UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For
the quarterly period ended
For the transition period from _________________ to _________________
Commission
file number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
| (Address of principal executive offices) | (Zip Code) |
| Registrant’s telephone number, including area code |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
| None |
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.
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).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Smaller reporting company
| |
| 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 is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.
| Class | Outstanding at August 14, 2026 | |
| Common Stock, par value per share |
NOVELSTEM INTERNATIONAL CORP.
Quarterly Report on Form 10-Q
for the Quarterly Period Ended June 30, 2026
TABLE OF CONTENTS
| 2 |
PART I
| ITEM 1. | UNAUDITED CONDENSED FINANCIAL STATEMENTS |
NOVELSTEM INTERNATIONAL CORP.
CONDENSED BALANCE SHEETS
| As of | ||||||||
| June 30 | December 31, | |||||||
| 2026 | 2025 | |||||||
| (Unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Prepaid expenses | ||||||||
| Total current assets | ||||||||
| Total assets | $ | $ | ||||||
| LIABILITIES AND SHAREHOLDERS’ DEFICIT | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses | ||||||||
| Notes payable, including accrued interest | ||||||||
| Notes payable related parties, including accrued interest | ||||||||
| Bridge loan payable, related party, including accrued interest | ||||||||
| Convertible debt, including accrued interest | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (See Note 7) | ||||||||
| Shareholders’ deficit: | ||||||||
| Common stock, $ par value, shares authorized, and shares issued at June 30, 2026 and December 31, 2025, respectively, and and shares outstanding at June 30, 2026 and December 31, 2025, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Treasury stock, at cost, shares at June 30, 2026 and December 31, 2025 | ( | ) | ( | ) | ||||
| Total shareholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and shareholders’ deficit | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 3 |
NOVELSTEM INTERNATIONAL CORP.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
| Six Months Ended | Three Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Operating expenses: | ||||||||||||||||
| General and administrative expenses | ||||||||||||||||
| Total operating expenses | ||||||||||||||||
| Loss from operations | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
| Other (income) expenses: | ||||||||||||||||
| Gain on disposal of equity method investment | ( | ) | ( | ) | ||||||||||||
| Relief of indebtedness income | ( | ) | ( | ) | ||||||||||||
| Interest expense | ||||||||||||||||
| Total other (income) expenses | ( | ) | ( | ) | ||||||||||||
| Income (loss) before income taxes | ( | ) | ( | ) | ||||||||||||
| Provision for income tax | ||||||||||||||||
| Income (loss) before equity in net income (loss) of equity method investees | ( | ) | ( | ) | ||||||||||||
| Equity in net income (loss) of equity method investees | ||||||||||||||||
| Net income (loss) | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Basic and diluted net income (loss) per share: | ||||||||||||||||
| Net income (loss) per share - basic | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average number of shares outstanding - basic | ||||||||||||||||
| Net income (loss) per share - diluted | $ | ( | ) | $ | $ | ( | ) | $ | ||||||||
| Weighted average number of shares outstanding - diluted | ||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 4 |
NOVELSTEM INTERNATIONAL CORP.
