12

Research and Development

Research and development costs include patent investigational expenditures, application filing fees, patent attorney costs, and other research and development costs (excluding laboratory expenses which are included in laboratory and clinical expenses above).  Research and development costs in 2005 consisted of research related startup expenses associated with the inception of the business.  Expenditures in 2006 consists of costs related to define and file our patent applications surrounding treatments for lower back pain, erectile dysfunction, and cardiac valvular dysfunction as well as differing methods for expanding stem cells and matching stem cells to a recipient to reduce rejection rates.

Factors that influence our amount of research and development costs include the number of patents to be pursued, the volume of clinical trials to be conducted, and the amount of medical discoveries or breakthroughs that merit further research and development.  In 2007, we hired a Chief of Scientific Development to pursue such endeavors on a full-time basis.

Professional Fees

Professional fees include payments made to consultants and other professionals for a variety of outsourced services, including legal, accounting, tax, business development, business process design and execution, etc.  In 2005, we commenced operations in October 2005 and did not have a full years’ worth of expenditures.  In 2006, we expanded our need for such services particularly in connection with the activities necessary to obtain regulatory approval and open ICM’s clinic in Costa Rica.

Factors that impact the amount of professional fees to be incurred include the rate of growth of our business, the expansion of our business model to new licensees around the world, and the number of key business functions that are outsourced.

13

General and Administrative

General and administrative expenses include rent, utilities, general office expenses, insurance, personnel and other costs necessary to conduct business operations.  As the Company commenced operations in October 2005 and had no salaried personnel, it had little general and administrative expenses.  During 2006, we began paying our CEO, hired a CFO, secured necessary insurance policies and incurred other general and administrative expenses as we began developing our business.  Likewise, ICM hired staff, rented facilities, and began incurring general and administrative expenses which allowed it to open its facilities and begin generating revenues in the third quarter of 2006.

Factors that impact the amount of general and administrative expenses are similar to those of professional fees described above.

Stock Based Compensation

Stock based compensation in 2005 consisted of the issuance of warrants to a third-party firm in exchange for future investor relations services.  However as such warrants were immediately exerciseable, we recorded the entire expense in 2005.  There are no future expenses or stock based compensation associated with this firm.  In 2006, stock based compensation consisted of options, warrants and restricted stock to officers and directors, key employees and third-parties.  Such shares were expensed over the vesting period of each award based on the grant-date fair value as computed using Black-Scholes option pricing models.  

Factors that influence the amount of stock based compensation include decisions about whether to use stock-based or cash compensation with employees, officers, directors and third-parties, the rate of growth of our business which may necessitate the granting of stock based compensation to new employees or third party affiliates, and factors that affect the per share value of stock awards (including our stock price, our estimated volatility and other factors).

14

Operating Loss

Operating loss increased as we incurred additional expenses necessary to develop our business and open our first affiliated clinic in Costa Rica, the specifics of which are described above.

Other Income (Expense)

Other income in 2005 consisted of $1,623 of interest income on cash deposits and short term investments and other miscellaneous income of $3,060.  In 2006, other income (expense) consisted primarily of $114,706 of accrued liquidated damages incurred in connection with the registration rights agreements associated with our preferred stock offerings in 2006, offset by $42,595 of interest income.  We have since complied with all such agreements and no longer expect to incur any additional liquidated damages.

Net Loss

Net losses in 2005 and 2006 are attributable to expenses incurred in the development of our business and the establishment of our first affiliated clinic in Costa Rica.  A substantial amount of this net loss is attributable to stock based compensation, as previously described.  

15

Sources and Uses of Cash

We require cash to fund the expenditures necessary to further develop and operate ICM’s clinic, to maintain our operating infrastructure, to pay for research and development activities, and to pay our medical personnel and management team.  As we seek to expand our licensee portfolio, we may need additional cash if such future licenses require us to provide equipment or working capital.  Further, we may need cash to fund clinical trials or other research and development endeavors to further develop our intellectual property.

We have historically relied primarily on financing activities to provide the cash needed for our operating expenses.  We have recently commenced revenue generating activities with the opening of ICM’s clinic in Costa Rica, and expect revenues from ICM and other affiliated clinics to contribute to the funding of our future cash requirements.  

