Attached files
| file | filename |
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| EX-32 - EX-32 - Stemcell Holdings, Inc. | ex32_ye.htm |
| EX-31 - EX-31 - Stemcell Holdings, Inc. | ex31_ye.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
| [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
FOR THE FISCAL YEAR ENDED December 31, 2017
OR
| [ ] ANNUAL 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.) | ||
5-9-15-3F, Minamiaoyama Minato-ku, Tokyo, Japan |
107-0062 | ||
| (Address of Principal Executive Offices) | (Zip Code) |
Securities to be registered under Section 12(b) of the Act: None
Securities to be registered under Section 12(g) of the Exchange Act:
| Title of each class | Name of each exchange on which registered |
|||
| Common Stock, $.0001 | N/A |
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
[ ] Yes [X] No
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
[ ] Yes [X] No
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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 (§ 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[ ]
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
As of June 30, 2017, the aggregate market value of the voting common stock held by non-affiliates of the Registrant was approximately $227. This value was determined with each share of common stock valued at par value ($0.0001).
As of March 30, 2018, there were 27,596,000 shares of the Registrant’s common stock, par value $0.0001 per share, issued and outstanding.
Stemcell Holdings, Inc.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Information included in this Annual Report on Form 10-K (this “Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act), and Section 21 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are not statements of historical facts, but rather reflect our current expectations concerning future events and results. We generally use the words “believes,” “expects,” “intends,” “plans,” “anticipates,” “likely,” “will” and similar expressions to identify forward-looking statements. Such forward-looking statements, including those concerning our expectations, involve risks, uncertainties and other factors, some of which are beyond our control, which may cause our actual results, performance or achievements, or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks, uncertainties and factors include, but are not limited to, those factors set forth in this Report under “Item 1A. – Risk Factors” below. Except as required by applicable law, including the securities laws of the United States, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in this Report.
CERTAIN TERMS USED IN THIS REPORT
References in this report to “we,” “us,” “our,” the “Company” or “Stemcell” means Stemcell Holdings, Inc., unless otherwise indicated.
PART I
Corporate History
The Company was originally incorporated with the name Perfect Acquisition, Inc., under the laws of the State of Delaware on December 31, 2015, with an objective to acquire, or merge with, an operating business.
On December 31, 2015, Jeffrey DeNunzio was appointed as Director, Chief Executive Officer, Chief Financial Officer, President, Secretary, and Treasurer.
On December 31, 2015, the Company issued 40,000,000,000 shares of restricted common stock to Jeffrey DeNunzio in return for his services developing the Company’s business concept.
On January 27, 2016, Jeffrey DeNunzio of 780 Reservoir Avenue, #123, Cranston, RI 02910, the sole shareholder of the Company, entered into a Share Purchase Agreement with Takaaki Matsuoka with an address at 3-18-17-6F, Minamiaoyama, Minato-ku, Tokyo, 107-0062, Japan. Pursuant to the Agreement, Mr. DeNunzio transferred to Takaaki Matsuoka, 40,000,000,000 shares of our common stock which represents all of our issued and outstanding shares.
Following the closing of the share purchase transaction, Takaaki Matsuoka gained a 100% interest in the issued and outstanding shares of our common stock and became the controlling shareholder of the Company.
The sale of shares between Jeffrey DeNunzio and Takaaki Matsuoka was made pursuant to Regulation S of the Securities Act of 1933, as amended ("Regulation S"). No directed selling efforts were made in the United States. Takaaki Matsuoka is a Japanese citizen.
On January 27, 2016, the Company changed its name to Stemcell Holdings, Inc. and filed with the Delaware Secretary of State, a Certificate of Amendment.
On January 27, 2016, Jeffrey DeNunzio resigned as our Chief Executive Officer, Chief Financial Officer, President, Director, Secretary, and Treasurer. The resignation was not the result of any disagreement with us on any matter relating to our operations, policies or practices.
On January 27, 2016, Mr. Takaaki Matsuoka was appointed as our Chief Executive Officer, Chief Financial Officer, President, Director, Secretary, and Treasurer.
On March 23, 2016, Stemcell Holdings, Inc., a Delaware corporation, entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Takaaki Matsuoka, our President, CEO and Director. Pursuant to this Agreement, on March 24, 2016 Takaaki Matsuoka transferred to Stemcell Holdings, Inc., 500 shares of the common stock of Stemcell Co., Ltd., a Japan corporation (“Stemcell”), which represents all of its issued and outstanding shares, in consideration of JPY 5,000,000 ($44,476). Following the effective date of the share purchase transaction above on March 24, 2016, Stemcell Holdings, Inc. gained a 100% interest in the issued and outstanding shares of Stemcell’s common stock and Stemcell became a wholly owned subsidiary of Stemcell Holdings, Inc.
On May 2, 2016, Takaaki Matsuoka entered into a Stock Purchase Agreement with Primavera Singa Pte Ltd, a Singapore corporation (“Primavera Singa”) with an address at 60 Paya Lebar Rd #09-25, Paya Lebar Square 409051, Singapore. Pursuant to the Agreement, Takaaki Matsuoka transferred to Primavera Singa, 34,599,066,000 shares of our common stock in consideration of JPY 3,000,000 (approximately $28,145) which represents 86.5% of our issued and outstanding shares.
Shiho Matsuoka, the wife of our sole officer and director Takaaki Matsuoka, owns and controls 100% of Primavera Singa Pte., Ltd.
Following the closing of the share purchase transaction, Primavera Singa Pte., Ltd. became the controlling shareholder of the Company.
The sale of shares between Takaaki Matsuoka and Primavera Singa was made pursuant to Regulation S of the Securities Act of 1933, as amended ("Regulation S"). No directed selling efforts were made in the United States. Takaaki Matsuoka is a Japanese Citizen.
On September 10, 2016, the Company changed its principal executive offices to 5-9-15-3F, Minamiaoyama, Minato-ku, Tokyo, 107-0062, Japan.
On October 26, 2016, the Board and majority shareholders approved to cancel 39,972,404,000 shares owned by 7 shareholders (the “Stock Cancellation”). The 7 shareholders were the “majority shareholders.”
On October 29, 2016, the Company effected a forward stock split, whereby every one (1) share of the common stock was automatically reclassified and changed into two thousand (2,000) shares (the “2000-for-1 Forward Stock Split”). The authorized number of shares and par value per share were not be affected by the 2000-for-1 Forward Stock Split. The 2000-for-1 Forward Stock Split was executed subsequent to the Stock Cancellation. On October 29, 2016, we filed a Certificate of Amendment with the Delaware Secretary of State.
Currently, we operate through our wholly owned subsidiary, Stemcell Co., Ltd., which is primarily engaged in the regenerative medicine-related business which includes but is not limited to providing technical assistance to the culturing, storing and delivery of stem cells and administrative and consulting services to clinics.
Our principal executive offices are located at 5-9-15-3F, Minamiaoyama, Minato-ku, Tokyo, 107-0062, Japan. Our phone number is +81-3-3400-0077.
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Our Stem Cell Culturing Technical Assistance Business
We currently provide two different options for stem cell regenerative therapy: autologous adipose derived mesenchymal stem cells (ADMSC) and natural killer cells (NK).
For autologous stem cell culturing, tissue is extracted from patient’s subcutaneous fat from either the abdominal area or from the area behind the ear lobe. The fat contains stem cells which are then cultured using our proprietary medium and culturing technology to increase to approximately 1 billion cells in roughly a month. As for NK cells, by using a culturing kit developed by the Company, over 4 billion cells can be cultured within ten days. Stemcell Co., Ltd. has also been certified as ISO 9001.
NK Kit
NK cells play a major role in the host-rejection of both tumors and virally infected cells. They have the ability to identify and attack cells that have not become MHC class 1 or damaged cells that release MICA/B molecules. The number of NK cells can be increased by culturing them outside the body. Subsequently, they can be put back into the body intravenously allowing the patients’ immune systems to strengthen.
How stem cells are used
The cultured stem cells are inserted back into a patient’s body through either muscle or IV injection at a hospital or clinic. All stem cell treatments are performed by such institutions. Stemcell Co., Ltd does not treat patients or individuals in any form or manner, and does not inject any individuals with the stem cells. The role of the Company is strictly to provide technical assistance to culture the stem cells for clinics and other medical institutions for patients’ medical treatments and to enable such treatments by coordination services for such medical institutions and sales agents.
With aging, the older we get, the fewer stem cells we have. This results in a slower metabolism among other physiological changes. Stem cell therapies assist in repairing cells and preventing cell losses. The following are diseases and symptoms that stem cell therapy may be used for treating/improving the condition of patients.
Chronic fatigue syndrome, facial rejuvenation, type II diabetes mellitus, autism, ovarian functions, cerebral infarction,
Alzheimer’s disease, Parkinson disease, spinocerebellar degeneration, Multiple Sclerosis (MS), Amyotrophic Lateral Sclerosis (ALS), inflammatory colitis, knee joint pain and cosmetic improvements. Please note that these are not all of the potential uses for stem cell therapy, and only a list of the more common ailments that stem cell therapy has been shown to treat.
Coordination Services
We provide coordination services to facilitate our stem cell culturing business. Currently, our coordination services primarily include the introduction of patients to clinics, arranging patients’ schedules, and translating between patients and clinics due to language barriers that may be present. We also serve as a sales agent for Omotesando Helene Clinic, a related party, providing stem cell treatment to patients.
Growth Strategy
In order to increase awareness of our business, we promote our services in a variety of ways. A large portion of our business is generated through referrals made by clinics and hospitals that we have worked with, including Omotesando Helene Clinic. We have also received referrals from a number of sales agencies and through professional relationships that have been developed over the course of our employees’ careers. Additionally, we have an online presence through the corporate website: http://stemcells.ne.jp/ and coordination website: https://www.stemcoordinate.com/.
Marketing Services and Rental Services
We provide internet marketing services by providing search engine optimization for clinics. We also provide rental services to parties so they can utilize our idle property and equipment when it is not being used.
Team
Our team consists of a total of 28 members as of December 31, 2017. Most notable is our Officer and sole Director Takaaki Matsuoka who studied at the Keio University School of Medicine, specializing in anesthesiology, thereafter gaining extensive clinical and surgical experience in various hospitals and clinics prior to establishing his own surgical and stem cell businesses. The management team has also been strengthened with a Chief Financial Officer (both for the holding and operating company), Chief Human Resources Officer and Chief in-house legal counsel joining respectively in May, July and September 2017. On the operations side, we have four highly experienced and dedicated cell culturists with extensive medical backgrounds and graduate degrees in cell tissue engineering and molecular biology. Coordination and marketing services are provided by our Chief Marketing Officer and other members of our team. These members are proficient in multiple languages such as Japanese, English and Mandarin. They also have experience in search engine optimization (SEO) and marketing. To support business growth, our back office functions have also been strengthened with a total of 19 employees joining after Q2 to year end, providing administrative, accounting, payroll, HR and other non-medical clinic enabling services.
