UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
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Amendment 1
to
FORM 10-KSB
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[x] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
OF 1934.
FOR THE FISCAL YEAR ENDED MARCH 31, 2008
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934.
FOR THE TRANSITION PERIOD FROM ____ TO ____.
COMMISSION FILE NUMBER
0-17232
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STEM CELL THERAPY INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
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NEVADA 88-0374180
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NUMBER)
INCORPORATION OR ORGANIZATION)
2203 N. LOIS AVENUE, 9TH FLOOR, TAMPA, FL
33607
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(813) 600-4088
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the past 12 months (or
for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. [x]
YES [ ] NO
Check if no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is contained in this form, and no disclosure will be contained,
to the best of registrant's knowledge, in definitive proxy of information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [x]
Indicate by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act) [ ] YES [x] NO
State issuer's revenues for its most recent fiscal year $132,960
Aggregate market value of the voting and non-voting common equity of the
registrant held by non-affiliates of the registrant at March 31, 2008, was
$3,069,028 based upon the closing sale price of $0.075 or the Registrant's
common stock, $.001 par value, as reported by the National Association of
Securities Dealers OTC Bulletin Board on July 10, 2008.
There were 40,920,369 shares of the Registrant's $.001 par value common
stock outstanding as of March 31, 2008.
Transitional Small Business Format (check one) Yes [ ] NO [x]
STEM CELL THERAPY INTERNATIONAL, INC.
FORM 10-KSB - INDEX
Part I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Part II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis
Item 7. Consolidated Financial Statements
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Item 8A. Controls and Procedures
Item 8B Other Information
Part III
Item 9. Directors, Executive Officers, Promoters, and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation
Item 11. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and Reports on Form 8-K
Item 14. Principal Accountants Fees and Services
STEM CELL THERAPY INTERNATIONAL, INC.
This Annual Report on Form 10-KSB and the documents incorporated herein by
reference contain forward-looking statements that have been made pursuant to the
provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are based on current expectations, estimates and
projections about Stem Cell Therapy International, Inc.'s industry, management
beliefs, and assumptions made by management. Words such as "anticipates,"
"expects," "intends," "plans," "believes," "seeks," "estimates," variations of
such words and similar expressions are intended to identify such forward-looking
statements. These statements are not guarantees of future performance and are
subject to certain risks, uncertainties and assumptions that are difficult to
predict; therefore, actual results and outcomes may differ materially from what
is expressed or forecasted in any such forward-looking statements.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
COMPANY HISTORY
Stem Cell Therapy International, Inc. (the "Company") has been engaged in
the licensing of stem cell technology, the sale of stem cell products, and the
referral of patients to affiliated stem cell clinics through it's wholly-owned
subsidiary Stem Cell Therapy International Corp ("Stem Cell Florida"), which the
Company acquired in 2005. The complete history of the Company and its operating
subsidiary is as follows:
The Company's operating subsidiary is Stem Cell Florida. Stem Cell Florida
was incorporated in Nevada on December 2, 2004, with the primary purpose of
establishing stem cell transplantation clinics and stem cell marketing. Prior to
the reverse acquisition, as discussed below, and since inception, Stem Cell
Florida was a development stage company whose activities had been limited to
raising capital, organizational matters, and the structuring of its business
plan. Stem Cell Florida remains in a developmental stage, as the Company
continues to focus primarily on developing its business strategy and financing
the Company.
The Company was originally incorporated in Nevada on December 28, 1992 as
Arklow Associates, Inc. On March 20, 1997, the Company changed its name to The
Ultimate Cigar Company, Inc. On July 22, 1999, the Company changed its name to
Ultimate Direct, Inc. On January 11, 2005, the Company changed its name to
Altadyne, Inc.
On March 20, 2005, R Capital Partners, Inc., a Nevada Corporation ("R
Capital"), acquired the Company (then Altadyne, Inc., a shell company).
On September 1, 2005, R Capital, Stem Cell Florida, and the Company (then
Altadyne, Inc.) entered into a Reorganization and Stock Purchase Agreement. At
that point, the Company had no assets, liabilities or ongoing operations.
Pursuant to the agreement, Altadyne acquired 100% of the issued and outstanding
shares of common stock of Stem Cell Florida in a non-cash transaction and Stem
Cell Florida became a wholly-owned subsidiary of Altadyne. As consideration for
100% of the shares of Stem Cell Florida, the shareholders of Stem Cell Florida
acquired (1) shares newly issued by the Company (then Altadyne, Inc.), and (2)
certain shares transferred by R Capital. Of the 22,500,000 shares originally
held by R Capital, R Capital retained 4,349,196 shares and transferred 4,000,000
shares to finders unaffiliated with R Capital. R Capital transferred the
remaining 14,150,804 shares held by it to the shareholders of Stem Cell Florida
and others. In addition, the Company issued 11,030,000 new shares to the
shareholders of Stem Cell Florida and others. The recipients of these 25,180,804
shares include the shareholders of Stem Cell Florida, unaffiliated consultants
in exchange for services, and members of the President's family in exchange for
a reduction in debt owed to the President.
As a result of this transaction, Stem Cell Florida became a wholly owned
subsidiary of the Company (then Altadyne, Inc.), and the shareholders of Stem
Cell Florida became shareholders of the Company. The Company assumed operation
of the business of Stem Cell Florida, which was to establish stem cell therapy
clinics and stem cell marketing. On October 5, 2005, the Company changed its
name to Stem Cell Therapy International, Inc. to reflect the new business of the
Company.
On March 10, 2008, the Company entered into a Reorganization and Stock
Purchase Agreement and its amendments (the "Agreement") with Histostem Co.,
Ltd., a Korean company ("Histostem"). Pursuant to the Agreement (as subsequently
amended), the Company will acquire 90% of the issued and outstanding stock of
Histostem, and Histostem's shareholders will acquire a controlling interest in
the Company. The original definitive agreement called for closing of the
acquisition by April 30, 2008. Subsequent to Closing, the Company will be held
approximately 60% by Histostem and 40% by the existing shareholders of the
Company. Upon completion of the acquisition, the Company will be renamed AmStem
International Corp., increase the authorized number of shares to 500,000,000 and
seek a new symbol on the over-the-counter bulletin board.
On April 22, 2008, the Company amended the Agreement to state that
Histostem shall have received funding at the date of the actual closing at a
minimum of 2 million dollars towards the initial round of funding of at least 10
million dollars. Subsequent to that amendment, the actual closing deadline of
April 30, 2008 was no longer in effect.
On June 19, 2008, the Company entered into a second Amendment to the
Reorganization and Stock Purchase Agreement. In accordance with the terms of
this second Amendment, the Company and Histostem issued and delivered shares
reflecting the acquisition of Histostem into Escrow by the Company pending
resolution of outstanding litigation between Histostem Korea and Histostem, Inc.
(a United States corporation unrelated to Histostem) ("Histostem USA"). This
essentially effectuates an immediate closing of the Histostem acquisition. In
the Amendment the parties also agreed to complete a one for three reverse stock
split of the Company's common stock. That reverse stock split will be completed
after filing, mailing and completion of a 14C Information Statement to the
Company's shareholders and appropriate notice and filings with the NASD.
COMPANY AND BUSINESS OVERVIEW
The Company's executive management team are: David Stark, President, Andrew,
J. Norstrud, Chief Financial Officer; and Lixian Jiang, Chief Operating Officer
and Patent Trademark Counsel.
We have been indirectly involved, as a "middle man," in research and
development and practical application within the field of regenerative medicine.
SCTI provides allo (human) stem cell biological solutions that are currently
being used in the treatment of patients suffering from degenerative disorders of
the human body.
Our mission has been to make available our stem cell products to treatment
facilities around the world, so that patients suffering from biological and
neurological disorders, previously deemed incurable by traditional medicine, may
find a solution to their disabling and crippling conditions within the new field
of stem cell transplantation therapy. Our products include solutions containing
allo stem cell biological solutions, adult stem cells (stem cells that remain
undifferentiated in a mature organism) and stem cells which are extracted from
umbilical cord blood.
Members of our U.S. and European Medical and Scientific Advisory Boards
review each patient's condition and medical history. They establish an
individual treatment protocol for each patient that includes the appropriate
stem cell transplantation therapy, the number of stem cell doses required,
special diet and lifestyle recommendations as well as physical therapy and
specific exercise and recovery programs. There are no set criteria to determine
these questions; the members of each Board use their professional expertise and
judgment to determine the treatment protocol on a case by case basis. The Boards
consist of independent consultants.
Stem cell transplantation therapy is a field of medicine which uses
techniques and technologies that rely on replacing diseased, damaged or
dysfunctional cells with healthy, functioning ones. This therapy is similar to
the process of organ transplantation where the treatment only consists of the
transplantation of allo stem cells into the body rather than entire organs, thus
eliminating any chance of rejection, or the need for expensive and potentially
dangerous immunosuppression drug therapy (the use of drug therapy to suppress
the immune system, in order to prevent the immune system from attacking a
transplanted organ). See Mayo Clinic Medical Services, "Stem Cell Transplant,"
at www.mayoclinic.com/health/stem-cell-transplant/CA00067.
These new techniques are being applied to potentially finding a cure for a
wide range of human disorders, including neurological diseases such as
Alzheimer's, Parkinson's Disease, ALS (which is also commonly known as Lou
Gehrig's disease), leukemia, muscular dystrophy, multiple sclerosis, arthritis,
spinal cord injuries, brain injury, stroke, heart disease, liver and retinal
disease, diabetes as well as certain types of cancer and can alleviate the side
effects of chemotherapy. See "List of Diseases Potentially Treated by the
Company's Technology" below for a more complete discussion.
Since 1981, the study and production of biological preparations from animal
and human cells were being carried out within the framework of the scientific
programs under the aegis of the National Academy of Sciences, the Medical
Academy of Sciences, the Ministry of Public Health and the Coordination Center
for Organ, Tissue, and Cells Transplantation within the Ukraine Ministry of
Public Health. The applications of biological stem cell preparations have been
sanctioned by the Ministry of Public Health of the Ukraine since 1991 (The end
of communist control in the Ukraine). See P. Filaroski, "ALS Victim Hunts for
Cure in Ukraine Clinic Offers Hope in Stem Cell Treatment," The Florida
Union-Times, July 17, 2002.
We also have affiliate treatment facilities in Tijuana, Mexico and Shenzhen,
China.
The Company's offices are presently located at 2203 N Lois Ave 9th Floor,
Tampa, FL 33607. The Company's website is HTTP://WWW.SCTICORP.COM.
PRINCIPAL PRODUCTS AND SERVICES
We do not directly offer any medical advise, diagnosis or treatment involving
Stem Cells, and we do not create stem cells. Instead, we essentially act as a
"middle man" between stem cell product suppliers, clinics, and patients.
To date, we have referred patients for treatment to facilities in Kiev,
Ukraine, Tijuana, Mexico and Shenzhen, China. All of these clinics are
independently owned and operated by the treating physicians at each location.
Our involvement is to refer patients for treatment to either facility. We also
purchase the stem cell biological solution used for the treatment of the
patients from each location. Beyond the referral service and the purchase of the
stem cell biological solution, we have no involvement or control on how the
clinics are staffed or operated, that function remains with the local treating
physicians. These clinics operate independently of our operations, receive
patients from sources in addition to our referrals and are controlled by their
principals without management assistance or direction from our operations.
While we may enter into relationships with other facilities in the future, to
date we only have utilized the services of the three independent clinics for
referrals of our patients. Since September 2006, all referrals of patients have
been to treatment facilities located in Mexico and China.
Accordingly, our primary source of revenue has been derived from: (1)
providing referral services, including information and education services, to
patients, and (2) purchasing stem cell products that they will use on the
patients that we refer to them. The amount we charge for these services is
comparable to other companies providing this type of referral service. We have
negotiated with the treatment facilities we utilize and will negotiate with
other future clinics we intend to utilize for the pricing of the biological
solution of stem cell materials which we supply to them. The terms and
conditions, including any potential volume discounts, are negotiated on an
individual basis.
We have established a Medical and Scientific Board of Advisors (the Advisory
Board) who act as consultants and whose responsibility is to determine any
potential patients' medical condition based on specific medical test results and
other information that is provided by the patient's treating physician. These
consultants are neurosurgeons, M.D.'s, Ph.D.'s, scientists and research fellows,
all of whom are currently working in the field of stem cell treatment and
research. The Advisory Board determines the viability of the stem cell
transplantation therapy for each potential patient and whether or not the
potential patient will benefit from stem cell treatment. If the Advisory Board
determines that a patient's condition will not improve upon receiving the stem
cell transplantation, then the patient is not accepted for treatment. However,
if the Advisory Board determines that the patient may benefit from stem cell
transplantation, then management, the Advisory Board and the patient determine
which treatment facility will provide the best possible treatment for the
patient's condition. Each member of the Advisory Board received a one-time award
of 10,000 shares of restricted common stock as compensation for the services
provided to the Company.
These shares are awarded without regard to how many patients are recommended for
stem cell therapy, if any. Management believes that it has recruited industry
respected individuals to form the Advisory Board and encourages those members to
recommend only what is in the best interest of each patient. A potential
conflict of interest may exist as the members of the Advisory Board are
compensated with restricted common stock and the value of that common stock may
be influenced by the number of patient procedures recommended by the Advisory
Board. In addition, two members of the Advisory Board are located in Mexico and
provide treatment services to patients, which could result in an additional
conflict of interest.
In addition, some members of the Advisory Board are requested to perform
additional services, such as evaluating new technologies and products that are
available for stem cell treatment. In exchange for these services, these members
are compensated with additional shares of restricted common stock equivalent in
value to the services provided, as determined by the Company's management.
Although the market for our services is in its infancy and still developing,
the potential market includes any person with a disease or injury that becomes
treatable by stem cell therapy. Thus, our market depends largely on the Research
and Development efforts of our affiliates and others from which we may obtain
licenses in the future.
Information, Education and Referral Services
Through our website and organizations like the StrokeNetwork.org,
DifferentStrokes.org, the MS Society, we have a worldwide referral network of
potential patients seeking stem cell treatment. We offer information, education
and referral services for those individuals with degenerative conditions seeking
stem cell and related therapies in a lawful jurisdiction outside of the United
States.
Sales of Stem Cell Products
Once we have referred patients to an affiliated clinic, we supply that clinic
with the stem cell products that they will use on the referred patients which is
acquired from local stem cell manufacturers. Our principal stem cell products
are solutions containing allo stem cell biological solutions, either adult stem
cells or stem cells which are extracted from umbilical cord blood. We do not
directly collect, culture or clone stem cell lines. We provide stem cell
products and technology to clinics in Mexico and China (although we may have
future affiliations), which are highly specialized, professional medical
treatment facilities around the world in locations where Stem Cell
Transplantation therapy is approved by the appropriate local government
agencies.
OVERVIEW OF STEM CELLS AND THEIR BENEFITS
Stem Cell Transplantation is a minimal surgical procedure that has been used
successfully for more than 70 years as a treatment of many diseases for which
modern medicine has had no therapy, or in which traditional therapies stopped
being effective. A documented 5 million patients have already been treated using
Stem Cell Transplantation worldwide to-date, evidenced by over 140,000
publications in MEDLINE. For a complete resource on stem cells and stem cell
transplantation, visit www.nlm.nih.gov/medlineplus/stemcellsandstemcell
transplantation.html.
Stem cell transplantation is not a "wonder drug," or a transplantation of
some "wonder cell" that will cure everything. The body of every member of the
animal kingdom, including man, is built from about 200 kinds of cells, see P.
Dasgupta, "Much Ado about Stem Cells," The Statesman SciTech Supplement, Aug.
20, 2001, available at http://cactus.eas.asu.edu/ Partha/columns.htm, and since
1998 the Company's affiliated entities have been able to prepare stem cell
transplants and make such transplants available for patient treatment, without
immunosuppression.
This is the result of more than 20 years of ongoing research by many
individuals and companies, and clinical experience with stem cell
transplantation in patients suffering from those diseases where physicians
recognized that their patient needed an outright transplantation of allo stem
cells to replace the dead or non-functioning cells, or a direct stimulation of
regeneration (i.e. repair) of the damaged cells and tissues of various organs.
There are crucial differences in the mechanism of the action of Stem Cell
Transplantation as opposed to traditional drug (chemical) therapy and organ
transplantation; Cell transplantation is a vastly different approach to existing
medical therapy. Everything in the living body is in constant motion: electrons,
protons, and other elementary particles of each atom, all atoms, all molecules,
all cell organelles (the specialized parts of a cell, analogous to a cell's
"organs"), as well as all fluids, which represent between 75% and 55% of body
weight. See University of Massachusetts, Amherst Dining Services, "The Six Basic
Nutrients," at
http://www.umass.edu/diningservices/nutrition/six_basic_nutrients.html. Further,
there is electromagnetic radiation associated with all such movement, a subject
almost completely neglected by
medical science. The final result of all of this activity is that every cell in
your body (with the possible exception of certain neurons) is programmed to die.
All cells of our body are being continuously replaced, albeit each kind with
different speed. See generally Christopher Potten and James Wilson, Apoptosis:
the Life and Death of Cells, Cambridge University Press (2004) for a complete
discussion on the death and replacement of the body's cells.
It is common knowledge among the medical community that generally in every
disease the principal cells of a diseased organ die faster than the sick body is
able to replace them. When the quantity of principal cells of a diseased organ
drops below a certain limit, the organ dies. If it is a vitally important organ,
without which one cannot live, such as the heart, liver or brain, for example,
and surgeons cannot replace such a dying organ, the sick organism will die, as
well. Current medicine knows of one treatment only when it becomes mandatory to
replace dead cells, tissues, or organs--transplantation. Transplantations of
organs from human donors, such as heart, kidney, liver, etc., have become fairly
common nowadays. See "The Future of Organ Transplantations," at
http://www.itvisus.com/programs/cemr/press_futureorgan.asp. These are life
saving major surgical procedures, usually done as a "treatment of last resort."
Besides the obvious surgical risk, there is always a problem of rejection.
See "Transplant Rejection," at
http://en.wikipedia.org/wiki/Transplant_rejection. The body of the recipient
patient rejecting a transplanted organ from another body is almost always
guaranteed as an issue in transplantation surgery, and the only way to prevent
it is by taking immunosuppressants (drugs used to suppress the immune system)
for the rest of the patient's life. These drugs can stop a rejection for some
time, but only at the expense of serious, often life-endangering, complications.
By suppressing the patients' immune system it leaves the patient vulnerable to
many types of infectious diseases. See "Immunosuppression," at
http://en.wikipedia.org/wiki/ Immunosuppression.
Some organs cannot be transplanted, such as the brain, spinal cord, eyes,
neural system or the immune system, so that many diseases cannot be treated by
organ transplantation. See "Whole Body Transplant" at
http://en.wikipedia.org/wiki/B rain_transfer; Boulder Eye Surgeons, "Basic Eye
Facts," at http://www.bouldereyesurgeons.com/basiceyefacts.htm; F. Wilt,
"Continuation of Discussion of Cloning," at
http://mcb.berkeley.edu/courses/mcb31/lect10.html.
Transplantation of bone marrow hematopoitic stem cells was introduced into
clinical practice in the 1950s, approximately the same time as the first
successful organ transplantation. See The Fred Hutchison Cancer Research Center,
"The History of Transplantation," at
http://www.fhcrc.org/science/clinical/ltfu/faqs/transplantation.html; The
Southeast Tissue Alliance, "History of Organ and Tissue Transplantation," at
http://www.donorcare.org/ about_history.html. The Company believes that stem
cell transplantation will dominate the medicine of the 21st century. The main
reasons for such statements are:
1) Stem cell transplantation is a minor procedure for a patient, (no more than
an Intra Muscular injection or an Intra Venus drip like a transfusion) and for
that reason the Company believes it can be, and should be, used in the earlier
stages of those diseases that current medicine cannot cure, or even treat. It
means that there is no logical reason to wait until the end-stage, as is the
case with organ transplantation, and has been the case with stem cell
transplantation until now.
2) One of the reasons why stem cell transplantation is such a simple procedure
for a patient to go through is the principle of "homing." Homing means that the
respective stem cells do not have to be implanted directly into a damaged organ,
(e.g. liver stem cells into liver), they can be implanted into more accessible
superficial tissues, (e.g. under certain connective tissues of an abdominal
muscle), because they will find their way into the damaged organ, as if
"attracted" by it. See National Heart, Lung, and Blood Institute, "Homing
Determinants in Stem/Progenitor Cells," 25 NIH Guide No. 24 (1996), available at
http://grants.nih.gov/grants/guide/rfa-files/RFA-HL-96-020.html.
3) The Company believes that every diseased organ in the human body can be
treated by stem cell transplantation.