We expect that the cash flows from our licensing arrangements, together with existing cash on hand, will permit us to finance our existing operating activities for the next twelve months.  However, we are currently exploring means for commercializing certain treatments in the United States.  If we proceed with such endeavors, we may need to secure additional financing through future equity or debt offerings or both.  There can be no assurance that such equity or borrowings will be available or, if available, will be at rates or prices acceptable to us.

Analysis of Cash Flows

Our operating cash outflows were $1,012,341 for the year ended December 31, 2006, as compared to $248,556 for the year ended December 31, 2005, an increase of $763,785.  We experienced a smaller amount of net cash outflows in 2005 as we did not commence operations until October 2005.  Our net cash outflows are significantly different than our net income due to the substantial amount of non-cash expenses, particularly stock-based compensation.

Investing cash outflows were $486,122 for the year ended December 31, 2006 as compared to $195,527 for the year ended December 31, 2005, an increase of $230,595.  In 2006, our cash outflows consisted of purchases of equipment, leasehold improvements and other fixed assets, the majority of which were for our affiliated clinic in Costa Rica, as well as the purchase of a $60,000 long-term certificate of deposit.  In 2005, our cash outflows consisted of $175,527 of fixed assets and the purchase of a $20,000 short-term certificate of deposit.  

Financing cash inflows totaled $2,073,859 for the year ended December 31, 2006 as compared to $854,000 for the year ended December 31, 2005.  In 2006, cash inflows consisted of $1,495,994 from the sale of preferred stock and warrants and $577,865 from the sale of common stock, each of which were net of offering costs. In 2005, cash inflows consisted of $842,500 of proceeds from equity offerings and $43,000 of contributed capital from our existing shareholders, offset by payments of $31,500 to acquire and retire 59.6 million shares from the former Chief Executive Officer in connection with the change in control.

16

Off-Balance Sheet Arrangements

The company has no off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on the Company’s financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.

Certain Factors That May Affect Future Operating Results

Our business is subject to various risks, including those described below.  You should carefully consider the following risk factors, together with all of the other information included in this Form 10-KSB.  Any of these risks could materially adversely affect our business, operating results and financial condition.

Risks Relating to our Finances

We have a history of losses and will likely incur future losses during the next few years as we attempt to expand our number of licensee clinics around the world and enhance our research and development endeavors.

As of December 31 2006, we had an accumulated deficit of $6,722,000.  We may incur additional losses in the future.  We have a limited relevant operating history which makes it difficult for you to evaluate our historical operating results and our future business prospects.

Our business is at an early stage of development.

Our business is at an early stage of development, in that we have only recently commenced the clinical application of adult stem cells and the administration of adult stem cells on a fee-for-service basis.  Our ability to generate revenue and profitably operate is dependent on our ability to:

•

succeed in our research and development efforts;

•

select therapeutic compounds or cell therapies for development and administration;

•

obtain required regulatory approvals; and

•

collaborate successfully with clinics like our affiliated Costa Rican facility and employ qualified personnel to operate such clinics.

We also expect to experience negative cash flow in the immediate future as we fund our operating losses and capital expenditures.  This will result in decreases in our working capital, total assets and stockholders’ equity, which may not be offset by future financings.  We will need to generate significant revenues to achieve profitability.  We may not be able to generate these revenues, and we may never achieve profitability.  Our failure to achieve profitability could negatively impact the market price of our common stock.  Even if we do become profitable, we cannot assure you that we would be able to sustain or increase profitability on a quarterly or annual basis.

17

We may need additional capital to conduct our operations and our ability to obtain the necessary funding is uncertain.

We will require substantial capital resources in order to conduct our operations and develop our products, and we cannot assure you that our existing capital resources will be sufficient to fund our planned operations.  The timing and degree of any future capital requirements will depend on many factors, including:

•

the accuracy of the assumptions underlying our estimates for our capital needs in 2007 and beyond:

•

the magnitude and scope of our research and development programs;

•

the progress we make in our research and development programs;

•

our ability to establish, enforce and maintain strategic arrangements for research, development, clinical testing manufacturing and marketing;

•

the time and costs involved in obtaining regulatory approvals; and

•

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims.