Our Facilities
We share the same address as our wholly owned subsidiary Stemcell Co., Ltd.
Our facility is located at 5-9-15-3F, Minamiaoyama, Minato-ku, Tokyo, 107-0062, Japan. The space is currently being provided to the Company rent-free by Omotesando Helene Clinic, which is owned by our officer and director Takaaki Matsuoka.
Equipment
As of December 31, 2017, Stemcell Holdings, Inc., through our wholly-owned subsidiary Stemcell Co., Ltd. owned equipment and accessories (excluding software) with a net book value of $972,873.
Outline of the Structure of Our Stem Cell Culturing Technical Assistance Business
We operate through our wholly owned subsidiary Stemcell Co., Ltd. which provides technical assistance to the culturing, storing and delivering of stem cells to our clientele.
Process
We provide technical assistance to culture stem cells for clinics, hospitals, and medical institutions. All of the stem cell culturing is conducted at our managed facility. After we culture a batch of stem cells we supply them directly to the clinic, hospital, medical center, etc. whereupon that party then uses the delivered stem cells to inject back into the respective patient for stem cell therapy. It is important to note that we do not conduct any medical operations, operate, or directly treat any patients. We provide technical assistance to culture the stem cells.
Government Regulations
In 2015, our Chief Executive Officer, Takaaki Matsuoka, filed a notification and operations plan to the MHLW (Minister of Health, Labor and Welfare in Japan) in accordance with the Regenerative Medicine Safety Assurance Law of Japan. The notification and plan were submitted to the MHLW so that the Company could engage in activities relating to regenerative medicine.
Market and Competition
According to Scalar Market Research, a Chicago-based market research firm, the global stem cell therapy market is expected to grow at a CAGR of 31.1% from $11.99 billion in 2016 to $60.94 billion by 2022. While the U.S. is the largest and dominant market for stem cell therapies due to increased awareness related to the therapeutic potency of stem cells in disease management, development of advanced genome-based cell analysis techniques, and increasing public-private investments for stem cell research, cell therapy in Asia is becoming the next fastest growing market. The growth drivers in Asia are:
| 1. | Aging population with increasing healthcare needs |
| 2. | Establishment of governmental approval processes and pathways |
| 3. | Enhanced desire for youthfulness and longevity |
| 4. | Growing government and private investment for new technology |
There are various players in the regenerative medicine, stem cell therapy arena ranging from large pharmaceutical companies targeting cure or alleviation of life threatening diseases to smaller biotechnology companies focusing on innovative cell therapy technology worldwide. Clinical data supporting patient-specific therapy has been compelling and there has been pressure for the industry to manufacture these therapies on a larger scale economically. Providing stem cell therapy requires technical, manufacturing and regulatory expertise and barriers to entry are high.
In Japan, stem cell related business is highly regulated by the Health Ministry and barriers to entry remain high. As stem cell therapies are not approved in some Asian countries, Japan attracts many Asian patients due to its reputation of high quality medical services. The Company’s subsidiary, located in Tokyo, Japan is uniquely positioned to possess technical, manufacturing and regulatory expertise to service clinics with technical assistance for stem cell culturing. It also has a strong partnership with an approved clinic to perform designated stem cell therapies, and provides marketing and coordination services to patients and agents seeking stem cell therapies.
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Risks Relating to Our Company and Our Industry
Our limited operating history makes it difficult for us to accurately forecast net sales and appropriately plan our expenses.
We have a very limited operating history. As a result, it is difficult to accurately forecast our net sales and plan our operating expenses. Certain factors that could influence our net sales or operating expenses may include, but are not limited to, demand for our stem cell culturing technical assistance services, negative or positive public perceptions regarding stem cells and stem cell therapy, general economic conditions, and disposable consumer income.
We operate in a competitive environment, and if we are unable to compete with our competitors, our business, financial condition, results of operations, cash flows and prospects could be materially adversely affected.
We operate in a competitive environment. Our competition includes all other companies that are in the business of stem cell culturing. While stem cell culturing is illegal in many countries, it is legal within Japan and we face competition from other facilities on a national level, as well as from companies which operate in countries where such operations are legal. A competitive environment could materially adversely affect our business, financial condition, results of operations, cash flows and prospects.
We expect our quarterly financial results to fluctuate.
We expect our net sales and operating results to vary significantly from quarter to quarter due to a number of factors, including but not limited to changes in:
• Demand for our stem cell culturing technical assistance services;
• Our ability to obtain and retain existing patients and customers, or encourage repeat purchases from clinics and hospitals;
• Our ability to keep abreast with technological advances;
• Our ability to manage our services;
• General economic conditions;
• Advertising and other marketing costs.
As a result of the variability of these and other factors, our operating results in future quarters may be below the expectations of public market analysts and investors.
The negative stigma attached to stem cell therapy may limit our appeal.
In some countries, including the United States, stem cell therapy is not available for legal reasons. In these countries, and indeed even in countries where stem cell therapy is legal, there could be a stigma associated with the industry in general that may limit the growth of our client base. If there are not as many individuals seeking stem cell therapy for any reason whatsoever the results of our operations may not meet our expectations and we may not see the growth we anticipate. In the event that our business becomes unsustainable, we may be forced to cease operations entirely and investors may lose part or all of their investment.
Because the Company’s headquarters and assets are located outside the United States in Japan, investors may experience difficulties in attempting to effect service of process and to enforce judgments based upon US Federal Securities Laws against the Company and its non-US resident officers and directors.
While we are organized under the laws of State of Delaware, our officers and Directors are non-US residents and our headquarters and assets are located outside the United States in Japan. Consequently, it may be difficult for investors to effect service of process on them in the United States and to enforce in the United States judgments obtained in United States courts against them based on the civil liability provisions of the United States securities laws. Since all our assets will be located outside U.S. it may be difficult or impossible for U.S. investors to collect a judgment against us.
Our future success is dependent, in part, on the performance and continued services of Takaaki Matsuoka, our CEO and Director. Without his continued service, we may be forced to interrupt or eventually cease our operations.
We are presently dependent to a great extent upon the experience, abilities and continued services of Takaaki Matsuoka, our CEO and Director. The loss of his services would delay our business operations substantially.
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The recently enacted JOBS Act will allow the Company to postpone the date by which it must comply with certain laws and regulations intended to protect investors and to reduce the amount of information provided in reports filed with the SEC.
The recently enacted JOBS Act is intended to reduce the regulatory burden on “emerging growth companies”. The Company meets the definition of an “emerging growth company” and so long as it qualifies as an “emerging growth company,” it will, among other things:
-be exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that its independent registered public accounting firm provide an attestation report on the effectiveness of its internal control over financial reporting;
-be exempt from the "say on pay” provisions (requiring a non-binding shareholder vote to approve compensation of certain executive officers) and the "say on golden parachute” provisions (requiring a non-binding shareholder vote to approve golden parachute arrangements for certain executive officers in connection with mergers and certain other business combinations) of The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) and certain disclosure requirements of the Dodd-Frank Act relating to compensation of Chief Executive Officers;
-be permitted to omit the detailed compensation discussion and analysis from proxy statements and reports filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and instead provide a reduced level of disclosure concerning executive compensation; and
-be exempt from any rules that may be adopted by the Public Company Accounting Oversight Board (the “PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report on the financial statements.
Although the Company is still evaluating the JOBS Act, it currently intends to take advantage of all of the reduced regulatory and reporting requirements that will be available to it so long as it qualifies as an “emerging growth company”. The Company has elected not to opt out of the extension of time to comply with new or revised financial accounting standards available under Section 102(b)(1) of the JOBS Act. Among other things, this means that the Company's independent registered public accounting firm will not be required to provide an attestation report on the effectiveness of the Company's internal control over financial reporting so long as it qualifies as an “emerging growth company”, which may increase the risk that weaknesses or deficiencies in the internal control over financial reporting go undetected. Likewise, so long as it qualifies as an “emerging growth company”, the Company may elect not to provide certain information, including certain financial information and certain information regarding compensation of executive officers, which would otherwise have been required to provide in filings with the SEC, which may make it more difficult for investors and securities analysts to evaluate the Company. As a result, investor confidence in the Company and the market price of its common stock may be adversely affected.
Notwithstanding the above, we are also currently a “smaller reporting company”, meaning that we are not an investment company, an asset-backed issuer, or a majority-owned subsidiary of a parent company that is not a smaller reporting company and have a public float of less than $75 million and annual revenues of less than $50 million during the most recently completed fiscal year. In the event that we are still considered a “smaller reporting company”, at such time are we cease being an “emerging growth company”, the disclosure we will be required to provide in our SEC filings will increase, but will still be less than it would be if we were not considered either an “emerging growth company” or a “smaller reporting company”. Specifically, similar to “emerging growth companies”, “smaller reporting companies” are able to provide simplified executive compensation disclosures in their filings; are exempt from the provisions of Section 404(b) of the Sarbanes-Oxley Act requiring that independent registered public accounting firms provide an attestation report on the effectiveness of internal control over financial reporting; and have certain other decreased disclosure obligations in their SEC filings, including, among other things, being required to provide only two years of audited financial statements in annual reports. Decreased disclosures in our SEC filings due to our status as an “emerging growth company” or “smaller reporting company” may make it harder for investors to analyze the Company’s results of operations and financial prospects.
We are an “emerging growth company” under the JOBS Act of 2012, and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
In addition, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We are choosing to take advantage of the extended transition period for complying with new or revised accounting standards. As a result, our financial statements may not be comparable to those of companies that comply with public company effective dates.
We will remain an “emerging growth company” for up to five years, although we will lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three-year period, or if the market value of our common stock that is held by non-affiliates exceeds $700 million.
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Risks Relating to the Company’s Securities
We may never have a public market for our common stock or may never trade on a recognized exchange. Therefore, you may be unable to liquidate your investment in our stock.
There is no established public trading market for our securities. Our shares are not and have not been listed or quoted on any exchange or quotation system.
In order for our shares to be quoted, a market maker must agree to file the necessary documents with FINRA, which operates the OTCBB. In addition, it is possible that such application for quotation may not be approved and even if approved it is possible that a regular trading market will not develop or that if it did develop, will be sustained. In the absence of a trading market, an investor may be unable to liquidate their investment.
We may, in the future, issue additional shares of our common stock, which may have a dilutive effect on our stockholders.