4) Besides serving as a replacement for dead cells of a diseased organ, the
transplanted cells can bring back to life (or repair) those cells of such organ
which actually have not died, just stopped functioning properly as a result of
the disease. In other words, besides transplanting new stem cells there is
another mechanism of action of stem cell transplantation: a direct stimulation
of regeneration (or repair) of existing organs at the cellular level. See O.
Lindvall et al., "Stem Cells For the Treatment of Neurological Disorders," 441
Nature 1094 (2006), available at
http://www.nature.com/nature/journal/v441/n7097/full/nature04960.html
5) If stem cells are properly prepared, such as by the methods employed by the
Company, they can be implanted without immunosuppression, and thus avoid all
complications caused by the use of such medications. For clinical examples of
the use of stem cells without the need for immunosuppression, See Makkar, R. et
al., "Intramyocardial Injection of Allogenic Bone Marrow-Derived Mesenchymal
Stem Cells Without Immunosuppression Preserves Cardiac Function in a Porcine
Model of Myocardial Infarction," 10 J. Cardiovascular Pharmacology &
Therapeutics 225 (2005), available at http://cpt.sagepub.com; Johns Hopkins
Heart Institute, "Stem Cell Therapy Effectively Treats Heart Attacks in
Animals," at http://www.hopkinsmedicine.org/ Press_releases/2004/
WHAT IS STEM CELL TRANSPLANTATION?
Stem cells can be compared to floating voters - they have yet to make up
their minds. They are unspecialized cells that can renew themselves indefinitely
and develop into specialized, more mature cells. They have the potential to be
useful in repairing or replacing damaged body parts, and the hope is that they
could be the basis for future treatments of many diseases, including Alzheimer's
and Parkinson's diseases, spinal cord injuries, multiple sclerosis and diabetes.
Stem cells can potentially be derived from several sources: (1) from embryos
while they are still microscopic clusters of cells; (2) from fetal tissue,
usually from aborted fetuses; and (3) perhaps with greater technical difficulty,
from adult organs, for example from bone marrow during transplantation. See St.
Jude's Children's Research Hospital, "Stem Cell Sources," at
http://www.stjude.org/stem-cell-trans/0,2527,419_4135_6103,00.html.
Possible sources of embryonic stem cells are embryos left over from fertility
treatment that would otherwise be discarded, and specially created embryos.
Embryos could be specially created using standard in vitro fertilization (IVF)
techniques, whereby a sperm cell and an egg cell are combined. Other methods are
cloning techniques, such as cell nuclear replacement (where the nucleus of an
adult cell is introduced into an unfertilized egg), and parthenogenesis (where
an egg cell is activated into commencing development without being fertilized).
A potential advantage of cloning is that it could avoid the recognition by the
recipient's immune system of the tissue developed from the stem cells as
foreign, and rejection of the tissue. Once isolated, stem cells can be cultured
and stored. As well as being potentially useful in treating disease (therapeutic
cloning), cloned embryos could be implanted into a woman with a view to the
birth of a child (reproductive cloning). See The Royal Society, "Stem Cells and
Cloning," at http://www.royalsoc.ac.uk/landing.asp?id=1202 for a complete
resource on stem cells and cloning. Neither the Company nor its affiliates have
any plans to clone human embryos.
Human embryonic stem cells were successfully isolated and cultured from
embryos in the United States in 1998. These embryos were produced for clinical
purposes, and donated for the research. See "What is the History of Stem Cell
Research?" at http://www.allaboutpopular
issues.org/history-of-stem-cell-research-faq.htm.
In summary:
- Stem Cell Transplantation is a surgical procedure that has its origins in
bone marrow transplants first performed in the 1950s, and has the potential to
treat many conditions for which modern medicine has had no therapy, or for which
'state-of-art' therapies stopped being effective;
- Stem cell transplantation is not a 'wonder drug';
- Stem cell transplantation directly stimulates repair of the damaged cells of
any and all organs and tissues, and replaces dead or non-functioning cells;
- Stem cells can be of human (allo-) or animal (xeno-) origin; and
- Stem cell transplantation can be done through implantation by injection,
minor or major surgery, or by surface application.
ILLUSTRATIONS OF STEM CELLS AND HOW THEY WORK
When an egg is fertilized, the cells start to divide, first into two, then
four, eight cells, and more and more cells. Cell division continues, after four
days from fertilization, the conceptus (fertilized, pre-birth entity) becomes a
multi-cell ball called a blastocyst. After ten days, the blastocyst will begin
to form an embryo. The precursor stem cells of any and all organs or tissues are
harvested along with other members of the cell family from the fetus at 27 days
and can be transplanted into a patient to treat a variety of conditions. Stem
cells can regenerate into new cells, repairing or replacing the damaged cells.
Chemokine Receptors
HEART WITH DAMAGED OR INJURED CELLS (DIAGRAM 2)
-----------------------------------------------
[Omitted here, but included in .pdf version filed herewith]
BASIC STEM CELL CYCLE
[Omitted here, but included in .pdf version filed herewith]
The following photographs are an example of a topological application of stem
cells for burn patients. The patient depicted in the following graphics was
treated by our affiliate clinic in Kiev, which is run by ICT. All photographs of
the patient were produced by ICT.
Burn patient's state, before and after stem cell vs. traditional tissue
regeneration therapy. (Course of this treatment was 30 days)
[Omitted here, but included in .pdf version filed herewith]
Burn patients condition 30 days after beginning stem cell therapy and tissue
regeneration therapy. Stem cell biological solution applied 10 days prior to
picture being taken.
[Omitted here, but included in .pdf version filed herewith]
STEM CELL INDUSTRY CONSIDERATIONS
In the nascent, but rapidly growing field of stem cell therapies, products
are a long way from being commercialized. However, the market potential for stem
cell therapies products is very large. See generally "Cell Therapy
Commercialization: Applying Stem Cell and Related Strategies," Drug and Market
Development Publishing, January, 2006.
Much has been made of President Bush's 2001 executive order limiting the use
of federal funds for human embryonic stem-cell research. With this absence of
federal funding for stem cell research, researchers and stem-cell supporters are
seeking private investment to drive the science and the industry forward.
According to an abundant and diverse body of clinical studies, scientists
believe embryonic stem cells, which can grow and assimilate into any type of
body tissue, could eventually provide a unique way to repair damaged or diseased
tissue and treat or cure ailments including Parkinson's disease, Alzheimer's,
diabetes and even spinal cord injuries. See "List of Diseases Potentially
Treatable by the Company's Technology," below page 15. Supporters say the
laboratory creation and study of these lines, which could number in the
hundreds, is crucial to the advancement of the research.
Private donations have also spurred discovery of new stem-cell lines at
Harvard, which subsequently created the Stem Cell Institute, and the University
of Wisconsin, the University of California and Johns Hopkins have all made
advancements in stem-cell research.
According to an editorial published in RED HERRING (Feb 2003), stem cell
therapies are poised to capture what could be the biggest new market to hit
biotech in a decade, nearly equal to the whole biotech industry at present. This
estimate doesn't even address the market for stem cells capable of repairing
damaged vital organs like the brain, heart, and kidneys.
California's Proposition 71 currently allocates $3 billion funding for stem
cell research and development. Other states are rapidly following suit. On April
7, 2006, for example, the governor of Maryland signed a new bill into law
setting aside $15 million for stem cell research.
According to the website of the U.S. NIDDK (National Institute of Diabetes,
Digestive & Kidney Diseases) 18.2 million people - 6.3% of the population -
suffer from diabetes mellitus in the U.S. in 2000 and over 194 million globally.
LIST OF DISEASES POTENTIALLY TREATED BY THE COMPANY'S TECHNOLOGY:
Together with independent clinical research studies, our affiliates'
successful clinical results with about thirty patients, which the company
considers quite an adequate number considering the developmental stage our
industry is in, have demonstrated several categories of diseases that
potentially can be cured or otherwise treated by the use of stem cell
transplantation therapy.
The following is a non-exhaustive list of diseases that have either actually
been treated with stem cell therapy, or have had positive clinical results that
indicate that the disease may be treatable in the not-so-distant future:
Cancers and other Malignant Growths
- Acute and Chronic Leukemia
- Myelodysplastic Syndromes (Pre-Leukemia)
- Hodgkin's Disease and other Lymphomas
- Neuroblastoma
- Brain Tumors
- Ewing Sarcoma
- Ovarian Cancer
- Renal Cell Carcinoma
- Small-Cell Lung Cancer
- Testicular Cancer
SOURCES: Family Cord Blood Services, "Stem Cell Applications," at
http://www.familycordbloodservices.com/applications_list.cfm (hereinafter
"FCBS"); Cord Blood Registry, "Current Stem Cell Applications," at
http://www.cordblood.com/cord_blood_banking_with_
cbr/banking/diseases_treated.asp (hereinafter "CBR"); Czyz, J. et al., "Outcome
and Prognostic Factors in Advanced Hodgkin's Disease Treated with High-Dose
Chemotherapy and Autologous Stem Cell Transplantation: a Study of 341 Patients"
15 Annals of Oncology 1222 (2004), available at
http://annonc.oxfordjournals.org.
Immunodeficiencies
- Autoimmune Diseases
o HIV/AIDs
o Multiple Sclerosis
o Rheumatoid Arthritis
o Systemic Lupus Erythematosus
- Histiocytic Disorders
o Familial Erythrophagocytic Lymphohistiocytosis
o Hemophagocytosis
o Histiocytosis-X
o Langerhans' Cell Histiocytosis
- Congenital Immunodeficiencies
o Absense of T & B Cells
o Absense of T Cells
o Ataxia-Telangiectasia
o Bare Lymphocyte Syndrome
o Common Variable Immunodeficiency
o DiGeorge Syndrome
o Kostmann Syndrome
o Leukocyte Adhesion Deficiency
o Omenn's Syndrome
o Severe Combined Immunodeficiency
o Wiskott-Aldrich Syndrome
o X-Linked Lympho-proliferative Disorder
- Other Immune Disorders
o Neutrophil Actin Dysgenesis
o Reticular Dysgenesis
o Chediak-Higashi Syndrome
o Chronic Granulomatous disease
SOURCES: CBR; FCBS; Hearthstone Communications, Ltd., "Women's Health
Information: Diseases Treated by Cord Blood," (2006) at
http://www.womens-health.co.uk/diseases_treated.html (hereinafter
"Hearthstone"); E. Rivero, "UCLA AIDS and Stem Cell Researchers Discover Way to
Develop T-cells From Human Embryonic Stem Cells, Raising Hopes for a Gene
Therapy to Combat AIDS," UCLA News, July 3, 2006, available at
http://www.newsroom.ucla.edu; Z. Galic, et al., "T lineage Differentiation from
Human Embryonic Stem Cells," Proc. Natl. Acad. Sci. (2006), published online
before print at http://www.pnas.org; R. Burt et al., "Hematopoietic Stem Cell
Transplantation: A New Therapy for Autoimmune Disease" 4 The Oncologist 77
(1999), available at http://alphamedpress.org.
Metabolic Diseases
- Endocrine Diseases:
o Diabetes Type 1 & 2
o Diabetic complications
o Hypothyroidism
o Suprarenal insufficiency
- Cystic Fibrosis
- Leukodystrophy:
o Krabbe's Disease (globoid cell leukodystrophy)
o Adrenoleukodystrophy
o Metachromatic Leukodystrophy
- Gaucher's disease
- Niemann-Pick Disease
- Mucoplysaccharide Deficiencies:
o Mucopolysaccharidoses (MPS)
o Hurler's Syndrome (MPS-IH)
o Scheie Syndrome (MPS-IS)
o Hunter's Syndrome (MPS-II)
o Sanfilippo Syndrome (MPS-III)
o Morquio Syndrome (MPS-IV)
o Maroteaux-Lamy Syndrome (MPS-VI)
o Sly Syndrome, Beta-Glucuronidase Deficiency (MPS-VII)
SOURCES: CBR; Hearthstone; D. Castillo, "In Stem Cells, Researchers see Hope for
Cures" Missourian News, dateMonth4Day28Year2006April 28, 2006, available at
http://www.columbiamissourian.com/news/story.php?ID=19662 (hereinafter
"Castillo").
Neurological Diseases
- Adulthood/Age-Related:
o Alzheimer's Disease
o Huntington's Disease
o Lou Gehrig's Disease
o Parkinson's Disease
- Neurological Birth Defects:
o Autism
o Cerebral Palsy
o Down's Syndrome
o Epilepsy
- Serious traumas of the spinal cord and cerebrum
- Other Nervous System Disorders:
o Depression
o Loss of Memory
o Migraine
o Cerebral spastic infantile paralysis
o Neuritis
o Consequences of a cranio-cerebral trauma
o Encephalitis
o Stroke and its Consequences
SOURCES: CBR; Castillo; Business Communications Company, Inc., "Down's Syndrome
Stem Cells Studied," Applied Genetics News, Feb. 2002, available at
http://www.findarticles.com; R. Parker, "Depression Tied To Hippocampal Stem
Cells," Future Pundit, Oct. 30, 2002, available at
http://www.futurepundit.com/archives/000477.html; Harvard Stem Cell Institute,
"Nervous System Diseases Program," at
http://stemcell.harvard.edu/research/disease/neuro; Center for Immunotherapy and
Cell-Based Technologies, "Stem cell therapy for the spinal cord injury
treatment" at http://www.transplantation.ru/spinal-cord-injury-treatment.php.
Blood and Bone Marrow Disorders
- Myeloproliferative Disorders
o Acute Myelofibrosis
o Agnogenic Myeloid Metaplasia
o Essential Thromocythermia
o Polycythemia Vera
- Inherited Red Cell Abnormalities:
o Beta Thalassemia Major
o Blackfan-Diamond Anemia
o Pure Red Cell Aplasia
o Sickle Cell Anemia
- Inherited Platelet Abnormalities
o Amegakaryocytosis/ Congen-ital Thrombocytopenia
- Plasma Cell Disorders
o Multiple Myeloma
o Plasma Cell Leukemia
o Waldenstrom's Macroglobulinemia
- Stem Cell Disorders
o Congenital Cytopenia
o Dyskeratosis Congenita
o Fanconi Anemia
o Multiple Myeloma
o Paroxysmal Nocturnal Hemoglobinuria
o Plasma Cell Leukemia
o Severe Aplastic Anemia
SOURCES: CBR; FCBS; Hearthstone.
Other Organ-Specific Diseases
- Cardiovascular system diseases:
o Myocardial infarction(heart attack)
o Cerebral atherosclerosis (Stroke)
o Essential hypertension
o Ischemic heart disease
o Neurocirculatory dystonia.
- Muscular Dystrophy
- Systemic diseases of connective tissue:
o Atrophic arthritis
o Systemic angiitis
o Systemic lupus
o Systemic scleroderma
o Systemic sclerosis
o Rheumatism
- Respiratory diseases:
o Bronchial Asthma
o Bronchitis
o Chronic Pneumonias
o Chronic Obstructive Pulmonary disease
o Congenital Lung Hyoplasia
o Pulmonary Fibrosis
- Liver diseases:
o Cirrhosis
o Viral and Toxic Hepatitis
o Liver Fibrosis
- Kidney and urinary tract diseases:
o Pyelonephritis
o Cystitis
o Urethritis
o Urinary Incontinence
- Obstetrics and gynecology:
o Premature detachment of the placenta
o Pre-term delivery
o Toxicosis of pregnancy
o Fetal hypotrophy
o Menopause
o Climacteric neuroses
- Skin diseases:
o Psoriasis
o Tropic ulcers
o Dermatitis
- Ocular diseases:
o Retinal Degeneration
- Dental and oral cavity diseases.
- Osteopetrosis
SOURCES: CBR; FCBS; Castillo; J. Morser et al., Eds., Stem Cells in Reproduction
and in the Brain (2006); S. Terai et al., "Improved Liver Function in Liver
Cirrhosis Patients after Autologous Bone Marrow Cell Infusion Therapy," Stem
Cells (2006), electronically published ahead of print, abstract available at
http://stemcells.alphamedpress.org/cgi/content/abstract/2005-0542v1;The Royal
Society, "Dr Fiona Watt FRS - Getting under the skin," at
http://www.royalsoc.ac.uk/page.asp?id=1567 (2006); L. Hemphill, "Dental stem
cells have been characterized for tooth tissue engineering," at
http://www.eurekalert.org (2006); R. Nash et al., "Allogeneic Marrow
Transplantation in Patients with Severe Systemic Sclerosis: Resolution of Dermal
Fibrosis," 54 Arthritis & Rheumatism J. 1982 (2006); L. Bergeron, "Behind method
for activating adult stem cells, a shaggy-mouse story," Stanford Report, August
24, 2005, available at
http://news-service.stanford.edu/news/2005/august24/mice-082405.html; Home
Office (UK), "Stem Cell Therapy for Ocular Disease," Animals in Scientific
Procedures (2006), Abstract available at
http://scienceandresearch.homeoffice.gov.uk/animal-research/publications; S.
Ricardo, "Stem Cells in Renal Regeneration and Repair," at
http://www.med.monash.edu.au/anatomy/research/kidney-scarring.html (2005); Stem
Cell Network, "Research Overview," at
http://www.stemcellnetwork.ca/research/overview.php (2005); Harvard Stem Cell
Institute, "Cardiovascular Disease," at
http://stemcell.harvard.edu/research/disease/cardio (2005); "Stem Cells 'To
Treat Liver Harm'" BBC News, December 16, 2004, available at
http://news.bbc.co.uk; I. Neuringer and S. Randel, "Stem Cells and Repair of
Lung Injuries," 5 Respiratory Research 6 (2004), available at
http://respiratory-research.com; "Stem Cells Offer Hope for Urinary
Incontinence" Health Day News, Nov. 29, 2004, available at
http://www.medicineonline.com/conditions/article.html?articleID=3055; A. Perillo
et al., "Stem cells in gynecology and obstetrics," 46 Panminerva Medica 49
(2004), available at http://www.minervamedica.it/index2.t; "Healing the Heart
with Stem Cells" Blood Weekly, Sept. 4, 2003, available at
http://www.newsrx.com/newsletters/Blood-Weekly/2003-09-04.html; "Bone Marrow
Cells Capable of Becoming Kidney Cells," Daily University Science News, July 25,
2001, available at http://unisci.com; Department of Health and Human Services,
"Can Stem Cells Repair a Damaged Heart?" in "Stem Cells: Scientific Progress and
Future Research Directions" (2001), available at
http://stemcells.nih.gov/info/scireport; P. Goodenough, "Adult Stem Cells May
Help Treat Kidney Disease," at
http://www.cnsnews.com/Culture/archive/200107/CUL20010725b.html (2001);
Department of Health and Human Services, "Stem Cells and Diabetes," in "Stem
Cells: Scientific Progress and Future Research Directions," (2001), available at
http://stemcells.nih.gov/info/scireport; R. K. Burt et al., "Intense Immune
Suppression for Systemic Lupus--the Role of Hematopoietic Stem Cells," 20 J.
Clinical Immunology 31 (2000); C. Padovan et al., "Angiitis of the Central
Nervous System after Allogeneic Bone Marrow Transplantation?" 30 Stroke 1651
(1999), available at http://stroke.ahajournals.org/cgi/content/full/30/8/1651;
J. Mastrandrea et al., "Hemopoietic Progenitor Cells in Atopic Dermatitis Skin
Lesions," 9 J. Investigational Allergology & Clinical Immunology 386 (1999).
Other Applications
- Surgical Diseases
o Osteomyelitis
o Fractures
o Reconstructive Operations on Bone Tissue
- Male and female sexuality:
o Impotency
o Sterility
o Contraception
- Gerontology and Anti-Aging
- Rejuvenation SC Therapy
o Increasing vitality
o Slowing down pre-senility
o Relieving age-related pathologies
o Prolonging life
o Improving memory
o Improving quality of life
SOURCES: C. Weinand et al., "Hydrogel-Beta-TCP Scaffolds and Stem Cells for
Tissue Engineering Bone," 38 Bone 555 (2006); T. Rando, "Stem Cells, Ageing and
the Quest for Immortality," 441 Nature 1080 (2006), available at
http://www.nature.com/nature/journal/v441 /n7097/full/nature04958.html; Center
for Immunotherapy and Cell-Based Technologies, "Stem Cell Therapy for Chronical
Osteomyelitis," at http://www.transplantation.ru/osteomyelitis.php
(2006);National Institutes of Health, Clinical Trials, "Autologous Implantation
of Mesenchymal Stem Cells for the Treatment of Distal Tibial Fractures" at
http://www.clinicaltrials.gov/ct/gui/show/NCT00250302 (2005); "Researchers
Identify Gene Linked To Sperm-producing Stem Cells In Mammals," Science Daily,
May 24, 2004, available at
http://www.sciencedaily.com/releases/2004/05/040524060300.htm; M. Mattson, Ed.,
Stem Cells: A Cellular Fountain of Youth (Advances in Cell Aging & Gerontology)
Elsevier Publishing Company (2002); R. Parker, "Depression Tied To Hippocampal
Stem Cells," at http://www.futurepundit.com/archives/000477.html (2002)
Based on the enormous amount of positive clinical studies in such a broad
array of different diseases, the Company firmly believes that every diseased
organ may become treatable with stem cells, including diseases of the digestive
tract, ear, nose and throat diseases, infectious diseases, allergies, and other
long-term chronic diseases of the internal organs.
