price of $0.10 per share, options to purchase 100,000 shares of common stock at an exercise
price of $0.29 per share, options to purchase 100,000 shares of common stock at an exercise price of $0.20 per share, and options to
purchase 100,000 shares of common stock at an exercise price of $0.06 per share.
(3)
Includes options to purchase 100,000 shares of common stock at an exercise price of $0.10 per share, options to purchase 100,000 shares
of common stock at an exercise price of $0.29 per share, options to purchase 50,000 shares of common stock at an exercise price of $0.20
per share, and options to purchase 100,000 shares of common stock at an exercise price of $0.06 per share.
(4)
Director.
(5)
Includes options to purchase 1,050,000 shares of common stock at an exercise price of $0.10 per share, options to purchase 100,000 shares
of common stock at an exercise price of $0.29 per share, options to purchase 50,000 shares of common stock at an exercise price of $0.20
per share, and options to purchase 100,000 shares of common stock at an exercise price of $0.06 per share.
(6)
The address of each person is c/o NovelStem International Corp. 7740 Cavern Lane, Suite 100 Parkland FL 33067.
| 23 | |
**Securities
authorized for issuance under equity compensation plans**
**Equity
Compensation Plan Information**
|
Plan
category |
|
Number
of securities to be issued upon exercise of outstanding options, warrants and rights |
|
|
Weighted-average
exercise price of outstanding options, warrants and rights |
|
|
Number
of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) |
| |
|
|
|
(a) |
|
|
(b) |
|
|
(c) |
| |
|
Equity
compensation plans approved by security holders |
|
|
- |
|
|
|
- |
|
|
|
- |
| |
|
Equity
compensation plans not approved by security holders |
|
|
6,060,000 |
|
|
$ |
0.1365 |
|
|
|
940,000 |
| |
|
Total |
|
|
6,060,000 |
|
|
$ |
0.1365 |
|
|
|
940,000 |
| |
**Item
13. Certain Relationships and Related Transactions, and Director Independence.**
Jan
Loeb, our President and Executive Chairman of the Board, was also the Chairman of the Board of NewStem until its liquidation.
During
the year ended December 31, 2022, the Company entered into note agreements with Jan Loeb, our Executive Chairman and Jerry Wolasky, a
shareholder and member of the Board, to borrow up to an aggregate of $600,000 for working capital needs. The note agreements were amended
in March 2024 to increase the total borrowing to $650,000 and extend the maturity date. The note agreements were refinanced in August
2024 providing for total borrowings of $750,000. The agreements provide for interest at a rate of 10% per annum and mature December 31,
2025. As of the date of this Annual Report, the full amount of $750,000 has been funded pursuant to these agreements and the maturity
date has been extended to June 30, 2026.
On
May 5, 2023, the Company entered into a long term note payable with a shareholder for $300,000 in financing to be funded $150,000 at
inception and $150,000 in October 2023. This note bore interest at zero percent (0%) and matured on May 5, 2025. This note agreement
was restructured during 2025 to provide for a fixed amount of interest in lieu of the guarantee and beginning October 1, 2025, the note
began to bear interest at a rate of 10% per annum. The note matures on December 31, 2026.
In
February 2025, our Executive Chairman began advancing funds to the Company for operating expenses in the form of an interim bridge loan
until alternate funding sources can be found. The bridge loan matured December 31, 2025 and has been extended to June 30, 2026. The total
advanced during the year ended December 31, 2025 was $161,867.
Except
as disclosed herein, no director, executive officer, stockholder holding at least 5% of shares of our common stock, or any family member
thereof, had any material interest, direct or indirect, in any transaction, or proposed transaction since January 1, 2019, in which the
amount involved in the transaction exceeds the lesser of $120,000 or one percent of the average of our total assets at the year-end for
the last two completed fiscal years.
| 24 | |
****
**Review,
Approval or Ratification of Transactions with Related Persons**
The
Board conducts an appropriate review of and oversees all related party transactions on a continuing basis and reviews potential conflict
of interest situations where appropriate. The Board has adopted formal standards to apply when it reviews, approves or ratifies any related
party transaction. In addition, the Board applies the following standards to such reviews: (i) all related party transactions must be
fair and reasonable and on terms comparable to those reasonably expected to be agreed to with independent third parties for the same
goods and/or services at the time they are authorized by the Board and (ii) all related party transactions should be authorized, approved
or ratified by the affirmative vote of a majority of the directors who have no interest, either directly or indirectly, in any such related
party transaction.
**Director
Independence**
We
have determined that, under the criteria established by NASDAQ and by our board of directors, Tracy Clifford, Eric Richman, Mitchell
Rubenstein and David Seltzer are independent.
**Item
14. Principal Accountant Fees and Services.**
**Accounting
Fees**
*Kreit
& Chiu CPA LLP*
The
following table summarizes the fees accrued and paid by NovelStem for professional services rendered by Kreit & Chiu CPA LLP for
the years ended December 31, 2025 and 2024.
|
| |
2025 | | |
2024 | | |
|
Audit fees | |
$ | 102,090 | | |
$ | 113,030 | | |
|
Tax Fees | |
| - | | |
| - | | |
|
All other fees | |
| - | | |
| - | | |
|
Total | |
$ | 102,090 | | |
$ | 113,030 | | |
**Pre-Approval
Policies and Procedures**
The
Audit Committees current policy is to pre-approve all audit and non-audit services that are to be performed and fees to be charged
by our independent auditor to assure that the provision of these services does not impair the independence of the auditor. The Audit
Committee pre-approved all audit and non-audit services rendered by our principal accountant in 2025 and 2024.
| 25 | |
****
**PART
IV**
**Item
15. Exhibit and Financial Statement Schedules.**
|
|
(a) |
Financial
Statements. | |
The
following financial statements are filed as part of this registration statement:
**NOVELSTEM
INTERNATIONAL CORP.**
**Years
Ended December 31, 2025 and 2024**
Index
to Audited Financial Statements
|
|
|
Page | |
|
Audited
Financial Statements |
|
| |
|
Report of Independent Registered Public Accounting Firm (PCAOB ID: 6651) |
|
F-1 | |
|
Balance Sheets |
|
F-2 | |
|
Statements of Operations |
|
F-3 | |
|
Statements of Changes in Shareholders Equity (Deficit) |
|
F-4 | |
|
Statements of Cash Flows |
|
F-5 | |
|
Notes to Financial Statements |
|
F-6 | |
****
| 26 | |
**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM**
****
Board
of Directors and Shareholders of
NovelStem
International Corp.
**Opinion
on the Financial Statements**
We
have audited the accompanying balance sheets of NovelStem International Corp. as of December 31, 2025 and 2024, and the related statements
of operations, shareholders equity (deficit), and cash flows for each of the two years in the period ended December 31, 2025,
and the related notes (collectively referred to as the financial statements). In our opinion, the financial statements
present fairly, in all material respects, the financial position of NovelStem International Corp. as of December 31, 2025 and 2024, and
the results of its operations and its cash flows for each of the two years in the period ended December 31, 2025, in conformity with
accounting principles generally accepted in the United States of America.
**Going
Concern**
****
The
accompanying financial statements have been prepared assuming that the entity will continue as a going concern. As discussed in Note
1 to the financial statements, the entity has an accumulated deficit of approximately $294 million and $296 million at December 31,
2025 and 2024, respectively, and has suffered losses from operations that raise substantial doubt about its ability to continue as a
going concern. Management's plans in regard to these matters are also described in Note 1. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
**Basis
for Opinion**
**
These
financial statements are the responsibility of the entitys management. Our responsibility is to express an opinion on these financial
statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United
States) ("PCAOB") and are required to be independent with respect to NovelStem International Corp. in accordance with the U.S.
federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We
conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. NovelStem
International Corp. is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.
As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose
of expressing an opinion on the effectiveness of the entitys internal control over financial reporting. Accordingly, we express
no such opinion.
Our
audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error
or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding
the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant
estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
**
**Critical
Audit Matters**
Critical
audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be
communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and
(2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.
/s/
Kreit & Chiu CPA LLP
We
have served as NovelStem International Corp.'s auditor since 2024.
