What changed in this filing

/stocks — the workspaceLOADING

Item 9A. Controls and Procedures

2025-04-07 compared with 2024-04-01 · 378 added, 868 removed, 708 unchanged (64% of the section changed)

11 unchanged sentences

and concluded that they were not effective as of December 31, 2024 and we concluded there was a material weakness in the design of our

internal control over financial reporting as it relates to insufficient resources to employ proper segregation of duties over the processing of transactions

and financial reporting.

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.

material weakness is defined as a deficiency, or a combination of deficiencies, in internal control over financial reporting such that

1 unchanged sentence

detected on a timely basis.

intends to focus on strengthening the Company’s internal controls.

Management expects to make progress towards reducing the risk

that the material weakness could result in a material misstatement of the Company’s annual or interim financial statements.

resources permit, management will continue to systematically build the necessary capabilities and infrastructure to implement corrective

continues to focus on strengthening the Company’s internal controls within the parameters of what can be done with limited resources.

As resources permit, management will continue to attempt to build the necessary capabilities and infrastructure to implement corrective

At the current time, financial resources are limited thereby impeding the ability of management to employ personnel to provide

proper separation of duties.

in Internal Control Over Financial Reporting

9 unchanged sentences

Except as indicated below, none of our directors is a director in any other reporting companies.

None of our officers or directors has been affiliated with any company that has filed for bankruptcy within the last ten years except

that Jan Loeb has previously been affiliated with Kid Brands, Inc., which filed for bankruptcy in June 2014.

None of our officers or directors has been affiliated with any company that has filed for bankruptcy within the last ten years.

We are not aware of any

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Company’s full board is functioning as our audit committee at the time of this Annual Report.

do not have a compensation committee or persons participating in deliberations concerning executive officer compensation as there

was no executive officer compensation paid other than hourly payments for Chief Financial Officer services during 2023 and

do not have a compensation committee or persons participating in deliberations concerning executive officer compensation as there was

no executive officer compensation paid other than hourly payments for Chief Financial Officer services during 2024 and 2023.

do not have a nominating committee.

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and Director Compensation

Compensation Table

and Principal Position

President and Executive

Summary Compensation Table

Name and Principal Position

President and Executive Chairman

Christine Jenkins

Vice President and Chief

Financial Officer

Vice President and Chief Financial Officer

Mitchell Rubenstein

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the grant date fair value calculated in accordance with applicable accounting principles with respect to 100,000 options granted per

Director and 100,000 options granted to the President and Executive Chairman on

April 1, 2024 with an exercise price of $0.06.

The fair value of the options was determined using the Black-Scholes option pricing

model using the following assumptions:

(i) a risk-free interest rate of 4.34% (ii) an expected term of 5.09 years (iii) an assumed

volatility of 116.9853% and (iv) no dividends.

the grant date fair value calculated in accordance with applicable accounting principles with respect to 50,000 options granted per

Director, 100,000 options granted to the President and Executive Chairman and 10,000 options granted to the Vice President and Chief

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(iii) an assumed volatility of 118.3067% and (iv) no dividends.

the grant date fair value calculated in accordance with applicable accounting principles with respect to 100,000 options granted

per Executive/Director on January 31, 2022 with an exercise price of $0.29.

The fair value of the options was determined using the

Black-Scholes option pricing model using the following assumptions:

(i) a risk-free interest rate of 1.505% (ii) an expected term

of 4 years (iii) an assumed volatility of 184.74% and (iv) no dividends.

hourly fees paid to Ms.

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Compensation for 2023 and 2024

to being appointed as our Chief Financial Officer on September 29, 2022 and Vice President on January 13, 2023, beginning in March 2022,

Jenkins served as our outside consultant providing certain financial services.

Chief Financial Officer and Vice President, Ms.

Jenkins is paid on an hourly basis.

appointed as Executive Chairman on September 29, 2022 and President on January 13, 2023 and does not receive any compensation for his

role as an officer of the Company.

Loeb, our Executive Chairman and President does

not receive any compensation for his role as an officer of the Company.

Company pays compensation to its directors pursuant to the NovelStem International Corp.

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following tables set forth all outstanding equity awards made to each of the Executives and Directors that were outstanding at December

to Purchase NovelStem International Corp.

Options to Purchase NovelStem International Corp.

Unexercisable

1 unchanged sentence

Expiration Date

November 12, 2025

November 26, 2026

November 24, 2027

January 31, 2029

March 23, 2030

April 1, 2031

Mitchell Rubenstein

November 12, 2025

November 26, 2026

November 24, 2027

January 31, 2029

March 23, 2030

April 1, 2031

November 12, 2025

November 26, 2026

November 24, 2027

January 31, 2029

March 23, 2030

April 1, 2031

David Seltzer

November 12, 2025

November 26, 2026

November 24, 2027

January 31, 2029

March 23, 2030

April 1, 2031

Jerry Wolasky

November 12, 2025

November 26, 2026

November 24, 2027

January 31, 2029

March 23, 2030

April 1, 2031

Tracy Clifford

November 12, 2025

November 26, 2026

November 24, 2027

January 31, 2029

March 23, 2030

April 1, 2031

Christine Jenkins

to Purchase NovelStem International Corp.

March 23, 2030

Warrants to Purchase NovelStem International Corp.

