UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

~~SECURITIES~~For ~~EXCHANGE~~the ~~ACT~~quarterly OFperiod ~~1934~~ended March 31, 2024

For the quarterly period ended September 30, 2023

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________________ to _________________

Commission file number: 001-14332

NOVELSTEM INTERNATIONAL CORP.

(Exact name of registrant as specified in its charter)

Florida

65-0385686

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

2255 Glades Road, Suite 221A, Boca Raton, FL		33431
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code

(410) 598-9024

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. Yes ☐☒ No ☒☐

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filed, 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 ☐
Non-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 ☒

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 ~~November~~May 1715, ~~2023~~2024
Common Stock, $0.01 par value per share		46,881,475

NOVELSTEM INTERNATIONAL CORP.

Quarterly Report on Form 10-Q

for the Quarterly Period Ended ~~September~~March 3031, ~~2023~~2024

TABLE OF CONTENTS

	~~PAGE~~	PAGE
Part I Financial Information
Item 1. Financial Statements:
Item 1. Unaudited Condensed Financial Statements:
Condensed Balance Sheets as of September 30, 2023 (unaudited) and December 31, 2022	3
Condensed Balance Sheets as of March 31, 2024 and December 31, 2023		3
Condensed Statements of Operations (unaudited) for the three and nine months ended September 30, 2023 and 2022	4
Condensed Statements of Operations for the three months ended March 31, 2024 and 2023		4
Condensed Statements of Changes in Shareholders’ Equity (Deficit) (unaudited) for the three and nine months ended September 30, 2023 and 2022	5
Condensed Statements of Changes in Shareholders’ Deficit for the three months ended March 31, 2024 and 2023		5
Condensed Statements of Cash Flows (unaudited) for the nine months ended September 30, 2023 and 2022	6
Condensed Statements of Cash Flows for the three months ended March 31, 2024 and 2023		6
Notes to Condensed Financial Statements	7	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	16	15
Item 3. Quantitative and Qualitative Disclosures About Market Risk	19	18
Item 4. Controls and Procedures	19	18
Part II Other Information
Item 1. Legal Proceedings	20	18
Item 1A. Risk Factors	20	19
Item 6. Exhibits	20	19
Signatures	21	20

PART I

ITEM 1.

UNAUDITED CONDENSED FINANCIAL STATEMENTS

NOVELSTEM INTERNATIONAL CORP.

CONDENSED BALANCE SHEETS

	September 30,			December 31,
	March 31,			December 31,
	As of
	September 30,			December 31,
	March 31,			December 31,
	2023			2022
	2024			2023
	(Unaudited)
ASSETS
Current assets:
Cash	$	65,~~963~~181		$	653,~~346~~063
Accounts receivable, administrative fees		-3,000			~~12,000~~-
Prepaid expenses		4327,~~019~~855			4033,~~561~~540
Total current assets		4936,~~982~~036			5886,~~907~~603
Investment in Netco Partners		~~135~~132,~~498~~358			~~137~~133,~~011~~709
Investment in NewStem Ltd		1,833,396			2,090,286
Note receivable, NewStem Ltd		500,000			250,000
Total assets	$	2,018,876		$	2,286,204
Investment in NewStem Ltd		1,732,375			1,784,234
LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIT)
Total assets	$	2,400,769		$	2,254,546
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Current liabilities:
Accounts payable	$	23149,~~224~~672		$	2154,~~203~~257
Current portion of long-term notes payable		1,833,104			-
Notes payable		250,000			250,000
Accrued expenses		97,200			43,673
Current portion of long-term notes payable, including accrued interest		2,850,916			-
Total current liabilities		1,953,528			64,876
Accrued expenses		45,974			42,223
Total current liabilities		3,296,562			346,480
Long-term liabilities:
Long-term notes payable, including accrued interest, net		1810,~~430,009~~527			~~288~~3,~~450~~324,599
Derivative liability, guarantee		~~650~~535,000			-535,000
Total long-term liabilities		21,~~080~~345,~~009~~527			~~288~~3,~~450~~859,599
Total liabilities		4,~~033~~642,~~537~~089			~~353~~4,~~326~~206,079
Commitments and contingencies (see Note 7)		-			-
Shareholders’ (deficit) equity:
Shareholders’ deficit:
Common stock, $.01 par value, 100,000,000 shares authorized, 50,316,672 shares issued, and 46,881,475 shares outstanding as of September 30, 2023 and December 31, 2022		468,815			468,815
Common stock, $.01 par value, 100,000,000 shares authorized, 50,316,672 shares issued, and 46,881,475 shares outstanding as of March 31, 2024 and December 31, 2023		468,815			468,815
Additional paid-in capital		290,~~896~~920,~~833~~710			290,~~604~~907,~~327~~217
Accumulated deficit		(293,~~180~~431,~~555~~091	)		(~~288~~293,~~940~~127,~~510~~811	)
Treasury stock, at cost, 3,435,197 shares as of September 30, 2023 and December 31, 2022		(199,754	)		(199,754	)
Treasury stock, at cost, 3,435,197 shares as of March 31, 2024 and December 31, 2023		(199,754	)		(199,754	)
Total shareholders’ (deficit) equity		(2,014,661	)		1,932,878
Total shareholders’ deficit		(2,241,320	)		(1,951,533	)
Total liabilities and shareholders’ equity (deficit)	$	2,018,876		$	2,286,204
Total liabilities and shareholders’ deficit	$	2,400,769		$	2,254,546

The accompanying notes are an integral part of these condensed financial statements.

NOVELSTEM INTERNATIONAL CORP.

CONDENSED STATEMENTS OF OPERATIONS

(UNAUDITED)

	2023			2022			2023			2022
	2024			2023
	Nine Months Ended						Three Months Ended
	Three Months Ended
	September 30,						September 30,
	March 31,
	2023			2022			2023			2022
	2024			2023
Administrative fee income	$	93,000		$	-		$	~~9,000~~		$	-
Operating expenses:
General and administrative expenses		~~635~~183,~~360~~306			~~574~~164,~~741~~792			~~84,208~~			~~206,210~~
Litigation expenses (contra expenses) (Note 7)		2,805,884			(310,000	)		473,221			-
Total operating expenses		183,306			164,792
Total operating expenses		3,441,244			264,741			557,429			206,210
Loss from operations		(180,306	)		(164,792	)
Loss from operations		(3,432,244	)		(264,741	)		(548,429	)		(206,210	)
Other expenses:
Other expenses:
Gain on derivative instrument		(25,000	)		-
Loss on derivative instrument		500,000			-			445,205			-
Interest expense		94,764			7,313
Interest expense		56,274			5,542			28,450			3,530
Total other expenses		69,764			7,313
Total other expenses		556,274			5,542			473,655			3,530
Loss before income taxes		(250,070	)		(172,105	)
Loss before income taxes		(3,988,518	)		(270,283	)		(1,022,084	)		(209,740	)
Provision for income tax		-			-
Provision for income tax		-			-			-			-
Loss before equity in net income of equity method investees		(250,070	)		(172,105	)
Loss before equity in net income of equity method investees		(3,988,518	)		(270,283	)		(1,022,084	)		(209,740	)
Equity in net loss of equity method investees		(53,210	)		(96,716	)
Equity in net loss of equity method investees		(251,527	)		(411,788	)		(74,381	)		(85,532	)
Net loss	$	(303,280	)	$	(268,821	)
Net loss	$	(4,240,045	)	$	(682,071	)	$	(1,096,465	)	$	(295,272	)
Basic and diluted net loss per share:
Basic and diluted net loss per share:
Net loss per share - basic and diluted	$	(0.01	)	$	(0.01	)
Net loss per share - basic and diluted	$	(0.09	)	$	(0.01	)	$	(0.02	)	$	(0.01	)
Weighted average number of shares outstanding - basic and diluted		46,881,475			46,881,475
Weighted average number of shares outstanding - basic and diluted		46,881,475			46,881,475			46,881,475			46,881,475

The accompanying notes are an integral part of these unaudited condensed financial statements.

NOVELSTEM INTERNATIONAL CORP.