Los
Angeles, California
March
25, 2026
| F-1 | |
****
**NOVELSTEM
INTERNATIONAL CORP.
BALANCE SHEETS**
|
| |
2025 | | |
2024 | | |
|
| |
As of December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
ASSETS | |
| | | |
| | | |
|
Current assets: | |
| | | |
| | | |
|
Cash | |
$ | 333 | | |
$ | 6,099 | | |
|
Accounts receivable, administrative fees | |
| - | | |
| 10,500 | | |
|
Prepaid expenses | |
| 15,453 | | |
| 15,272 | | |
|
Total current assets | |
| 15,786 | | |
| 31,871 | | |
|
Investment in NetCo | |
| - | | |
| 128,240 | | |
|
Total assets | |
$ | 15,786 | | |
$ | 160,111 | | |
|
| |
| | | |
| | | |
|
LIABILITIES AND SHAREHOLDERS EQUITY (DEFICIT) | |
| | | |
| | | |
|
Current liabilities: | |
| | | |
| | | |
|
Accounts payable | |
$ | 215,958 | | |
$ | 167,898 | | |
|
Accrued expenses | |
| 37,673 | | |
| 68,576 | | |
|
Notes payable, including accrued interest | |
| 317,734 | | |
| 250,000 | | |
|
Current portion of long-term notes payable, including accrued interest | |
| 1,295,405 | | |
| 4,059,366 | | |
|
Bridge loan payable, related party, including accrued interest | |
| 171,857 | | |
| - | | |
|
Convertible debt, including accrued interest | |
| 118,814 | | |
| 108,646 | | |
|
Derivative liability, guarantee | |
| - | | |
| 650,000 | | |
|
Total liabilities | |
| 2,157,441 | | |
| 5,304,486 | | |
|
Commitments and contingencies (see Note 7) | |
| - | | |
| - | | |
|
Shareholders equity (deficit): | |
| | | |
| | | |
|
Common stock, $.01 par value, 100,000,000 shares authorized, 50,316,672 shares issued at December 31, 2025 and 2024 and 46,881,475 shares outstanding at December 31, 2025 and 2024 | |
| 468,815 | | |
| 468,815 | | |
|
Additional paid-in capital | |
| 291,570,255 | | |
| 290,947,417 | | |
|
Accumulated deficit | |
| (293,980,971 | ) | |
| (296,360,853 | ) | |
|
Treasury stock, at cost, 3,435,197 shares at December 31, 2025 and 2024 | |
| (199,754 | ) | |
| (199,754 | ) | |
|
Total shareholders equity (deficit) | |
| (2,141,655 | ) | |
| (5,144,375 | ) | |
|
Total liabilities and shareholders equity (deficit) | |
$ | 15,786 | | |
$ | 160,111 | | |
The
accompanying notes are an integral part of these financial statements.
| F-2 | |
**NOVELSTEM
INTERNATIONAL CORP.**
**STATEMENTS
OF OPERATIONS**
****
****
|
| |
2025 | | |
2024 | | |
|
| |
Years Ended | | |
|
| |
December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
Administrative fee income | |
$ | - | | |
$ | 12,000 | | |
|
Operating expenses: | |
| | | |
| | | |
|
General and administrative expenses | |
| 238,755 | | |
| 880,947 | | |
|
Litigation expenses (Note 7) | |
| - | | |
| 58,975 | | |
|
Total operating expenses | |
| 238,755 | | |
| 939,922 | | |
|
Loss from operations | |
| (238,755 | ) | |
| (927,922 | ) | |
|
Other (income) expenses: | |
| | | |
| | | |
|
Loss on derivative instrument | |
| - | | |
| 90,000 | | |
|
Gain on disposal of equity method investment | |
| (1,171,760 | ) | |
| - | | |
|
Relief of indebtedness income | |
| (1,697,024 | ) | |
| - | | |
|
Interest expense | |
| 256,219 | | |
| 425,417 | | |
|
Total other (income) expenses | |
| (2,612,565 | ) | |
| 515,417 | | |
|
Income (loss) before income taxes | |
| 2,373,810 | | |
| (1,443,339 | ) | |
|
Provision for income tax | |
| - | | |
| - | | |
|
Net income (loss) before equity in net loss of equity method investees | |
| 2,373,810 | | |
| (1,443,339 | ) | |
|
Equity in net income (loss) of equity method investees | |
| 640 | | |
| (161,046 | ) | |
|
Income from (impairment of) equity method investee, NewStem | |
| 5,432 | | |
| (1,628,657 | ) | |
|
Net income (loss) | |
$ | 2,379,882 | | |
$ | (3,233,042 | ) | |
|
| |
| | | |
| | | |
|
Basic and diluted net income (loss) per share: | |
| | | |
| | | |
|
Net income (loss) per share - basic | |
$ | 0.05 | | |
$ | (0.07 | ) | |
|
Weighted average number of shares outstanding basic | |
$ | 46,881,475 | | |
$ | 46,881,475 | | |
|
Net income (loss) per share - diluted | |
$ | 0.05 | | |
$ | (0.07 | ) | |
|
Weighted average number of shares outstanding - diluted | |
$ | 47,795,437 | | |
$ | 46,881,475 | | |
****
The
accompanying notes are an integral part of these financial statements.
| F-3 | |
****
**NOVELSTEM
INTERNATIONAL CORP.**
**STATEMENTS
OF SHAREHOLDERS EQUITY (DEFICIT)**
|
| |
Shares | | |
Stock | | |
Capital | | |
Deficit | | |
Shares | | |
Stock | | |
Equity | | |
|
| |
| | |
| | |
| | |
| | |
Number | | |
| | |
| | |
|
| |
| | |
| | |
Additional | | |
| | |
of | | |
| | |
Total | | |
|
| |
Number of | | |
Common | | |
Paid-In | | |
Accumulated | | |
Treasury | | |
Treasury | | |
Shareholders | | |
|
| |
Shares | | |
Stock | | |
Capital | | |
Deficit | | |
Shares | | |
Stock | | |
Equity | | |
|
| |
| | |
| | |
| | |
| | |
| | |
| | |
| | |
|
Balance, December 31, 2023 | |
| 46,881,475 | | |
$ | 468,815 | | |
$ | 290,907,217 | | |
$ | (293,127,811 | ) | |
| 3,435,197 | | |
$ | (199,754 | ) | |
$ | (1,951,533 | ) | |
|
Net loss | |
| - | | |
| - | | |
| - | | |
| (3,233,042 | ) | |
| - | | |
| - | | |
| (3,233,042 | ) | |
|
Stock issued | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
| - | | |
|
Stock-based compensation | |
| - | | |
| - | | |
| 40,200 | | |
| - | | |
| | | |
| | | |
| 40,200 | | |
|
Balance, December 31, 2024 | |
| 46,881,475 | | |
| 468,815 | | |
| 290,947,417 | | |
| (296,360,853 | ) | |
| 3,435,197 | | |
| (199,754 | ) | |
| (5,144,375 | ) | |
|
Balance | |
| 46,881,475 | | |
| 468,815 | | |
| 290,947,417 | | |
| (296,360,853 | ) | |
| 3,435,197 | | |
| (199,754 | ) | |
| (5,144,375 | ) | |
|
Net income | |
| - | | |
| - | | |
| - | | |
| 2,379,882 | | |
| - | | |
| - | | |
| 2,379,882 | | |
|
Net income (loss) | |
| - | | |
| - | | |
| - | | |
| 2,379,882 | | |
| - | | |
| - | | |
| 2,379,882 | | |
|
Debt restructuring | |
| | | |
| | | |
| 614,000 | | |
| | | |
| | | |
| | | |
| 614,000 | | |
|
Stock-based compensation | |
| - | | |
| - | | |
| 8,838 | | |
| - | | |
| - | | |
| - | | |
| 8,838 | | |
|
Balance, December 31, 2025 | |
| 46,881,475 | | |
$ | 468,815 | | |
$ | 291,570,255 | | |
$ | (293,980,971 | ) | |
| 3,435,197 | | |
$ | (199,754 | ) | |
$ | (2,141,655 | ) | |
|
Balance | |
| 46,881,475 | | |
$ | 468,815 | | |
$ | 291,570,255 | | |
$ | (293,980,971 | ) | |
| 3,435,197 | | |
$ | (199,754 | ) | |
$ | (2,141,655 | ) | |
The
accompanying notes are an integral part of these financial statements.