Our affiliate clinics in Kiev, Ukraine, Tijuana, Mexico and Shenzhen, China
have treated several different diseases, as described below. Even though the
Company is still in its developmental and planning stage, to date we have
already referred several patients for treatment to each of the above treatment
facilities.
LICENSE AGREEMENT WITH INSTITUTE OF CELL THERAPY
Effective September 1, 2005, the Company entered into a ten year licensing
agreement with the Institute of Cell Therapy, a company incorporated and
organized under the laws of Kiev, Ukraine ("ICT"). Pursuant to the agreement,
the Company issued ICT 5,000,000 shares of the Company's common stock recorded
at the fair market value of the Company's common stock of $5,000. The agreement
grants the Company a right and license in most parts of the world to utilize
patents, processes and products owned or produced by ICT in connection with the
operation of the Company's business. In exchange for the license, the Company
agrees to exclusively purchase all biological solution of stem cell Allo
Transplant materials from ICT. Such Allo Transplant materials shall be at a cost
of $6,500 per patient per condition. The licensing agreement guarantees a
minimum purchase of 60 portions per twelve month period. In the event that the
Company is unable to purchase the minimum quantities, ICT will be entitled to
draw upon the irrevocable letter of credit at the rate of $2,000 for every
portion less than the minimum required purchase. The Company had provided ICT
with a $120,000 irrevocable letter of credit in ICT's favor for the first three
years of the agreement. In the event the Letter of Credit is drawn upon, the
Company agreed to replenish the Letter of Credit to the extent of any such
draws. As of September 2006, the Company had not met the first year's minimum
purchase requirement and ICT withdrew $116,000 on the letter of credit, which
has been included in the cost of goods sold in the accompanying Consolidated
Statements of Operations for the year ended March 31, 2007 and the period from
inception through March 31, 2008. However, ICT was unable to provide the
product as requested and the Company was required to purchase the stem cell
materials from alternative sources. Management believes that ICT's inability to
provide the requested stem cell materials relieves the Company of its
obligations to replenish the letter of credit and to fulfill the minimum
purchase requirements. As such, the accompanying consolidated financial
statements do not reflect any liability for the Company's failure to purchase
the minimum amount of stem cell materials under the above mentioned license
agreement and as of the date of this filing, ICT has not made any claims against
the Company. The agreement with ICT was terminated during the year ended March
31, 2008
NUMBER OF PATIENTS TREATED BY THE COMPANY'S AFFILIATES:
The company does not directly treat patients with Stem Cell Therapy, but
instead refers patients to clinics affiliated with the Company. The following
table reflects the treatments to date by clinics affiliated with the Company,
including the types of diseases treated and the number of patients treated for
each disease:
DISEASES TREATED WITH SCTI PATIENT SPECIFIC NUMBERS OF
STEM CELL TRANSPLANTS PATIENTS TREATED
-------------------------------------------------------------- ----------------
Type 1 Diabetes & Type 2 Diabetic complications 5
-------------------------------------------------------------- ----------------
Stroke 1
-------------------------------------------------------------- ----------------
Multiple Sclerosis 2
-------------------------------------------------------------- ----------------
Acute Leukemia 4
-------------------------------------------------------------- ----------------
Rectal Cancer 1
-------------------------------------------------------------- ----------------
Congenital Aplastic Anemia 2
-------------------------------------------------------------- ----------------
Acquired Aplastic Anemia 4
-------------------------------------------------------------- ----------------
Closed abdominal injury, traumatic kidney rupture, nephrectomy 1
-------------------------------------------------------------- ----------------
Neuro-degenerative diseases 3
-------------------------------------------------------------- ----------------
Sigmoid colon cancer 1
-------------------------------------------------------------- ----------------
Severe Skin Burn Patient 1
-------------------------------------------------------------- ----------------
Liver cirrhosis 1
-------------------------------------------------------------- ----------------
Ovarian carcinoma 3
-------------------------------------------------------------- ----------------
The Company is presently affiliated with the following two clinics:
1. Tijuana, Mexico: Dr. Salvador Vargas's clinic has been offering stem
cell transplants since 2000.
2. Shenzhen, China
The clinics in Tijuana, Mexico and Shenzhen, China are independently owned
and operated. We have no ownership and we do not treat any patients.
Instead of treating patients, we provide information and education services
to patients interested in Stem Cell Therapy, and if they elect to pursue the
treatment we refer the patients to our Medical and Scientific Advisory Board, a
group of independent consultants. The Board determines if the patient is a good
candidate for Stem Cell Therapy, and if they are, the Company refers the
patients to one of our affiliated clinics. After we refer the patients to the
independent clinics, the Company has no further discretion regarding the
diagnosis, treatment, progress, or prognosis of the patient.
MANUFACTURING
Basic Approach
The basis of stem cell therapy is the presence of preparations of allo stem
cell biological solutions. The Company holds licensing rights to a patented
unique biological solution, which consists of hematopoietic human stem cells,
numerous low-molecular proteins, nutrients, hormones and human growth factors
(compounds made by the body to regulate cell division and cell survival). For
further reference this whole set will be called a "biological solution."
Stem cells are a fundamental principle of an organism; they give rise to all
220 types of specialized cells and tissues of an organism. They are present in
the human embryo, placental complex, an adults' bone marrow and also in
insignificant number in other tissues. Their main feature is an ability to
regenerate: they are capable of making identical copies of themselves for the
lifetime of the organism. To put it simply, they are theoretically eternal. In
reality, as a result of enduring infections, traumas, hereditary infringements,
harmful factors of the environment and emotional stresses stem cells lose their
ability of endless regeneration and basically that is the starting point of the
aging processes and appearance of the long-term diseases which in turn stop the
processes of the stem cells division. If at birth their content equals one stem
cell to 10 thousand, then at the age of 50 it is already one to half a million
and at the age of 70, one to a million of the
hematopoietic cells. See generally Christopher Potten and James Wilson,
Apoptosis: the Life and Death of Cells, Cambridge University Press (2004).
The isolation process of stem cells for medical purposes is the most
expensive part of modern biotechnology for stem cells. Today there have been
effective methods worked out for the isolation of stem cells from an embryo,
fetus and umbilical cord blood (the rest of the blood in an umbilical cord and
placenta after delivery). Modern technology allows for the preparation of these
cells for the treatment of many diseases.
The Company believes that the most promising way to create this
individualized medication, which could be used in the case of disease or the
loss of any organ, is to keep stem cells in a frozen condition, collecting the
rest of the umbilical cord blood during a birth and using preparations created
on their basis. Upon introduction into the organism of a patient, stem cells
find the struck organs, the so-called target organs, where they migrate and
provide powerful restoration of whole biological structures, normalize the
metabolism, harmonize the immune status of an organism, and make active
antineoplastic factors (compounds that prevent the growth and development of
malignant cells). This way cell suspension introduction results in the increase
of the number of leukocytes (white blood cells) in ontological patients with
chemo rays depression of hemopoiesis (the formation of blood cells in the body)
from 2 to 5 thousand for two weeks.
Stem cells actively perform their main responsibility - they replace the sick
and old cells of an aging organism rejuvenating it, which cannot be done by any
other medicine. Also, highly active regulating factors are present within the
cells suspension which exist and work only during an embryonic period of the
organism's development. That is why the cells suspension introduction in the
adult organism and engraftment of stem cells among the aging and pathologically
altered cells of this organism creates a unique situation when the most powerful
development, renewal and functions' ensuring factors that only exist start
constantly influencing the cells and organs of the adult organism.
These biological preparations in their complex state influence:
- normalization and stimulation of the metabolism
- rise in the activity of the immune and neuro-endocrinal systems
- strongly marked antineoplastic action;
- delay pre-senility, dynamically rejuvenating the organism
- strongly marked medical effects upon diversified pathologies
In the Ukraine the study and production of biological preparations from the
animal and human cells were being carried out within the framework of the
scientific programs under the aegis of the National Academy of Sciences, Medical
Academy of Sciences, Ministry of Public Health, Coordination Center of the
organs, tissues, and cells transplantation of the Ministry of Public Health of
Ukraine.
The application of allo (human) biological preparations have been allowed by
the Ministry of Public Health of Ukraine since 1991.
Cryopreservation
Long-term methods of storage have been used in medical practice for a long
time. Among those commonly famous methods of storage there is lyophilization
(freeze-drying), treatment by alcohol or formalin solutions and some others. But
the basic drawback of such methods of storage is dehydration of protein
compounds which cause cells and tissues to completely lose their main biological
features - ability to function after transfusion.
Nowadays, low temperatures are the only way to allow for the storage of
cells and tissues for long time intervals (running for years) in a viable
condition. Storage in liquid nitrogen at the temperature of -196 C is the basic
method of the long-term storage of biological objects today. The development of
personal modern technologies of cryogenic-preservation, corresponding to world
standards as well as observing the demands of producing biological preparations,
their testing, marking and storing in accordance with statements of the European
Tissue Banks Association, allowed ICT to create high-quality cryogenically-
preserved embryonic stem cells, tissue preparations and extracts for clinical
application and system of examination and treatment of patients with minimum
risk and maximum effect with the most diversified pathologies.
Quality Control
The efficiency of stem cell therapy is ensured through the latest special
methods of bacteriological and virological control which guarantee the highest
quality of preparations. Every preparation prepared for use is supplied with its
own certificate containing test results which certify the safety of this
biological preparation. The patient's safety assurance totally corresponds with
international Standards of Activity of the European and American Tissue Banks
Association.
The Company warrants that a batch of allo stem cell biological solution for
transplants are individually prepared for a specific patient have been
manufactured in accordance with and in strict compliance with Good Manufacturing
Practice ("GMP"), and following the regulations of the U. S. Food and Drug
Administration (the "FDA") as well as the respective regulatory agencies of the
European Union. GMP is a set of guidelines established by the FDA regarding the
production or manufacture of any drug or biological products. The FDA certifies
and enforces US manufacturers that comply with the GMP standards. Although the
Company is not GMP certified or GMP enforceable since its manufacturing
facilities are located outside of the U.S., we have voluntarily complied with
all GMP standards. More information on GMP standards is available at
www.gmp-online-consultancy.com.
The Company follows all steps recommended by the FDA and the respective
counterpart regulatory agencies of the EU. We have put into practice all of
these recommendations to aid and assure top quality preparations of each allo
stem cell biological solution therapy batch. In addition, many other specimens,
samples of each stem cell transplant(s) prepared by the Company are kept in
liquid nitrogen at its laboratories, pursuant to FDA regulations.
RESEARCH AND DEVELOPMENT
We do not directly engage in Research and Development. Instead, we rely on
the technology that results from Research and Development activities performed
through contractual arrangements and possibly the technology that results from
such arrangements in the future.
PRICING
Our stem preparations are priced competitively with others in our industry,
reflecting pricing which has been the same as it has been in Germany for the
past approximate 10 years.
The complex approach to stem cell transplantation is based upon cleansing and
detoxification and balancing of all metabolic processes, whereby the patient
will be prepared to accept the stem transplants for their maximum healing
effects.
COMPETITION
We are unaware of any competitor that has the same business model in the
manufacturing process and cryo-preservation process of allo stem cell biological
solution and other products. To our knowledge, these procedures have only been
used by our affiliates. Further, we are unaware of any competitor engaged in the
business of providing educational, informational, and referral services to
potential candidates for stem cell therapy.
Although we have not noted any Companies that offer an identical array of
services, there are several stem cell companies that compete with us on an
individual service level. First, there are the stem cell research and
development companies that are only doing scientific work with stem cells, but
are not in the business of treating patients. Second, there are companies that
have their own treatment facilities and their own source of stem cells. Third,
there are the companies that supply the stem cells for research and treatment of
patients.
There is no assurance that the Company will be able to compete successfully
against any such current and any developing future competitors, and competitive
pressures faced by the Company may have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
Further, as a strategic response to changes in the competitive environment, the
Company may from time to time make certain pricing, service or marketing
decisions or acquisitions that could have a material adverse effect on its
business, prospects, financial condition and results of operations. New
technologies and the expansion of existing technologies may increase the
competitive pressures on the Company.
In our research, the closest competitor that we have to our business model is
a company called VesCell (www.vescell.com). This company has licensed a
proprietary technology from their partner TheraVitae that uses the patients own
blood to draw out the stem cells which are then culture grown and are then used
as an injection back into the patient. VesCell has a number of affiliate
treatment facilities which are located in Thailand and
Singapore where these procedures are performed. VesCell also
has a number of treating physicians at each affiliate hospital or clinic
facility that actually perform the stem cell transplantation procedure. The cost
of the VesCell therapy is $34,500, USD, per treatment.
Currently, the Company has two affiliate treatment facilities outside of the
United States: Shenzhen, China and Tijuana, Mexico.
REGULATION
As the technological milestones for stem cell transplantation have been
announced, governments have begun to impose regulation. Many developed countries
have now drawn up legislation or codes, or signed up to Conventions, regulating
the creation and use of embryonic stem cells. Some regimes have already been
shown to be lagging behind the technology.
From a regulatory viewpoint stem cell transplant represents a very unique
product, which really is not really a "product" at all, because it does not
fulfill the legal definition of a medicinal "product." The FDA's regulations
label live cell transplants as products, while under German law they are
classified neither as drugs nor as medications, because:
[] they are individually prepared for each patient,
[] they are for one time use only, by implantation on a pre-determined date,
[] the implantation is carried out by a physician who wrote a prescription for
the stem cell transplants used,
[] stem cell transplants have no 'shelf-life', and
[] they are not distributed through the usual channels.
The response of many governments to reproductive cloning is a complete ban,
but approaches to therapeutic cloning vary quite widely. The United States
presidency and various European bodies and institutions are taking a restrictive
approach to embryonic stem cells, while the United Kingdom has passed relatively
permissive legislation.
The United States
The United States' regulation falls into two main areas:
control of federal funds for research, and the broader question of regulation of
the activities themselves. Following an announcement by President Bush on
August 9, 2001, United States federal
funds became available only for stem cell research on embryonic cell lines
already in existence. Before that, more liberal National Institutes of Health
("NIH") Guidelines had recommended that funds were to be available for the
creation and use of stem cells from spare IVF embryos. The 64 embryonic cell
lines identified by US officials as already being in existence, and therefore a
suitable subject for federally funded research, were generated by various
institutes in the United States, Sweden, Australia, India, and Israel. We
currently plan to seek research funding from the NIH, and will consider seeking
research funding from other government health agencies in the future.
Separately from the funding issue, the regulation of embryonic stem cell
research is being actively considered by the US Government. On July 31, 2001,
the House of Representatives voted for a broad ban on human cloning that would
prohibit cloning for research purposes as well as for reproduction. The
resulting law imposes heavy financial penalties and terms of imprisonment on
those who generate cloned embryos, and thus affects both privately funded and
NIH-supported research. Fortunately, the Company's lines of allo transplants are
outside of this regulation, both because we do not engage in any cloning
activities, and because we do not engage in any stem cell production, research,
or development in the United States. Further, since all of our stem cell
activities are performed in jurisdictions where such activities are legal, we do
not currently have any obligation to obtain government approval for our
activities, and do not currently have any compliance costs. However, there is no
assurance that we will not face costs or the need for government approval with
regard to future regulations or the regulations of any country into which we may
expand our operations in the future. Germany and the Rest of Europe
Germany's highest court re-affirmed its approval of therapeutic use of cell
allo transplantation on February 16, 2000, by its decision in the case number 1
BvR 420/97. Germany had previously approved of this use in the early fifties.
This German decision had serious implication for the remainder of the
European Community ("EC") as well. Under the European Community Council
Directives, all Member States of EC are obliged to accept laws and regulations
of other member States of European Community dealing with medical therapeutics
for human use, and that includes stem cell transplantation.
All applicable regulations of the Public Health Service, and EU Directives,
were incorporated in our manufacturing technology, and that was of enormous
importance in order to attain the heretofore unknown 'state-of-art' level of
safety of stem cell transplantation.
The European Community Council's Directives are in harmony with this German
legal concept, and thus European Community Member States do not classify stem
cell allo and/or xeno-transplants as 'products' either.
EMPLOYEES
As of March 31, 2008, the Company employed 3 full-time employees, and one
part-time employee. The Company also engages independent contractors and other
temporary employees in its operations and finance and administration
departments. None of the Company's employees is represented by a labor union,
and the Company considers its employee relations to be good. Competition for
qualified personnel in the Company's industry is intense, particularly among
Doctors and other technical staff. The Company believes that its future success
will depend in part on its continued ability to attract, hire and retain
qualified personnel.
RISK FACTORS
THE FOLLOWING RISK FACTORS SHOULD BE CONSIDERED CAREFULLY IN EVALUATING THE
COMPANY, ITS BUSINESS, CONDITION AND PROSPECTS (FINANCIAL AND OTHERWISE). THESE
RISK FACTORS ARE NOT NECESSARILY EXHAUSTIVE AND ADDITIONAL RISK FACTORS, IF ANY,
MAY BE MATERIAL OR HAVE SIGNIFICANCE TO AN INDIVIDUAL INVESTOR. MANY INVESTMENT
OPPORTUNITIES INVOLVE RISK FACTORS OR A RISK OF LOSS AND THE EXISTENCE OF THE
NORMAL AND CERTAIN EXTRAORDINARY RISKS.
USE OF FORWARD-LOOKING LANGUAGE; FORECASTS UNRELIABLE: All statements, trend
analysis and other information contained in this document relative to markets
for the Company's products and trends in net sales, gross margin and anticipated
expense levels, as well as other statements including words such as
"anticipate," "believe," "plan," "estimate," "expect" and "intend" and other
similar expressions, constitute forward-looking statements. These
forward-looking statements are subject to business and economic risks, and the
Company's actual results of operations may differ materially from those
contained in the forward-looking statements.
LIMITED OPERATING HISTORY; ACCUMULATED DEFICIT; ANTICIPATED LOSSES: The
Company has a limited operating history on which to base an evaluation of its
business and prospects. The Company's prospects must be considered in light of
the risks, expenses and difficulties frequently encountered by companies in
their early stage of development. Nonetheless, there is no assurance that the
Company will be successful in addressing such risks, and the failure to do so
could have a material adverse effect on the Company's business, prospects,
financial condition and results of operations.
UNPREDICTABILITY OF FUTURE REVENUES; POTENTIAL FLUCTUATIONS IN QUARTERLY
OPERATING RESULTS; SEASONALITY; As a result of the Company's limited operating
history and the emerging nature of the biotechnological markets in which it
competes, the Company is unable to accurately forecast its revenues. The
Company's current and future expense levels are based largely on its investment
plans and estimates of future revenues and are to a large extent fixed and
expected to increase.
Sales and operating results generally depend on the volume of, timing of and
ability to fulfill the number of orders received for the biological solution and
the number of patients treated which are difficult to forecast. The Company may
be unable to adjust spending in a timely manner to compensate for any unexpected
revenue shortfall. Accordingly, any significant shortfall in revenues in
relation to the Company's planned expenditures would have an immediate adverse
effect on the Company's business, prospects, financial condition and results of
operations. Further, as a strategic response to changes in the competitive
environment, the Company may from time to time make certain pricing, service or
marketing decisions which could have a material adverse effect on its business,
prospects, financial condition and results of operations.
The Company expects to experience significant fluctuations in its future
quarterly operating results due to a variety of factors, many of which are
outside the Company's control. Factors that may adversely affect the Company's
quarterly operating results include (i) the Company's ability to retain existing
patients, attract new patients at a steady rate and maintain patient
satisfaction, (ii) the Company's ability to manage its production facility and
maintain gross margins, (iii) the announcement or introduction of new treatments
and/or patents by the Company and its competitors, (iv) price competition or
higher prices in the industry, (v) the level of use of the Internet and on-line
patient services, (vi) the Company's ability to upgrade and develop its systems
and infrastructure and attract new personnel in a timely and effective manner,
(vii) the level of traffic on the Company's website, (viii) technical
difficulties, system downtime, (ix) the amount and timing of operating costs and
capital expenditures relating to expansion of the Company's business, operations
and infrastructure, (x) governmental regulation, and (xi) general economic
conditions.
MANAGEMENT OF POTENTIAL GROWTH: LIMITED SENIOR MANAGEMENT RESOURCES: While we
cannot be sure we will be successful in growing the Company's operations, our
goal is to rapidly and significantly expand our operations to address potential
growth and market opportunities. We intend to seek to accomplish this by adding
additional affiliate clinics, and by our marketing efforts. By adding
affiliates, our intention is to seek to not only increase the number of patients
that can be treated, but increase the visibility of stem cell therapy in
general. We believe that the combination of word of mouth and our marketing
efforts may lead to a significant growth in demand for our products and
services.