Unexercisable

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Expiration Date

June 28, 2025

Mitchell Rubenstein

June 28, 2025

David Seltzer

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Ownership of Certain Beneficial Owners and Management

and Address of beneficial owner (6)

and nature of beneficial ownership

Name and Address of beneficial owner (6)

Amount and nature of beneficial ownership

Christine Jenkins

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3,624,324 (3)(4)

All directors and officers as a group (seven

All directors and officers as a group (seven persons)

Applicable percentage ownership is based on 46,881,475 shares of common stock outstanding as of December 31, 2024, together with securities

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stock, warrants or other securities that are currently exercisable or convertible or that will become exercisable or convertible within

60 days of December 31, 2023, are deemed to be beneficially owned by the person holding such securities for the purpose of computing the

number of shares beneficially owned and percentage of ownership of such person, but are not treated as outstanding for the purpose of

computing the percentage ownership of any other person.

60 days of December 31, 2024, are deemed to be beneficially owned by the person holding such securities for the purpose of computing

the number of shares beneficially owned and percentage of ownership of such person, but are not treated as outstanding for the purpose

of computing the percentage ownership of any other person.

Includes 1,108,108 held in an IRA and 874,528 held as Trustee for the Steinberg Family Trust.

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shares of common stock at an exercise price of $0.13 per share, options to purchase 1,100,000 million shares of common stock at an exercise

price of $0.10 per share and options to purchase 100,000 shares of common stock at an exercise price of $0.29 per share.

Includes options to purchase 150,000 shares of common stock at an exercise price of $0.10 per share and options to purchase 100,000 shares of common stock at an exercise price of $0.29 per share.

Includes options and warrants to purchase 1,850,000 shares of common stock at an exercise price of $0.10 per share and options to purchase 100,000 shares of common stock at an exercise price of $0.29 per share.

price of $0.10 per share, options to purchase 100,000 shares of common stock at an exercise price of $0.29 per share, and options to

purchase 100,000 shares of common stock at an exercise price of $0.20 per share.

Includes options to purchase 150,000 shares of common stock at an exercise price of $0.10 per share, options to purchase 100,000 shares

of common stock at an exercise price of $0.29 per share, and options to purchase 50,000 shares of common stock at an exercise price of

$0.20 per share.

Includes options and warrants to purchase 1,850,000 shares of common stock at an exercise price of $0.10 per share, options to purchase

100,000 shares of common stock at an exercise price of $0.29 per share, and options to purchase 50,000 shares of common stock at an exercise

price of $0.20 per share.

The address of each person is c/o NovelStem International Corp.

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Plan category

of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average

exercise price of outstanding options, warrants and rights

of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity compensation plans approved by security

Equity compensation plans not approved

by security holders

Number of securities to be issued upon exercise of outstanding options, warrants and rights

Weighted-average exercise price of outstanding options, warrants and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity compensation plans approved by security holders

Equity compensation plans not approved by security holders

Certain Relationships and Related Transactions, and Director Independence.

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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, increased to 10% per annum for advances subsequent to November 11, 2022, and mature September 1, 2025.

As of the date

of this Annual Report, the full amount of $650,000 has been funded pursuant to these agreements.

The note agreements were refinanced in August

2024 providing for total borrowings of $750,000.

The agreements provide for interest at a rate of 10% per annum and mature December 31,

As of the date of this Annual Report, the full amount of $750,000 has been funded pursuant to these agreements.

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

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Principal Accountant Fees and Services.

following table summarizes the fees accrued and paid by NovelStem for professional services rendered by Cherry Bekaert LLP for the years

ended December 31, 2023 and 2022.

& Chiu CPA LLP

following table summarizes the fees accrued and paid by NovelStem for professional services rendered by Kreit & Chiu CPA LLP and

Cherry Bekaert LLP for the years ended December 31, 2024 and 2023.

All other fees

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Report of Independent Registered Public Accounting Firm (PCAOB ID:

Report of Predecessor Auditor (PCAOB ID 677 )

Balance Sheets

Statements of Operations

of Changes in Shareholders’ Equity (Deficit)

Statements of Changes in Shareholders’ Equity (Deficit)

Statements of Cash Flows

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OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

of Directors and Shareholders of

International Corp.

on the Financial Statements

have audited the accompanying balance sheet of NovelStem International Corp.

as of December 31, 2023, and the related statements of operations,

shareholders’ equity (deficit) and cash flows for the year then ended, and the related notes (collectively referred to as the “financial

statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of NovelStem

International Corp.

as of December 31, 2023, and the results of its operations and its cash flows for each of the years then ended, in

conformity with accounting principles generally accepted in the United States of America.

accompanying financial statements have been prepared assuming that the entity will continue as a going concern.

As discussed in Note

1 to the financial statements, the entity has suffered losses from operations that raise substantial doubt about its ability to continue

as a going concern.

Management’s plans in regard to these matters are also described in Note 1.

The financial statements do not

include any adjustments that might result from the outcome of this uncertainty.

financial statements are the responsibility of the entity’s management.

Our responsibility is to express an opinion on these financial

statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (“PCAOB”) and are required to be independent with respect to NovelStem International Corp.

in accordance with the

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

International Corp.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose

of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting.

Accordingly, we express

no such opinion.

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

Kreit & Chiu CPA LLP

have served as NovelStem International Corp.’s auditor since 2024.

York , New York

of Independent Registered Public Accounting Firm

the Board of Directors and Stockholders

International Corp.

Raton, Florida

on the Financial Statements

have audited the accompanying balance sheet of NovelStem International Corp.

(the “Company”) as of December 31, 2022, and

the related statements of operations, shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively

referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects,

the financial position of the Company as of December 31, 2022, and the results of its operations and its cash flows for the year

then ended, in conformity with accounting principles generally accepted in the United States of America.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on the Company’s

financial statements based on our audit.

We are a public accounting firm registered with the Public Company Accounting Oversight Board

(United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S.

securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audit,

we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion

on the effectiveness of the Company’s internal control over financial reporting.

Board of Directors and Shareholders of

NovelStem International Corp.