| F-4 | |
****
**NOVELSTEM
INTERNATIONAL CORP.**
**STATEMENTS
OF CASH FLOWS**
|
| |
2025 | | |
2024 | | |
|
| |
Years Ended | | |
|
| |
December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Cash flows from operating activities: | |
| | | |
| | | |
|
Net income (loss) | |
$ | 2,379,882 | | |
$ | (3,233,042 | ) | |
|
Adjustments to reconcile net income (loss) to cash used in operating activities: | |
| | | |
| | | |
|
Equity in net loss of equity method investees | |
| - | | |
| 161,046 | | |
|
Impairment loss, NewStem | |
| - | | |
| 1,628,657 | | |
|
Bad debt expense | |
| - | | |
| 500,000 | | |
|
Accretion of discount on note payable | |
| 60,417 | | |
| 177,768 | | |
|
Loss on derivative instrument | |
| - | | |
| 90,000 | | |
|
Gain on disposal of equity method investment | |
| (1,171,760 | ) | |
| - | | |
|
Relief of indebtedness income | |
| (1,697,024 | ) | |
| - | | |
|
Accrued interest added to short term notes payable | |
| 36,830 | | |
| - | | |
|
Accrued interest added to long-term notes payable | |
| 136,647 | | |
| 206,999 | | |
|
Accrued interest added to bridge loan payable | |
| 9,990 | | |
| - | | |
|
Accrued interest added to convertible debt | |
| 10,168 | | |
| 8,646 | | |
|
Stock-based compensation | |
| 8,838 | | |
| 40,200 | | |
|
Change in operating assets and liabilities: | |
| | | |
| | | |
|
Accounts receivable, administrative fees | |
| 10,500 | | |
| (10,500 | ) | |
|
Prepaid expenses | |
| (181 | ) | |
| 18,268 | | |
|
Accounts payable | |
| 48,060 | | |
| 113,641 | | |
|
Accrued expenses | |
| - | | |
| 26,353 | | |
|
Net cash used in operating activities | |
| (167,633 | ) | |
| (271,964 | ) | |
|
| |
| | | |
| | | |
|
Cash flows from investing activities: | |
| | | |
| | | |
|
Loans made | |
| - | | |
| (250,000 | ) | |
|
Net cash used in investing activities | |
| - | | |
| (250,000 | ) | |
|
| |
| | | |
| | | |
|
Cash flows from financing activities: | |
| | | |
| | | |
|
Proceeds from convertible debt | |
$ | - | | |
$ | 100,000 | | |
|
Proceeds from note payable, current | |
| - | | |
| 375,000 | | |
|
Proceeds from bridge loan payable | |
| 161,867 | | |
| - | | |
|
Net cash provided by financing activities | |
| 161,867 | | |
| 475,000 | | |
|
| |
| | | |
| | | |
|
Net change in cash | |
| (5,766 | ) | |
| (46,964 | ) | |
|
Cash at the beginning of the year | |
| 6,099 | | |
| 53,063 | | |
|
Cash at the end of the year | |
$ | 333 | | |
$ | 6,099 | | |
|
| |
| | | |
| | | |
|
Supplemental cash flow information: | |
| | | |
| | | |
|
Cash paid during the period for: | |
| | | |
| | | |
|
Interest | |
$ | 2,166 | | |
$ | 1,922 | | |
|
Supplemental Non-Cash Investing and Financing Activities: | |
| | | |
| | | |
|
Interest capitalized to notes payable | |
$ | 36,000 | | |
$ | - | | |
|
Settlement of long term notes payable | |
$ | 2,997,025 | | |
$ | - | | |
|
Settlement of derivative liability, net of interest | |
$ | 614,000 | | |
$ | - | | |
The
accompanying notes are an integral part of these financial statements.
| F-5 | |
****
**NOVELSTEM
INTERNATIONAL CORP.**
**Notes
to Financial Statements**
****
**NOTE
1NATURE OF OPERATIONS**
Description
of Business
NovelStem
International Corp. (NovelStem or the Company) is a holding company whose principal assets consisted of an
approximate 31% equity interest in NewStem Ltd, an Israeli biotech company (NewStem) and its developed technology, and
a 50% equity interest in NetCo Partners (NetCo). The interest in NetCo was sold in May 2025 in a noncash transaction which
settled significant debt of the Company in the form of a litigation funding agreement. NovelStem was formerly known as Hollywood Media
Corp. The Company was incorporated in the State of Florida on January 22, 1993 and changed its name to NovelStem International Corp.
in September 2018.
NewStem
focused on the development and commercialization of diagnostic technology that can predict patients anti-cancer drug resistance,
allowing for targeted cancer treatments and the potential to reduce resistance to chemotherapy.
NetCo
is a legacy media business interest which owns Net Force, a book publishing franchise.
Going
Concern, Liquidity and Managements Plans
Since
inception, the Company has accumulated a deficit of approximately $294,000,000. The accumulated deficit of the Company subsequent to
its business focus shift and name change in September 2018 is approximately $7,300,000 which is comprised primarily of allocated losses
from equity method investments and general and administrative costs incurred by the Company.
The
Company will need to obtain additional funds to continue its operations. Managements plans with regard to these matters include
additional financing and fundraising as well as monetization of assets held related to equity method investments as well as potential
merger or buyout transactions. Specifically, the Company sold its interest in NetCo to its joint venture partner in a transaction that
satisfied the related debt (litigation funding agreement). Also, the Company is working with former NewStem management to monetize the
technology of NewStem and has an agreement in place to receive up to $3,750,000 of any monetization of these licenses and related intangible
assets. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient
cash from financing on terms acceptable to the Company, or that the Company will realize any value from the retained interest in intangible
assets or technology of NewStem, which was liquidated in August 2025 (see Note 3).
The
Company has in place a finance agreement with two individuals who are shareholders and directors under which it borrowed $750,000 and
an additional finance agreement with a shareholder under which it borrowed $300,000 for working capital needs (see Note 4). Additionally,
the Company entered into additional finance agreements with unrelated parties in December 2023 and April 2024 under which it borrowed
an additional $450,000 for working capital needs and to fund NewStem (see Note 4). All funds available pursuant to these agreements have
been received. During the year ended December 31, 2025, the Companys executive chairman advanced $161,867 to the Company as an
interim bridge loan to fund ongoing expenses. The Company will need to obtain additional funds to continue operations for the next 12
months.
On
May 9, 2025, the Company entered into a Settlement Agreement and Release whereby the investment in NetCo was monetized to settle the
litigation funding liability to Omni Bridgeway in full. See Note 8.
In
view of the matters described above, the Companys ability to meet financing requirements is dependent upon the ability to complete
additional fundraising or obtain additional financing, and/or monetize the intangible assets of NewStem. These factors, among others,
raise substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities
that might be necessary should the Company be unable to continue in existence.
| F-6 | |
****
**NOVELSTEM
INTERNATIONAL CORP.**
**Notes
to Financial Statements**
****
**NOTE
2SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**
**Basis
of Presentation**
The
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP).
The Financial Accounting Standards Board (FASB) has established the FASB Accounting Standards Codification (ASC)
as the single source of authoritative GAAP.
**Use
of Estimates**
****
The
preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
****
**Cash
and Cash Equivalents**
****
Cash
and cash equivalents include certain investments in highly liquid debt instruments with original maturities of three months or less at
the date of purchase. The Company had no cash equivalents as of either year end.
****
**Equity
Investments**
****
Investee
companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method
of accounting. Whether or not the Company exercises significant influence with respect to an Investee depends on an evaluation of several
factors, including, among others, representation on the Investee companys board of directors and ownership level, which is generally
a 20% to 50% interest in the voting securities of the Investee company. Under the equity method of accounting, an Investee companys
accounts are not reflected within the Companys Balance Sheets or Statements of Operations; however, the Companys share
of the earnings or losses of the Investee company is reflected in the caption Equity in net income (loss) of equity method investees
in the Statements of Operations. The Companys carrying value in an equity method Investee company is reflected in the caption
Investment in Investee company in the Companys Balance Sheets.
