Item 1. Business
Item
1. Business.
NovelStem
International Corp. (“NovelStem” or the “Company”) is a holding company whose principal assets consisted of an
approximate 31% equity interest in NewStem Ltd, an Israeli biotech company (“NewStem”) and its developed technology, and
a 50% equity interest in NetCo Partners (“NetCo”). The interest in NetCo was sold in May 2025 in a noncash transaction which
settled significant debt of the Company in the form of a litigation funding agreement. As described below, NewStem was liquidated in
October 2025. Currently, the Company’s principal asset consists of rights to profits from a license held by Yissum Research Development
Company, Hebrew University’s technology transfer company (“Yissum”), which we previously held through our ownership
interest in NewStem. NovelStem was formerly known as Hollywood Media Corp. The Company was incorporated in the State of Florida on January
22, 1993 and changed its name to NovelStem International Corp. in September 2018.
With
the purchase of NewStem, an Israeli biotech company, in 2018 the Company expanded its business focus from media to cutting edge biotech.
As a significant shareholder in NewStem, and the substantial commitment of our management and financial resources to NewStem, including
the fact that our Executive Chairman, Jan Loeb, was also the Chairman of NewStem, we had the ability to exert significant influence over
the management and operations of NewStem resulting in NewStem functioning as a minority operating subsidiary of the Company. Concurrent
to his appointment in July 2018, Mr. Loeb acted in an executive capacity on behalf of the Company and has served in a de facto
leadership role. In September 2022, the Board appointed Mr. Loeb as Executive Chairman of NovelStem in order to ratify Mr. Loeb’s
position and clarify his executive role. On January 13, 2023, the Board appointed Mr. Loeb as President. With respect to NewStem, Mr.
Loeb, as the Chairman, presided over the meetings of NewStem’s Board of Directors. Additionally, Mr. Loeb leveraged his financial
expertise by guiding NewStem’s financial and strategic planning, including the raising and deployment of capital, developing and
modifying NewStem’s business plan and budget and by participating in the negotiation of NewStem’s material contracts as required.
NewStem did not have an appointed Chief Financial Officer and, as such, Mr. Loeb served as the de facto Chief Financial Officer
and Chief Strategic Officer of NewStem.
Through
the second quarter of 2024, the Company was a development stage biotechnology holding company focused on the stem cell-based technology
developed by Hebrew University under exclusive license to NewStem. The Company signed an agreement (the “Purchase Agreement”)
on June 20, 2024 to acquire the remainder of NewStem in exchange for Company stock as well as funding for NewStem. The Company was unable
to obtain funding to proceed, and the Purchase Agreement was not fully consummated. As such, no Company shares were issued to NewStem
shareholders in exchange for NewStem shares.
During
the third quarter of 2024, it became evident that NewStem would not be able to raise funds to continue operations consisting of research
and development and further development of the technology. In October 2024, NewStem ceased operations and began the process of liquidation
under which the current state of the technology reverted back to the original licensor, Yissum, with the Company retaining a financial
interest of up to $3,750,000 in any future licensing. NewStem’s liquidation was completed in October 2025.
Additionally,
NovelStem owned a 50% interest in NetCo, a joint venture that owns the Net Force publishing franchise. On May 9, 2025, the Company entered
into a Settlement Agreement and Release whereby the investment in NetCo was sold to the Company’s JV partner for $1,300,000 to
settle the related litigation funding liability to Omni Bridgeway in full. This transaction was fully consummated as funds were received
by Omni Bridgeway from CP Partners pursuant to the terms of the agreement.
NovelStem
depended entirely on earnings and cash from its investments in NewStem and the NewStem technology and our 50% equity interest in the
NetCo joint venture. The Company’s principal operations coincided with those of NewStem. We have not received any dividend payments
or other distributions from NewStem in the fiscal years ended December 31, 2025 and 2024. We received minimal distributions (approximately
$600) of earnings from NetCo during the year ended December 31, 2025 and none during the year ended December 31, 2024.