CONDENSED STATEMENTS OF SHAREHOLDERS’ EQUITY ~~(DEFICIT)~~

(UNAUDITED)

	Shares		Stock		Capital		Deficit			Shares		Stock			Equity
					Additional					Number of					Total
	Number of		Common		Paid-In		Accumulated			Treasury		Treasury			Shareholders’
	Shares		Stock		Capital		Deficit			Shares		Stock			Equity
Balance, January 1, 2023		46,881,475	$	468,815	$	290,604,327	$	(288,940,510	)		3,435,197	$	(199,754	)	$	1,932,878
Net loss		-		-		-		(268,821	)		-		-			(268,821	)
Stock option compensation		-		-		15,077		-			-		-			15,077
Balance, March 31, 2023		46,881,475	$	468,815	$	290,619,404	$	(289,209,331	)		3,435,197	$	(199,754	)	$	1,679,134
Net loss		-		-		-		(2,874,759	)		-		-			(2,874,759	)
Stock option compensation		-		-		260,282		-			-		-			260,282
Balance, June 30, 2023		46,881,475	$	468,815	$	290,879,686	$	(292,084,090	)		3,435,197	$	(199,754	)	$	(935,343	)
Net loss		-		-		-		(1,096,465	)		-		-			(1,096,465	)
Stock option compensation		-		-		17,147		-			-		-			17,147
Balance, September 30, 2023		46,881,475	$	468,815	$	290,896,833	$	(293,180,555	)		3,435,197	$	(199,754	)	$	(2,014,661	)

For the Three Months Ended March 31, 2024:

						Additional					Number of					Total
	Number of		Common		Additional Paid-In		Accumulated			Number of Treasury		Treasury			Total Shareholders’
		Number of		Common		Paid-In		Accumulated			Treasury		Treasury			Shareholders’
	Shares		Stock		Capital		Deficit			Shares		Stock			Equity
		Shares		Stock		Capital		Deficit			Shares		Stock			Equity
Balance, January 1, 2024		46,881,475	$	468,815	$	290,907,217	$	(293,127,811	)		3,435,197	$	(199,754	)	$	(1,951,533	)
Balance, January 1, 2022		46,881,475	$	468,815	$	290,321,665	$	(288,174,780	)		3,435,197	$	(199,754	)	$	2,415,946
Net loss		-		-		-		(303,280	)		-		-			(303,280	)
Net loss		-		-		-		(217,464	)		-		-			(217,464	)
Stock option compensation		-		-		13,493		-			-		-			13,493
Stock option compensation		-		-		49,011		-			-		-			49,011
Balance, March 31, 2024		46,881,475	$	468,815	$	290,920,710	$	(293,431,091	)		3,435,197	$	(199,754	)	$	(2,241,320	)
Balance, March 31, 2022		46,881,475		468,815		290,370,676		(288,392,244	)		3,435,197		(199,754	)		2,247,493
Net loss		-		-		-		(169,335	)		-		-			(169,335	)
Stock option compensation		-		-		74,333		-			-		-			74,333
Balance, June 30, 2022		46,881,475		468,815		290,445,009		(288,561,579	)		3,435,197		(199,754	)		2,152,491
Balance		46,881,475		468,815		290,445,009		(288,561,579	)		3,435,197		(199,754	)		2,152,491
Net loss		-		-		-		(295,272	)		-		-			(295,272	)
Stock option compensation		-		-		75,150		-			-		-			75,150
Balance, September 30, 2022		46,881,475	$	468,815	$	290,520,159	$	(288,856,851	)		3,435,197	$	(199,754	)	$	1,932,369
Balance		46,881,475	$	468,815	$	290,520,159	$	(288,856,851	)		3,435,197	$	(199,754	)	$	1,932,369

For the Three Months Ended March 31, 2023:

					Additional					Number of					Total
	Number of		Common		Paid-In		Accumulated			Treasury		Treasury			Shareholders’
	Shares		Stock		Capital		Deficit			Shares		Stock			Equity

Balance, January 1, 2023		46,881,475	$	468,815	$	290,604,327	$	(288,940,510	)		3,435,197	$	(199,754	)	$	1,932,878
Balance, value		46,881,475	$	468,815	$	290,604,327	$	(288,940,510	)		3,435,197	$	(199,754	)	$	1,932,878
Net loss		-		-		-		(268,821	)		-		-			(268,821	)
Stock option compensation		-		-		15,077		-			-		-			15,077
Balance, March 31, 2023		46,881,475	$	468,815	$	290,619,404	$	(289,209,331	)		3,435,197	$	(199,754	)	$	1,679,134
Balance, value		46,881,475	$	468,815	$	290,619,404	$	(289,209,331	)		3,435,197	$	(199,754	)	$	1,679,134

The accompanying notes are an integral part of these condensed financial statements.

NOVELSTEM INTERNATIONAL CORP.

CONDENSED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	2023			2022
	2024			2023
	Nine Months Ended
	Three Months Ended
	September 30,
	March 31,
	2023			2022
	2024			2023
Cash flows from operating activities:
Net loss	$	(4303,~~240,045~~280	)	$	(~~682~~268,~~071~~821	)
Equity in loss of equity method investees		251,528			411,788
Equity in net loss of equity method investees		53,210			96,716
Distribution from NetCo Partners		~~6,875~~-			-7,875
Accretion of discount on note payable		3044,~~411~~398			-
Loss on derivative instrument		500,000			-
Gain on derivative instrument		(25,000	)		-
Legal fees and litigation funding fees funded by litigation funding agreement		2,799,196			-
Accrued interest added to long-term notes payable		42,446			7,079
Accrued interest added to long-term note payable		25,055			-
Stock-based compensation		13,493			15,077
Stock-based compensation		292,506			198,494
Change in operating assets and liabilities:
Accounts receivable, administrative fees		12(3,000	)		-12,000
Prepaid expenses		(25,~~458~~685	)		~~(20,624~~994	)
Accounts payable		295,~~022~~415			11107,~~683~~296
Accrued expenses		533,~~527~~751			20(6,~~747~~000	)
Net cash (used in) provided by operating activities		(269,383	)		(59,983	)
Net cash used in operating activities		(72,882	)		(27,784	)
Cash flows from investing activities:
Loans made		(250,000	)		-
Net cash used in investing activities		(250,000	)		-
Cash flows from financing activities:
Repayment of short term note payable		-			(100,000	)
Proceeds from long term notes payable		275,000			62,000
Proceeds from long term notes payable		270,000			168,209
Net cash provided by financing activities		275,000			62,000
Net cash from financing activities		270,000			68,209
Net change in cash		(47,882	)		34,216
Net change in cash		617			8,226
Cash at the beginning of the period		53,063			6,346
Cash at the beginning of the period		6,346			8,666
Cash at the end of the period	$	5,181		$	40,562
Cash at the end of the period	$	6,963		$	16,892
Supplemental cash flow information:
Cash paid during the period for:
Interest	$	~~807~~441		$	~~8,085~~234
Non-cash financing activities:
Fair value of derivative liability	$	150,000			-
Discount of long term note payable	$	150,000			-

The accompanying notes are an integral part of these condensed financial statements.

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 are aan ~~30.58~~approximate 31% equity interest in NewStem Ltd, an Israeli biotech company (“NewStem”), and a 50% equity interest in NetCo Partners (“NetCo”). 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 as a result of its business focus shift from a media business to biotech.

NewStem focuses 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 is collaborating with life sciences companies for the development of drugs and reagents. NetCo is a legacy media business interest which owns “Net Force”, a book publishing franchise.

Going Concern, Liquidity and Management’s Plans

~~Management~~Since ~~believes the accompanying condensed financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”)~~inception, ~~which contemplate continuation of~~ the Company ~~as a going concern. Since inception, the Company~~ has accumulated a deficit of approximately $293,000,000. The accumulated deficit of the Company subsequent to its business focus shift and name change in September 2018 is approximately $6,~~500~~750,000 which is comprised primarily of allocated losses from equity method investments and general and administrative costs incurred by the Company.

The Company will need to obtain additional funds to continue its operations. Management’s plans with regard to these matters include additional financing and fundraising until its equity investment in NewStem 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 will be able to continue as a going concern and become profitable (see Note 3).

The Company has in place a ~~financing~~finance agreement with ~~related~~two ~~parties~~individuals who are shareholders and directors to borrow up$650,000 and an additional finance agreement with a shareholder to borrow $~~600~~300,000 for working capital needs (see Note 4). Additionally, in ~~May 2023,~~ the Company entered into additional afinance ~~financing~~agreements ~~agreement~~ with aunrelated ~~shareholder~~parties toin ~~borrow~~December ~~$300,000~~2023 ~~consisting~~and ofApril ~~advances~~2024 ofto borrow an additional $~~150~~350,000 in ~~May~~for ~~2023~~working capital needs and ~~$150,000~~to infund ~~October~~NewStem ~~2023~~ (see Note 94). ~~Following~~As ~~this~~of ~~financing~~the date of these financial statements, ~~the~~these borrowings have been fully utilized and the Company ~~believes~~will ~~that~~need ~~its~~to ~~cash~~obtain ~~resources~~additional ~~are~~funds ~~sufficient for~~to ~~the~~continue operations offor the ~~Company~~next ~~until~~12 ~~April 2024~~months.

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 its investment in NetCo, along with NewStem continuing as a going concern. These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern. The ~~condensed~~ financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts ~~and~~ and classification of liabilities that might be necessary should the Company be unable to continue in existence.