Our Certificate of Incorporation authorizes the issuance of 500,000,000 shares of common stock, of which 27,596,000 shares are issued and outstanding as of December 31, 2017 and the date of this report. The future issuance of our common shares may result in substantial dilution in the percentage of our common shares held by our then existing stockholders. We may value any common stock issued in the future on an arbitrary basis. The issuance of common stock for future services or acquisitions or other corporate actions may have the effect of diluting the value of the shares held by our investors, and might have an adverse effect on any trading market for our common stock.
We may issue shares of preferred stock in the future that may adversely impact your rights as holders of our common stock.
Our Certificate of Incorporation authorizes us to issue up to 20,000,000 shares of preferred stock. Accordingly, our board of directors will have the authority to fix and determine the relative rights and preferences of preferred shares, as well as the authority to issue such shares, without further stockholder approval. Our board of directors could authorize the issuance of a series of preferred stock that would grant to holders preferred rights to our assets upon liquidation, the right to receive dividends before dividends are declared to holders of our common stock, and the right to the redemption of such preferred shares, together with a premium, prior to the redemption of the common stock. To the extent that we do issue such additional shares of preferred stock, your rights as holders of common stock could be impaired thereby, including, without limitation, dilution of your ownership interests in us. In addition, shares of preferred stock could be issued with terms calculated to delay or prevent a change in control or make removal of management more difficult, which may not be in your interest as holders of common stock.
We do not currently intend to pay dividends on our common stock and consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in its value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares.
We may be exposed to potential risks resulting from requirements under Section 404 of the Sarbanes-Oxley Act of 2002.
As a reporting company we are required, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, to include in our annual report our assessment of the effectiveness of our internal control over financial reporting. We do not have a sufficient number of employees to segregate responsibilities and may be unable to afford increasing our staff or engaging outside consultants or professionals to overcome our lack of employees.
We do not currently have independent audit or compensation committees. As a result, our directors have the ability, among other things, to determine their own level of compensation. Until we comply with such corporate governance measures, regardless of whether such compliance is required, the absence of such standards of corporate governance may leave our stockholders without protections against interested director transactions, conflicts of interest and similar matters and investors may be reluctant to provide us with funds necessary to expand our operations.
The costs to meet our reporting and other requirements as a public company subject to the Exchange Act of 1934 is and will be substantial and may result in us having insufficient funds to expand our business or even to meet routine business obligations.
As a public entity going forward, subject to the reporting requirements of the Exchange Act of 1934, we will continue to incur ongoing expenses associated with professional fees for accounting, legal and a host of other expenses for annual reports and proxy statements. We estimate that these costs will range up to $150,000 per year for the next few years and will be higher if our business volume and activity increases. As a result, we may not have sufficient funds to grow our operations.
State Securities Laws may limit secondary trading, which may restrict the states in which and conditions under which you can sell shares.
Secondary trading in our common stock may not be possible in any state until the common stock is qualified for sale under the applicable securities laws of the state or there is confirmation that an exemption, such as listing in certain recognized securities manuals, is available for secondary trading in the state. If we fail to register or qualify, or to obtain or verify an exemption for the secondary trading of, the common stock in any particular state, the common stock cannot be offered or sold to, or purchased by, a resident of that state. In the event that a significant number of states refuse to permit secondary trading in our common stock, the liquidity for the common stock could be significantly impacted.
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Item 1B. Unresolved Staff Comments.
None.
We and our wholly owned subsidiary Stemcell Co., Ltd. share the same address.
Our operating/office space is located at 5-9-15-3F, Minamiaoyama, Minato-ku, Tokyo, 107-0062, Japan. The space is currently being provided to the Company rent-free by Omotesando Helene Clinic, which is controlled by our sole director Takaaki Matsuoka.
From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course of our business. We are not currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects, financial condition or results of operations.
Item 4. Mine Safety Disclosures.
Not applicable.
PART II
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Market Information
We are not currently listed on any exchange, however, in the future we intend to list on the OTC Marketplace.
Holders
As of the date of this report, there are approximately 69 shareholders of record of our common stock and 27,596,000 shares of common stock issued and outstanding.
Dividends and Share Repurchases
We have not paid any dividends to our shareholders. There are no restrictions which would limit our ability to pay dividends on common equity or that are likely to do so in the future.
Issuer Purchases of Equity Securities
None.
Equity Compensation Plan Information
Not applicable.
Recent Sales of Unregistered Securities; Uses of Proceeds from Registered Securities
The Company has had no recent sales of unregistered securities.
- 6 -
Item 6. Selected Financial Data.
As a “smaller reporting company”, we are not required to provide the information required by this Item.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Forward-Looking Statements
Certain statements, other than purely historical information, including estimates, projections, statements relating to our business plans, objectives, and expected operating results, and the assumptions upon which those statements are based, are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements generally are identified by the words “believes,” “project,” “expects,” “anticipates,” “estimates,” “intends,” “strategy,” “plan,” “may,” “will,” “would,” “will be,” “will continue,” “will likely result,” and similar expressions. We intend such forward-looking statements to be covered by the safe-harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and are including this statement for purposes of complying with those safe-harbor provisions. Forward-looking statements are based on current expectations and assumptions that are subject to risks and uncertainties which may cause actual results to differ materially from the forward-looking statements. Our ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Factors which could have a material adverse effect on our operations and future prospects on a consolidated basis include, but are not limited to: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.
Overview of Results
The key financial results for the twelve months ended December 31, 2017 as compared to the previous year same period on a consolidated basis are as follows:
| w | Total revenues for the years ended December 31, 2017 and 2016 were $6,179,820 and $3,338,706, respectively, growing 85% or $2,841,114 year over year primarily due to increasing number of patients receiving stem cell and related therapies from our major client, Helene Clinic. Patients increased as a result of growing interest of stem cell related therapies in Asia and from strengthening our marketing activities targeting sales agents in Asia. 63% of revenue was derived from cell culturing and tissue handling technical assistance, 19% from coordination services and the remaining from marketing and rental services provided to clinics, $537,114 and $601,940, respectively for the year ended December 31, 2017, increases of $414,505 and $ 548,280, respectively year over year, due to full year impact and additional clinics serviced. The Company began to generate revenue from May 2016. |
| w | Total cost of revenues in 2017 was $1,185,609 vs. $369,195 the previous year. Cost increased primarily due to increased material, equipment and labor costs related to providing technical assistance to culture cells and handle tissues to serve a larger patient base and depreciation and labor cost increases for expanded services to clinics.
Gross profit margin has declined to 80.8% in 2017 from 88.9% the previous year reflecting increasing costs for business expansion. Management considers this as a more realistic gross margin for our business going forward. |
| w | Operating expenses for the years ended December 31, 2017 and 2016, (excluding cost of revenues) were $1,394,397 and $317,609, respectively, reflecting an increase of $1,076,788 year over year. Expenses increased due to costs associated with increase in sales, depreciation expense and headcount to support both increased number of patients and expansion of enabling services to clinics. In addition, rental fees of equipment and facilities of $283,601 were incurred during 2017 that did not exist in 2016. |
| w | Effective tax rate was 32.0% versus 27.7% in the prior year due to differing applicable tax rates based on income size. |
| w | Net income was $2,409,694 and $1,402,419 for the years ended December 31, 2017 and 2016, respectively, with net income per share of $0.09 and $0.00, respectively. |
Liquidity and Capital Resources
Our liquidity and cash position has improved over the previous year. As of December 31, 2017, our cash balance was $4,483,705 and our working capital was $2,666,243 up by $1,836,850 and $1,856,898 respectively compared to December 31, 2016. Our cash balance is currently sufficient to fund our operations for beyond twelve months. Operating cash flow was $ 2,522,990 down by $843,152 from $3,366,142 the prior year same period. Capital expenditures, composed primarily of equipment purchases, was $633,858. As of December 31, 2017, and December 31, 2016, the net book values of the equipment were $1,033,605 and $529,747, respectively.
While management believes that cash on hand as of December 31, 2017 is sufficient to cover operating needs beyond 2018, should cash flow from operations fall and cannot cover our operating needs, 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 are unable to raise it, we will either have to suspend operations until we raise the cash we need, or cease operations entirely.
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP). In doing so, we have to make estimates and assumptions that affect our reported amounts of assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. In some cases, we could reasonably have used different accounting policies and estimates. In some cases, changes in the accounting estimates are reasonably likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there are material differences between these estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and estimates. We have reviewed our critical accounting policies and estimates with management. See Note 2 to our consolidated financial statements included in Part II of this report for discussion of our critical accounting policies.
Concentrations of Risk
Our revenue is highly dependent on one customer, Omotesando Helene Clinic, which comprised 82% of our total revenue. Our business will be significantly affected should we lose this customer. Helene Clinic is fully-owned by Takaaki Matsuoka, our CEO and director.
Principal Commitments
With the exception of the Company’s lease agreement for Kita Senju Clinic’s space, we are not a party to any agreements other than those services we provide to our customers as part of our normal course of business. See Note 6 to our consolidated financial statements included in Part II of this report.
Off Balance Sheet Arrangements
We are not a party to any material off balance sheet agreements.
Recent Accounting Pronouncements
Refer to Note 2 to our consolidated financial statements included elsewhere in this report.
Going Concern Analysis
As of December 31, 2017, the Company had cash of $4,483,705. In addition, for the year ended December 31, 2017, the Company had positive cash flow of $2,522,706 from operations. The combination of growth in the Company’s revenues, cash flows from operations and net income leads management to believe that it is probable that our cash resources will be sufficient to meet our cash requirements for current operations through and beyond twelve months from the date of this filing. As a result, the accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. While we believe in the viability of our strategy to generate sufficient revenues and cash flows and to control costs, there can be no assurances to that effect. Our ability to continue as a going concern is dependent upon our ability to further implement our business plan, generate sufficient revenues and cash flows and to control operating expenses.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
As a “smaller reporting company”, we are not required to provide the information required by this Item.
- 7 -
Item 8. Financial Statements and Supplementary Data.
Stemcell Holdings, Inc.
FINANCIAL STATEMENTS
INDEX TO FINANCIAL STATEMENTS
| Pages | ||
| Reports of Independent Registered Public Accounting Firms | F2-F3 | |
| Consolidated Balance Sheets | F4 | |
| Consolidated Statements of Operations and Comprehensive Income | F5 | |
| Consolidated Statements of Shareholders’ Equity | F6 | |
| Consolidated Statements of Cash Flows | F7 | |
| Notes to Consolidated Financial Statements | F8-F9 |
- F1 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Directors of
Stemcell Holdings, Inc. and Subsidiary
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheet of Stemcell Holdings, Inc. and subsidiary (collectively, the “Company”) as of December 31, 2017, and the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for the year then ended, and the related notes (collectively, the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2017, and the consolidated results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Emphasis of Matter – Related Party Transactions
As discussed in Note 4 to the consolidated financial statements, the Company generated 93% of its revenue from related parties. If these related parties ceased doing business with the Company, it would have a significant impact on the Company’s results of operations. Our opinion was not modified with respect to this matter.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting, Accordingly, we express no such opinion.
