NSTM 10-K & 10-Q changes, risk factors and insider trading

We are a holding companycompany, the principal assets of which are illiquid,illiquid ownershiprights intereststo ina NetColicensing and NewStem.agreement.

Our Company’s primary assetsasset are equity interests in NetCo and NewStem, includingis the residual value of relicensing the licenseLicense formerly held by NewStem. We are a 50% partner in NetCo. Our President and Executive Chairman, Jan Loeb, is also the Chairman of NewStem.

We conduct no other business and, as a result, we depend entirely upon earnings and cash flow from NewStemthe andLicense itsheld technologyby andYissum. NetCo. If we decide in the future to pay dividends, as a holding company, our ability to pay dividends and meet other obligations depends upon upon the receipt of dividends or other paymentsprofits from ourthis operatinglicense subsidiaries.agreement.

We believe that our continued growth and future success will depend in large part on the skills of our management team and the management teams team of NewStem,Yissum includingrelated to subsequent monetization of the License and NetCo, and our partners’ respective abilities to motivate and retain these individuals and other key individuals.License. The loss of any of theirthe servicekey individuals’ services could reduce our ability to successfully implement implement our long-term business strategy which may result in a loss of revenue, and the value of our common stock could be materially adversely adversely affected. Leadership changes will occur from time to timetime, and we cannot predict whether significant resignations will occur or whetheroccur. NewStem will be able to recruit additional qualified personnel. We believe these management teams possess valuable knowledge about our, NewStem’sour and NetCo’sformer NewStem’s respective industries and that their knowledge and relationships would be very difficult to replicate. The loss of key personnel, or the inability to recruit and retain qualified and talented personnel in the future, could have an adverse effect on the respective businesses of NewStem and NetCo, and, consequently, our business, financial condition and/or operating results.

We and NewStem have limited operating histories and have generated minimal revenue to date.

We and NewStem have a limited operating history and do not have a meaningful historical record of sales and revenues, nor do we or NewStem have an established business track record. While we believe that we have the opportunity to be successful, there can be no assurance that we will be successful in accomplishing our business initiatives, or that we will be able to achieve any significant levels of revenues revenue or net income.

Success from NewStem’s efforts will depend upon Yissum’sthe ability of Yissum to relicense the technology supported by the License.

The technologies underlying NewStem’s products and the license technology are subject to rapid and profound technological change. Competition intensifies as technical advances in each field are made and become more widely known. We can give no assurance that others will not develop services, products, or processes with significant advantages over the products, services, and processes that hashave developed. Any Any such occurrence could have a material and adverse effect on our business, results of operations and financial condition.

We are a holding company whose primary assetsasset areis our ownershipright ofto equityincome interestsfrom inthe NewStem and NetCo.License. We currently conduct no other business and, as a result, we depend entirely upon NewStem’s and NetCo’s earnings and cash flow.flow from the License. If we decide in the future to pay dividends, as a holding company, our ability to pay dividends and meet other obligations depends upon the receipt of dividendscash orflow other payments from NewStem or NetCo. NewStem and/or NetCo may be restricted in their ability to pay dividends, make distributions or otherwise transfer funds to us prior to the satisfactionLicense. of other obligations, including the payment of operating expenses or debt service, appropriation to reserves prescribed by laws and regulations, covering losses in previous years, restrictions on the conversion of local currency into U.S. dollars or other hard currency, completion of relevant procedures with governmental authorities or banks and other regulatory restrictions. We do not presently have any intention to declare or pay dividends in the future. You should not purchase shares of our common stock in anticipation of receiving dividends in future periods.

We are a development stage company and reported net income (losses) of approximately $3,233,000$2,380,000 and $4,187,000$(3,233,000) for the years ended December 31, 2024 2025 and 2023,2024, respectively. We had current assets of approximately $32,000$16,000 and current liabilities of approximately $5,304,000$2,157,000 as of December 31, 2024.2025. As of December 31, 2023,2024, our current assets and current liabilities were approximately $87,000$32,000 and $346,000,$5,304,000, respectively. respectively. We have prepared our financial statements for the years ended December 31, 20242025 and 20232024 assuming that we will continue as a going concern. Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our shareholders as well as Yissum’s ability to successfully commercialize the License. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions, and short-term debt. During the current year, we continued toentered borrowinto ona existingbridge financeloan agreementsagreement with twoour relatedExecutive party individuals and a shareholderChairman to fundobtain funding for current operating expenses. Additionally, we entered into two convertible debt instruments to fund advances to NewStem.

