UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[x]   Quarterly  Report  Pursuant  to  Section  13 or  15(d)  of the  Securities
      Exchange Act of 1934

      For the quarter ended September 30, 2007

                                       or

[ ]   Transition  Report  Pursuant  to Section 13 or 15(d) of the  Securities
      Exchange Act of 1934

      For the transition period from ___________ to ________________

      Commission File Number: 0-10379

                           STEM CELL INNOVATIONS, INC.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

             Delaware                                             22-2313648
----------------------------------------------------        --------------------
(State or other jurisdiction of                                 (I.R.S. Employer
incorporation or organization)                               Identification No.)

1812 Front Street, Scotch Plains, New Jersey                               07076
----------------------------------------------------        --------------------
(Address of principal executive offices)                              (Zip code)

(908) 663-2150
---------------------------------------------------
(Registrant's telephone number, including area code)

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.

                                 Yes [X] No [ ]

Number of shares  outstanding of each of issuer's  classes of common stock as of
October 31, 2007.

                        Common Stock     1,095,115,144 shares

<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

                                                                            Page
                                                                            ----

Part I.    Financial Information

Item 1.    Financial Statements (Unaudited)
           Consolidated Condensed Balance Sheet - September 30, 2007          3

           Consolidated Condensed Statements of Operations - Three Months
           and Nine Months Ended September 30, 2007 and 2006                  4

           Consolidated Condensed Statement of Capital Deficiency - Nine
           Months Ended September 30, 2007                                    6

           Consolidated Condensed Statements of Cash Flows - Nine Months
           Ended September 30, 2007 and 2006                                  7

           Notes to Consolidated Condensed Financial Statements               8

Item 2.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations                                          18

Item 3.    Controls and Procedures                                            23

Part II.   Other Information                                                  24

Item 1.    Legal Proceedings                                                  25

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds        24

Item 3.    Defaults on Senior Securities                                      24

Item 4.    Submission of Matters to a Vote of Security Holders                24

Item 5.    Other Information                                                  24

Item 6.    Exhibits and Reports on Form 8-K                                   24

<PAGE>

Item. 1    Financial Statements

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEET

                                                               September 30,
                                                                    2007
                                                                (Unaudited)
                                                             ------------------

ASSETS (Note 4)
Current assets
   Cash and cash equivalents                                 $           54,640
   Other receivables                                                     84,239
   Prepaid expenses and other current assets                             36,813
                                                             ------------------
Total current assets                                                    175,692
                                                             ------------------

Property, plant and equipment, net                                      728,484
Deferred finance costs, net                                           1,034,886
Other assets                                                              9,879
                                                             ------------------
Total assets                                                 $        1,948,941
                                                             ==================
LIABILITIES AND CAPITAL DEFICIENCY
Current liabilities
   Accounts payable and accrued expenses                     $        1,815,761
   Convertible notes payable, net of debt discount                    1,786,654
   Notes payable to stockholder                                         700,000
   Deferred revenues                                                    362,254
                                                             ------------------
Total current liabilities                                             4,664,669
                                                             ------------------
Long-term liabilities
   Notes payable - Stockholders/Directors                               400,000
   Convertible notes payable, net of debt discount                      952,594
   Amount due Eaglestone (including Series 2 preferred stock)         5,982,757
   Derivative instrument liability                                      200,000
   Other liabilities                                                    216,753
                                                             ------------------
Total long-term liabilities                                           7,752,104
                                                             ------------------
Commitments and contingencies

Capital Deficiency
Preferred stock, par value $.01 per share;
   authorized-5,000,000 shares;  Series 1 Convertible
   Preferred Stock; None issued and outstanding                              --
   Series 2 Preferred Stock; 2,000,000 issued and
   outstanding                                                               --
Common stock, par value $.01 per share;
authorized-4,000,000,000 shares; issued  and
outstanding-1,095,115,144 shares                                     10,951,151
Additional paid-in capital                                           15,165,971
Accumulated deficit                                                 (36,584,954)
                                                             ------------------
Total capital deficiency                                            (10,467,832)
                                                             ------------------
Total liabilities and capital deficiency                     $        1,948,941
                                                             ==================

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

                                        3
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                              Three Months Ended
                                                                                     -----------------------------------
                                                                                       September 30,      September 30,
                                                                                           2007               2006
                                                                                     -----------------------------------
<S>                                                                                  <C>                <C>
Revenue
   Royalty income                                                                    $             --   $             --
   Contract Research                                                                           66,965              6,090
   License Fees                                                                                    --             10,000
                                                                                     ----------------   ----------------
   Total revenue                                                                               66,965             16,090
                                                                                     ----------------   ----------------

Costs and expenses
   General and administrative                                                                 657,903          1,144,581
   Research and development                                                                   384,621            122,620
   Depreciation and amortization                                                              277,880            260,826
                                                                                     ----------------   ----------------
Total costs and expenses                                                                    1,320,404          1,528,027
                                                                                     ----------------   ----------------

Loss from operations before other items                                                    (1,253,439)        (1,511,937)

Interest expense including accretion of debt discount of $570,841 in 2007 and                (926,575)          (461,111)
   $197,556 in 2006 and amortization of deferred financing costs of $241,351
   in 2007 and $207,449 in 2006
Gain on sale of royalty rights                                                                     --            620,000
Loss on sale of securities                                                                         --            (83,719)
Reduction in derivative instrument liability                                                  200,000                 --
Loss on impairment of acquired intangibles                                                 (4,445,615)                --
                                                                                     ----------------   ----------------
Net loss                                                                             $     (6,425,629)  $     (1,436,767)
                                                                                     ================   ================

Basic and diluted net loss per share attributable to common stockholders             $           (.01)  $             --
                                                                                     ================   ================
Weigthed average number of shares outstanding -
   basic and diluted, (common shares limited to
   authorized shares available through July 5, 2006)                                    1,095,115,144        982,076,169
                                                                                     ================   ================

Proforma basic and diluted net loss per share (assuming sufficient authorized
   shares)                                                                                              $             --
                                                                                                        ================
Proforma weighted average number of shares outstanding -
   basic and diluted (assuming sufficient authorized shares)                                               1,046,612,476
                                                                                                        ================
</TABLE>

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

                                        4
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                              Nine Months Ended
                                                                                     -----------------------------------
                                                                                       September 30,      September 30,
                                                                                           2007               2006
                                                                                     -----------------------------------
<S>                                                                                  <C>                <C>
Revenue
   Royalty income                                                                    $             --   $         17,282
   Contract Research                                                                          173,481             25,368
   License Fees                                                                                    --             10,000
                                                                                     ----------------   ----------------
   Total revenue                                                                              173,481             52,650
                                                                                     ----------------   ----------------

Costs and expenses
   General and administrative                                                               2,887,271          7,836,315
   Research and development                                                                 1,140,867            370,868
   Depreciation and amortization                                                              819,521            614,524
                                                                                     ----------------   ----------------
Total costs and expenses                                                                    4,847,659          8,821,707
                                                                                     ----------------   ----------------

Loss from operations before other items                                                    (4,674,178)        (8,769,057)

Interest expense including accretion of debt discount of $2,002,556 in 2007 and            (3,026,781)        (3,025,757)
   $502,136 in 2006, amortization of deferred financing costs of $716,017 in
   2007 and $518,622 in 2006 and a charge for beneficial conversion expense of
   nil in 2007 and $1,794,375 in 2006
Gain on sale of royalty rights                                                                     --            620,000
Loss on sale of securities                                                                         --            (83,719)
Reduction in derivative instrument liability                                                1,600,000                 --
Charge related to Eaglestone debt                                                          (1,200,000)                --
Loss on impairment of acquired intangibles                                                 (4,445,615)                --
                                                                                     ----------------   ----------------

Net loss                                                                                  (11,746,574)       (11,258,533)
Less: Amount attributable to preferred stock beneficial conversion feature                         --         (1,563,500)
                                                                                     ----------------   ----------------
Net loss attributable to common stockholders                                         $    (11,746,574)  $    (12,822,033)
                                                                                     ================   ================

Basic and diluted net loss per share attributable to common stockholders             $           (.01)  $           (.03)
                                                                                     ================   ================

Weighted average number of shares outstanding -
   basic and diluted, (common shares limited to authorized shares available
   through July 5, 2006)                                                                1,087,162,763        367,421,273
                                                                                     ================   ================