When
the Companys carrying value in an equity method Investee company is reduced to zero, no further losses are recorded in the Companys
financial statements unless the Company guaranteed obligations of the Investee company or has committed additional funding. When the
Investee company subsequently reports income, the Company will not record its share of such income until it equals the amount of its
share of losses not previously recognized.
The
Company reviews equity investments for impairment on an annual basis, or earlier if events or changes in circumstances indicate that
the carrying amounts might not be recoverable.
The
Company held a minority investment in an entity, NewStem, which was accounted for pursuant to the equity method of accounting until its
dissolution in August 2025. Additionally, until May 9, 2025 the Company was a 50% joint venture partner in NetCo which was accounted
for pursuant to the equity method of accounting. See Note 3.
****
**Reclassifications**
****
Accrued
interest of $30,903 has been reclassified from accrued expenses on the balance sheet to be presented as part of the related notes payable
balance as of December 31, 2025.
****
| F-7 | |
**NOVELSTEM
INTERNATIONAL CORP.**
**Notes
to Financial Statements**
****
**Derivative
Financial Instruments**
The
Company had in place a financial instrument, in the form of a note payable, which included an identified embedded derivative in the form
of a guarantee. The identified embedded derivative was bifurcated and accounted for separately. Such derivative financial instruments
are measured at fair value at each financial statement reporting date. If the fair value of a financial liability (the derivative) exceeds
the proceeds received for the issuance of a hybrid instrument in an arms length transaction with no rights or privileges that
require separate accounting recognition as an asset identified, then the embedded derivative is recorded at fair value with the excess
of fair value over proceeds recognized as a loss in earnings. During the year ended December 31, 2024, the Company recognized a loss
on derivative financial instruments of $90,000. Proceeds from the note payable are shown as cash from financing instruments and the loss
on derivative instrument is included as an adjustment to reconcile loss to net cash used in operating activities in the statements of
cash flows for the years ended December 31, 2025 and 2024. The financial instrument was amended on May 16, 2025 to remove the guarantee
and replace the guarantee with fixed interest of $36,000 through September 30, 2025. This amendment terminated the embedded derivative
and pursuant to ASC 470 for troubled debt restructuring with a related party. The Company recognized a gain on derivative financial instruments
of $650,000 net of interest expense of $36,000 as an equity transaction for troubled debt restructuring during the year ended December
31, 2025.
****
**Treasury
Stock**
Shares
of common stock repurchased are recorded at cost as treasury stock.
****
**Stock-Based
Compensation**
The
Company accounts for stock-based awards in accordance with applicable accounting principles, which require compensation expense related
to share-based transactions to be measured and recognized in the financial statements based on a determination of the fair value of the
stock options. The grant date fair value is determined using the Black-Scholes-Merton (Black-Scholes) pricing model. For
all stock options, the Company recognizes expense on an accelerated basis over the requisite service period (generally the vesting period
of the equity grant). The Companys option pricing model requires the input of highly subjective assumptions, including the expected
stock price volatility, expected term, and forfeiture rate. Any changes in these highly subjective assumptions significantly impact stock-based
compensation expense.
Options
awarded to purchase shares of common stock issued to non-employees in exchange for services are accounted for as variable awards in accordance
with applicable accounting principles. Such options are valued using the Black-Scholes option pricing model.
In
the event of the termination of an employee, third party service provider, officer or Directors service on the Board of the Company
for any reason other than for cause, all of the options which are then vested may be exercised within 18 months of such termination,
provided that, in no event shall this extension period continue beyond the expiration of the term of the option(s). In addition, any
such extension shall be applicable only to the extent that such option or options are vested and exercisable according to the terms of
the Plan and this Agreement. Any unvested options are immediately terminated on the effective date of the termination. In the event of
termination of an employee, third party service provider, officer or Directors service for cause, all options are forfeited and
deemed cancelled and no longer exercisable on the date of termination.
See
Note 5 for the assumptions used to calculate the fair value of stock-based compensation. Upon the exercise of options, it is the Companys
policy to issue new shares rather than utilizing treasury shares.
| F-8 | |
**NOVELSTEM
INTERNATIONAL CORP.**
**Notes
to Financial Statements**
****
**Income
Taxes**
****
Deferred
income taxes are determined using the asset and liability method in accordance with Accounting Standards Codification (ASC)
Topic 740. 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 income taxes are measured
using enacted tax rates expected to apply to taxable income in years in which such temporary differences are expected to be recovered
or settled. The effect of a change in tax rates on deferred income taxes is recognized in the statement of operations of the period that
includes the enactment date. In addition, a valuation allowance is established to reduce any deferred tax asset for which it is determined
that it is more likely than not that some portion of the deferred tax asset will not be realized.
**Basic
and Diluted Net Income (Loss) Per Share**
Basic
net income (loss) per share is computed by dividing the net income (loss) by the weighted average number of shares outstanding
during the period, excluding treasury stock. Diluted net income (loss) per share is computed by dividing the net income (loss) by the
weighted average number of shares outstanding plus the dilutive potential of common shares which would result from the exercise of
stock options and warrants. The dilutive effects of stock options and warrants are excluded from the computation of diluted net
income (loss) per share if the effect of doing so would be antidilutive.
****
The
following data represents the amounts used in computing earnings per share and the effect on net income (loss) and the weighted average
number of shares of dilutive potential common stock:
SCHEDULE
OF AMOUNTS USED IN COMPUTING EARNINGS PER SHARE AND EFFECT ON INCOME (LOSS) AND WEIGHTED AVERAGE NUMBER OF SHARES
|
| |
2025 | | |
2024 | | |
|
| |
Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
Net income (loss) available to common shareholders | |
$ | 2,379,882 | | |
$ | (3,233,042 | ) | |
|
| |
| | | |
| | | |
|
Weighted average shares outstanding: | |
| | | |
| | | |
|
-Basic | |
| 46,881,475 | | |
| 46,881,475 | | |
|
| |
| | | |
| | | |
|
Basic net income (loss) per share | |
$ | 0.05 | | |
$ | (0.07 | ) | |
|
| |
| | | |
| | | |
|
Net income (loss) attributable to common shareholders | |
$ | 2,379,882 | | |
$ | (3,233,042 | ) | |
|
Effect of dilutive securities: | |
| | | |
| | | |
|
Convertible debt, interest | |
| 10,169 | | |
| - | | |
|
| |
| | | |
| | | |
|
Net income (loss) attributable to common shareholders | |
$ | 2,390,051 | | |
$ | (3,233,042 | ) | |
|
| |
| | | |
| | | |
|
Weighted average shares outstanding: | |
| | | |
| | | |
|
-Basic | |
| 46,881,475 | | |
| 46,881,475 | | |
|
Add: Convertible Debt | |
| 913,962 | | |
| - | | |
|
Add: Stock options | |
| - | | |
| - | | |
|
-Diluted | |
| 47,795,437 | | |
| 46,881,475 | | |
|
| |
| | | |
| | | |
|
Diluted net income (loss) per share | |
$ | 0.05 | | |
$ | (0.07 | ) | |
****
| F-9 | |
****
**NOVELSTEM
INTERNATIONAL CORP.**
**Notes
to Financial Statements**
****
Common stock equivalents excluded from the computation of earnings per share for the years ended:
SCHEDULE OF OPTIONS AND WARRANTS EXCLUDED FROM COMPUTATION
OF EARNINGS PER SHARE
|
| |
2025 | | |
2024 | | |
|
| |
Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Warrants | |
| - | | |
| 3,000,000 | | |
|
Stock options | |
| 6,060,000 | | |
| 6,210,411 | | |
|
Convertible debt | |
| - | | |
| 827,323 | | |
|
Anti-dilutive securities | |
| - | | |
| 827,323 | | |
**Recently Adopted Accounting Standards**
In December 2023, the FASB issued
ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires disaggregated information about a reporting
entitys effective tax rate reconciliation, as well as information related to income taxes paid to enhance the transparency and
decision usefulness of income tax disclosures. The Company adopted ASU 2023-09 for the current year and has elected to apply the standard
on a prospective basis.