The following discussion of critical accounting policies represents our attempt to report on these accounting policies which we believe are critical to our financial statements and other financial disclosure.disclosures. It is not intended to be a comprehensive list of all of our significant accounting policies, which are more fully described in Note 2 of the Notes to the Financial Statements included in this Annual Report.

The Company did not grant any options during the year ended December 31, 2025. The expected volatility factor used to value stock options granted in 2024 was based on the historical volatility of the market price of our common stock over the period from our change to a biotechnology company, September 2018, through December 2024. For the expected term of the option, we used an estimate of the expected option life based on historical experience. The risk-free interest rate used is based upon U.S. Treasury yields for a period consistent with the expected term of the options. We assumed no quarterly dividend rate. Due to the numerous assumptions involved in calculating stock-based compensation expense, the expense recognized in our financial statements may differ significantly from the value realized by option holders on exercise of the share-based instruments. In accordance with the prescribed methodology, we do not adjust our recognized compensation expense to reflect these differences.

For the years ended December 31, 20242025 and 2023,2024, we incurred stock compensation expense with respect to options and warrants of approximately $40,000 $8,800 and $303,000, $40,000, respectively.

In accordance with Accounting Standards Codification (“ASC”) 815, Derivatives and Hedging, we identify and, if applicable, bifurcate bifurcate embedded derivatives in financial instrument instruments. Those embedded features that are identified, bifurcated and accounted for separately are measured at fair value continuously at each financial statement reporting date. If the fair value of a financial liability (the derivative) exceeds the proceeds received for the issuance of a hybrid instrument in an arm’s length transaction with no rights or privileges that require separate accounting recognition as an asset identified, then we record the embedded derivative at fair value with the excess of fair value over proceeds recognized as a loss in earnings. Our only identified derivative was terminated as part of the amendment of a note payable to a shareholder during the year ended December 31, 2025.

Results of Operations.Operations

The selected statement of operations data for the years ended December 31, 20242025 and 20232024 and balance sheet data as of December 31, 20242025 and 20232024 hashave been derived from our audited financial statements included in this Annual Report.

We are a holding company whose primary assetsasset arecurrently is our ownershipright to the monetization of equitythe interests in NetCo andformer NewStem includinglicense thenow technologyheld ofby NewStem.Yissum. We currently conduct no other business and as a result, we have no operating revenue or cost of revenue. We dodid charge annual administrative fees fees to an affiliated entity.entity through the year ended December 31, 2024.

The Company incurs general and administrative (“G&A”) expenses primarily related to professional fees, insurance and stock basedstock-based compensation. We incurred G&A expenses of approximately $881,000$239,000 and $665,000$881,000 for the years ended December 31, 20242025 and 2023,2024, respectively. Our increasedecrease in G&A expenses relates primarily to decreases in bad debt incurredexpense, with the write off of notes receivable from NewStem, stock-based compensation and professional fees incurred in the audit of our financial statements for the years ended December 31, 2024 2025 and 2023,2024, preparation of our quarterly reports for 20242025 and 2023,2024, and for documents and advice related to our attempt to purchase the remaining shares of NewStem.NewStem in 2024.

Specifically, we wrote off as bad debt uncollected management fees of $9,500 during the year ended December 31, 2025 as compared to the net balance due from NewStem of $458,000 in the year ended December 31, 2024, and professional fees increased decreased by approximately $40,000$145,000 in the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024. Insurance costs decreased by approximately $14,000$17,000 in the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024.

Total stock compensation expense, included in G&A expenses, decreased by approximately $263,000$31,000 in the year ended December 31, 20242025 as compared compared to the year ended December 31, 2023 due to a smaller number of options awarded in the current period as compared to the prior period as well as by the recognition of $243,000 in stock compensation expense in the year ended December 31, 2023 related to the increased value of our outstanding warrants2024 due to the amendmentfact ofthat no options were awarded during the agreementscurrent tofiscal extend the due date by two years.year.