We do not have any committed sources of capital.  Additional financing through strategic collaborations, public or private equity financings or other financing sources may not be available on acceptable terms, or at all.  The receptivity of the public and private equity or debt markets to proposed financings is substantially affected by the general economic, market and political climate and by other factors which are unpredictable and over which we have no control.  Additional equity and/or convertible debt financings, if we obtain them, could result in significant dilution to stockholders.  Further, in the event that additional funds are obtained through arrangements with collaborative partners, these arrangements may require us to relinquish rights to some of our technologies, stem cell therapies or proposed products that we would otherwise seek to develop and commercialize ourselves.  If sufficient capital is not available, we may be required to delay, reduce the scope of or eliminate one or more of our programs, any of which could have a material adverse effect on our business.

Risks Relating to our Business

We do not have experience in the successful marketing of therapeutic compounds or stem cell therapies.

We do not currently have marketing capabilities, other than via our affiliate ICM, for any therapeutic compounds or stem cell therapies that we have developed or intend to develop.  Developing an internal marketing organization would be an expensive and time-consuming process.  We may enter into agreements with third parties that would be responsible for marketing.  However, these third parties may not be capable of successfully marketing our services. As a result, our marketing ability is limited by the effectiveness of our licensee.

18

Restrictions on the use of stem cells, political commentary and the ethical, legal and social implications of research involving stem cells could prevent us from developing or gaining acceptance for commercially viable products based upon such stem cells and adversely affect the market price of our common stock.

The use of human embryonic stem cells has given rise to ethical, legal and social issues regarding the appropriate use of these cells.  While our business does not relate to this controversial area, the use of adult stem cells may become the subject of adverse commentary or publicity, which could significantly harm the market price for our common stock.

Much of the information and know-how that is critical to our business is not patentable and we may not be able to prevent others from obtaining this information and establishing competitive enterprises.

We sometimes rely on trade secrets to protect our proprietary technology, especially in circumstances in which we believe patent protection is not appropriate or available.  We attempt to protect our proprietary technology in part by confidentiality agreements with our employees, consultants, collaborators and contractors.  We cannot assure you that these agreements will not be breached, that we would have adequate remedies for any breach, or that our trade secrets will not otherwise become known or be independently discovered by competitors, any of which would harm our business significantly.

Initially, we are dependent on our licensees in foreign countries to help us develop and test our stem cell therapies, and our ability to develop and commercialize potential stem cell therapies may be impaired or delayed if our licensees are unsuccessful.

Our strategy for the development, clinical testing and commercialization of our stem cell therapies requires that we enter into license arrangements with entities in countries that permit our research and development activities.  We are dependent upon the subsequent success of these other parties in performing their respective responsibilities and the continued cooperation of them.  Although ICM is controlled by our Chairman, CEO and President, no assurance can be given that the individuals operating that clinic will cooperate with us or perform their obligations under our agreements with them.  We cannot control the amount and timing of the resources that will be devoted by ICM to activities related to our license agreement with ICM.  

Under agreements with our licensees and other collaborators and joint venture partners, we may rely significantly on these parties to, among other activities:

•

conduct research and development activities in conjunction with us:

•

design and conduct advanced clinical trials in the event that we reach clinical trials;

•

fund research and development activities with us;

•

manage and license certain patent rights;

19

•

pay us fees upon the achievement of milestones; and

•

market with us any commercial products that result from our collaborations or joint ventures.

The development and commercialization of potential products will be delayed if these licensees, collaborators or joint venture partners fail to conduct these activities in a timely manner or at all.  If we do not achieve milestones set forth in the agreements, or if our licensees, collaborators, or joint venture partners breach or terminate their agreements with us, our business may be materially harmed.

Some of our competitors may develop technologies that are superior to or more cost-effective than ours, which may impact the commercial viability of our technologies and which may significantly damage our ability to sustain operations.

The pharmaceutical and biotechnology industries are intensely competitive.  Other pharmaceutical and biotechnology companies and research organizations currently engage in or have in the past engaged in efforts related to the biological mechanisms that are the focus of our programs in oncology and stem cell therapies.  In addition, other products and therapies that could compete directly with the stem cell therapies that we are seeking to develop and market currently exist or are being developed by pharmaceutical and biopharmaceutical companies and by academic and other research organizations.