This expansion if successful could place a significant strain on the
Company's management, operational and financial resources. The Company will be
required to hire new employees including senior management, key managerial,
technical and operations personnel who would have to be fully integrated into
the Company, operational and financial systems, procedures and controls, and to
expand, train and manage its already growing employee base.
The Company also would be required to add finance, administrative and
operations staff. Further, the Company's management would be required to
maintain and expand its relationships with Affiliate Treatment Clinics and
Medical Facilities, University Labs, Private Labs and Treating Physicians
globally.
If we grow rapidly, there is no assurance that the Company's planned
personnel, systems, procedures and controls would be adequate to support the
Company's future operations, that the management would be able to hire train,
retain, motivate and manage required personnel or that Company management would
be able to successfully identify, manage and exploit existing and potential
market opportunities. If the Company is unable to manage growth effectively, its
business, prospects, financial condition and results of operations will be
materially adversely affected.
DEPENDENCE ON KEY PERSONNEL; NEED FOR ADDITIONAL PERSONNEL: The Company's
performance is substantially dependent on the continued services and on the
performance of its senior management and other key personnel, particularly the
Company's President, David Stark, and Chief Financial Officer, Andrew Norstrud.
The Company's performance also depends on the Company's ability to employ,
retain and motivate its other officers and key employees. The loss of the
services of any of its executive officers or future key employees could have a
material adverse effect on the Company's business, prospects, financial
condition and results of operations. The Company is currently negotiating
long-term employment agreements with its executive officers and intends to
obtain "key person" life insurance policies. The Company's future success also
depends on its ability to identify, attract, hire, train, retain and motivate
other highly skilled doctors, scientists, qualified PhD's, technical,
managerial, marketing and customer service personnel. Competition for such
personnel is intense, and there is no assurance that the Company will be able to
successfully attract, assimilate or retain sufficiently qualified personnel. The
failure to retain and attract the necessary doctors, scientists, qualified
PhD's, technical, managerial, marketing and customer service personnel could
have a material adverse effect on the Company's business, prospects, financial
condition and results of operations.
COMPETITION: While we are presently unaware of any competitor that has the
same business model in the manufacturing process and cryo-preservation process
of allo stem cell biological solution and other products, competitors may
already exist or may develop with respect to our specific business model.
Although we have not noted any Companies that offer an identical array of
services, there are several stem cell companies that compete with us on an
individual service level. First, there are the stem cell research and
development companies that are only doing scientific work with stem cells, but
are not in the business of treating patients. Second, there are companies that
have their own treatment facilities and their own source of stem cells. Third,
there are the companies that supply the stem cells for research and treatment of
patients.
There is no assurance that the Company will be able to compete successfully
against any such current and any developing future competitors, and competitive
pressures faced by the Company may have a material adverse effect on the
Company's business, prospects, financial condition and results of operations.
Further, as a strategic response to changes in the competitive environment, the
Company may from time to time make certain pricing, service or marketing
decisions or acquisitions that could have a material adverse effect on its
business, prospects, financial condition and results of operations. New
technologies and the expansion of existing technologies may increase the
competitive pressures on the Company.
TRADEMARKS AND PROPRIETARY RIGHTS: The Company regards its copyrights,
service marks, trademarks, trade dress, trade secrets and similar intellectual
property as important, and critical to its success. In addition, certain aspects
of trademark and copyright law, trade secret protection and confidentiality
and/or license agreements with its employees may be relied upon to protect its
proprietary rights. The Company is pursuing the registration of its trademarks
and service marks in the U.S. and internationally, and has applied for the
registration of certain of its trademarks and service marks. Effective
trademark, service mark, copyright and trade secret protection may not be
available in every country. The Company expects that it may license in the
future certain parts of its proprietary rights, such as trademarks or
copyrighted material, to third parties.
There is no assurance that the steps taken by the Company to protect its
proprietary rights will be adequate or that third parties will not infringe or
misappropriate the Company's copyrights, trademarks, trade dress and similar
proprietary rights. In addition, there is no assurance that other parties will
not assert infringement claims against the Company. The Company is not currently
aware of any legal proceedings pending against it.
GOVERNMENTAL REGULATION AND LEGAL UNCERTAINTIES: The Company is subject to
regulation by domestic and foreign governmental agencies with respect to many
aspects of stem cell transplantation. In addition, new legislation or regulation
could occur. Any such new legislation or regulation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to the
Company's business, or the application of existing laws and regulations to stem
cell transplantation technology could have a material adverse effect on the
Company's business, prospects, financial condition and results or operations.
NO ASSURANCE OF PUBLIC MARKET FOR COMMON STOCK, POSSIBLE LACK OF MARKET
MAKERS; VOLATILITY. Although the Company's stock is currently quoted on the
Over-the-Counter Bulletin Board, there is no assurance that a public trading
market will continue or develop for the Common Stock. There is also no assurance
that the existing trading or any such future market will be characterized as
active.
Development of an active trading market for the Company's Common Stock may
depend upon the interest of securities market makers and the investing public
which may depend in turn on the Company's revenues and profits. The prices of
securities of companies which are in limited supply in the public securities
markets, which could describe the Company, are typically volatile.
POSSIBLE NEGATIVE EFFECT OF COMMON STOCK AVAILABLE FOR FUTURE SALE: A
substantial component of the Common Stock issued by the Company is "restricted
stock" as defined in SEC Rule 144, promulgated under the Securities Act of 1933.
The offer of a significant number of restricted shares of Common Stock in the
future in the public market, at or about the same time pursuant to Rule 144 or
pursuant to a subsequent registration statement under the Securities Act of 1933
could have a depressive effect on the public market price of the Company's
common stock.
TRADING LIMITATIONS ON STOCK AT A MARKET PRICE OF LESS THAN $5.00 PER
SHARE: Management cannot predict the market price of the Common Stock in the
public market. At any time that the market price is less than $5.00 per share,
certain larger stock brokerage firms may prohibit purchase or sale of the Shares
within their clients' accounts.
All securities brokerage firms effecting purchase orders for clients in the
Company's common stock at a time when the common stock has a market bid price of
less than $5.00 per share are required by federal law to send a standardized
notice to such clients regarding the risks of investing in "penny stocks", to
provide additional bid, ask and broker compensation and other information to the
stockholders and to make a written determination that the Company's common stock
is a suitable investment for the client and receive the client's written
agreement to the transaction, unless the client is an established client of the
firm, prior to effecting a transaction for the client. These business practices
may inhibit the development of a public trading market for the Company's common
stock during periods that the price of the common stock in the public market is
less than $5.00 by both limiting the number of brokerage firms which may
participate in the market and increasing the difficulty in selling the Company's
common stock.
NEED FOR FINANCING. In order to continue as a going concern, the Company
will require significant additional financing or a merger partner with
substantial resources. We cannot guarantee that additional financing will be
available to us when needed or, if available, that it can be obtained on
commercially reasonable terms. Even if we are able to expand our business, we
cannot provide certainty that we will be successful or that investors will
derive a profit from an investment in our equity. Subsequent to year end, the
Company entered into a merger agreement to acquire another Company that should
positively impact the Company's liquidity, however, as of the date of this
filing, the agreement has not yet closed, while management believes the
transaction will be consummated, there can be no assurance in that regard.
ITEM 2. DESCRIPTION OF PROPERTY
We lease office space and office equipment under an operating lease on a
month-to-month basis. We lease the executive office suite from Wilder
Corporation for approximately $820. Our office is located at 2203 N. Lois
Avenue, Suite #901, Tampa, FL 33607. The office is approximately three hundred
seventy-four (374) square feet and is in a condition adequate to our needs. The
terms of the lease agreement require 30 days written notice to terminate the
lease.
Rent expense amounted to $18,048 and $23,298 for the years months ended
March 31, 2008 and 2007.
The Company is not involved in investments in (i) real estate or interests
in real estate, (ii) real estate mortgages, and (iii) securities of or interests
in persons primarily engaged in real estate activities, as all of its land
rights are used for production purposes.
ITEM 3. LEGAL PROCEEDINGS
The Company is currently involved in a legal dispute over the payment and
performance of a consulting agreement. The Company contends that the contract
never became effective, and therefore the consultant was not entitled to receive
compensation. The consultant contends that the Company and its representatives
induced them to begin performance of the services early, based on certain
promises. The original contract calls for the consultant to be awarded the
compensation of 3,000,000 shares of the Company's common stock valued at
$390,000. The company currently holds the stock certificates and intends to
vigorously defend its position, however, the outcome of the proceedings cannot
be determined
The Company expects to be subject to legal proceedings and claims from time to
time in the ordinary course of its business, including, but not limited to,
claims of alleged infringement of the trademarks and other intellectual property
rights of third parties by the Company and its licensees. Such claims, even if
not meritorious, could result in the expenditure of significant financial and
managerial resources.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the year ended March 31, 2008, the Company's shareholders agreed to
change the name of the Company to Amstem International Corp. and increased the
authorized common stock to 500,000,000 shares. The Company filed and
distributed a Schedule 14C to reflect that change.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
Stem Cell Therapy International, Inc. common stock is quoted in United
States markets on the Over the Counter Bulletin Board ("OTCBB").
Currently there are 400,000 outstanding warrants and 3,650,000 oustanding
options to purchase stock.
PENNY STOCK REGULATIONS:
Our common stock is quoted on the OTCBB, under the symbol "SCII". On July
10, 2008 the last reported sale price of our common stock was $0.075 per share.
The Company's common stock is subject to provisions of Section 15(g) and Rule
15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
commonly referred to as the "penny stock rule." Section 15(g) sets forth certain
requirements for transactions in penny stocks, and Rule 15g-9(d) incorporates
the definition of "penny stock" that is found in Rule 3a51-1 of the Exchange
Act. The SEC generally defines "penny stock" to be any equity security that has
a market price less than $5.00 per share, subject to certain exceptions. As long
as the Company's common stock is deemed to be a penny stock, trading in the
shares will be subject to additional sales practice requirements on
broker-dealers who sell penny stocks to persons other than established customers
and accredited investors.
The following table shows the high and low per share price quotations of
Stem Cell Therapy International, Inc. common stock as reported in the OTCBB for
the periods presented. High and low bid quotations reflect inter-dealer prices
without adjustment for retail mark-ups, markdowns or commissions and may not
necessarily represent actual transactions. We completed our acquisition of Stem
Cell Therapy Corp.("Stem Cell Florida") in the third calendar quarter of 2005.
Our stock has been thinly traded.
HIGH LOW
(Calendar Quarters)
2008
First Quarter $0.27 $0.08
2007
Fourth Quarter $0.21 $0.05
Third Quarter $0.40 $0.15
Second Quarter $0.43 $0.07
First Quarter $0.30 $0.098
2006
Fourth Quarter $0.35 $0.10
Third Quarter $0.40 $0.23
Second Quarter $0.75 $0.40
First Quarter $1.00 $0.47
As of March 31, 2008 there were approximately 280 holders of record of Stem
Cell Therapy International, Inc. common stock. Many of these shares are held in
street name, and consequently we have numerous additional beneficial owners.
DIVIDENDS
The Company has never declared or paid a dividend on its Common Stock, and does
not anticipate paying any cash dividends on its Common Stock in the foreseeable
future. The Company expects to retain, if any, its future earnings for expansion
or development of the Company's business. The decision to pay dividends, if any,
in the future is within the discretion of the Board of Directors and will depend
upon the Company's earnings, capital requirements, financial condition and other
relevant factors such as contractual obligations. There can be no assurance that
dividends can or will ever be paid.
RECENT SALES OF UNREGISTERED SECURITIES
Effective May 11, 2007, the Company issued 250,000 shares of common stock
to Mirador Consulting Group in connection with consulting services to be
provided to the Company. These shares were issued without any public offering
in accordance with Section 4(2) of the Securities Act of 1933, as amended.
Effective June 25, 2007, the Company issued 300,000 shares of common stock
to Interactive Resources Group Inc. in connection with consulting services to be
provided to the Company. These shares were issued without any public offering
in accordance with Section 4(2) of the Securities Act of 1933, as amended.
During the year ended March 31, 2008, the Company issued 2,000,000 shares
of common stock to accredited investors in connection with a private placement
offering in exchange for $250,000, this amount includes $43,976 of offering
costs. These shares were issued under Regulation D.
During the year ended March 31, 2008, the Company issued 375,000 shares of
common stock in conversion of common stock warrants. These shares were issued
without any public offering in accordance with Section 4(2) of the Securities
Act of 1933, as amended.
Effective February 22, 2008, the Company issued 500,000 shares of common
stock to Elite International Partners in connection with consulting services to
be provided to the Company. These shares were issued without any public
offering in accordance with Section 4(2) of the Securities Act of 1933, as
amended.
Effective March 1, 2008, the Company issued 500,000 shares of common stock
to Cutler Law Group in connection with legal services to be provided to the
Company. These shares were issued without any public offering in accordance with
Section 4(2) of the Securities Act of 1933, as amended.
Effective March 1, 2008, the Company issued 250,000 shares of common stock
to an employee in connection with the execution of an employment agreement.
These shares were issued without any public offering in accordance with Section
4(2) of the Securities Act of 1933, as amended.
Effective March 5, 2008, the Company issued 250,000 shares of common stock
to First Capital Partners in connection with consulting services to be provided
to the Company. These shares were issued without any public offering in
accordance with Section 4(2) of the Securities Act of 1933, as amended.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS
THE FOLLOWING INFORMATION SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED
FINANCIAL STATEMENTS OF STEM CELL THERAPY INTERNATIONAL, INC. AND THE NOTES
THERETO APPEARING ELSEWHERE IN THIS FILING. STATEMENTS IN THIS MANAGEMENT'S
DISCUSSION AND ANALYSIS OR PLAN OF OPERATION AND ELSEWHERE IN THIS ANNUAL REPORT
THAT ARE NOT STATEMENTS OF HISTORICAL OR CURRENT FACT CONSTITUTES
"FORWARD-LOOKING STATEMENTS."
The following management discussion should be read together with the Stem Cell
Therapy International, Inc. consolidated financial statements included in this
annual report. See "Index to Consolidated Financial Statements" at page F-1.
Those financial statements have been prepared in accordance with generally
accepted accounting principles of the United States of America.
GENERAL OVERVIEW
Stem Cell Therapy International, Inc. (the "Company") was originally
incorporated in Nevada on December 28, 1992 as Arklow Associates, Inc., and
after several name changes was renamed Altadyne, Inc. By March, 2005, the
Company (then Altadyne, Inc.) had no assets, liabilities, or ongoing business.
On March 20, 2005, R Capital Partners ("R Capital") acquired the Company (then
Altadyne, Inc.), and on September 1, 2005, the Company (then Altadyne), acquired
Stem Cell Therapy International Corp., a Nevada corporation ("Stem Cell
Florida") in what was effectively a reverse acquisition. Following the
transaction, Stem Cell Florida became a wholly owned subsidiary of the Company,
and Stem Cell Florida's shareholders became shareholders of the Company. On
October 5, 2005, the Company changed its name to Stem Cell Therapy
International, Inc. to reflect the new business of the Company. This transaction
is accounted for as a reverse merger, with Stem Cell Florida treated as the
accounting acquirer for financial statement purposes.
Stem Cell Florida was incorporated in Nevada on December 2, 2004. Following
the reverse acquisition, the Company assumed and is continuing the operations of
Stem Cell Florida. The Company's executive management team are: Calvin C. Cao,
Chairman and Chief Executive Officer (subsequent to year end, submitted his
resignation), David Stark, President, Andrew J. Norstrud, Chief Financial
Officer, and Lixian Jiang, Chief Operating Officer and Patent Trademark Counsel.
We are indirectly involved, as a "middle man," in research and development
and practical application within the field of regenerative medicine. We provide
allo (human) stem cell biological solutions that are currently being used in the
treatment of patients suffering from degenerative disorders of the human body.
We have established agreements with highly specialized, professional medical
treatment facilities around the world in locations where Stem Cell
Transplantation therapy is approved by the appropriate local government
agencies.
We initially devoted most of our efforts toward organization and fund
raising for planned clinics and patient operations and limited revenues have
been generated from any such operations. The Company has experienced recurring
losses from operations since its inception and at March 31, 2008, we had a
working capital deficit of $820,951 and an accumulated deficit from operations
of $1,969,717. As noted in the independent audit report for the audited Stem
Cell Therapy International, Inc. financial statements for the period from
inception to March 31, 2008, these factors raise doubt about the ability of the
Company to continue as a going concern. Realization of the Company's business
plan is dependent upon the Company's ability to meet its future financing
requirements, and the success of future operations. This is because we have not
generated substantial revenues since inception. Our only other source for cash
at this time is through investments or loans from management. We must raise cash
to implement our project and stay in business.
On March 10, 2008, the Company entered into a Reorganization and Stock
Purchase Agreement and its amendments (the "Agreement") with Histostem Co.,
Ltd., a Korean company ("Histostem"). Pursuant to the Agreement (as
subsequently amended), the Company will acquire 90% of the issued and
outstanding stock of Histostem, and Histostem's shareholders will acquire a
controlling interest in the Company. The original definitive agreement called
for closing of the acquisition by April 30, 2008. Subsequent to Closing, the
Company will be held approximately 60% by Histostem and 40% by the existing
shareholders of the Company. Upon completion of the acquisition, the Company
will be renamed AmStem International Corp., increase the authorized number of
shares to 500,000,000 and seek a new symbol on the over-the-counter bulletin
board.
On April 22, 2008, the Company amended the Agreement to state that
Histostem shall have received funding at the date of the actual closing at a
minimum of 2 million dollars towards the initial round of funding of at least 10
million dollars. Subsequent to that amendment, the actual closing deadline of
April 30, 2008 was no longer in effect.
On June 19, 2008, the Company entered into a second Amendment to the
Reorganization and Stock Purchase Agreement. In accordance with the terms of
this second Amendment, the Company and Histostem issued and delivered shares
reflecting the acquisition of Histostem into Escrow by the Company pending
resolution of outstanding litigation between Histostem Korea and Histostem, Inc.
(a United States corporation unrelated to Histostem) ("Histostem USA"). This
essentially effectuates an immediate closing of the Histostem acquisition. In
the Amendment the parties also agreed to complete a one for three reverse stock
split of the Company's common stock. That reverse stock split will be completed
after filing, mailing and completion of a 14C Information Statement to the
Company's shareholders and appropriate notice and filings with the NASD.
CRITICAL ACCOUNTING POLICIES
The accounting policies of the Company are in accordance with generally
accepted accounting principles of the United States of America, and their basis
of application is consistent. Outlined below are those policies considered
particularly significant:
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
Common stock transactions for services are recorded at either the fair
value of the stock issued or the fair value of the services rendered, which ever
is more evident on the day that the transactions are executed. The certificates
must be issued subsequent to the transaction date.
We apply Staff Accounting Bulletin No. 104 "Revenue Recognition" ("SAB No.
104") to our revenue arrangements. Currently, our only revenue transactions
derive from the licensing of stem cell technology, the sale of stem cell
products, and providing informational and referral services; we have no plans to
enter into any other revenue transaction in the near future. In accordance with
SAB No. 104, we recognize revenue related to these licenses, sales and services
upon delivering the license or product, or rendering the services, respectively,
as long as (1) there is persuasive evidence of an arrangement, (2) the sales
price is fixed or determinable, and (3) collection of the related receivable is
reasonably assured. Any payments received prior to delivery of the products or
services are included in deferred revenue and recognized once the products are
delivered or the services are performed.
Research and development costs are charged to operations when incurred and
are included in operating expenses.
RESULTS OF OPERATIONS
As of March 31, 2008 and for the years March 31, 2008 and 2007
We had revenue of $132,960 during the year ended March 31, 2008 as compared
to $345,510 of revenue for the comparable period in 2007. Revenues during 2008
reflected the treatment of four patients and nine patients were treated during
the same period ended 2007.
Our cost of goods sold for the stem cell biological material delivered
during the year ended March 31, 2008 was $52,268 as compared to $289,993 for the
same period ended 2007. The decrease in cost of goods sold is due to the
decreased number of treatments and during the year ended March 31, 2007, a
$116,000 charge for an additional payment made to ICT for not meeting the
contractual minimum purchase requirement, which, due to ICT's failure to be able
to deliver the product, has caused the minimum purchase requirement to be
terminated.
Gross margin for the year ended March 31, 2008 was $80,692 as compared to
$55,517 for the year ended March 31, 2007. Gross margin as a percentage of
revenue for the year ended March 31, 2008 was 61% as compared to 16% for the
year ended March 31, 2007. The increased gross margin is primarily due to using
alternative vendors for treatment supplies and the Company did not enter into
any agreements with a minimum purchase requirement.