Proforma basic and diluted net loss per share (assuming sufficient authorized
   shares)                                                                                              $           (.01)
                                                                                                        ================

Proforma weighted average number of shares outstanding - basic and diluted
   (assuming sufficient authorized shares)                                                                   934,324,170
                                                                                                        ================
</TABLE>

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

                                        5
<PAGE>

                  Stem Cell Innovations, Inc. and Subsidiaries
             Consolidated Condensed Statement of Capital Deficiency
                      Nine Months Ended September 30, 2007

                                   (unaudited)

<TABLE>
<CAPTION>
                                                     Common Stock              Additional
                                             -----------------------------      Paid-In        Accumulated
                                                 Shares         Amount          Capital          Deficit          Total
                                             -------------   -------------   --------------   -------------   -------------
<S>                                          <C>             <C>             <C>              <C>             <C>
Balances at January 1, 2007                  1,064,565,144   $  10,645,651   $   14,098,207   $ (24,838,380)  $     (94,522)

Shares issued as placement agent fee               250,000           2,500           10,000                          12,500
Conversion of notes into common stock           19,600,000         196,000          392,000                        588,,000
Stock based compensation for directors and
  employees                                                                         620,617                         620,617
Stock based compensation for consultants                                              4,688                           4,688
Capital contribution of imputed interest
  on convertible notes                                                               56,459                          56,459
Shares issued as compensation for services         700,000           7,000           84,000                          91,000
Issuance of common stock in exchange for
  warrants                                      10,000,000         100,000         (100,000)
Net Loss                                                                                        (11,746,574)    (11,746,574)
                                             -------------   -------------   --------------   -------------   -------------

Balances at September 30, 2007               1,095,115,144   $  10,951,151   $   15,165,971   $ (36,584,954)  $ (10,467,832)
                                             =============   =============   ==============   =============   =============
</TABLE>

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

                                        6
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
                 CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                        Nine Months Ended
                                                                          September 30,

                                                                      2007            2006
                                                                  -------------   -------------
<S>                                                               <C>             <C>
Cash flows from operating activities:
   Net loss                                                       $ (11,746,574)  $ (11,258,533)
   Adjustments to reconcile net loss to net cash used in
     operating activities:
      Beneficial conversion charge                                           --       1,794,375
      Depreciation and amortization                                     819,521         614,525
      Sale of royalty right for marketable securities                        --        (620,000)
      Realized loss on sale of marketable securities                         --          83,719
      Gain on reduction of derivative instrument liability           (1,600,000)             --
      Charge related to Eaglestone debt                               1,200,000              --
      Loss on impairment of acquired intangibles                      4,445,615              --
      Stock based compensation charge                                   625,305       4,159,043
      Common stock issued for services                                   91,000              --
      Imputed interest charge                                            56,459         127,913
      Accretion of debt discount                                      2,002,556         502,136
      Amortization of deferred finance costs                            716,017         518,622
Change in operating assets and liabilities:
      Accounts receivable                                                    --           7,000
      Other receivables                                                  46,816         (89,547)
      Prepaid expenses and other current assets                          53,776         (30,553)
      Accounts payable and accrued expenses                             409,707         306,647
      Deferred revenues                                                 362,254              --
                                                                  -------------   -------------

      Net cash used in operating activities                          (2,517,548)     (3,884,653)
                                                                  -------------   -------------
Cash flows from investing activities:
Proceeds from sale of marketable securities                                  --         525,939
Cost of acquiring Plurion intangibles                                        --        (178,500)
Additions to property, plant and equipment                              (95,218)       (532,711)
                                                                  -------------   -------------

Net cash used in investing activities                                   (95,218)       (185,272)
                                                                  -------------   -------------

Cash flows from financing activities:
  Collection of receivables from 2005 financing                              --         395,066
  Net proceeds from issuance of Series 1 preferred stock                     --       1,326,700
  Net proceeds from issuance of convertible notes payable               975,000       1,994,800
  Proceeds from issuance of notes payable                               700,000              --
  Partial repayment of Eaglestone note                                       --         (15,932)
  Proceeds from merger with public shell treated as capital                  --       1,115,922
                                                                  -------------   -------------

Net cash provided by financing activities                             1,675,000       4,816,556
                                                                  -------------   -------------

Net (decrease) increase in cash and cash equivalents                   (937,766)        746,631

Cash and cash equivalents at beginning of period                        992,406          65,537
                                                                  -------------   -------------

Cash and cash equivalents at end of period                        $      54,640   $     812,168
                                                                  =============   =============

Noncash investing and financing activities:
Acquisition of Intangibles:
      License and Patent                                                          $   5,700,000
      Less: Liabilities assumed                                                         (88,000)
                                                                                  -------------

                                                                                      5,612,000
                                                                                  =============
Exchange of notes and accrued interest for Series 1 preferred
  stock                                                                           $   3,611,518
                                                                                  =============

Conversion of convertible notes for common stock                  $     588,000   $      69,862
                                                                  =============   =============
Financing fees paid in common stock                               $      12,500
                                                                  =============
Debt discount recorded in connection with February, 2007
  financing                                                       $     500,000
                                                                  =============
</TABLE>

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

                                        7
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                                   (Unaudited)

Note 1.     The Company and the Basis of Presentation

      Stem Cell  Innovations,  Inc.  (the  "Company")  through its wholly  owned
subsidiaries,  Amphioxus  Cell  Technologies,  Inc.  ("ACT"),  which is based in
Houston,  Texas,  and Stem  Cell  Innovations  BV  which  is  based  in  Leiden,
Netherlands,  is a cell biology  company.  It utilizes its proprietary C3A human
liver cell line in the field of drug  discovery  and  toxicology  testing and is
also engaged in the development  and production of its  proprietary  pluripotent
stem cells.  These human  cell-based  disease  models  create a platform for the
discovery, testing and development of all therapeutic modalities including small
molecules, cell-based therapeutics, small interfering RNAs and antibodies.

      On February 14, 2006, the Company merged with ACT (the "Merger"). Upon the
completion of the Merger,  the stockholders of ACT controlled  approximately 77%
of the merged  entity.  The Merger was accounted for as a reverse  purchase with
ACT being the accounting  acquirer.  Immediately  prior to the completion of the
Merger,  ACT  acquired  from  Plurion,  Inc.  ("Plurion")  all  of  its  assets,
consisting of a patent and an  assignment of its license to certain  patents and
patent  applications in the field of pluripotent stem cells, and assumed certain
liabilities of Plurion.

      The accompanying  unaudited condensed  consolidated  financial  statements
have been prepared in accordance with accounting  principles  generally accepted
in the United States of America ("GAAP") for interim  financial  information and
pursuant to the rules and regulations of the Securities and Exchange  Commission
(the  "SEC").  Accordingly,  they  do not  include  all of the  information  and
footnotes required by GAAP for complete financial statements.  In the opinion of
management,  the accompanying  statements include all adjustments (consisting of
normal  items) that are  considered  necessary  for a fair  presentation  of the
consolidated financial position of Stem Cell Innovations,  Inc. and subsidiaries
and the  results of  operations  and  consolidated  cash  flows for the  periods
presented.  The results of operations for the nine-month  period ended September
30, 2007 are not  necessarily  indicative of the operating  results for the full
year. It is suggested  that these  financial  statements be read in  conjunction
with the consolidated  financial statements and related disclosures for the year
ended December 31, 2006 included in the Annual Report of Stem Cell  Innovations,
Inc. on Form 10-KSB filed with the SEC.

      The financial statements have been prepared assuming that the Company will
continue as a going concern which  contemplates  the  realization  of assets and
satisfaction  of liabilities  in the normal course of business.  The Company has
incurred cumulative losses of approximately $37 million through the period ended
September  30, 2007 and has been  dependent  on funding  operations  through the
issuances of debt and equity securities.  At September 30, 2007 cash amounted to
approximately  $55,000.  Management believes that current cash resources will be
insufficient to fund its operations through September 30, 2008.  Management will
attempt to  continue  to finance the  Company's  operations  by (i) a private or
public  placement  of  equity  or debt  securities,  (ii)  licensing  its  human
pluripotent  stem cells  (PluricellsTM),  (iii) increasing sales of its ACTIVTox
products, and (iv) reducing expenditures. However, it is uncertain as to whether
the Company  will be able to achieve  these  objectives.  These  factors,  among
others,  raise  substantial  doubt about the Company's  ability to continue as a
going concern.  The financial statements do not include any adjustments relating
to the  recoverability  and  classification  of  recorded  asset  amounts or the
amounts and  classification  of liabilities  that might be necessary  should the
Company be unable to continue as a going concern.