3
NewStem
NewStem
was a development stage Israeli biotech limited liability company that performed research focused on human Pluripotent Stem Cells (hPSCs)
in general, and Haploid human Pluripotent Stem Cells (HhPSCs), in particular. These cells have the potential to change the face of medical
research as they play a pivotal role in cancer research, regenerative medicine and disease therapy. NewStem established a discovery bio-platform
based on haploid human embryonic stem cell technology for genome-wide screenings and is currently using this platform for the discovery
and development of oncology drugs based on synthetic lethal interaction and developing a personalized diagnostic for early detection
of chemotherapy resistance. NewStem incurred losses from inception and generated minimal revenues from a licensing agreement. NewStem
filed an FDA Pre-Submission and received a CE Mark from the European Medicines Agency (EMA) for its in vitro diagnostic device (IVDD).
NewStem does not have an FDA approved medical device. The NewStem Software Diagnostic Device (NSDD) is CE marked under EU regulation
as an “other” IVD under Directive 98/79/EC since March 2022.
We
believe that NewStem was the only company worldwide to develop products based on this innovative proprietary technology. These products
refer to the medical device platform that provides information to oncologists regarding the presence of mutations in the patient’s
tumor profile which may confer resistance to different anti-cancer drugs and to anticancer drugs that target tumors with specific mutations
based on a synthetic-lethal interaction approach.
NewStem’s
technology solutions were derived from an exclusive, worldwide license from Yissum and The New York Stem Cells Foundation, based on the
findings and inventions of Prof. Nissim Benvenisty, Director of the Azrieli Center for Stem Cells and Genetic Research, The Hebrew University
of Jerusalem (the “License”). The License provided NewStem with an exclusive worldwide license to make commercial use of
the License and to develop, manufacture, market, distribute or sell a product in the field of therapeutics, diagnostics, screening, development
and testing. In consideration for the grant of the License, NewStem was obligated to pay royalties of up to 3% of net sales and up to
12% of “Sublicense Consideration” (as defined in the License Agreement). As part of the liquidation of NewStem, the License
reverted to the original holders and NovelStem retained a significant financial interest in any future monetization of the License.
NovelStem
was the original seed investor in NewStem providing $2 million in July 2018 and another $2 million over the next two and a half years.
At the time of liquidation, we owned a 30.51% equity interest in NewStem. The remaining equity interests in NewStem are owned by Yissum
and Professor Benvenisty, each of whom owned a 30.51% equity interest, Illumina Cambridge LTD, which owned a 5.31% equity interest, and
management and a number of other shareholders who owned collectively approximately 3.18%.
Competition
The
technologies underlying future monetization of the License are subject to rapid and profound technological change. Competition intensifies
as technical advances in each field are made and become more widely known. We can give no assurance that others will not develop services,
products, or processes with significant advantages over the products, services, and processes that can be developed through the License.
Any such occurrence could have a material and adverse effect on our business, results of operations and financial condition.
4
Yissum
plans to find new users for the technology based on the License. The success of a future licensee to enhance and broaden its product
offerings in response to changing customer demands and competitive pressure and technologies will depend on numerous factors, including
the ability to:
-
Properly
identify and anticipate physician and patient needs;
-
Develop
and introduce new products or product enhancements in a timely manner;
-
Adequately
protect intellectual property and avoid infringing upon the intellectual property rights of third parties;
-
Demonstrate
the safety and efficacy of new products; and
-
Obtain
the necessary regulatory clearances or approvals for new products or product enhancements.
Government
Regulation
In
the United States, pharmaceutical products are subject to extensive regulation by the Federal Food and Drug Administration and Cosmetic
Act or the FDA. The FDA and other federal and state statutes and regulations, govern, among other things, the research, development,
testing, manufacture, storage, recordkeeping, approval, labeling, promotion and marketing, distribution, post-approval monitoring and
reporting, sampling, and import and export of pharmaceutical products. The FDA has very broad enforcement authority and failure to abide
by applicable regulatory requirements can result in administrative or judicial sanctions being imposed on NewStem, including warning
letters, refusals of government contracts, clinical holds, civil penalties, injunctions, restitution, disgorgement of profits, recall
or seizure of products, total or partial suspension of production or distribution, withdrawal of approval, refusal to approve pending
applications, and criminal prosecution.
