Item 1A. Risk Factors
Item
1A. Risk Factors.
Our
business is subject to certain risks, including those described below. If any of the events described in the following risk factors actually
occurs then our business, results of operations and financial condition could be materially adversely affected. More detailed information
concerning these risks is contained in other sections of this registration statement, including “Business” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.”
Risks
Relating to our Business
We
are a holding company, the principal assets of which are illiquid rights to a licensing agreement.
Our
Company’s primary asset is the residual value of relicensing the License formerly held by NewStem.
We
conduct no other business and, as a result, we depend entirely upon earnings and cash flow from the License held by Yissum.
If we decide in the future to pay dividends, as a holding company, our ability to pay dividends and meet other obligations depends upon
the receipt of profits from this license agreement.
We
depend on our executive officers and consultants and other key individuals along with the executive officers and key individuals of NewStem
to continue the implementation of our long-term business strategy and could be harmed by the loss of their services and our inability
to make up for such loss with qualified replacements.
We
believe that our future success will depend in large part on the skills of our management team and the management team of Yissum related
to subsequent monetization of the License. The loss of any of the key individuals’ services could reduce our ability to successfully
implement our long-term business strategy which may result in a loss of revenue, and the value of our common stock could be materially
adversely affected. Leadership changes will occur from time to time, and we cannot predict whether significant resignations will occur.
We believe these management teams possess valuable knowledge about our and former NewStem’s respective industries and that their
knowledge and relationships would be very difficult to replicate. The loss of key personnel, or the inability to recruit and retain qualified
and talented personnel in the future, could have an adverse effect on our business, financial condition and/or operating results.
We
have limited operating histories and have generated minimal revenue to date.
We
have a limited operating history and do not have a meaningful historical record of sales and revenues, nor do we have an established
business track record. While we believe that we have the opportunity to be successful, there can be no assurance that we will be successful
in accomplishing our business initiatives, or that we will be able to achieve any significant levels of revenue or net income.
We
have identified material weaknesses in our internal control and procedures and internal control over financial reporting. If not remediated,
our failure to establish and maintain effective disclosure controls and procedures and internal control over financial reporting could
result in material misstatements in our financial statements and a failure to meet our reporting and financial obligations, each of which
could have a material adverse effect on our financial condition and the trading price of our common stock.
Maintaining
effective internal control over financial reporting and effective disclosure controls and procedures are necessary for us to produce
reliable financial statements. We have re-evaluated our internal control over financial reporting and our disclosure controls and procedures
and concluded that they were not effective as of December 31, 2025 and we concluded there was a material weakness in the design of our
internal control over financial reporting.
A
material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that
there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or
detected on a timely basis.
7
Rapid
technological change could cause the License to become obsolete.
Success
from NewStem’s efforts will depend upon the ability of Yissum to relicense the technology supported by the License.
The
technologies underlying NewStem’s products and the license technology are subject to rapid and profound technological change. Competition
intensifies as technical advances in each field are made and become more widely known. We can give no assurance that others will not
develop services, products, or processes with significant advantages over the products, services, and processes that have developed.
Any such occurrence could have a material and adverse effect on our business, results of operations and financial condition.
Yissum
plans to find new users for the technology based on the License. The success of a future licensee to enhance and broaden its product
offerings in response to changing customer demands and competitive pressure and technologies will depend on numerous factors, including
the ability to:
-
Properly
identify and anticipate physician and patient needs;
-
Develop
and introduce new products or product enhancements in a timely manner;
-
Adequately
protect intellectual property and avoid infringing upon the intellectual property rights of third parties;
-
Demonstrate
the safety and efficacy of new products; and
-
Obtain
the necessary regulatory clearances or approvals for new products or product enhancements.
Risks
relating to our common stock
Because
our holding company structure creates restrictions on the payment of dividends, our ability to pay dividends is limited.
We
are a holding company whose primary asset is our right to income from the License. We currently conduct no other business and, as a result,
we depend entirely upon cash flow from the License. If we decide in the future to pay dividends, as a holding company, our ability to
pay dividends and meet other obligations depends upon the receipt of cash flow from the License. We do not presently have any intention
to declare or pay dividends in the future. You should not purchase shares of our common stock in anticipation of receiving dividends
in future periods.
Because
we do not intend to pay any cash dividends on our common stock, our shareholders will not be able to receive a return on their shares
unless they sell them.
We
intend to retain any future earnings to reduce debt. We do not anticipate paying any cash dividends on our common stock in the foreseeable
future. Unless we pay dividends, our shareholders will not be able to receive a return on their shares unless they sell them. Shareholders
may never be able to sell shares when desired. Before you invest in our securities, you should be aware that there are various risks.