                                        8
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                                   (Unaudited)

Note 2.     Summary of Significant Accounting Policies

      Principles  of  consolidation  -  The  consolidated  financial  statements
include  the  operations  of the  Company,  ACT,  Stem Cell  Innovations  BV and
Interferon Sciences Development  Corporation ("ISD"), the Company's wholly owned
subsidiaries.  The operations of Stem Cell  Innovations,  Inc. are included from
the date of the Merger.

      Acquired intangibles - The license and patent purchased from Plurion, were
stated at cost and being  amortized  using the  straight-line  method over their
estimated remaining useful lives (approximately six years) of the patents. As of
September 30, 2007, the Company reviewed its acquired intangibles for impairment
and determined they were impaired. See Note 12.

      Research and Development - Research and  development  expenses are charged
to operations as incurred.

      Revenue and royalty  recognition - Revenue is recognized when the products
are shipped and title passes.  Revenue from contract research is recognized when
the research and testing is completed.  Revenue from royalties  were  recognized
over the royalty period based upon periodic  reports received from the licensee.
See Note 10.

      Derivative  Instruments - We have issued and outstanding certain financial
instruments with features which we analyze in accordance with the pronouncements
relating to accounting  for  derivative  instruments  and hedging  activities to
determine if these instruments are derivatives or have embedded derivatives that
must be  bifurcated.  Under the applicable  accounting  literature the estimated
value of the embedded derivative, if any, is bifurcated from its host instrument
on the date of sale or issuance of the  securities  or debt based on a valuation
utilizing the appropriate  valuation model. The embedded derivative liability is
classified  as such and is  marked-to-market  and adjusted to fair value at each
reporting date and the change in fair value is record to other (income) expense,
net.  In  addition,  freestanding  warrants  are  accounted  for as  equities or
liabilities  in  accordance  with the  provisions of the  applicable  accounting
literature.  As the  conversion  rate  or  exercise  price  of  all  outstanding
instruments  vary with the fair value of our common stock,  they are recorded as
an obligation at fair value,  marked-to-market  at each reporting  date, and are
carried on a separate line of the  accompanying  balance sheet. If there is more
than one embedded  derivative,  their value is considered in the aggregate.  See
Note 5.

      Recently  Issued  Accounting   Pronouncements  -  In  February  2007,  the
Financial  Accounting  Standards  Board  (FASB)  issued  Statement  of Financial
Accounting Standards (SFAS) No. 159, "The Fair Value Option for Financial Assets
and Financial  Liabilities,  Including an Amendment of FASB  Statement No. 115,"
which will become  effective in 2008.  SFAS No. 159 permits  entities to measure
eligible  financial assets,  financial  liabilities and firm commitments at fair
value, on an instrument-by-instrument basis, that are otherwise not permitted to
be  accounted  for at fair  value  under  other  generally  accepted  accounting
principles.  The fair value  measurement  election is irrevocable and subsequent
changes in fair value must be recorded in earnings. The Company expects to adopt
this  Statement in the first  quarter of 2008 and is assessing  SFAS No. 159 and
has not yet determined the impact that the adoption of SFAS No. 159 will have on
its consolidated financial statements.

      In September  2006, the FASB issued SFAS No. 158,  "Employers'  Accounting
for Defined  Benefit Pension and Other  Postretirement  Plans -- An Amendment of
FASB  Statements 87, 88, 106 and 132 (R)". SFAS No. 158 requires the recognition
of an  asset  for  a  plan's  overfunded  status  or a  liability  for a  plan's
underfunded  status in the statement of financial  position,  measurement of the
funded status of

                                        9
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                                   (Unaudited)

a plan as of the  date of its  year-end  statement  of  financial  position  and
recognition for changes in the funded status of a defined benefit postretirement
plan  in  the  year  in  which  the  changes  occur  as  a  component  of  other
comprehensive  income. The Company adopted the provisions of SFAS No. 158 in the
first  quarter  of 2007.  The  adoption  of SFAS No. 158 did not have a material
effect on the Company's consolidated financial statements.

      In  September   2006,  the  FASB  finalized  SFAS  No.  157,  "Fair  Value
Measurements"  which will become effective in 2008. This Statement  defines fair
value,  establishes a framework for measuring fair value and expands disclosures
about fair value  measurements;  however, it does not require any new fair value
measurements.  The provisions of SFAS No. 157 will be applied  prospectively  to
fair value measurements and disclosures  beginning in the first quarter of 2008.
The  Company  is  evaluating  the  impact  of SFAS No.  157 on its  consolidated
financial statements.

      In  the  first  quarter  of  2007,  the  Company  adopted  SFAS  No.  156,
"Accounting  for Servicing of Financial  Assets--an  amendment of FASB Statement
No.  140," that  provides  guidance  on  accounting  for  separately  recognized
servicing assets and servicing liabilities. In accordance with the provisions of
SFAS No. 156, separately  recognized servicing assets and servicing  liabilities
must be initially measured at fair value, if practicable.  Subsequent to initial
recognition,  the  Company  may use either the  amortization  method or the fair
value  measurement   method  to  account  for  servicing  assets  and  servicing
liabilities  within the scope of this Statement.  The adoption of this Statement
did  not  have  a  material  effect  on  the  Company's  consolidated  financial
statements.

      In  the  first  quarter  of  2007,  the  Company  adopted  SFAS  No.  155,
"Accounting  for Certain  Hybrid  Financial  Instruments--an  amendment  of FASB
Statements  No. 133 and 140," which  permits  fair value  remeasurement  for any
hybrid financial  instrument that contains an embedded derivative that otherwise
would require  bifurcation  in accordance  with the  provisions of SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging Activities." The adoption of
this  Statement  did not have a material  effect on the  Company's  consolidated
financial statements.

      The  Company  adopted  FASB   Interpretation   No.  48,   "Accounting  for
Uncertainty in Income Taxes -- an Interpretation of FASB Statement No. 109" (FIN
48) on January 1, 2007.  FIN 48  clarifies  the  accounting  and  reporting  for
uncertainties in income tax law. This Interpretation  prescribes a comprehensive
model for the financial  statement  recognition,  measurement,  presentation and
disclosure of uncertain  tax  positions  taken or expected to be taken in income
tax  returns.  The  adoption  of FIN 48 did not have a  material  effect  on the
Company's consolidated  financial statements.  The tax years 2003-2006 generally
remain  open to  examination  by the  major  taxing  jurisdictions  to which the
Company is  subject.  However,  the  Company  utilized a net  operating  loss of
approximately  $0.4  million  in its 2004 tax year that was  generated  in 1989.
Thus,  the  1989 tax year  remains  open to  examination  to the  extent  of the
utilization.  Furthermore,  the  Company  has the  opportunity  to  utilize  net
operating  losses  generated  from the 1992  through  2002 tax years  that could
potentially  open up those  years to  examination  to the  extent  that such net
operating losses are utilized in the future.

Note 3.     Loss Per Share and Pro forma Loss Per Share

      Basic loss per share has been computed  using the weighted  average number
of  shares  outstanding.  The  shares  of common  stock of ACT,  the  accounting
acquirer,  were exchanged for 37,891 shares of Series 1 mandatorily  convertible
preferred  stock of the  Company  which  represented  378,910,706  shares of the
Company's   common  stock  upon  their   mandatory   conversion  in  July  2006.
Accordingly,  the weighted average number of shares outstanding has been limited
to the 55,000,000

                                       10
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                                   (Unaudited)

shares of common stock authorized for issuance through July 5,
2006.  For the three months and nine months ended  September  30, 2007 and 2006,
potential  common stock shares are not included in the  calculation  of loss per
share as the effect would be antidilutive.  On July 6, 2006, the stockholders of
the Company  approved  increasing the number of shares of common stock which the
Company is authorized to issue to 4,000,000,000. As of September 30, 2007, there
are 1,095,115,144  shares of common stock  outstanding,  warrants to purchase an
additional  160,017,802  shares of common  stock,  25,500,000  issuable upon the
exercise of stock options,  and 76,404,599  shares of common stock issuable upon
conversion  of the notes.  For the three months and nine months ended  September
30, 2006, the  presentation  of proforma loss per share is intended to represent
the  amounts  per share that  would  have been  recognized  if the  Company  had
sufficient authorized common stock and had issued common stock in lieu of Series
1 Preferred  Stock.  The proforma  weighted  average shares  outstanding for the
three  months and nine months ended  September  30, 2006 assumes the Company had
sufficient  authorized  common  stock to convert  all of the Series 1  Preferred
Stock and that the conversions took place as of the beginning of the period.