Opinion on the Financial Statements

We have audited the accompanying balance sheets of

NovelStem International Corp.

as of December 31, 2024 and 2023, and the related statements of operations, shareholders’ equity (deficit),

and cash flows for the two years then ended, and the related notes (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of NovelStem International Corp.

as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years then ended, in conformity

with accounting principles generally accepted in the United States of America.

Going Concern

The accompanying financial statements have been prepared

assuming that the entity will continue as a going concern.

As discussed in Note 1 to the financial statements, the entity has suffered

losses from operations that raise substantial doubt about its ability to continue as a going concern.

Management’s plans in regard

to these matters are also described in Note 1.

The financial statements do not include any adjustments that might result from the outcome

of this uncertainty.

Basis for Opinion

These financial statements are the responsibility

of the entity’s management.

Our responsibility is to express an opinion on these financial statements based on our audits.

a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required

to be independent with respect to NovelStem International Corp.

in accordance with the U.S.

federal securities laws and the applicable

rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards

of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements

are free of material misstatement, whether due to error or fraud.

NovelStem International Corp.

is not required to have, nor were we engaged

to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding

of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s

internal control over financial reporting.

Accordingly, we express no such opinion.

audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or

fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audit also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audit provides

a reasonable basis for our opinion.

Cherry Bekaert LLP

have served as the Company’s auditor from 2021 through 2022.

Lauderdale, Florida

Our audits included performing procedures to assess

the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond

to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating

the overall presentation of the financial statements.

We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the

current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective,

or complex judgments.

We determined that there are no critical audit matters.

& Chiu CPA LLP

We have served as NovelStem International Corp.’s auditor since 2024.

Los Angeles, California

April 7, 2025

INTERNATIONAL CORP.

of December 31,

BALANCE SHEETS

As of December 31,

Current assets:

Cash and cash equivalents

Accounts receivable, administrative fees

Prepaid expenses

current assets

Total current assets

and equipment, net

Investment in Netco

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Accounts payable

Related party

Accrued expenses

Notes payable

Current portion of long-term notes payable, including accrued interest

Convertible debt, including accrued interest

Derivative liability, guarantee

Total current liabilities

Long-term liabilities:

Long-term notes payable, including accrued interest

financial instrument

Long-term notes payable, including accrued interest, net

Derivative liability, guarantee

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( 5,144,375 )

( 1,951,533 )

Total liabilities and shareholders’ equity (deficit)

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OF OPERATIONS

Ended December 31,

Administrative fee income

Operating expenses:

Research and development expenses

– grants and participations received

and development expenses, net

General and administrative expenses

Litigation expenses (contra expenses) (Note 7)

Litigation expenses

Total operating expenses

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Loss on derivative instrument

Impairment loss on equity method investee

Interest expense

Total other expenses

Financial income, net

Loss before income taxes

( 3,071,996 )

( 3,884,822 )

Provision for income tax

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( 3,071,996 )

( 3,884,822 )

Equity in net loss of equity method investees

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$ ( 199,754 )

( 4,187,301 )

Stock-based compensation

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( 1,951,533 )

( 3,233,042 )

Stock-based compensation

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OF CASH FLOWS

Ended December 31,

Cash flows from operating activities:

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$ ( 4,187,301 )

required to reconcile loss to net cash used in operating activities:

of convertible financial instrument

Equity in net loss of equity method investees

Impairment loss, NewStem

Gain on dilution of equity method investment

Distribution from NetCo

Bad debt expense

Accretion of discount on note payable

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Accrued interest added to long-term note payable

Accrued interest added to convertible debt

Stock-based compensation

Change in operating assets and liabilities:

in other current assets

Decrease in other liabilities

Accounts receivable, administrative fees

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Cash flows from financing activities:

Proceeds from (repayment of) note payable, current

Proceeds from convertible debt

Proceeds from note payable, current

Proceeds from long-term note payable

received from a related party

of ordinary shares, net

Net cash from financing activities

Net change in cash

Net cash provided by financing activities

Net (decrease) increase in cash

Cash at the beginning of the year

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Cash paid during the year for:

Supplemental Non-Cash Investing and Financing Activities:

Interest added to notes payable and convertible debt

accompanying notes are an integral part of these financial statements.

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(“NovelStem” or the “Company”) is a holding company whose principal assets are an approximate

31 % equity interest in NewStem Ltd, an Israeli biotech company (“NewStem”), and a 50 % equity interest in NetCo Partners (“NetCo”).

31 % equity interest in NewStem Ltd, an Israeli biotech company (“NewStem”) and its developed technology, 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 cutting

edge biotech.

focuses on the development and commercialization of diagnostic technology that can predict patients’ anti-cancer drug resistance,

The Company was incorporated

in the State of Florida on January 22, 1993 and changed its name to NovelStem International Corp.

in September 2018.

focused on the development and commercialization of diagnostic technology that can predict patients’ anti-cancer drug resistance,

allowing for targeted cancer treatments and the potential to reduce resistance to chemotherapy.

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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).

Company has in place a finance agreement with two individuals who are shareholders and directors to borrow $ 650,000 for working capital

needs (see Note 4).

Additionally, the Company entered into an additional finance agreement with a shareholder in 2023 to borrow $ 300,000

for working capital needs (see Note 4).

As of the date of these financial statements, these borrowings have been fully utilized and the

Company will need to obtain additional funds to continue operations for the next 12 months.

additional financing and fundraising as well as monetization of assets held related to equity method investments.

Specifically, the Company

is in the final stages of the process of selling NetCo to its joint venture partner in a transaction that satisfies the related debt

(litigation funding agreement).

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 the Company will realize any value from the intangible

assets or technology of NewStem, which is currently in the process of liquidation due to its inability to raise funds for continued operations

(see Note 3).