CONDENSED STATEMENTS OF SHAREHOLDERS’ DEFICIT
(UNAUDITED)
For the Six Months Ended June 30, 2026:
| Additional | Number of | Total | ||||||||||||||||||||||||||
| Number of | Common | Paid-In | Accumulated | Treasury | Treasury | Shareholders’ | ||||||||||||||||||||||
| Shares | Stock | Capital | Deficit | Shares | Stock | Deficit | ||||||||||||||||||||||
| Balance, January 1, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Net loss | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Stock issued | - | |||||||||||||||||||||||||||
| Balance, March 31, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Net loss | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Balance, June 30, 2026 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
For the Six Months Ended June 30, 2025:
| Additional | Number of | Total | ||||||||||||||||||||||||||
| Number of | Common | Paid-In | Accumulated | Treasury | Treasury | Shareholders’ | ||||||||||||||||||||||
| Shares | Stock | Capital | Deficit | Shares | Stock | Deficit | ||||||||||||||||||||||
| Balance, January 1, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Net loss | - | ( | ) | - | ( | ) | ||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| Balance, March 31, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
| Net income | - | - | ||||||||||||||||||||||||||
| Debt restructuring | ||||||||||||||||||||||||||||
| Stock-based compensation | - | - | ||||||||||||||||||||||||||
| Balance, June 30, 2025 | $ | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||||||||||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 5 |
NOVELSTEM INTERNATIONAL CORP.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Six Months Ended | ||||||||
| June 30, | ||||||||
| 2026 | 2025 | |||||||
| Cash flows from operating activities: | ||||||||
| Net income (loss) | $ | ( | ) | $ | ||||
| Accretion of discount on note payable | ||||||||
| Gain on disposal of equity method investment | ( | ) | ||||||
| Relief of indebtedness income | ( | ) | ||||||
| Accrued interest added to notes payable and convertible debt | ||||||||
| Noncash settlement of accounts payable | ( | ) | ||||||
| Stock-based compensation | ||||||||
| Change in operating assets and liabilities: | ||||||||
| Accounts receivable, administrative fees | ||||||||
| Prepaid expenses | ||||||||
| Accounts payable | ( | ) | ||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from issuances of short term notes payable | $ | $ | ||||||
| Principal reductions, short term notes payable | ( | ) | ||||||
| Proceeds from sale of common stock | ||||||||
| Net cash provided by financing activities | ||||||||
| Net change in cash | ( | ) | ||||||
| Cash at the beginning of the period | ||||||||
| Cash at the end of the period | $ | $ | ||||||
| Supplemental cash flow information: | ||||||||
| Cash paid during the period for: | ||||||||
| Interest | $ | $ | ||||||
| Income taxes | $ | $ | ||||||
| Supplemental Non-Cash Investing and Financing Activities: | ||||||||
Interest capitalized to notes payable | $ | $ | ||||||
Settlement of long term notes payable | $ | $ | ||||||
Settlement of derivative liability, net of interest | $ | $ | ||||||
The accompanying notes are an integral part of these unaudited condensed financial statements.
| 6 |
NOVELSTEM INTERNATIONAL CORP.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—NATURE OF OPERATIONS
Description of Business
NovelStem
International Corp. (“NovelStem” or the “Company”) is a holding company whose principal assets consisted of an
approximate
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. NewStem was liquidated in August 2025 at which time its intangible assets, primarily in the form of licensing agreements, reverted to the original license holder. The Company retains a right to income from these license agreements.
NetCo is a legacy media business interest which owns “Net Force”, a book publishing franchise.
Going Concern, Liquidity and Management’s Plans
Since
inception, the Company has accumulated a deficit of approximately $
The
Company will need to obtain additional funds to continue its operations. Management’s plans with regard to these matters include
additional financing and fundraising as well as monetization of the right to intangible assets held from NewStem 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 $
The
Company has in place a finance agreement with two individuals who are shareholders and directors under which it borrowed $ and
an additional finance agreement with a shareholder under which it borrowed $ 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 $
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 4.
On
March 13, 2026, the Company received $
As of the date of this filing, the Company is in negotiations with all debt holders to convert their debt to equity in the Company.
In view of the matters described above, the Company’s ability to meet financing requirements is dependent upon the ability to complete additional fundraising or obtain additional financing, and/or monetize the rights to intangible assets from NewStem. These factors, among others, raise substantial doubt about the Company’s 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.
| 7 |
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the unaudited condensed financial statements reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the balances and results for the periods presented. Certain information and footnote disclosures normally included in the Company’s annual financial statements prepared in accordance with GAAP have been condensed or omitted. These condensed financial statement results are not necessarily indicative of results to be expected for the full fiscal year or any future period.
The accompanying unaudited condensed financial statements and related disclosures have been prepared with the presumption that users of the unaudited condensed financial statements have read or have access to the audited financial statements for the preceding fiscal year. Accordingly, these unaudited condensed financial statements should be read in conjunction with the Company’s Form 10-K, which was filed with the United States Securities and Exchange Commission (“SEC”) on March 26, 2026, from which the Company derived the balance sheet data at December 31, 2025.
Certain information and footnote disclosures normally included in condensed financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations for interim reporting. The Company believes that the disclosures contained herein are adequate to make the information presented not misleading. These condensed financial statements should be read in conjunction with the Company’s Form 10K, filed with the Securities and Exchange Commission on March 26, 2026, for the years ended December 31, 2025 and 2024.