FDA
Approval Process
NewStem’s
therapeutic product candidates were expected to be regulated by the FDA as drugs, and it is expected that this would be applicable to
any future licensee as well. No manufacturer may market a new drug until it has submitted a New Drug Application, or NDA, to the FDA,
and the FDA has approved it.
The
testing and approval process requires substantial time, effort and financial resources, and any future licensee’s product candidates
may not be approved on a timely basis, if at all. The time and expense required to perform the clinical testing necessary to obtain FDA
approval for regulated products can frequently exceed the time and expense of the research and development initially required to create
the product. The results of preclinical studies and initial clinical trials of NewStem’s product candidates are not necessarily
predictive of the results from large-scale clinical trials, and clinical trials may be subject to additional costs, delays or modifications
due to a number of factors, including difficulty in obtaining enough patients, investigators or product candidate supply. Failure by
any licensee to obtain, or any delay in obtaining, regulatory approvals or in complying with requirements could adversely affect the
commercialization of product candidates and the Company’s ability to receive licensing revenues.
Other
Regulatory Requirements
After
approval, drug products are subject to extensive continuing regulation by the FDA, which include obligations to manufacture products
in accordance with Good Manufacturing Practice, or GMP, maintain and provide to the FDA updated safety and efficacy information, report
adverse experiences with the product, keep certain records and submit periodic reports, obtain FDA approval of certain manufacturing
or labeling changes, and comply with FDA promotion and advertising requirements and restrictions. Failure by a licensee to meet these
obligations can result in various adverse consequences, both voluntary and FDA-imposed, including product recalls, withdrawal of approval,
restrictions on marketing, and the imposition of civil fines and criminal penalties against the NDA holder. In addition, later discovery
of previously unknown safety or efficacy issues may result in restrictions on the product, manufacturer or NDA holder.
Outside
the United States, a licensee’s ability to market a product is contingent upon receiving marketing authorization from the appropriate
regulatory authorities. The requirements governing marketing authorization, pricing and reimbursement vary widely from jurisdiction to
jurisdiction. At present, foreign marketing authorizations are applied for at a national level, although within the European Union registration
procedures are available to companies wishing to market a product in more than one European Union member state.
5
NetCo
In
June 1995, we and C.P. Group Inc. (“C.P. Group”), formed the joint venture, NetCo. NetCo owns the entertainment property,
“Net Force”, about a division of the FBI investigating crimes and adventures involving the internet and the digital world.
NovelStem and C.P. Group each owned 50% of the ownership interest in NetCo. NetCo owns all rights in all media to the Net Force property
including film, television, and video games.
In
1997, NetCo licensed the rights to publish the first six Net Force books in North America to Putnam Berkely, which books were written
and published. This agreement was subsequently renewed in December 2001 for four more books that were created and published. There was
also a series of books targeted to the young adult market, Net Force Explorer, also published by Putnam Berkley. Net Force books have
so far been published in mass market paperback format. The first book in the series was adapted as a four-hour mini-series on the ABC
television network.
In
2019, NetCo entered into a new publishing agreement with HarperCollins. Three novels and two Net Force novellas were published under
that agreement. Through its interest in NetCo, NovelStem received distributions of its 50% share of proceeds generated from the rights
to Net Force.
In
May 2025, we sold our interest in NetCo to our joint venture partner in exchange for the settlement of related debt in the form of a
litigation funding agreement.
Employees
We
do not currently have any employees; however, the Company relies on consultants to perform the duties that would be performed by employees.
Additional
Financial Information
For
additional financial information regarding our operations, see “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our Financial Statements included in this Annual Report.
Available
Information
We
file annual, quarterly and current reports and other information with the U.S. Securities and Exchange Commission (the “SEC”).
These filings are available to the public over the internet at the SEC’s website at http://www.sec.gov. You may also read and copy
any document we file at the SEC’s public reference room located at 100 F Street, NE, Washington, DC 20549. Please call the SEC
at 1-800-SEC-0330 for further information on the public reference room.
Our
website can be found at http://novelstem.com.
6