We may not be able to obtain or maintain sufficient insurance on commercially reasonable terms or with adequate coverage against potential liabilities in order to protect ourselves against product liability claims.

Our business exposes us to potential product liability risks that are inherent in the testing, manufacturing and marketing of human therapeutic and diagnostic products.  We may become subject to product liability claims if the use of our potential products is alleged to have injured subjects or patients.  This risk exists for stem cell therapies tested in human clinical trials as well as potential products that are sold commercially.  We currently have no clinical trial liability insurance and we may not be able to obtain this type of insurance for any of our clinical trials.  In addition, product liability insurance is becoming increasingly expensive.  As a result, we may not be able to obtain or maintain product liability insurance in the future on acceptable terms or with adequate coverage against potential liabilities that could have a material adverse effect on our business.

To be successful, our stem cell therapies must be accepted by the health care community, which can be very slow to adopt or unreceptive to new technologies and products.

Our stem cell therapies may not achieve market acceptance since hospitals, physicians, patients or the medical community in general may decide not to accept and utilize these products.  The therapies that we are attempting to develop represent substantial departures from established treatment methods and will compete with a number of more conventional drugs and therapies manufactured and marketed by major pharmaceutical companies.  The degree of market acceptance of any of our developed potential therapies will depend on a number of factors, including:

20

•

our establishment and demonstration to the medical community of the clinical efficacy and safety of our therapies;

•

our ability to create therapies that are superior to alternatives currently on the market;

•

our ability to establish in the medical community the potential advantage of our treatments over alternative treatment methods; and

•

reimbursement policies of government and third-party payers.

If the health care community does not accept our therapies for any of the foregoing reasons, or for any other reason, our business would be materially harmed.

We may not be able to compete successfully because of the number and strength of our competitors and expected numerous market entrants and product introductions.

We compete with all companies in the biotechnology industry.  Most of these competitors benefit from greater name recognition and have substantially greater financial, personal, technical and marketing resources than we have.  These companies, as well as other large, well-known biotech companies, are continuously developing new technologies or enhancing existing technologies or methods.

There is significant competition in our industry for highly skilled employees and our failure to attract and retain technical personnel would adversely affect our business.

We may not be able to successfully attract or retain highly skilled employees.  Our inability to hire or retain highly qualified individuals may impede our ability to develop and commercially introduce our products which may adversely affect our business.  Even if we are able to hire these individuals, we may be unable to retain them.  Furthermore, there is increasing pressure to provide technical employees with stock options and other equity interests, which may dilute earnings per share.

We may be unable to retain our key people.

Our future success depends, in significant part, upon the continuing service and performance of our senior management and other key personnel.  In particular, our future depends on the continued services of Neil H. Riordan Ph.D., our Chairman, President, and Chief Executive Officer, and Dr. Roger Nocera, our Executive Vice President and Chief Medical Officer.  Although we have an employment agreement with Dr. Nocera, there is a risk that these individuals will not remain in our employ.  If we lose the services of any of these individuals, our ability to effectively develop and manage our business effectively could be impaired.  We do not have key-person life insurance on any of our key personnel.

21

Unauthorized use of our intellectual property by third parties may damage our competitive position.

We regard our trade secrets, proprietary information and other intellectual property as critical to our success.  The unauthorized use of our intellectual property by third parties might damage our competitive position.  

We also generally enter into confidentiality agreements with our employees and consultants and limit access to and distribution of our proprietary information.  These steps may not be enough to deter misappropriation of our proprietary information.  To the extent that proprietary information is misappropriated from us, our business could be seriously harmed.

Defending against intellectual property infringement claims could be expensive and, if unsuccessful, could harm the business.

We cannot be certain that the services and products we deliver do not or will not infringe valid patents, copyrights, trademarks or other intellectual property rights held by third parties.  We may incur substantial expenses in defending against infringement claims, regardless of their merit.  If any claims are successfully asserted against us, we may be required to modify our technology or seek a license to use the infringing technology.  We may not be able to do so on commercially reasonable terms, or at all.  Such claims could seriously harm our business.  Successful infringement claims against us may also result in substantial monetary liability.  Any of the foregoing could seriously harm our business.