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 of 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 consolidated 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 consolidated 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 April 1, 2024, from which the Company derived the balance sheet data at December 31, 2023.

~~The~~Certain ~~accompanying~~information ~~unaudited~~and footnote disclosures normally included in condensed financial statements ~~and~~prepared ~~related~~in ~~disclosures~~accordance with GAAP have been ~~prepared~~condensed or ~~with~~omitted ~~the~~pursuant ~~presumption~~to ~~that~~such ~~users~~rules ofand ~~the unaudited~~regulations ~~condensed~~for ~~financial~~interim ~~statements~~reporting. ~~have~~The ~~read~~Company orbelieves ~~have~~that ~~access~~the todisclosures ~~the~~contained ~~audited~~herein ~~financial~~are adequate ~~statements~~to ~~for~~make the ~~preceding~~information ~~fiscal~~presented ~~year~~not misleading. ~~Accordingly,~~ ~~these~~These ~~unaudited~~ condensed ~~consolidated~~ financial statements should be read in conjunction with the Company’s Form ~~10-K,~~ ~~which~~10K ~~was~~ filed with the ~~United States~~ Securities and Exchange Commission ~~(“SEC”)~~ on ~~March~~April 311, ~~2023,~~2024 ~~from~~for ~~which~~ the ~~Company~~ ~~derived~~years ~~the~~ended ~~balance sheet data at~~ December 31, 2023 and 2022.

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.

Equity Investments

Investee companies that are not consolidated, but over which the Company exercises significant influence, are accounted for under the equity method of accounting. Whether or not the Company exercises significant influence with respect to an investee depends on an evaluation of several factors, including, among others, representation on the investee company’s board of directors and ownership level, which is generally a 20% to 50% interest in the voting securities of the investee company. Under the equity method of accounting, an investee company’s accounts are not reflected within the Company’s balance sheets or statements of operations; however, the Company’s share of the earnings or losses of the investee company is reflected in the caption “Equity in net income (loss) of investee company” in the statements of operations. The Company’s carrying value in an equity method investee company is reflected in the caption “Investment in investee company’ in the Company’s balance sheets.

The Company reviews equity investments for impairment on an annual basis, or earlier if events or changes in circumstances indicate that the carrying amounts might not be recoverable.

The Company holds a minority investment in an entity, NewStem, which is accounted for pursuant to the equity method of accounting. Additionally, the Company is a 50% partner in NetCo (which is accounted for pursuant to the equity method of accounting). See Note 3.

Derivative Financial Instruments

The Company has in place a financial instrument, in the form of a note payable, with an identified embedded derivative in the form of a guarantee. The identified embedded derivative has been bifurcated and accounted for separately. Such derivative financial instruments are measured at fair value at each financial statement reporting date. If the fair value of a financial liability (the derivative) exceeds the proceeds received for the issuance of a hybrid instrument in an arms length transaction with no rights or privileges that require separate accounting recognition as an asset identified, then the embedded derivative is recorded at fair value with the excess of fair value over proceeds recognized as a loss in earnings. During the three months ended March 31, 2024, the Company recognized a gain on derivative financial instruments of $25,000. Proceeds from the note payable are shown as cash from financing instruments and the gain on derivative instrument is included as an adjustment to reconcile loss to net cash used in operating activities in the statements of cash flows for the three months ended March 31, 2024.

Basic and Diluted Net Loss Per Share

Basic net loss per share is computed by dividing the net 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. The dilutive effects of stock options and warrants are excluded from the computation of diluted net income (loss) per share if the effect of doing so would be antidilutive.

The following data represents the amounts used in computing earnings per share and the effect on loss and the weighted average number of shares of dilutive potential common stock (unaudited):

	2023			2022			2023			2022
	Three Months Ended March 31,
	Nine Months Ended September 30,						Three Months Ended September 30,
	2024			2023
	2023			2022			2023			2022
Net loss attributable to common shareholders	$	(303,280	)	$	(268,821	)
Net loss attributable to common shareholders	$	(4,240,045	)	$	(682,071	)	$	(1,096,465	)	$	(295,272	)
Weighted average shares outstanding:
Weighted average shares outstanding:
-Basic		46,881,475			46,881,475
-Basic		46,881,475			46,881,475			46,881,475			46,881,475
Add: Warrants		-			-
Add: Warrants		-			-			-			-
Add: Stock options		-			-
Add: Stock options		-			-			-			-
-Diluted		46,881,475			46,881,475
-Diluted		46,881,475			46,881,475			46,881,475			46,881,475
Basic and diluted net loss per share	$	(0.01	)	$	(0.01	)
Basic and diluted net loss per share	$	(0.09	)	$	(0.01	)	$	(0.02	)	$	(0.01	)

~~Warrants~~Options and ~~stock~~warrants ~~options~~ excluded from the ~~above~~computation ~~calculations~~of ~~due~~earnings toper ~~anti-dilutive impact are as follows~~share:

SCHEDULE OF WARRANTS AND STOCK OPTIONS

	2023		2022		2023		2022
	2024		2023
	Nine Months Ended September 30,				Three Months Ended March 31,
	Three Months Ended March 31,
	2023		2022		2023		2022
	2024		2023
Warrants		3,000,000		3,000,000		~~3,000,000~~		~~3,000,000~~
Stock options		5,760,000		5,~~400~~760,000		~~5,760,000~~		~~5,400,000~~
Anti-dilutive securities		5,760,000		5,760,000

NOTE 3—EQUITY METHOD INVESTMENTS

Investment in NewStem

In 2018, the Company entered into a Share Purchase Agreement with NewStem and other related parties to provide aggregate funding of up to $4,000,000 to NewStem. This funding was to be provided through the sale of up to 50,000 common shares of NewStem to the Company representing 33% of New Stem’s outstanding shares. In 2018, the Company purchased 25,000 shares of NewStem for $2,000,000 acquiring an ownership interest of 20%. The Company made additional investments in 2019 and 2020 purchasing 12,500 shares each year for a $1,000,000 investment each year. NewStem sold and issued shares to third party investors in 2021, 2022 and ~~2022~~2023 resulting in the Company recognizing a gain on dilution of equity method investment. These transactions resulted in the Company having an ownership interest of 30.5851% as of ~~September 30~~March 31, ~~2023~~ 2024 and December 31, ~~2022~~2023.

The Company accounts for its investment in NewStem under the equity method. AtAs ~~September~~of 30March 31, ~~2023~~2024 and December 31, ~~2022~~2023, the carrying value of the investment in NewStem exceeded its portion of the underlying net assets of NewStem by approximately $1,~~800~~655,000 and $1,~~900~~800,000, respectively. The excess relates to identified intangible assets including license agreements, specialized work force (goodwill) and two separate projects of in process research and development (“IPR&D”) related to stem cell-based diagnostics and therapeutics for cancer chemotherapies.

~~NewStem~~The isCompany inassesses ~~the development stage and has incurred losses since~~ its ~~inception~~investment and has yet to generate revenues sufficient to support operations. NewStem will need to obtain additional funds to continue its operations. NewStem management’s plans with regard to these matters include continued development, marketing, and licensing of its products, as well as seeking additional financing arrangements. Although NewStem’s management continues to pursue these plans, there is no assurance that the NewStem will be successful in ~~obtaining sufficient cash from sales of products or financing on terms acceptable to~~ NewStem’s management. NewStem obtained additional funding of approximately $1,450,000 in 2022 through the sale of shares of ordinary stock. The current state of war in Israel has caused further difficulties in NewStem management’s efforts to seek additional financing arrangements. On October 23, 2023, the board of directors of NewStem resolved to implement a plan of dismissal of all employees effective December 31, 2023 and is in negotiations with the Company for aimpairment ~~plan~~on ~~whereby~~an ~~NewStem~~annual ~~research~~basis ~~will continue and NewStem assets will be purchased~~ or ~~merged~~more ~~into~~frequently ~~the~~if ~~Company.~~indicators ~~The effect~~ of ~~this~~impairment ~~transaction to the Company’s financial reporting is continuing to be reviewed by Company management as negotiations continue~~exist.

During the three months ended March 31, 2024, the Company recorded a reimbursement due to NewStem of approximately $36,000 (included in accounts payable in the accompanying balance sheet) for audit related costs. During the three months ended March 31, 2023, the Company reimbursed NewStem for audit related costs of approximately $37,000.

As disclosed in Note 8, the Company is in negotiations to acquire the remainder of NewStem in exchange for shares of Company stock. In anticipation of this transaction, the Company advanced $250,000 to NewStem in December 2023 and an additional $250,000 in March 2024. The related note agreement bears no interest and is payable on December 30, 2024. The agreement provides for discharge of the note upon the closing of the anticipated acquisition transaction. This note receivable has been presented as a noncurrent asset along with the investment in NewStem in the accompanying balance sheets. The second advance on the note was not received and recorded by NewStem until April 2024 and therefore is not reflected in the schedule of financial position of NewStem presented below.