Our audit included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for our opinion.
/s/ Haskell & White LLP
HASKELL & WHITE LLP
We have served as the Company’s auditor since 2017.
Irvine, California
March 30, 2018
- F2 -
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Board of Directors and Shareholders
Stemcell Holdings, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of Stemcell Holdings, Inc. and its subsidiary (collectively, the “Company”) as of December 31, 2016, and the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for the year then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Stemcell Holdings, Inc. and its subsidiary as of December 31, 2016, and the consolidated results of their operations and their cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
/s/ MaloneBailey, LLP
www.malonebailey.com
Houston, Texas
May 15, 2017
- F3 -
STEMCELL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
| As of | As of | |||||
| December 31, 2017 | December 31, 2016 | |||||
| ASSETS | ||||||
| Current Assets | ||||||
| Cash | $ | 4,483,705 | $ | 2,646,855 | ||
| Trade receivables | 177,064 | - | ||||
| Prepaid expenses and other current assets | 615,954 | 30,452 | ||||
| TOTAL CURRENT ASSETS | 5,276,723 | 2,677,307 | ||||
| Property and equipment, net | ||||||
| Equipment | 1,183,436 | 549,578 | ||||
| Less accumulated depreciation | (149,831) | (19,831) | ||||
| Property and equipment, net | 1,033,605 | 529,747 | ||||
| Deferred tax assets | 61,842 | 21,848 | ||||
| Other non-current assets | 46,010 | - | ||||
| TOTAL ASSETS | $ | 6,418,180 | $ | 3,228,902 | ||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||||
| Current Liabilities | ||||||
| Accounts payable to related party | $ | 278,593 | $ | 530,490 | ||
| Loan from director | - | 43,337 | ||||
| Accrued expenses and other liabilities | 1,781,670 | 106,413 | ||||
| Income tax payables | 550,217 | 1,187,722 | ||||
| TOTAL CURRENT LIABILITIES | 2,610,480 | 1,867,962 | ||||
| TOTAL LIABILITIES | 2,610,480 | 1,867,962 | ||||
| Commitments and Contingencies (Note 7) | ||||||
| Shareholders' Equity | ||||||
| Preferred stock ($.0001 par value, 20,000,000 shares authorized; none issued and outstanding as of December 31, 2017 and December 31, 2016) | - | - | ||||
| Common stock ($.0001 par value, 500,000,000 shares authorized, 27,596,000 shares issued and outstanding | ||||||
| as of December 31, 2017 and December 31, 2016) | 2,760 | 2,760 | ||||
| Additional paid-in capital | 65,116 | 65,116 | ||||
| Retained earnings | 3,807,115 | 1,397,421 | ||||
| Accumulated other comprehensive loss | (67,291) | (104,357) | ||||
| TOTAL SHAREHOLDERS' EQUITY | 3,807,700 | 1,360,940 | ||||
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $ | 6,418,180 | $ | 3,228,902 | ||
The accompanying notes are an integral part of these consolidated financial statements.
- F4 -
STEMCELL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
| Year Ended | Year Ended | ||||
| December 31, 2017 | December 31, 2016 | ||||
| Revenues from related parties | |||||
| Stem cell culturing & tissue handling technical assistance fees | $ | 3,879,565 | $ | 2,776,327 | |
| Coordination fees | 1,161,201 | 386,110 | |||
| Marketing & other services | 398,621 | 122,609 | |||
| Rental services | 338,002 | - | |||
| Total revenues from related parties | 5,777,389 | 3,285,046 | |||
| Revenues from third parties | |||||
| Marketing & other services | 138,493 | - | |||
| Rental services | 263,938 | 53,660 | |||
| Total revenues from third parties | 402,431 | 53,660 | |||
| Total revenues | 6,179,820 | 3,338,706 | |||
| Cost of revenues | 1,185,609 | 369,195 | |||
| Gross profit | 4,994,211 | 2,969,511 | |||
| 80.8% | 88.9% | ||||
| Operating expenses | |||||
| Selling, general and administrative expenses | 1,394,397 | 317,609 | |||
| Total operating expenses | 1,394,397 | 317,609 | |||
| Other (expenses) income | (1,413) | 3,043 | |||
| NET INCOME BEFORE TAXES | 3,598,401 | 2,654,945 | |||
| Income tax expenses | 1,188,707 | 1,252,526 | |||
| NET INCOME | $ | 2,409,694 | $ | 1,402,419 | |
| Other Comprehensive Income | |||||
| Foreign currency translation adjustment | $ | 37,066 | $ | (104,357) | |
| TOTAL COMPREHENSIVE INCOME | $ | 2,446,760 | $ | 1,298,062 | |
| BASIC AND DILUTED NET INCOME PER COMMON SHARE | $ | 0.09 | $ | 0.00 | |
| WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING, BASIC AND DILUTED | 27,596,000 | 33,119,504,230 | |||
The accompanying notes are an integral part of these consolidated financial statements.
- F5 -
STEMCELL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
For the Years Ended December 31, 2017 and December 31, 2016
| ADDITIONAL | RETAINED | ACCUMULATED | |||||||||
| COMMON STOCK | COMMON STOCK | PAID IN | EARNINGS | OTHER | |||||||
| NUMBER | AMOUNT | CAPITAL | (ACCUMULATED DEFICIT) | COMPREHENSIVE INCOME | TOTAL | ||||||
| Balance at December 31, 2015 | 40,000,000,000 | $ | 4,000,000 | $ | (3,998,000) | $ | (4,998) | $ | - | $ | (2,998) |
| Debt assumed by former sole shareholder of the Company | - | - | 2,998 | - | - | 2,998 | |||||
| Services contributed by sole director | - | - | 58,674 | - | - | 58,674 | |||||
| Excess of acquisition price over carrying value of equipment purchased from entity under common control | - | - | 4,204 | - | - | 4,204 | |||||
| Stock cancellation (39,972,404,000) | (39,972,404,000) | (3,997,240) | 3,997,240 | - | - | - | |||||
| Net income for the year ended December 31, 2016 | - | - | - | 1,402,419 | - | 1,402,419 | |||||
| Foreign currency translation | - | - | - | - | (104,357) | (104,357) | |||||
| Balance at December 31, 2016 | 27,596,000 | 2,760 | 65,116 | 1,397,421 | (104,357) | 1,360,940 | |||||
| Net income for the year ended December 31, 2017 | 2,409,694 | 2,409,694 | |||||||||
| Foreign currency translation | - | - | - | 37,066 | 37,066 | ||||||
| Balance at Dec. 31, 2017 | 27,596,000 | $ | 2,760 | $ | 65,116 | $ | 3,807,115 | $ | (67,291) | $ | 3,807,700 |
The accompanying notes are an integral part of these consolidated financial statements .
- F6 -
STEMCELL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
| Year Ended | Year Ended | |||||
| December 31, 2017 | December 31, 2016 | |||||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
| Net income | $ | 2,409,694 | $ | 1,402,419 | ||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||
| Depreciation expense | 130,000 | 21,306 | ||||
| Deferred income tax | (39,994) | (23,472) | ||||
| Service contributed by sole director | - | 58,674 | ||||
| Changes in operating assets and liabilities: | ||||||
| Trade receivables | (177,064) | - | ||||
| Prepaid expenses and other current assets | (585,502) | (26,835) | ||||
| Accounts payable to related party | (251,897) | 544,306 | ||||
| Accrued expenses and other current liabilities | 1,675,257 | 113,746 | ||||
| Income tax payables | (637,505) | 1,275,998 | ||||
| Net cash provided by operating activities | 2,522,990 | 3,366,142 | ||||
| CASH FLOWS FROM INVESTING ACTIVITIES | ||||||
| Purchase of property and equipment | (633,858) | (600,800) | ||||
| Security deposit | (46,010) | - | ||||
| Net cash used in investing activities | (679,868) | (600,800) | ||||
| CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
| (Repayments) borrowing on loan from director | (43,337) | 69,047 | ||||
| Net cash provided by financing activities | (43,337) | 69,047 | ||||
| Net effect of exchange rate changes on cash | $ | 37,066 | (187,534) | |||
| Net change in cash | 1,836,851 | 2,646,855 | ||||
| Cash - beginning of period | 2,646,855 | - | ||||
| Cash - end of period | $ | 4,483,705 | $ | 2,646,855 | ||
| SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||
| Income taxes paid | $ | 1,898,605 | $ | - | ||
| NON-CASH FINANCING AND INVESTING TRANSACTIONS | ||||||
| Forgiveness of debt by former sole shareholder | $ | - | $ | 2,998 | ||
| Excess of acquisition price over carrying value of equipment purchase from entity | ||||||
| under common control | $ | - | $ | 4,204 | ||
The accompanying notes are an integral part of these consolidated financial statements.
- F7 -
STEMCELL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2017 AND DECEMBER 31, 2016
NOTE 1 - ORGANIZATION AND DESCRIPTION OF BUSINESS
Stemcell Holdings, Inc., formerly known as Perfect Acquisition, Inc. (the “Company”), was incorporated under the laws of the State of Delaware on December 31, 2015, with an objective to acquire, or merge with, an operating business. On March 23, 2016, the Company entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with Takaaki Matsuoka, our President, CEO and Director. Pursuant to the Stock Purchase Agreement, on March 24, 2016, Takaaki Matsuoka transferred to the Company, 500 shares of the common stock of Stemcell Co., Ltd., a Japanese corporation (“Stemcell”), which represented all of its issued and outstanding shares, in a cash consideration of JPY 5,000,000 ($44,476). Following the effective date of the share purchase transaction, Stemcell Holdings, Inc. gained a 100% interest in the issued and outstanding shares of Stemcell’s common stock and Stemcell became a wholly owned subsidiary of the Company.
The Company concentrates on regenerative medicine-related business which includes but is not limited to the culturing, storing and delivery of stem cells, providing related technical assistance thereof and other ancillary services to facilitate cell therapies through Stemcell, which is our wholly owned subsidiary.
While our previous auditor, MaloneBailey, LLP, had substantial doubt about the Company’s ability to continue as a going concern, with robust sales and operating cash flow available beyond a year, such concern has been resolved.
NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Stemcell Co., Ltd. Intercompany accounts and transactions are eliminated.
Please note that there have been minor reclassifications of balance sheet accounts of 2016 for comparability with 2017.
USE OF ESTIMATES
The presentation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. The most significant estimates and assumptions made by management include going concern and valuation allowance on deferred income tax. Operating results in the future could vary from the amounts derived from management's estimates and assumptions.