****
**NOTE
3EQUITY METHOD INVESTMENTS**
****
**Investment
in NewStem**
In
2018, the Company entered into a Share Purchase Agreement with NewStem and other related parties to provide aggregate funding of up to
$4,000,000 to NewStem. This funding was to be provided through the sale of up to 50,000 common shares of NewStem to the Company representing
33% of NewStems outstanding shares. In 2018, the Company purchased 25,000 shares of NewStem for $2,000,000 acquiring an ownership
interest of 20%. The Company made additional investments in 2019 and 2020 purchasing 12,500 shares each year for a $1,000,000 investment
each year resulting in an ownership interest of 30.51% as of December 31, 2024 and until its liquidation in August 2025.
The
Company accounted for its investment in NewStem under the equity method.
NewStem
was a development stage company which incurred losses since its inception and generated only minimal revenues under a licensing agreement.
NewStem was liquidated in August 2025.
During
the year ended December 31, 2024, the Company signed an agreement (the Purchase Agreement) to acquire the remainder of
NewStem in exchange for shares of Company stock as well as funding for NewStem operations. In anticipation of this transaction, the Company
advanced $250,000 to NewStem in December 2023 and an additional $250,000 in March 2024. The related note agreement bore no interest and
was payable on December 30, 2024. The agreement provided for discharge of the note upon the closing of the anticipated acquisition transaction.
The Purchase Agreement was not fully consummated, and no Company shares were issued to NewStem shareholders in exchange for NewStem shares,
therefore the note was not discharged. The Company determined that collection of the note was unlikely due to NewStems liquidation
status and lack of assets. As such, the Company wrote the note off as a bad debt during the year ended December 31, 2024.
The
Company assessed its investment in NewStem for impairment on an annual basis or more frequently if indicators of impairment exist.
During the year ended December 31, 2024, indicators of impairment became evident due to the inability of NewStem to raise funds. Due
to the inability to raise funds, NewStem was unable to continue operations and dissolved in August 2025. The intangible assets of
NewStem, including license agreements, have reverted to the licensor, Yissum (the commercial division of Hebrew University). The
Company has reached an agreement with Yissum regarding the potential monetization of these intangible assets which provides for the
Company to receive up to $3,750,000
in the event of re-licensing or monetizing the licenses or related technology developed by NewStem. Due to the current uncertainty
of the timing of recovery of any value from these intangible assets and the liquidation status of NewStem, the Company fully
impaired the investment in NewStem and reduced the carrying value to zero ($0)
at December 31, 2024. On August 14, 2025, the Company received $5,432
from NewStem upon the final closing of their accounts which was recorded as a reduction of the previously recognized impairment loss
in the condensed statements of operations for the year ended December 31, 2025. In October 2025, the Company wrote off all asset
accounts and the related impairment and ceased accounting for NewStem.
| F-10 | |
**NOVELSTEM
INTERNATIONAL CORP.**
**Notes
to Financial Statements**
****
****
During
the year ended December 31, 2024, the Company recorded a reimbursement due to NewStem of approximately $42,000 for audit and accounting
related costs which was offset against the note receivable from NewStem. No such reimbursements were made during the year ended December
31, 2025.
The
following table represents the Companys investment in NewStem:
SCHEDULE OF INVESTMENTS
|
| |
2025 | | |
2024 | | |
|
| |
Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
Investment in NewStem, beginning | |
$ | - | | |
$ | 1,784,234 | | |
|
Allocation of net loss from NewStem | |
| - | | |
| (155,577 | ) | |
|
Investment in NewStem before impairment | |
| - | | |
| 1,628,657 | | |
|
Impairment loss recorded | |
| - | | |
| (1,628,657 | ) | |
|
Investment in NewStem, ending | |
$ | - | | |
$ | - | | |
The
results of operations and financial position of the Companys investment in NewStem are summarized below:
SCHEDULE OF OPERATIONS AND FINANCIAL POSITION INVESTMENT
|
| |
2025 | | |
2024 | | |
|
| |
Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Condensed income statement information: | |
| | | |
| | | |
|
Net revenues | |
$ | - | | |
$ | - | | |
|
Gross margin | |
$ | - | | |
$ | - | | |
|
Net loss | |
$ | - | | |
$ | (510,000 | ) | |
|
Companys allocation of net loss from NewStem | |
$ | - | | |
$ | (155,577 | ) | |
|
| |
2025 | | |
2024 | | |
|
| |
As of December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Condensed balance sheet information: | |
| | | |
| | | |
|
Current assets | |
$ | - | | |
$ | 100,000 | | |
|
Non-current assets | |
$ | - | | |
$ | 2,000 | | |
|
Current liabilities | |
$ | - | | |
$ | 548,000 | | |
|
Non-current liabilities | |
$ | - | | |
$ | - | | |
**Investment
in NetCo**
****
As
of December 31, 2024, NovelStem owned a 50% interest in NetCo, a joint venture that owns the Net Force publishing franchise. On May 9,
2025, the Company entered into a Settlement Agreement and Release whereby the investment in NetCo was sold to the Companys JV
partner for $1,300,000 to settle the related litigation funding liability to Omni Bridgeway in full. This transaction was fully consummated
as funds were received by Omni Bridgeway from CP Partners pursuant to the terms of the agreement.
| F-11 | |
**NOVELSTEM
INTERNATIONAL CORP.**
**Notes
to Financial Statements**
****
The
Company accounted for its investment in NetCo under the equity method and recognized nominal royalties and administrative fees from this
arrangement. The Company assessed its investment in NetCo for impairment on an annual basis or more frequently if indicators of impairment
existed.
The
following table represents the Companys investment in NetCo:
SCHEDULE OF INVESTMENTS
|
| |
2025 | | |
2024 | | |
|
| |
Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Investment in NetCo, beginning | |
$ | 128,240 | | |
$ | 133,709 | | |
|
Allocation of net income (loss) from Netco | |
| 640 | | |
| (5,469 | ) | |
|
Distribution from NetCo | |
| (640 | ) | |
| - | | |
|
Sale of ownership interest in NetCo | |
| (128,240 | ) | |
| - | | |
|
Investment in NetCo, ending | |
$ | - | | |
$ | 128,240 | | |
****
The
results of operations and financial position of the Companys investment in NetCo are summarized below:
****SCHEDULE OF OPERATIONS AND FINANCIAL POSITION INVESTMENT
|
| |
2025 | | |
2024 | | |
|
| |
Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Condensed income statement information: | |
| | | |
| | | |
|
Net sales | |
$ | 1,280 | | |
$ | 1,479 | | |
|
Gross margin | |
$ | 1,280 | | |
$ | 1,362 | | |
|
Net income (loss) | |
$ | 1,280 | | |
$ | (10,938 | ) | |
|
Companys allocation of net income (loss) from NetCo | |
$ | 640 | | |
$ | (5,469 | ) | |
****
|
| |
2025 | | |
2024 | | |
|
| |
As of December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Condensed balance sheet information: | |
| | | |
| | | |
|
Current assets | |
$ | - | | |
$ | 1,305 | | |
|
Non-current assets | |
$ | - | | |
$ | 272,799 | | |
|
Current liabilities | |
$ | - | | |
$ | 10,748 | | |
|
Non-current liabilities | |
$ | - | | |
$ | - | | |
| F-12 | |
**NOVELSTEM
INTERNATIONAL CORP.**
**Notes
to Financial Statements**
****
**NOTE
4NOTES PAYABLE**
****
In
December 2023, the Company entered into two short term notes payable with unrelated parties, Hewlett Fund and AIGH Investment Partners,
LLC. The notes are for $125,000 each, for a total of $250,000 in borrowings utilized for the funding of NewStem. The notes bear interest
at 12% per annum and originally matured on December 21, 2024. The maturity date for both notes has been extended until June 30, 2026
at which time all principal and accrued interest are due and payable. The note agreements include a provision whereby, in the event of
a capital raise transaction by the Company, the note holders would be entitled to participate in the transaction in an amount equal to
133% of the amounts owed on the note agreements at the closing of the transaction. Interest expense related to these notes was $36,830
and $30,082, respectively, for the years ended December 31, 2025 and 2024.