NewStem is in the development stage and has incurred losses since its inception and has generated only minimal revenues under a licensing agreement. NewStem will need to obtain additional funds to continue its operations. NewStem management’s plans with regard to these matters include continued development, marketing and licensing of its products, as well as seeking additional financing arrangements. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient cash from sales, licensing or financing on terms acceptable to the Company. NewStem obtained additional funding of approximately $1,450,000 in April 2022 through the sale of shares of ordinary stock. NewStem’s management has adopted a cost reduction plan in order to adjust future operation expenses to its cash balance. In October 2023, the NewStem board of directors unanimously resolved to dismiss most employees which occurred in December 2023.

The aforementioned events indicate significant difficulties to continue as a concern. Additionally, Israel declared a state of war in October 2023 which resulted in a decrease in Israel’s economic and business activity. The security situation in Israel led to a disruption in the chain of supply and production, a decrease in the volume of national transportation, and a shortage in manpower as well as a decrease in the value of financial assets. As a result of the movement and work restrictions, NewStem began operating on a limited scale. Additionally, the situation has brought further difficulties in management’s efforts to seek additional financing.

The following table represents the Company’s investment in NewStem:

SCHEDULE OF INVESTMENTS

	Nine Months Ended September 30, 2023			Year Ended December 31, 2022
	2024			2023
		(Unaudited)
	Three Months Ended March 31, 2024			Year Ended December 31, 2023
Investment in NewStem, beginning	$	2,090,286		$	2,435,155
	(Unaudited)
Allocation of net loss from NewStem, Ltd.		(256,890	)		(732,393	)
Investment in NewStem, beginning	$	1,784,234		$	2,090,286
Gain on dilution of equity method investment		-			387,524
Allocation of net loss from NewStem, Ltd.		(51,859	)		(342,191	)
Investment in NewStem, ending	$	1,833,396		$	2,090,286
Gain on dilution of equity method investment		-			36,139
Distribution from NetCo
Investment in NewStem, ending	$	1,732,375		$	1,784,234

The results of operations of the Company’s investment in NewStem is summarized below (unaudited):

	2023			2022			2023			2022
	2024			2023
	Nine Months Ended September 30,						Three Months Ended September 30,
	Three Months Ended March 31,
	2023			2022			2023			2022
	2024			2023
Condensed income statement information:
Net revenues	$	~~95,000~~-		$	-95,000		$	-		$	-
Gross margin	$	~~84,000~~-		$	-84,000		$	-		$	-
Net loss	$	(~~840~~170,000	)	$	(1342,~~935,~~000	)	$	~~(235,000~~	)	$	~~(276,000~~	)
Company’s allocation of net loss from NewStem, Ltd.	$	(~~256~~51,~~890~~859	)	$	(~~606~~104,~~736~~591	)	$	~~(71,868~~	)	$	~~(85,532~~	)

The financial position of the Company’s investment in NewStem is summarized below:

	2023		2022
	2024		2023
	As of
	September 30,		December 31,
	March 31,		December 31,
	2023		2022
	2024		2023
	(Unaudited)
Condensed balance sheet information:
Current assets	$	~~247~~246,000	$	~~911~~353,000
Non-current assets	$	116,000	$	239,000
Current liabilities	$	5486,000	$	97284,000
Non-current liabilities	$	~~122~~250,000	$	~~121,000~~-

Investment in NetCo

NovelStem owns a 50% interest in NetCo, a joint venture that owns the Net Force publishing franchise. The Company accounts for its investment in NetCo under the equity method and recognizes nominal royalties and administrative fees from this arrangement. The Company assesses its investment in NetCo for impairment on an annual basis or more frequently if indicators of impairment exist.

The following table represents the Company’s investment in NetCo:

SCHEDULE OF INVESTMENTS

	Nine Months Ended September 30, 2023			Year Ended December 31, 2022
	Three Months Ended March 31, 2024			Year Ended December 31, 2023
		(Unaudited)
Investment in NetCo, beginning	$	~~137~~133,~~011~~709		$	137,011
Allocation of net income from NetCo		5,362			12,591
Allocation of net income (loss) from NetCo		(1,351	)		3,573
Distribution from NetCo		~~(6,875~~-	)		(126,~~591~~875	)
Investment in NetCo, ending	$	~~135~~132,~~498~~358		$	~~137~~133,~~011~~709

The results of operations of the Company’s investment in NetCo is summarized below (unaudited):

	2023			2022		2023		2022
	2024			2023
	Nine Months Ended September 30,					Three Months Ended September 30,
	Three Months Ended March 31,
	2023			2022		2023		2022
	2024			2023
Condensed income statement information:
Net sales	$	~~25,328~~373		$	-15,750	$	-	$	-
Gross margin	$	~~19,924~~373		$	-15,750	$	-	$	-
Net income	$	10(2,~~724~~702	)	$	-15,750	$	-	$	-
Net income (loss)	$	10,724		$	-	$	-	$	-
Company’s allocation of net income from NetCo	$	(1,351	)	$	7,875
Company’s allocation of net income from NetCo	$	5,362		$	-	$	-	$	-

The financial position of the Company’s investment in NetCo is summarized below:

	September 30,		December 31,
	2024		2023
	As of
	September 30,		December 31,
	March 31,		December 31,
	2023		2022
	2024		2023
	(Unaudited)
Condensed balance sheet information:
Current assets	$	82,~~322~~042	$	131,~~475~~820
Non-current assets	$	272,799	$	272,799
Current liabilities	$	43,~~250~~249	$	~~12,252~~325
Non-current liabilities	$	-	$	-

NOTE 4—NOTES PAYABLE

~~Notes~~In December 2023, the Company entered into two short term notes payable with unrelated parties, Hewlett Fund and AIGH Investment Partners, LLC. The notes are ~~summarized~~for as$125,000 ~~follows:~~each, for a total of $250,000 in borrowings utilized for the funding of NewStem. The notes bear interest at 12% per annum and mature December 21, 2024, at which time all principal and accrued interest are due and payable. The note agreements include a provision whereby, in the event of a capital raise transaction by the Company, the note holders would be entitled to participate in the transaction in an amount equal to 133% of the amounts owed on the note agreements at the closing of the transaction. Interest expense related to these notes was $7,479 for the three months ended March 31, 2024.

~~SCHEDULE~~Long-term OFnotes ~~NOTES~~payable ~~PAYABLE~~are summarized as follows:

	As of
	September 30,			December 31,
	2023			2022
	(Unaudited)
Notes payable related parties:
Notes payable director and Executive Chairman	$	400,000		$	280,000
Accrued interest added to note balance		33,506			8,450
Total notes payable director and Executive Chairman		433,506			288,450
Note payable shareholder, principal amount		150,000			-
Less unamortized discount		(119,589	)		-
Total note payable shareholder		30,411			-
Note payable, litigation funding agreement:
Note payable Omni Bridgeway (Fund 4) Invt. 3 L.P.		2,799,196			-
Total notes payable		3,263,113			288,450
Less current portion		(1,833,104	)		-
Long-term notes payable	$	1,430,009		$	288,450

SCHEDULE OF LONG TERM NOTES PAYABLE

	As of
	March 31,			December 31,
	2024			2023
	(Unaudited)
Notes payable related parties:
Notes payable director and Executive Chairman	$	650,000		$	400,000
Accrued interest added to note balance		54,314			43,588
Total notes payable director and Executive Chairman		704,314			443,588
Note payable shareholder, principal amount		300,000			275,000
Less unamortized discount		(193,787	)		(213,185	)
Total note payable shareholder		106,213			61,815
Note payable, litigation funding agreement:
Note payable Omni Bridgeway (Fund 4) Invt. 3 L.P.		2,819,196			2,819,196
Accrued interest added to agreement balance		31,720			-
Total note payable, litigation funding agreement		2,850,916			2,819,196
Total notes payable		3,661,443			3,324,599
Less current portion		(2,850,916	)		-
Long-term notes payable	$	810,527		$	3,324,599

~~Notes~~In ~~Payable~~May ~~Related~~2022, ~~Parties~~the Company entered into note agreements with two individuals who are related parties to borrow up to $600,000 for working capital needs. The agreements were amended in March 2024 to increase the total borrowing to $650,000 and extend the maturity date. The agreements provide for interest at a rate of 8% per annum through November 11, 2022, at which time the interest rate increased to 10% per annum for subsequent advances. The agreements mature September 1, 2025. The Company received advances of $650,000 and $400,000, respectively, pursuant to these agreements through March 31, 2024 and December 31, 2023.