Note 4.     Notes Payable and Redeemable Series 2 Preferred

      At September 30, 2007, the Company's long term  obligations  are set forth
in the table below.

<TABLE>
<S>                                                                       <C>
Notes payable - Stockholder/Directors
Interest at the rate of 4% per annum payable at maturity. Notes due
June 15, 2009, subject to earlier repayment under certain conditions.     $    400,000

Convertible notes payable, net of debt discount
$1,692,137 principal amount of non-interest bearing notes, due December
31, 2008 and convertible into an aggregate of 56,404,600 shares of
common stock                                                                   952,594

Amount due Eaglestone
Composed of (i) the Eaglestone Note, in the principal amount of
$2,935,000, bearing interest at the rate of 4% per annum and due June
15, 2009 and (ii) 2,000,000 shares of  Series 2 Preferred Stock,
mandatorily redeemable on June 15, 2009 for $3,065,000.                      5,982,757
                                                                          ------------
                                                                  Total   $  7,335,351
</TABLE>

      The  Company had the right to repay the  Eaglestone  Note and the Series 2
Preferred at any time prior to May 14, 2007 for  $4,782,757.  Because the amount
due to Eaglestone  was not paid by May 14, 2007, in the quarter  ending June 30,
2007, the Company  recorded a charge to operations of  $1,200,000,  which is the
difference  between (i)  $4,782,757 and (ii) the face amount of the note and the
redemption  amount  of  Series  2  Preferred  (which  as of March  31,  2007 was
$5,982,757).  During the nine  months  ended  September  30,  2007,  the Company
recorded  $1,311  under the terms of the  Accelerated  Repayment  Amount,  which
reduced the amount payable under the Eaglestone Note.

      On November  16,  2006,  the Company  completed a private  placement  of a
convertible  secured note and  warrants to an  accredited  investor  pursuant to
which  the  Company  sold an  aggregate  of  $1,000,000  principal  amount  of a
convertible  secured note, bearing interest at the rate of 10% per annum and due
November 16, 2007. The convertible  secured note is convertible  into 10,000,000
shares  of  common  stock  and is  collateralized  by all of the  assets  of the
Company.  The investor also received

                                       11
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                                   (Unaudited)

warrants to purchase  10,000,000  shares of common stock at an exercise price of
$.12 per share.  The warrants  expire  November 16, 2011. The Company valued the
warrants as of November 16, 2006, the measurement date, at $1,500,000, utilizing
the Black-Scholes option pricing model,  assuming (i) an expected dividend yield
of 0%, (ii) a risk-free interest rate of 4.69%, (iii) an expected  volatility of
172%, and (iv) an expected term of five years.  Based upon such  valuation,  the
Company  recorded a charge to interest  expense of $500,000 and a  corresponding
liability of $1,500,000 relating to the warrants issued. Therefore, the note was
effectively  recorded at $0. The value is being accreted back to face value over
the term of the note.  We incurred  placement  fees and other legal  expenses of
approximately  $96,000,  in connection with this  transaction.  These costs were
recorded as deferred financing costs which are being amortized.

      On February 23, 2007, the Company sold to the same investor, an additional
$1,000,000  principal  amount of a convertible  secured note bearing interest at
the rate of 10% per annum and due  November 16, 2007.  The  convertible  secured
note  is  convertible  into  10,000,000  shares  of  common  stock  and is  also
collateralized  by all of the assets of the Company.  The investor also received
warrants to purchase  10,000,000  shares of common stock at an exercise price of
$.12 per share.  The warrants  expire  February 23, 2012. The Company valued the
warrants as of February 23, 2007, the measurement  date, at $500,000,  utilizing
the Black-Scholes option pricing model,  assuming (i) an expected dividend yield
of 0%, (ii) a risk-free interest rate of 4.71%, (iii) an expected  volatility of
168%, and (iv) an expected term of five years.  Based upon such  valuation,  the
Company  recorded a $500,000  liability  relating to the  warrants  issued and a
$500,000 liability relating to the note. The value is being accreted to the face
value over the term of the note.

      The Company  incurred  placement fees of $37,500,  in connection with this
transaction.  The Company recorded these costs as deferred financing costs which
are being amortized.

Note 5.     Derivative Instrument Liability

      The warrants  issued in connection with the November 16, 2006 and February
23, 2007 notes contain certain  anti-dilution  adjustments to protect the holder
of the  warrants in the event that the  Company  subsequently  issues  shares of
common stock or other convertible  securities with a price per share or exercise
price less than the exercise  price of the  warrants.  The number of  additional
shares underlying potential future issuances of warrants is indeterminate. There
is no obligation to register the common shares underlying the warrants except in
the event that the Company  decides to register any of its common stock for cash
("piggyback registration rights"). EITF 00-19 requires liability treatment for a
contract that contains a provision for an  indeterminate  number of shares to be
delivered in a share settlement that the Company believes is beyond its control.
The warrants contain such a provision as a result of the  anti-dilution  feature
contained in the relevant contract.  Accordingly,  the Company has accounted for
the  warrants as a  liability.  The  liability  for the warrants is measured and
recorded at its fair value.  The  liability  for the warrants  will be marked to
market for each  future  period they  remain  outstanding  and the change in the
value will be recorded as a charge (or credit) to operations.

      At September 30, 2007, the Company had a derivative  instrument  liability
associated with the warrants issued in connection with the November 16, 2006 and
February 23, 2007 notes of $200,000 and a change in fair value of the  liability
of $200,000 and  $1,600,000,  which was  recorded as a reduction  in  derivative
instrument  liability  for the three months and nine months ended  September 30,
2007, respectively.

                                       12
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                                   (Unaudited)

Note 6.     Stock-based compensation

      The Company adopted SFAS 123R on January 1, 2006, which requires companies
to  recognize  compensation  expense for all  equity-based  compensation  awards
issued  to  employees  that  are  expected  to  vest.  SFAS  123R  requires  all
share-based  payments to employees,  including grants of employee stock options,
to be recognized in the financial statements based on their fair values.

      On July 6, 2006,  the  stockholders  approved the Company's 2006 Incentive
Stock Plan (the "2006 Plan").  Pursuant to the 2006 Plan,  the Company may grant
awards of  non-qualified  stock options,  incentive  stock  options,  restricted
stock, stock units,  performance shares,  performance units and other incentives
payable  in cash  or in  shares  of the  Company's  Common  Stock  to  officers,
employees or members of the Board of  Directors.  The Company is  authorized  to
grant an aggregate of 100,000,000 shares under the 2006 Plan.

      Prior to adopting SFAS 123, the Company accounted for stock-based employee
compensation  under APB 25 and its  related  interpretations.  The  Company  has
applied the modified prospective method in the adoption of SFAS 123R.

      Under  SFAS  123R,  the  Company  recognizes  compensation  expense  on  a
straight-line   basis  over  the  requisite   service  period  for   stock-based
compensation  awards. The Company applies a forfeiture  estimate to compensation
expense  recognized  for awards that are  expected to vest during the  requisite
service period,  and revises that estimate if subsequent  information  indicates
that the actual forfeitures will differ from the estimate.

      The Company has retained the services of a consultant on a  month-to-month
basis to aid in business development in Europe. As partial compensation for such
services,  the Company has issued  options to purchase  7,500,000  shares of its
common stock,  exercisable at a price $.14 per share.  3,750,000 of such options
are currently exercisable, 1,875,000 vest on December 14, 2007 and the remaining
1,875,000 vest on December 14, 2008. If the  consulting  agreement is terminated
by either the  consultant or the Company,  the  Consultant  will have 30 days to
exercise all vested options and any unvested  options shall be  terminated.  The
Company recorded a charge of $4,688  associated with the estimated fair value of
such options for the nine-month  period ended  September 30, 2007. The estimated
fair value of such options was  determined  utilizing the  Black-Scholes  option
pricing model,  assuming (i) an expected  dividend yield of 0%, (ii) a risk-free
interest  rate of  4.26%,  (iii) an  expected  volatility  of 200%,  and (iv) an
expected  term of 4.21 years.  The Company will  remeasure the fair value of the
options  based on changes in the market  price of its common stock at the end of
each quarter.