The Company has recorded a loss on derivative instrumentinstruments of $90,000 and $260,000, respectively,$90,000, for the yearsyear ended December 31, 2024 and 2023 related to a guarantee previously included in the note payable shareholder entered into in May 2023. The lossguarantee recordedwas removed in an amendment to the note payable during the year ended December 31, 20242024, bringsterminating the derivative instrument to its highest contractual liability.derivative.

The Company has recorded an impairment loss of approximately $1,629,000 during the year ended December 31, 2024 related to its investment in in NewStem. This loss reducesreduced our investment in NewStem to zero ($0.00) as of December 31, 2024. This adjustment was made in response to to the fact that NewStem ceased operations and iswas in the process of liquidation. The technology and license held by NewStem reverted to to the original licensee, Yissum, and the Company retains a right to a share of future licensing or monetization of the technology and license. license. The Company does expect to recover some value from the license, up to a total of $3,750,000, however, as of December 31, 2025 and 2024, the realization of this value is not certain, therefore has not been recorded by the Company. No such adjustment was made duringDuring the year ended December 31, 2023.2025, the Company received approximately $5,000 from the liquidation of the remaining assets of NewStem which was reported as a partial recovery of the impairment loss.

Interest expense increaseddecreased by approximately $326,000$169,000 in the year ended December 31, 20242025 as compared to the year ended December 31, 2023.2024. The increasesdecrease in interest expense areis primarily related to the reduction of interest from the settlement of the litigation funding agreement offset by increased debt incurred for operations, the accrual of interest on the litigation funding agreement and the funding of NewStem.operations.

We reported net income and losses from equity method investees during the years ended December 31, 20242025 and 2023.2024. The net income reported for the year ended December 31, 2025 included net income of $640 from NetCo. Net losses reported for the year ended December 31, 2024 included net loss of approximately $5,000 from NetCo combined with net loss of approximately $156,000 from NewStem. Net losses reported for the year ended December 31, 2023 included net income of approximately $3,000 from NetCo which was offset by net loss of approximately $342,000 from NewStem.

The Company will need to obtain additional funds to continue its operations. Management’s plans with regard to these matters include the potential sale of our interest in NetCo to settle our liability related to the litigation funding agreement and additional financing and fundraising until our interest in NewStem’s technology via monetization of the License is profitable. Although management continues to pursue these plans, there is no assurance that the Company will be successful in obtaining sufficient cash from financing on terms acceptable to the Company, or that NewStem’s technology will be monetized and become profitable.

During the year ended December 31, 2022, the Company entered into note agreements with Jan Loeb, our Executive Chairman and Jerry Wolasky, a member of the Board, to borrow up to an aggregate of $600,000 for working capital needs. The note agreements were amended in March 2024 to increase the total borrowing to $650,000 and extend the maturity date. The note agreements were refinanced in August 2024 providing for total borrowings of $750,000 and extending the maturity date to December 31, 2025. The agreements provide for interest at a rate of 10% per annum. As ofPrior to the datefiling of this Annual Report, the fullmaturity amountdate of $650,000these hasnotes beenwas funded pursuantextended to theseJune agreements.30, 2026.

During the year ended December 31, 2023, the Company entered into a note agreement with a shareholder to borrow $300,000 for continued working capital. This note bearsbore interest at zero percent (0%) and maturesmatured on May 5, 2025. The note includesincluded a guarantee which has been identified as an embedded derivative with a fair value of a liability of $650,000 and $535,000 at December 31, 20242024. This note was amended in May 2025 to provide for fixed interest, remove the guarantee and 2023,extend respectively.the maturity date to September 30, 2025. This note was amended for a second time in October 2025 to extend the maturity date to December 31, 2026.