Selling, general and administrative expenses increased $944,548 or 132% to
$1,658,775 for the year ended March 31, 2008 as compared to $714,227 for the
year ended March 31, 2007. Selling, general and administrative expenses for the
year ended March 31, 2008 primarily consists of the following items:
- Payroll expense was $227,296 for the year ended March 31, 2008, which is an
increase of $51,091 over the year ended March 31, 2007. This increase was
due to the Board of Directors approval of salary increases for the two
executives and the addition of a Chief Financial Officer.
- Professional fees-legal and accounting amounted to $496,594 for fiscal year
2008 as compared to $92,244 for fiscal year 2007. The increase in legal and
accounting was due to the Company performing due diligence for potential
merger candidates and the addition of another legal firm to assist the
Company during the year ended March 31, 2008.
- Professional fees-consulting amounted to $701,456 for the year ended March
31, 2008 as compared to $357,282 for 2007.
During the year ended March 31, 2008, the Company issued 3,000,000
shares of common stock valued at $390,000 for investor relations; this
contract was terminated in February The Company is currently involved in a
legal dispute over the payment and performance of the consulting agreement.
The Company contends that the contract never became effective, and
therefore the consultant was not entitled to receive compensation. The
consultant contends that the Company and its representatives induced them
to begin performance of the services early, based on certain promises. The
Company currently holds the stock certificates and intends to vigorously
defend its position however, the outcome of the proceedings cannot be
determined.
Our net loss for the year ended March 31, 2008 was $1,579,717 as compared
to $657,046 during the same period in 2007. The loss primarily reflects
increases in payroll expenses, professional fees and stock compensation expense.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial statements have been prepared assuming that the
Company will continue as a going concern. For the year ended March 31, 2008 and
the period since December 2, 2004 (date of inception) through March 31, 2008,
the Company has had a net loss of $1,579,717and $2,769,165, respectively and
cash used by operations of $168,708 and $455,330, respectively, and negative
working capital of $430,576 at March 31, 2008.
As of March 31, 2008, the Company has not emerged from the development
stage. In view of these matters, recoverability of recorded asset amounts shown
in the accompanying financial statements is dependent upon the Company's ability
to begin significant operations and to achieve a level of profitability. Since
inception, the Company has financed its activities principally from shareholder
advances and some relatively minor sales of equity securities (as set forth
below). The Company intends on financing its future development activities and
its working capital needs largely from the sale of equity securities until such
time that funds provided by operations are sufficient to fund working capital
requirements.
Effective June 27, 2007, the Company entered into an agreement with
Newbridge Securities, Corp. ("Newbridge") to assist the Company on a "best
efforts" basis in raising approximately $250,000 in a private offering of up to
2 million shares of restricted common stock at a price of $.125 per share.
On March 10, 2008, the Company entered into a Reorganization and Stock
Purchase Agreement and its amendments (the "Agreement") with Histostem Co.,
Ltd., a Korean company ("Histostem"). Pursuant to the Agreement (as
subsequently amended), the Company will acquire 90% of the issued and
outstanding stock of Histostem, and Histostem's shareholders will acquire a
controlling interest in the Company. The original definitive agreement called
for closing of the acquisition by April 30, 2008. Subsequent to Closing, the
Company will be held approximately 60% by Histostem and 40% by the existing
shareholders of the Company. Upon completion of the acquisition, the Company
will be renamed AmStem International Corp., increase the authorized number of
shares to 500,000,000 and seek a new symbol on the over-the-counter bulletin
board.
On April 22, 2008, the Company amended the Agreement to state that
Histostem shall have received funding at the date of the actual closing at a
minimum of 2 million dollars towards the initial round of funding of at least 10
million dollars. Subsequent to that amendment, the actual closing deadline of
April 30, 2008 was no longer in effect.
On June 19, 2008, the Company entered into a second Amendment to the
Reorganization and Stock Purchase Agreement. In accordance with the terms of
this second Amendment, the Company and Histostem issued and delivered shares
reflecting the acquisition of Histostem into Escrow by the Company pending
resolution of outstanding litigation between Histostem Korea and Histostem, Inc.
(a United States corporation unrelated to Histostem) ("Histostem USA"). This
essentially effectuates an immediate closing of the Histostem acquisition. In
the Amendment the parties also agreed to complete a one for three reverse stock
split of the Company's common stock. That reverse stock split will be completed
after filing, mailing and completion of a 14C Information Statement to the
Company's shareholders and appropriate notice and filings with the NASD.
In April 2008, the Company entered into a consulting agreement with
Mirador Consulting, Inc. to provide management consulting services for three
months. The Company has agreed to issued 200,000 shares of common stock valued
at $25,000.
In April 2008, the Company entered into a consulting agreement with Hunden
Consulting Group to provide investor relations services for one year. Fees
shall be paid to the consultant only if the consultant introduces the Company,
in writing, to a third party investor or merger candidate, then the fees shall
equal 10% of the total investment or loan to the Company and if a merger
transaction occurs between the Company and a party introduced by the Consultant,
the Consultant would be entitled to receive a 5% commission.
On May 28, 2008, the Company entered into a consulting agreement with Shea
Financial, LLC to provide fund raising services for a term of three months in
exchange for the right to purchase 500,000 shares of common stock at $0.05 per
share upon a funding commitment to the Company of at least $10 million from
consultant funding and $2,500,000 at the closing. To date, the Company has not
received any funding under this agreement.
On June 5, 2008, the Company entered into an agreement with Ventana Group
to extend a Credit Facility of up to $2,500,000 in bridge financing. The loan
will mature the sooner of 180 days from the date of funding with interest
accruing at a rate of 1.25% and principal and interest due at maturity. Ventana
has the option to convert all or any portion of the loan to equity, with the
conversion terms to be determined at a later date. The Company has agreed to
pay Ventana a 5% loan fee based on the amount of the draw down on the credit
facility and to issue a warrant to purchase shares of common stock equal to 25%
of the loan commitment ($2,500,000). The number of warrants and strike price
shall be determined using the 45 day average trading price per share of the
stock at the time of execution, less a 10% discount. The warrant will be
exercisable for 3 years from the date of issuance. As of the date of this
filing, no funding has been received, nor can there be any assurance regarding
the closing of this funding.
On June 12, 2008, the Company sold 388,889 shares of common stock along
with an option to purchase an additional 722,222 shares of common stock at $0.09
per share to an accredited investor for an aggregate price of $35,000.
Subsequent to year end, the Company borrowed money from related parties
totaling $45,000. The notes are due on demand and bear interest at 7% per year.
Seasonality
As a result of the Company's limited operating history and the emerging
nature of the biotechnological markets in which it competes, the Company is
unable to accurately forecast its revenues. The Company's current and future
expense levels are based largely on its investment plans and estimates of future
revenues and are to a large extent fixed and expected to increase.
OFF-BALANCE SHEET ARRANGEMENTS
The Company is not currently engaged in any off-balance sheet arrangements,
as defined by Item 303(c)(2) of Regulation S-B. The Company has not engaged in
any off-balance sheet arrangement during the last fiscal year, and is not
reasonably likely to engage in any off-balance sheet arrangement in the near
future.
NEW ACCOUNTING PRONOUNCEMENTS
In February 2007, the FASB issued SFAS No. 159 ("SFAS 159"), "The Fair Value
Option for Financial Assets and Financial Liabilities", which permits an entity
to measure certain financial assets and financial liabilities at fair value.
Under SFAS 159, entities that elect the fair value option will report unrealized
gains and losses in earnings at each subsequent reporting date. The fair value
option may be elected on a instrument-by-instrument basis, with a few
exceptions, as long as it is applied to the instrument in its entirety. The fair
value option election is irrevocable, unless a new election date occurs. SFAS
159 establishes presentation and disclosure requirements to help financial
statement users understand the effect of the entity's election on its earnings
but does not eliminate disclosure requirements of other accounting standards.
Assets and liabilities that are measured at fair value must be displayed on the
face of the balance sheet. SFAS 159 is effective as of the beginning of the
first fiscal year that begins after November 15, 2007. The Company does not
expect the adoption of SFAS 159 to have a material impact on the financial
statements.
In December 2007, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141 (revised 2007),
Business Combinations, which replaces SFAS No 141. The statement retains the
purchase method of accounting for acquisitions, but requires a number of
changes, including changes in the way assets and liabilities are recognized in
the purchase accounting. It also changes the recognition of assets acquired and
liabilities assumed arising from contingencies, requires the capitalization of
in-process research and development at fair value, and requires the expensing of
acquisition-related costs as incurred. SFAS No. 141R is effective for business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008.
In December 2007, the FASB issued SFAS No. 160. "Noncontrolling Interests in
Consolidated Financial Statements-and Amendment of ARB No. 51." SFAS 160
establishes accounting and reporting standards pertaining to ownership interests
in subsidiaries held by parties other than the parent, the amount of net income
attributable to the parent and to the noncontrolling interest, changes in a
parent's ownership interest, and the valuation of any retained noncontrolling
equity investment when a subsidiary is deconsolidated. This statement also
establishes disclosure requirements that clearly identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners. SFAS 160 is effective for fiscal years beginning on or after December
15, 2008. The adoption of SFAS 160 is not currently expected to have a material
effect on the Company's financial position, results of operations, or cash
flows.
In March 2008, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 161, Disclosures about Derivative Instruments and Hedging
Activities. The new standard is intended to improve financial reporting about
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity's financial
position, financial performance, and cash flows. It is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The company is currently evaluating
the impact of adopting SFAS. No. 161 on its financial statements.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles." The current GAAP hierarchy, as set forth in the
American Institute of Certified Public Accountants (AICPA) Statement on Auditing
Standard No. 69, The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles, has been criticized because (1) it is directed
to the auditor rather than the entity, (2) it is complex, and (3) it ranks FASB
Statements of Financial Accounting Concepts. The FASB believes that the GAAP
hierarchy should be directed to entities because it is the entity (not its
auditor) that is responsible for selecting accounting principles for financial
statements that are presented in conformity with GAAP. Accordingly, the FASB
concluded that the GAAP hierarchy should reside in the accounting literature
established by the FASB and is issuing this Statement to achieve that result.
This Statement is effective 60 days following the SEC's approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, The Meaning of
Present Fairly in Conformity with Generally Accepted Accounting Principles. The
adoption of SFAS No. 162 is not expected to have a material impact on the
Company's financial position.
Other recent accounting pronouncements issued by the FASB (including its EITF),
the AICPA, and the SEC did not or are not believed by management to have a
material impact on the Company's present or future financial statements.
ITEM 7. FINANCIAL STATEMENTS
TABLE OF CONTENTS:
Report of Independent Registered Certified Public Accounting
Firm-Aidman, Piser & Company P.A. F-2
Consolidated Balance Sheets as of March 31, 2008 and 2007 F-3
Consolidated Statements of Operations for the years ended
March 31, 2008 and 2007 and for the period from December
2, 2004 (Date of Inception) through March 31, 2008 F-4
Consolidated Statement of Changes in Stockholders' (Deficit) for
the period from December 2, 2004 (Date of Inception) through
March 31, 2008 F-5
Consolidated Statements of Cash Flows for the years ended March
31, 2008 and 2007 and for the period from December 2, 2004
(Date of Inception) through March 31, 2008 F-8
Notes to Consolidated Financial Statements F-9
REPORT OF INDEPENDENT REGISTERED CERTIFIED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Stem Cell Therapy International, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of Stem Cell Therapy
International, Inc and Subsidiary as of March 31, 2008 and 2007 and the related
consolidated statements of operations, changes in stockholders' deficit, and
cash flows for the years then ended, and for the period from December 2, 2004
(date of inception) through March 31, 2008. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with standards of the Public Company
Accounting Oversight Board (United States of America). Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of internal
control over financial reporting as a basis for designing audit procedures that
are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Company's internal control over financial
reporting. Accordingly, we express no such opinion. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Stem
Cell Therapy International, Inc. and Subsidiary as of March 31, 2008 and 2007
and the consolidated results of their operations and their cash flows for the
years then ended and for the period from December 2, 2004 (date of inception)
through March 31, 2008 in conformity with accounting principles generally
accepted in the United States of America.
The accompanying consolidated financial statements have been prepared assuming
that Stem Cell Therapy International, Inc. and Subsidiary will continue as a
going concern. As discussed in Note 2 to the consolidated financial
statements, the Company incurred significant losses and used cash in operating
activities during the year ended March 31, 2008, and had a deficit in working
capital at March 31, 2008. These factors, among others as discussed in Note 2
to the consolidated financial statements, raise substantial doubt about the
Company's ability to continue as a going concern. Management's plans in regards
to these matters are also described in Note 2. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
/s/ Aidman, Piser & Company, P.A.
Tampa, Florida
July 14, 2008
Stem Cell Therapy International, Inc. and Subsidiary
(a development stage enterprise)
CONSOLIDATED BALANCE SHEETS
March 31,
--------------------------
2008 2007
------------ ------------
ASSETS
Current assets:
Cash $ 2,387 $ 27,905
Inventory - 5,988
Prepaid expenses 358,738 47,317
------------ ------------
Total current assets 361,125 81,210
Certificate of deposit, restricted - 3,919
Deposits 2,169 2,169
Prepaid expenses 10,792 51,209
------------ ------------
Total assets $ 374,086 $ 138,507
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 126,670 $ 62,875
Accrued expenses 99,000 75,000
Accrued payroll and payroll related expenses 358,831 170,557
Deferred revenue - 50,000
Stockholder advances - 48,753
Due to related party 207,200 225,200
------------ ------------
Total current liabilities 791,701 632,385
Commitments and contingencies (Note 8) - -
Stockholders' deficit:
Preferred stock; $.001 par value; 10,000,000
shares authorized and 500,000 issued
and outstanding 500 500
Common stock; $.001 par value; 100,000,000
shares authorized and 40,920,369 and
34,495,369issued and outstanding,
respectively 40,920 34,495
Additional paid-in capital 2,310,130 660,575
Deficit accumulated during development stage (2,769,165) (1,189,448)
------------ ------------
Total stockholders' deficit (417,615) (493,878)
------------ ------------
Total liabilities and stockholders'
deficit $ 374,086 $ 138,507
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
Stem Cell Therapy International, Inc. and Subsidiary
(a development stage enterprise)
CONSOLIDATED STATEMENTS OF OPERATIONS
Period from
December 2, 2004
Years Ended (Date of Inception)
March 31, through March 31,
------------ ------------ --------------------
2008 2007 2008
------------ ------------ --------------------
Revenue $ 132,960 $ 345,510 $ 559,404
Cost of goods sold:
General 52,268 173,993 278,361
Loss on firm purchase
commitment - 116,000 116,000
------------ ------------ --------------------
Gross margin 80,692 55,517 165,043
Operating expenses:
Selling, general
& administrative
expenses 1,658,775 714,227 2,936,354
Loss from operations (1,578,083) (658,710) (2,771,311)
Interest income, net (1,634) 1,664 2,146
------------ ------------ --------------------
Net loss before taxes (1,579,717) (657,046) (2,769,165)
Income tax expense - - -
------------ ------------ --------------------
Net loss (1,579,717) (657,046) (2,769,165)
Less dividends on
preferred stock - - (10,000)
------------ ------------ --------------------
Loss attributable to
common shareholders $(1,579,717) $ (657,046) $ (2,779,165)
============ ============ ====================
Net loss per share,
basic & diluted $ (.04) $ (.02) $ (.09)
============ ============ ====================
Weighted average
number of common
shares, basic & diluted 36,950,506 34,310,534 31,182,100
============ ============ ====================
The accompanying notes are an integral part of the consolidated financial
statements.
STEM CELL THERAPY INTERNATIONAL, INC. AND SUBSIDIARY
(A DEVELOPMENT STAGE ENTERPRISE)
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
FOR THE PERIOD FROM DECEMBER 2, 2004 (DATE OF INCEPTION) THROUGH MARCH 31, 2008
DEFICIT
ACCUMULATED
Common Stock Preferred Stock ADDITIONAL DURING
--------------------- ---------------- PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL
----------- -------- ------- ------- ------------ ------------- ---------
Issuance of common
stock for cash
(December 2004) 11,600,000 $11,600 - $ - $ - $ - $ 11,600
Exercise of stock options
for services (December 2004) 500,000 500 - - - - 500
Issuance of common
stock and options for
acquisition deposit
(December 2004) 5,000,000 5,000 - - 2,749 - 7,749
Stock options issued
for services - - - - 906 - 906
Issuance of common
stock for services
(January 2005) 2,170,000 2,170 - - - - 2,170
Issuance of common
stock for cash
(January 2005) 200,000 200 - - - - 200
Issuance of common
stock for cash
(February 2005) 1,100,000 1,100 - - - - 1,100
Issuance of common
stock for cash
(March 2005) 650,000 650 - - - - 650
Net loss for the period - - - - - (26,241) (26,241)
----------- -------- ------- ------- ------------ ------------- ---------
Balance, March 31, 2005 21,220,000 21,220 - - 3,655 (26,241) (1,366)
Cancellation of common
stock issued and options
awarded for services
(May 2005) (5,600,000) (5,600) - - (2,749) - (8,349)
Issuance of common
stock for services
(September 2005) 379,000 379 - - - - 379
Issuance of common
stock for intangible asset 5,000,000 5,000 - - - - 5,000
Reverse acquisition,
September 1, 2005 6,310,678 6,311 - - (906) - 5,405
Issuance of common
stock for a reduction in
stockholder advances
(September 2005) 3,000,000 3,000 - - - - 3,000
Issuance of common
stock for services
(September 2005) 3,030,000 3,030 - - - - 3,030
Issuance of preferred
stock for cash
(September 2005) - - 500,000 500 34,500 - 35,000
Dividend on preferred stock - - - - (10,000) - (10,000)
Issuance of common
stock for services
(September 2005) 6,400 6 - - 11,994 - 12,000
Issuance of common
stock for services
(October 2005) 11,882 12 - - 11,988 - 12,000
Issuance of common
stock for services
(October 2005) 20,000 20 - - 20,980 - 21,000
Issuance of common
stock for services
(October 2005) 10,000 10 - - 17,490 - 17,500
Issuance of common
stock for services
(October 2005) 10,000 10 - - 14,490 - 14,500
Issuance of common
stock for services
(November 2005) 13,953 14 - - 11,986 - 12,000
Issuance of common
stock for services
(December 2005) 30,000 30 - - 29,070 - 29,100
Issuance of common
stock for services
(December 2005) 12,000 12 - - 11,988 - 12,000
Issuance of common
stock for services
(January 2006) 10,000 10 - - 7,555 - 7,565
STEM CELL THERAPY INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (CONTINUED)
FOR THE PERIOD FROM DECEMBER 2, 2004 (DATE OF INCEPTION) THROUGH MARCH 31, 2008
DEFICIT
ACCUMULATED
Common Stock Preferred Stock ADDITIONAL DURING
------------------ --------------- PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL
---------- ------ ------- ------ ---------- ------------ ---------
Issuance of common
stock for services
(January 2006) 10,000 10 - - 7,555 - 7,565
Issuance of common
stock for services
(January 2006) 14,118 14 - - 11,986 - 12,000
Issuance of common
stock for services
(January 2006) 20,000 20 - - 16,980 - 17,000
Issuance of common
stock for services
(February 2006) 14,118 14 - - 11,986 - 12,000
Issuance of common
stock for services
(February 2006) 24,000 24 - - 20,376 - 20,400
Issuance of common
stock for services
(February 2006) 48,000 48 - - 40,752 - 40,800
Issuance of common
stock for services
(February 2006) 48,000 48 - - 40,752 - 40,800
Issuance of common
stock for services
(March 2006) 30,361 30 - - 11,970 - 12,000
Net loss for the year
ended March 31, 2006 - - - - - (506,161) (506,161)
---------- ------ ------- ------ ---------- ------------ ---------
Balance, March 31, 2006 33,672,510 33,672 500,000 500 324,398 (532,402) (173,832)
Issuance of common
stock for services
(April 2006) 25,276 26 - - 21,974 - 22,000
Issuance of common
stock for services
(May 2006) 16,484 16 - - 11,.984 - 12,000
Issuance of common
stock for services
(June 2006) 422,599 423 - - 167,577 - 168,000
Issuance of common
stock for services
(July 2006) 330,265 330 - - 122,670 - 123,000
Issuance of common
stock for services
(August 2006) 28,235 28 - - 11,972 - 12,000
Net loss for the year
ended March 31, 2007 - - - - - (657,046) (657,046)
---------- ------ ------- ------ ---------- ------------ ---------
Balance, March 31, 2007 34,495,369 34,495 500,000 500 660,575 (1,189,448) (493,878)
The accompanying notes are an integral part of the consolidated financial
statements.