Failure to manage growth may adversely affect business.

We plan to greatly expand our product development efforts and increase our licensed locations and the number of professionals and key executives we employ.  We cannot be sure that we will be able to grow or manage such growth.  This expansion of operations will result in new and increased responsibilities for management, and will place a significant strain on our operating and financial systems.  To accommodate the increased number of employees, locations and the increased size of operations, we will need to recruit and retain the appropriate personnel to manage operations.  We will also need to improve our operations, financial and management processes and systems.  If we fail to successfully implement and integrate these systems, or if it is unable to expand these systems to accommodate our growth, we may have inadequate, inaccurate or non-timely financial and operational information, which could seriously harm our business.

22

Risks Related to our Common Stock

Our Chairman, Chief Executive Officer and President controls a significant portion of our stock, and his interests may differ from those of other stockholders.

As of December 31, 2006, Dr. Riordan, our Chairman, Chief Executive Officer and President, owned approximately 76.7% of our outstanding voting stock.  Accordingly, he controls or has significant input as to the outcome of any corporate transaction or other matter submitted to the stockholders for approval, including mergers, acquisitions, consolidations and sales of all or substantially all of its assets, as well as the power to prevent or cause a change in control.  The interests of Mr. Riordan may differ from an investor’s interests.  Moreover, this consolidation of voting power could also have the effect of delaying, deterring or preventing a change of control that might be beneficial to other investors.

We do not expect to pay dividends on our common stock for the foreseeable future.

We do not expect to pay cash or other dividends on our common stock for the foreseeable future.

There is a limited public market for our shares of common stock.

There is presently a limited public market for our common stock.  There is no assurance that an active trading market will develop or be sustained.  Accordingly, you may have to hold the shares of common stock indefinitely and may have difficulty selling them if an active trading market does not develop.

We have the ability to issue additional series of preferred stock without our common stockholders consent.

We have the ability to issue series of preferred stock which could have rights more favorable than the Common Stock.  The Company is authorized to issue up to 200,000,000 shares of preferred stock.  Under our articles of incorporation, unissued shares of preferred stock may be issued from time to time in one or more series as may be determined by the board of directors without stockholder approval.  Furthermore, the voting powers and preferences, the relative rights of each such series, and the qualifications, limitations and restrictions of the unissued shares of preferred stock may be established by the board of directors without stockholder approval.  Any further issuances of preferred stock could adversely affect the rights of the holders of common stock by, among other things, establishing preferential dividends, liquidation rights or voting powers.

The current capitalization could delay, defer, or prevent a change of control.

We are authorized to issue up to 300,000,000 shares of common stock and up to 200,000,000 shares of preferred stock, in one or more series, and to determine the price, rights, preferences and privileges of the shares of each such series without any further vote or action by the stockholders. The issuance of preferred stock could have the effect of making it more difficult for a third party to acquire a majority of our outstanding voting stock, thereby delaying, deferring, or preventing a change of control that might be beneficial to investors.

23

Recent Accounting Pronouncements

In July 2006, the FASB issued FASB Interpretation No. 48 “Accounting For Uncertain Tax Positions” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement No. 109 “Accounting for Income Taxes”. It prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. We are currently evaluating the impact of FIN 48 on our financial position and results of operations.

Inflation and Seasonality

We do not believe that our operations are significantly impacted by inflation.  Our business is not seasonal in nature.

24

Item 7. Financial Statements.

The financial statements and schedules are included herewith commencing on page F-1.

25

Item 8.  Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

On December 27, 2006, we dismissed Beckstead & Watts, LLP as our independent auditors. The decision to change accountants was approved by our Board of Directors. The reports of Beckstead & Watts, LLP dated March 22, 2006 and March 8, 2005 on our balance sheets as of December 31, 2005, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2005 and 2004, and for the period from December 5, 2001 (Date of Inception) to December 31, 2005, did not contain an adverse opinion or disclaimer of opinion, or qualification or modification as to uncertainty, audit scope, or accounting principles. However, both reports contained an explanatory paragraph disclosing the uncertainty regarding the ability of the Company to continue as a going concern.