You should consider carefully these risk factors, together with all of the other information included in this annual report before you
decide to purchase our securities. If any of the following risks and uncertainties develop into actual events, our business, financial
condition or results of operations could be materially adversely affected.
8
Reporting
requirement under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and compliance with the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley Act”), including establishing and maintaining acceptable internal controls over financial
reporting, are costly and may increase substantially.
The
rules and regulations of the SEC require a public company to prepare and file periodic reports under the Exchange Act, which require
that the Company engage legal, accounting, auditing and other professional services. The engagement of such services is costly. Additionally,
the Sarbanes-Oxley Act requires, among other things, that we design, implement and maintain adequate internal controls and procedures
over financial reporting. The costs of complying with the Sarbanes-Oxley Act and the limited technically qualified personnel we have
may make it difficult for us to design, implement and maintain adequate internal controls over financial reporting. In the event that
we fail to maintain an effective system of internal controls or discover material weaknesses in our internal controls, we may not be
able to produce reliable financial reports or report fraud, which may harm our overall financial condition and result in loss of investor
confidence and a decline in our share price.
We
are working with our legal, accounting and financial advisors to identify those areas in which changes should be made to our financial
and management control systems to manage our growth and our obligations as a public company. These areas include corporate governance,
corporate control, disclosure controls and procedures and financial reporting and accounting systems. We have made, and will continue
to make, changes in these and other areas. However, we anticipate that the expenses that will be required in order to adequately prepare
for being a public company could be material. We estimate that the aggregate cost of increased legal services; accounting and audit functions;
consultants to design and implement internal controls; and financial printing alone will be a few hundred thousand dollars per year and
could be several hundred thousand dollars per year. In addition, we may incur additional expenses related to director compensation and/or
premiums for directors’ and officers’ liability insurance, the costs of which we cannot estimate at this time. We may also
incur additional expenses associated with investor relations and similar functions, the cost of which we also cannot estimate at this
time. However, these additional expenses individually, or in the aggregate, may also be material.
The
continued increased costs associated with operating as a public company may decrease our net income or increase our net loss and may
cause us to reduce costs in other areas of our business. Additionally, if these requirements divert our management’s attention
from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations.
There
is a very limited trading market for our common stock and investors are not assured of the opportunity to sell their stock, should they
desire to do so.
Our
common stock is currently quoted on the OTC Pink Market. However, our stock has traded in very limited quantities in the past. We believe
a significant factor in the limited market is our limited capitalization and liquidity, results of operations and the characterization
of our stock as a “penny stock.” We hope to remedy our financial condition and results of operation in the future. This,
in turn, may assist us in obtaining listing of our stock on other exchanges. However, there is no assurance that any of these objectives
will be met or that the market will ever increase to a point where investors could sell their stock at a desirable price, should they
desire to do so.
The
price of our common stock could be highly volatile.
Our
shares of common stock are quoted on the OTC Pink Market. It is likely that our common stock will be subject to price volatility, low
volumes of trades and large spreads in bid and ask prices quoted by market makers. Due to the low volume of shares traded on any trading
day, persons buying or selling in relatively small quantities may easily influence prices of our common stock. This low volume of trades
could also cause the price of our stock to fluctuate greatly, with large percentage changes in price occurring in any trading day session.
Holders of our common stock may also not be able to readily liquidate their investment or may be forced to sell at depressed prices due
to low volume trading. If high spreads between the bid and ask prices of our common stock exist at the time of a purchase, the stock
would have to appreciate substantially on a relative percentage basis for an investor to recoup their investment. Broad market fluctuations
and general economic and political conditions may also adversely affect the market price of our common stock. No assurance can be given
that an active market in our common stock will be sustained. If an active market does not continue, holders of our common stock may be
unable to readily sell the shares they hold or may not be able to sell their shares at all.
9
We
may be deemed an investment company, which could impose on us burdensome compliance requirements.
The
Investment Company Act of 1940, as amended (the “Investment Company Act”), requires companies to register as an investment
company if they are engaged primarily in the business of investing, reinvesting, owning, holding, or trading securities. Generally, companies
may be deemed investment companies under the Investment Company Act if they are viewed as engaging in the business of investing in securities
or they own investment securities having a value exceeding 40% of certain assets. We are not in the business of investing, reinvesting,
owning, holding or trading securities. However, if the Securities and Exchange Commission deems us to be an investment company, we may
have imposed upon us additional burdensome requirements, including having to register as an investment company, adopting a specific form
of corporation structure and having to comply with certain reporting, record keeping, voting, proxy, and disclosure requirements. Such
additional requirements would require us to incur additional costs and have an adverse effect on our results of operations and our ability
to effectively carry out our business plan.