Item 1A. RISK FACTORS 7
Item 1B. UNRESOLVED STAFF COMMENTS 10
Item 1C. CYBERSECURITY 10
Item 2. PROPERTIES 10
Item 3. LEGAL PROCEEDINGS 10
Item 4. MINE SAFETY DISCLOSURES 10
PART II
Item 6. [RESERVED] 11
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 16
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 16
Item 9A. CONTROLS AND PROCEDURES 17
Item 9B. OTHER INFORMATION 17
Item 9C. DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS 17
PART III
Item 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 18
Item 11. EXECUTIVE COMPENSATION 20
Item 14. PRINCIPAL ACCOUNTING FEES AND SERVICES 25
PART IV
Item 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 26
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.”
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 Company’s principal asset consists of rights to profits from a license held by Yissum Research Development
Company, Hebrew University’s 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. Loeb’s
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 NewStem’s Board of Directors. Additionally, Mr. Loeb leveraged his financial
expertise by guiding NewStem’s financial and strategic planning, including the raising and deployment of capital, developing and
modifying NewStem’s business plan and budget and by participating in the negotiation of NewStem’s 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. NewStem’s 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 Company’s 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 Company’s 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.
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 patient’s
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.
NewStem’s
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.
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;
- Demonstrate the safety and efficacy of new products; and
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
NewStem’s
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 licensee’s 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 NewStem’s 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 Company’s 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 licensee’s 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.
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. Management’s 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 SEC’s website at http://www.sec.gov. You may also read and copy
any document we file at the SEC’s 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.
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 “Management’s
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
Company’s 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 NewStem’s 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.
Rapid
technological change could cause the License to become obsolete.
Success
from NewStem’s efforts will depend upon the ability of Yissum to relicense the technology supported by the License.
The
technologies underlying NewStem’s 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;
- Demonstrate the safety and efficacy of new products; and
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.
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 management’s 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.
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
PART
II
[See
General Instruction G2]
Item
5. Market for Registrant’s 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
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. Management’s 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 Yissum’s 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.
Critical
Accounting Policies
The
SEC defines “critical accounting policies” as those that require application of management’s 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 arm’s 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.
Selected
Statement of Operations Data:
Years Ended December 31,
Operating expenses:
Litigation expenses (contra expenses) - 58,975 (58,975 )
Other (income) expenses:
Gain on disposal of equity method investment (1,171,760 ) - (1,171,760 )
Equity in net income (loss) of equity method investees 640 (161,046 ) 161,686
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.
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. Management’s plans with regard to these matters include
fundraising until our interest in NewStem’s 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 NewStem’s 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.
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.
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