STEM CELL THERAPY INTERNATIONAL, INC.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT (CONTINUED)
FOR THE PERIOD FROM DECEMBER 2, 2004 (DATE OF INCEPTION) THROUGH MARCH 31, 2008
DEFICIT
ACCUMULATED
Common Stock Preferred Stock ADDITIONAL DURING
------------------- ---------------- PAID-IN DEVELOPMENT
SHARES AMOUNT SHARES AMOUNT CAPITAL STAGE TOTAL
---------- ------- ------- ------- ------------ ------------ -----------
Issuance of common
stock for services
(May 2007) 250,000 250 - - 44,750 - 45,000
Issuance of common
stock for services
(June 2007) 300,000 300 - - 116,700 - 117,000
Issuance of common
stock for cash, net of
offering costs (July 2007) 2,000,000 2,000 - - 204,024 - 206,024
Issuance of warrants
for consulting services
(September 2007) - - - - 23,750 - 23,750
Exercise of warrants
(September 2007) 125,000 125 - - (125) - -
Share-based compens-
ation to employees - - - - 505,716 - 505,716
Issuance of warrants
for consulting services
(October 2007) - - - - 419,864 - 419,864
Issuance of warrants
for consulting services
(December 2007) - - - - 10,000 - 10,000
Exercise of warrants
(December 2007) 125,000 125 - - (125) - -
Exercise of options
(January 2008) 2,000,000 2,000 - - - - 2,000
Issuance of common
stock for services
(February 2008) 500,000 500 - - 62,000 - 62,500
Issuance of common
stock for services
(March 2008) 750,000 750 - - 176,750 - 177,500
Share-based compens-
ation to employees
(March 2008) 250,000 250 54,750 - 55,000
Issuance of warrants
for consulting services
(March 2008) - - - - 28,700 - 28,700
Exercise of warrants
(March 2008) 125,000 125 - - (125) - -
Share-based compens-
ation to employees
(March 2008) - - - - 2,926 - 2,926
Net loss for the year
ended March 31, 2008 - - - - - (1,579,717) (1,579,717)
---------- ------- ------- ------- ------------ ------------ -----------
Balance, March 31, 2008 40,920,369 $40,920 500,000 $ 500 $ 2,310,130 ($2,769,165) ($417,615)
========== ======= ======= ======= ============ ============ ===========
The accompanying notes are an integral part of the consolidated financial
statements
Stem Cell Therapy International, Inc. and Subsidiary
(a development stage enterprise)
Consolidated Statements of Cash Flows
Period from
December 2, 2004
Years Ended (Date of Inception)
March 31, through March 31,
2008 2007 2008
------------ ---------- --------------------
OPERATING ACTIVITIES:
Net loss $(1,579,717) $(657,046) $ (2,769,165)
Adjustments to reconcile net
loss to net cash used by
operating activities:
Share-based compensation to
non-employees 601,366 325,539 1,164,178
Share-based compensation to
employees 563,642 - 563,642
Investment income reinvested - (2,943) (2,943)
Amortization - 375 668
Write off of intangible asset - 4,333 4,333
(Increase) decrease in:
Inventory 5,988 (5,988) -
Prepaid expenses 11,943 (8,117) (375)
Deposits - (580) (2,169)
Increase in:
Accounts payable 65,795 34,505 128,670
Accrued payroll 188,275 135,557 358,831
Accrued expenses 24,000 - 99,000
Deferred revenue (50,000) 50,000 -
------------ ---------- --------------------
Net cash used by operating
activities (168,708) (124,365) (455,330)
------------ ---------- --------------------
INVESTING ACTIVITIES:
Proceeds from certificate of
deposit, restricted 3,919 119,024 2,943
------------ ---------- --------------------
Net cash provided (used) by
investing activities 3,919 119,024 2,943
------------ ---------- --------------------
FINANCING ACTIVITIES:
Proceeds from advances from
stockholder - 376 52,528
Repayment of stockholder
advances (48,753) - (49,528)
(Repayment) advances from
related party, net (18,000) 228 207,200
Payment of stock offering costs (43,976) - (43,976)
Proceeds from sale of stock 250,000 - 288,550
------------ ---------- --------------------
Net cash provided by financing
activities 139,271 604 454,774
------------ ---------- --------------------
NET (DECREASE) INCREASE IN CASH (25,518) (4,737) 2,387
Cash at beginning of period 27,905 32,642 -
------------ ---------- --------------------
Cash at end of period $ 2,387 $ 27,905 $ 2,387
============ ========== ====================
Supplemental disclosure of cash flow information and non-cash financing
activities:
Cash paid for interest $ 1,645 $ 1,554 $ 3,308
============ ========== ====================
Common stock issued for a
reduction in advance from
stockholder $ - $ - $ 3,000
============ ========== ====================
Common stock issued for a
reduction in accounts payable $ 2,000 $ - $ 2,000
============ ========== ====================
Common stock issued for
purchase of intangible asset $ - $ - $ 5,000
============ ========== ====================
The accompanying notes are an integral part of the consolidated financial
statements.
Stem Cell Therapy International, Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2008 and 2007
and for the period from December 2, 2004 (Date of Inception)
through March 31, 2008
1. BACKGROUND INFORMATION, BASIS OF PRESENTATION AND BUSINESS REORGANIZATION
Company background:
Stem Cell Therapy International, Inc. (the "Company"), was originally
incorporated in the state of Nevada on December 28, 1992 as Arklow Associates,
Inc. The Company's operating business is Stem Cell Therapy International Corp.
("Stem Cell Florida") a wholly owned subsidiary, which is a development stage
enterprise, and was incorporated in the state of Nevada on December 2, 2004. To
date, the Company's activities have been limited to raising capital,
organizational matters and the structuring of its business plan. The corporate
headquarters is located in Tampa, Florida.
To date, the Company has been engaged in the licensing of stem cell technology,
the sale of stem cell products, and information, education, and referral
services relating to potential stem cell therapy patients. The Company purchases
allo stem cell biological solutions that are currently being used in the
treatment of patients suffering from degenerative disorders of the human body
such as Alzheimer's, Parkinson's Disease, ALS, leukemia, muscular dystrophy,
multiple sclerosis, arthritis, spinal cord injuries, brain injury, stroke, heart
disease, liver and retinal disease, diabetes as well as certain types of cancer.
Business reorganization:
Effective September 1, 2005, Stem Cell Florida entered into a Reorganization and
Stock Purchase Agreement (the "Agreement") with the Company, then named
Altadyne, Inc., a company quoted on the Pink Sheets, which had no assets,
liabilities or ongoing operations. Under the terms of the agreement, the
Company, (then Altadyne) acquired 100% of the issued and outstanding shares of
common stock of Stem Cell Florida in a non-cash transaction and Stem Cell
Florida became a wholly owned subsidiary of the Company. Subsequent to the
merger, Altadyne changed its name to Stem Cell Therapy International Inc. This
transaction is accounted for as a reverse merger, with Stem Cell Florida treated
as the accounting acquirer for financial statement purposes.
The results of operations for Stem Cell Florida, the accounting acquirer, for
the period from December 2, 2004 (Date of Inception) have been included in the
consolidated statements of operations of the Company.
Principles of consolidation:
The accompanying consolidated financial statements include the accounts of Stem
Cell Therapy International, Inc. and its wholly-owned subsidiary, Stem Cell
Therapy International Corp. All intercompany accounts and transactions have
been eliminated.
2. LIQUIDITY AND MANAGEMENT'S PLANS
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. For the year ended March 31, 2008
and the period since December 2, 2004 (date of inception) through March 31,
2008, the Company has had net losses of $1,579,717 and $2,769,165, respectively,
and cash used in operations of $168,708 and $455,330, respectively, and has
negative working capital of $430,576 at March 31, 2008. As of March 31, 2008,
the Company has not emerged from the development stage. In view of these
matters, the ability of the Company to continue as a going concern is dependent
upon the Company's ability to generate additional financing and ultimately
increase operations and to achieve a level of profitability. Since inception,
the Company has financed its activities principally from the use of equity
securities to pay for services and related party advances. The Company intends
on financing its future development activities and its working capital needs
largely from the sale of equity securities and loans from the Company's Chief
Executive Officer, until such time that funds provided by operations are
sufficient to fund working capital requirements. There can be no assurance that
the Company will be successful at achieving its financing goals at reasonably
commercial terms, if at all.
Stem Cell Therapy International, Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2008 and 2007
and for the period from December 2, 2004 (Date of Inception)
through March 31, 2008
2. LIQUIDITY AND MANAGEMENT'S PLANS (CONTINUED)
On March 10, 2008, the Company entered into a Reorganization and Stock
Purchase Agreement (the "Agreement") with Histostem Co., Ltd., a Korean company
("Histostem"). Pursuant to the Agreement (as subsequently amended), the Company
will acquire 90% of the issued and outstanding stock of Histostem from
Histostem's shareholders, and Histostem's shareholders will acquire a
controlling interest in the Company. The original definitive agreement called
for closing of the acquisition by April 30, 2008. Subsequent to closing, the
Company will be held approximately 60% by Histostem and 40% by the existing
shareholders of the Company. Upon completion of the acquisition, the Company
will be renamed AmStem International Corp., increase the number of authorized
shares of common stock and will seek a new symbol on the over-the-counter
bulletin board.
On April 22, 2008, the Company amended the Agreement to state that
Histostem shall have received funding at the date of the actual closing at a
minimum of 2 million dollars towards the initial found of funding of at least 10
million dollars. Subsequent to that amendment, the actual closing deadline of
April 30, 2008 was no longer in effect.
On June 19, 2008, the Company entered into a second Amendment to the
Reorganization and Stock Purchase Agreement. In accordance with the terms of
this second Amendment, the Company and Histostem issued and delivered shares
reflecting the acquisition of Histostem into Escrow by the Company pending
resolution of outstanding litigation between Histostem Korea and Histostem, Inc.
(a United States corporation unrelated to Histostem) ("Histostem USA"). This
essentially effectuates an immediate closing of the Histostem acquisition. In
the Amendment the parties also agreed to complete a one for three reverse stock
split of the Company's common stock. That reverse stock split will be completed
after filing, mailing and completion of a 14C Information Statement to the
Company's shareholders and appropriate notice and filings with the NASD.
3. SIGNIFICANT ACCOUNTING POLICIES
Use of estimates:
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Concentration of credit risk:
Cash balances are maintained with a major financial institution in the United
States. Deposits with this bank may exceed the amount of insurance provided on
such deposits. Generally, these deposits may be redeemed upon demand and,
therefore, bear minimal risk.
Impairment of long-lived assets:
The Company evaluates the recoverability of its long-lived assets or asset
groups whenever adverse events or changes in business climate indicate that the
expected undiscounted future cash flows from the related assets may be less than
previously anticipated. If the net book value of the related assets exceeds the
undiscounted future cash flows of the assets, the carrying amount would be
reduced to the present value of their expected future cash flows and an
impairment loss would be recognized. During the year ended March 31, 2007, the
Company impaired the remaining balance of $4,333 of intangible assets with a
charge to the consolidated statement of operations.
Revenue recognition:
Revenue is derived from the sale of stem cell products, and providing
informational and referral services. Revenue related to these licenses, sales
and services is recognized upon delivering the license or product, or rendering
the services, respectively. Any payments received prior to delivery of the
products or services are included in deferred revenue and recognized once the
products are delivered or the services are performed.
Stem Cell Therapy International, Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2008 and 2007
and for the period from December 2, 2004 (Date of Inception)
through March 31, 2008
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income taxes:
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their respective income
tax bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized as income in the
period that included the enactment date. Due to the Company's continued losses,
the Company has placed a full valuation allowance against the deferred tax
asset.
Loss per common share:
Basic and diluted loss per share are computed based on the weighted average
number of common shares outstanding during the period. Common stock equivalents
are not considered in the calculation of diluted earnings per share for the
periods presented if their effect would be anti-dilutive. The Company had no
common stock equivalents outstanding at March 31, 2008 or 2007.
Stock-based compensation:
In April 2006, the Company adopted the provisions of Statement of Financial
Accounting Standards No. 123R - Share-based Payments ("FAS 123R") replacing
Accounting for Stock-Based Compensation ("FAS 123"), which are similar and
require the use of the fair-value based method to determine compensation for all
arrangements under which employees and others receive shares of stock or equity
instruments (warrants and options). The adoption of SFAS 123R had no
significant impact on the Company's results of operations.
Recently issued accounting pronouncements:
In September 2006, the FASB issued Statement No. 157, Fair Value Measurements
("SFAS 157"). SFAS 157 clarifies the principle that fair value should be based
on the assumptions that market participants would use when pricing an asset or
liability. Additionally, it establishes a fair value hierarchy that prioritizes
the information used to develop those assumptions. SFAS 157 is effective for
financial statements issued for fiscal years beginning after November 15, 2007.
The adoption of SFAS 157 on April 1, 2008 is not expected to have a material
impact on the Company's financial position, results of operations or cash flows.
In February 2008, the FASB issued a staff position that delays the effective
date of SFAS 157 for all nonfinancial assets and liabilities except for those
recognized or disclosed at least annually.
In February 2007, the FASB issued SFAS No. 159 ("SFAS 159"), "The Fair Value
Option for Financial Assets and Financial Liabilities", which permits an entity
to measure certain financial assets and financial liabilities at fair value.
Under SFAS 159, entities that elect the fair value option will report unrealized
gains and losses in earnings at each subsequent reporting date. The fair value
option may be elected on a instrument-by-instrument basis, with a few
exceptions, as long as it is applied to the instrument in its entirety. The
fair value option election is irrevocable, unless a new election date occurs.
SFAS 159 establishes presentation and disclosure requirements to help financial
statement users understand the effect of the entity's election on its earnings
but does not eliminate disclosure requirements of other accounting standards.
Assets and liabilities that are measured at fair value must be displayed on the
face of the balance sheet. SFAS 159 is effective as of the beginning of the
first fiscal year that begins after November 15, 2007. The Company does not
expect the adoption of SFAS 159 to have a material impact on the financial
statements.
In December 2007, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 141 (revised 2007),
Business Combinations, which replaces SFAS No 141. The statement retains the
purchase method of accounting for acquisitions, but requires a number of
changes, including changes in the way assets and liabilities are recognized in
the purchase accounting. It also changes the recognition of assets acquired and
liabilities assumed arising from contingencies, requires the capitalization of
in-process research and development at fair value, and requires the expensing of
acquisition-related costs as incurred. SFAS No. 141R is effective for business
combinations for which the acquisition date is on or after the beginning of the
first annual reporting period beginning on or after December 15, 2008.
Stem Cell Therapy International, Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2008 and 2007
and for the period from December 2, 2004 (Date of Inception)
through March 31, 2008
3. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
In December 2007, the FASB issued SFAS No. 160. "Noncontrolling Interests in
Consolidated Financial Statements-and Amendment of ARB No. 51." SFAS 160
establishes accounting and reporting standards pertaining to ownership interests
in subsidiaries held by parties other than the parent, the amount of net income
attributable to the parent and to the noncontrolling interest, changes in a
parent's ownership interest, and the valuation of any retained noncontrolling
equity investment when a subsidiary is deconsolidated. This statement also
establishes disclosure requirements that clearly identify and distinguish
between the interests of the parent and the interests of the noncontrolling
owners. SFAS 160 is effective for fiscal years beginning on or after December
15, 2008. The adoption of SFAS 160 is not currently expected to have a material
effect on the Company's financial position, results of operations, or cash
flows.
In March 2008, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 161, Disclosures about Derivative Instruments and Hedging
Activities. The new standard is intended to improve financial reporting about
derivative instruments and hedging activities by requiring enhanced disclosures
to enable investors to better understand their effects on an entity's financial
position, financial performance, and cash flows. It is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008, with early application encouraged. The company is currently evaluating
the impact of adopting SFAS. No. 161 on its financial statements.
In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted
Accounting Principles." The current GAAP hierarchy, as set forth in the
American Institute of Certified Public Accountants (AICPA) Statement on Auditing
Standard No. 69, The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles, has been criticized because (1) it is directed
to the auditor rather than the entity, (2) it is complex, and (3) it ranks FASB
Statements of Financial Accounting Concepts. The FASB believes that the GAAP
hierarchy should be directed to entities because it is the entity (not its
auditor) that is responsible for selecting accounting principles for financial
statements that are presented in conformity with GAAP. Accordingly, the FASB
concluded that the GAAP hierarchy should reside in the accounting literature
established by the FASB and is issuing this Statement to achieve that result.
This Statement is effective 60 days following the SEC's approval of the Public
Company Accounting Oversight Board amendments to AU Section 411, The Meaning of
Present Fairly in Conformity with Generally Accepted Accounting Principles. The
adoption of SFAS No. 162 will not have a material impact on the Company's
financial statements.
Other recent accounting pronouncements issued by the FASB (including its EITF),
the AICPA, and the SEC did not or are not believed by management to have a
material impact on the Company's present or future financial statements.
4. RELATED PARTY TRANSACTIONS
Stockholder advances consisted of advances from an officer and significant
stockholder of the Company to assist the Company in meeting its financial
obligations. These advances were non-interest bearing, unsecured and due on
demand. The stockholder advances were repaid during the year ended March 31,
2008.
Due to related party of $207,200, represents advances from the majority
stockholder to assist the Company with its financial obligations. These
advances were non-interest bearing, unsecured and due on demand.
The above amounts are not necessarily indicative of the amounts that would have
been incurred had a comparable transaction been entered into with independent
parties.
5. STOCKHOLDERS' DEFICIT
Capitalization:
The Company has 100,000,000 shares of common stock authorized. In addition,
there are 10,000,000 authorized shares of participating convertible preferred
stock, $.001 par value, the issuance of which is subject to approval by the
Board of Directors. The Board of Directors has the authority to declare
dividends. The voting rights of the convertible preferred stockholders are
equivalent to that of the common stockholders. Each share of convertible
preferred stock can be converted at any time by the holder into one share of
common stock. As of March 31, 2008, the Company had 500,000 shares of
convertible preferred stock issued and outstanding. Upon issuance of the
preferred stock, management determined that the convertible preferred stock
contained a beneficial conversion feature calculated as of the date of
commitment, September 15, 2005, based on the fair value of the closing price of
the common stock, $0.07 per share, and an exercise price of $0.05 per share,
calculated as $25,000 paid for the preferred stock divided by the 500,000 shares
of convertible preferred stock received. Each share of the preferred stock is
convertible into one share of common stock with no additional investment. The
beneficial conversion was recorded as a dividend, as the preferred stock can be
converted at any time after the issue date.
Stem Cell Therapy International, Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2008 and 2007
and for the period from December 2, 2004 (Date of Inception)
through March 31, 2008
5. STOCKHOLDERS' DEFICIT (CONTINUED)
Stock options and warrants:
During the year ended March 31, 2008, the Company issued 3,650,000 stock options
to employees and 2,775,000 common stock warrants to consultants. The options and
warrants entitle the holders to purchase 6,425,000 shares of the Company's
common stock, at any time, at an exercise price of between $0.001 -- $0.25 per
share and begin expiring in 2012.
The fair value of each option was estimated on the date of grant using the Black
Scholes model that uses assumptions noted in the following table. Expected
volatility is based on the weekly trading of two similar Company's underlying
common stock (as the Company does not have an adequate trading history for an
accurate calculation) and other factors. Expected term is based upon the use of
the simplified method.
Expected volatility 102.9% - 169.7%
Expected dividends 0
Expected term 2.75 years - 10 years
Risk-free interest rate 1.99% - 4.59%
The value of the options granted totaled $508,642 and has been included in
selling, general and administrative expenses in the accompanying Condensed
Consolidated Statement of Operations for the year ended March 31, 2008.
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE GRANT DATE
SHARES PRICES PRICE FAIR VALUE
--------- -------------- --------- -----------
OPTIONSOUTSTANDING
-----------------------------
AND EXERCISABLE
-----------------------------
Outstanding at March 31, 2007 -- -- -- --
Options granted 3,650,000 $0.19 -- 0.25 $ 0.20 $ .18
Options exercised -- -- -- --
Options cancelled or expired -- -- -- --
---------
Outstanding at March 31, 2008 3,650,000 $0.19 -- 0.25 $ 0.20
---------
Exercisable at March 31, 2008 2,900,000 $0.19 -- 0.25
---------
The following table summarizes information about options outstanding and
exercisable as of March 31, 2008:
Outstanding Options Exercisable Options
------------------------------- -------------------------------
WEIGHTED WEIGHTED
RANGE OF NUMBER AVERAGE WEIGHTED AVERAGE NUMBER WEIGHTED
EXERCISE OUTST- REMAINING AVERAGE REMAINING EXERCIS- AVERAGE
PRICE ANDING LIFE PRICE LIFE ABLE PRICE
------------- --------- ---------- -------- ---------- --------- --------
$0.19 - $0.25 3,650,000 8.37 Years $ 0.20 9.45 Years 2,900,000 $ 0.19
There was no aggregate intrinsic value of options outstanding at March 31, 2008,
based on the Company's closing stock price of $0.17. Intrinsic value is the
amount by which the fair value of the underlying stock exceeds the exercise
price of the options.