****
Long-term
notes payable are summarized as follows:
SCHEDULE OF LONG TERM NOTES PAYABLE
|
| |
As of December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Notes payable related parties: | |
| | | |
| | | |
|
Notes payable director and Executive Chairman | |
$ | 821,766 | | |
$ | 821,766 | | |
|
Accrued interest added to note balance | |
| 129,208 | | |
| 38,392 | | |
|
Total notes payable director and Executive Chairman | |
| 950,974 | | |
| 860,158 | | |
|
Note payable shareholder, principal amount | |
| 300,000 | | |
| 300,000 | | |
|
Accrued interest added to note balance | |
| 44,431 | | |
| - | | |
|
Less unamortized discount | |
| - | | |
| (60,417 | ) | |
|
Total note payable shareholder | |
| 344,431 | | |
| 239,583 | | |
|
Note payable, litigation funding agreement: | |
| | | |
| | | |
|
Note payable Omni Bridgeway (Fund 4) Invt. 3 L.P. | |
| - | | |
| 2,819,196 | | |
|
Accrued interest added to agreement balance | |
| - | | |
| 140,429 | | |
|
Total note payable, litigation funding agreement | |
| - | | |
| 2,959,625 | | |
|
Total notes payable | |
| 1,295,405 | | |
| 4,059,366 | | |
|
Less current portion | |
| (1,295,405 | ) | |
| (4,059,366 | ) | |
|
Long-term notes payable | |
$ | - | | |
$ | - | | |
During
the year ended December 31, 2022, the Company entered into note agreements with Jan Loeb, our Executive Chairman and Jerry Wolasky, a
shareholder and member of the Board, to borrow up to an aggregate of $600,000 for working capital needs. The note agreements were amended
in March 2024 to increase the total borrowing to $650,000 and extend the maturity date. The note agreements were refinanced in August
2024 providing for total borrowings of $750,000. The agreements provide for interest at a rate of 10% per annum and matured December
31, 2025. As of the date of financial statements, the full amount of $750,000 has been funded pursuant to these agreements and the maturity
date has been extended to June 30, 2026. Interest expense related to these notes was $90,816 and $66,570, respectively, for the years
ended December 31, 2025 and 2024.
On
May 5, 2023, the Company entered into a long-term note payable with a shareholder for $300,000
in financing to be funded $150,000
at inception and $150,000
in October 2023. This note bore interest at zero percent (0%)
and originally matured on May
5, 2025. The note included a guarantee which was identified as an embedded derivative with a fair value of a liability of
$650,000
at December 31, 2024 which is reported separately on the balance sheet. The fair value of the note exceeded the proceeds, and the
note was discounted at inception so that the net liability was the fair value of the derivative. Accretion of the note discount of
$60,417
and $177,768,
respectively, is included in interest expense in the statement of operations for the years ended December 31, 2025 and 2024. This
note agreement was restructured during 2025 to provide for a fixed amount of interest in lieu of the guarantee. This amendment,
which was determined to be accounted for pursuant to the provisions of ASC 470 for troubled debt restructurings with related
parties, ended the discounting of the note and the separate recording of an embedded derivative, as the note now bears interest and
contains no identifiable embedded derivative. As such, the relief of the guarantee was recorded as an adjustment to equity in the
accompanying financial statements and interest expense of $36,000
was accrued and treated as a reduction to equity. Beginning October 1, 2025, the note began to bear interest at a rate of 10%
per annum and $8,431
of interest expense was accrued during the year ended December 31, 2025. The note matures December
31, 2026.
****
| F-13 | |
****
**NOVELSTEM
INTERNATIONAL CORP.**
**Notes
to Financial Statements**
****
**Note
Payable, Litigation Funding Agreement**
On
February 11, 2022, the Company entered into a nonrecourse litigation funding agreement (the Agreement) with Omni Bridgeway
(Fund 4) Invt. 3 L.P. (Omni) related to an arbitration proceeding disclosed in Note 7. The Agreement provided for Omni
to fund all costs related to the arbitration up to $1,000,000 in exchange for an assignment of a certain portion of rights to and interest
in claims related to this arbitration. The agreement provided for specific calculations of the portion of any claims collected to be
received by Omni with the remainder collectible by the Company. Additionally, the agreement provided for repayment of funded costs pursuant
to the same multiple calculations in the event of a favorable outcome that does not include the collection of claims.
During
July 2023, the arbitration was settled. As a result of the ruling disclosed in Note 7, the liability became probable and reasonably estimable,
and the Company recorded the full liability due to Omni as of December 31, 2023. This liability consists of expenses funded by Omni of
$933,065, including $310,000 advanced for working capital, and related fees to Omni calculated as contractual multiples of funding totaling
$1,886,131 for a total liability of $2,819,196. This agreement bore interest at 5% per annum beginning January 2024 and was payable in
full on January 10, 2025. The Company accrued interest related to the Agreement of $37,400 and $140,429, respectively, during the years
ended December 31, 2025 and 2024.
The
Company began negotiations for settlement of this Agreement during 2024 and on May 9, 2025, the Company entered into a Settlement Agreement
and Release with our JV partner in NetCo, C.P. Group, and Omni whereby our interest in NetCo was sold in exchange for funds of $1,300,000
which were paid directly to Omni by CP Group in full settlement and release of all liabilities related to the Litigation Funding Agreement.
This transaction resulted in relief of indebtedness income of $1,697,024 during the year ended December 31, 2025.
****
**Bridge
Loan**
In
February 2025, Jan Loeb, Executive Chairman, began advancing funds to the Company for operating expenses in the form of an interim bridge
loan until alternate funding sources can be found. The bridge loan matured December 31, 2025 and has been extended to June 30, 2026.
The Company is accruing interest at 10% per annum for these advances. The total advanced during the year ended December 31, 2025 was
$161,867. Interest expense related to these advances was $9,990, during the year ended December 31, 2025.
**Convertible
Debt**
In
April 2024, the Company borrowed $100,000 from unrelated parties pursuant to convertible debt agreements accounted for as debt. These
agreements bear interest at 10% per annum and matured December 30, 2025. The maturity dates have been extended to June 30, 2026. The
unpaid principal balance of these notes and any accrued interest may be converted into shares of the Companys common stock at
a conversion price of $0.13 per share. Interest accrued related to these agreements was $17,595 and $8,646, respectively, during the
years ended December 31, 2025 and 2024.
**NOTE
5EQUITY**
(a)
General
At
December 31, 2025 and 2024, the Company had issued 50,316,672 shares and had 46,881,475 shares of its common stock outstanding with a
par value of $0.01 per share. Holders of outstanding common stock are entitled to receive dividends when, as and if declared by the Board,
and to share ratably in the assets of the Company legally available for distribution in the event of liquidation, dissolution or winding
up of the Company.
| F-14 | |
**NOVELSTEM
INTERNATIONAL CORP.**
**Notes
to Financial Statements**
****
(b)
Summary Employee Option Information
The
Companys stock option plans provide for the grant to officers, directors, third party contractors and other future key employees
of options to purchase shares of common stock. The purchase price may be paid in cash or at the end of the option term, if the option
is in-the-money, it is automatically exercised net. In a net exercise of an option, the Company does not
require a payment of the exercise price of the option from the optionee but reduces the number of shares of common stock issued upon
the exercise of the option by the smallest number of whole shares that has an aggregate fair market value equal to or in excess of the
aggregate exercise price for the option shares covered by the option exercised. Each option is exercisable to one share of the Companys
common stock. Most options expire within six years from the date of the grant and generally vest on the first anniversary date of their
issuance. Pursuant to the Equity Incentive Plan approved by the Companys board of directors on November 12, 2018, an aggregate
of 6,360,000 options have been issued to directors and investor relations professionals of which 300,000 have expired and 6,060,000 remain
outstanding.