Company has in place a finance agreement with two individuals who are shareholders and directors under which it borrowed $ 750,000 and

an additional finance agreement with a shareholder under which it borrowed $ 300,000 for working capital needs (see Note 4).

Additionally,

the Company entered into additional finance agreements with unrelated parties in December 2023 and April 2024 under which it borrowed

an additional $ 450,000 for working capital needs and to fund NewStem (see Note 4).

All funds available pursuant to these agreements have

been received.

The Company will need to obtain additional funds to continue operations for the next 12 months.

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

additional fundraising or obtain additional financing, and/or monetize its investment in NetCo, along with monetizing intangible assets

These factors, among others, raise substantial doubt about the Company’s ability to continue as a going concern.

The financial

statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and

classification of liabilities that might be necessary should the Company be unable to continue in existence.

financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts

and classification of liabilities that might be necessary should the Company be unable to continue in existence.

2— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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as the single source of authoritative GAAP.

INTERNATIONAL CORP.

to Financial Statements

preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain

1 unchanged sentence

Accordingly, actual results could differ from those estimates.

INTERNATIONAL CORP.

to Financial Statements

and Cash Equivalents

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the Company is a 50 % joint venture partner in NetCo which is accounted for pursuant to the equity method of accounting.

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 year ended December 31, 2023, the Company recognized a loss on derivative financial instruments of $ 260,000 .

Proceeds from the note payable are shown as cash from financing instruments and the loss 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 year ended December 31, 2023.

Financial Instruments

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 arm’s 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 years ended December 31, 2024 and 2023, the Company recognized a loss on derivative financial

instruments of $ 90,000 and $ 260,000 , respectively.

Proceeds from the note payable are shown as cash from financing instruments and the

loss 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 years ended December 31, 2024 and 2023.

of common stock repurchased are recorded at cost as treasury stock.

5 unchanged sentences

The grant date fair value is determined using the Black-Scholes-Merton (“Black-Scholes”) pricing model.

all stock options, the Company recognizes expense on an accelerated basis over the requisite service period (generally the vesting

period of the equity grant).

The Company’s option pricing model requires the input of highly subjective assumptions, including

the expected stock price volatility, expected term, and forfeiture rate.

Any changes in these highly subjective assumptions significantly

impact stock-based compensation expense.

all stock options, the Company recognizes expense on an accelerated basis over the requisite service period (generally the vesting period

of the equity grant).

The Company’s option pricing model requires the input of highly subjective assumptions, including the expected

stock price volatility, expected term, and forfeiture rate.

Any changes in these highly subjective assumptions significantly impact stock-based

compensation expense.

awarded to purchase shares of common stock issued to non-employees in exchange for services are accounted for as variable awards in accordance

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that it is more likely than not that some portion of the deferred tax asset will not be realized.

INTERNATIONAL CORP.

to Financial Statements

and Diluted Net Loss Per Share

5 unchanged sentences

of stock options and warrants are excluded from the computation of diluted net income per share if the effect of doing so would be antidilutive.

INTERNATIONAL CORP.

to Financial Statements

following data represents the amounts used in computing earnings per share and the effect on net income (loss) and the weighted average

18 unchanged sentences

Company accounts for its investment in NewStem under the equity method.

At December 31, 2023 and 2022, the carrying value of the investment

in NewStem exceeded its portion of the underlying net assets of NewStem by approximately $ 1,800,000 and $ 1,900,000 , respectively.

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.

During the years ended December

31, 2023 and 2022, the Company reimbursed NewStem for audit and audit related costs of approximately $ 58,000 and $ 105,000 , respectively.

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

This note receivable has been presented as a noncurrent asset along with the investment in NewStem in the balance

At December 31, 2023, the carrying value of the investment in

NewStem exceeded its portion of the underlying net assets of NewStem by approximately $ 1,800,000 .

The excess related to identified intangible

assets including license agreements, specialized work force (goodwill) and two separate projects of in process research and development

is a development stage company and has incurred losses since its inception and has generated only minimal revenues under a licensing

Company assesses its investment in NewStem for impairment on an annual basis or more frequently if indicators of impairment exist.

the year ended December 31, 2024 indicators of impairment became evident due to the inability of NewStem to raise funds.

Due to the inability

to raise funds, NewStem has been unable to continue operations and is in the process of liquidation.

The intangible assets of NewStem,

including license agreements, have reverted to the licensor, Yissum (the commercial division of Hebrew University).

The Company has reached

an agreement with Yissum regarding the potential monetization of these intangible assets which provides for funds to be received by the

Company in the event of re-licensing or monetizing of the licenses or related technology developed by NewStem.

Due to the current uncertainty

of the recovery of any value from these intangible assets and the liquidation status of NewStem, the Company has fully impaired the investment

in NewStem and reduced the carrying value to zero ($ 0 ) at December 31, 2024, recognizing an impairment loss of $ 1,628,657 during the

year ended December 31, 2024.

INTERNATIONAL CORP.

to Financial Statements

is in the development stage and has incurred losses since its inception and has generated only minimal revenues related to 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.

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.

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.

Company signed an agreement (the “Purchase Agreement”) to acquire the remainder of NewStem in exchange for shares of Company

stock as well as funding for NewStem operations.

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 was payable on December 30, 2024.

agreement provided for discharge of the note upon the closing of the anticipated acquisition transaction.

The Purchase Agreement was

not fully consummated, and no Company shares were issued to NewStem shareholders in exchange for NewStem shares, therefore the note was

not discharged.