      During the nine months ended  September 30, 2007,  the Company  recognized
$625,305  (which  included  $4,688  of  stock-based   compensation   expense  in
connection with the issuance of non-qualified  stock options to a consultant) of
stock-based  compensation expense under the fair value method in accordance with
SFAS 123R. All of the  compensation  expense resulted from the issuance of stock
options.  As of September  30, 2007,  the Company had only  non-qualified  stock
options outstanding.

      The stock  options were  granted with an exercise  price equal to the fair
market value of the  Company's  Common  Stock at the date of grant,  vest over a
period up to three years, and expire five years from the date of grant.

      Summarized information for the Company's non-qualified stock options is as
follows:

                                       13
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                   Weighted    Weighted
                                        Number     average     average    Aggregate
                                          of       exercise   remaining   intrinsic
                                       options      price       years       value
                                      ----------   --------   ---------   ---------
<S>                                   <C>          <C>             <C>    <C>
Outstanding at December 31, 2006      25,500,000   $    .17        4.90   $       0
Forfeited                             (5,625,000)       .14        4.21           0
Outstanding at September 30, 2007     19,875,000        .18        4.13   $       0
                                      ==========

Vested and expected to vest           19,875,000        .18        4.13   $       0
                                      ==========
Exercisable at September 30, 2007     10,875,000        .17        4.14   $       0
                                      ==========
</TABLE>

      The Company did not grant any stock  options  during the nine months ended
September 30, 2007.

      As of  September  30,  2007,  the  Company had  $875,677  of  unrecognized
compensation related to the unvested portion of outstanding stock options issued
to employees expected to be recognized through November 2009.

      The Company also uses  historical data in order to estimate the volatility
factor for a period equal to the duration of the expected  life of stock options
granted.  The Company believes that the use of historical data to estimate these
factors  provides  a  reasonable  basis for  these  assumptions.  The  risk-free
interest rate for the periods within the expected life of the option is based on
the U.S. Treasury yield curve in effect at the time of grant.  Under SFAS 123(R)
forfeitures  are estimated at the time of valuation and reduce  expense  ratably
over the vesting  period.  This estimate is adjusted  periodically  based on the
extent to which actual forfeitures  differ, or are expected to differ,  from the
previous estimate. As of September 30, 2007, the Company anticipates  19,875,000
options will vest.

      A summary of the status of the  Company's  nonvested  non-qualified  stock
options as of  December  31,  2006,  and changes  during the nine  months  ended
September 30, 2007, is presented below:

                                                  Weighted
                                                   Average
                                   Number of    Grant-Date
                                     Options    Fair Value

Nonvested at December 31, 2006    17,250,000          $.16
      Options granted                     --            --
      Options vested               2,625,000          $.20
      Options forfeited            5,625,000          $.13
                                  ----------
Nonvested at September 30, 2007    9,000,000          $.17

Note 7. Related Party Transactions

Consulting Agreement

      The Company has a consulting arrangement with the Chairman of the Board of
the Company,  which  provides for a monthly  consulting  fee of $10,000 and a 3%
success  fee on  corporate  transactions  other  than sales of  products  in the
ordinary  course  of  business.   Either  party  can  terminate  the  consulting
arrangement on 30 days notice.  During the nine months ended  September 30, 2007
and 2006,  the Company  recorded  fees to the  Chairman of $90,000 and  $90,000,
respectively. In addition, in

                                       14
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                                   (Unaudited)

connection with the acquisition of Plurion's assets by the Company, he received,
in March  2006,  a fee of  $171,000  which has been  included in the cost of the
acquisition.

Agreement with prior Management of the Company

      In connection  with the Merger,  the three senior members of the Company's
management  terminated  their existing  employment  agreements with the Company,
which entitled them to receive an aggregate of  $1,407,141.  In exchange for the
termination of their existing employment agreements, these members of management
received an  aggregate  of  $972,685  (which was  charged to  operations  in the
quarter  ended  March  31,  2006),  $170,000  of which  was used by each of them
($510,000 in the aggregate) to purchase shares of Series 1 Preferred convertible
into 5,666,666 shares of Common Stock and Warrants to purchase  2,833,333 shares
of Common Stock, and each entered into new one-year  employment  agreements with
the Company.  These agreements provided for an aggregate compensation of $23,000
per month. In connection  with the shares and warrants  purchased by management,
the Company recorded a charge of $3,995,000 in the quarter ended March 31, 2006.

Securities Exchange Agreement

      On  February 7, 2007,  the  Company  entered  into a  Securities  Exchange
Agreement with a stockholder who owns  approximately 17% of the Company's common
stock.  Under the terms of the Securities  Exchange  Agreement,  the stockholder
exchanged warrants to purchase  15,000,000 shares of the Company's common stock,
exercisable  until  March  2008,  at a price of $.01 per share,  for  10,000,000
shares of the Company's common stock.

Loan from Stockholder

      During the nine months  ended  September  30, 2007,  the Company  received
$700,000 from a stockholder  of the Company and issued a note,  with interest at
the rate of 10% per annum,  due May 23, 2008. The Company received an additional
$87,500 from the same  stockholder  after the end of the quarter ended September
30, 2007, on the same terms.

Note 8. Warrants

      At September 30, 2007, the Company had warrants outstanding to purchase an
aggregate of 160,017,802  shares of common stock. The following table sets forth
the warrants outstanding by exercise price and expiration date:

Number of Shares Issuable upon Exercise   Exercise Price   Expiration Date
---------------------------------------   --------------   ---------------

              13,045,000                      $.03         July, 2011*
             126,972,802                      $.06         July, 2011*
              10,000,000                      $.12         November, 2011**
              10,000,000                      $.12         February, 2012***
             -----------
             160,017,802

----------

      *     Includes  120,450,302  warrants exercisable at $.06 per share issued
            in  February  2006,  in  connection  with the private  offerings  of
            convertible securities. Also includes 13,045,000

                                       15
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                                   (Unaudited)

            warrants  exercisable  at $.03  per  share  and  6,522,500  warrants
            exercisable  at $.06 per share  which were  issued to the  placement
            agent in  connection  with the notes issued in a private  placement.
            The warrants were valued at an aggregate of $1,995,885 and are being
            amortized  as  interest  expense  over  the term of the  notes.  The
            warrants were valued using the Black Scholes  option  pricing model,
            based  upon the  closing  price of the  common  stock on the date of
            issue and assuming a volatility  of 145%, a risk-free  rate of 4.57%
            and an expected term of five years. The warrants can be exercised on
            a cashless exercise basis.

      **    Includes  warrants  exercisable at $.12 per share issued in November
            2006, in  connection  with the issuance of the  convertible  secured
            note.  The warrants can be exercised on a cashless  exercise  basis.
            See Note 5.

      ***   Includes  warrants  exercisable at $.12 per share issued in February
            2007, in  connection  with the issuance of the  convertible  secured
            note.  The warrants can be exercised on a cashless  exercise  basis.
            See Note 5.

Note 9. Research Agreements

      In December  2006,  the Company  entered into an agreement  with  Biofocus
Discovery Limited pursuant to which the Company will provide human motor neurons
made  utilizing  our  proprietary  Pluricell  technology.  The Company  received
(euro)100,000  (approximately  $134,000) in the first quarter of 2007, which was
recorded as deferred revenues on the September 30, 2007  consolidated  condensed
balance  sheet,   and  is  eligible  to  receive  an  additional   (euro)350,000
(approximately $500,000) upon the completion of certain agreed upon milestones.

      In June  2007,  the  Company  entered  into an  agreement  with the High Q
Foundation  pursuant to which the Company will provide medium spiny neurons made
utilizing our proprietary  Pluricell  technology.  The Company received $227,800
through  September  30,  2007,  which was  recorded as deferred  revenues on the
September 30, 2007  consolidated  condensed  balance  sheet,  and is eligible to
receive an  additional  $844,200  upon the  completion  of certain  agreed  upon
milestones.

