UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q/A

(AMENDMENT NO. 1)

 

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED mARCH 31, 2017

OR

 

[   ] 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: 000-55583

  

Stemcell Holdings, Inc.

(Exact name of registrant as specified in its charter)

 

	Delaware	36-4827622
	(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
	C/O Stemcell Co., Ltd., 5-9-15-3F, Minamiaoyama Minato-ku, Tokyo, Japan	107-0062 (Zip Code)
	(Address of Principal Executive Offices)

 

  Issuer's telephone number: +81-3-3400-0707

Fax number: +81-3-3400-2276 

Email: stemcellholdings@gmail.com

 

C/O Omotesando Helene Clinic, 3-18-17-6F, Minamiaoyama

Minato-ku, Tokyo, Japan

(Former address)

 

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the preceding 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

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). [X] Yes [ ] No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer  ☐		Accelerated filer  ☐		Non-accelerated filer  ☐ (Do not check if a smaller reporting company)
Smaller reporting company  ☒		Emerging growth company  ☒

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

 

[ ] Yes [X] No

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

As of December 6, 2017, there were approximately 27,596,000 shares of common stock and none of preferred stock issued and outstanding. 

 

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Explanatory Note

We are filing this Amendment No. 1 on Form 10-Q/A to amend our Quarterly Report (“Amended Report”) ended March 31, 2017, originally filed with the Securities and Exchange Commission on May 19, 2017 (the “Original Report”), to restate our unaudited consolidated financial statements. This Amended Report contains only Part I, Item 1 “Financial Statements”, an additional description to Note 4 of “Notes to Unaudited Consolidated Financial Statements” and Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations, - Liquidity and Capital Resources” section.

This Amended Report has not been updated for events occurring after the filing of the Original Report nor does it change any other disclosures contained in the Original Report. Accordingly, this Amended Report should be read in conjunction with the Original Report.

In accordance with applicable SEC rules, this Form 10-Q/A includes new certifications required by Sections 302 and 906 of the SarbanesOxley Act of 2002, as amended, from our Chief Executive Officer and Chief Financial Officer dated 5/18/2017 10-Q (link) as of the filing date of this Form 10-Q/A.

Restatement Background

In the course of its financial statement closing process for the quarter ended September 30, 2017, the CEO and CFO (collectively, “the Management”) of Stemcell Holdings, Inc. (the “Company”), determined that the Company’s interim financial statements for the periods ended March 31, 2017 and June 30, 2017, could no longer be relied upon. Specifically, on November 5, 2017, Management discovered that certain material rental payments should have been expensed in the first and second quarters. As such, previously issued financial statements should be adjusted for such certain rental payments in the respective quarters to reflect such applicable expenses.

The Company has evaluated that the changes described above will result in an increase in expenses of $157,478 for the quarter ended March 31, and a decrease in income tax expense and net income of $55,809 and $101,669 respectively, for the period ended March 31, 2017. Accordingly, retained earnings will decrease by $101,669 as of March 31, 2017.

Because these revisions are treated as corrections of errors to our prior period financial results, the revisions are considered to be a “restatement” under U.S. generally accepted accounting principles. Accordingly, the revised financial information included in this Quarterly Report on Form 10-Q/A has been identified as “restated”.

Internal Control Consideration

As disclosed in the Company’s Form 10-K filed on May 15, 2017, Management had previously disclosed that material weaknesses existed as of December 31, 2016 with respect to the lack of a functioning audit committee and inadequate segregation of duties resulting in ineffective oversight in the establishment and monitoring of required internal controls and procedures. While management’s assessment of the Company’s internal control over financial reporting is ongoing, because of the material weaknesses identified, management concludes that the Company’s internal controls over financial reporting remain ineffective as of the date of this report. Management has determined that the failure to record this rental expense resulted from control deficiencies with respect to the tracking and disclosure of all Company agreements, and that this control deficiency constitutes a material weakness in the Company’s internal controls over financial reporting. The Company has thoroughly investigated all documents to ensure no other material agreements are left undiscovered that may affect the Company’s financial results. The Company has also hired an in-house legal counsel to keep all Company agreements in control.