ALLOWANCE FOR DOUBTFUL ACCOUNTS
The Company generally requires payment in advance of performing its services. As such, the Company’s trade accounts receivable is typically comprised of a limited number of clinics and one sales agent with which the Company has never experienced any collections issues. Therefore, Management believes that all trade accounts receivable are fully collectible and has not made any allowance for doubtful accounts as of December 31, 2017 or 2016.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company follows Accounting Standard Codification (ASC) 820, “Fair Value Measurements and Disclosures”, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that distinguishes between (1) market participant assumptions developed based on market data obtained from independent sources (observable inputs) and (2) an entity’s own assumptions about market participant assumptions developed based on the best information available in the circumstances (unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described:
· Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
· Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.
· Level 3 - Inputs that are both significant to the fair value measurement and unobservable.
For certain of the Company’s financial instruments, including cash, prepaid expenses and other current assets, deferred tax assets, accrued expenses and other current liabilities, and income tax payables, the carrying amounts approximate fair values due to their short maturities.
Transactions involving related parties cannot be presumed to be carried out on an arm's-length basis, as the requisite conditions of competitive, free market dealings may not exist. Representations about transactions with related parties, if made, shall not imply that the related party transactions were consummated on terms equivalent to those that prevail in arm's-length transactions unless such representations can be substantiated. It is not, however, practical to determine the fair value of amounts due from/to related parties due to their related party nature.
RELATED PARTY TRANSACTION
A related party is generally defined as (i) the Company’s management, (ii) someone that directly or indirectly controls, is controlled by or is under common control with the Company, or (iii) anyone who can significantly influence the financial and operating decisions of the Company. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties. The Company conducts business with its related parties in the ordinary course of business.
CASH AND CASH EQUIVALENTS
Cash includes cash on hand, certificates of deposit and all highly liquid investments with maturities of three months or less at the time of purchase. The Company did not have any cash equivalents at December 31, 2017 or 2016.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost less depreciation and impairment loss. The initial cost of the assets comprises its purchase price and any directly attributable costs of bringing the asset to its working condition and location for its intended use. Depreciation is calculated using the straight-line method over the estimated useful life of the respective assets as follows: computer software developed or acquired for internal use, 2 to 5 years; computer equipment, 2 to 5 years; buildings and improvements, 5 to 15 years; leasehold improvements, 2 to 10 years; and furniture and equipment, 1 to 5 years.
Significant improvements are capitalized when it is probable that the expenditure resulted in an increase in the future economic benefits expected to be obtained from the use of the asset beyond its originally assessed standard of performance. When improvements are made to real property and those improvements are permanently affixed to the property, the title to those improvements automatically transfers to the owner of the property. The lessee’s interest in the improvements is not a direct ownership interest but rather it is an intangible right to use and benefit from the improvements during the term of the lease. The Company uses the straight-line method over the shorter of the estimated useful life of the asset or the lease term.
In accordance with ASC Topic 360, the Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable, or at least annually. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. For years ended December 31, 2017 and December 31, 2016, the Company did not record any impairment charges on long-lived assets.
Routine repairs and maintenance are expensed when incurred. Gains and losses on disposal of fixed assets are recognized in the income statement based on the net disposal proceeds less the carrying amount of the assets.
FOREIGN CURRENCY TRANSLATION
The reporting currency of the Company is the United States Dollars (“US$”) and the accompanying financial statements have been expressed in US$. Stemcell maintains its books and records in its local currency, Japanese YEN (“JPY”), which is a functional currency as being the primary currency of the economic environment in which its operation is conducted. In accordance with ASC Topic 830-30, “Translation of Financial Statements”, assets and liabilities of the Company whose functional currency is not US$ are translated into US$, using the exchange rate on the balance sheet date. Revenues and expenses are translated at average rates prevailing during the period. The gains and losses resulting from translation of financial statements are recorded as a separate component of accumulated other comprehensive income (loss) within the statements of shareholders’ equity. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.
Translation of amounts from the local currency of Stemcell into US$1 has been made at the following exchange rates:
| December 31, 2017 | |
| Current JPY: US$1 exchange rate | 112.67 |
| Average JPY: US$1 exchange rate | 112.14 |
- F8 -
REVENUE RECOGNITION
The Company applies ASC 605 for revenue recognition. The Company recognizes revenue when it is realized or realizable and earned. The Company considers revenue realized or realizable and earned when all of the following criteria are met: (i) persuasive evidence of an arrangement exists, (ii) the product has been shipped or the services have been rendered to the customer, (iii) the sales price is fixed or determinable, and (iv) collectability is reasonably assured. The Company provides guarantee for the delivery of its service. If the Company cannot deliver its service to customers successfully, the Company will retry its operation until the service is completed. The Company has four revenue streams as described below.
Stem Cell Culturing and Tissue Handling Technical Assistance Revenue
Stem cell culturing and tissue handling technical assistance revenue is recognized by providing technical assistance to customers for culturing stem cells or handling of tissues when persuasive evidence of an arrangement exists, the cells are cultured or tissues handled and have been delivered, the sales price is fixed or determinable, collection of the resulting receivable is reasonably assured, there are no material contingencies and the Company does not have significant obligations for future performance. When collectability is not reasonably assured, the Company defers the revenue until the cash is received. Revenue is recorded net of any discounts given to the customer.
During the years ended December 31, 2017 and December 31, 2016, the Company derived all of its stem cell culturing and tissue handling technical assistance revenue from Omotesando Helene Clinic (the “Helene Clinic”), which is fully owned by Takaaki Matsuoka. Pursuant to the agreement entered into by the two parties, once technical assistance is provided to the cells or tissues that were cultured or handled, no returns are allowed.
Coordination Service Revenue
During the years ended December 31, 2017 and December 31, 2016, all coordination services were delivered to Helene Clinic. Pursuant to the service agreement entered into by the Company and Helene Clinic, the Company’s performance obligations under the coordination service include introducing patients to clinics, arranging schedules and any related translation thereof. Revenue is recognized when a series of abovementioned services are delivered and treatments for the patient are completed as identified by Helene Clinic.
Marketing and Other Services Revenue
During the year ended December 31, 2017, the Company provided internet marketing services by optimizing search engines for two third-party clinics and six medical clinics, including Helene Clinic, which are fully owned or managed by Takaaki Matsuoka. Since July 2017, the Company commenced outsourcing services to clinics, encompassing administration services including accounting, payroll, tax support, clinic non-medical operations, recruiting and HR planning, facilities and maintenance services, IT support and legal services enabling the clinics to concentrate more on medical activities.
During the year ended December 31, 2016, the Company provided internet marketing services by optimizing search engines for six medical clinics, including Helene Clinic, which are fully owned or managed by Takaaki Matsuoka.
Rental Revenue
The Company leased certain medical equipment and properties to medical clinics. For the years ended December 31, 2017 and 2016, rental revenue was derived from two third-party clinics and four clinics, including Helene Clinic, which are fully owned or managed by Takaaki Matsuoka.
NET INCOME PER COMMON SHARE
Net income per common share is computed pursuant to ASC 260. Basic net income (loss) per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted net income per share is computed by dividing net income by the weighted average number of shares of common stock and potentially outstanding shares of common stock during each period. There were no potentially dilutive shares outstanding during the years ended December 31, 2017 and December 31, 2016.
INCOME TAX
The Company follows ASC 740, which requires recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax assets and liabilities are based on the differences between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reduced by a valuation allowance to the extent management concludes it is more likely than not that the assets will not be realized. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the Statements of Operations in the period that includes the enactment date. Under ASC 740, the Company may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent (50%) likelihood of being realized upon ultimate settlement.
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Tax Act reduces the corporate tax rate from a maximum of 35% to a flat 21% rate. The rate reduction is effective on January 1, 2018. There was no impact of the rate reduction on the Company's income tax provision as the Company had no federal deferred tax balances at December 31, 2017.
In conjunction with the Tax Act, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company has determined the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act.
SEGMENT INFORMATION
We have determined that we operate in one segment for financial reporting purposes.
CONCENTRATION OF CREDIT RISKS
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash. The Company places its cash with financial institutions. The Company does not require collateral or other security to support financial instruments subject to credit risks.
The Company received lump-sum payments from individual patients for the services to be delivered by them and Helene Clinic as a whole. Historically, the Company deducted 10% of the total payments and remitted the remainder to Helene Clinic, after which the Company billed and received payments from Helene Clinic for stem cell culturing and tissue handling technical assistance services. Since the beginning of 2017, the Company changed this business model to deduct the 10% and the amount to be recognized as stem cell culturing and tissue handling technical assistance revenue prior to remitting the remainder to Helene Clinic and sales agents. As of December 31, 2017, and December 31, 2016, the Company had accounts payable to Helene Clinic of $278,593 and $530,490, respectively. Also see Note 4.
Net revenues from customers accounting for 10% or more of total revenues are as follows:
Year ended December 31, 2017 |
Year ended December 31, 2016 | |||||
| % | % | |||||
| Omotesando Helene Clinic | 82.3 | 95.0 | ||||
| Total | 82.3 | 95.0 | ||||
EFFECT OF RECENTLY ADOPTED AND ISSUED PRONOUNCEMENTS
In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2014-09 (“ASU 2014-09”), Revenue from Contracts with Customers. This amendment updates addressing revenue from contracts with customers, which clarifies existing accounting literature relating to how and when a company recognizes revenue. Under the standard, a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for those goods and services. This standard update was effective for interim and annual reporting periods beginning after December 15, 2016 for public companies and December 15, 2017 for private companies, and was to be applied retrospectively or the cumulative effect as of the date of adoption, with early application not permitted. In July 2015, a one-year deferral of the effective date of the new guidance was approved. Since the Company is an Emerging Growth Company and has made the election under Section 107 (b) for extended transition to new or revised accounting standards, it follows the effective date for private companies. We are currently conducting a detailed assessment of the impact that this guidance will have on our consolidated financial statements and related disclosures.
In August 2014, the FASB issued Accounting Standards Update 2014-15 (“ASU 2014-15”). This amendment requires management to assess an entity’s ability to continue as a going concern every reporting period including interim periods, and to provide related footnote disclosure in certain circumstances. Adoption of this standard is required for annual periods ending after December 15, 2016 for both public and private companies. The adoption of this amendment has changed our disclosures.
In November 2015, the FASB issued Accounting Standards Update 2015-17 (“ASU 2015-17”) to simplify the presentation of deferred taxes. This amendment requires that all deferred tax assets and liabilities, along with any related valuation allowances, be classified as noncurrent on the balance sheet. Adoption of this standard was required for annual periods beginning after December 15, 2016 for public companies and beginning after December 15, 2017 for private companies. Earlier application is permitted. Since the Company is an Emerging Growth Company and has made the election under Section 107 (b) for extended transition to new or revised accounting standards, it follows the effective date for private companies. The Company adopted this amendment from January 1, 2017. The adoption did not have an impact on our consolidated financial statements and related disclosures other than for reclassification.