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 Company reviewed 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. NewStem was liquidated in August 2025.
Additionally,
until May 9, 2025 the Company was a
| 8 |
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 loss per share is computed by dividing the net 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 or the conversion of debt. 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.
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net income (loss) attributable to common shareholders | $ | ( | ) | $ | ||||
| Weighted average shares outstanding: | ||||||||
| -Basic | ||||||||
| Basic net income (loss) per share | $ | ( | ) | $ | ||||
| Net income (loss) attributable to common shareholders | $ | ( | ) | $ | ||||
| Effect of dilutive securities: | ||||||||
| Convertible debt, interest | ||||||||
| Net income (loss) attributable to common shareholders | $ | ( | ) | $ | ||||
| Weighted average shares outstanding: | ||||||||
| -Basic | ||||||||
| Add: Convertible Debt | ||||||||
| Add: Stock options | ||||||||
| -Diluted | ||||||||
| Diluted net income (loss) per share | $ | ( | ) | $ | ||||
| Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Net income (loss) attributable to common shareholders | $ | ( | ) | $ | ||||
| Weighted average shares outstanding: | ||||||||
| -Basic | ||||||||
| Basic net income (loss) per share | $ | ( | ) | $ | ||||
| Net income (loss) attributable to common shareholders | $ | ( | ) | $ | ||||
| Effect of dilutive securities: | ||||||||
| Convertible debt, interest | ||||||||
| Net income (loss) attributable to common shareholders | $ | ( | ) | $ | ||||
| Weighted average shares outstanding: | ||||||||
| -Basic | ||||||||
| Add: Convertible Debt | ||||||||
| Add: Stock options | ||||||||
| -Diluted | ||||||||
| Diluted net income (loss) per share | $ | ( | ) | $ | ||||
| Six Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Convertible debt | ||||||||
| Stock options | ||||||||
| Three Months Ended June 30, | ||||||||
| 2026 | 2025 | |||||||
| Convertible debt | ||||||||
| Stock options | ||||||||
| 9 |
NOTE 3—EQUITY METHOD INVESTMENTS
Investment in NewStem
The
Company held a
The Company accounted for its investment in NewStem under the equity method. NewStem was a development stage company which incurred losses from inception and generated only minimal revenues under a licensing agreement.
The
Company assessed its investment in NewStem for impairment on an annual basis or more frequently if indicators of impairment existed.
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 was liquidated. The intangible assets of NewStem, including
license agreements (the “License”), 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 funds
to be received by the Company in the event of re-licensing or monetizing the licenses or related technology developed by NewStem. Due
to the current uncertainty of the recovery of any value from these intangible assets and the liquidation status of NewStem, the Company
fully impaired the investment in NewStem during the year ended December 31, 2024. On August 14, 2025, the Company received $
Investment in NetCo
Until
May 2025, NovelStem owned a
The following table represents the Company’s investment in NetCo:
Six Months Ended June 30, 2026 | Year Ended December 31, 2025 | |||||||
| (Unaudited) | ||||||||
| Investment in NetCo, beginning | $ | $ | ||||||
| Allocation of net income (loss) from NetCo | ||||||||
| Distribution from NetCo | ( | ) | ||||||
| Sale of ownership interest in NetCo | ( | ) | ||||||
| Investment in NetCo, ending | $ | $ | ||||||
The results of operations of the Company’s investment in NetCo is summarized below (unaudited):
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Condensed income statement information: | ||||||||||||||||
| Net sales | $ | $ | $ | $ | ||||||||||||
| Gross margin | $ | $ | ( | ) | $ | $ | ( | ) | ||||||||
| Net income | $ | $ | $ | $ | ||||||||||||
| Company’s allocation of net income from NetCo | $ | $ | $ | $ | ||||||||||||
| 10 |
NOTE 4—NOTES PAYABLE
In
December 2023, the Company entered into two notes payable with unrelated parties, Hewlett Fund and AIGH Investment Partners, LLC. The
notes are for $
The
notes provide that principal and accrued interest become due and payable upon the earlier of the stated maturity date or the closing
of a capital raise, which the notes define as any transaction, whether debt, equity or any combination thereof, to raise capital for
the Company.