During the two most recent fiscal years ended December 31, 2005 and 2004, and in the subsequent interim periods, there were no disagreements with Beckstead & Watts, LLP on any matters of accounting principles or practices, financial statement disclosure, or auditing scope and procedures which, if not resolved to their satisfaction would have caused them to make reference to the matter in their report.

Malone & Bailey, PC (“M&B”) was engaged by the Company on December 27, 2006 as our principal accountant.

During the fiscal years ended December 31, 2005 and through December 27, 2006, neither we nor anyone on our behalf consulted with M&B regarding either (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, nor has M&B provided to us a written report or oral advice regarding such principles or audit opinion or (ii) any matter that was the subject of a disagreement or reportable events set forth in Item 304(a)(iv) and (v), respectively, of Regulation S-K..

Item 8A. Controls and Procedures.

In accordance with Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Annual Report on Form 10-KSB, the Company’s management evaluated, with the participation of the Company’s principal executive officer and principal financial officer, the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) under the Exchange Act). Based on their evaluation of these disclosure controls and procedures, the Company’s chairman of the board and chief executive officer and the Company’s chief financial officer have concluded that the disclosure controls and procedures were effective as of the date of such evaluation to ensure that material information relating to the Company, including its consolidated subsidiaries, was made known to them by others within those entities, particularly during the period in which this Annual Report on Form 10-KSB was being prepared.  Due to the change in control that occurred during the fourth quarter of 2005, there have been changes in our internal control over financial reporting during such quarter.  However, such changes were due solely to the personnel turnover and strategic direction inherent in the change in control and not as a remedy of internal control deficiencies.

26

Item 8B. Other Information.

None.

PART III

Item 9.

Directors, Executive Officers, Promoters, Control Persons and Corporate Governance; Compliance With Section 16(a) of the Exchange Act.

Neil H. Riordan, 48, Ph.D., Chairman, President and Chief Executive Officer.

Neil H. Riordan has served as the Company’s Chairman, Chief Executive Officer, and a Director since October 2005.  From 1999 to present, Dr. Riordan served as the President and Founder of the Aidan Clinic, etc., a successful integrative treatment center for cancer patients.

From 2003 to present, he has served as the Director of Research at ITL Cancer Clinics.  Mr. Riordan’s eduction includes MUA, Ph.D., University of Nebraska, College of Medicine, M.S. P.A., and Wichita State University, B.S. magna cum laude.  

Roger M. Nocera, 57, M.D., Executive Vice President, Director and Chief Medical Officer.

Dr. Roger M. Nocera has served as the Company’s Executive Vice President, Chief Medical Officer, and Director since October 2005.  Dr. Nocera is the Medical Director and owner of the Nocera Antiaging Clinic in Scottsdale, Arizona.  He also founded and remains the Medical Director of MRI and CT at Arcadia Radiology & Open MRI, Ltd. in Phoenix.  Nocera received his B.S. with Distinction from the University of Arizona, his M.D. from the University of Massachusetts Medical School and then completed a four-year residency in Diagnostic Radiology at the University of Texas Medical Branch in Galveston.  He also completed a
one-year fellowship in computed tomography and breast cancer detection at the University of Texas Galveston Branch and a second fellowship in Radiological Pathology at the famed Armed Forces Institute of Pathology, Washington, D.C.  He is board certified in radiology and anti-aging.

John Peterson, 67, Director.

John Peterson has served as a Director of the Company since October 2005.  Mr. Peterson has been involved in the financial markets for most of his professional career.  He has worked with Dow Jones & Co., Inc., as a national correspondent and then as the author of Dow Jones’ Investing for Pleasure and Profit.  He has held management positions with NYSE, AMEX and NASDAQ companies, including L.F. Rothschild Unterberg Towbin, Gilford Securities, Inc. and GFP Communications, Inc.  Peterson has been involved in the founding, financing and management of small cap companies involved in insurance marketing, insurance brokerage, toxic remediation, chemical processing, healthcare and securities analysis.  Peterson was also a lecturer for three years at the University of Kansas School of Journalism, from which he graduated with Distinction.  