Stem Cell Therapy International, Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2008 and 2007
and for the period from December 2, 2004 (Date of Inception)
through March 31, 2008
5. STOCKHOLDERS' DEFICIT (CONTINUED)
The fair value of each warrant was estimated on the date of grant using the
Black Scholes model that uses assumptions noted in the following table. Expected
volatility is based on the weekly trading of two similar Company's underlying
common stock (as the Company does not have an adequate trading history for an
accurate calculation) and other factors.
Expected volatility 88% - 163.2%
Expected dividends 0
Expected term 1 - 10 years
Risk-free interest rate 1.99% - 4.71%
The value of the warrants granted totaled $603,445, of which $487,501 has been
included in operating expenses in the accompanying condensed consolidated
statement of operations for the year ended March 31, 2008 and $115,944, is
included in prepaid expenses in the accompanying March 31, 2008 condensed
consolidated balance sheet.
WEIGHTED
AVERAGE
WEIGHTED GRANT
AVERAGE DATE
EXERCISE EXERCISE FAIR
SHARES PRICES PRICE VALUE
----------- -------------- --------- ---------
OUTSTANDING AND EXERCISABLE
-----------------------------
Outstanding at March 31, 2007 -- -- -- --
Warrants granted 2,775,000 $0.001 - $0.15 $ 0.02 $ 0.22
Warrants exercised (2,375,000) $ 0.001 $ 0.001 --
Warrants cancelled or expired -- -- -- --
-----------
Outstanding at March 31, 2008 400,000 $ 0.15 $ 0.15
-----------
Exercisable at March 31, 2008 400,000 $ 0.15 $ 0.15
-----------
The following table summarizes information about warrants outstanding and
exercisable as of March 31, 2008:
Outstanding Warrants Exercisable Warrants
------------------------------ -------------------------------
WEIGHTED WEIGHTED
RANGE OF NUMBER AVERAGE WEIGHTED AVERAGE NUMBER WEIGHTED
EXERCISE OUTSTA- REMAINING AVERAGE REMAINING EXERCIS- AVERAGE
PRICE NDING LIFE PRICE LIFE ABLE PRICE
--------- ------- ---------- --------- ---------- -------- ---------
0.15 400,000 9.51 Years $ 0.15 9.51 Years 400,000 $ 0.15
--------- ------- ---------- --------- ---------- -------- ---------
The aggregate intrinsic value of warrants outstanding at March 31, 2008, based
on the Company's closing stock price of $0.17 was $8,000. Intrinsic value is the
amount by which the fair value of the underlying stock exceeds the exercise
price of the warrants.
6. EARNINGS PER SHARE
Earnings per common share are computed in accordance with SFAS No. 128,
"Earnings per Share," which requires companies to present basic earnings per
share and diluted earnings per share. Basic earnings per share are computed by
dividing net income by the weighted average number of shares of common stock
outstanding during the year. Diluted earnings per common share are computed by
dividing net income by the weighted average number of shares of common stock
outstanding and dilutive options and warrants outstanding during the year. The
basic and diluted weighted average number of shares was 36,950,506, 34,310,534
and 31,182,100 for the years ended March 31, 2008 and 2007 and the period from
December 2, 2004 (Date of Inception) through March 31, 2008, respectively.
Common stock equivalents for the years ended March 31, 2008 and 2007 and the
period from December 2, 2004 (Date of Inception) through March 31, 2008 were
anti-dilutive due to the net losses sustained by the Company during these
periods.
Stem Cell Therapy International, Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2008 and 2007
and for the period from December 2, 2004 (Date of Inception)
through March 31, 2008
7. INCOME TAXES
Deferred income tax assets and liabilities are recognized for the expected
future tax consequences of events that have been reflected in the consolidated
financial statements. Deferred tax assets and liabilities are determined based
on the differences between the book values and the tax bases of particular
assets and liabilities and the tax effects of net operating loss and capital
loss carry forwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect
on deferred tax assets and liabilities of a change in the tax rate is recognized
as income or expense in the period that included the enactment date.
The Company has incurred operating losses since its inception and, therefore, no
tax liabilities have been incurred for the periods presented. The amount of
unused tax losses available to carry forward and apply against taxable income in
future years totaled approximately $1,750,000 at March 31, 2008. The loss carry
forwards expire beginning in 2025. Internal Revenue Code Sec. 382 places
limitations on the utilization of net operating losses. Due to the limitation
and the Company's historical losses, the Company has placed a full valuation
allowance against that asset of approximately $959,300.
The income tax provision differs from the amount of tax determined by applying
the Federal statutory rate as follows:
Period from
December 2, 2004
Years Ended through
------------------------ -------------
March 31, March 31, March 31,
----------- ----------- -------------
2008 2007 2008
----------- ----------- -------------
Income tax benefit at statutory rate ($537,100) ($223,400) ($ 941,500)
Increase (decrease) in income
tax due to:
Nondeductible expenses 82,000 600 82,700
State income taxes, net (57,300) (23,900) (100,500)
Change in valuation allowance 512,400 246,700 959,300
----------- ----------- -------------
$ - $ - $ -
=========== =========== =============
There was no current or deferred provision or benefit for income taxes for the
year ended March 31, 2008 and 2007 and for the period from December 2, 2004
(Date of Inception) through March 31, 2008. The components of deferred tax
assets as of March 31, 2008 and 2007 are as follows:
March 31, 2008 March 31, 2007
---------------- ----------------
Deferred tax (liability) asset:
Accrued payroll $ 144,200 $ 64,200
Options and warrants 156,300 0
Net operating loss carryforward 658,800 382,700
---------------- ----------------
959,300 446,900
Valuation allowance (959,300) (446,900)
---------------- ----------------
Total deferred taxes $ 0 $ 0
================ ================
8. COMMITMENTS AND CONTINGENCIES
Consulting agreements:
The Company has entered into several consulting agreements with other companies
and individuals to provide consulting and advisory services to the Company. The
agreements provide for terms ranging from one to three years. Additionally, the
consulting agreements required the issuance of 4,789,000 shares of the Company's
common stock valued at $544,409 on the date of the
Stem Cell Therapy International, Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2008 and 2007
and for the period from December 2, 2004 (Date of Inception)
through March 31, 2008
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
performance commitment. As of March 31, 2008, the Company had issued these
shares of common stock and has included $48,208 in prepaid expenses for services
not yet performed pursuant to the agreements.
The Company has entered into several consulting agreements with doctors to
provide consulting and advisory services to the Company. The agreements provide
for six months to one year service terms. In exchange for these services, the
Company issued a total of 110,000 shares of common stock valued at $114,230 on
the date of the performance commitment. As of March 31, 2008, the Company had
issued these shares of common for services performed pursuant to the agreements.
The Company is currently involved in a legal dispute over the payment and
performance of a consulting agreement. The Company contends that the contract
never became effective, and therefore the consultant was not entitled to receive
compensation. The consultant contends that the Company and its representatives
induced them to begin performance of the services early, based on certain
promises. The original contract calls for the consultant to be awarded the
compensation of 3,000,000 shares of the Company's common stock valued at
$390,000. The Company currently holds the stock certificates and intends to
vigorously defend its position however, the outcome of the proceedings cannot be
determined
Licensing agreement:
Effective September 1, 2005, the Company entered into a ten year licensing
agreement with the Institute of Cell Therapy, a company incorporated and
organized under the laws of Kiev, Ukraine ("ICT"). Pursuant to the agreement,
the Company issued ICT 5,000,000 shares of the Company's common stock recorded
at the fair market value of the Company's common stock of $5,000. The agreement
grants the Company a right and license in most parts of the world to utilize
patents, processes and products owned or produced by ICT in connection with the
operation of the Company's business. In exchange for the license, the Company
agrees to exclusively purchase all biological solution of stem cell Allo
Transplant materials from ICT. Such Allo Transplant materials shall be at a cost
of $6,500 per patient per condition. The licensing agreement guarantees a
minimum purchase of 60 portions per twelve month period. In the event that the
Company is unable to purchase the minimum quantities, ICT will be entitled to
draw upon the irrevocable letter of credit at the rate of $2,000 for every
portion less than the minimum required purchase. The Company had provided ICT
with a $120,000 irrevocable letter of credit in ICT's favor for the first three
years of the agreement. In the event the Letter of Credit is drawn upon, the
Company agreed to replenish the Letter of Credit to the extent of any such
draws. As of September 2006, the Company had not met the first year's minimum
purchase requirement and ICT withdrew $116,000 on the letter of credit, which
has been included in the cost of goods sold in the accompanying Consolidated
Statements of Operations for the year ended March 31, 2007 and the period from
inception through March 31, 2008. However, ICT was unable to provide the
product as requested and the Company was required to purchase the stem cell
materials from alternative sources. Management believes that ICT's inability to
provide the requested stem cell materials relieves the Company of its
obligations to replenish the letter of credit and to fulfill the minimum
purchase requirements. As such, the accompanying consolidated financial
statements do not reflect any liability for the Company's failure to purchase
the minimum amount of stem cell materials under the above mentioned license
agreement and as of the date of this filing, ICT has not made any claims against
the Company. The agreement with ICT was terminated during the year ended March
31, 2008.
Financing agreement:
During the year ended March 31, 2007, the Company entered into an agreement to
locate financing with a third party for three years. As consideration for these
consulting services, the Company has agreed to issue 500,000 shares of
restricted common stock and a 10% finder's fee for any funds brought into the
Company. As of March 31, 2008, the Company has not entered into any funding
agreements, and therefore the third party is not owed any consideration.
Stem Cell Therapy International, Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2008 and 2007
and for the period from December 2, 2004 (Date of Inception)
through March 31, 2008
8. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Consulting Agreement:
Effective September 12, 2007, the Company entered into a consulting agreement
with Newbridge for business and financial related advice and services through
September 11, 2008. As compensation for these services, the Company has agreed
to pay $4,000 per month and issue a total of 500,000 warrants. At March 31,
2008, 375,000 of the warrants valued as $62,450 have been issued, with the
remaining 125,000 warrants are to be issued in June 2008. In the event
Newbridge assists with an offering or sale of the Company's securities,
Newbridge will be entitled to receive a financing fee to be determined at the
time of such financing. Also, should any transactions be consumated by the
Company, in which Newbridge introduced the other party, during the six months
following termination of the agreement, Newbridge will be entitled to receive a
transaction fee based on the aggregate consideration received, computed as
follows: 5% for the first million dollars; 4% for the second million dollars;
3% for the third million dollars; 2% for the fourth million dollars and 1% of
the balance of the value of the transaction. In May 2008, the Company
terminated this agreement in exchange 500,000 shares of the Company's common
stock and $24,000 cash.
In February 2008, the Company entered into a consulting agreement with Elite
International Partners, Inc. to provide consulting services relative to business
licensing matters in foreign and domestic markets for a period of six months.
In exchange for these services, the Company has issued the consultant 500,000
shares of restricted common stock valued at $62,500. As of March 31, 2008, the
Company has expensed $10,417 to consulting expense with the balance of $52,083
included in prepaid expenses.
In March 2008, the Company entered into a consulting services agreement with
First Capital Partners LLC to provide consulting services through June 2008 in
exchange for 250,000 shares of the Company's restricted common stock valued at
$67,500. For the year ended March 31, 2008, the Company has recorded $22,500 as
consulting expense in the accompanying statement of operations and the remainder
of $45,000 in prepaid expenses.
Employment Agreements
In September 2007, the Company entered into employment agreements with the
Company's Chief Executive Officer, Chief Financial Officer and Chief Operating
Officer. Under the employment agreement for the Chief Executive Officer, the
employment term is five years and with an annual base salary of $150,000, with
minimum annual increases of $10,000. The Chief Financial Officer and Chief
Operating Officer each have employment agreements for a term of two years, with
an annual base salary of $60,000. Additional performance-based bonuses are
provided for, and the employees were granted options to purchase 2,900,000
shares of Company stock. Benefits under the agreement are accelerated on a
change of control, and the employee is subject to certain non-competition
covenants.
In March 2008, the Company entered into an employment agreement with the
Company's President. Under the employment agreement, the employment term is one
year and with payments of $8,500 per month for the first 90 days, and
subsequently, an annual base salary of $225,000. Additional performance-based
bonuses are provided for, and the employee was granted options to purchase
750,000 shares of Company stock at $0.25 per share. Benefits under the
agreement are accelerated on a change of control, and the employee is subject to
certain non-competition covenants. Upon execution of the employment agreement,
the Company issued the individual 250,000 shares of the Company's common stock
valued at $55,000.
9. MERGER AND REORGANIZATION AGREEMENT
On March 10, 2008, the Company entered into a Reorganization and Stock Purchase
Agreement and its amendments (the "Agreement") with Histostem Co., Ltd., a
Korean company ("Histostem"). Pursuant to the Agreement (as subsequently
amended), the Company will acquire 90% of the issued and outstanding stock of
Histostem, and Histostem's shareholders will acquire a controlling interest in
the Company. The original definitive agreement called for closing of the
acquisition by April 30, 2008. Subsequent to Closing, the Company will be held
approximately 60% by Histostem and 40% by the existing shareholders of the
Company. Upon completion of the acquisition, the Company will be renamed AmStem
International Corp., increase the authorized number of shares to 500,000,000 and
seek a new symbol on the over-the-counter bulletin board.
Stem Cell Therapy International, Inc.
(a development stage enterprise)
Notes to Consolidated Financial Statements
For the Years Ended March 31, 2008 and 2007
and for the period from December 2, 2004 (Date of Inception)
through March 31, 2008
9. MERGER AND REORGANIZATION AGREEMENT (CONTINUED)
On April 22, 2008, the Company amended the Agreement to state that Histostem
shall have received funding at the date of the actual closing at a minimum of 2
million dollars towards the initial round of funding of at least 10 million
dollars. Subsequent to that amendment, the actual closing deadline of April 30,
2008 was no longer in effect.
On June 19, 2008, the Company entered into a second Amendment to the
Reorganization and Stock Purchase Agreement. In accordance with the terms of
this second Amendment, the Company and Histostem issued and delivered shares
reflecting the acquisition of Histostem into Escrow by the Company pending
resolution of outstanding litigation between Histostem Korea and Histostem, Inc.
(a United States corporation unrelated to Histostem) ("Histostem USA"). This
essentially effectuates an immediate closing of the Histostem acquisition. In
the Amendment the parties also agreed to complete a one for three reverse stock
split of the Company's common stock. That reverse stock split will be completed
after filing, mailing and completion of a 14C Information Statement to the
Company's shareholders and appropriate notice and filings with the NASD.
10. SUBSEQUENT EVENTS
In April 2008, the Company entered into a consulting agreement with Mirador
Consulting, Inc. to provide management consulting services for three months.
The Company has agreed to issued 200,000 shares of common stock valued at
$25,000.
In April 2008, the Company entered into a consulting agreement with Hunden
Consulting Group to provide investor relations services for one year. Fees
shall be paid to the consultant only if the consultant introduces the Company,
in writing, to a third party investor or merger candidate, then the fees shall
equal 10% of the total investment or loan to the Company and if a merger
transaction occurs between the Company and a party introduced by the Consultant,
the Consultant would be entitled to receive a 5% commission.
On May 28, 2008, the Company entered into a consulting agreement with Shea
Financial, LLC to provide consulting services for a term of three months in
exchange for the right to purchase 500,000 shares of common stock at $0.05 per
share upon a funding commitment to the Company of at least $10 million from
consultant funding and $2,500,000 at the closing. To date, the Company has not
received any funding under this agreement.
On June 5, 2008, the Company entered into an agreement with Ventana Group to
extend a Credit Facility of up to $2,500,000 in bridge financing. The loan will
mature 6 months from the date of the promissory note with one 90 day extension
upon payment of an additional 2% fee. The promissory note will accrue interest
at a rate of 1.25%, with principal and interest due at maturity. Ventana has
the option to convert all or any portion of the loan to equity, with the
conversion terms to be determined at a later date. The Company has agreed to
pay Ventana a 5% loan fee based on the amount of the draw down on the credit
facility and to issue a warrant to purchase shares of common stock equal to 25%
of the loan commitment ($2,500,000). The number of warrants and strike price
will be $1.00. The warrant will be exercisable for 5 years from the date of
issuance. As of the date of this filing, no funding has been received, nor can
there be any assurance regarding the closing of this funding.
On June 12, 2008, the Company sold 388,889 shares of common stock along with an
option to purchase an additional 722,222 shares of common stock at $0.09 per
share to an accredited investor for an aggregate price of $35,000.
Subsequent to year end, the Company borrowed money from related parties totaling
$45,000. The notes are due on demand and bear interest at 7% per year.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
On July 14, 2008, Aidman, Piser & Company, P.A. ("Aidman Piser") resigned
as our independent registered public accounting firm. Aidman Piser's practice
was acquired by Cherry, Bekaert & Holland, L.L.P. ("Cherry Bekaert") in a
transaction pursuant to which Aidman Piser merged its operations into Cherry
Bekaert and certain of the professional staff and shareholders of Aidman Piser
joined Cherry Bekaert either as employees or partners of Cherry Bekaert and will
continue to practice as members of Cherry Bekaert. The Audit Committee of our
Board of Directors is currently identifying potential independent registered
public accounting firms to interview and engage for the year ending March 31,
2009, and we expect to make an announcement with regard to this matter in the
near future.
The report of Aidman Piser regarding our financial statements for the fiscal
year ended March 31, 2008 does not contain any adverse opinion or disclaimer of
opinion and was not qualified or modified as to uncertainty, audit scope or
accounting principles, except that substantial doubt was raised as to our
ability to continue as a going concern. During the past year and during the
period from the end of the most recently completed year through July 14, 2008,
the date of resignation, there were no disagreements with Aidman Piser on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedures, which disagreements, if not resolved to the
satisfaction of Aidman Piser would have caused it to make reference to such
disagreements in its reports.
We provided Aidman Piser with a copy of the this Annual Report on Form 10-KSB
prior to its filing with the Securities and Exchange Commission and requested
that Aidman Piser furnish the Company with a letter addressed to the Securities
and Exchange Commission stating whether it agrees with the statements set forth
above in this Item 8 and, if it does not agree, the respects in which it does
not agree. A copy of the letter, dated July 14, 2008, is filed as Exhibit 10.30
to this Report.
ITEM 8A. CONTROLS AND PROCEDURES
The Company's Chief Executive Officer and Chief Financial Officer have evaluated
the effectiveness of the Company's disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the
fiscal period ending March 31, 2008 covered by this Annual Report on Form
10-KSB. Based upon such evaluation, the Chief Executive Officer and Chief
Financial Officer have concluded that, as of the end of such period, the
Company's disclosure controls and procedures were not effective as required
under Rules 13a-15(e) and 15d-15(e) under the Exchange Act. This conclusion by
the Company's Chief Executive Officer and Chief Financial Officer does not
relate to reporting periods after March 31, 2008.
Management's Report on Internal Control Over Financial Reporting
-----------------------------------------------------------------------
Management is responsible for establishing and maintaining adequate internal
control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of
the Exchange Act) of the Company. Internal control over financial reporting is
a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with accounting principles generally accepted in the
United States of America.
The Company's internal control over financial reporting includes those policies
and procedures that (i) pertain to the maintenance of records that, in
reasonable detail, accurately and fairly reflect the transactions and
dispositions of the assets of the company; (ii) provide reasonable assurance
that transactions are recorded as necessary to permit preparation of financial
statements in accordance with accounting principles generally accepted in the
United States of America, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of
the Company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of the
Company's assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate.
Management, under the supervision of the Company's Chief Executive Officer and
Chief Financial Officer, conducted an evaluation of the effectiveness of
internal control over financial reporting based on the framework in Internal
Control-Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this evaluation, management concluded that
the Company's internal control over financial reporting was not effective as of
March 31, 2008 under the criteria set forth in the Internal Control-Integrated
Framework.
A material weakness is a deficiency, or combination of deficiencies, in internal
control over financial reporting such that there is a reasonable possibility
that a material misstatement of the Company's annual or interim financial
statements will not be prevented or detected on a timely basis. Management has
determined that material weaknesses exist due to the lack of an independent
Audit Committee, as well as a lack of segregation of duties, resulting from the
Company's limited resources.
This annual report does not include an attestation report of the Company's
registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our registered
public accounting firm
pursuant to temporary rules of the SEC that permit us to provide only
management's report in this Annual Report on Form 10-KSB.
Changes in Internal Control Over Financial Reporting
----------------------------------------------------------
No change in the Company's internal control over financial reporting occurred
during the year ended March 31, 2008, that materially affected, or is reasonably
likely to materially affect, the Company's internal control over financial
reporting.
ITEM 8B OTHER INFORMATION
None
PART III
ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names and ages of our current directors and
executive officers, their principal offices and positions and the date each such
person became a director or executive officer. The Board of Directors elects our
executive officers annually. Our directors serve one-year terms or until their
successors are elected and accept their positions. The executive officers serve
terms of one year or until their death, resignation or removal by the Board of
Directors. There are no family relationships or understandings between any of
the directors and executive officers. In addition, there was no arrangement or
understanding between any executive officer and any other person pursuant to
which any person was selected as an executive officer.