On ~~April~~May 125, ~~2021~~2023, the Company entered into a ~~promissory~~long term note ~~(the~~payable ~~“Note”)~~ with a ~~related~~shareholder ~~party~~for ~~(individual)~~$300,000 ~~for~~in financing to be funded $~~100~~150,000. ~~The~~at ~~Note~~inception ~~accrued~~and $150,000 in October 2023. This note bears interest at 8%zero ~~per~~percent ~~annum~~(0%) and ~~matured~~matures on ~~April~~May 125, ~~2022~~2025. The ~~proceeds~~note ofincludes ~~this~~a guarantee ~~Note~~which ~~were~~has ~~used~~been toidentified ~~pay~~as ~~operating~~an ~~expenses~~embedded derivative with a fair value of a liability of $535,000 at March 31, 2024 and December 31, 2023 which is reported separately on the ~~Company~~balance sheet. ~~Interest~~The ~~expense~~fair ~~related~~value toof ~~this~~the ~~Note~~note ~~was~~exceeds $1the proceeds,~~198~~ ~~for~~and the ~~nine~~note ~~months~~has ~~ended~~been ~~September~~discounted at ~~30,~~inception ~~2022~~so that the net liability is the fair value of the derivative. ~~The~~Accretion ~~Note~~of ~~and~~the ~~accrued~~note ~~interest~~ discount of $644,~~752~~398 ~~were~~has ~~paid~~been reflected as part of interest expense in ~~full~~the onstatement ~~February~~of 16operations for three months ended March 31, ~~2022~~2024.

In May 2022, the Company entered into long-term notes payable in the form of finance agreements (the “Agreements”) with two individuals who are related parties, which were amended in July 2022, to borrow up to $600,000 for working capital needs. One of the individuals is a director and shareholder, the other is our Executive Chairman who is also a shareholder. These agreements provide for funding through January 31, 2024, provide for interest at a rate of 8% per annum through November 11, 2022, at which time the interest rate increased to 10% per annum for subsequent advances. The Agreements mature the earlier of January 31, 2024 or twenty months from the date of the first funded amount (May 2022) unless the shareholders agree to extend the due date at that time. The Company received advances of $120,000 and $280,000, respectively, pursuant to this agreement during the nine months ended September 30, 2023 and the year ended December 31, 2022. Interest expense related to the agreements was $25,056 and $9,208, respectively, for the nine and three months ended September 30, 2023. Pursuant to the Agreements, accrued interest is added to the note balances.

On May 5, 2023, the Company entered into a long term note payable with a shareholder for $300,000 in financing to be funded $150,000 at inception and $150,000 in October 2023. This note bears interest at zero percent (0%) and matures on May 5, 2025. The note includes a guarantee which has been identified as an embedded derivative with a fair value of a liability of $650,000 at September 30, 2023 which is reported separately on the condensed balance sheet. The fair value of the note exceeds the proceeds, and the note has been discounted at inception so that the net liability is the fair value of the derivative. Accretion of the note discount of $30,411 and $18,904, respectively, has been reflected as part of interest expense in the condensed statements of operations for the nine and three months ended September 30, 2023.

Note Payable, Litigation Funding Agreement

On February 11, 2022, the Company entered into a nonrecourse litigation funding agreement (the “Agreement”) with Omni Bridgeway (Fund 4) Invt. 3 L.P. (“Omni”) related to an arbitration proceeding disclosed in Note 7. The Agreement provides for Omni to fund all costs related to the arbitration up to $1,000,000 in exchange for an assignment of a certain portion of rights to and interest in claims related to this arbitration. The agreement provides for specific calculations of the portion of any claims collected to be received by Omni with the remainder collectible by the Company. Additionally, the agreement provides for repayment of funded costs pursuant to the same multiple calculations in the event of a favorable outcome that does not include the collection of claims. During the nine months ended September 30, 2022, the Company received $310,000 pursuant to this agreement for the reimbursement of legal costs and working capital expenditures, including previously incurred general and administrative costs.

During July 2023, the arbitration was settled with a favorable outcome for the Company. As a result of the favorable ruling disclosed in Note 7, the liability became probable and reasonably estimable, and the Company has recorded the full liability due to Omni as of September 30, 2023. This liability consists of expenses funded by Omni of $933,065, including $310,000 advanced for working capital, and related fees or investment return to Omni calculated as contractual multiples of funding totaling $1,866,131 as of September 30, 2023 for a total liability of $2,799,196. This agreement bears interest at 5% per annum beginning January 2024 and is payable in four quarterly installments beginning April 4, 2024.11

12During July 2023, the arbitration was settled with a partially favorable outcome for the Company. As a result of the ruling disclosed in Note 7, the liability became probable and reasonably estimable, and the Company has recorded the full liability due to Omni as of December 31, 2023. This liability consists of expenses funded by Omni of $933,065, including $310,000 advanced for working capital, and related fees or investment return to Omni calculated as contractual multiples of funding totaling $1,886,131 as of December 31, 2023 for a total liability of $2,819,196. This agreement bears interest at 5% per annum beginning January 2024 and is payable on January 10, 2025.

NOTE 5—EQUITY ~~(DEFICIT)~~

(a) General

At ~~September~~March 3031, ~~2023~~2024 and December 31, ~~2022~~2023, the Company had issued and outstanding 46,881,475 shares of its common stock, par value $0.01 ~~per~~ per share. Holders of outstanding common stock are entitled to receive dividends when, as and if declared by the Board and to share ratably in the assets of the Company legally available for distribution in the event of a liquidation, dissolution or winding up of the Company.

(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~~ 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 ~~nine~~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 ~~which~~ the Company’s board of directors approved on November 12, 2018, an aggregate of 5,760,000 options have been issued to directors and investor relations professionals as of March 31, 2024. An additional 600,000 options were issued to directors on April 1, 2024.

The Company utilized the Black-Scholes option-pricing model to estimate fair value, utilizing the following assumptions for the ~~respective periods~~options issued during the three months ended March 31, 2023 (all in weighted averages):

	Nine Months Ended September 30,
Risk-free interest rate		3.5	%
	2023			2022
Expected term of options, in years		4.00
Risk-free interest rate		3.5	%		1.5	%
Expected annual volatility		191.1	%
Expected term of options, in years		4.0			3.9
Expected dividend yield		0	%
Expected annual volatility		191.1	%		185.8	%
Determined weighted average grant date fair value per option	$	0.19
Expected dividend yield		0	%		0	%
Determined weighted average grant date fair value per option	$	0.19		$	0.27

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 7 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 0% 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.

1312

A summary of the Company’s option plans for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024, is presented below (unaudited):

SCHEDULE OF STOCK OPTION ACTIVITIES

	Number	~~Number~~		Weighted	~~Weighted~~
	of	of		Average	~~Average~~
	Options	~~Options~~		Exercise	~~Exercise~~
	(in shares)	~~(in shares)~~		Price	~~Price~~
Outstanding, December 31, 2022			5,400,000		$	0.14
Outstanding, December 31, 2023		5,760,000		$	0.14
Granted		-	~~360,000~~		-	~~0.20~~
Outstanding, September 30, 2023			5,760,000		$	0.14
Outstanding, March 31, 2024		5,760,000		$	0.14
Exercisable, September 30, 2023			5,400,000		$	0.14
Exercisable, March 31, 2024		5,760,000		$	0.14

Stock-based compensation expense ~~related to stock options~~ was approximately $5013,000 and $1715,000 in the ~~nine months and~~ three months ended ~~September 30,~~March ~~2023~~31, ~~respectively.~~2024 ~~Stock-based compensation expense related to stock options was approximately $198,000~~ and ~~$75~~2023,~~000~~ ~~for the nine months and three months ended September 30, 2022,~~ respectively.

The total compensation cost related to non-vested awards not yet recognized was approximately $3367,000 as of ~~September~~March 3031, 2023. As of ~~September 30,~~March 31, 2023, 360,000 options were unvested. These options ~~vest~~vested ~~one~~during ~~year from their grant date which is~~ March 2024.

(d) Warrants

The Company has issued warrants at exercise prices equal to or greater than the market value of the Company’s common stock at the date of issuance. A summary of warrant activity follows (unaudited):

SUMMARY OF WARRANTS ACTIVITY

	Number of		Weighted
	shares		Average
	underlying		Exercise
	warrants		Price
Outstanding, December 31, 2022		3,000,000	$	0.12
Outstanding, December 31, 2023		3,000,000	$	0.12
Granted		-		-
Exercised		-		-
Forfeited or expired		-		-
Outstanding, September 30, 2023		3,000,000	$	0.12
Outstanding, March 31, 2024		3,000,000	$	0.12

The warrant agreements were amended on May 12, 2023 to extend the expiration date to June 28, 2025. The warrants outstanding at ~~September 30~~March 31, 2024 ~~2023~~ have a weighted average remaining contractual life of approximately ~~two~~one ~~years.~~year ~~The~~and Company recognized $243,000 in stock-based compensation expense related to the increase in fair value of warrants pursuant to the modification of the warrant term during the nine months ended September 30, 2023. No such expense was recognized related to the warrants during the three months ~~ended September 30, 2023~~.