The
Company utilized the Black-Scholes option-pricing model to estimate fair value, utilizing the following assumptions for the options issued
(in weighted averages) during the year ended December 31, 2024:
SCHEDULE OF FAIR VALUE OF OPTION USING VALUATION ASSUMPTIONS
|
Risk-free interest rate | |
| 4.3 | % | |
|
Expected term, in years | |
| 5.09 | | |
|
Expected volatility | |
| 116.9 | % | |
|
Expected dividend yield | |
| 0 | % | |
|
Determined weighted average grant date fair value per option | |
$ | 0.06 | | |
No
options were issued during the year ended December 31, 2025.
The
expected term of the options represents an estimate of the length of time until the expected date of exercising the options. Options
granted have a maximum life of 6 years. With respect to determining expected exercise behavior, the Company has grouped its option grants
into certain groups in order to track exercise behavior and establish historical rates. The Company estimated volatility by considering
historical stock volatility over the period since the Companys shift in business focus to biotech. The risk-free interest rates
are based on the U.S. Treasury yields for a period consistent with the expected term. The dividend yield of 0% is based on the Companys
history and expectation of dividend payout. The Company has not paid and does not anticipate paying dividends in the near future.
(c)
Summary Option Information
A
summary of the Companys option plans as of December 31, 2025 and 2024, as well as changes during each of the years then ended,
is presented below:
SCHEDULE OF STOCK OPTION ACTIVITIES
|
| |
Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
Number | | |
Weighted | | |
Number | | |
Weighted | | |
|
| |
of | | |
Average | | |
of | | |
Average | | |
|
| |
Options | | |
Exercise | | |
Options | | |
Exercise | | |
|
| |
(in shares) | | |
Price | | |
(in shares) | | |
Price | | |
|
Outstanding at beginning of year | |
| 6,360,000 | | |
| 0.135 | | |
| 5,760,000 | | |
| 0.143 | | |
|
Granted | |
| - | | |
| - | | |
| 600,000 | | |
| 0.060 | | |
|
Forfeited or expired | |
| (300,000 | ) | |
| 0.100 | | |
| - | | |
| - | | |
|
Outstanding at end of year | |
| 6,060,000 | | |
| 0.137 | | |
| 6,360,000 | | |
| 0.135 | | |
|
Exercisable at end of year | |
| 6,060,000 | | |
| 0.137 | | |
| 5,760,000 | | |
| 0.135 | | |
Stock-based
compensation expense was approximately $8,800 and $40,000 in the years ending December 31, 2025 and 2024, respectively.
| F-15 | |
****
**NOVELSTEM
INTERNATIONAL CORP.**
**Notes
to Financial Statements**
The
total compensation cost related to non-vested awards not yet recognized was approximately $9,000 as of December 31, 2024.
(d)
Warrants
The
Company had issued warrants at exercise prices equal to or greater than market value of the Companys common stock at the date
of issuance. A summary of warrant activity follows:
SUMMARY OF WARRANTS ACTIVITY
|
| |
Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
Number of | | |
Weighted | | |
Number | | |
Weighted | | |
|
| |
shares | | |
Average | | |
of | | |
Average | | |
|
| |
underlying | | |
Exercise | | |
Options | | |
Exercise | | |
|
| |
warrants | | |
Price | | |
(in shares) | | |
Price | | |
|
Outstanding at beginning of year | |
| 3,000,000 | | |
| 0.12 | | |
| 3,000,000 | | |
| 0.12 | | |
|
Granted | |
| - | | |
| - | | |
| - | | |
| - | | |
|
Exercised | |
| - | | |
| - | | |
| - | | |
| - | | |
|
Forfeited or expired | |
| (3,000,000 | ) | |
| 0.12 | | |
| - | | |
| - | | |
|
Outstanding at end of year | |
| - | | |
| - | | |
| 3,000,000 | | |
| 0.12 | | |
The
warrant agreements were amended on May 12, 2023 to extend the expiration date to June
28, 2025. The warrants outstanding at December
31, 2024 had a weighted average remaining contractual life of approximately 1.5six months, all warrants expired on June
28, 2025.
****
**NOTE
6INCOME TAXES**
****
For
the years ended December 31, 2025 and 2024, the Company incurred tax basis net operating losses and, accordingly, no provision for income
taxes has been recorded. In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any
tax assets. At December 31, 2025 and 2024, the Company had approximately $41,000,000 and $48,000,000, respectively of net operating losses
subject to IRC Section 382 limitations, of which $13,600,000 and $10,600,000, respectively, were available for carryforward after the
consideration of IRC Section 382 limitations. State of Florida net operating losses available for carryforward approximate the federal
net operating loss carryforward amounts.
The
federal and state net operating losses began expiring in 2021. Approximately $7,400,000 and $1,100,000, respectively of federal and state
losses expired in December 2025, and approximately $5,000,000 and $300,000, respectively, of federal and state losses expired in December
2024. The Company has approximately $9,032,000 in federal and state losses that do not expire. The remaining losses expire from 2026
through 2036. The majority of these expiring losses are further limited by IRC section 382 as shown in the deferred tax table below.
All such deferred tax assets have been offset with a full valuation allowance.
The composition of income (loss) before income taxes is as follows:
SCHEDULE
OF INCOME LOSS BEFORE INCOME TAXES
|
| |
2025 | | |
2024 | | |
|
| |
Year Ended December 31, | | |
|
| |
2025 | | |
2024 | | |
|
Domestic | |
$ | 2,373,810 | | |
| (1,443,339 | ) | |
The
Companys income tax provision differs from the expense that would result from applying statutory rates to income before taxes.
Upon
adoption of ASU 2023-09, Improvements to Income Tax Disclosures, as described in Note 2, Recently Adopted Accounting Standards, the reconciliation
of taxes at the federal statutory rate to our provision for income tax for the year ended December 31, 2025 was as follows:
SCHEDULE
OF FEDERAL STATUTORY RATE TO OUR PROVISION FOR INCOME TAX
|
| |
Amount | | |
Tax Rate | | |
|
| |
Year Ended December 31, | | |
|
| |
2025 | | |
|
| |
Amount | | |
Tax Rate | | |
|
Computed tax at the federal statutory rate of 21% | |
$ | 498,500 | | |
| 21.00 | % | |
|
Increase (decrease) in income tax rate resulting from: | |
| | | |
| | | |
|
Nondeductible/nontaxable items | |
| | | |
| | | |
|
Stock compensation | |
| 1,856 | | |
| 0.00 | % | |
|
Interest, related party, note discount and limitation | |
| 53,806 | | |
| 2.00 | % | |
|
Loss on dissolution of equity method investment | |
| (840,000 | ) | |
| (35.00 | )% | |
|
Other | |
| (1,148 | ) | |
| 0.00 | % | |
|
State income taxes, net of federal income tax benefit | |
| 103,261 | | |
| 4.00 | % | |
|
Net Operating Loss Expiration | |
| 1,545,358 | | |
| 65.00 | % | |
|
Permanent difference - relief of indebtedness income | |
| (356,375 | ) | |
| (15.00 | )% | |
|
Foreign rate differential | |
| | |
| | |
|
Change in federal valuation allowance | |
| (1,005,258 | ) | |
| (42.00 | )% | |
|
Total provision for income tax | |
$ | - | | |
| 0.00 | % | |
As previously disclosed for the
year ended December 31, 2024, prior to the adoption of ASU No. 2023-09, reconciliation of the provision (benefit) for income taxes with
amounts determined by applying the statutory U.S. federal income tax rate to income before income taxes is as follows:
|
| |
Amount | | |
Tax Rate | | |
|
| |
Year Ended December 31, | | |
|
| |
2024 | | |
|
| |
Amount | | |
Tax Rate | | |
|
Computed tax at the federal statutory rate of 21% | |
| (303,101 | ) | |
| 21.00 | % | |
|
State income taxes, net of federal income tax benefit | |
| (62,785 | ) | |
| 4.35 | % | |
|
Foreign rate differential | |
| (24,892 | ) | |
| 1.72 | % | |
|
Change in federal valuation allowance | |
| 390,778 | | |
| (27.07 | )% | |
|
Permanent difference - relief of indebtedness income | |
| - | | |
| 0.00 | % | |
|
Total provision for income tax | |
$ | - | | |
| 0.00 | % | |
****
The Company has changed the calculation
of income tax at the statutory rate based on net loss after losses from equity method investments of $3,233,042,
as previously shown in our December 31, 2024 financial statements, to calculate income tax at the statutory rate based on net loss before
income taxes, prior to the consideration of losses from equity method investments of $1,443,339.