In December 2023, the Company entered into two short term notes payable with unrelated parties for a total of $250,000 in borrowings utilized for the funding of NewStem. The notes bear interest at 12% per annum and matured December 21, 2024,2025, at which time all principal and accrued interest arewere due and payable. Prior to the filing of this Annual Report, the maturity date of these notes was extended to DecemberJune 21,30, 2026. 2025. The note agreements include a provision whereby, in the event of a capital raise transaction by the Company, the note holders would be be entitled to participate in the transaction in an amount equal to 133% of the amounts owed on the note agreements at the closing of the the transaction.

In April 2024, the Company borrowed $100,000 from unrelated parties pursuant to convertible debt agreements accounted for as debt. These agreements bear interest at 10% per annum and matured December 30, 2025. Prior to the filing of this Annual Report, the maturity dates have been extended to June 30, 2026.

During the yearsyear ended December 31, 2024 and 2023,2024, the Company loaned a total of $500,000, consisting of $250,000 per year to NewStem in anticipation of a purchase transaction. This transaction was not consummated and NewStem ceased operations and began liquidation proceedings in October 2024, resulting in the loan becoming uncollectible. As such, the Company determined the note was uncollectible and wrote the balance balance, including $250,000 loaned in 2023, off as a bad debt during the year ended December 31, 2024.

We are a development stageholding company with limited operations and reported net income (losses) of approximately $55,000$(141,000) and $207,000$2,547,000 for the six months ended June 30, 2026 and 2025, respectively, and $(86,000) and $2,754,000, for the three months ended MarchJune 31,30, 2026 and and 2025, respectively.2025. We had current assets of approximately $101,000$65,000 and current liabilities of $2,048,000$2,097,000 as of MarchJune 31,30, 2026. As of December 31, 2025, our current assets and current liabilities were approximately $16,000 and $2,157,000, respectively. The increase in current assets is due to the sale of equity securities during the threesix months ended MarchJune 31,30, 2026. The decrease in current liabilities is is primarily due to the reduction of accounts payable and the repayment of $50,000 on short-term borrowings as offset by interest accrued accrued on debt and advances on short-term borrowings to fund operating expenses.

We have prepared our financial statements for the threesix months ended MarchJune 31,30, 2026, assuming that we will continue as a going concern. Our Our continuation as a going concern is dependent upon improving our profitability and the continuing financial support from our shareholders as well as Yissum’s ability to successfully commercialize the License. Our sources of capital in the past have included the sale of equity securities, which include common stock sold in private transactions, and related party debt as well as debt from unrelated parties. During 2025 we entered into a bridge loan agreement with our Executive Chairman to obtain funding for current operating expenses and in March 2026 we issued common stock in exchange for $250,000 in a private transaction.

The Company incurs general and administrative (“G&A”) expenses primarily related to professional fees, insurance and stock-based compensation. We incurred G&A expenses of approximately $5,000$40,000 and $95,000$159,000 for the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. Specifically, professional fees decreased by approximately $69,000$95,000 in the threesix months ended MarchJune 31,30, 2026 as compared to the threesix months months ended MarchJune 31,30, 2025, primarily due to a decrease in accounting and audit fees of approximately $4,100$27,500 and the write off of approximately $67,500 in prior years legal fees due to the settlement of outstanding fees at a discount, netted with an increase in audit fees of approximately $1,600 combined with other increases of approximately $1,000.discount. We incurred a bad debt expense during the three six months ended MarchJune 31, 30, 2025 of approximately $9,500 for the write off of uncollectible administrative fees. We had reductions in stock compensation of approximately $8,700 $8,800 as no options were issued during 2025 and previously issued stock options were fully expensed during 2025. Other miscellaneous G&A expenses decreased by approximately $2,000.$5,700.

Interest expense decreased by approximately $63,000 in the threesix months ended MarchJune 31,30, 2026 as compared to the threesix months ended MarchJune 31,30, 2025 primarily primarily due to the settlement of the litigation funding agreement on May 9, 2025.

The Company has in place note agreements entered into during 2022 with Jan Loeb, our Executive Chairman and Jerry Wolasky, a member of the Board, to borrow up to an aggregate of $750,000 for working capital needs. The agreements provide for interest at a rate of 10% per annum and mature JuneMarch 30, 2026.2027. As of the date of this Quarterly Report, the full amount of $750,000 has been funded pursuant to these agreements.

During the year ended December 31, 2023, the Company entered into a note agreement with a shareholder to borrow $300,000 for continued working working capital. This note bore interest at zero percent (0%) and matured on May 5, 2025. The note included a guarantee which was identified identified as an embedded derivative with a fair value of a liability of $650,000 at March 31, 2025.derivative. This note was amended in May 2025 to provide for fixed interest,interest from inception of $36,000 to be added to the principal balance, remove the guarantee and extend the maturity date to September 30, 2025. This note was amended for a second time in October 2025 to extend the maturity date to December 31, 2026.

In December 2023, the Company entered into two short-term notes payable with unrelated parties for a total of $250,000 in borrowings utilized utilized for the funding of NewStem. The notes bear interest at 12% per annum prior to an event of default and mature JuneMarch 30, 2026 2027, at which time all principal and accrued interest are due and payable. The notenotes agreementsprovide includethat principal and accrued interest become due and payable upon the earlier of the stated maturity date or the closing of a provisioncapital whereby,raise, and that in the event of a capital raise transactioneach holder by the Company, the note holders would beis entitled to participate in thethat transaction in an amount equaland to tender its note, valued at 133% of the amounts owed on the noteclosing date, as payment for securities issued to that holder. Subsequent to June 30, 2026, the Company entered into waiver and confirmation agreements atwith both holders with respect to financing transactions completed on or prior to the closingdate of those agreements, including the transaction.March 13, 2026 issuance of common stock.

In April 2024, the Company borrowed $100,000 from unrelated parties pursuant to convertible debt agreements accounted for as debt. The notes bear interest at 10% per annum and mature JuneMarch 30, 2026.2027.

In February 2025, the Company entered into a bridge loan agreement with the Executive Chairman to fund working capital until such time as additional funding can be obtained. Advances from on this note were approximately $28,000 and $41,000$106,000 during the threesix months ended MarchJune 31,30, 2026 and 2025, respectively. The Company repaid $50,000 on this note during the threesix months ended MarchJune 31,30, 2026. The note bears interest interest at 10% per annum and matures JuneMarch 30, 2026 On May 9, 2025 the Company sold its interest in NetCo to its JV partner for $1,300,000 which was paid directly to Omni Bridgeway in full settlement of all liabilities related to the litigation funding agreement totaling $2,959,625.2027.

For the threesix months ended MarchJune 31,30, 2026, net cash used in operating activities was approximately $139,000,$172,000, which consisted primarily of a a net loss of approximately $55,000,$141,000 and the noncash settlement of accounts payable of $67,500, offset by interest added to notes payable of approximately $49,000.$100,000. Additionally, cash was used in operations related to a decrease in accounts payable of approximately $137,000 $71,000, offset by a decrease in currentprepaid assetsexpenses of approximately $4,000. $7,000.

For the threesix months ended MarchJune 31,30, 2025, net cash used in operating activities was approximately $44,000,$110,000, which consisted primarily of a net loss income of approximately $207,000,$2,547,000, offset by accretionnoncash disposal of discountequity onmethod notes payableinvestment of approximately $43,000,$1,172,000, relief of indebtedness income of approximately $1,697,000, stock-based compensation of approximately $9,000 and interest added to notes payable of approximately $103,000 $68,000.and accretion of interest on notes payable of approximately $60,000. Additionally, cash was used in operations related to an increase decrease in current assets of approximately $8,000$12,000 and a net increase in total accrued liabilities and accounts payablespayable of approximately $35,000. $28,000.

No net cash was used in investing activities during the threesix months ended MarchJune 31,30, 2026 and 2025.

For the threesix months ended MarchJune 31,30, 2026, net cash provided by financing activities was $228,000, consisting of short-term borrowings from the Executive Chairman of approximately $28,000, proceeds from the issuance of common stock of $250,000 offset by repayment of $50,000 in short-term borrowings from the Executive Chairman.

For the threesix months ended MarchJune 31,30, 2025, net cash provided by financing activities was $41,000,$105,500, consisting of short-term borrowings from the Executive Chairman.