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INDEX

			Page
PART I - FINANCIAL INFORMATION
ITEM 1	FINANCIAL STATEMENTS		F1
CONSOLIDATED Balance Sheets as of MARCH 31, 2017 (unaudited) and December 31, 2016			F1
CONSOLIDATED StatementS of Operations AND COMPREHENSIVE INCOME FOR THE THREE months ENDED march 31, 2017 AND march 30, 2016 (UNAUDITED)			F2
CONSOLIDATED StatementS of cash flows for the THREE months ENDED march 31, 2017 AND march 30, 2016 (UNAUDITED)			F3
nOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS			F5
ITEM 2	Management’S discussion and analysis of financial condition and results of operations		2
ITEM 6	EXHIBITS		3
SIGNATURES			4

 

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Table of Contents

 

PART I - FINANCIAL INFORMATION

 

ITEM 1

FINANCIAL STATEMENTS

  

 STEMCELL HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

 

			RESTATED
			As of		As of
			March 31, 2017		December 31, 2016
			(UNAUDITED)
ASSETS
Current Assets
	Cash	$	2,488,136	$	2,646,855
	Prepaid expenses and other current assets		64,090		30,452
TOTAL CURRENT ASSETS			2,552,226		2,677,307
Property and equipment, net			713,277		529,747
Deferred tax assets			22,537		21,848
TOTAL ASSETS		$	3,288,040	$	3,228,902
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
	Accounts payable to related party	$	1,301,756	$	573,827
	Accrued expenses and other current liabilities		61,069		106,413
	Income tax payables		184,777		1,187,722
TOTAL CURRENT LIABILITIES			1,547,602		1,867,962
TOTAL LIABILITIES			1,547,602		1,867,962
Shareholders' Equity
	Preferred stock ($.0001 par value, 20,000,000 shares authorized;
	none issued and outstanding as of March 31, 2017 and December 31, 2016)		-		-
	Common stock ($.0001 par value, 500,000,000 shares authorized,
	27,596,000 shares issued and outstanding as of March 31, 2017 and December 31, 2016		2,760		2,760
	Additional paid-in capital		65,116		65,116
	Accumulated earnings		1,731,240		1,397,421
	Accumulated other comprehensive loss		(58,678)		(104,357)
TOTAL SHAREHOLDERS' EQUITY			1,740,438		1,360,940
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY		$	3,288,040	$	3,228,902

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

-F1-

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STEMCELL HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

			RESTATED
			Three months		Three months
			Ended		Ended
			March 31, 2017		March 31, 2016
Revenues
	Stem cell culturing	$	706,052	$	-
	Coordination services		131,413		-
	Marketing services		39,464		-
	Rental services		118,955		-
Total revenues from related parties			995,884		-
Revenues from third party
	Marketing services		7,893		-
	Rental services		47,401		-
Total revenues from third party			55,294		-
Total revenues			1,051,178		-
Cost of revenues			175,597		-
Gross profit			875,581		-
Operating expenses
	Selling, general and administrative expenses		358,520		4,522
Total operating expenses			358,520		4,522
NET INCOME (LOSS) BEFORE TAXES		$	517,061	$	(4,522)
Income tax expenses		$	183,242	$	239,051
NET INCOME (LOSS)		$	333,819	$	(243,573)
Other Comprehensive Income (Loss)
	Foreign currency translation adjustment		45,679		(107)
TOTAL COMPREHENSIVE INCOME (LOSS)		$	379,498	$	(243,680)
NET INCOME (LOSS) PER COMMON SHARE, BASIC AND DILUTED		$	0.01	$	(0.00)
WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED (*)			27,596,000		40,000,000,000

 

  

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

(*) On October 29, 2016, the Company performed the forward stock split, whereby every one (1) share of common stock was automatically reclassified and changed into two thousand (2,000) shares (the “2,000-for-1 Forward Stock Split”). The authorized number of shares and par value per share were not be affected by the 2,000-for-1 Forward Stock Split. The Company had 27,596,000 shares and 20,000,000 (as restated) shares of common stock outstanding as of March 31, 2017 and March 31, 2016.

 

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CONSOLIDATED STATEMENT OF CASH FLOWS

(UNAUDITED)

  

			RESTATED
			Three months			Three months
			Ended			Ended
			March 31, 2017			March 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
	Net income (loss)	$	333,819		$	(4,522)
	Adjustments to reconcile net income to net cash provided by operating activities:
	Depreciation expense		22,778			296
	Changes in operating assets and liabilities:
	Prepaid expenses and other current assets		(32,472)			-
	Accrued expenses and other current liabilities		(67,178)			-
	Accounts payable to related party		725,120			46,719
	Income tax payables		(1,034,089)			-
	Net cash (used in) provided by operating activities		(52,022)			42,493
CASH FLOWS FROM INVESTING ACTIVITIES
	Purchase of property, plant and equipment		(188,552)			(17,768)
	Net cash used in investing activities		(188,552)			(17,768)
Net effect of exchange rate changes on cash			81,855			(107)
Net change in cash			(158,719)			24,618
Cash - beginning of period			2,646,855			-
Cash - end of period		$	2,488,136		$	24,618
SUPPLEMENTAL  DISCLOSURES OF CASH FLOW INFORMATION
Interest paid		$	-		$	-
Income taxes paid		$	1,217,331		$	-
NON-CASH FINANCING AND INVESTING TRANSACTIONS
	Forgiveness of debt by former sole shareholder	$	-		$	2,998

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

 

-F3-

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Restatement of Previously Issued Consolidated Financial Statements

 

The combined impact of all adjustments to the applicable line items in our unaudited consolidated financial statements for the periods covered by this Form 10-Q/A are provided in the table below.