1413

NOTE 6—INCOME TAXES

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):

SCHEDULE OF INCOME BEFORE INCOME TAX

	2023			2022
	2024			2023
	Nine Months Ended September 30,
	Three Months Ended March 31,
	2023			2022
	2024			2023
Computed tax at the federal statutory rate of 21%	$	(~~812~~63,~~931~~689	)	$	(~~184~~56,~~174~~452	)
State income taxes, net of federal income tax benefit		(~~168~~13,~~199~~178	)		(3811,~~106~~680	)
Change in federal valuation allowance		185,~~022,232~~164			~~231~~87,~~592~~972
Foreign rate differential		(418,~~102~~297	)		(919,~~312~~840	)
Total provision for income tax	$	-		$	-

	2023			2022
	Three Months Ended September 30,
	2023			2022
Computed tax at the federal statutory rate of 21%	$	(203,809	)	$	(62,007	)
State income taxes, net of federal income tax benefit		(42,169	)		(12,829	)
Change in federal valuation allowance		257,476			77,971
Foreign rate differential		(11,499	)		(3,135	)
Total provision for income tax	$	-		$	-

NOTE 7—COMMITMENTS AND CONTINGENCIES

The Company was the claimant in an arbitration proceeding against their 50% partner in NetCo. The Company initiated the arbitration proceeding in an effort to maximize the total potential value to be derived from fully utilizing the NetCo intellectual property across publishing, entertainment, digital media, merchandising and other ancillary markets. Arbitration hearings were held at the end of July 2022. Arbitration proceedings for the joint owners of NetCo concluded during 2022 and the arbitrator rendered a decision in July 2023. The ~~Arbitrator~~arbitrator ruled against the Company on certain key issues of the arbitration and in the Company’s favor on two key issues of the arbitration.

As a result of this ruling, the costs related to the litigation funding agreement disclosed in Note 4 were recognized. ~~Total costs related to the litigation~~ and ~~the~~a ~~related~~total ~~litigation funding agreement~~ liability of $2,~~805~~819,~~884,~~196 ~~including~~was ~~a reversal of the prior period contra expenses, were~~ recorded ~~during the nine months ended September 2023 and were separately stated in the condensed statement of operations (unaudited)~~.

NOTE 8—SUBSEQUENT EVENTS

The Company ~~has~~evaluated ~~reviewed~~ subsequent events through ~~November~~the ~~17,~~date ~~2023,~~these ~~the~~financial ~~date~~statements ofwere ~~this~~available ~~filing~~to be issued and filed with the SEC.

AsDuring the ~~disclosed~~fourth inquarter ~~Note~~of 32023, ~~during~~the ~~October~~Company ~~2023,~~entered into negotiations with NewStem stockholders for the acquisition of the shares not held by the Company. ~~began~~The negotiations ~~with~~are ongoing for the ~~NewStem~~transaction ~~board~~in ofwhich ~~directors~~the Company would acquire all outstanding shares in exchange for ashares ~~plan~~of ~~whereby~~NovelStem ~~NewStem~~stock. ~~research~~Company ~~activities~~management ~~will~~anticipates ~~continue~~the ~~and~~transaction ~~NewStem~~to ~~assets~~conclude ~~will~~in bethe ~~purchased~~second orquarter ~~merged~~of ~~into~~2024. In anticipation of the Company acquiring the remaining ownership of NewStem, the Company has loaned $500,000 to NewStem to ensure continuing operations. See Note 3.

15An additional 600,000 options were issued to directors on April 1, 2024 pursuant to the Company’s Equity Incentive Plan.

In April 2024, the Company borrowed $100,000 from unrelated parties pursuant to convertible debt agreements. These agreements bear interest at 10% per annum and mature December 30, 2025. 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 $0.13 per share.

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 development stage company and reported net losses of approximately $4303,~~240,~~000 and $~~682~~269,000 for the ~~nine months ended September 30, 2023 and 2022 and approximately $1,096,000 and $295,000 for the~~ three months ended ~~September~~March 3031, ~~2023~~ 2024 and ~~2022~~2023, respectively. We had current assets of approximately $5036,000 and current liabilities of $13,~~954~~297,000 as of ~~September~~March 3031, ~~2023~~2024. As of December 31, ~~2022~~2023, our current assets and current liabilities were approximately $5987,000 and $65346,000, respectively. The significant increase in current liabilities is primarily due to the litigation funding agreement liability classification changing from noncurrent to current in January 2024.

We have prepared our financial statements for the ~~nine and~~ three months ended ~~September~~March 3031, ~~2023~~2024 assuming that we will continue as a going concern. Our continuation as a going concern is dependent upon ~~the~~NewStem’s ability to successfully develop and commercialize ~~NewStem’s~~ its products, improving our profitability and the continuing financial support from our shareholders as well as ~~our~~obtaining ~~ability~~additional tooutside ~~utilize the NetCo intellectual property~~funding. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions, large alternative minimum tax refunds, ~~litigation funding~~ and related party debt. Weas ~~believe~~well ~~that~~as ~~our~~debt ~~current~~from ~~financing~~unrelated ~~resources are sufficient for the operations of the Company until April 2024~~parties.

NewStem is a development stage Israeli biotech limited liability company focused on pioneering intellectual property related to haploid human embryonic stem cells for the development of personalized diagnostics and therapeutics for genetic and epigenetic diseases. NewStem has incurred losses related to in process research and development since inception and the Company records our percentage allocation of these net losses as incurred. We have included the condensed financial statements of NewStem as an exhibit to this Form 10-Q.

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”.

	Nine Months Ended September 30,									Three Months Ended September 30,
	Three Months Ended March 31,
	2023			2022			Change			2023			2022			Change
	2024			2023			Change
Administrative fee income	$	93,000		$	-		$	93,000		$	~~9,000~~		$	-		$	~~9,000~~
Operating expenses:
G&A expenses	$	~~635~~183,~~360~~306		$	~~574~~164,~~741~~792		$	60(18,~~619~~514	)	$	~~84,208~~		$	~~206,210~~		$	~~(122,002~~	)
Litigation expenses (contra expenses)		2,805,884			(310,000	)		3,115,884			473,221			-			473,221
Total operating expenses		183,306			164,792			(18,514	)
Total operating expenses		3,441,244			264,741			3,176,503			557,429			206,210			351,219
Loss from operations		(180,306	)		(164,792	)		(15,514	)
Loss from operations		(3,432,244	)		(264,741	)		(3,167,503	)		(548,429	)		(206,210	)		(342,219	)
Other expenses:
Other expenses:
Gain on derivative instrument		(25,000	)		-			(25,000	)
Loss on derivative instrument		500,000			-			500,000			445,205			-			445,205
Interest expense		94,764			7,313			87,451
Interest expense		56,274			5,542			50,732			28,450			3,530			24,920
Total other expenses		69,764			7,313			62,451
Total other expenses		556,274			5,542			550,732			473,655			3,530			470,125
Net loss before equity in net
Net loss before equity in net loss of equity method investees		(3,988,518	)		(270,283	)		(3,718,235	)		(1,022,084	)		(209,740	)		(812,344	)
loss of equity method investees		(250,070	)		(172,105	)		(77,965	)
Equity in net loss of equity method investees		(~~251~~53,~~527~~210	)		(~~411~~96,~~788~~716	)		~~160~~43,~~261~~506			~~(74,381~~	)		~~(85,532~~	)		~~11,151~~
Net loss	$	(4303,~~240,045~~280	)	$	(~~682~~268,~~071~~821	)	$	(334,~~557,974~~459	)	$	~~(1,096,465~~	)	$	~~(295,272~~	)	$	~~(801,193~~	)

We are a holding company whose primary assets are our ownership of equity interests in NewStem and NetCo. We conduct no other business and as a result, we have no revenue or cost of revenue. We do charge annual administrative fees to an affiliated entity.

The Company incurs G&A expenses primarily related to professional fees, insurance and ~~insurance~~stock based compensation. We incurred G&A expenses of approximately $~~635~~183,000 and $~~575~~165,000 for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024 and ~~2022~~2023, respectively. Specifically, ~~the~~professional ~~increase~~fees increased ofby approximately $6022,000 is ~~comprised~~in ~~primarily~~the ofthree amonths ~~reduction~~ended ofMarch ~~nonrecurring~~31, ~~professional~~2024 ~~fees~~as ~~related~~compared to the ~~filing~~three ofmonths ~~our~~ended ~~Form~~March 1031, in2023. ~~2022~~Primarily ofdue ~~approximately $26,000~~to ~~combined with~~ an increase in ~~stock~~audit ~~compensation~~fees ~~expense~~and ~~related~~general tocounsel alegal ~~modification~~fees. ofOther ~~our~~miscellaneous ~~outstanding~~G&A ~~warrants~~expenses asdecreased by ~~described~~approximately ~~below~~$2,000.