Note 10. Termination of Royalty Rights

      In March 2003, the Company sold to Hemispherx  Biopharma,  Inc. all of its
inventory  related  to  ALFERON  N  Injection  and a license  to sell  ALFERON N
Injection.  In  connection  with the sale,  the Company  continued  to receive a
royalty on products  containing natural alpha interferon.  On July 26, 2006, the
Company  terminated  its  royalty  right  in  exchange  for  250,000  shares  of
Hemispherx  Biopharma common stock. The Company recognized income of $620,000 in
the quarter ended September 30, 2006,  based on the fair value of the Hemispherx
Biopharma  common stock  received on the sale of the royalty  right.  During the
period from August through October, 2006, the Company sold the 250,000 shares of
the Hemispherx  Biopharma common stock and realized net proceeds of $536,000 and
recorded a loss of $83,719.

                                       16
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

                                   (Unaudited)

Note 11. Proposed  Transaction with Pluristem Life Systems,  Inc. and Pluristem,
Ltd.

      On February 21, 2007,  the Company  entered into a letter  agreement  with
Pluristem Life Systems, Inc. ("PLS") and its wholly owned subsidiary,  Pluristem
Ltd. for a proposed transaction pursuant to which the Company agreed to issue to
PLS 27,000,000  shares of the Company's  common stock in exchange for 66,000,000
shares of PLS  common  stock  (representing  approximately  7% of the PLS common
stock) and warrants to purchase an  additional  66,000,000  shares of PLS common
stock at a price of $.03 per  share.  The  common  stock of PLS is traded in the
over-the-counter  market  and  quoted on the  Bulletin  Board  under the  symbol
PLRS.OB.  In addition,  the Company has agreed to license certain  technology of
Pluristem Ltd. for an upfront license fee of 23,000,000  shares of the Company's
common  stock and the  obligation  to make  certain  milestone  payments and pay
certain  royalties.  The  Chairman  of  the  Board  of  the  Company,  who  owns
approximately  8% of the Company's  common stock, is also the Co-Chairman of the
PLS Board of Directors.

      This letter  agreement  is intended to be binding but does not contain all
the terms which will be included in the definitive agreements. The Company is in
the  process  of  finalizing   the  definitive   agreements   related  to  these
transactions.

Note 12. Impairment of Acquired Intangibles.

      Acquired  intangibles  consist of the  license and patent  purchased  from
Plurion,  were stated at cost and being amortized using the straight-line method
over the  estimated  remaining  useful  lives  (approximately  six years) of the
patents.  During the quarter ended September 30, 2007, the Company  reviewed its
acquired  intangibles for impairment as changes in circumstances  indicated that
the carrying amount of the intangibles may not be recoverable. Recoverability of
intangibles  to be held and used was  measured by a  comparison  of the carrying
amount of the  intangibles  to future net cash flows expected to be generated by
the  intangibles.  Such  intangibles  were  considered  to be  impaired  and the
impairment recognized was measured by the amount by which the carrying amount of
the  intangibles   exceeded  the  estimated  fair  value  of  the   intangibles.
Intangibles  to be disposed of are reported at the lower of the carrying  amount
or estimated fair value less cost to sell.

      The Company  performed  the  impairment  test required by SFAS No. 142. An
evaluation  of the  Company's  acquired  intangibles  indicated  that the entire
amount of the  acquired  intangibles  were  impaired as of  September  30, 2007.
Accordingly,  the Company  recorded an  impairment  charge of  $4,445,615 in the
third  quarter  of  2007,  which  is  included  in  the  consolidated  condensed
statements of  operations  for the quarter  ended  September  30, 2007.  Factors
contributing to the impairment charge were (i) the inability to generate revenue
and cash flows from the acquired intangibles,  (ii) the closing of the Company's
subsidiary  located  in the  Netherlands  (see  Note 13),  (iii)  the  Company's
continued liquidity problems and (iii) the Company's inability to raise funds in
a private or public placement of equity or debt.

Note 13. Subsequent Event.

      In October,  2007,  the Company  decided to cease  operations at Stem Cell
Innovations  BV ("Stem Cell BV"),  its  subsidiary  located in the  Netherlands,
because of the Company's continued liquidity problems and its inability to raise
funds in a private or public placement of equity or debt securities.  Based upon
(i) the Company's estimate of the net realizable value of Stem Cell BV's assets,
(ii) any costs incurred by Stem Cell BV after  September 30, 2007, and (iii) the
estimated  cost of  terminating  the  operations  of Stem Cell BV,  the  Company
estimates that it will take a charge to operations in the fourth quarter of 2007
in the amount of approximately  $850,000. The Company's estimates that the funds
required to complete the  termination  of the operations of Stem Cell BV will be
approximately $1,000,000.

                                       17
<PAGE>

Item 2.     MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND
            RESULTS OF OPERATIONS

The following  discussion  of our financial  condition and results of operations
should be read in  conjunction  with the financial  statements and notes thereto
appearing in this Quarterly Report on Form 10-QSB.

Overview

      Stem Cell  Innovations,  Inc.  (the  "Company")  through its wholly  owned
subsidiaries,  Amphioxus  Cell  Technologies,  Inc.  ("ACT"),  which is based in
Houston,  Texas,  and Stem  Cell  Innovations  BV,  which  is  based in  Leiden,
Netherlands,  is a cell biology company. We have an ongoing business relating to
the use of our C3A human  liver  cell line in the  field of drug  discovery  and
toxicology  testing.  We have not yet developed any  substantial  market for our
primary products. Our principal revenues have been contract research and testing
and  consulting  services  for other  companies,  which have  historically  been
minimal.  To achieve  profitable  operations,  we,  alone or with  others,  must
successfully  develop,  introduce and market our drug  discovery and  toxicology
testing and other products.  We intend to attempt to develop our C3A human liver
cell line for the  production  of human serum  proteins,  including the clotting
factors, Factor VIII and Factor IX, used by hemophiliacs to allow their blood to
clot. In addition,  we intend to broaden the  application  of our expertise into
the area of  pluripotent  cell  biology.  Our  acquisition  of Plurion's  assets
consisted  substantially of fundamental  intellectual property applicable to the
development and use of human pluripotent  cells,  often referred to as embryonic
stem or germ cells.  We are in the  process of  developing  differentiated  cell
lines from our proprietary  human  pluripotent  cells,  adding to the cell types
that may be used as a screen for drug  discovery  and  toxicity,  as well as for
cellular  replacement  therapy.  In December  2006, we entered into an agreement
with Biofocus  Discovery  Limited pursuant to which we would provide human motor
neurons made utilizing our proprietary  Pluricell  technology  which would allow
them to discover genes which could be potentially useful in the development of a
treatment  for  Amyotrophic   Lateral  Sclerosis.   We  received   (euro)100,000
(approximately  $134,000)  in the  first  quarter  of 2007 and are  eligible  to
receive an additional (euro)350,000 (approximately $500,000) upon the completion
of certain  agreed upon  milestones.  In June 2007, we entered into an agreement
with the High Q  Foundation  pursuant  to which  we will  provide  medium  spiny
neurons made utilizing our proprietary  Pluricell  technology  which would allow
them to discover genes which could be potentially useful in the development of a
treatment for Huntington  Disease.  We received $227,800 to date in 2007 and are
eligible to receive an additional $844,200 upon the completion of certain agreed
upon milestones.

      Until March 2003, the Company was a  biopharmaceutical  company  (formerly
known as Interferon Sciences,  Inc. ("ISI")) engaged in the study,  manufacture,
and sale of ALFERON(R) N Injection,  a highly  purified,  multispecies,  natural
source alpha interferon  product.  In March 2003, the Company sold to Hemispherx
Biopharma,  Inc.  all of its  inventory  related  to ALFERON N  Injection  and a
license to sell ALFERON N Injection.  In connection  with the sale,  the Company
continued to receive a royalty on products  containing natural alpha interferon.
On July 26,  2006,  the Company  terminated  its royalty  right in exchange  for
250,000 shares of Hemispherx Biopharma common stock.