NAME OF DIRECTOR OR EXECUTIVE OFFICER AGE CURRENT POSITION AND OFFICE
------------------------------------- --- ------------------------------------
David Stark President
------------------------------------- ------------------------------------
Andrew J. Norstrud 34 Chief Financial Officer
------------------------------------- --- ------------------------------------
Chief Operating Officer and Patent
Lixian (John) Jiang 36 Trademark Counsel and Director
------------------------------------- --- ------------------------------------
PRESIDENT - DAVID STARK:
-------------
David Stark, Q.M.E., CCRA, joined the Company in 2008 and is also currently
the President and CEO of Stark-SMO, a Site Management Organization whose
services focus primarily on the research of stem cells and cord and tissue
repositories. Due to his extensive and broad experiences in the inner workings
of the research and regulatory aspects of clinical trials and FDA approval for
Biologics, Dr. Stark brings a unique vision to the industry, and is a clear,
motivated designer of superior approaches to research challenges. Formerly the
Director of the National Institute of Clinical Research (NICR), he has been
fully responsible for the design, organization and implementation of clinical
trials for FDA approval for numerous biological and stem cell research. He has
a broad background in designing, conducting, and monitoring clinical trials of
new pharmaceuticals and Biologics'. Through his diverse and devoted networking
within the industry, working with such companies as Genentech, Suni Medical
imaging Inc. and UCSF medical school, Stark-SMO has assembled a wide network of
more than 5233 physicians in hospitals and private practice throughout the
United States, and even extending to the international community. His focus now
is on clinical trial management for Stem Cell research, small start up biotech
companies and device inventors (array genome chips). In addition to his solid
accomplishments on the industry side of clinical drug and device development,
Dr. Stark is familiar with the FDA and has fostered a good working relationship
with that governmental organization. Currently he has work on over 130 clinical
and over 63 device trials from protocol development to FDA approval.
CHIEF FINANCIAL OFFICER - ANDREW J. NORSTRUD:
---------------------
Mr. Norstrud joined the Company in September 2007. He is also currently
the Chief Financail Officer of Jagged Peak, Inc. and previously with Segmentz,
Inc., where he served as Chief Financial Officer, and played an instrumental
role in the company achieving its strategic goals by pursuing and attaining
growth initiatives, building an exceptional financial team, completing and
integrating strategic acquisitions and implementing the structure required of
public companies. Previously, Mr. Norstrud has worked for Grant Thornton LLP,
Norco Accounting and Consulting, Aerosonic and PricewaterhouseCoopers LLP and
has extensive experience with young, rapid growth public companies. Mr. Norstrud
earned a Master of Accounting with a systems emphasis from the University of
Florida and is a Florida licensed Certified Public Accountant.
CHIEF OPERATING OFFICER AND PATENT TRADEMARK COUNSEL - LIXIAN (JOHN) JIANG
-------------------
Lixian (John) Jiang is a senior Attorney from China and a Patent Agent in the
United States. Mr. Jiang specializes in intellectual property law, China tax law
and corporate law. He has worked in a number of top specialty law firms before
he joined the Company in June of 2006. In addition, Mr. Jiang is a stem cell
scientist with a PhD Candidate who is expecting to get his formal degree
certificate in August 2006 Convocation Ceremony from the University of South
Florida Medical School.
From December 2002 through August 2003, Mr. Jiang served as a Patent and
Trademark Attorney in Shanghai, China for Sounding Intellectual Property Counsel
Sino Co. Ltd. In this capacity, he performed inventor interviews, patent prior
art searches in the area of medical science and chemistry, drafted and
prosecuted patent applications in the areas of mechanic, chemistry and medical
sciences, prosecuted trademark applications, performed intellectual property
litigation in petition, infringement and disputation, and docketed
patent/trademark files and maintained dockets of all due dates for patent and
trademarks.
From December 2003 through June 2006, Mr. Jiang served as a Patent
Prosecution Agent for Cedar Patent LLC, in Tampa, Florida. In this capacity, he
performed inventor interviews, drafted computer science patent applications in
the area of MSQL database and Macromedia flash communication server software,
performed prior art searches for medical science and chemistry patents, drafted
and prosecuted medical science patent applications in the fields of Chinese
medicine, western blotting, PCR, immunohistochemistry staining, cell
cryo-preservation, gene transfer, including a patent for PEP nadir and its
apparatus, drafted more than 5 mechanical patent applications, prosecuted
Trademark applications and docketed patent/ trademark files; and maintained
docket of all due dates for patent and trademark cases
Lixian (John) Jiang is currently employed in the capacity of Chief Operating
Officer and Patent Trademark Counsel of the Company and reports directly to the
Board of Directors and the Chief Executive Officer of the Company. He was
reelected in March 2007 and his term expires March 2008, or when his replacement
is duly elected and qualified.
Lixian (John) Jiang is responsible for the supervision and the operations of the
facility in China of the Company and a local Beijing hospital. He will commence
establishing the Company's stem cell cryo-preservation bank in China,
coordination of patient treatment procedures with the hospital(s) in China, and
the ongoing management and oversight of the general business operations in China
of the Company, providing legal representation and directing the market of China
Operations, as well as being the legal advisor for all of the Company's patents
and trademarks in stem cell and biotechnology in China.
EUROPEAN SCIENTIFIC AND MEDICAL ADVISORY BOARD - EUROPE
The Company has also engaged the following persons as independent
consultants to assist as part of its Scientific and Medical Advisory Board in
Europe:
SERGEI MARTYNENKO, Senior Administrator and Director of the clinic in Kiev,
Ukraine. Mr . Martynenko' organizational, administrative and communications
skills provide a vital link of information and technology exchange between the
Kiev based manufacturing, research and development facility and the SCTI
affiliated patient treatment facility.
DR. YURIV GLADKIKH, Chief of Scientist: A graduate of the Kiev Medical Institute
of A.A. Bohomolets, Dr. Gladkikh has worked in Europe and Asia in the field of
management and organization of health protection, as well as research in
cryobiology and cryo-medicine, internal diseases, virology, quantum, cell and
tissue therapy, modern methods of diagnostics and laboratory researches,
epidemiology and infectious diseases.
DR. GALINA LOBYNTSEVA, Chief of Manufacture: A graduate of Kharkov State
University with a specialty in genetics, Dr. Lobyntseva has been in the
forefront of research in embryonic hematopoitic cells and work on methods for
long-term storage of the cells at low temperatures. She has been working with
Cryobiology and Cryomedicine at the National Academy of Sciences of the Ukraine
since its foundation in 1972. Ms. Lobyntseva has received 15 authors'
certificates and patents. Dr. Lobyntseva is also responsible for the Quality
Control, testing and Quality Certification of every dose of the allo stem cell
biological solution.
DR. DIMITRIY LOBYNTSEV, Director of Research: A graduate of the Odessa Academy
-
of Cold with a specialty in cryogenic technique and technologies, Dr.
Lobyntsevis the author of five patents in the Ukraine and co-author of volume
one of "Human Stem Embryonic Hemopoitic Cells. Theory and Clinical Practice."
DR. VLADIMIR GLADKIKH, Medical Director: A graduate of the Vinnitsa National
Medical University with a specialty in surgery, Dr. Gladkikh is engaged in
research in the field of vascular surgery.
SCIENTIFIC AND MEDICAL ADVISORY BOARD - UNITED STATES AND MEXICO
The Company has also engaged the following persons as independent
consultants to assist as part of its Scientific and Medical Advisory Board in
the United States and Mexico:
DR. NICHOLAS KIPSHIDZE, MD., PH. D. - Lenox Hill Hospital, NYC
DR. WEIWEN DENG, MD., PH.D. - Research Instructor, Tulane University, LA
DR. ALEXEY BERSENEV, MD., PH.D. - Thomas Jefferson University, PA
IGOR KATKOV, PH.D. - Project Scientist, Level V, UCSD & Burnham Institute, La
Jolla, CA
DR. SALVADOR VARGAS, MD., - Betania West Institute, Tijuana, Mexico
DR. LUIS JORGE QUINTERO, MD., - Neurosurgery, Tijuana, Mexico
DR. NIKITA TREGUBOV, MD., - Internal Medicine, Walter Reed Army Institute of
Research, Seminole, FL
Each member of the Advisory Board, that is not a member of the management
of ICT, receives 10,000 shares of restricted common stock as compensation for
services provided to the Company as a member of the Advisory Board. These shares
are awarded without regard to the number of patients recommended for stem cell
therapy, if any.
Management believes that it has recruited industry respected individuals to
form the Advisory Board and encourages all members of the Advisory Board to
recommend only what is in the best interest of each patient. A potential
conflict of interest exists as the member of the MSAB are compensated in
restricted stock and the value of that stock may be influenced by the number of
patient procedures recommended by the Advisory Board. In addition, two members
of the Advisory Board located in Mexico are also treating physicians, which
could result in a potential conflict of interest.
Some members of the Advisory Board are requested to perform additional
services such as evaluate new technologies and products that are available for
stem cell treatment. These Advisory Board members are compensated with
additional shares of the Company stock as determined by the Company.
ITEM 10. EXECUTIVE COMPENSATION
Except as noted in the table below, no employee was compensated over $100,000
for fiscal years ended 2007 or 2008.
SUMMARY COMPENSATION TABLE
SUMMARY COMPENSATION TABLE
STOCK OPTION ALL OTHER
NAME YEAR SALARY BONUS AWARDS AWARDS COMPENSATION TOTAL
PRINCIPAL POSITIONS ENDED ($) ($) ($) ($) (A) ($) ($)
---------------------------- ----- -------- ------ ------- -------- ------------- --------
Calvin Cao, former CEO 2007 80,000 - - 348,770 - 428,770
---------------------------- ----- -------- ------ ------- -------- ------------- --------
2008 150,000 - - - - 150,000
----- -------- ------ ------- -------- ------------- --------
David Stark, President 2008 - - 55,000 70,219 - 125,219
---------------------------- ----- -------- ------ ------- -------- ------------- --------
Peter Sidorenko, (terminated
January 2007) COO 2007 45,000 - - - - 45,000
---------------------------- ----- -------- ------ ------- -------- ------------- --------
Lixian (John) Jiang, COO 2008 60,000 - - 87,192 - 147,192
---------------------------- ----- -------- ------ ------- -------- ------------- --------
Andrew Norstrud, CFO 2008 60,000 - - 69,754 - 129,754
---------------------------- ----- -------- ------ ------- -------- ------------- --------
Daniel Sullivan, former CFO 2007 - - - - - -
---------------------------- ----- -------- ------ ------- -------- ------------- --------
The Company does not have any annuity, retirement, pension, deferred or
incentive compensation plan or arrangement under which any executive officers
are entitled to benefits, nor does the Company have any long-term incentive plan
pursuant to which performance units or other forms of compensation are paid.
Executive officers may participate in group life, health and hospitalization
plans if and when such plans are available generally to all employees. All other
compensation consisted solely of health care premiums.
DIRECTOR COMPENSATION
Directors of the Company who are not employees or consultants do not receive any
compensation for their services as members of the Board of Directors, but are
reimbursed for expenses incurred in connection with their attendance at meetings
of the Board of Directors.
CHANGE IN
PENSION VALUE
AND
NONQUALIFIED
FEES NON-EQUITY DEFERRED
EARNED OR STOCK OPTION INCENTIVE PLAN COMPENSATION
PAID IN AWARDS AWARDS COMPENSATION EARNINGS TOTAL
NAME CASH ($) ($) ($) ($) ($) ($)
---- ----------- -------- ------- --------------- -------------- ------
$ - $ - $ - $ - $ - $ -
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows the beneficial ownership of Stem Cell Therapy
International, Inc. common stock as of March 31, 2008. The table shows each
person known to us who owns beneficially more than five percent of the
outstanding common stock of Stem Cell Therapy International, Inc. based on
40,920,369 shares being outstanding as of March 31, 2008, and the total amount
of common stock of Stem Cell Therapy International, Inc. owned by each of its
Directors and Executive Officers and for all of its Directors and Executive
Officers as a group.
AMOUNT AND
NATURE OF
NAME AND ADDRESS OR BENEFICIAL PERCENTAGE
NUMBER IN GROUP OWNERSHIP (1) OF CLASS (2)
---------------------------------- ------------- ----------------
Global Capital Corp.
2203 N. Lois Avenue, 9th Floor
Tampa, FL 33607 4,000,000 9.8%
Thuy-Van Chau
2203 N. Lois Avenue, 9th Floor
Tampa, FL 33607 3,000,000 7.3%
Vivian Cao Irrevocable Trust
2203 N. Lois Avenue, 9th Floor
Tampa, FL 33607 2,000,000 4.9%
Christopher Cao Irrevocable Trust
2203 N. Lois Avenue, 9th Floor
Tampa, FL 33607 2,000,000 4.9%
Calvin C. Cao
2203 N. Lois Avenue, 9th Floor
Tampa, FL 33607 11,000,000 (1) 26.9%
Daniel J. Sullivan
2203 N. Lois Avenue, 9th Floor
Tampa, FL 33607 200,000 .4%
M. Richard Cutler
c/o Cutler Law Group
3206 West Wimbledon Drive
Augusta, GA 30909 3,174,196 (2) 7.8%
All Directors and Executive
Officers as a Group (2 persons) 11,200,000 27.4%
(1) Consists of 4,000,000 shares held by Global Capital Corp., 2,000,000
shares held by Vivian Cao Irrevocable Trust and 2,000,000 shares held by
Christopher Cao Irrevocable Trust and 3,000,000 shares held by Thuy-Van Chau.
(2) Consists of 1,792,259 shares held by Cutler Law Group and 1,381,937
shares held by R Capital Partners, Inc.
BENEFICIAL OWNERSHIP OF SECURITIES: Pursuant to Rule 13d-3 under the Securities
Exchange Act of 1934, involving the determination of beneficial owners of
securities, includes as beneficial owners of securities, any person who directly
or indirectly, through any contract, arrangement, understanding, relationship or
otherwise has, or shares, voting power and/or investment power with respect to
the securities, and any person who has the right to acquire beneficial ownership
of the security within sixty days through means including the exercise of any
option, warrant or conversion of a security.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Due to related party of $207,200, represents advances from the majority
stockholder to assist the Company with its financial obligations. These
advances are non-interest bearing, unsecured and due on demand.
The above terms and amounts are not necessarily indicative of the terms and
amounts that would have been received had comparable transactions been entered
into with independent party.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index. The following exhibits are filed with or incorporated by
-------------
reference into this quarterly report:
3.1 Articles of Incorporation of Stem Cell Therapy International, Inc., as
amended*
3.2 Articles of Incorporation of Stem Cell Therapy Corp.*
3.3 Certificate of Designation of Series A Preferred Stock*
3.4 By-laws of Stem Cell Therapy International, Inc.*
10.1 Business Consulting and Services Agreement dated as of December 16, 2004
between Stem Cell Therapy International Corp. and PMS SA.*
10.2 Consulting Agreement dated as of January 4, 2005 between Stem Cell
Therapy International Corp. and RES Holdings Corp.*
10.3 Investor and Media Relations Contract dated as of February 10, 2005
between Stem Cell Therapy International Corp. and Stern & Co.*
10.4 Executive Suite Lease Agreement dated as of February 15, 2005 between
Stem Cell Therapy International Corp. and Wilder Corporation.*
10.5 Engagement Letter dated as of May 3, 2005 between the Company and
Westminster Securities Corporation.*
10.6 Reorganization and Stock Purchase Agreement dated as of September 1,
2005 between the Company (then Altadyne, Inc.), Stem Cell Therapy
International Corp. and R Capital Partners, Inc.*
10.7 Licensing Agreement dated as of September 1, 2005 between the Company
and Institute of Cell Therapy.*
10.8 Consulting Agreement dated as of September 1, 2005 between the Company
and European Consulting Group, LLC.*
10.9 Consulting Agreement dated as of September 1, 2005 between the Company
and Global Management Enterprises, LLC.*
10.10 Consulting Agreement dated as of September 1, 2005 between the Company
and USA Consulting Group, LLC.*
10.11 Professional Services Agreement dated as of September 7, 2005 between
the Company and Bridgehead Group Limited , Inc.*
10.12 Public Relations Agreement dated as of September 19, 2005 between the
Company and Stern & Co.*
10.13 Advisory Physician Agreement dated as of October 4, 2005 between the
Company and Alexey Bersenev.*
10.14 Medical and Scientific Advisory Board Member Agreement dated as of
October 10, 2005, between the Company and Dr. Weiwen Deng.*
10.15 Medical and Scientific Advisory Board Member Agreement dated as of
October 24, 2005, between the Company and Dr. Jorge Quintero.*
10.16 Medical and Scientific Advisory Board Member Agreement dated as of
October 24, 2005, between the Company and Dr. Salvador Vargas.*
10.17 Medical and Scientific Advisory Board Member Agreement dated as of
December 2, 2005 between the Company and Dr. Igor Katkov.*
10.18 Medical and Scientific Advisory Board Member Agreement dated as of
December 2, 2005, between the Company and Dr. Nikita Tregubov.*
10.19 Business Advisory Board Agreement dated as of December 5, 2005 between
the Company and Fred J. Villella.*
10.20 Business Development Advisory Agreement dated as of January 1, 2006
between the Company and Alexander Kulik.*
10.21 Termination and Modification of Engagement Letter dated January 4, 2006
between the Company and Westminster Securities Corporation.*
10.22 Business Consulting and Services Agreement dated January 20, 2006
between the Company and Julio C. Ferreira dba Sphaera Inte-Par.*
10.23 Business Development Advisory Agreement dated as of February 7, 2006
between the Company and Gus Yepes.*
10.25 Treating Physician Agreement dated as of October 24, 2005 between the
Company and Dr. Salvador Vargas.*
10.26 Treating Physician Agreement dated as of October 24, 2005 between the
Company and Dr. Jorge Quintero.*
10.27 Consulting Agreement dated as of June 9, 2006 between the Company and
Rick Langley.**
10.28 Patient Treatment Agreement dated November 1, 2006 between the Company
and Shenzhen Beike Biotechnology Company Limited.
10.29 Consulting Agreement dated as of October 12, 2006 between the Company
and SOS Resource Services, Inc.
10.30 Letter from Aidman Piser & Company, P.A.
21. List of Subsidiaries*
31.1 Chief Executive Officer certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
32.1 Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350
32.2 Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350
_______________________
* Previously filed with the Company's initial filing of Form 10-SB, file number
000-51931, filed on April 25, 2006, and incorporated by this reference as an
exhibit to this Form 10-QSB.
** Previously filed with the Company's filing of Form 10-QSB, filed on November
14, 2006 and incorporated by this reference as an exhibit.
(b) Reports on Form 8-K.
--------------------
Form 8-K filed on February 27, 2008, reporting that the Company had entered into
a Memorandum of Understanding with Histostem, Co. Ltd., to acquire 100% of its
issued and outstanding common stock in exchange for stock is the Company.
Form 8-K filed on March 10, 2008, reporting that the Company entered into a
Reorganization and Stock Purchase Agreement with Histostem. Pursuant to the
Agreement, the Company will acquire 95% of the issued and outstanding common
stock of Histostem in exchange for a controlling interest in the Company. The
agreement is scheduled to close on April 30, 2008.
Form 8-K filed on April 22, 2008, reporting that the Company entered into an
amendment of the agreement with Histostem filed on March 10, 2008.
Form 8-K filed on June 17, 2008, reporting that the Company entered into
Amendment No. 2 to the Reorganization and Stock Purchase Agreement with
Histostem Co., Ltd., a Korean company originally executed on March 10, 2008.
ITEM 14. PRINCIPAL ACCOUNTANTS FEES AND SERVICES
Audit Fees
-----------
During 2008 and 2007, we incurred fees for services from our principal
accountants of approximately $54,500 and $55,700, respectively, for audit and
review services associated with our filings.
Non-Audit related fees
------------------------
None
Tax Fees
---------
None
All Other Fees
----------------
None
Audit Committee Pre-Approval Process, Policies and Procedures
-------------------------------------------------------------------
Our principal auditors have performed their audit procedures in accordance with
pre-approved policies and procedures established by our Board of Directors. Our
principal auditors have informed our Board of Directors of the scope and nature
of each service provided. With respect to the provisions of services other than
audit, review, or attest services, our principal accountants brought such
services to the attention of our Board of Directors prior to commencing such
services.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: July 14, 2008
By: /s/Calvin Cao
-------------
Name: Calvin Cao
Title: Former CEO
Date: July 14, 2008
By: /s/Andrew J. Norstrud
---------------------
Name: Andrew J. Norstrud
Title: Chief Financial Officer and
Chief Accounting Officer