In February 2016, the FASB issued Accounting Standards Update 2016-02 (“ASU 2016-02”) which requires lessees to recognize most leases on the balance sheet. This is expected to increase both reported assets and liabilities. The new lease standard does not substantially change lessor accounting. For public and private companies, respectively, the standard will be effective for the first interim reporting period within annual periods beginning after December 15, 2018 and 2019, although early adoption is permitted. Since the Company is an Emerging Growth Company and has made the election under Section 107 (b) for extended transition to new or revised accounting standards, it follows the effective date for private companies. Lessees and lessors will be required to apply the new standard at the beginning of the earliest period presented in the financial statements in which they first apply the new guidance, using a modified retrospective transition method. The requirements of this standard include a significant increase in required disclosures. We began a detailed assessment of the impact that this guidance will have on our consolidated financial statements and related disclosures, and our analysis is ongoing.
NOTE 3 - RELATED-PARTY TRANSACTIONS
For the years ended December 31, 2017 and December 31, 2016, the Company derived stem cell culturing and tissue handling technical assistance revenue and coordination revenue in the amounts of $3,879,565 and $1,161,201, $2,776,327 and $386,110, respectively, from Helene Clinic which is fully owned by Takaaki Matsuoka, the sole director of the Company.
For the years ended December 31, 2017 and December 31, 2016, the Company provided marketing and other services in the amount of $398,621 and $122,609, respectively, to six clinics which are fully owned or managed by Takaaki Matsuoka, the sole director of the Company.
For the year ended December 31, 2017, the Company leased its properties and equipment in the amount of $338,002 to four clinics which are fully owned or managed by Takaaki Matsuoka, the sole director of the Company. Management determined that the Company has no interest in any residual gains or losses of the related party clinics. Therefore, management determined that consolidation of these clinics was not required under the guidance of ASC 810-15 Variable Interest Entities.
Office space of the Company is provided rent-free by Helene Clinic.
The Company has no outstanding loans to Takaaki Matsuoka, CEO and director of the Company at December 31, 2017. As of December 31, 2016, the Company had a short term loan outstanding with an amount of $43,337 to Takaaki Matsuoka, CEO and director of the Company.
As of December 31, 2016, after netting the receivable of $548,884 from stem cell culturing and tissue handling technical assistance, the Company had net payables of $530,490 to Helene Clinic. Starting from 2017, upon the mutual agreement between Helene Clinic and the Company, the business model was changed. Other than the 10% coordination fees, the Company also deducted from total payments from patients, the portion for stem cell culturing and tissue handling technical assistance pursuant to the agreement entered into between the Company and Helene Clinic. The remainder was then remitted to Helene Clinic. As of December 31, 2017, the Company had payables of $278,593 to Helene Clinic.
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment consisted of the following as of December 31, 2017 and 2016, respectively:
December 31, 2017 |
December 31, 2016 | ||||||
| Property, Plant and Equipment | 1,183,436 | 549,578 | |||||
| Less: accumulated depreciation | (149,831) | (19,831) | |||||
| Property, plant and equipment, net | $ | 1,033,605 | $ | 529,747 | |||
Depreciation expense charged to operations was $130,000 and $21,306 for the years ended December 31, 2017 and December 31, 2016, respectively.
NOTE 5 - SHAREHOLDERS’ EQUITY
On December 31, 2015, the Company issued 40,000,000,000 shares of restricted common stock to Jeffrey DeNunzio, the former sole shareholder of the Company.
On January 27, 2016, Jeffrey DeNunzio consummated a sale of 40,000,000,000 shares of the Company’s common stock to Takaaki Matsuoka, for an aggregate purchase price of $30,000.
On March 23, 2016, the Company entered into a Stock Purchase Agreement with Takaaki Matsuoka, pursuant to which Takaaki Matsuoka transferred to Stemcell Holdings, Inc. 500 shares of the common stock of Stemcell in consideration of JPY 5,000,000 (approximately $44,476). The transaction is between entities under common control.
On March 31, 2016, Jeffrey DeNunzio, the former sole shareholder of the Company waived the Company’s obligation for debt payment of $2,998. The waived debt is reflected as an increase in additional paid-in capital.
During the year ended December 31, 2016, Takaaki Matsuoka waived the Company’s director compensation payable in the amount of JPY 6,000,000 ($58,674).
On October 26, 2016, the Board of Directors and the Company’s major shareholders approved to cancel 39,972,404,000 shares owned by 7 shareholders. On October 29, 2016, the Company performed the Stock Split, whereby every one share of the Company’s common stock was automatically reclassified and changed into two thousand shares. The Stock Split is retroactively reflected on the consolidated financial statements and accompanying footnotes.
In the year ended December 31, 2016, Stemcell purchased equipment for stem cells culturing from the Helene Clinic in a cash consideration of JPY 2,000,000 (approximately $17,113). The transaction was between entities under common control of Takaaki Matsuoka and his wife, Shiho Matsuoka, and therefore was recorded at historical costs. The excess of total historical costs over cash consideration in the amount of $4,204 was reflected as an increase in shareholders’ equity.
NOTE 6 - INCOME TAXES
Stemcell Holdings, Inc., the holding company registered in the state of Delaware, does not plan to engage in any business activities in the United States. For the years ended December 31, 2017 and 2016, Stemcell Holdings, Inc. was subject to U.S. federal income tax but had no corporate tax liabilities as it reported insignificant net and tax losses due to local and professional fees. Stemcell Holdings, Inc. is not expected to generate any future taxable income in the United States and does not recognize any tax benefit from federal net operating losses.
The Company conducts its businesses through its wholly owned subsidiary, Stemcell Co., Ltd. Stemcell Co., Ltd. is registered in Japan and is subject to national and local income taxes in Japan.
The provisions for income taxes for the years ended December 31, 2017 and 2016 relate to Japanese income taxes by Stemcell Co., Ltd. and are summarized as follows:
| For the Year Ended | For the Year Ended | ||||
| December 31, 2017 | December 31, 2016 | ||||
| Current | $ 1,250,838 | $ 1,275,998 | |||
| Deferred | (62,131) | (23,472) | |||
| Total | $ 1,188,707 | $ 1,252,526 |
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
The Company's deferred income taxes at December 31, 2017 and 2016 relate to Stemcell Co., Ltd. and are as follows:
| December 31, 2017 | December 31, 2016 | |||
| Deferred tax assets: | ||||
| Accrued vacation | $ | 10,025 | $ | - |
| Accrued bonus | 3,782 | - | ||
| Business taxes | 53,901 | - | ||
| Unpaid accrued expenses | - | 4,290 | ||
| Revenue | - | 17,558 | ||
| Deferred tax assets | 67,708 | 21,848 | ||
| Deferred tax liabilities: | ||||
| Fixed Assets | (5,866) | - | ||
| Deferred tax liabilities | (5,866) | - | ||
| Valuation allowance | ||||
| Net deferred tax assets | $ | 61,842 | $ | 21,848 |
The reconciliation of the Company's effective income tax rate to the U.S. federal statutory income tax rate for the years ended December 31, 2017 and 2016 is as follows:
| For the Year Ended | For the Year Ended | ||
| December 31, 2017 | December 31, 2016 | ||
| U.S. federal statutory rate | 34.00% | 34.00% | |
| Japanese tax rate differential | 4.01% | -10.10% | |
| Effect of expenses not deductible for tax purposes | -3.30% | 3.82% | |
| Return to provision and other true-ups | -2.76% | 0.00% | |
| Other, net | 0.04% | 0.00% | |
| Total | 31.99% | 27.72% |
On December 22, 2017, the President of the United States signed into law the Tax Cuts and Jobs Act (the "Tax Act"). The Tax Act amends the Internal Revenue Code to reduce tax rates and modify policies, credits, and deductions for individuals and businesses. For businesses, the Tax Act reduces the corporate tax rate from a maximum of 35% to a flat 21% rate. The rate reduction is effective on January 1, 2018. There was no impact of the rate reduction on the Company's income tax provision as the Company had no federal deferred tax balances at December 31, 2017.
In conjunction with the Tax Act, the SEC staff issued Staff Accounting Bulletin No. 118 ("SAB 118") to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Act. The Company has determined the provisional tax impacts related to deemed repatriated earnings and the revaluation of deferred tax assets and liabilities and included these amounts in its consolidated financial statements for the year ended December 31, 2017. The ultimate impact may differ from these provisional amounts, possibly materially, due to, among other things, additional analysis, changes in interpretations and assumptions the Company has made, additional regulatory guidance that may be issued, and actions the Company may take as a result of the Tax Act.
At December 31, 2017 and 2016, the Company had no unrecognized tax benefits, accrued interest or penalties. The Company does not expect any significant increases or decreases to the Company's unrecognized tax benefits within the next 12 months.
The Company is subject to examinations by US federal and Japanese taxing authorities for the tax year ended December 31, 2016. The Company is not current under any tax examinations.
NOTE 7 - COMMITMENTS AND CONTINGENCIES
The Company has entered into a lease agreement to rent space for Kita Senju Clinic on April 1, 2017 with a monthly rent of $7,690 for a lease term of 3 years. The monthly rent is paid by Kita Senju Clinic. In the event it fails to pay the rent, the Company is responsible for the payment. The Company has also put down the initial deposit for the lease in the amount of $46,010.
We are not a party to any material pending legal proceedings other than that which arise in the ordinary course of business. We believe that any liability that would ultimately result from the resolution on these matters will not, individually or in the aggregate, have a material adverse effect on our financial position or results of operations.
NOTE 8 - NET INCOME PER SHARE
The following table shows the computation of basic net income per share of our common stock. There are no instruments that have dilutive effect on the number of shares computation.
Year ended December 31, 2017 |
Year ended December 31, 2016 | ||
| Net Income | Numerator (a) | 2,409,694 | 1,402,419 |
| Weighted Average Number of Common Shares Outstanding, Basic and Dilutive | Denominator (b) | 27,596,000 | 33,119,504,230 |
| Basic and Diluted Net Income | (a)/(b) | $0.09 | $0.00 |
- F9 -
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.
Item 9A Controls and Procedures.
Management’s Report on Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15e and Rule 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) that are designed to ensure that information required to be disclosed in our reports filed under the Exchange Act, as amended, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer to allow for timely decisions regarding required disclosure.
As of December 31, 2017, the end of the year covered by this report, we carried out an evaluation, under the supervision of our chief executive officer, with the participation of our chief financial officer, of the effectiveness of the design and the operation of our disclosure controls and procedures. The officers concluded that the disclosure controls and procedures were not effective as of the end of the period covered by this report due to material weaknesses identified below.