      Pursuant to the terms of the Agreement  and Plan of Merger dated  February
14,  2006  (the  "Merger  Agreement")  by  and  among  the  Company,  ACT  and a
wholly-owned   subsidiary   of  the   Company,   Amphioxus   Acquisition,   Inc.
("Acquisition  Sub"),  ACT merged with and into  Acquisition Sub (the "Merger"),
such that  Acquisition  Sub was the surviving  corporation,  changed its name to
Amphioxus Cell  Technologies,  Inc. and became a wholly-owned  subsidiary of the
Company.  Upon the completion of the Merger,  the stockholders of ACT controlled
approximately  77% of the merged entity.  The Merger has been accounted for as a
reverse purchase with ACT being the accounting acquirer.

                                       18
<PAGE>

      The operations of the Company include the historical operations of ACT and
the operations of ISI from February 15, 2006.

Liquidity and Capital Resources

      During the nine months  ended  September  30, 2007,  the Company  received
$700,000 from a stockholder  of the Company and issued a note,  with interest at
the rate of 10% per annum,  due May 23, 2008. The Company received an additional
$87,500 from the same  stockholder  after the end of the quarter ended September
30,  2007,  on the same  terms.  See Note 7 of Notes to  Consolidated  Condensed
Financial Statements.

      On February 23, 2007, the Company sold to an existing investor, $1,000,000
principal amount of a secured  convertible note, bearing interest at the rate of
10% per annum and due November 16, 2007. The Company is currently  discussing an
extention of the note. The note is convertible into 10,000,000  shares of common
stock and is secured  by all of the assets of the  Company.  The  investor  also
received  warrants to purchase  10,000,000 shares of common stock at an exercise
price of $.12 per  share.  After  fees and  expenses  of  $25,000,  the  Company
received net proceeds of $975,000. See Note 4 of Notes to Consolidated Condensed
Financial Statements.

      In October,  2007,  the Company  decided to cease  operations at Stem Cell
Innovations  BV ("Stem Cell BV"),  its  subsidiary  located in the  Netherlands,
because of the  Company's  continued  liquidity  problems and its  difficulty in
raising funds in a private or public placement of equity or debt securities. The
Company's  entire  obligation under the lease for office and laboratory space in
the  Netherlands  is  approximately  $2,350,000.  The  Company is  currently  in
discussions  with the landlord  regarding the lease  obligations.  The Company's
estimates that the funds required to complete the  termination of the operations
of Stem Cell BV will be approximately $1,000,000.

      At September 30, 2007, the Company had  approximately  $55,000 in cash and
cash  equivalents.  Until  utilized,  such cash and cash  equivalents  are being
invested  principally  in short-term  interest-bearing  investments.  Management
believes that current cash resources will be insufficient to fund its operations
for the next twelve months.  Management is attempting to continue to finance the
Company's  operations  by (i) a private  or public  placement  of equity or debt
securities,  (ii)  licensing its human  pluripotent  stem cells  (PluricellsTM),
(iii) increasing sales of its ACTIVTox products, and (iv) reducing expenditures.
However, it is uncertain as to whether the Company will be able to achieve these
objectives.  Insufficient funds will require the Company to curtail or terminate
its activities.  These factors,  among others, raise substantial doubt about the
Company's ability to continue as a going concern.

      The Company's  Common Stock is traded in the  over-the-counter  market and
quoted on the OTC Bulletin  Board,  which may have a material  adverse effect on
the  liquidity  of its  Common  Stock and on its  ability  to obtain  additional
financing.

Results of Operations

      Nine Months Ended September 30, 2007 Versus Nine Months Ended September
      30, 2006

      For the nine  months  ended  September  30, 2007 (the "2007  Period")  and
September 30, 2006 (the "2006  Period"),  the Company  recorded total revenue of
$173,481 and $52,650,  respectively.  For the 2007 Period, the increase in total
revenues was primarily due to contract research.

      General and administrative  expenses consist primarily of (i) salaries and
wages,  (ii) legal,  professional  and consulting  fees, and (iii)  equity-based
compensation. For the 2007 Period, general and

                                       19
<PAGE>

administrative  expenses were  $2,887,271 as compared to $7,836,315 for the 2006
Period.  The 2007  Period  included a  recovery  of  $125,000  related to a loan
written  off  in  an  earlier  year.  The  2006  Period  expenses   include  (i)
equity-based  compensation charges of $3,995,000,  and (ii) expenses of $892,508
of expenses related to the Merger.

      Research and  development  expenses for the 2007 Period were $1,140,867 as
compared to $370,868 in the 2006 Period.  The research and development  incurred
in the 2007 Period related to Company's stem cell program and ACTIVTox  program.
The increase for the 2007 Period was due to the substantially improved liquidity
of the Company.

      Interest  expense  for the 2007  Period  was  $3,026,781  as  compared  to
$3,025,757 for the 2006 Period.  The 2006 Period included  $1,794,375 related to
the  beneficial  conversion  feature  of the  notes of the  Company  which  were
exchanged  for Series 1 Preferred  and  Warrants.  The 2007 Period  included (i)
accretion  of debt  discount  in the amount of  $2,002,556  related to the notes
payable and (ii) the amortization of deferred financing costs of $716,017.

      Sale of royalty rights in the 2006 Period was $620,000.

      Loss on sale of securities  of $83,719  resulted from the loss on the sale
of the Hemispherx common stock in the 2006 Period.

      During the 2007 Period, the Company recorded a reduction in the fair value
of the derivative instrument liability of $1,600,000.

      During the 2007  Period,  the  Company  recorded  a charge  related to the
Eaglestone debt of $1,200,000.

      During the 2007  Period,  the  Company  recorded  a charge  related to the
impairment of its acquired  intangibles of  $4,445,615.  See Note 12 of Notes to
Consolidated Condensed Financial Statements.

      Depreciation and amortization for the 2007 Period was $819,521 as compared
to  $614,524  for  the  2006  Period.  The  increase  in  the  2007  Period  was
attributable to amortization related to the patents acquired from Plurion in the
Merger.

      As a  result  of  the  foregoing,  the  Company  incurred  a net  loss  of
$11,746,574  for the 2007 Period as compared to a net loss of $11,258,533 in the
2006 Period.

      Three Months Ended  September 30, 2007 Versus Three Months Ended September
      30, 2006

      For the three  months  ended  September  30, 2007 (the "2007  Period") and
September 30, 2006 (the "2006  Period"),  the Company  recorded total revenue of
$66,965 and $16,090,  respectively.  For the 2007 Period,  the increase in total
revenues was due to contract research.

      General and administrative  expenses consist primarily of (i) salaries and
wages,  (ii) legal,  professional  and consulting  fees, and (iii)  equity-based
compensation.  For the 2007 Period,  general and  administrative  expenses  were
$657,903 as compared to $1,144,581 for the 2006 Period. The 2007 Period incurred
lower legal, professional and consulting fees, and equity-based compensation.

      Research and  development  expenses  for the 2007 Period were  $384,621 as
compared to $122,620 in the 2006 Period.  The research and development  incurred
in the 2007 Period related to Company's stem

                                       20
<PAGE>

cell program and ACTIVTox  program.  The increase for the 2007 Period was due to
the substantially improved liquidity of the Company.

      Interest  expense for the 2007 Period was $926,575 as compared to $461,111
for the 2006 Period.  The 2007 Period included (i) accretion of debt discount in
the amount of $570,841 related to the notes payable and (ii) the amortization of
deferred financing costs of $241,351.

      Sale of royalty rights in the 2006 Period was $620,000.

      Loss on sale of securities  of $83,719  resulted from the loss on the sale
of the Hemispherx common stock in the 2006 Period.

      During the 2007 Period, the Company recorded a reduction in the fair value
of the derivative instrument liability of $200,000.

      During the 2007  Period,  the  Company  recorded  a charge  related to the
impairment of its acquired  intangibles of  $4,445,615.  See Note 12 of Notes to
Consolidated Condensed Financial Statements.

      Depreciation and amortization for the 2007 Period was $277,880 as compared
to  $260,826  for  the  2006  Period.  The  increase  in  the  2007  Period  was
attributable to amortization related to the patents acquired from Plurion in the
Merger.

      As a  result  of  the  foregoing,  the  Company  incurred  a net  loss  of
$6,425,629  for the 2007 Period as compared to a net loss of  $1,436,767  in the
2006 Period.