We incurred G&A expenses of approximately $84,000 and $206,000 for the three months ended September 30, 2023 and 2022, respectively. The decrease in G&A expenses relates primarily an decrease in stock compensation expense combined with a decrease in professional fees compared to those incurred in the previous period related to the filing of our Form 10 which are non-recurring. Specifically, professional fees decreased by approximately $60,000 in the three months ended September 30, 2023 as compared to the three months ended September 30, 2022. Stock compensation expense decreased as described below, which when combined with the decrease in professional fees, comprises our decrease in G&A expenses of approximately $122,000 for the three months ended September 30, 2023 compared to the three months ended September 30, 2022.15

~~Total~~Stock ~~stock~~ compensation expense, included in G&A expenses, ~~increased~~decreased by approximately $942,000 in the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~ 2024 as compared to the ~~nine~~three months ended ~~September~~March 3031, ~~2022~~2023 due to a smaller number of options awarded in the current period as compared to the prior period offset by the recognition of $243,000 in stock compensation expense related to the increased value of our outstanding warrants due to the amendment of the agreements to extend the due date by two years.

~~Total~~Interest ~~stock compensation~~ expense, ~~included~~increased ~~in G&A expenses, decreased~~ by approximately $5887,000 in the three months ended ~~September~~March 3031, ~~2023~~ 2024 as compared to the three months ended ~~September~~March 3031, ~~2022~~ 2023 due to ~~a smaller number of options awarded in~~ the ~~current~~increased ~~period~~debt asincurred ~~compared to~~through ~~the~~March ~~prior~~31, ~~period~~2024.

We incurred costs related to litigation and the litigation funding agreement involving our arbitration with our NetCo joint venture partner of approximately $2,806,000 for the nine months ended September 30, 2023. We recognized contra expenses of $310,000 during the nine months ended September 30, 2022 in relation to the same litigation and related litigation funding agreement. We incurred costs related to the litigation funding agreement of approximately $473,000 during the three months ended September 30, 2023. No related costs were incurred in the three months ended September 30, 2022. Specifically, the increase of approximately $3,116,000 for the nine months ended September 30, 2023 as compared to 2022 is comprised of legal fees related to our NetCo arbitration including litigation funding fees due to Omni pursuant to the litigation funding agreement combined with the reversal of the contra expenses recognized in the previous period. These expenses and contra expenses were funded by a litigation funding agreement. The increase of approximately $473,000 in the three months ended September 30, 2023 compared to 2022 is comprised of additional fees pursuant to the litigation funding agreement. This agreement was signed during the first quarter of 2022 with Omni Bridgeway to fund our arbitration against our 50% joint venture partner, C.P. Group. This is a nonrecourse agreement, and the Company had no obligation to repay any funds received under the agreement unless the NetCo arbitration resulted in a favorable outcome. These amounts are included in the note payable to Omni which was recorded in June 2023 as a result of the favorable arbitration ruling.

The Company has recorded a loss on derivative instrument of approximately $500,000 and $445,000, respectively, for the nine and three months ended September 30, 2023 related to a guarantee included in the note payable shareholder entered into in May 2023. No such instrument was in effect in the nine and three months ended September 30, 2022.

Interest expense increased by approximately $50,000 and $25,000, respectively, in the nine and three months ended September 30, 2023 as compared to the nine and three months ended September 30, 2022. The increases in interest expense are related to 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 losses from equity method investees in all periods presented. The net losses reported for the ~~nine~~three months ended ~~September 30~~March 31, 2024 ~~2023~~ included ~~income~~a ofloss ~~$5,362~~ from NetCo ~~which~~of ~~was~~$1,351 ~~offset~~and bya ~~net~~ loss from NewStem of $~~256~~51,~~889 from NewStem~~859. The net losses reported for the ~~nine~~ three months ended ~~September 30~~March 31, ~~2022~~2023 ~~were~~included ~~fully~~net ~~comprised~~income of $7,875 from NetCo which was offset by net ~~losses~~loss of $104,591 from NewStem.

The net loss from equity method investees reported for the three months ended September 30, 2023 was comprised of net loss of $2,513 from NetCo and net loss of $71,868 from NewStem. The net loss reported for the three months ended September 30, 2022 was fully comprised of net losses from NewStem.

Liquidity and Capital Resources

We have not paid dividends on our common stock since our name change and ~~shift in~~ business tofocus ~~biotech~~shift in ~~September~~ 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.

We expect to continue to incur greater expenses in the near future as we expand our business, including funding NewStem, or enter into strategic partnerships. We also expect our G&A expenses to ~~remain~~increase ~~consistent in the near term~~ as we ~~have~~expand ~~expanded~~ our ~~finance and~~ administrative staff and ~~incurred~~add additional costs related to being a reporting act company, including directors’ and officers’ insurance and increased professional fees, which should all now be normalized for our current operationsinfrastructure.

18The Company will need to obtain additional funds to continue its operations. Management’s plans with regard to these matters include additional financing and fundraising until our equity investment in NewStem 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 will become profitable.

~~The~~In May 2022, the Company ~~will~~entered ~~need~~into tonote ~~obtain~~agreements ~~additional~~with ~~funds~~Jan toLoeb, ~~continue~~our ~~its~~Executive ~~operations.~~Chairman ~~Management’s~~and ~~plans~~Jerry ~~with~~Wolasky, ~~regard~~a tomember ~~these~~of ~~matters~~the ~~include~~Board, ~~additional~~to ~~financing~~borrow ~~and~~up ~~fundraising~~to ~~until~~an ~~its~~aggregate ~~equity~~of ~~investment~~$600,000 infor ~~NewStem~~working iscapital ~~profitable~~needs. ~~Although~~The ~~management~~note ~~continues~~agreements were amended in March 2024 to ~~pursue~~increase ~~these~~the ~~plans,~~total ~~there~~borrowing isto no$650,000 ~~assurance~~and ~~that~~extend the ~~Company~~maturity ~~will~~date. beThe ~~successful~~agreements inprovide ~~obtaining~~for ~~sufficient~~interest ~~cash~~at ~~from~~a ~~financing~~rate onof ~~terms~~8% ~~acceptable~~per annum, increased to 10% per annum for advances subsequent to November 11, 2022, and mature September 1, 2025. As of the date of this Quarterly ~~Company~~Report, orthe ~~that~~full ~~NewStem~~amount ~~will~~of ~~become~~$650,000 ~~profitable~~has been funded pursuant to these agreements.

InDuring ~~May~~the ~~2022~~year ended December 31, 2023, the Company entered into ana note agreement with ~~Jan Loeb, our Executive Chairman and Jerry Wolasky,~~ a ~~member~~shareholder ~~of the Board, which was amended in July 2022,~~ to borrow ~~up to an aggregate of~~ $~~600~~300,000 for ~~working~~continued working capital ~~needs~~. This ~~agreement~~note ~~provides~~bears ~~for funding through January 31, 2024, provides for~~ interest at azero ~~rate~~percent ~~of 8~~(0%) ~~per annum, increased to 10% per annum for advances subsequent to November 11, 2022,~~ and matures ~~the~~on ~~earlier~~May ~~of January 31~~5, ~~2024~~2025. orThe ~~twenty~~note ~~months~~includes ~~from~~a ~~the~~guarantee ~~date~~which ofhas ~~the~~been ~~first funded amount unless the lenders agree~~identified toas ~~extend~~an ~~the~~embedded ~~due~~derivative ~~date~~with ata ~~that~~fair ~~time.~~value As of ~~the~~a ~~date~~liability of ~~this Form 10-Q~~$535,000 ~~the~~at ~~Company~~March ~~has drawn $400~~31,~~000~~ ~~pursuant~~2024 toand ~~the~~December ~~aforementioned agreement~~31, 2023.