A material weakness is a significant deficiency, or combination of deficiencies, in internal control over financial reporting that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. As a result of the determination that there was a lack of resources to provide segregation of duties consistent with control objectives and establish procedures to identify, approve and report related party transactions, the lack of a formal audit committee, and the lack of internal resources for required report disclosures, management has determined that material weaknesses existed as of December 31, 2017. These material weaknesses were further confirmed by the fact that we have restated our March 31, 2017 and June 30, 2017 financial statements due to not properly identifying and reporting a related party transaction.
As a result of the material weaknesses, management has hired in-house legal counsel to review and manage contracts and agreements and is further evaluating mitigating controls to minimize errors related to financial reporting for related party transactions. In addition, management is planning to remediate segregation of duties issues.
Inherent limitations on effectiveness of controls
Internal control over financial reporting has inherent limitations which include but is not limited to the use of independent professionals for advice and guidance, interpretation of existing and/or changing rules and principles, segregation of management duties, scale of organization, and personnel factors. Internal control over financial reporting is a process which involves human diligence and compliance and is subject to lapses in judgment and breakdowns resulting from human failures. Internal control over financial reporting also can be circumvented by collusion or improper management override. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements on a timely basis, however these inherent limitations are known features of the financial reporting process and it is possible to design into the process safeguards to reduce, though not eliminate, this risk. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Changes in Internal Control over Financial Reporting
Other than the hiring of the new chief financial officer, there have been no changes in our internal controls over financial reporting (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) that have occurred since our report on our fiscal year end December 31, 2016, or subsequent to the end of the period covered in this report that have materially or are reasonably likely to materially affect, our internal controls over financial reporting.
This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to rules of the SEC that permit the Company to provide only management’s report in this Annual Report on Form 10-K.
None.
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PART III
Item 10. Directors, Executive Officers and Corporate Governance.
Biographical information regarding the Officers and Directors of the Company, who will continue to serve as Officers and Directors of the Company and Stemcell Co., Ltd. (our wholly owned subsidiary) are provided below:
Stemcell Holdings, Inc.
| NAME | AGE | POSITION | |||||
| Takaaki Matsuoka | 40 | Chief Executive Officer, President, Secretary, Treasurer and Director | |||||
| Erika Nakazawa | 53 | Chief Financial Officer | |||||
Stemcell Co., Ltd.
| NAME | AGE | POSITION | |||||
| Takaaki Matsuoka | 40 | Chief Executive Officer, President and Director | |||||
| Erika Nakazawa | 53 | Chief Financial Officer | |||||
| Sahori Kanai | 44 | Chief Human Resources Officer | |||||
| Hiroyuki Tanabe | 33 | Chief Legal Officer | |||||
| Alexis Liu | 26 | Chief Marketing Officer | |||||
Takaaki Matsuoka
In 2003 Takaaki Matsuoka graduated from Keio University, Department of Medicine and that same year he joined Keio University Hospital. In 2004, he served as a practicing MD at Keio for one year before transferring to Keiyu Hospital another year of residency. In 2005 Takaaki Matsuoka left Keiyu Hospital and began practicing at Shonan Beauty Clinic where he remained for the next eight years. By 2013 Takaaki Matusoka had incorporated and founded Helene Omotesando Beauty Clinic. Currently, he serves as the Hospital Director at Hellene Omotesando Beauty Clinic. Takaaki’s Matsuoka’s medical experience and history has led to his appointment as President, Chief Executive Officer and Director.
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 Securities and Exchange Commission (the “SEC”) and in other public communications made by the Company; and strives to be compliant with applicable governmental laws, rules and regulations. The Company has not formally adopted a written code of business conduct and ethics that governs the Company’s employees, officers and Directors as the Company is not required to do so.
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, the Chief Executive Officer and the Chief Financial Officer of the Company review the Company's internal accounting controls, practices and policies.
Committees of the Board
Our Company currently does not have nominating, compensation, or audit committees or committees performing similar functions nor does our Company have a written nominating, compensation or audit committee charter. Our sole Director believes that it is not necessary to have such committees, at this time, because the Director(s) can adequately perform the functions of such committees.
Audit Committee Financial Expert
Our Board of Directors has determined that we do not have a board member that qualifies as an “audit committee financial expert” as defined in Item 407(D)(5) of Regulation S-K, nor do we have a Board member that qualifies as “independent” as the term is used in Item 7(d)(3)(iv)(B) of Schedule 14A under the Securities Exchange Act of 1934, as amended, and as defined by Rule 4200(a)(14) of the FINRA Rules.
We believe that our Director is capable of analyzing and evaluating our financial statements and understanding internal controls and procedures for financial reporting. The Director of our Company does not believe that it is necessary to have an audit committee because management believes that the Board of Directors can adequately perform the functions of an audit committee. In addition, we believe that retaining an independent Director who would qualify as an "audit committee financial expert" would be overly costly and burdensome and is not warranted in our circumstances given the rapidly growing nature of our business to invest further in business opportunities. We are planning to install a statutory auditor at the operating company level. We will consider establishing a Committee when so required.
Involvement in Certain Legal Proceedings
Our sole officer and director has not been involved in or a party in any of the following events or actions during the past ten years:
| 1. | Any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time; |
| 2. | Any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses); |
| 3. | Being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or |
| 4. | Being found by a court of competent jurisdiction (in a civil action), the Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated. |
| 5. | Such person was found by a court of competent jurisdiction in a civil action or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by the Commission has not been subsequently reversed, suspended, or vacated; |
| 6. | Such person was found by a court of competent jurisdiction in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated; |
| 7. | Such person was the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding, not subsequently reversed, suspended or vacated, relating to an alleged violation of:(i) Any Federal or State securities or commodities law or regulation; or(ii) Any law or regulation respecting financial institutions or insurance companies including, but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary or permanent cease-and-desist order, or removal or prohibition order; or(iii) Any law or regulation prohibiting mail or wire fraud or fraud in connection with any business entity; or |
| 8. | Such person was the subject of, or a party to, any sanction or order, not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act (7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its members or persons associated with a member. |
Independence of Directors
We are not required to have independent members of our Board of Directors, and do not anticipate having independent directors until such time as we are required to do so.
Code of Ethics
We have not adopted a formal Code of Ethics. The Board of Director(s) evaluated the business of the Company and the number of employees and determined that since the business is operated by a small number of persons, general rules of fiduciary duty and federal and state criminal, business conduct and securities laws are adequate ethical guidelines. In the event our operations, employees and/or Directors expand in the future, we may take actions to adopt a formal Code of Ethics.
Shareholder Proposals
Our Company does not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for Directors. The Board of Director(s) believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. Our Company does not currently have any specific or minimum criteria for the election of nominees to the Board of Directors and we do not have any specific process or procedure for evaluating such nominees. The Board of Director(s) will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.
A shareholder who wishes to communicate with our Board of Director(s) may do so by directing a written request addressed to our sole officer and director Takaaki Matsuoka, at the address appearing on the first page of this Information Statement.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company’s executive officers, directors and persons who beneficially own more than ten percent of a registered class of the Company’s equity securities, to file with the SEC initial reports of ownership and reports of changes in ownership of the Company’s common stock. Such officers, directors and persons are required by SEC regulation to furnish the Company with copies of all Section 16(a) forms that they file with the SEC.
Based solely on a review of the copies of such forms that were received by the Company, or written representations from certain reporting persons that no Form 5s were required for those persons, the Company is not aware of any failures to file reports or report transactions in a timely manner during the Company’s fiscal years ended December 31, 2017 and December 31, 2016.
Procedure for Nominating Directors
In 2017, we have not made any material changes to the procedures by which security holders may recommend nominees to our Board of Directors.
Family Relationships
There are no family relationships among our directors, executive officers or persons nominated to become executive officers or directors.
Arrangements
There are no arrangements or understandings between an executive officer, director or nominee and any other person pursuant to which he was or is to be selected as an executive officer or director.
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Item 11. Executive Compensation.
The table below summarizes all compensation awarded to, earned by, or paid to our named executive officer (including our officer(s)/director(s) of our wholly owned subsidiary) for all services rendered in all capacities to us for the year ended December 31, 2017 and December 31, 2016.
Stemcell Holdings, Inc. (Consolidated)
Name and principal position |
Year | Salary ($) |
Bonus ($) |
Stock Awards ($) |
Option Awards ($) |
Non-Equity Incentive Plan Compensation ($) |
Nonqualified Deferred Compensation Earnings ($) |
All Other Compensation ($) |
Total ($) |
Takaaki Matsuoka Chief Executive Officer |
2017 | 80,257 | 0 | 0 | 0 | 0 | 0 | 0 | 80,257 |
Erika Nakazawa Chief Financial Officer |
2017 | 89,915 | 0 | 0 | 0 | 0 | 0 | 0 | 89,915 |
Sahori Kanai Chief Human Resources Officer |
2017 | 64,395 | 0 | 0 | 0 | 0 | 0 | 0 | 64,395 |
Hiroyuki Tanabe Chief Legal Officer |
2017 | 21,238 | 0 | 0 | 0 | 0 | 0 | 0 | 21,238 |
Alexis Liu Chief Marketing Officer |
2017 | 73,809 | 0 | 0 | 0 | 0 | 0 | 0 | 73,809 |
Takaaki Matsuoka Chief Executive Officer Chief Financial Officer |
2016 |
110,310 |
0 |
0 |
0 |
0 |
0 |
0 |
110,310 |
On December 31, 2015, the Company issued 40,000,000,000 shares of restricted common stock to Jeffrey DeNunzio in return for his services developing the Company’s business concept.
On January 27, 2016, Jeffrey DeNunzio of 780 Reservoir Avenue, #123, Cranston, RI 02910, the sole shareholder of the Company, entered into a Share Purchase Agreement with Takaaki Matsuoka., with an address at 3-18-17-6F, Minamiaoyama, Minato-ku, Tokyo, 107-0062, Japan.
On January 27, 2016, pursuant to the Agreement, Mr. DeNunzio transferred to Takaaki Matsuoka., 40,000,000,000 shares of our common stock which represented all of our issued and outstanding shares.
The sale of shares between Jeffrey DeNunzio and Takaaki Matsuoka was made pursuant to Regulation S of the Securities Act of 1933, as amended ("Regulation S"). No directed selling efforts were made in the United States. Takaaki Matsuoka is a Japanese Citizen.
On January 27, 2016, Mr. Jeffrey DeNunzio resigned as our Chief Executive Officer, Chief Financial Officer, President, Director, Secretary, and Treasurer.