The Company completed
a capital raise on March 13, 2026 through the issuance of common stock for cash proceeds of $
Interest expense related to these notes was $
Notes payable related parties are summarized as follows:
| As of | ||||||||
| June 30, | December 31, | |||||||
| 2026 | 2025 | |||||||
| (Unaudited) | ||||||||
| Notes payable related parties: | ||||||||
| Notes payable director and Executive Chairman | $ | $ | ||||||
| Accrued interest added to note balance | ||||||||
| Total notes payable director and Executive Chairman | ||||||||
| Note payable shareholder, principal amount | ||||||||
| Accrued interest added to note balance | ||||||||
| Total note payable shareholder | ||||||||
| Total notes payable | ||||||||
| Less current portion | ( | ) | ( | ) | ||||
| Long-term notes payable | $ | $ | ||||||
The notes payable summarized above were originally issued with maturities greater than one year. Since their original maturity dates, the notes have been extended from time to time, in each case for a period of less than one year from the date of extension. Accordingly, all amounts are due within one year of each balance sheet date presented and are classified as current liabilities, and no amounts have been classified as long-term.
The
weighted average interest rate on the Company’s notes payable, all of which are classified as current, was approximately
In
May 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 $
The
Company has in place a note payable with a shareholder for $. The note bore no interest included a guarantee which was
identified as an embedded derivative. This note agreement was amended in May 2025 to provide for a fixed amount of interest of $
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 a previously settled arbitration. The Agreement provided for Omni to fund all costs
related to the arbitration up to $
| 11 |
During
July 2023, the arbitration was settled. As a result of the ruling, the liability became probable and reasonably estimable, and the
Company recorded the full liability due to Omni as of December 31, 2023. This liability consisted of expenses funded by Omni of
$
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 $
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 on
Convertible Debt
In April 2024, the Company borrowed $ from unrelated parties pursuant to convertible debt agreements accounted for as debt. These agreements bear interest at % per annum and matured on . The maturity dates have been extended to . The unpaid principal balance of these notes and any accrued interest may be converted into shares of the Company’s common stock at a conversion price of $ per share. Interest accrued related to these agreements was $ and $ respectively, during the six months ended June 30, 2026 and 2025. Interest accrued related to these agreements was $ and $, respectively, during the three months ended June 30, 2026 and 2025.
NOTE 5—EQUITY
(a) General
At June 30, 2026, the Company had issued shares and had shares of its stock outstanding with a par value of $ per share.
At December 31, 2025, the Company had issued shares and had shares of its common stock outstanding with a par value of $ per share.
In March 2026, the Company issued
shares of its common stock to an individual accredited investor in a privately negotiated transaction for cash proceeds of $
Holders of outstanding common stock are entitled to receive dividends when, 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.
| 12 |
(b) Summary Employee Option Information
The Company’s stock option plan provides 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, 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 Company’s 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 the Company’s board of directors approved on November 12, 2018, an aggregate of options have been issued to directors and investor relations professionals of which have expired and remain outstanding.
options were issued during the six months ended June 30, 2026 and 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 years. With respect to determining expected exercise behavior, the Company has grouped its option grants into certain groups to track exercise behavior and establish historical rates. The Company estimated volatility by considering historical stock volatility over the expected term of the option. 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 % is based on the Company’s 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
| Number | Weighted | |||||||
| of | Average | |||||||
| Options | Exercise | |||||||
| (in shares) | Price | |||||||
| Outstanding, December 31, 2025 | $ | |||||||
| Granted | ||||||||
| Outstanding, June 30, 2026 | $ | |||||||
| Exercisable, June 30, 2026 | $ | |||||||
Stock-based compensation expense was $ and $ in the six and three months ended June 30, 2025, respectively. There was such stock-based compensation expense during the six and three months ended June 30, 2026.