On May 5, 2023 the Company entered into a financing agreement with a shareholder to borrow $300,000 consisting of advances of $150,000 in May 2023 and $150,000 in October 2023. This agreement bears no interest and matures May 5, 2025. The agreement includes a guarantee which has been identified as an embedded derivative with a fair value of a liability of $281,057 at September 30, 2023.16

In ~~July~~December 2023, the Company ~~received~~entered ainto ~~favorable~~two ~~ruling~~short onterm ~~our~~notes ~~arbitration~~payable ~~related~~with tounrelated ~~NetCo,~~parties asfor ~~such,~~a ~~the~~total ~~contingent~~of ~~litigation~~$250,000 ~~funding~~in ~~note~~borrowings utilized ~~payable~~for ~~became~~the ~~probable~~funding ~~and~~of ~~reasonably estimable~~NewStem. AThe ~~liability~~notes ofbear ~~approximately~~interest ~~$2,800,000~~at ~~has~~12% ~~been~~per ~~recorded~~annum ~~for~~and ~~litigation~~mature ~~costs~~December ~~funded by~~21, ~~the~~2024, ~~agreement~~at ~~along~~which ~~with~~time ~~fees~~all principal and ~~investment~~accrued interest ~~return~~are todue ~~Omni~~and ~~related~~payable. toThe ~~the~~note ~~litigation~~agreements ~~funding~~include ~~agreement~~a ~~(note~~provision ~~payable).~~whereby, ~~The~~in ~~ruling did~~the ~~not~~event ~~provide~~of ~~any~~a ~~claim~~capital ~~recovery~~raise totransaction by the Company., the ~~This~~ note isholders ~~payable~~would inbe ~~four~~entitled ~~quarterly~~to ~~installments~~participate ~~beginning~~in ~~April~~the ~~2024.~~transaction ~~Management plans~~in toan ~~work~~amount equal to ~~maximize~~133% ~~the potential~~ of the ~~NetCo~~amounts ~~assets~~owed ~~based~~ on the ~~favorable~~note ~~arbitration~~agreements at ~~ruling~~the inclosing ~~order~~of tothe ~~service this debt and future operations~~transaction.

In April 2024, the Company borrowed $100,000 from unrelated parties pursuant to convertible debt agreements. These agreements bear interest at $10% per annum and mature December 30, 2025. 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 $0.13 per share.

Net Cash Used In Operating Activities.

For the three months ended March 31, 2024, net cash used in operating activities was approximately $73,000, which consisted primarily of a net loss of approximately $303,000, offset by noncash equity in loss of equity method investees of approximately $53,000, accretion of discount on notes payable of approximately $44,000, stock based compensation of approximately $14,000 and interest added to notes payable of approximately $42,000 and reduced by gain on derivative instrument of $25,000. Additionally, cash was used in operations related to an increase in current assets of approximately $3,000 and an increase in accrued liabilities and other payables of approximately $95,000.

For the three months ended March 31, 2023, net cash used in operating activities was approximately $28,000, which consisted primarily of a net loss of approximately $269,000, offset by noncash equity in loss of equity method investees of approximately $97,000 and distributions from equity method investees of approximately $8,000, stock based compensation of approximately $15,000 and interest added to notes payable of approximately $7,000. Additionally, cash was used in operations related to an increase in current assets of approximately $13,000 and an increase in accrued liabilities and other payables of approximately $101,000.

Net Cash Used In Investing Activities.

During the three months ended March 31, 2024, $250,000 was loaned to NewStem in an investing activity. For the three months ended March 31, 2023, no net cash was used in investing activities.

Net Cash Provided By Financing Activities.

For the three months ended March 31, 2024, net cash provided by financing activities was $275,000, consisting of long-term borrowings from two directors and a significant stockholder totaling $275,000.

For the three months ended March 31, 2023, net cash provided by financing activities was $62,000, consisting of long-term borrowings from two directors.

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 ~~September~~March 3031, ~~2023~~2024 and we concluded there was a material weakness in the design of our ~~internal~~ 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.

The material weaknesses identified included insufficient resources to employ proper segregation of duties over the processing of transactions and financial reporting.

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.

PART II

ITEM 1.

LEGAL PROCEEDINGS

~~NetCo~~As ~~owns~~noted ~~all~~above, ~~rights~~NetCo inowns all ~~media~~rights to the ~~NetForce~~“Tom ~~intellectual~~Clancy’s ~~property including film, television, and video games. Consistent with our contractual and statutory rights, NovelStem is intent on commercially exploiting the full array of media rights relating to~~ Net Force.” ~~We initiated an arbitration proceeding against our 50% partner in Netco, C.P. Group, in an effort to maximize the total potential value to be derived from fully utilizing the Netco~~ intellectual property ~~across~~in ~~video~~all ~~games~~media, ~~streaming,~~including ~~entertainment~~film, ~~digital media~~ television, ~~merchandising~~ and ~~other ancillary~~video ~~markets~~games. ~~Arbitration~~As ~~proceedings~~part ~~for~~of the joint ~~owners~~venture, of NetCo ~~began~~has inpublished ~~July~~more ~~2022~~than ~~and~~ a ~~ruling~~dozen ~~was~~books ~~issued~~and inhad ~~July~~an ~~2023.~~ABC ~~To fund efforts to maximize the value of Netco, NovelStem has secured non-recourse litigation funding~~miniseries.

~~Arbitration~~After ~~proceedings~~Tom ~~for~~Clancy ~~the~~passed ~~joint~~away ~~owners~~in of2013, ~~NetCo~~his ~~concluded~~estate ~~during~~and ~~2022~~business ~~with~~partners ~~final~~refused ~~briefs~~to ~~being~~cooperate ~~filed~~ in ~~January~~exploiting ~~2023~~the intellectual property. InAfter trying ~~July~~to ~~2023~~amicably resolve the ~~Arbitrator ruled~~dispute, inthe ~~NovelStem’s~~Company ~~favor~~initiated onarbitration proceedings with the ~~issue~~American ofArbitration ~~contract~~Association. ~~interpretation~~The Company’s arbitration demand asserted claims for breach of the ~~Netco~~joint ~~Partners~~venture JVagreement ~~Agreement.~~and ~~The~~breach ~~Arbitrator~~of ~~also~~fiduciary ~~found~~duty. Both claims ~~that~~arise ~~the~~from ~~Company~~C.P. Group’s ~~joint~~failure ~~venture partner failed~~ to ~~use~~make “reasonable, good faith efforts” to ~~license and~~ exploit the ~~Net~~ ~~Force~~full ~~concept,~~array inof ~~breach~~media ofrights ~~its~~relating ~~contractual~~to ~~obligations~~Net Force. ~~under~~The Company’s goal is to maximize the ~~Netco~~total ~~Partners’~~potential ~~Joint~~value ~~Venture~~of ~~Agreement.~~the ~~The~~NetCo ~~Arbitrator~~intellectual ~~confirmed NovelStem’s~~property ~~contractual~~across ~~right~~video togames, ~~use~~streaming, digital ~~Tom~~media, ~~Clancy’s~~merchandising ~~name~~and asother aancillary ~~possessory~~markets. ~~credit~~The inCompany believes that the ~~Net~~value ~~Force~~of ~~title~~the ~~(Tom~~intellectual ~~Clancy’s Net~~property ~~Force)~~is significant.

The arbitration evidentiary hearing concluded on October 20, 2022, and the arbitrator ordered the parties to submit post-hearing briefs. Final briefs were filed in January 2023. The Arbitrator ruled in the Company’s favor on two key issues of the arbitration and ruled against the Company in other key issues.

The Arbitrator ruled in NovelStem’s favor on the issue of contract interpretation of the Netco Partners JV Agreement. The Arbitrator also found that the Company’s joint venture partner failed to use “reasonable, good faith efforts” to license and exploit the Net Force concept, in breach of its contractual obligations under the Netco Partners’ Joint Venture Agreement. The Arbitrator confirmed NovelStem’s contractual right to use Tom Clancy’s name as a possessory credit in the Net Force title (Tom Clancy’s Net Force). However, the arbitrator did not award any damages to the Company and did not cede operating control of the joint venture to the Company as requested. As such, the Company continues to struggle to maximize the potential of the NetCo asset.

To fund efforts to maximize the value of NetCo, NovelStem has secured non-recourse litigation funding. As a result of this ruling, the costs related to the litigation funding agreement were recognized. All costs related to the litigation and the related litigation funding agreement were recorded by the Company for a total liability of $2,819,196.

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

#31.1	Certification of Principal Executive Officer and Executive Chairman pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
#31.2	Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
#32.1	Certification of Principal Executive Officer and Executive Chairman pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
#32.2	Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
#33.1	Condensed Financial Statements of NewStem Ltd. asAs of and for the ~~nine~~three months ended ~~September~~March 3031, ~~2023~~2024

#101.1 The following financial statements from NovelStem International Corp.’s Form 10-Q for the quarter ended ~~September~~March 3031, ~~2023~~2024, filed on May ~~November 17~~15, ~~2023~~2025, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets, (ii) Condensed Statements of of Operations, (iii) Condensed Statements of Changes in Shareholders’ Equity, (iv) Condensed Statements of Cash Flows and (v) Notes to Condensed Financial Statements, tagged as blocks of text.

104 Cover Page Interactive Data File (embedded within the Inline XBRL document).

#	This exhibit is filed or furnished herewith.

2019

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.

	NOVELSTEM INTERNATIONAL CORP.
Date: November 17, 2023	By:	/s/ Jan Loeb
Date: May 15, 2024	By:	/s/ Jan Loeb
	Name:	Jan Loeb
	Title:	Executive Chairman

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