On January 27, 2016, Mr. Takaaki Matsuoka was appointed as Chief Executive Officer, Chief Financial Officer, President, Director, Secretary, and Treasurer.
On January 27, 2016, the Company filed an amendment to our articles of incorporation with the state of Delaware to change the name of the Company to “Stemcell Holdings, Inc.”
On March 24, 2016, the Company gained a 100% interest in the issued and outstanding shares of Stemcell Co., Ltd.’s common stock and Stemcell Co., Ltd. became a wholly owned subsidiary of the Company.
Compensation of Directors
The table above summarizes all compensation of our directors as of December 31, 2017.
Option/SAR Grants in Last Fiscal Year
None.
Outstanding Equity Awards at Fiscal Year-End
None.
Equity Compensation Plan Information
Not applicable.
Employment Agreements
None.
Compensation Discussion and Analysis
Director Compensation
The Board of Directors reserves the right in the future to award the members of the Board of Directors cash or stock based consideration for their services to the Company, which awards, if granted shall be in the sole determination of the Board of Directors.
Executive Compensation Philosophy
Our Board of Directors determines the compensation given to our executive officers in their sole determination. Our Board of Directors reserves the right to pay our executive or any future executives a salary, and/or issue them shares of common stock issued in consideration for services rendered and/or to award incentive bonuses which are linked to our performance, as well as to the individual executive officer’s performance. This package may also include long-term stock based compensation to certain executives, which is intended to align the performance of our executives with our long-term business strategies. Additionally, while our Board of Directors has not granted any performance base stock options to date, the Board of Directors reserves the right to grant such options in the future, if the Board in its sole determination believes such grants would be in the best interests of the Company.
Incentive Bonus
The Board of Directors may grant incentive bonuses to our executive officer and/or future executive officers in its sole discretion, if the Board of Directors believes such bonuses are in the Company’s best interest, after analyzing our current business objectives and growth, if any, and the amount of revenue we are able to generate each month, which revenue is a direct result of the actions and ability of such executives.
Long-term, Stock Based Compensation
In order to attract, retain and motivate executive talent necessary to support the Company’s long-term business strategy we may award our executive and any future executives with long-term, stock-based compensation in the future, at the sole discretion of our Board of Directors, which we do not currently have any immediate plans to award.
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Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
As of December 31, 2017 and March 30, 2018, the date of this report, the Company had/has 27,596,000 shares of common stock and no shares of preferred stock issued and outstanding, which number of issued and outstanding shares of common stock and preferred stock have been used throughout this report.
The table below is as of December 31, 2017.
| Name and Address of Beneficial Owner | Shares of Common Stock Beneficially Owned | Common Stock Voting Percentage Beneficially Owned | Voting Shares of Preferred Stock | Preferred Stock Voting Percentage Beneficially Owned | Total Voting Percentage Beneficially Owned (1) |
| Executive Officers and Directors | |||||
| Takaaki Matsuoka | 266,000 | 0.96% | 0 | 0.0% | 0.96% |
| 5% Shareholders | |||||
| Primavera Singa Pte Ltd* | 23,066,000 | 83.58% | 0 | 0.0% | 83.58% |
*Shiho Matsuoka, the wife of our sole officer and director Takaaki Matsuoka, owns and controls 100% of Primavera Singa Pte., Ltd.
Beneficial ownership has been determined in accordance with Rule 13d-3 under the Exchange Act. Under this rule, certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire shares (for example, upon exercise of an option or warrant) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the number of shares is deemed to include the number of shares beneficially owned by such person by reason of such acquisition rights. As a result, the percentage of outstanding shares of any person as shown in the following table does not necessarily reflect the person’s actual voting power at any particular date.
Item 13. Certain Relationships and Related Transactions.
On December 31, 2015, Jeffrey DeNunzio was appointed as Director, Chief Executive Officer, Chief Financial Officer, President, Secretary, and Treasurer.
On December 31, 2015, the Company issued 40,000,000,000 shares of restricted common stock to Jeffrey DeNunzio in return for his services developing the Company’s business concept.
On January 27, 2016, Mr. Jeffrey DeNunzio, the sole shareholder of Perfect Acquisition, Inc., consummated a sale of 40,000,000,000 shares of our common stock to Takaaki Matsuoka. Following the closing of the share purchase transaction, Takaaki Matsuoka., gained a 100% interest in the issued and outstanding shares of our common stock. Commensurate with the closing, Perfect Acquisition, Inc. filed with the Delaware Secretary of State, a Certificate of Amendment to change the name of Registrant to Stemcell Holdings, Inc.
On January 27, 2016, Mr. DeNunzio resigned as our Chief Executive Officer, Chief Financial Officer, President, Director, Secretary, and Treasurer. The resignation was not the result of any disagreement with us on any matter relating to our operations, policies or practices.
On January 27, 2016, Dr. Takaaki Matsuoka was appointed as Chief Executive Officer, Chief Financial Officer, President, Director, Secretary, and Treasurer.
On March 24, 2016, the Company entered into a Stock Purchase Agreement with Takaaki Matsuoka, our President, CEO and Director. Pursuant to this Agreement, on March 24, 2016 Takaaki Matsuoka transferred to Stemcell Holdings, Inc., 500 shares of the common stock of Stemcell Co., Ltd., a Japan corporation which represents all of its issued and outstanding shares, in consideration of JPY5,000,000 ($44,476). Following the effective date of the share purchase transaction above on March 24, 2016, Stemcell Holdings, Inc. gained a 100% interest in the issued and outstanding shares of Stemcell’s common stock and Stemcell became a wholly owned subsidiary of the Company. The Company is now the controlling and sole shareholder of Stemcell.
On March 31, 2016, the Company wrote off the accrued expenses owed by the previous owner whose amount was $2,998. The accrued expense written off has been recorded as additional paid in capital.
On May 2, 2016, Takaaki Matsuoka entered into a Stock Purchase Agreement with Primavera Singa Pte Ltd, a Singapore corporation (“Primavera Singa”) with an address at 60 Paya Lebar Rd #09-25, Paya Lebar Square 409051, Singapore. Pursuant to the Agreement, Takaaki Matsuoka transferred to Primavera Singa, 34,599,066,000 shares of our common stock which represents 86.5% of our issued and outstanding shares, in consideration of JPY 3,000,000 ($28,145). Shiho Matsuoka, the wife of our sole officer and director Takaaki Matsuoka, owns and controls 100% of Primavera Singa Pte., Ltd. The sale of shares between Takaaki Matsuoka and Primavera Singa was made pursuant to Regulation S of the Securities Act of 1933, as amended ("Regulation S"). No directed selling efforts were made in the United States. Takaaki Matsuoka is a Japanese Citizen.
On May 6, 2016, Takaaki Matsuoka entered into stock purchase agreements with 67 Japanese shareholders. Pursuant to these agreements, Takaaki Matsuoka sold 5,000,934,000 shares of common stock in total to these individuals and received JPY 2,514,700 ($22,861) as aggregate consideration. The aforementioned sale of shares was exempt from registration in accordance with Regulation S of the Securities Act of 1933, as amended ("Regulation S") because the above sales of the stock were made to non-U.S. persons (as defined under Rule 902 section (k)(2)(i) of Regulation S), pursuant to offshore transactions, and no directed selling efforts were made in the United States by the issuer, a distributor, any of their respective affiliates, or any person acting on behalf of any of the foregoing.
For the year ended December 31, 2016, the Company provided stem cell culturing services in the amount of $2,776,327 and coordination services in the amount of $386,110 to Omotesando Helene Clinic. Takaaki Matsuoka is the director and majority owner of Omotesando Helene Clinic. As of December 31, 2016, the Company had balance of $555,490 due to Omotesando Helene Clinic, which is the unpaid balance received from patients on behalf of the clinic.
For the year ended December 31, 2017, the Company provided stem cell culturing and tissue handling technical assistance and coordination services in the amounts of $3,879,565 and $1,161,201, respectively, to Helene Clinic which is fully owned by Takaaki Matsuoka, the sole director of the Company.
For the year ended December 31, 2016, the Company through its subsidiary Stemcell Co., Ltd, provided internet marketing services in the amount of $122,609 to seven health clinics, which are fully owned by Takaaki Matsuoka, the sole director of the Company.
For the year ended December 31, 2017, the Company provided marketing and other services in the amount of $398,621 to six clinics which are fully owned or managed by Takaaki Matsuoka, the sole director of the Company.
For the year ended December 31, 2017, the Company leased its properties and equipment in the amount of $338,002 to four clinics which are fully owned or managed by Takaaki Matsuoka, the sole director of the Company.
On March 4, 2016 Stemcell Co., Ltd. purchased equipment for culturing and storing stem cells from Omotesando Helene Clinic in consideration of JPY 2,000,000 (approximately $17,113).
Our principal executive offices are located at 5-9-15-3F, Minamiaoyama, Minato-ku, Tokyo, 107-0062, Japan. The office space is currently being provided to the Company rent-free by Omotesando Helene Clinic, which is under common control of our sole officer and director Takaaki Matsuoka and his wife, Shiho Matsuoka.
Item 14. Principal Accounting Fees and Services.
Below is the aggregate amount of fees billed for professional services rendered by our principal accountants with respect to our last two fiscal years.
| 2017 | 2016 | |||
| Audit fees | Haskell & White | $26,965 | ||
| MaloneBailey, LLP | $24,500 | $16,400 | ||
| Audit-related fees | $29 | - | ||
| Tax fees | - | |||
| All other fees | - | - | ||
| Total | $51,494 | $16,400 |
Board of Directors Pre-Approval Process, Policies and Procedures
Our principal auditors have performed their audit procedures in accordance with pre-approved policies and procedures established by our sole director. Our principal auditors have informed our sole director of the scope and nature of each service provided. With respect to the provisions of services other than audit, review, or attest services, our principal accountants brought such services to the attention of our sole director prior to commencing such services.
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PART IV
Item 15. Exhibits, Financial Statement Schedules.
(a) Financial Statements
1. Financial statements for our Company are listed in the index under Item 8 of this document
2. All financial statement schedules are omitted because they are not applicable, not material or the required information is shown in the financial statements or notes thereto.
(b) Exhibits required by Item 601 of Regulation S-K.
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-K (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.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Stemcell Holdings, Inc.
(Registrant)
By: /s/ Takaaki Matsuoka
Takaaki Matsuoka, Chief Executive Officer
Dated: March 30, 2018
By:/s/ Erika Nakazawa
Erika Nakazawa. Chief Financial Officer
Dated: March 30, 2018
In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ Takaaki Matsuoka
Takaaki Matsuoka, Chief Executive Officer
Dated: March 30, 2018
By:/s/ Erika Nakazawa
Erika Nakazawa. Chief Financial Officer
Dated: March 30, 2018
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