Recently Issued Accounting Pronouncements

      In February 2007, the Financial  Accounting  Standards Board (FASB) issued
Statement  of Financial  Accounting  Standards  (SFAS) No. 159,  "The Fair Value
Option for Financial Assets and Financial Liabilities, Including an Amendment of
FASB  Statement  No.  115," which will become  effective  in 2008.  SFAS No. 159
permits entities to measure eligible financial assets, financial liabilities and
firm commitments at fair value, on an  instrument-by-instrument  basis, that are
otherwise not permitted to be accounted for at fair value under other  generally
accepted  accounting   principles.   The  fair  value  measurement  election  is
irrevocable  and subsequent  changes in fair value must be recorded in earnings.
The Company will adopt this  Statement in fiscal year 2008 and is assessing SFAS
No. 159 and have not yet determined the impact that the adoption of SFAS No. 159
will have on its consolidated financial statements.

      In September  2006, the FASB issued SFAS No. 158,  "Employers'  Accounting
for Defined  Benefit Pension and Other  Postretirement  Plans -- An Amendment of
FASB  Statements 87, 88, 106 and 132 (R)". SFAS No. 158 requires the recognition
of an  asset  for  a  plan's  overfunded  status  or a  liability  for a  plan's
underfunded  status in the statement of financial  position,  measurement of the
funded  status of a plan as of the date of its  year-end  statement of financial
position and  recognition  for changes in the funded status of a defined benefit
postretirement  plan in the year in which the changes  occur as a  component  of
other  comprehensive  income. The Company adopted the provisions of SFAS No. 158
in the  first  quarter  of 2007.  The  adoption  of SFAS No.  158 did not have a
material effect on the Company's consolidated financial statements.

      In  September   2006,  the  FASB  finalized  SFAS  No.  157,  "Fair  Value
Measurements"  which will become effective in 2008. This Statement  defines fair
value,  establishes a framework for measuring fair value and expands disclosures
about fair value  measurements;  however, it does not require any new fair

                                       21
<PAGE>

value measurements. The provisions of SFAS No. 157 will be applied prospectively
to fair value  measurements  and  disclosures  beginning in the first quarter of
2008. The Company is evaluating  the impact of SFAS No. 157 on its  consolidated
financial statements.

      In  the  first  quarter  of  2007,  the  Company  adopted  SFAS  No.  156,
"Accounting  for Servicing of Financial  Assets--an  amendment of FASB Statement
No.  140," that  provides  guidance  on  accounting  for  separately  recognized
servicing assets and servicing liabilities. In accordance with the provisions of
SFAS No. 156, separately  recognized servicing assets and servicing  liabilities
must be initially measured at fair value, if practicable.  Subsequent to initial
recognition,  the  Company  may use either the  amortization  method or the fair
value  measurement   method  to  account  for  servicing  assets  and  servicing
liabilities  within the scope of this Statement.  The adoption of this Statement
did  not  have  a  material  effect  on  the  Company's  consolidated  financial
statements.

      In  the  first  quarter  of  2007,  the  Company  adopted  SFAS  No.  155,
"Accounting  for Certain  Hybrid  Financial  Instruments--an  amendment  of FASB
Statements  No. 133 and 140," which  permits  fair value  remeasurement  for any
hybrid financial  instrument that contains an embedded derivative that otherwise
would require  bifurcation  in accordance  with the  provisions of SFAS No. 133,
"Accounting for Derivative  Instruments and Hedging Activities." The adoption of
this  Statement  did not have a material  effect on the  Company's  consolidated
financial statements.

      The  Company  adopted  FASB   Interpretation   No.  48,   "Accounting  for
Uncertainty in Income Taxes -- an Interpretation of FASB Statement No. 109" (FIN
48) on January 1, 2007.  FIN 48  clarifies  the  accounting  and  reporting  for
uncertainties in income tax law. This Interpretation  prescribes a comprehensive
model for the financial  statement  recognition,  measurement,  presentation and
disclosure of uncertain  tax  positions  taken or expected to be taken in income
tax  returns.  The  adoption  of FIN 48 did not have a  material  effect  on the
Company's consolidated  financial statements.  The tax years 2003-2006 generally
remain  open to  examination  by the  major  taxing  jurisdictions  to which the
Company is  subject.  However,  the  Company  utilized a net  operating  loss of
approximately  $0.4  million  in its 2004 tax year that was  generated  in 1989.
Thus,  the  1989 tax year  remains  open to  examination  to the  extent  of the
utilization.  Furthermore,  the  Company  has the  opportunity  to  utilize  net
operating  losses  generated  from the 1992  through  2002 tax years  that could
potentially  open up those  years to  examination  to the  extent  that such net
operating losses are utilized in the future.

Cautionary Statements

Cautionary   Statement  Pursuant  to  Safe  Harbor  Provisions  of  the  Private
Securities Litigation Reform Act of 1995:

      Except  for  the  historical   information  presented  in  this  document,
including financial information for the nine months ended September 30, 2007 and
September 30, 2006,  this  Quarterly  Report on Form 10-QSB,  including the item
entitled  "Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations," and documents and information  incorporated by reference
into this Quarterly Report on Form 10-QSB contain  "forward-looking  statements"
(as such term is  defined in the  Private  Securities  Litigation  Reform Act of
1995). These statements are identified by the use of forward-looking terminology
such as "believes",  "plans", "intend",  "scheduled",  "potential",  "continue",
"estimates", "hopes", "goal", "objective",  expects", "may", "will", "should" or
"anticipates" or the negative thereof or other variations  thereon or comparable
terminology, or by discussions of strategy that involve risks and uncertainties.
The safe harbor  provisions  of Section 21E of the  Securities  Exchange  Act of
1934,  as amended,  and Section 27A of the  Securities  Act of 1933, as amended,
apply to forward-looking statements made by us.

                                       22
<PAGE>

      We caution you that no statements  contained in this  Quarterly  Report on
Form  10-QSB  should  be  construed  as  a  guarantee  or  assurance  of  future
performance  or results.  These  forward-looking  statements  involve  risks and
uncertainties,  including those identified  within this Form 10-QSB.  The actual
results  that  we  achieve  may  differ  materially  from  any   forward-looking
statements due to such risks and uncertainties. These forward-looking statements
are based on current  expectations,  and we assume no  obligation to update this
information.   We  urge  you  to  carefully  review  and  consider  the  various
disclosures  made by us in this Form  10-QSB that  attempt to advise  interested
parties of the risks and factors that may affect our business and the market for
our stock.

Item 3. Controls and Procedures

      The Company's  management,  including the Chief Executive  Officer and the
Chief  Financial  Officer,   have  conducted  an  evaluation  of  the  Company's
disclosure  controls and  procedures as of the end of the period covered by this
report and have concluded  that these controls and procedures  were effective to
provide  reasonable  assurance that the information  required to be disclosed by
the Company in the reports the  Company  files or submits  under the  Securities
Exchange Act of 1934 is recorded, processed,  summarized and reported within the
time periods  specified in the SEC's rules and forms, and to provide  reasonable
assurance  that  information  required  to be  disclosed  by the Company in such
reports is accumulated and communicated to the Company's  management,  including
its Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding the required disclosure.

      There have been no significant  changes in internal control over financial
reporting,  for the period covered by this report, that have materially affected
or are reasonably likely to materially  affect,  the Company's  internal control
over financial reporting.

                                       23
<PAGE>

                  STEM CELL INNOVATIONS, INC. AND SUBSIDIARIES

                           PART II. OTHER INFORMATION

Item 1.  Legal Proceedings

         None.

Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds

         None.

Item 3.  Defaults Upon Senior Securities

         None.

Item 4.  Submission of Matters to a Vote of Security Holders

         None.

Item 5.  Other Information

Item 6.  Exhibits

         31.1  Certification  of Chief  Executive  Officer  and Chief  Financial
Officer of the Company

         32.1  Certification  of Chief  Executive  Officer  and Chief  Financial
Officer of the Company pursuant to 18 U.S.C. Section 1350 as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.

                                       24
<PAGE>

                           STEM CELL INNOVATIONS, INC.

                               September 30, 2007

                                   SIGNATURES

      Pursuant to the  requirements of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  in its  behalf by the
undersigned thereunto duly authorized.

                                             STEM CELL INNOVATIONS, INC.

DATE: November 14, 2007                  By: /s/ Dr. James H. Kelly
                                             -----------------------------
                                             Chief Executive
                                             and Chief Financial
                                             Officer

                                       25