(d) Warrants
The Company had issued warrants at exercise prices equal to or greater than the market value of the Company’s common stock at the date of issuance. All warrants expired on June 28, 2025.
| 13 |
NOTE 6—INCOME TAXES
The Company’s income tax expense and effective tax rates for the six and three months ended June 30, 2026 and 2025 were as follows:
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||
| Income (loss) before income taxes | $ | ( | ) | $ | ( | ) | $ | |||||||||
| Income tax expense | ||||||||||||||||
| Effective tax rate | % | % | % | % | ||||||||||||
The Company’s income tax provision differs from the expense that would result from applying statutory rates to income (loss) before taxes. A 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 (unaudited):
| Six Months Ended June 30, | ||||||||||||||||
| 2026 | 2025 | |||||||||||||||
| Amount | Tax Rate | Amount | Tax Rate | |||||||||||||
| Computed tax at the statutory rate of | $ | ( | ) | % | $ | % | ||||||||||
| Increase (decrease) in income tax rate resulting from: | ||||||||||||||||
| Nondeductible/nontaxable items | ||||||||||||||||
| Interest- related party, note discount and limitation | ( | )% | % | |||||||||||||
| Other | ( | ) | % | ( | ) | ( | )% | |||||||||
| State income taxes, net of federal income tax benefit | ( | ) | % | % | ||||||||||||
| Permanent difference - relief of indebtedness income | % | ( | ) | ( | )% | |||||||||||
| Change in federal valuation allowance | ( | )% | ( | ) | ( | )% | ||||||||||
| Total provision for income tax | $ | % | $ | % | ||||||||||||
| Three Months Ended June 30, | ||||||||||||||||
| 2026 | 2025 | |||||||||||||||
| Amount | Tax Rate | Amount | Tax Rate | |||||||||||||
| Computed tax at the statutory rate of | $ | ( | ) | % | $ | % | ||||||||||
| Increase (decrease) in income tax rate resulting from: | ||||||||||||||||
| Nondeductible/nontaxable items | ||||||||||||||||
| Interest- related party, note discount and limitation | ( | )% | % | |||||||||||||
| Other | ( | ) | % | ( | ) | ( | )% | |||||||||
| State income taxes, net of federal income tax benefit | ( | ) | % | % | ||||||||||||
| Permanent difference - relief of indebtedness income | % | ( | ) | ( | )% | |||||||||||
| Change in federal valuation allowance | ( | )% | ( | ) | ( | )% | ||||||||||
| Total provision for income tax | $ | % | $ | % | ||||||||||||
NOTE 7—COMMITMENTS AND CONTINGENCIES
In
July 2026, the Company entered into a contractual obligation related to our directors’ and officers’ insurance providing
for a down payment of $
NOTE 8—SUBSEQUENT EVENTS
The Company evaluated subsequent events through the date these financial statements were available to be issued and filed with the SEC.
Loan Extension Agreements
Subsequent to June 30, 2026, the Company entered into loan extension agreements extending the maturity date, of all of its then-outstanding notes payable which had previously been extended to June 30, 2026, to March 30, 2027.
During August 2026, the Company entered into a loan extension agreement with Jan Loeb, the Company’s Executive Chairman, extending the
maturity of the bridge loan payable to Mr. Loeb, with net principal advances of $
Waiver and Confirmation Agreements
Subsequent
to June 30, 2026, the Company entered into waiver and confirmation agreements with Hewlett Fund and AIGH Investment Partners, LLC, the
holders of the Company’s notes payable to unrelated parties described in Note 4. Under these agreements each holder confirmed the
amount owed under its note as of June 30, 2026; confirmed that interest has accrued and continues to accrue at
| 14 |
NOVELSTEM INTERNATIONAL CORP.
| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Statements in the following discussion and throughout this Form 10-Q that are not historical in nature are “forward-looking statements.” You can identify forward-looking statements by the use of words such as “expect,” “anticipate,” “estimate,” “may,” “will,” “should,” “intend,” “believe,” and similar expressions. Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risk and we can give no assurances that our expectations will prove to be correct. Actual results could differ from those described in this Form 10-Q because of numerous factors, many of which are beyond our control. We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this Form 10-Q or to reflect actual outcomes.
Overview
We are a holding company with limited operations and reported net income (losses) of approximately $(141,000) and $2,547,000 for the six months ended June 30, 2026 and 2025, respectively, and $(86,000) and $2,754,000, for the three months ended June 30, 2026 and 2025. We had current assets of approximately $65,000 and current liabilities of $2,097,000 as of June 30, 2026. As of December 31, 2025, our current assets and current liabilities were approximately $16,000 and $2,157,000, respectively. The increase in current assets is due to the sale of equity securities during the six months ended June 30, 2026. The decrease in current liabilities is primarily due to the reduction of accounts payable and the repayment of $50,000 on short-term borrowings as offset by interest accrued on debt and advances on short-term borrowings to fund operating expenses.