| F-16 | |
****
**NOVELSTEM
INTERNATIONAL CORP.**
**Notes
to Financial Statements**
****
Deferred
income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. Deferred tax assets as of December 31, 2025 and 2024 consist of the
following:
SCHEDULE OF DEFERRED TAX ASSETS
|
| |
2025 | | |
2024 | | |
|
| |
As of December 31, | | |
|
| |
2025 | | |
2024 | | |
|
| |
| | |
| | |
|
Outside tax basis difference in equity investments | |
$ | - | | |
$ | 1,700,000 | | |
|
Federal and state net operating loss carryforwards available after consideration of IRC Section 382 limitations | |
| 3,610,354 | | |
| 2,801,830 | | |
|
General business credit | |
| 41,552 | | |
| 41,552 | | |
|
Related party interest and accretion of note discount | |
| 55,900 | | |
| 71,666 | | |
|
IRC Sec. 163(j) interest limitation | |
| 70,926 | | |
| - | | |
|
Loss on derivative instrument | |
| - | | |
| 92,750 | | |
|
Stock compensation | |
| 267,270 | | |
| 262,560 | | |
|
Total deferred tax assets | |
$ | 4,046,002 | | |
$ | 4,970,358 | | |
|
Federal and state net operating loss carryforwards subject to IRC Section 382 limitations | |
| 10,906,631 | | |
| 13,644,005 | | |
|
Less valuation allowance for net operating loss limitations | |
| (10,906,631 | ) | |
| (13,644,005 | ) | |
|
Valuation allowance | |
| (4,046,002 | ) | |
| (4,968,553 | ) | |
|
Subtotal deferred tax assets | |
| - | | |
| 1,805 | | |
|
Deferred tax liability, equity method basis difference | |
| - | | |
| (1,805 | ) | |
|
Net deferred tax assets | |
$ | - | | |
$ | - | | |
Management
has evaluated all tax positions that could have a significant effect on the financial statements and determined the Company had no
significant uncertain income tax positions at December 31, 2025 and 2024.
**NOTE
7COMMITMENTS AND CONTINGENCIES**
The
Company was the claimant in an arbitration proceeding against their 50% partner in NetCo. Arbitration proceedings concluded during 2022,
and the arbitrator rendered a decision in July 2023. The arbitrator ruled against the Company on certain key issues of arbitration and
in the Companys favor on two key issues of arbitration.
As
a result of this ruling, the costs related to the litigation funding agreement disclosed in Note 4 were recognized and a total liability
of $2,819,196 was recorded. In May 2025 the Companys interest in NetCo was sold in exchange for funds of $1,300,000 which were
paid directly to Omni by CP Group in full settlement and release of all liabilities related to the Litigation Funding Agreement.
**NOTE
8SUBSEQUENT EVENTS**
****
The
Company evaluated subsequent events through the date these financial statements were available to be issued and filed with the SEC.
To date in 2026, the Company borrowed additional funds totaling approximately $28,000
from the Executive Chairman pursuant to the interim bridge loan disclosed in Note 4.
On
March 13, 2026, the Company received $250,000 in exchange for 2,450,980.39 shares of common stock of the Company from an unrelated party.
| F-17 | |
|
|
(b) |
Exhibits. | |
|
Exhibit
Number |
|
Description | |
|
|
|
| |
|
3.1 |
|
Third Amended and Restated Articles of Incorporation December 1999 (1) | |
|
|
|
| |
|
3.2 |
|
Articles of Amendment to Articles of Incorporation 2004 (1) | |
|
|
|
| |
|
3.3 |
|
Articles of Amendment to Articles of Incorporation 2018 (1) | |
|
|
|
| |
|
3.4 |
|
Bylaws (1) | |
|
|
|
| |
|
3.5 |
|
Articles of Association of NewStem (1) | |
|
|
|
| |
|
10.1 |
|
Equity Incentive Plan (1) | |
|
|
|
| |
|
10.2 |
|
Joint Venture Agreement by and between the Company and NetCo (1) | |
|
|
|
| |
|
10.3 |
|
Financing Agreement dated May 2022 (1) | |
|
|
|
| |
|
10.4 |
|
Amendment to Financing Agreement dated July 2022 (1) | |
|
|
|
| |
|
10.5 |
|
Promissory Note issued to Jan Loeb (1) | |
|
|
|
| |
|
10.6 |
|
Promissory Note issued to Jerry Wolasky (1) | |
|
|
|
| |
|
10.7 |
|
Form of NovelStem Subscription Agreement (1) | |
|
|
|
| |
|
10.8 |
|
NewStem Share Purchase Agreement (1) | |
|
|
|
| |
|
10.9 |
|
Redacted Litigation Funding Agreement with Omni Bridgeway (1) | |
|
|
|
| |
|
10.10 |
|
Promissory Note issued to Stephen Gans (1) | |
|
|
|
| |
|
10.11 |
|
1st Amendment to Promissory Note issued to Jan Loeb (1) | |
|
|
|
| |
|
10.12 |
|
1st Amendment to Promissory Note issued to Jerry Wolasky (1) | |
|
|
|
| |
|
10.13 |
|
1st Amendment to Promissory Note issued to Stephen Gans (1) | |
|
|
|
| |
|
10.14 |
|
Bridge Note issued to Jan Loeb (1) | |
|
|
|
| |
|
10.15 |
|
2nd Amendment to Promissory Note issued to Stephen Gans (1) | |
|
|
|
| |
|
10.16 |
|
Certification of Principal Executive Officer and Executive Chairman pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
|
|
|
| |
|
10.17 |
|
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
|
|
|
| |
|
10.18 |
|
Certification of Principal Executive Officer and Executive Chairman pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
|
|
|
| |
|
10.19 |
|
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
|
|
|
| |
|
101.INS |
|
Inline XBRL Instance Document | |
|
|
|
| |
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document | |
|
|
|
| |
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
|
|
|
| |
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document | |
|
|
|
| |
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document | |
|
|
|
| |
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
|
|
|
| |
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) | |
|
|
(1) |
Previously
filed. | |
**Item
16. Form 10K Summary.**
Not
applicable
| 27 | |
**SIGNATURES**
Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized on March 25, 2026.
|
NovelStem International Corp. |
| |
|
|
|
| |
|
By: |
/s/
Jan H Loeb |
| |
|
|
Jan
H. Loeb |
| |
|
|
President
and Executive Chairman |
| |
Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
|
Signature |
|
Title |
|
Date | |
|
|
|
|
|
| |
|
/s/
Jan H. Loeb |
|
President
and Executive Chairman |
|
March
25, 2026 | |
|
Jan
H. Loeb |
|
|
|
| |
|
|
|
|
|
| |
|
/s/
Christine Jenkins |
|
Vice
President and Chief Financial Officer |
|
March
25, 2026 | |
|
Christine
Jenkins |
|
|
|
| |
|
|
|
|
|
| |
|
/s/
Mitchell Rubenstein |
|
Director |
|
March
25, 2026 | |
|
Mitchell
Rubenstein |
|
|
|
| |
|
|
|
|
|
| |
|
/s/
Eric Richman |
|
Director |
|
March
25, 2026 | |
|
Eric
Richman |
|
|
|
| |
|
|
|
|
|
| |
|
/s/
David Seltzer |
|
Director |
|
March
25, 2026 | |
|
David
Seltzer |
|
|
|
| |
|
|
|
|
|
| |
|
/s/
Jerry Wolasky |
|
Director |
|
March
25, 2026 | |
|
Jerry
Wolasky |
|
|
|
| |
|
|
|
|
|
| |
|
/s/
Tracy Clifford |
|
Director |
|
March
25, 2026 | |
|
Tracy
Clifford |
|
|
|
| |
| 28 | |