					As Previously Reported		Adjustment		As Restated
Effects on Consolidated Balance Sheet
As of March 31, 2017
Accounts payable to related party				$	1,144,278	$	157,478	$	1,301,756
Income tax payables					240,586		(55,809)		184,777
Accumulated earnings					1,832,909		(101,669)		1,731,240
Total shareholders' equity					1,842,107		(101,669)		1,740,438
Effects on Consolidated Statement of Operations
Three Months Ended March 31, 2017
Selling, general and administrative expenses				$	201,042	$	157,478	$	358,520
Total operating expenses					201,042		157,478		358,520
Net income before taxes					674,539		(157,478)		517,061
Income tax expenses					239,051		(55,809)		183,242
Net income					435,488		(101,669)		333,819
Per share data - basic and diluted				$	0.02	$	(0.01)	$	0.01
Total comprehensive income					481,167		(101,669)		379,498
Effects on Consolidated Statement of Cash Flows
Three Months Ended March 31, 2017
Net income					435,488		(101,669)		333,819
Changes in accounts payable to related party					567,642		157,478		725,120
Income tax payables					(978,280)		(55,809)		(1,034,089)

 

-F4-

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STEMCELL HOLDINGS, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

AS OF MARCH 31, 2017

 

This Amendment Report adds the following description to the following note of the Original Report.

 

NOTE 4 – RELATED-PARTY TRANSACTIONS

 

For the three months ended March 31, 2017, the Company incurred $157,478 of expenses for rental fees of certain equipment and other assets to Takaaki Matsuoka, CEO and Director of the Company.

 

-F5-

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ITEM 2

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Liquidity and Capital Resources 

 

As of March 31, 2017, our cash balance was $2,488,136 and our working capital was $1,004,624 down by $158,719 and up by $195,279 respectively compared to December 31, 2016. Our cash balance is currently sufficient to fund our operations. If our revenue, however, cannot cover our operating funds, we would need to either borrow funds from Takaaki Matsuoka, our sole Director, or obtain bank financing. Takaaki Matsuoka has informally agreed to advance funds to allow us to pay for operating expenses. He, however, has no formal commitment, arrangement or legal obligation to advance or loan funds to the Company. If we need additional cash and cannot raise it, we will either have to suspend operations until we raise the cash we need, or cease operations entirely.

 

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ITEM 6

EXHIBITS

 

Exhibit No.		Description
3.1		Certificate of Incorporation (1)
3.2		By-laws (1)
3.3		Articles of Incorporation of Stemcell - translated (2)
10.1		Stock Purchase Agreement (2)
31		Certification of the Company’s Principal Executive and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the registrant’s report on Form 10-Q for the period ended March 31, 2017 (4)
32		Certification of the Company’s Principal Executive and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (4)
99.1		Resolutions Approving Acquisition (2)
101.INS		XBRL Instance Document (3)
101.SCH		XBRL Taxonomy Extension Schema (3)
101.CAL		XBRL Taxonomy Extension Calculation Linkbase (3)
101.DEF		XBRL Taxonomy Extension Definition Linkbase (3)
101.LAB		XBRL Taxonomy Extension Label Linkbase (3)
101.PRE		XBRL Taxonomy Extension Presentation Linkbase (3)

 

(1) Filed as an exhibit to the Company's Registration Statement on Form 10, as filed with the SEC on February 12, 2015, and incorporated herein by this reference.

(2) Filed as an exhibit to the Company's Form 8-K, as filed with the SEC on March 28, 2016, and incorporated herein by this reference.

(3) Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or Annual Report for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Exchange Act of 1934 and otherwise are not subject to liability.

(4) Filed herewith.

 

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SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

 

Stemcell Holdings, Inc.

(Registrant)

 

By: /s/ Takaaki Matsuoka 

Name: Takaaki Matsuoka

CEO, President, Director

Dated: December 6, 2017

 

By: /s/ Erika Nakazawa 

Name: Erika Nakazawa

CFO

Dated: December 6, 2017

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