We have prepared our financial statements for the six months ended June 30, 2026, 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 related party debt as well as debt from unrelated parties. During 2025 we entered into a bridge loan agreement with our Executive Chairman to obtain funding for current operating expenses and in March 2026 we issued common stock in exchange for $250,000 in a private transaction.
RESULTS OF OPERATIONS
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 Form 10-Q. In the discussion below, general and administrative expenses are referred to as “G&A expenses”.
| Six Months Ended June 30, | Three Months Ended June 30, | |||||||||||||||||||||||
| 2026 | 2025 | Change | 2026 | 2025 | Change | |||||||||||||||||||
| Operating expenses: | ||||||||||||||||||||||||
| General and administrative expenses | 39,888 | 158,537 | (118,649 | ) | 34,935 | 63,964 | (29,029 | ) | ||||||||||||||||
| Total operating expenses | 39,888 | 158,537 | (118,649 | ) | 34,935 | 63,964 | (29,029 | ) | ||||||||||||||||
| Loss from operations | (39,888 | ) | (158,537 | ) | 118,649 | (34,935 | ) | (63,964 | ) | 29,029 | ||||||||||||||
| Other (income) expenses: | ||||||||||||||||||||||||
| Gain on disposal of equity method investment | - | (1,171,760 | ) | 1,171,760 | - | (1,171,760 | ) | 1,171,760 | ||||||||||||||||
| Relief of indebtedness income | - | (1,697,024 | ) | 1,697,024 | - | (1,697,024 | ) | 1,697,024 | ||||||||||||||||
| Interest expense | 100,928 | 163,962 | (63,034 | ) | 50,860 | 51,319 | (459 | ) | ||||||||||||||||
| Total other (income) expenses | 100,928 | (2,704,822 | ) | 2,805,750 | 50,860 | (2,817,465 | ) | 2,868,325 | ||||||||||||||||
| Income (loss) before income taxes | (140,816 | ) | 2,546,285 | (2,687,101 | ) | (85,795 | ) | 2,753,501 | (2,839,296 | ) | ||||||||||||||
| Provision for income tax | - | - | - | - | - | - | ||||||||||||||||||
| Income (loss) before equity in net income (loss) of equity method investees | (140,816 | ) | 2,546,285 | (2,687,101 | ) | (85,795 | ) | 2,753,501 | (2,839,296 | ) | ||||||||||||||
| Equity in net income (loss) of equity method investees | - | 340 | (340 | ) | - | 340 | (340 | ) | ||||||||||||||||
| Net income (loss) | (140,816 | ) | 2,546,625 | (2,687,441 | ) | $ | (85,795 | ) | $ | 2,753,841 | $ | (2,839,636 | ) | |||||||||||
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.
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 $40,000 and $159,000 for the six months ended June 30, 2026 and 2025, respectively. Specifically, professional fees decreased by approximately $95,000 in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025, primarily due to a decrease in accounting and audit fees of approximately $27,500 and the write off of approximately $67,500 in prior years legal fees due to the settlement of outstanding fees at a discount. We incurred a bad debt expense during the six months ended June 30, 2025 of approximately $9,500 for the write off of uncollectible administrative fees. We had reductions in stock compensation of approximately $8,800 as no options were issued during 2025 and previously issued stock options were fully expensed during 2025. Other miscellaneous G&A expenses decreased by approximately $5,700.
The Company incurs G&A expenses primarily related to professional fees, insurance and stock-based compensation. We incurred G&A expenses of approximately $35,000 and $64,000 for the three months ended June 30, 2026 and 2025, respectively. Specifically, professional fees decreased by approximately $26,000 in the three months ended June 30, 2026 as compared to the three months ended June 30, 2025, primarily due to a decrease in legal fees and audit fees for NewStem. We also had reductions in stock compensation and investor costs of approximately $3,000.
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Interest expense decreased by approximately $63,000 in the six months ended June 30, 2026 as compared to the six months ended June 30, 2025 primarily due to the settlement of the litigation funding agreement on May 9, 2025.
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.
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 debt service, 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.