27

Steven M. Rivers, 36, Chief Financial Officer

Steven M. Rivers has served as our Chief Financial Officer since July 3, 2006.  Prior to joining Medistem, Mr. Rivers was co-founder of Rivers & Moorehead PLLC, an internal controls, accounting and financial reporting consulting firm he co-founded in 2004 that has served over 20 public and private company clients ranging from micro cap companies to Fortune 100 enterprises.  From 2000 to 2004, Mr. Rivers worked for ON Semiconductor Corporation in various positions including Controller.  He is a licensed Certified Public Accountant in Arizona and received a Bachelor’s degree with Distinction in Accounting from Indiana University.

Chris McGuinn, 30, Vice President and Chief Operating Officer.

Chris McGuinn has served as the Company’s Vice President and Chief Operating Officer since February 2006.  From February 2004 to present, McGuinn has been an independent strategy and management consultant.  During this time he also functioned as the CFO of CB Technologies, Inc., a software development company.  From 2000 to 2004, McGuinn served as a management consultant with Accenture, formerly Andersen Consulting.  His education includes Bachelor’s degrees in History and Religious Studies and an MBA from Arizona State University.

Corporate Governance

The Company promotes accountability for adherence to honest and ethical conduct; endeavors to provide full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with the Commission and in other public communications made by the Company; strive to be compliant with applicable governmental laws, rules and regulations; and promotes prompt internal reporting of violations of the code of ethics to an appropriate person or persons. The Company has not formally adopted a written code of business conduct and ethics that governs to the Company’s employees, officers and directors as the Company is not required to do so.

There were no material changes to the procedures by which shareholders may recommend nominees to the Company’s board of directors.

In lieu of an Audit Committee, the Company’s Board of Directors is responsible for reviewing and making recommendations concerning the selection of outside auditors, reviewing the scope, results and effectiveness of the annual audit of the Company's financial statements and other services provided by the Company’s independent public accountants. The Board of Directors also reviews the Company's internal accounting controls, practices and policies. No director qualifies as an audit committee financial expert as defined in Item 407(d)(5)(ii) of Regulation S-B.

28

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our directors and executive officers, as well as persons beneficially owning more than 10% of our outstanding common stock, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the “SEC”) within specified time periods.  Such officers, directors and shareholders are also required to furnish us with copies of all Section 16(a) forms they file.

Based solely on its review of such forms received by us, or written representations from certain reporting persons, we believe that all Section 16(a) filing requirements applicable to our officers, directors and 10% shareholders were complied with during the fiscal year ended December 31, 2005, except that the initial statement of beneficial ownership on Form 3 for Dr. Riordan was not timely filed.

Item 10.  Executive Compensation.

The following table summarizes all compensation paid to our Chief Executive Officer, our two highest compensated named executive officers, and our two highest compensated non-executives for each of the fiscal years ended December 31, 2006 and 2005.  

SUMMARY COMPENSATION TABLE

----------

29

(1)  Dr. Riordan drew an annual salary of $120,000 beginning August 1, 2006.

(2)  Dr. Nocera did not draw a salary during 2006.  Option awards consist of an aggregate of 6 million options granted in 2006, with 1.5 million vesting on the date of grant and 1.5 million vesting on each of the first three anniversary dates of the grant date.

(3)  Mr. McGuinn did not draw a salary during 2006.  Bonuses were awarded based on services provided for the development of the Company’s business processes and pursuit of licensee opportunities. Option awards consist of 750,000 options granted in 2006 that vested as of May 1, 2006

(4)  Dr. Solano is not a named executive officer.  Dr Solano’s salary payments commenced in April, 2006.  Bonus payments consist of awards for the establishment of the ICM clinic.  Stock awards consist of 1.5 million shares of restricted stock granted in 2006 that vest in February 2008.

(5)  Dr. Glenn is not a named executive officer.  Dr Glenn’s salary payments commenced in April, 2006.  Bonus payments consist of awards for the establishment of the ICM laboratory.  Stock awards consist of 1.5 million shares of restricted stock granted in 2006 that vest in February 2008.

(6)  Option awards are based on expense recognized under FAS123(R).  Awards were granted with a strike price equal to the quoted market price on the day prior to the grant and were valued at date of grant using Black-Scholes option pricing models with the following assumptions:  risk free rate 4-5%, volatility 61-62%, and expected lives 5-6.5 years.