The Company determined that collection of the note was unlikely due to NewStem’s liquidation status and lack of

As such, the Company wrote the note off as a bad debt during the year ended December 31, 2024.

the year ended December 31, 2024, the Company recorded a reimbursement due to NewStem of approximately $ 42,000 for audit and accounting

related costs which was offset against the note receivable from NewStem.

During the year ended December 31, 2023, the Company reimbursed

NewStem for audit and audit related costs of approximately $ 58,000 .

following table represents the Company’s investment in NewStem:

OF INVESTMENTS

SCHEDULE OF INVESTMENTS

Year Ended December 31,

2 unchanged sentences

Gain on dilution of equity method investment

Investment in NewStem before impairment

Impairment loss recorded

( 1,628,657 )

Investment in NewStem, ending

results of operations and financial position of the Company’s investment in NewStem are summarized below:

OF OPERATIONS AND FINANCIAL POSITION INVESTMENT

SCHEDULE OF OPERATIONS AND FINANCIAL POSITION INVESTMENT

Year Ended December 31,

13 unchanged sentences

to Financial Statements

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.

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

1 unchanged sentence

following table represents the Company’s investment in NetCo:

OF INVESTMENTS

SCHEDULE OF INVESTMENTS

Year Ended December 31,

Investment in NetCo, beginning

Allocation of net income from Netco

Allocation of net income (loss) from Netco

Distribution from NetCo

1 unchanged sentence

results of operations and financial position of the Company’s investment in NetCo are summarized below:

OF OPERATIONS AND FINANCIAL POSITION INVESTMENT

SCHEDULE OF OPERATIONS AND FINANCIAL POSITION INVESTMENT

Year Ended December 31,

Condensed income statement information:

Net income (loss)

Company’s allocation of net income from NetCo

5 unchanged sentences

Non-current liabilities

INTERNATIONAL CORP.

to Financial Statements

4— NOTES PAYABLE

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 for $ 125,000

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

December 2023, the Company entered into two short term notes payable with unrelated parties, Hewlett Fund and AIGH Investment Partners,

The notes are for $ 125,000 each, for a total of $ 250,000 in borrowings utilized for the funding of NewStem.

The notes bear interest

at 12 % per annum and originally matured on December 21, 2024.

The maturity date for both notes has been extended until December 21, 2025

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 .

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 $ 30,082

$ 822 for the year ended December 31, 2023.

Long-term notes

payable are summarized as follows:

OF LONG TERM NOTES PAYABLE

and $ 822 , respectively, for the years ended December 31, 2024 and 2023.

INTERNATIONAL CORP.

to Financial Statements

notes payable are summarized as follows:

SCHEDULE OF LONG TERM NOTES PAYABLE

As of December 31,

8 unchanged sentences

Note payable Omni Bridgeway (Fund 4) Invt.

Accrued interest added to agreement balance

Total note payable, litigation funding agreement

Total notes payable

Less current portion

( 4,059,366 )

Long-term notes payable

April 12, 2021, the Company entered into a promissory note (the “Note”) with a related party (individual) for $ 100,000 .

Note accrued interest at 8 % per annum and matured on April 12, 2022 .

The proceeds of this Note were used to pay operating expenses of

the Company including directors and officer insurance premiums.

Interest expense accrued related to this Note was $ 1,198 for the year

ended December 31, 2022.

The Note and all accrued interest, totaling $ 6,752 , were paid in full on February 16, 2022.

May 2022, 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.

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 $ 400,000 and $ 280,000 , respectively,

pursuant to these agreements through December 31, 2023 and 2022.

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 $ 535,000 at December 31, 2023 which

is reported separately on the 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 $ 61,815 has been reflected

as part of interest expense in the statement of operations for year ended December 31, 2023.

the year ended December 31, 2022, the Company entered into note agreements with Jan Loeb, our Executive Chairman and Jerry Wolasky, a

shareholder and member of the Board, to borrow up to an aggregate of $ 600,000 for working capital needs.

The note agreements were amended

in March 2024 to increase the total borrowing to $ 650,000 and extend the maturity date.

The note agreements were refinanced in August

2024 providing for total borrowings of $ 750,000 .

The agreements provide for interest at a rate of 10 % per annum and mature December 31,

As of the date of financial statements, the full amount of $ 750,000 has been funded pursuant to these agreements.

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

The note includes a guarantee which has been identified as an embedded derivative with a fair value of a liability

and $ 535,000

at December 31, 2024 and 2023, respectively, which is reported separately on the 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.

of the note discount of $ 66,570

and $ 61,815 ,

respectively, has been reflected as part of interest expense in the statement of operations for year ended December 31, 2024 and

INTERNATIONAL CORP.

to Financial Statements

Payable, Litigation Funding Agreement

9 unchanged sentences

to the same multiple calculations in the event of a favorable outcome that does not include the collection of claims.

During the year

ended December 31, 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.

INTERNATIONAL CORP.

to Financial Statements

July 2023, the arbitration was settled with a 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,

July 2023, the arbitration was settled.

As a result of the ruling disclosed in Note 7, the liability became probable and reasonably estimable,

and the Company recorded the full liability due to Omni as of December 31, 2023.

This liability consists of expenses funded by Omni of

including $ 310,000

advanced for working capital, and related fees or investment return to Omni calculated as contractual multiples of funding totaling

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 on January 10, 2025.

At December 31, 2023 and 2022 the Company had issued 50,316,672 and outstanding

46,881,475 shares of its common stock, par value $ 0.01 per share.

The Company held 3,435,197 shares of its common stock, $ .01 par value,

in treasury at December 31, 2023 and 2022.

Holders of outstanding common stock are entitled to receive dividends when, and if declared

by the Board and to share ratably in the assets of the Company legally available for distribution in the event of a liquidation, dissolution

or winding up of the Company.

$ 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 .

The Company accrued interest related to the Agreement of $ 140,428 during the

year ended December 31, 2024.

April 2024, the Company borrowed $ 100,000 from unrelated parties pursuant to convertible debt agreements accounted for as debt.

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.

Interest accrued related to

these agreements was $ 8,646 during the year ended December 31, 2024.

December 31, 2024 and 2023 the Company had issued 50,316,672 shares and had issued and outstanding 46,881,475 shares of its common stock,

par value $ 0.01 per share.

The Company held 3,435,197 shares of its common stock, $ 0.01 par value, in treasury at December 31, 2024 and

Holders of outstanding common stock are entitled to receive dividends when, and if declared by the Board and to share ratably in

the assets of the Company legally available for distribution in the event of a liquidation, dissolution or winding up of the Company.

Summary Employee Option Information

12 unchanged sentences

of 6,360,000 options have been issued to directors and investor relations professionals.

INTERNATIONAL CORP.

to Financial Statements

Company utilized the Black-Scholes option-pricing model to estimate fair value, utilizing the following assumptions for the respective

years (all in weighted averages):

OF FAIR VALUE OF OPTION USING VALUATION ASSUMPTIONS

SCHEDULE OF FAIR VALUE OF OPTION USING VALUATION ASSUMPTIONS

Year Ended December 31,

16 unchanged sentences

The Company has not paid and does not anticipate paying of dividends in the near future.

INTERNATIONAL CORP.

to Financial Statements

Summary Option Information

1 unchanged sentence

is presented below:

OF STOCK OPTION ACTIVITIES

SCHEDULE OF STOCK OPTION ACTIVITIES

Year Ended December 31,

5 unchanged sentences

31, 2024 and 2023.

An award of 500,000 options granted on January 31, 2022 had special vesting provisions whereby the awards fully vested

INTERNATIONAL CORP.

to Financial Statements

Company has issued warrants at exercise prices equal to or greater than market value of the Company’s common stock at the date

A summary of warrant activity follows:

OF WARRANTS ACTIVITY

SUMMARY OF WARRANTS ACTIVITY

Year Ended December 31,

3 unchanged sentences

warrant agreements were amended on May 12, 2023 to extend the expiration date to June

The warrants outstanding at December

31, 2023 have a weighted average remaining contractual life of approximately one and a half years .

The 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 year ended December 31, 2023.

The warrants outstanding at December 31, 2024 have a weighted average remaining contractual life of approximately one

1.5 half year.

The 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 year ended December 31, 2023.

No such expense was recognized related to the warrants during the year ended December

INTERNATIONAL CORP.

to Financial Statements

6— INCOME TAXES

the years ended December 31, 2023 and 2022, the Company incurred net operating losses and, accordingly, no provision for income

taxes has been recorded.

In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any

At December 31, 2023 and 2022, the Company had approximately $ 54,000,000

and $ 61,000,000 ,

respectively of net operating losses subject to IRC Section 382 limitations, of which $ 9,900,000

and $ 6,400,000 ,

respectively, were available for carryforward after the consideration of IRC Section 382 limitations.

State of Florida net operating

losses available for carryforward approximate the federal net operating loss carryforward amounts.

Company’s federal and state net operating losses began expiring in 2021.

Approximately $ 8,000,000

and $ 4,000,000 ,

respectively of federal and state losses expired in December 2023, and approximately $ 55,000,000

and $ 25,000,000 ,

respectively, of federal and state losses expired in December 2022.

The Company has approximately $ 5,331,000

in federal and state losses that do not expire.

The remaining losses expire from 2024 through 2036.

The majority of these expiring

losses are further limited by IRC section 382 as shown in the deferred tax table below.

All such deferred tax assets have been

offset with a full valuation allowance.

the years ended December 31, 2024 and 2023, the Company incurred net operating losses and, accordingly, no provision for income taxes

has been recorded.

In addition, no benefit for income taxes has been recorded due to the uncertainty of the realization of any tax assets.

At December 31, 2024 and 2023, the Company had approximately $ 48,000,000 and $ 54,000,000 , respectively of net operating losses subject

to IRC Section 382 limitations, of which $ 10,600,000 and $ 9,600,000 , respectively, were available for carryforward after the consideration

of IRC Section 382 limitations.

State of Florida net operating losses available for carryforward approximate the federal net operating

loss carryforward amounts.

federal and state net operating losses began expiring in 2021.

Approximately $ 5,000,000 and $ 300,000 , respectively of federal and state

losses expired in December 2024, and approximately $ 8,000,000 and $ 4,000,000 , respectively, of federal and state losses expired in December

The Company has approximately $ 6,063,000 in federal and state losses that do not expire.

The remaining losses expire from 2025

through 2036.

The majority of these expiring losses are further limited by IRC section 382 as shown in the deferred tax table below.

All such deferred tax assets have been offset with a full valuation allowance.

Company’s income tax provision differs from the expense that would result from applying statutory rates to income before taxes.

2 unchanged sentences

rate to income before income taxes is as follows:

OF INCOME BEFORE INCOME TAX

SCHEDULE OF INCOME BEFORE INCOME TAX

Year Ended December 31,

6 unchanged sentences

Total provision for income tax

INTERNATIONAL CORP.

to Financial Statements

income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial

1 unchanged sentence

Deferred tax assets as of December 31, 2024 and 2023 consist of the

SCHEDULE OF DEFERRED TAX

SCHEDULE OF DEFERRED TAX ASSETS

As of December 31,

2 unchanged sentences

General business credit

Related party

interest and accretion of note discount

Related party interest and accretion of note discount

Loss on derivative instrument

11 unchanged sentences

Net deferred tax assets

has evaluated all tax positions that could have a significant effect on the combined financial statements and determined the Companies

has evaluated all tax positions that could have a significant effect on the combined financial statements and determined the Company

had no significant uncertain income tax positions at December 31, 2024 and 2023.

INTERNATIONAL CORP.

to Financial Statements

7— COMMITMENTS AND CONTINGENCIES

5 unchanged sentences

proceedings for the joint owners of NetCo concluded during 2022 and the arbitrator rendered a decision in July 2023.

The 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.

The 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.

Arbitrator ruled in NovelStem’s favor on the issue of contract interpretation of the Netco Partners JV Agreement.

9 unchanged sentences

8— SUBSEQUENT EVENTS

The Company evaluated subsequent events through the date these financial statements were available

to be issued and filed with the SEC.

During the fourth quarter of 2023,

the Company entered into negotiations with NewStem stockholders for the acquisition of the shares not held by the Company.

The negotiations

are ongoing for the transaction in which the Company would acquire all outstanding shares in exchange for shares of NovelStem stock.

management anticipates the transaction to conclude in the second quarter of 2024.

In anticipation of the Company acquiring the remaining

ownership of NewStem, the Company has loaned $ 500,000 to NewStem to ensure continuing operations.

The Company advanced $ 250,000 of this

loan to NewStem in December 2023 and the remainder in March 2024.

As disclosed in Note 4, related

party loan agreements were amended in March 2024 to increase the total borrowing to $ 650,000 and extend the maturity date to September

The Company received an advances of $ 250,000 on these agreements which was utilized to fund NewStem in March 2024 fully utilizing

available borrowings.

Amended and Restated Articles of Incorporation December 1999 (1)

of Amendment to Articles of Incorporation 2004 (1)

of Amendment to Articles of Incorporation 2018 (1)

of Association of NewStem (1)

Incentive Plan (1)

Venture Agreement by and between the Company and NetCo (1)

Company evaluated subsequent events through the date these financial statements were available to be issued and filed with the SEC.

February 2025, the Company reached an agreement with C.P.

(“CP”), our NetCo joint venture partner, and Omni

Bridgeway (‘Omni”), the holder of the litigation funding agreement, to sell our interest in NetCo to CP for $ 1,300,000

in a transaction where the sales proceeds would be provided to Omni in exchange for a full release of our liability to Omni.

Settlement Agreement and Release has been prepared and approved by all parties, however is still in the process of being circulated

and reviewed for final execution as of the date of these financial statements.

Third Amended and Restated Articles of Incorporation December 1999 (1)

Articles of Amendment to Articles of Incorporation 2004 (1)

Articles of Amendment to Articles of Incorporation 2018 (1)

Articles of Association of NewStem (1)

Equity Incentive Plan (1)

Joint Venture Agreement by and between the Company and NetCo (1)

Financing Agreement dated May 2022 (1)

to Financing Agreement dated July 2022 (1)

Amendment to Financing Agreement dated July 2022 (1)

Promissory Note issued to Jan Loeb (1)

Note issued to Jerry Wolasky (1)

of NovelStem Subscription Agreement (1)

Share Purchase Agreement (1)

Litigation Funding Agreement with Omni Bridgeway (1)

Promissory Note issued to Jerry Wolasky (1)

Form of NovelStem Subscription Agreement (1)

NewStem Share Purchase Agreement (1)

Redacted Litigation Funding Agreement with Omni Bridgeway (1)

Promissory Note issued to Stephen Gans

12 unchanged sentences

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

statements of fifty percent or less owned subsidiaries.

of December 31, 2023

Statements as of December 31, 2023

of Independent Registered Public Accounting Firm

of Operations

of Changes in Shareholders’ Equity

of Cash Flows

to the Financial Statements

Millennium Tower

Ha’arba’a Street, PO Box 609

Aviv 61006, Israel

of Independent Registered Public Accounting Firm

the Shareholders and the Board of Directors of NewStem Ltd.

on the Financial Statements

have audited the accompanying balance sheets of NewStem Ltd.

as of December 31, 2023 and 2022, the related statements of operations,

changes in shareholders’ equity and cash flows for each of the years in the two-year period ended December 31, 2023, and the related

notes (collectively, the financial statements).

In our opinion, the financial statements present fairly, in all material respects, the

financial position of the Company as of December 31, 2023 and 2022, and the results of its operations and its cash flows for each of

the years in the two-year period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

accompanying financial statements have been prepared assuming that the Company will continue as a going concern.

As discussed in Note

1C to the financial statements, the Company has suffered recurring losses from operations and has an accumulated deficit that raise substantial

doubt about its ability to continue as a going concern.

Management’s plans in regard to these matters are also described in Note

The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

financial statements are the responsibility of the Company’s management.

Our responsibility is to express an opinion on these financial

statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United

States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and

the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

conducted our audits in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain

reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error

or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding

the amounts and disclosures in the financial statements.

Our audits also included evaluating the accounting principles used and significant

estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that our audits

provide a reasonable basis for our opinion.

Audit Matters

audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be

communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and

(2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ Somekh Chaikin

Firm of KPMG International

have served as the Company’s auditor since 2021.

Somekh Chaikin, an Israeli partnership and a member firm of the KPMG global organization of independent member

firms affiliated with

KPMG International Limited, a private English company limited by guarantee

Sheets as of December 31,

and cash equivalents

current assets

and equipment, net

and shareholders’ equity

current liabilities

financial instrument

and contingent liabilities

Shareholders’

paid-in capital

shareholders’ equity

liabilities and shareholders’ equity

of approval of the financial statements:

March 20, 2024

* Represents an amount

less than $1 thousand.

accompanying notes are an integral part of the financial statements.

of Operations for the Year Ended December 31,

and development expenses

– grants and participations received

and development expenses, net

and administrative expenses, net

accompanying notes are an integral part of the financial statements.

of Changes in Shareholders’ Equity

as of January 1, 2022

of ordinary shares, net

based compensation

as of December 31, 2022

of convertible financial instrument

based compensation

as of December 31, 2023

* Represents an amount

less than $1 thousand.

accompanying notes are an integral part of the financial statements.

of Cash Flows for the year ended December 31

flows from operating activities

required to reconcile loss to net cash used in operating activities:

of convertible financial instrument

based compensation

in other current assets

in other liabilities

in accounts payable

cash used in operating activities

flows from financing activities

received from a related party

of ordinary shares, net

cash provided by financing activities

increase (decrease) in cash and cash equivalents

and cash equivalents at the beginning of the year

and cash equivalents at the end of the year

financing activities

of convertible financial instrument

accompanying notes are an integral part of the financial statements.

to the Financial Statements for the year ended December 31, 2023

1— NATURE OF OPERATIONS

(“the Company”) was incorporated in September 2016 under the laws of the

State of Israel and commenced its business operations in July 2018.

Company is a development stage company utilizing its pioneering intellectual property related

to haploid human embryonic stem cells for the development of personalized diagnostics and

therapeutics for genetic and epigenetic diseases.

inception, the Company has accumulated losses of US$ 9,089 thousand.

During the year ended December 31, 2023, the Company has incurred

losses of US$ 1,119 thousand.

As of December 31, 2023, the Company’s cash and cash equivalents balance is US$ 324 thousand, and the

net cash used in operating activities during 2023, is US$ 804 thousand.

Company will need to obtain additional funds to continue its operations over the next 12 months.

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 (see also Note 1D).

The Company’s management has adopted

a cost reduction plan in order to adjust future operation expenses to its cash balance.

On October 23, 2023, the board of directors of

the Company unanimously resolved, due to the financial status of the Company, to hold a hearing for most of the Company’s employees

to be followed by a dismissal notice, which occurred on December 31, 2023.

above-mentioned events incur significant difficulties to continue to operate the Company’s business and there is a substantial

doubt about its ability to continue as a going concern during the look-forward period.

The financial statements do not include any adjustments

to the carrying amounts and classification of assets, liabilities, and reported expenses that may be necessary if the Company were unable

to continue as a going concern.

the brutal attacks on Israel, the mobilization of army reserves, and the Government declaring a state of war (“Iron Swords”

war) in October 2023, there was a decrease in Israel’s economic and business activity.

The security situation has led, inter alia,

to a disruption in the chain of supply and production, a decrease in the volume of national transportation, a shortage in manpower as

well as a decrease in the value of financial assets and a rise in the exchange rate of foreign currencies in relation to the shekel.

a result of the movement and work restrictions, the Company began operating on a limited scale, and most of the employees were instructed

to work from home.

In addition, the situation has brought further difficulties in management’s efforts to seek additional financing

arrangements.

these financial statements –

Company – NewStem Ltd.

Party – Within its meaning in ASC 850, “Related Party Transactions”.

to the Financial Statements for the year ended December 31, 2023

2 - Significant Accounting Policies

2— SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

significant accounting policies applied on a consistent basis are as follows:

Basis of Presentation

financial statements are prepared in accordance with accounting principles generally accepted in the United States (“US GAAP”).

Functional currency

currency of the primary economic environment in which the Company conducts its operations is the U.S.

The Company raises funds

in US dollars and manages its budget in US dollars.

Initial revenues recorded in 2023 were generated in US dollars, and future revenues

are also expected to be generated in US dollars.

Accordingly, the Company uses the U.S.

dollar as its functional and reporting currency.

Use of estimates

preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions regarding transactions

or matters the final effect of which on the financial statements cannot be accurately determined at the time of their preparation.

though the estimates and assumptions are based on management’s best judgment, the final effect of such transactions or matters

may be different from the estimates and assumptions made in their respect.

applicable to these financial statements, the most significant estimates and assumptions relate to stock-based compensation.

Cash and cash equivalents

and cash equivalents include short-term bank deposits with an original maturity not exceeding three months, that is not restricted for

Property and equipment

and equipment are stated at cost.

Depreciation is computed by using the straight-line method, over the assets’ estimated useful

annual depreciation rate for Software and Computers is 33 %.

of the depreciation method, useful life and residual value are reviewed at least at the end of each reporting year and adjusted as necessary.

assets held and used by the Company, are reviewed for impairment whenever events or changes in circumstance indicate that the carrying

amount of the assets may not be recoverable.

No such impairment was recorded in 2023 or 2022.

to the Financial Statements for the year ended December 31, 2023

2 - Significant Accounting Policies (cont’d)

Concentrations of credit risk

instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents.

and cash equivalents are invested in a major bank in Israel.

Management believes that the financial institution that holds the Company’s

investments is financially sound and, accordingly, a minimal credit risk exists with respect to these investments.

Company has no off-balance-sheet concentration of credit risk such as foreign exchange contracts, option contracts or other foreign hedging

arrangements.

Severance pays

to Section 14 of the Severance Compensation Law, 1963 (“Section 14”), the Company’s employees, covered by this section,

are entitled only to monthly deposits, at a rate of 8.33% of their monthly salary, made in their name with insurance companies and/or

pension funds.

Payments in accordance with Section 14 release the Company from any liability for future severance payments in respect

of those employees.

Deposits under Section 14 are not recorded as an asset in the Company’s balance sheet.

All of the Company’s

employees are included under Section 14.

Research and development costs

and development expenses consist mainly of labor costs.

Costs are expensed as incurred.

grant received is offset from research and development expenses.

What changed 10-K

Item 9A. Controls and Procedures