The Company has in place note agreements entered into during 2022 with Jan Loeb, our Executive Chairman and Jerry Wolasky, a member of the Board, to borrow up to an aggregate of $750,000 for working capital needs. The agreements provide for interest at a rate of 10% per annum and mature March 30, 2027. As of the date of this Quarterly Report, the full amount of $750,000 has been funded pursuant to these agreements.
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 was identified as an embedded derivative. This note was amended in May 2025 to provide for fixed interest from inception of $36,000 to be added to the principal balance, 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 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 prior to an event of default and mature March 30, 2027, at which time all principal and accrued interest are due and payable. The notes provide that principal and accrued interest become due and payable upon the earlier of the stated maturity date or the closing of a capital raise, and that in the event of a capital raise each holder is entitled to participate in that transaction and to tender its note, valued at 133% of the amounts owed on the closing date, as payment for securities issued to that holder. Subsequent to June 30, 2026, the Company entered into waiver and confirmation agreements with both holders with respect to financing transactions completed on or prior to the date of those agreements, including the March 13, 2026 issuance of common stock.
In April 2024, the Company borrowed $100,000 from unrelated parties pursuant to convertible debt agreements accounted for as debt. The notes bear interest at 10% per annum and mature March 30, 2027.
In February 2025, the Company entered into a bridge loan agreement with the Executive Chairman to fund working capital until such time as additional funding can be obtained. Advances from this note were approximately $28,000 and $106,000 during the six months ended June 30, 2026 and 2025, respectively. The Company repaid $50,000 on this note during the six months ended June 30, 2026. The note bears interest at 10% per annum and matures March 30, 2027.
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 including all accrued and unpaid interest.
On March 13, 2026, the Company received $250,000 in exchange for 2,450,980 shares of common stock from an unrelated party.
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Net Cash Used In Operating Activities.
For the six months ended June 30, 2026, net cash used in operating activities was approximately $172,000, which consisted primarily of a net loss of approximately $141,000 and the noncash settlement of accounts payable of $67,500, offset by interest added to notes payable of approximately $100,000. Additionally, cash was used in operations related to a decrease in accounts payable of approximately $71,000, offset by a decrease in prepaid expenses of approximately $7,000.
For the six months ended June 30, 2025, net cash used in operating activities was approximately $110,000, which consisted primarily of net income of approximately $2,547,000, offset by noncash disposal of equity method investment of approximately $1,172,000, relief of indebtedness income of approximately $1,697,000, stock-based compensation of approximately $9,000 and interest added to notes payable of approximately $103,000 and accretion of interest on notes payable of approximately $60,000. Additionally, cash was used in operations related to decrease in current assets of approximately $12,000 and a net increase in total accrued liabilities and accounts payable of approximately $28,000.
Net Cash Used In Investing Activities.
No net cash was used in investing activities during the six months ended June 30, 2026 and 2025.
Net Cash Provided By Financing Activities.
For the six months ended June 30, 2026, net cash provided by financing activities was $228,000, consisting of short-term borrowings from the Executive Chairman of approximately $28,000, proceeds from the issuance of common stock of $250,000 offset by repayment of $50,000 in short-term borrowings from the Executive Chairman.
For the six months ended June 30, 2025, net cash provided by financing activities was $105,500, consisting of short-term borrowings from the Executive Chairman.
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| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK |
This section is not applicable.
| ITEM 4. | 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 June 30, 2026 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.
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.
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PART II
| ITEM 1. | LEGAL PROCEEDINGS |
The Company had no legal proceedings during the reporting period.
| ITEM 1A. | RISK FACTORS |
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.
| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
| (a) | Not applicable. | |
| (b) | Not applicable. | |
| (c) | Not applicable. |
| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
Not applicable.
| ITEM 4. | MINE SAFETY DISCLOSURES |
Not applicable.
| ITEM 5. | OTHER INFORMATION |
None.
| ITEM 6. | EXHIBITS |
104 Cover Page Interactive Data File (embedded within the Inline XBRL document).
| # | This exhibit is filed or furnished herewith. |
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SIGNATURES
Pursuant to the requirements 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.
| NOVELSTEM INTERNATIONAL CORP. | ||
| Date: August 14, 2026 | By: | /s/ Jan Loeb |
| Name: | Jan Loeb | |
| Title: | Executive Chairman | |
| By: | /s/ Christine T. Jenkins | |
| Name: | Christine T. Jenkins | |
| Title: | Chief Financial Officer | |
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