SUMMARY COMPENSATION TABLE

(continued)

----------

(1)  Dr. Riordan received other compensation totaling $14,476 associated with his relocation to Costa Rica.

There were no option exercises during the fiscal year ended December 31, 2006.

30

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2006

31

OUTSTANDING EQUITY AWARDS AT DECEMBER 31, 2006

(continued)

Employment Agreements

Effective October 1, 2005, the Company entered into an Employment Agreement with Dr. Roger Nocera, in which Dr. Nocera agreed to serve as the Chief Medical Officer of the Company for a term ending December 31, 2009.  Dr. Nocera also agreed to serve, if elected, as a director of the Company.

32

Under Dr. Nocera’s agreement, he will receive an annual base salary of $150,000 commencing on the date the Company first achieves total revenue (as defined in the Employment Agreement) in excess of $10,000,000.  This salary automatically increases prospectively in any fiscal quarter of the Company following the achievement of the following total revenue targets:

Dr. Nocera’s agreement also provides for discretionary bonus payments commensurate with bonuses paid to other senior executives of the Company and a grant of stock options in 2006 to purchase 6,000,000 shares of common stock of the Company, with such options vesting over three years, with the first 25% vesting on the date of grant and the remaining 75% vesting over the following three years.  The exercise price for the options was determined by the market price of the common stock on the date of grant.

If Dr. Nocera’s agreement is terminated without Cause (as defined in the agreement), he will be entitled to receive accrued and vesting benefits up to the date of termination and will have 90 days from the date of termination to exercise any vested but unexercised options existing as of the termination date.

Effective July 3, 2006, we hired Steven M. Rivers as our Chief Financial Officer (“CFO”). Under Mr. Rivers' employment agreement, he will receive an annual base salary of $110,000 and will devote at least 50% of his time to our business and no more than 50% of his time to Rivers & Moorehead, PLLC, an internal controls, accounting and financial reporting consulting firm he co-founded in 2004.  He also received an aggregate of 720,000 stock options, of which the first 33% will vest on the first anniversary of the agreement, the second 33% on the second anniversary of the agreement and the remaining 33% will vest on the third anniversary of the agreement. The exercise price for the options was determined by the closing market price of the common stock on the date of grant.   In connection with the employment agreement, we also entered into an Indemnification Agreement which contains provisions that may require us to, among other things: indemnify Mr. Rivers against liabilities that may arise by reason of his status or service as an officer to the fullest extent permitted under Nevada law and Medistem's bylaws and certificate of incorporation and advance Mr. Rivers' expenses incurred as a result of any proceeding against him as to which he could be indemnified.

Compensation of Directors

The following table sets forth compensation for non-employee directors:

33

DIRECTOR COMPENSATION

(1)

Mr. Peterson has an aggregate of 750,000 fully-vested options outstanding at December 31, 2006.

Item 11.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

EQUITY COMPENSATION PLAN INFORMATION

The following table sets forth information as of December 31, 2006, concerning outstanding options and rights to purchase common stock granted to participants in our equity compensation plans and the number of shares of common stock remaining available for issuance under such equity compensation plans.

(1)  Represents shares of common stock that may be issued pursuant to options granted and available for future grant under the 2005 Officer & Director Equity Ownership Plan.

(2)  Represents 5,000,000 shares of common stock underlying warrants approved by the Company’s board of directors and granted to third-party consultants in exchange for investor relations services.  See Note 7 to our Consolidated Financial Statements for a detailed description of the terms of these warrants.

34

The following table sets forth certain information, as of February 28, 2007, concerning the beneficial ownership of shares of Common Stock of the Company by (i) each person known by the Company to beneficially own more than 5% of the Company’s Common Stock; (ii) each Director; (iii) the Company’s Chief Executive Officer; and (iv) all directors and executive officers of the Company as a group.  To the knowledge of the Company, all persons listed in the table have sole voting and investment power with respect to their shares, except to the extent that authority is shared with their respective spouse under applicable law.

MEDISTEM LABORATORIES, INC.

POWER OF ATTORNEY

To the Board of Directors and Stockholders of Medistem Laboratories, Inc.: