NovelStem Swings to Profit on Debt Relief, Asset Sales; Cash Dwindles

TL;DR

**NSTM's 'profit' is a mirage from one-time gains; this company is running on fumes and a going concern risk is flashing red.**

AI Summary

NovelStem International Corp. (NSTM) reported a significant turnaround in net income for the nine months ended September 30, 2025, achieving a net income of $2,469,177, a substantial improvement from a net loss of $3,070,027 in the prior year period. This positive shift was primarily driven by a $1,697,024 relief of indebtedness income and a $1,171,760 gain on disposal of an equity method investment. However, the company's cash position remains precarious, with cash decreasing from $6,099 at December 31, 2024, to $627 at September 30, 2025. Total assets plummeted from $160,111 to $14,849 over the same period, largely due to the disposal of the NetCo investment and the dissolution of NewStem. Operating expenses decreased significantly to $198,007 for the nine months ended September 30, 2025, down from $893,887 in 2024. The company continues to operate with a substantial accumulated deficit of approximately $294,000,000, raising substantial doubt about its ability to continue as a going concern, despite a reduction in total liabilities from $5,304,486 to $2,067,209.

Why It Matters

NovelStem's dramatic swing to net income, driven by one-time events like debt relief and asset disposal, masks a critical underlying issue: dwindling cash reserves and a going concern warning. For investors, this signals extreme risk, as the company's operational viability is questionable without further financing or asset monetization. Employees and customers of its former equity investees, NewStem and NetCo, have already seen their ventures liquidated or sold, highlighting the instability. The broader market should view NSTM as a cautionary tale of a holding company struggling to find a sustainable business model, with its competitive context severely weakened by the divestment of its core biotech and media interests.

Risk Assessment

Risk Level: high — NovelStem faces a 'substantial doubt about the Company's ability to continue as a going concern,' explicitly stated in Note 1. This is evidenced by a cash balance of only $627 as of September 30, 2025, down from $6,099 at December 31, 2024, and an accumulated deficit of approximately $294,000,000. The company's reliance on 'additional financing and fundraising' and 'monetization of assets' without assurance of success underscores its high-risk profile.

Analyst Insight

Investors should avoid NSTM given the explicit going concern warning and minimal cash reserves. The reported net income is non-recurring and does not reflect sustainable operational profitability. Current shareholders should consider the high risk of further dilution or potential delisting if the company fails to secure substantial additional funding or successfully monetize its remaining intangible assets.

Financial Highlights

debt To Equity

N/A

revenue

N/A

operating Margin

N/A

total Assets

$14,849

total Debt

$2,067,209

net Income

$2,469,177

eps

N/A

gross Margin

N/A

cash Position

$627

revenue Growth

N/A

Key Numbers

• $2,469,177 — Net income (for the nine months ended September 30, 2025, a significant improvement from a $3,070,027 net loss in 2024)
• $627 — Cash (as of September 30, 2025, down from $6,099 at December 31, 2024)
• $1,697,024 — Relief of indebtedness income (a primary driver of net income for the nine months ended September 30, 2025)
• $1,171,760 — Gain on disposal of equity method investment (contributed to net income for the nine months ended September 30, 2025)
• $294,000,000 — Accumulated deficit (as of September 30, 2025, indicating long-term unprofitability)
• $14,849 — Total assets (as of September 30, 2025, a sharp decline from $160,111 at December 31, 2024)
• $2,067,209 — Total liabilities (as of September 30, 2025, reduced from $5,304,486 at December 31, 2024)
• $198,007 — General and administrative expenses (for the nine months ended September 30, 2025, a decrease from $893,887 in the prior year)
• 46,881,475 — Common Stock Shares Outstanding (as of November 12, 2025)

Key Players & Entities

• NovelStem International Corp. (company) — registrant of the 10-Q filing
• NewStem Ltd (company) — Israeli biotech company, 31% equity interest, liquidated in August 2025
• NetCo Partners (company) — legacy media business, 50% equity interest, sold in May 2025
• Omni Bridgeway (company) — recipient of litigation funding liability settlement
• Hollywood Media Corp. (company) — former name of NovelStem International Corp.
• SEC (regulator) — Securities and Exchange Commission

FAQ

Risk Factors

• Going Concern Uncertainty [high — financial]: The company has a substantial accumulated deficit of approximately $294,000,000, raising substantial doubt about its ability to continue as a going concern. Despite a significant net income of $2,469,177 for the nine months ended September 30, 2025, this was largely driven by non-operational items like relief of indebtedness and asset disposal gains, not sustainable operating revenue.
• Deteriorating Cash Position [high — financial]: Cash reserves have dwindled from $6,099 at December 31, 2024, to a critically low $627 as of September 30, 2025. This severe reduction in liquidity, despite a reduction in liabilities, poses an immediate threat to the company's operational continuity.
• Asset and Entity Dissolution [medium — operational]: Total assets have plummeted from $160,111 to $14,849 due to the disposal of the NetCo investment and the dissolution of NewStem. This indicates a significant contraction of the company's operational base and asset structure.
• Reliance on Non-Recurring Income [high — financial]: The reported net income of $2,469,177 for the nine months ended September 30, 2025, is heavily reliant on a $1,697,024 relief of indebtedness income and a $1,171,760 gain on disposal of an equity method investment. These are not sustainable sources of profit.

Industry Context

NovelStem International Corp. operates in a highly competitive and capital-intensive biotechnology sector. The industry is characterized by long development cycles, significant R&D investment, and stringent regulatory hurdles. Companies often rely on substantial funding rounds or strategic partnerships to advance their pipelines. Recent trends show increased consolidation and a focus on specialized therapeutic areas.

Regulatory Implications

As a biotechnology company, NSTM is subject to rigorous oversight from regulatory bodies like the FDA. Any delays in clinical trials, manufacturing issues, or failure to meet compliance standards can have severe financial and operational consequences. The company's current financial precariousness could impede its ability to fund necessary regulatory submissions and ongoing compliance.

What Investors Should Do

1. Monitor cash burn rate closely: The extremely low cash balance of $627 requires immediate attention and a clear plan for funding operations.
2. Scrutinize future earnings drivers: Assess the sustainability of profitability beyond one-off gains from debt relief and asset disposals.
3. Evaluate going concern disclosures: Pay close attention to management's plans and assurances regarding the company's ability to continue as a going concern.
4. Analyze asset disposal impact: Understand the strategic rationale and long-term implications of the disposal of the NetCo investment and dissolution of NewStem.

Key Dates

• 2025-09-30: Nine months ended September 30, 2025 — Reported net income of $2,469,177, a significant improvement from a net loss in the prior year, driven by non-operational gains. Cash position critically low at $627.
• 2024-12-31: As of December 31, 2024 — Cash balance was $6,099 and total assets were $160,111, indicating a much larger asset base and better cash position compared to September 30, 2025.

Glossary

Relief of indebtedness income

Income recognized when a company's debt is forgiven or reduced by creditors, often in restructuring or bankruptcy scenarios. (A significant contributor to NSTM's net income for the period, highlighting a potential debt restructuring or settlement.)

Equity method investment

An accounting method where an investment in another company is recorded at cost and adjusted for the investor's share of the investee's net income or loss. (NSTM recognized a gain on the disposal of such an investment, impacting its profitability for the period.)

Accumulated deficit

The cumulative net losses of a company since its inception that have not been offset by net income. (NSTM's substantial accumulated deficit of $294,000,000 raises serious concerns about its long-term viability and ability to continue as a going concern.)

Going concern

The assumption that a company will continue to operate for the foreseeable future, typically at least 12 months from the reporting date. (The company's financial condition, particularly its low cash and high accumulated deficit, casts doubt on its ability to meet this assumption.)

Year-Over-Year Comparison

Compared to the prior year period, NovelStem International Corp. has shown a dramatic shift from a net loss to a net income of $2,469,177 for the nine months ended September 30, 2025. This turnaround is primarily due to significant non-operational income sources, including relief of indebtedness and a gain on investment disposal, rather than improved operational performance. Operating expenses have decreased substantially, but the company's cash position has deteriorated severely, and total assets have shrunk considerably due to asset disposals and entity dissolution, reinforcing concerns about its going concern status.

Filing Documents

• form10-q.htm (10-Q) — 702KB
• ex10-13.htm (EX-10.13) — 15KB
• ex10-14.htm (EX-10.14) — 55KB
• ex10-15.htm (EX-10.15) — 14KB
• ex31-1.htm (EX-31.1) — 20KB
• ex31-2.htm (EX-31.2) — 19KB
• ex32-1.htm (EX-32.1) — 7KB
• ex32-2.htm (EX-32.2) — 7KB
• 0001493152-25-021861.txt ( ) — 4408KB
• nstm-20250930.xsd (EX-101.SCH) — 34KB
• nstm-20250930_cal.xml (EX-101.CAL) — 45KB
• nstm-20250930_def.xml (EX-101.DEF) — 136KB
• nstm-20250930_lab.xml (EX-101.LAB) — 271KB
• nstm-20250930_pre.xml (EX-101.PRE) — 223KB
• form10-q_htm.xml (XML) — 673KB

Financial Information

Part I Financial Information

Unaudited Condensed Financial Statements

Item 1. Unaudited Condensed Financial Statements: Unaudited Condensed Balance Sheets as of September 30, 2025 and December 31, 2024 3 Unaudited Condensed Statements of Operations for the nine and three months ended September 30, 2025 and 2024 4 Unaudited Condensed Statements of Changes in Shareholders' Deficit for the nine months ended September 30, 2025 and 2024 5 Unaudited Condensed Statements of Cash Flows for the nine months ended September 30, 2025 and 2024 6 Notes to Unaudited Condensed Financial Statements 7

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 15

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 18

Controls and Procedures

Item 4. Controls and Procedures 18

Other Information

Part II Other Information

Legal Proceedings

Item 1. Legal Proceedings 19

Risk Factors

Item 1A. Risk Factors 19

Exhibits

Item 6. Exhibits 19

Signatures

Signatures 20 2 PART I ITEM 1. UNAUDITED CONDENSED FINANCIAL STATEMENTS NOVELSTEM INTERNATIONAL CORP. CONDENSED BALANCE SHEETS 2025 2024 As of September 30, December 31, 2025 2024 (Unaudited) ASSETS Current assets: Cash $ 627 $ 6,099 Accounts receivable, administrative fees - 10,500 Prepaid expenses 14,222 15,272 Total current assets 14,849 31,871 Investment in NetCo - 128,240 Investment in NewStem, net - - Total assets $ 14,849 $ 160,111 LIABILITIES AND SHAREHOLDERS' DEFICIT Current liabilities: Accounts payable $ 199,610 $ 167,898 Accrued expenses 37,673 68,576 Notes payable, including accrued interest 308,479 250,000 Current portion of long-term notes payable, including accrued interest 1,263,590 4,059,366 Bridge loan payable, related party, including accrued interest 141,964 - Convertible debt, including accrued interest 115,893 108,646 Derivative liability, guarantee - 650,000 Total liabilities 2,067,209 5,304,486 Commitments and contingencies (see Note 7) - - Shareholders' deficit: Common stock, $ .01 par value, 100,000,000 shares authorized, 50,316,672 shares issued at September 30, 2025 and December 31, 2024 and 46,881,475 shares outstanding at September 30, 2025 and December 31, 2024 468,815 468,815 Additional paid-in capital 291,570,255 290,947,417 Accumulated deficit ( 293,891,676 ) ( 296,360,853 ) Treasury stock, at cost, 3,435,197 shares at September 30, 2025 and December 31, 2024 ( 199,754 ) ( 199,754 ) Total shareholders' deficit ( 2,052,360 ) ( 5,144,375 ) Total liabilities and shareholders' deficit $ 14,849 $ 160,111 The accompanying notes are an integral part of these unaudited condensed financial statements. 3 NOVELSTEM INTERNATIONAL CORP. CONDENSED (UNAUDITED) 2025 2024 2025 2024 Nine Months Ended Three Months Ended September 30, September 30, 2025 2024 2025 2024 Administrat

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